What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-02-28 compared with 2021-03-01 · 559 added, 509 removed, 1059 unchanged (50% of the section changed)

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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.

Currently, the functional currency of our subsidiaries, FibroGen Europe Oy and FibroGen Beijing, is the local currency.

Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the U.S., 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.

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We also seek to maximize income from our cash and cash equivalents without assuming significant risk.

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

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

To achieve our objectives, we invest our non-operating cash and cash equivalents primarily in money market funds as of December 31, 2021.

Given the nature of our investments as of December 31, 2021, we believe that our exposure to interest rate risk is not significant.

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FibroGen, Inc.

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Financial Statements:

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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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

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.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

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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 report referred to above.

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.

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.

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Critical Audit Matters

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 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.

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.

Determining the Transaction Price for Product Revenue Recognition for Sales to Beijing Falikang Pharmaceutical Co., Ltd.

As described in Notes 2 and 3 to the consolidated financial statements, with respect to the roxadustat commercial product, r evenue is recognized at a point in time when control of the product is transferred to Falikang.

Total product revenue, net recognized related to sales to Falikang was $35.6 million for the year ended December 31, 2021.

Revenue is recognized based on the estimated transaction price per unit and the actual quantity of product delivered to Falikang during the reporting period .

The estimated transaction price per unit is determined based on the overall transaction price over the total estimated sales quantity for the estimated performance period in which management determined it is likely those sales would occur.

Management applied significant judgment in determining the transaction price per unit, which involved the use of significant assumptions such as (i) the estimated total gross transaction price and profit share, (ii) the estimated total sales quantity, and (iii) the estimated performance period in which the Company determined it is likely those sales would occur.

The principal considerations for our determination that performing procedures relating to determining the transaction price for product revenue recognition for sales to Falikang is a critical audit matter are the significant judgment by management when determining the transaction price per unit, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s significant assumptions related to the estimated total gross transaction price, estimated total sales quantity, and estimated performance period over which the Company determined it is likely those sales would occur.

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.

These procedures included testing the effectiveness of controls relating to revenue recognition, including controls over the determination of the transaction price per unit for sales to Falikang.

These procedures also included, among others, testing management’s process for determining the transaction price per unit, which included evaluating the appropriateness of the method, testing the completeness and accuracy of the data used in the method, and evaluating the reasonableness of significant assumptions related to the estimated total gross transaction price, estimated total sales quantity, and estimated performance period over which the Company determined it is likely those sales would occur.

Evaluating the reasonableness of the significant assumptions used by management involved evaluating whether the assumptions were reasonable considering (i) the current and historical transaction price and quantity, (ii) the consistency with external market, industry and regulatory data, (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit, and (iv) patent expiration and market exclusivity.

/s/ PricewaterhouseCoopers LLP

San Jose, California

March 1, 2021

February 28, 2022

We have served as the Company’s auditor since 2000.

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Short-term investments

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

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

related parties)

Accounts receivable, net ($ 10,930 and $ 4,127 from related parties)

Prepaid expenses and other current assets ($ 0 and $ 889 from a related party)

Total current assets

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Equity method investment in unconsolidated variable interest entity

Operating lease right-of-use assets

Liabilities, stockholders’ equity and non-controlling interests

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Accrued and other current liabilities ($ 4 and $ 24 to a related party)

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

Deferred revenue ($ 3,201 and $ 2,907 to related parties)

Finance lease liabilities, current

Operating lease liabilities, current

Total current liabilities

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Finance lease liabilities, non-current

Operating lease liabilities, non-current

Other long-term liabilities

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Years Ended December 31,

License revenue (includes $ 14,323 , $ 129,405 and $ 14,323

from a related party)

Development and other revenue (includes $ 19,174 , $ 29,393

License revenue (includes $ 108,434 , $ 14,323

and $ 129,405 from a related party)

Product revenue, net

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

Development and other revenue (includes $ 21,928 , $ 19,174

and $ 29,393 from a related party)

Product revenue, net (includes $ 35,568 , $ 0 and $ 0 from

a related party)

Drug product revenue (includes $ 3,186 , $ 4,281 and

$( 36,324 ) from a related party)

Total revenue

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Interest expense

Investment loss in unconsolidated variable interest entity

Interest income and other, net

Interest income and other income (expenses), net

Total interest and other, net

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Provision for income taxes

Investment income (loss) in unconsolidated variable

interest entity

Net loss per share - basic and diluted

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Years Ended December 31,

Net income (loss)

Other comprehensive income (loss):

Foreign currency translation adjustments (Note 2)

Foreign currency translation adjustments

Available-for-sale investments:

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Other comprehensive income (loss), net of taxes

Comprehensive income (loss)

Comprehensive loss

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

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Balance at December 31,

Impact of adoption of

ASC 842 (Note 2)

Impact of change in

accounting principle

upon adoption of

ASU 2016-01 (Note 2)

upon adoption of ASU

2018-02 (Note 2)

Change in unrealized gain

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translation adjustments

Adjustment to issuance

costs for Follow-on

Shares issued from stock

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Stock-based compensation

Warrants exercised

Balance at December 31,

Impact of adoption of

ASC 842 (Note 2)

Impact of change in

accounting principle

upon adoption of ASU

2018-02 (Note 2)

Change in unrealized gain

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plans, net of payroll

Warrants exercised

Stock-based compensation

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Stock-based compensation

Conversion of subsidiary's

convertible note payable

Balance at December 31,

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Amortization of finance lease right-of-use assets

Net accretion of discount on investments

Unrealized loss (gain) on equity investments

Investment loss in unconsolidated variable interest entity

Net accretion of premium and discount on investments

Unrealized loss on equity investments

Investment (gain) loss in unconsolidated variable interest entity

Loss (gain) on disposal of property and equipment

Stock-based compensation

Realized foreign currency gain

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

Expense for acquired in-process research and development asset

Realized loss 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)

Accounts receivable, net ($( 6,803 ), $ 718 and $ 42,365 from related parties)

Prepaid expenses and other current assets ($ 889 , $ 124,321

and $( 125,210 ) from a related party)

Operating lease right-of-use assets

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

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

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

Lease obligations

Accrued and other liabilities ($( 20 ), $( 36,859 ) and $ 36,439 from

a related party)

Operating lease liabilities, current

Deferred revenue ($ 21,549 , $ 7,169 and $( 3,137 ) from related parties)

Accrued interest for finance lease liabilities

Operating lease liabilities, non-current

Other long-term liabilities

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Purchases of property and equipment

Payment made for acquired in-process research and development asset

Payment made for investment in unconsolidated variable interest entity

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Proceeds from sale of property and equipment

Purchases of available-for-sale securities and term deposit

Purchases of available-for-sale securities

Proceeds from sales of available-for-sale securities

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Financing activities

Borrowings under capital lease obligations

Repayments of capital lease obligations

Repayments of finance lease liabilities

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property and equipment

Deferred offering costs recorded in accounts payable and accrued liabilities

Balance in accrued liabilities related to acquired in-process research

and development asset

Balance in other receivables related to stock option exercise

Conversion of subsidiary's convertible note payable to non-controlling interests

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

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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”) 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 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 idiopathic pulmonary fibrosis, locally advanced unresectable pancreatic cancer and Duchenne muscular dystrophy.

FibroGen applies its pioneering expertise in hypoxia-inducible factor biology, 2-oxoglutarate enzymology, and connective tissue growth factor biology to advance innovative medicines for the treatment of anemia, fibrotic disease, and cancer.

Roxadustat is FibroGen’s most advanced product, an oral small molecule inhibitor of hypoxia-inducible factor prolyl hydroxylase activity.

Roxadustat is currently approved for use in patients with anemia associated with chronic kidney disease (“CKD”) in China (2019), Japan (2020) and Europe (2021), under the tradename EVRENZO ® .

Roxadustat is also being commercialized in China for CKD anemia in dialysis and non-dialysis patients under the tradename:

Roxadustat is in Phase 3 clinical development for anemia associated with myelodysplastic syndromes and Phase 2 clinical development for chemotherapy-induced anemia.

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

In the second quarter of 2021, the Food and Drug Administration (“FDA”) granted both Rare Pediatric Disease designation and Fast Track designation for pamrevlumab for the treatment of patients with Duchenne Muscular Dystrophy.

In addition, the FDA has granted Orphan Drug Designation to pamrevlumab for the treatment of idiopathic pulmonary fibrosis, locally advanced unresectable pancreatic cancer, and Duchenne Muscular Dystrophy.

Pamrevlumab has also received Fast Track designation from the FDA for the treatment of both idiopathic pulmonary fibrosis and locally advanced unresectable pancreatic cancer.

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

Summary of Significant Accounting Policies

Basis of Presentation

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

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

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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.

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

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

Certain prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications and recalculations had no impact on previously reported financial position, results of operations, or cash flows.

Foreign Currency Translation

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(“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.

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.

The more significant areas requiring the use of management estimates and assumptions include valuation and recognition of revenue.

The more significant areas requiring the use of management estimates and assumptions include valuation and recognition of revenue, specifically, estimates in variable consideration for drug product sales, and estimates in transaction price per unit for the China performance obligation (as defined and discussed under Revenue Recognition below).

On an ongoing basis, management reviews these estimates and assumptions.

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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.

As of December 31, 2021, the accounts receivable related to roxadustat sales in China from Beijing Falikang Pharmaceutical Co., Ltd.

(“Falikang”) and direct sales to distributors were not material.

As of December 31, 2020, the aggregate accounts receivable related to roxadustat sales in China 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, 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

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

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

As of December 31, 2021, the Company’s investments consist primarily of diversified bonds, commercial paper, and asset-backed securities.

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.

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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 5, Fair Value Measurements ).

Trade accounts receivable

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Leasehold improvements are recorded at cost and amortized over the term of the lease or their useful life, whichever is shorter.

Equity method investment - 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 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.

The Company determines if an arrangement is or contains a lease at inception date when it is given control of the underlying assets.

The Company elected the practical expedient not to apply the lease recognition and measurement requirements to short-term leases, which is any lease with a term of 12 months or less as of the commencement date that does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

The Company’s building leases previously accounted for as build-to-suit arrangements prior to the adoption of Accounting Standards Codification (“ASC”) 842 - Leases (“ASC 842”) are accounted for as finance leases under the requirements of ASC 842.

Lease right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

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The Company reassesses the incremental borrowing rate periodically for application to any new leases or lease modifications, which approximates the rate at which the Company would borrow, on a secured basis, in the country where the lease was executed.

For any lease modification, the Company reassesses the lease classification, remeasures the related lease liability using an updated discount rate, and adjusts the related ROU asset under the lease modification guidance under the ASC 842.

Lease ROU assets include any lease payments made and initial direct costs incurred.

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Finance leases are included in finance lease ROU assets, finance lease liabilities, current and non-current on the Company’s consolidated balance sheets.

Operating leases are included in other assets, accrued and other current liabilities, and other long-term liabilities on the Company’s consolidated balance sheets.

Operating leases are included in operating lease ROU assets, operating lease liabilities, current and non-current on the Company’s consolidated balance sheets.

Impairment of Long-Lived Assets

The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets may warrant revision or that the carrying value of these assets may be impaired.

If the Company determines that an impairment trigger has been met, the Company evaluates the realizability of its long-lived assets based on a comparison of projected undiscounted cash flows from use and eventual disposition with the carrying value of the related asset.

If the Company determines that an impairment trigger has been met, the Company evaluates the realizability of its long-lived assets (asset group) based on a comparison of projected undiscounted cash flows from use and eventual disposition with the carrying value of the related asset.

Any write-downs (which are measured based on the difference between the fair value and the carrying value of the asset) are treated as permanent reductions in the carrying amount of the assets (asset group).

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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 4, Collaboration Agreements and Revenues .

The Company’s process for identifying performance obligations and an enumeration of each obligation for each agreement is outlined in Note 3, Collaboration Agreements, License Agreement 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.

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(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 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.

The evaluation as to whether these promises are distinct, and therefore represent separate performance obligations, is described in more detail in Note 3, Collaboration Agreements, License Agreement and Revenues .

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

In each agreement, the contract term is defined as the period in which parties to the contract have present and enforceable rights and obligations.

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For arrangements that include sales-based royalties and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

To date, the Company has not recognized any royalty revenue resulting from its collaboration arrangements.

To date, royalty revenue resulting from its collaboration arrangements was immaterial.

The transaction price is allocated to performance obligations based on their relative standalone selling price (“SSP”), with the exception of co-development billings allocated entirely to co-development services performance obligations.

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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 4, Collaboration Agreements and Revenues .

An enumeration of the Company’s significant judgments is outlined in Note 3, Collaboration Agreements, License Agreement 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.

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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.

License revenue

Under a license agreement, if the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from upfront license fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license.

For licenses that are bundled with other promises, the Company determines whether the combined performance obligation is satisfied over time or at a point in time.

If the combined performance obligation is satisfied over time, the Company uses judgment in determining the appropriate method of measuring progress for purposes of recognizing revenue from the up-front license fees.

The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Product revenue, net

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

Product revenue, net consists of revenues from sales of roxadustat commercial product to Falikang, and directly to pharmaceutical distributors located in a few provinces in China that are not covered by Falikang.

Falikang is jointly owned by AstraZeneca and FibroGen Beijing.

The Company is not the primary beneficiary of Falikang for accounting purposes, as AstraZeneca is the final decision maker for all the roxadustat commercialization activities, and the Company lacks the power criterion to direct the activities of Falikang (see Note 4, Equity method investment - Variable Interest Entity ).

Sales to Falikang

Falikang became fully operational in January 2021, at which time FibroGen Beijing began selling roxadustat commercial product to Falikang.

Falikang is FibroGen Beijing’s primary customer in China and substantially all roxadustat product sales to distributors in China are made by Falikang.

Falikang bears inventory risk once it receives and accepts the product from FibroGen Beijing, and is responsible for delivering product to its distributors.

The promises identified under the AstraZeneca China Agreement (as defined in Note 3, Collaboration Agreements, License Agreement and Revenues ), including the license, co-development services and manufacturing of commercial supplies have been bundled into a single performance obligation (“China performance obligation”).

Amounts of the transaction price allocable to this performance obligation under the Company’s agreements with AstraZeneca as outlined in Note 3, Collaboration Agreements, License Agreement and Revenues, are deferred until control of the manufactured commercial product is transferred to AstraZeneca.

The initiation of roxadustat sales to Falikang marked the beginning of the China performance obligation .

Revenue is recognized at a point in time when control of roxadustat commercial product is transferred to Falikang.

Revenue is recognized based on the estimated transaction price per unit and actual quantity of product delivered during the reporting period.

Specifically, the transaction price per unit is determined based on the overall transaction price over the total estimated sales quantity for the estimated performance period in which the Company determined it is likely those sales would occur.

The price per unit is subject to reassessment on a quarterly basis, which may result in cumulative catch up adjustments due to changes in estimates.

The overall transaction price for FibroGen Beijing’s product sales to Falikang includes the following elements of consideration:

Non-refundable upfront license fees;

development, regulatory, and commercial milestone payments based on the China Agreement allocated to the China performance obligation;

Co-development billings resulting from the Company’s research and development efforts, which are reimbursable under the China Agreement;

Interim profit/loss share between FibroGen Beijing and AstraZeneca from April 1, 2020 through December 31, 2020;

Net transaction price from product sales to Falikang from January 1, 2021 onwards.

The net transaction price includes the following elements:

Gross transaction price:

The gross transaction price is based on a percentage of Falikang’s net sales to its distributors, which takes into account Falikang’s operating expenses and its payments to AstraZeneca for roxadustat sales and marketing efforts, capped at a percentage of Falikang’s net roxadustat sales.

Profit share:

The gross transaction price is then adjusted for an estimated amount to achieve the 50 /50 profit share from current period roxadustat net sales in China.

The adjustments to date have been a reduction to the transaction price and the related accounts receivable from Falikang.

The non-refundable upfront license fees constitute a fixed consideration.

The remainder of the above are variable consideration components, which may be constrained, and included in the transaction price 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.

The calculation of the above variable consideration includes significant assumptions such as total sales quantity, performance period, gross transaction price and profit share, which require a significant judgment.

Any net transaction price in excess of the revenue recognized is deferred, and will be recognized over future periods as the performance obligations are satisfied.

Direct Sales to Distributors

The Company sells roxadustat in China directly to a number of pharmaceutical distributors located in a few provinces in China that are not covered by Falikang.

These pharmaceutical distributors are the Company’s customers.

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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 to in exchange for the product.

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.

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

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

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

Product 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 that includes the following estimates of variable consideration:

Price adjustment:

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.

The price adjustment is calculated based on estimated channel inventory levels at January 1, 2020.

If price guidance changes in the future, the price adjustment will be calculated in the same manner;

When China’s National Healthcare Security Administration releases price guidance for roxadustat under the National Reimbursement Drug List, any channel inventories that have not been sold through by distributors, or to patients by hospitals and retailers, would be eligible for a price adjustment under the price protection.

The price adjustment is calculated based on estimated channel inventory levels;

Contractual sales rebate:

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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 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 recorded as a reduction to revenue as incurred;

Sales return :

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 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.

For the year ended December 31, 2020, t he non-key account hospital listing award was capitalized when the distributor meets eligibility requirements, and amortized as reduction to product revenue over future sales orders made by the distributor until exhausted .

For the year ended December 31, 2021, the non-key account hospital listing award was immaterial and recorded as a reduction to revenue when distributor meets eligibility requirements ;

Other discounts and rebates, including key account hospital sales rebate and transfer fee discount, are generally based on a percentage of eligible gross sales made by the distributor and recorded as a reduction to revenue at the point of sale to the distributor;

Sales returns:

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.

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.

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

Drug product revenue

Drug product revenue includes commercial-grade API or bulk drug product sales to AstraZeneca and Astellas in support of pre-commercial preparation prior to the New Drug Application (“NDA”) or Marketing Authorization Application approval, and to Astellas for ongoing commercial launch in Japan and Europe.

Drug product revenue is recognized when the Company fulfills the inventory transfer obligations.

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 revenue adjustment, if certain and material.

The total amount constrained as of December 31, 2021 was $ 88.8 million related to the drug product shipments to Astellas and AstraZeneca.

License Acquisition Agreement

In June 2021, the Company entered into an exclusive license and option agreement (the “HiFiBiO Agreement”) with HiFiBiO Therapeutics (“HiFiBiO”), pursuant to which the Company exclusively licensed all product candidates in HiFiBiO’s Galectin-9 program.

Pursuant to its option, the Company has also exclusively licensed all product candidates in HiFiBiO’s CCR8 program in December 2021.

The Company has declined to exercise its option to HiFiBiO’s CXCR5 program, however, it is pursuing a replacement option program as specified under the HiFiBiO Agreement.

Under the terms of the HiFiBiO Agreement, the Company has paid a $ 25.0 million upfront payment to HiFiBiO during the year ended December 31, 2021, and recorded a $ 35.0 million upfront payment for the CCR8 option exercise in accrued liabilities as of December 31, 2021, which was paid during the first quarter of 2022.

In addition, HiFiBiO may receive up to a total of an additional $ 1.1 billion in future option, clinical, regulatory, and commercial milestone payments across all three potential programs.

HiFiBiO will also be eligible to receive royalties based upon worldwide net sales.

The acquisition of these licenses was accounted for as an asset acquisition.

The above-mentioned upfront payments of $ 60.0 million related to the license and options acquisition meets the definition of an in-process research and development asset (“IPR&D asset”) under the ASC 730, Research and Development .

They relate to particular research and development projects and are determined to have no alternative future uses and thus have no separate economic value.

Therefore, these upfront payments were recorded as research and development expenses during the year ended December 31, 2021, and the cash payment of $ 25.0 million during the year ended December 31, 2021 was reflected as an investing activity in the consolidated statement of cash flows.

Contingent consideration payments will be evaluated and recognized when they become probable and reasonably estimable.

The related IPR&D asset will only be capitalized if it has an alternative future use other than in a particular research and development project.

Otherwise, amounts allocated to IPR&D asset that have no alternative use will be expensed.

As of December 31, 2021, all programs were at the early stage of development and the contingencies related to the milestone payments had not been resolved, therefore no contingent consideration was recognized.

The Company will reassess the probability of future option payments and contingent payments on a quarterly basis.

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 expenses consist of above-mentioned expense for acquired IPR&D asset, 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, other clinical and preclinical costs and allocated direct and indirect overhead costs, such as facilities costs, information technology costs and other overhead.

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Selling, general and administrative (“SG&A”) expenses consist primarily of employee-related expenses for executive, operational, finance, legal, compliance and human resource functions.

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

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

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.

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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.

See Note 1 2 , 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.

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Recently Issued and Adopted Accounting Guidance

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

This guidance simplifies the accounting for income taxes by clarifying and amending existing guidance related to the recognition of franchise tax, the evaluation of a step up in the tax basis of goodwill, and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications.

This guidance was effective for annual reporting periods beginning after December 15, 2020 including interim periods.

The Company adopted this guidance on January 1, 2021, and the adoption of this guidance did not have material impact to the Company’s consolidated financial statements and related disclosures.

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

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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 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, 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

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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 is in the process of evaluating options for transitioning away from LIBOR and expects to complete this analysis 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, 2021 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.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

This guidance is effective for annual reporting periods beginning after December 15, 2020 including interim periods, with early adoption permitted.

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.

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

Collaboration Agreements, License Agreement and Revenues

Astellas Agreements

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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.

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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:

In September 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 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.

The Company evaluated the regulatory milestone payment associated with NDA submission in Japan based on variable consideration requirements under the current revenue standards and concluded that this milestone became probable of being achieved in the second quarter of 2018.

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.

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.

The aggregate amount of the considerations received under the Japan Agreement, through December 31, 2021 totals $ 105.1 million, excluding drug product revenue that is discussed separately below.

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”).

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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.

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 $ 2.1 million, $ 4.3 million and $( 36.3 ) million in the years ended December 31, 2021, 2020 and 2019, respectively.

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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 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.

During the third quarter of 2021, the European Commission approved EVRENZO ® (roxadustat) for the treatment of adult patients with symptomatic anemia associated with CKD.

Astellas has launched EVRENZO in Germany, the United Kingdom, the Netherlands, and Austria.

This approval triggered a total of $ 120.0 million milestone payable to the Company by Astellas under the Europe Agreement.

Accordingly, the consideration of $ 120.0 million associated with these milestones was included in the transaction price and allocated to performance obligations under the Europe Agreement, all of which was recognized as revenue during the year ended December 31, 2021 from performance obligations satisfied.

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 a Marketing Authorization Application (“MAA”) submission to the European Medicines Agency 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 and $ 0.8 million was recognized as revenue during the year ended December 31, 2020, from performance obligations satisfied or partially satisfied.

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 immaterial amounts for the years ended December 31, 2021 and 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.

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

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 second quarter of 2024 to allow for development of this indication.

The aggregate amount of the considerations received under the Europe Agreement through December 31, 2021 totals $ 660.0 million, excluding drug product revenue that is discussed separately below.

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

U.S./Rest of World (“RoW”) Agreement

Effective July 30, 2013, the Company entered into a collaboration agreement with AstraZeneca for the development and commercialization of roxadustat for the treatment of anemia in the U.S.

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

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

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, (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.

the Company’s share of development costs is $ 116.5 million, which was reached in 2015).

Development costs incurred by FibroGen during the development period in excess of the $ 233.0 million (aggregated spend) are fully reimbursed by AstraZeneca.

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 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 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

Effective July 30, 2013, the Company (through its subsidiaries affiliated with China) entered into a collaboration agreement with AstraZeneca for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in China (“China Agreement”).

Under the terms of the China Agreement, AstraZeneca agreed to pay upfront consideration totaling $ 28.2 million (such amounts were fully received in 2014).

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), 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 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 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.

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.

The Company fulfilled an inventory transfer obligation under the terms of the Europe Agreement in the fourth quarter of 2020.

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

The Company transferred bulk drug product to Astellas as pre-commercial supply for process validation purposes during the first quarter and commercial product during the fourth quarter of 2021.

The Company recognized the related fully burdened manufacturing costs of $ 1.0 million as drug product revenue during the year ended December 21, 2021, and recorded the consideration of $ 25.9 million from these inventory transfers as deferred revenue as of December 31, 2021.

See details under Drug Product Revenue section below.

Accounting for the Astellas Agreements

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Manufacturing rights.

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.

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 op posed 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 avail able third parties in order to benefit from the license.

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.

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.

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.

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The measure of progress is updated each reporting period.

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 second quarter of 2024 .

Co-development services related to CKD continued over its development period through August 2021 .

In addition, the Company accounts for the indications related to chemotherapy-induced anemia and myelodysplastic syndromes separately through the end of 2021 and the third quarter of 2024, respectively.

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

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

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.

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 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, the drug product revenue amount represents variable consideration and is estimated based on the quantity of product transferred 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.

AstraZeneca Agreements

U.S./Rest of World (“RoW”) Agreement

Effective July 30, 2013, the Company entered into a collaboration agreement with AstraZeneca for the development and commercialization of roxadustat for the treatment of anemia in the U.S.

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

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

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

the Company’s share of development costs is $ 116.5 million, which was reached in 2015).

Development costs incurred by FibroGen during the development period in excess of the $ 233.0 million (aggregated spend) are fully reimbursed by AstraZeneca.

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 .

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 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 immaterial amounts were recognized as revenue during the years ended December 31, 2021 and 2020, from performance obligations satisfied or partially satisfied.

This milestone was fully received in April 2020.

The aggregate amount of the considerations received under the U.S./RoW Agreement through December 31, 2021 totals $ 439.0 million, excluding drug product revenue that is discussed separately below.

The Company shipped bulk drug product to AstraZeneca as commercial supply during 2020, and the first and second quarter of 2021.

In August 2021, the FDA Issued a complete response letter regarding roxadustat’s NDA for the treatment of anemia due to CKD in adult patients, stating that it could not be approved in its present form.

The Company evaluated the impact of these developments in revising its estimates of variable consideration associated with drug product revenue and updated the estimated transaction price, and recorded $ 11.2 million as deferred revenue as of December 31, 2021.

See details under Drug Product Revenue section below.

China Agreement

Under the terms of the China Agreement, AstraZeneca agreed to pay upfront consideration totaling $ 28.2 million (such amounts were fully received in 2014).

In December 2019, roxadustat has been included on the updated National Reimbursement Drug List (“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 combined arrangement, of which $ 18.7 million was recognized as revenue during the year ended December 31, 2019.

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

The Company continued to recognize related revenue during the years ended December 31, 2021 and 2020, from performance obligations satisfied or partially satisfied, and the amounts were not material.

The aggregate amount of the considerations received for milestone and upfront payments under the China Agreement through December 31, 2021 totals $ 77.2 million.

China Amendment

In July 2020, FibroGen Cayman, FibroGen Beijing, and FibroGen International (Hong Kong) Limited (collectively, “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 performs roxadustat distribution, as well as conduct sales and marketing through AstraZeneca.

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

Falikang became fully operational in January 2021.

The calculation for profit or loss share related to sales of roxadustat in China has changed 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.

As a result, the interim period during the year ended December 31, 2020 primarily included the following activities:

Co-promotion expenses:

The co-promotion expenses for the years ended December 31, 2021 and 2020, capped at a percentage of net roxadustat sales in China, were $ 4.7 million and $ 27.2 million, respectively, included in the selling, general and administrative expenses.

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 $ 7.9 million and $ 7.0 million to AstraZeneca as of December 31, 2021 and 2020, respectively, in the accrued and other current liabilities, which correspondingly reduced the deferred revenue related to the performance obligation in accordance with the China Agreement.

Since Falikang became fully operational in January 2021, substantially all direct roxadustat product sales to distributors in China are made by Falikang, while FibroGen Beijing continues to sell roxadustat product directly in a few provinces in China.

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

In addition, AstraZeneca now bills the co-promotion expenses to Falikang and to FibroGen Beijing, respectively, for its services provided to the respective entity.

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

During the year ended December 31, 2021, the Company recognized $ 35.6 million of net product revenue from the sales to Falikang, as described in details under Product Revenue, Net section below.

In addition to sales to Falikang, during the year ended December 31, 2021, the Company recognized $ 12.1 million of net product revenue from sales directly to distributors in a few provinces in China, as described as direct sales under Product Revenue, Net section below.

Accounting for the AstraZeneca Agreements

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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.

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 c ontained in the agreements.

T he 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 agre ement.

For revenue recognition purposes, the Company determined that the terms of its collaboration agreements with AstraZeneca begin on the effective date and end 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.

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

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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 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 .

Co-development services related to CKD continued over its development period through the end of 2021.

In addition, the Company accounts for the other significant indications related to chemotherapy-induced anemia and myelodysplastic syndromes separately over their development periods through the end of 2021 and the third quarter of 2024 , respectively.

Manufacturing of clinical supplies of products.

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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:

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

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

The Company holds 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 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

The table below summarizes the accounting treatment for the various performance obligations pursuant to each of the Astellas and AstraZeneca agreements.

Revenue is recognized at a point in time when control of roxadustat commercial product is transferred to Falikang.

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

Eluminex Agreement

In July 2021, FibroGen exclusively licensed to Eluminex Biosciences (Suzhou) Limited (“Eluminex”) global rights to its investigational biosynthetic cornea derived from recombinant human collagen Type III.

Under the terms of the agreement with Eluminex (the “Eluminex Agreement”), Eluminex will make an $ 8.0 million upfront payment to FibroGen.

In addition, FibroGen may receive up to a total of $ 64.0 million in future manufacturing, clinical, regulatory, and commercial milestone payments for the biosynthetic cornea program, as well as $ 36.0 million in commercial milestones for the first recombinant collagen III product that is not the biosynthetic cornea.

FibroGen will also be eligible to receive mid single-digit to low double-digit royalties based upon worldwide net sales of cornea products, and low single-digit to mid single-digit royalties based upon worldwide net sales of other recombinant human collagen type III products that are not cornea products .

The Company accounted for this agreement under ASC 606 and identified one performance obligation at inception of the agreement related to the granting of the license rights to the investigational biosynthetic cornea derived from recombinant human collagen Type III.

The Company based its assessment on the determination that Eluminex can benefit from the granted license on its own by developing and commercializing the underlying product using its own resources.

All components of the transaction price in the agreement were allocated to the single performance obligation.

Additionally, the Company will be responsible for supplying the cornea product at 110 % of its product manufacturing costs until its manufacturing technology is fully transferred to Eluminex.

Supply of the cornea product will be managed by a separate agreement and is considered a separate performance obligation.

During the year ended December 31, 2021, the $ 8.0 million upfront license payment was recognized as license revenue for the performance obligation satisfied.

This amount was recorded as an unbilled contract asset as of December 31, 2021 in the prepaid expenses and other current assets in the consolidated balance sheets.

The remaining future variable consideration related to future manufacturing, clinical, regulatory milestone payments as described above were fully constrained because the Company cannot conclude that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur, given the inherent uncertainties of success with these future milestones.

For commercial milestones and royalties, the Company determined that the license is the predominant item to which the royalties or sales-based milestones relate and revenue will be recognized when the corresponding milestones and royalties are earned .

License Revenue and Development Revenue Recognized Under the Collaboration Agreements and License Agreement

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.

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):

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Development revenue

The transaction price related to consideration received and accounts receivable has been allocated to each of the following performance obligations under the Japan Agreement, along with any associated deferred revenue as follows (in thousands):

The transaction price related to consideration received and accounts receivable has been allocated to each of the following performance obligations under the Japan Agreement with Astellas, along with any associated deferred revenue as follows (in thousands):

Japan Agreement

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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 revenue recognized under the Japan Agreement for the year ended December 31, 2021 included immaterial revenue resulting from changes to estimated variable consideration in the current year relating to performance obligations satisfied or partially satisfied in previous periods.

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.

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Total license and development

China performance obligation revenue is recognized as product revenue, as described in details under Product Revenue, Net section below.

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

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The revenue recognized under the U.S./RoW Agreement and China Agreement for the year ended December 31, 2021 included a reduction in revenue of $ 4.8 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 remainder of the transaction price related to the U.S./RoW Agreement and China Agreement includes $ 30.9 million of variable consideration from estimated future co-development billing and is expected to be recognized over the remaining development service period, except for amounts allocated to the China performance obligation.

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.

Amounts recognized as revenue under the Eluminex were as follows (in thousands):

Years Ended December 31,

Performance Obligation

License revenue

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):

Product revenue, net from the sales of roxadustat commercial product in China was as follows (in thousands):

Years Ended December 31,

Direct Sales:

Gross revenue

3 unchanged sentences

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.

Sales returns

Direct sales revenue, net

Sales to Falikang:

Gross transaction price

Net transaction price

Increase in deferred revenue

Sales to Falikang revenue, net

Total product revenue, net

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

The total discounts and rebates were $ 1.7 million, $ 16.4 million and $ 1.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The discounts and rebates for the years ended December 31, 2021 and 2019 primarily consisted of $ 1.0 million and $ 0.9 million, respectively, of price adjustments recorded based on government-listed price guidance and estimated channel inventory levels.

The discounts and rebates also consisted of the contractual sales rebate 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 was $ 0.8 million, $ 6.2 million and $ 0.1 million, respectively, for the years ended December 31, 2021, 2020 and 2019.

In addition, 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 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.

1 unchanged sentence

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

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

December 31, 2020

Presented Net

December 31, 2021

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.

Product revenue - Direct sales - contract liabilities

As of December 31, 2021 and 2020, the total contract liabilities was $ 3.2 million and $ 15.1 million, respectively, which was included in accrued and other current liabilities in the consolidated balance sheet.

As of December 31, 2021 and 2020, the total rebates and discounts reflected as reductions to gross accounts receivable for direct sales was $ 1.1 million and $ 0.5 million, respectively.

Sales to Falikang – China Performance Obligation

Since Falikang became fully operational in January 2021, substantially all direct roxadustat product sales to distributors in China are made by Falikang.

FibroGen Beijing manufactures and supplies commercial product to Falikang.

The net transaction price for FibroGen Beijing’s product sales to Falikang is based on a gross transaction price, which is adjusted to account for the 50/50 profit share for the period.

The roxadustat sales to Falikang marked the beginning of the Company’s China performance obligation under the Company’s agreements with AstraZeneca .

Product revenue is based on the transaction price of the China performance obligation.

Revenue is recognized when control of the product is transferred to Falikang, in an amount that reflects the allocation of the transaction price to the performance obligation satisfied during the reporting period .

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

During the year ended December 31, 2021, following updates to its estimates, the Company deferred $ 27.2 million from the net transaction price to Falikang, which was included in the related deferred revenue of the China performance obligation.

The following table includes a roll-forward of the related deferred revenue that is considered as a contract liability (in thousands):

December 31, 2020

Recognized as Revenue

December 31, 2021

Product revenue - AstraZeneca China

performance obligation - deferred revenue

Deferred revenue includes amounts allocated to the China performance obligation under the AstraZeneca arrangement as revenue recognition associated with this unit of accounting is tied to the commercial launch of the products within China and to when the control of the manufactured commercial products is transferred to AstraZeneca.

As of December 31, 2021, approximately $ 10.6 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.

The reductions to gross accounts receivable related to product revenue to Falikang was $ 13.4 million as of December 31, 2021.

Drug Product Revenue

2 unchanged sentences

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):

During the second quarter of 2020, the Company fulfilled shipment obligations under the terms of Japan Amendment with Astellas, and recognized related drug product revenue of $ 8.2 million in the same period.

During the years ended December 31, 2021, 2020 and 2019, the Company updated its estimate of variable consideration related to the API shipments fulfilled under the terms of the Japan Amendment with Astellas in 2018 and 2020, and recorded an adjustment to the drug product revenue of $ 2.1 million, $( 4.0 ) million and $( 36.3 ) million for the years ended December 31, 2021, 2020 and 2019, respectively.

Specifically, the change in estimated variable consideration was based on the API held by Astellas at the period end, adjusted to reflect the changes in the estimated bulk product strength mix intended to be manufactured by Astellas, estimated cost to convert the API to bulk product tablets, and estimated yield from the manufacture of bulk product tablets, among others.

During the fourth quarter of 2021, the Company transferred bulk drug product for commercial purposes under the terms of the Europe Agreement and the EU Supply Agreement with Astellas, and recognized the related fully burdened manufacturing costs of $ 1.0 million as drug product revenue, and recorded $ 8.3 million as deferred revenue as of December 31, 2021, due to a high degree of uncertainty associated with the final consideration.

During the first quarter of 2021, the Company transferred bulk drug product from process validation supplies for commercial purposes under the terms of the Europe Agreement and the EU Supply Agreement with Astellas.

The Company recorded the consideration of $ 11.8 million from this inventory transfer as deferred revenue as of December 31, 2021, due to a high degree of uncertainty associated with the final consideration.

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

As a result, the Company recorded $ 6.0 million as deferred revenue as of December 31, 2020, due to a high degree of uncertainty associated with the final consideration.

The Company recognized royalty revenue of $ 0.2 million from this deferred revenue during the year ended December 31, 2021.

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

During the fourth quarter of 2021, the Company updated its estimate of variable consideration related to the bulk drug product inventory transfers fulfilled under the terms of the Europe Agreement and the EU Supply Agreement with Astellas, and recorded an unbilled contract asset of $ 49.8 million, which was offset by related deferred revenue under the Europe Agreement and EU Supply Agreement.

Specifically, the change in estimated variable consideration was based on the bulk drug product held by Astellas at the period end, adjusted to reflect the changes in the estimated transfer price, among others.

During the first half of 2021 and during the year ended December 31, 2020, the Company shipped bulk drug product to AstraZeneca as commercial supply under the terms of the Master Supply Agreement.

Based on the complete response letter issued by the FDA in August 2021, the Company evaluated the impact of these developments in revising its estimates of variable consideration associated with drug product revenue.

As a result, the Company updated the estimated transaction price for these shipments, and recorded $ 11.2 million as deferred revenue as of December 31, 2021.

The following table includes a roll-forward of the above-mentioned deferred revenues that are considered as contract liabilities related to drug product (in thousands):

December 31, 2020

Recognized as Revenue

Presented Net

Contract Asset

December 31, 2021

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

Other revenues consist primarily of collagen material sold for research purposes.

Other revenues were immaterial for each of the three years ended December 31, 2020.

Deferred Revenue

Deferred revenue represents amounts billed, or in certain cases, yet to be billed to the Company’s collaboration partners for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met.

The current portion of deferred revenue represents the amount to be recognized within one year from the balance sheet date based on the estimated performance period of the underlying performance obligations.

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.

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.

Astellas - Japan Agreement

Astellas - Europe Agreement

AstraZeneca - U.S.

Drug product revenue - deferred revenue

Equity method investment - Variable Interest Entity

Falikang is a distribution entity jointly owned by AstraZeneca and FibroGen Beijing.

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

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

GAAP purposes under ASC 810.

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

Therefore, the Company is not the primary beneficiary of this VIE for U.S.

GAAP accounting purposes.

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

Accordingly, the Company records its total investments in Falikang as an equity method investment in an unconsolidated VIE in the consolidated balance sheet.

In addition, the Company recognizes its proportionate share of the reported profits or losses of Falikang as investment income (loss) in unconsolidated VIE in the consolidated statement of operations, and as an adjustment to its investment in Falikang in the consolidated balance sheet.

Falikang has not incurred material profit or loss to date.

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

To date, these loans have been immaterial.

The Company’s equity method investment in Falikang was as follows for the year ended December 31, 2021 (in thousands):

Ownership Percentage

December 31, 2020

Share of Net Income

December 31, 2021

Falikang is considered as a related party to the Company.

See Note 13, Related Party Transactions , for related disclosures.

Fair Value Measurements

17 unchanged sentences

December 31, 2021

Bond and mutual funds

Equity investments

Money market funds

Corporate bonds

Commercial paper

government bonds

Asset-backed securities

Foreign government bonds

December 31, 2020

treasury notes and bills

Bond and mutual funds

1 unchanged sentence

Money market funds

Certificate of deposit

The Company’s Level 2 investments are valued using third-party pricing sources.

3 unchanged sentences

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.

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

December 31, 2020

Lease obligations

December 31, 2019

Lease obligations

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.

The fair value of the Company’s financial liabilities related to lease obligations were derived by using an income approach, which required Level 3 inputs such as discounted estimated future cash flows, which were immaterial as of December 31, 2021 and 2020.

There were no transfers of liabilities between levels for the years ended December 31, 2021, 2020 and 2019.

The Company currently has two building leases treated as finance leases.

In 2006, the Company entered into a long-term property lease with Alexandria for its corporate headquarters in San Francisco, California, with an initial term of 15 years, scheduled to expire in 2023 .

The Company has an option to extend the lease for an additional 10 years through 2033 .

The lease contract provides for a fixed annual rent, with scheduled increases of two percent that occur on each anniversary of the rent commencement date.

The Company’s long-term property lease with Alexandria for its corporate headquarters in San Francisco, California, had an initial term of 15 years, scheduled to expire in 2023 .

The original lease was accounted for as a finance lease upon adoption of ASC 842, Leases (“ASC 842”), at January 1, 2019.

On June 1, 2021, the Company entered into an amendment with Alexandria to extend the lease to 2028 (“Lease Amendment”).

Under the terms of the Lease Amendment, the Company has two optional rights to each extend the lease for an additional five years .

The lease contract provides for a fixed annual rent, with scheduled increases of two percent that occur on each anniversary of the rent commencement date through 2023 , and with scheduled increases of three percent that occur on each anniversary of the rent commencement date through 2028 .

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 of BDA.

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

Renewal options are not specified within the lease contract.

The lease contract provides for fixed quarterly rent payments, with scheduled increases that occur as detailed in the lease contract.

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

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 .

Company determined that the Lease Amendment was a lease modification, effective June 1, 2021, and thus reassessed the lease classification, remeasured the related lease liability using an updated discount rate, and adjusted the related right-of-use asset under the lease modification guidance under the ASC 842.

Accordingly, on June 1, 2021, the Company determined that the modified lease be accounted for as an operating lease, and therefore derecognized the previous finance lease right-of-use asset of $ 24.6 million and the related finance lease liability of $ 32.6 million, and recognized an operating lease right-of-use asset of $ 93.2 million and the related operating lease liability of $ 101.2 million.

Starting June 1, 2021, the cash payment related to this lease was classified as an operating activity, the impact of which was approximately $ 7.9 million to the consolidated statement of cash flow for the year ended December 31, 2021.

During the first quarter of 2021, after FibroGen Beijing’s previous long-term lease agreement expired, the Company entered into a new lease agreement with the landlord for the same pilot plant located in Beijing Yizhuang Biomedical Park of BDA.

The new lease term is five year , scheduled to expire in 2026 , and is treated as an operating lease.

Accordingly, the Company recorded $ 3.4 million in the operating right-of-use assets and total operating lease liabilities, respectively.

The lease contract provides for fixed quarterly rent payments, and requires the Company to pay operating and maintenance costs.

The Company currently has several 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 one to five 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 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.

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

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

7 unchanged sentences

Operating lease right-of-use assets, net

Operating lease right-of-use assets

Total lease assets

2 unchanged sentences

Operating lease liabilities

Accrued and other current liabilities

Operating lease liabilities, current

Finance lease liabilities

1 unchanged sentence

Operating lease liabilities

Other long-term liabilities

Operating lease liabilities, non-current

Total lease liabilities

26 unchanged sentences

Operating leases

Increase (decrease) resulting from lease modification:

Finance lease right-of-use assets

Operating lease right-of-use assets

Finance lease liabilities, current

Operating lease liabilities, current

Finance lease liabilities, non-current

Operating lease liabilities, non-current

Lease term and discount rate were as follows:

14 unchanged sentences

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

Commercial paper

Money market funds

Total cash and cash equivalents

The Company’s investments consist of available-for-sale debt investments, marketable equity investments, term deposit and certificate of deposit.

The Company’s investments consist of available-for-sale debt investments and marketable equity investments.

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

5 unchanged sentences

Holding Losses

Bond and mutual funds

Equity investments

Corporate bonds

Commercial paper

government bonds

Asset-backed securities

Foreign government bonds

Total investments

5 unchanged sentences

Holding Losses

treasury notes and bills

Certificates of deposit

Bond and mutual funds

4 unchanged sentences

Within one year - Bond and mutual funds

Equity investments

After one year through three years

Total investments

The Company periodically reviews its available-for-sale investments and term deposit for other-than-temporary impairment.

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

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

6 unchanged sentences

Total inventories

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.

The Company capitalizes inventory costs for FibroGen Beijing’s production of roxadustat for commercial sales purposes.

The Company started capitalizing inventory costs for the U.S.

entity in the second quarter of 2020 prior to regulatory approvals in the U.S., Europe and other territories.

As of December 31, 2021 and 2020, inventory capitalized for the U.S.

entity was 38 % and 29 % of the total inventory balance, respectively, which will be used for commercial launches in Europe and other territories where the Company has received regulatory approvals.

The provision to write-down excess and obsolete inventory was immaterial as of December 31, 2021 and 2020.

Prepaid expenses and other current assets

6 unchanged sentences

Total prepaid expenses and other current assets

The unbilled contract assets as of December 31, 2021 included $ 49.8 million related to transfer price true up for bulk drug product under the Europe Agreement with Astellas, $ 9.1 million related to unbilled co-development revenue under the China Amendment with AstraZeneca, and the $ 8.0 million unbilled upfront license payment under the Eluminex Agreement.

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 4, Collaboration Agreements and Revenues , for details.

See Note 3, Collaboration Agreements, License Agreement and Revenues , for details.

Property and Equipment

12 unchanged sentences

Preclinical and clinical trial accruals

API product price adjustment

Acquired in-process research and development asset

Payroll and related accruals

2 unchanged sentences

Roxadustat profit share to AstraZeneca

Property taxes and other

Property taxes and other taxes

Professional services

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.

The acquired IPR&D asset of $ 35.0 million as of December 31, 2021 was related to the upfront payment to HiFiBiO under the HiFiBiO Agreement.

See Note 2, Summary of Significant Accounting Policies - License Acquisition Agreement , for details.

The profit share liability to AstraZeneca as of December 31, 2021 and 2020 was $ 7.9 million and $ 7.0 million, respectively, which represented the profit/loss share between FibroGen Beijing and AstraZeneca that was calculated for the interim period pursuant to the China Amendment.

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

See Note 3, Collaboration Agreements, License Agreement and Revenues , for details.

Other Long-term Liabilities

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

December 31, 2021

December 31, 2020

Accrued long-term co-promotion expenses

Other long-term tax liabilities

Operating lease liabilities, non-current

Total other long-term liabilities

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.

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

8 unchanged sentences

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):

As of December 31, 2021, the Company had the following outstanding non-cancelable purchase obligations (in thousands):

Purchase Obligations

1 unchanged sentence

(in thousands)

Manufacture and supply of roxadustat

Manufacture and supply of pamrevlumab

Manufacture and supply of roxadustat

Other purchases

Total purchase obligations

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

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

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.

As of December 31, 2021, future milestone payments for research and pre-clinical stage development programs consisted of up to approximately $ 704.1 million in total potential future milestone payments under the Company’s license agreements with HiFiBiO (for Galectin-9 and CCR8), Medarex, Inc.

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

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

Legal Proceedings

Legal Proceedings and Other Matters

From time to time, the Company is a party to various legal actions, both inside and outside the U.S., arising in the ordinary course of its business or otherwise.

1 unchanged sentence

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.

The Company did not have any material accruals for any currently active legal action in its consolidated balance sheets as of December 31, 2021, as the Company could not predict the ultimate outcome of these matters, or reasonably estimate the potential exposure.

In April 2021, three putative securities class action complaints were filed against FibroGen and certain of its current and former executive officers (collectively, the “Defendants”) in the U.S.

District Court for the Northern District of California.

The lawsuits allege that Defendants violated the Securities Exchange Act of 1934 by making materially false and misleading statements regarding FibroGen’s Phase 3 clinical studies data and prospects for FDA approval between November 2019 and December 2020.

Plaintiffs seek to represent a class of persons or entities that purchased FibroGen securities between November 8, 2019 and April 6, 2021.

In May 2021, two additional putative securities class action complaints were filed against Defendants alleging the same claims.

One of the lawsuits alleges that Defendants made materially false and misleading statements between October 2017 and December 2020 and seeks to represent a class of persons or entities that purchased FibroGen securities between October 18, 2017 and April 6, 2021.

The other lawsuit alleges that Defendants made materially false and misleading statements between December 2018 and February 2020 and seeks to represent a class of persons or entities that purchased FibroGen securities between December 20, 2018 and April 6, 2021.

All plaintiffs seek unspecified monetary damages and other relief.

On August 30, 2021, the Court consolidated the actions and appointed a group of lead plaintiffs.

Plaintiffs filed their consolidated amended complaint on October 29, 2021 and a corrected consolidated amended complaint on November 19, 2021 (the “Complaint”).

The Complaint alleges false and misleading statements between December 2018 and June 2021 and seeks to represent a class of persons or entities that purchased FibroGen securities between December 20, 2018 and July 15, 2021.

Defendants filed motions to dismiss the Complaint on January 14, 2021.

Plaintiffs’ opposition to Defendants’ motions to dismiss is due March 4, 2022 and Defendants’ reply briefs are due April 8, 2022.

A hearing on Defendants’ motions to dismiss has been set for April 28, 2022.

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

District Court for the Northern District of California.

The complaint names as defendants ten of FibroGen’s current and former officers and directors, as well as FibroGen as nominal defendant, and asserts state and federal claims based on some of the same alleged misstatements as the securities class action complaint.

The complaint seeks unspecified damages, attorneys’ fees, and other costs.

The parties have agreed to stay the action pending resolution of a forthcoming motion to dismiss the securities class action.

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

District Court for the District of Delaware.

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

The complaint seeks unspecified damages, attorneys’ fees, and other costs.

Defendants have not been served in the second action.

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

However, any litigation is inherently uncertain, and any judgment or injunctive relief entered against FibroGen or any adverse settlement could materially and adversely impact its business, results of operations, financial condition, and prospects.

In the fourth quarter of 2021, the Company received a subpoena from the SEC requesting documents related to roxadustat’s pooled cardiovascular safety data.

The Company is fully cooperating with the SEC.

The Company cannot predict with any degree of certainty the outcome of the SEC’s investigation or determine the extent of any potential liabilities.

The Company also cannot predict whether there will be any loss as a result of the investigation nor can it provide an estimate of the possible loss or range of loss.

Any adverse outcome in this matter or any related proceeding could expose the Company to substantial damages, penalties, or reputational harm that may have a material adverse impact on the Company’s business, results of operations, financial condition, growth prospects, and price of its common stock.

Indemnification Agreements

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Equity and Stock-based Compensation

Subsidiary Stock and Non-Controlling Interests

FibroGen Europe

As of December 31, 2020 and 2019, respectively, FibroGen Europe had a total of 42,619,022 shares of Preferred Stock outstanding, of which there were 1,700,845 shares of Series A Preferred Stock, 1,875,000 shares of Series B Preferred Stock, 1,599,503 shares of Series C Preferred Stock, 1,520,141 shares of Series D Preferred Stock, 459,565 shares of Series E Preferred Stock, 5,714,332 shares of Series F Preferred Stock, 9,927,500 shares of Series G Preferred Stock and 19,822,136 shares of Series H Preferred Stock, all of which shares no longer have any right to be exchanged for FibroGen, Inc.

Common Stock.

The holders of FibroGen Europe’s shares of Preferred Stock (“Preferred Shares”) have the following rights, preferences and privileges:

Dividend Rights — When the assets of FibroGen Europe are distributed (except for distribution in a liquidation), Preferred Shares shall have the same rights to dividend or other forms of distribution as shares of Common Stock of FibroGen Europe.

In the event of a merger, holders of Preferred Shares do not have the right to demand FibroGen Europe to redeem all or part of their Preferred Shares.

FibroGen Europe may repurchase shares of Common Stock or Preferred Shares for consideration.

Pre-emptive Right — Preferred Shares shall have pre-emptive subscription right in accordance with the Finnish Limited Liability Companies Act if additional shares are issued, option rights are given, or convertible loan is taken, provided , however , that the foregoing pre-emptive right does not apply to a directed share issue, for which two thirds (2/3) of the voting shares represented at a general meeting of shareholders approve for an important legitimate cause.

Redemption Right — If a Preferred Share can be redeemed by a majority shareholder owning more than ninety percent ( 90 %) of the shares of FibroGen Europe in accordance with the provisions of the Finnish Limited Liability Companies Act, the minority holders of Preferred Shares have the right to request redemption of their shares.

Voting Right — Each share has one vote .

Preferred Shares have voting rights only in situations that are specifically provided in the Articles of Association, which include a merger transaction and directed share issue.

In addition, Preferred Shares have right to vote in a general shareholder meeting for amending the Articles of Association if the amendment will affect the rights of Preferred Shares.

Conversion Right (1-for- 1 basis into Common Stock of FibroGen Europe):

Voluntary conversion right:

Preferred Shares can be converted into common shares upon the written request of a shareholder provided that the conversion is feasible within the maximum and minimum amounts of shares of classes of FibroGen Europe as set forth in its Articles of Association.

Such request can be withdrawn before the notification of conversion is filed with the Finnish Trade Register.

Compulsory conversion right:

Preferred Shares will be converted into common shares if (i) FibroGen Europe’s shares are listed in a stock exchange or other trading system in the European Economic Area, or (ii) FibroGen Europe’s recombinant collagen and gelatin production technology is being put into commercial use in the area of Europe and certain other European states.

Commercial use means there is income generated from the first commercial sale of the products incorporating the above mentioned technology and does not include license fees, development financing, milestone payments or income from test products or equipment used in research.

The board of directors of FibroGen Europe shall notify the shareholders of the compulsory conversion in writing, and the shareholders shall request to convert their shares within the timeframe provided in the notification.

Should the shareholders fail to make the conversion request within the time limit, FibroGen Europe may redeem the shares of such shareholders.

Liquidation Right — In the event of a dissolution of FibroGen Europe, holders of Preferred Shares are entitled to be paid in an amount equal to the subscription price of the shares before any distribution is made to holders of common shares.

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 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 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

Non-controlling interest positions related to the issuance of subsidiary stock as described above are reported as a separate component of consolidated equity from the equity attributable to the Company’s stockholders at December 31, 2020 and 2019.

In addition, the Company does not allocate losses to the non-controlling interests as the outstanding shares representing the non-controlling interest do not represent a residual equity interest in the subsidiary.

Upon the initial public offering and as described above, all eligible FibroGen Europe preferred shares were exchanged for 958,996 shares of FibroGen Common Stock.

No other FibroGen Europe shares have the right to be exchanged for FibroGen, Inc.

Common Stock.

Each share of Common Stock is entitled to one vote .

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Options granted under the 2005 Stock Plan may be incentive stock options or nonqualified stock options.

Incentive stock options (“ISO”) may be granted only to employees and officers of the Company.

Nonqualified stock options (“NSO”) and stock purchase rights may be granted to employees, directors and consultants.

Incentive stock options may be granted only to employees and officers of the Company.

Nonqualified stock options and stock purchase rights may be granted to employees, directors and consultants.

The board of directors has the authority to determine to whom options will be granted, the number of options, the term and the exercise price.

Options are to be granted at an exercise price not less than fair market value for an ISO or an NSO.

Options are to be granted at an exercise price not less than fair market value for an incentive stock option or a nonqualified stock option.

Options generally vest over four years .

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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, 2021 and 2020.

Subsidiary Stock and Non-Controlling Interests

FibroGen Europe

As of December 31, 2021 and 2020, respectively, FibroGen Europe had a total of 42,619,022 shares of Preferred Stock outstanding, of which there were 1,700,845 shares of Series A Preferred Stock, 1,875,000 shares of Series B Preferred Stock, 1,599,503 shares of Series C Preferred Stock, 1,520,141 shares of Series D Preferred Stock, 459,565 shares of Series E Preferred Stock, 5,714,332 shares of Series F Preferred Stock, 9,927,500 shares of Series G Preferred Stock and 19,822,136 shares of Series H Preferred Stock, all of which shares no longer have any right to be exchanged for FibroGen, Inc.

Common Stock.

The holders of FibroGen Europe’s shares of Preferred Stock (“Preferred Shares”) have the following rights, preferences and privileges:

In the event of a merger, holders of Preferred Shares do not have the right to demand FibroGen Europe to redeem all or part of their Preferred Shares.

FibroGen Europe may repurchase shares of Common Stock or Preferred Shares for consideration.

Voting Right — Each share has one vote .

Preferred Shares have voting rights only in situations that are specifically provided in the Articles of Association, which include a merger transaction and directed share issue.

In addition, Preferred Shares have right to vote in a general shareholder meeting for amending the Articles of Association if the amendment will affect the rights of Preferred Shares.

Conversion Right (1-for- 1 basis into Common Stock of FibroGen Europe):

Voluntary conversion right:

Such request can be withdrawn before the notification of conversion is filed with the Finnish Trade Register.

Compulsory conversion right:

Commercial use means there is income generated from the first commercial sale of the products incorporating the above-mentioned technology and does not include license fees, development financing, milestone payments or income from test products or equipment used in research.

Should the shareholders fail to make the conversion request within the time limit, FibroGen Europe may redeem the shares of such shareholders.

FibroGen Cayman

FibroGen Cayman had 6,758,000 Series A Preference Shares outstanding as of December 31, 2021 and 2020, respectively.

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

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 Cayman Series A Preference Shares are entitled to vote together with the FibroGen Cayman Common Stockholders 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

In January 2013, FibroGen Cayman entered into a $ 0.6 million convertible promissory note.

The note bears simple interest at a rate of two percent ( 2.00 %) per annum, accrued on an annual basis in arrears.

The outstanding principal balance and unpaid accrued interest on the note is due and payable upon the earlier of (a) the effectiveness of the initial public offering of FibroGen Cayman or (b) the eight year anniversary of the date of the note.

As of December 31, 2020, the total outstanding principal balance and accrued interest were $ 0.7 million and recorded in the other long-term liabilities in the consolidated balance sheets.

During the year ended December 31, 2021, at the option of the lender, the $ 0.7 million total outstanding principal balance and unpaid accrued interest on the note were converted into Series A Preferred Stock of FibroGen Cayman, and was recorded as an addition to the non-controlling interest of the Company.

Upon the initial public offering and as described above, all eligible FibroGen Europe preferred shares were exchanged for 958,996 shares of FibroGen Common Stock.

No other FibroGen Europe shares have the right to be exchanged for FibroGen, Inc.

Common Stock.

Net Loss Per Share

The following weighted impacts of outstanding securities were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the three years presented (in thousands):

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

During the years ended December 31, 2021, 2020 and 2019, the Company reported a net loss.

Therefore, dilutive common shares are not assumed to have been issued since their effect is anti-dilutive.

Diluted weighted average shares excluded the following potential common shares related to stock options, restricted stock units and shares to be purchased under the employee stock purchase plan for the three years presented as they were anti-dilutive (in thousands):

Years Ended December 31,

Employee stock options

FibroGen, Inc.

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.

The Company may elect to match employee contributions.

Matching contributions of $ 3.2 million, $ 3.0 million and $ 2.9 million were made during years ended December 31, 2020, 2019 and 2018, respectively.

The components of loss before income taxes are as follows (in thousands):

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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.

The Company intends to continue maintaining a full valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance.

However, given the anticipated future foreign earnings, the Company believes that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to reach a conclusion that a portion of the valuation allowance may no longer be needed.

Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

The exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that the Company is able to actually achieve.

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.

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Balance as of December 31, 2018

Increase due to prior positions

Decrease due to prior positions

Increase due to current year position

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Increase due to current year position

Foreign exchange rate differential

Balance as of December 31, 2021

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During the years ended December 31, 2021, 2020 and 2019, the Company also recorded drug product revenue from Astellas of $ 3.2 million, $ 4.3 million, and $( 36.3 ) 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.

See Note 3, Collaboration Agreements, License Agreement and Revenues , for details.

During the years ended December 31, 2021, 2020 and 2019, the Company recorded expense related to collaboration agreements with Astellas of $ 0.2 million, $ 0.5 million and $ 2.8 million, respectively.

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As of December 31, 2021 and 2020, total deferred revenue from Astellas were $ 27.9 million and $ 7.5 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 .

As of December 31, 2021, the amount due to Astellas was immaterial.

As of December 31, 2020, amount due to Astellas was $ 1.1 million.

Falikang, an entity jointly owned by FibroGen Beijing and AstraZeneca is an unconsolidated VIE accounted for as an equity method investment, and considered as a related party to the Company.

FibroGen Beijing owns 51.1 % of Falikang’s equity.

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

For the year ended December 31, 2021, the net product revenue from Falikang was $ 35.6 million.

See Note 3, Collaboration Agreements, License Agreement and Revenues , for details.

For the years ended December 31, 2021 and 2020, the investment income (loss) in Falikang was $ 1.0 million and $( 0.2 ) million, respectively.

As of December 31, 2021 and 2020, the Company’s equity method investment in Falikang was $ 3.8 million and $ 2.7 million, respectively.

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

As of December 31, 2021, accounts receivable, net, from Falikang was zero .

As of December 31, 2021, the advanced payment from Falikang, classified as deferred revenue, was $ 1.2 million.

As of December 31, 2021, there was no miscellaneous receivables from Falikang.

As of December 31, 2020, prepaid expenses and other current assets included miscellaneous receivables from Falikang of $ 0.9 million.

Segment and Geographic Information

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Geographic Revenues

Geographic revenues, which are based on the bill-to region, are as follows (in thousands):

To provide a more meaningful disclosure along with the developments in its business, the Company changed its methodology of summarizing geographic revenues to be by the region that the revenue is generated, from the previously reported by the bill-to region.

Accordingly, the information for the year ended December 31, 2020 and 2019 were recalculated.

Geographic revenues, which are based on the region that revenue is generated, are as follows (in thousands):

Years Ended December 31,

United States

Total revenue

Geographic Assets

Inventory by geographic location are as follows (in thousands):

Geographic information for inventory is as follows (in thousands):

By geographic location:

United States

Total inventory

By inventory ownership:

United States

Total inventory

Property and equipment, net by geographic location are as follows (in thousands):

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Customer Concentration

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 and distribution entity that respectively accounted for 10% or more of the Company’s total revenue and accounts receivable:

Percentage of Revenue

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Astellas—Related party

Falikang—Related party

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

In January 2021, Falikang became fully operational and substantially all direct product sales to distributors in China were made by Falikang, while FibroGen Beijing continued to sell product directly in a few provinces in China during 2021.

The aggregate revenue from FibroGen Beijing’s direct sales to distributors for the year ended December 31, 2021 and the aggregate accounts receivable from direct sales to distributors as of December 31, 2021 were immaterial.

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.

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Year ended December 31, 2020

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Year ended December 31, 2019

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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