Is Recent IPO FibroGen Inc (FGEN) a Good Biotech Bet? CNAT, ICPT & RPTP

Recent IPO FibroGen Inc (NASDAQ: FGEN) surged 22.96% today, reportedly after the journal Hepatology published the results of a workshop between the FDA and the American Association for the Study of Liver Disease (AASLD) which laid out criteria for a phase three study of a treatment for non-alcoholic steatohepatitis (NASH) – meaning its worth taking a closer look at the stock along with the performance of potential small cap or mid cap liver disease stock peers like Conatus Pharmaceuticals Inc (NASDAQ: CNAT), Intercept Pharmaceuticals Inc (NASDAQ: ICPT) and Raptor Pharmaceutical Corp (NASDAQ: RPTP) which rose 24.35%, 10.98% and 2.02%, respectively. According to Investors Business Daily, NASH (the more serious version of fatty liver disease) is potentially an enormous market with about 6 million US patients but the lack of previous treatments had left it unclear how the FDA would measure success against the disease while FibroGen Inc doesn't yet have a NASH human trial in the works, it has said it hopes to start one for its lead candidate FG-3019 (its in mid-stage trials for pulmonary fibrosis and liver fibrosis due to hepatitis B infection).

What is FibroGen Inc?

Small cap FibroGen Inc is a research-based biotechnology company using its expertise in connective tissue growth factor (CTGF) and hypoxia-inducible factor (HIF) biology to discover, develop and commercialize novel therapeutics for serious unmet medical needs. In 2006, FibroGen Inc entered an licensing agreement with Astellas Pharma Inc (TYO: 4503) that provides Astellas development and marketing rights to roxadustat (FG-4592) and certain other FibroGen HIF prolyl hydroxylase inhibitors for the treatment of anemia in Europe, Commonwealth of Independent States (CIS), Middle East and South Africa. In 2013, FibroGen Inc entered an licensing arrangement with AstraZeneca plc (NYSE: AZN) that provides AstraZeneca development and commercialization rights to roxadustat (FG-4592) for the treatment of anemia associated with chronic kidney disease (CKD) and end-stage renal disease (ESRD). Current clinical trials include the following:

FG-3019 FG-3019-067, Phase 2, Idiopathic Pulmonary Fibrosis
> Currently enrolling  FG-3019-049, Phase 2, Idiopathic Pulmonary Fibrosis
> Study ongoing FG-3019-801, Phase 2, Liver Fibrosis Due to Chronic Hepatitis B Infection
> Currently enrolling  FG-3019-028, Phase 1, Pancreatic Cancer
> Study ongoing  FG-4592 FG-4592-060, Phase 3, Nondialysis CKD Anemia
> Currently enrolling FG-4592-059, Phase 2, Dialysis and Nondialysis CKD Anemia
> Currently enrolling FG-4592-063, Phase 3 Dialysis CKD Anemia
> Currently enrolling

As for potential liver disease stock peers, small cap Conatus Pharmaceuticals Inc is a biotechnology company focused on the development and commercialization of novel medicines to treat liver disease that's developing a lead compound, emricasan, for the treatment of patients with chronic liver disease and acute exacerbations of chronic liver disease; mid cap Intercept Pharmaceuticals Inc is focused on the development and commercialization of novel therapeutics to treat chronic liver diseases utilizing our proprietary bile acid chemistry; and small cap Raptor Pharmaceutical Corp has active clinical development programs in multiple therapeutic areas such as nephropathic cystinosis, nonalcoholic fatty liver disease, Huntington's disease (HD), and Leigh syndrome and other mitochondrial disease.

What You Need to Know or Be Warned About FibroGen Inc

In the middle of November, FibroGen Inc announced the pricing of an IPO of 8,100,000 shares at $18.00 per share (near the top of the $16 to $19 range) plus underwriters were granted a 30-day option to purchase up to an additional 1,215,000 shares of common stock (Note: The Chairman/CEO along with Astellas Pharma Inc are its largest shareholders with 12.6% and 10.5% stakes, respectively). The company raised $146 million and shares closed at $22.

What's potentially interesting about FibroGen Inc is the fact its trying to show that a HIF-modulating drug can produce an effective and safe oral anemia pill. Right now, injectable anemia biologics bring in billions of dollars despite safety issues that have curtailed their use. However, the payout for replacing them with a pill without safety issues could be substantial. In addition, FibroGen Inc is targeting China with at least two drugs as its lead drug roxadustat is expected to begin a late-stage clinical trial in China in the first half of this year in chronic kidney disease patients with anemia along with FG-5200, a drug aimed at blindness.

Moreover and while FibroGen Inc has not generated any commercial product revenue, the company's Form S-1/A (filed on 11/12/2014) noted there is plenty of revenue with revenue to date being generated primarily from collaboration and license revenue from collaboration agreements with Astellas and AstraZeneca. Specifically, FibroGen Inc had revenue of $65,933k (2012), $102,170k (2013) and $121,496k (Nine Months ended September 30, 2014) along with net losses of $32,571k (2012), $14,943k (2013) and $8,944k (Nine Months ended September 30, 2014). As of September 30, 2014, the company had $175.5 million in cash, cash equivalents and short-term investments and an accumulated deficit of $271.7 million.

However, investors should be aware that FibroGen Inc has been around since 1993 and still doesn't have a drug that is approved and being sold. The company has also burned through over $217 million in cash since its inception.

Share Performance: FibroGen Inc vs. CNAT, ICPT & RPTP

On Monday, small cap FibroGen Inc surged 22.96% to $33.79 (FGEN has a 52 week trading range of $20.10 to $34.24 a share) for a market cap of $1.59 billion plus shares are up 53.6% for retail investors since last November. Here is a look at the performance of FibroGen Inc compared with the performance of Conatus Pharmaceuticals Inc, Intercept Pharmaceuticals Inc and Raptor Pharmaceutical Corp:

As you can see from the above chart, Intercept Pharmaceuticals Inc and Raptor Pharmaceutical Corp have been big winners for investors or traders with good timing.

Finally, here is look at the latest technical charts for all four liver disease stocks or players: 

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The Bottom Line. The fact that small cap FibroGen Inc has been around for over twenty years and has not yet created an approved drug should have investors a little cautious; but then again, that could change in the near future.