What changed in this filing

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Item 1. Financial Statements

2023-08-07 compared with 2023-05-08 · 562 added, 372 removed, 792 unchanged (54% of the section changed)

2 unchanged sentences

(In thousands, except per share amounts)

March 31, 2023

June 30, 2023

December 31, 2022

10 unchanged sentences

Operating lease right-of-use assets

Liabilities, stockholders’

equity (deficit) and non-controlling interests

Liabilities, redeemable non-controlling interests and deficit

Current liabilities:

7 unchanged sentences

Operating lease liabilities, non-current

Senior secured term loan facilities, non-current

Liability related to sale of future revenues, non-current

2 unchanged sentences

Commitments and Contingencies (Note 12)

Redeemable non-controlling interests

Stockholders’

2 unchanged sentences

no shares issued

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

and outstanding at June 30, 2023 and December 31, 2022

Common stock, $ 0.01 par value;

225,000 shares authorized at March 31, 2023

225,000 shares authorized at June 30, 2023

and December 31, 2022;

98,204 and 94,166 shares issued and outstanding at

March 31, 2023 and December 31, 2022

June 30, 2023 and December 31, 2022

Additional paid-in capital

2 unchanged sentences

Total stockholders’

Non-controlling interests

deficit attributable to FibroGen

Nonredeemable non-controlling interests

Total deficit

Total liabilities, stockholders’

deficit and non-controlling interests

Total liabilities, redeemable non-controlling interests and deficit

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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

4 unchanged sentences

from a related party)

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

from a related party)

Drug product revenue, net (from a related party)

Total revenue

10 unchanged sentences

Loss before income taxes

Provision for income taxes

Provision for (benefit from) income taxes

Investment income in unconsolidated variable

7 unchanged sentences

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive income (loss):

11 unchanged sentences

Comprehensive

Nonredeemable

Non-Controlling

Income (Loss)

Balance at December 31,

Change in unrealized gain or

loss on investments

Foreign currency translation

Equity (Deficit)

Balance at March 31,

Consolidation of Fortis

Change in unrealized gain

or loss on investments

Foreign currency

translation adjustments

Issuance of common stock

1 unchanged sentence

Shares issued from stock

plans, net of payroll taxes

Stock-based compensation

Balance at June 30,

Balance at March 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 June 30,

FIBROGEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIT) (CONTINUED)

(In thousands, except share data)

For The Six Month Period

Comprehensive

Nonredeemable

Non-Controlling

Equity (Deficit)

Balance at December 31,

Change in unrealized gain or

loss on investments

Foreign currency translation

Consolidation of Fortis

Change in unrealized gain

or loss on investments

Foreign currency

translation adjustments

Issuance of common stock

under ATM Program

Shares issued from stock

plans, net of payroll taxes

plans, net of payroll

Stock-based compensation

Balance at March 31,

Balance at June 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 June 30,

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

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

3 unchanged sentences

Investment income in unconsolidated variable interest entity

Loss on disposal of property and equipment

Loss (gain) on disposal of property and equipment

Stock-based compensation

Acquired in-process research and development expenses

Non-cash interest expense related to sale of future revenues

16 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

Cash acquired from consolidation of Fortis

Proceeds from sales of available-for-sale securities

2 unchanged sentences

Financing activities

Proceeds from senior secured term loan facilities, net of issuance costs

Cash paid for transaction costs for senior secured term loan facilities

Repayments of finance lease liabilities

5 unchanged sentences

Effect of exchange rate change on cash and cash equivalents

Net increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Total cash and cash equivalents at beginning of period

10 unchanged sentences

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

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

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

Pamrevlumab is also in Phase 2/3 development for the treatment of metastatic pancreatic cancer.

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

2 unchanged sentences

® , 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.

Roxadustat is in clinical development for 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.

1 unchanged sentence

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the accounts of FibroGen, its wholly-owned subsidiaries and its majority-owned subsidiaries, FibroGen Europe Oy and FibroGen China Anemia Holdings, Ltd.

The condensed consolidated financial statements include the accounts of FibroGen, its wholly-owned subsidiaries and its majority-owned subsidiaries, as well as any variable interest entity (“VIE”) for which FibroGen is the primary beneficiary.

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

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

For any VIE for which FibroGen is not the primary beneficiary, the Company uses the equity method of accounting.

The Company operates as one reportable segment —

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

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

(“U.S.

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

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

9 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 2022 Form 10-K.

Asset Acquisition

The Company evaluates acquisitions of entities or assets to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

If this screen criteria is met, the transaction is accounted for as an asset acquisition.

If not, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the definition of a business.

The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs.

In an asset acquisition, the cost allocated to acquire in-process research and development (“IPR&D”) with no alternative future use is charged to research and development expense at the acquisition date.

The Company recognizes assets acquired and liabilities assumed in asset acquisitions, including contingent assets and liabilities, and non-controlling interests (“NCI”) in the acquired assets at their estimated fair values as of the date of acquisition.

An NCI represents the non-affiliated equity interest in the underlying entity or asset.

The Company presents redeemable NCI in its consolidated statements of changes in equity within mezzanine equity.

Nonredeemable NCI and redeemable NCI are initially recorded at their fair values.

Subsequently, net loss in the underlying entity or asset is only allocated to nonredeemable NCI.

Net income in the underlying entity or asset is allocated to nonredeemable NCI and redeemable NCI based on their respective stated rights.

Net Loss per Share

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

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

The Company reported a net loss for each of the three and six months ended June 30, 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, 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,

Three Months Ended June 30,

Six Months Ended June 30,

Employee stock options

9 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 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,

The aggregate amount of consideration received through June 30, 2023 totaled $ 105.1 million , excluding drug product revenue that is discussed under the Drug Product Revenue, Net section below.

Based on its current development plans for roxadustat in Japan, the Company does not expect to receive most or all of the additional potential milestones under the Astellas Japan Agreement.

Amounts recognized as license revenue and development revenue under the Astellas Japan Agreement were as follows for the three and six months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Performance Obligation

Astellas Japan Agreement

License revenue

Development revenue

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):

The transaction price related to consideration received through June 30, 2023 and accounts receivable has been allocated to each of the following performance obligations under the Astellas Japan Agreement (in thousands):

Astellas Japan Agreement

Total Consideration

Through March 31, 2023

Through June 30, 2023

Development revenue

Total license and development revenue

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.

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

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

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

Astellas Europe Agreement

6 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.

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,

The aggregate amount of consideration received under the Astellas Europe Agreement through June 30, 2023 totaled $ 685.0 million , excluding drug product revenue that is discussed under the Drug Product Revenue, Net section below.

Based on its current development plans for roxadustat in Europe, the Company does not expect to receive most or all of the additional potential milestones under the Astellas Europe Agreement.

Amounts recognized as license revenue and development revenue under the Astellas Europe Agreement were as follows for the three and six months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Performance Obligation

2 unchanged sentences

Development revenue

Astellas Europe Agreement

Total Consideration

Through March 31, 2023

Through June 30, 2023

Development revenue

Total license and development revenue

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.

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 June 30, 2023 under the Astellas Europe Agreement.

The remainder of the transaction price related to the Astellas Europe Agreement includes $ 2.7 million of variable consideration from estimated future co-development billing and is expected to be recognized over the remaining development service period.

1 unchanged sentence

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

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

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

AstraZeneca Agreements

2 unchanged sentences

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

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

China is covered by a separate agreement with AstraZeneca described below.

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

1 unchanged sentence

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 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 chronic kidney disease 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.

The aggregate amount of consideration received under the AstraZeneca U.S./RoW Agreement through June 30, 2023 totaled $ 439.0 million , excluding drug product revenue that is discussed separately below.

Based on its current development plans for roxadustat in the U.S., the Company does not expect to receive most or all of the additional potential milestones under the AstraZeneca U.S./RoW Agreement.

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

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

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

AstraZeneca China Agreement

2 unchanged sentences

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 .

The aggregate amount of such consideration received for milestone and upfront payments through June 30, 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 an amendment to the AstraZeneca China Amendment, relating to the development and commercialization of roxadustat in China (the “AstraZeneca China Amendment”).

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

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

2 unchanged sentences

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 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,

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 and six months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Performance Obligation

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

License revenue

Development revenue

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):

The transaction price relat ed to consideration received through June 30, 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

1 unchanged sentence

Cumulative Revenue

Through March 31, 2023

Through June 30, 2023

Deferred Revenue at

March 31, 2023

June 30, 2023

Total Consideration

Through March 31, 2023

Through June 30, 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 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.

As of June 30, 2023, deferred revenue included $ 157.4 million related to the AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement, which represents the net of $ 178.2 million of deferred revenue presented above and a $ 20.8 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 $ 4.9 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.

2 unchanged sentences

Product Revenue, Net

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,

Product revenue, net from the sales of roxadustat commercial product in China was as follows for the three and six months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Direct Sales:

6 unchanged sentences

Net transaction price

Decrease in deferred revenue

Decrease (increase) in deferred revenue

Sales to Falikang revenue, net

3 unchanged sentences

Due to the Company’s legal right to offset, at each balance sheet date, the rebates and discounts are presented as reductions to gross accounts receivable from the distributor, or as a current liability to the distributor to the extent that the total amount exceeds the gross accounts receivable or when the Company expects to settle the discount in cash.

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

The 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.

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

The contract liabilities were included in accrued and other current liabilities in the condensed consolidated balance sheet and were immaterial as of June 30, 2023 and December 31, 2022, respectively.

The rebates and discounts reflected as reductions to gross accounts receivable for direct sales were immaterial as of June 30, 2023 and December 31, 2022, respectively.

Sales to Falikang –

8 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 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.

Following updates to its estimates, the Company deferred $ 3.3 million and $ 1.2 million from the revenue of the China performance obligation during the three and six months ended June 30, 2023, respectively.

The product revenue recognized for the three and six months ended June 30, 2023 included a decrease in revenue of $ 4.7 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

March 31, 2023

June 30, 2023

Product revenue - AstraZeneca China

1 unchanged sentence

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 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 months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

As of June 30, 2023 , approximately $ 24.8 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 $ 2.5 million and $ 0.5 million as of June 30, 2023 and December 31, 2022 , respectively.

Drug Product Revenue, Net

Drug product revenue from commercial-grade active pharmaceutical ingredient (“API”) or bulk drug product sales to Astellas and AstraZeneca was as follows for the three and six months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Astellas Japan Agreement

Astellas Europe Agreement

Drug product revenue

Drug product revenue, net

Astellas Japan Agreement

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.

During the three months ended June 30, 2023 , the Company fulfilled two shipment obligations under the terms of Astellas Japan Amendment, and recognized related drug product revenue of $ 14.4 million in the same period.

In addition, t he Company updates its estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment at each balance sheet date.

As a result, the Company recorded a reduction to the drug product revenue of $ 0.6 million for the three months ended June 30, 2023.

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 exchange impacts, among others.

For 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 an adjustment to the drug product revenue of $ 1.7 million.

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.

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 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 June 30, 2023, t he balances related to the API price true-up under the Astellas Japan Agreement were $ 4.6 million in accounts payable, $ 1.4 million in accrued liabilities and $ 0.6 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.

1 unchanged sentence

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.

The Company updates its estimate of variable consideration related to the bulk drug product transferred in prior years at each balance sheet date.

During 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, 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.

As of De cember 31, 2022, the related balance was $ 57.4 million in accrued liabilities, which was paid to Astellas during the second quarter of 2023.

Further for the six months ended June 30, 2023 , the Company reclassified $ 24.0 million from the related deferred revenue to accrued liabilities.

As of June 30, 2023, the balances related to the bulk drug product price true-up under the Astellas Europe Agreement and the Astellas EU Supply Agreement were $ 23.8 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 $ 0.5 million and $ 0.8 million as drug product revenue from the deferred revenue under the Astellas Europe Agreement during the three and six months ended June 30, 2023, respectively.

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.

3 unchanged sentences

Reclassified to Accrued Liability / Accounts Payable

March 31, 2023

June 30, 2023

Drug product revenue - deferred revenue:

1 unchanged sentence

AstraZeneca U.S./RoW Agreement

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.

There was no shipment of bulk drug product to AstraZeneca as commercial supply under the terms of the AstraZeneca Master Supply Agreement during the periods presented.

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 .

As a result, the Company reclassified $ 11.2 million from the related deferred revenue to accrued liabilities during the year ended December 31, 2022, which remained unchanged as of June 30, 2023 and December 31, 2022, representing the Company’s best estimate that this amount will be paid within the next 12 months .

Eluminex Agreement

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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.

In April 2023, FibroGen and Eluminex entered into an Amended and Restated Exclusive License Agreement (“A&R Eluminex Agreement”) in order to add to the license rights to recombinant human collagen Type I (in addition to the rights to collagen Type III that were already licensed).

The A&R Eluminex Agreement included additional total upfront payments of $ 1.5 million.

During the three months ended June 30, 2023 , the Company recognized a $ 1.0 million upfront payment under the A&R Eluminex Agreement.

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.

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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 months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Amounts recognized as revenue under the Eluminex were as follows for the three and six months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Performance Obligation

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Other revenue - contract manufacturing

Exclusive License and Option to Acquire Fortis Therapeutics

On May 5, 2023 (the “Option Acquisition Date”), the Company entered into an exclusive option agreement to acquire Fortis Therapeutics (“Fortis”) with its novel Phase 1 antibody-drug conjugate, FOR46 (now referred to as “FG-3246”), that targets a novel epitope on CD46 preferentially expressed on certain cancer cells.

FG-3246 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 (together the “Fortis Agreements”), FibroGen has exclusively licensed FG-3246 and will control and fund future research, development, including a Phase 2 clinical study sponsored by FibroGen, and manufacturing of FG-3246 during the up-to 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 for patient selection.

Pursuant to the guidance under Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”), the Company determined that Fortis is a VIE and that the Company is the primary beneficiary of Fortis, as through the Fortis Agreements the Company has the power to direct activities that most significantly impact the economic performance of Fortis.

Therefore, the Company consolidated Fortis starting from the Option Acquisition Date, and continues to consolidate as of June 30, 2023.

The transaction was accounted for as an asset acquisition under ASC 805, Business Combinations , as substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable IPR&D asset.

The fair value of the consideration transferred was zero .

If FibroGen exercises the option to acquire Fortis, it will pay Fortis an option exercise payment of $ 80.0 million, and thereafter, legacy Fortis shareholders 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 licensing arrangement between Fortis and UCSF .

If FibroGen chooses not to acquire Fortis, its exclusive license to FG-3246 would expire.

Additionally, the Company is obligated to make four quarterly payments totaling $ 5.0 million to Fortis in support of its continued development obligations.

The Company determined that these payments should not be included in the purchase consideration, as those payments are payable to Fortis rather than to its shareholders.

Fortis has authorized and issued common shares and Series A preferred shares.

As of the Option Acquisition Date and June 30, 2023, the Company owned approximately 2 % of Fortis’

Series A preferred shares, which was acquired previously and carried at zero cost.

The NCI attributable to the common shares is classified as nonredeemable NCI, as it is 100 % owned by third party shareholders.

The NCI attributable to the approximately 98 % of Series A preferred shares owned by other investors are classified as redeemable NCI in temporary equity, as the preferred shares are redeemable by the non-controlling shares holders upon occurrence of certain events out of the Company’s control.

Subsequent to the Option Acquisition Date, Fortis’

net income is allocated to its common shares and preferred shares based on their respective stated rights.

Fortis’

net loss is allocated to its common shares only as the holders of preferred shares do not have a contractual obligation to absorb such losses.

The following table represents the allocation of purchase consideration based on estimated fair values of the acquired assets (in thousands):

Estimated Fair Value as of the Option Acquisition Date

Purchase consideration

Cash and cash equivalents

Prepaid expenses and other current assets

Accounts payable

Accrued and other current liabilities

Total liabilities

Redeemable non-controlling interests

Nonredeemable non-controlling interests

Net identifiable assets, liabilities and non-controlling interests

Loss on asset acquisition

The Company used a third party valuation specialist to determine the fair value of the IPR&D assets using a risk-adjusted net present value discounted cash flow model (the “rNPV”) with the following key assumptions:

(i) estimated cash flow forecasts of peak sales, sales penetration, remaining IPR&D related product development costs, and other related general and administrative costs;

(ii) probabilities of technical success of future underlying Phase II and Phase III clinical trials and ensuing probability of regulatory approval related to the IPR&D assets;

and (iii) estimate of a risk-adjusted discount rate of 16.5 %.

The acquired IPR&D assets were determined to have no alternative future use.

Accordingly, the Company expensed fair value of the acquired IPR&D assets of $ 24.4 million as research and development expense in the condensed consolidated statements of operations for the three months ended June 30, 2023.

The fair value of Fortis (enterprise value) and the fair value of nonredeemable NCI and redeemable NCI were determined based on the above-mentioned option exercise payment of $ 80.0 million and contingent payments up to $ 200.0 million, weighted with probability and expected timing of the underlying events consistent with the assumptions under the rNPV, and discounted by the Company’s estimated market level cost of debt.

As of June 30, 2023, total assets and liabilities of Fortis were immaterial.

For the period from the Option Acquisition Date to June 30, 2023, Fortis’

net income (losses) was immaterial.

Equity method investment - Variable Interest Entity

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FibroGen Beijing owns 51.1 % of the outstanding shares of Falikang.

Pursuant to the guidance under ASC 810, Consolidation (“ASC 810”), the Company concluded that Falikang qualifies as a VIE.

Pursuant to the guidance under ASC 810, the Company concluded that Falikang qualifies as a VIE.

As Falikang is a distribution entity and AstraZeneca is the final decision maker for all the roxadustat commercialization activities, the Company lacks the power criterion, while AstraZeneca meets both the power and economic criteria under the ASC 810 to direct the activities of Falikang that most significantly impact its performance.

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Share of Net Income

March 31, 2023

June 30, 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):

March 31, 2023

June 30, 2023

Money market funds

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

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.

There were no transfers of assets between levels during the three months ended June 30, 2023 .

During the three months ended March 31, 2023, a total of $ 7.0 million of U.S.

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):

March 31, 2023

June 30, 2023

December 31, 2022

Commercial paper

Money market funds

Total cash and cash equivalents

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.

At June 30, 2023 and December 31, 2022, a total of $ 79.7 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.

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

March 31, 2023

June 30, 2023

Amortized Cost

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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):

March 31, 2023

June 30, 2023

Less than 12 Months

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Asset-backed securities

Commercial paper

December 31, 2022

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Foreign government bonds

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.

The Company considers factors such as the duration, severity and the reason for the decline in value, the potential recovery period and its intent to sell.

At June 30, 2023, the available-for-sale investments had remaining contractual maturities of less than twelve months.

The Company periodically assesses whether the unrealized losses on its available-for-sale investments were temporary.

The Company considers factors such as the severity and the reason for the decline in value and the potential recovery period and its intent to sell.

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

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.

Based on the results of its review, the Company did no t recognize any impairment for its available-for-sale investments during the three and six months ended June 30, 2023 and 2022.

Inventories consisted of the following (in thousands):

March 31, 2023

June 30, 2023

December 31, 2022

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

March 31, 2023

June 30, 2023

December 31, 2022

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Total accrued and other current liabilities

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 accrued liabilities of $ 36.4 million for API and bulk drug product price true-up as of June 30, 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, Net section in Note 2, Collaboration Agreements, License Agreement and Revenues, for details.

Senior Secured Term Loan Facilities

On April 29, 2023, the Company 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, 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 have funded the Initial Term Loan and, at their discretion, may provide Delayed Draw Term Loan 2 on or prior to August 31, 2023.

The clinical development milestones which could have triggered Delayed Draw Term Loan 1 were not achieved.

The Term Loans shall accrue interest at a fixed 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.

On May 8, 2023, the Company received $ 74.1 million, representing the Initial Term Loan of $ 75.0 million net of $ 0.9 million issuance costs.

The issuance costs and the related transaction costs, totaling $ 3.7 million is amortized as interest expense using the effective interest method over the term of the Initial Term Loan and are reported on the balance sheet as a direct deduction from the amount of the Initial Term Loan.

The effective annual interest rate of the Initial Term Loan was 16.1 % for the three and six months ended June 30, 2023.

The Company recorded interest expense of $ 1.7 million for the three and six months ended June 30, 2023.

As of June 30, 2023, the related accrued interest was $ 0.4 million The Company was in compliance with all debt covenants associated with the senior secured term loan facilities as of June 30, 2023, including maintaining a minimum balance of $ 30 million of unrestricted cash and cash equivalents held in accounts in the U.S.

The Company has determined that certain features embedded within the Loan should be bifurcated and accounted for separately as a derivative.

At inception and as of June 30, 2023, the fair values of such derivatives were negligible due to the low probability of the underlying events.

The Company’s senior secured term loan facilities as of June 30, 2023 were as follows (in thousands):

June 30, 2023

Principal of senior secured term loan facilities

Unamortized issuance costs and transaction costs

Senior secured term loan facilities, ending balance

Current Portion classified to accrued and other current liabilities

Senior secured term loan facilities, non-current

Liability Related to Sale of Future Revenues

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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

The Company’s estimated effective annual interest rate was 15.95 % for the three and six months ended June 30, 2023.

The following table summarizes the activities of the liability related to sale of future revenues for the six months ended June 30, 2023:

Six Months Ended

June 30, 2023

Liability related to sale of future revenues - beginning balance

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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.

During the three and six months ended June 30, 2023, the Company recognized, under Astellas Agreements, development revenue of $ 1.8 million and $ 3.5 million , respectively, and drug product revenue of $ 14.3 million and $ 16.4 million , respectively.

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.

During the three and six months ended June 30, 2023 , the Company recognized the related non-cash interest expense of $ 1.3 million and $ 3.6 million, respectively.

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.

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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.

For the three and six months ended June 30, 2023 , the Company sold 930,511 and 2,472,090 shares under the ATM Program, respectively, for proceeds of approximately $ 17.3 million and $ 48.4 million, respectively, net of commissions to Sales Agents, at a weighted-average offering prices per share of $ 18.61 and $ 19.63 , respectively.

Provisions for (benefits from) income tax for the three and six months ended June 30, 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 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.

The Company recorded license and development revenue related to collaboration agreements with Astellas of $ 1.8 million for each of the three months ended June 30, 2023 and 2022, and $ 3.5 million and $ 29.6 million for the six months ended June 30, 2023 and 2022, respectively.

The Company also recorded drug product revenue from Astellas of $ 14.3 million and $ 1.1 million for the three months ended June 30, 2023 and 2022, and $ 16.4 million and $ 8.7 million for the six months ended June 30, 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 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.

The Company’s expense related to collaboration agreements with Astellas was immaterial for each of the three and six months ended June 30, 2023 and 2022.

As of June 30, 2023 and December 31, 2022 , accounts receivable from Astellas were $ 8.9 million and $ 1.5 million, respectively.

As of June 30, 2023 and December 31, 2022 , total deferred revenue from Astellas was $ 15.5 million and $ 40.3 million, respectively.

As of June 30, 2023, the amounts due to Astellas, included in accounts payable, accrued and other current liabilities, and other long-term liabilities, totaled $ 30.4 million.

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

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See Note 4, 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.

The net product revenue from Falikang was $ 20.5 million and $ 19.7 million for the three months ended June 30, 2023 and 2022, and $ 41.9 million and $ 36.0 million for the six months ended June 30, 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 $ 0.8 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.

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.

The investment income in Falikang was $ 0.6 million for each of the three months ended June 30, 2023 and 2022, and $ 1.3 million and $ 0.9 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023 and December 31, 2022, the Company’s equity method investment in Falikang was $ 6.1 million and $ 5.1 million , respectively.

See Note 4, Equity method investment - Variable Interest Entity , for details.

The other income from Falikang was immaterial for each of the three and six months ended June 30, 2023 and 2022.

As of June 30, 2023 and December 31, 2022 , accounts receivable, net, from Falikang, were $ 11.0 million and $ 10.5 million, respectively.

Commitments and Contingencies

Contract Obligations

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.

As of June 30, 2023 , the Company had outstanding total non-cancelable purchase obligations of $ 40.8 million, including $ 22.4 million for manufacture and supply of pamrevlumab, $ 2.5 million for manufacture and supply of roxadustat, and $ 15.9 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 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.

As of June 30, 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.

As of June 30, 2023, the Company had $ 84.8 million of operating lease liabilities.

In addition, see Note 7, Senior Secured Term Loan Facilities and Note 8, Liability Related to Sale of Future Revenues for details of the related obligations.

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 March 31, 2023, 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 June 30, 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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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 FibroGen’s current and former officers and directors, as well as FibroGen as nominal defendant, and asserts state and federal claims based on some of the same alleged misstatements as the securities class action complaint.

The California Federal Derivative complaint seeks unspecified damages, attorneys’

fees, and other costs.

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

District Court for the District of Delaware.

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

The Delaware Federal Derivative complaint seeks unspecified damages, attorneys’

fees, and other costs.

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

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

The Delaware Chancery Derivative complaint seeks unspecified damages, attorneys’

On May 12, 2023, Defendants filed their opposition to Plaintiffs’

motion for class certification and Plaintiffs filed their reply on June 23, 2023.

On June 8, 2023, Plaintiffs filed a motion for spoliation sanctions against Dr.

Yu and the Company.

Defendants filed their opposition to the motion for spoliation sanctions on July 17, 2023 and Plaintiffs’

reply is due August 11, 2023.

A hearing on both motions is scheduled for August 31, 2023.

On May 25, 2023, another complaint was filed against the same defendants, asserting similar claims as the class action and additional common-law and California state fraud claims.

The parties have stipulated to a briefing schedule on Defendants’

forthcoming motion to dismiss, which will be due on September 20, 2023.

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

District Court for the Northern District of California (the “California Federal Derivative”).

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

District Court for the District of Delaware (the “Delaware Federal Derivative”).

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

On June 1, 2023, a fourth purported shareholder derivative complaint was filed in the Delaware Court of Chancery (the “Second Delaware Chancery Derivative”).

All four derivative actions name FibroGen’s current and former officers and directors as defendants, as well as FibroGen as nominal defendant, and assert state and federal claims based on some of the same alleged misstatements as the securities class action complaint.

The complaints seek unspecified damages, attorneys’

fees, and other costs.

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

The California Federal Derivative action and the Delaware Federal Derivative action are stayed pending the resolution of any motions for summary judgment in the securities class action.

The First and Second Delaware Chancery Derivative actions have been consolidated and the plaintiffs have not yet filed an amended complaint, but have expressed their intent to do so.

On June 30, 2023, a fifth derivative action was filed in the U.S.

District Court for the District of Delaware (the “Demand Refused Derivative”).

The Demand Refused Derivative action names FibroGen’s current and former officers, 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 Company has not been served in the Demand Refused Derivative.

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

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Subsequent Event

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.

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

On July 14, 2023, the Company approved a restructuring plan (the “Plan”) to lower the Company’s operating expenses.

The Plan includes an expected reduction to the Company’s U.S.

workforce of approximately 32 %.

The Company estimates that it will incur non-recurring payments in the range of $ 13 million to $ 15 million in connection with the Plan, primarily consisting of notice period and severance payments, accrued vacation and employee benefits contributions.

The Company’s estimates are subject to a number of assumptions, and actual costs may differ materially.

The Company expects that the majority of the restructuring charges will be recognized in the third quarter of 2023 and that the implementation of the headcount reductions, including cash payments, will be substantially complete by the end of the first quarter of 2024.

The Plan is in connection with the Company’s efforts to streamline operations to align with the Company’s business goals.

The Company may incur additional expenses not currently contemplated due to events associated with the Plan.

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

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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.

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”).

Pamrevlumab is also in Phase 2/3 development for the treatment of metastatic pancreatic cancer.

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

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

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

Roxadustat is in clinical development for chemotherapy-induced anemia (“CIA”) 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except for per share data)

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Net loss per share - basic and diluted

March 31, 2023

June 30, 2023

December 31, 2022

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Accounts receivable

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.

Our revenue for the three and six months ended June 30, 2023 included primarily the revenue recognized related to the following:

$23.9 million and $48.0 million of net product revenue from roxadustat commercial sales in China;

$14.3 million and $16.4 million of drug product revenue related to active pharmaceutical ingredient (“API”) deliveries to Astellas;

$4.1 million and $7.8 million of development revenue recognized under our collaboration agreements with our partners Astellas Pharma Inc.

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

$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.

$1.0 million upfront payment for the second quarter of 2023 and a $3.0 million milestone payment based on Eluminex Biosciences (Suzhou) Limited (“Eluminex”) implanting a biosynthetic cornea in the first patient of its clinical trial in China and a $3.0 million manufacturing related milestone payment in the first quarter of 2023 for the first quarter of 2023, recognized under our license agreement and amendments with Eluminex.

As a comparison, our revenue for the three and six months ended June 30, 2022 included primarily the revenue recognized related to the following:

$5.2 million and $16.2 million development revenue recognized under our collaboration agreements with our partners Astellas and AstraZeneca;

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

$1.1 million and $8.7 million of drug product revenue related to API deliveries to Astellas.

Our revenue for the six months ended June 30, 2022 also included $25.0 million regulatory milestone recognized during the three months ended March 31, 2022 under our collaboration agreements with 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.

$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:

Operating costs and expenses for the three months ended June 30, 2023 increased compared to the same period a year ago primarily as a result of the net effect of the following:

$24.6 million one-time, non-cash charge of acquired in-process research and development (“IPR&D”) expenses associated with the recent exclusive license for FOR46 (now referred to as “FG-3246”) from Fortis Therapeutics (“Fortis”) and the acquisition of Fortis;

$4.3 million higher employee-related expenses primarily due to overall merit increase, more business travel activities and higher severance during the current year period;

$3.3 million higher clinical trial expenses primarily associated with Phase 3 trials and data for pamrevlumab, offset by lower roxadustat post-approval safety studies in China;

$7.6 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.

Operating costs and expenses for the six months ended June 30, 2023 increased compared to the same period a year ago primarily as a result of the net effect of the following:

$24.6 million one-time, non-cash charge of acquired IPR&D expenses associated with the recent exclusive license for FG-3246 from Fortis and the acquisition of Fortis;

$8.0 million higher employee-related expenses primarily due to overall merit increase, more business travel activities and higher severance during the current year period, and

$21.5 million lower drug development expenses associated with drug substance and drug product manufacturing activities related to roxadustat post-approval safety studies in China and pamrevlumab which were largely completed in the prior periods.

For the three months ended June 30, 2023, we had a net loss of $87.7 million, or a net loss per basic and diluted share of $0.90, as compared to a net loss of $72.6 million, or a net loss per basic and diluted share of $0.78, for the same period a year ago, due to increases in operating costs and expenses, offset by increases in revenue, as discussed above.

For the six months ended June 30, 2023, we had a net loss of $164.4 million, or a net loss per basic and diluted share of $1.71, as compared to a net loss of $135.8 million, or a net loss per basic and diluted share of $1.46, for the same period a year ago, due to decreases in revenue and increases in operating costs and expenses as discussed above.

Cash and cash equivalents, investments, and accounts receivable totaled $361.3 million at June 30, 2023, a decrease of $81.3 million from December 31, 2022, primarily due to the cash used in operations, partially offset by the net proceeds received under our senior secured term loan facilities and at-the-market program, discussed under the Liquidity and Capital Resources section below.

Commercial, Development and Research Programs

Our goals are to continue our commercialization of roxadustat in China and other approved countries, continue our development of pamrevlumab in three indications, and build a diversified pipeline with novel drugs that will address unmet patient needs in oncology, immunology, and fibrosis.

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

Monoclonal Antibody Targeting Connective Tissue Growth Factor

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 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 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.

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

Pamrevlumab for the Treatment of Locally Advanced Unresectable Pancreatic Cancer

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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.

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

Pamrevlumab for the Treatment of Metastatic Pancreatic Cancer

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.

In June 2021, the Pancreatic Cancer Action Network’s (PanCAN) Precision Promise SM Phase 2/3 registration study, an adaptive trial platform, included pamrevlumab in combination with standard of care chemotherapy treatments for pancreatic cancer (gemcitabine and Abraxane ® ), for patients with metastatic pancreatic cancer.

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.

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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.

The pamrevlumab portion of the trial is still ongoing, fully enrolled, and we expect topline results in the first half of 2024.

Pamrevlumab for the Treatment of Duchenne Muscular Dystrophy

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 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 is our double-blind, placebo-controlled Phase 3 trial evaluating pamrevlumab in ambulatory 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 [third] quarter of 2023.

We expect topline data from this study in August 2023.

Non-Ambulatory DMD Patients

In June 2023, we announced topline data from our 99 patient Phase 3 LELANTOS-1 placebo-controlled trial of pamrevlumab for the treatment of non-ambulatory patients (age 12 years and older) with DMD on background corticosteroids.

The study did not meet the primary endpoint of Performance of the Upper Limb 2.0 (PUL 2.0) score at Week 52 compared to baseline.

In addition, none of the secondary endpoints were met (including change from baseline to Week 52 in forced vital capacity (“FVC”) percent predicted, grip strength, and left ventricular ejection fraction percentage measured by MRI).

Pamrevlumab was generally safe and well tolerated and the majority of treatment emergent adverse events were mild or moderate.

FibroGen plans to present the complete results of the LELANTOS-1 study at an upcoming medical conference and to publish the full results.

Pamrevlumab for the Treatment of Idiopathic Pulmonary Fibrosis

In June 2023, we announced topline results from our Phase 3 ZEPHYRUS-1 trial evaluating the safety and efficacy of pamrevlumab in patients with idiopathic pulmonary fibrosis.

The study compared treatment with pamrevlumab to placebo and did not meet the primary endpoint of change from baseline in FVC at Week 48 (p=0.29).

The mean decline in FVC from baseline to Week 48 was 260 ml in the pamrevlumab arm compared to 330 ml in the placebo arm (placebo-corrected difference of 70 ml;

95% CI -60 to 190 ml).

The secondary endpoint of time to disease progression (FVC percent predicted decline of ≥10% or death) was also not met (HR= 0.78;

95% CI 0.52 to 1.15).

In the safety analysis, pamrevlumab was generally safe and well tolerated and the majority of treatment emergent adverse events were mild or moderate.

Treatment-emergent serious adverse events were observed in 28.2% of patients in the pamrevlumab group and 34.3% of patients in the placebo group.

Based on the results of ZEPHYRUS-1, ZEPHYRUS-2, the second Phase 3 clinical trial,has been discontinued.

FibroGen plans to communicate the results of the ZEPHYRUS-1 study at an upcoming medical forum.

Roxadustat for the Treatment of Anemia in Chronic Kidney Disease

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® ) 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.

In the second quarter of 2023, roxadustat achieved an over 40% increase in sales volume relative to the second quarter of 2022.

As of May 2023, roxadustat was the top CKD anemia brand in China with approximately 39% value share within the segment of erythropoiesis stimulating agents and HIF-PH inhibitors (roxadustat is currently the only HIF-PH inhibitor on the market in China).

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.

In May 2023, we announced positive topline data from our Phase 3 clinical study of roxadustat for treatment of anemia in patients receiving concurrent chemotherapy treatment for non-myeloid malignancies in China.

Roxadustat (爱瑞卓

® ) demonstrated non-inferiority compared to recombinant erythropoietin alfa (SEPO ® ) on the primary endpoint of change in hemoglobin (Hb) level from baseline to the average level during Weeks 9-13.

In the preliminary safety analysis, the adverse event profile of roxadustat was generally consistent with previous findings and supportive of a positive benefit risk in this patient population.

A total of 159 patients with non-myeloid malignancy (solid tumor) with a baseline hemoglobin level at or below 10 g/dL were enrolled into this Phase 3, randomized, open-label, active-controlled study investigating the efficacy and safety of roxadustat for treatment of CIA.

Patients were randomly assigned roxadustat or erythropoietin alfa three times per week (TIW), during a treatment period of 12 weeks, with an additional 4-week follow-up period.

Detailed results from the study will be submitted for presentation at an upcoming medical conference.

We recently submitted our supplemental New Drug Application for roxadustat in CIA with the China Health Authority.

Although CIA is one of the most common side effects of chemotherapy, it is frequently undertreated.

CIA can adversely affect long-term patient outcomes, as anemia limits both quality of life and of the ability of patients to continue chemotherapy treatment.

The incidence and severity of CIA depends on a variety of factors.

This includes the type of cancer and the treatment, including the type of chemotherapy, schedule, and intensity of therapy.

It also depends on whether the patient has received prior myelosuppressive chemotherapy, radiation therapy, or both.

Almost 80% of cancer patients in China receiving chemotherapy develop anemia.

Approximately 50% of cancer patients in China receiving chemotherapy develop severe anemia that merits treatment (hemoglobin under 10g/dL).

In China, over 3 million cancer patients undergo chemotherapy.

Prostate Cancer;

Potential Additional Cancer Indications

In May 2023 we obtained an exclusive license to develop FG-3246 (previously FOR46) in metastatic castration-resistant prostate cancer (“mCRPC”) and other cancer indications.

FG-3246 is a first-in-class antibody-drug conjugate targeting a novel epitope on CD46 that is expressed at high levels in certain tumor types with limited expression in most normal tissues.

The cytotoxic payload of FG-3246 is monomethyl auristatin E, an anti-mitotic agent that has been utilized in four commercially approved antibody-drug conjugate drugs.

FG-3246 showed monotherapy efficacy in a Phase 1 clinical study in patients with mCRPC, with a PSA50 response rate of 45% and an objective partial response rate of 19%.

An investigator sponsored trial of FG-3246 plus enzalutimide is ongoing.

Side effects have been manageable and are consistent with other monomethyl auristatin E-based antibody-drug conjugate drugs.

We anticipate the initiation of a PET biomarker driven Phase 2 trial of FG-3246 for mCRPC in the second half of 2024.

Development of the CD46-targeted PET biomarker is currently underway with UCSF, a collaborator of Fortis.

We are also exploring additional potential tumor indications in which CD46 is commonly expressed.

Preclinical Pipeline

Our preclinical pipeline consists of two antibodies for immuno-oncology that are in investigational new drug application (“IND”)-enabling studies, and an additional small molecule drug discovery pipeline that leverages the expertise we developed through our HIF-PH inhibitor programs in 2 oxoglutarate dependent dioxygenase biology.

FG-3165 is a galectin-9 (“Gal9”) targeted antibody under development for treatment of solid tumors characterized by high Gal9 levels of expression.

Gal9 has been reported to bind to multiple immune checkpoints on lymphocytes that suppress T and natural killer cell activation.

In preclinical studies FG-3165 and its variants inhibit Gal9 mediated T cell death, and also promotes anti-tumor immune responses in combination with other immune checkpoint targeted drugs.

We plan to submit an IND in the first quarter of 2024.

FG-3175 is a c-c motif chemokine receptor 8 (“CCR8”) targeted antibody under development for treatment of solid tumors that are highly infiltrated by CCR8-positive T regulatory cells.

T regulatory cells contribute to an immune suppressed tumor microenvironment, and multiple preclinical studies have demonstrated immune activation and tumor regression following depletion of this cell type from the tumor microenvironment.

FG-3175 is a variant of our previous lead anti-CCR8 antibody, FG-3163, and was deemed to be a superior clinical candidate following extended characterization of both antibodies.

FG-3175 has enhanced antibody dependent cellular cytotoxicity activity and induces potent killing of CCR8 expressing cells by natural killer cells in in vitro assay systems.

An IND is planned for the second half of 2024.

The 2 oxoglutarate dependent dioxygenase targeted small molecule pipeline is being developed to target cancer epigenetic pathways that contribute to tumor proliferation.

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.

On April 29, 2023, we entered into a financing agreement (the “Financing Agreement”) with a $75.0 million senior secured term loan with investment funds managed by Morgan Stanley Tactical Value, as lenders, and Wilmington Trust, National Association, as the administrative agent.

For additional details about this financing transaction, see Note 7, Senior Secured Term Loan Facilities , 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.

On May 5, 2023, we entered into an exclusive option agreement to acquire Fortis with its novel Phase 1 antibody-drug conjugate, FG-3246 (previously FOR46), that targets a novel epitope on CD46 preferentially expressed on certain cancer cells.

FG-3246 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 FG-3246 and will control and fund future research, development, including a Phase 2 clinical study sponsored by FibroGen, and manufacturing of FG-3246 during the option period.

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 for patient selection.

FibroGen will pay Fortis $5.0 million during the up to 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.

If FibroGen chooses not to acquire Fortis, its exclusive license to FG-3246 would expire.

For additional details about this transaction, see Note 3, Exclusive License and Option to Acquire Fortis Therapeutics , to the condensed consolidated financial statements.

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.

The A&R Eluminex Agreement included additional total upfront payments of $1.5 million.

During the three months ended June 30, 2023, we recognized a $1.0 million upfront payment under the above amendment.

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.

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

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 March 31, 2023 totaled $790.1 million.

Under these agreements, the aggregate amount of consideration received through June 30, 2023 totaled $790.1 million.

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

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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 $1.7 million and $7.6 million for three months ended March 31, 2023 and 2022, respectively.

The related drug product revenue was $13.8 million and $15.5 million for the three and six months ended June 30, 2023, respectively, and $7.6 million for the six months ended June 30, 2022.

The related drug product revenue was immaterial for the three months ended June 30, 2022.

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 $0.4 million for the three months ended March 31, 2023.

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

The related drug product revenue was $0.5 million and $1.1 million for the three months ended June 30, 2023 and 2022, $0.8 million and $1.1 million for the six months ended June 30, 2023 and 2022, respectively.

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

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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 March 31, 2023 totaled $516.2 million.

Under the AstraZeneca agreements, the aggregate amount of consideration received through June 30, 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.

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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 months ended March 31, 2023 and 2022.

There was no related drug product revenue for the three and six months ended June 30, 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 $24.2 million and $18.9 million for the three months ended March 31, 2023 and 2022, respectively.

We recognized related net product revenue of $23.9 million and $23.3 million for the three months ended June 30, 2023 and 2022, and $48.0 million and $42.1 million for the six months ended June 30, 2023 and 2022, respectively.

Additional Information Related to Collaboration Agreements

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:

Total cash consideration received through June 30, 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

March 31, 2023

June 30, 2023

Cash Payment for Milestones

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The above table does not include development cost reimbursement, transfer price payments, and royalties and profit share under our existing collaboration agreements.

While we continue to commercialize roxadustat in China with AstraZeneca, and develop roxadustat in the U.S.

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

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

Based on our current development plans for roxadustat in Japan, Europe and U.S., we do not expect to receive most or all of these additional potential milestones under the Astellas Japan Agreement, the Astellas Europe Agreement and the AstraZeneca U.S./RoW Agreement.

RESULTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Product revenue, net

Drug product revenue

Drug product revenue, net

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.

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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.

As of June 30, 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.

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

Total revenue 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.

Total revenue increased $14.5 million, or 49% for the three months ended June 30, 2023, and decreased $10.2 million, or 11% for the six months ended June 30, 2023, respectively, compared to the same periods a year ago for the reasons discussed in the sections below.

License Revenue

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

2 unchanged sentences

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 for three and six months ended June 30, 2023 included $1.0 million upfront payment under the A&R Eluminex Agreement.

License revenue recognized for the six months ended June 30, 2023 also included 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.

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Total development and other revenue

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 and other revenue decreased $0.3 million, or 5% for the three months ended June 30, 2023, and decreased $8.2 million, or 47% for the six months ended June 30, 2023, respectively, compared to the same periods a year ago.

Development revenue recognized under our collaboration agreements with Astellas for the six months ended June 30, 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 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.

Development revenue recognized under our collaboration agreements with AstraZeneca for the three and six months ended June 30, 2023 was impacted by the decrease in CKD-related co-development billings in the U.S.

Other revenue recognized for the three and six months ended June 30, 2023 and 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.

Other revenue recognized for the three and six months ended June 30, 2023 also included revenue from sales of certain research and development material.

Product Revenue, Net

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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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.

Total product revenue, net increased $0.6 million, or 3% for the three months ended June 30, 2023, and increased $5.9 million, or 14%, respectively, compared to the same periods 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 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.

Product revenue from direct sales, net remained relatively flat for the three and six months ended June 30, 2023, compared to the same periods a year ago.

The total discounts and rebates were immaterial for each of the three and six months ended June 30, 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.

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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 $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.

Sales to Falikang revenue, net increased $0.8 million, or 4% for the three months ended June 30, 2023, and increased $5.9 million, or 16% for the six months ended June 30, 2023, respectively, compared to the same periods a year ago.

The gross transfer price increased $13.9 million and $25.4 million, and the calculated profit share increased $8.2 million and $14.4 million for the three and six months ended June 30, 2023, respectively, compared to the same periods a year ago, 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 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 March 31,

Following updates to our estimates, for the three and six months ended June 30, 2023, we deferred $3.3 million and $1.2 million, respectively, from the net transfer price to Falikang, which was included in the related deferred revenue of the China performance obligation.

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

Drug Product Revenue, Net

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

Drug product revenue:

Drug product revenue, net:

Astellas Japan Agreement

Astellas Europe Agreement

Total drug product revenue:

Total drug product revenue, net:

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.

Drug product revenue, net increased $13.2 million, or 1,206% for the three months ended June 30, 2023, and increased $7.7 million, or 89% for the six months ended June 30, 2023, respectively, compared to the same periods a year ago.

Astellas Japan Agreement

During the second quarter of 2023, we fulfilled two shipment obligations under the terms of Astellas Japan Amendment, and recognized related drug product revenue of $14.4 million in the same period.

In addition, we updated our estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment, and accordingly recorded a reduction to the drug product revenue of $0.6 million.

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.

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As of June 30, 2023, the balances related to the API price true-up under the Astellas Japan Agreement were $4.6 million in accounts payable, $1.4 million in accrued liabilities and $0.6 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

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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.

Further during the first and second quarter of 2023, we reclassified $24.0 million from the related deferred revenue to accrued liabilities.

As of June 30, 2023, the balances related to the bulk drug product price true-up under the Astellas Europe Agreement and the Astellas EU Supply Agreement were $23.8 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 as drug product revenue, from the deferred revenue under the Astellas Europe Agreement, of $0.5 million and $0.8 million for the three and six months ended June 30, 2023, respectively, and $0.1 million during the second quarter of 2022.

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

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.

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 and six months ended June 30, 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, 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.

As a result, we reclassified $11.2 million from the related deferred revenue to accrued liabilities during the year ended December 31, 2022, which remained unchanged as of June 30, 2023 and December 31, 2022, representing our best estimate that this amount will be paid within the next 12 months.

Operating Costs and Expenses

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

4 unchanged sentences

Total operating costs and expenses

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.

Total operating costs and expenses increased $24.3 million, or 23% for the three months ended June 30, 2023, and increased $12.8 million, or 6% for the six months ended June 30, 2023, respectively, compared to the same periods a year ago for the reasons discussed in the sections below.

Cost of Goods Sold

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 decreased $1.1 million, or 16% for the three months ended June 30, 2023, and decreased $1.8 million, or 17% for the six months ended June 30, 2023, respectively, compared to the same periods 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 $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.

Cost of goods sold associated with the roxadustat commercial sales in China was $3.6 million for the three months ended June 30, 2023, a decrease of 1.3 million, or 26%;

and $6.8 million for the six months ended June 30, 2023, a decrease of $0.7 million, or 10%, respectively, as compared to the same periods a year ago, resulting from the improved unit cost efficiency due to higher production volume, partially offset by the increases in the sales volume.

Cost of goods sold in the U.S., associated with costs of the roxadustat API or bulk drug product delivered to Astellas was $1.9 million and $1.7 million for the three months ended June 30, 2023 and 2022, and $2.0 million and $2.6 million for the six months ended June 30, 2023 and 2022, respectively.

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 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.

Cost of goods sold also included manufacturing costs related to our contract manufacturing revenue from Eluminex, which was immaterial for the periods presented.

Research and Development Expenses

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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.

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,

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

The following table summarizes our research and development expenses incurred during the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30,

Six Months Ended June 30,

Product Candidate

2 unchanged sentences

Total research and development expenses

* Included $24.6 million one-time, non-cash acquired IPR&D expenses associated with the recent exclusive license for FG-3246 from Fortis and the acquisition of Fortis.

See Note 3, Exclusive License and Option to Acquire Fortis Therapeutics , to the condensed consolidated financial statements.

The program-specific expenses summarized in the table above include costs we directly attribute to our product candidates.

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

Research and development expenses decreased $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.

Research and development expenses increased $24.5 million, or 35% for the three months ended June 30, 2023, compared to the same period a year ago, primarily as a result of the net effect of the following:

$24.6 million one-time, non-cash acquired IPR&D expenses associated with the recent exclusive license for FG-3246 from Fortis and the acquisition of Fortis;

Increase of $3.3 million in clinical trials costs, primarily due to Phase 3 trials for pamrevlumab;

Increase of $3.2 million in employee-related costs primarily due to overall merit increase and higher business travel activities and higher severance during the current year period;

Decrease of $7.6 million in drug development expenses associated with drug substance and drug product manufacturing activities related to pamrevlumab which was largely completed in the prior year.

Research and development expenses increased $10.0 million, or 6% for the six months ended June 30, 2023, compared to the same period a year ago, primarily as a result of the net effect of the following:

$24.6 million one-time, non-cash acquired IPR&D expenses associated with the recent exclusive license for FG-3246 from Fortis and the acquisition of Fortis;

Increase of $5.3 million in employee-related costs primarily due to overall merit increase and higher business travel activities and higher severance during the current year period;

Increase of $2.4 million information technology and facilities costs primarily associated with software costs and maintenance services;

Decrease of $21.5 million in drug development expenses associated with drug substance and drug product manufacturing activities related to roxadustat post-approval safety studies in China and pamrevlumab which were largely completed in the prior periods;

Decrease of $2.9 million in stock-based compensation primarily resulting from cancellations and impacts from lower stock price.

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.

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.

SG&A expenses increased $0.9 million, or 3% for the three months ended June 30, 2023, compared to the same period a year ago, primarily as a result of the net effect of the following:

Increase of $2.0 million in outside services expenses due to higher consulting activities in general administrative and efforts to prepare for commercialization;

Decrease of $1.2 million in legal expenses mainly associated with corporate legal activities.

SG&A expenses increased $4.6 million or 8% for the six months ended June 30, 2023, compared to the same period a year ago, primarily as a result of the net effect of the following:

Increase of $2.7 million in employee-related costs primarily due to overall merit increase and higher business travel activities and higher severance during the current year period;

Increase of $2.4 million in outside services expenses due to higher consulting activities in general administrative and efforts to prepare for commercialization.

Interest and Other, Net

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Interest Expense

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”).

Interest expense represents the interest related to the senior secured term loan facilities, 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 and six months ended June 30, 2023 included $1.3 million and $3.6 million, respectively, related to sale of future revenues under the Revenue Interest Financing Agreement (“RIFA”) with an affiliate of NovaQuest Capital Management (“NovaQuest”).

See Note 8, Liability Related to Sale of Future Revenues , to the condensed consolidated financial statements for details.

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

Interest expense for each of the three and six months ended June 30, 2023 also included $1.7 million related to the senior secured term loan facilities.

See Note 7, Senior Secured Term Loan Facilities, to the condensed consolidated financial statements for details.

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 $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,

Interest income and other income (expenses), net decreased $2.5 million, or 49% for the three months ended June 30, 2023, and $1.2 million, or 24% for the six months ended June 30, 2023, compared to the same periods a year ago, primarily due to an impact of $5.0 million recorded during the second quarter of 2022, which did not recur in the current year periods, resulting from a reduction to other expenses to release the previously estimated late payment fees related to value added tax in China.

This impact was partially offset by higher interest income from our investments with higher interest rate during the current year period.

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

Loss before income taxes

Provision for income taxes

Provision for (benefit from) income taxes

Effective tax rate

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

Provisions for income taxes for the three and six months ended June 30, 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.

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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 months ended March 31, 2023 and 2022.

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

See Note 4, Equity method investment - Variable Interest Entity , to the condensed consolidated financial statements for details.

LIQUIDITY AND CAPITAL RESOURCES

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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.

Pursuant to the RIFA, in the fourth quarter of 2022, we received $49.8 million from NovaQuest, representing the gross proceeds of $50.0 million net of initial issuance costs, in consideration for a portion of future revenues we will receive from Astellas.

For additional details about this financing transaction, see Note 8, Liability Related to Sale of Future Revenues , to the condensed consolidated financial statements.

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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.

Under the ATM Program, we sold 2,472,090 shares of our common stock and received net proceeds of approximately $48.4 million during the six months ended June 30, 2023.

See Note 9, At-the-Market Program , to the condensed consolidated financial statements for details.

On April 29, 2023, we entered into a financing agreement (the “Financing Agreement”) with investment funds managed by Morgan Stanley Tactical Value, (“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 7, Senior Secured Revolving Line of Credit , to the condensed consolidated financial statements.

As of June 30, 2023, we had cash and cash equivalents of $152.6 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 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 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.

As of June 30, 2023, we had short-term investments of $183.1 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 June 30, 2023, a total of $79.7 million of our cash and cash equivalents was held outside of the U.S.

in our foreign subsidiaries, substantially all held in China, to be used primarily for our China operations.

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

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

Three Months Ended March 31,

Six Months Ended June 30,

Net cash provided by (used in):

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Operating Activities

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.

Net cash used in operating activities was $212.2 million for the six months ended June 30, 2023 and consisted primarily of net loss of $164.4 million adjusted for non-operating cash items of $64.0 million, and a net decrease in operating assets and liabilities of $111.8 million.

The significant non-operating cash items included stock-based compensation expense of $32.0 million, acquired IPR&D expenses associated with the acquisition of Fortis of $24.6 million, depreciation expense of $5.0 million and non-cash interest expense related to sale of future revenues of $3.6 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.

Accrued and other liabilities decreased $57.0 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 the payment of $57.4 million previously accrued balance made during the current year period.

See the Drug Product Revenue, Net 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 timing of invoicing and payment;

Deferred revenue decreased $25.6 million, primarily related to the reclassification of $24.0 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.

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

Accounts payable decreased $20.8 million, primarily driven by the payments made for the historical co-promotion expenses to AstraZeneca during the current year period, as well as the timing of invoicing and payments.

Accounts receivable increased $10.0 million, primarily driven by the receivable related to the API shipments to Astellas during the second quarter of 2023, as well as the timing of the receipt of payments and the billings under our collaboration and license agreements;

Prepaid expenses and other current assets decreased $4.2 million, primarily due to less prepayments made for roxadustat and pamrevlumab clinical activities;

Inventories increased $2.0 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.

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

The significant non-operating cash items included stock-based compensation expense of $33.8 million, and depreciation expense of $5.0 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;

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

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

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

Accounts payable increased $4.2 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 $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.

Investing activities primarily consist of purchases of property and equipment, purchases of investments, purchase of acquired IPR&D assets and proceeds from the maturity and sale of investments.

Net cash provided by investing activities was $89.2 million for the six months ended June 30, 2023 and consisted primarily of $192.9 million of proceeds from maturities of investments, partially offset by $104.5 million of cash used in purchases of available-for-sale securities.

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

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 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.

Net cash provided by financing activities was $123.0 million for the six months ended June 30, 2023 and consisted primarily of $71.3 million net proceeds from senior secured term loan facilities, $48.4 million net proceeds received under the ATM Program, $3.7 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under our Employee Stock Purchase Plan.

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

Material Cash Requirements

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

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

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

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

Although AstraZeneca is currently funding all non-China collaboration expenses not reimbursed by Astellas, including development of MDS in the U.S., we expect our research and development expenses to continue to increase as we invest in our other programs.

Additionally, we have not been able to agree on a path forward for AstraZeneca to fund further roxadustat development in the U.S.

for CKD anemia.

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

We generate revenue from commercial sales of roxadustat product in China, Japan and Europe.

Even with the expectation of increases in these revenues, we anticipate that we will continue to generate losses for the foreseeable future.

To date, we have funded certain portions of our research and development and manufacturing efforts globally through collaboration partners, debt financings, and equity financing.

We expect to continue to incur significant research and development expenses to invest in our other programs and there is no guarantee that sufficient funds will be available to continue to fund these development efforts through commercialization or otherwise.

Risk Factors ”

in this Quarterly Report on Form 10-Q.

in this Quarterly Report on Form 10-Q, as well as unknown factors that may adversely affect our business.

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

We believe that our existing cash and cash equivalents, short-term and long-term investments and accounts receivable, together with the financing amount under the RIFA received in November 2022 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.

We believe that our existing cash and cash equivalents, short-term and long-term investments and accounts receivable, together with the proceeds from senior secured term loan facilities in the second quarter of 2023, the financing amount under the RIFA received in the fourth quarter of 2022, and the net proceeds received under our ATM program in the first half of 2023, as well as the cost savings we have recently implemented (including from the reduction in workforce that we announced on July 19, 2023), 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.

We may incur additional expenses not currently contemplated due to events associated with the recently announced reduction in workforce.

In addition, we may elect to raise additional funds at any time through equity, equity-linked, debt financing arrangements or from other sources.

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Contractual Obligations

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

As of June 30, 2023, we had $84.8 million of operating lease liabilities.

The material cash requirements related to our lease liabilities included $14.5 million expected to be paid within the next 12 months.

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.

As of June 30, 2023, we had outstanding total non-cancelable purchase obligations of $40.8 million, including $22.4 million for manufacture and supply of pamrevlumab, $2.5 million for manufacture and supply of roxadustat, and $15.9 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 $18.5 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.

Under the Financing Agreement with Morgan Stanley Tactical Value, as of June 30, 2023, we had $71.4 million of senior secured term loan facilities balance on the condensed consolidated balance sheets, which are not subject for repayment until May 2026.

Meanwhile, we are obliged to pay interest on a monthly basis, for which we expect to pay a total of $10.5 million within the next 12 months.

See Note 7, Senior Secured Term Loan Facilities , to the condensed consolidated financial statements for details.

Under the RIFA with NovaQuest, as of June 30, 2023, we had $52.9 million of liability related to sale of future revenues on the condensed consolidated balance sheets, $4.5 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.

See Note 8, Liability Related to Sale of Future Revenues , to the condensed 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 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.

As of June 30, 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 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.

During the three and six months ended June 30, 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 months ended March 31, 2023 compared with the disclosures in Part II, Item 7 of our 2022 Form 10-K.

There have been no material changes in our critical accounting policies, estimates and judgments during the three and six months ended June 30, 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 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”

During the three and six months ended June 30, 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