What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-03-01 compared with 2020-03-02 · 594 added, 434 removed, 974 unchanged (51% of the section changed)

3 unchanged sentences

Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates.

The functional currency of our FibroGen Europe Oy subsidiary is the local currency.

Most of our revenue from collaboration agreements are denominated in U.S.

dollars, and therefore our revenue is not currently subject to significant foreign currency risk.

The functional currency of our FibroGen Europe Oy subsidiary is the local currency.

On April 1, 2020, our subsidiary FibroGen Beijing changed its functional currency from U.S.

dollars to its local currency.

Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the United States, China, and Europe.

Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates.

As of December 31, 2019, our financial assets and liabilities denominated in foreign currencies primarily included CNY14.3 million in cash and cash equivalent, CNY48.7 million in other current and long-term assets, and CNY434.1 million and EUR1.4 million in accounts payable, accrued liabilities and other long-term liabilities.

These balances are subject to fluctuation in the exchange rate with the U.S.

The effect of a hypothetical 10% change in foreign currency exchange rates would have resulted in a net gain or loss on foreign currency of approximately $5.5 million for the year ended December 31, 2019.

As of December 31, 2020, we did not have material financial assets and liabilities denominated in foreign currencies that are subject to fluctuation in the exchange rate with the U.S.

Therefore, the effect of a hypothetical 10% change in foreign currency exchange rates would not have resulted in a material net gain or loss on foreign currency for the year ended December 31, 2020.

The primary objective of our investment activities is to preserve our capital to fund our operations.

1 unchanged sentence

To achieve our objectives, we invest our non-operating cash and cash equivalents primarily in U.S.

government treasury bills and notes.

A portion of our investments is also invested in certificates of deposit and demand deposits with high quality and established banking institutions.

treasuries and money market funds as of December 31, 2020.

Given the nature of our investments as of December 31, 2020, we believe that our exposure to interest rate risk is not significant.

1 unchanged sentence

To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments.

CONSOLIDATED FINANCIAL ST ATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FibroGen, Inc.

9 unchanged sentences

II Valuation and Qualifying Accounts for each of the three years ended December 31, 2020

The supplementary financial information required by this Item 8 is included in Item 7 under the caption “Quarterly Results of Operations”.

Report of Independent Registered Public Accounting Firm

5 unchanged sentences

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date related to the risk assessment component of internal control, as the Company did not design and maintain an effective risk assessment process at a precise enough level to identify new and evolving risks of material misstatement to the financial statements as a result of changes in the Company’s business operation, which gave rise to additional material weaknesses as the Company did not design and maintain effective controls related to the timely identification of shipments associated with drug product revenue, or changes in estimated variable consideration related to drug product revenue.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses referred to above are described in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Change in Accounting Principle

1 unchanged sentence

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

17 unchanged sentences

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimated Variable Consideration Associated With Milestones Related to the United States New Drug Application (NDA) and the European Marketing Authorization Application (MAA) Submissions

As described in Notes 2 and 3 to the consolidated financial statements, milestone payments are considered variable consideration, which requires management to make estimates of when achievement of a particular milestone becomes probable.

Milestone payments are included in the transaction price when it becomes probable that such inclusion would not result in a significant revenue reversal.

Management evaluated the two regulatory milestone payments associated with the planned European MAA submission and the regulatory milestone payment associated with the acceptance by the United States Food and Drug Administration (FDA) of the NDA submission and concluded that these milestones became probable of being achieved in the second quarter of 2019.

Accordingly, the total consideration of $180.0 million associated with these milestones was included in the transaction price and allocated to performance obligations under the related agreements, of which $171.2 million was recognized as revenue during the year ended December 31, 2019 from performance obligations satisfied or partially satisfied as of December 31, 2019.

The principal consideration for our determination that performing procedures relating to revenue recognition – estimated variable consideration associated with milestones related to the United States NDA submission and European MAA submission is a critical audit matter is there was significant judgment by management in determining that these milestones became probable of being achieved.

This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the judgments made by management.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Deferred Tax Asset – Valuation of Intellectual Property Rights

As described in Notes 2 and 13 to the consolidated financial statements, in 2020, the Company transferred certain intellectual property rights relating to its Chinese business.

Management estimated the fair value of the intellectual property rights using the excess earning method.

The transaction resulted in the recognition of a deferred tax asset in the amount of $78.7 million.

The establishment of a deferred tax asset from the intra-entity transfer of intangible assets required management to make significant estimates and assumptions to determine the fair value of intellectual property rights transferred which include, but are not limited to, management’s expectations of discount rate, revenue volume and price.

The principal considerations for our determination that performing procedures relating to the valuation of intellectual property rights is a critical audit matter are the significant judgment by management when estimating the fair value of the intellectual property rights, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to discount rate, revenue volume and price.

Also, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including the control over the milestone probability assessment performed by management.

These procedures also included, among others, reading the collaboration agreements and testing management’s process for determining the acceptance of the United States NDA submission and the European MAA submission were probable.

These procedures included testing the effectiveness of controls over management’s valuation of intellectual property rights .

These procedures also included, among others (i) reading the intellectual property license agreement and (ii) testing management’s process for estimating the fair value of intellectual property rights, which included (a) evaluating the appropriateness of the valuation method used, (b) testing the completeness, accuracy, and relevance of the data used in the method, and (c) evaluating the reasonableness of management’s significant assumptions relating to discount rate, revenue volume and price.

Evaluating the reasonableness of the revenue volume and price assumptions involved considering the current performance of the business and evaluating management’s forecasts.

Professionals with specialized skill and knowledge were used to assist in the evaluation of valuation method and discount rate used to value the intellectual property rights.

Revenue Recognition – Estimates in Variable Consideration for Active Pharmaceutical Ingredients Sales

As described in Notes 2 and 4 to the consolidated financial statements, the Company recognizes revenue from sales to its collaboration partners for the shipment of bulk drug product.

The revenue from customers under these arrangements are accounted for as variable consideration, estimated at the time of sale using the expected value method.

Revenue recognized under these arrangements was $8.9 million for the year ended December 31, 2020.

Management applied significant judgment in estimating the variable consideration, which involved the use of significant assumptions such as (i) the future list price adjustments set by the Japanese Ministry of Health, Labour and Welfare, (ii) product mix, and (iii) timing of processing of active pharmaceutical ingredient (API) into bulk drug product.

The principal considerations for our determination that performing procedures relating to estimates in variable consideration for active pharmaceutical ingredients sales is a critical audit matter are the significant judgment by management in estimating the variable consideration, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the future list price adjustments, product mix and timing of processing of API into bulk drug product.

As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, a material weakness was identified related to this matter.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, testing management’s process for estimating the variable consideration, which included (a) evaluating the appropriateness of the expected value method, (b) evaluating the reasonableness of management’s significant assumptions related to future list price adjustments, product mix, and timing of processing of API into bulk drug product, and (c) testing the completeness, accuracy, and relevance of underlying data.

Evaluating management’s assumption related to future list price adjustments involved evaluating whether the assumption was reasonable considering historical price list changes and industry data.

Evaluating management’s assumptions related to product mix and timing of processing of API into bulk drug product involved evaluating whether the assumptions were reasonable considering current and historical manufacturing levels and mix and other external data.

/s/ PricewaterhouseCoopers LLP

11 unchanged sentences

Accounts receivable, net ($ 4,127 and $ 4,845 from a related party)

Prepaid expenses and other current assets ($ 125,210 and $ 0 from a related party)

Prepaid expenses and other current assets ($ 889 and $ 125,210 from

related parties)

Total current assets

3 unchanged sentences

Finance lease right-of-use assets

Equity method investment in unconsolidated variable interest entity

Liabilities, stockholders’ equity and non-controlling interests

Current liabilities:

Accounts payable

Accounts payable ($ 1,118 and $ 0 to a related party)

Accrued and other current liabilities ($ 24 and $ 36,883 to a related party)

Deferred revenue

Deferred revenue ($ 2,907 and $ 249 to a related party)

Finance lease liabilities, current

Total current liabilities

Long-term portion of lease obligations

Product development obligations

Deferred rent

Deferred revenue, net of current

Deferred revenue, net of current ($ 4,636 and $ 125 to a related party)

Finance lease liabilities, non-current

1 unchanged sentence

Total liabilities

Commitments and Contingencies

Commitments and Contingencies (Note 9)

Stockholders’ equity:

2 unchanged sentences

no shares issued

and outstanding at December 31, 2019 and December 31, 2018

and outstanding at December 31, 2020 and 2019

Common stock, $ 0.01 par value;

225,000 shares authorized at December 31,

and December 31, 2018;

2020 and 2019;

91,441 and 87,657 shares issued and outstanding at

December 31, 2019 and December 31, 2018

December 31, 2020 and 2019

Additional paid-in capital

13 unchanged sentences

and $ 20,903 from a related party)

Product revenue, net (includes $( 36,324 ), $ 64,776

Product revenue, net

Drug product revenue (includes $ 4,281 , $( 36,324 )

and $ 64,776 from a related party)

8 unchanged sentences

Interest expense

Investment loss in unconsolidated variable interest entity

Interest income and other, net

10 unchanged sentences

Years Ended December 31,

Net income (loss)

Other comprehensive income (loss):

Foreign currency translation adjustments

Foreign currency translation adjustments (Note 2)

Available-for-sale investments:

Unrealized gain (loss) on investments, net of tax effect

Reclassification from accumulated other comprehensive loss

Net change in unrealized gain on available-for-sale

Other comprehensive income (loss), net of taxes

Comprehensive loss

Comprehensive income (loss)

The accompanying notes are an integral part of these Consolidated Financial Statements.

4 unchanged sentences

Balance at December 31,

Change in unrealized gain or

loss on investments

Foreign currency translation

Follow-on Offerings, net of

underwriting discounts,

commission and issuance

Shares issued from stock

plans, net of payroll taxes

Stock-based compensation

Balance at December 31,

Impact of change in

accounting principle upon

adoption of ASU 2016-01

Change in unrealized gain or

loss on investments

Foreign currency translation

Adjustment to issuance costs

for Follow-on Offerings

accounting principle

upon adoption of

ASU 2016-01 (Note 2)

Change in unrealized gain

or loss on investments

Foreign currency

translation adjustments

Adjustment to issuance

costs for Follow-on

Shares issued from stock

plans, net of payroll taxes

plans, net of payroll

Stock-based compensation

3 unchanged sentences

Impact of change in

accounting principle upon

adoption of ASU 2018-02

Change in unrealized gain or

loss on investments

Foreign currency translation

accounting principle

upon adoption of ASU

2018-02 (Note 2)

Change in unrealized gain

or loss on investments

Foreign currency

translation adjustments

Shares issued from stock

plans, net of payroll taxes

plans, net of payroll

Warrants exercised

1 unchanged sentence

Balance at December 31,

Change in unrealized gain

or loss on investments

Foreign currency

translation adjustments

Shares issued from stock

plans, net of payroll

Stock-based compensation

Balance at December 31,

The accompanying notes are an integral part of these Consolidated Financial Statements.

4 unchanged sentences

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Amortization of finance lease right-of-use assets

Net amortization (accretion) of premium (discount) on investments

Unrealized loss (gain) on cash equivalents and short-term equity investments

Net accretion of discount on investments

Unrealized loss (gain) on equity investments

Investment loss in unconsolidated variable interest entity

Loss (gain) on disposal of property and equipment

1 unchanged sentence

Realized foreign currency gain

Realized gain on sales of available-for-sale securities

Realized loss (gain) on sales of available-for-sale securities

Changes in operating assets and liabilities:

Accounts receivable, net ($ 718 , $ 42,365 and $( 43,486 ) from a related party)

Prepaid expenses and other current assets ($( 125,210 ), $ 0 and

$ 0 from a related party)

Accounts payable

Prepaid expenses and other current assets ($ 124,321 , $( 125,210 )

and $ 0 from a related party)

Accounts payable ($ 1,118 , $ 0 and $ 0 from a related party)

Accrued and other liabilities ($( 36,859 ), $ 36,439 and $ 172 from a related party)

Deferred revenue

Deferred revenue ($ 7,169 , $( 3,137 ) and $( 3,908 ) from a related party)

Lease obligations

1 unchanged sentence

Other long-term liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

Investing activities

Purchases of property and equipment

Payment made for investment in unconsolidated variable interest entity

Proceeds from equity transfer of unconsolidated variable interest entity

Proceeds from sale of property and equipment

8 unchanged sentences

Repayments of lease obligations

Proceeds from follow-on offerings, net of underwriting discounts and

commission costs

Cash paid for payroll taxes on restricted stock unit releases

Proceeds from issuance of common stock

Payments of deferred offering costs

Net cash provided by (used in) financing activities

12 unchanged sentences

FibroGen, Inc.

(“FibroGen” or the “Company”) was incorporated in 1993 in Delaware and are headquartered in San Francisco, California, with subsidiary offices in Beijing and Shanghai, People’s Republic of China (“China”).

(“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 developing and commercializing a pipeline of first-in-class therapeutics.

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

Roxadustat, FibroGen’s most advanced product, is an oral small molecule inhibitor of HIF prolyl hydroxylase (“HIF-PH”) activity that has received marketing authorization in China for the treatment of anemia caused by chronic kidney disease (“CKD”) in dialysis and non-dialysis patients.

In September 2019, roxadustat (Evrenzo ® ) was approved in Japan for the treatment of anemia associated with CKD in dialysis-dependent patients.

In January 2020, Astellas Pharma Inc.

(“Astellas”) submitted a supplemental New Drug Application (“NDA”) in Japan for the treatment of anemia in non-dialysis CKD patients.

The Company’s U.S.

NDA filing for roxadustat for the treatment of anemia patients with dialysis-dependent CKD and non-dialysis-dependent CKD was accepted by the U.S.

Food and Drug Administration (“FDA”) in February, 2020, and Astellas is in the process of preparing a Marketing Authorization Application (“MAA”) for submission to the European Medicines Agency (“EMA”) in the second quarter of 2020 for the same indications.

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

Roxadustat, FibroGen’s most advanced product, is an oral small molecule inhibitor of HIF prolyl hydroxylase activity that has received marketing authorization in China (tradename:

爱瑞卓 ® ) for the treatment of anemia caused by chronic kidney disease (“CKD”) in dialysis and non-dialysis patients.

EVRENZO® (roxadustat) is also approved in Japan and Chile for the treatment of anemia associated with CKD in dialysis and non-dialysis patients.

The Company’s New Drug Application (“NDA”) filing in the United States (“U.S.”) for roxadustat for the treatment of anemia in dialysis and non-dialysis CKD patients was submitted in December 2019 to the U.S.

Food and Drug Administration (“FDA”).

In December 2020, the FDA extended the review period of the NDA by three months for FibroGen to submit additional analyses of existing roxadustat clinical data, and set a new Prescription Drug User Fee Act goal date of March 20, 2021.

On March 1, 2021, the FDA informed us that the Cardiovascular and Renal Drugs Advisory Committee will hold an advisory committee meeting to review the NDA for roxadustat.

The date of the advisory committee meeting has not been set.

As a result of this communication, we will not receive an approval decision by the PDUFA goal date.

In Europe, the Marketing Authorization Application (“MAA”) filing for roxadustat for the treatment of anemia in dialysis and non-dialysis CKD patients was accepted for regulatory review by the European Medicines Agency (“EMA”) in May 2020 and Astellas expects an approval decision by the EMA mid-2021.

Roxadustat is in Phase 3 clinical development in the U.S.

and Europe and in Phase 2/3 development in China for anemia associated with myelodysplastic syndromes (“MDS”).

and Europe and in Phase 3 development in China for anemia associated with myelodysplastic syndromes.

Roxadustat is in Phase 2 clinical development for chemotherapy-induced anemia.

Pamrevlumab, an anti-CTGF human monoclonal antibody, is in Phase 3 clinical development for the treatment of both idiopathic pulmonary fibrosis (“IPF”) and pancreatic cancer.

Pamrevlumab is also currently in a Phase 2 trial for Duchenne muscular dystrophy (“DMD”).

Pamrevlumab, an anti-CTGF human monoclonal antibody, is in Phase 3 clinical development for the treatment of idiopathic pulmonary fibrosis, locally advanced unresectable pancreatic cancer and Duchenne muscular dystrophy.

Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S.

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

(“FibroGen China”).

(“FibroGen Cayman”).

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

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

The Company operates in one segment — the discovery, development and commercialization of novel therapeutics to treat serious unmet medical needs.

Variable Interest Entity

Under the Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”), when the Company obtains an economic interest in an entity, it evaluates the entity to determine if it should be deemed a variable interest entity (“VIE”), and, if so, whether the Company is the primary beneficiary and is therefore required to consolidate the VIE, based on significant judgment whether the Company (i) has the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

On an ongoing basis, the Company re-evaluates the VIE assessment based on potential changes in facts and circumstances, including but not limited to, the shareholder loans to the entity and the execution of any future significant agreements between the entity and its shareholders and/or other third parties.

Foreign Currency Translation

The reporting currency of the Company and its subsidiaries is the United States (“U.S.”) dollar.

The reporting currency of the Company and its subsidiaries is the U.S.

The functional currency of FibroGen Europe is the Euro.

3 unchanged sentences

Resulting foreign currency translation adjustments are recorded directly in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity.

Prior to April 1, 2020, the functional currency of the Company’s subsidiary, FibroGen (China) Medical Technology Development Co., Ltd.

(“FibroGen Beijing”), was the U.S.

Accordingly, monetary assets and liabilities of FibroGen Beijing in the currencies other than U.S.

dollar were remeasured using exchange rates in effect at the end of the period.

Revenues and costs in its local currency, Renminbi Yuan (“CNY”), were remeasured using average exchange rates for the period, except for costs related to those balance sheet items that were remeasured using historical exchange rates.

The resulting remeasurement gains and losses were included within interest income and other, net in the consolidated statements of operations as incurred.

On April 1, 2020, FibroGen Beijing adopted CNY as its functional currency based on reassessment of the primary economic operational environment of FibroGen Beijing that is mainly associated with its growing manufacturing and product sales activities conducted in CNY.

As such, monetary assets and liabilities of FibroGen Beijing in currencies other than CNY are remeasured using exchange rates in effect at the end of the period.

The assets and liabilities of FibroGen Beijing are translated to U.S.

dollars at exchange rates in effect at the balance sheet date.

All income statement accounts are translated at monthly average exchange rates.

Resulting foreign currency translation adjustments are recorded directly in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity.

This change in FibroGen Beijing’s functional currency was accounted for prospectively from April 1, 2020, and the prior consolidated financial statements were not restated.

The related currency translation adjustment was $ 1.3 million at April 1, 2020 upon adoption.

The functional currency of FibroGen, Inc.

9 unchanged sentences

Changes in facts and circumstances may alter such estimates and actual results could differ from those estimates.

Concentration of Credit Risk and Other Risks and Uncertainties

Concentration of Credit Risk

The Company is subject to risks associated with concentration of credit for cash and cash equivalents.

Outside of short-term operating needs, the majority of cash on hand is invested in US treasury instruments.

Outside of short-term operating needs, the majority of cash on hand is invested in U.S.

treasuries and money market funds.

Any remaining cash is deposited with major financial institutions in the U.S., Finland, China and the Cayman Islands.

5 unchanged sentences

AstraZeneca AB (“AstraZeneca”)

The Company started selling roxadustat in China since late 2019 through a growing number of pharmaceutical distributors located in China.

As of December 31, 2019, the aggregate accounts receivable from distributors was immaterial.

As of December 31, 2020, along with the growing roxadustat sales in China, the aggregate accounts receivable from distributors represented 64 % of the consolidated accounts receivable, with no material balance from any individual distributor.

Other Risks and Uncertainties

The Company’s business is subject to risks and uncertainties, including those related to COVID-19 and the related shelter-in-place, stay-at-home and other similar governmental orders issued in response to the COVID-19 pandemic.

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, rapid technological change, the results of clinical trials and the achievement of milestones, market acceptance of the Company’s product candidates, competition from other products and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals.

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, rapid technological change, obtaining second source suppliers, regulatory approval from the FDA or other regulatory authorities, the results of clinical trials and the achievement of milestones, market acceptance of the Company’s product candidates, competition from other products and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals.

Starting in the first quarter of 2020, the Company experienced slower enrollment in its clinical trials due to the interruption caused by COVID-19 in the worldwide healthcare system.

The future impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict.

The COVID-19 pandemic may continue to affect enrollment in and initiation of the Company’s clinical trials, and could affect the Company’s supply chain if further social distancing and other business restrictions are put in place by various government entities, particularly in China and the U.S.

COVID-19 may affect the health of the Company’s employees limiting the Company’s productivity.

The COVID-19 pandemic may also impact the market for the Company’s products and product candidates in the future, affecting sales of the Company’s products.

Such possible risks and uncertain impacts from the COVID-19 pandemic could have a material adverse effect on the Company’s drug development, commercialization revenues, and other portions of its business, and in particular, could impact the Company’s assumptions of accounts receivable collectability, fair value measurements of investments, liquidity, and development costs.

The extent of the pandemic’s effect on the Company’s operational and financial performance will depend in large part on future developments, particularly with respect to the scope and severity of the pandemic, governmental restrictions put in place to fight the pandemic, and the development of vaccines and treatments for COVID-19.

Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, the Company is unable to estimate the likely impact of the COVID-19 pandemic on its future operations.

Cash, Cash Equivalents and Restricted Time Deposits

5 unchanged sentences

in the Company’s foreign subsidiaries to be used primarily for the Company’s China operations.

As of December 31, 2019, the Company’s investments consist of US treasuries, diversified bond funds, marketable equity investments, a term deposit and a certificate of deposit.

As of December 31, 2020, the Company’s investments consist of diversified bond funds and marketable equity investments.

Those investments with original maturities of greater than three months and remaining maturities of less than 12 months (365 days) are considered short-term investments.

Those investments with maturities greater than 12 months (365 days) are considered long-term investments.

Those investments with maturities greater than 12 months (365 days) from the balance sheet date are considered long-term investments.

When such investments are held, the Company’s investments classified as available-for-sale are recorded at fair value based upon quoted market prices at period end.

7 unchanged sentences

Fair Value of Financial Instruments

Carrying amounts of certain of the Company’s financial instruments including cash equivalents, investments, receivables, accounts payable and accrued liabilities approximate fair value (refer to Note 4).

Inventories are stated at the lower of cost or net realizable value.

The cost of inventories is determined using full absorption and standard costing, which approximates cost based on a first-in, first-out method.

Trade accounts receivable

The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts.

The Company makes estimates of expected credit losses for the allowance for doubtful accounts by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, current economic and regulatory conditions that may affect a customer’s ability to pay, and estimates of expected future losses.

The Company’s bad debt expense for the years ended December 31, 2020, 2019 and 2018 and the allowance for doubtful accounts as of December 31, 2020 and 2019 were immaterial.

Credit losses – Available-for-sale debt securities

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

For debt securities in an unrealized loss position, the Company first considers its intent to sell, or whether it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis.

If either of these criteria are met, the amortized cost basis of such debt securities is written down to fair value through interest and other, net.

For debt securities in an unrealized loss position that do not meet the aforementioned criteria, the Company assesses whether the decline in the fair value of such debt securities has resulted from credit losses or other factors.

The Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the securities, among other factors.

If this assessment indicates that a credit loss may exist, the Company then compares the present value of cash flows expected to be collected from such securities to their amortized cost basis.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded through interest and other, net, limited by the amount that the fair value is less than the amortized cost basis.

Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as provision for, or reversal of, credit loss expense.

Losses are charged against the allowance when the Company believes that an available-for-sale security is confirmed uncollectable or when either of the criteria regarding intent or requirement to sell is met.

Inventories are stated at the lower of cost or net realizable value, on a first-in, first-out, or FIFO, basis.

The cost of the Company’s inventories in China is determined using full absorption and standard costing method.

The Company reviews the standard cost of raw materials, work-in-process and finished goods annually and more often as appropriate to ensure that its inventories approximate current actual cost.

The cost of the Company’s inventories in the U.S.

uses actual costs to determine its cost basis.

The cost of inventories includes direct material cost, direct labor and manufacturing overhead.

When the technical feasibility of the Company’s future commercialization is considered probable and the future economic benefit is expected to be realized, based on management’s judgment, the Company capitalizes pre-launch inventory costs prior to regulatory approval.

A number of factors are considered, including the status in the validation process in significant jurisdictions, regulatory application and approval process, and terms and condition for future sale of such inventory or future alternative use.

The pre-launch inventory cost includes purchase cost of raw materials, cost paid to contract manufacturers for inventory manufacturing, freight and custom charges, and certain direct internal labor and overhead expenses.

The Company periodically reviews its inventories to identify obsolete, slow-moving, excess or otherwise unsaleable items.

If obsolete, excess or unsaleable items are observed and there are no alternate uses for the inventory, an inventory valuation reserve is recorded through a charge to cost of goods sold on the Company’s consolidated statements of operations.

If obsolete, excess or unsaleable items are observed and there are no alternate uses for the inventory , an inventory valuation adjustment is recorded through a charge to cost of goods sold on the Company’s consolidated statements of operations.

The establishment of inventory valuation reserves, together with the calculation of the amount of such reserves, requires judgment including consideration of many factors, such as estimates of future product demand and product expiration period, among others.

24 unchanged sentences

Based on this evaluation, the Company believes that, as of each of the balance sheet dates presented, no ne of the Company’s long-lived assets were impaired.

The Company’s impairment of long-lived assets for the years ended December 31, 2020, 2019 and 2018 were immaterial.

Revenue Recognition

Revenues under collaboration agreements

Substantially all of the Company’s revenues to date have been generated from its collaboration agreements.

The Company’s collaboration agreements include multiple performance obligations comprised of promised services, or bundles of services, that are distinct.

Services that are not distinct are combined with other services in the agreement until they form a distinct bundle of services.

The Company’s process for identifying performance obligations and an enumeration of each obligation for each agreement is outlined in Note 3 “Collaboration Agreements.” Determining the performance obligations within a collaboration agreement often involves significant judgment and is specific to the facts and circumstances contained in each agreement.

The Company’s process for identifying performance obligations and an enumeration of each obligation for each agreement is outlined in Note 4, Collaboration Agreements and Revenues .

Determining the performance obligations within a collaboration agreement often involves significant judgment and is specific to the facts and circumstances contained in each agreement.

The Company has identified the following material promises under its collaboration agreements:

(1) license of FibroGen technology, (2) the performance of co-development services, including manufacturing of clinical supplies and other services during the development period, and (3) manufacture of commercial supply.

The evaluation as to whether these promises are distinct, and therefore represent separate performance obligations, is described in more details in Note 3 “Collaboration Agreements.”

The evaluation as to whether these promises are distinct, and therefore represent separate performance obligations, is described in more details in Note 4, Collaboration Agreements and Revenues .

For revenue recognition purposes, the Company determines that the term of its collaboration agreements begin on the effective date and ends upon the completion of all performance obligations contained in the agreements.

7 unchanged sentences

payments from sales of active pharmaceutical ingredient (“API”);

and royalties on net sales of licensed products.

payments from sales of bulk drug product and royalties on net sales of licensed products.

Upfront license fees are non-contingent and non-refundable in nature and are included in the transaction price at the point when the license fees become due to the Company.

14 unchanged sentences

Significant judgment may be required in determining whether a performance obligation is distinct, determining the amount of variable consideration to be included in the transaction price, and estimating the SSP of each performance obligation.

An enumeration of the Company’s significant judgments is outlined in Note 3 “Collaboration Agreements.”

An enumeration of the Company’s significant judgments is outlined in Note 4, Collaboration Agreements and Revenues .

For each performance obligation identified within an arrangement, the Company determines the period over which the promised services are transferred and the performance obligation is satisfied.

Service revenue is recognized over time based on progress toward complete satisfaction of the performance obligation.

The Company uses an input method to measure progress toward the satisfaction of co-development services and certain other related performance obligations, which is based on costs of labor hours or full time equivalents and out-of-pocket expenses incurred relative to total expected costs to be incurred.

The Company believes this measure of progress provides a faithful depiction of the transfer of services because other measures do not measure as accurately how the Company transfers its performance obligations to its collaboration partners.

API product revenue

Product revenue in 2018 consisted of sales of commercial-grade API used in support of pre-commercial validation work.

In 2018, the Company recorded revenue from commercial-grade API sales to Astellas based on a transaction price that was subject to potential future adjustments, which represented a form of variable consideration.

The Company evaluated the latest available facts and circumstances in 2018, including listed prices of comparable drug products in Japan and historical bulk drug product manufacturing yields and costs, to determine whether any adjustments to the estimated transaction price was necessary.

As of December 31, 2018, no new facts or circumstances were available to warrant an adjustment to the estimated transaction price.

With respect to these sales in 2018, a change in estimated variable consideration occurred in 2019 at the time the actual listed price for roxadustat was issued by the Japanese Ministry of Health, Labour and Welfare, which resulted in a total difference of $ 36.3 million between the estimated and the actual listed price and yield from the manufacture of bulk product tablets.

Drug product revenue, net

During 2019, the Company started selling roxadustat in China through a number of pharmaceutical distributors located in China.

For each performance obligation satisfied over time, the Company assesses the proper method to be used for revenue recognition, either an input method to measure progress toward the satisfaction of services or an output method of determining the progress of completion of performance obligation.

Drug product revenue

Drug product revenue includes commercial-grade API or bulk drug product sales to AstraZeneca and Astellas, and is recognized when the Company fulfills the shipment obligations.

The drug product revenue is accounted for as variable consideration, estimated at the time of sale using the expected value method.

The Company applies significant judgment in estimating the variable consideration, which involves the use of significant assumptions such as the future list price adjustments set by the Japanese Ministry of Health, Labour and Welfare, product mix, and timing of processing of API into bulk drug product.

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

Under this amendment, FibroGen would continue to manufacture and supply roxadustat API to Astellas for the roxadustat commercial launch in Japan.

The drug product revenue represents variable consideration and is estimated based on the quantity of product shipped, actual listed price for roxadustat issued by the Japanese Ministry of Health, Labour and Welfare and possible future changes to the listed price, adjusted for the timing of and estimated bulk product strength mix intended to be manufactured by Astellas, estimated cost to convert the API to bulk drug product tablets, and estimated yield from the manufacture of bulk product tablets, among others.

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

The drug product revenue amount represents variable consideration and was estimated based on the quantity of product shipped and an estimated price.

The estimated price is based on the contractual transfer price percentage applied on the estimated weighted average net sales price per strength, which is estimated to be realized by Astellas from the end sale of roxadustat in its approved territories.

In 2020, the Company entered into Commercial Supply Agreement under the U.S./RoW Agreement with AstraZeneca 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 drug product revenue amount represents variable consideration and was estimated based on the quantity of product shipped and an estimated price.

The estimated price is based on the contractual transfer price percentage applied on the estimated weighted average net sales price per strength, which is estimated to be realized by AstraZeneca from the end sale of roxadustat in its approved territories.

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.

Estimating variable consideration and the related constraint requires the use of significant management judgment.

The Company reviews new information that may affect its variable consideration estimate at every reporting period and record revenue adjustment, if certain and material.

Actual amounts of consideration ultimately received in the future may differ from the Company’s estimates, for which the Company will adjust these estimates and affect the drug product revenue in the period such variances become known.

The amount constrained as of December 31, 2020 was $ 6.0 million related to the drug product shipment to Astellas under the Europe Agreement in the fourth quarter of 2020.

As each of the Company’s collaboration agreements provide for annual true up to the considerations paid for its commercial supplies, the Company will re-evaluate the transaction price in each reporting period and record adjustment to revenue as uncertain events are resolved or other changes in circumstances occur.

Product revenue, net

The Company sells roxadustat in China through a number of pharmaceutical distributors located in China.

These pharmaceutical distributors are the Company’s customers.

3 unchanged sentences

Distributors bear inventory risk once they receive and accept the product.

Product revenue is recognized when control of the promised good is transferred to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the product.

The period between the transfer control of promised goods and when the Company receives payment is based on a general 60-day payment term.

The period between the transfer of control of the promised goods and when the Company receives payment is based on a general 60-day payment term.

As such, product revenue is not adjusted for the effects of a significant financing component.

The Company established a bad debt allowance based on its judgment to consider factors such as the age of the receivables.

Bad debt expense is included in selling, general and administrative expenses on the consolidated statements of operations.

There was no bad debt allowance provided as of December 31, 2019.

Product drug revenue is recorded at the net sales prices (transaction price) which includes the following estimates of variable consideration:

Product revenue is recorded at the net sales prices (transaction price) which includes the following estimates of variable consideration:

Price adjustment:

In December 2019, China’s NHSA released price guidance for roxadustat under NRDL, effective January 1, 2020.

In December 2019, China’s National Healthcare Security Administration released price guidance for roxadustat under the National Reimbursement Drug List (“NRDL”), effective January 1, 2020.

Any channel inventories as of January 1, 2020 that had not been sold to hospitals by distributors, or to patients by hospitals, were eligible for a price adjustment under the price protection.

3 unchanged sentences

The contractual sales rebate is calculated based on the stated percentage of gross sales by each distributor in the distribution agreement entered between FibroGen and each distributor.

The contractual sales rebate is accrued at the point of sale to the distributor, and applied to future sales orders made by the distributor under the Company’s discretion;

The contractual sales rebate is recorded as a reduction to revenue at the point of sale to the distributor;

Key account hospital sales rebate :

An additional sales rebate is provided to a distributor for product sold to key account hospitals as a percentage of gross sales made by the distributor to eligible hospitals.

This additional rebate is accrued at the point of sale to the distributor and applied to future sales orders made by the distributor under the Company’s discretion;

This additional rebate is recorded as a reduction to revenue at the point of sale to the distributor;

Transfer fee discount :

The transfer fee discount is offered to a distributor who has its downstream distributors supply to eligible hospitals.

This discount is calculated based on a percentage of gross sales made to the downstream distributors, and accrued at the point of sale to the distributor;

This discount is calculated based on a percentage of gross sales made to the downstream distributors, and recorded as a reduction to revenue as incurred;

Sales return :

Distributors can request to return product to the Company only due to quality issues and for product within one year of its expiration date.

The Company, at its sole discretion, decides whether to accept such return request.

The sales return allowance provided as of December 31, 2019 was immaterial;

Distributors can request to return product to the Company only due to quality issues or for product purchased within one year prior to the product’s expiration date ;

Non-key account hospital listing award:

A one-time fixed-amount award is offered to a distributor who successfully lists the product with an eligible hospital, and meets the sales volume and timing requirements.

The non-key account hospital listing award is accrued when the distributor meets eligibility requirements, and applied against future sales orders made by the distributor.

The Company considers this particular award to be a material right within the definitions of ASC 606 and therefore have treated it as a separate performance obligation.

The above allowances are recorded as reductions of gross accounts receivable from the distributor in the same period that the related revenue is recorded, with the exception of the non-key account hospital listing award, which is accrued when the distributor meets the eligibility requirements.

The calculation of such allowances are based on gross sales to the distributor, or estimated utilizing best available information from the distributor, maximum known exposures and other available information including estimated channel inventory levels and estimated sales made by the distributor to hospitals, which involve a substantial degree of judgment.

A one-time fixed-amount award is offered to a distributor who successfully lists the product with an eligible hospital, and who meets certain requirements.

The Company considers this particular award to be an upfront payment to a customer within the definitions of ASC 606.

The non-key account hospital listing award is capitalized when the distributor meets eligibility requirements, and amortized as reduction to product revenue over future sales orders made by the distributor until exhausted.

The calculation of the above variable consideration is based on gross sales to the distributor, or estimated utilizing best available information from the distributor, maximum known exposures and other available information including estimated channel inventory levels and estimated sales made by the distributor to hospitals, which involve a substantial degree of judgment.

The above rebates and discounts all together are eligible to be applied against the distributor’s future sales order, limited to certain maximums until such rebates and discounts are exhausted.

These rebates and discounts are recorded as contract liabilities at the time they become eligible and in the same period that the related revenue is recorded.

Due to the distributor’s legal right to offset, at each balance sheet date, the liability for rebates and discounts are presented as reductions of 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 distributor’s legal right of offset is calculated at the individual distributor level.

Research and Development Expenses

Research and development expenses consist of independent research and development costs and the gross amount of costs associated with work performed under collaboration agreements.

Research and development costs include employee-related expenses, expenses incurred under agreements with clinical research organizations (“CROs”), other clinical and preclinical costs and allocated direct and indirect overhead costs, such as facilities costs, information technology costs and other overhead.

Research and development costs include employee-related expenses, 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.

All research and development costs are expensed as incurred.

7 unchanged sentences

The Company utilizes the asset and liability method of accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for expected future consequences of temporary differences between the financial reporting and income tax bases of assets and liabilities using enacted tax rates.

Management makes estimates, assumptions and judgments to determine the Company’s provision for income taxes and also for deferred tax assets and liabilities, and any valuation allowances recorded against the Company’s deferred tax assets.

Management makes estimates, assumptions and judgments to determine the Company’s provision for income taxes and for deferred tax assets and liabilities, and any valuation allowances recorded against the Company’s deferred tax assets.

The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery is not likely, the Company must establish a valuation allowance.

4 unchanged sentences

Actual future operating results and the underlying amount and type of income could differ materially from the Company’s estimates, assumptions and judgments thereby impacting the Company’s financial position and results of operations.

During 2020, the Company transferred certain intellectual property rights relating to its Chinese business between its wholly owned subsidiaries that are based in different tax jurisdictions.

Refer to Note 13, Income Taxes , for more information.

The establishment of a deferred tax asset from the intra-entity transfer of intangible assets required the Company to make significant estimates and assumptions to determine the fair value of intellectual property rights transferred, which include but are not limited to, its expectations of discount rate, revenue volume and price.

The accuracy of these estimates could be affected by unforeseen events or actual results, and the sustainability of the Company’s future tax benefits is dependent upon the acceptance of these valuation estimates and assumptions by the taxing authorities.

The Company has adopted ASC 740-10, Accounting for Uncertainty in Income Taxes , that prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in the Company’s income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

7 unchanged sentences

The Company believes that the fair value of stock options granted to non-employees is more reliably measured than the fair value of the services received.

As such, the fair value of the unvested portion of the options granted to non-employees is re-measured each period.

The resulting increase in value, if any, is recognized as expense during the period the related services are rendered on a straight-line basis.

The determination of the grant date fair value of options using an option pricing model is affected by the Company’s estimated Common Stock fair value and requires management to make a number of assumptions including the expected life of the option, the volatility of the underlying stock, the risk-free interest rate and expected dividends.

4 unchanged sentences

Recently Issued and Adopted Accounting Guidance

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”).

Under this guidance, an entity is required to recognize ROU assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.

This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions.

Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements (“ASU 2018-11”), which provides entities the option to initially apply ASU 2016-02 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company adopted the above guidance under ASC 842 as of January 1, 2019, using the modified retrospective transition method, through a cumulative-effect adjustment at the beginning of the first quarter of 2019.

The Company elected the optional transition method under the guidance, which allowed it to continue applying previous lease guidance (ASC 840) for the comparative prior year periods presentation in the year of adoption.

Accordingly, the Company recognized a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

In addition, the Company elected the package of transitional practical expedients permitted under the transition guidance under ASC 842, which among other things allows the Company to carry forward its historical lease classification, and not to reassess initial direct costs for any existing leases.

Meanwhile, the Company did not elect the hindsight practical expedient because it has a limited number of leases, lease terms are straightforward, and most of its lease renewals are undefined until negotiated.

In addition, the Company has elected the short-term accounting policy practical expedient and does not apply the balance sheet recognition requirements for short-term leases (excluding expenses relating to leases with a lease term of one month or less), by class of underlying asset to which the right of use relates.

The Company has not elected the non-lease components practical expedient, and therefore accounts for each lease component separately from the non-lease components.

Upon adoption of ASC 842, the Company classified its existing building leases that were previously accounted for as build-to-suit arrangements as finance leases and applied the transition guidance.

Accordingly, the Company derecognized the assets and liabilities previously recognized under ASC 840 build-to-suit guidance.

In addition, as a result of applying the transition guidance, the Company also recorded an adjustment to the accumulated depreciation of related leasehold improvements to reflect a change in estimated useful life from the building life to the shorter of the building life and remaining lease term.

Differences between the assets and liabilities derecognized were recorded to the opening balance of retained earnings.

The impacts to the select line items from the Company’s consolidated balance sheet upon adoption of the ASC 842 guidance are as follows (in thousands):

Balance Sheet Line Item

Nature of Adjustment

New Lease Guidance Adoption Adjustment

Property and equipment, net

Derecognition - build-to-suit lease assets - building shell, cost

Derecognition - build-to-suit lease assets - building shell,

accumulated depreciation

Change of useful life - leasehold improvements,

accumulated depreciation

Finance lease right-of-use assets

Recognition - finance lease ROU assets

Recognition - operating lease ROU assets

Accrued and other current liabilities

Derecognition - deferred rent, current

Derecognition - build-to-suit lease liabilities, current

Recognition - operating lease liabilities, current

Finance lease liabilities, current

Recognition - finance lease liabilities, current

Long-term portion of lease obligations

Derecognition - build-to-suit lease liabilities, non-current

Deferred rent

Derecognition - deferred rent, non-current

Finance lease liabilities, non-current

Recognition - finance lease liabilities, non-current

Other long-term liabilities

Recognition - operating lease liabilities, non-current

Stockholders’ equity

Accumulated deficit

Cumulative decrease to accumulated deficit

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

This guidance requires capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

This guidance was effective for annual reporting periods beginning after December 15, 2019, including interim periods.

The Company adopted this guidance on January 1, 2020 using the prospective method, and the adoption of this guidance did not have material impact to the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

This guidance is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

This guidance requires the measurement of financial assets with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

This guidance requires an impairment model, known as the current expected credit loss model, which is based on expected losses rather than incurred losses.

Entities are required to carry an allowance for expected credit losses for financial assets, including most debt instruments (except those carried at fair value) and trade receivables.

In November 2019, the FASB issued ASU No.

2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (“ASU 2019-11”) , which has the same effective dates and transition requirements as ASU 2016-13.

ASU 2016-13 and ASU 2019-11 were effective for annual reporting periods beginning after December 15, 2019 including interim periods.

The Company’s investment portfolio primarily consists of U.S.

Treasury bills and notes carried at fair value, which is required to follow the impairment model under Topic 326.

The Company adopted this guidance on January 1, 2020.

Based on the composition of the Company’s trade receivables and investment portfolio, economic conditions and historical credit loss activity, the adoption of this guidance did not have material impact to the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).

The Company adopted the lease guidance under ASC 842 as of January 1, 2019, using the modified retrospective transition method, through a cumulative-effect adjustment.

The adoption of this guidance resulted in a reduction of $ 8.7 million to the Company’s accumulated deficit and also impacted various balance sheet line items in its consolidated balance sheet as of January 1, 2019 upon adoption.

The adoption of this guidance did not have a material impact to the Company’s consolidated statement of operations or consolidated statement of cash flows for the year ended December 31, 2019.

1 unchanged sentence

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

This guidance allows for the reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects arising from the reduction of the U.S.

federal statutory income tax rate from 35 % to 21 %.

This guidance was effective for annual reporting periods beginning after December 15, 2018, including interim periods.

The Company adopted this guidance on January 1, 2019 using the modified retrospective approach.

The impacts, based on the aggregate portfolio approach, to the Company’s accumulated other comprehensive loss and accumulated deficit upon adoption of this guidance are as follows (in thousands):

Comprehensive Loss

Accumulated Deficit

Balance at December 31, 2018

Impact of change in accounting principle

upon adoption of ASU 2018-02

Opening balance as of January 1, 2019

The Company adopted this guidance on January 1, 2019 using the modified retrospective approach, with a reduction of $ 0.6 million to its accumulated other comprehensive loss and an increase of $ 0.6 million to its accumulated deficit as of January 1, 2019 upon adoption.

The adoption of this guidance had no impact to the Company’s consolidated statement of operations or consolidated statement of cash flows for the year ended December 31, 2019.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting.

This guidance expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees.

The guidance also specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards.

This guidance was effective for annual reporting periods beginning after December 15, 2018, including interim periods.

The Company adopted this guidance on January 1, 2019, and the adoption of this guidance had no impact to the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10) .

The Company adopted this guidance as of January 1, 2018 using the modified retrospective approach.

The impacts to the Company’s accumulated other comprehensive loss and accumulated deficit upon adoption of this guidance are as follows (in thousands):

Comprehensive Loss

Accumulated Deficit

Balance at December 31, 2017

Impact of change in accounting principle

upon adoption of ASU 2016-01

Opening balance as of January 1, 2018

The Company adopted this guidance as of January 1, 2018 using the modified retrospective approach, with an increase of $ 1.3 million to its accumulated other comprehensive loss and a reduction of $ 1.3 million to its accumulated deficit as of January 1, 2018 upon adoption.

The adoption of this guidance had no impact to the Company’s consolidated statement of cash flows for the year ended December 31, 2018.

Recently Issued Accounting Guidance Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020 - 04 ” ) , which provides companies with optional financial reporting alternatives to reduce the cost and complexity associated with the accounting for contracts and hedging relationships affected by reference rate reform.

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

Subsequently in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope , which clarifies ASU 2020-04 and provides certain optional expedients that allow derivative instruments impacted by changes in the interest rate used for margining, discounting or contract price alignment to qualify for certain optional relief.

ASU 2021-01 is effective in the same timeframe as ASU 2020-04.

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

The Company has certain lease arrangements that are linked to LIBOR.

The Company is in the process of evaluating options for transitioning away from LIBOR and expects to complete by the time LIBOR is phased out.

The Company did not elect to apply any of the expedients or exceptions as of and for the year ended December 31, 2020 and is currently evaluating the impact on its consolidated financial statements and related disclosures upon adoption of this guidance.

In December 2019, the FASB issued ASU No.

4 unchanged sentences

The Company does not plan to early adopt this guidance and does not anticipate a material impact to its consolidated financial statements upon adoption of this guidance.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

This guidance requires capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

This guidance should be applied either retrospectively or prospectively, and is effective for annual reporting periods beginning after December 15, 2019 including interim periods, with early adoption permitted.

The Company will adopt this guidance on January 1, 2020 and does not anticipate a material impact to its consolidated financial statements upon adoption of this guidance.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

This guidance requires an impairment model, known as the current expected credit loss model, which is based on expected losses rather than incurred losses.

Entities are required to carry an allowance for expected credit losses for financial assets, including most debt instruments (except those carried at fair value) and trade receivables.

Available-for-sale debt securities are scoped out of this guidance.

This guidance is effective for annual reporting periods beginning after December 15, 2019 including interim periods.

The Company’s investment portfolio primarily consists of U.S.

Treasury bills and notes carried at fair value.

Further, the Company’s trade receivables do not have abnormally long terms and the Company has never written off trade receivables.

Accordingly, the Company has concluded that the adoption of this guidance on January 1, 2020 will not have a material impact on the Company’s consolidated financial statements.

Acquisition and Variable Interest Entity

On July 8, 2020, FibroGen Cayman, FibroGen Beijing, and FibroGen International (Hong Kong) Limited (collectively, “FibroGen China”) and AstraZeneca entered into an amendment, effective July 1, 2020, to the collaboration agreement for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in China (“China Agreement”), relating to the development and commercialization of roxadustat in China (the “China Amendment”).

The China Amendment provides for the establishment of a jointly owned entity that will perform roxadustat distribution, as well as conduct sales and marketing through AstraZeneca.

To prepare for the establishment of this jointly owned entity, in July 2020, FibroGen Beijing acquired 100 % of the outstanding shares of Beijing Kangda Yongfu Pharmaceutical Co., LTD (“Kangda”) in exchange for cash consideration of CNY 15.0 million (approximately $ 2.1 million).

The purpose of the acquisition was to acquire a distribution license owned by Kangda for commercializing and distributing roxadustat in China.

FibroGen Beijing continues to hold all of the regulatory licenses issued by China regulatory authorities and continues to be primarily responsible for regulatory, clinical, manufacturing, medical affairs and pharmacovigilance.

The transaction costs related to the execution of the acquisition, primarily legal expenses, totaled CNY 5.0 million and were shared equally with AstraZeneca.

Therefore, the acquisition costs for FibroGen Beijing were CNY 2.5 million (approximately $ 0.4 million).

Under the ASU No.

2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business , the Company determined that the all of the value of Kangda was attributable to the acquired license, and therefore the transaction was accounted for as an asset acquisition.

The Company allocated the entire purchase price of $ 2.5 million to the acquired license that was recorded as an intangible asset, to be amortized over the duration of expected sales of roxadustat.

There was no excess consideration over the estimated fair value.

Through September 15, 2020, Kangda was consolidated as a wholly owned subsidiary of the Company.

The amortization of the license was immaterial during the short period of time before Kangda was deconsolidated upon the establishment of the jointly owned entity described below.

On September 15, 2020, FibroGen Beijing and AstraZeneca entered into an equity transfer agreement and shareholders agreement, under which FibroGen Beijing sold 48.9 % of the outstanding shares of Kangda to AstraZeneca in exchange for cash consideration of CNY 7.3 million (approximately $ 1.0 million).

Concurrently with the equity transfer, the two parties renamed Kangda to Beijing Falikang Pharmaceutical Co.

(“Falikang”).

Following the sale, FibroGen Beijing owns 51.1 % of the outstanding shares of Falikang.

The gain (loss) resulting from the equity transfer was immaterial.

In addition, based on the shareholders’ resolutions of Falikang, in December 2020, FibroGen Beijing made cash contribution of CNY 8.9 million (approximately $ 1.4 million) to Falikang, representing 51.1 % of Falikang’s registered capital of CNY 17.5 million.

AstraZeneca completed its cash contribution of 48.9 % of Falikang’s registered capital in December 2020 as well.

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

As Falikang is a distribution entity for roxadustat 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 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.

As a result, the Company accounted for its investment in Falikang under the equity method, and Falikang is not consolidated into the Company’s consolidated financial statements.

Accordingly, The Company recorded its total investments in Falikang of CNY 19.2 million (approximately $ 2.8 million), which is the total of the 51.1 % of Falikang’s equity and the acquisition costs, as an investment in unconsolidated subsidiary in other assets in the consolidated balance sheet.

In addition, the Company recognized its proportionate share of the reported profits or losses of Falikang, beginning September 15, 2020, as other income (loss) in the consolidated statement of operations, and as an adjustment to its investment in unconsolidated subsidiary in the consolidated balance sheet.

Falikang has not incurred material profit or loss to date.

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

To date, these loans have been immaterial.

The Company’s equity method investment in Falikang was as follows for the year ended December 31, 2020 (in thousands):

Ownership Percentage

December 31, 2019

Share of Net Loss

December 31, 2020

Falikang is considered as a related party to the Company.

See Note 14, Related Party Transactions , for related disclosures.

On an ongoing basis, the Company will re-evaluate the VIE assessment based on changes in facts and circumstances, including but not limited to, the shareholder loans received by Falikang and the execution of any future significant agreements between Falikang and its shareholders and/or other third parties.

The Company will assess the impairment of its equity method investment whenever events or changes in circumstances indicate that a decrease in value of the investment has occurred that is other than temporary.

Collaboration Agreements and Revenues

1 unchanged sentence

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 (“Japan Agreement”).

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

Under this agreement, Astellas paid license fees and other consideration totaling $ 40.1 million (such amounts were fully received as of February 2009).

Under the Japan Agreement, the Company is also eligible to receive from Astellas an aggregate of approximately $ 132.5 million in potential milestone payments, comprised of (i) up to $ 22.5 million in milestone payments upon achievement of specified clinical and development milestone events (such amounts were fully received as of July 2016), (ii) up to $ 95.0 million in milestone payments upon achievement of specified regulatory milestone events, and (iii) up to approximately $ 15.0 million in milestone payments upon the achievement of specified commercial sales milestone.

The Japan Agreement also provides for tiered payments based on net sales of product (as defined) in the low 20% range after commercial launch.

The aggregate amount of such consideration received through December 31, 2019 totals $ 90.1 million.

In September 2019, Japan’s Ministry of Health, Labour and Welfare approved Evrenzo® (generic name:

The 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 the Japanese Ministry of Health, Labour and Welfare, adjusted for certain elements, after commercial launch.

The aggregate amount of the considerations received under the Japan Agreement, through December 31, 2020 totals $ 105.1 million, excluding drug product revenue that is discussed separately below.

During the fourth quarter of 2020, the Japanese Ministry of Health, Labour and Welfare approved EVRENZO® (roxadustat) for the treatment of anemia of CKD in adult patients not on dialysis.

This approval triggered a $ 15.0 million milestone payable to the Company by Astellas under the Japan Agreement.

Accordingly, the consideration of $ 15.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Japan Agreement in the fourth quarter of 2020, substantially all of which was recognized as revenue during the year ended December 31, 2020 from performance obligations satisfied or partially satisfied.

In Septembe r 2019, the Japanese Ministry of Health, Labour and Welfare approved EVRENZO® (generic name:

tradename EVRENZO® in Japan) for the treatment of anemia associated with CKD in dialysis patients.

This approval triggered a $ 12.5 million milestone payable to the Company by Astellas under the Japan Agreement.

Accordingly, the consideration of $ 12.5 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Japan Agreement in the third quarter of 2019, substantially all of which was recognized as revenue during the year ended December 31, 2019 from performance obligations satisfied or partially satisfied.

Accordingly, the consideration of $ 12.5 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Japan Agreement in the t hird quarter of 2019, substantially all of which was recognized as revenue during the year ended December 31, 2019 from performance obligations satisfied or partially satisfied.

During the second quarter of 2018, Astellas reported positive results from the final phase 3 CKD-dialysis trial of roxadustat in Japan, indicating that Astellas was ready to make an NDA submission for the treatment of anemia with roxadustat in CKD-dialysis patients in 2018.

1 unchanged sentence

Accordingly, the consideration of $ 15.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Japan Agreement in the second quarter of 2018, substantially all of which was recognized as revenue during the year ended December 31, 2018 from performance obligations satisfied or partially satisfied.

On November 30, 2018, FibroGen and Astellas entered into an amendment to the Japan Agreement that will allow Astellas to manufacture roxadustat drug product for commercialization in Japan (the “Japan Amendment”).

Under this amendment, FibroGen would continue to manufacture and deliver to Astellas roxadustat API.

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

Under this amendment, FibroGen would continue to manufacture and supply roxadustat API to Astellas for the roxadustat commercial launch in Japan.

The commercial terms of the Japan Agreement relating to the transfer price for roxadustat for commercial use remain substantially the same, reflecting an adjustment for the manufacture of drug product by Astellas rather than FibroGen.

This amendment obligates Astellas to purchase API from the Company, of which $ 20.9 million was delivered to Astellas in the second quarter of 2018 under a material transfer agreement to conduct commercial scale manufacturing validation for roxadustat drug product in anticipation of commercial launch in Japan.

The remaining $ 43.9 million of API was delivered to Astellas in December 2018.

The transaction price of such API product was adjusted in 2019 at the time the listed price for roxadustat was issued by the Japanese Ministry of Health, Labour and Welfare to reflect a total difference of $ 36.3 million between estimated and actual listed price and yield from the manufacture of bulk product tablets.

The Company fulfilled shipment obligations under the term of the Japan Amendment in the second quarter of 2020 and in 2018.

The related drug product revenue, as described in details under Drug Product Revenue section below, were $ 4.3 million, $( 36.3 ) million and $ 64.8 million in the years ended December 31, 2020, 2019 and 2018, respectively.

Europe Agreement

4 unchanged sentences

The Europe Agreement also provides for tiered payments based on net sales of product (as defined) in the low 20% range .

The aggregate amount of such consideration received through December 31, 2019 totals $ 410.0 million.

During the second quarter of 2019, the Company received positive topline results from analyses of pooled major adverse cardiac event (“MACE”) and MACE+ data from its Phase 3 trials evaluating roxadustat as a treatment for dialysis and non-dialysis CKD patients, enabling Astellas to prepare for an MAA submission to the EMA in the second quarter of 2020, following the Company’s NDA submission to the FDA that was accepted for review in February 2020.

The aggregate amount of the considerations received under the Europe Agreement through December 31, 2020 totals $ 540.0 million, excluding drug product revenue that is discussed separately below.

During the second quarter of 2019, the Company received positive topline results from analyses of pooled major adverse cardiovascular event (“MACE”) and MACE+ data from its Phase 3 trials evaluating roxadustat as a treatment for dialysis and non-dialysis CKD patients, enabling Astellas to prepare for an MAA submission to the EMA in the second quarter of 2020, following the Company’s NDA submission to the FDA that was accepted for review in February 2020.

The Company evaluated the two regulatory milestone payments associated with the planned MAA submission and concluded that these milestones became probable of being achieved in the second quarter of 2019.

Accordingly, the total consideration of $ 130.0 million associated with these milestones was included in the transaction price and allocated to performance obligations under the Europe Agreement in the second quarter of 2019, of which $ 128.8 million was recognized as revenue during the year ended December 31, 2019 from performance obligations satisfied or partially satisfied.

According to the Europe Agreement, these milestone payments are not billable to Astellas until the submission of an MAA, therefore this $ 130.0 million remained as an unbilled contract asset as of December 31, 2019.

In the fourth quarter of 2018, the Company’s was engaged in the final stages of review with its partners over the proposed development of roxadustat for the treatment of chemotherapy induced anemia (“CIA”).

Accordingly, the total consideration of $ 130.0 million associated with these milestones was included in the transaction price and allocated to performance obligations under the Europe Agreement in the second quarter of 2019, of which $ 128.8 million was recognized as revenue during the year ended December 31, 2019 and $ 0.8 million was recognized as revenue during the year ended December 31, 2020, from performance obligations satisfied or partially satisfied.

According to the Europe Agreement, these milestone payments are billable to Astellas upon the submission of an MAA, therefore this $ 130.0 million was an unbilled contract asset as of December 31, 2019, and billed to Astellas upon the submission of an MAA in the second quarter of 2020 with the total $ 130.0 million received during the same quarter.

In the fourth quarter of 2018, the Company was engaged in the final stages of review with its partners over the proposed development of roxadustat for the treatment of chemotherapy-induced anemia (“CIA”).

AstraZeneca and Astellas approved the program in December 2018 and January 2019, respectively.

1 unchanged sentence

For revenue recognition purposes, the Company concluded that this new indication represents a modification to the Europe agreements and will be accounted for separately, meaning the development costs associated with the new indications are distinct from the original development costs.

The development service period for roxadustat for the treatment of CIA under the Europe Agreement is estimated to continue through the end of 2023 to allow for development of this indication.

The development service period for roxadustat for the treatment of CIA under the Europe Agreement is estimated to continue through the second quarter of 2024 to allow for development of this indication.

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

The Company fulfilled a shipment obligation under the term of the Europe Amendment in the fourth quarter of 2020, as described in details under Drug Product Revenue section below.

AstraZeneca Agreements

4 unchanged sentences

Under the terms of the U.S./RoW Agreement, AstraZeneca paid upfront, non-contingent, non-refundable and time-based payments totaling $ 374.0 million (such amounts were fully received as of June 2016).

Under the U.S./RoW Agreement, the Company is also eligible to receive from AstraZeneca an aggregate of approximately $ 875.0 million in potential milestone payments, comprised of (i) up to $ 65.0 million in milestone payments upon achievement of specified clinical and development milestone events, $ 15.0 million of which was received in 2015 as a result of the finalization of its two audited pre-clinical carcinogenicity study reports, (ii) up to $ 325.0 million in milestone payments upon achievement of specified regulatory milestone events, (iii) up to $ 160.0 million in milestone payments related to activity by potential competitors and (iv) up to approximately $ 325.0 million in milestone payments upon the achievement of specified commercial sales events.

The aggregate amount of such consideration received through December 31, 2019 totals $ 389.0 million.

Under the U.S./RoW Agreement, the Company is also eligible to receive from AstraZeneca an aggregate of approximately $ 875.0 million in potential milestone payments, comprised of (i) up to $ 65.0 million in milestone payments upon achievement of specified clinical and development milestone events, (ii) up to $ 325.0 million in milestone payments upon achievement of specified regulatory milestone events, (iii) up to $ 160.0 million in milestone payments related to activity by potential competitors and (iv) up to approximately $ 325.0 million in milestone payments upon the achievement of specified commercial sales events.

The aggregate amount of the considerations received under the U.S./RoW Agreement through December 31, 2020 totals $ 439.0 million, excluding drug product revenue that is discussed separately below.

Under the U.S./RoW Agreement, the Company and AstraZeneca will share equally in the development costs of roxadustat not already paid for by Astellas, up to a total of $ 233.0 million (i.e.

2 unchanged sentences

AstraZeneca will pay the Company 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 will receive a transfer price for delivery 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.

In addition, the Company will 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.

As mentioned above, during the second quarter of 2019, the Company received positive topline results from analyses of pooled MACE and MACE+ data from its Phase 3 trials for roxadustat, enabling the Company’s NDA submission to the FDA.

The Company evaluated the regulatory milestone payment associated with this planned NDA submission and concluded that this milestone became probable of being achieved in the second quarter of 2019.

Accordingly, the consideration of $ 50.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the U.S./ RoW Agreement in the second quarter of 2019, of which $ 42.4 million was recognized as revenue during the year ended December 31, 2019 from performance obligations satisfied or partially satisfied.

On December 23, 2019, the Company submitted such NDA, which was accepted by FDA in February 2020.

According to the U.S/RoW Agreement, this milestone payment is not billable to AstraZeneca until the NDA is accepted by the FDA, therefore this $ 50.0 million remained as an unbilled contract asset as of December 31, 2019, and will be billed during the first quarter of 2020.

Accordingly, the consideration of $ 50.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the combined arrangement in the second quarter of 2019, of which $ 42.4 million was recognized as revenue during the year ended December 31, 2019 and $ 0.6 million was recognized as revenue during the year ended December 31, 2020, from performance obligations satisfied or partially satisfied.

The Company submitted such NDA in December 2019, which was accepted by FDA in February 2020.

According to the U.S/RoW Agreement, this milestone payment is billable to AstraZeneca when the NDA is accepted by the FDA, therefore this $ 50.0 million was an unbilled contract asset as of December 31, 2019, and was billed during the first quarter of 2020, the payment of which was fully received in April 2020.

As mentioned above, AstraZeneca and Astellas approved the development of roxadustat for the treatment of CIA in December 2018 and January 2019, respectively.

Costs associated with the development of this indication are expected to be shared 50/50 between AstraZeneca and Astellas.

In addition, in December 2018, anemia of chronic inflammation and multiple myeloma was approved for development by AstraZeneca and is expected to be fully funded by them.

For revenue recognition purposes, the Company concluded that the addition of these new indications represents a modification to the collaboration agreements and will be accounted for separately, meaning the development costs associated with the new indications are distinct from the original development costs.

The development service period for roxadustat for the treatment of CIA, anemia of chronic inflammation and multiple myeloma under the AstraZeneca agreements is estimated to continue through the end of 2024 , to allow for development of these additional indications.

The Company shipped bulk drug product to AstraZeneca as pre-commercial supply for process validation purposes during the year ended December 31, 2020 and recognized related drug product revenue of $ 4.6 million, as described in details under Drug Product Revenue section below.

China Agreement

2 unchanged sentences

Under the China Agreement, the Company is also eligible to receive from AstraZeneca an aggregate of approximately $ 348.5 million in potential milestone payments, comprised of (i) up to $ 15.0 million in milestone payments upon achievement of specified clinical and development milestone events, (ii) up to $ 146.0 million in milestone payments upon achievement of specified regulatory milestone events, and (iii) up to approximately $ 187.5 million in milestone payments upon the achievement of specified commercial sales and other events.

The China Agreement is structured as a 50/50 profit or loss share (as defined) 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.

The aggregate amount of such consideration received through December 31, 2019 totals $ 55.2 million.

In December 2019, roxadustat has been included on the updated NRDL released by China’s NHSA for the treatment of anemia in CKD, covering patients who are non-dialysis dependent as well as those who are dialysis-dependent .

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

The aggregate amount of the considerations received under the China Agreement through December 31, 2020 totals $ 77.2 million.

In December 2019, roxadustat has been included on the updated NRDL released by China’s National Healthcare Security Administration for the treatment of anemia in CKD, covering patients who are non-dialysis dependent as well as those who are dialysis-dependent.

The inclusion on the NRDL triggered a total of $ 22.0 million milestones payable to the Company by AstraZeneca.

Accordingly, the total consideration of $22.0 million associated with these milestones was included in the transaction price and allocated to performance obligations under the China Agreement, of which $ 18.7 million was recognized as revenue during the year ended December 31, 2019 from performance obligations satisfied or partially satisfied.

As mentioned above, in the fourth quarter of 2018, the Company was engaged in the final stages of review with its partners over the proposed development of roxadustat for the treatment of CIA.

AstraZeneca and Astellas approved the program in December 2018 and January 2019, respectively.

Costs associated with the development of this indication are expected to be shared 50-50 between the Company’s two partners.

In addition to CIA, in December 2018, anemia of chronic inflammation (“ACI”) and multiple myeloma (“MM”) have been approved for development by AstraZeneca and is expected to be fully funded by them.

The development service period for roxadustat for the treatment of CIA, ACI and MM under the AstraZeneca agreements is estimated to continue through the end of 2024 , to allow for development of these additional indications.

On December 17, 2018, FibroGen (China) Medical Technology Development Co., Ltd.

(“FibroGen China”), received marketing authorization from the NMPA for roxadustat, a first-in-class hypoxia-inducible factor prolyl hydroxylase inhibitor, for the treatment of anemia caused by CKD in patients on dialysis.

Accordingly, the total consideration of $22.0 million associated with these milestones was included in the transaction price and allocated to performance obligations under the combined arrangement, of which $ 18.7 million was recognized as revenue during the year ended December 31, 2019.

The Company continued to recognize related revenue during the year ended December 31, 2020, from performance obligations satisfied or partially satisfied, and the amount was not material.

This milestone payment was received during the first quarter of 2020.

On December 17, 2018, FibroGen Beijing, received marketing authorization from the NMPA for roxadustat, a first-in-class HIF prolyl hydroxylase inhibitor, for the treatment of anemia caused by CKD in patients on dialysis.

This approval triggered a $ 6.0 million milestone payable to the Company by AstraZeneca.

On December 29, 2018, FibroGen China received First Manufacturing Approval for a Product in the Field in the Territory , which allows production for Phase 4 clinical studies, patients’ early experience programs, donation programs, as well as to supply products for testing and assessments required prior to launch.

On December 29, 2018, FibroGen Beijing received First Manufacturing Approval for a Product in the Field in the Territory, which allows production for Phase 4 clinical studies, patients’ early experience programs, donation programs, as well as to supply products for testing and assessments required prior to launch.

This approval triggered a $ 6.0 million milestone payable to the Company by AstraZeneca.

Approximately $ 9.9 million of the total $ 12.0 million milestone payables was recognized as revenue during the year ended December 31, 2018 from performance obligations satisfied or partially satisfied.

Approximately $ 9.9 million of the total $ 12.0 million milestone payables was recognized as revenue during the year ended December 31, 2018.

The Company continued to recognize related revenues during the years ended December 31, 2019 and 2020, from performance obligations satisfied or partially satisfied, and the amounts were not material.

China Amendment

On July 8, 2020, FibroGen China and AstraZeneca (together with FibroGen China, the “Parties”) entered into the China Amendment, effective July 1, 2020, relating to the development and commercialization of roxadustat in China.

While the responsibilities of the Parties under the China Agreement remain largely the same, certain changes were made.

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

See Note 3, Acquisition and Variable Interest Entity , for details.

In accordance with the China Amendment, the Company is currently in the interim period.

Under the China Amendment, the interim period is defined as the period from April 1, 2020 to the time when Falikang is fully operational, which commenced in January 2021.

During the interim period, FibroGen continues to sell product directly to the distributors, who remain as the Company’s customers.

Under the China Amendment, the calculation for profit or loss share has changed related to sales of roxadustat in China for the period from April 1, 2020 onwards.

With effect from April 1, 2020, the Parties have changed the method under which commercial expenses incurred by AstraZeneca are calculated and billed.

AstraZeneca’s co-promotion expenses for their sales and marketing efforts are now subject to a cap of a percentage of net sales.

Once AstraZeneca has been fully reimbursed for their sales and marketing costs under the cap, AstraZeneca will bill the co-promotion expenses based on actual costs on a prospective basis.

In addition, the China Amendment has allowed for a higher cost of manufacturing incurred by FibroGen Beijing to be included in the profit or loss share calculation, subject to an annual cap, among other changes.

Once Falikang is fully operational, substantially all direct product sales will be made by Falikang while the Company continues to sell product directly in few provinces in China.

AstraZeneca will bill the co-promotion expenses to Falikang and to FibroGen Beijing, respectively, for its services provided to the respective entity.

In addition, FibroGen Beijing will sell commercial product to Falikang based on an agreed upon transfer price.

Development costs will continue to be shared 50/50 between the Parties.

As a result, the interim period primarily includes the following activities:

Co-promotion expenses:

The China Amendment revised the payment arrangements and calculation of the historical unpaid co-promotion expenses to AstraZeneca for its sales and marketing efforts associated with the commercial sales for roxadustat in China since the product launch.

Under the previous China Agreement, payment of these historical co-promotion expenses was subject to certain profitability and cash flow thresholds.

No amount of the historical co-promotion costs had been paid prior to the China Amendment as these thresholds had not yet been met.

Under the China Amendment, a portion of the historical unpaid co-promotion expenses was adjusted to reduce the amount owed by FibroGen Beijing and the current period co-promotion expenses are capped at a percentage of net roxadustat sales in China.

As a result, in the third quarter of 2020, the Company reversed approximately $ 84.4 million of previously accrued co-promotion expenses payable, which was recorded as a reduction to selling, general and administrative expenses, where these expenses were initially recorded during the periods from the initiation of commercial activities in the first quarter of 2019 to the second quarter of 2020.

The co-promotion expenses for the year ended December 31, 2020, capped at a percentage of net roxadustat sales in China, were $ 27.2 million, included in the selling, general and administrative expenses.

After this adjustment, as of December 31, 2020, $ 16.9 million and $ 11.5 million of the recalculated accrued co-promotion expenses were recorded in accounts payable and accrued liabilities, respectively, as they were anticipated to be paid within the next 12 months;

and $ 27.4 million of the recalculated accrued co-promotion expenses adjusted under the China Amendment remained in the long-term liabilities, as it is not anticipated to be paid within the next 12 months.

Profit share:

Profit/loss share between FibroGen Beijing and AstraZeneca is based on a calculation of the current period net roxadustat sales in China and deductible expenses pursuant to the China Agreement.

Based on the calculation revised under the China Amendment, profit was achieved during the third and fourth quarter of 2020.

As a result, the Company recorded a profit share liability of $ 7.0 million to AstraZeneca as of December 31, 2020 in the accrued and other current liabilities, which correspondingly reduced the deferred revenue related to the performance obligation in accordance with the China Agreement.

Accounting for the Astellas Agreements

2 unchanged sentences

There are no right-of-return provisions for the delivered items in the Astellas agreements.

As of December 31, 2019, the transaction price for the Japan Agreement included $ 40.1 million of non-contingent upfront payments, $ 50.0 million of variable consideration related to payments for milestones considered probable of being achieved, and $ 11.4 million of variable consideration related to co-development billings.

The transaction price for the Europe Agreement included $ 320.0 million of non-contingent upfront payments, $ 220.0 million of variable consideration related to payments for milestones considered probable of being achieved, and $ 229.2 million of variable consideration related to co-development billings.

As of December 31, 2020, the transaction price for the Japan Agreement, excluding manufacturing services that is discussed separately below, included $ 40.1 million of non-contingent upfront payments, $ 65.0 million of variable consideration related to payments for milestones considered probable of being achieved, and $ 11.7 million of variable consideration related to co-development billings.

The transaction price for the Europe Agreement, excluding manufacturing services that is discussed separately below, included $ 320.0 million of non-contingent upfront payments, $ 220.0 million of variable consideration related to payments for milestones considered probable of being achieved, and $ 225.9 million of variable consideration related to co-development billings.

For revenue recognition purposes, the Company determined that the term of each collaboration agreement with Astellas begins on the effective date and ends upon the completion of all performance obligations contained in the agreement.

2 unchanged sentences

For the Astellas agreements, the Company allocated the transaction price to the various performance obligations based on the relative SSP of each performance obligation, with the exception of co-development billings allocated entirely to co-development services performance obligations.

For the technology license under the Japan Agreement and Europe Agreement, SSP was determined primarily by using the discounted cash flow (“DCF”) method, which aggregates the present value of future cash flows to determine the valuation as of the effective date of each of the agreements.

For the technology license under the Japan Agreement and the Europe Agreement, SSP was determined primarily by using the discounted cash flow (“DCF”) method, which aggregates the present value of future cash flows to determine the valuation as of the effective date of each of the agreements.

The DCF method involves the following key steps:

16 unchanged sentences

Manufacturing rights.

In the case of the Japan Agreement, the Company retained manufacturing rights largely because of the way the parties chose for FibroGen to be compensated under the agreement.

At the time the agreement was signed, the Company believed that it was more advantageous upon commercialization to have a transfer price revenue model in place as opposed to a traditional sales-based model.

The manufacturing process does not require specialized knowledge or expertise uniquely held by FibroGen, and notwithstanding contractual restrictions, Astellas could employ manufacturing services from readily available third parties in order to benefit from the license.

In the case of the Japan Agreement, the Company retained manufacturing rights largel y because of the way the parties chose for FibroGen to be compensated under the agreement.

The manufacturing process does not require specialized knowledge or expertise uniquely held by FibroGen, and notwithstanding contractual restrictions, Astellas could employ manufacturing services from readily avail able third parties in order to benefit from the license.

Therefore, along with the foregoing paragraph, the Company determined that the license in Japan is a distinct performance obligation despite the retention of manufacturing rights by the Company.

8 unchanged sentences

Co-development services are expected to continue over the development period that is currently estimated to continue through the end of 2021.

In addition, the Company concluded that the new indication related to CIA approved in January 2019 represents a modification to the Europe agreements at that time and will be accounted for separately, for which the development service period is estimated to continue through the end of 2023 .

There was no provision for co-development services in the Japan Agreement.

5 unchanged sentences

This promise is satisfied throughout the course of the agreements as meetings are attended.

Items (3)-(5) are bundled into a single performance obligation which is distinct given the fact that all are highly interrelated during the development period (pre-commercial phase of development) such that satisfying them independently is not practicable.

Items (2)-(5) are bundled into a single performance obligation that is distinct given the fact that all are highly interrelated during the development period (pre-commercial phase of development) such that satisfying them independently is not practicable.

Revenue is recognized over time based on progress toward complete satisfaction of the performance obligation.

5 unchanged sentences

Revenue is recognized as supplies are shipped for commercial use during the commercialization period.

To date, no such revenue has been recognized.

In 2018, the Company recorded revenue from commercial-grade API sales to Astellas to conduct commercial scale manufacturing validation based on a transaction price that was subject to potential future adjustments.

This represents a form of variable consideration.

As of December 31, 2018, no new facts or circumstances were available to warrant an adjustment to the transaction price.

The transaction price was later adjusted in 2019 at the time the listed price for roxadustat was issued by the Japanese Ministry of Health, Labour and Welfare to reflect the difference between estimated and actual listed price and yield from the manufacture of bulk product tablets.

Under the Japan Amendment the drug product revenue represents variable consideration and is estimated based on the quantity of product shipped, actual listed price for roxadustat issued by the Japanese Ministry of Health, Labour and Welfare and possible future changes to the listed price, adjusted for estimated bulk product strength mix intended to be manufactured by Astellas, estimated cost to convert the API to bulk drug product tablets, and estimated yield from the manufacture of bulk product tablets, among others.

Under the Europe Agreement, the drug product revenue amount represents variable consideration and is estimated based on the quantity of product shipped and an estimated price.

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 re versal 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.

Estimating variable consideration and the related constraint requires the use of significant management judgment.

The Company reviews new information that may affect its variable consideration estimate at every reporting period and records an adjustment to revenue, if certain and material .

As each of the agreements provides for annual true up to the considerations paid for its commercial supplies, the Company will re-evaluate the transaction price in each reporting period and record adjustment to revenue as uncertain events are resolved or other changes in circumstances occur.

Accounting for the AstraZeneca Agreements

The Company evaluated whether the U.S./RoW Agreement and China Agreement should be accounted for as a single or separate arrangements and concluded that the agreements should be accounted for as a single arrangement with the presumption that two or more agreements executed with a single customer at or around the same time should be presumed to be a single arrangement.

The Company evaluated whether the U.S./RoW Agreement and the China Agreement should be accounted for as a single or separate arrangements and concluded that the agreements should be accounted for as a single arrangement with the presumption that two or more agreements executed with a single customer at or around the same time should be presumed to be a single arrangement.

The key points the Company considered in reaching this conclusion are as follows:

3 unchanged sentences

The two agreements were executed as separate agreements because different development, regulatory and commercial approaches required certain terms of the agreements to be structured differently, rather than because the Company or the counterparties considered the agreements to be fundamentally separate negotiations.

Accordingly, as the agreements are being accounted for as a single arrangement, upfront and other non-contingent consideration received and to be received has been and will be pooled together and allocated to each of the performance obligations in both the U.S./RoW Agreement and China Agreement based on their relative SSPs.

For each of the AstraZeneca agreements, the Company has evaluated the promised services within the respective arrangements and has identified performance obligations representing those services and bundled services that are distinct.

1 unchanged sentence

There are no right-of-return provisions for the delivered items in the AstraZeneca agreements.

As of December 31, 2019, the transaction price for the U.S./RoW Agreement and China Agreement included $ 402.2 million of non-contingent upfront payments, $ 114.0 million of variable consideration related to payments for milestones considered probable of being achieved, and $ 598.8 million of variable consideration related to co-development billings.

For the AstraZeneca agreements, the Company allocated the transaction price to the various performance obligations based on the relative SSP of each performance obligation, with the exception of co-development billings.

As of December 31, 2020, the transaction price for the U.S./RoW Agreement and the China Agreement, excluding manufacturing services that is discussed separately below, included $ 402.2 million of non-contingent upfront payments, $ 114.0 million of variable consideration related to payments for milestones considered probable of being achieved, $ 564.9 million of variable consideration related to co-development billings, offset by $ 7.0 million of variable consideration related to profit share under the China Amendment.

Co-development billings under the U.S./RoW Agreement were allocated entirely to the U.S./RoW co-development services performance obligation, and co-development billings under the China Agreement were allocated entirely to the combined performance obligation under the China Agreement.

For revenue recognition purposes, the Company determined that the term of its collaboration agreements with AstraZeneca begin on the effective date and ends upon the completion of all performance obligations contained in the agreements.

The contract term is defined as the period in which parties to the contract have present and enforceable rights and obligations.

The Company believes that the requirement to continue funding development for a substantive period of time and the loss of product rights, along with non-refundable upfront payments already remitted by AstraZeneca, represent substantive termination penalties that create significant disincentive for AstraZeneca to exercise its right to terminate the agreement.

Commercial sale of product under the U.S./ROW Agreement is entirely allocated to the manufacturing commercial supply of products performance obligation, and commercial sale of product under the China Agreement is allocated entirely to the combined China performance obligation.

T he contract term is defined as the period in which parties to the contract have present and enforceable rights and obligations.

For the technology license under the AstraZeneca U.S./RoW Agreement, SSP was determined based on a two-step process.

21 unchanged sentences

The Company uses an input method to measure progress toward the satisfaction of the performance obligation, which is based on costs of labor hours or full time equivalents and out-of-pocket expenses incurred relative to total expected costs to be incurred.

Co-development services are expected to continue over the development period that is currently estimated to continue through the end of 2020.

In addition, the Company concluded that the addition of the new indications related to CIA, ACI and MM approved during the fourth quarter of 2018 represents a modification to the collaboration agreements and will be accounted for separately, for which the joint development service period is estimated to continue through the end of 2024 .

Co-development services are expected to continue over the development period that is currently estimated to continue through the end of the first quarter of 2021.

In addition, the Company concluded that the addition of the new indications related to CIA, anemia of chronic inflammation and multiple myeloma approved during the fourth quarter of 2018 represents a modification to the collaboration agreements and will be accounted for separately, for which the joint development service period is estimated to continue through the end of 2024 .

Manufacturing of clinical supplies of products.

2 unchanged sentences

These promises are satisfied throughout the course of the agreement as services are provided.

Items (3)-(4) are bundled into a single performance obligation which is distinct given the fact that all are highly interrelated during the development period (pre-commercial phase of development) such that delivering them independently is not practicable.

Items (2)-(4) are bundled into a single performance obligation that is distinct given the fact that all are highly interrelated during the development period (pre-commercial phase of development) such that delivering them independently is not practicable.

Revenue is recognized over time based on progress toward complete satisfaction of the performance obligation.

3 unchanged sentences

This promise is distinct as services are not interrelated with any of the other performance obligations.

Payments received for commercial supplies of products represent sales-based royalties related predominately to the license of intellectual property under the agreement.

Revenue is recognized as supplies are shipped for commercial use during the commercialization period.

To date, no such revenue has been recognized.

The drug product revenue amount represents variable consideration and is estimated based on the quantity of product shipped and an estimated price for each individual purchase order.

The estimated price is based on the contractual transfer price percentage applied on the estimated weighted average net sales price, which is estimated to be realized by AstraZeneca from the end sale o f roxadustat in its approved territories.

Estimating variable consideration and the related constraint requires the use of significant management judgment.

The Company reviews new information that may affect its variable consideration estimate at every reporting period and records an adjustment to revenue, if certain and material.

As the agreement provides for an annual true up to the considerations paid for its commercial supplies, the Company will re-evaluate the transaction price in each reporting period and record an adjustment to revenue as uncertain events are resolved or other changes in circumstances occur.

China Agreement:

The performance obligation that were analyzed, along with their general timing of satisfaction and recognition as revenue, are as follows:

The promised services that were analyzed are consistent with the U.S./RoW Agreement, except for license to the Company’s technology existing at the effective date of the agreement, described as follows:

License to the Company’s technology existing at the effective date of the agreement.

5 unchanged sentences

The prospects for the collaboration as a whole would have been substantially different had manufacturing rights been provided to AstraZeneca.

Due to certain regulatory restrictions in China, manufacturing services of commercial drug product in China are not readily available to AstraZeneca or any other parties.

We hold the rights to manufacture commercial drug product in China.

Therefore, AstraZeneca cannot benefit from the license on its own or together with other readily available resources.

Accordingly, all the promises identified, including co-development services, under the China Agreement have been bundled into a single performance obligation and amounts of the transaction price allocable to this performance obligation are deferred until control of the manufactured commercial drug product has begun to transfer to AstraZeneca.

Upon commencement of the transfer of control to commercial drug product, revenue would be recognized in a pattern consistent with estimated deliveries of the commercial drug product.

Accordingly, all the promises identified, including the license, co-development services and manufacturing of commercial supplies,, under the China Agreement have been bundled into a single performance obligation and amounts of the transaction price allocable to this performance obligation are deferred until control of the manufactured commercial drug product has begun to transfer to AstraZeneca.

In accordance with the China Amendment, once Falikang is fully operational, which commenced in January 2021, substantially all product sales will be made by Falikang directly to the distributors in China, while the Company continues to sell directly in few provinces in China.

Revenue will be recognized upon the transfer of control of commercial drug product to Falikang.

For the Company’s direct sales of commercial drug product, revenue will be recognized when control of the promised good is transferred to the customer in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for the product.

Summary of revenue recognized under the collaboration agreements

1 unchanged sentence

License amounts identified below are included in the “License revenue” line item in the consolidated statements of operations.

All other elements identified below are included in the “Development and other revenue” line item in the consolidated statements of operations .

Amounts recognized as revenue under the Japan Agreement with Astellas were as follows (in thousands):

All other elements identified

below are included in the “Development and other revenue” line item in the consolidated statements of operations.

Amounts recognized as license revenue and development revenue under the Japan Agreement with Astellas were as follows (in thousands):

Years Ended December 31,

9 unchanged sentences

Development revenue

Total license and development revenue

Total license and development

The revenue recognized under the Japan Agreement for the year ended December 31, 2020 included an increase of $ 15.1 million resulting from changes to estimated variable consideration in the current year relating to performance obligations satisfied or partially satisfied in previous periods.

The remainder of the transaction price related to the Japan Agreement includes no further variable consideration from estimated future co-development billing.

Amounts recognized as revenue under the Europe Agreement with Astellas were as follows (in thousands):

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

Amounts recognized as license revenue and development revenue under the Europe Agreement with Astellas were as follows (in thousands):

Years Ended December 31,

9 unchanged sentences

Development revenue

Total license and development revenue

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

As of December 31, 2019, prepaid expenses and other current assets included a net unbilled contract asset of $ 125.2 million related to the Europe Agreement, which represents the net of the above-mentioned unbilled contract asset of $ 130.0 million, and $ 4.8 million of deferred revenue presented above.

Total license and development

The revenue recognized under the Europe Agreement for the year ended December 31, 2020 included an increase in revenue of $ 1.5 million resulting from changes to estimated variable consideration in the current year relating to performance obligations satisfied or partially satisfied in previous periods.

The remainder of the transaction price related to the Europe Agreement includes $ 27.6 million of variable consideration from estimated future co-development billing and is expected to be recognized over the remaining development service period.

Amounts recognized as revenue under the U.S./RoW and China Agreements with AstraZeneca were as follows (in thousands):

Amounts recognized as license revenue and development revenue under the U.S./RoW and China Agreements with AstraZeneca were as follows (in thousands):

Years Ended December 31,

12 unchanged sentences

China performance obligation

Total license and development revenue

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

As of December 31, 2019, long-term deferred revenue included $ 99.3 million related to the U.S./RoW and China Agreement, which represents the net of $ 149.3 million of deferred revenue presented above and the above-mentioned $ 50.0 million unbilled contract asset.

The revenue recognized under the U.S./RoW Agreement and China Agreement for the year ended December 31, 2019 included an increase in revenue of $ 62.6 million resulting from changes to estimated variable consideration in the current year relating to performance obligations satisfied or partially satisfied in previous periods.

The remainder of the transaction price related to the U.S./RoW Agreement and China Agreement includes $ 130.4 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, which are expected to be recognized in a pattern consistent with estimated deliveries of the commercial drug product.

Total license and development

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

As of December 31, 2020, deferred revenue included $ 137.5 million related to the U.S./RoW and China Agreement, which represents the net of $ 139.6 million of deferred revenue presented above and a $ 2.1 million unbilled co-development revenue under the China Amendment with AstraZeneca.

The revenue recognized under the U.S./RoW Agreement and China Agreement for the year ended December 31, 2020 included a reduction in revenue of $ 2.9 million resulting from changes to estimated variable consideration in the current year relating to performance obligations satisfied or partially satisfied in previous periods.

The remainder of the transaction price related to the U.S./RoW Agreement and China Agreement includes $ 37.9 million of variable consideration from estimated future co-development billing.

The amount allocated to the U.S./RoW Agreement is expected to be recognized over the remaining development service period.

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.

Product Revenue, Net

Product revenue from roxadustat commercial sales in China is recognized in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those products, net of various sales rebates and discounts.

Product revenue, net was as follows (in thousands):

Years Ended December 31,

(dollars in thousands)

Product revenue, net:

Gross revenue

Price adjustment

Sales rebates and other discounts

Drug product revenue, net

Total product revenue, net

As described above, the Japan Amendment obligates Astellas to purchase API from the Company to conduct commercial scale manufacturing validation for roxadustat drug product in anticipation of commercial launch in Japan.

The Company fulfilled all the delivery obligations under the term of the Japan Amendment during the year ended December 31, 2018, and recognized the related product revenue of $ 64.8 million in the same period based on a transaction price that was subject to potential future adjustments, which represented a form of variable consideration.

A change in estimated variable consideration incurred in 2019 at the time the actual listed price for roxadustat was issued by the Japanese Ministry of Health, Labour and Welfare, which resulted in a total difference of $ 36.3 million between the estimated and the actual listed price and yield from the manufacture of bulk product tablets.

In addition, the Company started commercial sales of roxadustat drug product in China in the third quarter of 2019.

Drug product revenue is recognized in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those products, net of price adjustment, contractual sales rebate and other discounts.

Non-key account hospital listing award

Contractual sales rebate

Other discounts and rebates

Product revenue, net

In the second quarter of 2020, the Company amended the agreement with its pharmaceutical distributors, which triggered accounting modifications particularly related to the non-key account hospital listing award.

For the year ended December 31, 2020, the non-key account hospital listing award was $ 9.3 million, which was recorded as a reduction to the revenue and calculated based on eligible non-key account hospital listings to date achieved by each distributor with certain requirements met during the period.

For the year ended December 31, 2020 and 2019, the contractual sales rebate was $ 6.2 million and $ 0.1 million, respectively, which were calculated based on the stated percentage of gross sales by each distributor in the distribution agreement entered between FibroGen and each distributor.

All other rebates and discounts, including sales return allowance were immaterial for the periods presented.

For the year ended December 31, 2019, a $ 0.9 million of price adjustment was recorded based on government-listed price guidance and estimated channel inventory levels.

The contractual sales rebate and other discounts were immaterial for the year ended December 31, 2019.

The rebates and discounts that the Company’s pharmaceutical distributors have earned are eligible to be applied against future sales orders, limited to certain maximums until such rebates and discounts are exhausted.

These rebates and discounts are recorded as contract liabilities at the time they become eligible in the same period that the related revenue is recorded.

Due to the distributor’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 distributor’s legal right of offset is calculated at the individual distributor level .

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

December 31, 2019

Presented Net

December 31, 2020

Product revenue - Contract liabilities

As of December 31, 2020, the total rebates and discounts as reductions to gross accounts receivable was $ 0.5 million, and the total contract liabilities was $ 15.1 million, which was included in accrued and other current liabilities in the consolidated balance sheet.

The reductions to gross accounts receivable, including the above-mentioned contra-accounts receivable items related to product revenue, totaled $ 0.8 million and $ 1.1 million as of December 31, 2020 and 2019, respectively.

Drug Product Revenue

Drug product revenue was as follows (in thousands):

Years Ended December 31,

Drug product revenue

The Company fulfilled all the shipment obligations under the term of the Japan Amendment during the year ended December 31, 2018, and recognized the related product revenue of $ 64.8 million in the same period based on a transaction price that was subject to potential future adjustments, which represented a form of variable consideration.

A change in estimated variable consideration incurred in 2019 related to the above API shipments in 2018, at the time the actual listed price for roxadustat was issued by the Japanese Ministry of Health, Labour and Welfare, which resulted in a total difference of $ 36.3 million between the estimated and the actual listed price and yield from the manufacture of bulk product tablets.

In addition, during the year ended December 31, 2020, the Company recorded another $ 4.0 million reduction to drug product revenue related to the above API shipments, due to a change in estimated variable consideration.

Specifically, the change in estimated variable consideration was based on the API held by Astellas at March 31, 2020 adjusted to reflect the updated listed price for roxadustat issued by the Japanese Ministry of Health, Labour and Welfare and 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 second quarter of 2020, the Company fulfilled shipment obligations under the term of Japan Amendment with Astellas, and recognized related drug product revenue of $ 8.2 million in the same period.

During the fourth quarter of 2020, the Company shipped bulk drug product from process validation supplies for commercial purposes under the term of the Europe Agreement with Astellas.

The Company constrained the consideration from this shipment due to a high degree of uncertainty associated to the final consideration.

As a result, the Company recorded $ 1.4 million as current deferred revenue and $ 4.6 million as long-term deferred revenue as of December 31, 2020.

The deferred revenue will be recognized as and when uncertainty is resolved.

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

December 31, 2019

December 31, 2020

Drug product revenue - Astellas - contract liabilities

During the year ended December 31, 2020, the Company shipped bulk drug product to AstraZeneca as pre-commercial supply for process validation purposes, under the term of Commercial Supply Agreement under the U.S./RoW Agreement with AstraZeneca, and recognized drug product revenue of $ 4.6 million.

Other Revenues

5 unchanged sentences

The long-term portion of deferred revenue represents amounts to be recognized after one year through the end of the non-contingent performance period of the underlying performance obligations.

Deferred revenue includes amounts allocated to the China unit of accounting under the AstraZeneca arrangement as revenue recognition associated with this unit of accounting is tied to the commercial launch of the products within China.

As of December 31, 2018, such deferred revenue was included in long-term deferred revenue.

As of December 31, 2019, following receipt of the Chinese Good Manufacturing Practices license by FibroGen Beijing in the second quarter of 2019, approximately $ 0.8 million of the related deferred revenue 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, as a result of the transfer of control of commercial drug product in China.

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 drug product is transferred to AstraZeneca.

As of December 31, 2020, approximately $ 3.5 million of the 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.

Fair Value Measurements

17 unchanged sentences

December 31, 2020

US treasury notes and bills

Bond and mutual funds

1 unchanged sentence

Money market funds

Certificate of deposit

December 31, 2019

US treasury notes and bills

treasury notes and bills

Bond and mutual funds

5 unchanged sentences

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 fourth quarter of 2019, there was a $ 29.8 million transfer of assets from Level 1 to Level 2 as such US treasury notes and bills were changed to off-the-run when they were issued before the most recent issue and were still outstanding at measurement day.

There were no transfers of assets between levels for the years ended December 31, 2020 and 2018.

The fair values of the Company’s financial liabilities that are carried at historical cost are as follows (in thousands):

4 unchanged sentences

The fair value of the Company’s financial liabilities were derived by using an income approach, which required Level 3 inputs such as discounted estimated future cash flows.

As of December 31, 2018, the Company had $ 96.2 million in lease obligations related to its building leases under build-to-suit arrangements.

Upon the adoption of ASC 842 as of January 1, 2019, using the modified retrospective transition method, the Company derecognized these liabilities previously recognized under ASC 840 build-to-suit designation.

Refer to Note 2 for details.

There were no transfers of liabilities between levels for the years ended December 31, 2020, 2019 and 2018.

4 unchanged sentences

This lease requires the Company to pay all costs of ownership, operation, and maintenance of the premises, including without limitation all operating costs, insurance costs, and taxes.

In 2013, the Company entered into a long-term property lease with Beijing Economic-Technological Development Area (“BDA”) Management Committee for a pilot plant located in Beijing Yizhuang Biomedical Park (“BYBP”) of BDA.

The building is leased for an initial lease term of eight years , scheduled to expire in 2021 .

2 unchanged sentences

This lease requires the Company to pay all operating and maintenance costs, and a fixed amount for property management fees.

The Company currently has seven additional real estate leases for space within a building, which are treated as operating leases.

These leases have lease terms ranging from two to four years .

The Company currently has six additional real estate leases for office spaces in Shanghai and Beijing, China, which are treated as operating leases.

These leases have lease terms ranging from two to three years , expiring in 2023 .

These lease contracts provide for fixed quarterly rent payments, and require the Company to pay operating and maintenance costs, and a fixed amount for property management fees.

In addition, the Company has several immaterial lease arrangements for office equipment, scientific devices and automobile leases, with contracted lease terms ranging from two to five years , treated as finance leases or operating leases, respectively.

In addition, the Company has several immaterial lease arrangements in China and U.S.

for office equipment, scientific devices and automobile leases, with contracted lease terms ranging from two to four years , treated as finance leases or operating leases, respectively.

The Company’s lease assets and related lease liabilities were as follows (in thousands):

Balance Sheet Line Item

December 31, 2019

Right-of-use assets - cost

16 unchanged sentences

The components of lease expense were as follows (in thousands):

Years Ended December 31,

Statement of Operations Line Item

December 31, 2019

Finance lease cost:

Amortization of right-of-use assets

Amortization of

right-of-use assets

Cost of goods sold;

Research and development;

3 unchanged sentences

Operating lease cost

Cost of goods sold;

Research and development;

4 unchanged sentences

Supplemental cash flow information related to leases were as follows (in thousands):

December 31, 2019

Years Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities:

5 unchanged sentences

Operating leases

Lease term and discount rate were as follows at December 31, 2019:

December 31, 2019

Lease term and discount rate were as follows:

Weighted-average remaining lease term (years):

4 unchanged sentences

Operating leases

Maturities of lease liabilities are as follows:

Maturities of lease liabilities as of December 31, 2020 are as follows (in thousands):

Year Ending December 31,

Finance Leases

2 unchanged sentences

Present value of lease liabilities

The following information was previously disclosed under ASC 840 as of December 31, 2018:

Future minimum lease payments under all non-cancelable operating lease obligations as of December 31, 2018 were as follows (in thousands):

Operating Leases

Total minimum payments

Future minimum lease payments, on a consolidated basis, under the Company’s facility lease financing obligations as of December 31, 2018 were as follows (in thousands):

Lease financing

Total minimum payments

Balance Sheet Components

1 unchanged sentence

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

US treasury notes and bills

Money market funds

8 unchanged sentences

Holding Losses

US treasury notes and bills

Certificates of deposit

Bond and mutual funds

7 unchanged sentences

Holding Losses

US treasury notes and bills

treasury notes and bills

Certificates of deposit

2 unchanged sentences

Total investments

The contractual maturities of the available-for-sale investments and term deposit were as follows (in thousands):

The contractual maturities of the available-for-sale investments were as follows (in thousands):

December 31, 2020

Within one year

After one year through four years

Total debt investments

Bond and mutual funds

Within one year - Bond and mutual funds

Equity investments

3 unchanged sentences

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.

During the three years ended December 31, 2019, the Company did not recognize any other-than-temporary impairment loss.

During the three years ended December 31, 2020, the Company did no t recognize any other-than-temporary impairment loss.

Inventories consisted of the following (in thousands):

December 31, 2019

Raw materials

2 unchanged sentences

Total inventories

The Company started capitalizing inventory costs in June 2019 when FibroGen China began productions of roxadustat for commercial sales purposes.

The provision to write-down excess and obsolete inventory was nominal for the year ended December 31, 2019.

The Company started capitalizing inventory costs in June 2019 when FibroGen Beijing began productions of roxadustat for commercial sales purposes.

The Company started capitalizing pre-launch inventory costs in the U.S.

the second quarter of 2020 prior to regulatory approval.

As of December 31, 2020, pre-launch inventory capitalized was 29 % of the total inventory balance.

The provision to write-down excess and obsolete inventory was nominal for the years ended December 31, 2020 and 2019.

Prepaid expenses and other current assets

6 unchanged sentences

Total prepaid expenses and other current assets

The unbilled contract assets as of December 31, 2020 were related to unbilled co-development revenue under the China Amendment with AstraZeneca.

The unbilled contract assets as of December 31, 2019 were related to two regulatory milestones totaling $ 130.0 million under the Europe Agreement with Astellas associated with the planned MAA submission in Europe, and a $ 50.0 million regulatory milestone under the U.S./RoW Agreement with AstraZeneca associated with the NDA submission in the U.S., which was submitted in December 2019 and accepted for review in February 2020.

See Note 3 for details.

See Note 4, Collaboration Agreements and Revenues , for details.

Property and Equipment

1 unchanged sentence

Leasehold improvements

Building shell

Laboratory equipment

5 unchanged sentences

Property and equipment, net

As of December 31, 2018, the Company had $ 53.9 million building shell cost and $ 13.5 million accumulated depreciation related to its building leases under build-to-suit arrangements.

Upon the adoption of ASC 842 as of January 1, 2019, using the modified retrospective transition method, the Company derecognized these assets previously recognized under ASC 840 build-to-suit designation.

Up to December 31, 2018, the leasehold improvements related to these building leases were depreciated over the life of the building under ASC 840.

Upon the adoption of ASC 842, these leasehold improvements should have a useful life based on the lease term.

As a result, at the adoption date, the Company recorded a cumulative adjustment of $ 38.9 million to the opening accumulated depreciation for these leasehold improvements so that their net balance equals the undepreciated amount had the useful life of the leasehold improvements always been equal to the lease terms.

Refer to Note 2 for details.

Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $ 11.7 million, $ 11.1 million, and $ 6.6 million, respectively.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

Accrued and Other Current Liabilities

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

Preclinical and clinical trial accruals

1 unchanged sentence

Payroll and related accruals

Contract liabilities to pharmaceutical distributors

Accrued co-promotion expenses - current

Roxadustat profit share to AstraZeneca

Property taxes and other

Professional services

Total accrued liabilities

The amount of $ 36.3 million accrued as of December 31, 2019 was related to the change in estimated variable consideration of API product at the time the roxadustat listed price was issued by the Japanese Ministry of Health, Labour and Welfare.

Refer to Note 3 for details.

Total accrued and other current liabilities

The API product price adjustment of $ 36.3 million accrued as of December 31, 2019 was related to the change in estimated variable consideration of API product at the time the roxadustat listed price was issued by the Japanese Ministry of Health, Labour and Welfare in the fourth quarter of 2019.

This amount was fully paid during the first quarter of 2020.

Refer to Note 4, Collaboration Agreements and Revenues , for details.

On July 8, 2020, the Parties entered into an amendment to the China Agreement, relating to the development and commercialization of roxadustat in China, which revised, among other things, the arrangements and calculation of the estimated co-promotion expenses payable to AstraZeneca for its sales and marketing efforts associated with the commercial sales for roxadustat in China.

As a result, the previously accrued long-term co-promotion expenses were significantly reduced during the third quarter of 2020.

$ 11.5 million of the recalculated accrued co-promotion expenses is anticipated to be paid within the next 12 months, therefore was recorded as a current liability as of December 31, 2020.

The profit share liability of $ 7.0 million to AstraZeneca as of December 31, 2020 represented the profit/loss share between FibroGen Beijing and AstraZeneca that is calculated pursuant to the China Agreement.

This liability correspondingly reduced the deferred revenue related to the performance obligation in accordance with the China Agreement.

Refer to Note 4, Collaboration Agreements and Revenues , for details.

Other Long-term Liabilities

Other long-term liabilities consisted of the following (in thousands):

Accrued long-term co-promotional expenses

Accrued long-term co-promotion expenses

Other long-term tax liabilities

2 unchanged sentences

The a ccrued long-term co-promotional expenses of $ 53.1 million as of December 31, 2019 was related to the estimated amount payable to AstraZeneca for its sales and marketing efforts related to the commercial launch for roxadustat in China.

The payment for such amount is not expected to occur within the next yea r.

As mentioned above, the China Amendment revised the arrangements and calculation of the estimated co-promotion expenses payable to AstraZeneca.

As a result, we reversed approximately $ 84.4 million of previously accrued long-term co-promotion expenses during the third quarter of 2020.

$ 27.4 million of the recalculated accrued co-promotion expenses remained in the long-term liabilities as of December 31, 2020, as it is not anticipated to be paid within the next 12 months.

Product Development Obligations

3 unchanged sentences

If the research work funded by TEKES does not result in an economically profitable business or does not meet its technological objectives, TEKES may, on application from FibroGen Europe, forgive each of these loans, including accrued interest, either in full or in part.

As of December 31, 2019 and 2018, the Company had USD equivalent of $ 10.6 million and $ 10.8 million of principal outstanding, respectively, and $ 6.2 million and $ 6.0 million of interest accrued, respectively, which were presented in the product development obligations line on the consolidated balance sheets.

As of December 31, 2020 and 2019, the Company had U.S.

Dollar equivalent of $ 11.6 million and $ 10.6 million of principal outstanding, respectively, and $ 7.1 million and $ 6.2 million of interest accrued, respectively, which were presented in the product development obligations line on the consolidated balance sheets.

The Company is not a guarantor of these loans, and these loans are not repayable by FibroGen Europe until it has distributable funds.

Commitments and Contingencies

Lease Obligations

In 2006, upon signing the Company’s above-mentioned long-term property lease agreement with Alexandria, a stand-by letter of credit $ 7.3 million was established which has been included in restricted time deposits on the Company’s consolidated balance sheet.

Starting the fourth quarter of 2016, on an annual basis, a portion of this letter of credit was released.

As a result, the restriction of a $ 2.1 million was removed during the year ended December 31, 2019.

The agreement also included an expansion option to occupy part of an adjacent building, for which the Company gave notice to its landlord that it would not exercise this expansion option .

This resulted in a $ 5.0 million payment liability to the landlord which is being financed over the remaining lease term of its lease.

The related balance was $ 1.5 million as of December 31, 2019, with $ 0.4 million included in accrued and other current liabilities, and $ 1.1 million included in long-term portion of lease obligations on the Company’s consolidated balance sheet.

Contract Obligations

As of December 31, 2020, the Company had outstanding total non-cancelable purchase obligations of $ 86.0 million.

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

The unconditional purchase obligations consisted of the following (in thousands):

Purchase Obligations

Due In The Year Ending December 31,

(in thousands)

Manufacture and supply of roxadustat

Manufacture and supply of pamrevlumab

Other purchases

Total purchase obligations

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.

Future milestone payments for research and pre-clinical stage development programs consisted of up to approximately $ 10.9 million in total potential future milestone payments under the Company’s license agreements with Dana-Farber Cancer Institute, University of Miami and Medarex, Inc.

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

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

Legal Proceedings

The Company a party to various legal actions that arose in the ordinary course of its business.

The Company recognizes accruals for any legal action when it concludes that a loss is probable and reasonably estimable.

The Company did not have any material accruals for any currently active legal action in its consolidated balance sheets as of December 31, 2019 and 2018, as it could not predict the ultimate outcome of these matters, or reasonably estimate the potential exposure.

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.

On April 20, 2020, in response to an invalidation action brought against certain FibroGen United Kingdom patents by Akebia, the United Kingdom court handed down a decision invalidating United Kingdom designations of European Patent Nos.

1463823, 1633333, 2298301, 2322153, and 2322155.

The United Kingdom designation to European Patent No.

2289531 was held to be valid in amended form, but not infringed by Akebia.

The Company and its partner Astellas have filed an appeal of the decision in the United Kingdom Court of Appeal.

The Company did not have material accruals for any currently active legal action in its consolidated balance sheets as of December 31, 2020, as it could not predict the ultimate outcome of these matters, or reasonably estimate the potential exposure.

Indemnification Agreements

2 unchanged sentences

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.

1 unchanged sentence

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

Future milestone payments for research and pre-clinical stage development programs consisted of up to approximately $ 11.0 million in total potential future milestone payments under the Company’s license agreements with Dana-Farber Cancer Institute, University of Miami and Medarex, Inc.

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

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

Equity and Stock-based Compensation

23 unchanged sentences

Among holders of Preferred Shares, holders of shares of Series F Preferred Stock are entitled to be paid in an amount equal to the subscription price of Series F Preferred Stock before any distribution is made to holders of other Preferred Shares.

FibroGen China

FibroGen China had 6,758,000 Series A Preference Shares outstanding as of December 31, 2019 and 2018, respectively.

The holders of the FibroGen China Series A Preference Shares have the following rights, preferences and privileges:

Liquidation — In the event of liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, including by means of a merger, the holders of FibroGen China Series A Preference Shares are entitled to be paid an amount equal to the product of the number of shares held by a holder of shares of FibroGen China Series A Preference Shares and the original issue price of $ 1.00 (subject to equitable adjustment for any stock dividend, combination, split, reclassification, recapitalization) plus all declared and unpaid dividends thereon.

Conversion — Each share of FibroGen China Series A Preference Shares is convertible into the number of fully paid and non-assessable shares of Common Stock of FibroGen China that results from dividing the original issue price by the conversion price in effect at the time of the conversion, subject to adjustments for stock splits, stock dividends, reclassifications and like events.

The FibroGen China Series A Preference Shares have a conversion price that is equal to the original issuance price such that the conversion ratio to FibroGen China Common Stock is 1:

FibroGen Cayman

FibroGen Cayman had 6,758,000 Series A Preference Shares outstanding as of December 31, 2020 and 2019, respectively.

The holders of the FibroGen Cayman Series A Preference Shares have the following rights, preferences and privileges:

Liquidation — In the event of liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, including by means of a merger, the holders of FibroGen Cayman Series A Preference Shares are entitled to be paid an amount equal to the product of the number of shares held by a holder of shares of FibroGen Cayman Series A Preference Shares and the original issue price of $ 1.00 (subject to equitable adjustment for any stock dividend, combination, split, reclassification, recapitalization) plus all declared and unpaid dividends thereon.

Conversion — Each share of FibroGen Cayman Series A Preference Shares is convertible into the number of fully paid and non-assessable shares of Common Stock of FibroGen Cayman that results from dividing the original issue price by the conversion price in effect at the time of the conversion, subject to adjustments for stock splits, stock dividends, reclassifications and like events.

The FibroGen Cayman Series A Preference Shares have a conversion price that is equal to the original issuance price such that the conversion ratio to FibroGen Cayman Common Stock is 1:

1 as of all periods presented.

Voting — The holders of FibroGen China Series A Preference Shares are entitled to vote together with the FibroGen China Common Stock holders on all matters submitted for a vote of the stockholders.

The holder of each share of FibroGen China Series A Preference Shares has the number of votes equal to the number of shares of FibroGen China Common Stock into which it is convertible.

Dividends — The holders of FibroGen China Series A Preference Shares are entitled to receive cash dividends when and if declared, at a rate of 6 %.

Voting — The holders of FibroGen Cayman Series A Preference Shares are entitled to vote together with the FibroGen Cayman Common Stock holders on all matters submitted for a vote of the stockholders.

The holder of each share of FibroGen Cayman Series A Preference Shares has the number of votes equal to the number of shares of FibroGen Cayman Common Stock into which it is convertible.

Dividends — The holders of FibroGen Cayman Series A Preference Shares are entitled to receive cash dividends when and if declared, at a rate of 6 %.

Non-Controlling Interests

10 unchanged sentences

RSUs outstanding

Common stock warrants outstanding

Shares reserved for future stock options and RSUs grant

53 unchanged sentences

Stock-Based Compensation

Stock-based compensation expense allocated to research and development and selling, general and administrative expense for the years ended December 31, 2019, 2018 and 2017 was as follows (in thousands):

Stock-based compensation expense was recorded directly to research and development and selling, general and administrative expense for the years ended December 31, 2020, 2019 and 2018 was as follows (in thousands):

Years Ended December 31,

4 unchanged sentences

The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards.

Prior to the Company’s initial public offering, the Company, in making its determinations of the fair value of its Common Stock, considered a variety of quantitative and qualitative factors, including (i) net present value of the Company’s projected earnings, (ii) fair market value of the stock of comparable publicly-traded companies, (iii) any third party transactions involving the Company’s convertible preferred stock, (iv) liquidation preferences of the Company’s preferred stock and the likelihood of conversion of the preferred stock, (v) changes in the Company’s business operations, financial condition and results of operations over time, including cash balances and burn-rate, (vi) the status of new product development, and (vii) general financial market conditions.

Subsequent to the IPO, the fair market value of common stock is based on the closing price of the Company’s common stock as reported on the NASDAQ Global Select Market on the date of the grant.

The fair value of employee stock-based compensation was estimated using the following assumptions:

The fair market value of common stock is based on the closing price of the Company’s common stock as reported on the NASDAQ Global Select Market on the date of the grant.

The fair value of employee stock-based compensation is estimated using the following assumptions:

Expected Term.

2 unchanged sentences

The Company considers its historical volatility data for volatility considerations for its ESPP.

The expected volatility for all other stock-based compensation is currently based upon the historical volatility of comparable public entities.

In evaluating comparable companies, the Company considered factors such as industry, stage of life cycle, size and duration as a public company.

Historically, the expected volatility for all other stock-based compensation was based upon a blend of the Company’s and comparable public entities’ historical volatility.

Since the third quarter of 2020, the expected volatility for all other stock-based compensation is currently based upon the Company’s historical volatility data.

Risk-Free Interest Rate.

18 unchanged sentences

As of December 31, 2020, there was $ 55.5 million of total unrecognized compensation costs, net of estimated forfeitures, related to non-vested RSUs granted that will be recognized on a straight-line basis over the weighted-average period of 2.73 years.

During the year ended December 31, 2019, a warrant to purchase 4,430 shares of our common stock was exercised and there was no warrant to purchase shares of Common Stock outstanding at December 31, 2019.

Net Loss Per Share

3 unchanged sentences

FibroGen, Inc.

Substantially all of the Company’s full-time United States of America-based employees are eligible to make contributions to the Company’s 401(k) Plan.

Substantially all of the Company’s full-time U.S.-based employees are eligible to make contributions to the Company’s 401(k) Plan.

Under this plan, participating employees may defer up to 60 % of their pretax salary during the year, but not more than statutory limits.

13 unchanged sentences

Stock-based compensation expense

Change in deferred tax assets due to rate change

Change in valuation allowance due to rate change

Benefit due to intercompany transfer of assets

Valuation allowance on intercompany transfer of assets

Net operating losses not benefitted

Foreign net operating losses not benefitted

Orphan drug credit

Deduction limitation on executive compensation

7 unchanged sentences

Deferred revenue

Intangible assets

Valuation allowance

6 unchanged sentences

Due to uncertainty surrounding the realization of the favorable tax attributes in the future tax returns, the Company has established a valuation allowance against its otherwise recognizable net deferred tax assets.

During 2020, the Company transferred certain intellectual property rights relating to its Chinese business between its wholly owned subsidiaries that are based in different tax jurisdictions.

The transferor entity was not subject to income taxes in its local jurisdiction.

The acquiring entity of the intellectual property is entitled to amortize the acquisition price of the intangible assets for tax purposes.

In accordance with ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory , the Company recognized a deferred tax asset of $ 78.7 million for the temporary difference arising from the acquirer’s excess tax basis.

Furthermore, based upon the weight of available evidence, the Company recognized a full valuation allowance against this deferred tax asset since it does not currently believe that realization of this gross deductible temporary difference is more likely than not.

Accordingly, this inter-company transfer did not have a material impact to the Company’s consolidated financial statements.

At December 31, 2020, the Company had net operating loss carryforwards available to offset future taxable income of approximately $ 606.8 million and $ 133.6 million for federal and state tax purposes, respectively.

3 unchanged sentences

The federal credits begin to expire in 2021 and the California research credits have no expiration dates.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law making significant changes to the Internal Revenue Code.

Changes include, but are not limited to, a corporate tax rate decrease from 35 % to 21 % effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings.

In the fourth quarter of 2018, the Company completed its analysis to determine the effect of the Tax Act and no material adjustments were recognized as of December 31, 2018.

Developing interpretations of the provisions of the Tax Act, changes to U.S.

Treasury regulations, administrative interpretations or court decisions interpreting the Tax Act in the future periods may require further adjustments to the Company’s analysis.

Federal and state tax laws impose substantial restrictions on the utilization of net operating loss and credit carryforwards in the event of an “ownership change” for tax purposes, as defined in IRC Section 382.

10 unchanged sentences

Increase due to current year position

Decrease due to U.S.

tax rate change

Balance as of December 31, 2018

Increase due to prior positions

Decrease due to prior positions

Increase due to current year position

15 unchanged sentences

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

During the years ended December 31, 2019, 2018 and 2017, the Company recorded revenue related to collaboration agreements with Astellas of $ 122.5 million, $ 100.0 million, and $ 20.1 million, respectively.

The related party revenue for the year ended December 31, 2019 included a change in estimated variable consideration that resulted in a $ 36.3 million reduction to revenue related to the product revenue of $ 64.8 million for API recorded in 2018.

See Note 3 and below for details.

During the years ended December 31, 2020, 2019 and 2018, the Company recorded license and development revenue related to collaboration agreements with Astellas of $ 33.5 million, $ 158.8 million, and $ 35.2 million, respectively.

During the years ended December 31, 2020, 2019 and 2018, the Company also recorded drug product revenue from Astellas of $ 4.3 million, $( 36.3 ) million, and $ 64.8 million, respectively.

The drug product revenue from Astellas for the year ended December 31, 2020 included $ 8.2 million under the Japan Agreement, and a $ 4.0 million reduction to revenue as a change in estimated variable consideration at the time an updated listed price for roxadustat was issued by the Japanese Ministry of Health, Labour and Welfare related to roxadustat API sales in 2018.

The drug product revenue from Astellas for the year ended December 31, 2019 included a change in estimated variable consideration that resulted in a $ 36.3 million reduction to revenue related to the product revenue of $ 64.8 million for API recorded in 2018.

See Note 4, Collaboration Agreements and Revenues , for details.

During the years ended December 31, 2020, 2019 and 2018, the Company recorded expense related to collaboration agreements with Astellas of $ 0.5 million, $ 2.8 million and $ 1.5 million, respectively.

As of December 31, 2019 and 2018, accounts receivable from Astellas were $ 4.8 million and $ 47.2 million, respectively, and amounts due to Astellas were $ 36.9 million and $ 0.4 million, respectively.

The amounts due are included in accrued liabilities on the consolidated balance sheets.

The accounts receivable from Astellas as of December 31, 2018 included $ 43.8 million related to the delivery of roxadustat API to Astellas during the fourth quarter of 2018.

The sale of API was pursuant to the Japan Amendment allowing Astellas to manufacture roxadustat drug product for commercialization in Japan.

The amount was received during the first quarter of 2019.

The amounts due to Astellas as of December 31, 2019 included $ 36.3 million of a change in estimated variable consideration related to the API product revenue recognized in 2018, at the time the roxadustat listed price was issued by the Japanese Ministry of Health, Labour and Welfare.

Refer to Note 3 for details.

Prepaid expenses and other current assets as of December 31, 2019 included $ 125.2 million of net unbilled contract assets, representing a $ 130.0 million unbilled contract asset related to two regulatory milestones under the Europe Agreement with Astellas associated with the planned MAA submission to the EMA, net of $ 4.8 million of associated deferred revenue.

See Note 3 for details.

As of December 31, 2020 and 2019, accounts receivable from Astellas were $ 4.1 million and $ 4.8 million, respectively.

As of December 31, 2020 and 2019, total deferred revenue from Astellas were $ 7.5 million and $ 0.4 million, respectively.

As of December 31, 2019, prepaid expenses and other current assets from Astellas was $ 125.2 million of net unbilled contract assets, representing a $ 130.0 million unbilled contract asset related to two regulatory milestones under the Europe Agreement with Astellas associated with the planned MAA submission to the EMA, net of $ 4.8 million of associated deferred revenue.

According to the Europe Agreement, this $ 130.0 million is not billable to Astellas until the submission of an MAA, therefore the net contract asset was included in the prepaid expenses and other current assets line on the Company’s consolidated balance sheet as of December 31, 2019.

The $ 130.0 million was billed to Astellas upon the submission of an MAA in the second quarter of 2020.

There was no such contract asset balance as of December 31, 2020.

See Note 4, Collaboration Agreements and Revenues , for details.

As of December 31, 2020 and 2019, amounts due to Astellas were $ 1.1 million and $ 36.9 million, respectively.

The amounts due are included in accrued liabilities and accounts payable on the consolidated balance sheets.

The amount as of December 31, 2019 included the above-mentioned $ 36.3 million of a change in estimated variable consideration related to the API product revenue recognized in 2018, which was fully paid during the first quarter of 2020.

In September 2020, FibroGen Beijing and AstraZeneca completed the establishment of a jointly owned entity, Falikang, which was determined to be an unconsolidated VIE.

As such, Falikang is accounted for as an equity method investment, and considered as a related party to the Company.

The Company’s total investments in Falikang was approximately $ 2.8 million, which is the total of the 51.1 % of Falikang’s equity and the acquisition costs.

In addition, the Company recognized its proportionate share of the reported profits or losses of Falikang, b eginning September 15, 2020, as other income (loss) in the consolidated statement of operations, and as an adjustment to its investment in unconsolidated subsidiary in the condensed consolidated balance sheet.

Falikang has not incurred material profit or loss to date.

As of December 31, 2020, the Company’s equity method investment in Falikang was $ 2.7 million , and prepaid expenses and other current assets included its miscellaneous receivables of $ 0.9 million from Falikang.

See Note 3, Acquisition and Variable Interest Entity , for details .

Segment and Geographic Information

7 unchanged sentences

Years Ended December 31,

Japan (related party)

Total revenue

Revenues to other regions include the Company commercial sales of roxadustat drug product in China starting in the third quarter of 2019.

See Note 3 for details.

Geographic Long-Lived Assets

Geographic Assets

Inventory by geographic location are as follows (in thousands):

United States

Total inventory

Property and equipment, net by geographic location are as follows (in thousands):

7 unchanged sentences

Customer Concentration

Substantially all of the Company’s revenues to date have been generated from the following collaboration partners that respectively accounted for 10% or more of the Company’s total revenue and accounts receivable:

The Company’s revenues to date have been generated from the following collaboration partners that respectively accounted for 10% or more of the Company’s total revenue and accounts receivable:

Percentage of Revenue

2 unchanged sentences

Astellas—Related party

The Company started selling roxadustat in China since late 2019 through a growing number of pharmaceutical distributors located in China.

For the year ended December 31, 2020, the aggregate revenue from distributors represented 42 % of the consolidated revenue, with no individual distributor representing over 10% of the total revenue.

As of December 31, 2020, the aggregate accounts receivable from distributors represented 64 % of the consolidated accounts receivable, with no material balance from any individual distributor.

The aggregate revenue from distributors for the year ended December 31, 2019 and the aggregate accounts receivable from distributors as of December 31, 2019 were immaterial.

Valuation and Qualifying Accounts

4 unchanged sentences

Year ended December 31, 2018

Allowances for rebates and discounts

Year ended December 31, 2020

Year ended December 31, 2019

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

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-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk