What changed in this filing

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Item 1. Financial Statements

2022-11-07 compared with 2022-08-08 · 482 added, 417 removed, 711 unchanged (56% of the section changed)

2 unchanged sentences

(In thousands, except per share amounts)

June 30, 2022

September 30, 2022

December 31, 2021

23 unchanged sentences

Total liabilities

C ommitments and Contingencies

Commitments and Contingencies (Note 8)

Stockholders’

2 unchanged sentences

no shares issued

and outstanding at June 30, 2022 and December 31, 2021

and outstanding at September 30, 2022 and December 31, 2021

Common stock, $ 0.01 par value;

225,000 shares authorized at June 30, 2022

225,000 shares authorized at September 30, 2022

and December 31, 2021;

93,936 and 92,881 shares issued and outstanding at

June 30, 2022 and December 31, 2021

September 30, 2022 and December 31, 2021

Additional paid-in capital

9 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

License revenue (includes $ 0 , $ 0 and $ 22,590

Three Months Ended September 30,

Nine Months Ended September 30,

License revenue (includes $ 0 , $ 108,434 , $ 22,590

and $ 108,434 from a related party)

11 unchanged sentences

Total operating costs and expenses

Loss from operations

Income (loss) from operations

Interest and other, net

2 unchanged sentences

Total interest and other, net

Loss before income taxes

Provision for (benefit from) income taxes

Income (loss) before income taxes

Provision for income taxes

Investment income in unconsolidated variable

interest entity

Net loss per share - basic and diluted

Weighted average number of common shares used to calculate

net loss per share - basic and diluted

Net income (loss)

Net income (loss) per share - basic and diluted

Weighted average number of common shares used to

calculate net income (loss) per share:

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

FIBROGEN, INC.

CONDENSED CONSOLIDATED STATE MENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATE MENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net income (loss)

Other comprehensive income (loss):

3 unchanged sentences

Other comprehensive gain (loss), net of taxes

Comprehensive loss

Comprehensive income (loss)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5 unchanged sentences

Income (Loss)

Balance at March 31,

Change in unrealized gain

or loss on investments

Foreign currency

translation adjustments

Balance at June 30,

Change in unrealized gain or

loss on investments

Foreign currency translation

Shares issued from stock

plans, net of payroll

plans, net of payroll taxes

Stock-based compensation

Balance at September 30,

Balance at June 30,

Balance at March 31,

Change in unrealized gain

or loss on investments

Foreign currency

translation adjustments

Change in unrealized gain or

loss on investments

Foreign currency translation

Shares issued from stock

plans, net of payroll

plans, net of payroll taxes

Stock-based compensation

Balance at June 30,

Balance at September 30,

FIBROGEN, INC.

1 unchanged sentence

(In thousands, except share data)

For The Six Month Period

For The Nine Month Period

Comprehensive

7 unchanged sentences

Stock-based compensation

Balance at June 30,

Balance at September 30,

Balance at December 31,

6 unchanged sentences

Stock-based compensation

Balance at June 30,

Balance at September 30,

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

33 unchanged sentences

Proceeds from issuance of common stock

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of exchange rate change on cash and cash equivalents

11 unchanged sentences

FibroGen is a leading biopharmaceutical company developing and commercializing a pipeline of first-in-class therapeutics.

The Company applies its pioneering expertise in hypoxia-inducible factor ("HIF") biology, 2-oxoglutarate enzymology, and connective tissue growth factor to advance innovative medicines for the treatment of anemia, fibrotic disease, and cancer.

The Company applies its pioneering expertise in hypoxia-inducible factor (“HIF”) biology, 2-oxoglutarate enzymology, and connective tissue growth factor to advance innovative medicines for the treatment of anemia, fibrotic disease, and cancer.

Pamrevlumab, a human monoclonal antibody targeting connective tissue growth factor, is in Phase 3 clinical development for the treatment of idiopathic pulmonary fibrosis, locally advanced unresectable pancreatic cancer and Duchenne muscular dystrophy.

To date, the Company has retained exclusive worldwide rights for pamrevlumab.

Roxadustat is an oral small molecule inhibitor of HIF prolyl hydroxylase (“HIF-PH”) activity.

Roxadustat is an oral small molecule inhibitor of HIF prolyl hydroxylase activity.

Roxadustat (爱瑞卓

® , EVRENZO TM ) is now approved in China, Europe, Japan, and numerous other countries for the treatment of anemia in chronic kidney disease (“CKD”) patients on dialysis and those not on dialysis.

® , EVRENZO TM ) is approved in China, Europe, Japan, and numerous other countries for the treatment of anemia in chronic kidney disease (“CKD”) for patients who are on dialysis and not on dialysis.

Astellas Pharma Inc.

(“Astellas”) and FibroGen are collaborating on the development and commercialization of roxadustat for the potential treatment of anemia in territories including Japan, Europe, Turkey, Russia and the Commonwealth of Independent States, the Middle East, and South Africa.

FibroGen and AstraZeneca are collaborating on the development and commercialization of roxadustat for the potential treatment of anemia in the U.S., China, other markets in the Americas, Australia/New Zealand, and Southeast Asia.

(“Astellas”) and FibroGen are collaborating on the development and commercialization of roxadustat in territories including Japan, Europe, Turkey, Russia and the Commonwealth of Independent States, the Middle East, and South Africa.

FibroGen and AstraZeneca AB (“AstraZeneca”) are collaborating on the development and commercialization of roxadustat in the United States (“U.S.”), China, other markets in the Americas, Australia/New Zealand, and Southeast Asia.

Roxadustat is in Phase 3 clinical development for anemia associated with myelodysplastic syndromes.

The Company has completed a Phase 2 study of roxadustat in chemotherapy-induced anemia and is running a Phase 3 trial of roxadustat chemotherapy-induced anemia in China.

The Company has completed a Phase 2 study of roxadustat in chemotherapy-induced anemia and is running a Phase 3 trial of roxadustat in chemotherapy-induced anemia in China.

The Company has a pipeline of late-stage clinical programs as well as preclinical drug candidates at various stages of development that include both small molecules and biologics.

The Company has leveraged its internally developed 2-oxoglutarate and connective tissue growth factor biology expertise as well as in-licensing of additional programs, such as antibodies targeting Galectin-9 protein (“Gal-9”) and C-C Motif Chemokine Receptor 8 (“CCR8”), to further enhance its late-stage preclinical pipeline.

FibroGen's goal is to build a diversified pipeline with novel drugs that will address unmet patient needs in oncology, immunology, and fibrosis.

FibroGen’s goal is to build a diversified pipeline with novel drugs that will address unmet patient needs in oncology, immunology, and fibrosis.

Basis of Presentation and Principles of Consolidation

4 unchanged sentences

the discovery, development and commercialization of novel therapeutics to treat serious unmet medical needs.

The unaudited condensed consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.

The unaudited condensed consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the U.S.

(“U.S.

GAAP”) applicable to interim financial reporting and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U.S.

13 unchanged sentences

Stock-Based Compensation

The Company maintains equity incentive plans under which incentive and nonqualified stock options are granted to employees, which are comprised of stock options, service-based restricted stock units ("RSUs"), performance-based RSUs and total shareholder return (“TSR”) awards.

The Company maintains equity incentive plans under which equity awards are granted to employees, which are comprised of stock options, service-based restricted stock units (“RSUs”), performance-based RSUs, and total shareholder return (“TSR”) awards.

The Company measures and recognizes compensation expense for all stock options, service and performance-based restricted stock units granted to its employees and directors based on the estimated fair value of the award on the grant date.

7 unchanged sentences

Net Loss per Share

The following is a reconciliation of the basic and diluted net income (loss) per share calculation for the periods presented (in thousands, except per share data):

Three Months Ended September 30,

Nine Months Ended September 30,

Net income (loss)

Weighted average shares used to compute net

income (loss) per share:

Dilutive effect of potential common shares

Net income (loss) per share:

Potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive and as such, these shares are not included in the calculation of diluted earnings per share.

The Company reported a net loss for each interim period presented.

Therefore, dilutive common shares are not assumed to have been issued since their effect is anti-dilutive.

Diluted weighted average shares excluded potential common shares related to stock options, restricted stock units (including service-based RSUs, performance-based RSUs and TSR awards) and shares to be purchased under the employee stock purchase plan totaling 14.2 million and 11.4 million for the three months ended June 30, 2022 and 2021 , and totaling 13.3 million and 9.4 million for the six months ended June 30, 2022 and 2021 , respectively, as they were anti-dilutive.

The Company reported a net loss for the three months ended September 30, 2022, and nine months ended September 30, 2022 and 2021.

Therefore, dilutive common shares are not assumed to have been issued since their effect is anti-dilutive for these periods.

Diluted weighted average shares excluded the following potential common shares related to s tock options, RSUs (including service-based RSUs, performance-based RSUs and TSR awards) and shares to be purchased under the 2014 Employee Stock Purchase Plan (“ESPP”) for the periods presented as they were anti-dilutive (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Employee stock options

Risks and Uncertainties

11 unchanged sentences

The relief offered by this guidance, if adopted, is available to companies for the period March 12, 2020 through December 31, 2022.

The Company has certain lease arrangements that are linked to the London Inter-Bank Offered Rate ("LIBOR").

The Company is in the process of evaluating options for transitioning away from LIBOR and expects to complete this analysis by the time LIBOR is phased out.

The Company did not elect to apply any of the expedients or exceptions as of and for the three and six months ended June 30, 2022 and is currently evaluating the impact on its condensed consolidated financial statements and related disclosures upon adoption of this guidance.

The Company did not elect to apply any of the expedients or exceptions as of and for the three and nine months ended September 30, 2022 .

The Company has certain lease arrangements that were accounted for with reference to the London Inter-Bank Offered Rate (“LIBOR”).

The Company has evaluated the options for transitioning away from LIBOR for these arrangements and does not expect a material impact on its condensed consolidated financial statements and related disclosures upon adoption of this guidance.

Collaboration Agreements, License Agreement and Revenues

Astellas Agreements

Japan Agreement

In June 2005, the Company entered into a collaboration agreement with Astellas for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in Japan (“Japan Agreement”).

Astellas Japan Agreement

Under this agreement, Astellas agreed to pay license fees, other upfront consideration and various milestone payments, totaling $ 172.6 million .

The Japan Agreement also provides for tiered payments based on net sales of product (as defined) in the low 20% range of the list price published by Japan’s Ministry of Health, Labour and Welfare, adjusted for certain elements, after commercial launch.

The aggregate amount of consideration received through June 30, 2022 totaled $ 105.1 million , excluding drug product revenue that is discussed separately below.

Amounts recognized as license revenue and development revenue under the Japan Agreement with Astellas were as follows for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

The Astellas Japan Agreement also provides for tiered payments based on net sales of product (as defined) in the low 20% range of the list price published by Japan’s Ministry of Health, Labour and Welfare, adjusted for certain elements, after commercial launch.

The aggregate amount of consideration received through September 30, 2022 totaled $ 105.1 million , excluding drug product revenue that is discussed under the Drug Product Revenue section below.

Amounts recognized as license revenue and development revenue under the Astellas Japan Agreement were as follows for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Performance Obligation

Astellas Japan Agreement

License revenue

Development revenue

The transaction price related to consideration received and accounts receivable has been allocated to each of the following performance obligations under the Japan Agreement with Astellas, along with any associated deferred revenue as follows (in thousands):

Japan Agreement

June 30, 2022

The transaction price related to consideration received through September 30, 2022 and accounts receivable has been allocated to each of the following performance obligations under the Astellas Japan Agreement, along with any associated deferred revenue as follows (in thousands):

Astellas Japan Agreement

September 30, 2022

Consideration

June 30, 2022

September 30, 2022

Development revenue

Total license and development revenue

There was no rev enue resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied or partially satisfied in previous periods for the three months ended June 30, 2022 under the Japan Agreement.

The Company does no t expect material variable consideration from estimated future co-development billing beyond the development period in the transaction price related to the Japan Agreement.

In 2018, FibroGen and Astellas entered into an amendment to the Japan Agreement that allows Astellas to manufacture roxadustat drug product for commercialization in Japan (the “Japan Amendment”).

The related drug product revenue, as described under Drug Product Revenue section below, was immaterial for the three months ended June 30, 2022, $( 2.0 ) million for the three months ended June 30, 2021, and $ 7.6 million and $ 2.1 million for the six months ended June 30, 2022 and 2021, respectively.

Europe Agreement

In April 2006, the Company entered into a separate collaboration agreement with Astellas for the development and commercialization of roxadustat for the treatment of anemia in Europe, the Middle East, the Commonwealth of Independent States and South Africa (“Europe Agreement”).

Under the terms of the Europe Agreement, Astellas agreed to pay license fees, other upfront consideration and various milestone payments, totaling $ 745.0 million .

U nder the Europe Agreement, Astellas committed to fund 50 % of joint development costs for Europe and North America, and all territory-specific costs.

The Europe Agreement also provides for tiered payments based on net sales of product (as defined) in the low 20% range .

The Company does no t expect material variable consideration from estimated future co-development billing beyond the development period in the transaction price related to the Astellas Japan Agreement.

In 2018, FibroGen and Astellas entered into an amendment to the Astellas Japan Agreement that allows Astellas to manufacture roxadustat drug product for commercialization in Japan (the “Astellas Japan Amendment”).

The related drug product revenue is described under the Drug Product Revenue section below.

Astellas Europe Agreement

Under the terms of the Astellas Europe Agreement, Astellas agreed to pay license fees, other upfront consideration and various milestone payments, totaling $ 745.0 million .

U nder the Astellas Europe Agreement, Astellas committed to fund 50 % of joint development costs for Europe and North America, and all territory-specific costs.

The Astellas Europe Agreement also provides for tiered payments based on net sales of product (as defined) in the low 20% range .

On March 21, 2022, EVRENZO ® (roxadustat) was registered with the Russian Ministry of Health.

The Company evaluated the regulatory milestone payment associated with the approval in Russia under the Europe Agreement and concluded that this milestone was achieved in the first quarter of 2022.

Accordingly, the consideration of $ 25.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Europe Agreement, all of which was recognized as revenue during the first quarter of 2022 from performance obligations satisfied.

The Company evaluated the regulatory milestone payment associated with the approval in Russia under the Astellas Europe Agreement and concluded that this milestone was achieved in the first quarter of 2022.

Accordingly, the consideration of $ 25.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Astellas Europe Agreement, all of which was recognized as revenue during the first quarter of 2022 from performance obligations satisfied.

Such amount was billed and recorded in accounts receivable from Astellas as of March 31, 2022 and received in April 2022.

The aggregate amount of consideration received under the Europe Agreement through June 30, 2022 totaled $ 685.0 million , excluding drug product revenue that is discussed separately below.

Amounts recognized as license revenue and development revenue under the Europe Agreement with Astellas were as follows for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

The aggregate amount of consideration received under the Astellas Europe Agreement through September 30, 2022 totaled $ 685.0 million , excluding drug product revenue that is discussed under the Drug Product Revenue section below.

Amounts recognized as license revenue and development revenue under the Astellas Europe Agreement were as follows for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Performance Obligation

Astellas Europe Agreement

License revenue

Development revenue

The transaction price related to consideration received and accounts receivable has been allocated to each of the following performance obligations under the Europe Agreement with Astellas, along with any associated deferred revenue as follows (in thousands):

Europe Agreement

June 30, 2022

The transaction price related to consideration received through September 30, 2022 and accounts receivable has been allocated to each of the following performance obligations under the Astellas Europe Agreement, along with any associated deferred revenue as follows (in thousands):

Astellas Europe Agreement

September 30, 2022

Consideration

June 30, 2022

September 30, 2022

Development revenue

Total license and development revenue

There was no rev enue resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied or partially satisfied in previous periods for three months ended June 30, 2022 under the Europe Agreement.

The remainder of the transaction price related to the Europe Agreement includes $ 7.6 million of variable consideration from estimated future co-development billing and is estimated to be recognized over the remaining development service period.

Under the Europe Agreement, Astellas has an option to purchase roxadustat bulk drug product in support of commercial supplies.

During the first quarter of 2021, the Company entered into an EU Supply Agreement under the Europe Agreement with Astellas (“EU Supply Agreement”) to define general forecast, order, supply and payment terms for Astellas to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies.

The related drug product revenue, as described under Drug Product Revenue section below, was $ 1.1 million for the three and six months ended June 30, 2022, respectively.

There was no related drug product revenue for the three and six months ended June 30, 2021.

There was no rev enue resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied or partially satisfied in previous periods for three months ended September 30, 2022 under the Astellas Europe Agreement.

The remainder of the transaction price related to the Astellas Europe Agreement includes $ 6.3 million of variable consideration from estimated future co-development billing and is estimated to be recognized over the remaining development service period.

Under the Astellas Europe Agreement, Astellas has an option to purchase roxadustat bulk drug product in support of commercial supplies.

During the first quarter of 2021, the Company entered into an EU Supply Agreement with Astellas under the Astellas Europe Agreement (“Astellas EU Supply Agreement”) to define general forecast, order, supply and payment terms for Astellas to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies.

The related drug product revenue is described under the Drug Product Revenue section below.

AstraZeneca Agreements

U.S./Rest of World (“RoW”) Agreement

Effective July 30, 2013, the Company entered into a collaboration agreement with AstraZeneca AB ("AstraZeneca") for the development and commercialization of roxadustat for the treatment of anemia in the U.S.

and all other countries in the world, other than China, not previously licensed under the Astellas Europe and Astellas Japan Agreements (“U.S./RoW Agreement”).

AstraZeneca U.S./Rest of World (“RoW”) Agreement

Effective July 30, 2013, the Company entered into a collaboration agreement with AstraZeneca for the development and commercialization of roxadustat for the treatment of anemia in the U.S.

and all other countries in the world, other than China, not previously licensed under the Astellas Europe and Astellas Japan Agreements (“AstraZeneca U.S./RoW Agreement”).

It also excludes China, which is covered by a separate agreement with AstraZeneca described below.

Under the terms of the U.S./RoW Agreement, AstraZeneca agreed to pay upfront, non-contingent, non-refundable and time-based payments, and potential milestone payments, totaling $ 1.2 billion .

AstraZeneca will pay the Comp any tiered royalty payments on AstraZeneca’s future net sales (as defined in the agreement) of roxadustat in the low 20% range .

In addition, the Company will receive a transfer price for shipment of commercial product based on a percentage of AstraZeneca’s net sales (as defined in the agreement) in the low- to mid-single digit range.

The aggregate amount of consideration received under the U.S./RoW Agreement through June 30, 2022 totaled $ 439.0 million , excluding drug product revenue that is discussed separately below.

Under the terms of the AstraZeneca U.S./RoW Agreement, AstraZeneca agreed to pay upfront, non-contingent, non-refundable and time-based payments, and potential milestone payments, totaling $ 1.2 billion .

AstraZeneca commits to pay the Comp any tiered royalty payments on AstraZeneca’s future net sales (as defined in the agreement) of roxadustat in the low 20% range .

In addition, the Company is entitled to receive a transfer price for shipment of commercial product based on a percentage of AstraZeneca’s net sales (as defined in the agreement) in the low- to mid-single digit range.

The aggregate amount of consideration received under the AstraZeneca U.S./RoW Agreement through September 30, 2022 totaled $ 439.0 million , excluding drug product revenue that is discussed separately below.

While FibroGen and AstraZeneca continue to develop roxadustat in the U.S.

for the treatment of anemia in patients with myelodysplastic syndromes, the Company has not been able to agree on a path forward for AstraZeneca to fund further roxadustat development for CKD anemia in the U.S.

Therefore, the Company does not expect to receive most or all of the remaining U.S./RoW Agreement milestones from AstraZeneca.

In 2020, the Company entered into Master Supply Agreement under the U.S./RoW Agreement with AstraZeneca (“Master Supply Agreement”) to define general forecast, order, supply and payment terms for AstraZeneca to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies.

There was no related drug product revenue for the three and six months ended June 30, 2022, and the related drug product revenue was $( 6.7 ) million and $( 2.2 ) million for the three and six months ended June 30, 2021, respectively.

See Drug Product Revenue section below.

China Agreement

Effective July 30, 2013, the Company (through its subsidiaries affiliated with China) entered into the China Agreement (“China Agreement”).

Under the terms of the China Agreement, AstraZeneca agreed to pay upfront consideration and potential milestone payments, totaling $ 376.7 million .

The China Agreement is structured as a 50/50 profit or loss share (as defined), which was amended under the China Amendment discussed below in 2020, and provides for joint development costs (including capital and equipment costs for construction of the manufacturing plant in China), to be shared equally during the development period.

The aggregate amount of such consideration received for milestone and upfront payments through June 30, 2022 totaled $ 77.2 million .

China Amendment

Therefore, the Company does not expect to receive most or all of the remaining AstraZeneca U.S./RoW Agreement milestones from AstraZeneca.

In 2020, the Company entered into a Master Supply Agreement with AstraZeneca under the AstraZeneca U.S./RoW Agreement (“AstraZeneca Master Supply Agreement”) to define general forecast, order, supply and payment terms for AstraZeneca to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies.

The related drug product revenue is described under the Drug Product Revenue section below.

AstraZeneca China Agreement

Effective July 30, 2013, the Company (through its subsidiaries affiliated with China) entered into the China Agreement (“AstraZeneca China Agreement”).

Under the terms of the AstraZeneca China Agreement, AstraZeneca agreed to pay upfront consideration and potential milestone payments, totaling $ 376.7 million .

The AstraZeneca China Agreement is structured as a 50/50 profit or loss share (as defined), which was amended under the China Amendment discussed below in 2020, and provides for joint development costs (including capital and equipment costs for construction of the manufacturing plant in China), to be shared equally during the development period.

The aggregate amount of such consideration received for milestone and upfront payments through September 30, 2022 totaled $ 77.2 million .

AstraZeneca China Amendment

In July 2020, FibroGen China Anemia Holdings, Ltd., FibroGen (China) Medical Technology Development Co., Ltd.

("FibroGen Beijing"), and FibroGen International (Hong Kong) Limited (collectively “FibroGen China”) and AstraZeneca entered into the China Amendment, relating to the development and commercialization of roxadustat in China.

(“FibroGen Beijing”), and FibroGen International (Hong Kong) Limited and AstraZeneca entered into the China Amendment, relating to the development and commercialization of roxadustat in China.

Under the China Amendment, in September 2020, FibroGen Beijing and AstraZeneca completed the establishment of a jointly owned entity, Beijing Falikang Pharmaceutical Co., Ltd.

("Falikang"), which performs roxadustat distribution, as well as conducts sales and marketing through AstraZeneca.

(“Falikang”), which performs roxadustat distribution, as well as conducts sales and marketing through AstraZeneca.

Since Falikang became fully operational in January 2021, substantially all direct roxadustat product sales to distributors in China are made by Falikang, while FibroGen Beijing continues to sell roxadustat product directly in one province in China.

FibroGen Beijing manufactures and supplies commercial product to Falikang based on a gross transfer price, which is adjusted for the estimated profit share.

Amounts recognized as revenue under the U.S./RoW Agreement and China Agreement with AstraZeneca were as follows for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Amounts recognized as revenue under the AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement were as follows for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Performance Obligation

AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement

License revenue

Development revenue

The transaction price relat ed to consideration received and accounts receivable has been allocated to each of the following performance obligations under the U.S./RoW Agreement and China Agreement with AstraZeneca, along with any associated deferred revenue as follows (in thousands):

/ RoW and China Agreements

June 30, 2022

The transaction price relat ed to consideration received through September 30, 2022 and accounts receivable has been allocated to each of the following performance obligations under the AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement, along with any associated deferred revenue as follows (in thousands):

AstraZeneca U.S./RoW Agreement and

AstraZeneca China Agreement

September 30, 2022

Consideration

June 30, 2022

September 30, 2022

Co-development, information sharing &

4 unchanged sentences

** Contract assets and liabilities related to rights and obligations in the same contract are recorded net on the consolidated balance sheets.

As of June 30, 2022, deferred revenue included $ 157.3 million related to the U.S./RoW Agreement and China Agreement, which represents the net of $ 170.5 million of deferred revenue presented above and a $ 13.2 million unbilled co-development revenue under the China Amendment with AstraZeneca.

There was no revenue resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied or partially satisfied in previous periods for the three months ended June 30, 2022 under the U.S./RoW Agreement.

The remainder of the transaction price related to the U.S./R oW Agreement and China Agreement includes $ 18.0 million of variable consideration from estimated future co-development billing and is estimated to be recognized over the remaining development service period, except for amounts allocated to the China performance obligation.

As of September 30, 2022, deferred revenue included $ 160.1 million related to the AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement, which represents the net of $ 175.4 million of deferred revenue presented above and a $ 15.3 million unbilled co-development revenue under the AstraZeneca China Amendment.

There was no revenue resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied or partially satisfied in previous periods for the three months ended September 30, 2022 under the AstraZeneca U.S./RoW Agreement.

The remainder of the transaction price related to the AstraZeneca U.S./R oW Agreement and AstraZeneca China Agreement includes $ 13.4 million of variable consideration from estimated future co-development billing and is estimated to be recognized over the remaining development service period, except for amounts allocated to the China performance obligation.

The amount allocated to the China performance obligation is expected to be recognized as the Company transfers control of the commercial drug product to Falikang.

The net product revenue from the sales to Falikang was $ 19.7 million and $ 11.8 million for the three months ended June 30, 2022 and 2021, and $ 36.0 million and $ 22.2 million for the six months ended June 30, 2022 and 2021, respectively, as described under Product Revenue, Net section below.

In addition to sales to Falikang, the net product revenue from direct sales distributors in China was $ 3.5 million and $ 1.6 million for the three months ended June 30, 2022 and 2021, and $ 6.2 million and $ 6.6 million for the six months ended June 30, 2022 and 2021, respectively, as described as direct sales under Product Revenue, Net section below.

The net product revenue from the sales to Falikang and the net product revenue from direct sales distributors in China are described under Product Revenue, Net section below.

Product Revenue, Net

Product revenue, net from the sales of roxadustat commercial product in China was as follows for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Product revenue, net from the sales of roxadustat commercial product in China was as follows for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Direct Sales:

6 unchanged sentences

Net transaction price

Decrease (increase) in deferred revenue

Increase in deferred revenue

Sales to Falikang revenue, net

6 unchanged sentences

December 31, 2021

June 30, 2022

September 30, 2022

Product revenue - Direct sales - contract liabilities

The above contract liabilities were included in accrued and other current liabilities in the condensed consolidated balance sheet.

The rebates and discounts reflected as reductions to gross accounts receivable for direct sales wer e $ 0.7 million and $ 1.1 million a s of June 30, 2022 and December 31, 2021, respectively.

The rebates and discounts reflected as reductions to gross accounts receivable for direct sales wer e $ 0.7 million and $ 1.1 million a s of September 30, 2022 and December 31, 2021, respectively.

Sales to Falikang –

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Revenue is recognized when control of the product is transferred to Falikang, in an amount that reflects the allocation of the transaction price to the performance obligation satisfied during the reporting period.

Any net transaction price in excess of the revenue recognized is added to the deferred balance to date, and will be recognized over future periods as the performance obligation is satisfied.

Following updates to its estimates, the Company recognized $ 1.5 million and $ 3.9 million from the previously deferred revenue of the China performance obligation during the three and six months ended June 30, 2022, respectively.

Any net transaction price in excess of the revenue recognized is added to the deferred balance to date, and will be recognized in future periods as the performance obligation is satisfied.

Periodically, the Company updates its assumptions such as total sales quantity, performance period and other inputs including foreign currency translation impact, among others.

Following updates to its estimates, the Company deferred $ 4.6 million and $ 0.8 million from the net transfer price to Falikang, which was included in the related deferred revenue of the China performance obligation during the three and nine months ended September 30, 2022, respectively.

The following table includes a roll-forward of the related deferred revenue that is considered as a contract liability (in thousands):

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Recognized as Revenue

June 30, 2022

September 30, 2022

Product revenue - AstraZeneca China

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Deferred revenue includes amounts allocated to the China performance obligation under the AstraZeneca arrangement as revenue recognition associated with this unit of accounting is tied to the commercial launch of the products within China and to when the control of the manufactured commercial products is transferred to AstraZeneca.

As of June 30, 2022 , approximately $ 14.9 million of the above deferred revenue related to the China unit of accounting was included in short-term deferred revenue, which represents the amount of deferred revenue associated with the China unit of accounting that is expected to be recognized within the next 12 months, associated with the commercial sales in China.

Due to the Company’s legal right to offset, at each balance sheet date, the rebates and discounts, mainly related to profit sharing, are presented as reductions to gross accounts receivable from Falikang, which was $ 6.5 million and $ 13.4 million as of June 30, 2022 and December 31, 2021 , respectively.

As of September 30, 2022 , approximately $ 18.0 million of the above deferred revenue related to the China unit of accounting was included in short-term deferred revenue, which represents the amount of deferred revenue associated with the China unit of accounting that is expected to be recognized within the next 12 months, associated with the commercial sales in China.

Due to the Company’s legal right to offset, at each balance sheet date, the rebates and discounts, mainly related to profit sharing, are presented as reductions to gross accounts receivable from Falikang, which was $ 0.3 million and $ 13.4 million as of September 30, 2022 and December 31, 2021 , respectively.

Drug Product Revenue

Drug product revenue from commercial-grade active pharmaceutical ingredient (“API”) or bulk drug product sales to Astellas and AstraZeneca was as follows for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Drug product revenue from commercial-grade active pharmaceutical ingredient (“API”) or bulk drug product sales to Astellas and AstraZeneca was as follows for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Astellas Japan Agreement

Astellas Europe Agreement

AstraZeneca - U.S.

AstraZeneca U.S./RoW Agreement

Drug product revenue

During the first quarter of 2022, the Company fulfilled a shipment obligation under the terms of Japan Amendment with Astellas, and recognized related drug product revenue of $ 9.8 million in the same period.

In addition, the Company updated its estimate of variable consideration related to the API shipments fulfilled under the terms of Japan Amendment with Astellas, and accordingly recorded adjustments to the drug product revenue of $( 2.2 ) million, $( 2.0 ) million and $ 4.0 million for the first quarter of 2022, the second quarter of 2021 and the first quarter of 2021, respectively.

Astellas Japan Agreement

During the first quarter of 2022, the Company fulfilled a shipment obligation under the terms of Astellas Japan Amendment, and recognized related drug product revenue of $ 9.8 million in the same period.

In addition, the Company updated its estimate of variable consideration related to the API shipments fulfilled under the terms of Japan Amendment with Astellas, and recorded a reduction to the drug product revenue of $ 2.2 million during the first quarter of 2022.

Specifically, the change in estimated variable consideration was based on the API held by Astellas at period end, adjusted to reflect the changes in the estimated bulk product strength mix intended to be manufactured by Astellas, estimated cost to convert the API to bulk product tablets, and estimated yield from the manufacture of bulk product tablets, among others.

During the second quarter of 2022, the Company transferred bulk drug product for commercial purposes under the terms of the Europe Agreement and the EU Supply Agreement with Astellas, and recognized the related fully burdened manufacturing costs of $ 1.0 million as drug product revenue, and recorded $ 23.2 million as deferred revenue due to a high degree of uncertainty associated with the final consideration.

In addition, the Company recognized royalty revenue of $ 0.1 million as drug product revenue from the deferred revenue under the Europe Agreement during the second quar ter of 2022.

The remainder of the deferred revenue will be recognized as and when uncertainty is resolved, based on the performance of roxadustat product sales in the territory.

During the three months ended September 30, 2022, the Company updated its estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment, and accordingly recorded adjustments to the drug product revenue of $( 4.3 ) million.

Specifically, the change in estimated variable consideration was based on the API held by Astellas at period end, adjusted to reflect foreign currency translation impact and the changes in the estimated bulk product strength mix intended to be manufactured by Astellas, among others.

This amount was included in accrued liabilities as of September 30, 2022, representing the Company's best estimate that this amount will be paid within the next 12 months.

During the nine months ended September 30, 2021, the Company updated its estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment, and accordingly recorded adjustments to the drug product revenue of $ 2.1 million.

Astellas Europe Agreement

During the second quarter of 2022, the Company transferred bulk drug product for commercial purposes under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement, and recognized the related fully burdened manufacturing costs of $ 1.0 million as drug product revenue, and recorded $ 23.2 million as deferred revenue due to a high degree of uncertainty associated with the variable consideration for revenue recognition purposes.

In addition, the Company recognized royalty revenue of $ 0.2 million and $ 0.3 million as drug product revenue from the deferred revenue under the Astellas Europe Agreement during the three and nine months ended September 30, 2022, respectively.

The remainder of the deferred revenue will be recognized as and when uncertainty is resolved, based on the performance of roxadustat product sales in the Astellas territory.

During the first quarter of 2022, the Company billed and received $ 49.2 million from Astellas related to the annual transfer price true up for bulk drug product transferred for commercial purposes.

This amount was recorded in deferred revenue and netted against an unbilled contract asset as of December 31, 2021.

During the first and second quarter of 2022, the Company updated its estimate of variable consideration related to the bulk drug product transferred in prior years.

The Company updated its estimate of variable consideration related to the bulk drug product transferred in prior years.

Specifically, the change in estimated variable consideration was based on the bulk drug product held by Astellas at the period end, adjusted to reflect the changes in the estimated transfer price, forecast information, shelf-life estimates and other items.

As a result, the Company reclassified $ 43.3 million from deferred revenue to accrued liabilities as of June 30, 2022, representing its best estimate that this amount will be paid in the first quarter of 2023.

As a result, during the nine months ended September 30, 2022, the Company reclassified a total of $ 51.0 million from the related deferred revenue to accrued liabilities.

As of September 30, 2022, the related balance in accrued liabilities was $ 51.0 million, representing the Company's best estimate that this amount will be paid within the next 12 months.

AstraZeneca U.S./RoW Agreement

During the first quarter of 2022, the Company evaluated the current developments in the U.S.

market, and updated its estimates of variable consideration associated with bulk drug product shipments to AstraZeneca in prior years as commercial supply.

As a result, the Company reclassified $ 11.2 million from the related deferred revenue to accrued liabilities as of June 30, 2022.

As a result, during the nine months ended September 30, 2022, the Company reclassified $ 11.2 million from the related deferred revenue to accrued liabilities.

As of September 30, 2022, the related balance in accrued liabilities was $ 11.2 million, representing its best estimate that this amount will be paid within the next 12 months .

The following table includes a roll-forward of the above-mentioned deferred revenues that are considered as contract liabilities related to drug product (in thousands):

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Reclassified to Accrued Liability / Accounts Payable

June 30, 2022

September 30, 2022

Astellas Japan Agreement

Astellas Europe Agreement

AstraZeneca - U.S.

AstraZeneca U.S./RoW Agreement

Drug product revenue - deferred revenue

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In July 2021, FibroGen exclusively licensed to Eluminex Biosciences (Suzhou) Limited (“Eluminex”) global rights to its investigational biosynthetic cornea derived from recombinant human collagen Type III.

Under the terms of the agreement with Eluminex , as amended and restated on January 21, 2022, Eluminex made an $ 8.0 million upfront payment to FibroGen during the first quarter of 2022, which was recorded as an unbilled contract asset as of December 31, 2021 in the prepaid expenses and other current assets in the condensed consolidated balance sheets.

Under the terms of the agreement with Eluminex , as amended and restated on January 21, 2022, Eluminex made an $ 8.0 million upfront payment to FibroGen during the first quarter of 2022, which was recognized as license revenue for the performance obligation satisfied during the third quarter of 2021 and recorded as an unbilled contract asset as of December 31, 2021 in the prepaid expenses and other current assets in the condensed consolidated balance sheet.

In addition, FibroGen may receive up to a total of $ 64.0 million in future manufacturing, clinical, regulatory, and commercial milestone payments for the biosynthetic cornea program, as well as $ 36.0 million in commercial milestones for the first recombinant collagen III product that is not the biosynthetic cornea.

FibroGen will also be eligible to receive mid single-digit to low double-digit royalties based upon worldwide net sales of cornea products, and low single-digit to mid single-digit royalties based upon worldwide n et sales of other recombinant human collagen type III products that are not cornea products.

During the first quarter of 2022, FibroGen and Eluminex entered into a separate contract manufacturing agreement, under which the Company is responsible for supplying the cornea product at 110 % of its product manufacturing costs until its manufacturing technology is fully transferred to Eluminex.

During the first quarter of 2022, FibroGen and Eluminex entered into a separate contract manufacturing agreement, under which the Company is responsible for supplying the cornea product at cost plus 10 % of its product manufacturing costs until its manufacturing technology is fully transferred to Eluminex.

The related contract manufacturing revenue was recorded as other revenue and included in development and other revenue in the condensed consolidated statement of operations.

Amounts recognized as revenue under the Eluminex were as follows for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Amounts recognized as revenue under the Eluminex were as follows for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Performance Obligation

License revenue

Other revenue - contract manufacturing

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Share of Net Income

June 30, 2022

September 30, 2022

Falikang is considered a related party to the Company.

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The fair values of the Company’s financial assets that are measured on a recurring basis are as follows (in thousands):

June 30, 2022

September 30, 2022

Money market funds

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These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data, and other observable inputs.

There were no transfers of assets between levels during the three and six months ended June 30, 2022 .

There were no transfers of assets between levels during the three and nine months ended September 30, 2022 .

Balance Sheet Components

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Cash and cash equivalents consisted of the following (in thousands):

June 30, 2022

September 30, 2022

December 31, 2021

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Total cash and cash equivalents

At June 30, 2022 and December 31, 2021 , a total of $ 98.8 million and $ 91.2 million, respectively, of the Company’s cash and cash equivalents were held outside of the U.S.

At September 30, 2022 and December 31, 2021 , a total of $ 84.4 million and $ 91.2 million, respectively, of the Company’s cash and cash equivalents were held outside of the U.S.

in its foreign subsidiaries to be used primarily for its China operations.

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The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s investments by major investments type are summarized in the tables below (in thousands):

June 30, 2022

September 30, 2022

Amortized Cost

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Total investments

At June 30, 2022 , the available-for-sale investments had contractual maturities range from several months to two years .

The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and gross unrealized loss by length of time the security has been in a continual unrealized loss position (in thousands):

September 30, 2022

Less than 12 Months

12 Months or More

Gross Unrealized

Holding Losses

Gross Unrealized

Holding Losses

Gross Unrealized

Holding Losses

Corporate bonds

government bonds

Asset-backed securities

Foreign government bonds

December 31, 2021

Less than 12 Months

12 Months or More

Gross Unrealized

Holding Losses

Gross Unrealized

Holding Losses

Gross Unrealized

Holding Losses

Corporate bonds

government bonds

Asset-backed securities

Foreign government bonds

At September 30, 2022 , the available-for-sale investments had contractual maturities range from several months to two years .

The Company periodically reviews its available-for-sale investments for other-than-temporary impairment.

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For debt securities, the Company also considers whether (i) it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses.

Based on the results of its review, the Company did no t recognize any other-than-temporary impairment loss during the three and six months ended June 30, 2022 and 2021.

Based on the results of its review, the Company did no t recognize any other-than-temporary impairment loss during the three and nine months ended September 30, 2022 and 2021.

Inventories consisted of the following (in thousands):

June 30, 2022

September 30, 2022

December 31, 2021

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Accrued and other current liabilities consisted of the following (in thousands):

June 30, 2022

September 30, 2022

December 31, 2021

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Total accrued and other current liabilities

The accrued liabilities of $ 54.4 million for API and bulk drug product price true-up as of June 30, 2022 resulted from changes in estimated variable consideration associated with the API shipments fulfilled under the terms of the Japan Amendment with Astellas, the bulk drug product transferred under the terms of the Europe Agreement and the EU Supply Agreement with Astellas, and the bulk drug product shipments to AstraZeneca under the terms of the Master Supply Agreement.

See Note 2, Collaboration Agreements, License Agreement and Revenues, for details.

The acquired in-process research and development asset of $ 35.0 million as of December 31, 2021 was related to the upfront payment under an exclusive license and option agreement with HiFiBiO Therapeutics (“HiFiBiO”), which was paid during the six months ended June 30, 2022 .

Provisions for (benefit from) income tax for the three and six months ended June 30, 2022 and 2021 were primarily due to foreign taxes.

The accrued liabilities of $ 66.5 million for API and bulk drug product price true-up as of September 30, 2022 resulted from changes in estimated variable consideration associated with the API shipments fulfilled under the terms of the Astellas Japan Amendment, the bulk drug product transferred under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement, and the bulk drug product shipments to AstraZeneca under the terms of the AstraZeneca Master Supply Agreement.

See the Drug Product Revenue section in Note 2, Collaboration Agreements, License Agreement and Revenues, for details.

Provisions for income tax for the three and nine months ended September 30, 2022 and 2021 were primarily due to foreign taxes.

Based upon the weight of available evidence, which includes its historical operating performance, reported cumulative net losses since inception, the Company has established and continues to maintain a full valuation allowance against its net deferred tax assets as it does not currently believe that realization of those assets is more likely than not.

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Astellas is an equity investor in the Company and is considered a related party.

The Company recorded revenue related to collaboration agreements with Astellas of $ 1.8 million and $ 2.6 million for the three months ended June 30, 2022 and 2021 , and $ 29.6 million and $ 6.3 million for the six months ended June 30, 2022 and 2021 , respectively.

The Company also recorded drug product revenue from Astellas of $ 1.1 million and $( 2.0 ) million for the three months ended June 30, 2022 and 2021, and $ 8.7 million and $ 2.1 million for the six months ended June 30, 2022 and 2021, respectively.

The Company recorded revenue related to collaboration agreements with Astellas of $ 1.4 million and $12 2.6 million for the three months ended September 30, 2022 and 2021 , and $ 31.0 million and $ 128.8 million for the nine months ended September 30, 2022 and 2021 , respectively.

The Company also recorded drug product revenue from Astellas of $( 4.1 ) million and zero for the three months ended September 30, 2022 and 2021 , and $ 4.6 million and $ 2.1 million for the nine months ended September 30, 2022 and 2021, respectively.

See Note 2, Collaboration Agreements, License Agreement and Revenues , for details.

The Company’s expense related to collaboration agreements with Astellas was immaterial for each of the three and six months ended June 30, 2022 and 2021.

As of June 30, 2022 and December 31, 2021 , accounts receivable from Astellas were $ 26.1 million and $ 10.9 million, respectively.

As of June 30, 2022 and December 31, 2021 , total deferred revenue from Astellas was $ 54.9 million and $ 27.9 million, respectively.

As of June 30, 2022 , the amount due to Astellas was $ 43.3 million.

The Company’s expense related to collaboration agreements with Astellas was immaterial for each of the three and nine months ended September 30, 2022 and 2021.

As of September 30, 2022 and December 31, 2021 , accounts receivable from Astellas were $ 1.4 million and $ 10.9 million, respectively.

As of September 30, 2022 and December 31, 2021 , total deferred revenue from Astellas was $ 47.0 million and $ 27.9 million, respectively.

As of September 30, 2022 , the amount due to Astellas was $ 55.3 million.

As of December 31, 2021, amount due to Astellas was immaterial.

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See Note 3, Variable Interest Entity , for details.

The net product revenue from Falikang was $ 19.7 million and $ 11.8 million for the three months ended June 30, 2022 and 2021, and $ 36.0 million and $ 22.2 million for the six months ended June 30, 2022 and 2021, respectively.

See Note 2, Collaboration Agreements, License Agreement and Revenues , for details.

The investment income in Falikang was $ 0.6 million for each of the three months ended June 30, 2022 and 2021, and $ 0.9 million and $ 0.3 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022 and December 31, 2021, the Company’s equity method investment in Falikang was $ 4.5 million and $ 3.8 million , respectively.

The net product revenue from Falikang was $ 14.9 million and $ 10.3 million for the three months ended September 30, 2022 and 2021, and $ 50.9 million and $ 32.5 million for the nine months ended September 30, 2022 and 2021, respectively.

See the Product Revenue, Net section in Note 2, Collaboration Agreements, License Agreement and Revenues , for details.

The investment income in Falikang was $ 0.4 million and $ 0.3 million for the three months ended September 30, 2022 and 2021, and $ 1.3 million and $ 0.7 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, the Company’s equity method investment in Falikang was $ 4.6 million and $ 3.8 million , respectively.

See Note 3, Variable Interest Entity , for details.

As of June 30, 2022 , accounts receivable, net, from Falikang was of $ 0.7 million.

As of September 30, 2022 , accounts receivable, net, from Falikang was of $ 12.9 million.

As of December 31, 2021 , accounts receivable, net, from Falikang was zero .

The total deferred revenue from Falikang was zero as of June 30, 2022 .

The total deferred revenue from Falikang was $ 1.2 million as of December 31, 2021 .

As of September 30, 2022 , the total deferred revenue from Falikang was zero .

As of December 31, 2021 , the total deferred revenue from Falikang was $ 1.2 million.

Commitments and Contingencies

Contract Obligations

As of June 30, 2022, the Company had $ 94.1 million of operating lease liabilities.

As of June 30, 2022 , the Company had outstanding total non-cancelable purchase obligations of $ 57.7 million, including $ 33.2 million for manufacture and supply of pamrevlumab, $ 9.2 million for manufacture and supply of roxadustat, and $ 15.3 million for other purchases and programs.

As of September 30, 2022, the Company had $ 92.6 million of operating lease liabilities.

As of September 30, 2022 , the Company had outstanding total non-cancelable purchase obligations of $ 51.2 million, including $ 21.0 million for manufacture and supply of pamrevlumab, $ 7.8 million for manufacture and supply of roxadustat, and $ 22.3 million for other purchases and programs.

The Company expects to fulfill its commitments under these agreements in the normal course of business, and as such, no liability has been recorded.

Some of the Company’s license agreements provide for periodic maintenance fees over specified time periods, as well as payments by the Company upon the achievement of development, regulatory and commercial milestones.

As of June 30, 2022 , future milestone payments for research and preclinical stage development programs consisted of up to approximately $ 697.9 million in total potential future milestone payments under the Company’s license agreements with HiFiBiO (for Gal-9 and CCR8), Medarex, Inc.

As of September 30, 2022 , future milestone payments for research and preclinical stage development programs consisted of up to approximately $ 697.9 million in total potential future milestone payments under the Company’s license agreements with HiFiBiO (for Gal-9 and CCR8), Medarex, Inc.

These milestone payments generally become due and payable only upon the achievement of certain developmental, clinical, regulatory and/or commercial milestones.

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A loss or a range of loss is disclosed when it is reasonably possible that a material loss will incur and can be estimated, or when it is reasonably possible that the amount of a loss, when material, will exceed the recorded provision.

The Company did not have any material accruals for any active legal action in its condensed consolidated balance sheets as of June 30, 2022, as the Company could not predict the ultimate outcome of these matters, or reasonably estimate the potential exposure.

In April 2021, three putative securities class action complaints were filed against FibroGen and certain of its current and former executive officers (collectively, the “Defendants”) in the U.S.

The Company did not have any material accruals for any active legal action in its condensed consolidated balance sheet as of September 30, 2022, as the Company could not predict the ultimate outcome of these matters, or reasonably estimate the potential exposure.

Between April 2021 and May 2021, five putative securities class action complaints were filed against FibroGen and certain of its current and former executive officers (collectively, the “Defendants”) in the U.S.

District Court for the Northern District of California.

The lawsuits allege that Defendants violated the Securities Exchange Act of 1934 by making materially false and misleading statements regarding FibroGen’s Phase 3 clinical studies data and prospects for U.S.

Food and Drug Administration approval between November 2019 and December 2020.

Plaintiffs seek to represent a class of persons or entities that purchased FibroGen securities between November 8, 2019 and April 6, 2021.

In May 2021, two additional putative securities class action complaints were filed against Defendants alleging the same claims.

One of the lawsuits alleges that Defendants made materially false and misleading statements between October 2017 and December 2020 and seeks to represent a class of persons or entities that purchased FibroGen securities between October 18, 2017 and April 6, 2021.

The other lawsuit alleges that Defendants made materially false and misleading statements between December 2018 and February 2020 and seeks to represent a class of persons or entities that purchased FibroGen securities between December 20, 2018 and April 6, 2021.

All plaintiffs seek unspecified monetary damages and other relief.

Food and Drug Administration approval.

On August 30, 2021, the Court consolidated the actions and appointed a group of lead plaintiffs.

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The Complaint alleges false and misleading statements between December 2018 and June 2021 and seeks to represent a class of persons or entities that purchased FibroGen securities between December 20, 2018 and July 15, 2021.

Defendants filed motions to dismiss the Complaint on January 14, 2022.

Plaintiffs’

opposition to Defendants’

motions to dismiss was due March 4, 2022 and Defendants’

reply briefs were due April 8, 2022.

On July 15, 2022, the court issued an order denying Defendants’

motions to dismiss.

Defendants’

answer to the Complaint is due September 13, 2022.

On July 30, 2021, a purported shareholder derivative complaint was filed in the U.S.

Defendants answered the Complaint on September 13, 2022 and discovery is ongoing.

On July 30, 2021, a purported shareholder derivative (the “California Federal Derivative”) complaint was filed in the U.S.

District Court for the Northern District of California.

The complaint names as defendants ten of FibroGen’s current and former officers and directors, as well as FibroGen as nominal defendant, and asserts state and federal claims based on some of the same alleged misstatements as the securities class action complaint.

The complaint seeks unspecified damages, attorneys’

The California Federal Derivative complaint names as defendants ten of FibroGen’s current and former officers and directors, as well as FibroGen as nominal defendant, and asserts state and federal claims based on some of the same alleged misstatements as the securities class action complaint.

The California Federal Derivative complaint seeks unspecified damages, attorneys’

fees, and other costs.

The action remains stayed at this time.

On December 27, 2021, a second purported shareholder derivative complaint was filed in the U.S.

On October 21, 2022, the parties filed a stipulation setting forth a schedule by which plaintiff will file an amended complaint in the California Federal Derivative action and defendants will move to dismiss on the basis of improper forum.

On December 27, 2021, a second purported shareholder derivative (the “Delaware Federal Derivative”) complaint was filed in the U.S.

District Court for the District of Delaware.

The complaint names seventeen of FibroGen’s current and former officers and directors as defendants, as well as FibroGen as nominal defendant, and asserts state and federal claims based on some of the same alleged misstatements as the securities class action complaint, as well as allegations of insider trading against certain defendants.

The complaint seeks unspecified damages, attorneys’

The Delaware Federal Derivative complaint names 17 of FibroGen’s current and former officers and directors as defendants, as well as FibroGen as nominal defendant, and asserts state and federal claims based on some of the same alleged misstatements as the securities class action complaint, as well as allegations of insider trading against certain defendants.

The Delaware Federal Derivative complaint seeks unspecified damages, attorneys’

fees, and other costs.

The action remains stayed at this time.

On April 14, 2022, a third purported shareholder derivative complaint was filed in the Delaware Court of Chancery.

It names the same defendants as the second purported shareholder derivative action and asserts similar claims based upon similar allegations.

The complaint seeks unspecified damages, attorneys’

The Delaware Federal Derivative action has been stayed pending resolution of any motions for summary judgment in the securities class action.

On April 14, 2022, a third purported shareholder derivative (the “Delaware Chancery Derivative”) complaint was filed in the Delaware Court of Chancery.

The Delaware Chancery Derivative complaint names the same defendants as the second purported shareholder derivative action and asserts similar claims based upon similar allegations.

The Delaware Chancery Derivative complaint seeks unspecified damages, attorneys’

fees, and other costs.

Defendants have not been served in the third action.

Defendants have not been served in the Delaware Chancery Derivative action.

The Company believes that the claims are without merit and it intends to vigorously defend against them.

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Any adverse outcome in this matter or any related proceeding could expose the Company to substantial damages, penalties, or reputational harm that may have a material adverse impact on the Company’s business, results of operations, financial condition, growth prospects, and price of its common stock.

On August 3, 2022, the Company's Board of Directors received two litigation demands from purported shareholders of the Company, asking the Board of Directors to investigate and take action against certain current and former officers and directors of the Company for alleged wrongdoing based on the same allegations in the pending derivative and securities class action lawsuits.

Between August 3, 2022 and August 4, 2022, the Company's Board of Directors received three litigation demands from purported shareholders of the Company, asking the Board of Directors to investigate and take action against certain current and former officers and directors of the Company for alleged wrongdoing based on the same allegations in the pending derivative and securities class action lawsuits.

The Company may in the future receive such additional demands.

Starting in October 2021, certain challenges have been filed with the China National Intellectual Property Administration against patents which claim a crystalline form of roxadustat.

Final resolution of such proceedings will take time and the Company could not predict the ultimate outcome, or reasonably estimate the potential exposure.

Indemnification Agreements

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Subsequent Event

On July 26, 2022, the Company received a written evidence from China’s State Taxation Administration, which confirms the transfer of certain intellectual property rights in 2020 relating to the Company’s Chinese business between its wholly owned subsidiaries is exempted from value added tax (“VAT”).

The Company evaluated this subsequent event and concluded that it required adjustment and disclosure in the condensed consolidated financial statements.

Specifically, the Company released the previously accrued input VAT and output VAT (with a zero net impact to the condensed consolidated balance sheet), the related VAT surcharge, and the estimated late payment fees.

As a result, for the three months ended June 30, 2022, the Company recorded a reduction of $ 8.2 million to the accrued and other current liabilities, and a reduction of $ 2.3 million to the other assets in the condensed consolidated balance sheet, and a reduction of $ 6.0 million to other expenses in the condensed consolidated statement of operations.

Strategic Financing Agreement

On November 4, 2022, the Company entered into a revenue interest financing agreement (“RIFA”) with an affiliate of NovaQuest Capital Management (“NovaQuest”) with respect to royalties from Astellas’s sales of roxadustat in Europe, Japan and the other Astellas territories.

Pursuant to the RIFA, NovaQuest agreed to pay FibroGen, within ten business days, an investment amount equal to $ 50.0 million (the “Investment Amount”), in consideration for certain royalty and other revenue payments FibroGen will make to NovaQuest.

FibroGen agreed to pay NovaQuest annually, up to certain caps (see below), 22.5% of all revenue recognized by the Company in respect of net sales of roxadustat in Europe and Japan and the other Astellas territories, and certain other tiered percentages of revenue (in each case paid annually), pursuant to FibroGen’s license and collaboration agreements with Astellas.

The RIFA also provides for certain minimum repayment provisions.

The total aggregate payments that can be received by NovaQuest under this Agreement are capped at certain fixed multiples of the Investment Amount based upon time.

Once NovaQuest receives an aggregate of either $ 100 million (two times of the Investment Amount) by the end of 2028, $ 112.5 million (two and a quarter times of the Investment Amount) by the end of 2029, or $ 125 million (two and a half times of the Investment Amount) by the end of 2030, the Agreement will expire resulting in FibroGen retaining all subsequent Investment roxadustat royalties.

FibroGen is also permitted to prepay its obligations according to a prepayment schedule with reduced repayment caps.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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“expect,”

“believe,”

“anticipate,”

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and similar expressions or variations.

Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements.

In addition, statements that “we believe”

and similar statements reflect our beliefs and opinions on the relevant subject.

These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

Such forward-looking and other statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors,”

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We anticipate that subsequent events and developments will cause our views to change.

New risks emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.

In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

While we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law.

You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q and are cautioned not to place undue reliance on such forward-looking statements.

While we may elect to update these forward-looking and other statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law.

You should, therefore, not rely on these forward-looking and other statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q and are cautioned not to place undue reliance on such forward-looking statements.

BUSINESS OVERVIEW

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Financial Highlights

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except for per share data)

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Net loss per share - basic and diluted

June 30, 2022

September 30, 2022

December 31, 2021

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Accounts receivable

Our revenue for the three and six months ended June 30, 2022 included the revenue recognized related to the following:

$5.2 million and $16.2 million development revenue recognized under our collaboration agreements with our partners Astellas and AstraZeneca AB (“AstraZeneca”);

$23.3 million and $42.1 million of net product revenue from roxadustat commercial sales in China;

$1.1 million and $8.7 million of drug product revenue related to active pharmaceutical ingredient (“API”) deliveries to Astellas.

Our revenue for the six months ended June 30, 2022 also included $25.0 million regulatory milestone recognized during the first quarter of 2022 under our collaboration agreements with our partner Astellas Pharma Inc.

(“Astellas”) associated with the approval of EVRENZO ® (roxadustat) in Russia.

Our revenue for the current year periods included the revenue recognized related to the following:

$2.0 million and $18.2 million of development revenue for the three and nine months ended September 30, 2022, respectively, recognized under our collaboration agreements with our partners Astellas Pharma Inc.

(“Astellas”) and AstraZeneca AB (“AstraZeneca”);

For the nine months ended September 30, 2022, a $25.0 million regulatory milestone recognized in the first quarter of 2022 under our collaboration agreements with our partner Astellas associated with the approval of EVRENZO ® (roxadustat) in Russia.

Of this amount, $22.6 million was recognized as license revenue and the remainder was included as development revenue;

$17.4 million and $59.5 million of net product revenue for the three and nine months ended September 30, 2022, respectively, from roxadustat commercial sales in China;

$(4.1) million and $4.6 million of drug product revenue for the three and nine months ended September 30, 2022, respectively, related to active pharmaceutical ingredient (“API”) deliveries to Astellas.

As a comparison, our revenue for the prior year periods included the revenue recognized related to the following:

$120.0 million regulatory milestones recognized under our collaboration agreements with our partner Astellas associated with the approval by European Commission of EVRENZO® (roxadustat) for the treatment of adult patients with symptomatic anemia associated with chronic kidney disease (“CKD”) during the third quarter of 2021.

Of this amount, $108.4 million was recognized as license revenue and the remainder included as development revenue;

As a comparison, our revenue for the three and six months ended June 30, 2021 included the revenue recognized related to the following:

$19.6 million and $34.2 million of development revenue recognized under our collaboration agreements with our partners Astellas and AstraZeneca;

$13.4 million and $28.7 million of net product revenue from roxadustat commercial sales in China;

$(8.6) million and $(0.2) million of drug product revenue primarily resulted from the deferred considerations of roxadustat bulk drug or API deliveries to AstraZeneca and Astellas.

Operating costs and expenses for the three months ended June 30, 2022 decreased compared to the same period a year ago as a result of the net effect of the following:

$26.1 million and $60.3 million of development revenue for the three and nine months ended September 30, 2021, respectively, recognized under our collaboration agreements with our partners Astellas and AstraZeneca;

$13.4 million and $42.2 million of net product revenue for the three and nine months ended September 30, 2021, respectively, from roxadustat commercial sales in China;

$8.0 million upfront license payment recognized in the third quarter of 2021 under our license agreement with Eluminex Biosciences (Suzhou) Limited (“Eluminex”).

Operating costs and expenses for the three months ended September 30, 2022 increased compared to the same period a year ago as a result of the net effect of the following:

$11.8 million higher drug development expenses associated with drug substance and drug product manufacturing activities related to pamrevlumab;

$6.2 million higher legal expenses primarily due to a one-time favorable patent-related court ruling recorded in the prior year period;

$8.0 million lower clinical trial expenses associated with roxadustat post-approval safety studies and Phase 3 trials for pamrevlumab;

$4.3 million lower employee-related expenses primarily due to a payroll tax refund received during the third quarter of 2022, and lower headcount as part of the cost reduction effort we started to implement in the second half of 2021 following the complete response letter (“CRL”) issued by the Food and Drug Administration for roxadustat in CKD anemia in the United States (“U.S.”), stating that it could not be approved in its present form.

Operating costs and expenses for the nine months ended September 30, 2022 decreased compared to the same period a year ago as a result of the net effect of the following:

$25.0 million for acquired in-process research and development asset from HiFiBiO Therapeutics (“HiFiBiO”) in the prior year period, which did not recur in the current year period;

$13.4 million lower drug development expenses associated with drug substance and drug product manufacturing activities related to pamrevlumab;

$11.3 million lower employee-related expenses and $4.7 million lower stock-based compensation expenses primarily due to lower headcount as part of the cost reduction effort mentioned above, and a payroll tax refund received during the third quarter of 2022;

$9.0 million lower clinical trial expenses associated with roxadustat post-approval safety studies and Phase 3 trials for pamrevlumab;

$4.1 million lower employee-related expenses and $2.3 million lower stock-based compensation expenses primarily due to lower headcount as part of the cost reduction effort we started to implement in the second half of 2021 following the complete response letter (“CRL”) for roxadustat in the United States (“U.S.”);

$3.7 million higher cost of goods sold due to higher roxadustat product sales.

Operating costs and expenses for the six months ended June 30, 2022 decreased compared to the same period a year ago as a result of the net effect of the following:

$25.0 million for acquired in-process research and development asset from HiFiBiO in the prior year period, which did not recur in the current year period;

$7.0 million lower employee-related expenses and $4.6 million lower stock-based compensation expenses primarily due to lower headcount as part of the cost reduction effort mentioned above;

14.4 million higher drug development expenses associated with drug substance and drug product manufacturing activities related to pamrevlumab;

$5.6 million higher cost of goods sold due to higher roxadustat product sales;

For the three and six months ended June 30, 2022, we had a net loss of $72.6 million and $135.8 million, respectively, or a net loss per basic and diluted share of $0.78 and $1.46, respectively, as compared to a net loss of $134.0 million and $205.7 million for the same periods a year ago, due to increases in revenue, and decreases in operating costs and expenses as discussed above.

Cash and cash equivalents, investments, and accounts receivable totaled $517.6 million at June 30, 2022, a decrease of $72.8 million from December 31, 2021, primarily due to the cash used in operations and investment in our preclinical pipeline.

$4.9 million higher legal expenses primarily due to a one-time favorable patent-related court ruling recorded in the prior year period.

For the three months ended September 30, 2022, we had a net loss of $91.7 million, or a net loss per basic and diluted share of $0.98, as compared to a net income of $49.8 million for the same period a year ago, due to decrease in revenue and increases in operating costs and expenses as discussed above.

For the nine months ended September 30, 2022, we had a net loss of $227.5 million, or a net loss per basic and diluted share of $2.43, as compared to a net loss of $155.9 million for the same period a year ago, due to decreases in revenue, offset by decreases in operating costs and expenses as discussed above.

Cash and cash equivalents, investments, and accounts receivable totaled $441.6 million at September 30, 2022, a decrease of $148.8 million from December 31, 2021, primarily due to the cash used in operations and investment in our preclinical pipeline.

Commercial and Development Programs

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Roxadustat for the Treatment of Anemia in Chronic Kidney Disease

Roxadustat is our most advanced product, an oral small molecule inhibitor of HIF prolyl hydroxylase (“HIF-PH”) activity that acts by stimulating the body’s natural pathway of erythropoiesis, or red blood cell production.

Roxadustat continues to be approved in jurisdictions throughout the world, including recent marketing approvals in Mexico and South Africa.

Roxadustat (爱瑞卓®️, EVRENZO TM ) is now approved in China, Europe, Japan, and numerous other countries for the treatment of anemia in chronic kidney disease ("CKD") patients on dialysis and those not on dialysis.

Roxadustat is our commercial-stage product, an oral small molecule inhibitor of HIF prolyl hydroxylase (“HIF-PH”) activity that acts by stimulating the body’s natural pathway of erythropoiesis, or red blood cell production.

Roxadustat continues to be approved in jurisdictions throughout the world, including recent marketing approvals in Turkey and the Philippines.

Roxadustat (爱瑞卓®️, EVRENZO TM ) is approved in China, Europe, Japan, and numerous other countries for the treatment of anemia in CKD for patients who are on dialysis and not on dialysis.

In China, roxadustat (tradename:

爱瑞卓®) has seen significant volume growth in the treatment of anemia caused by CKD in non-dialysis and dialysis patients.

In the second quarter of 2022, roxadustat achieved an over 80% increase in sales volume relative to the second quarter of 2021, with net sales offset by the reduced price associated with the 2021 National Reimbursement Drug List.

As of May 2022, roxadustat was the top CKD anemia brand in China with approximately 33% value share within the segment of erythropoiesis stimulating agents (“ESAs”) and HIF-PH inhibitors (roxadustat is the only HIF-PH inhibitor on the market in China).

爱瑞卓®) continues to see significant volume growth in the treatment of anemia caused by CKD in non-dialysis and dialysis patients.

In the third quarter of 2022, roxadustat achieved an over 80% increase in sales volume relative to the third quarter of 2021 benefitting from the 2021 National Reimbursement Drug List price reduction.

As of August 2022, roxadustat was the top CKD anemia brand in China with approximately 33% value share within the segment of erythropoiesis stimulating agents and HIF-PH inhibitors (roxadustat is the only HIF-PH inhibitor on the market in China).

Roxadustat for the Treatment of Anemia in Myelodysplastic Syndromes

We continue to enroll MATTERHORN, our Phase 2/3 placebo-controlled, double-blind clinical trial to evaluate the safety and efficacy of roxadustat for treatment of anemia in myelodysplastic syndromes (“MDS”) in the U.S.

In the third quarter of 2022, we completed enrollment of MATTERHORN, our Phase 2/3 placebo-controlled, double-blind clinical trial to evaluate the safety and efficacy of roxadustat for the treatment of anemia in myelodysplastic syndromes (“MDS”) in the U.S.

This trial is studying roxadustat in 140 transfusion-dependent, lower-risk MDS patients, in which subjects are randomized 3:2 to receive roxadustat or placebo three-times-weekly.

The primary endpoint is the proportion of patients who achieve transfusion independence by 28 weeks with secondary endpoints and safety evaluated at 52 weeks.

We expect topline data from this study in the first half of 2023.

We have discontinued recruitment of the Phase 3 study of roxadustat for the treatment of MDS in China due to difficulties with enrollment.

Patients already randomized on the study will continue treatment under the study protocol.

We will revisit our regulatory plans for roxadustat for the treatment of MDS in China at the conclusion of the MATTERHORN study.

The primary endpoint is the proportion of patients who achieve transfusion independence for 56 consecutive days within the first 28 weeks of the trial, with secondary endpoints and safety evaluated at 52 weeks.

We expect topline 28-Week data from this study in the first half of 2023.

Roxadustat for the Treatment of Chemotherapy-Induced Anemia

We continue to enroll our randomized, active controlled Phase 3 clinical trial in China of roxadustat in CIA for non-myeloid malignancies.

We continue to enroll our randomized, active controlled Phase 3 clinical trial in China of roxadustat in chemotherapy-induced anemia for non-myeloid malignancies.

The study will enroll approximately 146 subjects and the primary efficacy endpoint is the mean change in hemoglobin level from baseline to the level averaged over Weeks 9-13.

Currently there are no plans to move forward with CIA in other territories.

We may revisit that decision once we review the results from the study in China.

We released additional data from WHITNEY, our Phase 2 clinical trial of roxadustat in the U.S.

in chemotherapy-induced anemia (“CIA”), at the 2022 American Society of Clinical Oncology annual meeting.

We expect topline data from this study in mid-2023.

Monoclonal Antibody Targeting Connective Tissue Growth Factor

Pamrevlumab is our first-in-class antibody developed to inhibit the activity of connective tissue growth factor, a common factor in fibrotic and fibro-proliferative disorders characterized by persistent and excessive scarring that can lead to organ dysfunction and failure.

Food and Drug Administration has granted Fast Track and Orphan Drug designations to pamrevlumab for the treatment of idiopathic pulmonary fibrosis (“IPF”), locally advanced unresectable pancreatic cancer ("LAPC"), and Duchenne muscular dystrophy (“DMD”) (with DMD receiving Rare Pediatric Disease designation).

Food and Drug Administration has granted Fast Track and Orphan Drug designations to pamrevlumab for the treatment of idiopathic pulmonary fibrosis (“IPF”), locally advanced unresectable pancreatic cancer (“LAPC”), and Duchenne muscular dystrophy (“DMD”) (with DMD receiving Rare Pediatric Disease designation).

Pamrevlumab for the Treatment of Idiopathic Pulmonary Fibrosis

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We completed enrollment of ZEPHYRUS-1, our first Phase 3 trial of pamrevlumab in 356 IPF patients, and we expect topline data from ZEPHYRUS-1 in mid-2023.

We continue to enroll patients in ZEPHYRUS-2, our second Phase 3 trial of pamrevlumab in approximately 340 IPF patients.

We continue to enroll patients in ZEPHYRUS-2, our second Phase 3 trial of pamrevlumab in approximately 340 IPF patients, and we expect topline data from ZEPHYRUS-2 in mid-2024.

Pamrevlumab for the Treatment of Locally Advanced Unresectable Pancreatic Cancer

We completed enrollment of LAPIS, our double-blind placebo-controlled Phase 3 clinical program for pamrevlumab as a neoadjuvant therapy for LAPC.

We completed enrollment of LAPIS in the first quarter of 2022, our double-blind placebo-controlled Phase 3 clinical program for pamrevlumab as a neoadjuvant therapy for LAPC.

We enrolled 284 patients, randomized at a 1:1 ratio to receive either pamrevlumab or placebo, in each case in combination with chemotherapy (either FOLFIRINOX or gemcitabine plus nab-paclitaxel).

After conducting the interim analysis of event-free survival, we are not filing a Biologics License Application for accelerated approval.

As planned, we will continue the study to its primary endpoint of overall survival, with topline data expected in the first half of 2024.

We expect topline data for the primary endpoint of overall survival in the first half of 2024.

Pamrevlumab for the Treatment of Metastatic Pancreatic Cancer

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Non-Ambulatory Patients

We have completed enrollment of LELANTOS-1, our Phase 3 clinical trial evaluating pamrevlumab in combination with systemic corticosteroids as a treatment for DMD.

In the first quarter of 2022, we completed enrollment of LELANTOS-1, our Phase 3 clinical trial evaluating pamrevlumab in combination with systemic corticosteroids as a treatment for DMD.

LELANTOS-1 is a double-blind, placebo-controlled trial in 99 non-ambulatory DMD patients.

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We expect topline data from this study in the second half of 2023.

Strategic Financing Agreement

On November 4, 2022, we entered into a revenue interest financing agreement (“RIFA”) with an affiliate of NovaQuest Capital Management (“NovaQuest”) with respect to our royalties from Astellas’

sales of roxadustat in Europe, Japan and the other Astellas territories.

Pursuant to the RIFA, NovaQuest agreed to pay us an investment amount equal to $50.0 million in consideration for certain royalty and other revenue payments we will make to NovaQuest.

For additional details about this financing transaction, see Note 9, Subsequent Event , to the condensed consolidated financial statements.

Collaboration Partnerships for Roxadustat

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See Note 2, Collaboration Agreements, License Agreement and Revenues , to the condensed consolidated financial statements for details.

In June 2005, we entered into a collaboration agreement with Astellas for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in Japan (“Japan Agreement”).

In April 2006, we entered into the Europe Agreement with Astellas for roxadustat for the treatment of anemia in Europe, the Commonwealth of Independent States, the Middle East, and South Africa (“Europe Agreement”).

Under these agreements, the aggregate amount of such consideration received through June 30, 2022 totaled $790.1 million.

In April 2006, we entered into a separate collaboration agreement with Astellas for roxadustat for the treatment of anemia in Europe, the Commonwealth of Independent States, the Middle East, and South Africa (“Astellas Europe Agreement”).

Under these agreements, the aggregate amount of consideration received through September 30, 2022 totaled $790.1 million.

On March 21, 2022, EVRENZO ® (roxadustat) was registered with the Russian Ministry of Health.

We evaluated the regulatory milestone payment associated with the approval in Russia under the Europe Agreement and concluded that this milestone was achieved in the first quarter of 2022.

Accordingly, the consideration of $25.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Europe Agreement, all of which was recognized as revenue during the first quarter of 2022 from performance obligations satisfied.

In 2018, FibroGen and Astellas entered into an amendment to the Japan Agreement that allows Astellas to manufacture roxadustat drug product for commercialization in Japan (the “Japan Amendment”).

The related drug product revenue was immaterial for the three months ended June 30, 2022, $(2.0) million for three months ended June 30, 2021, and $7.6 million and $2.1 million for six months ended June 30, 2022 and 2021, respectively.

During the first quarter of 2021, we entered into an EU Supply Agreement under the Europe Agreement with Astellas to define general forecast, order, supply and payment terms for Astellas to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies.

The related drug product revenue was $1.1 million for the three and six months ended June 30, 2022, respectively.

There was no related drug product revenue for the three and six months ended June 30, 2021.

We evaluated the regulatory milestone payment associated with the approval in Russia under the Astellas Europe Agreement and concluded that this milestone was achieved in the first quarter of 2022.

Accordingly, the consideration of $25.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Astellas Europe Agreement, all of which was recognized as revenue during the first quarter of 2022 from performance obligations satisfied.

In 2018, we and Astellas entered into an amendment to the Astellas Japan Agreement that allows Astellas to manufacture roxadustat drug product for commercialization in Japan (the “Astellas Japan Amendment”).

The related drug product revenue was $(4.3) million for the three months ended September 30, 2022, and $3.3 million and $2.1 million for nine months ended September 30, 2022 and 2021, respectively.

During the first quarter of 2021, we entered into an EU Supply Agreement with Astellas under the Astellas Europe Agreement to define general forecast, order, supply and payment terms for Astellas to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies (the “Astellas EU Supply Agreement”).

The related drug product revenue was $0.2 million and $1.3 million for the three and nine months ended September 30, 2022, respectively.

There was no related drug product revenue for the three and nine months ended September 30, 2021.

In July 2013, we entered into a collaboration agreement with AstraZeneca for roxadustat for the treatment of anemia in the U.S.

and all territories not previously licensed to Astellas, except China ("U.S./RoW Agreement").

In July 2013, through our China subsidiary and related affiliates, we entered into a collaboration agreement with AstraZeneca for roxadustat for the treatment of anemia in China (“China Agreement”).

Under the AstraZeneca agreements, aggregate amount of such consideration received through June 30, 2022 totaled $516.2 million.

Under the China Agreement, which is conducted through FibroGen China Anemia Holdings, Ltd., FibroGen (China) Medical Technology Development Co., Ltd.

("FibroGen Beijing"), and FibroGen International (Hong Kong) Limited (collectively, (“FibroGen China”), the commercial collaboration was structured as a 50/50 profit share, which was amended by the China Amendment in the third quarter of 2020, as discussed and defined below in China Amendment .

In 2020, we entered into Master Supply Agreement under the U.S./RoW Agreement with AstraZeneca (“Master Supply Agreement”) to define general forecast, order, supply and payment terms for AstraZeneca to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies.

There was no related drug product revenue for the three and six months ended June 30, 2022, and the related drug product revenue was $(6.7) million and $(2.2) million for the three and six months ended June 30, 2021, respectively.

China Amendment

In July 2020, FibroGen China and AstraZeneca entered into an amendment, effective July 1, 2020, to the China Agreement, relating to the development and commercialization of roxadustat in China (the “China Amendment”).

Under the China Amendment, in September 2020, FibroGen Beijing and AstraZeneca completed the establishment of a jointly owned entity, Beijing Falikang Pharmaceutical Co., Ltd.

("Falikang"), which performs roxadustat distribution, as well as conducts sales and marketing through AstraZeneca.

and all territories not previously licensed to Astellas, except China (the “AstraZeneca U.S./RoW Agreement”).

Under the AstraZeneca agreements, the aggregate amount of consideration received through September 30, 2022 totaled $516.2 million.

Under the AstraZeneca China Agreement, which is conducted through FibroGen China Anemia Holdings, Ltd., FibroGen (China) Medical Technology Development Co., Ltd.

(“FibroGen Beijing”), and FibroGen International (Hong Kong) Limited (collectively, (“FibroGen China”), the commercial collaboration was structured as a 50/50 profit share, which was amended by the China Amendment in the third quarter of 2020, as discussed and defined below in AstraZeneca China Amendment .

In 2020, we entered into a Master Supply Agreement with AstraZeneca under the AstraZeneca U.S./RoW Agreement (the “AstraZeneca Master Supply Agreement”) to define general forecast, order, supply and payment terms for AstraZeneca to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies.

There was no related drug product revenue for the three and nine months ended September 30, 2022 and the three months ended September 30, 2021.

The related drug product revenue was $(2.2) million for the nine months ended September 30, 2021.

AstraZeneca China Amendment

In July 2020, FibroGen China and AstraZeneca entered into an amendment, effective July 1, 2020, to the AstraZeneca China Agreement, relating to the development and commercialization of roxadustat in China (the “AstraZeneca China Amendment”).

Under the AstraZeneca China Amendment, in September 2020, FibroGen Beijing and AstraZeneca completed the establishment of a jointly owned entity, Beijing Falikang Pharmaceutical Co., Ltd.

(“Falikang”), which performs roxadustat distribution, as well as conducts sales and marketing through AstraZeneca.

FibroGen Beijing manufactures and supplies commercial product to Falikang based on an agreed upon transfer price, which includes gross transfer price, net of calculated profit share.

Revenue is recognized upon the transfer of control of commercial products to Falikang in an amount that reflects the allocation of transaction price of the China manufacturing and supply obligation (“China performance obligation”) to the performance obligation satisfied during the reporting period.

We recognized related net product revenue of $23.3 million and $13.4 million for the three months ended June 30, 2022 and 2021, and $42.1 million and $28.7 million for the six months ended June 30, 2022 and 2021, respectively.

We recognized related net product revenue of $17.4 million and $13.4 million for the three months ended September 30, 2022 and 2021, and $59.5 million and $42.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Additional Information Related to Collaboration Agreements

Total cash consideration received through June 30, 2022 and potential cash consideration, for upfront payments and milestone payments under our collaboration agreements are as follows:

Total cash consideration received through September 30, 2022 and potential cash consideration, for upfront payments and milestone payments under our collaboration agreements are as follows:

Cash Received for Upfront Payments and Milestone Payments

June 30, 2022

September 30, 2022

Cash Payment for Milestones

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Astellas--related-party:

Japan Agreement

Europe Agreement

Astellas Japan Agreement

Astellas Europe Agreement

Total Astellas

/ RoW Agreement

China Agreement

AstraZeneca U.S./RoW Agreement

AstraZeneca China Agreement

Total AstraZeneca

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for the treatment of anemia in patients with MDS, we have not been able to agree on a path forward for AstraZeneca to fund further roxadustat development for CKD anemia in the U.S.

Therefore, we do not expect to receive most or all of these potential U.S./RoW Agreement milestones from AstraZeneca.

Therefore, we do not expect to receive most or all of these potential AstraZeneca U.S./RoW Agreement milestones from AstraZeneca.

RESULTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Co-development services are recognized as revenue in the period in which they are billed to our partners, excluding China.

For China co-development services, revenue is deferred until we begin to transfer control of the manufactured commercial product to AstraZeneca, which commenced in the first quarter of 2021 and is expected to continue through 2028.

Other development related services are recognized as revenue over the non-contingent development period based on a proportional performance method.

As of June 30, 2022, the estimated future non-contingent development periods range from 21 to 33 months.

As of September 30, 2022, the estimated future non-contingent development periods range from 18 to 21 months.

Other revenues consist of contract manufacturing revenue and sales of research and development material and have not been material for any of the periods presented.

Product revenue is recognized when our customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services.

Drug product revenue includes commercial-grade API or bulk drug product sales to AstraZeneca and Astellas in support of pre-commercial preparation prior to the NDA or Marketing Authorization Application approval, and to Astellas for ongoing commercial launch in Japan and Europe.

Drug product revenue includes commercial-grade API or bulk drug product sales to AstraZeneca, under the AstraZeneca U.S./RoW Agreement, and Astellas in support of pre-commercial preparation prior to the New Drug Application or Marketing Authorization Application approval, and to Astellas for ongoing commercial launch in Japan and Europe.

Drug product revenue is recognized when we fulfill the inventory transfer obligations.

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We expect that any revenues we generate will fluctuate from quarter to quarter due to the uncertain timing and amount of such payments and sales.

Total revenue increased $5.4 million, or 22% for the three months ended June 30, 2022 and $27.8 million, or 44% for the six months ended June 30, 2022 compared to the same periods a year ago for the reasons discussed in the sections below.

Total revenue decreased $140.2 million, or 90% for the three months ended September 30, 2022 and $112.4 million, or 51% for the nine months ended September 30, 2022 compared to the same periods a year ago, respectively, for the reasons discussed in the sections below.

License Revenue

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Total license revenue

NM = Not meaningful

License revenue recognized under our collaboration agreements with Astellas for the six months ended June 30, 2022 represented the allocated revenue of related to $25.0 million regulatory milestone associated with the approval of EVRENZO ® (roxadustat) in Russia that was included in the transaction price during the first quarter of 2022 when such milestone was achieved.

We did not have any license revenue for the three months ended June 30, 2022 and the three and six months ended June 30, 2021.

License revenue recognized under our collaboration agreements with Astellas for the nine months ended September 30, 2022 represented the allocated revenue of related to $25.0 million regulatory milestone associated with the approval of EVRENZO ® (roxadustat) in Russia that was included in the transaction price during the first quarter of 2022 when such milestone was achieved.

License revenue recognized under our collaboration agreements with Astellas for the three and nine months ended September 30, 2021 represented the allocated revenue of related to a total of $120.0 million regulatory milestones associated with the approval by European Commission of EVRENZO ® (roxadustat) for the treatment of adult patients with symptomatic anemia associated with CKD during the third quarter of 2021.

Development and Other Revenue

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

3 unchanged sentences

Total development and other revenue

Development and other revenue decreased $14.2 million, or 72% for the three months ended June 30, 2022 and $17.0 million, or 50% for the six months ended June 30, 2022, compared to the same periods a year ago.

Development revenue recognized under our collaboration agreements with Astellas decreased in co-development billings related to the development of roxadustat under our collaboration agreements with Astellas for the three and six months ended June 30, 2022 as a result of the substantial completion of Phase 3 trials for roxadustat.

Development revenue recognized under our collaboration agreements with Astellas for the six months ended June 30, 2022 included the allocated revenue of $2.4 million related to the above-mentioned $25.0 million regulatory milestone associated with the approval in Russia during the first quarter of 2022.

Development revenue recognized under our collaboration agreements with AstraZeneca for the three and six months ended June 30, 2022 was impacted by the decrease in CKD-related co-development billings in the U.S.

Other revenue recognized for the three and six months ended June 30, 2022 was primarily related to our contract manufacturing agreement with Eluminex Biosciences (Suzhou) Limited (“Eluminex”), under which we are responsible for supplying the cornea product at 110% of our product manufacturing costs until our manufacturing technology is fully transferred to Eluminex.

Development and other revenue decreased $23.6 million, or 91% for the three months ended September 30, 2022 and $40.7 million, or 67% for the nine months ended September 30, 2022, compared to the same periods a year ago, respectively.

Development revenue recognized under our collaboration agreements with Astellas decreased in co-development billings related to the development of roxadustat under our collaboration agreements with Astellas for the three and nine months ended September 30, 2022 as a result of the substantial completion of Phase 3 trials for roxadustat.

Development revenue recognized under our collaboration agreements with Astellas for the nine months ended September 30, 2022 included the allocated revenue of $2.4 million related to the above-mentioned $25.0 million regulatory milestone associated with the approval in Russia during the first quarter of 2022.

Comparatively, development revenue recognized under our collaboration agreements with Astellas for the three and nine months ended September 30, 2021 included the allocated revenue of $11.6 million related to the above-mentioned $120.0 million associated with the approvals in EU achieved during the third quarter of 2021.

Development revenue recognized under our collaboration agreements with AstraZeneca for the three and nine months ended September 30, 2022 was impacted by the decrease in CKD-related co-development billings in the U.S.

Other revenue recognized for the three and nine months ended September 30, 2022 was primarily related to our contract manufacturing agreement with Eluminex, under which we are responsible for supplying the cornea product at 110% of our product manufacturing costs until our manufacturing technology is fully transferred to Eluminex.

Product Revenue, Net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

7 unchanged sentences

Net transaction price

Decrease (increase) in deferred revenue

Increase in deferred revenue

Sales to Falikang revenue, net

1 unchanged sentence

In January 2021, Falikang became fully operational and substantially all direct product sales to distributors in China have been made by Falikang, while FibroGen Beijing continues to sell product directly in one province in China.

Total product revenue, net increased $9.9 million, or 74% for the three months ended June 30, 2022, and $13.4 million, or 47% for the six months ended June 30, 2022 compared to the same periods a year ago.

Total product revenue, net increased $3.9 million, or 29% for the three months ended September 30, 2022, and $17.3 million, or 41% for the nine months ended September 30, 2022, compared to the same periods a year ago, respectively.

Product revenue from direct sales to distributors is recognized in an amount that reflects the consideration that we expect to be entitled to in exchange for those products, net of various sales rebates and discounts.

The discounts and rebates primarily consisted of the contractual sales rebate that were calculated based on the stated percentage of gross sales by each distributor in the distribution agreement, and non-key account hospital listing award that was calculated based on eligible non-key account hospital listing to date achieved by each distributor with certain requirements met during the period.

Product revenue from direct sales, net increased $1.9 million, or 118% for the three months ended June 30, 2022, compared to the same period a year ago.

The gross product revenue from direct sales to distributors increased $1.3 million for the three months ended June 30, 2022 primarily due to the increase in sales volume, partially offset by the lower NRDL price effective in the first quarter of 2022 and unfavorable foreign currency translation rate of Renminbi against the U.S.

dollar during the current year period.

Product revenue from direct sales, net decreased $0.4 million or 6% for the six months ended June 30, 2022, compared to the same period a year ago.

The gross product revenue from direct sales to distributors decreased $1.3 million for the six months ended June 30, 2022, compared to the same period a year ago, primarily due to the lower NRDL price effective in the first quarter of 2022 and unfavorable foreign currency translation rate of Renminbi against the U.S.

dollar during the current year period, partially offset by the increase in sales volume.

The total discounts and rebates were immaterial for the three and six months ended June 30, 2022 as compared to the same periods a year ago due to the continuous settlement as well as transition from direct sales to sales to Falikang.

Product revenue from direct sales, net decreased $0.7 million, or 21% for the three months ended September 30, 2022, and $1.1 million, or 11% for the nine months ended September 30, 2022, compared to the same periods a year ago, respectively.

The gross product revenue from direct sales to distributors decreased $0.6 million and $1.9 million for the three and nine months ended September 30, 2022, compared to the same periods a year ago, respectively, primarily due to the lower National Reimbursement Drug List price effective in the first quarter of 2022 and unfavorable foreign currency translation rate of Renminbi against the U.S.

dollar during the current year period, partially offset by an increase in sales volume.

The total discounts and rebates were immaterial for the three and nine months ended September 30, 2022 as compared to the same periods a year ago due to the continuous settlement as well as transition from direct sales to sales to Falikang.

FibroGen Beijing manufactures and supplies commercial product to Falikang based on an agreed upon transfer price, which includes gross transfer price, net of calculated profit share.

1 unchanged sentence

The variable consideration components that are included in the transaction price may be constrained, and are included in the product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period when the uncertainty associated with the variable consideration is subsequently resolved.

Sales to Falikang revenue, net increased $8.0 million, or 68% for the three months ended June 30, 2022, and $13.8 million, or 62% for the six months ended June 30, 2022 compared to the same periods a year ago.

The gross transfer price increased $1.6 million and the calculated profit share increased $0.5 million for the three months ended June 30, 2022, and the gross transfer price remained relatively flat and the calculated profit share decreased $0.7 million for the six months ended June 30, 2022, primarily due to the increase in sales volume, offset by the lower NRDL price effective in the first quarter of 2022.

Following updates to our estimates, we recognized $1.5 million and $3.9 million from the previously deferred revenue of the China performance obligation for the three and six months ended June 30, 2022, respectively.

Comparatively, for the three and six months ended June 30, 2021 we deferred $5.4 million and $9.3 million from the net transfer price to Falikang, which was included in the related deferred revenue of the China performance obligation.

Sales to Falikang revenue, net increased $4.6 million, or 44% for the three months ended September 30, 2022, and $18.4 million, or 57% for the nine months ended September 30, 2022, compared to the same periods a year ago, respectively.

The gross transfer price increased $1.3 million and $1.2 million, and the calculated profit share increased $0.9 million and $0.2 million for the three and nine months ended September 30, 2022, compared to the same periods a year ago, respectively, primarily due to the increase in sales volume, offset by the lower National Reimbursement Drug List price effective in the first quarter of 2022, and unfavorable foreign currency translation rate of Renminbi against the U.S.

dollar during the current year period.

Periodically, we update our assumptions such as total sales quantity, performance period and other inputs including foreign currency translation impact, among others.

Following updates to our estimates, we deferred $4.6 million and $0.8 million for the three and nine months ended September 30, 2022, and $8.8 million and $18.1 million for the three and nine months ended September 30, 2021, respectively, from the net transfer price to Falikang, which was included in the related deferred revenue of the China performance obligation.

Drug Product Revenue

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2 unchanged sentences

Astellas Europe Agreement

AstraZeneca - U.S.

AstraZeneca U.S./RoW Agreement

Total drug product revenue:

NM = Not meaningful

During the first quarter of 2022, we fulfilled a shipment obligation under the terms of Japan Amendment with Astellas and recognized related drug product revenue of $9.8 million in the same period.

In addition, we updated our estimate of variable consideration related to the API shipments fulfilled under the terms of Japan Amendment with Astellas, and recorded a reduction to the drug product revenue of $2.2 million during the first quarter of 2022, a reduction to the drug product revenue of $2.0 million during the second quarter of 2021, and $4.0 million additional drug product revenue during the first quarter of 2021, respectively.

Astellas Japan Agreement

During the first quarter of 2022, we fulfilled a shipment obligation under the terms of Astellas Japan Amendment and recognized related drug product revenue of $9.8 million in the same period.

In addition, during the first quarter of 2022, we updated our estimate of variable consideration related to the API shipments fulfilled under the terms of Japan Amendment with Astellas, and recorded a reduction to the drug product revenue of $2.2 million.

During the second quarter of 2022, we transferred bulk drug product for commercial purposes under the terms of the Europe Agreement and the EU Supply Agreement with Astellas, and recognized the related fully burdened manufacturing costs of $1.0 million as drug product revenue, and recorded $23.2 million as deferred revenue due to a high degree of uncertainty associated with the final consideration.

In addition, we recognized royalty revenue of $0.1 million as drug product revenue from the deferred revenue under the Europe Agreement during the second quarter of 2022.

The remainder of the deferred revenue will be recognized as and when uncertainty is resolved, based on the performance of roxadustat product sales in the territory.

During the first quarter of 2022, we billed and received $49.2 million from Astellas related to the annual transfer price true up for bulk drug product transferred for commercial purposes under the terms of the Europe Agreement and the EU Supply Agreement with Astellas.

During the three months ended September 30, 2022, we updated our estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment, and accordingly recorded adjustments to the drug product revenue of $(4.3) million.

Specifically, the change in estimated variable consideration was based on the API held by Astellas at period end, adjusted to reflect the changes in the estimated bulk product strength mix intended to be manufactured by Astellas and foreign currency translation impact, among others.

During the nine months ended September 30, 2021, we updated our estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment, and accordingly recorded adjustments to the drug product revenue of $2.1 million.

Astellas Europe Agreement

During the second quarter of 2022, we transferred bulk drug product for commercial purposes under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement, and recognized the related fully burdened manufacturing costs of $1.0 million as drug product revenue, and recorded $23.2 million as deferred revenue due to a high degree of uncertainty associated with the variable consideration for revenue recognition purposes.

In addition, we recognized royalty revenue of $0.2 million and $0.3 million as drug product revenue from the deferred revenue under the Astellas Europe Agreement for the three and nine months ended September 30, 2022, respectively.

The remainder of the deferred revenue will be recognized as and when uncertainty is resolved, based on the performance of roxadustat product sales in the Astellas territory.

During the first quarter of 2022, we billed and received $49.2 million from Astellas related to the annual transfer price true up for bulk drug product transferred for commercial purposes under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement.

This amount was recorded in deferred revenue and netted against an unbilled contract asset as of December 31, 2021.

During the first quarter of 2022, we updated our estimate of variable consideration related to the bulk drug product transferred in prior years.

We updated our estimate of variable consideration related to the bulk drug product transferred in prior years.

As a result, we reclassified $43.3 million from deferred revenue to accrued liabilities as of June 30, 2022, representing our best estimate that this amount will be paid in the first quarter of 2023.

During the first quarter of 2021, we shipped bulk drug product from process validation supplies for commercial purposes under the terms of the Europe Agreement with Astellas.

We constrained the consideration of $11.8 million from this shipment due to a high degree of uncertainty associated to the final consideration, which was recorded as deferred revenue and will be recognized as and when uncertainty is resolved.

We shipped bulk drug product to AstraZeneca as commercial supply under the terms of the Master Supply Agreement in 2020 and during the first half of 2021.

Following the CRL for roxadustat in the U.S.

As a result, during the nine months ended September 30, 2022, we reclassified a total of $51.0 million from the related deferred revenue to accrued liabilities.

As of September 30, 2022, the related balance in accrued liabilities was $51.0 million, representing our best estimate that this amount will be paid within the next 12 months.

During the first quarter of 2021, we shipped bulk drug product from process validation supplies for commercial purposes under the terms of the Astellas Europe Agreement.

We constrained the consideration of $11.8 million from this shipment due to a high degree of uncertainty associated with the variable consideration for revenue recognition purposes, which was recorded as deferred revenue and will be recognized as and when uncertainty is resolved.

AstraZeneca U.S./RoW Agreement

We shipped bulk drug product to AstraZeneca as commercial supply under the terms of the AstraZeneca Master Supply Agreement in 2020 and during the first half of 2021.

Following the CRL for roxadustat in CKD anemia in the U.S.

received in August 2021, we evaluated the impact of these developments in revising our estimates of variable consideration associated with drug product revenue.

As a result, we updated the estimated transaction price, and recorded $11.2 million as deferred revenue.

As a result, we updated the estimated transaction price during the nine months ended September 30, 2021, and recorded a reduction to the drug product revenue of $2.2 million and $11.2 million as deferred revenue.

During the first quarter of 2022, we evaluated the current developments in the U.S.

market, and updated our estimates of variable consideration associated with bulk drug product shipments to AstraZeneca in prior years as commercial supply under the terms of the Master Supply Agreement.

As a result, we reclassified $11.2 million from the related deferred revenue to accrued liabilities as of June 30, 2022.

As a result, during the nine months ended September 30, 2022, we reclassified $11.2 million from the related deferred revenue to accrued liabilities.

As of September 30, 2022, the related balance in accrued liabilities was $11.2 million, representing its best estimate that this amount will be paid within the next 12 months.

Operating Costs and Expenses

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

4 unchanged sentences

Total operating costs and expenses

Total operating costs and expenses decreased $50.2 million, or 32% for the three months ended June 30, 2022, and $35.2 million or 13% for the six months ended June 30, 2022, compared to the same periods a year ago, for the reason discussed in the sections below.

Total operating costs and expenses increased $4.4 million, or 4% for the three months ended September 30, 2022, and decreased $30.8 million, or 8% for the nine months ended September 30, 2022, compared to the same periods a year ago, respectively, for the reasons discussed in the sections below.

Cost of Goods Sold

Cost of goods sold increased $3.7 million, or 121% for the three months ended June 30, 2022 and $4.6 million or 71% for the six months ended June 30, 2022, compared to the same periods a year ago.

Cost of goods sold increased $1.0 million, or 32% for the three months ended September 30, 2022 and $5.6 million, or 58% for the nine months ended September 30, 2022, compared to the same periods a year ago, respectively.

Cost of goods sold, associated with the roxadustat commercial sales in China, consists of direct costs to manufacture commercial product, as well as indirect costs including factory overhead, storage, shipping, quality assurance, idle capacity charges, and inventory valuation adjustments.

Cost of goods sold associated with the roxadustat commercial sales in China was $4.9 million for the three months ended June 30, 2022, as compared to $1.9 million to the same period a year ago, an increase of $3.0 million, or 152%, and was $7.5 million for the six months ended June 30, 2022, as compared to $4.6 million to the same period a year ago, an increase of $2.9 million, or 62%, resulting from the increase in the sales volume, partially offset by improved unit cost efficiency due to higher production volume.

Cost of goods sold associated with the roxadustat commercial sales in China was $4.0 million for the three months ended September 30, 2022, as compared to $2.8 million to the same period a year ago, an increase of $1.2 million, or 44%, and was $11.5 million for the nine months ended September 30, 2022, as compared to $7.4 million to the same period a year ago, an increase of $4.1 million, or 55%, respectively, resulting from the increase in the sales volume, partially offset by improved unit cost efficiency due to higher production volume.

Cost of goods sold associated with the roxadustat drug product revenue in the U.S.

was $1.7 million and $1.1 million for the three months ended June 30, 2022 and 2021, and $2.6 million and $1.9 million for the six months ended June 30, 2022 and 2021, respectively, associated with the costs of API or bulk drug product delivered to Astellas and AstraZeneca in the respective periods.

was immaterial for the three months ended September 30, 2022 and 2021, and was $2.7 million and $2.3 million for the nine months ended September 30, 2022 and 2021, respectively, associated with the costs of API or bulk drug product delivered to Astellas and AstraZeneca in the respective periods.

We expect costs of goods sold to increase in relation to drug product revenue as we deplete inventories that we had expensed prior to receiving regulatory approvals.

Cost of goods sold for the three and six months ended June 30, 2022 also included manufacturing costs of $0.3 million and $0.9 million, respectively, related to our contract manufacturing revenue from Eluminex.

Cost of goods sold for the three and nine months ended September 30, 2022 also included manufacturing costs of $0.2 million and $1.2 million, respectively, related to our contract manufacturing revenue from Eluminex.

Research and Development Expenses

4 unchanged sentences

Research and development expenses also include in-process research and development assets that have no alternative future use other than in a particular research and development project.

Following the CRL for roxadustat in the U.S., we have implemented a cost reduction effort, and as a result, research and development expenses have decreased and may continue to decrease in certain areas over time.

The following table summarizes our research and development expenses incurred during the three and six months ended June 30, 2022 and 2021 :

Three Months Ended June 30,

Six Months Ended June 30,

Following the CRL for roxadustat in CKD anemia in the U.S., we have implemented a cost reduction effort and, as a result, research and development expenses have decreased and may continue to decrease in certain areas over time.

The following table summarizes our research and development expenses incurred during the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30,

Nine Months Ended September 30,

Product Candidate

Phase of Development

(in thousands)

3 unchanged sentences

We allocate research and development salaries, benefits, stock-based compensation and other indirect costs to our product candidates on a program-specific basis, and we include these costs in the program-specific expenses.

Research and development expenses decreased $51.6 million, or 42% for the three months ended June 30, 2022, compared to the same period a year ago, as a result of the net effect of the following:

Decrease of $25.0 million for acquired in-process research and development asset from HiFiBiO, which incurred in the prior year period;

Decrease of $13.4 million in drug development expenses associated with drug substance and drug product manufacturing activities primarily related to pamrevlumab;

Research and development expenses decreased $0.7 million, or 1% for the three months ended September 30, 2022, compared to the same period a year ago, as a result of the net effect of the following:

Decrease of $8.0 million in clinical trials costs, primarily due to Phase 3 trials for pamrevlumab and CKD studies for roxadustat;

Decrease of $3.7 million in employee-related costs and decrease of $1.6 million in stock-based compensation expenses primarily due to lower headcount as part of the cost reduction effort we started to implement in the second half of 2021 following the CRL for roxadustat in the U.S.

Research and development expenses decreased $37.3 million or 19% for the six months ended June 30, 2022, compared to the same period a year ago, as a result of the net effect of the following:

Decrease of $5.3 million in employee-related costs primarily due to a payroll tax refund received during the third quarter of 2022, and lower headcount as part of the cost reduction effort we started to implement in the second half of 2021 following the CRL for roxadustat in CKD anemia in the U.S.;

Increase of $11.8 million in drug development expenses associated with drug substance and drug product manufacturing activities primarily related to pamrevlumab.

Research and development expenses decreased $38.0 million, or 14% for the nine months ended September 30, 2022, compared to the same period a year ago, as a result of the net effect of the following:

Decrease of $25.0 million for acquired in-process research and development asset from HiFiBiO, which incurred in the prior year period;

Decrease of $6.7 million in employee-related costs and decrease of $4.2 million in stock-based compensation expenses primarily due to lower headcount as part of the cost reduction effort we started to implement in the second half of 2021 following the CRL for roxadustat in the U.S.

Decrease of $10.6 million in employee-related costs and decrease of $4.6 million in stock-based compensation expenses primarily due to lower headcount as part of the cost reduction effort we started to implement in the second half of 2021 following the CRL for roxadustat in CKD anemia in the U.S., and a payroll tax refund received during the third quarter of 2022;

Decrease of $9.0 million in clinical trials costs, primarily due to Phase 3 trials for pamrevlumab and CKD studies for roxadustat;

Increase of $14.4 million in drug development expenses associated with drug substance and drug product manufacturing activities primarily related to pamrevlumab.

Selling, General and Administrative Expenses

1 unchanged sentence

SG&A expenses also include facility-related costs, professional fees, accounting and legal services, other outside services including co-promotional expenses associated with our commercialization efforts in China, recruiting fees and expenses associated with obtaining and maintaining patents.

Following the CRL for roxadustat in the U.S., we have implemented a cost reduction effort, and as a result, SG&A expenses have decreased and may continue to decrease in certain areas over time.

SG&A expenses decreased $2.3 million, or 7% for the three months ended June 30, 2022, compared to the same period a year ago, primarily as a result of the following:

Decrease of $1.9 million in legal expenses primarily associated with less corporate legal activities and proprietary-related activities compared to the prior year period;

Decrease of $0.8 million in stock-based compensation expenses primarily due to lower headcount as part of the cost reduction effort we started to implement in the second half of 2021 following the CRL for roxadustat in the U.S.

SG&A expenses decreased $2.5 million, or 4% for the six months ended June 30, 2022, compared to the same period a year ago, as a result of the net effect of the following:

Decrease of $1.7 million in outside services expenses due to lower sample costs for roxadustat in China;

Decrease of $1.3 million in legal expenses primarily associated with less corporate legal activities and proprietary-related activities compared to the prior year period.

Following the CRL for roxadustat in CKD anemia in the U.S., we have implemented a cost reduction effort and, as a result, SG&A expenses have decreased and may continue to decrease in certain areas over time.

SG&A expenses increased $4.0 million, or 16% for the three months ended September 30, 2022, compared to the same period a year ago, primarily as a result of the net effect of the following:

Increase of $6.2 million in legal expenses primarily due to a one-time favorable patent-related court ruling recorded in the prior year period;

Decrease of $1.4 million in outside services expenses due to lower sample costs and promotional expenses for roxadustat in China.

SG&A expenses increased $1.5 million, or 2% for the nine months ended September 30, 2022, compared to the same period a year ago, as a result of the net effect of the following:

Increase of $4.9 million in legal expenses primarily due to a one-time favorable patent-related court ruling recorded in the prior year period;

Decrease of $3.0 million in outside services expenses due to lower promotional expenses and sample costs for roxadustat in China.

Interest and Other, Net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

6 unchanged sentences

Interest expense also includes interest related to the Technology Development Center of the Republic of Finland product development obligations.

Interest expense decreased $0.2 million, or 60% for the three months ended June 30, 2022, and $0.6 million or 72% for the six months ended June 30, 2022 compared to the same periods a year ago.

The decrease was primarily due to the lease modification and renewal in 2021 being classified as operating leases, as compared to finance leases previously.

Interest expense was immaterial for the three months ended September 30, 2022 and 2021.

Interest expense decreased $0.6 million, or 67% for the nine months ended September 30, 2022 compared to the same period a year ago primarily due to the lease modification and renewal in 2021 being classified as operating leases, as compared to finance leases previously.

Interest Income and Other Income (Expenses), Net

Interest income and other income (expenses), net primarily include interest income earned on our cash, cash equivalents and investments, foreign currency transaction gains (losses), remeasurement of certain monetary assets and liabilities in non-functional currency of our subsidiaries into the functional currency, realized gains (losses) on sales of investments, and other non-operating income and expenses.

Interest income and other income (expenses), net improved $5.6 million, or 1,532% for the three months ended June 30, 2022, and $5.7 million, or 697% for the six months ended June 30, 2022 compared to the same periods a year ago, primarily due to a reduction of $6.0 million recorded during the second quarter of 2022 to other expenses to release the previously estimated late payment fees related to value added tax in China.

See Note 9, Subsequent Event , to the condensed consolidated financial statements for details.

Three Months Ended June 30,

Six Months Ended June 30,

Interest income and other income (expenses), net improved $3.1 million, or 238% for the three months ended September 30, 2022, compared to the same period a year ago, primarily due to foreign currency transaction impacts and higher interest income from our investments.

Interest income and other income (expenses), net improved $8.8 million, or 415% for the nine months ended September 30, 2022 compared to the same period a year ago, primarily due to a reduction of $6.0 million to other expenses recorded during the second quarter of 2022 to release the previously estimated late payment fees related to value added tax in China, upon the receipt of a written evidence from China’s State Taxation Administration, which confirmed the transfer of certain intellectual property rights in 2020 relating to our Chinese business between our wholly owned subsidiaries is exempted from value added tax.

In addition, the interest income from our investments was higher compared to the same period a year ago.

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

Loss before income taxes

Provision for (benefit from) income taxes

Income (loss) before income taxes

Provision for income taxes

Effective tax rate

Provisions for (benefit from) income taxes for the three and six months ended June 30, 2022 and 2021 were primarily due to foreign taxes.

Provisions for income taxes for the three and nine months ended September 30, 2022 and 2021 were primarily due to foreign taxes.

Based upon the weight of available evidence, which includes our historical operating performance, reported cumulative net losses since inception and expected continuing net loss, we have established a full valuation allowance against our net deferred tax assets as we do not currently believe that realization of those assets is more likely than not.

4 unchanged sentences

Investment Income in Unconsolidated Variable Interest Entity

Investment income in unconsolidated variable interest entity represented our proportionate share of the reported profits of Falikang, an unconsolidated variable interest entity accounted for under the equity method, and was immaterial for the three and six months ended June 30, 2022 and 2021.

See Note 3, Variable Interest Entity , to the condensed consolidated financial statements for details.

LIQUIDITY AND CAPITAL RESOURCES

Financial Conditions

Financial Condition

We have historically funded our operations principally from the sale of common stock (including our public offering proceeds) and from the execution of collaboration agreements involving license payments, milestones and reimbursement for development services.

As of June 30, 2022, we had cash and cash equivalents of $167.8 million, compared to $171.2 million as of December 31, 2021.

As of September 30, 2022, we had cash and cash equivalents of $156.0 million, compared to $171.2 million as of December 31, 2021.

Cash is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Investments, consisting of available-for-sale securities, and stated at fair value, are also available as a source of liquidity.

As of June 30, 2022, we had short-term and long-term investments of $270.4 million and $45.9 million, respectively, compared to $234.0 million and $167.8 million, respectively, as of December 31, 2021.

As of June 30, 2022, a total of $98.8 million of our cash and cash equivalents was held outside of the U.S.

As of September 30, 2022, we had short-term and long-term investments of $252.6 million and $17.8 million, respectively, compared to $234.0 million and $167.8 million, respectively, as of December 31, 2021.

As of September 30, 2022, a total of $84.4 million of our cash and cash equivalents was held outside of the U.S.

in our foreign subsidiaries, including $63.1 million held in China, to be used primarily for our China operations.

On November 4, 2022, we entered into a RIFA with NovaQuest with respect to our royalties from Astellas’

sales of roxadustat in Europe, Japan and the other Astellas territories.

Pursuant to the RIFA, NovaQuest agreed to pay us an investment amount equal to $50.0 million, in consideration for certain royalty and other revenue payments we will make to NovaQuest.

For additional details about this financing transaction, see Note 9, Subsequent Event , to the condensed consolidated financial statements.

Cash flows from Falikang, a distribution joint venture between FibroGen Beijing and AstraZeneca, and cash flows into FibroGen Beijing, are currently intended to remain onshore in China.

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The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods set forth below (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash provided by (used in):

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Operating Activities

Net cash used in operating activities was $41.5 million for the six months ended June 30, 2022 and consisted primarily of net loss of $135.8 million adjusted for non-operating cash items of $39.7 million, offset by a net increase in operating assets and liabilities of $54.6 million.

Net cash used in operating activities was $93.4 million for the nine months ended September 30, 2022 and consisted primarily of net loss of $227.5 million adjusted for non-operating cash items of $57.8 million, partially offset by a net increase in operating assets and liabilities of $76.2 million.

The significant non-operating cash items included stock-based compensation expense of $49.4 million, and depreciation expense of $7.5 million.

The significant items in the changes in operating assets and liabilities included the increases resulting from the following:

Accrued and other liabilities of $61.0 million, primarily related to the total of 54.4 million for API and bulk drug product price true-up as of June 30, 2022, resulting from changes in estimated variable consideration associated with the API shipments fulfilled under the terms of the Japan Amendment with Astellas, the bulk drug product transferred under the terms of the Europe Agreement and the EU Supply Agreement with Astellas, and the bulk drug product shipments to AstraZeneca under the terms of the Master Supply Agreement.

See Note 2, Collaboration Agreements, License Agreement and Revenues, to the condensed consolidated financial statements for details.

Accrued and other liabilities increased $87.2 million, primarily related to the total of $66.5 million for API and bulk drug product price true-up as of September 30, 2022, resulting from changes in estimated variable consideration associated with the API shipments fulfilled under the terms of the Astellas Japan Amendment, the bulk drug product transferred under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement, and the bulk drug product shipments to AstraZeneca under the terms of the AstraZeneca Master Supply Agreement.

See the Drug Product Revenue section in Note 2, Collaboration Agreements, License Agreement and Revenues, to the condensed consolidated financial statements for details.

The accrued and other liabilities were also impacted by the classification of a portion of accrued co-promotion expenses from other long-term liabilities to current liabilities based on the updated estimate of timing for payment, and by the timing of invoicing and payment;

Prepaid expenses and other current assets of $11.6 million, primarily due to the collection of $8.0 million from Eluminex for upfront license payment during the first quarter of 2022, and less prepayments made for roxadustat API manufacturing activities;

Deferred revenue of $9.7 million, primarily related to the deferred considerations of the bulk drug product transferred to Astellas under the terms of the Europe Agreement and the EU Supply Agreement during the current year period, offset by the above-mentioned reclassification to accrued liabilities, resulting from changes in estimated variable consideration associated with the API or bulk drug product deliveries fulfilled with Astellas and AstraZeneca;

Accounts payable of $4.2 million, primarily driven by the timing of invoicing and payments.

Prepaid expenses and other current assets decreased $8.3 million, primarily due to the collection of $8.0 million from Eluminex for upfront license payment during the first quarter of 2022, and less prepayments made for roxadustat API manufacturing activities;

Deferred revenue increased $4.5 million, primarily related to the deferred considerations of the bulk drug product transferred to Astellas under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement during the current year period, offset by the above-mentioned reclassification to accrued liabilities, resulting from changes in estimated variable consideration associated with the API or bulk drug product deliveries fulfilled with Astellas and AstraZeneca.

The increases were partially offset by the decreases resulting from the following:

Accounts receivable of $16.2 million, primarily due to the receivable related to the bulk drug product transferred to Astellas during the second quarter of 2022;

Inventories of $10.9 million, driven by the increased inventory level primarily related to inventory cost capitalized related to Europe and other territories, and FibroGen Beijing’s productions of roxadustat for commercial sales purposes;

Other long-term liabilities of $7.1 million driven by the above-mentioned classification of a portion of accrued co-promotion expenses from other long-term liabilities to current liabilities based on the updated estimate of timing for payment.

Net cash used in operating activities was $71.5 million for the six months ended June 30, 2021 and consisted primarily of net loss of $205.7 million adjusted for non-cash items of $73.5 million, offset by a net increase in operating assets and liabilities of $60.7 million.

Inventories increased $11.1 million, driven by the increased inventory level primarily related to inventory cost capitalized related to Europe and other territories, and FibroGen Beijing’s productions of roxadustat for commercial sales purposes;

Other long-term liabilities decreased $10.3 million driven by the above-mentioned classification of a portion of accrued co-promotion expenses from other long-term liabilities to current liabilities based on the updated estimate of timing for payment;

Accounts payable decreased $5.1 million, primarily driven by the timing of invoicing and payments.

Net cash used in operating activities was $27.3 million for the nine months ended September 30, 2021 and consisted primarily of net loss of $155.9 million adjusted for non-operating cash items of $92.4 million, offset by a net increase in operating assets and liabilities of $36.3 million.

The significant non-operating cash items included stock-based compensation expense of $54.1 million, expense for acquired in-process research and development asset from HiFiBiO of $25.0 million, depreciation expense of $7.7 million and amortization of finance lease right-of-use assets of $4.5 million.

The significant items in the changes in operating assets and liabilities included the increases resulting from the following:

Deferred revenue of $33.1 million, primarily related to the above-mentioned $11.8 million and $11.2 million of the deferred considerations of the bulk drug product shipped to Astellas and AstraZeneca, respectively, due to a high degree of uncertainty associated to the final consideration, and $9.3 million of the deferred revenue from the sales to Falikang associated with the China performance obligation.

The change in deferred revenue was also driven by the extension of the estimated future non-contingent development period and recognition of revenues under our collaboration agreements with Astellas and AstraZeneca;

Accrued and other liabilities of $27.7 million, primarily driven by the timing of invoicing and payment;

Accounts receivable of $17.9 million, primarily driven by the timing of the receipt of upfront payments and the recognition of revenues under our collaboration agreements with Astellas and AstraZeneca, as well as the collection from our distributors and Falikang.

Deferred revenue increased $40.7 million, primarily related to the above-mentioned $11.8 million and $11.2 million of the deferred considerations of the bulk drug product shipped to Astellas and AstraZeneca, respectively, due to a high degree of uncertainty associated with the variable consideration for revenue recognition purposes, and $18.1 million of the deferred revenue from the sales to Falikang associated with the China performance obligation;

Accrued and other liabilities increased $32.0 million, primarily driven by the timing of invoicing and payment;

Accounts receivable decreased $6.1 million, primarily driven by the timing of the receipt of upfront payments and the recognition of revenues under our collaboration agreements with Astellas and AstraZeneca, as well as the collection from our distributors and Falikang.

The increases were partially offset by the decreases resulting from the following:

Other long-term liabilities of $8.1 million, primarily due to the decrease in the co-promotional expenses with AstraZeneca for its sales and marketing efforts related to the commercial launch of roxadustat in China that are not expected to be paid in the next year;

Inventories of $7.9 million, driven by the increased inventory level primarily related to FibroGen Beijing’s productions of roxadustat for commercial sales purposes and inventory cost capitalized in the U.S.

Other long-term liabilities decreased $14.2 million, primarily due to the decrease in the co-promotional expenses with AstraZeneca for its sales and marketing efforts related to the commercial launch of roxadustat in China that are not expected to be paid in the next year;

Inventories increased $12.7 million, driven by the increased inventory level primarily related to FibroGen Beijing’s productions of roxadustat for commercial sales purposes and pre-launch inventory cost capitalized in the U.S.;

Prepaid expenses and other current assets increased $11.2 million, primarily due to the unbilled upfront license payment from Eluminex of $8.0 million, and prepayments made for roxadustat API manufacturing activities;

Other assets increased $3.6 million, primarily related to the increases in various licenses.

Investing Activities

Investing activities primarily consist of purchases of property and equipment, purchases of investments, purchase of acquired in-process research and development asset and proceeds from the maturity and sale of investments.

Net cash provided by investing activities was $43.2 million for the six months ended June 30, 2022 and consisted primarily of $132.5 million of proceeds from maturities of investments and $7.4 million of proceeds from sales of available-for-sale securities, partially offset by $59.1 million of cash used in purchases of available-for-sale securities and $35.0 million of cash paid for the acquired in-process research and development asset.

Net cash used in investing activities was $254.3 million for the six months ended June 30, 2021 and consisted primarily of $266.6 million of cash used in purchases of available-for-sale securities, partially offset by $10.6 million of proceeds from maturities of investments, and $4.0 million of proceeds from sales of available-for-sale securities.

Net cash provided by investing activities was $88.0 million for the nine months ended September 30, 2022 and consisted primarily of $216.3 million of proceeds from maturities of investments and $7.4 million of proceeds from sales of available-for-sale securities, partially offset by $97.3 million of cash used in purchases of available-for-sale securities, $35.0 million of cash paid for the acquired in-process research and development asset, and $3.4 million of cash used in purchases of property and equipment.

Net cash used in investing activities was $376.4 million for the nine months ended September 30, 2021 and consisted primarily of $397.9 million of cash used in purchases of available-for-sale securities, $25.0 million of cash paid for the acquired in-process research and development asset and $3.8 million of cash used in purchases of property and equipment, partially offset by $46.3 million of proceeds from maturities of investments and $4.0 million of proceeds from sales of available-for-sale securities.

Financing Activities

Financing activities primarily reflect proceeds from the issuance of our common stock, cash paid for payroll taxes on restricted stock unit releases, repayments of our lease liabilities and obligations.

Net cash used in financing activities was $0.8 million for the six months ended June 30, 2022 and consisted primarily of $3.4 million of cash paid for payroll taxes on restricted stock unit releases, partially offset by $2.8 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under our Employee Share Purchase Plan (“ESPP”).

Net cash provided by financing activities was $0.3 million for the six months ended June 30, 2021 and consisted primarily of $11.8 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under our ESPP, partially offset by $5.9 million of cash paid for payroll taxes on restricted stock unit releases, and $5.3 million of repayments of finance lease liabilities.

Net cash used in financing activities was $1.9 million for the nine months ended September 30, 2022 and consisted primarily of $4.6 million of cash paid for payroll taxes on restricted stock unit releases, partially offset by $3.0 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under our 2014 Employee Stock Purchase Plan (“ESPP”).

Net cash provided by financing activities was $0.5 million for the nine months ended September 30, 2021 and consisted primarily of $11.9 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under our ESPP, partially offset by $6.7 million of cash paid for payroll taxes on restricted stock unit releases, and $5.4 million of repayments of finance lease liabilities.

Material Cash Requirements

In the third quarter of 2019, we started generating revenue from commercial sales of roxadustat product in China.

We started generating revenue from commercial sales of roxadustat product in China in the third quarter of 2019.

Even with the expectation of increases in revenue from product sales, we anticipate that we will continue to generate losses for the foreseeable future.

Following the CRL for roxadustat in the U.S., we have implemented a cost reduction effort, and as a result, operating expenses have decreased and may continue to decrease in certain areas over time compared to our previous internal plans.

To date, we have funded certain portions of our research and development and manufacturing efforts globally through collaboration partners, government support, and capital investment.

Following the CRL for roxadustat in CKD anemia in the U.S., we have implemented a cost reduction effort, and as a result, operating expenses have decreased and may continue to decrease in certain areas over time compared to our previous internal plans.

To date, we have funded certain portions of our research and development and manufacturing efforts globally through collaboration partners and capital investment.

There is no guarantee that sufficient funds will be available to continue to fund these development efforts through commercialization or otherwise.

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for CKD anemia.

We are also subject to all the risks related to the development and commercialization of novel therapeutics, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business, such as from the COVID-19 pandemic or other factors outlined under Part II, Item 1A “

We are also subject to all the risks related to the development and commercialization of novel therapeutics, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business, such as the COVID-19 pandemic or other factors outlined under Part II, Item 1A “

Risk Factors ”

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We anticipate that we will need substantial additional funding in connection with our continuing operations.

We believe that our existing cash and cash equivalents, short-term and long-term investments and accounts receivable will be sufficient to meet our anticipated cash requirements for at least the next 12 months from the date of issuance of these financial statements.

We believe that our existing cash and cash equivalents, short-term and long-term investments and accounts receivable, together with the financing amount under the RIFA expected in November 2022, will be sufficient to meet our anticipated cash requirements for at least the next 12 months from the date of issuance of the financial statements included in this Quarterly Report on Form 10-Q.

However, we may need additional capital thereafter and our liquidity assumptions could turn out to be wrong, or may change over time, and we could utilize our available financial resources sooner than we currently expect.

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Contractual Obligations

As of June 30, 2022, we had $94.1 million of operating lease liabilities.

As of September 30, 2022, we had $92.6 million of operating lease liabilities.

The material cash requirements related to our lease liabilities included $15.6 million expected to be paid within the next 12 months.

As of June 30, 2022, we had outstanding total non-cancelable purchase obligations of $57.7 million, including $33.2 million for manufacture and supply of pamrevlumab, $9.2 million for manufacture and supply of roxadustat, and $15.3 million for other purchases and programs.

As of September 30, 2022, we had outstanding total non-cancelable purchase obligations of $51.2 million, including $21.0 million for manufacture and supply of pamrevlumab, $7.8 million for manufacture and supply of roxadustat, and $22.3 million for other purchases and programs.

We expect to fulfill our commitments under these agreements in the normal course of business, and as such, no liability has been recorded.

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Some of our license agreements provide for periodic maintenance fees over specified time periods, as well as payments by the Company upon the achievement of development, regulatory and commercial milestones.

As of June 30, 2022, future milestone payments for research and preclinical stage development programs consisted of up to approximately $697.9 million in total potential future milestone payments under our license agreements with HiFiBiO (for Gal-9 and CCR8), Medarex, Inc.

As of September 30, 2022, future milestone payments for research and preclinical stage development programs consisted of up to approximately $697.9 million in total potential future milestone payments under our license agreements with HiFiBiO (for Gal-9 and CCR8), Medarex, Inc.

These milestone payments generally become due and payable only upon the achievement of certain developmental, clinical, regulatory and/or commercial milestones.

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Off-Balance Sheet Arrangements

During the three and six months ended June 30, 2022, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements.

During the three and nine months ended September 30, 2022, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements.

Recently Issued Accounting Guidance

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Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes in our critical accounting policies, estimates and judgments during the three and six months ended June 30, 2022 compared with the disclosures in Part II, Item 7 of our 2021 Form 10-K.

There have been no material changes in our critical accounting policies, estimates and judgments during the three and nine months ended September 30, 2022 compared with the disclosures in Part II, Item 7 of our 2021 Form 10-K.

QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK.

During the three and six months ended June 30, 2022, we believe there were no material changes to our exposure to market risks as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk”

During the three and nine months ended September 30, 2022, we believe there were no material changes to our exposure to market risks as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk”

in our 2021 Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements