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more people across various functions of its business, from R&D through sales and marketing, Pellini says. When asked if this financing might be an alternative to an initial public offering for Foundation, Pellini said he didn’t think so, but rather “it’s the next step in the company’s development.” Pellini adds: “We’ve tried to build this company a little differently. We wanted to get to market very quickly, get clinical adoption, have multiple opportunities with pharma companies, and medical oncologists.”
Pellini wouldn’t comment about whether the deal was designed to pave the way for an IPO, but reading between the lines, some signs point in that direction. Today’s announcement of the deal, for instance, includes an endorsement from Bill Slattery, the influential (and rarely quoted) hedge fund manager at Deerfield Management. Clearly, Slattery’s comment in the announcement about Foundation “changing the way cancer is treated” is being aimed at a major-league financial audience. This also isn’t the first time Foundation has shown up on public investor radar screens—it gave a presentation at the Goldman Sachs healthcare conference in June.
Foundation, like any young company making its way, still has a huge amount of work in front of it. Pellini said he’s got four main objectives coming out of today’s financing—to build up the commercial team; to develop more infrastructure for performing its tests; to run long-term clinical studies that it will need to move beyond the early-adopting physician audience and to win broad insurance reimbursement; and to develop more products.
Despite the encouraging trend with early adopters making repeat orders, Foundation will need to broaden its user base to really have an impact on how cancer is treated. Although 400 physicians is a good start, there are more than 10,000 oncologists in the U.S. alone. And while Foundation has seen encouraging adoption in the early days by “thought leader” physicians at the top academic centers like MD Anderson Cancer Center in Houston, an estimated 75 to 85 percent of U.S. cancer patients are treated in community oncology offices, which tend to adopt new technologies at a slower rate.
Pellini says he’s carefully watching where Foundation’s demand is coming from, and he says he’s happy to see demand increase from community oncology practices, which now account for about 60 percent of all of Foundation’s orders.
The repeat business, and the community oncology acceptance of the orders, are a couple of key indicators of future success that Foundation and its new investors going to watch very closely. Other than the sheer volume of tests, the success with repeat orders is the most important thing to happen to Foundation this year, Pellini says.
“It’s one thing to get an oncologist and a patient to try a comprehensive molecular profiling approach. If patient is sick, and neither the physician or patient is ready to give up, they are going to try it,” Pellini says. “But it’s another thing to have an oncologist order the test again. When they order a test for a second, fifth, tenth, or fiftieth time, it means they got the results, they understood the results, and the results helped them think about how they were going to treat the patients. All those pieces have to come together.”
Insurers are one other critical constituency that Foundation needs to win over. So far, Pellini will only say “Foundation One is being reimbursed at various levels by all payers we’ve submitted the tests to. I can’t think of a payer off hand that has flat-out rejected payment for Foundation One.”
In the early going, Foundation has had some varying success with insurance reimbursement based on leading physicians being willing to get on the phone and “go to bat for their patients and Foundation One,” Pellini says. But longer term, both the physicians and the insurers will need to see lots and lots of data.
Right now, Foundation has put together “a series of anecdotes” in which patients have gotten the test and it had some measurable impact, Pellini says. The company, mindful of the need to gather hard evidence of benefit beyond a few success anecdotes, is gathering data on the cost-effectiveness of its system, the impact it has on medical decision making, and the long-term outcomes for patients, Pellini says. Different payers will want to see different data sets before they become comfortable with making reimbursement for the test standard, Pellini says.
Although the hard-core biostatistics and medical evidence community tends to frown on anecdotes as the flimsiest kind of support for a claim, Foundation is beginning to see patterns that pharma customers and insurers are taking seriously, Pellini says. Foundation has gained much of its early support from pharma partners like Sanofi, Celgene, and Novartis that are using the test to help them identify patients likely to benefit in large, long-term, well-controlled, randomized clinical trials that are the gold standard for medical evidence.
“What we’re hearing from pharma company leadership and from payers is that while anecdotes are anecdotes, when you start to see patients responding to treatment who were unlikely to respond to any other approach, and you don’t just have one case or two cases, but you have 5, 10 or 20 cases, the evidence does have merit,” Pellini says. He added: “We’re starting to see a series of anecdotes come together, and to us, it provides further assurance.”
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