Is FGEN a Buy after AdComm Meltdown?
Summary:
FGEN stock was crushed last week on strong votes against Roxadustat in both DD and NDD by FDA AdComm Big-Mover event
In battle of statistical experts/analysis, FDA's negative Roxa safety analysis beat FGEN's more favorable comments/spin in the view of AdComm members.
There is still a small chance that Roxa will be approved by the FDA for a limited population and an unfavorable label
Most likely, Roxa approval in U.S. will depend on another long, expensive study with newly proposed dosing regimen
FGEN has a number of important upcoming catalysts left in 2021
We think there is enough upside in FGEN going forward with near-term catalysts in 2021, that at the current price, we are holding and probably adding to our positions.
INTRO
The FDA advisory committee (AdComm) meeting for Rox adustat (Roxa) for the treatment of anemia in dialysis dependent (DD) and non-dialysis dependent (NDD) patients with chronic kidney disease (CKD) occurred on July 15, 2021, as scheduled. This event was one of our BPIQ.com July 2021 Big-Mover events (Subscribers see Big Mover page here). Our assessment of the importance of the event to FGEN combined with stock options data, correctly indicated that a strong positive or negative was likely to move the stock more than 20%. Unfortunately for FGEN and its investors, and to our surprise, the AdComm panel members voted overwhelmingly against approving Roxadustat in both DD CKD (2 yes/12 no) and NDD CKD (1 yes/13 no).
BACKGROUND
For background on FGEN, Roxa, and this Adcomm, see our prior free blog post (Is FGEN a Buy Going Into Roxa AdComm? blog post) or subscribers can read our more in depth article (Is FGEN a Buy Going into Roxa AdComm? forum post), and see the 67 page FDA AdComm briefing document as well as the 154 page FGEN Adcomm briefing document.
The Negative FDA Viewpoint on Safety Won over FGEN's more Positive view of the data
In a battle of statistical experts/analysis, FDA's negative Roxa safety analysis beat FGEN's more favorable comments/spin in the view of the AdComm members in both the DD CKD and NDD CKD studies. This conclusion is based on both the highly negative votes against Roxa approval and based on the committee member comments to support their vote. The committee appeared concerned about the safety signals that were presented for death, thrombosis, infection, and seizures (see FDA AdComm briefing document at pg. 58), and not convinced by FGEN's explanation (See FGEN Adcomm briefing document at pg. 64) of the events in NDD CKD, mainly that they were caused by an imbalance in patient drop out rate for NDD CKD, and not convinced that the proposed dose lowering in DD CKD with the expected lower Hemoglobin rise would mitigate the issue without actual study data at the lower dose.
As we discussed in our prior free blog post (Is FGEN a Buy Going Into Roxa AdComm? blog post) and more in-depth subscriber post (Is FGEN a Buy Going into Roxa AdComm? forum post), the FGEN Roxa situation highlights a number of challenges for investors, especially retail investors. One huge challenge especially for retail investors is the amount and complexity of the data and analysis. This issue appears to have been confounded by the apparent lack of disclosure, or misleading disclosure by FGEN of some important findings, although we have not gone back to all the prior FGEN data to confirm this. See for example, the FDA's analysis of thrombosis in the Roxa trials (FIG. 1).
FIG. 1. FDA analysis of thrombotic events (see FDA AdComm briefing document at pg. 65)
This issue of missing or misleading disclosures will likely will be central to a future class action lawsuit, that seems almost inevitable given FGEN's concession that at least one of their previously data presentations was misleading (See our prior article here). Furthermore, we don't recall much disclosure re: increased thrombosis, infections, or seizures in the prior presentations of Roxa safety analysis before this past weeks AdComm briefings and presentations, although as indicated, we have not double-checked all the prior FGEN presentations and SEC filings. Furthermore, even at their briefing documents for, and presentation at the AdComm, FGEN stressed a 1.3 Hazard Ratio 95% confidence interval cutoff for MACE analysis (See FGEN Adcomm briefing document at pg. 45), but the FDA indicated in the Q&A session that they specifically would not agree to that cutoff in discussions with FGEN, and instead requested a cutoff of 1.25. Finally, FGEN repeatedly discussed their increased hemoglobin data for Roxa, above that of ESAs, as a positive result, even though they knew that the rate of increase and level of hemoglobin had previously been identified as a likely factor in an increased risk of MACE events for ESAs.
There is still a small chance that Roxa will be approved by the FDA for a limited population and an unfavorable label
The questions posed by the FDA for the AdComm and votes were as follows:
1) Should roxadustat be approved for treatment anemia due to CKD, in adult patients not on dialysis? (13 NO and 1 YES) and
2) Should roxadustat be approved for treatment anemia due to CKD, in adult patients on dialysis? (12 NO and 2 YES)
(See (see FDA AdComm briefing document at pg. 14).
Note that the questions did not for example, ask whether Roxa should be approved in certain subgroups of patients. Several AdComm members in their no votes particularly for the DD patients, mentioned that there vote would have been different if they were specifically asked the question regarding ESA hyporesponders. We did not hear any of the AdComm members reply regarding incident dialysis (newly initiated dialysis) patients. However, this might be an interesting subroup for Roxa too, since Roxa appeared to perform better in this important subgroup. Of course in our prior blog and forum posts and as played out recently in the controversial FDA approval of a different and related drug, Aduhelm (FDA Grants Accelerated Approval for Alzheimer’s Drug), the AdComm votes are not binding on the FDA. However, given the FDA's negative Briefing Document and presentation at the AdComm, a broad label approval for Roxa in DD and/or NDD CKD appears extremely unlikely. Nevertheless, there is still a small chance that Roxa will be approved by the FDA for a very limited population, with a black box warning for increased risk of thombosis, seizures, and infections, and with a post-approval study requirement. Most likely, Roxa's eventual approval in U.S. will not occur for some years, and will be dependent on solid efficacy and safety data in an additional long, large and expensive clinical trial(s) using FGEN's newly proposed dosing regimen targeting a lower hemoglobin level (See FGEN Adcomm briefing document at pg. 74). However, as mentioned, there is a slight chance that the FDA approves Roxa for a limited patient population and with warnings, especially for the limited ESA hyporesponder population.
FGEN has a number of important upcoming catalysts left in 2021
In some ways, FGEN has become a more interesting investment target for smid-cap biopharma investors now that it has a present market cap of around $600M. Thus, it has more long-term room to run up now, if Roxa is eventually approved and/or with positive data from FGEN's second major asset, Pamrevlumab (See FGEN Portfolio page on BPIQ.com). There are a number of upcoming catalysts for FGEN still in 2021 that likely will affect this stock price by at least 5% and probably at least 10%:
First: We still need to get the FDA's decision likely rejecting Roxa's NDA filing for approval (by issuing a Complete Response Letter (CRL)). The exact date of this decision is less certain than usual, since as far as we understand the FDA will not extend Roxa's PFUDA date again even though it has past, since it has been extended twice. However, the FDA's decision will likely come by September 15 (i.e. within 2 months after AdComm (See "FDA intends to convene AC meetings no later than 2 months (standard review) or no later than 6 weeks (priority review) prior to the PDUFA goal date" in "FDA - PDUFA REAUTHORIZATION PERFORMANCE GOALS AND PROCEDURES FISCAL YEARS 2018 THROUGH 2022")).
Second: The European regulatory agency, the EMA is expected to approval Roxa for NDD CKD and DD CKD later this summer. There is a question now, of whether the FDA's AdComm vote and likely refusal to grant approval for Roxa in any indication, will affect the EMA. We are not experts on the EMA, but we speculate that the U.S. AdComm vote or FDA decision will not affect the EMA. Roxa recently received a positive opinion in Europe from the Committee for Medicinal Products for Human Use (CHMP) (See June 21-24 CHMP meeting highlights).
Third: We will see more quarterly revenue data on sales from Roxa in China and Japan. Adoption of Roxa in China, where it was approved for both NDD and DD, through the marketing efforts of AZ, has been impressive thus far (See FIG. 2). It will be interesting to see how that revenue looks in FGEN and AZ's Q2 and Q3 investor calls.
FIG. 2. Roxa China sales (Slide 40 of Fibrogen June 2021 investor presentation)
Fourth: We will get important Phase 2 data for Roxa in CIA (Chemotherapy Induced Anemia) in Q4 of this year (See FIG. 3).
FIG. 3. FGEN Pipeline on BPIQ.com 7/11/21
Fifth: We might get an announcement from Astra Zeneca as to whether they will continue with U.S. rights to Roxa or give those back to Fibrogen if there is no approval from the FDA. The market would likely respond negatively to FGEN getting back U.S. rights because then they will have to pay for expensive clinical trials to try to get Roxa over the finish line with the FDA, without any guarantees of course, that the trials will be positive for efficacy and safety with the new dosing schedule.
Did the market over-react to the negative AdComm votes?
Of course, this has been a painful 3 or so years for FGEN investors. But the key question now for investors is whether the market over-reacted to FGEN's challenges with the FDA and the AdComm, creating an attractive entry point for FGEN. First, a key question is whether Roxa's class of drugs, HIF-PR inhibitors, has class-specific safety issues that will kill the opportunity for large market penetration. At this time, the answer to this question appears to be that HIF-PR's are still a class of drugs with a large market opportunity. They don't look as promising as they did a few years ago, but the drugs are effective in raising hemoglobin, and now it is better understood that this rate of increase needs to be more gradual. Future studies, should look better with respect to safety. As we indicated, FGEN’s fumbles at the FDA for Roxa has provided an opportunity for its major competitors, Vadadustat (Vada) from Akebia (2022 - PDUFA date - Subscribers, see Vada in CKD IQ card here), Duvroq from GSK (See GSK announces positive headline results from five Phase 3 studies of daprodustat for patients with anaemia due to chronic kidney disease, and Bayer’s molidustat (Long-Term Efficacy and Safety of Molidustat for Anemia in Chronic Kidney Disease: DIALOGUE Extension Studies). In the future we plan to look more closely at the dosing/activity/hemoglobin rise of patients receiving these drugs, as their sponsors are likely analyzing in great detail after the FGEN AdComm.
Furthermore, remember the Roxa is approved in Japan and China, and likely will be approved in Europe this year. FGEN presented data at the AdComm, which appeared to indicate that there are less adverse events/safety signal with Roxa in China. Despite the AdComm's lopsided vote, as at least 3 or 4 AdComm members concluded, there is a reasonable case to be made with the existing data that Roxa should be approved, at least for certain subpopulations even with the existing data.
As we concluded previously, even if ROXA gets a negative view of the AdComm on DD, FGEN in our view still is worth more than $1B and arguably could still be valued at $2 billion, given the ex-U.S. Roxa market and current Pembrolizumab (Phase 3 asset) value. Of course we have to weigh the future cost of the likely investor litigation and settlement, and future Roxa Phase 3 trial(s) with the new dosing schedule, which will likely be hefty. But FGEN had about 2 years of cash/equivalents as of the end of Q1 with over $650 million in cash and a burn rate of around $70M/quarter. Thus, FGEN is well funded. And even if Astra Zeneca pulls our of Roxa in the U.S., FGEN could likely fund at least phase 3 trials in either NDD or DD. Thus, in our view, FGEN is attractive at the current price. There may be another negative bump with a likely upcoming FDA CRL, but most of that is built into the current price. And China sales data, approval in Europe, and possible positive data in CIA could be positive catalysts for FGEN this year. And who knows, an approval for any indication by the FDA, longshot as it seems currently, would be a nice positive surprise too. Thus, we are holding our FGEN positions going forward, and might return them back to their pre-AdComm levels in the coming month.
This article is not investment, tax, or legal advice. Please do you own diligence and seek advice from professional advisors representing your interests.
Article history:
7/18/21 initial published at ~ 7PM Central
7/19/21 Added the fifth possible 2021 catalyst event.