KYNTRA BIO, INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDA TED BALANCE SHEETS (In thousands, except per share amounts) (Unaudited) September 30, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents $ 120,914 $ 155,700 Short-term investments 130,426 266,308 Accounts receivable, net ($ 22,916 and $ 12,088 from related parties) 31,694 16,299 Inventories 40,696 40,436 Prepaid expenses and other current assets 40,378 14,083 Total current assets 364,108 492,826 Restricted time deposits 2,072 2,072 Long-term investments — 4,348 Property and equipment, net 14,512 20,605 Equity method investment in unconsolidated variable interest entity 4,534 5,061 Operating lease right-of-use assets 71,248 79,893 Other assets 3,952 5,282 Total assets $ 460,426 $ 610,087 Liabilities, redeemable non-controlling interests and deficit Current liabilities: Accounts payable $ 19,220 $ 30,758 Accrued and other current liabilities ($ 29,157 and $ 63,886 to a related party) 170,986 219,773 Deferred revenue ($ 5,482 and $ 9,259 to related parties) 7,325 12,739 Operating lease liabilities, current 11,884 10,292 Total current liabilities 209,415 273,562 Product development obligations 16,942 16,917 Deferred revenue, net of current ($ 4,671 and $ 31,044 to a related party) 154,206 185,722 Operating lease liabilities, non-current 70,035 79,593 Senior secured term loan facilities, non-current 71,666 — Liability related to sale of future revenues, non-current 49,109 49,333 Other long-term liabilities ($ 668 and $ 0 to a related party) 4,255 6,440 Total liabilities 575,628 611,567 Commitments and Contingencies (Note 12) Redeemable non-controlling interests 21,480 — Stockholders’ deficit: Preferred stock, $ 0.01 par value; 125,000 shares authorized; no shares issued and outstanding at September 30, 2023 and December 31, 2022 — — Common stock, $ 0.01 par value; 225,000 shares authorized at September 30, 2023 and December 31, 2022; 98,339 and 94,166 shares issued and outstanding at September 30, 2023 and December 31, 2022 983 942 Additional paid-in capital 1,634,459 1,541,019 Accumulated other comprehensive loss ( 6,923 ) ( 5,720 ) Accumulated deficit ( 1,785,688 ) ( 1,557,688 ) Total stockholders’ deficit attributable to FibroGen ( 157,169 ) ( 21,447 ) Nonredeemable non-controlling interests 20,487 19,967 Total deficit ( 136,682 ) ( 1,480 ) Total liabilities, redeemable non-controlling interests and deficit $ 460,426 $ 610,087 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 2 Table of Contents FIBROGEN, INC. CONDENSED CONSOLIDATED S TATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenue: License revenue (includes $ 0 , $ 0 , $ 0 and $ 22,590 from a related party) $ 2,649 $ — $ 9,649 $ 22,590 Development and other revenue (includes $ 2,358 , $ 1,414 , $ 5,821 , and $ 8,419 from a related party) 6,775 2,453 15,825 19,672 Product revenue, net (includes $ 26,463 , $ 14,914 , $ 68,347 and $ 50,873 from a related party) 29,390 17,359 77,439 59,495 Drug product revenue, net (from a related party) 1,320 ( 4,077 ) 17,701 4,610 Total revenue 40,134 15,735 120,614 106,367 Operating costs and expenses: Cost of goods sold 4,243 4,308 13,441 15,355 Research and development 61,194 75,182 231,158 235,163 Selling, general and administrative 25,573 29,902 91,029 90,722 Restructuring charge 12,606 — 12,606 — Total operating costs and expenses 103,616 109,392 348,234 341,240 Loss from operations ( 63,482 ) ( 93,657 ) ( 227,620 ) ( 234,873 ) Interest and other, net Interest expense ( 5,022 ) ( 84 ) ( 10,464 ) ( 321 ) Interest income and other income (expenses), net 4,296 1,798 7,984 6,672 Total interest and other, net ( 726 ) 1,714 ( 2,480 ) 6,351 Loss before income taxes ( 64,208 ) ( 91,943 ) ( 230,100 ) ( 228,522 ) Provision for (benefit from) income taxes 84 114 ( 77 ) 250 Investment income in unconsolidated variable interest entity 677 407 2,023 1,293 Net loss $ ( 63,615 ) $ ( 91,650 ) $ ( 228,000 ) $ ( 227,479 ) Net loss per share - basic and diluted $ ( 0.65 ) $ ( 0.98 ) $ ( 2.35 ) $ ( 2.43 ) Weighted average number of common shares used to calculate net loss per share - basic and diluted 98,245 93,767 96,901 93,431 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 3 Table of Contents FIBROGEN, INC. CONDENSED CONSOLIDATED STATE MENTS OF COMPREHENSIVE LOSS (In thousands) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net loss $ ( 63,615 ) $ ( 91,650 ) $ ( 228,000 ) $ ( 227,479 ) Other comprehensive income (loss): Foreign currency translation adjustments ( 1,033 ) ( 436 ) ( 3,618 ) ( 28 ) Available-for-sale investments: Unrealized gain (loss) on investments, net of tax effect 360 20 2,415 ( 3,155 ) Other comprehensive gain (loss), net of taxes ( 673 ) ( 416 ) ( 1,203 ) ( 3,183 ) Comprehensive loss ( 64,288 ) ( 92,066 ) ( 229,203 ) ( 230,662 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 4 Table of Contents FIBROGEN, INC. CONDENSED CONSOLIDATED STATEMENT S OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (In thousands, except share data) (Unaudited) For The Three Month Period Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Nonredeemable Non-Controlling Total Redeemable Non-Controlling Shares Amount Capital Income (Loss) Deficit Interests Equity (Deficit) Interests (Note 3) Balance at June 30, 2023 98,204,243 $ 982 $ 1,625,067 $ ( 6,250 ) $ ( 1,722,073 ) $ 20,487 $ ( 81,787 ) $ 21,480 Net loss — — — — ( 63,615 ) — ( 63,615 ) — Change in unrealized gain or loss on investments — — — 360 — — 360 — Foreign currency translation adjustments — — — ( 1,033 ) — — ( 1,033 ) — Shares issued from stock plans, net of payroll taxes paid 134,880 1 ( 84 ) — — — ( 83 ) — Stock-based compensation — — 9,476 — — — 9,476 — Balance at September 30, 2023 98,339,123 $ 983 $ 1,634,459 $ ( 6,923 ) $ ( 1,785,688 ) $ 20,487 $ ( 136,682 ) $ 21,480 Balance at June 30, 2022 93,733,034 $ 937 $ 1,509,636 $ ( 6,930 ) $ ( 1,399,863 ) $ 19,967 $ 123,747 $ — Net loss — — — — ( 91,650 ) — ( 91,650 ) — Change in unrealized gain or loss on investments — — — 20 — — 20 — Foreign currency translation adjustments — — — ( 436 ) — — ( 436 ) — Shares issued from stock plans, net of payroll taxes paid 203,306 2 ( 995 ) — — — ( 993 ) — Stock-based compensation — — 15,585 — — — 15,585 — Balance at September 30, 2022 93,936,340 $ 939 $ 1,524,226 $ ( 7,346 ) $ ( 1,491,513 ) $ 19,967 $ 46,273 $ — 5 Table of Contents FIBROGEN, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED) (In thousands, except share data) (Unaudited) For The Nine Month Period Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Nonredeemable Non-Controlling Total Redeemable Non-Controlling Shares Amount Capital Loss Deficit Interests Equity (Deficit) Interests (Note 3) Balance at December 31, 2022 94,166,086 $ 942 $ 1,541,019 $ ( 5,720 ) $ ( 1,557,688 ) $ 19,967 $ ( 1,480 ) $ — Net loss — — — — ( 228,000 ) — ( 228,000 ) — Consolidation of Fortis (Note 3) — — — — — 520 520 21,480 Change in unrealized gain or loss on investments — — — 2,415 — — 2,415 — Foreign currency translation adjustments — — — ( 3,618 ) — — ( 3,618 ) — Issuance of common stock under ATM Program 2,472,090 24 48,383 — — — 48,407 — Shares issued from stock plans, net of payroll taxes paid 1,700,947 17 3,586 — — — 3,603 — Stock-based compensation — — 41,471 — — — 41,471 — Balance at September 30, 2023 98,339,123 $ 983 $ 1,634,459 $ ( 6,923 ) $ ( 1,785,688 ) $ 20,487 $ ( 136,682 ) $ 21,480 Balance at December 31, 2021 92,880,533 $ 929 $ 1,476,414 $ ( 4,163 ) $ ( 1,264,034 ) $ 19,967 $ 229,113 $ — Net loss — — — — ( 227,479 ) — ( 227,479 ) — Change in unrealized gain or loss on investments — — — ( 3,155 ) — — ( 3,155 ) — Foreign currency translation adjustments — — — ( 28 ) — — ( 28 ) — Shares issued from stock plans, net of payroll taxes paid 1,055,807 10 ( 1,583 ) — — — ( 1,573 ) — Stock-based compensation — — 49,395 — — — 49,395 — Balance at September 30, 2022 93,936,340 $ 939 $ 1,524,226 $ ( 7,346 ) $ ( 1,491,513 ) $ 19,967 $ 46,273 $ — The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 6 Table of Contents FIBROGEN, INC. CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended September 30, 2023 2022 Operating activities Net loss $ ( 228,000 ) $ ( 227,479 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 7,653 7,503 Amortization of finance lease right-of-use assets 402 411 Net accretion of premium and discount on investments ( 3,654 ) 1,842 Investment income in unconsolidated variable interest entity ( 2,023 ) ( 1,293 ) Loss (gain) on disposal of property and equipment 1 ( 3 ) Stock-based compensation 41,471 49,377 Acquired in-process research and development expenses 24,636 — Non-cash interest expense related to sale of future revenues 5,636 — Dividend received from unconsolidated variable interest entity 2,255 — Impairment of investment 1,000 — Realized loss on sales of available-for-sale securities 271 5 Changes in operating assets and liabilities: Accounts receivable, net ( 16,283 ) 983 Inventories ( 1,519 ) ( 11,147 ) Prepaid expenses and other current assets ( 27,393 ) 8,265 Operating lease right-of-use assets 8,447 7,759 Other assets 962 823 Accounts payable ( 14,057 ) ( 5,120 ) Accrued and other liabilities ( 50,246 ) 87,167 Operating lease liabilities, current 1,669 715 Deferred revenue ( 36,930 ) 4,509 Accrued interest for finance lease liabilities ( 22 ) ( 68 ) Operating lease liabilities, non-current ( 9,447 ) ( 7,407 ) Other long-term liabilities ( 1,529 ) ( 10,262 ) Net cash used in operating activities ( 296,700 ) ( 93,420 ) Investing activities Purchases of property and equipment ( 2,268 ) ( 3,408 ) Payment made for acquired in-process research and development asset — ( 35,000 ) Proceeds from sale of property and equipment — 8 Purchases of available-for-sale securities ( 157,210 ) ( 97,301 ) Cash acquired from consolidation of Fortis 656 — Proceeds from sales of available-for-sale securities 1,730 7,382 Proceeds from maturities of investments 300,507 216,342 Net cash provided by investing activities 143,415 88,023 Financing activities Proceeds from senior secured term loan facilities, net of issuance costs 74,078 — Cash paid for transaction costs for senior secured term loan facilities ( 2,746 ) — Repayments of finance lease liabilities ( 128 ) ( 23 ) Repayments of lease obligations ( 302 ) ( 302 ) Cash paid for payroll taxes on restricted stock unit releases — ( 4,562 ) Proceeds from issuance of common stock under ATM Program, net of commissions 48,407 — Proceeds from issuance of common stock under employee stock plans 3,686 2,989 Net cash provided by (used in) financing activities 122,995 ( 1,898 ) Effect of exchange rate change on cash and cash equivalents ( 4,496 ) ( 7,968 ) Net decrease in cash and cash equivalents ( 34,786 ) ( 15,263 ) Total cash and cash equivalents at beginning of period 155,700 171,223 Total cash and cash equivalents at end of period $ 120,914 $ 155,960 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 7 Table of Contents FIBROGEN, INC. NOTES TO THE CONDENSED CONSOL IDATED FINANCIAL STATEMENTS (Unaudited) 1. Significant Accounting Policies Description of Operations FibroGen, Inc. (“FibroGen” or the “Company”) is headquartered in San Francisco, California, with subsidiary offices in Beijing and Shanghai, People’s Republic of China (“China”). FibroGen is a leading biopharmaceutical company 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 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. Pamrevlumab is also in Phase 2/3 development for the treatment of metastatic pancreatic cancer. To date, the Company has retained exclusive worldwide rights for pamrevlumab. Roxadustat is an oral small molecule inhibitor of HIF prolyl hydroxylase activity. Roxadustat (爱瑞卓 ® , EVRENZO TM ) is approved in China, Europe, Japan, and numerous other countries for the treatment of anemia in chronic kidney disease for patients who are on dialysis and not on dialysis. Roxadustat is in clinical development for chemotherapy-induced anemia in China. The Company has a pipeline of late-stage clinical programs as well as preclinical drug candidates at various stages of development that include both small molecules and biologics. 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 The condensed consolidated financial statements include the accounts of FibroGen, its wholly-owned subsidiaries and its majority-owned subsidiaries, as well as any variable interest entity (“VIE”) for which FibroGen is the primary beneficiary. All inter-company transactions and balances have been eliminated in consolidation. For any VIE for which FibroGen is not the primary beneficiary, the Company uses the equity method of accounting. The Company operates as one reportable segment — the discovery, development and commercialization of novel therapeutics to treat serious unmet medical needs. The unaudited condensed consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to interim financial reporting and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U.S. 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. Use of Estimates The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions include valuation and recognition of revenue and deferred revenue, specifically, estimates in variable consideration for drug product sales, and estimates in transaction price per unit for the China performance obligation. On an ongoing basis, management reviews these estimates and assumptions. Changes in facts and circumstances may alter such estimates and actual results could differ from those estimates. In the Company’s opinion, the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair statement of its financial position, results of operations and cash flows for the interim periods presented. 8 Table of Contents 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 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 The Company evaluates acquisitions of entities or assets to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If this screen criteria is met, the transaction is accounted for as an asset acquisition. If not, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the definition of a business. The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs. In an asset acquisition, the cost allocated to acquire in-process research and development (“IPR&D”) with no alternative future use is charged to research and development expense at the acquisition date. The Company recognizes assets acquired and liabilities assumed in asset acquisitions, including contingent assets and liabilities, and non-controlling interests (“NCI”) in the acquired assets at their estimated fair values as of the date of acquisition. An NCI represents the non-affiliated equity interest in the underlying entity or asset. The Company presents redeemable NCI in its consolidated statements of changes in equity within mezzanine equity. Nonredeemable NCI and redeemable NCI are initially recorded at their fair values. Subsequently, net loss in the underlying entity or asset is only allocated to nonredeemable NCI. Net income in the underlying entity or asset is allocated to nonredeemable NCI and redeemable NCI based on their respective stated rights. 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 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 September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Employee stock options 11,293 9,715 10,022 9,794 RSUs, PRSUs and TSR awards 4,596 1,978 3,208 2,066 ESPP 559 50 556 390 16,448 11,743 13,786 12,250 Risks and Uncertainties The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, the results of clinical trials and the achievement of milestones, research developments, actions by regulatory authorities, market acceptance of the Company’s product candidates, competition from other products and larger companies, the liquidity and capital resources of the Company, intellectual property protection for the Company’s proprietary technology, strategic relationships, and dependence on key individuals, suppliers, clinical organization, and other third parties. 9 Table of Contents 2. Collaboration Agreements, License Agreement and Revenues Astellas Agreements 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 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 nine months ended September 30, 2023 and 2022 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Agreement Performance Obligation 2023 2022 2023 2022 Astellas Japan Agreement Development revenue $ 36 $ 45 $ 164 $ 156 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 September 30, 2023 License $ 100,347 Development revenue 17,047 Total license and development revenue $ 117,394 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 September 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. In 2018, FibroGen and Astellas entered into an amendment to the Astellas Japan Agreement that allows Astellas to manufacture roxadustat drug product for commercialization in Japan (the “Astellas Japan Amendment”). The related drug product revenue is described under the Drug Product Revenue, Net section below. Astellas Europe Agreement In April 2006, the Company entered into a separate collaboration agreement with Astellas for the development and commercialization of roxadustat for the treatment of anemia in Europe, the Middle East, the Commonwealth of Independent States and South Africa (“Astellas Europe Agreement”). Under the terms of the Astellas Europe Agreement, Astellas agreed to pay license fees, other upfront consideration and various milestone payments, totaling $ 745.0 million . U nder the Astellas Europe Agreement, Astellas committed to fund 50 % of joint development costs for Europe and North America, and all territory-specific costs. The Astellas Europe Agreement also provides for tiered payments based on net sales of product (as defined) in the low 20% range . On March 21, 2022, EVRENZO ® (roxadustat) was registered with the Russian Ministry of Health. The Company evaluated the regulatory milestone payment associated with the approval in Russia under the Astellas Europe Agreement and concluded that this milestone was achieved in the first quarter of 2022. Accordingly, the consideration of $ 25.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Astellas Europe Agreement, all of which was recognized as revenue during the first quarter of 2022 from performance obligations satisfied. 10 Table of Contents 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 nine months ended September 30, 2023 and 2022 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Agreement Performance Obligation 2023 2022 2023 2022 Astellas Europe Agreement License revenue $ — $ — $ — $ 22,590 Development revenue $ 2,322 $ 1,369 $ 5,657 $ 8,263 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 Europe Agreement as follows (in thousands): Astellas Europe Agreement Total Consideration Through September 30, 2023 License $ 618,975 Development revenue 285,922 Total license and development revenue $ 904,897 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. Under the Astellas Europe Agreement, Astellas has an option to purchase roxadustat bulk drug product in support of commercial supplies. During the first quarter of 2021, the Company entered into an EU Supply Agreement with Astellas under the Astellas Europe Agreement (“Astellas EU Supply Agreement”) to define general forecast, order, supply and payment terms for Astellas to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies. The related drug product revenue is described under the Drug Product Revenue, Net section below. AstraZeneca Agreements AstraZeneca U.S./Rest of World (“RoW”) Agreement Effective July 30, 2013, the Company entered into a collaboration agreement with AstraZeneca AB (“AstraZeneca”) for the development and commercialization of roxadustat for the treatment of anemia in the U.S. and all other countries in the world, other than China, not previously licensed under the Astellas Europe and Astellas Japan Agreements (“AstraZeneca U.S./RoW Agreement”). China is covered by a separate agreement with AstraZeneca described below. Under the terms of the AstraZeneca U.S./RoW Agreement, AstraZeneca agreed to pay upfront, non-contingent, non-refundable and time-based payments, and potential milestone payments, totaling $ 1.2 billion . AstraZeneca commits to pay the Comp any tiered royalty payments on AstraZeneca’s future net sales (as defined in the agreement) of roxadustat in the low 20% range . In addition, the Company is entitled to receive a transfer price for shipment of commercial product based on a percentage of AstraZeneca’s net sales (as defined in the agreement) in the low- to mid-single digit range. The aggregate amount of consideration received under the AstraZeneca U.S./RoW Agreement through September 30, 2023 totaled $ 439.0 million , excluding drug product revenue that is discussed separately below. Based on its current development plans for roxadustat in the U.S., the Company does not expect to receive most or all of the additional potential milestones under the AstraZeneca U.S./RoW Agreement. In 2020, the Company entered into a Master Supply Agreement with AstraZeneca under the AstraZeneca U.S./RoW Agreement (“AstraZeneca Master Supply Agreement”) to define general forecast, order, supply and payment terms for AstraZeneca to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies. The related drug product revenue is described under the Drug Product Revenue, Net section below. 11 Table of Contents 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 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 In July 2020, FibroGen China Anemia Holdings, Ltd., FibroGen (China) Medical Technology Development Co., Ltd. (“FibroGen Beijing”), and FibroGen International (Hong Kong) Limited and AstraZeneca entered into an amendment to the AstraZeneca China Agreement, relating to the development and commercialization of roxadustat in China (the “AstraZeneca China Amendment”). Under the AstraZeneca China Amendment, in 2020, FibroGen Beijing and AstraZeneca completed the establishment of a jointly owned entity, Beijing Falikang Pharmaceutical Co., Ltd. (“Falikang”), which performs roxadustat distribution, as well as conducts sales and marketing through AstraZeneca. Substantially all direct roxadustat product sales to distributors in China are made by Falikang, while FibroGen Beijing continues to sell roxadustat product directly in one province in China. FibroGen Beijing manufactures and supplies commercial product to Falikang based on a gross transfer price, which is adjusted for the estimated profit share. Amounts recognized as 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, Agreement Performance Obligation 2023 2022 2023 2022 AstraZeneca U.S./RoW Agreement and AstraZeneca China Agreement License revenue $ 2,649 $ — $ 2,649 $ — Development revenue $ 3,676 $ 579 $ 7,981 $ 9,750 12 Table of Contents 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 AstraZeneca China Agreement Cumulative Revenue Through September 30, 2023 Deferred Revenue at September 30, 2023 Total Consideration Through September 30, 2023 License $ 344,493 $ — $ 344,493 Co-development, information sharing & committee services 623,619 — 623,619 China performance obligation * 175,081 177,576 352,657 Total license and development revenue $ 1,143,193 $ 177,576 ** $ 1,320,769 * China performance obligation revenue is recognized as product revenue, as described under Product Revenue, Net section below. ** Contract assets and liabilities related to rights and obligations in the same contract are recorded net on the consolidated balance sheets. As of 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. 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 September 30, 2023 under the AstraZeneca U.S./RoW Agreement. The remainder of the transaction price related to the AstraZeneca U.S./R oW Agreement and AstraZeneca China Agreement includes $ 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. The amount allocated to the China performance obligation is expected to be recognized as the Company transfers control of the commercial drug product to Falikang, and is expected to continue through 2028, which reflects our best estimates. The net product revenue from the sales to Falikang and the net product revenue from direct sales distributors in China are described under Product Revenue, Net section below. Product Revenue, Net Product revenue, net from the sales of roxadustat commercial product in China was as follows for the three and nine months ended September 30, 2023 and 2022 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Direct Sales: Gross revenue $ 3,186 $ 2,610 $ 9,853 $ 8,972 Discounts and rebates ( 261 ) ( 166 ) ( 763 ) ( 353 ) Sales returns 2 1 2 3 Direct sales revenue, net 2,927 2,445 9,092 8,622 Sales to Falikang: Gross transaction price 42,294 32,510 118,696 83,517 Profit share ( 18,130 ) ( 12,980 ) ( 51,430 ) ( 31,894 ) Net transaction price 24,164 19,530 67,266 51,623 Decrease (increase) in deferred revenue 2,299 ( 4,616 ) 1,081 ( 750 ) Sales to Falikang revenue, net 26,463 14,914 68,347 50,873 Total product revenue, net $ 29,390 $ 17,359 $ 77,439 $ 59,495 13 Table of Contents Direct Sales Product revenue from direct roxadustat product sales to distributors in China is recognized in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those products, net of various sales rebates and discounts. The total discounts and rebates were immaterial for the periods presented. Due to the Company’s legal right to offset, at each balance sheet date, the rebates and discounts are presented as reductions to gross accounts receivable from the distributor, or as a current liability to the distributor to the extent that the total amount exceeds the gross accounts receivable or when the Company expects to settle the discount in cash. The Company’s legal right to offset is 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 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 – China Performance Obligation Substantially all direct roxadustat product sales to distributors in China are made by Falikang. FibroGen Beijing manufactures and supplies commercial product to Falikang. The net transfer price for FibroGen Beijing’s product sales to Falikang is based on a gross transfer price, which is adjusted to account for the 50/50 profit share for the period. The roxadustat sales to Falikang marked the beginning of the Company’s China performance obligation under the Company’s agreements with AstraZeneca . Product revenue is based on the transaction price of the China performance obligation. Revenue is recognized when control of the product is transferred to Falikang, in an amount that reflects the allocation of the transaction price to the performance obligation satisfied during the reporting period. Any net transaction price in excess of the revenue recognized is added to the deferred balance to date, and will be recognized in future periods as the performance obligation is satisfied. 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): Balance at December 31, 2022 Additions Recognized as Revenue Currency Translation and Other Balance at September 30, 2023 Product revenue - AstraZeneca China performance obligation - deferred revenue $ ( 175,646 ) $ ( 72,519 ) $ 68,347 $ 2,242 $ ( 177,576 ) Deferred revenue includes amounts allocated to the China performance obligation under the AstraZeneca arrangement as revenue recognition associated with this unit of accounting is tied to the commercial launch of the products within China and to when the control of the manufactured commercial products is transferred to AstraZeneca. As of September 30, 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. 14 Table of Contents 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 nine months ended September 30, 2023 and 2022 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Astellas Japan Agreement $ 695 $ ( 4,313 ) $ 16,236 $ 3,297 Astellas Europe Agreement 625 236 1,465 1,313 Drug product revenue, net $ 1,320 $ ( 4,077 ) $ 17,701 $ 4,610 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, 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. 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 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. Specifically, the change in estimated variable consideration was based on the API held by Astellas at period end, adjusted to reflect the changes in the estimated bulk product strength mix intended to be manufactured by Astellas, and estimated yield from the manufacture of bulk product tablets, among others. During the three months ended March 31, 2022, the Company fulfilled a shipment obligation under the terms of Astellas Japan Amendment, and recognized related drug product revenue of $ 9.8 million in the same period. In addition, the Company updated its estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment, and recorded a reduction to the drug product revenue of $ 2.2 million during the first quarter of 2022. Specifically, the change in estimated variable consideration was based on the API held by Astellas at period end, adjusted to reflect the changes in the estimated bulk product strength mix intended to be manufactured by Astellas, estimated cost to convert the API to bulk product tablets, and estimated yield from the manufacture of bulk product tablets, among others. During the three months ended September 30, 2022, the Company updated its estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment, and accordingly recorded 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. 15 Table of Contents 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. 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. During 2022, the Company updated its estimate of variable consideration related to the bulk drug product transferred in prior years. Specifically, the change in estimated variable consideration was based on the bulk drug product held by Astellas at the period end, adjusted to reflect the changes in the estimated transfer price, forecast information, shelf-life estimates and other items. As a result, the Company reclassified the related deferred revenue to accrued liabilities during the year ended December 31, 2022. As of 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 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. The following table includes a roll-forward of the above-mentioned deferred revenues that are considered as contract liabilities related to drug product (in thousands): Balance at December 31, 2022 Additions Recognized as Revenue Reclassified to Accrued Liability / Accounts Payable Balance at September 30, 2023 Drug product revenue - deferred revenue: Astellas Europe Agreement $ ( 40,303 ) $ — $ 1,465 $ 28,685 $ ( 10,153 ) 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 periods presented. During the first quarter of 2022, the Company evaluated the current developments in the U.S. market, and updated its estimates of variable consideration associated with bulk drug product shipments to AstraZeneca in prior years as commercial supply. As a result, the Company reclassified $ 11.2 million from the related deferred revenue to accrued liabilities during the year ended December 31, 2022, 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 . 16 Table of Contents Eluminex Agreement In July 2021, FibroGen exclusively licensed to Eluminex Biosciences (Suzhou) Limited (“Eluminex”) global rights to its investigational biosynthetic cornea derived from recombinant human collagen Type III. Under the terms of the agreement with Eluminex , as amended and restated, Eluminex made an $ 8.0 million upfront payment to FibroGen during the first quarter of 2022, which was recognized as license revenue for the performance obligation satisfied during 2021 . In addition, FibroGen may receive up to a total of $ 64.0 million in future manufacturing, clinical, regulatory, and commercial milestone payments for the biosynthetic cornea program, as well as $ 36.0 million in commercial milestones for the first recombinant collagen III product that is not the biosynthetic cornea. FibroGen will also be eligible to receive mid-single-digit to low double-digit royalties based upon worldwide net sales of cornea products, and low single-digit to mid-single-digit royalties based upon worldwide n et sales of other recombinant human collagen type III products that are not cornea products. In April 2023, FibroGen and Eluminex entered into an Amended and Restated Exclusive License Agreement (“A&R Eluminex Agreement”) in order to add to the license rights to recombinant human collagen Type I (in addition to the rights to collagen Type III that were already licensed). The A&R Eluminex Agreement included additional total upfront payments of $ 1.5 million. During the three months ended 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. During the first quarter of 2022, FibroGen and Eluminex entered into a separate contract manufacturing agreement, under which the Company is responsible for supplying the cornea product at cost plus 10 % of its product manufacturing costs until its manufacturing technology is fully transferred to Eluminex . The related contract manufacturing revenue was recorded as other revenue and included in development and other revenue in the condensed consolidated statement of operations. Amounts recognized as revenue under the Eluminex were as follows for the three and nine months ended September 30, 2023 and 2022 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Agreement Performance Obligation 2023 2022 2023 2022 Eluminex License revenue $ — $ — $ 7,000 $ — Other revenue - patent transfer 500 — 500 — Other revenue - contract manufacturing $ 241 $ 460 $ 723 $ 1,502 3. Exclusive License and Option to Acquire Fortis Therapeutics On May 5, 2023 (the “Option Acquisition Date”), the Company entered into an exclusive option agreement to acquire Fortis Therapeutics (“Fortis”) with its novel Phase 1 antibody-drug conjugate, FOR46 (now referred to as “FG-3246”), that targets a novel epitope on CD46 preferentially expressed on certain cancer cells. FG-3246 is in development for the treatment of metastatic castration-resistant prostate cancer with potential applicability in other solid tumors and hematologic malignancies. Pursuant to an evaluation agreement entered into with Fortis concurrent with the option agreement (together the “Fortis Agreements”), FibroGen has exclusively licensed FG-3246 and will control and fund future research, development, including a Phase 2 clinical study sponsored by FibroGen, and manufacturing of FG-3246 during the up-to four-year option period. As part of the clinical development strategy, FibroGen will continue the work to develop a PET-based biomarker utilizing a radiolabeled version of the targeting antibody for patient selection. Pursuant to the guidance under Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”), the Company determined that Fortis is a VIE and that the Company is the primary beneficiary of Fortis, as through the Fortis Agreements the Company has the power to direct activities that most significantly impact the economic performance of Fortis. Therefore, the Company consolidated Fortis starting from the Option Acquisition Date, and continues to consolidate as of 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. 17 Table of Contents The fair value of the consideration transferred was zero . If FibroGen exercises the option to acquire Fortis, it will pay Fortis an option exercise payment of $ 80.0 million, and thereafter, legacy Fortis shareholders would be eligible to receive from FibroGen up to $ 200.0 million in contingent payments associated with the achievement of various regulatory approvals. If FibroGen acquires Fortis, it would also be responsible to pay UCSF, an upstream licensor to Fortis, development milestone fees and a single digit royalty on net sales of therapeutic or diagnostic products arising from the licensing arrangement between Fortis and UCSF . If FibroGen chooses not to acquire Fortis, its exclusive license to FG-3246 would expire. Additionally, the Company is obligated to make four quarterly payments totaling $ 5.0 million to Fortis in support of its continued development obligations. The Company determined that these payments should not be included in the purchase consideration, as those payments are payable to Fortis rather than to its shareholders. Fortis has authorized and issued common shares and Series A preferred shares. As of the Option Acquisition Date and September 30, 2023 , the Company owned approximately 2 % of Fortis’ Series A preferred shares, which was acquired previously and carried at zero cost. The NCI attributable to the common shares is classified as nonredeemable NCI, as it is 100 % owned by third party shareholders. The NCI attributable to the approximately 98 % of Series A preferred shares owned by other investors are classified as redeemable NCI in temporary equity, as the preferred shares are redeemable by the non-controlling shares holders upon occurrence of certain events out of the Company’s control. Subsequent to the Option Acquisition Date, Fortis’ net income is allocated to its common shares and preferred shares based on their respective stated rights. Fortis’ net loss is allocated to its common shares only as the holders of preferred shares do not have a contractual obligation to absorb such losses. The following table represents the allocation of purchase consideration based on estimated fair values of the acquired assets (in thousands): Estimated Fair Value as of the Option Acquisition Date Purchase consideration $ — Assets Cash and cash equivalents 656 Prepaid expenses and other current assets 82 IPR&D assets 24,400 Total assets 25,138 Liabilities Accounts payable 2,671 Accrued and other current liabilities 703 Total liabilities 3,374 Redeemable non-controlling interests 21,480 Nonredeemable non-controlling interests 520 Net identifiable assets, liabilities and non-controlling interests $ ( 236 ) Loss on asset acquisition $ ( 236 ) The Company used a third party valuation specialist to determine the fair value of the IPR&D assets using a risk-adjusted net present value discounted cash flow model (the “rNPV”) with the following key assumptions: (i) estimated cash flow forecasts of peak sales, sales penetration, remaining IPR&D related product development costs, and other related general and administrative costs; (ii) probabilities of technical success of future underlying Phase II and Phase III clinical trials and ensuing probability of regulatory approval related to the IPR&D assets; and (iii) estimate of a risk-adjusted discount rate of 16.5 %. The acquired IPR&D assets were determined to have no alternative future use. Accordingly, the Company expensed fair value of the acquired IPR&D assets of $ 24.4 million as research and development expense in the condensed consolidated statements of operations for the nine months ended September 30, 2023. 18 Table of Contents 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 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. 4. Equity method investment - Variable Interest Entity Falikang is a distribution entity jointly owned by AstraZeneca and FibroGen Beijing. FibroGen Beijing owns 51.1 % of the outstanding shares of Falikang. Pursuant to the guidance under ASC 810, the Company concluded that Falikang qualifies as a VIE. As Falikang is a distribution entity and AstraZeneca is the final decision maker for all the roxadustat commercialization activities, the Company lacks the power criterion, while AstraZeneca meets both the power and economic criteria under the ASC 810 to direct the activities of Falikang that most significantly impact its performance. Therefore, the Company is not the primary beneficiary of this VIE for accounting purposes. As a result, the Company accounts for its investment in Falikang under the equity method, and Falikang is not consolidated into the Company’s condensed consolidated financial statements. The Company records its total investments in Falikang as an equity method investment in an unconsolidated VIE in the condensed consolidated balance sheet. In addition, the Company recognizes its proportionate share of the reported profits or losses of Falikang as investment gain or loss in unconsolidated VIE in the condensed consolidated statement of operations and as an adjustment to its investment in Falikang in the condensed consolidated balance sheet. Falikang has not incurred material profit or loss to date. The Company may provide shareholder loans to Falikang to meet necessary financial obligations as part of its operations. To date, there has been no such loans. 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): Entity Ownership Percentage Balance at December 31, 2022 Share of Net Income Dividend Received Currency Translation Balance at September 30, 2023 Falikang 51.1 % $ 5,061 $ 2,023 $ ( 2,255 ) $ ( 295 ) $ 4,534 Falikang is considered a related party to the Company. See Note 11, Related Party Transactions , for related disclosures. 5. Fair Value Measurements The fair values of the Company’s financial assets that are measured on a recurring basis are as follows (in thousands): September 30, 2023 Level 1 Level 2 Level 3 Total Money market funds $ 22,016 $ — $ — $ 22,016 Corporate bonds — 11,910 — 11,910 Commercial paper — 78,800 — 78,800 U.S. government bonds 18,834 43,831 — 62,665 Agency bonds — 4,967 — 4,967 Total $ 40,850 $ 139,508 $ — $ 180,358 December 31, 2022 Level 1 Level 2 Level 3 Total Money market funds $ 19,881 $ — $ — $ 19,881 Corporate bonds — 82,008 — 82,008 Commercial paper — 57,381 — 57,381 U.S. government bonds 98,972 12,373 — 111,345 Agency bonds — 11,468 — 11,468 Asset-backed securities — 2,474 — 2,474 Foreign government bonds — 4,980 — 4,980 Convertible promissory note — — 1,000 1,000 Total $ 118,853 $ 170,684 $ 1,000 $ 290,537 19 Table of Contents The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data, and other observable inputs. During the 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. 6. Balance Sheet Components Cash and Cash Equivalents Cash and cash equivalents consisted of the following (in thousands): September 30, 2023 December 31, 2022 Cash $ 70,982 $ 135,819 Commercial paper 22,942 — Money market funds 22,016 19,881 U.S. government bonds 4,974 — Total cash and cash equivalents $ 120,914 $ 155,700 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. Investments The Company’s investments consist primarily of available-for-sale debt investments. The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s investments by major investments type are summarized in the tables below (in thousands): September 30, 2023 Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value Corporate bonds $ 11,987 $ — $ ( 77 ) $ 11,910 Commercial paper 55,859 — ( 1 ) 55,858 U.S. government bonds 57,734 3 ( 46 ) 57,691 Agency bonds 4,965 2 — 4,967 Total investments $ 130,545 $ 5 $ ( 124 ) $ 130,426 December 31, 2022 Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value Corporate bonds $ 83,080 $ — $ ( 1,072 ) $ 82,008 Commercial paper 57,381 — — 57,381 U.S. government bonds 112,547 5 ( 1,207 ) 111,345 Agency bonds 11,690 — ( 222 ) 11,468 Asset-backed securities 2,484 — ( 10 ) 2,474 Foreign government bonds 5,007 — ( 27 ) 4,980 Convertible promissory note 1,000 — — 1,000 Total investments $ 273,189 $ 5 $ ( 2,538 ) $ 270,656 20 Table of Contents The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and gross unrealized loss by length of time the security has been in a continual unrealized loss position (in thousands): September 30, 2023 Less than 12 Months 12 Months or More Total Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses Corporate bonds $ 2,483 $ ( 8 ) $ 9,427 $ ( 69 ) $ 11,910 $ ( 77 ) U.S. government bonds 17,360 ( 4 ) 8,960 ( 42 ) 26,320 ( 46 ) Commercial paper 3,481 ( 1 ) — — 3,481 ( 1 ) Total $ 23,324 $ ( 13 ) $ 18,387 $ ( 111 ) $ 41,711 $ ( 124 ) December 31, 2022 Less than 12 Months 12 Months or More Total Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses Corporate bonds $ 6,738 $ ( 147 ) $ 75,270 $ ( 925 ) $ 82,008 $ ( 1,072 ) U.S. government bonds 22,326 ( 13 ) 67,909 ( 1,194 ) 90,235 ( 1,207 ) Agency bonds — — 11,468 ( 222 ) 11,468 ( 222 ) Asset-backed securities 2,474 ( 10 ) — — 2,474 ( 10 ) Foreign government bonds — — 4,980 ( 27 ) 4,980 ( 27 ) Total $ 31,538 $ ( 170 ) $ 159,627 $ ( 2,368 ) $ 191,165 $ ( 2,538 ) 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. The Company considers factors such as the severity and the reason for the decline in value and the potential recovery period and its intent to sell. For debt securities, the Company also considers whether (i) it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. Based on the results of its review, the Company did no t recognize any impairment for its available-for-sale investments during the three and nine months ended September 30, 2023 and 2022. Inventories Inventories consisted of the following (in thousands): September 30, 2023 December 31, 2022 Raw materials $ 1,179 $ 1,241 Work-in-progress 34,906 36,003 Finished goods 4,611 3,192 Total inventories $ 40,696 $ 40,436 Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following (in thousands): September 30, 2023 December 31, 2022 Preclinical and clinical trial accruals $ 34,670 $ 57,780 API and bulk drug product price true-up 40,325 75,055 Litigation settlement 28,500 — Payroll and related accruals 14,054 22,562 Accrued restructuring charge 4,694 — Accrued co-promotion expenses - current 10,065 36,677 Roxadustat profit share to AstraZeneca 6,884 7,280 Property taxes and other taxes 7,950 7,691 Professional services 11,016 5,480 Current portion of liability related to sale of future revenues 5,860 — Other 6,968 7,248 Total accrued and other current liabilities $ 170,986 $ 219,773 21 Table of Contents 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. 7. Senior Secured Term Loan Facilities On April 29, 2023, the Company entered into a financing agreement (“Financing Agreement”) with investment funds managed by Morgan Stanley Tactical Value, as lenders (the “Lenders”), and Wilmington Trust, National Association, as the administrative agent, providing for senior secured term loan facilities consisting of (i) a $ 75.0 million initial term loan (the “Initial Term Loan”), (ii) a $ 37.5 million delayed draw term loan that will be funded upon the achievement of certain clinical development milestones (“Delayed Draw Term Loan 1”) and, (iii) an uncommitted delayed draw term loan of up to $ 37.5 million to be funded at the Lenders sole discretion, (“Delayed Draw Term Loan 2” and, together with the Initial Term Loan and Delayed Draw Term Loan 1, the “Term Loans”). Pursuant to the Financing Agreement, the Lenders have funded the Initial Term Loan. 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. The Term Loans shall mature on May 8, 2026 . The Term Loans will not be subject to amortization payments. The Company is permitted to prepay the Term Loans from time to time, in whole or in part, subject to payment of a make-whole amount equal to the unpaid principal amount of the portion of the Term Loans being repaid or prepaid, plus accrued and unpaid interest of the portion of the Term Loans being repaid or prepaid, plus an amount equal to the remaining scheduled interest payments due on such portion of the Term Loans being repaid or prepaid as if such Term Loans were to remain outstanding until the scheduled maturity date. On May 8, 2023, the Company received $ 74.1 million, representing the Initial Term Loan of $ 75.0 million net of $ 0.9 million issuance costs. The issuance costs and the related transaction costs, totaling $ 3.7 million is amortized as interest expense using the effective interest method over the term of the Initial Term Loan and are reported on the balance sheet as a direct deduction from the amount of the Initial Term Loan. The effective annual interest rate of the Initial Term Loan was 16.13 % 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. 22 Table of Contents 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 $ 75,000 Less: Unamortized issuance costs and transaction costs ( 3,334 ) Senior secured term loan facilities, ending balance 71,666 Less: Current Portion classified to accrued and other current liabilities — Senior secured term loan facilities, non-current $ 71,666 8. Liability Related to Sale of Future Revenues On November 4, 2022, the Company entered into a Revenue Interest Financing Agreement (the “RIFA”) with an affiliate of NovaQuest Capital Management (“NovaQuest”), pursuant to which the Company granted NovaQuest 22.5 % of its drug product revenue and 10.0 % ( 20.0 % for fiscal year 2028 and thereafter) of its revenue from milestone payments that it is entitled to under the Astellas Agreements , for a consideration of $ 50.0 million (“Investment Amount”) before advisory fees. In November 2022, the Company received the Investment Amount, net of initial issuance costs, and accounted for it as long-term debt based on the terms of the RIFA because the risks and rewards to NovaQuest are limited by the terms of the transaction. The related debt discount and transaction costs are amortized as interest expense based on the projected balance of the liability as of the beginning of each period. As payments are made to NovaQuest, the balance of the liability related to sale of future revenues is being effectively repaid over the life of the RIFA. The payments to NovaQuest are accounted for as a reduction of debt. The Company may prepay its obligations to NovaQuest in full at any time during the term of RIFA. The prepayment amount varies from $ 80.0 million to $ 125.0 million less any revenue interest payments made up to such prepayment date. Under the RIFA the Company shall pay to NovaQuest up to a specified maximum amount (“Payment Cap”) of (a) $ 100.0 million, if the payment is made on or before December 31, 2028; (b) $ 112.5 million, if the payment is made on or after January 1, 2029, but on or before December 31, 2029; or (c) $ 125.0 million, if the payment is made after January 1, 2030. After January 1, 2028, if the product (as defined) is not commercialized for a consecutive twelve-month period, then, the payments owed under the RIFA by the Company to NovaQuest for each fiscal year shall be the greater of: (i) the amount which would otherwise be due pursuant to revenue interest payments terms; or (ii) $ 10.0 million. Before December 31, 2028, if the sum of all payments under the RIFA paid to NovaQuest, does not equal or exceed $ 62.5 million, then the Company shall pay NovaQuest the difference of these two amounts by no later than March 1, 2029. If, by no later than December 31, 2030, the sum of all payments under the RIFA paid to NovaQuest does not equal or exceed $ 125.0 million, then the Company shall pay NovaQuest the difference of these two amounts by no later than March 1, 2031. NovaQuest will retain this entitlement until it has reached the Payment Cap, at which point 100 % of such revenue interest on future global net sales of Astellas will revert to the Company. Over the course of the RIFA, the effective interest rate is affected by the amount and timing of drug product revenue and revenue from milestone payments recognized, the changes in the timing of forecasted drug product revenue and revenue from milestone payments, and the timing of the Company’s payments to NovaQuest. On a quarterly basis, the Company reassesses the expected total revenue and the timing of such revenue, recalculates the amortization of debt discount and transactions costs and effective interest rate, and adjusts the accounting prospectively as needed. The Company’s estimated effective annual interest rate was 16.07 % as of September 30, 2023. 23 Table of Contents 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 $ 49,333 Interest expense recognized 5,636 Liability related to sale of future revenues - ending balance 54,969 Less: Current portion classified to accrued and other current liabilities ( 5,860 ) Liability related to sale of future revenues, non-current $ 49,109 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 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. 9. At-the-Market Program On February 27, 2023, the Company entered into an Amended and Restated Equity Distribution Agreement (the “at-the-market agreement”) with Goldman Sachs & Co., LLC and BofA Securities, Inc. (each a “Sales Agent”), which amended and restated its Equity Distribution Agreement with Goldman Sachs & Co., LLC, dated August 8, 2022, to add BofA Securities, Inc. as an additional Sales Agent under that agreement. Under the at-the-market agreement, the Company may issue and sell, from time to time and through the Sales Agents, shares of its common stock having an aggregate offering price of up to $ 200.0 million (the “ATM Program”). 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 . 10. Income Taxes 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. 11. Related Party Transactions 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 $ 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 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. 24 Table of Contents 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. Falikang, an entity jointly owned by FibroGen Beijing and AstraZeneca is an unconsolidated VIE accounted for as an equity method investment, and considered as a related party to the Company. FibroGen Beijing owns 51.1 % of Falikang’s equity. See Note 4, Equity method investment - Variable Interest Entity , for details. 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 $ 0.7 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 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. 12. Commitments and Contingencies Contract Obligations 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 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. and others. These milestone payments generally become due and payable only upon the achievement of certain developmental, clinical, regulatory and/or commercial milestones. The event triggering such payment or obligation has not yet occurred. 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. 25 Table of Contents Legal Proceedings and Other Matters From time to time, the Company is a party to various legal actions, both inside and outside the U.S., arising in the ordinary course of its business or otherwise. The Company accrues amounts, to the extent they can be reasonably estimated, that the Company believes will result in a probable loss (including, among other things, probable settlement value) to adequately address any liabilities related to legal proceedings and other loss contingencies. A loss or a range of loss is disclosed when it is reasonably possible that a material loss will incur and can be estimated, or when it is reasonably possible that the amount of a loss, when material, will exceed the recorded provision. The Company did not have any material accruals for any active legal action, 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. District Court for the Northern District of California. The lawsuits allege that Defendants violated the Securities Exchange Act of 1934 by making materially false and misleading statements regarding FibroGen’s Phase 3 clinical studies data and prospects for U.S. Food and Drug Administration approval. On August 30, 2021, the Court consolidated the actions and appointed a group of lead plaintiffs. Plaintiffs filed their consolidated amended complaint on October 29, 2021 and a corrected consolidated amended complaint on November 19, 2021 (the “Complaint”). The Complaint alleges false and misleading statements between December 2018 and June 2021 and seeks to represent a class of persons or entities that purchased FibroGen securities between December 20, 2018 and July 15, 2021. On July 15, 2022, the court issued an order denying Defendants’ motions to dismiss. Defendants answered the Complaint on September 13, 2022. 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. 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. 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. District Court for the Northern District of California (the “California Federal Derivative”). On December 27, 2021, a second purported shareholder derivative complaint was filed in the U.S. District Court for the District of Delaware (the “Delaware Federal Derivative”). On April 14, 2022, a third purported shareholder derivative complaint was filed in the Delaware Court of Chancery (the “First Delaware Chancery Derivative”). On June 1, 2023, a fourth purported shareholder derivative complaint was filed in the Delaware Court of Chancery (the “Second Delaware Chancery Derivative”). All four derivative actions name FibroGen’s current and former officers and directors as defendants, as well as FibroGen as nominal defendant, and assert state and federal claims based on some of the same alleged misstatements as the securities class action complaint. The complaints seek unspecified damages, attorneys’ fees, and other costs. 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 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. District Court for the District of Delaware (the “Demand Refused Derivative”). The Demand Refused Derivative action names FibroGen’s current and former officers, as well as FibroGen as nominal defendant, and asserts state and federal claims based on some of the same alleged misstatements as the securities class action complaint. The 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. However, any litigation is inherently uncertain, and any judgment or injunctive relief entered against FibroGen or any adverse settlement could materially and adversely impact its business, results of operations, financial condition, and prospects. In the fourth quarter of 2021, the Company received a subpoena from the SEC requesting documents related to roxadustat’s pooled cardiovascular safety data. The Company is fully cooperating with the SEC. The Company cannot predict with any degree of certainty the outcome of the SEC’s investigation or determine the extent of any potential liabilities. The Company also cannot predict whether there will be any loss as a result of the investigation nor can it provide an estimate of the possible loss or range of loss. Any adverse outcome in this matter or any related proceeding could expose the Company to substantial damages, penalties, or reputational harm that may have a material adverse impact on the Company’s business, results of operations, financial condition, growth prospects, and price of its common stock. 26 Table of Contents Between August 3, 2022 and August 4, 2022, the Company’s Board of Directors received three litigation demands from purported shareholders of the Company, asking the Board of Directors to investigate and take action against certain current and former officers and directors of the Company for alleged wrongdoing based on the same allegations in the pending derivative and securities class action lawsuits. On March 27, 2023, the Company’s Board of Directors received another litigation demand from a purported shareholder of the Company, seeking similar action as the other litigation demands. The Company may in the future receive such additional demands. Starting in October 2021, certain challenges have been filed with the China National Intellectual Property Administration against patents which claim a crystalline form of roxadustat. Final resolution of such proceedings will take time and the Company could not predict the ultimate outcome, or reasonably estimate the potential exposure. Indemnification Agreements The Company enters into standard indemnification arrangements in the ordinary course of business, including for example, service, manufacturing and collaboration agreements. Pursuant to these arrangements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, including in connection with intellectual property infringement claims by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the extent permissible under applicable law. The maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable. The Company believes the estimated fair value of these arrangements is minimal. 27 Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and in our Securities and Exchange Commission (“SEC”) filings, including our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 27, 2023 (“2022 Form 10-K”). FORWARD-LOOKING STATEMENTS The following discussion and information contained elsewhere in this Quarterly Report on Form 10-Q contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), Section 27A of the Securities Act of 1933, as amended (“Securities Act”) and within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are often identified by the use of words such as “may,” “will,” “expect,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Such forward-looking and other statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. New risks emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking and other statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking and other statements. While we may elect to update these forward-looking and other statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking and other statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q and are cautioned not to place undue reliance on such forward-looking statements. BUSINESS OVERVIEW We are headquartered in San Francisco, California, with subsidiary offices in Beijing and Shanghai, People’s Republic of China (“China”). We are a leading biopharmaceutical company discovering, developing and commercializing a pipeline of first-in-class therapeutics. 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 (“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. To date, we have retained exclusive worldwide rights for pamrevlumab. Roxadustat is an oral small molecule inhibitor of HIF prolyl hydroxylase (“HIF-PH”) activity. Roxadustat (爱瑞卓 ® , EVRENZO TM ) is approved in China, Europe, Japan, and numerous other countries for the treatment of anemia in chronic kidney disease (“CKD”) for patients who are on dialysis and not on dialysis. Roxadustat is in clinical development for chemotherapy-induced anemia (“CIA”) in China. Our goal is to build a diversified pipeline with novel drugs that will address unmet patient needs with a refined focus in oncology. 28 Table of Contents Financial Highlights Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands, except for per share data) Result of Operations Revenue $ 40,134 $ 15,735 $ 120,614 $ 106,367 Operating costs and expenses 103,616 109,392 348,234 341,240 Net loss (63,615 ) (91,650 ) (228,000 ) (227,479 ) Net loss per share - basic and diluted $ (0.65 ) $ (0.98 ) $ (2.35 ) $ (2.43 ) September 30, 2023 December 31, 2022 (in thousands) Balance Sheet Cash and cash equivalents $ 120,914 $ 155,700 Short-term and long-term investments 130,426 270,656 Accounts receivable $ 31,694 $ 16,299 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; • $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; and • $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 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; and • $(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. 29 Table of Contents 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; and • $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; and • $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 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. 30 Table of Contents Pamrevlumab: Monoclonal Antibody Targeting Connective Tissue Growth Factor 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 LAPIS is our double-blind placebo-controlled Phase 3 clinical program for pamrevlumab as a therapy for LAPC. We completed enrollment of 284 patients that are randomized at a 1:1 ratio to receive either pamrevlumab or placebo, in each case in combination with chemotherapy (either FOLFIRINOX or gemcitabine plus nab-paclitaxel). We expect topline data for the primary endpoint of overall survival in the first quarter of 2024. Pamrevlumab for the Treatment of Metastatic Pancreatic Cancer In June 2021, the Pancreatic Cancer Action Network’s (PanCAN) Precision Promise SM Phase 2/3 registration study, an adaptive trial platform, included pamrevlumab in combination with standard of care chemotherapy treatments for pancreatic cancer (gemcitabine and Abraxane ® ), for patients with metastatic pancreatic cancer. Drug candidates in the Precision Promise study will continue to progress (including from Phase 2 to Phase 3) unless stopped sooner for safety or futility. The pamrevlumab combination therapy is offered to patients as either a first- or second-line treatment option. Pamrevlumab was the first experimental treatment arm to be offered as a first-line treatment in PanCAN’s innovative Precision Promise trial. The objective of Precision Promise is to expedite the study and approval of promising therapies for pancreatic cancer by bringing multiple stakeholders together, including academic, industry and regulatory entities. The pamrevlumab portion of the trial is still ongoing, fully enrolled, and we expect topline results in the first half of 2024. Pamrevlumab for the Treatment of Duchenne Muscular Dystrophy Ambulatory DMD Patients 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; p=0.5553). 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 Roxadustat is our commercial-stage product, an oral small molecule inhibitor of HIF-PH activity that acts by stimulating the body’s natural pathway of erythropoiesis, or red blood cell production. Roxadustat (爱瑞卓 ®️ , EVRENZO TM ) is approved in China, Europe, Japan, and numerous other countries for the treatment of anemia in CKD for patients who are on dialysis and not on dialysis. In China, roxadustat (tradename: 爱瑞卓 ® ) continues to see significant volume growth in the treatment of anemia caused by CKD in non-dialysis and dialysis patients. In the 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). 31 Table of Contents Roxadustat for the Treatment of Chemotherapy-Induced Anemia In May 2023, we announced positive topline data from our Phase 3 clinical study of roxadustat for treatment of anemia in patients receiving concurrent chemotherapy treatment for non-myeloid malignancies in China. Roxadustat (爱瑞卓 ® ) demonstrated non-inferiority compared to recombinant erythropoietin alfa (SEPO ® ) on the primary endpoint of change in hemoglobin (Hb) level from baseline to the average level during Weeks 9-13. In the preliminary safety analysis, the adverse event profile of roxadustat was generally consistent with previous findings and supportive of a positive benefit risk in this patient population. A total of 159 patients with non-myeloid malignancy (solid tumor) with a baseline hemoglobin level at or below 10 g/dL were enrolled into this Phase 3, randomized, open-label, active-controlled study investigating the efficacy and safety of roxadustat for treatment of CIA. Patients were randomly assigned roxadustat or erythropoietin alfa three times per week (TIW), during a treatment period of 12 weeks, with an additional 4-week follow-up period. 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 the ability of patients to continue chemotherapy treatment. The incidence and severity of CIA depends on a variety of factors. This includes the type of cancer and the treatment, including the type of chemotherapy, schedule, and intensity of therapy. It also depends on whether the patient has received prior myelosuppressive chemotherapy, radiation therapy, or both. Almost 80% of cancer patients in China receiving chemotherapy develop anemia. Approximately 50% of cancer patients in China receiving chemotherapy develop severe anemia that merits treatment (hemoglobin under 10g/dL). In China, over 3 million cancer patients undergo chemotherapy. FG-3246: Prostate Cancer; Potential Additional Cancer Indications In May 2023 we obtained an exclusive license to develop FG-3246 (previously FOR46) in metastatic castration-resistant prostate cancer (“mCRPC”) and other cancer indications. FG-3246 is a first-in-class antibody-drug conjugate targeting a novel epitope on CD46 that is expressed at high levels in certain tumor types with limited expression in most normal tissues. The cytotoxic payload of FG-3246 is monomethyl auristatin E, an anti-mitotic agent that has been utilized in four commercially approved antibody-drug conjugate drugs. FG-3246 showed monotherapy efficacy in a Phase 1 clinical study in patients with mCRPC, with a PSA50 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. Side effects have been manageable and are consistent with other monomethyl auristatin E-based antibody-drug conjugate drugs. We anticipate the initiation of a PET biomarker driven Phase 2 trial of FG-3246 for mCRPC in the second half of 2024. Development of the CD46-targeted PET biomarker is currently underway with UCSF, a collaborator of Fortis. We are also exploring additional potential tumor indications in which CD46 is commonly expressed. Preclinical Pipeline Our preclinical pipeline consists of two antibodies for immuno-oncology that are in investigational new drug application-enabling studies, and an additional small molecule drug discovery pipeline that leverages the expertise we developed through our HIF-PH inhibitor programs in 2 oxoglutarate dependent dioxygenase biology. FG-3165 is a galectin-9 (“Gal9”) targeted antibody under development for treatment of solid tumors characterized by high Gal9 levels of expression. Gal9 has been reported to bind to multiple immune checkpoints on lymphocytes that suppress T and natural killer cell activation. In preclinical studies FG-3165 and its variants inhibit Gal9 mediated T cell death, and also promotes anti-tumor immune responses in combination with other immune checkpoint targeted drugs. We plan to submit an investigational new drug application in the first quarter of 2024. 32 Table of Contents FG-3175 is a c-c motif chemokine receptor 8 (“CCR8”) targeted antibody under development for treatment of solid tumors that are highly infiltrated by CCR8-positive T regulatory cells. T regulatory cells contribute to an immune suppressed tumor microenvironment, and multiple preclinical studies have demonstrated immune activation and tumor regression following depletion of this cell type from the tumor microenvironment. FG-3175 is a variant of our previous lead anti-CCR8 antibody, FG-3163, and was deemed to be a superior clinical candidate following extended characterization of both antibodies. FG-3175 has enhanced antibody dependent cellular cytotoxicity activity and induces potent killing of CCR8 expressing cells by natural killer cells in in vitro assay systems. An 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. Debt Financing Agreement On April 29, 2023, we entered into a financing agreement (the “Financing Agreement”) with a $75.0 million senior secured term loan with investment funds managed by Morgan Stanley Tactical Value, as lenders, and Wilmington Trust, National Association, as the administrative agent. For additional details about this financing transaction, see Note 7, Senior Secured Term Loan Facilities , to the condensed consolidated financial statements. Exclusive License and Option to Acquire Fortis Therapeutics On May 5, 2023, we entered into an exclusive option agreement to acquire Fortis with its novel Phase 1 antibody-drug conjugate, FG-3246 (previously FOR46), that targets a novel epitope on CD46 preferentially expressed on certain cancer cells. FG-3246 is in development for the treatment of metastatic castration-resistant prostate cancer with potential applicability in other solid tumors and hematologic malignancies. Pursuant to an evaluation agreement entered into with Fortis concurrent with the option agreement, FibroGen has exclusively licensed FG-3246 and will control and fund future research, development, including a Phase 2 clinical study sponsored by FibroGen, and manufacturing of FG-3246 during the option period. As part of the clinical development strategy, we will continue the work to develop a PET-based biomarker utilizing a radiolabeled version of the targeting antibody for patient selection. FibroGen will pay Fortis $5.0 million during the up to four-year option period in support of their continued development obligations. If we exercise the option to acquire Fortis, we will pay Fortis $80.0 million, and thereafter, Fortis would be eligible to receive from FibroGen up to $200.0 million in contingent payments associated with the achievement of various regulatory approvals. If we acquire Fortis, we would also be responsible to pay UCSF, an upstream licensor to Fortis, development milestone fees and a single digit royalty on net sales of therapeutic or diagnostic products arising from the collaboration. If FibroGen chooses not to acquire Fortis, its exclusive license to FG-3246 would expire. For additional details about this transaction, see Note 3, Exclusive License and Option to Acquire Fortis Therapeutics , to the condensed consolidated financial statements. Eluminex Agreement In April 2023, FibroGen and Eluminex entered into an Amended and Restated Exclusive License Agreement (“A&R Eluminex Agreement”) in order to add to the license rights to recombinant human collagen Type I (in addition to the rights to collagen Type III that were already licensed). The A&R Eluminex Agreement included additional total upfront payments of $1.5 million. During the three months ended 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. During the three months ended March 31, 2023, we recognized a $3.0 million milestone payment based on Eluminex implanting a biosynthetic cornea in the first patient of its clinical trial in China, and a $3.0 million manufacturing related milestone payment. See the Eluminex Agreement section in Note 2, Collaboration Agreements, License Agreement and Revenues, to the condensed consolidated financial statements for details. 33 Table of Contents Collaboration Partnerships for Roxadustat Our current and future research, development, manufacturing and commercialization efforts with respect to roxadustat depend on funds from our collaboration agreements with Astellas and AstraZeneca. See Note 2, Collaboration Agreements, License Agreement and Revenues , to the condensed consolidated financial statements for details. Astellas In June 2005, we entered into a collaboration agreement with Astellas for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in Japan (“Astellas Japan Agreement”). In April 2006, we entered into a separate collaboration agreement with Astellas for roxadustat for the treatment of anemia in Europe, the Commonwealth of Independent States, the Middle East, and South Africa (“Astellas Europe Agreement”). Under these agreements, the aggregate amount of consideration received through September 30, 2023 totaled $790.1 million. On March 21, 2022, EVRENZO ® (roxadustat) was registered with the Russian Ministry of Health. We evaluated the regulatory milestone payment associated with the approval in Russia under the Astellas Europe Agreement and concluded that this milestone was achieved in the first quarter of 2022. Accordingly, the consideration of $25.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Astellas Europe Agreement, all of which was recognized as revenue during the first quarter of 2022 from performance obligations satisfied. In 2018, we and Astellas entered into an amendment to the Astellas Japan Agreement that allows Astellas to manufacture roxadustat drug product for commercialization in Japan (the “Astellas Japan Amendment”). The related drug product revenue was $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 $0.6 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. AstraZeneca In July 2013, we entered into a collaboration agreement with AstraZeneca for roxadustat for the treatment of anemia in the U.S. and all territories not previously licensed to Astellas, except China (the “AstraZeneca U.S./RoW Agreement”). In July 2013, through our China subsidiary and related affiliates, we entered into a collaboration agreement with AstraZeneca for roxadustat for the treatment of anemia in China (the “AstraZeneca China Agreement”). 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 nine months ended September 30, 2023 and 2022. 34 Table of Contents AstraZeneca China Amendment In July 2020, FibroGen China and AstraZeneca entered into an amendment, effective July 1, 2020, to the AstraZeneca China Agreement, relating to the development and commercialization of roxadustat in China (the “AstraZeneca China Amendment”). Under the AstraZeneca China Amendment, in September 2020, FibroGen Beijing and AstraZeneca completed the establishment of a jointly owned entity, Beijing Falikang Pharmaceutical Co., Ltd. (“Falikang”), which performs roxadustat distribution, as well as conducts sales and marketing through AstraZeneca. FibroGen Beijing manufactures and supplies commercial product to Falikang based on an agreed upon transfer price, which includes gross transfer price, net of calculated profit share. Revenue is recognized upon the transfer of control of commercial products to Falikang in an amount that reflects the allocation of transaction price of the China manufacturing and supply obligation (“China performance obligation”) to the performance obligation satisfied during the reporting period. We recognized related net product revenue of $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 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 Through September 30, 2023 Additional Potential Cash Payment for Milestones Total Potential Cash Payments for Upfront Payments and Milestones (in thousands) Astellas--related-party: Astellas Japan Agreement $ 105,093 $ 67,500 $ 172,593 Astellas Europe Agreement 685,000 60,000 745,000 Total Astellas 790,093 127,500 917,593 AstraZeneca: AstraZeneca U.S./RoW Agreement 439,000 810,000 1,249,000 AstraZeneca China Agreement 77,200 299,500 376,700 Total AstraZeneca 516,200 1,109,500 1,625,700 Total $ 1,306,293 $ 1,237,000 $ 2,543,293 The above table does not include development cost reimbursement, transfer price payments, and royalties and profit share under our existing collaboration agreements. Based on our current development plans for roxadustat in Japan, Europe and U.S., we do not expect to receive most or all of these additional potential milestones under the Astellas Japan Agreement, the Astellas Europe Agreement and the AstraZeneca U.S./RoW Agreement. RESULTS OF OPERATIONS Revenue Three Months Ended September 30, Change Nine Months Ended September 30, Change 2023 2022 $ % 2023 2022 $ % (dollars in thousands) Revenue: License revenue $ 2,649 $ — $ 2,649 NM $ 9,649 $ 22,590 $ (12,941 ) (57 ) % Development and other revenue 6,775 2,453 4,322 176 % 15,825 19,672 (3,847 ) (20 ) % Product revenue, net 29,390 17,359 12,031 69 % 77,439 59,495 17,944 30 % Drug product revenue, net 1,320 (4,077 ) 5,397 132 % 17,701 4,610 13,091 284 % Total revenue $ 40,134 $ 15,735 $ 24,399 155 % $ 120,614 $ 106,367 $ 14,247 13 % NM = Not meaningful 35 Table of Contents Under our revenue recognition policy, license revenue includes amounts from upfront, non-refundable license payments and amounts allocated pursuant to the standalone selling price method from other consideration received during the respective periods. This revenue is generally recognized as deliverables are met and services are performed. Development revenue includes co-development and other development related services. We recognize development services as revenue in the period in which they are billed to our partners, excluding China. As of 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, 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. Drug product revenue includes commercial-grade API or bulk drug product sales to AstraZeneca, under the AstraZeneca U.S./RoW Agreement, and Astellas in support of pre-commercial preparation prior to the New Drug Application or marketing authorization application approval, and to Astellas for ongoing commercial launch in Japan and Europe. We recognize drug product revenue when we fulfill the inventory transfer obligations. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the drug product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period when the uncertainty associated with the variable consideration is subsequently resolved. Actual amounts of consideration ultimately received in the future may differ from our estimates, for which we will adjust these estimates and affect the drug product revenue in the period such variances become known. In the future, we will continue generating revenue from collaboration agreements in the form of license fees, milestone payments, reimbursements for collaboration services and royalties on drug product sales, and from product sales. We expect that any revenues we generate will fluctuate from quarter to quarter due to the uncertain timing and amount of such payments and sales. Total revenue 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 September 30, Change Nine Months Ended September 30, Change 2023 2022 $ % 2023 2022 $ % (dollars in thousands) License revenue: Astellas $ — $ — $ — NM $ — $ 22,590 $ (22,590 ) NM AstraZeneca 2,649 — 2,649 NM 2,649 — 2,649 NM % Eluminex — — — NM 7,000 — 7,000 NM Total license revenue $ 2,649 $ — $ 2,649 NM $ 9,649 $ 22,590 $ (12,941 ) (57 ) % NM = Not meaningful 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. 36 Table of Contents Development and Other Revenue Three Months Ended September 30, Change Nine Months Ended September 30, Change 2023 2022 $ % 2023 2022 $ % (dollars in thousands) Development revenue: Astellas $ 2,358 $ 1,414 $ 944 67 % $ 5,821 $ 8,419 $ (2,598 ) (31 ) % AstraZeneca 3,676 579 3,097 535 % 7,981 9,750 (1,769 ) (18 ) % Total development revenue 6,034 1,993 4,041 203 % 13,802 18,169 (4,367 ) (24 ) % Other revenue 741 460 281 61 % 2,023 1,503 520 35 % Total development and other revenue $ 6,775 $ 2,453 $ 4,322 176 % $ 15,825 $ 19,672 $ (3,847 ) (20 ) % 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. 37 Table of Contents Product Revenue, Net Three Months Ended September 30, Change Nine Months Ended September 30, Change 2023 2022 $ % 2023 2022 $ % (dollars in thousands) Direct Sales: Gross revenue $ 3,186 $ 2,610 $ 576 22 % $ 9,853 $ 8,972 $ 881 10 % Discounts and rebates (261 ) (166 ) (95 ) 57 % (763 ) (353 ) (410 ) 116 % Sales returns 2 1 1 100 % 2 3 (1 ) (33 ) % Direct sales revenue, net 2,927 2,445 482 20 % 9,092 8,622 470 5 % Sales to Falikang: Gross transaction price 42,294 32,510 9,784 30 % 118,696 83,517 35,179 42 % Profit share (18,130 ) (12,980 ) (5,150 ) 40 % (51,430 ) (31,894 ) (19,536 ) 61 % Net transaction price 24,164 19,530 4,634 24 % 67,266 51,623 15,643 30 % Decrease (increase) in deferred revenue 2,299 (4,616 ) 6,915 (150 ) % 1,081 (750 ) 1,831 (244 ) % Sales to Falikang revenue, net 26,463 14,914 11,549 77 % 68,347 50,873 17,474 34 % Total product revenue, net $ 29,390 $ 17,359 $ 12,031 69 % $ 77,439 $ 59,495 $ 17,944 30 % 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 $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, 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. We recognize revenue upon the transfer of control of commercial products to Falikang in an amount that reflects the allocation of the China performance obligation transaction price to the performance obligation satisfied during the reporting period. The variable consideration components that are included in the transaction price may be constrained, and are included in the product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period when the uncertainty associated with the variable consideration is subsequently resolved. Sales to Falikang revenue, net increased $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. 38 Table of Contents 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 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 September 30, Change Nine Months Ended September 30, Change 2023 2022 $ % 2023 2022 $ % (dollars in thousands) Drug product revenue, net: Astellas Japan Agreement $ 695 $ (4,313 ) $ 5,008 116 $ 16,236 $ 3,297 $ 12,939 392 % Astellas Europe Agreement 625 236 389 165 % 1,465 1,313 152 12 % Total drug product revenue, net: $ 1,320 $ (4,077 ) $ 5,397 132 % $ 17,701 $ 4,610 $ 13,091 284 % 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. 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 second quarter of 2023, we fulfilled two shipment obligations under the terms of Astellas Japan Amendment, and recognized related drug product revenue of $14.4 million in the same period. In addition, we updated our estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment, and accordingly recorded a reduction to the drug product revenue of $0.6 million. 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 first quarter of 2023, we updated our estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment, and accordingly recorded adjustments to the drug product revenue of $1.7 million. Specifically, the change in estimated variable consideration was based on the API held by Astellas at period end, adjusted to reflect the changes in the estimated bulk product strength mix intended to be manufactured by Astellas, and estimated yield from the manufacture of bulk product tablets, among others. During the 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. Specifically, the change in estimated variable consideration was based on the API held by Astellas at period end, adjusted to reflect the changes in the estimated bulk product strength mix intended to be manufactured by Astellas and foreign currency translation impact, among others. During the first quarter of 2022, we fulfilled a shipment obligation under the terms of Astellas Japan Amendment and recognized related drug product revenue of $9.8 million in the same period. In addition, during the first quarter of 2022, we updated our estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment, and recorded a reduction to the drug product revenue of $2.2 million. Specifically, the change in estimated variable consideration was based on the API held by Astellas at period end, adjusted to reflect the changes in the estimated bulk product strength mix intended to be manufactured by Astellas, estimated cost to convert the API to bulk product tablets, and estimated yield from the manufacture of bulk product tablets, among others. 39 Table of Contents 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. Astellas Europe Agreement During the first quarter of 2022, we updated our estimate of variable consideration related to the bulk drug product transferred in prior years. Specifically, the change in estimated variable consideration was based on the bulk drug product held by Astellas at the period end, adjusted to reflect the changes in the estimated transfer price, forecast information, shelf-life estimates and other items. As a result, we reclassified the related deferred revenue to accrued liabilities during the year ended December 31, 2022. As of December 31, 2022, the related balance was $57.4 million in accrued liabilities. Further during the first 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 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 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 September 30, Change Nine Months Ended September 30, Change 2023 2022 $ % 2023 2022 $ % (dollars in thousands) Operating costs and expenses Cost of goods sold $ 4,243 $ 4,308 $ (65 ) (2 ) % $ 13,441 $ 15,355 $ (1,914 ) (12 ) % Research and development 61,194 75,182 (13,988 ) (19 ) % 231,158 235,163 (4,005 ) (2 ) % Selling, general and administrative 25,573 29,902 (4,329 ) (14 ) % 91,029 90,722 307 — % Restructuring charge 12,606 — 12,606 NM 12,606 — 12,606 NM Total operating costs and expenses $ 103,616 $ 109,392 $ (5,776 ) (5 ) % $ 348,234 $ 341,240 $ 6,994 2 % 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. 40 Table of Contents Cost of Goods Sold 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 $3.9 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. Cost of goods sold also included manufacturing costs related to our contract manufacturing revenue from Eluminex, which was immaterial for the periods presented. Research and Development Expenses Research and development expenses consist of third-party research and development costs and the fully-burdened amount of costs associated with work performed under collaboration agreements. Research and development expenses include employee-related expenses for research and development functions, expenses incurred under agreements with clinical research organizations, other clinical and preclinical costs and allocated direct and indirect overhead costs, such as facilities costs, information technology costs and other overhead. We expense research and development costs as incurred. We recognize costs for certain development activities based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites. Research and development expenses also include 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 nine months ended September 30, 2023 and 2022: Phase of Three Months Ended September 30, Nine Months Ended September 30, Product Candidate Development 2023 2022 2023 2022 (in thousands) Pamrevlumab Phase 2/3 $ 27,466 $ 53,582 $ 115,237 $ 149,590 Roxadustat Approved / Phase 3 9,120 9,147 26,570 31,873 FG-3246 Preclinical 1,759 — 27,654 * — Other research and development expenses 22,849 12,453 61,697 53,700 Total research and development expenses $ 61,194 $ 75,182 $ 231,158 $ 235,163 * Included $24.6 million one-time, non-cash acquired IPR&D expenses associated with the recent exclusive license for FG-3246 from Fortis and the acquisition of Fortis. See Note 3, Exclusive License and Option to Acquire Fortis Therapeutics , to the condensed consolidated financial statements. The program-specific expenses summarized in the table above include costs we directly attribute to our product candidates. We allocate research and development salaries, benefits, stock-based compensation and other indirect costs to our product candidates on a program-specific basis, and we include these costs in the program-specific expenses. 41 Table of Contents 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; and • 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; and • $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. Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses consist primarily of employee-related expenses for executive, operational, finance, legal, compliance, and human resource functions. SG&A expenses also include facility-related costs, professional fees, accounting and legal services, other outside services including co-promotional expenses associated with our commercialization efforts in China, recruiting fees and expenses associated with obtaining and maintaining patents. 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; and • Increase of $1.6 million in outside services expenses primarily due to higher consulting activities in general administrative function. 42 Table of Contents 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; and • 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 September 30, Change Nine Months Ended September 30, Change 2023 2022 $ % 2023 2022 $ % (dollars in thousands) Interest and other, net: Interest expense $ (5,022 ) $ (84 ) $ (4,938 ) 5,879 % $ (10,464 ) $ (321 ) $ (10,143 ) 3,160 % Interest income and other income (expenses), net 4,296 1,798 2,498 139 % 7,984 6,672 1,312 20 % Total interest and other, net $ (726 ) $ 1,714 $ (2,440 ) (142 ) % $ (2,480 ) $ 6,351 $ (8,831 ) (139 ) % Interest Expense 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 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 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. 43 Table of Contents Interest Income and Other Income (Expenses), Net Interest income and other income (expenses), net primarily include interest income earned on our cash, cash equivalents and investments, foreign currency transaction gains (losses), remeasurement of certain monetary assets and liabilities in non-functional currency of our subsidiaries into the functional currency, realized gains (losses) on sales of investments, and other non-operating income and expenses. Interest income and other income (expenses), net increased $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. Income Taxes Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (dollars in thousands) Loss before income taxes $ (64,208 ) $ (91,943 ) $ (230,100 ) $ (228,522 ) Provision for (benefit from) income taxes 84 114 (77 ) 250 Effective tax rate (0.1 ) % (0.1 ) % — % (0.1 ) % 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. We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance. 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, 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. LIQUIDITY AND CAPITAL RESOURCES Financial Condition We have historically funded our operations principally from the sale of common stock (including our public offering proceeds), from the execution of collaboration agreements involving license payments, milestone payments, reimbursement for development services, and the associated product revenue and drug product revenue. On November 4, 2022, we entered into a RIFA with NovaQuest with respect to our revenues from Astellas’ sales of roxadustat in Europe, Japan and the other Astellas territories. Pursuant to the RIFA, in the fourth quarter of 2022, we received $49.8 million from NovaQuest, representing the gross proceeds of $50.0 million net of initial issuance costs, in consideration for a portion of future revenues we will receive from Astellas. For additional details about this financing transaction, see Note 8, Liability Related to Sale of Future Revenues , to the condensed consolidated financial statements. 44 Table of Contents On February 27, 2023, we entered into an Amended and Restated Equity Distribution Agreement (the “at-the-market agreement”) with Goldman Sachs & Co., LLC and BofA Securities, Inc. (each a “Sales Agent”), which amended and restated its Equity Distribution Agreement with Goldman Sachs & Co., LLC, dated August 8, 2022, to add BofA Securities, Inc. as an additional Sales Agent under that agreement. Under the at-the-market agreement, we may issue and sell, from time to time and through the Sales Agents, shares of our common stock having an aggregate offering price of up to $200.0 million (the “ATM Program”). Under the ATM Program, we sold 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 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 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 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. 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. 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 “ Risk Factors ” in this Quarterly Report. Cash Sources and Uses The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods set forth below (in thousands): Nine Months Ended September 30, 2023 2022 Net cash provided by (used in): Operating activities $ (296,700 ) $ (93,420 ) Investing activities 143,415 88,023 Financing activities 122,995 (1,898 ) Effect of exchange rate changes on cash and cash equivalents (4,496 ) (7,968 ) Net decrease in cash and cash equivalents $ (34,786 ) $ (15,263 ) 45 Table of Contents Operating Activities 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. The significant items in the changes in operating assets and liabilities included the following: • Accrued and other liabilities decreased $50.2 million, primarily related to the movements related to API and bulk drug product price true-up, resulting from changes in estimated variable consideration associated with the API shipments fulfilled under the terms of the Astellas Japan Amendment, and the bulk drug product transferred under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement, including the payment of $57.4 million previously accrued balance made during the current year period. See the Drug Product Revenue, Net section in Note 2, Collaboration Agreements, License Agreement and Revenues, to the condensed consolidated financial statements for details. The 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; • Deferred revenue decreased $36.9 million, primarily related to the reclassification of $28.7 million to accrued liabilities, resulting from changes in estimated variable consideration associated with the bulk drug product transferred to Astellas under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement during the current year period. See the Drug Product Revenue, Net section in Note 2, Collaboration Agreements, License Agreement and Revenues, to the condensed consolidated financial statements for details. • 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; • 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; and • 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 $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 $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; 46 Table of Contents • 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; and • 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 $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 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 We generate revenue from commercial sales of roxadustat product in China, Japan and Europe. Even with the expectation of increases in these revenues, we anticipate that we will continue to generate losses for the foreseeable future. To date, we have funded certain portions of our research and development and manufacturing efforts globally through collaboration partners, debt financings, and equity financing. We expect to continue to incur significant research and development expenses to invest in our other programs and there is no guarantee that sufficient funds will be available to continue to fund these development efforts through commercialization or otherwise. We are also subject to all the risks related to the development and commercialization of novel therapeutics, and we may encounter unforeseen expenses, difficulties, complications, delays and other factors outlined under Part II, Item 1A “ Risk Factors ” in this Quarterly Report on Form 10-Q, as well as unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations. 47 Table of Contents We believe that our existing cash and cash equivalents, short-term and long-term investments and accounts receivable, together with the proceeds from senior secured term loan facilities in the second quarter of 2023, the financing amount under the RIFA received in the fourth quarter of 2022, and the net proceeds received under our ATM program in the first half of 2023, as well as the cost savings we have recently implemented (including from the reduction in workforce that we announced on July 19, 2023), will be sufficient to meet our anticipated cash requirements for at least the next 12 months from the date of issuance of the financial statements included in this Quarterly Report on Form 10-Q. However, we may need additional capital thereafter and our liquidity assumptions could turn out to be wrong, or may change over time, and we could utilize our available financial resources sooner than we currently expect. We may incur additional expenses not currently contemplated due to events associated with the recently announced reduction in workforce. In addition, we may elect to raise additional funds at any time through equity, equity-linked, debt financing arrangements or from other sources. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under Part II, Item 1A “ Risk Factors ” in this Quarterly Report on Form 10-Q. We may not be able to secure additional financing to meet our operating requirements on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we will be subject to increased fixed payment obligations and could also be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to obtain needed additional funds, we will have to reduce our operating costs and expenses, which would impair our growth prospects and could otherwise negatively impact our business. Commitments and Contingencies Contractual Obligations 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 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 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 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. See Note 8, Liability Related to Sale of Future Revenues , to the condensed consolidated financial statements for details. Some of our license agreements provide for periodic maintenance fees over specified time periods, as well as payments by the Company upon the achievement of development, regulatory and commercial milestones. As of 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. and others. These milestone payments generally become due and payable only upon the achievement of certain developmental, clinical, regulatory and/or commercial milestones. The event triggering such payment or obligation has not yet occurred. 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. 48 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 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. ITEM 3. QUANTITATIVE AND QUALITAT IVE 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.