Foundation Medicine shares rise 89 percent in market debut
(Reuters) - Cancer diagnostic company Foundation Medicine Inc's (FMI.O) shares rose as much as 89 percent in their market debut as investors bet on the potential of genomics in the treatment of the disease.
The company, which counts Bill Gates and Russian billionaire Yuri Milner as investors, develops FoundationOne test kits, used by doctors to recommend treatment options for cancer patients based on their genetic profile.
It also analyzes tissue samples from clinical trials conducted by companies such as Novartis AG (NOVN.VX), Johnson & Johnson (JNJ.N) and Celgene Corp (CELG.O). Novartis accounts for more than 10 percent of Foundation Medicine's revenue.
Personalized medicine, the new buzzword in the field of pharmaceuticals, is seen as the future of cancer treatment, targeting the type of cancer instead of the organ in which the tumor is.
Genetic tests are used to predict patients' vulnerability to diseases and identify specific medicines for individual patients.
"It seems like a fairly large market for what they're (Foundation Medicine) targeting in terms of solid tumors and rare and recurring cancers," Wedbush Securities analyst Zarak Khurshid said. "The whole space for personalized medicine in cancer diagnostics is several billion dollars," he said.
The Cambridge, Massachusetts-based company raised about $106.2 million after its initial public offering was priced at $18 per share, well above its expected price of $14-$16.
Foundation Medicine's shares touched a high of $34.19 on the Nasdaq, valuing the company at about $900 million. About 6 million shares changed hands, making it one of the most heavily traded stocks on the exchange.
The stock was at $33.80 in early afternoon trading.
Foundation Medicine is the third biotech company to be taken public this year by its majority shareholder Third Rock Ventures.
Third Rock's Bluebird Bio Inc (BLUE.O) made a successful market debut in June and its shares have risen 69 percent since then. Agios Pharmaceuticals Inc (AGIO.O) was taken public by the venture fund in July. Agios shares have risen more than 40 percent since their listing.
Other investors in Foundation Medicine include Kleiner Perkins Caufield & Byers, Google Ventures and Gates Ventures LLC.
Foundation Medicine, which expects to launch the test for blood cancers by early next year, said net proceeds from the offering would be used to expand its commercial and laboratory operations and fund clinical studies.
The company's net loss widened to $22.7 million in 2012 from $17.3 million a year earlier. Revenue rose four-fold to $10.6 million.
Goldman Sachs and JP Morgan were the lead underwriters for the offering.
Shares of eye drug maker Ophthotech Corp (OPHT.O), which also went public on Wednesday, rose as much as 22 percent. The company raised about $167.2 million after its offering was priced at $22 per share, above its expected price of $16-$19.
(Reporting by Vrinda Manocha and Avik Das in Bangalore; Editing by Kirti Pandey)