Foundation Medicine, Inc. (FMI, Financial), a provider of high end genetic oncology testing and informatics, was hurt by 33% during the quarter after investors grew concerned over reimbursement for its tests. Certain competitor tests were cut substantially by CMS (which determines Medicare pricing, and which in many cases is followed by private payers). However, the competitor tests provide testing for only a handful of genes and other markers, while Foundation's tests provide for hundreds at only about twice the price. The additional markers provided in Foundation's tests allow oncologists to determine whether there might be other disease pathways at work in a patient's cancer, which allows better targeting of therapy (costing orders of magnitude more per year than the testing). We continue to believe that Foundation will establish itself as a share leader, and that it has many years of growth ahead.
From Ron Baron (Trades, Portfolio)'s Baron Funds fourth quarter 2013 letter to shareholders.
