Editor's Note

When insiders are selling at a 20:1 ratio over purchases it suggests they know something that everyone else does not. This stock was on a solid path higher until the end of December and since then it has been a straight dive lower.


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FGEN - Fibrogen Inc - Company Profile

Fibrogen is a small research-based biopharmaceutical company that discovers, develope and commercializes therapeutic agents to treat serious unmet needs. At least that is what their profile says about them. Their stock chart suggests they are not successful in this field.

The do have some novel drugs in the pipeline but the clinical studies are taking forever and the results of the latest study was limited at best. Their current drug under development is roxadustat, a "first in class anemia treatment" according to the company. However, they have only been able to enroll 80% of their targeted enrollment. If everything goes well they may get approval to market it in China by the end of 2016 but it will be 2018 before it can be marketed in the USA.

The FDA has more than 3,000 drug applications in the pipeline and it takes forever to get one through the system from start to finish.

For the last quarter they reported a loss of 74 cents. They had $365 million in cash and their burn rate is high. AstraZenaca has agreed to fund up to $116.5 million in research after the drug reaches certain clinical test levels. Only $11.8 million remained unspent at the end of the quarter meaning Fibrogen is going to see its own cash disappear even faster.

Shares of the company have been falling like a rock since the start of 2016. While I hate to short a stock already oversold the decline on Friday closed at a new historic low. They went public in October 2015. The decline appears to be accelerating.

The decline began in early January when Miguel Madero, a board member for 20 years resigned unexpectedly. He sold half his stake the week before he resigned. Insiders have been selling shares like crazy with no buys in the last three months and 29 sells. In the last 12 months, there have been 80 sales and only 4 insider buys.

There are options but the volume is too thin and the spreads too wide to play.

With a FGEN trade at $16.45

Short FGEN shares, initial stop loss $18.65