FibroGen Stock Craters After Roxadustat Setback, But There Is A Silver Lining

The stock price of FibroGen (NASDAQ: FGEN), a biopharmaceutical company focused on therapeutics in immunology and oncology, reached its 52-week high of $56 in February this year before a larger sell-off in FGEN stock, especially after the U.S. FDA in March requested an additional meeting before reviewing the company’s much-awaited Roxadustat – a drug aimed at the treatment of anemia in chronic kidney disease. Furthermore, in April, the company disclosed that safety analyses from a late-stage study of Roxadustat were incorrect, sending the stock to even lower levels as low as under $19.

FGEN stock is down 6% over the last five trading sessions, and there has been another negative development for the company. Yesterday, the U.S. FDA’s Advisory Committee voted not to recommend the approval of Roxadustat for the treatment of anemia due to chronic kidney disease in adult patients. ^[1] The drug was pegged to have $3 billion in peak sales, and the recent development is a major setback for the company. FGEN stock is down nearly 38% in after-hours trading to levels of around $15. But will FGEN stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent?

According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for FGEN stock average 3% in the next one-month (twenty-one trading days) period after experiencing a 6% drop over the previous week (five trading days). However, for FGEN stock, today’s move will likely take it to an all-time low of under $16.

That said, historically, in rare events where FGEN stock has seen such a large decline, it has seen a rebound over the subsequent month. Based on our scenario for FibroGen’s stock returns, we find that if FGEN stock moved by -30% over five trading days, then over the next twenty-one trading days, FGEN stock moves an average of 13.8%, with a solid 91% probability of a positive return over this period. While there are only a few data points to back these numbers, a strong downward move in FGEN stock will also make it appealing to long-term investors. Note that Roxadustat is already approved in China, Japan, and South Korea, and it has a positive opinion from the committee for European Medicine Agency.

But how would these numbers change if you are interested in holding FGEN stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test FibroGen stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

Some Fun Scenarios, FAQs & Making Sense of FibroGen Stock Movements:

Question 1: Is the average return for FibroGen stock higher after a drop?

Answer: Consider two situations,

Case 1: FibroGen stock drops by -5% or more in a week

Case 2: FibroGen stock rises by 5% or more in a week

Is the average return for FibroGen stock higher over the subsequent month after Case 1 or Case 2?

FGEN stock fares better after Case 1, with an average return of 3.2% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus an average return of 1.6% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1 and an average return of just 0.5% for Case 2, as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how FibroGen stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold FibroGen stock, the expectation is over time, the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For FGEN stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for FibroGen after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall, as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

It’s pretty powerful to test the trend for yourself for FibroGen stock by changing the inputs in the charts above.

While FGEN stock will likely see a significant fall in the near term, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Merck vs. Regeneron.

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