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Why FibroGen Fell by More Than 9% on Wednesday

By Eric Volkman – Sep 22, 2021 at 4:30PM

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A noted investment bank takes a dimmer view of the company's stock.

What happened

The rising stock market had many winners on Wednesday, but alas for its shareholders FibroGen (FGEN -2.46%) wasn't one of them. The biotech's shares declined by over 9% following a downgrade from a famous investment bank.

So what

Goldman Sachs analyst Paul Choi has downshifted his recommendation for FibroGen stock. According to him, it's now a sell; previously he tagged it as a neutral. He also trimmed his price target from $16 per share to $11.

A medical professional using a microscope.

Image source: Getty Images.

Choi's concern is the company's leading product, roxadustat, which targets anemia due to chronic kidney disease. The drug has been stuck in the U.S. regulatory pipeline for quite some time. Of roxadustat, he wrote in a research note that it "faces an uphill struggle with regard to the path forward in the U.S."

"Absent regulatory clarity and convincing data and with competitor vadadustat poised to be the first to leapfrog onto the market, we expect [FibroGen] shares to underperform relative to the group," Choi added.

Vadadustat is a pipeline drug from peer biotech Akebia Therapeutics widely expected to get a Food and Drug Administration nod in the near future; Akebia submitted a New Drug Application for it in June. Meanwhile, the following month an FDA advisory committee officially recommended that the regulator not approve roxadustat, citing the potentially elevated risk of patients developing blood clots and experiencing seizures.

Now what

While I should note that the FDA is not required to follow the recommendations of its advisory committees, it frequently defers to their expertise. Additionally, this committee's vote against recommending approval for roxadustat was overwhelming, at 12 members against two. That does not bode well at all for FibroGen, so Choi's adjustment feels sensible and justified.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

FibroGen Stock Quote
FibroGen
FGEN
$15.05 (-2.46%) $0.38
Goldman Sachs Group Stock Quote
Goldman Sachs Group
GS
$358.08 (-0.51%) $-1.84
Akebia Therapeutics Stock Quote
Akebia Therapeutics
AKBA
$0.30 (%)

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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