Wedbush Previews Foundation Medicine, Expects In-Line Earnings

In an equity research report published Monday, Wedbush analyst Zarak Khurshid previewed fourth quarter results for Foundation Medicine Inc FMI, to be reported on Tuesday after market close. The firm expects figures in line with the January 12 preliminary results, and maintained an Outperform rating and a $45 price target on the stock.

The company guided sales of $18.7 million, versus Wedbush’s estimate of $16.9 million and consensus sales estimates of $17.7 million. The firm forecasts EPS loss of ($0.48) for the quarter, and ($1.87) for the full year. For 2015, EPS loss is expected to come in at ($1.23).

“2014 revenue of $61.1 MM was just above the top end of FMI’s prior guidance range of $58 -$60 MM and 2014 clinical test volume of 24,271 was within initial guidance of 22,000 to 25,000.”

Despite the preliminary results already out, the revenue upside driver for the fourth quarter remains unclear, the report said. “4Q14 clinical test volumes were 7,233, which missed our 7,704 estimate suggesting to us that the revenue be at was likely driven by pharmaceutical services unless there was a meaningful improvement in reimbursement levels or collection efficiency in 4Q14. Clinical test volume was up 113% y/y (vs 150% in 3Q14) and up 13% q/q (vs 9% in 3Q14) demonstrating q/q acceleration. It appears that the September & October clinical rebound from weaker later summer activity mostly continued in 4Q14.”

However, the analysts note that they would not expect significant color on the potential immunotherapy test and circulating tumor DNA test programs on the earnings call.

Finally, analysts looked into the 2015 guidance, which they think is likely to be in-line with estimates. They also expect “solid reimbursement in the $3,600 range consistent with 3Q.”