SEC Filing | FibroGen, Inc.

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fgen-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36740

FIBROGEN, INC.

(Exact name of registrant as specified in its charter)

Delaware

77-0357827

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

409 Illinois Street
San Francisco, CA		94158
(Address of Principal Executive Offices)		(Zip Code)

(415) 978-1200

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	FGEN	The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐ No ☑

The number of shares of common stock outstanding as of October 31, 2021 was 92,709,943.

FIBROGEN, INC.

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (Unaudited)	4
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)	6
	Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (Unaudited)	9
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86
Item 3.	Defaults Upon Senior Securities	86
Item 4.	Mine Safety Disclosures	86
Item 5.	Other Information	87
Item 6.	Exhibits	88
	Signatures	89

SUMMARY RISK FACTORS

The success of the Company will depend on a number of factors, many of which are beyond our control and involve risks, including but not limited to the following:

Risks Related to the Development and Commercialization of Our Product Candidates

•	We are substantially dependent on the success of our lead product, roxadustat, and our second compound in development, pamrevlumab.

•	As a company, we have limited commercialization experience, and the time and resources to develop such experience are significant. If we fail to achieve and sustain commercial success for roxadustat with our collaboration partners, our business would be harmed.

•

Although regulatory approval has been obtained for roxadustat in the European Union, Great Britain, China, Japan, South Korea, and Chile, we may be unable to obtain regulatory approval for other countries, or such approval may be delayed or limited, due to a number of factors, many of which are beyond our control.

•	The CRL we received for roxadustat has decreased the likelihood of approval and successful commercialization of roxadustat in the U.S., will decrease and/or delay expected revenue, and may increase the possibility that our Collaboration Agreement with AstraZeneca could be amended or terminated.

•	Preclinical, Phase 1 and Phase 2 clinical trial results may not be indicative of the results that may be obtained in larger clinical trials.

•	We do not know whether our ongoing or planned clinical trials of roxadustat or pamrevlumab will need to be redesigned based on interim results or if we will be able to achieve sufficient patient enrollment or complete planned clinical trials on schedule.

•	Our product candidates may cause or have attributed to them undesirable side effects or have other properties that delay or prevent their regulatory approval or limit their commercial potential.

•	Clinical trials of our product candidates may not uncover all possible adverse effects that patients may experience.

•	If our manufacturers or we cannot properly manufacture the appropriate volume of product, we may experience delays in development, regulatory approval, launch or successful commercialization.

•	Regulatory authorities will do their own benefit risk analysis and may reach a different conclusion than we or our partners have, and these regulatory authorities may base their approval decision on different analyses, data, and statistical methods than ours.

•	Even if we are able to obtain regulatory approval of our product candidates, the label we obtain may limit the indicated uses for which our product candidates may be marketed.

•	We face substantial competition in the discovery, development and commercialization of product candidates.

•	Our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors, and others in the medical community necessary for commercial success.

•	No or limited reimbursement or insurance coverage of our approved products, if any, by third-party payors may render our products less attractive to patients and healthcare providers.

Risks Related to COVID-19

•	Our business could continue to be adversely affected by the ongoing COVID-19 global pandemic.

Risks Related to Our Reliance on Third Parties

•	If our collaborations were terminated or if Astellas or AstraZeneca were to prioritize other initiatives over their collaborations with us, our ability to successfully develop and commercialize our product candidates would suffer.

•	If our preclinical and clinical trial contractors do not properly perform their agreed upon obligations, we may not be able to obtain or may be delayed in receiving regulatory approvals for our product candidates.

•	We currently rely, and expect to continue to rely, on third parties to conduct many aspects of our product manufacturing and distribution, and these third parties may terminate these agreements or not perform satisfactorily.

•	Certain components of our products are acquired from single-source suppliers or without long-term supply agreements. The loss of these suppliers, or their failure to supply, would materially and adversely affect our business.

Risks Related to Our Intellectual Property

•	If our efforts to protect our proprietary technologies are not adequate, we may not be able to compete effectively in our market.

•	Intellectual property disputes may be costly, time consuming, and may negatively affect our competitive position.

•	Our reliance on third parties and agreements with collaboration partners requires us to share our trade secrets, which increases the possibility that a competitor may discover them or that our trade secrets will be misappropriated or disclosed.

•	The cost of maintaining our patent protection is high and requires continuous review and diligence. We may not be able to effectively maintain our intellectual property position throughout the major markets of the world.

•	The laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the U.S., and we may encounter significant problems in securing and defending our intellectual property rights outside the U.S.

•	Intellectual property rights do not address all potential threats to any competitive advantage we may have.

•	The existence of counterfeit pharmaceutical products in pharmaceutical markets may compromise our brand and reputation and have a material adverse effect on our business, operations and prospects.

Risks Related to Government Regulation

•	The regulatory approval process is highly uncertain and we may not obtain regulatory approval for our product candidates.

•	Our product candidates could fail to receive regulatory approval from the FDA or other regulatory authorities for many reasons.

•

Our current and future relationships with customers, physicians, and third-party payors are subject to healthcare fraud and abuse laws, false claims laws, transparency laws, privacy and security laws, and other regulations. If we are unable to comply with such laws, we could face substantial penalties.

•	We are subject to laws and regulations governing corruption, which will require us to maintain costly compliance programs.

•	We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these, or if we otherwise fail to maintain an effective system of internal control, it may result in material misstatements in our financial statements.

•	The impact of U.S. healthcare reform may adversely affect our business model.

•	Roxadustat is considered a Class 2 substance on the 2019 World Anti-Doping Agency Prohibited List that could limit sales and increase security and distribution costs for our partners and us.

•	Our employees may engage in misconduct or improper activities, which could result in significant liability or harm our reputation.

•	If we fail to comply with environmental, health or safety laws and regulations, we could incur fines, penalties or other costs.

Risks Related to Our International Operations

•	We have established operations in China and are seeking approval to commercialize our product candidates outside of the U.S., and a number of risks associated with international operations could materially and adversely affect our business.

•	The pharmaceutical industry in China is highly regulated and such regulations are subject to change.

•	We have limited experience distributing drugs in China.

•	We use our own manufacturing facilities in China to produce roxadustat API and drug product for the market in China. There are risks inherent to operating commercial manufacturing facilities, and with these being our single source suppliers, we may not be able to continually meet market demand.

•	As a company, we have limited experience in pharmacovigilance, medical affairs, and management of the third-party distribution logistics, and cannot assure you we will be able to meet regulatory requirements or operate in these capacities successfully.

•	Our collaboration partner in China, AstraZeneca, and we may experience difficulties in successfully growing and sustaining sales of roxadustat in China.

•	The retail prices of any product candidates that we develop may be subject to pricing control in China and elsewhere.

•	FibroGen Beijing would be subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements.

•	Any capital contributions from us to FibroGen Beijing must be approved by the Ministry of Commerce in China, and failure to obtain such approval may materially and adversely affect the liquidity position of FibroGen Beijing.

•	We may be subject to currency exchange rate fluctuations and currency exchange restrictions with respect to our operations in China, which could adversely affect our financial performance.

•	Because FibroGen Beijing’s funds are held in banks that do not provide insurance, the failure of any bank in which FibroGen Beijing deposits its funds could adversely affect our business.

•	We may be subject to tax inefficiencies associated with our offshore corporate structure.

•	Our foreign operations, particularly those in China, are subject to significant risks involving the protection of intellectual property.

•	Uncertainties with respect to the China legal system and regulations could have a material adverse effect on us.

•	Changes in China’s economic, governmental, or social conditions could have a material adverse effect on our business.

•	Our operations in China subject us to various Chinese labor and social insurance laws, and our failure to comply with such laws may materially and adversely affect our business, financial condition and results of operations.

Risks Related to the Operation of Our Business

•	Please see Part II – Other Information, Item 1A. Risk Factors for additional risk factors related to the operation of our Business.

There are also a variety of Risks Related to Our Common Stock

•	Please see Part II – Other Information, Item 1A. Risk Factors for additional risk factors related to our Common Stock.

Table of Contents

FIBROGEN, INC.

PART I—FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

	September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	274,527		$	678,393
Short-term investments		211,875			8,144
Accounts receivable, net ($23,126 and $4,127 from related parties)		35,994			41,883
Inventories		29,315			16,530
Prepaid expenses and other current assets ($0 and $889 from related parties)		21,688			10,160
Total current assets		573,399			755,110
Restricted time deposits		2,072			2,072
Long-term investments		142,636			244
Property and equipment, net		29,052			33,647
Finance lease right-of-use assets		771			29,606
Equity method investment in unconsolidated variable interest entity		3,421			2,728
Operating lease right-of-use assets		94,055			2,043
Other assets		5,107			1,390
Total assets	$	850,513		$	826,840

Liabilities, stockholders’ equity and non-controlling interests
Current liabilities:
Accounts payable ($0 and $1,118 to a related party)	$	23,868		$	24,789
Accrued and other current liabilities ($18 and $24 to a related party)		151,346			118,333
Deferred revenue ($9,113 and $2,907 to a related party)		23,256			6,547
Finance lease liabilities, current		15			12,330
Operating lease liabilities, current		10,831			1,188
Total current liabilities		209,316			163,187
Product development obligations		17,914			18,697
Deferred revenue, net of current ($10,604 and $4,636 to a related party)		162,415			138,474
Finance lease liabilities, non-current		5			25,391
Operating lease liabilities, non-current		91,478			853
Other long-term liabilities		24,322			38,789
Total liabilities		505,450			385,391

Commitments and Contingencies

Stockholders’ equity:
Preferred stock, $0.01 par value; 125,000 shares authorized; no shares issued and outstanding at September 30, 2021, and December 31, 2020		—			—
Common stock, $0.01 par value; 225,000 shares authorized at September 30, 2021, and December 31, 2020; 92,708 and 91,441 shares issued and outstanding at September 30, 2021, and December 31, 2020		927			914
Additional paid-in capital		1,458,979			1,399,774
Accumulated other comprehensive loss		(4,158	)		(4,499	)
Accumulated deficit		(1,129,956	)		(974,011	)
Total stockholders’ equity		325,792			422,178
Non-controlling interests		19,271			19,271
Total equity		345,063			441,449
Total liabilities, stockholders’ equity and non-controlling interests	$	850,513		$	826,840

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

Table of Contents

FIBROGEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue:
License revenue(includes $108,434, $0, $108,434 and $0 from a related party)	$	116,434		$	—		$	116,434		$	—
Development and other revenue (includes $14,127, $4,736, $20,383 and $14,239 from a related party)		26,097			20,663			60,325			59,065
Product revenue, net (includes $10,328, $0, $32,495 and $0 from a related party)		13,442			22,683			42,175			43,331
Drug product revenue (includes $0, $(3,957), $2,056 and $4,281 from a related party)		—			686			(168	)		8,924
Total revenue		155,973			44,032			218,766			111,320

Operating costs and expenses:
Cost of goods sold		3,266			2,207			9,746			6,253
Research and development		75,880			58,476			273,123			174,792
Selling, general and administrative		25,853			(48,981	)		89,186			64,157
Total operating costs and expenses		104,999			11,702			372,055			245,202
Income (loss) from operations		50,974			32,330			(153,289	)		(133,882	)

Interest and other, net
Interest expense		(109	)		(580	)		(965	)		(1,864	)
Interest income and other income (expenses), net		(1,303	)		1,482			(2,120	)		5,292
Total interest and other, net		(1,412	)		902			(3,085	)		3,428

Income (loss) before income taxes		49,562			33,232			(156,374	)		(130,454	)
Provision for income taxes		106			215			235			190
Investment income (loss) in unconsolidated variable interest entity		342			(13	)		664			(13	)
Net income (loss)	$	49,798		$	33,004		$	(155,945	)	$	(130,657	)

Net income (loss) per share:
Basic	$	0.54		$	0.36		$	(1.69	)	$	(1.46	)
Diluted	$	0.54		$	0.35		$	(1.69	)	$	(1.46	)

Weighted average number of common shares used to calculate net income (loss) per share:
Basic		92,644			90,558			92,206			89,414
Diluted		92,808			93,678			92,206			89,414

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

Table of Contents

FIBROGEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020			2021			2020
Net income (loss)	$	49,798	$	33,004		$	(155,945	)	$	(130,657	)
Other comprehensive income (loss):
Foreign currency translation adjustments		396		(2,038	)		366			(3,372	)
Available-for-sale investments:
Unrealized gain (loss) on investments, net of tax effect		13		(657	)		(25	)		(137	)
Other comprehensive income (loss), net of taxes		409		(2,695	)		341			(3,509	)
Comprehensive income (loss)	$	50,207	$	30,309		$	(155,604	)	$	(134,166	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

Table of Contents

FIBROGEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share data)

(Unaudited)

	For The Three Month Period
	Common Stock				Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Non Controlling
	Shares		Amount		Capital			Income (Loss)			Deficit			Interests		Total
Balance at June 30, 2021		92,608,929	$	926	$	1,443,975		$	(4,567	)	$	(1,179,754	)	$	19,271	$	279,851
Net income		—		—		—			—			49,798			—		49,798
Change in unrealized gain or loss on investments		—		—		—			13			—			—		13
Foreign currency translation adjustments		—		—		—			396			—			—		396
Shares issued from stock plans, net of payroll taxes paid		99,023		1		(700	)		—			—			—		(699	)
Stock-based compensation		—		—		15,704			—			—			—		15,704
Balance at September 30, 2021		92,707,952	$	927	$	1,458,979		$	(4,158	)	$	(1,129,956	)	$	19,271	$	345,063