KYNTRA BIO, INC. 10-K

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our common stock has been listed on the Nasdaq Global Select Market (“Nasdaq”) since November 14, 2014, under the symbol “FGEN.” Prior to our initial public offering, there was no public market for our common stock. Stock Price Performance Graph The following graph illustrates a comparison of the total cumulative stockholder return for our common stock since December 31, 2017 to two indices: the NASDAQ Composite Index and the NASDAQ Biotechnology Index. The graph assumes an initial investment of $100 on December 31, 2017, in our common stock, the stocks comprising the NASDAQ Composite Index, and the stocks comprising the NASDAQ Biotechnology Index. The stockholder return shown in the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. The above Stock Price Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing. Dividend Policy We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. 78 Stockholders As of January 31, 2023, there were 113 registered stockholders of record for our common stock. This number of registered stockholders does not include stockholders whose shares are held in street names by brokers and other nominees, or may be held in trust by other entities. Therefore, the actual number of stockholders is greater than this number of registered stockholders of record. Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ITEM 6. [RESERVED] 79 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information included in Item 8 of this Annual Report on Form 10-K for the year ended December 31, 2022 (“Annual Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, international operations and product candidates, includes forward-looking statements that involve risks and uncertainties. You should review the “Forward-Looking Statements” and ““Risk Factors” sections of this Annual Report for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. This discussion and analysis generally addresses 2022 and 2021 items and year-over-year comparisons between 2022 and 2021. Discussions of 2020 items and year-over-year comparisons between 2021 and 2020 that are not included in this Annual Report can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 28, 2022. BUSINESS OVERVIEW We are headquartered in San Francisco, California, with subsidiary offices in Beijing and Shanghai, People’s Republic of China (“China”). We are a leading biopharmaceutical company discovering, developing and commercializing a pipeline of first-in-class therapeutics. We apply our pioneering expertise in hypoxia-inducible factor (“HIF”) biology, 2-oxoglutarate enzymology, and connective tissue growth factor biology to advance innovative medicines for the treatment of anemia, fibrotic disease, and cancer. We have 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. Our goal is to build a diversified pipeline with novel drugs that will address unmet patient needs in oncology, immunology, and fibrosis. We and Astellas Pharma Inc. (“Astellas”) 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. We 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. Financial Highlights Years Ended December 31, 2022 2021 2020 (in thousands, except for per share data) Result of Operations Revenue $ 140,734 $ 235,309 $ 176,319 Operating costs and expenses 441,759 523,839 368,199 Net loss (293,654 ) (290,023 ) (189,291 ) Net loss per share - basic and diluted $ (3.14 ) $ (3.14 ) $ (2.11 ) December 31, 2022 December 31, 2021 (in thousands) Balance Sheet Cash and cash equivalents $ 155,700 $ 171,223 Short-term and long-term investments $ 270,656 $ 401,763 Accounts receivable $ 16,299 $ 17,401 Our revenue for the year ended December 31, 2022 included the revenues recognized related to the following: • $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; • $22.4 million of development revenue recognized under our collaboration agreements with our partners Astellas and AstraZeneca; 80 • $82.9 million from roxadustat commercial sales in China, mostly from sales to Beijing Falikang Pharmaceutical Co. Ltd. (“Falikang”); and • $11.1 million of drug product revenue related to active pharmaceutical ingredient (“API”) deliveries to Astellas. As comparison, our revenue for the year ended December 31, 2021 included the revenues recognized related to the following: • $120.0 million regulatory milestones recognized under our collaboration agreement with Astellas 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. Of this amount, $108.4 million was recognized as license revenue and the remainder included as development revenue; • $70.3 million of development revenue recognized under our collaboration agreements with our partners Astellas and AstraZeneca; • $47.6 million of net product revenue from roxadustat commercial sales in China, mostly from sales to Falikang; and • $8.0 million upfront license payment recognized under our license agreement (defined below) with Eluminex Biosciences (Suzhou) Limited (“Eluminex”). Operating costs and expenses decreased for the year ended December 31, 2022 compared to the prior year as a result of the net effect of the following: • $60.0 million for acquired in-process research and development asset from HiFiBiO Therapeutics (“HiFiBiO”) in the prior year, which did not recur in the current year; • $19.1 million lower employee-related expenses and $5.6 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 CRL for roxadustat in CKD anemia in the U.S., and payroll tax refunds received during the year ended December 31, 2022, partially offset by overall merit increase during the current year; • $15.0 million lower clinical trial expenses associated with roxadustat post-approval safety studies and Phase 3 trials for pamrevlumab; • $2.3 million lower outside services expenses due to lower promotional expenses and sample costs for roxadustat in China. • $7.4 million higher cost of goods sold due to higher roxadustat product sales; • $7.1 million higher drug development expenses associated with drug substance and drug product manufacturing activities primarily related to pamrevlumab; and • $6.7 million higher legal expenses primarily due to a one-time favorable patent-related court ruling recorded in the prior year. Our research and development expenses were $296.8 million, $387.0 million and $252.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. Since inception and through December 31, 2022, we have incurred a total of approximately $2.9 billion in research and development expenses, a majority of which relates to the development of roxadustat, pamrevlumab and other HIF-PH inhibitors. We expect to continue to incur significant expenses and operating losses over at least the next few years as we continue to make investments in research and development to advance our product candidate portfolio. In addition, we expect to incur significant expenses relating to seeking regulatory approval for our product candidates and commercializing those products in various markets, including China. We consider the active management and development of our clinical pipeline to be particularly crucial to our long-term success. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming. We started to implement a cost reduction effort in the second half of 2021, following the complete response letter (“CRL”) for roxadustat in the U.S. As a result, operating expenses have decreased and may continue to decrease in certain areas over time. The actual probability of success for each of our product candidates and clinical programs, and our ability to generate product revenue and become profitable, depends upon a variety of factors, including the quality of the product candidate, clinical results, investment in the program, competition, manufacturing capability, commercial viability, and our and our partners’ ability to successfully execute our development and commercialization plans. For a description of the numerous risks and uncertainties associated with product development, refer to the “ Risk Factors ” section of this Annual Report. 81 During the year ended December 31, 2022, we had a net loss of $293.7 million, or net loss per basic and diluted share of $3.14, as compared to a net loss of $290.0 million, or net loss per basic and diluted share of $3.14 for the prior year, primarily due to a decrease in revenues, almost entirely offset by a decrease in operating costs and expenses. Cash and cash equivalents, investments and accounts receivable totaled $442.7 million at December 31, 2022, a decrease of $147.7 million from December 31, 2021, primarily due to cash used in operations and investment in our pre-clinical pipeline, partially offset by the proceeds received from sale of future revenues. Licensing Activities Exclusive License with Eluminex In July 2021, we exclusively licensed to Eluminex global rights to our investigational biosynthetic cornea derived from recombinant human collagen type III. Under the terms of the agreement with Eluminex, Eluminex made an $8.0 million upfront payment to FibroGen during the first quarter of 2022. 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 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 on worldwide net sales of other recombinant human collagen type III products that are not cornea products. During the third quarter of 2021, the $8.0 million upfront license payment was recognized as license revenue for the performance obligations satisfied. See the Eluminex Agreements section in Note 3, Collaboration Agreements, License Agreement and Revenues , to the consolidated financial statements for details. Collaboration Partnerships for Roxadustat Our current and future research, development, manufacturing and commercialization efforts with respect to roxadustat depend on funds from our collaboration agreements with Astellas and AstraZeneca. See Note 3, Collaboration Agreements, License Agreement and Revenues , to the consolidated financial statements for details. Astellas 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 (“Astellas 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 (“Astellas Europe Agreement”). Under these agreements, the aggregate amount for upfront payments and milestone payments received through December 31, 2022 totals $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 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 will allow Astellas to manufacture roxadustat drug product for commercialization in Japan (the “Astellas Japan Amendment”). The related drug product revenue was $9.5 million and $2.1 million for the years ended December 31, 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 $1.6 million and $1.1 million for the years ended December 31, 2022 and 2021, respectively. In addition, as of December 31, 2022, Astellas had a separate investment of $80.5 million in the equity of FibroGen, Inc. 82 AstraZeneca 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 (the “AstraZeneca U.S./RoW Agreement”), except China. In July 2013, through our China subsidiary and related affiliates, we entered into the China Agreement with AstraZeneca for roxadustat for the treatment of anemia in China (the “AstraZeneca China Agreement”). The aggregate amount for upfront payments and milestone payments received through December 31, 2022 totals $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 AstraZeneca 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 year ended December 31, 2022. The related drug product revenue was ($2.2) million for year ended December 31, 2021. AstraZeneca China Amendment In July 2020, FibroGen China and AstraZeneca (together with FibroGen China, the “Parties”) 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, Falikang, which performs roxadustat distribution, as well as conduct sales and marketing through AstraZeneca. W e account for our investment in Falikang under the equity method, and Falikang is not consolidated into our consolidated financial statements. In addition, we recognized our proportionate share of the reported profits or losses of Falikang, as other income (loss) in the consolidated statement of operations, and as an adjustment to investment in unconsolidated subsidiary in the consolidated balance sheet. See Note 4, Equity method investment - Variable Interest Entity , to the consolidated financial statements for details. 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 an agreed upon transfer price, which includes gross transfer price, net of calculated profit share. AstraZeneca now bills the co-promotion expenses to Falikang and to FibroGen Beijing, respectively, for its services provided to the respective entity. AstraZeneca is entitled to reimbursement of its sales and marketing expenses up to a cumulative capped amount of a percentage of net sales. Once such amount is reached, AstraZeneca will bill the co-promotion expenses based on actual costs as incurred plus a markup on a prospective basis, which is currently expected to continue through 2028. In addition, Development costs continue to be shared 50/50 between the Parties. We recognize revenue 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. For our direct sales of commercial drug product, we recognize revenue when control of the promised good is transferred to the customer in an amount that reflects the consideration that we expect to be entitled to in exchange for the product. During the years ended December 31, 2022 and 2021, we recognized $71.2 million and $35.6 million of net product revenue from the sales to Falikang, respectively, and $11.7 million and $12.1 million of net product revenue from sales directly to distributors in one province in China, as described in details under Product Revenue, Net section below. FibroGen, Inc. and AstraZeneca concurrently amended the AstraZeneca U.S./RoW Agreement to reflect minor changes in the governance structure under the AstraZeneca China Agreement. 83 Additional Information Related to Collaboration Agreements For more detailed discussions on the accounting for these agreements, See Note 3, Collaboration Agreements, License Agreement and Revenues, to the consolidated financial statements. Total cash consideration received through December 31, 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 Through December 31, 2022 Additional Potential Cash Payment for Milestones Total Potential Cash Payments for Upfront Payments and Milestones (in thousands) Astellas--related-party: Astellas Japan Agreement $ 105,093 $ 67,500 $ 172,593 Astellas Europe Agreement 685,000 60,000 745,000 Total Astellas 790,093 127,500 917,593 AstraZeneca: AstraZeneca U.S./RoW Agreement 439,000 810,000 1,249,000 AstraZeneca China Agreement 77,200 299,500 376,700 Total AstraZeneca 516,200 1,109,500 1,625,700 Total $ 1,306,293 $ 1,237,000 $ 2,543,293 The above table does not include development cost reimbursement, transfer price payments, and royalties and profit share under our existing collaboration agreements. While we continue to commercialize roxadustat in China with AstraZeneca, and develop roxadustat in the U.S. for the treatment of anemia in patients with myelodysplastic syndromes (“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 AstraZeneca U.S./RoW Agreement milestones from AstraZeneca. RESULTS OF OPERATIONS Revenue Years Ended December 31, Change 2022 vs. 2021 2022 2021 2020 $ % (dollars in thousands) Revenue: License revenue $ 22,590 $ 116,434 $ 14,323 $ (93,844 ) (81 ) % Development and other revenue 24,189 70,275 80,592 (46,086 ) (66 ) % Product revenue, net 82,869 47,638 72,498 35,231 74 % Drug product revenue 11,086 962 8,906 10,124 1,052 % Total revenue $ 140,734 $ 235,309 $ 176,319 $ (94,575 ) (40 ) % Under our revenue recognition policy, license revenue includes amounts from upfront, non-refundable license payments and amounts allocated pursuant to the standalone selling price method from other consideration received during the respective periods. This revenue is generally recognized as deliverables are met and services are performed. License revenues represented 16%, 50% and 8% of total revenues for the years ended December 31, 2022, 2021 and 2020, respectively. Development revenue includes co-development and other development related services. We recognize development services as revenue in the period in which they are billed to our partners, excluding China. As of December 31, 2022, we expect the future development services to continue through 2024. For China co-development services, we defer revenue until we begin to transfer control of the manufactured commercial product to AstraZeneca, which commenced in the first quarter of 2021 and we expect to continue through 2028, which reflects our best estimates. 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. Development and other revenues represented 17%, 30% and 46% of total revenues for the years ended December 31, 2022, 2021 and 2020, respectively. 84 We recognize product revenue 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. Product revenue represented 59%, 20% and 41% of total revenue for the years ended December 31, 2022, 2021 and 2020, respectively. 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. We recognize drug product revenue when we fulfill the inventory transfer obligations. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the drug 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. Actual amounts of consideration ultimately received in the future may differ from our estimates, for which we will adjust these estimates and affect the drug product revenue in the period such variances become known. Drug product revenues represented 8%, 0%, and 5% of total revenues for the years ended December 31, 2022, 2021 and 2020, respectively. In the future, we will continue generating revenue from collaboration agreements in the form of license fees, milestone payments, reimbursements for collaboration services and royalties on drug product sales, and from product sales. 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 decreased $94.6 million, or 40.0% for the year ended December 31, 2022 compared to the year ended December 31, 2021 for the reasons discussed in the sections below. License Revenue Years Ended December 31, Change 2022 vs. 2021 2022 2021 2020 $ % (dollars in thousands) License revenue: Astellas $ 22,590 $ 108,434 $ 14,323 $ (85,844 ) (79 ) % Eluminex — 8,000 — (8,000 ) (100 ) % Total license revenue $ 22,590 $ 116,434 $ 14,323 $ (93,844 ) (81 ) % License revenue decreased $93.8 million, or 81% for the year ended December 31, 2022 compared to the year ended December 31, 2021. License revenue recognized under our collaboration agreements with Astellas for the year ended December 31, 2022 represented the allocated revenue 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 year ended December 31, 2021 represented the allocated revenue 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. License revenue recognized under our license agreement with Eluminex for the year ended December 31, 2021 represented the $8.0 million upfront license payment for the performance obligations satisfied. 85 Development and Other Revenue Years Ended December 31, Change 2022 vs. 2021 2022 2021 2020 $ % (dollars in thousands) Development revenue: Astellas $ 9,908 $ 21,927 $ 19,174 $ (12,019 ) (55 ) % AstraZeneca 12,519 48,345 61,418 (35,826 ) (74 ) % Total development revenue 22,427 70,272 80,592 (47,845 ) (68 ) % Other revenue 1,762 3 — 1,759 58,633 % Total development and other revenue $ 24,189 $ 70,275 $ 80,592 $ (46,086 ) (66 ) % Development and other revenue decreased $46.1 million, or 66% for the year ended December 31, 2022 compared to the year ended December 31, 2021. Development revenue recognized under our collaboration agreements with Astellas for the year ended December 31, 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 year ended December 31, 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. In addition, 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 year ended December 31, 2022 as a result of the substantial completion of Phase 3 trials for roxadustat. Development revenue recognized under our collaboration agreements with AstraZeneca for the year ended December 31, 2022 was impacted by the decrease in CKD-related co-development billings in the U.S. Other revenue recognized for the year ended December 31, 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 Years Ended December 31, Change 2022 vs. 2021 2022 2021 2020 $ % (dollars in thousands) Direct Sales: Gross revenue $ 12,366 $ 13,727 $ 89,027 $ (1,361 ) (10 ) % Price adjustment 242 (982 ) — 1,224 (125 ) % Non-key account hospital listing award 49 95 (9,325 ) (46 ) (48 ) % Contractual sales rebate (624 ) (832 ) (6,189 ) 208 (25 ) % Other discounts and rebates (332 ) (21 ) (923 ) (311 ) 1,481 % Sales returns 1 83 (92 ) (82 ) (99 ) % Direct sales revenue, net 11,702 12,070 72,498 (368 ) (3 ) % Sales to Falikang: Gross transaction price 112,544 97,531 — 15,013 15 % Profit share (43,716 ) (34,759 ) — (8,957 ) 26 % Net transaction price 68,828 62,772 — 6,056 10 % Decrease (increase) in deferred revenue 2,339 (27,204 ) — 29,543 (109 ) % Sales to Falikang revenue, net 71,167 35,568 — 35,599 100 % Total product revenue, net $ 82,869 $ 47,638 $ 72,498 $ 35,231 74 % 86 In January 2021, Falikang became fully operational and substantially all direct product sales to distributors in China were made by Falikang, while FibroGen Beijing continued to sell product directly in one province in China. Total product revenue, net increased $35.2 million, or 74% for the year ended December 31, 2022 compared to the year ended December 31, 2021. We recognize product revenue from direct sales to distributors 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. Product revenue from direct sales, net decreased $0.4 million, or 3% for the year ended December 31, 2022 compared to the year ended December 31, 2021. The gross product revenue from direct sales to distributors decreased $1.4 million, or 10% for the year ended December 31, 2022 compared to the year ended December 31, 2021, 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 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. The discounts and rebates for the year ended December 31, 2021 included $1.0 million of price adjustments recorded based on government-listed price guidance and estimated channel inventory levels. The remaining discounts and rebates were immaterial for the years ended December 31, 2022 and 2021 due to the 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. We recognize revenue upon the transfer of control of commercial products to Falikang in an amount that reflects the allocation of the China performance obligation transaction price to the performance obligation satisfied during the reporting period. 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 $35.6 million, or 100% for the year ended December 31, 2022 compared to the year ended December 31, 2021. The gross transfer price increased $15.0 million and the calculated profit share increased $9.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, 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 recognized $2.3 million from the previously deferred revenue of the China performance obligation during the year ended December 31, 2022, and deferred $27.2 million from the net transaction price to Falikang, which we included in the related deferred revenue of the China performance obligation during the year ended December 31, 2021. Drug Product Revenue Years Ended December 31, Change 2022 vs. 2021 2022 2021 2020 $ % (dollars in thousands) Drug product revenue: Astellas Japan Agreement $ 9,480 $ 2,056 $ 4,281 $ 7,424 361 % Astellas Europe Agreement 1,606 1,130 — 476 42 % AstraZeneca U.S./RoW Agreement — (2,224 ) 4,625 2,224 100 % Total drug product revenue: $ 11,086 $ 962 $ 8,906 $ 10,124 1,052 % 87 Drug product revenue increased $10.1 million, or 1,052% for the year ended December 31, 2022 compared to the year ended December 31, 2021. Astellas Japan Agreement During the year ended December 31, 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. 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 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. During the fourth quarter of 2022, we fulfilled a shipment obligation under the terms of Astellas Japan Amendment, and recognized related drug product revenue of $8.4 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 $8.7 million during the year ended December 31, 2022 . 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, 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. This amount was included in accrued liabilities and as of December 31, 2022, the related balance in accrued liabilities was $6.5 million, representing our best estimate that this amount will be paid within the next 12 months . Astellas Europe Agreement During the first quarter of 2021, we transferred bulk drug product from process validation supplies for commercial purposes under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement. We recorded the consideration of $11.8 million from this inventory transfer as deferred revenue as of December 31, 2021, due to a high degree of uncertainty associated with the final consideration. During the fourth quarter of 2021, 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 $8.3 million as deferred revenue as of December 31, 2021, due to a high degree of uncertainty associated with the final consideration. 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. 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. We recorded this amount in deferred revenue and netted it against an unbilled contract asset as of December 31, 2021. We updated our 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, during the year ended December 31, 2022, we reclassified a total of $57.4 million from the related deferred revenue to accrued liabilities. As of December 31, 2022, the related balance in accrued liabilities was $57.4 million, representing our best estimate that this amount will be paid within the next 12 months. In addition, we recognized royalty revenue of $0.6 million and $0.2 million as drug product revenue from the deferred revenue under the Astellas Europe Agreement for the years ended December 31, 2022 and 2021, 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. 88 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 for these shipments and recorded a reduction to drug product revenue of $(2.2) million for the year ended December 31, 2021, and recorded $11.2 million as deferred revenue as of December 31, 2021. 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 AstraZeneca Master Supply Agreement. As a result, during the year ended December 31, 2022, we reclassified $11.2 million from the related deferred revenue to accrued liabilities. As of December 31, 2022, the related balance in accrued liabilities was $11.2 million, representing our best estimate that this amount will be paid within the next 12 months. Operating Costs and Expenses Years Ended December 31, Change 2022 vs. 2021 2022 2021 2020 $ % (dollars in thousands) Operating costs and expenses Cost of goods sold $ 20,280 $ 12,871 $ 8,869 $ 7,409 58 % Research and development 296,791 387,043 252,924 (90,252 ) (23 ) % Selling, general and administrative 124,688 123,925 106,406 763 1 % Total operating costs and expenses $ 441,759 $ 523,839 $ 368,199 $ (82,080 ) (16 ) % Total operating expenses decreased $82.1 million, or 16%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, for the reasons discussed in the sections below. Cost of goods sold Cost of goods sold increased $7.4 million, or 58%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. 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 $15.1 million for the year ended December 31, 2022, as compared to $9.3 million for the year ended December 31, 2021, an increase of $5.8 million, resulting from the increase in the sales volume, partially offset by improved unit cost efficiency primarily due to higher production volume. Cost of goods sold associated with the roxadustat drug product revenue in the U.S. was $3.8 million and $3.6 million for the years ended December 31, 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 year ended December 31, 2022 also included manufacturing costs $1.4 million related to our contract manufacturing revenue from Eluminex. 89 Research and Development Expenses Research and development expenses consist of third-party research and development costs and the fully-burdened amount of costs associated with work performed under collaboration agreements. Research and development expenses include employee-related expenses for research and development functions, expenses incurred under agreements with clinical research organizations, other clinical and preclinical costs and allocated direct and indirect overhead costs, such as facilities costs, information technology costs and other overhead. We expense research and development costs as incurred. We recognize costs for certain development activities based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites. 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 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 years ended December 31, 2022, 2021 and 2020: Phase of Years Ended December 31, Product Candidate Development 2022 2021 2020 (in thousands) Pamrevlumab Phase 2/3 $ 198,764 $ 188,534 $ 111,728 Roxadustat Phase 3 46,469 97,245 122,962 Other research and development expenses 51,558 101,264 * 18,234 Total research and development expenses $ 296,791 $ 387,043 $ 252,924 * Other research and development expenses included $60.0 million of acquired in-process research and development assets related to upfront payments to HiFiBiO during the year ended December 31, 2021. The program-specific expenses summarized in the table above include costs we directly attribute to our product candidates. 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 $90.3 million, or 23%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 as a result of the net effect of the following: • Decrease of $60.0 million for acquired in-process research and development asset from HiFiBiO, which incurred in the prior year; • Decrease of $16.4 million in employee-related costs and decrease of $5.7 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 payroll tax refunds received during the year ended December 31, 2022, partially offset by overall merit increase during the current year; • Decrease of $15.0 million in clinical trials costs, primarily due to Phase 3 trials for pamrevlumab and CKD studies for roxadustat reaching to their completion; and • Increase of $7.1 million in drug development expenses associated with drug substance and drug product manufacturing activities primarily related to pamrevlumab. 90 Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses consist primarily of employee-related expenses for executive, operational, finance, legal, compliance, and human resource functions. 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 CKD anemia in the U.S., we have implemented a cost reduction effort and, as a result, SG&A expenses have decreased in certain areas and may continue to decrease over time. SG&A expenses remained relatively flat for the year ended December 31, 2022 compared to the year ended December 31, 2021, as a result of the net effect of the following: • Decrease of $2.7 million in employee-related costs primarily due to payroll tax refunds received during the year ended December 31, 2022, lower headcount in the general and administrative functions as part of the cost reduction effort we started to implement in the second half of 2021, partially offset by overall merit increase during the current year; • Decrease of $2.3 million in outside services expenses due to lower promotional expenses and sample costs for roxadustat in China; and • Increase of $6.7 million in legal expenses primarily due to a one-time favorable patent-related court ruling recorded in the prior year. Interest and Other, Net Years Ended December 31, Change 2022 vs. 2021 2022 2021 2020 $ % (dollars in thousands) Interest and other, net: Interest expense $ (1,440 ) $ (1,075 ) $ (2,402 ) $ (365 ) 34 % Interest income and other income (expenses), net 7,596 (1,078 ) 5,553 8,674 805 % Total interest and other, net $ 6,156 $ (2,153 ) $ 3,151 $ 8,309 386 % Interest Expense Interest expense relates to our finance lease liabilities accretion primarily for our leased facilities in San Francisco and China. Interest expense also includes interest related to the Technology Development Center of the Republic of Finland product development obligations. Interest expense increased $0.4 million, or 34% for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to the $1.0 million interest expense related to sale of future revenues under the revenue interest financing agreement (“RIFA”) with an affiliate of NovaQuest Capital Management (“NovaQuest”). See Note 8, Liability Related to Sale of Future Revenues , to the consolidated financial statements for details. The increase was partially offset by the decrease 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 increased $8.7 million, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to an impact of $7.9 million resulting from a reduction 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 for the year ended December 31, 2022 compared to the year ended December 31, 2021 due to higher average investment balances and higher interest rate during the current year. 91 Provision for Income Taxes Years Ended December 31, 2022 2021 2020 (dollars in thousands) Loss before income taxes $ (294,869 ) $ (290,683 ) $ (188,729 ) Provision for income taxes 358 347 360 Effective tax rate (0.1 ) % (0.1 ) % (0.2 ) % The provisions for income taxes for the years ended December 31, 2022 and 2020 were 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. We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance. During 2020, we transferred certain intellectual property rights relating to our Chinese business between our wholly owned subsidiaries that are based in different tax jurisdictions. The transferor entity was not subject to income taxes in its local jurisdiction. The acquiring entity of the intellectual property is entitled to amortize the acquisition price of the intangible assets for tax purposes. In accordance with ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory , we recognized a deferred tax asset of $78.7 million for the temporary difference arising from the acquirer’s excess tax basis. Furthermore, based upon the weight of available evidence, we recognized a full valuation allowance against this deferred tax asset since it does not currently believe that realization of this gross deductible temporary difference is more likely than not. Accordingly, this inter-company transfer did not have a material impact to our consolidated financial statements. Investment Income (Loss) in Unconsolidated Variable Interest Entity Investment income (loss) in unconsolidated variable interest entity represented our proportionate share of the reported profits or losses of Falikang, an unconsolidated variable interest entity accounted for under the equity method, and was immaterial for the years ended December 31, 2022 and 2021. See Note 4, Equity method investment - Variable Interest Entity , to the consolidated financial statements for details. LIQUIDITY AND CAPITAL RESOURCES Financial Conditions 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 December 31, 2022, we had cash and cash equivalents of $155.7 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 December 31, 2022, we had short-term investments of $266.3 million and long-term investments of $4.3 million, respectively, compared to $234.0 million and $167.8 million, respectively, as of December 31, 2021. As of December 31, 2022, a total of $92.5 million of our cash and cash equivalents was held outside of the U.S. in our foreign subsidiaries, including $71.2 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 revenues from Astellas’ sales of roxadustat in Europe, Japan and the other Astellas territories. Pursuant to the RIFA, we received $49.8 million from NovaQuest, representing the gross proceeds of $50.0 million net of initial issuance costs, in consideration for a portion of future revenues we will receive from Astellas. For additional details about this financing transaction, see Note 8, Liability Related to Sale of Future Revenues , to the consolidated financial statements. 92 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. Our long-term plans for distributing cash flows from FibroGen Beijing may involve any number of scenarios including keeping the money onshore to fund future expansion of our China operations or paying down certain debt obligations. To date, no such debt repayments have occurred, nor have there been any other payments or distributions from FibroGen Beijing to entities or investors outside of China. Our capital contributions to FibroGen Beijing and the liquidity position of FibroGen Beijing depend on many factors, including those set forth under Part I, Item 1A “Risk Factors” in this Annual Report. Cash Sources and Uses The following table summarizes the primary sources and uses of cash for the years ended December 31, 2022, 2021 and 2020 (in thousands): Years Ended December 31, 2022 2021 2020 Net cash provided by (used in): Operating activities $ (145,933 ) $ (82,232 ) $ 81,602 Investing activities 89,116 (426,972 ) 452,487 Financing activities 46,776 (563 ) 13,343 Effect of exchange rate changes on cash and cash equivalents (5,482 ) 2,597 4,695 Net increase (decrease) in cash and cash equivalents $ (15,523 ) $ (507,170 ) $ 552,127 Operating Activities Net cash used in operating activities was $145.9 million for the year ended December 31, 2022 and consisted primarily of net loss of $293.7 million adjusted for non-cash items and non-operating activities of $77.3 million and a net increase in operating assets and liabilities of $70.4 million. The significant non-cash items included stock-based compensation expense of $65.6 million, and depreciation expense of $10.0 million. The significant items in the changes in operating assets and liabilities included the following: • Accrued and other liabilities increased $90.6 million, primarily related to the total of $75.1 million for API and bulk drug product price true-up as of December 31, 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 3, Collaboration Agreements, License Agreement and Revenues , to the 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; • Accounts payable increased $5.9 million, primarily driven by the timing of invoicing and payments; • Prepaid expenses and other current assets decreased $4.9 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, partially offset by a payroll tax refund recorded as other receivables as of December 31, 2022 and received in the first quarter of 2023; • Other long-term liabilities decreased $18.3 million primarily 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; • Inventories increased $11.0 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; and • Deferred revenue decreased $4.1 million, primarily related to revenue recognized from the previously deferred revenue of the China performance obligation during the year ended December 31, 2022, and 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. See the Drug Product Revenue section in Note 3, Collaboration Agreements, License Agreement and Revenues , to the consolidated financial statements for details. 93 Net cash used in operating activities was $82.2 million for the year ended December 31, 2021 and consisted primarily of net loss of $290.0 million adjusted for non-cash items and non-operating activities of $147.7 million and a net increase in operating assets and liabilities of $60.1 million. The significant non-cash items included stock-based compensation expense of $71.2 million, expense for acquired in-process research and development asset from HiFiBiO of $60.0 million, depreciation expense of $10.2 million, and amortization of finance lease ROU of $4.6 million. The significant items in the changes in operating assets and liabilities included the increases resulting from the following: • Deferred revenue of $57.6 million, primarily related to the above-mentioned $25.9 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 final consideration, and $27.2 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; • Accounts receivable of $25.2 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; • Accrued and other liabilities of $16.4 million, primarily driven by $14.2 million increase in co-promotion expenses at December 31, 2021 that is anticipated to be paid within the next 12 months, offset by $12.0 million decrease in contract liabilities to pharmaceutical distributors at December 31, 2021 due to settlement during the year. The accrued and other liabilities were also impacted by the timing of invoicing and payment; The increases were partially offset by the decreases resulting from the following: • Inventories of $14.2 million, driven by the increased inventory level primarily related to FibroGen Beijing’s productions of roxadustat for commercial sales purposes and inventory capitalized in the U.S.; • Other long-term liabilities of $12.1 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; • Prepaid expenses and other current assets of $9.9 million, primarily due to the unbilled upfront license payment from Eluminex of $8.0 million, and prepayments made for roxadustat API manufacturing activities; and • Other assets of $4.4 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 $89.1 million for the year ended December 31, 2022 and consisted primarily of $284.5 million of proceeds from maturities of investments and $7.4 million of proceeds from sales of available-for-sale securities, partially offset by $164.0 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 $3.7 million of cash used in purchases of property and equipment. Net cash used in investing activities was $427.0 million for the year ended December 31, 2021 and consisted primarily of $484.1 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 $5.2 million of cash used in purchases of property and equipment, partially offset by $83.1 million of proceeds from maturities of investments and $4.2 million of proceeds from sales of available-for-sale securities. 94 Financing Activities Financing activities primarily reflect proceeds from strategic financing arrangement, proceeds from the issuance of our common stock, cash paid for payroll taxes on restricted stock unit releases, and repayments of our lease liabilities and obligations. Net cash provided by financing activities was $46.8 million for the year ended December 31, 2022 and consisted primarily of $49.8 million of net proceeds from sale of future revenues from NovaQuest, $4.2 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under our Employee Share Purchase Plan (“ESPP”), partially offset by $5.2 million of cash paid for payroll taxes on restricted stock unit releases, and $1.5 million of cash paid for transaction costs related to sale of future revenues. Net cash used in financing activities was $0.6 million for the year ended December 31, 2021 and consisted primarily of $7.4 million of cash paid for payroll taxes on restricted stock unit releases, and $5.5 million of repayments of finance lease liabilities, partially offset by $12.7 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under our ESPP. Material Cash Requirements 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 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. Although AstraZeneca is currently funding all non-China collaboration expenses not reimbursed by Astellas, including development of MDS in the U.S., we expect our operating costs and expenses to increase as we invest in commercialization of pamrevlumab and development of our other programs. Additionally, we have not been able to agree on a path forward for AstraZeneca to fund further roxadustat development in the U.S. 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 the COVID-19 pandemic or other factors outlined under Part I, Item 1A “ Risk Factors ” in this Annual Report. 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, together with the financing amount under the RIFA received 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 Annual Report. 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. We may elect to raise additional funds at any time through equity, equity-linked, debt financing arrangements or from other sources. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under Part I, Item 1A “ Risk Factors ” in this Annual Report. We may not be able to secure additional financing to meet our operating requirements on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we will be subject to increased fixed payment obligations and could also be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to obtain needed additional funds, we will have to reduce our operating costs and expenses, which would impair our development and commercialization prospects and could otherwise negatively impact our business. 95 Commitments and Contingencies Contractual Obligations At December 31, 2022, our material cash requirements from known contractual and other obligations primarily relate to our lease liabilities, non-cancelable purchase obligations and liability related to sale of future revenues. Expected timing of those payments are as follows (in thousands): Payments Due In Total Next 12 Months Beyond 12 Months Lease liabilities $ 103,741 $ 13,959 $ 89,782 Purchase obligations 53,755 27,909 25,846 Liability related to sale of future revenues 125,000 — 125,000 Total payments $ 282,496 $ 41,868 $ 240,628 Our lease liabilities are primarily related to our real estate leases for office spaces in the U.S. and China. See Note 6, Leases , to the consolidated financial statements for details. Our outstanding non-cancelable purchase obligations primarily related to manufacturing and supply for pamrevlumab and roxadustat, and other purchases and programs. See Note 10, Commitments and Contingencies , to the consolidated financial statements for details. Under the RIFA with NovaQuest, as of December 31, 2022, we had $49.3 million of liability related to sale of future revenues on the consolidated balance sheets. Based on our current estimates of drug product revenue and revenue from milestone payments under the Astellas Agreements, and taking into the consideration of the terms under the RIFA, we anticipate to reach a payment cap up to $125.0 million by 2031. See Note 8, Liability Related to Sale of Future Revenues , to the consolidated financial statements for details. Some of our license agreements provide for periodic maintenance fees over specified time periods, as well as payments by us upon the achievement of development, regulatory and commercial milestones. As of December 31, 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. and others. These milestone payments generally become due and payable only upon the achievement of certain developmental, clinical, regulatory and/or commercial milestones. The event triggering such payment or obligation has not yet occurred and therefore these amounts have been excluded from the table above. The table above excludes uncertain tax benefits of approximately $72.8 million that are disclosed in Note 13, Income Taxes , to the consolidated financial statements because these uncertain tax positions, if recognized, would be an adjustment to the gross deferred tax assets and the corresponding valuation allowance, if warranted. As of December 31, 2022, we have several on-going clinical studies in various stages. Under agreements with various CROs, and clinical study sites, we incur expenses related to clinical studies of our product candidates and potential other clinical candidates. The timing and amounts of these disbursements are contingent upon the achievement of certain milestones, patient enrollment and services rendered or as expenses are incurred by the CROs or clinical trial sites. Therefore, we cannot estimate the potential timing and amount of these payments and they have been excluded from the table above. Although our material contracts with CROs are cancelable, we have historically not canceled such contracts. As of December 31, 2022, our FibroGen Europe Oy (“FibroGen Europe”) subsidiary had $10.1 million of principal outstanding and $6.8 million of interest accrued related to loans from the Finnish government (“TEKES” loans), respectively, which have been included as product development obligations on our consolidated balance sheet. See Note 9, Product Development Obligations , to the consolidated financial statements for details. There is no stated maturity date related to these loans and each loan may be forgiven if the research work funded by TEKES does not result in an economically profitable business or does not meet its technological objectives. In addition, we are not a guarantor of the TEKES loans, and these loans are not repayable by FibroGen Europe until it has distributable funds. We do not expect FibroGen Europe to have such funds in the foreseeable future. For the foregoing reasons, we cannot estimate the potential timing and the amounts of repayments (if required) or forgiveness. As a result, the TEKES loans have been excluded from the table above. 96 Off-Balance Sheet Arrangements During the year ended December 31, 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. Indemnification Agreements We enter into standard indemnification arrangements in the ordinary course of business, including for example, service, manufacturing and collaboration agreements. Pursuant to these arrangements, we indemnify, holds harmless, and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, including in connection with intellectual property infringement claims by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. We have entered into indemnification agreements with our directors and officers that may require us to indemnify our directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the extent permissible under applicable law. The maximum potential amount of future payments we could be required to make under these arrangements is not determinable. Recently Issued and Adopted Accounting Guidance For recently issued accounting guidance, see Note 2, Significant Accounting Policies, to the consolidated financial statements. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements. Revenue Recognition Revenues under collaboration agreements Our collaboration agreements include multiple performance obligations comprised of promised services, or bundles of services, that are distinct. Services that are not distinct are combined with other services in the agreement until they form a distinct bundle of services. Our process for identifying performance obligations and an enumeration of each obligation for each agreement is outlined in Note 3, Collaboration Agreements, License Agreement and Revenues , to our consolidated financial statements. Determining the performance obligations within a collaboration agreement often involves significant judgment and is specific to the facts and circumstances contained in each agreement. We have identified the following material promises under its collaboration agreements: (1) license of FibroGen technology, (2) the performance of co-development services, including manufacturing of clinical supplies and other services during the development period, and (3) manufacture of commercial supply. The evaluation as to whether these promises are distinct, and therefore represent separate performance obligations, is described in more detail in Note 3, Collaboration Agreements, License Agreement and Revenues , to our consolidated financial statements. For revenue recognition purposes, we determine that the terms of our collaboration agreements begin on the effective date and end upon the completion of all performance obligations contained in the agreements. In each agreement, the contract term is defined as the period in which parties to the contract have present and enforceable rights and obligations. We believe that the existence of what we consider to be substantive termination penalties on the part of the counterparty create sufficient incentive for the counterparty to avoid exercising its right to terminate the agreement. 97 The transaction price for each collaboration agreement is determined based on the amount of consideration we expect to be entitled for satisfying all performance obligations within the agreement. Our collaboration agreements include payments to us of one or more of the following: non-refundable upfront license fees; co-development billings; development, regulatory, and commercial milestone payments; payments from sales of API; payments from sales of bulk drug product and royalties on net sales of licensed products. Upfront license fees are non-contingent and non-refundable in nature and are included in the transaction price at the point when the license fees become due to us. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. Co-development billings resulting from our research and development efforts, which are reimbursable under its collaboration agreements, are considered variable consideration. Determining the reimbursable amount of research and development efforts requires detailed analysis of the terms of the collaboration agreements and the nature of the research and development efforts incurred. Prior to CKD approval in the third quarter of 2021, determining the amount of variable consideration from co-development billings required us to make estimates of future research and development efforts, which involves significant judgment. Co-development billings are allocated entirely to the co-development services performance obligation when amounts are related specifically to research and development efforts necessary to satisfy the performance obligation, and such an allocation is consistent with the allocation objective. Milestone payments are also considered variable consideration, which requires us to make estimates of when achievement of a particular milestone becomes probable. Similar to other forms of variable consideration, milestone payments are included in the transaction price when it becomes probable that such inclusion would not result in a significant revenue reversal. Milestones are therefore included in the transaction price when achievement of the milestone becomes probable. For arrangements that include sales-based royalties and for which the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, royalty revenue resulting from its collaboration arrangements was immaterial. We allocate the transaction price to performance obligations based on their relative standalone selling price (“SSP”), with the exception of co-development billings allocated entirely to co-development services performance obligations. The SSP is determined based on observable prices at which we separately sell the products and services. If an SSP is not directly observable, then we will estimate the SSP considering marketing conditions, entity-specific factors, and information about the customer or class of customer that is reasonably available. The process for determining SSP involves significant judgment and includes consideration of multiple factors, including assumptions related to the market opportunity and the time needed to commercialize a product candidate pursuant to the relevant license, estimated direct expenses and other costs, which include the rates normally charged by contract research and contract manufacturing organizations for development and manufacturing obligations, and rates that would be charged by qualified outsiders for committee services. Significant judgment may be required in determining whether a performance obligation is distinct, determining the amount of variable consideration to be included in the transaction price, and estimating the SSP of each performance obligation. An enumeration of our significant judgments is outlined in Note 3, Collaboration Agreements, License Agreement and Revenues, to our consolidated financial statements. 98 For each performance obligation identified within an arrangement, we determine the period over which the promised services are transferred and the performance obligation is satisfied. Service revenue that was recognized over time was based on progress toward complete satisfaction of the performance obligation. For each performance obligation satisfied over time, we assess the proper method to be used for revenue recognition, either an input method to measure progress toward the satisfaction of services or an output method of determining the progress of completion of performance obligation. Revenue under license agreements Under a license agreement, if the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from upfront license fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, we use judgment in determining the appropriate method of measuring progress for purposes of recognizing revenue from the up-front license fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. Product revenue, net Product revenue, net consists of revenues from sales of roxadustat commercial product to Falikang, and directly to pharmaceutical distributors located in one province in China that are not covered by Falikang. Falikang is jointly owned by AstraZeneca and FibroGen Beijing. We are not the primary beneficiary of Falikang for accounting purposes, as AstraZeneca is the final decision maker for all the roxadustat commercialization activities, and we lack the power criterion to direct the activities of Falikang (see Note 4, Equity method investment - Variable Interest Entity, to our consolidated financial statements). Sales to Falikang Falikang became fully operational in January 2021, at which time FibroGen Beijing began selling roxadustat commercial product to Falikang. Falikang is FibroGen Beijing’s primary customer in China and substantially all roxadustat product sales to distributors in China are made by Falikang. Falikang bears inventory risk once it receives and accepts the product from FibroGen Beijing, and is responsible for delivering product to its distributors. The promises identified under the AstraZeneca China Agreement (as defined in Note 3, Collaboration Agreements, License Agreement and Revenues ), including the license, co-development services and manufacturing of commercial supplies have been bundled into a single performance obligation (“China performance obligation”). Amounts of the transaction price allocable to this performance obligation under our agreements with AstraZeneca as outlined in Note 3, Collaboration Agreements, License Agreement and Revenues, are deferred until control of the manufactured commercial product is transferred to AstraZeneca. The initiation of roxadustat sales to Falikang marked the beginning of the China performance obligation . Revenue is recognized at a point in time when control of roxadustat commercial product is transferred to Falikang. Revenue is recognized based on the estimated transaction price per unit and actual quantity of product delivered during the reporting period. Specifically, the transaction price per unit is determined based on the overall transaction price over the total estimated sales quantity for the estimated performance period in which we determined it is likely those sales would occur. The price per unit is subject to reassessment on a quarterly basis, which may result in adjustments due to changes in estimates. The overall transaction price for FibroGen Beijing’s product sales to Falikang includes the following elements of consideration: ● Non-refundable upfront license fees; development, regulatory, and commercial milestone payments based on the AstraZeneca China Agreement allocated to the China performance obligation; ● Co-development billings resulting from our research and development efforts, which are reimbursable under the AstraZeneca China Agreement; 99 ● Interim profit/loss share between FibroGen Beijing and AstraZeneca from April 1, 2020 through December 31, 2020; and ● Net transaction price from product sales to Falikang from January 1, 2021 onwards. The net transaction price includes the following elements: o Gross transaction price: The gross transaction price is based on a percentage of Falikang’s net sales to its distributors, which takes into account Falikang’s operating expenses and its payments to AstraZeneca for roxadustat sales and marketing efforts, capped at a percentage of Falikang’s net roxadustat sales. o Profit share: The gross transaction price is then adjusted for an estimated amount to achieve the 50/50 profit share from current period roxadustat net sales in China. The adjustments to date have been a reduction to the transaction price and the related accounts receivable from Falikang. The non-refundable upfront license fees constitute a fixed consideration. The remainder of the above are variable consideration components, which may be constrained, and included in the transaction price 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. The calculation of the above variable consideration includes significant assumptions such as total sales quantity, performance period, gross transaction price and profit share, which require significant judgment. We defer any net transaction price in excess of the revenue recognized, and recognize it over future periods as the performance obligations are satisfied. Direct Sales to Distributors We sell roxadustat in China directly to a number of pharmaceutical distributors located in one province in China that are not covered by Falikang. These pharmaceutical distributors are our customers. Hospitals order roxadustat through a distributor and we ship the product directly to the distributors. The delivery of roxadustat to a distributor represents a single performance obligation. Distributors are responsible for delivering product to end users, primarily hospitals. Distributors bear inventory risk once they receive and accept the product. We recognize product revenue when control of the promised good is transferred to the customer in an amount that reflects the consideration that we expect to be entitled to in exchange for the product. The period between the transfer of control of the promised goods and when we receive payment is based on 60-day payment terms. As such, we do not adjust product revenue for the effects of a significant financing component. We record product revenue at the net sales prices that includes the following estimates of variable consideration: ● Price adjustment: When China’s National Healthcare Security Administration releases price guidance for roxadustat under the National Reimbursement Drug List, any channel inventories that have not been sold through by distributors, or to patients by hospitals and retailers, would be eligible for a price adjustment under the price protection. The price adjustment is calculated based on estimated channel inventory levels; ● Contractual sales rebate: The contractual sales rebate is calculated based on the stated percentage of gross sales by each distributor in the distribution agreement entered between FibroGen and each distributor. The contractual sales rebate is recorded as a reduction to revenue at the point of sale to the distributor; 100 ● Non-key account hospital listing award: A one-time fixed-amount award is offered to a distributor who successfully lists the product with an eligible hospital, and who meets certain requirements. For the year ended December 31, 2020, the non-key account hospital listing award was capitalized when the distributor meets eligibility requirements, and amortized as reduction to product revenue over future sales orders made by the distributor until exhausted. For the year ended December 31, 2021, the non-key account hospital listing award was immaterial and recorded as a reduction to revenue when distributor meets eligibility requirements; ● Other discounts and rebates, including key account hospital sales rebate and transfer fee discount, are generally based on a percentage of eligible gross sales made by the distributor and recorded as a reduction to revenue at the point of sale to the distributor; and ● Sales returns: Distributors can request to return product to us only due to quality issues or for product purchased within one year prior to the product’s expiration date. We calculate the above variable consideration based on gross sales to the distributor, or estimate it utilizing best available information from the distributor, maximum known exposures and other available information including estimated channel inventory levels and estimated sales made by the distributor to hospitals, which involves significant judgment. The above rebates and discounts all together are eligible to be applied against the distributor’s future sales order, limited to certain maximums until such rebates and discounts are exhausted. We record these rebates and discounts as contract liabilities at the time they become eligible and in the same period that the related revenue is recorded. Due to the distributor’s legal right to offset, at each balance sheet date, we present the liability for rebates and discounts as reductions of gross accounts receivable from the distributor, or as a current liability to the distributor to the extent that the total amount exceeds the gross accounts receivable or when we expect to settle the discount in cash. We calculate the distributor’s legal right of offset at the individual distributor level. Drug product revenue 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. We recognize drug product revenue when we fulfill the inventory transfer obligations. The amount of variable consideration that is included in the transaction price may be constrained, and we include it in the drug 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. Estimating variable consideration and the related constraint requires the use of significant management judgment. We review new information that may affect its variable consideration estimate at every reporting period and records revenue adjustment, if certain and material. Actual amounts of consideration ultimately received in the future may differ from our estimates, for which we will adjust these estimates and affect the drug product revenue in the period such variances become known. As each of our collaboration agreements provide for annual true up to the considerations paid for our commercial supplies, we will re-evaluate the transaction price in each reporting period and record adjustment to revenue as uncertain events are resolved or other changes in circumstances occur. 101 ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISKS We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates. Currently, the functional currency of our subsidiaries, FibroGen Europe Oy and FibroGen Beijing, is the local currency. Our consolidated results of operations are reported in U.S. Dollars. Our revenues and operating costs and expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the U.S. and China. Therefore, our consolidated results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. As of December 31, 2022, we did not have material financial assets and liabilities denominated in foreign currencies that are subject to fluctuation in the exchange rate with the U.S. dollar. Therefore, our financial assets and liabilities are not currently subject to significant foreign currency risk. The primary objective of our investment activities is to preserve our capital to fund our operations. We also seek to maximize income from our cash and cash equivalents without assuming significant risk. To achieve our objectives, we invest our non-operating cash and cash equivalents primarily in commercial paper and money market funds as of December 31, 2022. Given the nature of our investments as of December 31, 2022, we believe that our exposure to interest rate risk is not significant. We actively monitor changes in interest rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments. 102 ITEM 8. CONSOLIDATED FINANCIAL ST ATEMENTS AND SUPPLEMENTARY DATA Page FibroGen, Inc. Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 104 Financial Statements: Consolidated Balance Sheets 106 Consolidated Statements of Operations 107 Consolidated Statements of Comprehensive Loss 108 Consolidated Statements of Changes in Stockholders’ Equity (Deficit ) 109 Consolidated Statements of Cash Flows 110 Notes to Consolidated Financial Statements 111 Financial Statement Schedule: II Valuation and Qualifying Accounts for each of the three years ended December 31, 2022 158 103 Report of Independent Regis tered Public Accounting Firm To the Board of Directors and Stockholders of FibroGen, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of FibroGen, Inc. and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive loss, of changes in stockholders’ equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 104 Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Determining the Transaction Price for Product Revenue Recognition for Sales to Beijing Falikang Pharmaceutical Co., Ltd. (“Falikang”) As described in Notes 2 and 3 to the consolidated financial statements, with respect to the roxadustat commercial product, revenue is recognized at a point in time when control of the product is transferred to Falikang. Total product revenue, net recognized related to sales to Falikang was $71.2 million for the year ended December 31, 2022. Revenue is recognized based on the estimated transaction price per unit and the actual quantity of product delivered to Falikang during the reporting period. The estimated transaction price per unit is determined based on the overall transaction price over the total estimated sales quantity for the estimated performance period in which management determined it is likely those sales would occur. Management applied significant judgment in determining the transaction price per unit, which involved the use of significant assumptions such as (i) the estimated total gross transaction price and profit share, (ii) the estimated total sales quantity, and (iii) the estimated performance period in which the Company determined it is likely those sales would occur. The principal considerations for our determination that performing procedures relating to determining the transaction price for product revenue recognition for sales to Falikang is a critical audit matter are the significant judgment by management when determining the transaction price per unit, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s significant assumptions related to the estimated total gross transaction price, estimated total sales quantity, and estimated performance period over which the Company determined it is likely those sales would occur. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to revenue recognition, including controls over the determination of the transaction price per unit for sales to Falikang. These procedures also included, among others, testing management’s process for determining the transaction price per unit, which included evaluating the appropriateness of the method, testing the completeness and accuracy of the data used in the method, and evaluating the reasonableness of significant assumptions related to the estimated total gross transaction price, estimated total sales quantity, and estimated performance period over which the Company determined it is likely those sales would occur. Evaluating the reasonableness of the significant assumptions used by management involved evaluating whether the assumptions were reasonable considering (i) the current and historical transaction price and quantity, (ii) the consistency with external market, industry and regulatory data, (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit, and (iv) patent expiration and market exclusivity. /s/ PricewaterhouseCoopers LLP San Jose, California February 27, 2023 We have served as the Company’s auditor since 2000. 105 FIBROGEN, INC. CONSOLIDATED B ALANCE SHEETS (In thousands, except per share amounts) December 31, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 155,700 $ 171,223 Short-term investments 266,308 233,967 Accounts receivable, net ($ 12,088 and $ 10,930 from related parties) 16,299 17,401 Inventories 40,436 31,015 Prepaid expenses and other current assets 14,083 20,453 Total current assets 492,826 474,059 Restricted time deposits 2,072 2,072 Long-term investments 4,348 167,796 Property and equipment, net 20,605 28,277 Equity method investment in unconsolidated variable interest entity 5,061 3,825 Operating lease right-of-use assets 79,893 91,112 Other assets 5,282 6,680 Total assets $ 610,087 $ 773,821 Liabilities, stockholders’ equity (deficit) and non-controlling interests Current liabilities: Accounts payable $ 30,758 $ 26,097 Accrued and other current liabilities ($ 63,886 and $ 4 to a related party) 219,773 172,599 Deferred revenue ($ 9,259 and $ 3,201 to related parties) 12,739 15,857 Operating lease liabilities, current 10,292 10,944 Total current liabilities 273,562 225,497 Product development obligations 16,917 17,613 Deferred revenue, net of current ($ 31,044 and $ 25,891 to a related party) 185,722 186,801 Operating lease liabilities, non-current 79,593 88,776 Liability related to sale of future revenues, non-current 49,333 — Other long-term liabilities 6,440 26,021 Total liabilities 611,567 544,708 Commitments and Contingencies (Note 10) Stockholders’ equity (deficit): Preferred stock, $ 0.01 par value; 125,000 shares authorized; no shares issued and outstanding at December 31, 2022 and 2021 — — Common stock, $ 0.01 par value; 225,000 shares authorized at December 31, 2022 and 2021; 94,166 and 92,881 shares issued and outstanding at December 31, 2022 and 2021 942 929 Additional paid-in capital 1,541,019 1,476,414 Accumulated other comprehensive loss ( 5,720 ) ( 4,163 ) Accumulated deficit ( 1,557,688 ) ( 1,264,034 ) Total stockholders’ equity (deficit) ( 21,447 ) 209,146 Non-controlling interests 19,967 19,967 Total equity (deficit) ( 1,480 ) 229,113 Total liabilities, stockholders’ equity (deficit) and non-controlling interests $ 610,087 $ 773,821 The accompanying notes are an integral part of these Consolidated Financial Statements. 106 FIBROGEN, INC. CONSOLIDATED STATEM ENTS OF OPERATIONS (In thousands, except per share amounts) Years Ended December 31, 2022 2021 2020 Revenue: License revenue (includes $ 22,590 , $ 108,434 and $ 14,323 from a related party) $ 22,590 $ 116,434 $ 14,323 Development and other revenue (includes $ 9,908 , $ 21,928 and $ 19,174 from a related party) 24,189 70,275 80,592 Product revenue, net (includes $ 71,167 , $ 35,568 and $ 0 from a related party) 82,869 47,638 72,498 Drug product revenue (includes $ 11,086 , $ 3,186 and $ 4,281 from a related party) 11,086 962 8,906 Total revenue 140,734 235,309 176,319 Operating costs and expenses: Cost of goods sold 20,280 12,871 8,869 Research and development 296,791 387,043 252,924 Selling, general and administrative 124,688 123,925 106,406 Total operating costs and expenses 441,759 523,839 368,199 Loss from operations ( 301,025 ) ( 288,530 ) ( 191,880 ) Interest and other, net Interest expense ( 1,440 ) ( 1,075 ) ( 2,402 ) Interest income and other income (expenses), net 7,596 ( 1,078 ) 5,553 Total interest and other, net 6,156 ( 2,153 ) 3,151 Loss before income taxes ( 294,869 ) ( 290,683 ) ( 188,729 ) Provision for income taxes 358 347 360 Investment income (loss) in unconsolidated variable interest entity 1,573 1,007 ( 202 ) Net loss $ ( 293,654 ) $ ( 290,023 ) $ ( 189,291 ) Net loss per share - basic and diluted $ ( 3.14 ) $ ( 3.14 ) $ ( 2.11 ) Weighted average number of common shares used to calculate net loss per share - basic and diluted 93,582 92,349 89,854 The accompanying notes are an integral part of these Consolidated Financial Statements. 107 FIBROGEN, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) Years Ended December 31, 2022 2021 2020 Net loss $ ( 293,654 ) $ ( 290,023 ) $ ( 189,291 ) Other comprehensive income (loss): Foreign currency translation adjustments 75 1,235 ( 3,207 ) Available-for-sale investments: Unrealized gain (loss) on investments, net of tax effect ( 1,632 ) ( 899 ) ( 545 ) Other comprehensive gain (loss), net of taxes ( 1,557 ) 336 ( 3,752 ) Comprehensive loss $ ( 295,211 ) $ ( 289,687 ) $ ( 193,043 ) The accompanying notes are an integral part of these Consolidated Financial Statements. 108 FIBROGEN, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (In thousands, except share data) Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Non Controlling Shares Amount Capital Loss Deficit Interests Total Balance at December 31, 2019 87,657,489 $ 877 $ 1,300,725 $ ( 747 ) $ ( 784,720 ) $ 19,271 $ 535,406 Net loss — — — — ( 189,291 ) — ( 189,291 ) Change in unrealized gain or loss on investments — — — ( 545 ) — — ( 545 ) Foreign currency translation adjustments — — — ( 3,207 ) — — ( 3,207 ) Shares issued from stock plans, net of payroll taxes paid 3,783,144 37 26,329 — — — 26,366 Stock-based compensation — — 72,720 — — — 72,720 Balance at December 31, 2020 91,440,633 914 1,399,774 ( 4,499 ) ( 974,011 ) 19,271 441,449 Net loss — — — — ( 290,023 ) — ( 290,023 ) Change in unrealized gain or loss on investments — — — ( 899 ) — — ( 899 ) Foreign currency translation adjustments — — — 1,235 — — 1,235 Shares issued from stock plans, net of payroll taxes paid 1,439,900 15 5,479 — — — 5,494 Stock-based compensation — — 71,161 — — — 71,161 Conversion of subsidiary’s convertible note payable (Note 11) — — — — — 696 696 Balance at December 31, 2021 92,880,533 $ 929 $ 1,476,414 $ ( 4,163 ) $ ( 1,264,034 ) $ 19,967 $ 229,113 Net loss — — — — ( 293,654 ) — ( 293,654 ) Change in unrealized gain or loss on investments — — — ( 1,632 ) — — ( 1,632 ) Foreign currency translation adjustments — — — 75 — — 75 Shares issued from stock plans, net of payroll taxes paid 1,285,553 13 ( 996 ) — — — ( 983 ) Stock-based compensation — — 65,601 — — — 65,601 Balance at December 31, 2022 94,166,086 $ 942 $ 1,541,019 $ ( 5,720 ) $ ( 1,557,688 ) $ 19,967 $ ( 1,480 ) The accompanying notes are an integral part of these Consolidated Financial Statements. 109 FIBROGEN, INC. CONSOLIDATED STATEM ENTS OF CASH FLOWS (In thousands) Years Ended December 31, 2022 2021 2020 Operating activities Net loss $ ( 293,654 ) $ ( 290,023 ) $ ( 189,291 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 10,017 10,170 11,678 Amortization of finance lease right-of-use assets 587 4,639 10,369 Net accretion of premium and discount on investments 1,619 2,482 103 Unrealized loss on equity investments — 30 — Investment income in unconsolidated variable interest entity ( 1,573 ) ( 1,007 ) 202 (Gain) / loss on disposal of property and equipment ( 1 ) 233 933 Stock-based compensation 65,601 71,161 72,720 Expense for acquired in-process research and development asset — 60,000 — Non-cash interest expense related to sale of future revenues 1,036 — — Realized loss on sales of available-for-sale securities 5 — 258 Changes in operating assets and liabilities: Accounts receivable, net ($( 1,158 ), $( 6,803 ) and $ 718 from related parties) 765 25,180 ( 11,973 ) Inventories ( 10,999 ) ( 14,158 ) ( 9,175 ) Prepaid expenses and other current assets ($ 0 , $ 889 and $ 124,321 from a related party) 4,916 ( 9,854 ) 123,492 Operating lease right-of-use assets 10,908 4,209 ( 24 ) Other assets 263 ( 4,412 ) 5,843 Accounts payable ($ 0 , $( 1,118 ) and $ 1,118 from a related party) 5,909 805 17,731 Accrued and other liabilities ($ 63,882 , $( 20 ) and $( 36,859 ) from a related party) 90,556 16,380 30,914 Operating lease liabilities, current ( 547 ) 503 134 Deferred revenue ($ 11,211 , $ 21,549 and $ 7,169 from related parties) ( 4,130 ) 57,637 45,077 Accrued interest for finance lease liabilities 33 ( 75 ) ( 177 ) Operating lease liabilities, non-current ( 8,994 ) ( 4,043 ) ( 143 ) Other long-term liabilities ( 18,250 ) ( 12,089 ) ( 27,069 ) Net cash provided by (used in) operating activities ( 145,933 ) ( 82,232 ) 81,602 Investing activities Purchases of property and equipment ( 3,741 ) ( 5,186 ) ( 3,994 ) Payment made for acquired in-process research and development asset ( 35,000 ) ( 25,000 ) — Payment made for investment in unconsolidated variable interest entity — — ( 3,896 ) Proceeds from equity transfer of unconsolidated variable interest entity — — 1,063 Proceeds from sale of property and equipment 6 — — Purchases of available-for-sale securities ( 164,023 ) ( 484,144 ) ( 8,192 ) Proceeds from sales of available-for-sale securities 7,382 4,214 10,606 Proceeds from maturities of investments 284,492 83,144 456,900 Net cash provided by (used in) investing activities 89,116 ( 426,972 ) 452,487 Financing activities Repayments of finance lease liabilities ( 135 ) ( 5,489 ) ( 12,620 ) Repayments of lease obligations ( 403 ) ( 403 ) ( 403 ) Cash paid for payroll taxes on restricted stock unit releases ( 5,167 ) ( 7,372 ) ( 11,463 ) Proceeds from sale of future revenues, net of issuance costs 49,750 — — Cash paid for transaction costs related to sale of future revenues ( 1,453 ) — — Proceeds from issuance of common stock 4,184 12,701 37,829 Net cash provided by (used in) financing activities 46,776 ( 563 ) 13,343 Effect of exchange rate change on cash and cash equivalents ( 5,482 ) 2,597 4,695 Net increase (decrease) in cash and cash equivalents ( 15,523 ) ( 507,170 ) 552,127 Total cash and cash equivalents at beginning of period 171,223 678,393 126,266 Total cash and cash equivalents at end of period $ 155,700 $ 171,223 $ 678,393 Supplemental cash flow information: Interest payments $ 104 $ 94 $ 135 Balance in accounts payable and accrued liabilities related to purchases of property and equipment 428 1,009 884 Balance in accrued liabilities related to acquired in-process research and development asset — 35,000 — Balance in other receivables related to stock option exercise — 165 — Conversion of subsidiary’s convertible note payable to non-controlling interests $ — $ 696 $ — The accompanying notes are an integral part of these Consolidated Financial Statements. 110 FIBROGEN, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Th e Company FibroGen, Inc. (“FibroGen” or the “Company”) is headquartered in San Francisco, California, with subsidiary offices in Beijing and Shanghai, People’s Republic of China (“China”). 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. 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 activity. Roxadustat (爱瑞卓 ® , 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. Roxadustat is in Phase 3 clinical development for: anemia associated with myelodysplastic syndromes, in the U.S. and Europe, and 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. FibroGen’s goal is to build a diversified pipeline with novel drugs that will address unmet patient needs in oncology, immunology, and fibrosis. 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its majority-owned subsidiaries, FibroGen Europe and FibroGen China Anemia Holdings, Ltd. (“FibroGen Cayman”). All inter-company transactions and balances have been eliminated in consolidation. For any variable interest entity (“VIE”) for which FibroGen is not the primary beneficiary, the Company uses the equity method of accounting. The Company operates in one reportable segment — the discovery, development and commercialization of novel therapeutics to treat serious unmet medical needs. Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no impact on previously reported financial position, results of operations, or cash flows. Foreign Currency Translation The reporting currency of the Company and its subsidiaries is the U.S. dollar. The functional currency of FibroGen Europe is the Euro. The functional currency of FibroGen (China) Medical Technology Development Co., Ltd. (“FibroGen Beijing”) is CNY. As such, monetary assets and liabilities of FibroGen Europe and FibroGen Beijing in currencies other than their functional currencies are remeasured using exchange rates in effect at the end of the period. The assets and liabilities of FibroGen Europe and FibroGen Beijing are translated to U.S. dollars at exchange rates in effect at the balance sheet date. All income statement accounts are translated at monthly average exchange rates. Resulting foreign currency translation adjustments are recorded directly in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity (deficit). 111 The functional currency of FibroGen, Inc. and all other subsidiaries is the U.S. dollar. Accordingly, monetary assets and liabilities in the non-functional currency of these subsidiaries are remeasured using exchange rates in effect at the end of the period. Revenues and costs in local currency are remeasured using average exchange rates for the period, except for costs related to those balance sheet items that are remeasured using historical exchange rates. The resulting remeasurement gains and losses are included within interest income and other, net in the consolidated statements of operations as incurred and have not been material for all periods presented. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions include valuation and recognition of revenue, specifically, estimates in variable consideration for drug product sales, and estimates in transaction price per unit for the China performance obligation (as defined and discussed under Revenue Recognition below). On an ongoing basis, management reviews these estimates and assumptions. Changes in facts and circumstances may alter such estimates and actual results could differ from those estimates. Concentration of Credit Risk The Company is subject to risks associated with concentration of credit for cash and cash equivalents. Outside of short-term operating needs, the majority of cash on hand is invested in U.S. treasuries, corporate bonds, commercial paper and money market funds. Any remaining cash is deposited with major financial institutions primarily in the U.S., China and the Cayman Islands. At times, such deposits may be in excess of insured limits. The Company has not experienced any loss on its deposits of cash and cash equivalents. Included in current assets are significant balances of accounts receivable as follows: December 31, 2022 2021 Falikang — Related party 65 % — % Astellas — Related party 9 % 63 % AstraZeneca 16 % 34 % As of December 31, 2022 , the aggregate accounts receivable related to roxadustat sales in China from distributors represented 10 % of the consolidated accounts receivable, with no material balance from any individual distributor. As of December 31, 2021 , the accounts receivable related to roxadustat sales in China from Beijing Falikang Pharmaceutical Co., Ltd. (“Falikang”) and direct sales to distributors were not material. Other Risks and Uncertainties The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, the results of clinical trials and the achievement of milestones, research developments, actions by regulatory authorities, market acceptance of the Company’s product candidates, competition from other products and larger companies, the liquidity and capital resources of the Company, intellectual property protection for the Company's proprietary technology, strategic relationships, and dependence on key individuals, suppliers, clinical organization, and other third parties. Cash, Cash Equivalents and Restricted Time Deposits The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents also include money market accounts and various deposit accounts. Restricted time deposits include an irrevocable standby letter of credit as security deposit for a long-term property lease with the Company’s landlord. Restricted time deposits were $ 2.1 million at each of December 31, 2022 and 2021. As of December 31, 2022 and 2021, a total of $ 92.5 million and $ 91.2 million , respectively, of the Company’s cash and cash equivalents was held outside of the U.S. in the Company’s foreign subsidiaries to be used primarily for the Company’s China operations. 112 Investments As of December 31, 2022 , the Company’s investments consist primarily of diversified bonds, commercial paper, and money market funds. Those investments with original maturities of greater than three months and remaining maturities of less than 12 months (365 days) are considered short-term investments. Those investments with maturities greater than 12 months (365 days) from the balance sheet date are considered long-term investments. When such investments are held, the Company’s investments classified as available-for-sale are recorded at fair value based upon quoted market prices at period end. Unrealized gains and losses for available-for-sale debt investments that are deemed temporary in nature are recorded in accumulated other comprehensive income (loss) as a separate component of stockholder’ equity. Marketable equity securities are equity securities with readily determinable fair value, and are measured and recorded at fair value. Realized and unrealized gains or losses resulting from changes in value and sale of the Company’s marketable equity investments are recorded in other income (expenses) in the consolidated statement of operations. A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the security. Premiums and discounts are amortized (accreted) over the life of the related security as an adjustment to its yield. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of investments sold. Trade accounts receivable The allowance for credit losses is based on the Company’s assessment of the collectability of customer accounts. The Company makes estimates of expected credit losses for the allowance for doubtful accounts by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, current economic and regulatory conditions that may affect a customer’s ability to pay, and estimates of expected future losses. The Company’s bad debt expense for the years ended December 31, 2022, 2021 and 2020 and the allowance for doubtful accounts as of December 31, 2022 and 2021 were immaterial. Credit losses – Available-for-sale debt securities The Company periodically assesses its available-for-sale investments for other-than-temporary impairment. For debt securities in an unrealized loss position, the Company first considers its intent to sell, or whether it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis. If either of these criteria are met, the amortized cost basis of such debt securities is written down to fair value through interest and other, net. For debt securities in an unrealized loss position that do not meet the aforementioned criteria, the Company assesses whether the decline in the fair value of such debt securities has resulted from credit losses or other factors. The Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the securities, among other factors. If this assessment indicates that a credit loss may exist, the Company then compares the present value of cash flows expected to be collected from such securities to their amortized cost basis. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded through interest and other, net, limited by the amount that the fair value is less than the amortized cost basis. Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when the Company believes that an available-for-sale security is confirmed uncollectable or when either of the criteria regarding intent or requirement to sell is met. 113 Inventories Inventories are stated at the lower of cost or net realizable value, on a first-in, first-out, or FIFO, basis. The cost of the Company’s inventories in China is determined using full absorption and standard costing method. The Company reviews the standard cost of raw materials, work-in-process and finished goods annually and more often as appropriate to ensure that its inventories approximate current actual cost. The cost of the Company’s inventories in the U.S. uses actual costs to determine its cost basis. The cost of inventories includes direct material cost, direct labor and manufacturing overhead. When the technical feasibility of the Company’s future commercialization is considered probable and the future economic benefit is expected to be realized, based on management’s judgment, the Company capitalizes pre-launch inventory costs prior to regulatory approval. A number of factors are considered, including the status in the validation process in significant jurisdictions, regulatory application and approval process, and terms and condition for future sale of such inventory or future alternative use. The pre-launch inventory cost includes purchase cost of raw materials, cost paid to contract manufacturers for inventory manufacturing, freight and custom charges, and certain direct internal labor and overhead expenses. The Company periodically reviews its inventories to identify obsolete, slow-moving, excess or otherwise unsaleable items. If obsolete, excess or unsaleable items are observed and there are no alternate uses for the inventory, an inventory valuation adjustment is recorded through a charge to cost of goods sold on the Company’s consolidated statements of operations. Inventory valuation adjustments require judgment including consideration of many factors, such as estimates of future product demand and product expiration period, among others. Property and Equipment Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Computer equipment, laboratory equipment, machinery and furniture and fixtures are depreciated over three to five years . Leasehold improvements are recorded at cost and amortized over the term of the lease or their useful life, whichever is shorter. Equity method investment - Variable Interest Entity Under the Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”), when the Company obtains an economic interest in an entity, it evaluates the entity to determine if it should be deemed a VIE, and, if so, whether the Company is the primary beneficiary and is therefore required to consolidate the VIE, based on significant judgment whether the Company (i) has the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. On an ongoing basis, the Company re-evaluates the VIE assessment based on potential changes in facts and circumstances, including but not limited to, the shareholder loans to the entity and the execution of any future significant agreements between the entity and its shareholders and/or other third parties. Leases The Company determines if an arrangement is or contains a lease at inception date when it is given control of the underlying assets. The Company elected the practical expedient not to apply the lease recognition and measurement requirements to short-term leases, which is any lease with a term of 12 months or less as of the commencement date that does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. Lease right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As its leases do not typically provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company reassesses the incremental borrowing rate periodically for application to any new leases or lease modifications, which approximates the rate at which the Company would borrow, on a secured basis, in the country where the lease was executed. For any lease modification, the Company reassesses the lease classification, remeasures the related lease liability using an updated discount rate, and adjusts the related ROU asset under the lease modification guidance under the ASC 842. 114 Lease ROU assets include any lease payments made and initial direct costs incurred. The Company has lease agreements with lease and non-lease components. The Company generally accounts for each lease component separately from the non-lease components, and excludes all non-lease components from the calculation of minimum lease payments in measuring the ROU asset and lease liability. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease terms. Regarding leases denominated in a foreign currency, the related ROU assets and the corresponding ROU asset amortization costs are remeasured using the exchange rate in effect at the date of initial recognition; the related lease liabilities are remeasured using the exchange rate in effect at the end of the reporting period; the lease costs and interest expenses related to lease liability accretion are remeasured using average exchange rates for the reporting period. Finance leases are included in finance lease ROU assets, finance lease liabilities, current and non-current on the Company’s consolidated balance sheets. Operating leases are included in operating lease ROU assets, operating lease liabilities, current and non-current on the Company’s consolidated balance sheets. Impairment of Long-Lived Assets The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets may warrant revision or that the carrying value of these assets may be impaired. If the Company determines that an impairment trigger has been met, the Company evaluates the realizability of its long-lived assets (asset group) based on a comparison of projected undiscounted cash flows from use and eventual disposition with the carrying value of the related asset. Any write-downs (which are measured based on the difference between the fair value and the carrying value of the asset) are treated as permanent reductions in the carrying amount of the assets (asset group). Based on this evaluation, the Company believes that, as of each of the balance sheet dates presented, no ne of the Company’s long-lived assets were impaired. The Company had no impairment of long-lived assets for the years ended December 31, 2022 and 2021. The Company’s impairment of long-lived assets for the year ended December 31, 2020 was immaterial. Liability Related to Sale of Future Revenues The Company accounts for the sale of future revenue as a debt, because the risks and rewards to the investor are limited by the terms of the transaction as discussed further in Note 8, Liability Related to Sale of Future Revenues . The difference between the carrying amount of the initial liability and the gross proceeds received is accounted for as a discount. The Company recognizes interest expense based on an estimated effective annual interest rate, which is affected by the amount and timing of revenues recognized and changes in the timing of forecasted revenues. Quarterly, the Company reassesses the expected revenues and the timing of such revenues, recalculates the amortization and effective interest rate and adjusts the accounting prospectively as needed. Revenue Recognition Revenues under collaboration agreements The Company’s collaboration agreements include multiple performance obligations comprised of promised services, or bundles of services, that are distinct. Services that are not distinct are combined with other services in the agreement until they form a distinct bundle of services. The Company’s process for identifying performance obligations and an enumeration of each obligation for each agreement is outlined in Note 3, Collaboration Agreements, License Agreement and Revenues . Determining the performance obligations within a collaboration agreement often involves significant judgment and is specific to the facts and circumstances contained in each agreement. The Company has identified the following material promises under its collaboration agreements: (1) license of FibroGen technology, (2) the performance of co-development services, including manufacturing of clinical supplies and other services during the development period, and (3) manufacture of commercial supply. The evaluation as to whether these promises are distinct, and therefore represent separate performance obligations, is described in more detail in Note 3, Collaboration Agreements, License Agreement and Revenues . 115 For revenue recognition purposes, the Company determines that the terms of its collaboration agreements begin on the effective date and end upon the completion of all performance obligations contained in the agreements. In each agreement, the contract term is defined as the period in which parties to the contract have present and enforceable rights and obligations. The Company believes that the existence of what it considers to be substantive termination penalties on the part of the counterparty create sufficient incentive for the counterparty to avoid exercising its right to terminate the agreement. The transaction price for each collaboration agreement is determined based on the amount of consideration the Company expects to be entitled for satisfying all performance obligations within the agreement. The Company’s collaboration agreements include payments to the Company of one or more of the following: non-refundable upfront license fees; co-development billings; development, regulatory, and commercial milestone payments; payments from sales of active pharmaceutical ingredient (“API”); payments from sales of bulk drug product and royalties on net sales of licensed products. Upfront license fees are non-contingent and non-refundable in nature and are included in the transaction price at the point when the license fees become due to the Company. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. Co-development billings resulting from the Company’s research and development efforts, which are reimbursable under its collaboration agreements, are considered variable consideration. Determining the reimbursable amount of research and development efforts requires detailed analysis of the terms of the collaboration agreements and the nature of the research and development efforts incurred. Prior to CKD approval in the third quarter of 2021, determining the amount of variable consideration from co-development billings required the Company to make estimates of future research and development efforts, which involved significant judgment. Co-development billings are allocated entirely to the co-development services performance obligation when amounts are related specifically to research and development efforts necessary to satisfy the performance obligation, and such an allocation is consistent with the allocation objective. Milestone payments are also considered variable consideration, which requires the Company to make estimates of when achievement of a particular milestone becomes probable. Similar to other forms of variable consideration, milestone payments are included in the transaction price when it becomes probable that such inclusion would not result in a significant revenue reversal. Milestones are therefore included in the transaction price when achievement of the milestone becomes probable. For arrangements that include sales-based royalties and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, royalty revenue resulting from its collaboration arrangements was immaterial. The transaction price is allocated to performance obligations based on their relative standalone selling price (“SSP”), with the exception of co-development billings allocated entirely to co-development services performance obligations. The SSP is determined based on observable prices at which the Company separately sells the products and services. If an SSP is not directly observable, then the Company will estimate the SSP considering marketing conditions, entity-specific factors, and information about the customer or class of customer that is reasonably available. The process for determining SSP involves significant judgment and includes consideration of multiple factors, including assumptions related to the market opportunity and the time needed to commercialize a product candidate pursuant to the relevant license, estimated direct expenses and other costs, which include the rates normally charged by contract research and contract manufacturing organizations for development and manufacturing obligations, and rates that would be charged by qualified outsiders for committee services. 116 Significant judgment may be required in determining whether a performance obligation is distinct, determining the amount of variable consideration to be included in the transaction price, and estimating the SSP of each performance obligation. An enumeration of the Company’s significant judgments is outlined in Note 3, Collaboration Agreements, License Agreement and Revenues . For each performance obligation identified within an arrangement, the Company determines the period over which the promised services are transferred and the performance obligation is satisfied. Service revenue that was recognized over time was based on progress toward complete satisfaction of the performance obligation. For each performance obligation satisfied over time, the Company assesses the proper method to be used for revenue recognition, either an input method to measure progress toward the satisfaction of services or an output method of determining the progress of completion of performance obligation. Revenue under license agreements Under a license agreement, if the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from upfront license fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company determines whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, the Company uses judgment in determining the appropriate method of measuring progress for purposes of recognizing revenue from the up-front license fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Product revenue, net Product revenue, net consists of revenues from sales of roxadustat commercial product to Falikang, and directly to pharmaceutical distributors located in one province in China that are not covered by Falikang. Falikang is jointly owned by AstraZeneca AB (“AstraZeneca”) and FibroGen Beijing. The Company is not the primary beneficiary of Falikang for accounting purposes, as AstraZeneca is the final decision maker for all the roxadustat commercialization activities, and the Company lacks the power criterion to direct the activities of Falikang (see Note 4, Equity method investment - Variable Interest Entity ). Sales to Falikang Falikang became fully operational in January 2021, at which time FibroGen Beijing began selling roxadustat commercial product to Falikang. Falikang is FibroGen Beijing’s primary customer in China and substantially all roxadustat product sales to distributors in China are made by Falikang. Falikang bears inventory risk once it receives and accepts the product from FibroGen Beijing, and is responsible for delivering product to its distributors. The promises identified under the AstraZeneca China Agreement (as defined in Note 3, Collaboration Agreements, License Agreement and Revenues ), including the license, co-development services and manufacturing of commercial supplies have been bundled into a single performance obligation (“China performance obligation”). Amounts of the transaction price allocable to this performance obligation under the Company’s agreements with AstraZeneca as outlined in Note 3, Collaboration Agreements, License Agreement and Revenues, are deferred until control of the manufactured commercial product is transferred to AstraZeneca. The initiation of roxadustat sales to Falikang marked the beginning of the China performance obligation . Revenue is recognized at a point in time when control of roxadustat commercial product is transferred to Falikang. Revenue is recognized based on the estimated transaction price per unit and actual quantity of product delivered during the reporting period. Specifically, the transaction price per unit is determined based on the overall transaction price over the total estimated sales quantity for the estimated performance period in which the Company determined it is likely those sales would occur. The price per unit is subject to reassessment on a quarterly basis, which may result in cumulative catch up adjustments due to changes in estimates. 117 The overall transaction price for FibroGen Beijing’s product sales to Falikang includes the following elements of consideration: ● Non-refundable upfront license fees; development, regulatory, and commercial milestone payments based on the AstraZeneca China Agreement allocated to the China performance obligation; ● Co-development billings resulting from the Company’s research and development efforts, which are reimbursable under the AstraZeneca China Agreement; ● Interim profit/loss share between FibroGen Beijing and AstraZeneca from April 1, 2020 through December 31, 2020; and ● Net transaction price from product sales to Falikang from January 1, 2021 onwards. The net transaction price includes the following elements: o Gross transaction price: The gross transaction price is based on a percentage of Falikang’s net sales to its distributors, which takes into account Falikang’s operating expenses and its payments to AstraZeneca for roxadustat sales and marketing efforts, capped at a percentage of Falikang’s net roxadustat sales. o Profit share: The gross transaction price is then adjusted for an estimated amount to achieve the 50 /50 profit share from current period roxadustat net sales in China. The adjustments to date have been a reduction to the transaction price and the related accounts receivable from Falikang. The non-refundable upfront license fees constitute a fixed consideration. The remainder of the above are variable consideration components, which may be constrained, and included in the transaction price 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. The calculation of the above variable consideration includes significant assumptions such as total sales quantity, performance period, gross transaction price and profit share, which require significant judgment. Any net transaction price in excess of the revenue recognized is deferred, and will be recognized over future periods as the performance obligations are satisfied. Direct Sales to Distributors The Company sells roxadustat in China directly to a number of pharmaceutical distributors located in one province in China that are not covered by Falikang. These pharmaceutical distributors are the Company’s customers. Hospitals order roxadustat through a distributor and the Company ships the product directly to the distributors. The delivery of roxadustat to a distributor represents a single performance obligation. Distributors are responsible for delivering product to end users, primarily hospitals. Distributors bear inventory risk once they receive and accept the product. Product revenue is recognized when control of the promised good is transferred to the customer in an amount that reflects the consideration that the Company expects to be entitled to in exchange for the product. The period between the transfer of control of the promised goods and when the Company receives payment is based on 60-day payment terms. As such, product revenue is not adjusted for the effects of a significant financing component. Product revenue is recorded at the net sales prices that includes the following estimates of variable consideration: ● Price adjustment: When China’s National Healthcare Security Administration releases price guidance for roxadustat under the National Reimbursement Drug List, any channel inventories that have not been sold through by distributors, or to patients by hospitals and retailers, would be eligible for a price adjustment under the price protection. The price adjustment is calculated based on estimated channel inventory levels; ● Contractual sales rebate: The contractual sales rebate is calculated based on the stated percentage of gross sales by each distributor in the distribution agreement entered between FibroGen and each distributor. The contractual sales rebate is recorded as a reduction to revenue at the point of sale to the distributor; ● Non-key account hospital listing award: A one-time fixed-amount award is offered to a distributor who successfully lists the product with an eligible hospital, and who meets certain requirements. For the year ended December 31, 2020, the non-key account hospital listing award was capitalized when the distributor meets eligibility requirements, and amortized as reduction to product revenue over future sales orders made by the distributor until exhausted. For the years ended December 31, 2022 and 2021, the non-key account hospital listing award was immaterial and recorded as a reduction to revenue when distributor meets eligibility requirements; 118 ● Other discounts and rebates, including key account hospital sales rebate and transfer fee discount, are generally based on a percentage of eligible gross sales made by the distributor and recorded as a reduction to revenue at the point of sale to the distributor; and ● Sales returns: Distributors can request to return product to the Company only due to quality issues or for product purchased within one year prior to the product’s expiration date. The calculation of the above variable consideration is based on gross sales to the distributor, or estimated utilizing best available information from the distributor, maximum known exposures and other available information including estimated channel inventory levels and estimated sales made by the distributor to hospitals, which involve a significant judgment. The above rebates and discounts all together are eligible to be applied against the distributor’s future sales order, limited to certain maximums until such rebates and discounts are exhausted. These rebates and discounts are recorded as contract liabilities at the time they become eligible and in the same period that the related revenue is recorded. Due to the distributor’s legal right to offset, at each balance sheet date, the liability for rebates and discounts are presented as reductions of gross accounts receivable from the distributor, or as a current liability to the distributor to the extent that the total amount exceeds the gross accounts receivable or when the Company expects to settle the discount in cash. The distributor’s legal right of offset is calculated at the individual distributor level. Drug product revenue Drug product revenue includes commercial-grade API or bulk drug product sales to AstraZeneca and Astellas Pharma Inc. (“Astellas”) in support of pre-commercial preparation prior to the New Drug Application (“NDA”) or Marketing Authorization Application approval, and to Astellas for ongoing commercial launch in Japan and Europe. Drug product revenue is recognized when the Company fulfills the inventory transfer obligations. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the drug 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. Estimating variable consideration and the related constraint requires the use of significant management judgment. The Company reviews new information that may affect its variable consideration estimate at every reporting period and records revenue adjustment, if certain and material. Actual amounts of consideration ultimately received in the future may differ from the Company’s estimates, for which the Company will adjust these estimates and affect the drug product revenue in the period such variances become known. As each of the Company’s collaboration agreements provide for annual true up to the considerations paid for its commercial supplies, the Company will re-evaluate the transaction price in each reporting period and record adjustment to revenue as uncertain events are resolved or other changes in circumstances occur. License Acquisition Agreement In June 2021, the Company entered into an exclusive license and option agreement (the “HiFiBiO Agreement”) with HiFiBiO Therapeutics (“HiFiBiO”), pursuant to which the Company exclusively licensed all product candidates in HiFiBiO’s Galectin-9 program and subsequently exclusively licensed all product candidates in HiFiBiO’s CCR8 program in December 2021. Under the terms of the HiFiBiO Agreement, the Company has paid a $ 25.0 million upfront payment to HiFiBiO during the year ended December 31, 2021, and recorded a $ 35.0 million upfront payment for the CCR8 option exercise in accrued liabilities as of December 31, 2021, which was paid during the first quarter of 2022. HiFiBiO may receive up to a total of an additional $ 345 million in future clinical, regulatory, and commercial milestone payments for each program. HiFiBiO will also be eligible to receive tiered royalties based upon worldwide net sales. We expect to file INDs on product candidates for both the CCR8 and Galectin-9 programs in 2023. The acquisition of these licenses was accounted for as an asset acquisition. The above-mentioned upfront payments of $ 60.0 million related to the license and options acquisition meets the definition of an in-process research and development asset (“IPR&D asset”) under the ASC 730, Research and Development . They relate to particular research and development projects and are determined to have no alternative future uses and thus have no separate economic value. Therefore, these upfront payments were recorded as research and development expenses during the year ended December 31, 2021, and the cash payments were reflected as investing activities in the consolidated statement of cash flows during the years ended December 31, 2022 and 2021, respectively. 119 Contingent consideration payments will be evaluated and recognized when they become probable and reasonably estimable. The related IPR&D asset will only be capitalized if it has an alternative future use other than in a particular research and development project. Otherwise, amounts allocated to IPR&D asset that have no alternative use will be expensed. As of December 31, 2022 , all programs were at the early stage of development and the contingencies related to the milestone payments had not been resolved, therefore no contingent consideration was recognized. The Company will reassess the probability of future option payments and contingent payments on a quarterly basis. Research and Development Expenses Research and development expenses consist of above-mentioned expense for acquired IPR&D asset, independent research and development costs and the gross amount of costs associated with work performed under collaboration agreements. Research and development costs include employee-related expenses, expenses incurred under agreements with clinical research organizations, other clinical and preclinical costs and allocated direct and indirect overhead costs, such as facilities costs, information technology costs and other overhead. All research and development costs are expensed as incurred. Clinical Trial Accruals Clinical trial costs are a component of research and development expenses. The Company accrues and expenses clinical trial activities performed by third parties based upon actual work completed in accordance with agreements established with clinical research organizations and clinical sites. The Company determines the costs to be recorded based upon validation with the external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses consist primarily of employee-related expenses for executive, operational, finance, legal, compliance and human resource functions. 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. Income Taxes The Company utilizes the asset and liability method of accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for expected future consequences of temporary differences between the financial reporting and income tax bases of assets and liabilities using enacted tax rates. Management makes estimates, assumptions and judgments to determine the Company’s provision for income taxes and for deferred tax assets and liabilities, and any valuation allowances recorded against the Company’s deferred tax assets. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery is not likely, the Company must establish a valuation allowance. The calculation of the Company’s current provision for income taxes involves the use of estimates, assumptions and judgments while taking into account current tax laws, interpretation of current tax laws and possible outcomes of future tax audits. The Company has established reserves to address potential exposures related to tax positions that could be challenged by tax authorities. Although the Company believes its estimates, assumptions and judgments to be reasonable, any changes in tax law or its interpretation of tax laws and the resolutions of potential tax audits could significantly impact the amounts provided for income taxes in the Company’s consolidated financial statements. The calculation of the Company’s deferred tax asset balance involves the use of estimates, assumptions and judgments while taking into account estimates of the amounts and type of future taxable income. Actual future operating results and the underlying amount and type of income could differ materially from the Company’s estimates, assumptions and judgments thereby impacting the Company’s financial position and results of operations. During 2020, the Company transferred certain intellectual property rights relating to its Chinese business between its wholly owned subsidiaries that are based in different tax jurisdictions. See Note 13, Income Taxes , for more information. The establishment of a deferred tax asset from the intra-entity transfer of intangible assets required the Company to make significant estimates and assumptions to determine the fair value of intellectual property rights transferred, which include but are not limited to, its expectations of discount rate, revenue volume and price. The accuracy of these estimates could be affected by unforeseen events or actual results, and the sustainability of the Company’s future tax benefits is dependent upon the acceptance of these valuation estimates and assumptions by the taxing authorities. 120 The Company has adopted ASC 740-10, Accounting for Uncertainty in Income Taxes , that prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in the Company’s income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company includes interest and penalties related to unrecognized tax benefits within income tax expense in the Consolidated Statements of Operations. Stock-Based Compensation 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 (“PRSUs”), and total shareholder return (“TSR”) awards. The Company measures and recognizes compensation expense for all stock options, RSUs and PRSUs granted to its employees and directors based on the estimated fair value of the award on the grant date. The Company uses the Black-Scholes valuation model to estimate the fair value of stock option awards. The determination of the grant date fair value of options using the Black-Scholes valuation model is affected by the Company’s estimated common stock fair value and requires management to make a number of assumptions including the expected life of the option, the volatility of the underlying stock, the risk-free interest rate and expected dividends. The Company determines the fair value of RSUs and PRSUs using the fair value of our common stock on the date of grant. To estimate the fair value of the TSR awards, the Company uses the Monte Carlo valuation model to simulate the probabilities of achievement, which requires management to make a number of assumptions including 30-day average price, volatility of the underlying stock and the Company’s peers, and the risk-free interest rate. The compensation cost of service-based stock options and restricted stock units is recognized net of any estimated forfeitures on a straight-line basis over the employee requisite service period. Compensation cost for PRSUs is expensed over the respective vesting periods when the achievement of performance criteria is probable. Compensation cost for the TSR awards is recognized over the requisite service period, regardless of when, if ever, the market condition is satisfied. The Company believes that the fair value of stock options granted to non-employees is more reliably measured than the fair value of the services received. Comprehensive Income (Loss) The Company is required to report all components of comprehensive income (loss), including net loss, in the consolidated financial statements in the period in which they are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on investments and foreign currency translation adjustments. Comprehensive gains (losses) have been reflected in the consolidated statements of comprehensive income (loss) for all periods presented. Recently Issued and Adopted Accounting Guidance In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ ASU 2020-04” ) , which provides companies with optional financial reporting alternatives to reduce the cost and complexity associated with the accounting for contracts and hedging relationships affected by reference rate reform. Subsequently in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope , which clarifies ASU 2020-04 and provides certain optional expedients that allow derivative instruments impacted by changes in the interest rate used for margining, discounting or contract price alignment to qualify for certain optional relief. ASU 2021-01 is effective in the same timeframe as ASU2020-04. The Company did not elect to apply any of the expedients or exceptions as of and for the years ended December 31, 2022 and 2021. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 , which deferred the sunset date in Topic 848 from December 31, 2022 to December 31, 2024. 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 concluded that there is no material impact on its consolidated financial statements and related disclosures affected by reference rate reform. 121 3. Collaboration Agreements, License Agreement and Revenues Astellas Agreements Astellas 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 (“Astellas Japan Agreement”). Under this agreement, Astellas paid license fees and other consideration totaling $ 40.1 million (such amounts were fully received as of February 2009). Under the Astellas Japan Agreement, the Company is also eligible to receive from Astellas an aggregate of approximately $ 132.5 million in potential milestone payments, comprised of (i) up to $ 22.5 million in milestone payments upon achievement of specified clinical and development milestone events (such amounts were fully received as of July 2016), (ii) up to $ 95.0 million in milestone payments upon achievement of specified regulatory milestone events, and (iii) up to approximately $ 15.0 million in milestone payments upon the achievement of specified commercial sales milestone. 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 the Japanese Ministry of Health, Labour and Welfare, adjusted for certain elements, after commercial launch. During the fourth quarter of 2020, the Japanese Ministry of Health, Labour and Welfare approved EVRENZO® (roxadustat) for the treatment of anemia of CKD in adult patients not on dialysis. This approval triggered a $ 15.0 million milestone payable to the Company by Astellas under the Astellas Japan Agreement. Accordingly, the consideration of $ 15.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Astellas Japan Agreement in the fourth quarter of 2020, substantially all of which was recognized as revenue during the year ended December 31, 2020 from performance obligations satisfied or partially satisfied. The aggregate amount of the considerations received under the Astellas Japan Agreement, through December 31, 2022 totals $ 105.1 million excluding drug product revenue that is discussed under the Drug Product Revenue section below. 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”). Under this amendment, FibroGen would continue to manufacture and supply roxadustat API to Astellas for the roxadustat commercial launch in Japan. The commercial terms of the Astellas Japan Agreement relating to the transfer price for roxadustat for commercial use remain substantially the same, reflecting an adjustment for the manufacture of drug product by Astellas rather than FibroGen. The related drug product revenue is described under the Drug Product Revenue section below. Astellas 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 (“Astellas Europe Agreement”). Under the terms of the Astellas Europe Agreement, Astellas paid license fees and other upfront consideration totaling $ 320.0 million (such amounts were fully received as of February 2009). The Astellas Europe Agreement also provides for additional development and regulatory approval milestone payments up to $ 425.0 million, comprised of (i) up to $ 90.0 million in milestone payments upon achievement of specified clinical and development milestone events (such amounts were fully received as of 2012), and (ii) up to $ 335.0 million in milestone payments upon achievement of specified regulatory milestone events. Under 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 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 year ended December 31, 2022 from performance obligations satisfied. 122 During the third quarter of 2021, the European Commission approved EVRENZO ® (roxadustat) for the treatment of adult patients with symptomatic anemia associated with CKD. Astellas has launched EVRENZO in Germany, the United Kingdom, the Netherlands, and Austria. This approval triggered a total of $ 120.0 million milestone payable to the Company by Astellas under the Astellas Europe Agreement. Accordingly, the consideration of $ 120.0 million associated with these milestones 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 year ended December 31, 2021 from performance obligations satisfied. The aggregate amount of the considerations received under the Astellas Europe Agreement through December 31, 2022 totals $ 685.0 million , excluding drug product revenue that is discussed under the Drug Product Revenue section below. 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 (“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. Accounting for the Astellas Agreements For each of the Astellas agreements, the Company has evaluated the promised services within the respective arrangements and has identified performance obligations representing those services and bundles of services that are distinct. Promised services that were not distinct have been combined with other promised services to form a distinct bundle of promised services, with revenue being recognized on the bundle of services rather than the individual services. There are no right-of-return provisions for the delivered items in the Astellas agreements. As of December 31, 2022 , the transaction price for the Astellas Japan Agreement, excluding manufacturing services that is discussed separately below, included $ 40.1 million of non-contingent upfront payments, $ 65.0 million of variable consideration related to payments for milestones achieved, and $ 12.1 million of variable consideration related to co-development billings. The transaction price for the Astellas Europe Agreement, excluding manufacturing services that is discussed separately below, included $ 320.0 million of non-contingent upfront payments, $ 365.0 million of variable consideration related to payments for milestones achieved, and $ 219.2 million of variable consideration related to co-development billings. For the technology license under the Astellas Japan Agreement and the Astellas Europe Agreement, SSP was determined primarily by using the discounted cash flow (“DCF”) method, which aggregates the present value of future cash flows to determine the valuation as of the effective date of each of the agreements. The DCF method involves the following key steps: 1) the determination of cash flow forecasts and 2) the selection of a range of comparative risk-adjusted discount rates to apply against the cash flow forecasts. The discount rates selected were based on expectations of the total rate of return, the rate at which capital would be attracted to the Company and the level of risk inherent within the Company. The discounts applied in the DCF analysis ranged from 17.5 % to 20.0 %. The Company’s cash flow forecasts were derived from probability-adjusted revenue and expense projections by territory. Such projections included consideration of taxes and cash flow adjustments. The probability adjustments were made after considering the likelihood of technical success at various stages of clinical trials and regulatory approval phases. SSP also considered certain future royalty payments associated with commercial performance of the Company’s compounds, transfer prices and expected gross margins. 123 The promised services that were analyzed, along with their general timing of satisfaction and recognition as revenue, are as follows: (1) License to the Company’s technology existing at the effective date of the agreements. For both of the Astellas agreements, the license was delivered at the beginning of the agreement term. In both cases, the Company concluded at the time of the agreement that its collaboration partner, Astellas, would have the knowledge and capabilities to fully exploit the licenses without the Company’s further involvement. However, the Astellas Japan Agreement has contractual limitations that might affect Astellas’ ability to fully exploit the license and therefore, potentially, the conclusion as to whether the license is capable of being distinct. In the Astellas Japan Agreement, Astellas does not have the right to manufacture commercial supplies of the drug. In order to determine whether this characteristic of the agreement should lead to a conclusion that the license was not distinct in the context of the agreement, the Company considered the ability of Astellas to benefit from the license together with other resources readily available to Astellas. Finally, the Company considered the fact that at the time of delivery of the license, the development services were beyond the preclinical development phase and any remaining development work in either agreement would not be expected to result in any significant modification or customization to the licensed technology. As such, the development services are separately identifiable from the licensed technology, indicating that the license is a distinct performance obligation. Manufacturing rights. In the case of the Astellas Japan Agreement, the Company retained manufacturing rights largely because of the way the parties chose for FibroGen to be compensated under the agreement. At the time the agreement was signed, the Company believed that it was more advantageous upon commercialization to have a transfer price revenue model in place as opposed to a traditional sales-based model. The manufacturing process does not require specialized knowledge or expertise uniquely held by FibroGen, and notwithstanding contractual restrictions, Astellas could employ manufacturing services from readily available third parties in order to benefit from the license. Therefore, along with the foregoing paragraph, the Company determined that the license in Japan is a distinct performance obligation despite the retention of manufacturing rights by the Company. In summary, the Company concludes that item (1) represents a performance obligation. The portion of the transaction price allocated to this performance obligation based on a relative SSP basis was recognized as revenue in its entirety at the point in time the license transfers to Astellas. (2) Co-development services (Astellas Europe Agreement). This promise relates to co-development services that were reasonably expected to be performed by the Company at the time the collaboration agreement was signed and is considered distinct. Co-development billings are allocated entirely to the co-development services performance obligation as amounts are related specifically to research and development efforts necessary to satisfy the performance obligation related to CKD approval, and such an allocation is consistent with the allocation objective. Through the third quarter of 2021 upon the approval of CKD, revenue was recognized over time based on progress toward complete satisfaction of the performance obligation. The Company used an input method to measure progress toward the satisfaction of the performance obligation, which was based on costs of labor hours and out-of-pocket expenses incurred relative to total expected costs to be incurred. Subsequently, the Company accounts for the development services for the indications related to chemotherapy-induced anemia and myelodysplastic syndromes separately as services are provided. There w as no provision for co-development services in the Astellas Japan Agreement. (3) License to the Company’s technology developed during the term of the agreement and development (referred to as “when and if available”) and information sharing services. These promises are generally satisfied throughout the term of the agreements. (4) Manufacturing of clinical supplies of products. This promise is satisfied as supplies for clinical product are delivered for use in the Company’s clinical trial programs during the development period, or pre-commercialization period. 124 (5) Committee service . This promise is satisfied throughout the course of the agreements as meetings are attended. Items (2)-(5) are bundled into a single performance obligation that is distinct given the fact that all are highly interrelated during the development period (pre-commercial phase of development) such that satisfying them independently is not practicable. For the revenue recognized over time based on progress toward complete satisfaction of the performance obligation, the Company uses an input method to measure progress toward the satisfaction of the performance obligation, which is based on costs of labor hours or full time equivalents and out-of-pocket expenses incurred relative to total expected costs to be incurred, and updates the measure of progress in each reporting period. (6) Manufacturing commercial supplies of products. This promised service is distinct as services are not interrelated with any of the other performance obligations. Payments received for commercial supplies of products represent sales-based payments related predominately to the license of intellectual property under both Astellas agreements. Revenue is recognized as supplies are shipped for commercial use during the commercialization period. See the Drug Product Revenue section below. Under the Astellas Japan Amendment, the drug product revenue represents variable consideration and is estimated based on the quantity of product shipped, actual listed price for roxadustat issued by the Japanese Ministry of Health, Labour and Welfare and possible future changes to the listed price, adjusted for the timing of and estimated bulk product strength mix intended to be manufactured by Astellas, estimated cost to convert the API to bulk drug product tablets, and estimated yield from the manufacture of bulk product tablets, among others. Under the Astellas Europe Agreement, the drug product revenue amount represents variable consideration and is estimated based on the quantity of product transferred and an estimated price. The estimated price is based on the contractual transfer price percentage applied on the estimated weighted average net sales price per strength, which is estimated to be realized by Astellas from the end sale of roxadustat in its approved territories. License Revenue and Development Revenue Recognized Under the Astellas Agreements License amounts identified below are included in the “License revenue” line item in the consolidated statements of operations. All other elements identified below are included in the “Development and other revenue” line item in the consolidated statements of operations. Amounts recognized as license revenue and development revenue under the Astellas Japan Agreement were as follows for the years ended December 31, 2022, 2021 and 2020 (in thousands): Years Ended December 31, Agreement Performance Obligation 2022 2021 2020 Astellas Japan Agreement License revenue $ — $ — $ 14,323 Development revenue $ 284 $ 248 $ 1,220 The transaction price related to consideration received through December 31, 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 Cumulative Revenue Through December 31, 2022 Deferred Revenue at December 31, 2022 Total Consideration Through December 31, 2022 License $ 100,347 $ — $ 100,347 Development revenue 16,882 — 16,882 Total license and development revenue $ 117,229 $ — $ 117,229 125 There was no license revenue or development 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 year ended December 31, 2022 . 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. Amounts recognized as license revenue and development revenue under the Astellas Europe Agreement were as follows for the years ended December 31, 2022, 2021 and 2020 (in thousands): Years Ended December 31, Agreement Performance Obligation 2022 2021 2020 Astellas Europe Agreement License revenue $ 22,590 $ 108,434 $ — Development revenue $ 9,624 $ 21,679 $ 17,954 The transaction price related to consideration received through December 31, 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 Cumulative Revenue Through December 31, 2022 Deferred Revenue at December 31, 2022 Total Consideration Through December 31, 2022 License $ 618,975 $ — $ 618,975 Development revenue 280,265 — 280,265 Total license and development revenue $ 899,240 $ — $ 899,240 The license revenue and development revenue recognized under the Astellas Europe Agreement for the year ended December 31, 2022 included an increase in revenue of $ 25.0 million relating to performance obligations satisfied during the year. The remainder of the transaction price related to the Astellas Europe Agreement includes $ 5.0 million of variable consideration from estimated future co-development billing and is expected to be recognized over the remaining development service period. AstraZeneca Agreements 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”). China is covered by a separate agreement with AstraZeneca described below. Under the terms of the AstraZeneca U.S./RoW Agreement, AstraZeneca paid upfront, non-contingent, non-refundable and time-based payments totaling $ 374.0 million (such amounts were fully received as of June 2016). Under the AstraZeneca U.S./RoW Agreement, AstraZeneca also agreed to pay an aggregate of approximately $ 875.0 million in potential milestone payments, comprised of (i) up to $ 65.0 million in milestone payments upon achievement of specified clinical and development milestone events, (ii) up to $ 325.0 million in milestone payments upon achievement of specified regulatory milestone events, (iii) up to $ 160.0 million in milestone payments related to activity by potential competitors and (iv) up to approximately $ 325.0 million in milestone payments upon the achievement of specified commercial sales events. 126 Under the AstraZeneca U.S./RoW Agreement, the Company and AstraZeneca will equally share in the development costs of roxadustat not already paid for by Astellas, up to a total of $ 233.0 million (i.e. the Company’s share of development costs is $ 116.5 million, which was reached in 2015). Development costs incurred by FibroGen during the development period in excess of the $ 233.0 million (aggregated spend) are fully reimbursed by AstraZeneca. AstraZeneca will pay the Company 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 the considerations received under the AstraZeneca U.S./RoW Agreement through December 31, 2022 totals $ 439.0 million , excluding drug product revenue that is discussed under the Drug Product Revenue section below. 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 a collaboration agreement with AstraZeneca for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in China (“AstraZeneca China Agreement”). Under the terms of the AstraZeneca China Agreement, AstraZeneca agreed to pay upfront consideration totaling $ 28.2 million (such amounts were fully received in 2014). Under the AstraZeneca China Agreement, the Company is also eligible to receive from AstraZeneca an aggregate of approximately $ 348.5 million in potential milestone payments, comprised of (i) up to $ 15.0 million in milestone payments upon achievement of specified clinical and development milestone events, (ii) up to $ 146.0 million in milestone payments upon achievement of specified regulatory milestone events, and (iii) up to approximately $ 187.5 million in milestone payments upon the achievement of specified commercial sales and other events. The AstraZeneca China Agreement is structured as a 50/50 profit or loss share (as defined), which was amended under the AstraZeneca China Amendment discussed below in the third quarter of 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 the considerations received for milestone and upfront payments under the AstraZeneca China Agreement through December 31, 2022 totals $ 77.2 million . AstraZeneca China Amendment In July 2020, FibroGen China Anemia Holdings, Ltd., FibroGen Beijing, and FibroGen International (Hong Kong) Limited and AstraZeneca entered into an amendment, 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, Falikang, which performs roxadustat distribution, as well as conducts sales and marketing through AstraZeneca. Under the AstraZeneca China Amendment, the interim period is defined as the period from April 1, 2020 to the time when Falikang is fully operational. Falikang became fully operational in January 2021. The calculation for profit or loss share related to sales of roxadustat in China has changed for the period from April 1, 2020 onwards. With effect from April 1, 2020, the Parties have changed the method under which commercial expenses incurred by AstraZeneca are calculated and billed. AstraZeneca’s co-promotion expenses for their sales and marketing efforts are now subject to a cap of a percentage of net sales. In addition, the AstraZeneca China Amendment has allowed for a higher cost of manufacturing incurred by FibroGen Beijing to be included in the profit or loss share calculation, subject to an annual cap, among other changes. 127 As a result, the interim period during the year ended December 31, 2020 primarily included the following activities: • Co-promotion expenses: The AstraZeneca China Amendment revised the payment arrangements and calculation of the historical unpaid co-promotion expenses to AstraZeneca for its sales and marketing efforts associated with the commercial sales for roxadustat in China since the product launch. Under the AstraZeneca China Amendment, a portion of the historical unpaid co-promotion expenses was adjusted to reduce the amount owed by FibroGen Beijing and the current period co-promotion expenses are capped at a percentage of net roxadustat sales in China. As a result, in the third quarter of 2020, the Company reversed approximately $ 84.4 million of previously accrued co-promotion expenses payable, which was recorded as a reduction to selling, general and administrative expenses, where these expenses were initially recorded during the periods from the initiation of commercial activities in the first quarter of 2019 to the second quarter of 2020. The co-promotion expenses for the years ended December 31, 2022, 2021 and 2020 , capped at a percentage of net roxadustat sales in China, were $ 4.4 million, $ 4.7 million and $ 27.2 million, respectively, included in the selling, general and administrative expenses. • Profit share: Profit/loss share between FibroGen Beijing and AstraZeneca is based on a calculation of the current period net roxadustat sales in China and deductible expenses pursuant to the AstraZeneca China Agreement. Based on the calculation revised under the AstraZeneca China Amendment, profit was achieved during the third and fourth quarter of 2020. As a result, the Company recorded a profit share liability of $ 7.3 million and $ 7.9 million to AstraZeneca as of December 31, 2022 and 2021, respectively, in the accrued and other current liabilities, which correspondingly reduced the deferred revenue related to the performance obligation in accordance with the AstraZeneca China Agreement. 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 transaction price, which is adjusted for the estimated profit share. In addition, AstraZeneca now bills the co-promotion expenses to Falikang and to FibroGen Beijing, respectively, for its services provided to the respective entity. AstraZeneca is entitled to reimbursement of its sales and marketing expenses up to a cumulative capped amount of a percentage of net sales. Once such amount is reached, AstraZeneca will bill the co-promotion expenses based on actual costs as incurred plus a markup on a prospective basis, which is currently expected to continue through 2028. Development costs continue to be shared 50/50 between the Parties. The related net product revenue recognized from the sales to Falikang and the sales directly to distributors are discussed under the Product Revenue, Net section below. Accounting for the AstraZeneca Agreements The Company evaluated whether the AstraZeneca U.S./RoW Agreement and the AstraZeneca China Agreement should be accounted for as a single or separate arrangements and concluded that the agreements should be accounted for as a single arrangement with the presumption that two or more agreements executed with a single customer at or around the same time should be presumed to be a single arrangement. The key points the Company considered in reaching this conclusion are as follows: 1. While the two agreements were largely negotiated separately, those negotiations proceeded concurrently, and were intended to be completed contemporaneously, presuming AstraZeneca decided to proceed with licenses in all regions available. 2. Throughout negotiations for both agreements, the Company and the counterparties understood and considered the possibility that one arrangement may be executed without the execution of the other arrangement. However, the preference for the Company and the counterparties during the negotiations was to execute both arrangements concurrently. 3. The two agreements were executed as separate agreements because different development, regulatory and commercial approaches required certain terms of the agreements to be structured differently, rather than because the Company or the counterparties considered the agreements to be fundamentally separate negotiations. Accordingly, as the agreements are being accounted for as a single arrangement, upfront and other non-contingent consideration received and to be received has been and will be pooled together and allocated to each of the performance obligations in both the AstraZeneca U.S./RoW Agreement and the AstraZeneca China Agreement based on their relative SSPs. 128 For each of the AstraZeneca agreements, the Company has evaluated the promised services within the respective arrangements and has identified performance obligations representing those services and bundled services that are distinct. Promised services that were not distinct have been combined with other promised services to form a distinct bundle of promised services, with revenue being recognized on the bundle of services rather than the individual promised services. There are no right-of-return provisions for the delivered items in the AstraZeneca agreements. As of December 31, 2022 , the transaction price for the AstraZeneca U.S./RoW Agreement and the AstraZeneca China Agreement, excluding manufacturing services that is discussed separately below, included $ 402.2 million of non-contingent upfront payments, $ 114.0 million of variable consideration related to payments for milestones considered probable of being achieved, $ 610.5 million of variable consideration related to co-development billings, offset by $ 7.3 million of variable consideration related to profit share under the AstraZeneca China Amendment. For the AstraZeneca agreements, the Company allocated the transaction price to the various performance obligations based on the relative SSP of each performance obligation, with the exception of co-development billings and commercial sale of product. Co-development billings under the AstraZeneca U.S./RoW Agreement were allocated entirely to the U.S./RoW co-development services performance obligation, and co-development billings under the AstraZeneca China Agreement were allocated entirely to the combined performance obligation under the AstraZeneca China Agreement. Commercial sale of product under the AstraZeneca U.S./ROW Agreement is entirely allocated to the manufacturing commercial supply of products performance obligation, and commercial sale of product under the AstraZeneca China Agreement is allocated entirely to the combined China performance obligation. For revenue recognition purposes, the Company determined that the terms of its collaboration agreements with AstraZeneca begin on the effective date and end upon the completion of all performance obligations contained in the agreements. The contract term is defined as the period in which parties to the contract have present and enforceable rights and obligations. The Company believes that the requirement to continue funding development for a substantive period of time and the loss of product rights, along with non-refundable upfront payments already remitted by AstraZeneca, represent substantive termination penalties that create significant disincentive for AstraZeneca to exercise its right to terminate the agreement. For the technology license under the AstraZeneca U.S./RoW Agreement, SSP was determined based on a two-step process. The first step involved determining an implied royalty rate that would result in the net present value of future cash flows to equal to zero (i.e. where the implied royalty rate on the transaction would equal the target return for the investment). This results in an upper bound estimation of the magnitude of royalties that a hypothetical acquirer would reasonably pay for the forecasted cash flow stream. The Company’s cash flow forecasts were derived from probability-adjusted revenue and expense projections. Such projections included consideration of taxes and cash flow adjustments. The probability adjustments were made after considering the likelihood of technical success at various stages of clinical trials and regulatory approval phases. The second step involved applying the implied royalty rate, which was determined to be 40 %, against the probability-adjusted projected net revenues by territory and determining the value of the license as the net present value of future cash flows after adjusting for taxes. The discount rate utilized was 17.5 %. AstraZeneca U.S./RoW Agreement: The promised services that were analyzed, along with their general timing of satisfaction and recognition as revenue, are as follows: (1) License to the Company’s technology existing at the effective date of the agreements. For the AstraZeneca U.S./RoW Agreement, the license was delivered at the beginning of the agreement term. The Company concluded that AstraZeneca has the knowledge and capabilities to fully exploit the license under the AstraZeneca U.S./RoW Agreement without the Company’s further involvement. Finally, the Company considered the fact that at the time of delivery of the license, the development services were beyond the preclinical development phase and any remaining development work would not be expected to result in any significant modification or customization to the licensed technology. As such, the development services are separately identifiable from the licensed technology, indicating that the license is a distinct performance obligation. Therefore, the Company has concluded that the license is distinct and represents a performance obligation. The portion of the transaction price allocated to this performance obligation based on a relative SSP basis is recognized as revenue in its entirety at the point in time the license transfers to AstraZeneca. 129 (2) Co-development services. This promise relates to co-development services that were reasonably expected to be performed by the Company at the time the collaboration agreement was signed and is distinct. Co-development billings are allocated entirely to the co-development services performance obligation as amounts are related specifically to research and development efforts necessary to satisfy the performance obligation, and such an allocation is consistent with the allocation objective. Through the end of 2021, revenue was recognized over time based on progress toward complete satisfaction of the performance obligation. The Company used an input method to measure progress toward the satisfaction of the performance obligation related to CKD approval, which is based on costs of labor hours or full time equivalents and out-of-pocket expenses incurred relative to total expected costs to be incurred. Subsequently, the Company accounts for the development services for other significant indications related to chemotherapy-induced anemia and myelodysplastic syndromes separately as services are provided. (3) Manufacturing of clinical supplies of products. This promise is satisfied as supplies for clinical product are delivered for use in the Company’s clinical trial programs during the development period, or pre-commercialization period. (4) Information sharing and committee service. These promises are satisfied throughout the course of the agreement as services are provided. Items (2)-(4) are bundled into a single performance obligation that is distinct given the fact that all are highly interrelated during the development period (pre-commercial phase of development) such that delivering them independently is not practicable. For the revenue recognized over time based on progress toward complete satisfaction of the performance obligation, the Company uses an input method to measure progress toward the satisfaction of the performance obligation, which is based on costs of labor hours or full time equivalents and out-of-pocket expenses incurred relative to total expected costs to be incurred, and updates the measure of progress in each reporting period. (5) Manufacturing commercial supplies of products. This promise is distinct as services are not interrelated with any of the other performance obligations. Revenue is recognized as supplies are shipped for commercial use during the commercialization period. The drug product revenue amount represents variable consideration and is estimated based on the quantity of product shipped and an estimated price for each individual purchase order. The estimated price is based on the contractual transfer price percentage applied on the estimated weighted average net sales price, which is estimated to be realized by AstraZeneca from the end sale of roxadustat in its approved territories. See the Drug Product Revenue section below. AstraZeneca China Agreement: The promised services that were analyzed are consistent with the AstraZeneca U.S./RoW Agreement, except for license to the Company’s technology existing at the effective date of the agreement, described as follows: • License to the Company’s technology existing at the effective date of the agreement. The license was delivered at the beginning of the agreement term. However, the AstraZeneca China Agreement has contractual limitations that might affect AstraZeneca’s ability to fully exploit the license and therefore, potentially, the conclusion as to whether the license is distinct in the context of the agreement. In the AstraZeneca China Agreement, AstraZeneca does not have the right to manufacture commercial supplies of the drug. In order to determine whether this characteristic of the arrangement should lead to a conclusion that the license was not distinct in the context of the agreement, the Company considered the ability of AstraZeneca to benefit from the license on its own or together with other resources readily available to AstraZeneca. For the AstraZeneca China Agreement, the Company retained manufacturing rights as an essential part of a strategy to pursue domestic regulatory pathway for product approval, which requires the regulatory licensure of the manufacturing facility in order to commence commercial shipment. The prospects for the collaboration as a whole would have been substantially different had manufacturing rights been provided to AstraZeneca. The Company holds the rights to manufacture commercial drug product in China. Therefore, AstraZeneca cannot benefit from the license on its own or together with other readily available resources. Accordingly, all the promises identified, including the license, co-development services and manufacturing of commercial supplies, under the AstraZeneca China Agreement have been bundled into a single performance obligation and amounts of the transaction price allocable to this performance obligation are deferred until control of the manufactured commercial drug product has begun to transfer to AstraZeneca. 130 In accordance with the AstraZeneca China Amendment, once Falikang is fully operational, which commenced in January 2021, substantially all product sales will be made by Falikang directly to the distributors in China, while the Company continues to sell directly in one province in China. Revenue is recognized at a point in time when control of roxadustat commercial product is transferred to Falikang. For the Company’s direct sales of commercial drug product, revenue is recognized when control of the promised good is transferred to the customer in an amount that reflects the consideration that the Company expects to be entitled to in exchange for the product. See the Product Revenue, Net section below. License Revenue and Development Revenue Recognized Under the AstraZeneca Agreements Amounts recognized as license revenue and development revenue under the AstraZeneca U.S./RoW Agreement and the AstraZeneca China Agreement were as follows for the years ended December 31, 2022, 2021 and 2020 (in thousands): Years Ended December 31, Agreement Performance Obligation 2022 2021 2020 AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement License revenue $ — $ — $ — Development revenue 12,519 48,345 61,508 China performance obligation $ — $ — $ ( 90 ) The transaction price related to consideration received through December 31, 2022 and accounts receivable has been allocated to each of the following performance obligations under the AstraZeneca U.S./RoW Agreement and the AstraZeneca China Agreement, along with any associated deferred revenue as follows (in thousands): AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement Cumulative Revenue Through December 31, 2022 Deferred Revenue at December 31, 2022 Total Consideration Through December 31, 2022 License $ 341,844 $ — $ 341,844 Co-development, information sharing & committee services 615,639 — 615,639 China performance obligation * 106,734 175,646 282,380 Total license and development revenue $ 1,064,217 $ 175,646 ** $ 1,239,863 * China performance obligation revenue is recognized as product revenue, as described in details under Product Revenue, Net section below. ** Contract assets and liabilities related to rights and obligations in the same contract are recorded net on the consolidated balance sheets. As of December 31, 2022, deferred revenue included $ 158.2 million related to the AstraZeneca U.S./RoW and the AstraZeneca China Agreement, which represents the net of $ 175.6 million of deferred revenue presented above and a $ 17.5 million unbilled co-development revenue under the AstraZeneca China Amendment . There was no license rev enue or development 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 year ended December 31, 2022 . The remainder of the transaction price related to the AstraZeneca U.S./RoW Agreement and the AstraZeneca China Agreement includes $ 9.6 million of variable consideration from estimated future co-development billing and is expected 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, and is expected to continue through 2028, which reflects our best estimates. 131 Product Revenue, Net Product revenue, net from the sales of roxadustat commercial product in China was as follows for the years ended December 31, 2022, 2021 and 2020 (in thousands): Years Ended December 31, 2022 2021 2020 Direct Sales: Gross revenue $ 12,366 $ 13,727 89,027 Price adjustment 242 ( 982 ) — Non-key account hospital listing award 49 95 ( 9,325 ) Contractual sales rebate ( 624 ) ( 832 ) ( 6,189 ) Other discounts and rebates ( 332 ) ( 21 ) ( 923 ) Sales returns 1 83 ( 92 ) Direct sales revenue, net 11,702 12,070 72,498 Sales to Falikang: Gross transaction price 112,544 97,531 — Profit share ( 43,716 ) ( 34,759 ) — Net transaction price 68,828 62,772 — Decrease (increase) in deferred revenue 2,339 ( 27,204 ) — Sales to Falikang revenue, net 71,167 35,568 — Total product revenue, net $ 82,869 $ 47,638 $ 72,498 Direct Sales Product revenue from direct roxadustat product sales to distributors in China is recognized in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those products, net of sales rebates and discounts. The total discounts and rebates were $ 0.7 million , $ 1.7 million and $ 16.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. The discounts and rebates consisted of the contractual sales rebate calculated based on the stated percentage of gross sales by each distributor in the distribution agreement entered between FibroGen and each distributor. The contractual sales rebate was $ 0.6 million , $ 0.8 million and $ 6.2 million , for the years ended December 31, 2022, 2021 and 2020 , respectively. The discounts and rebates for the year ended December 31, 2021 also consisted of $ 1.0 million of price adjustments recorded based on government-listed price guidance and estimated channel inventory levels. In the second quarter of 2020, the Company amended the agreement with its pharmaceutical distributors, which triggered accounting modifications particularly related to the non-key account hospital listing award. As a result, for the year ended December 31, 2020, the non-key account hospital listing award was $ 9.3 million, which was recorded as a reduction to the revenue and calculated based on eligible non-key account hospital listings to date achieved by each distributor with certain requirements met during the period. All other rebates and discounts, including sales return allowance were immaterial for the periods presented. The rebates and discounts that the Company’s pharmaceutical distributors have earned are eligible to be applied against future sales orders, limited to certain maximums until such rebates and discounts are exhausted. These rebates and discounts are recorded as contract liabilities at the time they become eligible in the same period that the related revenue is recorded. Due to the Company’s legal right to offset, at each balance sheet date, the rebates and discounts are presented as reductions to gross accounts receivable from the distributor, or as a current liability to the distributor to the extent that the total amount exceeds the gross accounts receivable or when the Company expects to settle the discount in cash. The Company’s legal right to offset is calculated at the individual distributor level. The following table includes a roll-forward of the related contract liabilities (in thousands): Balance at December 31, 2021 Additions Deduction Currency Translation and Other Balance at December 31, 2022 Product revenue - Direct sales - contract liabilities $ ( 3,176 ) $ ( 653 ) $ 3,222 $ 217 $ ( 390 ) 132 The above contract liabilities were included in accrued and other current liabilities in the consolidated balance sheet. As of December 31, 2022 and 2021 , the total rebates and discounts reflected as reductions to gross accounts receivable for direct sales was $ 0.9 and $ 1.1 million, respectively. Sales to Falikang – China Performance Obligation Since Falikang became fully operational in January 2021, substantially all direct roxadustat product sales to distributors in China are made by Falikang. FibroGen Beijing manufactures and supplies commercial product to Falikang. The net transaction price for FibroGen Beijing’s product sales to Falikang is based on a gross transaction price, which is adjusted to account for the 50/50 profit share for the period. The roxadustat sales to Falikang marked the beginning of the Company’s China performance obligation under the Company’s agreements with AstraZeneca . Product revenue is based on the transaction price of the China performance obligation. 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 obligations are 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 recognized $ 2.3 million from the previously deferred revenue of the China performance obligation during the year ended December 31, 2022. The product revenue recognized for the year ended December 31, 2022 included an increase in revenue of $ 1.4 million resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied in previous periods. Comparatively, following updates to its estimates, the Company deferred $ 27.2 million from the net transaction price to Falikang, which was included in the related deferred revenue of the China performance obligation during the year ended December 31, 2021. The following table includes a roll-forward of the related deferred revenue that is considered as a contract liability (in thousands): Balance at December 31, 2021 Additions Recognized as Revenue Currency Translation and Other Balance at December 31, 2022 Product revenue - AstraZeneca China performance obligation - deferred revenue $ ( 171,516 ) $ ( 77,195 ) $ 71,167 $ 1,898 $ ( 175,646 ) 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 December 31, 2022 , approximately $ 21.0 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 $ 0.5 million and $ 13.4 million as of December 31, 2022 and 2021 , respectively. Drug Product Revenue Drug product revenue from commercial-grade API or bulk drug product sales to Astellas and AstraZeneca was as follows for the years ended December 31, 2022, 2021 and 2020 (in thousands): Years Ended December 31, 2022 2021 2020 Astellas Japan Agreement $ 9,480 $ 2,056 $ 4,281 Astellas Europe Agreement 1,606 1,130 — AstraZeneca U.S./RoW Agreement — ( 2,224 ) 4,625 Drug product revenue $ 11,086 $ 962 $ 8,906 133 Astellas Japan Agreement During the year ended December 31, 2020, the Company fulfilled shipment obligations under the terms of Astellas Japan Amendment with Astellas, and recognized related drug product revenue of $ 8.2 million in the same period. During the year ended December 31, 2020, the Company updated its estimate of variable consideration related to the API shipments fulfilled under the terms of the Astellas Japan Amendment, and accordingly recorded a reduction of $ 4.0 million to the drug product revenue. Specifically, the change in estimated variable consideration was based on the API held by Astellas at the 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 year ended December 31, 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. 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 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. During the fourth quarter of 2022, the Company fulfilled a shipment obligation under the terms of Astellas Japan Amendment, and recognized related drug product revenue of $ 8.4 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 $ 8.7 million during the year ended December 31, 2022. 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, 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. This amount was included in accrued liabilities and as of December 31, 2022 , the related balance in accrued liabilities was $ 6.5 million, representing the Company’s best estimate that this amount will be paid within the next 12 months. Astellas Europe Agreement During the fourth quarter of 2020, the Company transferred bulk drug product from process validation supplies for commercial purposes under the terms of the Astellas Europe Agreement. As a result, the Company recorded $ 6.0 million as deferred revenue as of December 31, 2020, due to a high degree of uncertainty associated with the final consideration. During the first quarter of 2021, the Company transferred bulk drug product from process validation supplies for commercial purposes under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement. The Company recorded the consideration of $ 11.8 million from this inventory transfer as deferred revenue as of December 31, 2021, due to a high degree of uncertainty associated with the final consideration. During the fourth quarter of 2021, 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 $ 8.3 million as deferred revenue as of December 31, 2021, due to a high degree of uncertainty associated with the final consideration. During the fourth quarter of 2021, the Company updated its estimate of variable consideration related to the bulk drug product inventory transfers fulfilled under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement, and recorded an unbilled contract asset of $ 49.8 million, which was offset by related deferred revenue under the Astellas Europe Agreement and Astellas EU Supply Agreement. 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, among others. 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. 134 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. 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, during the year ended December 31, 2022, the Company reclassified a total of $ 57.4 million from the related deferred revenue to accrued liabilities. As of December 31, 2022 , the related balance in accrued liabilities was $ 57.4 million, representing the Company’s best estimate that this amount will be paid within the next 12 months. In addition, the Company recognized royalty revenue of $ 0.6 million and $ 0.2 million as drug product revenue from the deferred revenue under the Astellas Europe Agreement during the years ended December 31, 2022 and 2021, 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. AstraZeneca U.S./RoW Agreement During the first half of 2021 and during the year ended December 31, 2020, the Company shipped bulk drug product to AstraZeneca as commercial supply under the terms of the Master Supply Agreement. Based on the complete response letter issued by the U.S. Food and Drug Administration in August 2021, the Company evaluated the impact of these developments in revising its estimates of variable consideration associated with drug product revenue. As a result, the Company updated the estimated transaction price for these shipments, and recorded $ 11.2 million as deferred revenue as of December 31, 2021. The related drug product revenue was $( 2.2 ) million and $ 4.6 million for the years ended December 31, 2021 and 2020, respectively. 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, during the year ended December 31, 2022, the Company reclassified $ 11.2 million from the related deferred revenue to accrued liabilities. As of December 31, 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): Balance at December 31, 2021 Additions Recognized as Revenue Reclassified to Accrued Liability / Accounts Payable Balance at December 31, 2022 Astellas Japan Agreement $ ( 1,974 ) $ ( 2,226 ) $ — $ 4,200 $ — Astellas Europe Agreement ( 25,891 ) ( 72,408 ) 619 57,377 ( 40,303 ) AstraZeneca U.S./RoW Agreement ( 11,171 ) — — 11,171 — Drug product revenue - deferred revenue $ ( 39,036 ) $ ( 74,634 ) $ 619 $ 72,748 $ ( 40,303 ) 135 Eluminex Agreements 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 recognized as license revenue for the performance obligation satisfied and included in license revenue in the consolidated statement of operations during the year ended December 31, 2021. 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. The Company accounted for this agreement under ASC 606 and identified one performance obligation at inception of the agreement related to the granting of the license rights to the investigational biosynthetic cornea derived from recombinant human collagen Type III. The Company based its assessment on the determination that Eluminex can benefit from the granted license on its own by developing and commercializing the underlying product using its own resources. All components of the transaction price in the agreement were allocated to the single performance obligation. The remaining future variable consideration related to future manufacturing, clinical, regulatory milestone payments as described above were fully constrained because the Company cannot conclude that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur, given the inherent uncertainties of success with these future milestones. For commercial milestones and royalties, the Company determined that the license is the predominant item to which the royalties or sales-based milestones relate and revenue will be recognized when the corresponding milestones and royalties are earned. 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. Supply of the cornea product will be managed by a separate agreement and is considered a separate performance obligation. The related contract manufacturing revenue was recorded as other revenue and included in development and other revenue in the consolidated statement of operations. Amounts recognized as revenue under the agreements with Eluminex were as follows for the years ended December 31, 2022 and 2021 (in thousands): Years Ended December 31, Agreement Performance Obligation 2022 2021 Eluminex License revenue $ — $ 8,000 Other revenue - contract manufacturing $ 1,761 $ — 4. Equity method investment - Variable Interest Entity Falikang is a distribution entity jointly owned by AstraZeneca and FibroGen Beijing. FibroGen Beijing owns 51.1 % of the outstanding shares of Falikang. Pursuant to the guidance under ASC 810, the Company concluded that Falikang qualifies as a VIE. As Falikang is a distribution entity and AstraZeneca is the final decision maker for all the roxadustat commercialization activities, the Company lacks the power criterion, while AstraZeneca meets both the power and economic criteria under the ASC 810 to direct the activities of Falikang that most significantly impact its performance. Therefore, the Company is not the primary beneficiary of this VIE for accounting purposes. As a result, the Company accounts for its investment in Falikang under the equity method, and Falikang is not consolidated into the Company’s consolidated financial statements. The Company records its total investments in Falikang as an equity method investment in an unconsolidated VIE in the consolidated balance sheet. In addition, the Company recognizes its proportionate share of the reported profits or losses of Falikang as investment gain or loss in unconsolidated VIE in the consolidated statement of operations and as an adjustment to its investment in Falikang in the consolidated balance sheet. Falikang has not incurred material profit or loss to date. The Company may provide shareholder loans to Falikang to meet necessary financial obligations as part of its operations. To date, there has been no such loans. 136 The Company’s equity method investment in Falikang was as follows for the year ended December 31, 2022 (in thousands): Entity Ownership Percentage Balance at December 31, 2021 Share of Net Income Currency Translation Balance at December 31, 2022 Falikang 51.1 % $ 3,825 $ 1,573 $ ( 337 ) $ 5,061 Falikang is considered as a related party to the Company. See Note 14, Related Party Transactions , for related disclosures. On an ongoing basis, the Company re-evaluates the VIE assessment based on changes in facts and circumstances, including but not limited to, the shareholder loans received by Falikang and the execution of any future significant agreements between Falikang and its shareholders and/or other third parties. The Company assessed the impairment of its equity method investment whenever events or changes in circumstances indicate that a decrease in value of the investment has occurred that is other than temporary. 5. Fair Value Measurements In accordance with the authoritative guidance on fair value measurements and disclosures under U.S. GAAP, the Company presents all financial assets and liabilities and any other assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. The guidance defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair-value measurements. The guidance also requires fair value measurements be classified and disclosed in one of the following three categories: Level 1 : Quoted prices in active markets for identical assets or liabilities. Level 2 : Observable inputs other than quoted prices in active markets for identical assets or liabilities. Level 3 : Unobservable inputs. The Company values certain assets and liabilities, focusing on the inputs used to measure fair value, particularly in instances where the measurement uses significant unobservable (Level 3) inputs. The Company’s financial instruments are valued using quoted prices in active markets (Level 1) or based upon other observable inputs (Level 2). The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and considers factors specific to the asset or liability. In addition, the categories presented do not suggest how prices may be affected by the size of the purchases or sales, particularly with the largest highly liquid financial issuers who are in markets continuously with non-equity instruments, or how any such financial assets may be impacted by other factors such as U.S. government guarantees. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The availability of observable data is monitored to assess appropriate classification of financial instruments within the fair value hierarchy. Depending upon the availability of such inputs, specific securities may transfer between levels. In such instances, the transfer is reported at the end of the reporting period. 137 The fair values of the Company’s financial assets that are measured on a recurring basis are as follows (in thousands): December 31, 2022 Level 1 Level 2 Level 3 Total Money market funds $ 19,881 $ — $ — $ 19,881 Corporate bonds — 82,008 — 82,008 Commercial paper — 57,381 — 57,381 U.S. government bonds 98,972 12,373 — 111,345 Agency bonds — 11,468 — 11,468 Asset-backed securities — 2,474 — 2,474 Foreign government bonds — 4,980 — 4,980 Convertible promissory note — — 1,000 1,000 Total $ 118,853 $ 170,684 $ 1,000 $ 290,537 December 31, 2021 Level 1 Level 2 Level 3 Total Money market funds $ 58,801 $ — $ — $ 58,801 Corporate bonds — 182,646 — 182,646 Commercial paper — 69,079 — 69,079 U.S. government bonds 91,522 — — 91,522 Agency bonds — 23,275 — 23,275 Asset-backed securities — 27,087 — 27,087 Foreign government bonds — 9,154 — 9,154 Total $ 150,323 $ 311,241 $ — $ 461,564 The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. 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. During the year ended December 31, 2022, the transfers of assets between levels was a total of $ 10.5 million transfer from Level 1 to Level 2 as such US treasury notes and bills were changed to off-the-run when they were issued before the most recent issue and were still outstanding at measurement day. There were no transfers of assets between levels for the years ended December 31, 2021 and 2020. 6. Leases The Company’s long-term property lease with Alexandria for its corporate headquarters in San Francisco, California, had an initial term of 15 years, scheduled to expire in 2023 . The original lease was accounted for as a finance lease. On June 1, 2021, the Company entered into an amendment with Alexandria to extend the lease to 2028 (“Lease Amendment”). Under the terms of the Lease Amendment, the Company has two optional rights to each extend the lease for an additional five years . The lease contract provides for a fixed annual rent, with scheduled increases of two percent that occur on each anniversary of the rent commencement date through 2023 , and with scheduled increases of three percent that occur on each anniversary of the rent commencement date through 2028 . This lease requires the Company to pay all costs of ownership, operation, and maintenance of the premises, including without limitation all operating costs, insurance costs, and taxes. The Company determined that the Lease Amendment was a lease modification, effective June 1, 2021, and thus reassessed the lease classification, remeasured the related lease liability using an updated discount rate, and adjusted the related right-of-use asset under the lease modification guidance under the ASC 842. Accordingly, on June 1, 2021, the Company determined that the modified lease be accounted for as an operating lease, and therefore derecognized the previous finance lease right-of-use asset of $ 24.6 million and the related finance lease liability of $ 32.6 million, and recognized an operating lease right-of-use asset of $ 93.2 million and the related operating lease liability of $ 101.2 million. Starting June 1, 2021, the cash payment related to this lease was classified as an operating activity. 138 During the first quarter of 2021, after FibroGen Beijing’s previous long-term lease agreement expired, the Company entered into a new lease agreement with the landlord for the same pilot plant located in Beijing Yizhuang Biomedical Park of BDA. The new lease term is five year , scheduled to expire in 2026 , and is treated as an operating lease. Accordingly, the Company recorded $ 3.4 million in the operating right-of-use assets and total operating lease liabilities, respectively. The lease contract provides for fixed quarterly rent payments, and requires the Company to pay operating and maintenance costs. The Company currently has several additional real estate leases for office spaces in Shanghai and Beijing, China, which are treated as operating leases. These leases have lease terms ranging from one to five years, expiring in 2025 . These lease contracts provide for fixed quarterly rent payments, and require the Company to pay operating and maintenance costs, and a fixed amount for property management fees. In addition, the Company has several immaterial lease arrangements in China and U.S. for office equipment, scientific devices and automobile leases, with contracted lease terms ranging from one to five years, treated as finance leases or operating leases. The Company’s lease assets and related lease liabilities were as follows (in thousands): December 31, Balance Sheet Line Item 2022 2021 Assets Finance: Right-of-use assets cost $ 2,367 $ 2,165 Accumulated amortization ( 1,932 ) ( 1,404 ) Finance lease right-of-use assets, net Other assets 435 761 Operating: Right-of-use assets cost 101,990 100,912 Accumulated amortization ( 22,097 ) ( 9,800 ) Operating lease right-of-use assets, net Operating lease right-of-use assets 79,893 91,112 Total lease assets $ 80,328 $ 91,873 Liabilities Current: Finance lease liabilities Accrued and other current liabilities $ 36 $ 11 Operating lease liabilities Operating lease liabilities, current 10,292 10,944 Non-current: Finance lease liabilities Other long-term liabilities 137 3 Operating lease liabilities Operating lease liabilities, non-current 79,593 88,776 Total lease liabilities $ 90,058 $ 99,734 The components of lease expense were as follows (in thousands): Years Ended December 31, Statement of Operations Line Item 2022 2021 2020 Finance lease cost: Amortization of right-of-use assets Cost of goods sold; Research and development; Selling, general and administrative expenses $ 587 $ 4,639 $ 10,369 Interest on lease liabilities Interest expense — 628 1,932 Operating lease cost Cost of goods sold; Research and development; Selling, general and administrative expenses 17,125 10,722 1,151 Sublease income Selling, general and administrative expenses ( 3,373 ) ( 1,271 ) ( 1,201 ) Total lease cost $ 14,339 $ 14,718 $ 12,251 139 Supplemental cash flow information related to leases were as follows (in thousands): Years Ended December 31, 2022 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 15,497 $ 10,022 $ 951 Operating cash flows from finance leases 2 629 1,896 Financing cash flows from finance leases 135 5,489 12,620 Non-cash: Right-of-use assets obtained in exchange for new lease liabilities: Finance leases 261 450 662 Operating leases 1,704 3,585 1,072 Non-cash: Increase (decrease) resulting from lease modification: Finance lease right-of-use assets — ( 24,654 ) — Operating lease right-of-use assets — 93,222 — Finance lease liabilities, current — ( 12,587 ) — Operating lease liabilities, current — 9,221 — Finance lease liabilities, non-current — ( 20,009 ) — Operating lease liabilities, non-current $ — $ 91,943 $ — Lease term and discount rate were as follows: December 31, 2022 2021 Weighted-average remaining lease term (years): Finance leases 4.9 1.1 Operating leases 5.8 6.8 Weighted-average discount rate: Finance leases 6.20 % 4.64 % Operating leases 4.75 % 4.75 % Maturities of lease liabilities as of December 31, 2022 are as follows (in thousands): Year Ending December 31, Finance Leases Operating Leases 2023 $ 44 $ 13,915 2024 41 17,302 2025 40 18,448 2026 39 18,000 2027 36 18,476 Beyond 2027 — 17,400 Total future lease payments 200 103,541 Less: Interest ( 27 ) ( 13,656 ) Present value of lease liabilities $ 173 $ 89,885 7. Balance Sheet Components Cash and Cash Equivalents Cash and cash equivalents consisted of the following (in thousands): December 31, 2022 2021 Cash $ 135,819 $ 111,422 Commercial paper — 1,000 Money market funds 19,881 58,801 Total cash and cash equivalents $ 155,700 $ 171,223 At December 31, 2022 and 2021, a total of $ 92.5 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. 140 Investments The Company’s investments consist primarily of available-for-sale debt investments. 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): December 31, 2022 Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value Corporate bonds $ 83,080 $ — $ ( 1,072 ) $ 82,008 Commercial paper 57,381 — — 57,381 U.S. government bonds 112,547 5 ( 1,207 ) 111,345 Agency bonds 11,690 — ( 222 ) 11,468 Asset-backed securities 2,484 — ( 10 ) 2,474 Foreign government bonds 5,007 — ( 27 ) 4,980 Convertible promissory note 1,000 — — 1,000 Total investments $ 273,189 $ 5 $ ( 2,538 ) $ 270,656 December 31, 2021 Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value Corporate bonds $ 183,136 $ 2 $ ( 492 ) $ 182,646 Commercial paper 68,079 — — 68,079 U.S. government bonds 91,840 — ( 318 ) 91,522 Agency bonds 23,339 — ( 64 ) 23,275 Asset-backed securities 27,105 — ( 18 ) 27,087 Foreign government bonds 9,165 — ( 11 ) 9,154 Total investments $ 402,664 $ 2 $ ( 903 ) $ 401,763 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): December 31, 2022 Less than 12 Months 12 Months or More Total Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses Corporate bonds $ 6,738 $ ( 147 ) $ 75,270 $ ( 925 ) $ 82,008 $ ( 1,072 ) U.S. government bonds 22,326 ( 13 ) 67,909 ( 1,194 ) 90,235 ( 1,207 ) Agency bonds — — 11,468 ( 222 ) 11,468 ( 222 ) Asset-backed securities 2,474 ( 10 ) — — 2,474 ( 10 ) Foreign government bonds — — 4,980 ( 27 ) 4,980 ( 27 ) Total $ 31,538 $ ( 170 ) $ 159,627 $ ( 2,368 ) $ 191,165 $ ( 2,538 ) December 31, 2021 Less than 12 Months 12 Months or More Total Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses Corporate bonds $ 177,124 $ ( 492 ) $ — $ — $ 177,124 $ ( 492 ) U.S. government bonds 91,522 ( 318 ) — — 91,522 ( 318 ) Agency bonds 23,274 ( 64 ) — — 23,274 ( 64 ) Asset-backed securities 27,087 ( 18 ) — — 27,087 ( 18 ) Foreign government bonds 9,155 ( 11 ) — — 9,155 ( 11 ) Total $ 328,162 $ ( 903 ) $ — $ — $ 328,162 $ ( 903 ) 141 The contractual maturities of the available-for-sale investments were as follows (in thousands): December 31, 2022 Amortized Cost Estimated Fair Value Within one year - Bond and mutual funds $ 268,709 $ 266,308 After one year through three years 4,480 4,348 Total investments $ 273,189 $ 270,656 The Company periodically reviews its available-for-sale investments for other-than-temporary impairment. The Company considers factors such as the duration, severity and the reason for the decline in value, the potential recovery period and its intent to sell. 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. During the three years ended December 31, 2022 , the Company did no t recognize any other-than-temporary impairment loss. Inventories Inventories consisted of the following (in thousands): December 31, 2022 2021 Raw materials $ 1,241 $ 1,363 Work-in-progress 36,003 21,499 Finished goods 3,192 8,153 Total inventories $ 40,436 $ 31,015 The provision to write-down excess and obsolete inventory were immaterial as of December 31, 2022 and December 31, 2021. Prepaid expenses and other current assets Prepaid expenses and other current assets consisted of the following (in thousands): December 31, 2022 2021 Contract assets $ 17,488 $ 66,909 Deferred revenues from associated contracts ( 17,488 ) ( 58,909 ) Net unbilled contract assets — 8,000 Prepaid assets 9,730 7,383 Other current assets 4,353 5,070 Total prepaid expenses and other current assets $ 14,083 $ 20,453 The unbilled contract assets of $ 17.5 million as of December 31, 2022 was related to unbilled co-development revenue under the AstraZeneca China Amendment. The unbilled contract assets as of December 31, 2021 included $ 49.8 million related to transfer price true up for bulk drug product under the Astellas Europe Agreement, $ 9.1 million related to unbilled co-development revenue under the AstraZeneca China Amendment, and the $ 8.0 million unbilled upfront license payment under the Eluminex Agreement. See the Eluminex Agreements section in Note 3, Collaboration Agreements, License Agreement and Revenues , for details. 142 Property and Equipment Property and equipment consisted of the following (in thousands): December 31, 2022 2021 Leasehold improvements $ 102,580 $ 103,352 Laboratory equipment 21,175 19,300 Machinery 9,642 8,339 Computer equipment 9,486 9,670 Furniture and fixtures 6,200 6,201 Construction in progress 204 2,423 Total property and equipment $ 149,287 $ 149,285 Less: accumulated depreciation ( 128,682 ) ( 121,008 ) Property and equipment, net $ 20,605 $ 28,277 Depreciation expense for the years ended December 31, 2022, 2021 and 2020 was $ 10.0 million , $ 10.2 million and $ 11.7 million , respectively. Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following (in thousands): December 31, 2022 2021 Preclinical and clinical trial accruals $ 57,780 $ 56,283 API and bulk drug product price true-up 75,055 — Acquired in-process research and development asset — 35,000 Payroll and related accruals 22,562 20,909 Accrued co-promotion expenses - current 36,677 25,746 Contract liabilities to pharmaceutical distributors 390 3,176 Roxadustat profit share to AstraZeneca 7,280 7,895 Property taxes and other taxes 7,691 12,610 Professional services 5,480 6,074 Other 6,858 4,906 Total accrued and other current liabilities $ 219,773 $ 172,599 The accrued liabilities of $ 75.1 million for API and bulk drug product price true-up as of December 31, 2022 resulted from changes in estimated variable consideration of $ 6.5 million associated with the API shipments fulfilled under the terms of the Astellas Japan Amendment, $ 57.4 million associated with the bulk drug product transferred under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement, and $ 11.2 million associated with the bulk drug product shipments to AstraZeneca under the terms of the AstraZeneca Master Supply Agreement. See the Drug Product Revenue section in Note 3, Collaboration Agreements, License Agreement and Revenues, for details. The acquired IPR&D asset of $ 35.0 million as of December 31, 2021 was related to the upfront payment to HiFiBiO under the HiFiBiO Agreement. See Note 2, Summary of Significant Accounting Policies - License Acquisition Agreement , for details. 143 8. Liability Related to Sale of Future Revenues On November 4, 2022, the Company entered into a Revenue Interest Financing Agreement (the “RIFA”) with NQ Entity, L.P. (“NovaQuest”), pursuant to which the Company granted a percentage interest in the Company’s future revenues under the Astellas Agreements, for a consideration of $ 50.0 million (“Investment Amount”) before advisory fees. The Company has evaluated the terms of the RIFA and concluded that the Investment Amount should be accounted for as debt because the risks and rewards to NovaQuest are limited by the terms of the transaction. Under the terms of the Astellas Agreements, the Company is entitled to drug product revenue and milestone payments upon occurrence of certain events. See the Astellas Agreements section in Note 3, Collaboration Agreements, License Agreement and Revenue , for details. Effective as of November 2022, the Company sold to NovaQuest 22.5 % of its drug product revenue and 10.0 % ( 20.0 % for fiscal year 2028 and thereafter) of its revenue from milestone payments under the Astellas Agreements . The Company received $ 49.8 million from NovaQuest at an initial funding on November 17, 2022, representing the gross proceeds of $ 50.0 million (the “Initial Investment Amount”) net of initial issuance costs, and accounted for this transaction as long-term debt as of December 31, 2022. The Company may prepay its obligations to NovaQuest in full at any time during the term of RIFA. The prepayment amount varies from $ 80.0 million to $ 125.0 million less any revenue interest payments made up to such prepayment date. Under the RIFA the Company shall pay to NovaQuest up to a specified maximum amount (“Payment Cap”) of (a) $ 100.0 million, if the payment is made on or before December 31, 2028; (b) $ 112.5 million, if the payment is made is on or after January 1, 2029, but on or before December 31, 2029; or (c) $ 125.0 million, if the payment is made after January 1, 2030. After January 1, 2028, if the product (as defined) is not commercialized for a consecutive twelve-month period, then, the payments owed under the RIFA by the Company to NovaQuest for each fiscal year shall be the greater of: (i) the amount which would otherwise be due pursuant to revenue interest payments terms; or (ii) $ 10.0 million. Before December 31, 2028, if the sum of all payments under the RIFA paid to NovaQuest, does not equal or exceed $ 62.5 million, then the Company shall pay NovaQuest the difference of these two amounts by no later than March 1, 2029 (“True-Up Payment One”). If, by no later than December 31, 2030, the sum of all payments under the RIFA paid to NovaQuest does not equal or exceed $ 125.0 million, then the Company shall pay NovaQuest the difference of these two amounts by no later than March 1, 2031. NovaQuest will retain this entitlement until it has reached the Payment Cap, at which point 100 % of such revenue interest on future global net sales of Astellas will revert to the Company. The payments to NovaQuest will be accounted for as a reduction of debt. The total debt discount and transaction costs of $ 1.7 million, will be amortized as interest expense based on the projected balance of the liability as of the beginning of each period. The Company estimated an effective annual interest rate of approximately 19.67 % for the year ended December 31, 2022. Over the course of the RIFA, the effective interest rate will be affected by the amount and timing of drug product revenue and revenue from milestone payments recognized, the changes in the timing of forecasted drug product revenue and revenue from milestone payments, and the timing of the Company’s payments to NovaQuest. On a quarterly basis, the Company will reassess the expected total revenue and the timing of such revenue, recalculate the amortization of debt discount and transactions costs and effective interest rate, and adjust the accounting prospectively as needed. As payments are made to NovaQuest, the balance of the liability related to sale of future revenues is being effectively repaid over the life of the RIFA. 144 During the year ended December 31, 2022, the Company recognized, under Astellas Agreements, license revenue of $ 22.6 million and development revenue of $ 2.4 million related to a $ 25.0 million regulatory milestone, and drug product revenue of $ 11.1 million. See Note 3, Collaboration Agreements, License Agreement and Revenue , for details. During the year ended December 31, 2022, the Company recognized the related non-cash interest expense of $ 1.0 million. The table below shows the activity of the liability related to sale of future revenues for the year ended December 31, 2022: Year Ended December 31, 2022 Liability related to sale of future revenues - beginning balance $ — Proceeds from sale of future revenues, gross 50,000 Less: Initial issuance costs ( 250 ) Less: Transaction costs ( 1,453 ) Interest expense recognized 1,036 Liability related to sale of future revenues - ending balance 49,333 Less: Current portion classified within accrued and other current liabilities — Liability related to sale of future revenues, non-current $ 49,333 Based on the current estimates of drug product revenue and revenue from milestone payments under the Astellas Agreements, and taking into the consideration of the terms discussed above, the Company anticipates to reach a Payment Cap up to $ 125.0 million by 2031. 9. Product Development Obligations The Technology Development Center of the Republic of Finland (“TEKES”) product development obligations consist of 11 separate advances (each in the form of a note agreement) received by FibroGen Europe between 1996 and 2008 from TEKES. These advances are granted on a project-by-project basis to fund various product development efforts undertaken by FibroGen Europe only. Each separate note is denominated in EUR and bears interest (not compounded) calculated as one percentage point less than the Bank of Finland rate in effect at the time of the note, but no less than 3.0 %. If the research work funded by TEKES does not result in an economically profitable business or does not meet its technological objectives, TEKES may, on application from FibroGen Europe, forgive each of these loans, including accrued interest, either in full or in part. As of December 31, 2022 and 2021 , the Company had U.S. Dollar equivalent of $ 10.1 million and $ 10.7 million of principal outstanding, respectively, and $ 6.8 million and $ 6.9 million of interest accrued, respectively, which were presented in the product development obligations line on the consolidated balance sheets. The Company is not a guarantor of these loans, and these loans are not repayable by FibroGen Europe until it has distributable funds. 10. Commitments and Contingencies Contract Obligations As of December 31, 2022, the Company had the following outstanding non-cancelable purchase obligations (in thousands): Purchase Obligations Due In The Year Ending December 31, 2023 2024 Total Manufacture and supply of pamrevlumab $ 85 $ 22,310 $ 22,395 Manufacture and supply of roxadustat 6,126 2,369 8,495 Other purchases and programs 21,698 1,167 22,865 Total $ 27,909 $ 25,846 $ 53,755 The Company expects to fulfill its commitments under these agreements in the normal course of business, and as such, no liability has been recorded. See Note 6, Leases , for details of the Company's operating and finance lease payment obligations. See Note 8, Liability Related to Sale of Future Revenues , and Note 9, Product Development Obligations for details of the respective obligations. 145 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 December 31, 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. and others. These milestone payments generally become due and payable only upon the achievement of certain developmental, clinical, regulatory and/or commercial milestones. The event triggering such payment or obligation has not yet occurred. Legal Proceedings and Other Matters From time to time, the Company is a party to various legal actions, both inside and outside the U.S., arising in the ordinary course of its business or otherwise. The Company accrues amounts, to the extent they can be reasonably estimated, that the Company believes will result in a probable loss (including, among other things, probable settlement value) to adequately address any liabilities related to legal proceedings and other loss contingencies. 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 consolidated balance sheet as of December 31, 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. On August 30, 2021, the Court consolidated the actions and appointed a group of lead plaintiffs. Plaintiffs filed their consolidated amended complaint on October 29, 2021 and a corrected consolidated amended complaint on November 19, 2021 (the “Complaint”). 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. On July 15, 2022, the court issued an order denying Defendants’ motions to dismiss. Defendants answered the Complaint on September 13, 2022 and discovery is ongoing. On January 27, 2023, Plaintiffs filed a motion for class certification. Defendants’ opposition is due April 28, 2023. 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 California Federal Derivative complaint names as defendants 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. On December 23, 2022, Plaintiff filed an amended complaint. On February 21, 2023, Defendants filed a motion to dismiss on the basis that the lawsuit was brought in the improper forum. Plaintiffs’ opposition is due April 7, 2023. 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 Delaware Federal Derivative complaint names 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 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 substantially the same defendants as the other purported shareholder derivative actions and asserts similar claims based upon similar allegations. The Delaware Chancery Derivative complaint seeks unspecified damages, attorneys’ fees, and other costs. On January 17, 2023, Defendants moved to dismiss on the basis of demand futility. Plaintiffs’ opposition is due on March 17, 2023. The Company believes that the claims are without merit and it intends to vigorously defend against them. However, any litigation is inherently uncertain, and any judgment or injunctive relief entered against FibroGen or any adverse settlement could materially and adversely impact its business, results of operations, financial condition, and prospects. 146 In the fourth quarter of 2021, the Company received a subpoena from the SEC requesting documents related to roxadustat’s pooled cardiovascular safety data. The Company is fully cooperating with the SEC. The Company cannot predict with any degree of certainty the outcome of the SEC’s investigation or determine the extent of any potential liabilities. The Company also cannot predict whether there will be any loss as a result of the investigation nor can it provide an estimate of the possible loss or range of loss. 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. 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 The Company enters into standard indemnification arrangements in the ordinary course of business, including for example, service, manufacturing and collaboration agreements. Pursuant to these arrangements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, including in connection with intellectual property infringement claims by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the extent permissible under applicable law. The maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these arrangements is minimal. 11. Equity and Stock-based Compensation Common Stock Each share of Common Stock is entitled to one vote . The holders of Common Stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding. Shares of Common Stock outstanding, shares of stock plans outstanding and shares reserved for future issuance related to stock options and RSU grants and the Company’s Employee Stock Purchase Plan (“ESPP”) purchases are as follows (in thousands): December 31, 2022 2021 Common stock outstanding 94,166 92,881 Stock options outstanding 9,088 8,967 RSUs outstanding 3,669 2,304 Shares reserved for future stock options and RSUs grant 11,524 10,253 Shares reserved for future ESPP offering 5,373 4,771 Total shares of common stock reserved 123,820 119,176 147 Stock Plans Stock Option and RSU Plans Under the Company’s Amended and Restated 2005 Stock Plan (“2005 Stock Plan”), the Company may issue shares of Common Stock and options to purchase Common Stock and other forms of equity incentives to employees, directors and consultants. Options granted under the 2005 Stock Plan may be incentive stock options or nonqualified stock options. Incentive stock options may be granted only to employees and officers of the Company. Nonqualified stock options and stock purchase rights may be granted to employees, directors and consultants. The board of directors has the authority to determine to whom options will be granted, the number of options, the term and the exercise price. Options are to be granted at an exercise price not less than fair market value for an incentive stock option or a nonqualified stock option. Options generally vest over four years . Options expire no more than 10 years after the date of grant. Upon the effective date of the registration statement related to the Company’s initial public offering, the 2005 Plan was amended to cease the grant of any additional awards thereunder, although the Company will continue to issue common stock upon the exercise of previously granted stock options under the 2005 Plan. In September 2014, the Company adopted a 2014 Equity Incentive Plan (the “2014 Plan”) which became effective on November 13, 2014. The 2014 Plan is the successor equity compensation plan to the 2005 Plan. The 2014 Plan will terminate on November 12, 2024 . The 2014 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, performance stock awards, performance cash awards, restricted stock units and other stock awards to employees, directors and consultants. Stock options granted must be at prices not less than 100 % of the fair market value at date of grant. Option vesting schedules are determined by the Company at the time of issuance and generally have a four year vesting schedule ( 25 % vesting on the first anniversary of the vesting base date and quarterly thereafter over the next 3 years). Options generally expire ten years from the date of grant unless the optionee is a 10% stockholder, in which case the term will be five years from the date of grant. Unvested options exercised are subject to the Company’s repurchase right. Shares reserved for issuance increases on January 1 of each year commencing on January 1, 2016 and ending on January 1, 2024 by the lesser of (i) the amount equal to 4 % of the number of shares issued and outstanding on December 31 immediately prior to the date of increase or (ii) such lower number of shares as may be determined by the board of directors. As of December 31, 2022 , the Company has reserved 11,523,829 shares of its common stock that remains unissued for issuance under the 2014 Plan. Issuance of shares upon share option exercise or share unit conversion is made through issuance of new shares authorized under the plan. Certain Common Stock option holders have the right to exercise unvested options, subject to a right held by the Company to repurchase the stock, at the original exercise price, in the event of voluntary or involuntary termination of employment of the stockholder. The shares are generally released from repurchase provisions ratably over four years. The Company accounts for the cash received in consideration for the early exercised options as a liability. At December 31, 2022 and 2021 , no shares of Common Stock were subject to repurchase by the Company. In Fe bruary 2022, the Company granted 280,450 total shares of PRSUs to certain executives for the performance period beginning January 1, 2022 and ending December 31, 2025. The ultimate number of shares eligible to vest for PRSUs range from 0 % to 200 % of the target number of shares depending on achievement relative to the predefined clinical performance metrics and continued employment with the Company. As of December 31, 2022, all the PRSUs have not become vested. In Fe bruary 2022, the Company granted 280,450 total shares of TSR awards to certain executives for the performance period beginning January 1, 2022 and ending December 31, 2025. The ultimate number of shares eligible to vest for the TSR awards range from 0 % to 200 % of the target number of shares depending on the TSR of FibroGen’s common stock as compared to companies in the NBI index, and continued employment with the Company. As of December 31, 2022, all the TSR awards have not become vested. 148 Stock option transactions, including forfeited options granted under the 2014 Plan as well as prior plans, are summarized below: Shares (In thousands) Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Life (In Years) Aggregate Intrinsic Value (In thousands) Outstanding at December 31, 2021 8,967 $ 34.84 Granted 2,902 14.72 Exercised ( 179 ) 8.24 Expired ( 1,847 ) 34.36 Forfeited ( 755 ) 32.89 Outstanding at December 31, 2022 9,088 29.19 7.03 $ 6,232 Vested and expected to vest, December 31, 2022 8,614 29.61 6.93 5,770 Exercisable at December 31, 2022 4,730 $ 35.07 5.45 $ 1,438 The estimated weighted-average fair value of the stock options granted during the years ended December 31, 2022, 2021 and 2020 was $ 14.72 , $ 35.58 and $ 31.55 , respectively. The total intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020 was $ 0.8 million, $ 13.1 million and $ 89.6 million, respectively. The following table summarizes the activities of RSUs, PRSUs and TSR awards: Shares (In thousands) Weighted Average Fair Value at Grant Unvested at December 31, 2021 2,304 $ 30.60 Granted 3,151 14.68 Vested ( 1,142 ) 27.72 Forfeited ( 644 ) 25.06 Unvested at December 31, 2022 3,669 $ 18.80 The numbers of PRSUs and TSR awards granted included in the table above reflect the shares that could be eligible to vest at 100 % of target number of shares. Among the vested RSUs during the year ended December 31, 2022 , 779,539 shares were released and issued, while the remaining was withheld for the related payroll taxes. The estimated weighted-average fair value of the awards granted during the years ended December 31, 2022, 2021 and 2020 was $ 14.68 , $ 30.19 and $ 29.99 , respectively. ESPP In September 2014, the Company adopted a 2014 ESPP that became effective on November 13, 2014. The 2014 ESPP is designed to enable eligible employees to periodically purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15 % of their eligible compensation, subject to any plan or IRS limitations. At the end of each offering period, employees are able to purchase shares at 85 % of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the offering period. Purchases are accomplished through participation in discrete offering periods. The 2014 ESPP is intended to qualify as an ESPP under Section 423 of the Internal Revenue Code. The Company has reserved 1,600,000 shares of its common stock for issuance under the 2014 ESPP and shares reserved for issuance increases January 1 of each year, which commenced on January 1, 2016, by the lesser of (i) a number of shares equal to 1 % of the total number of outstanding shares of common stock on December 31 immediately prior to the date of increase; (ii) 1,200,000 shares or (iii) such number of shares as may be determined by the board of directors. There were 327,298 shares, 213,505 shares and 143,876 shares purchased by employees under the 2014 Purchased Plan for the years ended December 31, 2022, 2021 and 2020, respectively. 149 Stock-Based Compensation Stock-based compensation expense was recorded directly to research and development and selling, general and administrative expense for the years ended December 31, 2022, 2021 and 2020 was as follows (in thousands): Years Ended December 31, 2022 2021 2020 Research and development $ 34,861 $ 40,547 $ 46,229 Selling, general and administrative 30,740 30,614 26,491 Total stock-based compensation expense $ 65,601 $ 71,161 $ 72,720 The Company estimates the fair value of stock options using the Black-Scholes option valuation model. The fair value of employee stock options and RSUs is being amortized on a straight-line basis over the requisite service period of the awards. Compensation cost for PRSUs is expensed over the respective vesting periods when the achievement of performance criteria is probable. The Company estimates the fair value of the TSR awards using the Monte Carlo valuation model to simulate the probabilities of achievement. Compensation cost for the TSR awards is recognized over the requisite service period, regardless of when, if ever, the market condition is satisfied. The fair market value of common stock is based on the closing price of the Company’s common stock as reported on the Nasdaq Global Select Market on the date of the grant. The fair value of employee stock-based compensation is estimated using the following assumptions: • Expected Term. Expressed as a weighted-average, the expected life of the options is based on the average period the stock options are expected to be outstanding and was based on the Company’s historical information of the option exercise patterns and post-vesting termination behavior as well as contractual terms of the instruments. The expected term of 2014 ESPP shares is the average of the remaining purchase periods under each offering period. The expected term of TSR awards is determined based on the grant date to the end of the performance period. • Expected Volatility. The Company considers its historical volatility data for volatility considerations for its ESPP. Historically, the expected volatility for all other stock-based compensation types was based upon a blend of the Company’s and comparable public entities’ historical volatility. Since the third quarter of 2020, the expected volatility for all other stock-based compensation types is currently based upon the Company’s historical volatility data. • Risk-Free Interest Rate. Expressed as a weighted-average, the risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s respective stock-based compensation types. • Expected Dividend Yield. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future. The assumptions used to estimate the fair value of stock options granted and ESPPs using the Black-Scholes option valuation model were as follows: Years Ended December 31, 2022 2021 2020 Stock Options Expected term (in years) 5.7 5.7 5.7 Expected volatility 66.8 % 61.9 % 67.1 % Risk-free interest rate 2.2 % 0.8 % 0.8 % Expected dividend yield — — — Weighted average estimated fair value $ 7.88 $ 20.21 $ 18.36 ESPPs Expected term (in years) 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 Expected volatility 58.5 - 97.6 % 47.1 - 104.4 % 47.5 - 77.1 % Risk-free interest rate 0.1 - 4.5 % 0.0 - 2.2 % 0.1 - 2.9 % Expected dividend yield — — — Weighted average estimated fair value $ 8.60 $ 12.40 $ 17.53 150 The assumptions used to estimate the fair value of the TSR awards using the Monte Carlo valuation model were as follows: Year Ended December 31, 2022 TSR awards Expected term (in years) 3.9 Expected volatility 69.0 % Risk-free interest rate 1.8 % Expected dividend yield — Weighted average estimated fair value $ 24.01 As of December 31, 2022 , there was $ 40.8 million of total unrecognized compensation costs, net of estimated forfeitures, related to non-vested stock option awards granted that will be recognized on a straight-line basis over the weighted-average period of 2.43 years. As of December 31, 2022 , there was $ 46.9 million of total unrecognized compensation costs, net of estimated forfeitures, related to non-vested RSUs, PRSUs and TSR awards granted that will be recognized on a straight-line basis over the weighted-average period of 2.59 years. Non-Controlling Interests and Subsidiary Stock Non-Controlling Interests Non-controlling interest positions related to the issuance of subsidiary stock as described below are reported as a separate component of consolidated equity from the equity attributable to the Company’s stockholders at December 31, 2022 and 2021. In addition, the Company does not allocate losses to the non-controlling interests as the outstanding shares representing the non-controlling interest do not represent a residual equity interest in the subsidiary. In January 2013, FibroGen Cayman entered into a $ 0.6 million convertible promissory note. The note bears simple interest at a rate of two percent ( 2.00 %) per annum, accrued on an annual basis in arrears. The outstanding principal balance and unpaid accrued interest on the note is due and payable upon the earlier of (a) the effectiveness of the initial public offering of FibroGen Cayman or (b) the eight year anniversary of the date of the note. During the year ended December 31, 2021, at the option of the lender, the $ 0.7 million total outstanding principal balance and unpaid accrued interest on the note were converted into Series A Preferred Stock of FibroGen Cayman, and was recorded as an addition to the non-controlling interest of the Company. Upon the initial public offering and as described below, all eligible FibroGen Europe preferred shares were exchanged for 958,996 shares of FibroGen Common Stock. No other FibroGen Europe shares have the right to be exchanged for FibroGen, Inc. Common Stock. FibroGen Europe As of December 31, 2022 and 2021 , respectively, FibroGen Europe had a total of 42,619,022 shares of Preferred Stock outstanding, of which there were 1,700,845 shares of Series A Preferred Stock, 1,875,000 shares of Series B Preferred Stock, 1,599,503 shares of Series C Preferred Stock, 1,520,141 shares of Series D Preferred Stock, 459,565 shares of Series E Preferred Stock, 5,714,332 shares of Series F Preferred Stock, 9,927,500 shares of Series G Preferred Stock and 19,822,136 shares of Series H Preferred Stock, all of which shares no longer have any right to be exchanged for FibroGen, Inc. Common Stock. The holders of FibroGen Europe’s shares of Preferred Stock (“Preferred Shares”) have the following rights, preferences and privileges: Dividend Rights — When the assets of FibroGen Europe are distributed (except for distribution in a liquidation), Preferred Shares shall have the same rights to dividend or other forms of distribution as shares of Common Stock of FibroGen Europe. In the event of a merger, holders of Preferred Shares do not have the right to demand FibroGen Europe to redeem all or part of their Preferred Shares. FibroGen Europe may repurchase shares of Common Stock or Preferred Shares for consideration. Pre-emptive Right — Preferred Shares shall have pre-emptive subscription right in accordance with the Finnish Limited Liability Companies Act if additional shares are issued, option rights are given, or convertible loan is taken, provided , however , that the foregoing pre-emptive right does not apply to a directed share issue, for which two thirds (2/3) of the voting shares represented at a general meeting of shareholders approve for an important legitimate cause. Redemption Right — If a Preferred Share can be redeemed by a majority shareholder owning more than ninety percent ( 90 %) of the shares of FibroGen Europe in accordance with the provisions of the Finnish Limited Liability Companies Act, the minority holders of Preferred Shares have the right to request redemption of their shares. 151 Voting Right — Each share has one vote . Preferred Shares have voting rights only in situations that are specifically provided in the Articles of Association, which include a merger transaction and directed share issue. In addition, Preferred Shares have right to vote in a general shareholder meeting for amending the Articles of Association if the amendment will affect the rights of Preferred Shares. Conversion Right (1-for- 1 basis into Common Stock of FibroGen Europe): • Voluntary conversion right: Preferred Shares can be converted into common shares upon the written request of a shareholder provided that the conversion is feasible within the maximum and minimum amounts of shares of classes of FibroGen Europe as set forth in its Articles of Association. Such request can be withdrawn before the notification of conversion is filed with the Finnish Trade Register. • Compulsory conversion right: Preferred Shares will be converted into common shares if (i) FibroGen Europe’s shares are listed in a stock exchange or other trading system in the European Economic Area, or (ii) FibroGen Europe’s recombinant collagen and gelatin production technology is being put into commercial use in the area of Europe and certain other European states. Commercial use means there is income generated from the first commercial sale of the products incorporating the above-mentioned technology and does not include license fees, development financing, milestone payments or income from test products or equipment used in research. The board of directors of FibroGen Europe shall notify the shareholders of the compulsory conversion in writing, and the shareholders shall request to convert their shares within the timeframe provided in the notification. Should the shareholders fail to make the conversion request within the time limit, FibroGen Europe may redeem the shares of such shareholders. Liquidation Right — In the event of a dissolution of FibroGen Europe, holders of Preferred Shares are entitled to be paid in an amount equal to the subscription price of the shares before any distribution is made to holders of common shares. Among holders of Preferred Shares, holders of shares of Series F Preferred Stock are entitled to be paid in an amount equal to the subscription price of Series F Preferred Stock before any distribution is made to holders of other Preferred Shares. FibroGen Cayman FibroGen Cayman had 6,758,000 Series A Preference Shares outstanding as of December 31, 2022 and 2021, respectively. The holders of the FibroGen Cayman Series A Preference Shares have the following rights, preferences and privileges: Liquidation — In the event of liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, including by means of a merger, the holders of FibroGen Cayman Series A Preference Shares are entitled to be paid an amount equal to the product of the number of shares held by a holder of shares of FibroGen Cayman Series A Preference Shares and the original issue price of $ 1.00 (subject to equitable adjustment for any stock dividend, combination, split, reclassification, recapitalization) plus all declared and unpaid dividends thereon. Conversion — Each share of FibroGen Cayman Series A Preference Shares is convertible into the number of fully paid and non-assessable shares of Common Stock of FibroGen Cayman that results from dividing the original issue price by the conversion price in effect at the time of the conversion, subject to adjustments for stock splits, stock dividends, reclassifications and like events. The FibroGen Cayman Series A Preference Shares have a conversion price that is equal to the original issuance price such that the conversion ratio to FibroGen Cayman Common Stock is 1: 1 as of all periods presented. Voting — The holders of FibroGen Cayman Series A Preference Shares are entitled to vote together with the FibroGen Cayman Common Stockholders on all matters submitted for a vote of the stockholders. The holder of each share of FibroGen Cayman Series A Preference Shares has the number of votes equal to the number of shares of FibroGen Cayman Common Stock into which it is convertible. Dividends — The holders of FibroGen Cayman Series A Preference Shares are entitled to receive cash dividends when and if declared, at a rate of 6 %. 152 12. Net 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 of the years ended December 31, 2022, 2021 and 2020. 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 stock options, RSUs, PRSUs 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): Years Ended December 31, 2022 2021 2020 Employee stock options 9,520 8,461 6,694 RSUs, PRSUs and TSR awards 2,137 1,538 564 ESPP 305 417 306 11,962 10,416 7,564 13. Income Taxes The components of loss before income taxes are as follows (in thousands): Years Ended December 31, 2022 2021 2020 Domestic $ ( 307,056 ) $ ( 268,499 ) $ ( 195,617 ) Foreign 12,187 ( 22,184 ) 6,888 Loss before provision for income taxes $ ( 294,869 ) $ ( 290,683 ) $ ( 188,729 ) The provision for income taxes consists of the following (in thousands): Years Ended December 31, 2022 2021 2020 Current: Federal $ — $ — $ — State — — — Foreign 358 347 360 Total current 358 347 360 Deferred: Federal — — — State — — — Foreign — — — Total deferred — — — Total provision for income taxes $ 358 $ 347 $ 360 The following is the reconciliation between the statutory federal income tax rate and the Company’s effective tax rate: Years Ended December 31, 2022 2021 2020 Tax at statutory federal rate 21.0 % 21.0 % 21.0 % State tax — % — % — % Stock-based compensation expense ( 2.5 )% ( 1.8 )% 2.4 % Benefit due to intercompany transfer of assets — % — % 41.7 % Valuation allowance on intercompany transfer of assets — % — % ( 41.7 )% Net operating losses not benefitted ( 16.3 )% ( 16.8 )% ( 23.2 )% Foreign net operating losses not benefitted 0.9 % ( 1.6 )% 0.7 % Deduction limitation on executive compensation ( 0.2 )% ( 0.3 )% ( 0.8 )% Global intangible low-taxed income ( 2.8 )% ( 0.4 )% — % Other ( 0.2 )% ( 0.2 )% ( 0.3 )% Total ( 0.1 )% ( 0.1 )% ( 0.2 )% 153 Significant components of the Company’s deferred tax assets are as follows (in thousands): December 31, 2022 2021 Federal and state net operating loss carryforwards $ 166,708 $ 167,135 Tax credit carryforwards 106,131 78,832 Foreign net operating loss carryforwards 49,990 38,117 Capitalized research and development expenses 45,125 — Stock-based compensation 8,616 10,050 Lease obligations 18,442 20,415 Reserves and accruals 4,929 6,067 Deferred revenue 21,624 20,101 Intangible assets 69,159 84,625 Other 1,277 825 Subtotal 492,001 426,167 Less: Valuation allowance ( 477,969 ) ( 409,810 ) Net deferred tax assets 14,032 16,357 Fixed assets ( 13,101 ) ( 16,357 ) Non-deductibale accrued expenses ( 931 ) — Net deferred tax liabilities ( 14,032 ) ( 16,357 ) Total net deferred tax assets $ — $ — A valuation allowance has been provided to reduce the deferred tax assets to an amount management believes is more likely than not to be realized. Expected realization of the deferred tax assets for which a valuation allowance has not been recognized is based on upon the reversal of existing temporary differences and future taxable income. The valuation allowance increased by $ 68.2 million , $ 72.0 million and $ 124.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. Due to uncertainty surrounding the realization of the favorable tax attributes in the future tax returns, the Company has established a valuation allowance against its otherwise recognizable net deferred tax assets. The Company intends to continue maintaining a full valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance. During 2020, the Company transferred certain intellectual property rights relating to its Chinese business between its wholly owned subsidiaries that are based in different tax jurisdictions. The transferor entity was not subject to income taxes in its local jurisdiction. The acquiring entity of the intellectual property is entitled to amortize the acquisition price of the intangible assets for tax purposes. In accordance with ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory , the Company recognized a deferred tax asset of $ 78.7 million for the temporary difference arising from the acquirer’s excess tax basis. Furthermore, based upon the weight of available evidence, the Company recognized a full valuation allowance against this deferred tax asset since it does not currently believe that realization of this gross deductible temporary difference is more likely than not. Accordingly, this inter-company transfer did not have a material impact to the Company’s consolidated financial statements. At December 31, 2022 , the Company had net operating loss carryforwards available to offset future taxable income of approximately $ 758.3 million and $ 140.1 million for federal and state tax purposes, respectively. These carryforwards will begin to expire in 2026 for federal and 2028 for state purposes, if not utilized before these dates. The Company also had foreign net operating loss carryforwards of approximately $ 242.6 million, which expire between 2023 and 2032 if not utilized. At December 31, 2022 , the Company had approximately $ 121.6 million of federal and $ 46.6 million of California research and development tax credit and other tax credit carryforwards available to offset future taxable income. The federal credits begin to expire in 2023 and the California research credits have no expiration dates. Federal and state tax laws impose substantial restrictions on the utilization of net operating loss and credit carryforwards in the event of an “ownership change” for tax purposes, as defined in IRC Section 382. The Company reviewed its stock ownership for year ended December 31, 2022 and concluded no ownership changes occurred which would result in a reduction of its net operating loss or in its research and development credits expiring unused. If additional ownership change occurs, the utilization of net operating loss and credit carryforwards could be significantly reduced. 154 On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. Among other changes to the Internal Revenue Code, the IRA imposes a 15 % corporate alternative minimum tax on certain corporations and 1 % excise tax on public company stock buybacks for tax years beginning after December 31, 2022. The Company does not expect these provisions to have a material impact on its consolidated financial statements and related disclosures. Uncertain Tax Positions The Company had unrecognized tax benefits of approximately $ 72.8 million as of December 31, 2022 . Approximately $ 0.7 million of unrecognized tax benefits, if recognized, would affect the effective tax rate. The interest accrued as of December 31, 2022 and 2021 was immaterial . A reconciliation of the beginning and ending amounts of unrecognized income tax benefits during the three years ended December 31, 2022 is as follows (in thousands): Federal and State Balance as of December 31, 2019 $ 32,263 Decrease due to prior positions ( 137 ) Increase due to current year position 16,448 Balance as of December 31, 2020 48,574 Decrease due to prior positions ( 245 ) Increase due to current year position 8,415 Foreign exchange rate differential 927 Balance as of December 31, 2021 57,671 Increase due to prior positions 6,954 Increase due to current year position 9,074 Foreign exchange rate differential ( 908 ) Balance as of December 31, 2022 $ 72,791 Unrecognized tax benefits may change during the next twelve months for items that arise in the ordinary course of business. The Company does not anticipate a material change to its unrecognized tax benefits over the next twelve months that would affect the Company’s effective tax rate. The Company classifies interest and penalties as a component of tax expense, if any. The Company files income tax returns in the U.S. federal jurisdiction, U.S. state and other foreign jurisdictions. The U.S. federal and U.S. state taxing authorities may choose to audit tax returns for tax years beyond the statute of limitation period due to significant tax attribute carryforwards from prior years, making adjustments only to carryforward attributes. The foreign statute of limitation generally remains open from 2013 to 2022 . The Company is not currently under audit in any tax jurisdiction. 14. Related Party Transactions Astellas is an equity investor in the Company and considered a related party. During the years ended December 31, 2022, 2021 and 2020 , the Company recorded license and development revenue related to collaboration agreements with Astellas of $ 32.5 million, $ 130.4 million, and $ 33.5 million, respectively. During the years ended December 31, 2022, 2021 and 2020 , the Company also recorded drug product revenue from Astellas of $ 11.1 million, $ 3.2 million, and $ 4.3 million, respectively. See Note 3, 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 years ended December 31, 2022. As of December 31, 2022 and 2021 , accounts receivable from Astellas were $ 1.5 million and $ 10.9 million, respectively. As of December 31, 2022 and 2021 , total deferred revenue from Astellas were $ 40.3 million and $ 27.9 million, respectively. As of December 31, 2022, the amount due to Astellas was $ 63.9 million. As of December 31, 2021, the amount due to Astellas was immaterial. 155 Falikang, an entity jointly owned by FibroGen Beijing and AstraZeneca is an unconsolidated VIE accounted for as an equity method investment, and considered as a related party to the Company. FibroGen Beijing owns 51.1 % of Falikang’s equity. See Note 4, Equity method investment - Variable Interest Entity , for details. For the years ended December 31, 2022 and 2021 , the net product revenue from sales to Falikang were $ 71.2 million, and $ 35.6 million, respectively. See the Product Revenue, Net section in Note 3, Collaboration Agreements, License Agreement and Revenues , for details. The other income from Falikang were immaterial for each of the three years ended December 31, 2022. For the years ended December 31, 2022, 2021 and 2020 , the investment income (loss) in Falikang was $ 1.6 million, $ 1.0 million, and $( 0.2 ) million, respectively. As of December 31, 2022 and 2021 , the Company’s equity method investment in Falikang were $ 5.1 million and $ 3.8 million, respectively. See Note 4, Equity method investment - Variable Interest Entity , for details. As of December 31, 2022 , accounts receivable, net, from Falikang were $ 10.5 million. As of December 31, 2021 , accounts receivable, net, from Falikang was zero . As of December 31, 2022 , the total deferred revenue from Falikang was zero . As of December 31, 2021 , the total deferred revenue from Falikang was $ 1.2 million. 15. Segment and Geographic Information The Company has determined that the chief executive officer is the chief operating decision maker (“CODM”). The CODM reviews financial information presented for the Company’s various clinical trial programs as well as results on a consolidated basis. License revenues and development revenues received are not allocated to various programs for purposes of determining a profit measure and resource allocation decisions are made by the CODM based primarily on consolidated results. As such, the Company has concluded that it operates as one segment. Supplemental enterprise-wide information has been presented below. Geographic Revenues Geographic revenues, which are based on the region that revenue is generated, are as follows (in thousands): Years Ended December 31, 2022 2021 2020 China $ 84,631 $ 55,640 $ 73,361 Europe 33,820 131,243 17,954 Japan 9,764 2,305 19,824 United States 12,519 46,121 65,180 Total revenue $ 140,734 $ 235,309 $ 176,319 Geographic Assets Property and equipment, net by geographic location are as follows (in thousands): December 31, 2022 2021 United States $ 10,094 $ 15,002 China 10,511 13,275 Total property and equipment $ 20,605 $ 28,277 156 Finance lease right-of-use assets and operating lease right-of-use assets, net by geographic location are as follows (in thousands): December 31, 2022 2021 United States $ 424 $ 730 China 11 31 Total finance lease right-of-use assets $ 435 $ 761 United States $ 76,273 $ 87,113 China 3,620 3,999 Total operating lease right-of-use assets $ 79,893 $ 91,112 Customer Concentration The Company’s revenues to date have been generated from the following collaboration partners and distribution entity that individually accounted for 10% or more of the Company’s total revenue or accounts receivable: Percentage of Revenue Percentage of Accounts Receivable Years Ended December 31, December 31, 2022 2021 2020 2022 2021 Falikang — Related party 51 % 15 % — % 65 % — % Astellas — Related party 31 % 57 % 21 % 9 % 63 % AstraZeneca 9 % 20 % 37 % 16 % 34 % In January 2021, Falikang became fully operational and substantially all direct product sales to distributors in China were made by Falikang, while FibroGen Beijing continued to sell roxadustat product directly through pharmaceutical distributors in one province in China during 2021 and in one province in 2022. No individual distributor represented over 10% of the total revenue for the years ended December 31, 2022 and 2021. The aggregate accounts receivable from direct sales to distributors as of December 31, 2022 and 2021 were immaterial. For the year ended December 31, 2020, the aggregate revenue from distributors represented 42 % of the consolidated revenue, with no individual distributor representing over 10% of the total revenue. As of December 31, 2020, the aggregate accounts receivable from distributors represented 64 % of the consolidated accounts receivable, with no material balance from any individual distributor. 157 Schedule II: Valuation an d Qualifying Accounts (in thousands) Charged Charged to Other Balance at (Credited) Accounts - Beginning of to Statement Liabilities Deductions, Balance at Year of Operation and Equity Net End of Year Valuation allowances for deferred tax assets Year ended December 31, 2022 $ 409,810 $ 68,159 $ — $ — $ 477,969 Year ended December 31, 2021 $ 337,824 $ 71,986 $ — $ — $ 409,810 Year ended December 31, 2020 $ 213,847 $ 123,977 $ — $ — $ 337,824 Allowances for rebates, discounts and adjustments Year ended December 31, 2022 $ 14,443 $ 39,082 $ 1,050 $ ( 53,226 ) $ 1,349 Year ended December 31, 2021 $ 548 $ 44,258 $ ( 734 ) $ ( 29,629 ) $ 14,443 Year ended December 31, 2020 $ 1,102 $ 16,497 $ ( 14,867 ) $ ( 2,184 ) $ 548 158 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOU NTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROL S AND PROCEDURES Attached as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K for the year ended December 31, 2022 (“Annual Report”) are certifications of our Chief Executive Officer and our Chief Financial Officer required by Rule 13a-14(a) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Rule 13a-14(a) and 15d-15(e) Certifications”). This Controls and Procedures section of the Annual Report includes the information concerning the controls evaluation referred to in the Rule 13a-14(a) and 15d-15(e) Certifications. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022, the end of the period covered by this Annual Report. Disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on our evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2022. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting is a process established under the supervision of and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management, with the participation and under the supervision of our Chief Executive Officer and our Chief Financial Officer, evaluated our internal control over financial reporting as of December 31, 2022, the end of our fiscal year, using the criteria established in Internal Control - Integrated Framework (2013) set forth by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2022 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that appears herein. Limitations on the Effectiveness of Controls In designing and evaluating the disclosure controls and procedures, management recognizes that because of the inherent limitations in all control systems, any controls and procedures, no matter how well designed and operated, can provide only reasonable not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and the benefits of controls and procedures must be considered relative to their costs. 159 Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the most recent fiscal quarter ended December 31, 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We are implementing an enterprise resource planning (“ERP”) system, which will replace our existing operating and financial systems in the U.S. in the first quarter of 2023. While we expect the ERP implementation to improve the efficiency of certain financial and transactional processes, the related changes will materially affect our internal control over financial reporting beginning in the first quarter of 2023, and we have been monitoring such changes during the implementation process. ITEM 9B. OTHER INFORMATION On February 27, 2023, we entered into an Amended and Restated Equity Distribution Agreement with Goldman Sachs & Co., LLC and BofA Securities, Inc., which amended and restated our Equity Distribution Agreement with Goldman Sachs & Co., LLC, dated August 8, 2022, to add BofA Securities, Inc. as an additional sales agent under that agreement. The Amended and Restated Equity Distribution Agreement is filed as Exhibit 10.44 to this Form 10-K. Ite m 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 160 PART III ITEM 10. DIRECTORS, EXECUTIVE OF FICERS AND CORPORATE GOVERNANCE The information required by this item relating to our directors and nominees, including information with respect to our audit committee, audit committee financial experts and procedures by which stockholders may recommend nominees to our Board of Directors, is incorporated by reference to the sections titled “Proposal 1 – Election of Directors” and “Directors and Corporate Governance" in our Proxy Statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2022 (the “2023 Proxy Statement”). The information required by this item regarding our executive officers is incorporated by reference to the section titled “Executive Officers” appearing in our 2023 Proxy Statement. The information, if any, required by this item regarding compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, is incorporated by reference to the section titled “Delinquent Section 16(a) Reports” appearing in our 2023 Proxy Statement. Code of Conduct We have adopted a Code of Business Conduct that applies to all of our directors, officers and employees. A copy of our Code of Business Conduct can be found on our website ( www.FibroGen.com ) under “Corporate Governance.” The contents of our website are not a part of this report. In addition, we intend to promptly disclose the nature of any amendment to, or waiver from, our Code of Business Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions on our website in the future. ITEM 11. EXECUTI VE COMPENSATION The information required by this item is incorporated by reference to the sections titled “Executive Compensation,” “Director Compensation,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” appearing in our 2023 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OW NERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference to the sections titled “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” appearing in our 2023 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is incorporated by reference to the sections titled “Transactions with Related Persons” and “Directors and Corporate Governance” appearing in our 2023 Proxy Statement. ITEM 14. PRINCIPAL ACCOU NTANT FEES AND SERVICES The information required by this item is incorporated by reference to the proposal title “Ratification of Selection of Independent Registered Public Accounting Firm” appearing in our 2023 Proxy Statement. 161 PART IV ITEM 15. EXHIBITS AND FINA NCIAL STATEMENT SCHEDULES (a) We have filed the following documents as part of this Annual Report: 1. Consolidated Financial Statements Information in response to this Item is included in Part II, Item 8 of this Annual Report. 2. Financial Statement Schedules Schedule II is included on page 158 . All other schedules are omitted because they are not required or the required information is included in the consolidated financial statements or notes thereto. 3. Exhibits See Item 15(b) below. (b) Exhibits —We have filed, or incorporated into this Annual Report by reference, the exhibits listed below. Where an exhibit is incorporated by reference, the number in parentheses indicates the document to which cross-reference is made. Refer to the end of this table for a listing of cross-reference documents. Exhibit Incorporation By Reference Number Exhibit Description Form SEC File No. Exhibit Filing Date 3.1 Amended and Restated Certificate of Incorporation of FibroGen, Inc. 8-K 001-36740 3.1 11/21/2014 3.2 Amended and Restated Bylaws of FibroGen, Inc. S-1/A 333-199069 3.4 10/23/2014 4.1 Form of Common Stock Certificate. 8-K 001-36740 4.1 11/21/2014 4.2 Shareholders’ Agreement by and among FibroGen International (Cayman) Limited and certain of its shareholders, dated as of September 8, 2017. 10-Q 001-36740 4.6 11/8/2017 4.3 Common Stock Purchase Agreement by and between FibroGen, Inc. and AstraZeneca AB, dated as of October 20, 2014. S-1/A 333-199069 4.17 10/24/2014 4.4 Description of Capital Stock of FibroGen, Inc 10-K 001-36740 4.4 3/2/2020 10.1(i)+ FibroGen, Inc. Amended and Restated 2005 Stock Plan. S-1 333-199069 10.3(i) 10/1/2014 10.1(ii)+ Forms of stock option agreement, restricted stock purchase agreement and stock appreciation right agreement under the FibroGen, Inc. Amended and Restated 2005 Stock Plan. S-1 333-199069 10.3(ii) 10/1/2014 162 10.1(iii)+ Form of stock option agreement under the FibroGen, Inc. Amended and Restated 2005 Stock Plan applicable to options exchanged pursuant to FibroGen, Inc.’s 2010 amendment and exchange offer. S-1 333-199069 10.3(iii) 10/1/2014 10.1(iv)+ Form of 2010 amendment to the form of stock option agreement under the FibroGen, Inc. Amended and Restated 2005 Stock Plan applicable to options amended pursuant to FibroGen, Inc.’s 2010 amendment and exchange offer. S-1 333-199069 10.3(iv) 10/1/2014 10.1(v)+ Form of 2013 amendment to the form of stock option agreement under the FibroGen, Inc. Amended and Restated 2005 Stock Plan applicable to options amended or exchanged pursuant to FibroGen, Inc.’s 2010 amendment and exchange offer. S-1 333-199069 10.3(v) 10/1/2014 10.2+ FibroGen, Inc. 2014 Equity Incentive Plan and forms of agreement thereunder. S-1/A 333-199069 10.4 11/12/2014 10.3+ FibroGen, Inc. 2014 Employee Stock Purchase Plan. S-1/A 333-199069 10.5 11/12/2014 10.4*+ FibroGen, Inc. Non-Employee Director Compensation Policy, as amended. — — — — 10.5+ FibroGen, Inc. 2018 Bonus Plan. 8-K 001-36740 10.5 2/16/2018 10.6 Lease Agreement by and between FibroGen, Inc. and X-4 Dolphin LLC, dated as of September 22, 2006; as amended by First Amendment to Lease by and between FibroGen, Inc. and X-4 Dolphin LLC, dated as of October 10, 2007; as amended by Second Amendment to Lease by and between FibroGen, Inc. and X-4 Dolphin LLC, dated as of June 29, 2009; as amended by Third Amendment to Lease by and between FibroGen, Inc. and Are-San Francisco No. 43, LLC (as successor in interest to X-4 Dolphin LLC), dated as of May 19, 2011; as amended by Fourth Amendment to Lease by and between FibroGen, Inc. and Are-San Francisco No. 43, LLC, dated as of September 8, 2011. S-1 333-199069 10.8 10/1/2014 163 10.7 Lease for Premises in Beijing BDA Biomedical Park by and among Beijing FibroGen Medical Technology Development Co., Ltd., Beijing Economic and Technology Investment Development Parent Company and Beijing BDA International Biological Pharmaceutical Investment Management Co., Ltd., effective as of February 1, 2013, as supplemented by the Supplementary Agreement to Lease of Premises in Beijing BDA Biomedical Park by and among Beijing FibroGen Medical Technology Development Co., Ltd., Beijing Economic Technology Investment Development Parent Company and Beijing BDA International Biological Pharmaceutical Investment Management Co., Ltd., dated as of January 30, 2013. S-1 333-199069 10.9 10/1/2014 10.8+ Form of Employment Offer Letter. S-1 333-199069 10.10 10/1/2014 10.9† Collaboration Agreement, by and between FibroGen, Inc. and Astellas Pharma Inc., effective as of June 1, 2005. 10-Q 001-36740 10.1 11/5/2020 10.9(i)† Amendment No. 1 to Collaboration Agreement, by and between FibroGen, Inc. and Astellas Pharma Inc., effective as of January 1, 2013. 10-K 001-36740 10.9(i) 2/27/2019 10.10† Anemia License and Collaboration Agreement, by and between FibroGen, Inc. and Astellas Pharma Inc., effective as of April 28, 2006. S-1 333-199069 10.12 10/1/2014 10.11† Amendment to Anemia License and Collaboration Agreement, by and between FibroGen, Inc. and Astellas Pharma Inc., effective as of August 31, 2006. S-1 333-199069 10.13 10/1/2014 10.12 Amendment No. 2 to Anemia License and Collaboration Agreement, by and between FibroGen, Inc. and Astellas Pharma Inc., effective as of December 1, 2006. S-1 333-199069 10.14 10/1/2014 164 10.13† Supplement to Anemia License and Collaboration Agreement, by and between FibroGen, Inc. and Astellas Pharma Inc., effective as of April 28, 2006. S-1 333-199069 10.15 10/1/2014 10.14† Amendment No. 3 to Anemia License and Collaboration Agreement, by and between FibroGen, Inc. and Astellas Pharma Inc., dated as of May 10, 2012. S-1 333-199069 10.16 10/1/2014 10.15† Amended and Restated License, Development and Commercialization Agreement (China) by and among FibroGen China Anemia Holdings, Ltd., Beijing FibroGen Medical Technology Development Co., Ltd., FibroGen International (Hong Kong) Limited and AstraZeneca AB, effective as of July 30, 2013. 10-Q 001-36740 10.3 11/5/2020 10.16† Amended and Restated License, Development and Commercialization Agreement (for the U.S. and Certain Other Territories) by and between FibroGen, Inc. and AstraZeneca AB, effective as of July 30, 2013. 10-Q 001-36740 10.2 11/5/2020 10.17 Research and Commercialization Agreement by and among FibroGen, Inc., GenPharm International Inc., Medarex, Inc. and FibroPharma, Inc., effective as of July 9, 1998. S-1 333-199069 10.21 10/1/2014 10.18 Amendment No. 1 to Research and Commercialization Agreement by and among FibroGen, Inc., GenPharm International Inc., Medarex, Inc. and FibroPharma, Inc., effective as of June 30, 2001. S-1 333-199069 10.22 10/1/2014 10.19† Amendment No. 2 to Research and Commercialization Agreement by and among FibroGen, Inc., GenPharm International Inc., Medarex, Inc. and FibroPharma, Inc., effective as of January 28, 2002. 10-Q 001-36740 10.6 11/5/2020 165 10.20+ Form of Indemnity Agreement by and between FibroGen, Inc. and its directors and officers. S-1/A 333-199069 10.27 10/23/2014 10.21† State-Owned Construction Land Use Right Granting Contract by and between FibroGen (China) Medical Technology Development Co., Ltd. and The Bureau of Land and Resources of Cangzhou, dated as of February 24, 2017 . 10-Q 001-36740 10.32 5/9/2017 10.22† Commercial Supply Agreement by and between FibroGen, Inc. and Catalent Pharma Solutions, LLC, effective as of January 1, 2020 . 10-K 001-36740 10.28 3/2/2020 10.23† Master Supply Agreement by and among FibroGen, Inc., Shanghai SynTheAll Pharmaceutical Co., Ltd. and STA Pharmaceutical Hong Kong Limited, effective March 2, 2020 . 8-K 001-36740 99.1 3/24/2020 10.24† Amendment No.1 to Master Supply Agreement by and among FibroGen, Inc., Shanghai SynTheAll Pharmaceutical Co., Ltd. and STA Pharmaceutical Hong Kong Limited, effective May 11, 2020 . 10-Q 001-36740 10.2 8/6/2020 10.25† Second Amended and Restated License, Development and Commercialization Agreement by and among FibroGen China Anemia Holdings, Ltd., FibroGen China Medical Technology Development Co., Ltd., FibroGen International (Hong Kong) Limited, and AstraZeneca AB, effective July 1, 2020 . 10-Q 001-36740 10.3 8/6/2020 10.26† Amendment No. 1 to the Amended and Restated License, Development and Commercialization Agreement by and between FibroGen, Inc. and AstraZeneca AB, effective July 1, 2020 . 10-Q 001-36740 10.4 8/6/2020 10.27† Amendment No. 2 to Master Supply Agreement by and among FibroGen, Inc., Shanghai SynTheAll Pharmaceutical Co., Ltd. and STA Pharmaceutical Hong Kong Limited, effective July 24, 2020 . 10-Q 001-36740 10.8 11/5/2020 166 10.28† Master Supply Agreement by and between FibroGen, Inc. and AstraZeneca UK Limited, effective September 10, 2020 . 10-Q 001-36740 10.9 11/5/2020 10.29† Master Services Agreement by and between FibroGen, Inc. and Samsung Biologics Co., Ltd., effective as of October 30, 2020. 10-K 001-36740 10.35 3/1/2021 10.30† Product Specific Agreement by and between FibroGen, Inc. and Samsung Biologics Co., Ltd., effective as of October 30, 2020. 10-K 001-36740 10.36 3/1/2021 10.31† Astellas EU Supply Agreement by and between FibroGen, Inc. and Astellas Pharma Europe Ltd, effective as of January 1, 2021. 10-Q 001-36740 10.2 5/10/2021 10.32† Amendment No. 3 to Master Supply Agreement by and among FibroGen, Inc., Shanghai SynTheAll Pharmaceutical Co., Ltd., and STA Pharmaceutical Hong Kong Limited, dated as of January 12, 2021. 10-Q 001-36740 10.3 5/10/2021 10.33 Sixth Amendment to the Lease by and between ARE-San Francisco No., 43, LLC and FibroGen, Inc. as of June 1, 2021. 10-Q 001-36740 10.1 8/9/2021 10.34† Exclusive License and Option Agreement by and between FibroGen, Inc. and HiFiBiO (HK) Limited (D.B.A. HiFiBiO Therapeutics), as of June 16, 2021. 10-Q 001-36740 10.2 8/9/2021 10.35† Amendment No. 4 to Master Supply Agreement by and among FibroGen, Inc., Shanghai SynTheAll Pharmaceutical Co., Ltd., and STA Pharmaceutical Hong Kong Limited, dated as of October 29, 2021. 10-K 001-36740 10.36 2/28/2022 10.36+ Offer Letter, by and between FibroGen, Inc. and Christine Chung, dated as of June 17, 2008. 10-K 001-36740 10.32 3/2/2020 10.37+ Offer Letter, by and between FibroGen, Inc. and James Schoeneck, dated as of September 18, 2019. 10-Q 001-36740 10.7 11/12/2019 10.38+ Offer Letter, by and between FibroGen, Inc. and Enrique Conterno, dated as of December 17, 2019. 10-K 001-36740 10.34 3/2/2020 167 10.39+ Offer Letter, by and between FibroGen, Inc. and Thane Wettig, dated as of May 7, 2020. 10-Q 001-36740 10.1 8/6/2020 10.40+ Offer Letter, by and between FibroGen, Inc. and Mark Eisner, dated as of October 22, 2020. 10-K 001-36740 10.44 3/1/2021 10.41+ Offer Letter by and between FibroGen, Inc. and Juan Graham, effective as of July 30, 2021. 10-Q 001-36740 10.2 11/9/2021 10.42+ Form of Executive Officer Change in Control and Severance Agreement . 10-K 001-36740 10.35 3/2/2020 10.43† Amended and Restated Exclusive License Agreement by and between FibroGen, Inc. and Eluminex Biosciences (Suzhou) Limited as of January 21, 2022. 10-Q 001-36740 10.1 5/9/2022 10.44* Amended and Restated Equity Distribution Agreement by and between FibroGen, Inc. and Goldman Sachs & Co. LLC and BofA Securities, Inc., dated February 27, 2023. __ __ __ __ 10.45*† Amendment No. 1 to Product Specific Agreement - Clinical Product Drug Substance by and between FibroGen, Inc. and Samsung Biologics Co., Ltd., effective as of October 25, 2022. __ __ __ __ 10.46*† Revenue Interest Financing Agreement by and between FibroGen, Inc. and NQ Project Phoebus, L.P., dated as of November 4, 2022. __ __ __ __ 10.47*† Letter Agreement by and among Astellas Pharma Inc., Astellas Pharma Europe Ltd., and FibroGen, Inc., effective as of November 4, 2022. __ __ __ __ 21.1 Subsidiaries of FibroGen, Inc. 10-Q 001-36740 21.1 8/9/2021 23.1* Consent of PricewaterhouseCoopers LLP. — — — — 24.1* Power of Attorney (included in signature pages). — — — — 168 31.1* Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a). — — — — 31.2* Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a). — — — — 32.1** Certification of Principal Executive Officer and Principal Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350)(1). — — — — 101.INS* Inline XBRL Instance Document: the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document — — — — 101.SCH* Inline XBRL Taxonomy Schema Linkbase Document — — — — 101.CAL* Inline XBRL Calculation Linkbase Document — — — — 101.DEF* Inline XBRL Definition Linkbase Document — — — — 101.LAB* Inline XBRL Labels Linkbase Document — — — — 101.PRE* Inline XBRL Taxonomy Presentation Linkbase Document — — — — 104 Cover Page Interactive Data File (embedded within the inline XBRL document) — — — — * Filed herewith. ** Furnished herewith. † Portions of this exhibit (indicated by asterisks) have been omitted as the Company has determined that (i) the omitted information is not material and (ii) the omitted information would likely cause competitive harm if publicly disclosed or is the type of information the Company treats as confidential. + Indicates a management contract or compensatory plan. (1) This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of FibroGen, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing. (c) Financial Statement Schedules —See (a) 2 above. All other financial statement schedules are omitted because they are not applicable because the requested information is included in the consolidated financial statements or notes thereto. ITEM 16. FOR M 10-K SUMMARY None. 169 SIGNA TURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California. FIBROGEN, INC. Date: February 27, 2023 By: /s/ Enrique Conterno Enrique Conterno Chief Executive Officer (Principal Executive Officer) Date: February 27, 2023 By: /s/ Juan Graham Juan Graham Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 170 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Enrique Conterno and Juan Graham, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Enrique Conterno Chief Executive Officer (Principal Executive Officer) February 27, 2023 Enrique Conterno /s/ Juan Graham Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) February 27, 2023 Juan Graham /s/ James A. Schoeneck Chairman of the Board and Director February 27, 2023 James A. Schoeneck /s/ Suzanne Blaug Director February 27, 2023 Suzanne Blaug /s/ Aoife Brennan Director February 27, 2023 Aoife Brennan, M.B., B.Ch. /s/ Benjamin F. Cravatt Director February 27, 2023 Benjamin F. Cravatt, Ph.D. /s/ Jeffrey L. Edwards Director February 27, 2023 Jeffrey L. Edwards /s/ Jeffrey W. Henderson Director February 27, 2023 Jeffrey W. Henderson /s/ Maykin Ho Director February 27, 2023 Maykin Ho, Ph.D. /s/ Gerald Lema Director February 27, 2023 Gerald Lema 171