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Item 9A. Controls and Procedures

2022-02-28 compared with 2021-03-01 · 64 added, 204 removed, 193 unchanged (58% of the section changed)

CONTROLS AND PROCEDURES

Attached as exhibits 31.1 and 31.2 to this Annual Report on Form 10-K are certifications of our Chief Executive Officer and our Chief Financial Officer required by Rule 13a-14(a) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Rule 13a-14(a) and 15d-15(e) Certifications”).

This Controls and Procedures section of the Annual Report on Form 10-K includes the information concerning the controls evaluation referred to in the Rule 13a-14(a) and 15d-15(e) Certifications.

Attached as exhibits 31.1 and 31.2 to this Annual Report on Form 10-K for the year ended December 31, 2021 (“Annual Report”) are certifications of our Chief Executive Officer and our Chief Financial Officer required by Rule 13a-14(a) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Rule 13a-14(a) and 15d-15(e) Certifications”).

This Controls and Procedures section of the Annual Report includes the information concerning the controls evaluation referred to in the Rule 13a-14(a) and 15d-15(e) Certifications.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020, the end of the period covered by this Annual Report on Form 10-K.

Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to the company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on our evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2020 because of the material weaknesses in our internal control over financial reporting described below.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021, the end of the period covered by this Annual Report.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on our evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021.

Management’s Annual Report on Internal Control over Financial Reporting

5 unchanged sentences

Management, with the participation and under the supervision of our Chief Executive Officer and our Chief Financial Officer , evaluated our internal control over financial reporting as of December 31, 2021, the end of our fiscal year, using the criteria established in Internal Control - Integrated Framework (2013) set forth by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation, our management has concluded that our internal control over financial reporting was not effective as of December 31, 2020 because of the material weaknesses in our internal control over financial reporting described below.

Based on our evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2021 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that appears herein.

Remediation of Previously Disclosed Material Weaknesses

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

As of September 30, 2020, we have identified a material weakness in the risk assessment component of internal control as we did not appropriately 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 our business operation.

As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2020 , as of September 30, 2020, we identified a material weakness in the risk assessment component of internal control as we did not appropriately 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 our business operations.

This material weakness gave rise to the following additional control deficiencies, which we also determined to be material weaknesses.

We did not design and maintain effective controls related to the timely identification of shipments associated with drug product revenue, and we did not design and maintain effective controls related to the timely identification of changes in estimated variable consideration related to drug product revenue.

Each of these material weaknesses could result in material misstatements in the drug product revenue, contract asset or contract liability account balances or disclosures in our annual or interim consolidated financial statements that would not be prevented or detected.

The material weaknesses described above did not result in any material misstatements of our consolidated financial statements or disclosures, but did result in immaterial out-of-period adjustments to drug product revenue related to pre-commercial shipments of drug product, contract assets and contract liabilities, and related financial statement disclosures during the quarter ended September 30, 2020.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that appears herein.

Remediation Plan and Status

Our Board of Directors and management are committed to maintaining a strong internal control environment.

We have developed a detailed remediation plan and are making progress of what will be a multi-step remediation process to fully remediate the material weaknesses described above.

Specifically, as of December 31, 2020, we have started, and will continue to the process of the steps including, but not limited to, the following:

We have performed a comprehensive risk assessment process, and will continue to refine the risk assessment, to identify and design our control activities related to the above mentioned material weaknesses;

We have identified and designed new controls and procedures associated with drug product revenue, and where applicable implemented new procedures and controls during the fourth quarter of 2020, and will continue to implement new procedures and controls in the future;

We started the process to hire additional resources to strengthen our accounting and internal audit functions.

In addition, we will continue to assess risks on a continuous basis to timely identify new exposures or risk categories as business practices change, and we plan to conduct a comprehensive review and, as applicable, update our existing internal control framework to ensure that it has identified, developed and deployed the appropriate business process controls to meet the objectives and address the risks identified.

The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

We believe the measures described above will remediate these material weaknesses and strengthen our internal control over financial reporting.

As we continue to evaluate and work to remediate these material weaknesses, we may determine to take additional measures to address these deficiencies or determine to modify certain of the remediation measures described above.

During the year ended December 31, 2021, our management, with the oversight of the Audit Committee of our Board of Directors, designed and implemented measures to remediate the control deficiencies contributing to these material weaknesses and completed testing of the design and operating effectiveness of all remediated controls .

These remediation efforts included the following:

We hired additional resources to strengthen our accounting and internal audit functions.

We finalized the implementation of a comprehensive annual risk assessment process to identify and design our control activities related to the above-mentioned material weaknesses.

In addition, we continue to assess risks on a continuous basis to timely identify new exposures or risk categories as business practices change and, as applicable, update our existing internal control framework to ensure that it has identified, developed and deployed the appropriate business process controls to meet the objectives and address the risks identified.

We identified and designed new controls and procedures associated with drug product revenue, and where applicable, have implemented new procedures and controls during the fourth quarter of 2020 and the year ended December 31, 2021.

Through testing of our internal controls, management has determined that the controls related to the remediation actions discussed above were effectively designed and operated effectively for a sufficient period of time to enable us to conclude that the material weaknesses have been remediated as of December 31, 2021.

Limitations on the Effectiveness of Controls

3 unchanged sentences

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the most recent fiscal quarter ended December 31, 2020 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the most recent fiscal quarter ended December 31, 2021 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Our independent registered public accounting firm, PricewaterhouseCoopers LLP, is headquartered in the U.S.

and was not identified in the Public Company Accounting Oversight Board (“PCAOB”) report dated December 16, 2021 as a firm that the PCAOB was unable to inspect.

Therefore, the Holding Foreign Companies Accountable Act does not apply to us.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

13 unchanged sentences

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) We have filed the following documents as part of this Annual Report on Form 10-K:

(a) We have filed the following documents as part of this Annual Report:

Consolidated Financial Statements

Information in response to this Item is included in Part II, Item 8 of this Annual Report on Form 10-K.

Information in response to this Item is included in Part II, Item 8 of this Annual Report.

Financial Statement Schedules

2 unchanged sentences

See Item 15(b) below.

(b) Exhibits —We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed below.

(b) Exhibits —We have filed, or incorporated into this Annual Report by reference, the exhibits listed below.

Where an exhibit is incorporated by reference, the number in parentheses indicates the document to which cross-reference is made.

62 unchanged sentences

and AstraZeneca AB, effective as of July 30, 2013.

License Agreement by and between FibroGen, Inc.

and the University of Miami and its School of Medicine, dated as of May 23, 1997.

First Amendment to May 23, 1997 License Agreement by and between FibroGen, Inc.

and University of Miami, effective as of July 29, 1999.

Research and Commercialization Agreement by and among FibroGen, Inc., GenPharm International Inc., Medarex, Inc.

6 unchanged sentences

and FibroPharma, Inc., effective as of January 28, 2002.

License Agreement by and between FibroGen, Inc.

and the Dana-Farber Cancer Institute, Inc., effective as of March 29, 2006.

Amendment No.

1 to License agreement by and between FibroGen, Inc.

and Dana-Farber Cancer Institute, Inc., effective as of February 28, 2006.

Amendment No.

2 to License Agreement by and between FibroGen, Inc.

and Dana-Farber Cancer Institute, Inc., effective as of March 14, 2006.

Form of Indemnity Agreement by and between FibroGen, Inc.

and its directors and officers.

Process Development and Clinical Supply Agreement by and between FibroGen, Inc.