What changed in this filing

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Item 1. Financial Statements

2023-11-06 compared with 2023-08-07 · 379 added, 339 removed, 1015 unchanged (41% of the section changed)

2 unchanged sentences

(In thousands, except per share amounts)

June 30, 2023

September 30, 2023

December 31, 2022

12 unchanged sentences

Current liabilities:

Accounts payable ($ 4,578 and $ 0 to a related party)

Accounts payable

Accrued and other current liabilities ($ 29,157 and $ 63,886 to a related party)

15 unchanged sentences

no shares issued

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

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

Common stock, $ 0.01 par value;

225,000 shares authorized at June 30, 2023

225,000 shares authorized at September 30, 2023

and December 31, 2022;

98,339 and 94,166 shares issued and outstanding at

June 30, 2023 and December 31, 2022

September 30, 2023 and December 31, 2022

Additional paid-in capital

10 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

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

10 unchanged sentences

Selling, general and administrative

Restructuring charge

Total operating costs and expenses

15 unchanged sentences

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Other comprehensive income (loss):

16 unchanged sentences

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

under ATM Program

Balance at June 30,

Change in unrealized gain or

loss on investments

Foreign currency translation

Shares issued from stock

plans, net of payroll taxes

Stock-based compensation

Balance at September 30,

Balance at June 30,

Balance at March 31,

Change in unrealized gain

or loss on investments

Foreign currency

translation adjustments

Change in unrealized gain or

loss on investments

Foreign currency translation

Shares issued from stock

plans, net of payroll

plans, net of payroll taxes

Stock-based compensation

Balance at June 30,

Balance at September 30,

FIBROGEN, INC.

2 unchanged sentences

(In thousands, except share data)

For The Six Month Period

For The Nine Month Period

Comprehensive

14 unchanged sentences

Stock-based compensation

Balance at June 30,

Balance at September 30,

Balance at December 31,

6 unchanged sentences

Stock-based compensation

Balance at June 30,

Balance at September 30,

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

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

7 unchanged sentences

Non-cash interest expense related to sale of future revenues

Dividend received from unconsolidated variable interest entity

Impairment of investment

43 unchanged sentences

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

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

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

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

5 unchanged sentences

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

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

FibroGen’s goal is to build a diversified pipeline with novel drugs that will address unmet patient needs with a refined focus in oncology.

Basis of Presentation and Principles of Consolidation

7 unchanged sentences

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

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

Use of Estimates

6 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, except for the updates to the following:

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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 27, 2023, except for the updates to the following:

Asset Acquisition

10 unchanged sentences

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

Restructuring Charge

A restructuring charge is recognized when the liability is incurred and accrued in the period in which it is probable that the employees are entitled to the restructuring benefits and the amounts can be reasonably estimated.

The restructuring liability accrued but not paid at the end of the reporting period is included in accrued and other current liabilities in the consolidated balance sheets.

Net Loss per Share

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

The Company reported a net loss for each of the three and six months ended June 30, 2023 and 2022.

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

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Employee stock options

6 unchanged sentences

Astellas Japan Agreement

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

In June 2005, the Company entered into a collaboration agreement with Astellas Pharma Inc.

(“Astellas”) for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in Japan (“Astellas Japan Agreement”).

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

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 June 30, 2023 totaled $ 105.1 million , excluding drug product revenue that is discussed under the Drug Product Revenue, Net section below.

The aggregate amount of consideration received through September 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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Performance Obligation

1 unchanged sentence

Development revenue

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):

The transaction price related to consideration received through September 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 June 30, 2023

Through September 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 June 30, 2023 under the Astellas Japan Agreement.

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

9 unchanged sentences

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

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.

The aggregate amount of consideration received under the Astellas Europe Agreement through September 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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Performance Obligation

2 unchanged sentences

Development revenue

Astellas Europe Agreement

Total Consideration

Through June 30, 2023

Through September 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 June 30, 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 September 30, 2023 under the Astellas Europe Agreement.

The remainder of the transaction price related to the Astellas Europe Agreement includes $ 0.8 million of variable consideration from estimated future co-development billing and is expected to be recognized over the remaining development service period.

10 unchanged sentences

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

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

The aggregate amount of consideration received under the AstraZeneca U.S./RoW Agreement through September 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.

2 unchanged sentences

AstraZeneca China Agreement

Effective July 30, 2013, the Company (through its subsidiaries affiliated with China) entered into a collaboration agreement with AztraZeneca for roxadustat for the treatment of anemia in China (“AstraZeneca China Agreement”).

Effective July 30, 2013, the Company (through its subsidiaries affiliated with China) entered into a collaboration agreement with AstraZeneca for roxadustat for the treatment of anemia in China (“AstraZeneca China Agreement”).

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

The AstraZeneca China Agreement is structured as a 50/50 profit or loss share (as defined), which was amended under the 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 June 30, 2023 totaled $ 77.2 million .

The aggregate amount of such consideration received for milestone and upfront payments through September 30, 2023 totaled $ 77.2 million .

On September 18, 2023, the Company received the formal notice, from Beijing Medical Products Administration, of renewal of its right to continue to market Roxadustat in China through 2028.

The Company evaluated the regulatory milestone payment associated with this renewal under the AstraZeneca China Agreement and concluded that this milestone was achieved in the third quarter of 2023.

Accordingly, the consideration of $ 4.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the AstraZeneca U.S./RoW Agreement and the AstraZeneca China Agreement, $ 3.5 million of which was recognized as revenue during the third quarter of 2023 from performance obligations satisfied or partially satisfied.

A s of September 30, 2023, t he $ 4.0 million milestone was recorded as a contract asset and was fully netted against the contract liabilities (deferred revenue) related to the AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement.

AstraZeneca China Amendment

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

Three Months Ended June 30,

Six Months Ended June 30,

Amounts recognized as license revenue and development revenue under the AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement were as follows for the three and nine months ended September 30, 2023 and 2022 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Performance Obligation

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

License revenue

Development revenue

The transaction price relat ed to consideration received 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):

The transaction price relat ed to consideration received through September 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 June 30, 2023

Through September 30, 2023

Deferred Revenue at

June 30, 2023

September 30, 2023

Total Consideration

Through June 30, 2023

Through September 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 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.

As of September 30, 2023, deferred revenue included $ 151.4 million related to the AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement, which represents the net of $ 177.6 million of deferred revenue presented above and a $ 26.2 million unbilled milestone and 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 $ 2.0 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 and six months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Direct Sales:

13 unchanged sentences

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.

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

Sales to Falikang –

7 unchanged sentences

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

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

Following updates to its estimates, the Company deferred $ 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.

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

Following updates to its estimates, the Company recognized $ 2.3 million and $ 1.1 million from the revenue of the China performance obligation during the three and nine months ended September 30, 2023, respectively.

The product revenue resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied in previous periods was immaterial for the three months ended September 30, 2023.

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

June 30, 2023

September 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 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.

As of September 30, 2023 , approximately $ 28.0 million of the above deferred revenue related to the China unit of accounting was included in short-term deferred revenue, which represents the amount of deferred revenue associated with the China unit of accounting that is expected to be recognized within the next 12 months, associated with the commercial sales in China.

Due to the Company’s legal right to offset, at each balance sheet date, the rebates and discounts, mainly related to profit sharing, are presented as reductions to gross accounts receivable from Falikang, which was $ 2.5 million and $ 0.5 million as of September 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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Astellas Japan Agreement

2 unchanged sentences

Astellas Japan Agreement

The 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 an adjustment to the drug product revenue of $ 0.7 million for the three months ended September 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.

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.

In addition, the Company updated its 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 for the three months ended June 30, 2023.

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

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

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

As of 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.

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

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

As of September 30, 2023, t he balances related to the API price true-up under the Astellas Japan Agreement were $ 0.6 million in accrued liabilities and $ 0.7 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

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.

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.

The Company 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.

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

3 unchanged sentences

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.

Further for the nine months ended September 30, 2023 , the Company reclassified $ 28.7 million from the related deferred revenue to accrued liabilities.

As of September 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 $ 28.6 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 $ 0.6 million and $ 1.5 million as drug product revenue from the deferred revenue under the Astellas Europe Agreement during the three and nine months ended September 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

June 30, 2023

September 30, 2023

Drug product revenue - deferred revenue:

4 unchanged sentences

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, 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 .

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 September 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

5 unchanged sentences

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 September 30, 2023 , the Company recognized a $ 0.5 million upfront payment related to patent transfer under the A&R Eluminex Agreement.

During the three months ended June 30, 2023, the Company recognized a $ 1.0 million upfront payment.

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.

1 unchanged sentence

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

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

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Performance Obligation

License revenue

Other revenue - patent transfer

Other revenue - contract manufacturing

5 unchanged sentences

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.

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

6 unchanged sentences

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’

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

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

22 unchanged sentences

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’

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

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

net income (losses) was immaterial.

11 unchanged sentences

To date, there has been no such loans.

During the three months ended September 30, 2023, the Company received $ 2.3 million of dividend distribution from Falikang.

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

2 unchanged sentences

Share of Net Income

June 30, 2023

Dividend Received

September 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):

June 30, 2023

September 30, 2023

Money market funds

2 unchanged sentences

government bonds

Asset-backed securities

December 31, 2022

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

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

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

During the three and nine months ended September 30, 2023, a total of $ 8.5 million and $ 15.4 million, respectively, 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.

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

June 30, 2023

September 30, 2023

December 31, 2022

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Money market funds

government bonds

Total cash and cash equivalents

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.

At September 30, 2023 and December 31, 2022, a total of $ 60.1 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):

June 30, 2023

September 30, 2023

Amortized Cost

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government bonds

Asset-backed securities

Total investments

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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):

June 30, 2023

September 30, 2023

Less than 12 Months

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government bonds

Asset-backed securities

Commercial paper

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Foreign government bonds

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

At September 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.

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

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

Inventories consisted of the following (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

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

June 30, 2023

September 30, 2023

December 31, 2022

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API and bulk drug product price true-up

Litigation settlement

Payroll and related accruals

Accrued restructuring charge

Accrued co-promotion expenses - current

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Total accrued and other current liabilities

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.

The accrued liabilities of $ 40.3 million for API and bulk drug product price true-up as of September 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.

As of S eptember 30, 2023, the accrued litigation settlement of $ 28.5 million was related to the Company’s agreement in principle with plaintiffs to settle the class action lawsuit.

The Company maintains insurance that covers exposure related to the class action lawsuit.

As the amount is fully recoverable under the Company’s insurance policies, the Company recorded a corresponding receivable in prepaid expenses and other current assets in the condensed consolidated balance sheet.

The determination that the recorded receivables are probable of collection is based on the terms of the applicable insurance policies and communications with the insurers.

See the Legal Proceedings and Other Matters section in Note 12, Commitments and Contingencies , for details.

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

The Plan included a reduction to the Company’s U.S.

workforce of approximately 32 %.

As a result, the Company recorded a total of $ 12.6 million non-recurring restructuring charge during the three months ended September 30, 2023, primarily consisting of notice period and severance payments, accrued vacation, and employee benefits contributions.

During the three months ended September 30, 2023, total cash payments under the Plan was $ 7.9 million.

The remaining accrued restructuring charge was $ 4.7 million as of September 30, 2023 and will be substantially paid out by early 2024.

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

Senior Secured Term Loan Facilities

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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.

Pursuant to the Financing Agreement, the Lenders have funded the Initial Term Loan.

The clinical development milestones which could have triggered Delayed Draw Term Loan 1 were not achieved, and the Lenders have not funded Delayed Draw Term Loan 2.

As such, these features have expired as of September 30, 2023.

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

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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

The effective annual interest rate of the Initial Term Loan was 16.13 % for three and nine months ended September 30, 2023 .

The Company recorded interest expense of $ 2.9 million and $ 4.5 million for the three and nine months ended September 30, 2023, respectively.

As of September 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 September 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 other features embedded within the Loan should be bifurcated and accounted for separately as a derivative.

At inception and as of September 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 September 30, 2023 were as follows (in thousands):

September 30, 2023

Principal of senior secured term loan facilities

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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 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

The Company’s estimated effective annual interest rate was 16.07 % as of September 30, 2023.

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

Nine Months Ended

September 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 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.

During the three and nine months ended September 30, 2023, the Company recognized, under Astellas Agreements, development revenue of $ 2.4 million and $ 5.8 million , respectively, and drug product revenue of $ 1.3 million and $ 17.7 million , respectively.

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

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.

During the three and nine months ended September 30, 2023 , the Company recognized the related non-cash interest expense of $ 2.1 million and $ 5.6 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 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.

There was no transaction under the ATM Program for the three months ended September 30, 2023.

For the nine months ended September 30, 2023 , the Company sold 2,472,090 shares under the ATM Program, for proceeds of approximately $ 48.4 million, net of commissions to Sales Agents, at a weighted-average offering prices per share of $ 19.63 .

Provisions for (benefits from) income tax for the three and nine months ended September 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 $ 1.8 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.

The Company recorded license and development revenue related to collaboration agreements with Astellas of $ 2.4 million and $ 1.4 million for the three months ended September 30, 2023 and 2022, and $ 5.8 million and $ 31.0 million for the nine months ended September 30, 2023 and 2022, respectively.

The Company also recorded drug product revenue from Astellas of $ 1.3 million and $( 4.1 ) million for the three months ended September 30, 2023 and 2022, and $ 17.7 million and $ 4.6 million for the nine months ended September 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 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.

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

As of September 30, 2023 and December 31, 2022 , accounts receivable from Astellas were $ 8.7 million and $ 1.5 million, respectively.

As of September 30, 2023 and December 31, 2022 , total deferred revenue from Astellas was $ 10.2 million and $ 40.3 million, respectively.

As of September 30, 2023, the amounts due to Astellas, included in accrued and other current liabilities, and other long-term liabilities, totaled $ 29.8 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 $ 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.

The net product revenue from Falikang was $ 26.5 million and $ 14.9 million for the three months ended September 30, 2023 and 2022, and $ 68.3 million and $ 50.9 million for the nine months ended September 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 $ 0.6 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.

The investment income in Falikang was $ 0.7 million and $ 0.4 million for the three months ended September 30, 2023 and 2022, and $ 2.0 million and $ 1.3 million for the nine months ended September 30, 2023 and 2022 , respectively.

During the three months ended September 30, 2023, the Company received $ 2.3 million of dividend distribution from Falikang.

As of September 30, 2023 and December 31, 2022, the Company’s equity method investment in Falikang was $ 4.5 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.

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

As of September 30, 2023 and December 31, 2022 , accounts receivable, net, from Falikang, were $ 14.2 million and $ 10.5 million, respectively.

Commitments and Contingencies

Contract Obligations

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.

As of September 30, 2023 , the Company had outstanding total non-cancelable purchase obligations of $ 37.8 million, including $ 22.8 million for manufacture and supply of pamrevlumab, $ 2.2 million for manufacture and supply of roxadustat, and $ 12.8 million for other purchases and programs.

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

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

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

As of September 30, 2023, the Company had $ 81.9 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.

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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 June 30, 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, except for the class action settlement mentioned below, in its condensed consolidated balance sheet as of September 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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motions to dismiss.

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

On January 27, 2023, Plaintiffs filed a motion for class certification.

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.

Defendants answered the Complaint on September 13, 2022.

On January 27, 2023, Plaintiffs filed a motion for class certification, which the court granted in part and denied in part on October 3, 2023.

On October 17, 2023, the parties reached an agreement in principle to settle the class action at $ 28.5 million.

Accordingly, as of September 30, 2023, the Company recorded the $ 28.5 million in accrued and other current liabilities in the condensed consolidated balance sheet.

The Company maintains insurance that covers exposure related to the class action lawsuit.

The determination that the recorded receivables are probable of collection is based on the terms of the applicable insurance policies and communications with the insurers.

Another case, filed on May 25, 2023, against the same defendants, asserting similar claims as the class action and additional common-law and California state fraud claims, remains pending.

Defendants filed a motion to dismiss the complaint in that case on September 20, 2023.

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

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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.

The First and Second Delaware Chancery Derivative actions have been consolidated and the plaintiffs in the consolidated Delaware Chancery Derivative filed their amended complaint on November 3, 2023.

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

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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 Demand Refused Derivative has been stayed pending the outcome of any motion to dismiss the amended complaint in the Delaware Chancery Derivative.

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

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The maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable.

The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

As a result, the Company believes the estimated fair value of these arrangements is minimal.

Subsequent Event

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.

The Company believes the estimated fair value of these arrangements is minimal.

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

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

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

We apply our pioneering expertise in hypoxia-inducible factor (“HIF”) biology, 2-oxoglutarate enzymology, and connective tissue growth factor (“CTGF”) biology to advance innovative medicines for the treatment of anemia and cancer.

Pamrevlumab, a human monoclonal antibody targeting CTGF, is in Phase 3 clinical development for the treatment of locally advanced unresectable pancreatic cancer (“LAPC”).

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

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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.

Our goal is to build a diversified pipeline with novel drugs that will address unmet patient needs with a refined focus in oncology.

Financial Highlights

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except for per share data)

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Net loss per share - basic and diluted

June 30, 2023

September 30, 2023

December 31, 2022

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Accounts receivable

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

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

$29.4 million and $77.4 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;

$6.0 million and $13.8 million of development revenue recognized under our collaboration agreements with our partners Astellas Pharma Inc.

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

$4.0 million regulatory milestone recognized during the three months ended September 30, 2023, under AstraZeneca China Agreement (defined further below) associated with the renewal of our right to continue to market Roxadustat in China.

Of this amount, $2.7 million was recognized as license revenue, $0.8 million was recognized as development revenue and the remainder was included in deferred revenue;

$1.3 million and $17.7 million of drug product revenue related to active pharmaceutical ingredient (“API”) deliveries to Astellas;

$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.

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.

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

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

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

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

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

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

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

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

$14.5 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 or terminated in the current year period;

$6.1 million lower stock-based compensation primarily resulting from significantly lower stock price and cancellations of stock options and restricted stock units;

$4.3 million lower employee-related expenses primarily due to the reduction in force in July 2023, offset by overall merit increase, and the impact from a payroll tax refund received during the third quarter of 2022 that did not recur in the current year period;

$12.6 million of restructuring charge recorded in the third quarter of 2023 related to the reduction in force in July 2023;

$4.0 million higher outside services expenses due to higher consulting activities in roxadustat post-approval safety studies and general administrative function;

$1.8 million higher clinical trial expenses primarily associated with Phase 2/3 trials for pamrevlumab for the treatment of metastatic pancreatic cancer.

Operating costs and expenses for the nine months ended September 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 FG-3246 from Fortis Therapeutics (“Fortis”) and the acquisition of Fortis;

$12.6 million of restructuring charge recorded in the third quarter of 2023 related to the reduction in force in July 2023;

$7.6 million higher outside services expenses due to higher consulting activities in roxadustat post-approval safety studies and general administrative function;

$3.7 million higher employee-related expenses primarily due to overall merit increase, more business travel activities and higher severance during the current year period, and the impact from a payroll tax refund received during the third quarter of 2022 that did not recur in the current year period, offset by the impact from the reduction in force in July 2023;

$36.0 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.

$7.9 million lower stock-based compensation primarily resulting from significantly lower stock price and cancellations of stock options and restricted stock units.

For the three months ended September 30, 2023, we had a net loss of $63.6 million, or a net loss per basic and diluted share of $0.65, as compared to a net loss of $91.7 million, or a net loss per basic and diluted share of $0.98, for the same period a year ago, due to increases in revenue and decreases in operating costs and expenses as discussed above.

For the nine months ended September 30, 2023, we had a net loss of $228.0 million, or a net loss per basic and diluted share of $2.35, as compared to a net loss of $227.5 million, or a net loss per basic and diluted share of $2.43, for the same period a year ago, due to increases in revenue, offset by increases in operating costs and expenses, as discussed above.

Cash and cash equivalents, investments, and accounts receivable totaled $283.0 million at September 30, 2023, a decrease of $159.6 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.

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

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

Monoclonal Antibody Targeting Connective Tissue Growth Factor

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

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 is our first-in-class antibody developed to inhibit the activity of CTGF.

In addition to enabling progression of fibrosis, CTGF has been shown preclinically to have pro-tumorigenic effects in pancreatic cancer through increasing tumor cell proliferation and survival and promoting tumor angiogenesis and metastasis.

The United States (“U.S.”) Food and Drug Administration has granted Fast Track and Orphan Drug designations to pamrevlumab for the treatment of LAPC.

Pamrevlumab for the Treatment of Locally Advanced Unresectable Pancreatic Cancer

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Ambulatory DMD Patients

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 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;

In August 2023, we announced topline results from LELANTOS-2, our double-blind, placebo-controlled Phase 3 trial evaluating pamrevlumab in ambulatory DMD, in combination with systemic corticosteroids.

The study did not meet the primary endpoint of change in the North Star Ambulatory Assessment (NSAA) total score from baseline to week 52 (placebo-corrected mean difference -0.528 points;

95% CI -2.308 to 1.251;

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.

Secondary endpoints measured by change from baseline at week 52 in 4-stair climb velocity, 10-meter walk/run test, time to stand, time to loss of ambulation, and proportion of patients with greater than 10 seconds in the 10-meter walk/run test were also not met.

Preliminary safety data showed that pamrevlumab was generally safe and well tolerated.

The majority of treatment emergent adverse events were mild or moderate.

The Company plans to communicate the full results of the LELANTOS-2 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 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).

In the third quarter of 2023, roxadustat achieved an over 37% increase in sales volume relative to the third quarter of 2022.

As of August 2023, roxadustat was the top CKD anemia brand in China with approximately 42% 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

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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.

We recently presented results from this study in an oral presentation at the European Society for Medical Oncology Congress 2023.

Our supplemental New Drug Application for roxadustat in CIA was accepted by the China Health Authority in August 2023.

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.

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

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

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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%.

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

We expect final topline results of this study by the first quarter of 2024.

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

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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.

Our preclinical pipeline consists of two antibodies for immuno-oncology that are in investigational new drug application-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.

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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.

We plan to submit an investigational new drug application 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.

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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.

An investigational new drug application 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.

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

During the three months ended September 30, 2023, we recognized a $0.5 million upfront payment under the A&R Eluminex Agreement.

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

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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 June 30, 2023 totaled $790.1 million.

Under these agreements, the aggregate amount of consideration received through September 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 $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.

The related drug product revenue was $0.7 million and $(4.3) million for the three months ended September 30, 2023 and 2022, and $16.2 million and $3.3 million for the nine months ended September 30, 2023 and 2022, respectively.

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

The related drug product revenue was $0.5 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.

The related drug product revenue was $0.6 million and $0.2 million for the three months ended September 30, 2023 and 2022, and $1.5 million and $1.3 million for the nine months ended September 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 June 30, 2023 totaled $516.2 million.

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

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

On September 18, 2023, we received the formal notice, from Beijing Medical Products Administration, of renewal of its right to continue to market Roxadustat in China through 2028.

The Company evaluated the regulatory milestone payment associated with this renewal under the AstraZeneca China Agreement and concluded that this milestone was achieved in the third quarter of 2023.

Accordingly, the consideration of $4.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the AstraZeneca U.S./RoW Agreement and the AstraZeneca China Agreement, $3.5 million of which was recognized as revenue during the third quarter of 2023 from performance obligations satisfied or partially satisfied.

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

There was no related drug product revenue for the three and six months ended June 30, 2023 and 2022.

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

We recognized related net product revenue of $29.4 million and $17.4 million for the three months ended September 30, 2023 and 2022, and $77.4 million and $59.5 million for the nine months ended September 30, 2023 and 2022, respectively.

Additional Information Related to Collaboration Agreements

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:

Total cash consideration received through September 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

June 30, 2023

September 30, 2023

Cash Payment for Milestones

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RESULTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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

As of June 30, 2023, we expect the future development services to continue through 2024.

As of September 30, 2023, we expect the future development services to continue through the end of 2023.

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

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

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

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

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

Total revenue increased $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.

Total revenue increased $24.4 million, or 155% for the three months ended September 30, 2023, and increased $14.2 million, or 13% for the nine months ended September 30, 2023, respectively, compared to the same periods a year ago for the reasons discussed in the sections below.

License Revenue

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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NM = Not meaningful

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 collaboration agreements with AstraZeneca for three and nine months ended September 30, 2023 represented the allocated revenue related to $4.0 million regulatory milestone associated with the renewal of our right to continue to market roxadustat in China that was included in the transaction price during the third quarter of 2023 when such milestone was achieved.

License revenue recognized for the nine months ended September 30, 2023 also included a $1.0 million upfront payment under the A&R Eluminex Agreement, 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 nine months ended September 30, 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.

Development and Other Revenue

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Total development and other revenue

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.

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.

Development and other revenue increased $4.3 million, or 176% for the three months ended September 30, 2023, and decreased $3.8 million, or 20% for the nine months ended September 30, 2023, respectively, compared to the same periods a year ago.

Development revenue recognized under our collaboration agreements with Astellas for the three and nine months ended September 30, 2023 was impacted by the increase in co-development billings due to the closeout activities under our collaboration agreements with Astellas for roxadustat.

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

Development revenue recognized under our collaboration agreements with AstraZeneca for the three months ended September 30, 2023 was impacted by the increase in co-development billings due to the closeout activities under our collaboration agreements with AstraZeneca for roxadustat, and included the allocated revenue of $0.8 million related to the above-mentioned $4.0 million regulatory milestone associated with the renewal of our right to continue to market Roxadustat in China.

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

Other revenue recognized for the three months ended September 30, 2023 included a $0.5 million upfront payment related to patent transfer under from Eluminex.

Other revenue recognized for the three and nine months ended September 30, 2023 and 2022 also included 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, as well as revenue from sales of certain research and development material.

Product Revenue, Net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Net transaction price

Decrease in deferred revenue

Decrease (increase) in deferred revenue

Sales to Falikang revenue, net

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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 $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.

Total product revenue, net increased $12.0 million, or 69% for the three months ended September 30, 2023, and increased $17.9 million, or 30%, 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 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.

Product revenue from direct sales, increased $0.5 million, or 20% for the three months ended September 30, 2023, and increased $0.5 million, or 5% for the nine months ended September 30, 2023, respectively, compared to the same periods a year ago, due to the increase in sales volume during the current year period.

The total discounts and rebates were immaterial for each of the three and nine months ended September 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 $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.

Sales to Falikang revenue, net increased $11.5 million, or 77% for the three months ended September 30, 2023, and increased $17.5 million, or 34% for the nine months ended September 30, 2023, respectively, compared to the same periods a year ago.

The gross transfer price increased $9.8 million and $35.2 million, and the calculated profit share increased $5.2 million and $19.5 million for the three and nine months ended September 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, 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.

Following updates to our estimates, for the three and nine months ended September 30, 2023, we recognized $2.3 million and $1.1 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 nine months ended September 30, 2022, we deferred $4.6 million and $0.8 million, respectively, from the net transfer price to Falikang, which was included in the related deferred revenue of the China performance obligation.

Drug Product Revenue, Net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Total drug product revenue, net:

NM = Not meaningful

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.

Drug product revenue, net increased $5.4 million, or 132% for the three months ended September 30, 2023, and increased $13.1 million, or 284% for the nine months ended September 30, 2023, respectively, compared to the same periods a year ago.

Astellas Japan Agreement

During the third 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 an adjustment to the drug product revenue of $0.7 million for the three months ended September 30, 2023.

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.

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During the third quarter of 2022, 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 $4.3 million.

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

1 unchanged sentence

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 September 30, 2023, the balances related to the API price true-up under the Astellas Japan Agreement were $0.6 million in accrued liabilities and $0.7 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.

4 unchanged sentences

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

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.

Further during the first three quarters of 2023, we reclassified $28.7 million from the related deferred revenue to accrued liabilities.

As of September 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 $28.6 million in accrued liabilities, representing our best estimate that these amounts will be paid within the next 12 months.

We recognized royalty revenue as drug product revenue, from the deferred revenue under the Astellas Europe Agreement, of $0.6 million and $1.5 million for the three and nine months ended September 30, 2023, and $0.2 million and $1.3 million for the three and nine months ended September 30, 2022, respectively.

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 and six months ended June 30, 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 nine months ended September 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, 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.

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 September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Selling, general and administrative

Restructuring charge

Total operating costs and expenses

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.

NM = Not meaningful

Total operating costs and expenses decreased $5.8 million, or 5% for the three months ended September 30, 2023, and increased $7.0 million, or 2% for the nine months ended September 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 $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 decreased $0.1 million, or 2% for the three months ended September 30, 2023, and decreased $1.9 million, or 12% for the nine months ended September 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 $3.6 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.

Cost of goods sold associated with the roxadustat commercial sales in China was $3.9 million and $4.0 million for the three months ended September 30, 2023 and 2022, and $10.7 million and 11.5 million for the nine months ended September 30, 2023 and 2022, respectively.

Cost of goods sold in China decreased as compared to the prior year periods resulting from the improved unit cost efficiency due to higher production volume, offset by the increases in the sales volume.

Cost of goods sold in the U.S.

was immaterial for the three months ended September 30, 2023 and 2022, and $2.1 million and $2.7 million for the nine months ended September 30, 2023 and 2022, respectively.

associated with the costs of the roxadustat API or bulk drug product delivered to Astellas in the respective periods.

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

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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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Product Candidate

(in thousands)

Approved / Phase 3

Other research and development expenses

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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 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:

Research and development expenses decreased $14.0 million, or 19% for the three months ended September 30, 2023, compared to the same period a year ago, primarily as a result of the net effect of the following:

Decrease of $14.5 million in drug development expenses associated with drug substance, drug product manufacturing and logistic activities related to pamrevlumab which was largely completed in the prior year;

Decrease of $3.1 million in employee-related costs primarily due to the reduction in force in July 2023, offset by overall merit increase and the impact from a payroll tax refund received during the third quarter of 2022 that did not recur in the current year period;

Decrease of $2.3 million in stock-based compensation primarily resulting from significantly lower stock price and cancellations of stock options and restricted stock units;

Increase of $2.5 million in outside services expenses primarily related to roxadustat post-approval safety studies activities in China;

Increase of $1.8 million in clinical trials costs primarily due to Phase 3 trials for pamrevlumab for the treatment of metastatic pancreatic cancer.

Research and development expenses decreased $4.0 million, or 2% for the nine months ended September 30, 2023, compared to the same period a year ago, primarily as a result of the net effect of the following:

Decrease of $36.0 million in drug development expenses associated with drug substance, drug product manufacturing activities and logistic activities related to roxadustat post-approval safety studies in China and pamrevlumab which were largely completed in the prior periods;

Decrease of $5.2 million in stock-based compensation primarily resulting from significantly lower stock price and cancellations of stock options and restricted stock units;

Increase of $2.2 million in employee-related costs primarily due to overall merit increase and higher business travel activities during the current year period, as well as the impact from a payroll tax refund received during the third quarter of 2022 that did not recur in the current year period, offset by the impact from the reduction in force in July 2023;

Increase of $4.1 million information technology, facilities and allocated costs primarily associated with software costs and maintenance services;

Increase of $3.7 million in outside services expenses primarily related to roxadustat post-approval safety studies activities in China;

$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 $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.

SG&A expenses decreased $4.3 million, or 14% for the three months ended September 30, 2023, compared to the same period a year ago, primarily as a result of the net effect of the following:

Decrease of $3.8 million in stock-based compensation primarily resulting from significantly lower stock price and cancellations of stock options and restricted stock units;

Decrease of $1.2 million in employee-related costs primarily due to the reduction in force in July 2023, offset by overall merit increase and the impact from a payroll tax refund received during the third quarter of 2022 that did not recur in the current year period;

Increase of $1.6 million in outside services expenses primarily due to higher consulting activities in general administrative function.

SG&A expenses remained relatively flat for the nine months ended September 30, 2023, compared to the same period a year ago, primarily as a result of the net effect of the following:

Increase of $3.9 million in outside services expenses due to higher consulting activities in general administrative function and efforts to prepare for commercialization in the first half of the year;

Increase of $1.5 million in employee-related costs primarily due to primarily due to overall merit increase and the impact from a payroll tax refund received during the third quarter of 2022 that did not recur in the current year period, offset by the impact from the reduction in force in July 2023;

Decrease of $2.7 million in stock-based compensation primarily resulting from significantly lower stock price and cancellations of stock options and restricted stock units;

Decrease of $3.8 million due to higher allocated-out information technology, facilities and costs primarily associated with software costs and maintenance services.

Restructuring Charge

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

The Plan included a reduction to our U.S.

workforce of approximately 32%.

As a result, we recorded a total of $12.6 million non-recurring restructuring charge during the three months ended September 30, 2023, primarily consisting of notice period and severance payments, accrued vacation and employee benefits contributions.

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

Interest and Other, Net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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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”).

Interest expense for the three and nine months ended September 30, 2023 included $2.1 million and $5.6 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 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.

Interest expense for each of the three and nine months ended September 30, 2023 also included $2.9 million and $4.5 million, respectively, related to the senior secured term loan facilities.

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

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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 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,

Interest income and other income (expenses), net increased $2.5 million, or 139% for the three months ended September 30, 2023, and $1.3 million, or 20% for the nine months ended September 30, 2023, compared to the same periods a year ago, primarily due to higher interest income from our investments with higher interest rate during the current year period, and favorable foreign exchange impact.

The increases in the nine-month period was partially offset by an impact of $5.0 million recorded during the second quarter of 2022, which did not recur in the current year period, resulting from a reduction to other expenses to release the previously estimated late payment fees related to value added tax in China.

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Effective tax rate

Provisions for income taxes for the three and six months ended June 30, 2023 and 2022 were primarily due to foreign taxes.

Provisions for (benefit from) income taxes for the three and nine months ended September 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 and six months ended June 30, 2023 and 2022.

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, which was immaterial for the three and nine months ended September 30, 2023 and 2022.

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

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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 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.

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 nine months ended September 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.

On April 29, 2023, we entered into 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.

The clinical development milestones which could have triggered Delayed Draw Term Loan 1 were not achieved, and the Lenders have not funded Delayed Draw Term Loan 2.

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.

As of September 30, 2023, we had cash and cash equivalents of $120.9 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 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.

As of September 30, 2023, we had short-term investments of $130.4 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 September 30, 2023, a total of $60.1 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.

Our long-term plans for distributing cash flows from FibroGen Beijing may involve any number of scenarios including keeping the money onshore to fund future expansion of our China operations or paying down certain debt obligations.

To date, no such debt repayments have occurred, nor have there been any other payments or distributions from FibroGen Beijing to entities or investors outside of China.

During the three months ended September 30, 2023, FibroGen Beijing made a repayment of $11.8 million of intercompany loans.

In addition, in October 2023, FibroGen Beijing made another repayment of $21.2 million of intercompany loans.

Our capital contributions to FibroGen Beijing and the liquidity position of FibroGen Beijing depend on many factors, including those set forth under Part II, Item 1A “

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

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash provided by (used in):

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Effect of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Operating Activities

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.

Net cash used in operating activities was $296.7 million for the nine months ended September 30, 2023 and consisted primarily of net loss of $228.0 million adjusted for non-operating cash items of $77.6 million, and a net decrease in operating assets and liabilities of $146.3 million.

The significant non-operating cash items included stock-based compensation expense of $41.5 million, acquired IPR&D expenses associated with the acquisition of Fortis of $24.6 million, depreciation expense of $7.7 million and non-cash interest expense related to sale of future revenues of $5.6 million.

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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 decrease was partially offset by the accrued liabilities of $28.5 million for the litigation settlement as of September 30, 2023, which is fully recoverable under our insurance policies.

See Note 12, Commitments and Contingencies, to the condensed consolidated financial statements for details.

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

1 unchanged sentence

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 $16.3 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.

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.

Accounts payable decreased $14.1 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;

Prepaid expenses and other current assets increased $27.4 million, primarily due to the $28.5 million receivable as of September 30, 2023 for the insurance recovery for the above-mentioned litigation settlement.

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

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

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

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.

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

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

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

Deferred revenue increased $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.

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

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

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

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

Investing Activities

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.

Net cash provided by investing activities was $143.4 million for the nine months ended September 30, 2023 and consisted primarily of $300.5 million of proceeds from maturities of investments, partially offset by $157.2 million of cash used in purchases of available-for-sale securities.

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

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 $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.

Net cash provided by financing activities was $123.0 million for the nine months ended September 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 $1.9 million for the nine months ended September 30, 2022 and consisted primarily of $4.6 million of cash paid for payroll taxes on restricted stock unit releases, partially offset by $3.0 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under our Employee Stock Purchase Plan.

Material Cash Requirements

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Contractual Obligations

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

As of September 30, 2023, we had $81.9 million of operating lease liabilities.

The material cash requirements related to our lease liabilities included $15.2 million expected to be paid within the next 12 months.

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.

As of September 30, 2023, we had outstanding total non-cancelable purchase obligations of $37.8 million, including $22.8 million for manufacture and supply of pamrevlumab, $2.2 million for manufacture and supply of roxadustat, and $12.8 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 $31.8 million expected to be paid within the next 12 months.

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.

Under the Financing Agreement with Morgan Stanley Tactical Value, as of September 30, 2023, we had $71.7 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.

Under the RIFA with NovaQuest, as of September 30, 2023, we had $55.0 million of liability related to sale of future revenues on the condensed consolidated balance sheets, $5.9 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.

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

As of June 30, 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 September 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 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.

During the three and nine months ended September 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 and six months ended June 30, 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 nine months ended September 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 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”

During the three and nine months ended September 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