FibroGen's leading drug failed in a final-phase study of Duchenne muscular dystrophy patients on Wednesday, leading FGEN stock to dive to a five-month low.
But William Blair analyst Andy Hsieh notes most investors had low expectations for the drug, dubbed pamrevlumab, in the muscle-wasting disease. Instead, they are looking forward to how pamrevlumab performs in patients with a lung condition known as idiopathic pulmonary fibrosis.
Hsieh says pamrevlumab targets muscle fibrosis in Duchenne patients. In contrast, it aims to improve fibrosis of lung tissue in idiopathic pulmonary fibrosis. The differences in the tissues targeted could lead to a different outcome when FibroGen unveils its results in the lung disease.
"As a result, we do not believe there is material read-through to the ongoing Phase 3 (study known as) Zepherus-1 readout" in idiopathic pulmonary fibrosis, he said in a note to clients.
Still, on today's stock market, FGEN stock tumbled 8.4% to close at 17.13. Earlier, shares fell as much as 16%, hitting a low at 16.42.
FGEN Stock: Further Testing In Duchenne
Pamrevlumab didn't improve upper-limb mobility over a year in non-walking patients with Duchenne muscular dystrophy. But the drug proved generally safe and well tolerated.
The results don't necessarily spell the end for pamrevlumab in Duchenne muscular dystrophy. FibroGen is also testing pamrevlumab in patients who can still walk. Those results are due in the third quarter, Hsieh said.
He kept his outperform rating on FGEN stock.
"From a stock perspective, we view the weakness as an additional entry opportunity prior to the Phase 3 (idiopathic pulmonary fibrosis) readout around the middle of the year," he said. "Overall, given the strength of the previous Phase 2 data of pamrevlumab in (idiopathic pulmonary fibrosis), we remain cautiously optimistic."
Shares Tumble Below Key Lines
Shares tumbled below their 50-day and 200-day moving averages, according to MarketSmith.com.
Still, FGEN stock has an IBD Digital Relative Strength Rating of 91 out of a best-possible 99. This means shares rank in the top 9% of all stocks when it comes to 12-month performance.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
