A Food and Drug Administration panel voted resoundingly against recommending approval for an anemia treatment from FibroGen (FGEN), and FGEN stock tanked on Friday.
FibroGen is angling for approval in chronic kidney disease patients. But panelists voted 13-1 against recommending the FDA approve roxadustat in patients not dependent on dialysis. They voted 12-2 in the case of dialysis-dependent patients.
Members of the FDA’s Cardiovascular and Renal Drugs Advisory Committee expressed concern that roxadustat increases the risk of death and other dangerous side effects, SVB Leerink analyst Geoffrey Porges said in a note to clients.
“We believe that potential U.S. approval for roxadustat will be delayed by years,” he said. And the FDA could ultimately restrict roxadustat to patients who don’t respond to standard drugs known as erythropoietin stimulating agent “if FibroGen continues U.S. development at all,” Porges added.
But FibroGen continued to defend roxadustat.
“While we are disappointed with today’s outcome, we believe the scientific evidence supports roxadustat approval in the U.S. and will work with the FDA as it completes its review of the New Drug Application for roxadustat,” Chief Executive Enrique Conterno said in a written statement.
FGEN Stock Craters On Panel Vote
In morning trading on the stock market today, FGEN stock collapsed 43.2% near 14.10.
In testing, roxadustat increased the risk of death, thrombosis, stent occlusion and serious infectious, Porges said. He added it also could cause seizures and metabolic/gastrointestinal side effects.
“Almost all of these imbalances were unknown to investors, and we expect investors to demand changes to the company’s board, management, staffing, portfolio and expenses as a result of this complete rejection,” he said.
The FDA isn’t bound by the committee’s recommendation. In fact, the FDA is currently facing mounting criticism after it approved Biogen‘s (BIIB) Alzheimer’s drug, Aduhelm, despite a negative advisory committee vote.
But Porges doesn’t expect that to happen in this case. He slashed his expectations for approval in the U.S. to zero. He also cut his price target on FGEN stock to 35 from 56, though he kept his outperform rating.
Will Investors Seek A Restructure?
Roxadustat is already approved in China and Japan, where FibroGen nets profit-sharing and royalties, respectively, from partner AstraZeneca (AZN). The European Medicines Agency’s Committee for Medicinal Products for Human Use previously issued a positive opinion on roxadustat.
FGEN investors are looking forward to test results for pamrevlumab, an experimental treatment for pancreatic cancer and Duchenne muscular dystrophy. But those results aren’t expected until the second half of 2022. That means the drug couldn’t launch until 2023.
“The remaining value of FibroGen’s stock is the value of other geographies for roxadustat, the value of pamrevlumab and the company’s cash,” Porges said. “FibroGen may insist that they deserve value for their ‘platform’ and for earlier-stage assets, but they are unlikely in our view to get any.”
Porges expects FGEN investors to also call for FibroGen to restructure itself following the vote. He argues the company should become one-third smaller.
“Such a restructuring typically takes months to design and implement, but we expect investors to demand no less given the lack of opportunity for roxadustat and the time until proof of (effectiveness) for pamrevlumab in the ongoing pivotal trials,” he said.
FGEN Stock Takes Another Hit
Mizuho Securities analyst Difei Yang also chopped her price target on FGEN stock to 18 from 32. She kept her neutral rating on shares.
She noted FibroGen suggested it could launch roxadustat with a lower starting dose and a risk-mitigation strategy.
“However, a number of panelists wanted to see this proposal validated in clinical trials, and thus voted against approval at this juncture,” she said.
Yang now believes FGEN stock is a commercial sales story in Europe and China in the short term. She also lowered her expectation for roxadustat approval in the U.S. to nothing.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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