FMI hasn't been a public company all that long, launching its IPO in September of 2013. Its first few years as a publicly traded stock were rather forgettable. In fact, shares had done virtually nothing from the time of its IPO all the way until the fall of last year. In October, FMI finally began to make a move and it hasn't looked back since, surging by over 150% since that time.
FMI markets FoundationOne for solid tumors, FoundationOne Heme for blood-based cancers , Foundation Assay for circulating tumor, and FoundationFocus CDxBRCA for ovarian cancer. In simple terms, these tests identify molecular differences in a patient's cancer, which then enables an oncologist to determine a targeted therapy to personalize their care.
What really ignited the stock last year was the announcement on November 30, 2017 in which the FDA approved its new FoundationOne CDx test to detect mutations in 324 genes. This product is FMI's companion diagnostic test for solid tumors, intended for treatment of patients with solid tumors.
FMI followed this milestone up with two significant positives: First, on January 8, it raised its Q4 revenue guidance to $48.9 mln versus the $39.2 mln consensus. Then on January 16, it announced a partnership with Pfizer (PFE) to develop companion diagnostics, including updates on FoundationOne CDx. From there, the stock was off to the races.
As for its financials, FMI reported Q1 results on May 2, beating on both the top and bottom lines. Revenue surged by 101% to $52.8 mln, driven by increasing clinical volume. More specifically, it reported 21,861 tests, a 57% jump from the same period last year. While the company is still not profitable, its net loss shrunk to ($1.02)/share from ($1.31)/share in 1Q17.
Roche is adding a company that is clearly on the rise, with strong momentum behind it. With a market cap of $182 bln, though, FMI is not really going to move the needle all that much in terms of the top-line, at least, not in the near term. Still, the acquisition is a good fit, given that RHHBY is the world's largest developer of cancer-related drugs. Ultimately, it could help the company develop new, and more personalized treatments, which would create a competitive advantage in a challenging market.
It is, however, paying a hefty price for FMI. Using FMI's FY18 revenue guidance of $200-$220 mln, and the $5.3 bln valuation, RHHBY is paying over 25x expected revenue for the unprofitable company.