Foundation Medicine could be next hot IPO
As biotechs draw interest, firm could be next rocket-propelled stock
Combine an emerging company at the vanguard of personalized cancer treatment with a white-hot market for biotech IPOs, and you have a recipe for the next rocket-propelled stock.
That is the hope for Foundation Medicine of Cambridge, a supplier of genomic testing for cancer patients that filed plans Tuesday with regulators to raise $86.25 million by going public.
The biotechnology company with an all-star list of advisers and investors could become the sixth from Massachusetts to launch an initial public offering this year — and the third backed by Boston’s Third Rock Ventures — adding to what is already the nation’s biggest coming-out class of public companies since 2007.
Foundation Medicine could be underestimating its IPO haul. Last week, another Third Rock biotech from Cambridge, Agios Pharmaceuticals, expected to raise about $86 million from its IPO. But demand for the stock was so high that Agios raked in $105 million, and its shares soared by 73 percent on the first day of trading.
“I’m always hesitant to say whether a company will be a hot stock or not a hot stock, but Foundation Medicine is a very interesting proposition,” said Jonathan P. Gertler, a partner at Back Bay Life Science Advisors. “The promise of personalized medicine that we heard about 15 years ago is coming to greater fruition, and they have a business model that’s already achieved some success. It’s a promising event in medicine.”
Foundation Medicine faces heavy competition in the personalized treatment for cancer and other diseases. California companies Illumina Inc. and Life Technologies Corp. have partnerships with Boston academic medical centers. Life Technologies said this year at the J.P. Morgan Healthcare Conference that it was working with Boston Children’s Hospital on tests for pediatric diseases.
At the same conference, Michael Pellini, chief executive of Foundation Medicine, asserted that his company’s tests are more comprehensive than any on the market. Foundation Medicine executives were barred by SEC rules from commenting for this story.
As of January, Foundation Medicine had raised almost $100 million from an impressive roster of investors that includes Microsoft founder Bill Gates and Russian billionaire Yuri Milner.
The company’s first commercial test, FoundationOne, collects genomic information that is unique to each cancer patient, helping doctors customize the most effective treatment strategy. Doctors have ordered more than 1,500 FoundationOne tests since they became available in June, the company said in its SEC filing.
Drug makers also can use information collected by FoundationOne tests to develop targeted cancer therapies. Foundation Medicine’s research partners include health care giants Johnson & Johnson, Sanofi, and Novartis.
FoundationOne tests have been used only against solid tumors, but the company said earlier this year that it is partnering with Memorial Sloan-Kettering Cancer Center to co-develop a version of the test for blood cancers that it hopes to bring to market next year.
One business challenge is that insurers, including Medicare, do not cover the FoundationOne test, which costs $5,800. Gaining insurance coverage is a key to becoming profitable, the company said.
Goldman Sachs and JP Morgan Securities will manage the public offering.