FibroGen, a biotech company, is currently facing a significant uphill battle as its stock plummets by 80% in just one day. This massive drop is a result of the company’s lead program, pamrevlumab, reporting disappointing late-stage clinical trial results for the second time in a month. As a result, shareholders are losing hope that the drug will be effective in treating idiopathic pulmonary fibrosis (IPF) and Duchenne muscular dystrophy (DMD), the two conditions it was being developed for.
In June, FibroGen experienced two phase 3 clinical trial failures and was forced to cancel a third trial for IPF, which was expected to yield similar results. The problem lies in the fact that the patients given pamrevlumab did not experience the specified benefits necessary for a successful course of treatment. Consequently, it is highly likely that FibroGen’s attempts to develop a drug for IPF will come to an end since the company does not have any other pipeline programs targeting the indication. Although there is still an ongoing phase 3 trial for DMD, investors remain pessimistic about its chances of success.
With its lead candidate underperforming and its prospects for growth severely impacted, FibroGen finds itself in a precarious position. It now only has three late-stage trials in progress, with its program for locally advanced unresectable pancreatic cancer (LAPC) being the only one fully owned by the company. This setback tarnishes the company’s growth prospects for the foreseeable future, and there is no clear path to reversing the damage. While FibroGen does have a drug on the market in China that generates some sales, it has not been enough to make the company profitable.
Roxadustat, FibroGen’s anemia drug for chronic kidney disease (CKD), generated $24.2 million in sales during the first quarter, representing a 28% increase from the previous year. However, the company reported a cash burn of $188 million over the past year, primarily due to its significant research and development expenses that exceeded $349 million. Even if Roxadustat continues to experience solid uptake and expands its indications to address other illnesses, it is unlikely to stabilize the company’s finances in the near future. Furthermore, cutting research costs to reduce cash burn would also hinder the opportunity for new pipeline deliveries.
Although June has been a challenging month for FibroGen, there are still three late-stage clinical trial readouts expected in the coming quarters that could potentially offer a glimmer of hope for the company’s stock. Favorable clinical trial results, coupled with the commercialization of its medicines, could generate additional sales and restore investor confidence. FibroGen also possesses enough resources to survive and make another attempt at entering its target markets. With approximately $356 million in cash and equivalents, along with $104 million in debt, the company can raise funds by issuing more stock. Management estimates that the current cash reserves will last until the end of 2026, assuming certain cost-cutting measures are implemented.
However, despite the potential for a turnaround, it is advisable to avoid investing in FibroGen at this time. With its lead candidate proving to be unsuccessful, the level of risk associated with the company is too high. Additionally, while the revenue growth from Roxadustat sales is promising, it does not address the fundamental challenges FibroGen faces moving forward.
Overall, FibroGen’s future seems uncertain. Shareholders are left waiting for the upcoming clinical trial readouts and potential positive results that could salvage the company’s stock. In the meantime, FibroGen needs to reassess its strategies and find new avenues for growth to regain investor confidence, as well as stabilize its financial position.
