Xconomy Boston — 

In what could be an important step forward for the mainstream acceptance of broad cancer genetic tests, a product from Foundation Medicine has simultaneously won FDA approval and gotten a coverage determination from the Centers for Medicare & Medicaid Services. Now the question is whether the ruling—the first decision of its kind—will help lead to widespread adoption of such tests, which have struggled to gain traction amid pushback from insurers, resistance from community oncologists, and questions about their utility.

Late Thursday afternoon, the FDA approved the FoundationOne CDx. The test, from Cambridge, MA-based Foundation (NASDAQ: FMI), looks for 324 cancer-related alterations in patients’ DNA. Foundation uses the results to whip up a report for doctors, who then use that information to suggest treatment options for cancer patients. The test is approved as a companion diagnostic to help patients who might benefit from FDA-approved targeted cancer therapies.

The decision came along with an important second component. The CMS, which administers the federal Medicare insurance program, also proposed coverage of Foundation’s test. It’s been a multi-year slog for Foundation to win reimbursement for its molecular profiling tests—particularly from Medicare and Medicare Advantage, which accounts for roughly 40 percent of its total tests in the U.S. Foundation began submitting claims to Medicare in 2013, but a payment backlog has grown as it still has yet to be paid for them. As of late 2016, Foundation hadn’t been paid for over 26,000 tests for Medicare patients, SEC filings show. The backlog has contributed to yearly losses for Foundation, most recently a $113.2 million net loss in 2016.

According to Foundation chief medical officer Vince Miller, who spoke with Xconomy weeks before the FDA approval decision, the company would still have to fight for the backlogged claims on a case-by-case basis. The CMS hasn’t yet decided how much it will reimburse for the FoundationOne CDx, but a decision is expected during the first quarter of 2018. Foundation hasn’t announced a list price for the test, but another one of its products, the FoundationOne, has a list price of $5,800.

Foundation will hold a conference call this morning to discuss the news.

Approval of the FoundationOne CDx is the latest in what has been a series of positive developments over the course of the past year for targeted cancer medicines—which, in turn, has started to trickle down to the developers of diagnostics that can help identify the patients who might benefit from them. In May, Merck’s (NYSE: MRK) immunotherapy drug pembrolizumab (Keytruda) was approved by the FDA to treat a cancerous mutation, regardless of where a tumor originated. Agios Pharmaceuticals (NASDAQ: AGIO) won FDA approval of enasidenib (Idhifa), a drug for people with acute myeloid leukemia and a specific genetic mutation. Loxo Oncology (NASDAQ: LOXO) could soon follow in Merck’s footsteps with a drug that targets a genetic alteration present in a number of different cancers. The more targeted therapies that enter the market, the more there might be a need to test simultaneously for a range of genetic alterations with a diagnostic like FoundationOne CDx, rather than just one.

The idea of targeted cancer therapies isn’t new—drugs like imatinib (Gleevec), trastuzumab (Herceptin) and crizotinib (Xalkori) were approved years ago for patients with a particular type of cancer and a specific molecular marker. But cheaper, better sequencing technologies, more insight into tumor genetics, and creative clinical trial designs are leading to more development programs, and more efforts to try to see if these and other molecular signatures can impact many cancers, not just a few. Larger studies are also underway, among them the 30-arm NCI-Match trial that began in 2015 that includes patients with lymphomas, solid tumors, and myelomas that, at least in theory, could help lead to greater adoption of targeted cancer medicines. To date, there are 17 on-label targeted cancer therapies that could be used with the FoundationOne CDx, according to Foundation.

These steps, in turn, are starting to boost the developers of the tests that use NGS techniques to scan for many tumor alterations at once. Because of the “increasing efficacy of targeted therapies,” says Foundation CMO Miller, “diagnostics are becoming increasingly important. They’re not just a ‘nice to have,’ they’re a ‘have to have.’”

The FDA in June approved a test from Thermo Fisher Scientific, Oncomine, which detects 23 genetic alterations. In November, the agency approved another tumor profiling test, Memorial Sloan Kettering Cancer Center’s MSK IMPACT, that detects mutations in 468 genes. It also unveiled a new, quicker approval path for test developers, in which products approved by a third-party reviewer—the New York State Department of Health—don’t have to undergo a separate FDA review. At the time, Edison Liu, the president and CEO of the non-profit Jackson Laboratory in Bar Harbor, ME, called the regulatory changes “remarkable.”

“In the past, even if it has passed NYSDOH accreditation, a test would have had to go through an FDA process,” he said in an e-mail to Xconomy. “This clearly reduces the regulatory burden for test developers.”

That streamlining was seen through the parallel review process for Foundation as well. Foundation’s application, submitted to the FDA in August, was approved in six months. “By leveraging two policy efforts aimed at expediting access to promising new technologies, we’ve been able to bring patients faster access to a breakthrough diagnostic that can help doctors tailor cancer treatments to improve medical outcomes and potentially reduce health care costs,” said FDA commissioner Scott Gottlieb, in a statement.

Before Thursday’s close, Foundation shares had almost tripled since the start of the year. They climbed another 10 percent, to $59 apiece, in pre-market trading on Friday morning. But whether this momentum will cause the floodgates to open for broad cancer tests, including the FoundationOne CDx, however, is still an open question. A major critique of broad tumor profiling tests is they can spit out a lot of data that, in the end, amount to an expensive exam that doesn’t accumulate useful signals, just noise. Such tests are most commonly used in clinical studies and major cancer centers, and payers have put up barriers. “They are considered investigational or exploratory tests, and those are very difficult to get reimbursement for,” Yuri Nikiforov, the director of the University of Pittsburgh Medical Center’s molecular and genomic pathology division, told Xconomy earlier this year.

Prior to the FDA and CMS decision, Foundation CMO Miller was bullish that a parallel approval might help change the landscape. “It be another catalyst, a multi-chain reaction, because it brings an FDA approval and it brings Medicare to the table—and that’s often a lever with the third party payers.”

—Alex Lash contributed to this report