WASHINGTON, DC (July 31, 2017) — U.S. Market Advisors Law Group PLLC announces that a class action lawsuit has been filed against Foundation Medicine, Inc. (“Foundation” or the “Company”) (NASDAQ:FMI). The class action is on behalf of investors who purchased or otherwise acquired Foundation common stock, seeking to recover compensable damages caused by defendants’ violations of the Securities Exchange Act of 1934. The case has been docketed under 17-cv-11394 in United States District Court for the District of Massachusetts.
If you are a shareholder who purchased Foundation stock between February 26, 2014 and November 3, 2015 (“Class Period”), you have until September 26, 2017 to ask the Court to appoint you as Lead Plaintiff for the class. The Lead Plaintiff is a representative for absent members of the class.
Investors do not need to seek appointment as Lead Plaintiff to share in any class recovery in this action. If you are a class member and there is a recovery for the class, you can share in that recovery as an absent class member. You may retain counsel of your choice to represent you in this action. Contact USMA Law Group to discuss this action.
Foundation develops, manufactures and sells genomic analysis diagnostic tests for solid and circulating cancers that are based on next-generation sequencing technology.
The Company’s flagship products are the FoundationOne tumor profiling test, and the FoundationOne Heme diagnostic test for blood cancers. The price for the FoundationOne test is $5,800 and the price for the FoundationOne Heme test is $7,200.
Reimbursement has been a major hurdle in the clinical sequencing and molecular diagnostic space as a whole, and neither Medicare nor almost any commercial insurance carrier has agreed to provide coverage for the Company’s tests, significantly diminishing demand for them. If Foundation obtained coverage approval from its regional Medicare Administrative Contractor (“MAC”), and Medicare began to cover the tests, it was expected that commercial insurers would cover as well.
Allegations Against Foundation
During the Class Period, the Company allegedly made positive statements regarding the reimbursement process for its tumor tests by Medicare, claimed to be on track for obtaining Medicare coverage, and provided strong 2015 financial guidance, causing the price of its common stock to trade at fraud-inflated prices.
On July 29, 2015, the Company finally disclosed that it was not making the strides obtaining coverage it had claimed to have been making during the Class Period and that in reality, Foundation would receive no Medicare payments in 2015 for its tumor profiling tests, due to a delay in receiving a local coverage determination (“LCD”) from its regional Medicare MAC. As a result of the delay, the Company slashed its 2015 financial guidance which, unbeknownst to investors, was based on an assumption that Medicare approval was going to be obtained in 2015. Foundation had previously projected revenues of $105 million to $115 million for 2015, but lowered that forecast to a range of $85 million to $95 million, while revising its expectations for clinical test volumes downward to between 35,000 and 38,000 tests from a previous range of 43,000 to 47,000.
During a conference call held that day to discuss its financial results and prospects, the Company’s Chief Executive Officer Michael Pellini disclosed that the original 2015 guidance had been based on Defendants’ assumption that an LCD from Foundation’s regional MAC would be in place in the first half of 2015 for at least some of Foundation’s Medicare patients. Mr. Pellini explained that lack of Medicare coverage impacted the number of clinical tests being ordered, not only for Medicare patients but also for non-Medicare patients, referring to a “spillover effect.”
On this news, the price of Foundation common stock plummeted, closing down $7 per share – a decline of approximately 24% – on July 30, 2015.
Then, on November 3, 2015, the Company disclosed a further revision to the number of clinical tests it expected to report for 2015, now in the range of 32,000-33,000 clinical tests (a material reduction from its July 29, 2015 already-reduced expected number of 35,000-38,000 clinical tests for 2015).
Following this disclosure, the price of Foundation common stock fell again, closing down $6.62 per share to close at $17.31 per share on November 4, 2015, on unusually high trading volume of more than 1.781 million shares trading.
U.S. Market Advisors Law Group PLLC is a national law firm based in Washington, D.C. The firm represents investors worldwide in U.S. securities class action lawsuits.
David P. Abel