What changed in this filing

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Item 1. Financial Statements

2023-05-08 compared with 2022-11-07 · 471 added, 500 removed, 693 unchanged (58% of the section changed)

2 unchanged sentences

(In thousands, except per share amounts)

September 30, 2022

March 31, 2023

December 31, 2022

11 unchanged sentences

Liabilities, stockholders’

equity and non-controlling interests

equity (deficit) and non-controlling interests

Current liabilities:

Accounts payable

Accounts payable ($ 57,499 and $ 0 to a related party)

Accrued and other current liabilities ($ 19,594 and $ 63,886 to a related party)

5 unchanged sentences

Operating lease liabilities, non-current

Other long-term liabilities

Liability related to sale of future revenues, non-current

Other long-term liabilities ($ 1,618 and $ 0 to a related party)

Total liabilities

4 unchanged sentences

no shares issued

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

and outstanding at March 31, 2023 and December 31, 2022

Common stock, $ 0.01 par value;

225,000 shares authorized at September 30, 2022

225,000 shares authorized at March 31, 2023

and December 31, 2022;

96,623 and 94,166 shares issued and outstanding at

September 30, 2022 and December 31, 2021

March 31, 2023 and December 31, 2022

Additional paid-in capital

3 unchanged sentences

Non-controlling interests

Total deficit

Total liabilities, stockholders’

equity and non-controlling interests

deficit and non-controlling interests

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

2 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

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

and $ 108,434 from a related party)

Three Months Ended March 31,

License revenue (includes $ 0 and $ 22,590

from a related party)

Development and other revenue (includes $ 1,624

and $ 5,180 from a related party)

Product revenue, net (includes $ 14,914 , $ 10,328 , $ 50,873

and $ 32,495 from a related party)

Drug product revenue (includes $( 4,077 ), $ 0 , $ 4,610

and $ 2,056 from a related party)

Product revenue, net (includes $ 21,372 and $ 16,223

from a related party)

Drug product revenue (includes $ 2,109 and $ 7,594

from a related party)

Total revenue

4 unchanged sentences

Total operating costs and expenses

Income (loss) from operations

Loss from operations

Interest and other, net

2 unchanged sentences

Total interest and other, net

Income (loss) before income taxes

Loss before income taxes

Provision for income taxes

1 unchanged sentence

interest entity

Net income (loss)

Net income (loss) per share - basic and diluted

Weighted average number of common shares used to

calculate net income (loss) per share:

Net loss per share - basic and diluted

Weighted average number of common shares used to calculate

net loss per share - basic and diluted

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

FIBROGEN, INC.

CONDENSED CONSOLIDATED STATE MENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATE MENTS OF COMPREHENSIVE LOSS

(In thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Net income (loss)

Three Months Ended March 31,

Other comprehensive income (loss):

3 unchanged sentences

Other comprehensive gain (loss), net of taxes

Comprehensive income (loss)

Comprehensive loss

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

FIBROGEN, INC.

CONDENSED CONSOLIDATED STATEMENT S OF CHANGES IN EQUITY

CONDENSED CONSOLIDATED STATEMENT S OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIT)

(In thousands, except share data)

2 unchanged sentences

Income (Loss)

Balance at June 30,

Balance at December 31,

Change in unrealized gain or

1 unchanged sentence

Foreign currency translation

Issuance of common stock

under ATM Program

Shares issued from stock

1 unchanged sentence

Stock-based compensation

Balance at September 30,

Balance at June 30,

Balance at March 31,

Balance at December 31,

Change in unrealized gain or

4 unchanged sentences

Stock-based compensation

Balance at September 30,

FIBROGEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

(In thousands, except share data)

For The Nine Month Period

Comprehensive

Balance at December 31,

Change in unrealized gain

or loss on investments

Foreign currency

translation adjustments

Shares issued from stock

plans, net of payroll

Stock-based compensation

Balance at September 30,

Balance at December 31,

Change in unrealized gain

or loss on investments

Foreign currency

translation adjustments

Shares issued from stock

plans, net of payroll

Stock-based compensation

Balance at September 30,

Balance at March 31,

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

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

2 unchanged sentences

Net accretion of premium and discount on investments

Unrealized loss on equity investments

Investment income in unconsolidated variable interest entity

(Gain) / loss on disposal of property and equipment

Loss on disposal of property and equipment

Stock-based compensation

Expense for acquired in-process research and development asset

Non-cash interest expense related to sale of future revenues

Impairment of investment

Realized loss on sales of available-for-sale securities

14 unchanged sentences

Payment made for acquired in-process research and development asset

Proceeds from sale of property and equipment

Purchases of available-for-sale securities

1 unchanged sentence

Proceeds from maturities of investments

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Financing activities

2 unchanged sentences

Cash paid for payroll taxes on restricted stock unit releases

Proceeds from issuance of common stock

Net cash used in financing activities

Proceeds from issuance of common stock under ATM Program, net of commissions

Proceeds from issuance of common stock under employee stock plans

Net cash provided by (used in) financing activities

Effect of exchange rate change on cash and cash equivalents

Net decrease in cash and cash equivalents

Net increase in cash and cash equivalents

Total cash and cash equivalents at beginning of period

8 unchanged sentences

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.

FibroGen is a leading biopharmaceutical company discovering, 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.

3 unchanged sentences

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.

Astellas Pharma Inc.

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

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

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

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

® , EVRENZO TM ) is approved in China, Europe, Japan, and numerous other countries for the treatment of anemia in chronic kidney disease 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 United States (“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.

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

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

2 unchanged sentences

All inter-company transactions and balances have been eliminated in consolidation.

For the variable interest entity (“VIE”) for which FibroGen is not the primary beneficiary, the Company uses the equity method of accounting.

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 as one reportable segment —

4 unchanged sentences

Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and footnote disclosures normally included in the annual consolidated financial statements.

The financial information included herein should be read in conjunction with the consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on February 28, 2022 and as amended on March 4, 2022 (“2021 Form 10-K”).

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.

The financial information included herein should be read in conjunction with the consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 , filed on February 27, 2023 (“2022 Form 10-K”).

Use of Estimates

1 unchanged sentence

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 and deferred revenue, specifically, estimates in variable consideration for drug product sales, and estimates in transaction price per unit for the China manufacturing and supply obligation.

On an ongoing basis, management reviews these estimates and assumptions.

2 unchanged sentences

Significant Accounting Policies

The accounting policies used by the Company in its presentation of interim financial results are consistent with those presented in Note 2 to the consolidated financial statements included in the 2021 Form 10-K, except for the updates to the following:

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, and total shareholder return (“TSR”) awards.

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

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.

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 performance-based RSUs 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.

Net Loss per Share

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

Three Months Ended September 30,

Nine Months Ended September 30,

Net income (loss)

Weighted average shares used to compute net

income (loss) per share:

Dilutive effect of potential common shares

Net income (loss) per share:

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

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

The Company reported a net loss for the three months ended March 31, 2023 and 2022.

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

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

Three Months Ended March 31,

Employee stock options

RSUs, PRSUs and TSR awards

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, intellectual property protection for the Company's proprietary technology, strategic relationships, and dependence on key individuals, suppliers, clinical organization, and other third parties.

Recently Issued Accounting Guidance Not Yet Adopted

In March 2020, the 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.

This guidance is effective as of March 12, 2020 through December 31, 2022.

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

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

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

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

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.

Collaboration Agreements, License Agreement and Revenues

4 unchanged sentences

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

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

The aggregate amount of consideration received through March 31, 2023 totaled $ 105.1 million , excluding drug product revenue that is discussed under the Drug Product Revenue section below.

Amounts recognized as license revenue and development revenue under the Astellas Japan Agreement were as follows for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Performance Obligation

2 unchanged sentences

Development revenue

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

The transaction price related to consideration received through March 31, 2023 and accounts receivable has been allocated to each of the following performance obligations under the Astellas Japan Agreement (in thousands):

Astellas Japan Agreement

September 30, 2022

Consideration

September 30, 2022

Total Consideration

Through March 31, 2023

Development revenue

Total license and development revenue

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

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 three months ended March 31, 2023 under the Astellas Japan Agreement.

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

9 unchanged sentences

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

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

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

The aggregate amount of consideration received under the Astellas Europe Agreement through March 31, 2023 totaled $ 685.0 million , excluding drug product revenue that is discussed under the Drug Product Revenue section below.

Amounts recognized as license revenue and development revenue under the Astellas Europe Agreement were as follows for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Performance Obligation

2 unchanged sentences

Development revenue

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

Astellas Europe Agreement

September 30, 2022

Consideration

September 30, 2022

Total Consideration

Through March 31, 2023

Development revenue

Total license and development revenue

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

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

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 three months ended March 31, 2023 under the Astellas Europe Agreement.

The remainder of the transaction price related to the Astellas Europe Agreement includes $ 5.8 million of variable consideration from estimated future co-development billing and is expected to be recognized over the remaining development service period.

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

3 unchanged sentences

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.

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

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

3 unchanged sentences

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

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

The aggregate amount of consideration received under the AstraZeneca U.S./RoW Agreement through March 31, 2023 totaled $ 439.0 million , excluding drug product revenue that is discussed separately below.

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

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

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

2 unchanged sentences

AstraZeneca China Agreement

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

Effective July 30, 2013, the Company (through its subsidiaries affiliated with China) entered into a collaboration agreement with AztraZeneca for 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 and potential milestone payments, totaling $ 376.7 million .

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

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

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

The aggregate amount of such consideration received for milestone and upfront payments through March 31, 2023 totaled $ 77.2 million .

AstraZeneca China Amendment

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

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

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

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

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

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

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.

Substantially all direct roxadustat product sales to distributors in China are made by Falikang, while FibroGen Beijing continues to sell roxadustat product directly in one province in China.

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

Amounts recognized as license revenue and development revenue under the AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement were as follows for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Performance Obligation

2 unchanged sentences

Development revenue

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

The transaction price relat ed to consideration received through March 31, 2023 and accounts receivable has been allocated to each of the following performance obligations under the AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement, along with any associated deferred revenue as follows (in thousands):

AstraZeneca U.S./RoW Agreement and

AstraZeneca China Agreement

September 30, 2022

Consideration

September 30, 2022

Cumulative Revenue

Through March 31, 2023

Deferred Revenue at

March 31, 2023

Total Consideration

Through March 31, 2023

Co-development, information sharing &

4 unchanged sentences

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

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

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

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

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

As of March 31, 2023, deferred revenue included $ 156.2 million related to the AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement, which represents the net of $ 175.3 million of deferred revenue presented above and a $ 19.1 million unbilled co-development revenue under the AstraZeneca China Amendment.

The remainder of the transaction price related to the AstraZeneca U.S./R oW Agreement and AstraZeneca China Agreement includes $ 9.8 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.

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

Product Revenue, Net

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

Three Months Ended September 30,

Nine Months Ended September 30,

Product revenue, net from the sales of roxadustat commercial product in China was as follows for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Direct Sales:

6 unchanged sentences

Net transaction price

Increase in deferred revenue

Decrease in deferred revenue

Sales to Falikang revenue, net

4 unchanged sentences

The Company’s legal right to offset is calculated at the individual distributor level.

The following table includes a roll-forward of the contract liabilities (in thousands):

December 31, 2021

September 30, 2022

Product revenue - Direct sales - contract liabilities

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

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

The contract liabilities were included in accrued and other current liabilities in the condensed consolidated balance sheet and were immaterial as of March 31, 2023 and December 31, 2022, respectively.

The rebates and discounts reflected as reductions to gross accounts receivable for direct sales were immaterial as of March 31, 2023 and December 31, 2022, 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.

Substantially all direct roxadustat product sales to distributors in China are made by Falikang.

FibroGen Beijing manufactures and supplies commercial product to Falikang.

5 unchanged sentences

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

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

Following updates to its estimates, the Company recognized $ 2.1 million and $ 2.3 million from the previously deferred revenue of the China performance obligation during the three months ended March 31, 2023 and 2022, respectively.

The product revenue recognized for the three months ended March 31, 2023 included a decrease in revenue of $ 0.3 million resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied in previous periods.

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

1 unchanged sentence

Recognized as Revenue

September 30, 2022

March 31, 2023

Product revenue - AstraZeneca China

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

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

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

As of March 31, 2023 , approximately $ 22.5 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 $ 2.2 million and $ 0.5 million as of March 31, 2023 and December 31, 2022 , respectively.

Drug Product Revenue

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

Three Months Ended September 30,

Nine Months Ended September 30,

Drug product revenue from commercial-grade active pharmaceutical ingredient (“API”) or bulk drug product sales to Astellas and AstraZeneca was as follows for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Astellas Japan Agreement

Astellas Europe Agreement

AstraZeneca U.S./RoW Agreement

Drug product revenue

Astellas Japan Agreement

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

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

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

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

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

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

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

During the three months ended March 31, 2023, 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 $ 1.7 million.

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

During the three months ended March 31, 2022, the Company fulfilled a shipment obligation under the terms of Astellas Japan Amendment, and recognized related drug product revenue of $ 9.8 million in the same period.

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

As of March 31, 2023, t he balances related to the API price true-up under the Astellas Japan Agreement were $ 3.2 million in accrued liabilities and $ 1.6 million in other long-term liabilities, representing the Company’s best estimate of the timing for these amounts to be paid.

As of December 31, 2022, the related balance in accrued liabilities was $ 6.5 million.

Astellas Europe Agreement

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

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

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

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

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

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

The Company transferred bulk drug product for commercial purposes under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement in the prior years, and recognized the related fully burdened manufacturing costs as drug product revenue in the respective periods and recorded the constrained transaction price in deferred revenue due to a high degree of uncertainty associated with the variable consideration for revenue recognition purposes.

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

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

AstraZeneca U.S./RoW Agreement

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

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

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

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

As a result, the Company reclassified the related deferred revenue to accrued liabilities during the year ended December 31, 2022.

As of December 31, 2022, the related balance was $ 57.4 million in accrued liabilities.

Further during the three months ended March 31, 2023 , the Company reclassified $ 16.6 million from the related deferred revenue to accrued liabilities.

As of March 31, 2023, the balances related to the bulk drug product price true-up under the Astellas Europe Agreement and the Astellas EU Supply Agreement were $ 57.5 million in accounts payable and $ 16.4 million in a ccrued liabilities, representing the Company’s best estimate that these amounts will be paid within the next 12 months.

The Company recognized royalty revenue of $ 0.4 million as drug product revenue from the deferred revenue under the Astellas Europe Agreement during the three months ended March 31, 2023.

It is the Company’s best estimate that the remainder of the deferred revenue will be recognized as revenue when uncertainty is resolved, based on the performance of roxadustat product sales in the Astellas territory.

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

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Reclassified to Accrued Liability / Accounts Payable

September 30, 2022

Astellas Japan Agreement

March 31, 2023

Drug product revenue - deferred revenue:

Astellas Europe Agreement

AstraZeneca U.S./RoW Agreement

Drug product revenue - deferred revenue

There was no shipment of bulk drug product to AstraZeneca as commercial supply under the terms of the AstraZeneca Master Supply Agreement during the three months ended March 31, 2023 and 2022.

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

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

As a result, the Company reclassified $ 11.2 million from the related deferred revenue to accrued liabilities during the year ended December 31, 2022.

As of each of March 31, 2023 and December 31, 2022, the related balance in accrued liabilities was $ 11.2 million, representing the Company’s best estimate that this amount will be paid within the next 12 months .

Eluminex Agreement

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 during the third quarter of 2021 and recorded as an unbilled contract asset as of December 31, 2021 in the prepaid expenses and other current assets in the condensed consolidated balance sheet.

Under the terms of the agreement with Eluminex , as amended and restated, Eluminex made an $ 8.0 million upfront payment to FibroGen during the first quarter of 2022, which was recognized as license revenue for the performance obligation satisfied during 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.

During the three months ended March 31, 2023 , the Company recognized a $ 3.0 million milestone payment based on Eluminex implanting a biosynthetic cornea in the first patient of its clinical trial in China, and a $ 3.0 million manufacturing related milestone payment.

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

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

Amounts recognized as revenue under the Eluminex were as follows for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Performance Obligation

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Other revenue - contract manufacturing

Variable Interest Entity

Equity method investment - Variable Interest Entity

Falikang is a distribution entity jointly owned by AstraZeneca and FibroGen Beijing.

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The Company may provide shareholder loans to Falikang to meet necessary financial obligations as part of its operations.

To date, these loans have been immaterial.

To date, there has been no such loans.

The Company’s equity method investment in Falikang was as follows (in thousands):

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Share of Net Income

September 30, 2022

March 31, 2023

Falikang is considered a related party to the Company.

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

September 30, 2022

March 31, 2023

Money market funds

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Asset-backed securities

Foreign government bonds

December 31, 2022

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Foreign government bonds

Convertible promissory note

The Company’s Level 2 investments are valued using third-party pricing sources.

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

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

During the three months ended March 31, 2023 , a total of $ 7.0 million of US treasury notes and bills were transferred from Level 1 to Level 2 as such instruments were changed to off-the-run when they were issued before the most recent issue and were still outstanding at measurement day.

Balance Sheet Components

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

September 30, 2022

March 31, 2023

December 31, 2022

Commercial paper

Money market funds

Total cash and cash equivalents

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

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

The Company’s investments consist of available-for-sale debt investments and marketable equity investments.

At March 31, 2023 and December 31, 2022, a total of $ 98.9 million and $ 92.5 million 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, respectively.

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):

September 30, 2022

March 31, 2023

Amortized Cost

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Asset-backed securities

Foreign government bonds

Total investments

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Foreign government bonds

Convertible promissory note

Total investments

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

September 30, 2022

March 31, 2023

Less than 12 Months

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Asset-backed securities

Foreign government bonds

December 31, 2022

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Foreign government bonds

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

At March 31, 2023, the available-for-sale investments had remaining contractual maturities of less than twelve months.

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

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

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

Based on the results of its review, the Company did no t recognize any other-than-temporary impairment loss during the three months ended March 31, 2023 and 2022.

Inventories consisted of the following (in thousands):

September 30, 2022

March 31, 2023

December 31, 2022

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

September 30, 2022

March 31, 2023

December 31, 2022

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API and bulk drug product price true-up

Acquired in-process research and development asset

Payroll and related accruals

Accrued co-promotion expenses - current

Contract liabilities to pharmaceutical distributors

Roxadustat profit share to AstraZeneca

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Professional services

Current portion of liability related to sale of future revenues

Total accrued and other current liabilities

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

The accrued liabilities of $ 30.8 million for API and bulk drug product price true-up as of March 31, 2023 resulted from changes in estimated variable consideration associated with the API shipments fulfilled under the terms of the Astellas Japan Amendment, the bulk drug product transferred under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement, and the bulk drug product shipments to AstraZeneca under the terms of the AstraZeneca Master Supply Agreement.

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

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

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

Liability Related to Sale of Future Revenues

On November 4, 2022, the Company entered into a Revenue Interest Financing Agreement (the “RIFA”) with an affiliate of NovaQuest Capital Management (“NovaQuest”), pursuant to which the Company granted 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 that it is entitled to under the Astellas Agreements , for a consideration of $ 50.0 million (“Investment Amount”) before advisory fees.

In November 2022, the Company received the Investment Amount, net of initial issuance costs, and accounted for it as long-term debt based on the terms of the RIFA because the risks and rewards to NovaQuest are limited by the terms of the transaction.

The related debt discount and transaction costs are amortized as interest expense based on the projected balance of the liability as of the beginning of each period.

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.

The payments to NovaQuest are accounted for as a reduction of debt.

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 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.

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.

Over the course of the RIFA, the effective interest rate is 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 reassesses the expected total revenue and the timing of such revenue, recalculates the amortization of debt discount and transactions costs and effective interest rate, and adjusts the accounting prospectively as needed.

The Company’s estimated effective annual interest rate was 19.64 % for the three months ended March 31, 2023.

The following table summarizes the activity of the liability related to sale of future revenues for the three months ended March 31, 2023:

Three Months Ended

March 31, 2023

Liability related to sale of future revenues - beginning balance

Interest expense recognized

Liability related to sale of future revenues - ending balance

Current portion classified to accrued and other current liabilities

Liability related to sale of future revenues, non-current

During the three months ended March 31, 2023 , the Company recognized, under Astellas Agreements, development revenue of $ 1.6 million and drug product revenue of $ 2.1 million.

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

During the three months ended March 31, 2023 , the Company recognized the related non-cash interest expense of $ 2.2 million.

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.

At-the-Market Program

On February 27, 2023, the Company entered into an Amended and Restated Equity Distribution Agreement (the “at-the-market agreement”) with Goldman Sachs & Co., LLC and BofA Securities, Inc.

(each a “Sales Agent”), which amended and restated its 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.

Under the at-the-market agreement, the Company may issue and sell, from time to time and through the Sales Agents, shares of its common stock having an aggregate offering price of up to $ 200.0 million (the “ATM Program”).

For the three months ended March 31, 2023 , the Company sold 1,541,579 shares under the ATM Program, for approximately $ 31.1 million, net of commissions to Sales Agents, at a weighted-average offering prices per share of $ 20.25 , of which $ 30.8 million was received in cash during the same period.

The remainder of the net proceeds was recorded as other receivables and included in prepaid expenses and other current assets in the condensed consolidated balance sheet as of March 31, 2023 and received in April 2023.

Provisions for income tax for the three months ended March 31, 2023 and 2022 were primarily due to foreign taxes.

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

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

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

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

The Company recorded license and development revenue related to collaboration agreements with Astellas of $ 1.6 million and $ 27.8 million for the three months ended March 31, 2023 and 2022 , respectively.

The Company also recorded drug product revenue from Astellas of $ 2.1 million and $ 7.6 million for the three months ended March 31, 2023 and 2022, respectively.

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

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

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

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

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

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

The Company’s expense related to collaboration agreements with Astellas was immaterial for each of the three months ended March 31, 2023 and 2022.

As of March 31, 2023 and December 31, 2022 , accounts receivable from Astellas were $ 1.6 million and $ 1.5 million, respectively.

As of March 31, 2023 and December 31, 2022 , total deferred revenue from Astellas was $ 23.4 million and $ 40.3 million, respectively.

As of March 31, 2023, the amounts due to Astellas, included in accounts payable, accrued and other current liabilities, and other long-term liabilities, totaled $ 78.7 million.

As of December 31, 2022 , the amount due to Astellas, included in accrued and other current liabilities, was $ 63.9 million.

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 3, Variable Interest Entity , for details.

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

See Note 3, Equity method investment - Variable Interest Entity , for details.

The net product revenue from Falikang was $ 21.4 million and $ 16.2 million for the three months ended March 31, 2023 and 2022, respectively.

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

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

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

The investment income in Falikang was $ 0.8 million and $ 0.3 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023 and December 31, 2022, the Company’s equity method investment in Falikang was $ 5.9 million and $ 5.1 million , respectively.

See Note 3, Variable Interest Entity , for details.

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

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

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

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

The other income from Falikang was immaterial for each of the three months ended March 31, 2023 and 2022.

As of March 31, 2023 and December 31, 2022 , accounts receivable, net, from Falikang, were $ 9.9 million and $ 10.5 million, respectively.

Commitments and Contingencies

Contract Obligations

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

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

As of March 31, 2023 , the Company had outstanding total non-cancelable purchase obligations of $ 51.9 million, including $ 22.4 million for manufacture and supply of pamrevlumab, $ 4.1 million for manufacture and supply of roxadustat, and $ 25.4 million for other purchases and programs.

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

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

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

As of March 31, 2023 , future milestone payments for research and preclinical stage development programs consisted of up to approximately $ 697.9 million in total potential future milestone payments under the Company’s license agreements with HiFiBiO (for Gal-9 and CCR8), Medarex, Inc.

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

The event triggering such payment or obligation has not yet occurred.

As of March 31, 2023, the Company had $ 86.8 million of operating lease liabilities.

In addition, see Note 6, Liability Related to Sale of Future Revenues for details of the related obligation.

Legal Proceedings and Other Matters

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

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

The Company did not have any material accruals for any active legal action in its condensed consolidated balance sheet as of March 31, 2023, 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.

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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 to the motion for class certification is due May 12, 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 ten of FibroGen’s current and former officers and directors, as well as FibroGen as nominal defendant, and asserts state and federal claims based on some of the same alleged misstatements as the securities class action complaint.

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

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

District Court for the District of Delaware.

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

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

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.

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

All three derivative actions have been stayed pending resolution of any motions for summary judgment in the securities class action.

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

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

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.

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.

On March 27, 2023, the Company’s Board of Directors received another litigation demand from a purported shareholder of the Company, seeking similar action as the other litigation demands.

The Company may in the future receive such additional demands.

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Subsequent Event

Strategic Financing Agreement

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

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

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

The RIFA also provides for certain minimum repayment provisions.

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

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

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

Debt Financing Agreement

On April 29, 2023, FibroGen entered into a financing agreement (“Financing Agreement”) with investment funds managed by Morgan Stanley Tactical Value, as lenders (the “Lenders”), and Wilmington Trust, National Association, as the administrative agent (the “Administrative Agent”), providing for senior secured term loan facilities consisting of (i) a $ 75.0 million initial term loan (the “Initial Term Loan”), (ii) a $ 37.5 million delayed draw term loan that will be funded upon the achievement of certain clinical development milestones (“Delayed Draw Term Loan 1”) and, (iii) an uncommitted delayed draw term loan of up to $ 37.5 million to be funded at the Lenders sole discretion, (“Delayed Draw Term Loan 2”

and, together with the Initial Term Loan and Delayed Draw Term Loan 1, the “Term Loans”).

Pursuant to the Financing Agreement, the Lenders (i) shall fund the Initial Term Loan by May 8, 2023, (ii) shall fund the Delayed Draw Term Loan 1 within 24 business days from the date of achievement of certain clinical development milestones but no later than August 31, 2023 and, (iii) at their discretion, shall provide Delayed Draw Term Loan 2 on or prior to August 31, 2023, whether or not such clinical development milestones are achieved.

The Term Loans shall accrue interest at a rate of 14.0 % per annum, payable monthly in arrears.

The Term Loans shall mature on May 8, 2026.

The Term Loans will not be subject to amortization payments.

The Company is permitted to prepay the Term Loans from time to time, in whole or in part, subject to payment of a make-whole amount equal to the unpaid principal amount of the portion of the Term Loans being repaid or prepaid, plus accrued and unpaid interest of the portion of the Term Loans being repaid or prepaid, plus an amount equal to the remaining scheduled interest payments due on such portion of the Term Loans being repaid or prepaid as if such Term Loans were to remain outstanding until the scheduled maturity date.

During the term of the Term Loans, the Company is required to maintain a minimum balance of $ 30.0 million of unrestricted cash and cash equivalents held in accounts in the United States, tested monthly on each interest payment date (after netting the monthly interest payment then due).

In addition, while any portion of the Term Loans or any other obligations under the Financing Agreement remain outstanding, the Company must comply with certain customary affirmative and negative covenants set forth in the Financing Agreement and related loan documents, including, without limitation, restrictions or limitations on:

incurrence of further indebtedness or liens, acquisitions and other investments, breach or material default under certain material contracts, dividends, distributions and stock buy-backs, negative pledges, sales, transfers, licenses or other disposition of assets (including core intellectual property), prepayment of other indebtedness, and transactions with affiliates, in each case, subject to thresholds and exceptions set forth in the Financing Agreement and related loan documents.

The Financing Agreement provides for customary events of default triggers, including, without limitation, non-payment, breach of covenants (including the minimum cash covenant described above), material misrepresentation, cross-default to other material indebtedness of the Company or its subsidiaries (or the imposition of a material event of default fee or similar payment under a royalty monetization transaction), commencement of voluntary or involuntary bankruptcy proceedings, material judgments, change of control, invalidity of loan documents, certain ERISA events, certain regulatory events and failure to draw any portion of the Delayed Draw Term Loan 1 when funded by the Lenders.

Upon an event of default, the Administrative Agent may, and at the direction of the majority Lenders shall, accelerate all outstanding obligations of the Company under the Financing Agreement and related loan documents, terminate all outstanding funding commitments and/or exercise remedies available at law or equity or under contract for secured creditors.

The Term Loans and all other obligations of the Company under the Financing Agreement and related loan documents are guaranteed by each of the Company’s current and future, direct and indirect, subsidiaries, with certain exceptions (including an exclusion for any Chinese subsidiary of the Company).

The Term Loans are secured by substantially all assets of the Company and the guarantors, subject to customary exceptions.

Exclusive License and Option to Acquire Fortis Therapeutics

On May 5, 2023, the Company entered into an exclusive option agreement to acquire Fortis Therapeutics (“Fortis”) with its novel Phase 1 antibody-drug conjugate, FOR46, that targets a novel epitope on CD46 preferentially expressed on certain cancer cells.

FOR46 is in development for the treatment of metastatic castration-resistant prostate cancer with potential applicability in other solid tumors and hematologic malignancies.

Pursuant to an evaluation agreement entered into with Fortis concurrent with the option agreement, FibroGen has exclusively licensed FOR46 and will control and fund future research, development, including a Phase 2 clinical study sponsored by FibroGen, and manufacturing of FOR46 during the four-year option period.

As part of the clinical development strategy, FibroGen will continue the work to develop a PET-based biomarker utilizing a radiolabeled version of the targeting antibody (“PET46”) for patient selection.

FibroGen will pay Fortis $ 5.0 million during the four-year option period in support of their continued development obligations.

If FibroGen exercises the option to acquire Fortis, it will pay Fortis $ 80.0 million, and thereafter, Fortis would be eligible to receive from FibroGen up to $ 200.0 million in contingent payments associated with the achievement of various regulatory approvals.

If FibroGen acquires Fortis, it would also be responsible to pay UCSF, an upstream licensor to Fortis, development milestone fees and a single digit royalty on net sales of therapeutic or diagnostic products arising from the collaboration.

If FibroGen chooses not to acquire Fortis, its exclusive license to FOR46 would expire.

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 in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and in our Securities and Exchange Commission (“SEC”) filings, including our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022 and as amended on March 4, 2022 (“2021 Form 10-K”).

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and in our Securities and Exchange Commission (“SEC”) filings, including our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 27, 2023 (“2022 Form 10-K”).

FORWARD-LOOKING STATEMENTS

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We are a leading biopharmaceutical company discovering, developing and commercializing a pipeline of first-in-class therapeutics.

Our lead product candidate and product are pamrevlumab and roxadustat, respectively.

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.

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

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

To date, we have retained exclusive worldwide rights for pamrevlumab.

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

Roxadustat (爱瑞卓

Roxadustat is in clinical development for anemia of CKD, anemia associated with myelodysplastic syndromes (“MDS”), and chemotherapy-induced anemia in China.

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

We expect to file up to two INDs near year-end 2023:

one for an antibody targeting CCR8 and the other for an antibody targeting Galectin-9.

Financial Highlights

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except for per share data)

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Net loss per share - basic and diluted

September 30, 2022

March 31, 2023

December 31, 2022

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Accounts receivable

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

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

Our revenue for the three months ended March 31, 2023 included the revenue recognized related to the following:

$3.7 million of development revenue recognized under our collaboration agreements with our partners Astellas Pharma Inc.

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

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

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

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

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

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

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

$24.2 million of net product revenue from roxadustat commercial sales in China;

$6.0 million total milestone payments recognized under our license agreement with Eluminex Biosciences (Suzhou) Limited (“Eluminex”), including a $3.0 million milestone payment based on Eluminex implanting a biosynthetic cornea in the first patient of its clinical trial in China, and a $3.0 million manufacturing related milestone payment;

$2.1 million of drug product revenue related to active pharmaceutical ingredient (“API”) deliveries to Astellas.

As a comparison, our revenue for the three months ended March 31, 2022 included the revenue recognized related to the following:

$25.0 million regulatory milestone payment recognized 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 included as development revenue;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

$11.0 million of development revenue recognized under our collaboration agreements with our partners Astellas and AstraZeneca;

$18.9 million of net product revenue from roxadustat commercial sales in China;

$7.6 million of drug product revenue related to API deliveries to Astellas.

Operating costs and expenses for the three months ended March 31, 2023 decreased compared to the same period a year ago primarily as a result of the net effect of the following:

$13.8 million lower drug development expenses associated with drug substance and drug product manufacturing activities related to pamrevlumab which was largely completed in the prior year;

$4.7 million lower clinical trial expenses associated with Phase 3 trials for pamrevlumab and roxadustat post-approval safety studies;

$3.7 million higher employee-related expenses primarily due to overall merit increase during the current year period.

For the three months ended March 31, 2023, we had a net loss of $76.7 million, or a net loss per basic and diluted share of $0.81, as compared to a net loss of $63.2 million, or a net loss per basic and diluted share of $0.68 for the same period a year ago, due to decreases in revenue, offset by decreases in operating costs and expenses as discussed above.

Cash and cash equivalents, investments, and accounts receivable totaled $373.6 million at March 31, 2023, a decrease of $69.1 million from December 31, 2022, primarily due to the cash used in operations, partially offset by the net proceeds received under our at-the-market program, discussed under the Liquidity and Capital Resources section below.

Commercial and Development Programs

We are well positioned over the next year to report topline results from six pivotal clinical studies with two different drug candidates:

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

Our upcoming clinical trial results for pamrevlumab are:

LELANTOS-1, a Phase 3 study in non-ambulatory DMD - topline data expected in the second quarter of 2023;

ZEPHYRUS-1, a Phase 3 study in IPF –

topline data expected in mid-2023;

LELANTOS-2, a Phase 3 study in ambulatory DMD –

topline data expected in the third quarter of 2023;

LAPIS, a Phase 3 study in LAPC –

topline data expected in in the first half of 2024;

ZEPHYRUS-2, a second Phase 3 study in IPF –

topline data expected in mid-2024.

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

Our upcoming clinical trial results for roxadustat are:

Phase 3 study in China in chemotherapy-induced anemia –

topline data expected in the second quarter of 2023.

The following is an overview of our clinical and commercial programs.

Roxadustat for the Treatment of Anemia in Chronic Kidney Disease

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

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

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

In China, roxadustat (tradename:

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

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

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

Roxadustat for the Treatment of Anemia in Myelodysplastic Syndromes

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

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

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

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

Roxadustat for the Treatment of Chemotherapy-Induced Anemia

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

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

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

Monoclonal Antibody Targeting Connective Tissue Growth Factor

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

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

The United States (“U.S.”) Food and Drug Administration (“FDA”) has granted Fast Track and Orphan Drug designations to pamrevlumab for the treatment of IPF, LAPC, and DMD (with DMD also receiving Rare Pediatric Disease designation).

Pamrevlumab for the Treatment of Idiopathic Pulmonary Fibrosis

We are conducting two randomized, double-blind, placebo-controlled, Phase 3 studies of pamrevlumab in IPF.

Each study has a primary efficacy endpoint for the U.S.

of change from baseline in forced vital capacity (“FVC”).

For Europe, these same trials utilize a different primary efficacy endpoint of disease progression (defined by a decline in FVC percent predicted of greater than or equal to 10% or death), with change of FVC as the key secondary endpoint.

Other secondary endpoints will include clinical outcomes of disease progression, acute IPF exacerbations, patient reported outcomes, and quantitative changes in lung fibrosis volume from baseline.

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

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

We have now completed enrollment of both of our two Phase 3 trials of pamrevlumab in IPF patients, ZEPHYRUS-1 and ZEPHYRUS-2.

Similar to our completed Phase 2 randomized trial in 101 IPF patients (PRAISE), both of our Phase 3 ZEPHYRUS studies are double-blind, placebo-controlled trials with a primary efficacy endpoint of change in forced vital capacity (“FVC”) at 48 weeks.

FVC is a lung function test measuring the volume of air exhaled by a patient.

Secondary efficacy endpoints for each study include disease progression (defined by a decline in FVC percent predicted of greater than or equal to 10% or death), acute IPF exacerbation, and quantitative changes in lung fibrosis volume from baseline.

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

ZEPHYRUS-2 is our second Phase 3 trial of pamrevlumab in 372 IPF patients and we expect topline data from ZEPHYRUS-2 in mid-2024.

Pamrevlumab for the Treatment of Locally Advanced Unresectable Pancreatic Cancer

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

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

LAPIS is our double-blind placebo-controlled Phase 3 clinical program for pamrevlumab as a therapy for LAPC.

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

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

Pamrevlumab for the Treatment of Metastatic Pancreatic Cancer

In June 2021 the Pancreatic Cancer Action Network's (PanCAN) Precision PromiseSM adaptive trial platform included pamrevlumab, with standard of care chemotherapy treatments for pancreatic cancer (gemcitabine and Abraxane®), in its study for patients with metastatic pancreatic cancer.

The combination therapy is offered to patients as either a first- or second-line treatment option (the first experimental treatment arm to be offered as a first-line treatment in PanCAN’s innovative Precision Promise trial).

In June 2021, the Pancreatic Cancer Action Network’s (PanCAN) Precision Promise SM adaptive trial platform included pamrevlumab in combination with standard of care chemotherapy treatments for pancreatic cancer (gemcitabine and Abraxane ® ), in its study for patients with metastatic pancreatic cancer.

The pamrevlumab portion of the trial is still ongoing.

Drug candidates in the Precision Promise study will continue to progress (including from Phase 2 to Phase 3) unless stopped sooner for safety or futility.

The pamrevlumab combination therapy is offered to patients as either a first- or second-line treatment option.

Pamrevlumab was the first experimental treatment arm to be offered as a first-line treatment in PanCAN’s innovative Precision Promise trial.

The objective of Precision Promise is to expedite the study and approval of promising therapies for pancreatic cancer by bringing multiple stakeholders together, including academic, industry and regulatory entities.

Pamrevlumab for the Treatment of Duchenne Muscular Dystrophy

Non-Ambulatory Patients

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

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

Patients are randomized at a 1:1 ratio to pamrevlumab or placebo for a treatment period of 52 weeks.

Non-Ambulatory DMD Patients

LELANTOS-1 is our double-blind, placebo-controlled Phase 3 clinical trial evaluating pamrevlumab as a treatment for DMD, in combination with systemic corticosteroids.

LELANTOS-1 completed enrollment of 99 non-ambulatory DMD patients randomized at a 1:1 ratio to pamrevlumab or placebo for a treatment period of 52 weeks.

The primary endpoint will assess change in upper limb function from baseline to Week 52 and additional endpoints will include pulmonary, cardiac, performance, and fibrosis assessments.

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

Ambulatory Patients

In the second quarter of 2022, we completed enrollment of our double-blind, placebo-controlled Phase 3 clinical trial, LELANTOS-2, evaluating pamrevlumab in combination with systemic corticosteroids in 73 ambulatory DMD patients.

Patients aged 6-12 are randomized at a 1:1 ratio to pamrevlumab or placebo for a treatment period of 52 weeks.

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

Ambulatory DMD Patients

LELANTOS-2 is our double-blind, placebo-controlled Phase 3 trial evaluating pamrevlumab in DMD, in combination with systemic corticosteroids.

LELANTOS-2 completed enrollment of 73 ambulatory patients aged 6-12, randomized at a 1:1 ratio to pamrevlumab or placebo for a treatment period of 52 weeks.

The primary efficacy endpoint will assess ambulatory function, measured by the change in North Star Ambulatory Assessment from baseline to Week 52.

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

Strategic Financing Agreement

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

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

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

We expect topline data from this study in the [third] quarter of 2023.

Roxadustat for the Treatment of Anemia in Chronic Kidney Disease

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

Roxadustat (爱瑞卓

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

In China, roxadustat (tradename:

爱瑞卓

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

In the first quarter of 2023, roxadustat achieved an over 50% increase in sales volume relative to the first quarter of 2022.

As of February 2023, roxadustat was the top CKD anemia brand in China with approximately 35% value share within the segment of erythropoiesis stimulating agents and HIF-PH inhibitors (roxadustat is the only HIF-PH inhibitor on the market in China).

Roxadustat for the Treatment of Anemia in Myelodysplastic Syndromes

We recently reported topline data from the 140 patient Phase 3 arm of MATTERHORN, our Phase 2/3 placebo-controlled, double-blind clinical trial of roxadustat for the treatment of anemia in MDS.

MATTERHORN did not meet its primary efficacy endpoint.

The proportion of patients who achieved red blood cell transfusion independence in the first 28 weeks was 47.5% for the roxadustat arm compared to 33.3% for the placebo arm (p=0.217).

The adverse event profile of roxadustat that was observed in the preliminary safety analysis was generally consistent with previous findings.

Safety will be further evaluated at study completion.

Roxadustat for the Treatment of Chemotherapy-Induced Anemia

We have completed enrollment of our active-controlled Phase 3 clinical trial in China of roxadustat in chemotherapy-induced anemia for non-myeloid malignancies.

The primary efficacy endpoint is the mean change in hemoglobin level from baseline to the level averaged over Weeks 9-13.

This trial has enrolled 159 subjects and we expect topline data from this study in the second quarter of 2023.

Debt Financing Agreement

On April 29, 2023, we entered into a financing agreement (the “Financing Agreement”) with investment funds managed by Morgan Stanley Tactical Value, as lenders, and Wilmington Trust, National Association, as the administrative agent, providing for senior secured term loan facilities consisting of (i) a $75.0 million initial term loan, (ii) a $37.5 million delayed draw term loan that will be funded upon the achievement of certain clinical development milestones, and (iii) an uncommitted delayed draw term loan of up to $37.5 million, to be funded at the Lenders sole discretion.

For additional details about this financing transaction, see Note 11, Subsequent Event , to the condensed consolidated financial statements.

Exclusive License and Option to Acquire Fortis Therapeutics

On May 5, 2023, we entered into an exclusive option agreement to acquire Fortis Therapeutics (“Fortis”) with its novel Phase 1 antibody-drug conjugate, FOR46, that targets a novel epitope on CD46 preferentially expressed on certain cancer cells.

FOR46 is in development for the treatment of metastatic castration-resistant prostate cancer with potential applicability in other solid tumors and hematologic malignancies.

As part of the clinical development strategy, we will continue the work to develop a PET-based biomarker utilizing a radiolabeled version of the targeting antibody (“PET46”) for patient selection.

FibroGen will pay Fortis $5.0 million during the four-year option period in support of their continued development obligations.

If we exercise the option to acquire Fortis, we will pay Fortis $80.0 million, and thereafter, Fortis would be eligible to receive from FibroGen up to $200.0 million in contingent payments associated with the achievement of various regulatory approvals.

If we acquire Fortis, we would also be responsible to pay UCSF, an upstream licensor to Fortis, development milestone fees and a single digit royalty on net sales of therapeutic or diagnostic products arising from the collaboration.

If FibroGen chooses not to acquire Fortis, its exclusive license to FOR46 would expire.

Eluminex Agreement

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

In April 2023, FibroGen and Eluminex entered into an Amended and Restated Exclusive License Agreement in order to add to the license rights to recombinant human collagen Type I.

During the three months ended March 31, 2023, we recognized a $3.0 million milestone payment based on Eluminex implanting a biosynthetic cornea in the first patient of its clinical trial in China, and a $3.0 million manufacturing related milestone payment.

Collaboration Partnerships for Roxadustat

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

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

Under these agreements, the aggregate amount of consideration received through March 31, 2023 totaled $790.1 million.

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

2 unchanged sentences

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

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

The related drug product revenue was $1.7 million and $7.6 million for three months ended March 31, 2023 and 2022, respectively.

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

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

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

The related drug product revenue was $0.4 million for the three months ended March 31, 2023.

There was no related drug product revenue for the three months ended March 31, 2022.

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

1 unchanged sentence

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

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

Under the AstraZeneca agreements, the aggregate amount of consideration received through March 31, 2023 totaled $516.2 million.

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

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

(“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 the three and nine months ended September 30, 2022 and the three months ended September 30, 2021.

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

There was no related drug product revenue for the three months ended March 31, 2023 and 2022.

AstraZeneca China Amendment

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

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

We recognized related net product revenue of $24.2 million and $18.9 million for the three months ended March 31, 2023 and 2022, respectively.

Additional Information Related to Collaboration Agreements

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

Total cash consideration received through March 31, 2023 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

September 30, 2022

March 31, 2023

Cash Payment for Milestones

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RESULTS OF OPERATIONS

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands)

4 unchanged sentences

Total revenue

NM = Not meaningful

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.

1 unchanged sentence

Development revenue includes co-development and other development related services.

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

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

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

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

We recognize development services as revenue in the period in which they are billed to our partners, excluding China.

As of March 31, 2023, 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.

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

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.

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

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

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.

2 unchanged sentences

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

Total revenue decreased $24.7 million, or 41% for the three months ended March 31, 2023, compared to the same period a year ago for the reasons discussed in the sections below.

License Revenue

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands)

1 unchanged sentence

Total license revenue

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

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

NM = Not meaningful

License revenue decreased $16.6 million, or 73% for the three months ended March 31, 2023, compared to the same period a year ago.

License revenue recognized under our collaboration agreements with Astellas for the three months ended March 31, 2022 represented the allocated revenue related to a $25.0 million regulatory milestone payment 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 license agreement with Eluminex for the three months ended March 31, 2023 represented a $3.0 million milestone payment based on Eluminex implanting a biosynthetic cornea in the first patient of its clinical trial in China, and a $3.0 million manufacturing related milestone payment when such milestones were achieved.

Development and Other Revenue

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands)

3 unchanged sentences

Total development and other revenue

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

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

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

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

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

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

Development and other revenue decreased $7.9 million, or 67% for the three months ended March 31, 2023, compared to the same period a year ago.

Development revenue recognized under our collaboration agreements with Astellas for the three months ended March 31, 2022 included the allocated revenue of $2.4 million related to the above-mentioned $25.0 million regulatory milestone payment associated with the approval in Russia during the first quarter of 2022.

In addition, development revenue recognized under our collaboration agreements with Astellas for the three months ended March 31, 2023 was impacted by the decrease in co-development billings related to the development of roxadustat under our collaboration agreements with Astellas as a result of the substantial completion of Phase 3 trials for roxadustat.

Development revenue recognized under our collaboration agreements with AstraZeneca for the three months ended March 31, 2023 was impacted by the decrease in CKD-related co-development billings in the U.S.

Other revenue recognized for the three months ended March 31, 2023 was primarily related to our contract manufacturing agreement with Eluminex, under which we are responsible for supplying the cornea product at 110% of our product manufacturing costs until our manufacturing technology is fully transferred to Eluminex.

Product Revenue, Net

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands)

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Net transaction price

Increase in deferred revenue

Decrease in deferred revenue

Sales to Falikang revenue, net

Total product revenue, net

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

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

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

Substantially all direct product sales to distributors in China have been made by Falikang, while FibroGen Beijing continues to sell product directly in one province in China.

Total product revenue, net increased $5.3 million, or 28% for the three months ended March 31, 2023, compared to the same period a year ago.

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.

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

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

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

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

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

Product revenue from direct sales, net remained relatively flat for the three months ended March 31, 2023, compared to the same period a year ago.

The total discounts and rebates were immaterial for each of the three months ended March 31, 2023 and 2022.

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

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

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

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

dollar during the current year period.

Sales to Falikang revenue, net increased $5.1 million, or 32% for the three months ended March 31, 2023, compared to the same periods a year ago.

The gross transfer price increased $11.5 million and the calculated profit share increased $6.1 million for the three months ended March 31, 2023, compared to the same period a year ago, respectively, primarily due to the increase in sales volume during the current year period.

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

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

Following updates to our estimates, we recognized $2.1 million and $2.3 million for the three months ended March 31, 2023 and 2022, respectively, from the previously deferred revenue of the China performance obligation.

Drug Product Revenue

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands)

2 unchanged sentences

Astellas Europe Agreement

AstraZeneca U.S./RoW Agreement

Total drug product revenue:

NM = Not meaningful

Drug product revenue decreased $5.5 million, or 72% for the three months ended March 31, 2023, compared to the same period a year ago.

Astellas Japan Agreement

During the first quarter of 2023, 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 $1.7 million.

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

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

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

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

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

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

Astellas Europe Agreement

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

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

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

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

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

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

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

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

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

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

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

As a result, we reclassified the related deferred revenue to accrued liabilities during the year ended December 31, 2022.

As of December 31, 2022, the related balance was $57.4 million in accrued liabilities.

Further during the first quarter of 2023, we reclassified $16.6 million from the related deferred revenue to accrued liabilities.

As of March 31, 2023, the balances related to the bulk drug product price true-up under the Astellas Europe Agreement and the Astellas EU Supply Agreement were $57.5 million in accounts payable and $16.4 million in accrued liabilities, representing our best estimate that these amounts will be paid within the next 12 months.

In addition, we recognized royalty revenue of $0.4 million as drug product revenue from the deferred revenue under the Astellas Europe Agreement for the three months ended March 31, 2023.

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

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 during the nine months ended September 30, 2021, and recorded a reduction to the drug product revenue of $2.2 million and $11.2 million as deferred revenue.

There was no shipment of bulk drug product to AstraZeneca as commercial supply under the terms of the AstraZeneca Master Supply Agreement during the three months ended March 31, 2023 and 2022.

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

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

As a result, we reclassified $11.2 million from the related deferred revenue to accrued liabilities during the year ended December 31, 2022.

As of each of March 31, 2023 and 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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands)

4 unchanged sentences

Total operating costs and expenses

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

Total operating costs and expenses increased $11.6 million, or 9% for the three months ended March 31, 2023, compared to the same period a year ago for the reasons discussed in the sections below.

Cost of Goods Sold

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

Cost of goods sold decreased $0.7 million, or 18% for the three months ended March 31, 2023, compared to the same period a year ago.

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

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

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

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

Cost of goods sold associated with the roxadustat commercial sales in China was $3.2 million for the three months ended March 31, 2023, as compared to $2.6 million to the same period a year ago, an increase of $0.6 million, or 21%, resulting from the increase in the sales volume, partially offset by improved unit cost efficiency due to higher production volume.

Cost of goods sold in the U.S., associated with costs of the roxadustat API or bulk drug product delivered to Astellas and AstraZeneca, was immaterial for the three months ended March 31, 2023 and 2022.

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

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

Cost of goods sold also included manufacturing costs related to our contract manufacturing revenue from Eluminex, which was immaterial for the three months ended March 31, 2023 and 2022.

Research and Development Expenses

1 unchanged sentence

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.

Research and development costs are expensed as incurred.

Costs for certain development activities are recognized 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.

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 three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30,

Nine Months Ended September 30,

The following table summarizes our research and development expenses incurred during the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

Product Candidate

4 unchanged sentences

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

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

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

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

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

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

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

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

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

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

Research and development expenses decreased $14.5 million, or 16% for the three months ended March 31, 2023, compared to the same period a year ago, primarily as a result of the net effect of the following:

Decrease of $13.8 million in drug development expenses associated with drug substance and drug product manufacturing activities primarily related to pamrevlumab, which incurred significant activities in the prior year period;

Decrease of $4.7 million in clinical trials costs, primarily due to Phase 3 trials for pamrevlumab and CKD studies for roxadustat reaching to their completion;

Increase of $2.1 million in employee-related costs primarily due to overall merit increase during the current year period.

Selling, General and Administrative Expenses

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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 and may continue to decrease in certain areas over time.

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

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

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

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

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

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

SG&A expenses increased $3.7 million, or 12% for the three months ended March 31, 2023, compared to the same period a year ago, primarily as a result of the net effect of the following:

Increase of $1.6 million in employee-related costs primarily due to overall merit increase during the current year period;

Increase of $1.6 million in legal expenses primarily due to corporate legal activities.

Interest and Other, Net

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands)

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

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

Interest expense includes interest related to sale of future revenues and interest related to the Technology Development Center of the Republic of Finland product development obligations.

Interest expense for the three months ended March 31, 2023 represented the interest related to sale of future revenues under the Revenue Interest Financing Agreement (“RIFA”) with an affiliate of NovaQuest Capital Management (“NovaQuest”).

See Note 6, Liability Related to Sale of Future Revenues , to the condensed consolidated financial statements for details.

Interest expense was immaterial for the three months ended March 31, 2022.

Interest Income and Other Income (Expenses), Net

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

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

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

Interest income and other income (expenses), net improved $1.4 million, or 422% for the three months ended March 31, 2023, compared to the same period a year ago, primarily due to higher interest income from our investments with higher interest rate during the current year period.

Three Months Ended March 31,

(dollars in thousands)

Income (loss) before income taxes

Loss before income taxes

Provision for income taxes

Effective tax rate

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

Provisions for income taxes for the three months ended March 31, 2023 and 2022 were primarily due to foreign taxes.

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

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.

However, given our anticipated future foreign earnings, we believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a portion of the valuation allowance may no longer be needed.

Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

The exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve.

Investment Income in Unconsolidated Variable Interest Entity

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

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

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Financial Condition

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

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

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

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 6, Liability Related to Sale of Future Revenues , to the condensed consolidated financial statements.

On February 27, 2023, we entered into an Amended and Restated Equity Distribution Agreement (the “at-the-market agreement”) with Goldman Sachs & Co., LLC and BofA Securities, Inc.

(each a “Sales Agent”), which amended and restated its 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.

Under the at-the-market agreement, we may issue and sell, from time to time and through the Sales Agents, shares of our common stock having an aggregate offering price of up to $200.0 million (the “ATM Program”).

Under the ATM Program, we sold 1,541,579 shares of our common stock and received net proceeds of approximately $30.8 million during the three months ended March 31, 2023, See Note 7, At-the-Market Program , to the condensed consolidated financial statements for details.

As of March 31, 2023, we had cash and cash equivalents of $188.6 million, compared to $155.7 million as of December 31, 2022.

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

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

As of March 31, 2023, we had short-term investments of $167.4 million, compared to short-term investments of $266.3 million and long-term investments of $4.3 million as of December 31, 2022.

As of March 31, 2023, a total of $98.9 million of our cash and cash equivalents was held outside of the U.S.

in our foreign subsidiaries, including $77.6 million held in China, to be used primarily for our China operations.

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

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

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

On April 29, 2023, we entered into a financing agreement (the “Financing Agreement”) with investment funds managed by Morgan Stanley Tactical Value, as lenders, and Wilmington Trust, National Association, as the administrative agent, providing for senior secured term loan facilities consisting of (i) a $75.0 million initial term loan, (ii) a $37.5 million delayed draw term loan that will be funded upon the achievement of certain clinical development milestones and, (iii) an uncommitted delayed draw term loan of up to $37.5 million, to be funded at the Lenders sole discretion.

For additional details about this financing transaction, see Note 11, Subsequent Event , to the condensed consolidated financial statements.

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

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash provided by (used in):

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Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents

Net increase in cash and cash equivalents

Operating Activities

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

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

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

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

Net cash used in operating activities was $101.6 million for the three months ended March 31, 2023 and consisted primarily of net loss of $76.7 million adjusted for non-operating cash items of $21.1 million, and a net decrease in operating assets and liabilities of $46.0 million.

The significant non-operating cash items included stock-based compensation expense of $16.1 million, depreciation expense of $2.5 million and non-cash interest expense related to sale of future revenues of $2.2 million.

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

Accrued and other liabilities decreased $66.3 million, primarily related to the movements related to API and bulk drug product price true-up, resulting from changes in estimated variable consideration associated with the API shipments fulfilled under the terms of the Astellas Japan Amendment, and the bulk drug product transferred under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement, including scheduling for payment of $57.4 million previously accrued balance and therefore moved it to accounts payable as of March 31, 2023.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The accrued and other liabilities were also impacted by the timing of invoicing and payment;

Deferred revenue decreased $18.9 million, primarily related to the reclassification of $16.6 million to accrued liabilities, resulting from changes in estimated variable consideration associated with the bulk drug product transferred to Astellas under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement during the current year period.

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

Inventories increased $1.9 million, driven by the increased inventory level primarily related to FibroGen Beijing’s productions of roxadustat for commercial sales purposes;

Accounts payable increased $40.5 million, primarily driven by the above-mentioned scheduling for payment of $57.4 million previously accrued balance related to the bulk drug product transferred under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement, as well as the timing of invoicing and payments.

Net cash used in operating activities was $8.5 million for the three months ended March 31, 2022 and consisted primarily of net loss of $63.2 million adjusted for non-operating cash items of $20.4 million, offset by a net increase in operating assets and liabilities of $34.4 million.

The significant non-operating cash items included stock-based compensation expense of $17.2 million, and depreciation expense of $2.5 million.

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

Accrued and other liabilities increased $66.0 million, primarily related to the total of 60.8 million for API and bulk drug product price true-up as of March 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 Master Supply Agreement.

The accrued and other liabilities were also impacted by the timing of invoicing and payment;

Prepaid expenses and other current assets decreased $11.4 million, primarily due to the collection of $8.0 million from Eluminex for upfront license payment during the quarter, and less prepayments made for roxadustat API manufacturing activities;

Accounts payable increased $10.2 million, primarily driven by the timing of invoicing and payments;

Accounts receivable increased $26.5 million, primarily due to the $25.0 million regulatory milestone payment receivable from Astellas under the Europe Agreement associated with the approval in Russia as of March 31, 2022;

Deferred revenue decreased $13.0 million, primarily related to 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;

Inventories increased $12.0 million, driven by the increased inventory level primarily related to pre-launch inventory cost capitalized for the U.S.

entity, and FibroGen Beijing’s productions of roxadustat for commercial sales purposes.

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

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

Net cash provided by investing activities was $103.5 million for the three months ended March 31, 2023 and consisted primarily of $104.8 million of proceeds from maturities of investments and $1.7 million of proceeds from sales of available-for-sale securities, partially offset by $2.5 million of cash used in purchases of available-for-sale securities.

Net cash used in investing activities was $25.9 million for the three months ended March 31, 2022 and consisted primarily of $76.1 million of proceeds from maturities of investments and $7.4 million of proceeds from sales of available-for-sale securities, partially offset by $35.0 million of cash paid for the acquired in-process research and development asset, and $20.9 million of cash used in purchases of available-for-sale securities.

Financing Activities

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

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

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

Net cash provided by financing activities was $31.5 million for the three months ended March 31, 2023 and consisted primarily of $30.8 million net proceeds received under the ATM Program.

See Note 7, At-the-Market Program, to the condensed consolidated financial statements for details.

Net cash used in financing activities was $2.9 million for the three months ended March 31, 2022 and consisted primarily of $3.0 million of cash paid for payroll taxes on restricted stock unit releases.

Material Cash Requirements

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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.

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

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

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 and the net proceeds received under our ATM program, will be sufficient to meet our anticipated cash requirements for at least the next 12 months from the date of issuance of the financial statements included in this Quarterly Report on Form 10-Q.

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

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Contractual Obligations

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

As of March 31, 2023, we had $86.8 million of operating lease liabilities.

The material cash requirements related to our lease liabilities included $13.5 million expected to be paid within the next 12 months.

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

As of March 31, 2023, we had outstanding total non-cancelable purchase obligations of $51.9 million, including $22.4 million for manufacture and supply of pamrevlumab, $4.1 million for manufacture and supply of roxadustat, and $25.4 million for other purchases and programs.

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

The material cash requirements related to our non-cancelable purchase obligations included $28.9 million expected to be paid within the next 12 months.

Under the RIFA with NovaQuest, as of March 31, 2023, we had $51.6 million of liability related to sale of future revenues on the consolidated balance sheets, $3.2 million of which we anticipate to pay within the next 12 month.

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 6, 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 the Company upon the achievement of development, regulatory and commercial milestones.

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

As of March 31, 2023, future milestone payments for research and preclinical stage development programs consisted of up to approximately $697.9 million in total potential future milestone payments under our license agreements with HiFiBiO (for Gal-9 and CCR8), Medarex, Inc.

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

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Off-Balance Sheet Arrangements

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

Recently Issued Accounting Guidance

For recently issued accounting guidance, see Note 1, Significant Accounting Policies, to the condensed consolidated financial statements.

During the three months ended March 31, 2023, 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

There have been no material changes in our critical accounting policies, estimates and judgments during the three months ended March 31, 2023 compared with the disclosures in Part II, Item 7 of our 2022 Form 10-K.

QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK.

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

During the three months ended March 31, 2023, we believe there were no material changes to our exposure to market risks as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk”

in our 2022 Form 10-K.

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

What changed 10-Q

Item 1. Financial Statements