What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-06 · 163 added, 161 removed, 335 unchanged (49% of the section changed)

24 unchanged sentences

Financial Highlights

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except for per share data)

2 unchanged sentences

Net loss per share - basic and diluted

June 30, 2024

September 30, 2024

December 31, 2023

4 unchanged sentences

Accounts receivable

Our revenue for the three and six months ended June 30, 2024 included primarily the revenue recognized related to the following, respectively:

Our revenue for the three and nine months ended September 30, 2024 included primarily the revenue recognized related to the following, respectively:

• $46.2 million and $126.4 million from roxadustat commercial sales in China, mostly from sales to Beijing Falikang Pharmaceutical Co.

(“Falikang”);

• $0.7 million and a net reduction of $0.5 million to drug product revenue related to active pharmaceutical ingredient (“API”) deliveries to Astellas Pharma Inc.

(“Astellas”);

in addition, $25.7 million cumulative catch-up net adjustment in the drug product revenue, for the six months ended June 30, 2024, as a result of terminating the AstraZeneca AB (“AstraZeneca”) U.S./RoW Agreement, effective as of February 25, 2024 (“AstraZeneca Termination and Transition Agreement”), with the exception of South Korea;

• $0.4 million and $1.5 million of development and other revenue recognized mainly under our collaboration agreements with our partners Astellas and AstraZeneca;

As a comparison, our revenue for the three and six months ended June 30, 2023 included primarily the revenue recognized related to the following, respectively:

• A net reduction of $0.3 million and $0.7 million to drug product revenue related to active pharmaceutical ingredient (“API”) deliveries to Astellas Pharma Inc.

(“Astellas”);

in addition, $25.7 million cumulative catch-up net adjustment in the drug product revenue, for the nine months ended September 30, 2024, as a result of terminating the AstraZeneca AB (“AstraZeneca”) U.S./RoW Agreement, effective as of February 25, 2024 (“AstraZeneca Termination and Transition Agreement”), with the exception of South Korea.

As a comparison, our revenue for the three and nine months ended September 30, 2023 included primarily the revenue recognized related to the following, respectively:

• $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 and 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 API deliveries to Astellas;

• $4.1 million and $7.8 million of development and other revenue recognized primarily under our collaboration agreements with our partners Astellas and AstraZeneca;

• $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.

Operating costs and expenses for the three and six months ended June 30, 2024 decreased compared to the same periods a year ago primarily as a result of the net effect of the following, respectively:

• $24.6 million one-time, non-cash charge of acquired in-process research and development (“IPR&D”) expenses, in the prior year periods, associated with the exclusive license for FG-3246 from Fortis Therapeutics, Inc.

(“Fortis”) and the acquisition of Fortis;

• $17.7 million and $32.2 million lower clinical trial expenses primarily associated with the wind down on Phase 2/3 trials for pamrevlumab for the treatment of metastatic pancreatic cancer;

• $10.4 million and $24.6 million lower employee-related expenses primarily due to the impact from reduction in force actions in July 2023 and cost control efforts;

Operating costs and expenses for the three and nine months ended September 30, 2024 decreased compared to the same periods a year ago primarily as a result of the net effect of the following, respectively:

• $18.8 million and $50.9 million lower clinical trial expenses primarily associated with the termination of pamrevlumab programs during the current year period responding to the reported results in July 2024;

• $12.5 million and $37.0 million lower employee-related expenses primarily due to the impact from reduction in force actions in August 2024 and July 2023, and cost control efforts;

• $5.9 million and $13.1 million lower outside services expenses due to termination of pamrevlumab programs, wind down of remaining obligations and cost control efforts;

• $2.4 million and $8.6 million lower facilities-related expenses due to cost control efforts and lower depreciation expense as certain property and equipment reached their useful lives in prior year period, offset by the loss on disposal of property and equipment associated with efforts to streamline operations during the third quarter of 2024;

• $2.8 million and $8.2 million lower drug development expenses associated with drug substance activities and logistic expenses related to pamrevlumab programs which were completed and terminated;

• $1.9 million and $5.1 million lower legal expenses primarily due to lower activities in corporate legal, legal proceedings and intellectual properties;

• $1.8 million and $16.4 million lower stock-based compensation primarily resulting from significantly lower stock price and cancellations of stock options and restricted stock units due to reduced headcount;

• $4.8 million and $7.3 million lower outside services expenses due to cancellation of certain programs to streamline operations and cost control efforts;

• $2.5 million and $5.5 million lower facilities-related expenses due to cost control efforts and lower depreciation expense as certain property and equipment reached their useful lives in prior year period;

• $2.5 million and $5.4 million lower drug development expenses associated with drug substance activities and logistic expenses related to pamrevlumab which was largely completed;

• $3.1 million lower legal expenses for the six months ended June 30, 2024 primarily due to lower activities in corporate legal, legal proceedings and intellectual properties;

• $21.1 million one-time cost of goods sold recorded for the six months ended June 30, 2024 correspondingly to the above-mentioned drug product revenue resulting from the AstraZeneca Termination and Transition Agreement related to the AstraZeneca U.S./RoW Agreement, as defined further below.

For the six months ended June 30, 2024, we had a net loss of $48.5 million, or a net loss per basic and diluted share of $0.49, as compared to a net loss of $164.4 million, or a net loss per basic and diluted share of $1.71, for the same period a year ago, due to increases in revenue and decreases in operating costs and expenses as discussed above.

Cash and cash equivalents, investments, and accounts receivable totaled $147.1 million at June 30, 2024, a decrease of $101.0 million from December 31, 2023, primarily due to the cash used in operations as discussed under the Liquidity and Capital Resources section below.

• $24.6 million one-time, non-cash charge of acquired in-process research and development (“IPR&D”) expenses, in the nine-month period in prior year, associated with the exclusive license for FG-3246 from Fortis Therapeutics, Inc.

(“Fortis”) and the acquisition of Fortis;

• $21.1 million one-time cost of goods sold recorded for the nine months ended September 30, 2024 correspondingly to the above-mentioned drug product revenue resulting from the AstraZeneca Termination and Transition Agreement related to the AstraZeneca U.S./RoW Agreement, as defined further below;

• $5.9 million higher restructuring charge recorded in the third quarter of 2024 related to the reduction in force plan in August 2024 with larger scale as compared to the reduction in force plan in July 2023.

For the three months ended September 30, 2024, we had a net loss of $17.1 million, or a net loss per basic and diluted share of $0.17, as compared to a net loss of $63.6 million, or a net loss per basic and diluted share of $0.65, for the same period a year ago, and for the nine months ended September 30, 2024, we had a net loss of $65.6 million, or a net loss per basic and diluted share of $0.66, as compared to a net loss of $228.0 million, or a net loss per basic and diluted share of $2.35, for the same period a year ago, due to increases in revenue and decreases in operating costs and expenses as discussed above.

Cash and cash equivalents, investments, and accounts receivable totaled $160.0 million at September 30, 2024, a decrease of $88.1 million from December 31, 2023, primarily due to the cash used in operations as discussed under the Liquidity and Capital Resources section below.

Commercial, Development and Research Programs

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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 second quarter of 2024, roxadustat achieved an over 33% increase in sales volume relative to the second quarter of 2023.

As of May 2024, roxadustat was the top CKD anemia brand in China with approximately 46% value share within the segment of erythropoiesis stimulating agents and HIF-PH inhibitors.

Our composition of matter patent in China expired in the second quarter of 2024 and the China Health Authority has approved two generic roxadustat applications for marketing.

In the third quarter of 2024, roxadustat achieved an over 34% increase in sales volume relative to the third quarter of 2023.

As of August 2024, roxadustat was the top CKD anemia brand in China with approximately 45% value share within the segment of erythropoiesis stimulating agents and HIF-PH inhibitors.

Roxadustat for the Treatment of Chemotherapy-Induced Anemia

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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, and we expect an approval decision in the second half of 2024.

Our supplemental new drug application for roxadustat in CIA was accepted by the China Health Authority in August 2023, and we currently expect an approval decision in early 2025.

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

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FG-3246 demonstrated an acceptable safety profile, with adverse events consistent with those observed in other antibody drug conjugate therapies with a monomethyl auristatin E payload, and included infusion related reactions, fatigue, weight loss, neutropenia, and peripheral neuropathy.

We plan to meet with the FDA to discuss the development pathway, and we anticipate initiation of a Phase 2 monotherapy dose optimization study of FG-3246 for mCRPC in the first quarter of 2025.

In May 2024, we announced positive interim results from the dose escalation portion of the investigator-sponsored Phase 1b/2 study conducted by the University of California, San Francisco (“UCSF”) of FG-3246 in combination with enzalutamide in patients with mCRPC at the 2024 American Society of Clinical Oncology Annual Meeting.

We have met with the FDA to discuss the development pathway of FG-3246, and we anticipate initiation of a Phase 2 monotherapy dose optimization study of FG-3246 for the treatment of mCRPC in the first quarter of 2025.

We also plan to commence a sub-study of FG-3180, our positron emission tomography (“PET”) imaging agent.

FG-3180 is a diagnostic radiopharmaceutical utilizing a radiolabeled version of our CD46 targeting antibody in FG-3246 to assess the correlation between CD46 expression and the response to FG-3246.

In May 2024, the University of California, San Francisco (“UCSF”) presented positive interim results from the dose escalation portion of the investigator-sponsored Phase 1b/2 study of FG-3246 in combination with enzalutamide in patients with mCRPC at the 2024 American Society of Clinical Oncology Annual Meeting.

The presentation includes data from 17 biomarker unselected patients in the dose escalation portion of the trial.

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We expect topline results from the Phase 2 portion of this study of FG-3246 in combination with enzalutamide in the first half of 2025.

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.

Monoclonal Antibody Targeting Connective Tissue Growth Factor

In July 2024, we reported results from Pancreatic Cancer Action Network’s (“PanCAN’s”) Precision Promise SM adaptive trial platform that included pamrevlumab, our antibody developed to inhibit the activity of connective tissue growth factor, in combination with standard-of-care chemotherapy treatments for pancreatic cancer (gemcitabine and Abraxane®), for patients with metastatic pancreatic cancer.

The pamrevlumab experimental arm in PanCAN’s Precision Promise Phase 2/3 adaptive platform trial did not meet the primary endpoint of overall survival as determined by the protocol pre-specified Bayesian statistical analysis.

Given both 1L and 2L pamrevlumab treatment groups graduated into Stage 2 of PanCAN’s Precision Promise study, the hazard ratio for the primary overall survival analysis assumed a common hazard ratio to estimate a single treatment effect for both 1L and 2L pamrevlumab patients combined compared to patients treated with gemcitabine + nab-paclitaxel.

In addition, the pre-specified Bayesian model utilized a hierarchical model that included the borrowing of data from the mFOLFIRINOX control arm to the gemcitabine + nab-paclitaxel control arm for the primary efficacy analysis.

The pre-specified primary efficacy analysis was performed in a modified intention-to-treat (“mITT”) population that included only subjects who initiated treatment.

The mITT population in the pamrevlumab arm was comprised of a total of 102 patients in the 1L treatment group and 111 patients in the 2L treatment group and the gemcitabine + nab-paclitaxel control arm was comprised of a total of 34 patients in the 1L treatment group and 36 patients in the 2L treatment group.

Primary Overall Survival Analysis as Determined by Pre-Specified Bayesian Statistical Analysis (mITT Population)

Bayesian Model Common Hazard Ratio (“HR”)

Posterior Probability

Primary Efficacy Analysis

1.184 (0.175)

(0.882, 1.563)

In July 2024, we also reported results from LAPIS, our double-blind placebo-controlled Phase 3 clinical program for pamrevlumab in 284 patients with locally advanced unresectable pancreatic cancer 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).

The study did not meet the primary endpoint of overall survival (stratified log-rank p-value=0.55).

Median overall survival of 17.3 months was observed in the pamrevlumab combined with gemcitabine + nab-paclitaxel or FOLFIRINOX arm compared to median overall survival of 17.9 months in the control arm of placebo combined with gemcitabine + nab-paclitaxel or FOLFIRINOX (HR:

95% CI – 0.83 to 1.41).

The preliminary safety analyses across both studies indicate that the safety profile of pamrevlumab combined with gemcitabine + nab-paclitaxel or FOLFIRINOX was generally well tolerated with an acceptable safety profile in pancreatic cancer patients.

No clinically meaningful differences in treatment emergent adverse events were seen between the treatment arms.

Preclinical Pipeline

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

Preclinical Portfolio

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

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

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

Under these agreements, the aggregate amount of consideration received through June 30, 2024 totaled $790.1 million.

Under these agreements, the aggregate amount of consideration received through September 30, 2024 totaled $790.1 million.

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

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 $(0.4) million and $13.8 million for the three months ended June 30, 2024 and 2023, and ($2.6) million and $15.5 million for the six months ended June 30, 2024 and 2023, respectively.

The related drug product revenue was $(1.4) million and $0.7 million for the three months ended September 30, 2024 and 2023, and ($3.9) million and $16.2 million for the nine months ended September 30, 2024 and 2023, respectively.

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

The related drug product revenue was $1.1 million and $0.5 million for the three months ended June 30, 2024 and 2023, and $2.1 million and $0.8 million for the six months ended June 30, 2024 and 2023, respectively.

The related drug product revenue was $1.1 million and $0.6 million for the three months ended September 30, 2024 and 2023, and $3.2 million and $1.5 million for the nine months ended September 30, 2024 and 2023, respectively.

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

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In addition, resulting from the AstraZeneca Termination and Transition Agreement, FibroGen and AstraZeneca settled the outstanding balances relating to past transactions under the AstraZeneca Master Supply Agreement.

Accordingly, during the three months ended March 31, 2024, we recorded a cumulative catch-up net adjustment of $25.7 million to the drug product revenue.

Accordingly, during the first quarter of 2024, we recorded a cumulative catch-up net adjustment of $25.7 million to the drug product revenue.

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

Under the AstraZeneca agreements, the aggregate amount of consideration received through June 30, 2024 totaled $77.2 million.

Under the AstraZeneca agreements, the aggregate amount of consideration received through September 30, 2024 totaled $77.2 million.

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

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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.

As of June 30, 2024, the $4.0 million milestone was recorded as a contract asset and was fully netted against the contract liabilities (deferred revenue) related to the AstraZeneca China Agreement.

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 and was unbilled as of December 31, 2023, recorded as a contract asset and fully netted against the contract liabilities (deferred revenue) related to the AstraZeneca China Agreement.

During the three months ended September 30, 2024, based on the arrangements under the settlement agreements entered in September 2024 between FibroGen China and AstraZeneca to settle certain historical items, the $4.0 million milestone was billed and included in the accounts receivable as of September 30, 2024.

AstraZeneca China Amendment

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Under the AstraZeneca China Amendment, in September 2020, FibroGen Beijing and AstraZeneca completed the establishment of a jointly owned entity, Falikang, which performs roxadustat distribution, as well as conducts sales and marketing through AstraZeneca.

Substantially all direct roxadustat product sales to distributors in China are made by Falikang, while we expect that FibroGen Beijing will continue to sell roxadustat product directly in one province in China.

FibroGen Beijing manufactures and supplies commercial product to Falikang based on an agreed upon transfer price, which includes gross transaction 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 net product revenue of $49.6 million and $23.9 million for the three months ended June 30, 2024 and 2023, and $80.2 million and $48.0 million for the six months ended June 30, 2024 and 2023, respectively, majority of which were from the sales to Falikang.

We recognized net product revenue of $46.2 million and $29.4 million for the three months ended September 30, 2024 and 2023, and $126.4 million and $77.4 million for the nine months ended September 30, 2024 and 2023, respectively, majority of which were from the sales to Falikang.

RESULTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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

As of June 30, 2024, we do not expect to incur significant future co-development services.

As of September 30, 2024, we do not expect to incur significant future co-development services.

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 2033, which reflects our best estimates.

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

Total revenue increased $6.3 million, or 14%, for the three months ended June 30, 2024, and increased $26.1 million, or 32%, for the six months ended June 30, 2024, respectively, compared to the same periods a year ago for the reasons discussed in the sections below.

Total revenue increased $6.2 million, or 15%, for the three months ended September 30, 2024, and increased $32.3 million, or 27%, for the nine months ended September 30, 2024, respectively, compared to the same periods a year ago for the reasons discussed in the sections below.

License Revenue

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

1 unchanged sentence

Total license revenue

There was no license revenue during the three and six months ended June 30, 2024.

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

License revenue recognized for the six months ended June 30, 2023 also included a $3.0 million milestone payment based on Eluminex implanting a biosynthetic cornea in the first patient of its clinical trial in China, and a $3.0 million manufacturing related milestone payment when such milestones were achieved.

NM = Not meaningful

There was no license revenue during the three and nine months ended September 30, 2024.

License revenue recognized for three and nine months ended September 30, 2023 included $2.7 million allocated revenue under our collaboration agreements with AstraZeneca 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.

Development and Other Revenue

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Total development and other revenue

Development and other revenue decreased $4.9 million, or 95%, for the three months ended June 30, 2024, and decreased $7.9 million, or 87%, for the six months ended June 30, 2024, respectively, compared to the same periods a year ago.

Development revenue recognized under our collaboration agreements with Astellas for the three and six months ended June 30, 2024 was impacted by the decrease 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 AstraZeneca for the three and six months ended June 30, 2024 was the final development revenue as a result of the termination of the AstraZeneca U.S./RoW Agreement.

Other revenue recognized for the six months ended June 30, 2024 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, which occurred by the end of 2023.

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

Development and other revenue decreased $6.4 million, or 94%, for the three months ended September 30, 2024, and decreased $14.3 million, or 90%, for the nine months ended September 30, 2024, 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, 2024 was impacted by the decrease 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 AstraZeneca for the nine months ended September 30, 2024 was the final development revenue as a result of the termination of the AstraZeneca U.S./RoW Agreement.

Development revenue recognized under our collaboration agreements with AstraZeneca for the three months ended September 30, 2023 also 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.

Other revenue recognized for the nine months ended September 30, 2024 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, which occurred by the end of 2023.

Other revenue recognized for the three and nine months ended September 30, 2023 also included a $0.5 million upfront payment related to patent transfer under from Eluminex and revenue from sales of certain research and development material.

Product Revenue, Net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Total product revenue, net

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 $25.8 million, or 108%, for the three months ended June 30, 2024, and increased $32.1 million, or 67%, for the six months ended June 30, 2024, respectively, compared to the same periods a year ago.

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

Total product revenue, net increased $16.8 million, or 57%, for the three months ended September 30, 2024, and increased $49.0 million, or 63%, for the nine months ended September 30, 2024, 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.

Product revenue from direct sales, increased $0.3 million, or 8%, for the three months ended June 30, 2024, and increased $0.9 million, or 15%, for the six months ended June 30, 2024, respectively, compared to the same periods a year ago, due to the increase in sales volume during the current year periods, offset by lower government-listed price.

The total discounts and rebates were immaterial for each of the three and six months ended June 30, 2024 and 2023.

Product revenue from direct sales, increased $1.1 million, or 36%, for the three months ended September 30, 2024, and increased $2.0 million, or 22%, for the nine months ended September 30, 2024, respectively, compared to the same periods a year ago, due to the increase in sales volume during the current year periods, offset by lower government-listed price.

The total discounts and rebates were immaterial for each of the three and nine months ended September 30, 2024 and 2023.

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

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The variable consideration components that are included in the transaction price may be constrained, and are included in the product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period when the uncertainty associated with the variable consideration is subsequently resolved.

Sales to Falikang revenue, net increased $25.5 million, or 124%, for the three months ended June 30, 2024, and increased $31.2 million, or 75%, for the six months ended June 30, 2024, respectively, compared to the same periods a year ago.

The gross transaction price increased $7.2 million, and the calculated profit share increased $3.1 million for the three months ended June 30, 2024, and the gross transaction price increased $16.5 million, and the calculated profit share increased $7.1 million for the six months ended June 30, 2024, respectively, compared to the same periods a year ago, primarily due to the increase in sales volume during the current year period.

Sales to Falikang revenue, net increased $15.8 million, or 60%, for the three months ended September 30, 2024, and increased $47.0 million, or 69%, for the nine months ended September 30, 2024, respectively, compared to the same periods a year ago.

The gross transaction price increased $11.4 million, and the calculated profit share increased $5.8 million for the three months ended September 30, 2024, and the gross transaction price increased $27.9 million, and the calculated profit share increased $13.0 million for the nine months ended September 30, 2024, respectively, compared to the same periods a year ago, primarily due to the increase in sales volume during the current year period.

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

Following updates to our estimates, we recognized $18.1 million and $20.6 million for the three and six months ended June 30, 2024, respectively, from the previously deferred revenue of the China performance obligation.

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

Following updates to our estimates, we recognized $12.5 million and $33.1 million for the three and nine months ended September 30, 2024, respectively, from the previously deferred revenue of the China performance obligation.

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

Drug Product Revenue, Net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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NM = Not meaningful

Drug product revenue, net decreased $13.5 million, or 95%, for the three months ended June 30, 2024, and increased $8.8 million, or 54%, for the six months ended June 30, 2024, respectively, compared to the same periods a year ago.

Drug product revenue, net decreased $1.6 million, or 120%, for the three months ended September 30, 2024, and increased $7.3 million, or 41%, for the nine months ended September 30, 2024, respectively, compared to the same periods a year ago.

Astellas Japan Agreement

During the third quarter of 2024, 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 $1.4 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, among others.

During the second quarter of 2024, 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 $0.4 million.

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During the third quarter of 2023, we updated our estimate of variable consideration related to the API shipments fulfilled under the terms of Astellas Japan Amendment, and accordingly recorded an adjustment to the drug product revenue of $0.7 million for the three months ended September 30, 2023.

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

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As of June 30, 2024, the balances related to the API price true-up under the Astellas Japan Agreement were $2.2 million in accrued liabilities and $0.6 million in other long-term liabilities, representing our best estimate of the timing for these amounts to be paid.

As of September 30, 2024, the balances related to the API price true-up under the Astellas Japan Agreement were $3.6 million in accrued liabilities and $0.6 million in other long-term liabilities, representing our best estimate of the timing for these amounts to be paid.

As of December 31, 2023, the related balances were $1.2 million in accrued liabilities and $0.7 million in other long-term liabilities.

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As a result, we reclassified from the related deferred revenue to accrued liabilities and as of December 31, 2023, the related balance in accrued liabilities was $38.6 million.

We further reclassified $5.4 million from the related deferred revenue to accrued liabilities and paid $35.3 million to Astellas during the six months ended June 30, 2024.

As of June 30, 2024, the balances related to the bulk drug product price true-up under the Astellas Europe Agreement and the Astellas EU Supply Agreement were $8.8 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 $1.1 million and $0.5 million for the three months ended June 30, 2024 and 2023, and $2.1 million and $0.8 million for the six months ended June 30, 2024 and 2023, respectively.

We further reclassified $5.6 million from the related deferred revenue to accrued liabilities and paid $35.3 million to Astellas during the nine months ended September 30, 2024.

As of September 30, 2024, the balances related to the bulk drug product price true-up under the Astellas Europe Agreement and the Astellas EU Supply Agreement were $9.0 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 $1.1 million and $0.6 million for the three months ended September 30, 2024 and 2023, and $3.2 million and $1.5 million for the nine months ended September 30, 2024 and 2023, 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.

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Accordingly, during the three months ended March 31, 2024, we accounted for the termination of the AstraZeneca U.S./RoW agreement as a contract modification under the ASC 606 and recorded a cumulative catch-up net adjustment of $25.7 million to the drug product revenue.

The related accounts receivable of $26.0 million and the related accrued liabilities of $11.5 million as of March 31, 2024 were settled during the three months ended June 30, 2024.

The related accounts receivable of $26.0 million and the related accrued liabilities of $11.5 million as of March 31, 2024 were settled during the second quarter of 2024.

Operating Costs and Expenses

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Selling, general and administrative

Restructuring charge

Total operating costs and expenses

Total operating costs and expenses decreased $70.8 million, or 53%, and decreased $96.1 million, or 39%, for the six months ended June 30, 2024, respectively, compared to the same periods a year ago for the reasons discussed in the sections below.

Total operating costs and expenses decreased $40.5 million, or 39%, and decreased $136.6 million, or 39%, for the three and nine months ended September 30, 2024, respectively, compared to the same periods a year ago for the reasons discussed in the sections below.

Cost of Goods Sold

Cost of goods sold decreased $0.5 million, or 9%, for the three months ended June 30, 2024, and increased $21.7 million, or 236%, for the six months ended June 30, 2024, respectively, compared to the same periods a year ago.

Cost of goods sold increased $1.1 million, or 25%, for the three months ended September 30, 2024, and increased $22.8 million, or 170%, for the nine months ended September 30, 2024, respectively, compared to the same periods a year ago.

As described above, during the three months ended March 31, 2024, we recorded a cumulative catch-up net adjustment to the drug product revenue resulting from the AstraZeneca Termination and Transition Agreement related to the AstraZeneca U.S./RoW Agreement.

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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 $5.0 million and $3.6 million for the three months ended June 30, 2024 and 2023, and $9.4 million and $6.8 million for the six months ended June 30, 2024, respectively.

Cost of goods sold associated with the roxadustat commercial sales in China was $5.4 million and $3.9 million for the three months ended September 30, 2024 and 2023, and $14.8 million and $10.7 million for the nine months ended September 30, 2024 and 2023, respectively.

Cost of goods sold in China increased as compared to the prior year periods due to the increases in the sales volume.

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

We have implemented efforts to streamline operations to align with our business goals in the second half of 2023.

As a result, research and development expenses have decreased and may continue to decrease in certain areas over time.

The following table summarizes our research and development expenses incurred during the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

We have implemented a significant cost reduction plan in the U.S.

in the third quarter of 2024, and efforts to streamline operations to align with our business goals in the second half of 2023.

As a result, research and development expenses have overall decreased and may continue to decrease in certain areas over time.

The following table summarizes our research and development expenses incurred during the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30,

Nine Months Ended September 30,

Product Candidate

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

Research and development expenses decreased $61.4 million, or 64%, for the three months ended June 30, 2024, and decreased $97.5 million, or 57%, for the six months ended June 30, 2024, compared to the same periods a year ago, primarily as a result of the net effect of the following, respectively:

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

• Decrease of $17.7 million and $32.2 million in clinical trials costs primarily associated with the wind down on Phase 2/3 trials for pamrevlumab for the treatment of metastatic pancreatic cancer;

• Decrease of $6.0 million and $17.0 million in employee-related costs primarily due to the impact from reduction in force actions in July 2023 and cost control efforts;

• Decrease of $3.6 million and $7.3 million in facilities-related expenses due to cost control efforts and lower depreciation expense as certain Property and equipment reached their useful lives in prior year period;

Research and development expenses decreased $39.5 million, or 65%, for the three months ended September 30, 2024, and decreased $137.0 million, or 59%, for the nine months ended September 30, 2024, compared to the same periods a year ago, primarily as a result of the net effect of the following, respectively:

• Decrease of $18.8 million and $50.9 million in clinical trials costs primarily associated with the termination of pamrevlumab programs during the current year period responding to the reported results in July 2024;

• Decrease of $8.6 million and $25.5 million in employee-related costs primarily due to the impact from reduction in force actions in August 2024 and July 2023, and cost control efforts;

• Decrease of $3.4 million and $10.7 million in facilities-related expenses due to cost control efforts and lower depreciation expense as certain property and equipment reached their useful lives in prior year period, offset by the loss on disposal of property and equipment associated with efforts to streamline operations during the third quarter of 2024;

• Decrease of $4.4 million and $8.6 million in outside services expenses primarily due to termination of pamrevlumab programs, wind down of remaining obligations and cost control efforts.

• Decrease of $2.8 million and $8.2 million in drug development expenses associated with drug substance activities and logistic expenses related to pamrevlumab programs which were completed and terminated;

• Decrease of $1.4 million and $8.6 million in stock-based compensation primarily resulting from significantly lower stock price and cancellations of stock options and restricted stock units due to reduced headcount;

• Decrease of $2.5 million and $5.4 million in drug development expenses associated with drug substance activities and logistic expenses related to pamrevlumab which was largely completed;

• Decrease of $2.2 million and $4.3 million in outside services expenses primarily related to cancellation of certain programs to streamline operations and cost control efforts.

• $24.6 million one-time, non-cash charge of acquired IPR&D expenses, in the nine-month period in prior year, associated with the exclusive license for FG-3246 from Fortis and the acquisition of Fortis.

Selling, General and Administrative Expenses

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SG&A expenses also include facility-related costs, professional fees, accounting and legal services, other outside services including co-promotional expenses associated with our commercialization efforts in China, recruiting fees and expenses associated with obtaining and maintaining patents.

We have implemented efforts to streamline operations to align with our business goals in the second half of 2023.

As a result, SG&A expenses have decreased in certain areas and may continue to decrease over time.

SG&A expenses decreased $8.9 million, or 29%, for the three months ended June 30, 2024, and decreased $20.4 million, or 31%, for the six months ended June 30, 2024, compared to the same periods a year ago, primarily as a result of the net effect of the following, respectively:

We have implemented a significant cost reduction plan in the U.S.

in the third quarter of 2024, and efforts to streamline operations to align with our business goals in the second half of 2023.

As a result, SG&A expenses have overall decreased and may continue to decrease over time.

SG&A expenses decreased $8.0 million, or 31%, for the three months ended September 30, 2024, and decreased $28.4 million, or 31%, for the nine months ended September 30, 2024, compared to the same periods a year ago, primarily as a result of the net effect of the following, respectively:

• Decrease of $3.9 million and $11.5 million in employee-related costs primarily due to the impact from reduction in force actions in August 2024 and July 2023, and cost control efforts;

• Decrease of $1.9 million and $5.1 million in legal expenses primarily due to lower activities in corporate legal, legal proceedings and intellectual properties;

• Decrease of $1.5 million and $4.5 million in outside services expenses due to cost control efforts;

• Decrease of $0.4 million and $7.8 million in stock-based compensation primarily resulting from significantly lower stock price and cancellations of stock options and restricted stock units due to reduced headcount.

• Decrease of $2.9 million and $7.6 million in employee-related costs primarily due to the impact from reduction in force actions in July 2023 and cost control efforts;

• Decrease of $2.6 million and $3.0 million in outside services expenses due to cancellation of certain programs and cost control efforts;

• Decrease of $3.1 million in legal expenses for the six months ended June 30, 2024 primarily due to lower activities in corporate legal, legal proceedings and intellectual properties.

Restructuring Charge

Responding to the reported results for pamrevlumab on July 30, 2024, we implemented an immediate and significant cost reduction plan in the U.S., including terminating pamrevlumab research and development investment and expeditiously wind down remaining obligations, and reducing U.S.

workforce by approximately 75% (we notified employees on August 2, 2024).

As a result, we recorded a total of $18.6 million non-recurring restructuring charge during the three months ended September 30, 2024, primarily consisting of notice period and severance payments, accrued vacation, and employee benefits contributions.

On July 14, 2023, we approved a restructuring plan to lower our operating expenses to streamline operations to align with our business goals, which 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.

Interest and Other, Net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Interest expense represents the interest related to the senior secured term loan facilities, interest related to sale of future revenues and interest related to the Technology Development Center of the Republic of Finland product development obligations.

Interest expense increased $1.7 million, or 56%, for the three months ended June 30, 2024, and increased $4.3 million, or 80%, for the six months ended June 30, 2024, respectively, compared to the same periods a year ago, primarily due to the higher interest expense related to the senior secured term loan facilities.

Interest expense remained relatively flat for the three months ended September 30, 2024.

Interest expense increased $4.3 million, or 41%, for the nine months ended September 30, 2024, compared to the same period a year ago, primarily due to the higher interest expense related to the senior secured term loan facilities.

The loan was drawn in the middle of the second quarter of 2023, and therefore, the related interest expense only the represented partial prior year periods.

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

Interest income and other income (expenses), net decreased $3.9 million, or 148%, and decreased $2.4 million, or 65%, for the six months ended June 30, 2024, respectively, compared to the same periods a year ago, primarily due to foreign currency transaction losses and lower interest income resulting from lower investment balances.

Three Months Ended June 30,

Six Months Ended June 30,

Interest income and other income (expenses), net decreased $0.5 million, or 11%, and decreased $2.9 million, or 36%, for the nine months ended September 30, 2024, respectively, compared to the same periods a year ago, primarily due to lower interest income resulting from lower investment balances and foreign currency transaction losses.

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

Loss before income taxes

Benefit from income taxes

Provision for (benefit from) income taxes

Effective tax rate

Benefits from income taxes for the three and six months ended June 30, 2024 and 2023 were primarily due to foreign taxes.

Provisions for (benefits from) income taxes for the three and nine months ended September 30, 2024 and 2023 were primarily due to foreign taxes.

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

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Investment Income in Unconsolidated Variable Interest Entity

Investment income in unconsolidated variable interest entity represented our proportionate share of the reported profits of Falikang, an unconsolidated variable interest entity accounted for under the equity method, which was immaterial for the three and six months ended June 30, 2024 and 2023.

See Equity method investment - Unconsolidated VIE - Falikang section of Note 4, Variable Interest Entities , to the condensed consolidated financial statements for details.

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For additional details about this financing transaction, see Note 7, Senior Secured Revolving Line of Credit , to the condensed consolidated financial statements.

As of June 30, 2024, we had cash and cash equivalents of $140.7 million, compared to $113.7 million as of December 31, 2023.

As of September 30, 2024, we had cash and cash equivalents of $131.0 million, compared to $113.7 million as of December 31, 2023.

Cash is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Investments, consisting of available-for-sale securities, and stated at fair value, are also available as a source of liquidity.

As of June 30, 2024, we did not have any short-term investments, compared to short-term investments of $121.9 million as of December 31, 2023.

As of June 30, 2024, a total of $39.3 million of our cash and cash equivalents was held outside of the U.S.

As of September 30, 2024, we did not have any short-term investments, compared to short-term investments of $121.9 million as of December 31, 2023.

As of September 30, 2024, a total of $51.0 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 and six months ended June 30, 2024, FibroGen Beijing made a total of $10.8 million and $27.3 million repayments of intercompany loans, respectively.

During the three and nine months ended September 30, 2024, FibroGen Beijing made a total of $22.5 million and $49.9 million repayments of intercompany loans, respectively.

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.

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

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash provided by (used in):

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Operating Activities

Net cash used in operating activities was $99.2 million for the six months ended June 30, 2024 and consisted primarily of net loss of $48.5 million adjusted for non-operating cash items of $15.8 million, and a net decrease in operating assets and liabilities of $66.5 million.

Net cash used in operating activities was $107.5 million for the nine months ended September 30, 2024 and consisted primarily of net loss of $65.6 million adjusted for non-operating cash items of $27.7 million, and a net decrease in operating assets and liabilities of $69.7 million.

The significant non-operating cash items included stock-based compensation expense of $25.0 million.

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

• Accrued and other liabilities decreased $52.7 million, primarily driven by payment of $35.3 million to Astellas and $11.5 million to AstraZeneca related to accrued API and bulk drug product price true-up;

bonus and severance payouts totaling $19.1 million, offset by accrued inventory related cost of $8.5 million as of June 30, 2024, as part of the cost of goods sold resulting from the above-mentioned termination of the AstraZeneca U.S./RoW agreement.

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

• Deferred revenue decreased $29.5 million, primarily related to the $20.6 million product revenue recognized from the previously deferred revenue of the China performance obligation during the six months ended June 30, 2023.

• Operating lease right-of-use assets decreased $66.0 million, operating lease liabilities, non-current decreased $65.8 million and operating lease liabilities, current decreased $12.8 million related to the operating lease termination of our corporate headquarters.

See Note 3, Leases, to the condensed consolidated financial statements for details;

• Prepaid expenses and other current assets increased $18.2 million, primarily due to the $24.8 million of unbilled receivables from Falikang based on the arrangements under the settlement agreements entered in September 2024 between FibroGen China and AstraZeneca to settle certain historical items, and the reimbursements from the insurance for the legal fees associated with the class action lawsuit, which is recoverable under our insurance policies.

• Accrued and other liabilities decreased $17.1 million, primarily driven by payment of $35.3 million to Astellas and $11.5 million to AstraZeneca related to accrued API and bulk drug product price true-up and bonus and severance payouts, totaling $25.2 million.

The decreases were offset by $42.4 million of historical co-promotion balances due to AstraZeneca based on the arrangements under the above-mentioned settlement agreements, accrued restructuring charge of $18.6 million related to the reduction in force in August 2024, and accrued inventory related cost of $8.5 million as of September 30, 2024, as part of the cost of goods sold resulting from the above-mentioned termination of the AstraZeneca U.S./RoW agreement.

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

• Accounts receivable increased $16.0 million, primarily driven by the billings to Falikang based on the arrangements under the above-mentioned settlement agreements and related to the increase product sales, as well as the timing of receipt of the billings under our collaboration and license agreements;

• Deferred revenue decreased $15.2 million, primarily related to the $33.1 million product revenue recognized from the previously deferred revenue of the China performance obligation during the nine months ended September 30, 2023.

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

In addition, the decrease in deferred revenue was also related to the $2.1 million royalty revenue recognized from the deferred revenue under the Astellas Europe Agreement, and the reclassification of $5.4 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 six months ended June 30, 2023.

In addition, the decrease in deferred revenue was also related to the $3.2 million royalty revenue recognized from the deferred revenue under the Astellas Europe Agreement, and the reclassification of $5.6 million to accrued liabilities, resulting from changes in estimated variable consideration associated with the bulk drug product transferred to Astellas under the terms of the Astellas Europe Agreement and the Astellas EU Supply Agreement during the nine months ended September 30, 2023.

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

• Accounts payable decreased $8.0 million, primarily driven by the timing of invoicing and payments;

• Accrued interest expense related to sale of future revenues decreased $1.9 million due to the $5.7 million interest paid, offset by the interest expense of $3.7 million accrued during the six months ended June 30, 2024.

See Note 7, Liability Related to Sale of Future Revenues, to the condensed consolidated financial statements for details;

Deferred revenue was no longer netted against any contract assets as of September 30, 2024, and the $22.5 million of unbilled co-development revenue under the AstraZeneca China Amendment and the $4.0 million unbilled regulatory milestone payment under the AstraZeneca China Agreement as of December 31, 2023 were billed during the three months ended September 30, 2024 under the above-mentioned settlement agreements;

• Accounts payable decreased $8.7 million, primarily driven by the timing of invoicing and payments and cost control efforts;

• Inventory decreased $17.8 million primarily driven by the $12.6 million of work-in-progress inventory that was reimbursed as part of the above-mentioned termination of the AstraZeneca U.S./RoW agreement.

• Accounts receivable decreased $6.0 million, primarily driven by the receipt of the billings under our collaboration and license agreements;

• Prepaid expenses and other current assets decreased $4.5 million, primarily due to the reimbursements from the insurance for the legal fees associated with the class action lawsuit, which is recoverable under our insurance policies.

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

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

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

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• 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;

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

• Accounts receivable increased $16.3 million, primarily driven by the receivable related to the API shipments to Astellas during the second quarter of 2023, as well as the timing of the receipt of payments and the billings under our collaboration and license agreements;

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

• Inventories increased $2.0 million, driven by the increased inventory level primarily related to FibroGen Beijing’s productions of roxadustat for commercial sales purposes.

• Accounts payable decreased $14.1 million, primarily driven by the payments made for the historical co-promotion expenses to AstraZeneca during the current year period, as well as the timing of invoicing and payments;

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

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 $123.5 million for the six months ended June 30, 2024 and consisted of $132.2 million of proceeds from maturities of investments, partially offset by $8.6 million of cash used in purchases of available-for-sale securities.

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

Net cash provided by investing activities was $124.3 million for the nine months ended September 30, 2024 and consisted of $132.2 million of proceeds from maturities of investments, partially offset by $8.6 million of cash used in purchases of available-for-sale securities.

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.

Financing Activities

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

Net cash used in financing activities was immaterial for the six months ended June 30, 2024.

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

Net cash used in financing activities was immaterial for the nine months ended September 30, 2024.

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.

Material Cash Requirements

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

Based on our current operating plan, which contemplates the maintenance of a minimum balance of $30 million of unrestricted cash and cash equivalents held in accounts in the U.S., as required under the debt covenants associated with the senior secured term loan facilities, we believe that our existing cash and cash equivalents 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 implemented (including from the reduction in workforce in July 2023), and the significant cost reduction plan in the U.S., responding to the recent pamrevlumab results announced in July 2024 (including terminating pamrevlumab research and development investment and expeditiously wind down remaining obligations, and reduction in U.S.

workforce) 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 to fund our operations, and our liquidity assumptions may materially differ (including assumptions with respect to our research and development expenses, revenue expectations, contractual obligations, ability to repatriate cash from China, partnering or monetization of assets, and others).

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

If we are unable to repatriate additional cash from our China operations or raise additional capital in the U.S., within the next 12 months, we would not be able to comply with our debt covenants under our senior secured term loan facilities that requires a minimum balance of $30 million of unrestricted cash and cash equivalents to be held in accounts in the U.S.

Upon an event of default, our senior secured term loan facilities would become immediately due and payable.

We continue to evaluate measures to repatriate additional cash from our China operations.

There is also the potential that we raise additional funds in the U.S.

at any time through equity, equity-linked, or debt financing arrangements or from other sources.

There can be no assurances that these plans will be successful.

As a result of these factors, we determined that there is substantial doubt about our ability to continue as a going concern within 12 months after the date that the financial statements are issued.

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.

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Contractual Obligations

As of June 30, 2024, we had $73.9 million of operating lease liabilities.

As of September 30, 2024, we had $2.0 million of operating lease liabilities.

The material cash requirements related to our lease liabilities included $1.3 million expected to be paid within the next 12 months.

As of June 30, 2024, we had outstanding total non-cancelable purchase obligations of $19.7 million, including $11.2 million for manufacture and supply of pamrevlumab, $0.8 million for manufacture and supply of roxadustat, and $7.6 million for other purchases and programs.

As of September 30, 2024, we had outstanding total non-cancelable purchase obligations of $1.0 million for manufacture and supply of roxadustat and $6.0 million for other purchases and programs, all of which are expected to be paid within the next 12 months.

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 $14.7 million expected to be paid within the next 12 months.

Under the Financing Agreement with Morgan Stanley Tactical Value, as of June 30, 2024, we had $72.5 million of senior secured term loan facilities balance on the condensed consolidated balance sheets, which are not subject for repayment until May 2026.

Under the Financing Agreement with Morgan Stanley Tactical Value, as of September 30, 2024, we had $72.8 million of senior secured term loan facilities balance on the condensed consolidated balance sheets, which are not subject for repayment until May 2026.

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

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

Under the RIFA with NovaQuest, as of June 30, 2024, we had $55.2 million of liability related to sale of future revenues on the condensed consolidated balance sheets, $0.6 million of which we anticipate to pay within the next 12 month.

Under the RIFA with NovaQuest, as of September 30, 2024, we had $57.2 million of liability related to sale of future revenues on the condensed consolidated balance sheets, $0.3 million of which we anticipate to pay within the next 12 month.

Based on our current estimates of drug product revenue and revenue from milestone payments under the Astellas Agreements, and taking into the consideration of the terms under the RIFA, we anticipate to reach a Payment Cap up to $125.0 million by 2031.

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

As of June 30, 2024, future milestone payments for research and preclinical stage development programs consisted of up to approximately $697.9 million in total potential future milestone payments under our license agreements with HiFiBiO (for Gal-9 and CCR8), Medarex, Inc.

As of September 30, 2024, future milestone payments for research and preclinical stage development programs consisted of up to approximately $697.9 million in total potential future milestone payments under our license agreements with HiFiBiO (for Gal-9 and CCR8), Medarex, Inc.

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

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

There have been no material changes in our critical accounting policies, estimates and judgments during the three and six months ended June 30, 2024 compared with the disclosures in Part II, Item 7 of our 2023 Form 10-K.

There have been no material changes in our critical accounting policies, estimates and judgments during the three and nine months ended September 30, 2024 compared with the disclosures in Part II, Item 7 of our 2023 Form 10-K.

QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK.

During the three and six months ended June 30, 2024, 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 2023 Form 10-K.

During the three and nine months ended September 30, 2024, 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 2023 Form 10-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis