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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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:

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, ~~2017~~2020 was ~~82,008,777.~~91,010,718.

	September 30, 2017			December 31, 2016
				(Note 1)			September 30, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	651,373		$	173,782		$	532,468		$	126,266
Short-term investments		78,599			79,397			155,398			407,491
Accounts receivable ($4,580 and $4,102 from a related party)		8,628			10,448
Prepaid expenses and other current assets		2,856			2,889
Accounts receivable, net ($4,715 and $4,845 from a related party)								26,252			28,455
Inventories								11,803			6,887
Prepaid expenses and other current assets ($165 and $125,210 from related parties)								11,563			133,391
Total current assets		741,456			266,516			737,484			702,490

Restricted time deposits		6,217			6,217			2,072			2,072
Long-term investments		16,767			71,010			247			61,118
Property and equipment, net		126,643			123,657			36,153			42,743
Other assets		3,809			2,152
Finance lease right-of-use assets								32,028			39,602
Other assets ($1,483 and $0 from a related party)								4,031			9,372
Total assets	$	894,892		$	469,552		$	812,015		$	857,397

Liabilities, stockholders’ equity and non-controlling interests
Current liabilities:
Accounts payable	$	6,407		$	6,223		$	7,553		$	6,088
Accrued liabilities ($479 and $1,615 to related parties)		54,117			50,914
Accrued and other current liabilities ($4,135 and $36,883 to a related party)								90,572			83,816
Deferred revenue		7,974			7,988			7,912			490
Finance lease liabilities, current								12,311			12,351
Total current liabilities		68,498			65,125			118,348			102,745

Long-term portion of lease financing obligations		97,370			97,352
Long-term portion of lease obligations								839			1,141
Product development obligations		16,922			14,854			17,790			16,780
Deferred rent		3,799			4,212
Deferred revenue, net of current		110,844			106,709			137,954			99,449
Finance lease liabilities, non-current								28,514			37,610
Other long-term liabilities		6,690			6,191			37,639			64,266
Total liabilities		304,123			294,443			341,084			321,991

Commitments and Contingencies
Commitments and Contingencies (Note 10)

Stockholders’ equity:
Preferred stock, $0.01 par value; 125,000 shares authorized at September 30, 2017 and December 31, 2016; no shares issued and outstanding at September 30, 2017 and December 31, 2016		—			—
Common stock, $0.01 par value; 225,000 shares authorized at September 30, 2017 and December 31, 2016; 81,814 and 63,665 shares issued and outstanding at September 30, 2017 and December 31, 2016		818			637
Preferred stock, $0.01 par value; 125,000 shares authorized; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019								0			0
Common stock, $0.01 par value; 225,000 shares authorized at September 30, 2020 and December 31, 2019; 90,885 and 87,657 shares issued and outstanding at September 30, 2020 and December 31, 2019								909			877
Additional paid-in capital		1,146,112			625,903			1,370,384			1,300,725
Accumulated other comprehensive loss		(1,609	)		(960	)		(4,256	)		(747	)
Accumulated deficit		(573,823	)		(469,742	)		(915,377	)		(784,720	)
Total stockholders’ equity		571,498			155,838			451,660			516,135
Non-controlling interests		19,271			19,271			19,271			19,271
Total equity		590,769			175,109			470,931			535,406
Total liabilities, stockholders’ equity and non-controlling interests	$	894,892		$	469,552		$	812,015		$	857,397

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenue:
License revenue (includes $0, $11,935, $0 and $129,405 from a related party)	$	0		$	11,935		$	0		$	162,517
Development and other revenue (includes $4,736, $3,533, $14,239 and $25,615 from a related party)		20,663			20,660			59,065			85,507
Product revenue, net		22,683			579			43,331			579
Drug product revenue (includes $(3,957), $0, $4,281 and $0 from a related party)		686			0			8,924			0
Total revenue		44,032			33,174			111,320			248,603

Operating costs and expenses:
Cost of goods sold		2,207			242			6,253			242
Research and development		58,476			49,963			174,792			152,467
Selling, general and administrative		(48,981	)		35,823			64,157			84,772
Total operating costs and expenses		11,702			86,028			245,202			237,481
Income (loss) from operations		32,330			(52,854	)		(133,882	)		11,122

Interest and other, net
Interest expense		(580	)		(702	)		(1,864	)		(2,209	)
Interest income and other, net (includes $(13), $0, $(13) and $0 from a related party)		1,469			4,193			5,279			12,496
Total interest and other, net		889			3,491			3,415			10,287

Income (loss) before income taxes		33,219			(49,363	)		(130,467	)		21,409
Provision for income taxes		215			76			190			256
Net income (loss)	$	33,004		$	(49,439	)	$	(130,657	)	$	21,153

Net income (loss) per share:
Basic	$	0.36		$	(0.57	)	$	(1.46	)	$	0.24
Diluted	$	0.35		$	(0.57	)	$	(1.46	)	$	0.23

Weighted average number of common shares used to calculate net income (loss) per share:
Basic		90,558			87,007			89,414			86,390
Diluted		93,678			87,007			89,414			91,995

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

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenue:

      License and milestone revenue (includes $4,125, $4,371,
        $11,652 and $20,727 from a related party)

$
19,997

$
20,867

$
60,930

$
113,802

      Collaboration services and other revenue (includes $445,
         $436,  $1,230 and $1,114 from a related party)

7,275

9,235

22,230

33,863

Total revenue

27,272

30,102

83,160

147,665

Operating expenses:

Research and development

50,336

40,558

144,049

136,599

General and administrative

12,953

11,646

37,908

33,440

Total operating expenses

63,289

52,204

181,957

170,039

Loss from operations

(36,017
)

(22,102
)

(98,797
)

(22,374
)

Interest and other, net

Interest expense

(2,769
)

(2,760
)

(7,901
)

(7,975
)
Interest income and other, net

1,106

866

2,783

2,411

Total interest and other, net

(1,663
)

(1,894
)

(5,118
)

(5,564
)

Loss before income taxes

(37,680
)

(23,996
)

(103,915
)

(27,938
)
Provision for (benefit from) income taxes

57

158

166

(260
)
Net loss

$
(37,737
)

$
(24,154
)

$
(104,081
)

$
(27,678
)

Net loss per share - basic and diluted

$
(0.50
)

$
(0.38
)

$
(1.49
)

$
(0.44
)
Weighted average number of common shares used to calculate net loss per share - basic and diluted

75,891

62,858

69,899

62,543

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

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Net loss

$
(37,737
)

$
(24,154
)

$
(104,081
)

$
(27,678
)
Other comprehensive income (loss):

Foreign currency translation adjustments

(578
)

(184
)

(1,827
)

(446
)
Available-for-sale investments:

Unrealized gain on investments, net of tax effect

403

(144
)

1,250

745

Reclassification from accumulated other comprehensive loss

(47
)

19

(72
)

19

Net change in unrealized gain on available-for-sale investments

356

(125
)

1,178

764

Other comprehensive income (loss), net of taxes

(222
)

(309
)

(649
)

318

Comprehensive loss

$
(37,959
)

$
(24,463
)

$
(104,730
)

$
(27,360
)

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

Nine Months Ended September 30,

2017

2016

Operating activities

Net loss

$
(104,081
)

$
(27,678
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation

4,582

4,520

Amortization of premium on investments

1,503

2,080

Unrealized loss (gain) on short-term investments

3

(436
)
Gain on disposal of property and equipment

3

—

Stock-based compensation

27,608

24,256

Tax benefit on unrealized gain on available-for-sale securities

—

(371
)
Realized gain on sales of available-for-sale securities

(143
)

(37
)
Changes in operating assets and liabilities:

Accounts receivable

1,820

7,713

Prepaid expenses and other current assets

33

23

Other assets

(1,657
)

23

Accounts payable

184

(4,482
)
Accrued liabilities

(114
)

4,231

Deferred revenue

4,121

14,733

Lease financing liability

474

690

Other long-term liabilities

337

388

Net cash provided by (used in) operating activities

(65,327
)

25,653

Investing activities

Purchases of property and equipment

(4,992
)

(1,106
)
Proceeds from sale of property and equipment

5

—

Purchases of available-for-sale securities

(102
)

(72
)
Proceeds from sales of available-for-sale securities

21,109

4,298

Proceeds from maturities of available-for-sale securities

33,849

12,617

Net cash provided by investing activities

49,869

15,737

Financing activities

Repayments of lease liability

(302
)

(302
)
Proceeds from follow-on offering, net of underwriting discounts and commission costs

471,205

—

Cash paid for payroll taxes on restricted stock unit releases

(5,970
)

(2,242
)
Proceeds from issuance of common stock

28,556

6,137

Payments of deferred offering costs

(430
)

—

Net cash provided by financing activities

493,059

3,593

Effect of exchange rate change on cash and cash equivalents

(10
)

(24
)
Net increase in cash and cash equivalents

477,591

44,959

Total cash and cash equivalents at beginning of period

173,782

153,324

Total cash and cash equivalents at end of period

$
651,373

$
198,283

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Net income (loss)	$	33,004		$	(49,439	)	$	(130,657	)	$	21,153
Other comprehensive income (loss):
Foreign currency translation adjustments (Note 1)		(2,038	)		623			(3,372	)		734
Available-for-sale investments:
Unrealized gain (loss) on investments, net of tax effect		(657	)		(385	)		(137	)		712
Other comprehensive income (loss), net of taxes		(2,695	)		238			(3,509	)		1,446
Comprehensive income (loss)	$	30,309		$	(49,201	)	$	(134,166	)	$	22,599

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

	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, 2020		90,228,293	$	902	$	1,344,912		$	(1,561	)	$	(948,381	)	$	19,271	$	415,143
Net loss		0		0		0			0			33,004			0		33,004
Change in unrealized gain or loss on investments		0		0		0			(657	)		0			0		(657	)
Foreign currency translation adjustments		0		0		0			(2,038	)		0			0		(2,038	)
Shares issued from stock plans, net of payroll taxes paid		656,463		7		7,581			0			0			0		7,588
Stock-based compensation		0		0		17,891			0			0			0		17,891
Balance at September 30, 2020		90,884,756	$	909	$	1,370,384		$	(4,256	)	$	(915,377	)	$	19,271	$	470,931

Balance at June 30, 2019		86,847,072	$	868	$	1,265,783		$	(462	)	$	(637,158	)	$	19,271	$	648,302
Net loss		0		0		0			0			(49,439	)		0		(49,439	)
Change in unrealized gain or loss on investments		0		0		0			(385	)		0			0		(385	)
Foreign currency translation adjustments		0		0		0			623			0			0		623
Shares issued from stock plans, net of payroll taxes paid		363,597		4		(180	)		0			0			0		(176	)
Stock-based compensation		0		0		14,793			0			0			0		14,793
Balance at September 30, 2019		87,210,669	$	872	$	1,280,396		$	(224	)	$	(686,597	)	$	19,271	$	613,718

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)

	For The Nine Month Period
	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Non Controlling
	Shares		Amount		Capital		Loss			Deficit			Interests		Total
Balance at December 31, 2019		87,657,489	$	877	$	1,300,725	$	(747	)	$	(784,720	)	$	19,271	$	535,406
Net income		0		0		0		0			(130,657	)		0		(130,657	)
Change in unrealized gain or loss on investments		0		0		0		(137	)		0			0		(137	)
Foreign currency translation adjustments (Note 1)		0		0		0		(3,372	)		0			0		(3,372	)
Shares issued from stock plans, net of payroll taxes paid		3,227,267		32		17,208		0			0			0		17,240
Stock-based compensation		0		0		52,451		0			0			0		52,451
Balance at September 30, 2020		90,884,756	$	909	$	1,370,384	$	(4,256	)	$	(915,377	)	$	19,271	$	470,931

Balance at December 31, 2018		85,432,102	$	854	$	1,226,453	$	(2,281	)	$	(715,827	)	$	19,271	$	528,470
Impact of adoption of ASC 842		0		0		0		0			8,688			0		8,688
Impact of change in accounting principle upon adoption of ASU 2018-02		0		0		0		611			(611	)		0		0
Net loss		0		0		0		0			21,153			0		21,153
Change in unrealized gain or loss on investments		0		0		0		712			0			0		712
Foreign currency translation adjustments		0		0		0		734			0			0		734
Shares issued from stock plans, net of payroll taxes paid		1,778,567		18		5,078		0			0			0		5,096
Stock-based compensation		0		0		48,865		0			0			0		48,865
Balance at September 30, 2019		87,210,669	$	872	$	1,280,396	$	(224	)	$	(686,597	)	$	19,271	$	613,718

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

	Nine Months Ended September 30,
	2020			2019
Operating activities
Net income (loss)	$	(130,657	)	$	21,153
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		8,671			8,715
Amortization of finance lease right-of-use assets		7,886			7,720
Net accretion of discount on investments		103			(3,354	)
Unrealized loss on equity investments		(3	)		(78	)
Investment loss in unconsolidated variable interest entity		13			0
Gain on disposal of property and equipment		(3	)		(10	)
Stock-based compensation		52,451			48,865
Realized loss on sales of available-for-sale securities		258			0
Changes in operating assets and liabilities:
Accounts receivable, net		2,520			44,459
Inventories		(5,206	)		(4,908	)
Prepaid expenses and other current assets		121,923			(128,922	)
Other assets		7,586			(953	)
Accounts payable		1,440			(5,084	)
Accrued and other liabilities		3,249			5,484
Deferred revenue		45,925			(50,915	)
Accrued interest for finance lease liabilities		(196	)		104
Other long-term liabilities		(27,130	)		24,069
Net cash provided by (used in) operating activities		88,830			(33,655	)

Investing activities
Purchases of property and equipment		(1,604	)		(4,017	)
Payment made for acquisition		(2,145	)		0
Purchases of available-for-sale securities and term deposit		(38	)		(155,932	)
Proceeds from sales of available-for-sale securities		10,606			0
Proceeds from maturities of investments		301,900			305,000
Net cash provided by (used in) investing activities		308,719			145,051

Financing activities
Repayments of finance lease liabilities		(9,254	)		(8,810	)
Repayments of lease obligations		(302	)		(302	)
Cash paid for payroll taxes on restricted stock unit releases		(9,007	)		(10,614	)
Proceeds from issuance of common stock		26,247			15,710
Net cash provided by (used in) financing activities		7,684			(4,016	)
Effect of exchange rate change on cash and cash equivalents		969			(46	)
Net increase (decrease) in cash and cash equivalents		406,202			107,334
Total cash and cash equivalents at beginning of period		126,266			89,258
Total cash and cash equivalents at end of period	$	532,468		$	196,592

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

FibroGen, Inc. (“FibroGen” or the “Company”) was incorporated in 1993 in Delaware and are headquartered in San Francisco, California, with subsidiary offices in Beijing and Shanghai, People’s Republic of China (“China”). FibroGen is a ~~research-based~~leading biopharmaceutical company ~~focused on the discovery, development~~developing and ~~commercialization~~commercializing a pipeline of ~~novel therapeutics agents to treat serious unmet medical needs.~~first-in-class therapeutics. The ~~Company’s focus~~Company applies its pioneering expertise in ~~the areas of fibrosis and~~ hypoxia-inducible factor (“HIF”), connective tissue growth factor (“CTGF”) biology, ~~has generated multiple programs targeting various therapeutic areas. The Company’s~~and clinical development to advance innovative medicines for the treatment of anemia, fibrotic disease, and cancer.

Roxadustat, FibroGen’s most advanced product, ~~candidate, roxadustat, or FG-4592,~~ is an oral small molecule inhibitor of HIF prolyl ~~hydroxylases~~hydroxylase (“~~HIF-PHs”~~HIF-PH”) 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 for the treatment of anemia associated with CKD in dialysis patients. In January 2020, Astellas Pharma Inc. (“Astellas”) submitted a supplemental New Drug Application (“NDA”) in Japan for the treatment of anemia in non-dialysis CKD patients.

The Company’s NDA filing in the United States (“U.S.”) for roxadustat for the treatment of anemia in dialysis and non-dialysis CKD patients was accepted by the U.S. Food and Drug Administration (“FDA”) in February 2020. 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.

Roxadustat is in Phase 3 clinical development in the U.S. and Europe and in Phase 2/3 development in China for anemia associated with myelodysplastic syndromes. 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 ~~anemia in chronic kidney disease (“CKD”). Pamrevlumab, or FG-3019,~~idiopathic pulmonary fibrosis, pancreatic cancer and Duchenne muscular dystrophy, and is ~~the Company’s monoclonal antibody~~also in Phase 2 ~~clinical~~ development ~~for the treatment of idiopathic pulmonary fibrosis~~in Severe Acute Respiratory Syndrome Coronavirus 2019 Disease (“IPF”), pancreatic cancer, Duchenne muscular dystrophy (“DMD”) and liver fibrosis. The Company has taken a global approach with respect to the development and future commercialization of its product candidates, and this includes development and commercialization in the People’s Republic of China (“China”COVID-19”). The Company is capitalizing on its extensive experience in fibrosis and hypoxia inducible factor (“HIF”) biology and clinical development to advance a pipeline of innovative medicines for the treatment of anemia, fibrotic disease cancer, corneal blindness and other serious unmet medical needs.

On April 11, 2017, the Company closed the follow-on offering of its common stock. In this offering, the Company sold 5,228,750 shares of its common stock at a public offering price of $22.95 per share. Net proceeds from this offering were $115.1 million, after deducting underwriting discounts and commissions of $4.9 million. In addition, the offering expenses were approximately $0.6 million in total. On August 24, 2017, the Company completed another follow-on offering of its common stock. In this offering, the Company sold a total of 9,200,000 shares of its common stock at a public offering price of $40.75 per share. Net proceeds from this offering were $356.2 million, after deducting underwriting discounts and commissions of $18.7 million. In addition, the offering expenses were approximately $0.4 million in total.

The condensed consolidated financial statements include the accounts of FibroGen, its wholly owned subsidiaries and its majority-owned subsidiaries, FibroGen Europe Oy and FibroGen China Anemia Holdings, Ltd. (“FibroGen ~~China”~~Cayman”). All inter-company transactions and balances have been eliminated in consolidation. For any variable interest entity for which FibroGen is not the primary beneficiary, the Company uses the equity method of accounting. The Company operates ~~in one~~as 1 segment — the discovery, development and commercialization of novel therapeutics to treat serious unmet medical needs.

The unaudited condensed consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the ~~United States of America~~U.S. (“U.S. GAAP”) applicable to interim financial reporting and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the ~~United States (“~~U.S.”) Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and footnote disclosures normally included in the annual consolidated financial statements. The December 31, 2016 condensed consolidated balance sheet data contained within this Form 10-Q was derived from audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2016 (“2016 Form 10-K”), but does not include all disclosures required by U.S. GAAP.

~~The~~ financial information included herein should be read in conjunction with the consolidated financial statements and related notes in the ~~2016~~Company’s Annual Report on Form ~~10-K. The accounting policies used by~~10-K filed with the SEC for the year ended December 31, 2019 (“2019 Form 10-K”).

During the third quarter of 2020, the Company recorded out-of-period adjustments that resulted in ~~its presentation~~a net decrease in revenue of ~~interim financial results are consistent with those presented~~$2.1 million. The Company does not believe the correction of these errors is individually or in ~~Note 2~~aggregate material to the consolidated financial statements ~~included in~~for the ~~2016 Form 10-K.~~three and nine months ended September 30, 2020 or to any prior period consolidated financial statements.

The preparation of the condensed consolidated financial statements in conformity with U.S. 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, estimates of accruals related to clinical trial costs, valuation allowances for deferred tax assets, and valuation and recognition of stock-based compensation.~~revenue. On an ongoing basis, management reviews these estimates and assumptions. Changes in facts and circumstances may alter such estimates and actual results could differ from those estimates. In ~~our~~the Company’s opinion, the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair statement of ~~our~~its financial position, results of operations and cash flows for the interim periods presented.

The following is a reconciliation of the basic and diluted net income (loss) per share calculation for the periods presented (in thousands, except per share data):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2020		2019			2020			2019
Net income (loss)	$	33,004	$	(49,439	)	$	(130,657	)	$	21,153
Weighted average shares used to compute net income (loss) per share:
Basic		90,558		87,007			89,414			86,390
Dilutive effect of potential common shares		3,120		0			0			5,605
Diluted		93,678		87,007			89,414			91,995

Net income (loss) per share:
Basic	$	0.36	$	(0.57	)	$	(1.46	)	$	0.24
Diluted	$	0.35	$	(0.57	)	$	(1.46	)	$	0.23

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 nine months ended September 30, 2020, and the three months ended September 30, 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 potential common shares related to stock options, restricted stock units and shares to be purchased under the employee stock purchase plan totaling 4.2 million and 9.2 million, respectively, for the three months ended September 30, 2020 and 2019, and totaling 8.9 million and 3.6 million, respectively, for the nine months ended September 30, 2020 and 2019, as they were anti-dilutive.

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.

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.

In ~~March 2016,~~August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2016-09,~~ ~~Compensation - Stock Compensation (Topic 718)~~. No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance ~~identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity~~requires capitalizing implementation costs incurred to develop or ~~liabilities,~~obtain internal-use software (and hosting arrangements that include an ~~option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows.~~internal-use software license). This guidance was effective for ~~the~~ annual reporting ~~period~~periods beginning after December 15, ~~2016,~~2019, including interim ~~periods within that reporting period.~~periods. The Company adopted this guidance ~~as of~~on January 1, ~~2017~~2020 using the prospective method, and ~~has elected to continue with its existing policy to estimate forfeitures expected to occur when calculating stock compensation expense. Upon adoption,~~ the Company recorded a retrospective increase of $19.5 million in deferred tax assets for previously unrecognized excess tax benefits that existed as of December 31, 2016, and a corresponding increase of $19.5 million in the valuation allowance against these deferred tax assets, as substantially all of the Company’s U.S. and foreign deferred tax assets, net of deferred tax liabilities, are subject to a full valuation allowance. ~~As such, the net impact from these retrospective adjustments was zero to the Company’s accumulated deficit. The~~ adoption of this guidance ~~had no~~did not have material impact to the Company’s condensed consolidated financial ~~statements for the three and nine months ended September 30, 2017.~~

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting~~. This guidance provides guidance about which changes to the terms or conditions of a stock-based payment award require an entity to apply modification accounting in Topic 718. This guidance is effective for annual reporting period beginning after December 15, 2017, including interim periods, with early adoption permitted~~. The Company is currently evaluating the impact on its consolidated financial statements upon the adoption of this guidance.~~statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments –- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments(“ASU 2016-13”). This guidance ~~requires that~~is intended to provide financial ~~assets measured at amortized cost be presented at~~statement users with more decision-useful information about the ~~net amount expected to be collected. The measurement of~~ expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. This guidance requires the measurement of financial assets with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance requires an impairment model, known as the current expected credit loss model, which is based on ~~historical experience, current conditions,~~expected losses rather than incurred losses. Entities are required to carry an allowance for expected credit losses for financial assets, including most debt instruments (except those carried at fair value) and ~~reasonable~~trade receivables. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (“ASU 2019-11”), which has the same effective dates and ~~supportable forecasts that affect the collectability. This guidance is~~transition requirements as ASU 2016-13. ASU 2016-13 and ASU 2019-11 were effective for ~~the~~ annual reporting ~~period~~periods beginning after December 15, 2019 including interim ~~periods within that reporting period.~~periods. The Company’s investment portfolio primarily consists of U.S. Treasury bills and notes carried at fair value, which is required to follow the impairment model under Topic 326. The Company ~~is currently evaluating~~adopted this guidance on January 1, 2020. Based on the ~~impact on its consolidated financial statements upon~~composition of the Company’s trade receivables and investment portfolio, economic conditions and historical credit loss activity, the adoption of this ~~guidance.~~guidance did not have material impact to the Company’s condensed consolidated financial statements.

In ~~February 2016,~~December 2019, the FASB issued ASU ~~2016-02,~~ ~~Leases~~No. 2019-12, Income Taxes (Topic ~~842)~~740): Simplifying the Accounting for Income Taxes. ~~Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.~~ This guidance ~~offers specific~~simplifies the accounting for income taxes by clarifying and amending existing guidance ~~for~~related to the recognition of franchise tax, the evaluation of a ~~lessee, a lessor~~step up in the tax basis of goodwill, and ~~sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user~~the effects of enacted changes in tax laws or rates in the ~~financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.~~effective tax rate computation, among other clarifications. This guidance is effective for ~~the~~ annual reporting ~~period~~periods beginning after December 15, ~~2018,~~2020 including interim periods, ~~within that reporting period, and requires a modified retrospective adoption,~~ with early adoption permitted. The Company ~~is currently evaluating the~~does not plan to early adopt this guidance and does not anticipate a material impact onto its consolidated financial statements upon ~~the~~ adoption of this guidance.

The accounting policies used by the ~~FASB issued ASU 2016-01,~~ ~~Financial Instruments-Overall (Subtopic 825-10). This guidance requires equity investments that~~Company in its presentation of interim financial results are ~~not accounted for under~~consistent with those presented in Note 2 to the equity method of accounting to be measured at fair value with changes recognized in net income, simplifies the impairment assessment of certain equity investments, and updates certain presentation and disclosure requirements. This guidance is effective for the annual reporting period beginning after December 15, 2017 and interim periods within those annual periods. The Company is currently evaluating the impact on its consolidated financial statements ~~upon~~included in the ~~adoption of this guidance.~~2019 Form 10-K, except for the following:

Under the ~~FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ ~~(“ASU 2014-09”), which supersedes the revenue recognition requirements in~~ Accounting Standards Codification (“ASC”) ~~605,~~ ~~Revenue Recognition. ASU 2014-09~~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.

Prior to April 1, 2020, the functional currency of the Company’s subsidiary, FibroGen (China) Medical Technology Development Co., Ltd. (“FibroGen Beijing”), was the U.S. dollar. Accordingly, monetary assets and liabilities of FibroGen Beijing in the currencies other than USD were remeasured using exchange rates in effect at the end of the period. Revenues and costs in its local currency, Renminbi Yuan (“CNY”), were remeasured using average exchange rates for the period, except for costs related to those balance sheet items that were remeasured using historical exchange rates. The resulting remeasurement gains and losses were included within interest income and other, net in the consolidated statements of operations as incurred.

On April 1, 2020, FibroGen Beijing adopted CNY as its functional currency based on reassessment of the primary economic operational environment of FibroGen Beijing that is mainly associated with its growing manufacturing and product sales activities conducted in CNY. As such, monetary assets and liabilities of FibroGen Beijing in currencies other than CNY are remeasured using exchange rates in effect at the end of the period. The assets and liabilities are translated to U.S. dollars at exchange rates in effect at the balance sheet date. All income statement accounts are translated at monthly average exchange rates. Resulting foreign currency translation adjustments are recorded directly in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. This change in FibroGen Beijing’s functional currency was accounted for prospectively from April 1, 2020, and the prior condensed consolidated financial statements were not restated. The related currency translation adjustment was $1.3 million at April 1, 2020, upon adoption.

The allowance for doubtful accounts is based on the ~~principle~~Company’s assessment of the collectability of customer accounts. The Company makes estimates of expected credit losses for the allowance for doubtful accounts by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, current economic and regulatory conditions that may affect a customer’s ability to pay, and estimates of expected future losses. The Company’s bad debt expense for the three and nine months ended September 30, 2020 and the allowance for doubtful accounts as of September 30, 2020 were immaterial.

The Company periodically assesses its available-for-sale investments for other-than-temporary impairment. For debt securities in an unrealized loss position, the Company first considers its intent to sell, or whether it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis. If either of these criteria are met, the amortized cost basis of such debt securities is written down to fair value through interest and other, net.

For debt securities in an unrealized loss position that do not meet the aforementioned criteria, the Company assesses whether the decline in the fair value of such debt securities has resulted from credit losses or other factors. The Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the securities, among other factors. If this assessment indicates that a credit loss may exist, the Company then compares the present value of cash flows expected to be collected from such securities to their amortized cost basis. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded through interest and other, net, limited by the amount that the fair value is less than the amortized cost basis. Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when the Company believes that an available-for-sale security is confirmed uncollectable or when either of the criteria regarding intent or requirement to sell is met.

The Company sells roxadustat in China through a number of pharmaceutical distributors located in China. These pharmaceutical distributors are the Company’s customers. Hospitals order roxadustat through a distributor and the Company ships the product directly to the distributors. The delivery of roxadustat to a distributor represents a single performance obligation. Distributors are responsible for delivering product to end users, primarily hospitals. Distributors bear inventory risk once they receive and accept the product. Product revenue is recognized when control of the promised good is transferred to ~~depict~~ the ~~transfer of goods or services to customers~~customer in an amount that reflects the consideration to which the ~~entity~~Company expects to be entitled to in exchange for ~~those~~the product.

The period between the transfer of control of the promised goods ~~or services. ASU 2014-09 also requires additional disclosure about~~and when the ~~nature, amount, timing and uncertainty~~Company receives payment is based on a general 60-day payment term. As such, product revenue is not adjusted for the effects of ~~revenue and cash flows arising from customer contracts, including~~a significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations~~ ~~(“ASU 2016-08”); ASU No. 2016-10,~~ ~~Revenue from Contracts with~~financing component.

~~Customers (Topic 606): Identifying Performance Obligations~~Product revenue is recorded at the net sales prices (transaction price) which includes the following estimates of variable consideration:

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 ~~Licensing~~other available information including estimated channel inventory levels and estimated sales made by the distributor to hospitals, which involve a substantial degree of judgment.

The above rebates and discounts all together are eligible to be applied against the distributor’s future sales order, limited to certain maximums until such rebates and discounts are exhausted. These rebates and discounts are recorded as contract liabilities at the time they become eligible and in the same period that the related revenue is recorded. Due to the distributor’s legal right to offset, at each balance sheet date, the liability for rebates and discounts are presented as reductions of gross accounts receivable from the distributor, or as a current liability to the distributor to the extent that the total amount exceeds the gross accounts receivable. The distributor’s legal right of offset is calculated at the individual distributor level.

On July 8, 2020, FibroGen Cayman, FibroGen Beijing, and FibroGen International (Hong Kong) Limited (collectively, “FibroGen China”) and AstraZeneca AB (“~~ASU 2016-10”~~AstraZeneca”)~~; ASU No. 2016-12,~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements~~ entered into an amendment, effective July 1, 2020, to the collaboration agreement for the development and ~~Practical Expedients~~commercialization (but not manufacture) of roxadustat for the treatment of anemia in China (“~~ASU 2016-12”~~China Agreement”);, relating to the development and ~~ASU No. 2016-20,~~ ~~Technical Corrections~~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 ~~Improvements to Topic 606, Revenue from Contracts with Customers~~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 (“~~ASU 2016-20”~~Kangda”) in exchange for cash consideration of CNY15.0 million (approximately $2.1 million). The ~~Company must adopt ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 with ASU 2014-09 (collectively, the “new revenue standards”).~~ ~~The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as~~purpose of the ~~date~~acquisition was to acquire a distribution license owned by Kangda for commercializing and distributing roxadustat in China. FibroGen Beijing will continue to hold all of ~~initial application (modified retrospective).~~the regulatory licenses issued by China regulatory authorities and will continue to be primarily responsible for regulatory, clinical, manufacturing, medical affairs and pharmacovigilance. The ~~Company has commenced its implementation activities~~transaction costs related to the ~~adoption~~execution of the acquisition, primarily legal expenses, totaled CNY5.0 million and were shared equally with AstraZeneca. Therefore, the acquisition costs for FibroGen Beijing were CNY2.5 million (approximately $0.4 million).

As of September 30, 2020, the cash consideration of CNY7.3 million for the above equity transfer, together with AstraZeneca’s share of the acquisition costs of CNY2.5 million, totaling CNY9.8 million (approximately $1.4 million), was recorded as a receivable from AstraZeneca in prepaid expenses and other current assets in the ~~first quarter of 2018 and apply the full retrospective method to restate each prior reporting period presented in the~~condensed consolidated financial statements. The new revenue standard is principle based and interpretation of those principles may vary from company to company based on their unique circumstances. It is possible that interpretation, industry practice, and guidance may evolve as companies and the accounting profession work to implement this new standard. As the Company completes its evaluation of this new standard, new information may arise that could change the Company's current understanding of the impact to revenues recognized and its views on the expected impact to the periods prior to adoption.balance sheet. In October 2020, CNY7.3 million cash consideration was received.

In June 2005, the Company entered into a collaboration agreement with Astellas ~~Pharma Inc. (“Astellas”)~~ for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in Japan (“Japan Agreement”). Under this agreement, Astellas paid license fees and other consideration totaling $40.1 million (such amounts were fully received as of February 2009). Under the Japan Agreement, the Company is also eligible to receive from Astellas an aggregate of approximately $132.5 million in potential milestone payments, comprised of (i) up to $22.5 million in milestone payments upon achievement of specified clinical and development milestone events (such amounts were fully received as of July 2016), (ii) up to $95.0 million in milestone payments upon achievement of specified regulatory milestone events, and (iii) up to approximately $15.0 million in milestone payments upon the achievement of specified commercial sales milestone. The aggregate amount of consideration received through September 30, 2020 totals $90.1 million. The Japan Agreement also provides for tiered payments based on net sales of roxadustat in the low 20% range after commercial launch.

In April 2006, the Company entered into a separate collaboration agreement with Astellas for the development and commercialization of roxadustat for the treatment of anemia in Europe, the Middle East, the Commonwealth of Independent States and South Africa (“Europe Agreement”). Under the terms of the Europe Agreement, Astellas paid license fees and other upfront consideration totaling $320.0 million (such amounts were fully received as of February 2009). The Europe Agreement also provides for additional development and regulatory approval milestone payments up to ~~$117.5~~$425.0 million, ~~a commercial sales related~~comprised of (i) up to $90.0 million in milestone payments upon achievement of ~~$15.0~~specified clinical and development milestone events (such amounts were fully received as of 2012), (ii) up to $335.0 million in milestone payments upon achievement of specified regulatory milestone events. Under the Europe Agreement, Astellas committed to fund 50% of joint development costs for Europe and ~~additional consideration~~North America, and all territory-specific costs. The Europe Agreement also provides for tiered payments based on net sales ~~(as defined)~~of roxadustat in the low 20% ~~range after commercial launch. A clinical milestone payment~~range. The aggregate amount of ~~$12.5 million was~~consideration received ~~in 2013.~~ through September 30, 2020 totals $540.0 million.

During the second quarter of ~~2016,~~2019, the Company received positive topline results from analyses of pooled major adverse cardiac event (“MACE”) and MACE plus hospitalized unstable angina and hospitalized congestive heart failure (“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, following the Company’s NDA submission to the FDA. These milestones became probable of being achieved in the second quarter of 2019, and 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 ~~$10.0~~as revenue during 2019, and $0.6 million was recognized as revenue during the nine months ended September 30, 2020, from performance obligations satisfied or partially satisfied. According to the Europe Agreement, these milestone payments were billed to Astellas upon the submission of an MAA in the second quarter of 2020 and the total $130.0 million was received during the same quarter.

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, $15.0 million of ~~revenue~~which was received in 2015 as a result of the ~~initiation by Astellas~~finalization of its two audited pre-clinical carcinogenicity study reports, and the remaining $50.0 million was received in April 2020 as a result of the ~~first~~NDA submission milestone, (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 consideration received through September 30, 2020 totals $439.0 million.

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 ~~clinical study~~trials for roxadustat, enabling the Company’s NDA submission to the FDA. The regulatory milestone payment associated with this NDA submission became probable of being achieved in ~~Japan~~the second quarter of 2019. Accordingly, the consideration of $50.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the U.S./ RoW Agreement in the second quarter of 2019, of which $42.4 million was recognized as revenue during 2019, and $0.6 million was recognized as revenue during the nine months ended September 30, 2020, from performance obligations satisfied or partially satisfied. The Company submitted such NDA in December 2019, which was accepted by the FDA for review 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 billed during the first quarter of 2020, the payment of which was fully received in April 2020.

AstraZeneca and Astellas approved the development of roxadustat for the treatment of chemotherapy-induced anemia 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 chemotherapy-induced anemia, 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.

Effective July 30, 2013, the Company (through its subsidiaries affiliated with China) entered into the 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 was 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 such consideration received for milestone and upfront payments through September 30, 2020 totals $77.2 million.

In December 2019, roxadustat was 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 of milestones payable to the Company by AstraZeneca. Accordingly, the total consideration of $22.0 million associated with ~~chronic kidney disease~~these milestones was included in ~~patients on dialysis. The amount~~the transaction price and allocated to performance obligations under the China Agreement during the fourth quarter of 2019. This milestone payment was received during the first quarter of 2020.

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 2, 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, expected in early ~~July 2016.~~ 2021. During the interim period, FibroGen will continue 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, AstraZeneca will bill the co-promotion expenses to Falikang, rather than FibroGen Beijing. In addition, FibroGen Beijing will manufacture and supply commercial product to Falikang based on an agreed upon transfer price. Development costs will continue to be shared 50/50 between the Parties.

The ~~Company evaluated~~table below summarizes the ~~criteria~~accounting treatment for the various performance obligations pursuant to each of the Astellas and AstraZeneca agreements. License amounts identified below are included in the “License revenue” line item in the condensed consolidated statements of operations. All other elements identified below are included in the “Development and other revenue” line item in the condensed consolidated statements of operations.

Amounts recognized as revenue under ~~ASC 605-28~~the Japan Agreement were as follows (in thousands):

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

The revenue recognized under the Japan Agreement for the three months ended September 30, 2020 included an increase in revenue of $0.1 million resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied or partially satisfied in previous periods. The remainder of the transaction price related to the Japan Agreement includes 0 further variable consideration from estimated future co-development billing.

Amounts recognized as revenue under the Europe Agreement were 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 Europe Agreement, along with any associated deferred revenue as follows (in thousands):

Europe Agreement In April 2006, the Company entered into a separate collaboration agreement with Astellas for the development and commercialization of roxadustat for the treatment of anemia in Europe, the Middle East, the Commonwealth of Independent States and South Africa (“Europe Agreement”). Under the terms of the Europe Agreement, Astellas paid license fees and other upfront consideration totaling $320.0 million (such amounts were fully received as of February 2009). The Europe Agreement also provides for additional development and regulatory approval milestone payments up to $425.0 million. Clinical milestone payments of $40.0 million and $50.0 million were received in 2010 and 2012, respectively. The Company evaluated the criteria under ASC 605-28 and concluded that each of those milestones was substantive. Under the Europe Agreement, Astellas committed to fund 50% of joint development costs for Europe and North America, and all territory-specific costs. The Europe Agreement also provides for tiered payments based on net sales of product (as defined) in the low 20% range. 9 ~~Table of Contents~~		Cumulative Revenue Through September 30, 2020		~~AstraZeneca Agreements~~	Deferred ~~U.S./Rest of World (“RoW”) Agreement~~Revenue at ~~Effective July~~September 30, 2013, the Company entered into a collaboration agreement with AstraZeneca AB (“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 has agreed to pay upfront, non-contingent and time-based payments totaling $374.0 million, which were fully received in various amounts through June 2016. In addition, the U.S./RoW Agreement also provides for development and regulatory approval based milestone payments of up to $550.0 million, which include potential future indications which the companies choose to pursue, and commercial related milestone payments of up to $325.0 million. During 2015, the Company received a $15.0 million development milestone payment as a result of the finalization of its two audited pre-clinical carcinogenicity study reports. The Company evaluated the criteria under ASC 605-28 and concluded that the aforementioned milestone was substantive.2020		Total 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 during the fourth quarter of 2015). Any additional development costs incurred by FibroGen during the development period in excess of the $233.0 million (aggregated spend) will be 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 delivery of commercial product based on a percentage of AstraZeneca’s net sales (as defined in the agreement) in the low- to mid-single digit range.Consideration ~~China Agreement~~Through ~~Effective July~~September 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, which were fully received in 2014. In addition, the China Agreement provides for AstraZeneca to pay regulatory approval and other approval related milestones of up to $161.0 million. The China Agreement also provides for sales related milestone payments of up to $167.5 million and contingent payments of $20.0 million related to possible future compounds. The China Agreement is structured as a 50/50 profit or loss share (as defined) and provides for joint development costs (including capital and equipment costs for construction of the manufacturing plant in China), to be shared equally during the development.2020		In September 2016, AstraZeneca approved the protocol related to the development of roxadustat for the treatment of anemia in patients with myelodysplastic syndromes (“MDS”), for which the Company has received approval from the China Food and Drug Administration for its clinical trial application for a Phase 2/3 trial and acceptance of its investigational new drug application from the U.S. Food and Drug Administration for a Phase 3 trial. As a result, for
License		$	487,951		$	0	$	487,951
Development revenue recognition purposes, during the third quarter of 2016, the Company extended the estimated joint development service period for the AstraZeneca agreements from the end of 2018 to the end of 2020, to allow for development of MDS.	In October 2017, the China Food and Drug Administration accepted the Company’s recently submitted New Drug Application (“NDA”) for registration of roxadustat for anemia in dialysis-dependent CKD and non-dialysis-dependent CKD (NDD-CKD) patients. This NDA submission triggers a $15.0 million milestone payment to the Company by AstraZeneca, which is expected to be received and fully recognized under the Company’s current revenue recognition policy as		244,834			2,096		246,930
Total license and ~~milestone~~development revenue ~~in the fourth quarter of 2017.~~	~~Summary of Revenue Recognized Under the Collaboration Agreements~~	The table below summarizes the accounting treatment for the various deliverables pursuant to each of the Astellas and AstraZeneca agreements. License amounts identified below are included in the “License and milestone revenue” line item in the condensed consolidated statements of operations. All other elements identified below are included in the “Collaboration services and other revenue” line item in the condensed consolidated statements of operations.$	10732,785		$	2,096	$	734,881

The revenue recognized under the Europe Agreement for the three months ended September 30, 2020 included an increase in revenue of $1.3 million resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied or partially satisfied in previous periods. The remainder of the transaction price related to the Europe Agreement includes $31.5 million of variable consideration from estimated future co-development billing and is expected to be recognized over the remaining development service period.

Amounts recognized as revenue under the U.S./RoW and China Agreement were 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 U.S./RoW Agreement and China Agreement, along with any associated deferred revenue as follows (in thousands):

The revenue recognized under the U.S./RoW Agreement for the three months ended September 30, 2020 included a decrease of $0.6 million in revenue resulting from changes to estimated variable consideration in the current period 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 $52.3 million of variable consideration from estimated future co-development billing and is expected to be recognized over the remaining development service period, except for amounts allocated to the China performance obligation, which are expected to be recognized in a pattern consistent with estimated deliveries of the commercial drug product. As mentioned above, a profit share with AstraZeneca of $2.0 million was recorded in the condensed consolidated statement of operations for the three months ended September 30, 2020.

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):

In the second quarter of 2020, the Company amended the agreement with its pharmaceutical distributors, which triggered accounting modifications particularly related to non-key account hospital listing award. For the three and nine months ended September 30, 2020, the non-key account hospital listing award was $2.9 million and $5.5 million, respectively, which was recorded as a reduction to the revenue and calculated based on eligible non-key account hospital listing to date achieved by each distributor with certain requirements met during the period.

For the three and nine months ended September 30, 2020, the contractual sales rebate was $2.0 million and $3.7 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.

The rebates and discounts that the Company’s pharmaceutical distributors have earned are eligible to be applied against future sales orders, limited to certain maximums until such rebates and discounts are exhausted. These rebates and discounts are recorded as contract liabilities at the time they become eligible in the same period that the related revenue is recorded. Due to the distributor’s legal right to offset, at each balance sheet date, the rebates and discounts are presented as reductions to gross accounts receivable from the distributor, or as a current liability to the distributor to the extent that the total amount exceeds the gross accounts receivable. The distributor’s legal right of offset is calculated at the individual distributor level. The following table includes a roll-forward of the contract liabilities (in thousands):

As of September 30, 2020, the total rebates and discounts as reductions to gross accounts receivable was $9.8 million, and the total contract liabilities was $1.6 million, which was included in accrued and other current liabilities in the condensed consolidated balance sheet.

The reductions to gross accounts receivable, including the above-mentioned contra-accounts receivable items related to product revenue, consisted of the following (in thousands):

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 deliver to Astellas roxadustat active pharmaceutical ingredient (“API”) for the roxadustat commercial launch in Japan. Related to the API shipments in 2018 under the Japan Amendment, during the three months ended September 30, 2020, the Company recorded a $4.0 million reduction to drug product revenue, related 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 three months ended June 30, 2020, the Company fulfilled delivery obligations under the term of the Japan Amendment, and recognized the related drug product revenue of $8.2 million in the same period. The amount represents variable consideration and was 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 product tablets, and estimated yield from the manufacture of bulk product tablets, among others.

Under the U.S./RoW Agreement, FibroGen would manufacture and deliver to AstraZeneca roxadustat bulk drug product in support of commercial supplies. The Company delivered bulk drug product to AstraZeneca as pre-commercial supply for process validation purposes in the three months ended March 31, 2020, June 30, 2020 and September 30, 2020, respectively. The related drug product revenue of $4.6 million was recognized in the three months ended September 30, 2020. The drug product revenue amount represents variable consideration and was estimated based on the quantity of product shipped and an estimated price.

The amount of variable consideration that is included in the transaction price may be constrained, and is included in the drug product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. 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.

Other revenues consist primarily of collagen material sold for research purposes. Other revenues were immaterial for all periods presented.

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.

Deferred revenue includes amounts allocated to the China unit of accounting under the AstraZeneca arrangement as revenue recognition associated with this unit of accounting is tied to the commercial sales of the products within China. As of September 30, 2020, approximately $3.2 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.

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

The fair values of the Company’s financial assets that are measured on a recurring basis are as follows (in thousands):

	September 30, 2020
	Level 1		Level 2		Level 3		Total
U.S. treasury notes and bills	$	125,388	$	0	$	0	$	125,388
Equity investments		247		0		0		247
Money market funds		451,917		0		0		451,917
Certificate of deposit		0		30,010		0		30,010
Total	$	577,552	$	30,010	$	0	$	607,562

	December 31, 2019
	Level 1		Level 2		Level 3		Total
U.S. treasury notes and bills	$	347,383	$	80,123	$	0	$	427,506
Bond and mutual funds		10,816		0		0		10,816
Equity investments		255		0		0		255
Money market funds		85,551		0		0		85,551
Certificate of deposit		0		30,032		0		30,032
Total	$	444,005	$	110,155	$	0	$	554,160

The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data and other observable inputs.

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

The fair values 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.

There were 0 transfers of assets or liabilities between levels for any of the periods presented.

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

	Balance Sheet Line Item	September 30, 2020			December 31, 2019
Assets
Finance:
Right-of-use assets - cost		$	50,220		$	49,909
Accumulated amortization			(18,192	)		(10,307	)
Finance lease right-of-use assets, net	Finance lease right-of-use assets		32,028			39,602
Operating:
Right-of-use assets - cost			2,796			2,736
Accumulated amortization			(1,554	)		(805	)
Operating lease right-of-use assets, net	Other assets		1,242			1,931
Total lease assets		$	33,270		$	41,533

Liabilities
Current:
Finance lease liabilities	Finance lease liabilities, current	$	12,311		$	12,351
Operating lease liabilities	Accrued and other current liabilities		770			983
Non-current:
Finance lease liabilities	Finance lease liabilities, non-current		28,514			37,610
Operating lease liabilities	Other long-term liabilities		472			942
Total lease liabilities		$	42,067		$	51,886

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

Maturities of lease liabilities as of September 30, 2020 are as follows (in thousands):

The underlying investments in the money market funds as of September 30, 2020 are all US government obligations. At September 30, 2020 and December 31, 2019, a total of $51.2 million and $11.9 million, respectively, of the Company’s cash and cash equivalents were held outside of the U.S. in its foreign subsidiaries to be used primarily for its China operations.

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

	September 30, 2020
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
U.S. treasury notes and bills	$	124,993	$	395	$	0		$	125,388
Certificates of deposit		30,000		10		0			30,010
Equity investments		125		122		0			247
Total investments	$	155,118	$	527	$	0		$	155,645

	December 31, 2019
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
U.S. treasury notes and bills	$	426,995	$	536	$	(25	)	$	427,506
Certificates of deposit		30,000		32		0			30,032
Bond and mutual funds		10,730		86		0			10,816
Equity investments		125		130		0			255
Total investments	$	467,850	$	784	$	(25	)	$	468,609

At September 30, 2020, all of the available-for-sale investments had contractual maturities within one year. During the three and nine months ended September 30, 2020 and 2019, the Company did 0t recognize any other-than-temporary impairment loss.

The provision to write-down excess and obsolete inventory was immaterial for the three and nine months ended September 30, 2020. There was 0 provision to write-down excess and obsolete inventory for the three and nine months ended September 30, 2019.

Prepaid expenses and other current assets consisted of the following (in thousands):

The unbilled contract assets as of December 31, 2019 included 2 regulatory milestones totaling $130.0 million under the Europe Agreement with Astellas associated with the planned MAA submission in Europe. The MAA was submitted in the second quarter of 2020. Therefore, the $130 million milestones were billed in the same quarter. The unbilled contract assets as of December 31, 2019 also included 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. Therefore, the $50.0 million milestone was billed during the first quarter of 2020. See Note 3, Collaboration Agreements and Revenues, for details.

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

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. The API product price adjustment of $4.0 million accrued as of September 30, 2020 related to the change in estimated variable consideration of API product at the time an updated roxadustat listed price was issued by the same Japanese authority in the first quarter of 2020. See Note 3, 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. $14.8 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 September 30, 2020.

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. $26.3 million of the recalculated accrued co-promotion expenses remained in the long-term liabilities as of September 30, 2020, as it is not anticipated to be paid within the next 12 months.

Stock-based compensation expense was recorded directly to research and development and selling, general and administrative expense as follows (in thousands):

The assumptions used to estimate the fair value of stock options granted and purchases under the Company’s 2014 Employee Share Purchase Plan (“ESPP”) using the Black-Scholes option valuation model were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Stock Options
Expected term (in years)		5.6			5.3			5.7			5.3
Expected volatility		59.0	%		67.8	%		67.7	%		67.9	%
Risk-free interest rate		0.3	%		1.7	%		0.8	%		2.4	%
Expected dividend yield		0			0			0			0
Weighted average estimated fair value	$	22.48		$	25.17		$	18.11		$	32.44

ESPPs
Expected term (in years)	0.5 - 2.0			0.5 - 2.0			0.5 - 2.0			0.5 - 2.0
Expected volatility	50.4 - 77.1		%	48.1 - 62.1		%	49.5 - 77.1		%	48.1 - 62.1		%
Risk-free interest rate	0.2 - 2.9		%	1.6 - 2.9		%	0.2 - 2.9		%	1.3 - 2.9		%
Expected dividend yield		0			0			0			0
Weighted average estimated fair value	$	17.00		$	19.27		$	17.74		$	19.53

Provision for income tax for the three and nine months ended September 30, 2020 and 2019 were primarily due to foreign taxes.

Based upon the weight of available evidence, which includes its historical operating performance, reported cumulative net losses since inception, the Company has established and continues to maintain a full valuation allowance against its deferred tax assets as it does not currently believe that realization of those assets is more likely than not.

~~The total arrangement consideration has been allocated to each of the following deliverables under the Europe Agreement, along with any associated deferred revenue as follows (in thousands):~~

~~Amounts recognized as revenue under the U.S./RoW Agreement were as follows (in thousands):~~

~~The total arrangement consideration has been allocated to each of the following deliverables under the U.S./RoW Agreement, along with any associated deferred revenue as follows (in thousands):~~

Other revenues consist of royalty payments received, which are recorded on a monthly basis as they are reported to the Company, and collagen feasibility sales. Other revenues were immaterial for all periods presented.

Deferred revenue represents amounts 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 deliverables. 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 deliverables. The long term portion of deferred revenue also includes amounts allocated to the China unit of accounting under the AstraZeneca arrangement as revenue recognition associated with this unit of accounting is tied to the commercial launch of the products within China, which is not expected to occur within the next year.

~~The fair values of our financial assets that are measured on a recurring basis are as follows (in thousands):~~

September 30, 2017

Level 1

Level 2

Level 3

Total

Corporate bonds

$
—

$
75,872

$
—

$
75,872

Bond and mutual funds

18,251

—

—

18,251

Equity investments

207

—

—

207

Money market funds

546,498

—

—

546,498

Certificate of deposits

—

1,036

—

1,036

Total

$
564,956

$
76,908

$
—

$
641,864

December 31, 2016

Level 1

Level 2

Level 3

Total

Corporate bonds

$
—

$
126,683

$
—

$
126,683

Bond and mutual funds

22,462

—

—

22,462

Equity investments

225

—

—

225

Money market funds

94,543

—

—

94,543

Certificate of deposits

—

1,037

—

1,037

Total

$
117,230

$
127,720

$
—

$
244,950

Our Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data and other observable inputs.

~~The fair values of our financial liabilities that are carried at historical cost are as follows (in thousands):~~

~~The fair values of our financial liabilities were derived by using an income approach, which required Level 3 inputs such as discounted estimated future cash flows.~~

~~There were no transfers of assets or liabilities between levels for any of the periods presented.~~

At September 30, 2017 and December 31, 2016, a total of $19.1 million and $24.3 million, respectively, of our cash and cash equivalents were held outside of the U.S. in our foreign subsidiaries to be used primarily for our China operations.

All investments are classified as available-for-sale. The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s available-for-sale investments by major investments type are summarized in the tables below (in thousands):

September 30, 2017

Amortized Cost

Gross Unrealized
Holding Gains

Gross Unrealized
Holding Losses

Fair Value

Corporate bonds

$
75,826

$
62

$
(16
)

$
75,872

Certificate of deposits

1,036

—

—

1,036

Bond and mutual funds

17,182

1,069

—

18,251

Equity investments

126

81

—

207

Total investments

$
94,170

$
1,212

$
(16
)

$
95,366

December 31, 2016

Amortized Cost

Gross Unrealized
Holding Gains

Gross Unrealized
Holding Losses

Fair Value

Corporate bonds

$
126,550

$
182

$
(49
)

$
126,683

Certificate of deposits

1,037

—

—

1,037

Bond and mutual funds

22,305

157

—

22,462

Equity investments

125

100

—

225

Total investments

$
150,017

$
439

$
(49
)

$
150,407

At September 30, 2017, all of the available-for-sale investments had contractual maturities within two years. 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 our intent to sell. For debt securities, the Company also considers whether (i) it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. During the three and nine months ended September 30, 2017 and 2016, the Company did not recognize any other-than-temporary impairment loss.

~~Stock-based compensation expense was allocated to research and development and general and administrative expense as follows (in thousands):~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Stock Options

Expected term (in years)

5.3

5.3

5.7

5.3

Expected volatility

69.5

%

72.5

%

71.5

%

69.8

%
Risk-free interest rate

1.9

1.2

2.2

1.4

Expected dividend yield

—

—

—

—

Weighted average estimated fair value

$
26.47

$
10.73

$
16.63

$
11.46

ESPPs

Expected term (in years)

0.5 - 2.0

0.5 - 2.0

0.5 - 2.0

0.5 - 2.0

Expected volatility

52.8 - 76.0

%

63.7 - 80.7

%

52.8 - 77.2

%

61.9 - 80.7

%
Risk-free interest rate

0.6 - 1.3

%

0.4 - 0.9

%

0.5 - 1.3

%

0.2 - 0.9

%
Expected dividend yield

—

—

—

—

Weighted average estimated fair value

$
9.67

$
9.04

$
9.15

$
10.27

~~The provisions for income taxes for the three and nine months ended September 30, 2017 were due to foreign taxes.~~

The provision for income taxes for the three months ended September 30, 2016 was due to the discrete tax effect arising from an unrealized loss in other comprehensive income (loss) related to available-for-sale securities, and foreign taxes. The benefit from income taxes for the nine months ended September 30, 2016 was due to the discrete tax effect arising from cumulative unrealized gains in other comprehensive income (loss) related to available-for-sale securities, partially offset by foreign taxes.

Based upon the weight of available evidence, which includes its historical operating performance, reported cumulative net losses since inception and expected continuing net loss, the Company has established and continues to maintain a full valuation allowance against its deferred tax assets as it does not currently believe that realization of those assets is more likely than not.

Astellas is an equity investor in the Company and considered a related party. The Company recorded revenue related to collaboration agreements with Astellas of $4.6 million and $4.8 million during the three months ended September 30, 2017 and 2016, respectively, and $12.9 million and $21.8 million during the nine months ended September 30, 2017 and 2016, respectively.

The Company recorded expense related to collaboration agreements with Astellas of $0.2 million and $1.8 million during the three months ended September 30, 2017 and 2016, respectively, and $0.8 million and $4.8 million during the nine months ended September 30, 2017 and 2016, respectively.

As of September 30, 2017 and December 31, 2016, accounts receivable from Astellas were $4.6 million and $4.1 million, respectively, and amounts due to Astellas were $0.5 million and $1.6 million, respectively.

Julian N. Stern, a director of the Company from November 1996 through June 2017, is currently serving as corporate secretary of the Company and is of counsel to the law firm of Goodwin Procter LLP, which he joined in 2008. He has received, and continues to receive, no compensation from Goodwin Procter LLP since joining as counsel. The Company retains Goodwin Procter LLP as legal counsel for various matters, primarily consisting of intellectual property matters. There was no payment to Goodwin Procter LLP during the three and nine months ended September 30, 2017. The Company’s payments to Goodwin Procter LLP during the three and nine months ended September 30, 2016 were immaterial. As of September 30, 2017 and December 31, 2016, the balance of the accrued liability for Goodwin Proctor LLP was zero.

In October 2017, the China Food and Drug Administration accepted the Company’s recently submitted NDA for registration of roxadustat for anemia in dialysis-dependent CKD and NDD-CKD patients. This NDA submission triggers a $15.0 million milestone payment to the Company by AstraZeneca, which is expected to be received and fully recognized under the Company’s current revenue recognition policy as license and milestone revenue in the fourth quarter of 2017.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~ ~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS.~~

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and in our Securities and Exchange Commission (“SEC”) filings, including our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 1, 2017.

The following discussion and information contained elsewhere in this Quarterly Report on Form 10-Q contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), Section 27A of the Securities Act of 1933, as amended (“Securities Act”) and within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. New risks emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. While we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q and are cautioned not to place undue reliance on such forward-looking statements.

We were incorporated in 1993 in Delaware and are headquartered in San Francisco, California, with subsidiary offices in Beijing and Shanghai, People’s Republic of China (“China”). We are a ~~science-based~~leading biopharmaceutical company ~~discovering~~developing and ~~developing~~commercializing a pipeline of first-in-class therapeutics. We apply our pioneering expertise in hypoxia-inducible factor (“HIF”), connective tissue growth factor (“CTGF”) biology, and clinical development to advance innovative medicines for the treatment of anemia, fibrotic disease, and cancer.

Roxadustat, ~~(FG-4592),~~ our most advanced product, ~~candidate,~~ is an oral small molecule inhibitor of HIF prolyl hydroxylase (“HIF-PH”) activity that has received marketing authorization in ~~Phase 3 clinical development~~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 approved in Japan for the treatment of anemia associated with CKD in dialysis patients. In January 2020, Astellas Pharma Inc. (“Astellas”) submitted a supplemental New Drug Application (“NDA”) in Japan for the treatment of anemia in ~~chronic kidney disease~~non-dialysis CKD patients.

Our NDA filing in the United States (“~~CKD”~~U.S.”)~~. Pamrevlumab (FG-3019), a fully-human monoclonal antibody that inhibits~~ for roxadustat for the ~~activity~~treatment of ~~connective tissue growth factor~~anemia in dialysis and non-dialysis CKD patients was accepted by the U.S. Food and Drug Administration (“~~CTGF”~~FDA”) in February 2020. 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.

Roxadustat is in Phase 3 clinical development in the U.S. and Europe and in Phase 2/3 development in China for anemia associated with myelodysplastic syndromes (“MDS”). 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 (“IPF”), pancreatic cancer and Duchenne muscular dystrophy (“DMD”) and is in Phase 2 development in Severe Acute Respiratory Syndrome Coronavirus 2019 Disease (“COVID-19”).

On March 11, 2020, COVID-19, a disease caused by a novel strain of the coronavirus, was characterized as a pandemic by the World Health Organization. Since December 2019, COVID-19 has spread rapidly. The rapid spread has resulted in authorities implementing numerous measures to contain the virus, such as travel restrictions, social distancing requirements, quarantines, shelter-in-place orders or voluntarily adopted practices, and business shutdowns.

We have taken ~~a global approach~~measures to minimize the health risks of COVID-19 to our staff, patients, healthcare providers and their communities, as their safety and well-being are our top priority. In the U.S., our employees are working remotely when possible, while in China they have returned to work in our offices, manufacturing plants, and are performing medical affairs out in the field. While we have seen some impacts from COVID-19, such as slower enrollment in our clinical trials and some effect on our roxadustat sales in China, particularly in February and March, we do not know if, or to what extent, these effects will continue in the future, as the impact of the COVID-19 pandemic continues to unfold. The effect on our operational and financial performance will depend in large part on future developments with the pandemic, which cannot be predicted with confidence at this time. Future developments include the duration, scope, and severity of the COVID-19 pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the impact on healthcare systems and operating procedures, the development of treatments or vaccines, and the resumption of widespread economic activity. Due to the ~~development~~inherent uncertainty of the largely unprecedented and ~~future commercialization~~rapidly evolving situation, we are unable to predict with any confidence the likely impact of ~~our product candidates, and this includes development and commercialization in~~ the ~~People’s Republic of China (“China”). We are capitalizing~~COVID-19 pandemic on our ~~extensive experience in fibrosis and hypoxia inducible factor (“HIF”) biology and clinical development to advance a pipeline of innovative medicines~~future operations.

The financial results for the ~~treatment~~three months ended September 30, 2020 were not significantly impacted by COVID-19 relative to prior quarters. However, we will continue to monitor, and to the extent possible, mitigate the impact of ~~anemia, fibrotic disease cancer, corneal blindness and other serious unmet medical needs.~~the COVID-19 pandemic on our business.

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016			2017			2016			2020		2019			2020			2019
	(in thousands, except for per share data)												(in thousands, except for per share data)
Result of Operations
Revenue	$	27,272		$	30,102		$	83,160		$	147,665		$	44,032	$	33,174		$	111,320		$	248,603
Operating expenses	$	63,289		$	52,204		$	181,957		$	170,039
Net loss	$	(37,737	)	$	(24,154	)	$	(104,081	)	$	(27,678	)
Net loss per share - basic and diluted	$	(0.50	)	$	(0.38	)	$	(1.49	)	$	(0.44	)
Operating costs and expenses														11,702		86,028			245,202			237,481
Net income (loss)														33,004		(49,439	)		(130,657	)		21,153
Net income (loss) per share - basic														0.36		(0.57	)		(1.46	)		0.24
Net income (loss) per share - diluted													$	0.35	$	(0.57	)	$	(1.46	)	$	0.23


							September 30, 2017			December 31, 2016								September 30, 2020			December 31, 2019
							(in thousands)											(in thousands)
Balance Sheet
Cash and cash equivalents							$	651,373		$	173,782							$	532,468		$	126,266
Short-term and long-term investments							$	95,366		$	150,407								155,645			468,609
Accounts receivable							$	8,628		$	10,448							$	26,252		$	28,455

Our revenue for the three and nine months ended September 30, ~~2017 decreased compared~~2020 included the revenue recognized related to the ~~same periods a year ago primarily due to the impact of extension of the estimated joint development service period for the AstraZeneca agreements, for~~following:

As comparison, our revenue recognition purposes, from the end of 2018 to the end of 2020. We made this extension in the third quarter of 2016 due to the approval of the development budget for roxadustat for the treatment of anemia in patients with myelodysplastic syndromes (“MDS”). Our revenue for the nine months ended September 30, 2017 decreased also due to that fact that, during the second quarter of 2016, we received an upfront payment of $62.0 million under our collaboration agreements with AstraZeneca and a $10.0 million development milestone revenue recorded under our collaboration agreements with Astellas, with no corresponding milestones in the current year periods.

~~Operating expenses~~ for the three and nine months ended September 30, ~~2017 increased~~2019 included the revenue recognized related to the following:

Operating costs and expenses for the three months ended September 30, 2020 decreased compared to the same period a year ago primarily, ~~due to higher drug development expenses associated with drug substance manufacturing activities related to pamrevlumab, higher clinical activities related to MDS, higher~~as a result of the net effect of the following:

Operating costs and ~~higher stock-based compensation. The increases were partially offset by lower research and development outside services expense related to other HIF-PH inhibitors. Operating~~ expenses for the nine months ended September 30, ~~2017 were also impacted by~~2020 increased slightly compared to the same period a ~~$3.0 million reduction in assessed property tax resulted from~~year ago, as a result of the ~~final assessment we obtained during~~net effect of the ~~first quarter of 2017.~~following:

During the three months ended September 30, 2020, we had a net income of $33.0 million, or net income per basic share of $ 0.36 and net income per diluted share of $0.35, as compared to a net loss of $49.4 million for the same period a year ago, due to an increase in revenue and a decrease in operating costs and expenses as discussed above. During the nine months ended September 30, ~~2017,~~2020, we had a net loss of ~~$37.7~~$130.7 million, ~~and $104.1 million, respectively,~~ or net loss per basic and diluted share of ~~$0.50 and $1.49, respectively,~~$1.46, as compared to a net ~~loss~~income of ~~$24.2 million and $27.7~~$21.2 million for the same ~~periods~~period a year ago, due to a decrease in revenue and an increase in operating ~~expenses.~~costs and expenses as discussed above.

Cash and cash equivalents, investments and accounts receivable totaled ~~$755.4~~$714.4 million at September 30, ~~2017,~~2020, an increase of ~~$420.8~~$91.1 million from December 31, ~~2016,~~2019, primarily due to the ~~net proceeds from the follow-on offerings of $115.1 million closed in April 2017~~cash provided by operations.

Commercial and ~~$356.2 million closed in August 2017, partially offset by cash used in operations.~~

Roxadustat ~~the~~is our most advanced product, an oral small molecule inhibitor of HIF-PH ~~inhibitor in clinical development,~~activity that acts by stimulating the body’s natural pathway of erythropoiesis, or red blood cell production.

We ~~along with~~continue our collaboration partners, Astellas Pharma Inc. (“Astellas”) and AstraZeneca AB (“AstraZeneca”), continue to advance roxadustat through a global Phase 3 program to support regulatory approvals in the United States, Europe, Japan, and China in both dialysis-dependent CKD patients and CKD patients who are not dialysis-dependent. We are currently targeting a New Drug Application (“NDA”) filingcommercial launch efforts for roxadustat (tradename: 爱瑞卓^®) in ~~the U.S. in 2018, subject to accrual of sufficient major adverse cardiac events (“MACE”) for pooled analyses.~~

~~In January 2017, we reported topline results from our two~~ China ~~Phase 3 studies of roxadustat in CKD anemia. In October 2017, the China Food and Drug Administration (“CFDA”) accepted for review our new drug application~~after receiving marketing authorization for the ~~registration~~treatment of anemia caused by CKD in non-dialysis and dialysis patients. Roxadustat was added to the National Reimbursement Drug List (“NRDL”), effective January 1, 2020. Now that China has largely re-opened, we and our partner AstraZeneca continue our strong focus on hospital listings for roxadustat. As of the end of the third quarter, roxadustat ~~to treat~~was listed at hospitals that represent approximately 55% of the CKD anemia market opportunity in ~~dialysis-dependent and non-dialysis-dependent CKD patients.~~ China.

In Japan, our partner Astellas continues the ~~double-blind, placebo-controlled non-dialysis Phase 3 trial in China, 151 anemia patients were randomized 2:1 to receive roxadustat (n=101) or placebo (n=50)~~commercial launch of Evrenzo® (roxadustat), which was approved for 8 weeks. As reported in January 2017, roxadustat met its primary efficacy endpoint of correcting anemia, by achieving a statistically significant increase in hemoglobin levels compared to placebo over eight weeks. After week 8, placebo patients were converted to roxadustatthe treatment ~~and patients originally in the roxadustat arm continued treatment through week 26. Anemia correction and hemoglobin maintenance were observed up to week 27.~~

~~FGCL-4592-808: Mean Change in Hemoglobin Over Time in Phase 3 China Non-Dialysis CKD Patients (26 Weeks) Including Placebo Crossover to Roxadustat~~

In the 26-week portion of this China Phase 3 non-dialysis study, 97.6 % of patients who received up to 26 weeks of roxadustat achieved anemia correction with Hb ≥10.0g/dL. For patients who crossed over from placebo to roxadustat, there was an increase in mean hemoglobin levels over 18 weeks of roxadustat treatment, with mean hemoglobin increasing from 8.6 g/dL (averaged over weeks 7 to 9) to 10.8 g/dL (averaged over weeks 23 to 27); a statistically significant increase (p <0.0001). Hemoglobin levels declined after week 27 when patients were no longer receiving roxadustat, as illustrated by the figure above.

In the 26-week portion of this non-dialysis study, roxadustat was shown to increase hemoglobin regardless of baseline inflammation status: both in patients with inflammation (CRP >4.9 mg/L) and patients without inflammation (CRP ≤4.9 mg/L). In addition, in the 8-week portion of this non-dialysis study, roxadustat led to significant reduction in serum hepcidin levels (-56.1 ng/mL for roxadustat patients vs -15.1 ng/mL for placebo, p=0.00000005). Anemia treatment with roxadustat was effective without the use of IV iron and there was no iron parameter (ferritin or TSAT) requirement for patients at study entry.

The durability of roxadustat’s effect on hemoglobin levels was further supported by data from the subset of patients (n=23) who participated in the 52-week safety extension of this non-dialysis China Phase 3 study. Approximately 95% of the non-dialysis patients who completed the 52-week safety extension period maintained Hb ≥10.0g/dL at the end of treatment.

In our Phase 3 dialysis study in China, 304 patients previously on epoetin alfa were randomized to and treated with roxadustat (n=204) or epoetin alfa (n=100) for 26 weeks. 112 roxadustat patients continued treatment in a safety extension study for a total of 52 weeks. Approximately 96% of the dialysis patients who completed the 52-week safety extension period maintained Hb ≥10.0 g/dL at the end of treatment.

Roxadustat was generally well tolerated and there were no safety signals observed in the China Phase 3 clinical trials, including through the 52-week safety extension periods. There were no study drug-related deaths. The AEs and SAEs reported in the Phase 3 studies were generally representative of the underlying patient population and associated co-morbidities. Treatment of anemia associated with ~~roxadustat~~CKD in ~~these Phase 3 clinical trials did not lead to an increase in blood pressure.~~

dialysis patients. In ~~Japan,~~January 2020, Astellas ~~completed the first of six roxadustat Phase 3 trials~~submitted a supplemental NDA in Japan ~~evaluating roxadustat~~ for the treatment of anemia in CKD patients not on ~~peritoneal~~dialysis. This supplemental NDA is under review by the Pharmaceuticals and Medical Devices Agency for the use of roxadustat in patients with anemia of CKD not on dialysis, ~~(PD),~~ with ~~or without previous~~an anticipated approval decision expected by year-end.

In conjunction with our collaboration partners, AstraZeneca and Astellas, we have completed the Phase 3 trials of roxadustat supporting our NDA in the U.S. and the MAA in the European Union and the United Kingdom (collectively, “Europe”) for the treatment of anemia in CKD.

With respect to our U.S. NDA, we continue to expect an FDA decision on this NDA by the Prescription Drug User Fee Act goal date of December 20, 2020.

In May 2020, our partner Astellas’ MAA for roxadustat for the treatment of anemia in patients with ~~erythropoiesis-stimulating agents (ESAs). The study enrolled a total~~CKD was accepted for regulatory review by the EMA. Our partner Astellas expects an approval decision by the EMA in the middle of ~~56 PD patients,~~2021.

In addition, in collaboration with AstraZeneca, applications for marketing authorization of ~~whom 43 patients had previously received ESAs (ESA-conversion patients),~~roxadustat in CKD anemia have been submitted for Canada, Australia, Mexico, Brazil, Chile, Taiwan, South Korea, Philippines, Singapore, India, Colombia, and ~~13 patients who had not previously received ESAs (ESA-naïve patients). Roxadustat was well tolerated~~Thailand.

In October 2020, we announced additional analyses from roxadustat Phase 3 clinical trials at the American Society of Nephrology Kidney Week 2020.

We and ~~shown to correct~~our partners made multiple presentations of Phase 3 analyses showing roxadustat’s consistent efficacy at correcting anemia and maintaining hemoglobin levels in ~~ESA-naïve~~multiple sub populations of patients with CKD, including:

In two late-breaking abstracts, we summarized post-hoc pooled analyses of roxadustat Phase 3 studies, examining associations between the achieved hemoglobin levels and ~~maintain~~cardiovascular outcomes of both non-dialysis-dependent and dialysis-dependent patients with CKD anemia. In both analyses, incidence rates of adjudicated Major Adverse Cardiovascular Events (“MACE”) (all-cause mortality, myocardial infarction, and stroke) and “MACE+” (MACE plus heart failure or unstable angina requiring hospitalization) were evaluated based on hemoglobin ~~(Hb) levels~~level achieved by a patient within four weeks of the ~~target range in both ESA-conversion patients and ESA-naïve patients.~~event.

Compared to placebo patients in the non-dialysis Phase 3 trials and compared to ESA patients in the Phase 3 dialysis trials, there were no clinically meaningful between–treatment-group differences in the pooled analyses in:

Roxadustat reduced the risk of red blood cell transfusion (5.2% of roxadustat patients) vs placebo (15.4%) in patients with non-dialysis dependent CKD (Hazard Ratio = 0.26 (0.21, 0.32), p<0.001) in the first 52 weeks of treatment. Roxadustat reduced the risk of red blood cell transfusion (9.5% of roxadustat patients) vs epoetin alfa (12.8%) in patients with dialysis-dependent CKD (Hazard Ratio = 0.82 (0.679, 0.997), p=0.046) in the first 52 weeks of treatment.

In a post-hoc analysis of patients not on dialysis and those on dialysis, regardless of treatment assignment, TEAEs (including blood-volume related TEAEs such as heart failure and volume overload) generally occurred at higher rates within the 2-week period after a red blood cell transfusion as compared to patients with no transfusions or during the period two weeks or more after a transfusion, showing the importance of avoiding red blood cell transfusions.

In dialysis patients, roxadustat treated patients required less IV iron supplementation than patients treated with ESA. Roxadustat facilitated iron transport and utilization by increasing both serum iron and iron-carrying capacity (TIBC), whereas these parameters were decreased and unchanged, respectively, with epoetin alfa. We believe these changes were most likely driven by the ~~proportion~~downstream effects of subjects with average Hb levels within the target Hb range of 10.0 to 12.0 g/dL for weeks 18 to 24, was 92% in ESA-naïve patients who were corrected from baseline hemoglobin levels and 74% in ESA-conversion patients. The preliminary safety analysis for this trial is consistent with the safety profile of roxadustat in previous clinical trials.reduced hepcidin.

We ~~plan~~are continuing to ~~initiate a~~enroll our global 160-patient double-blind, placebo-controlled Phase 3 clinical study of roxadustat in transfusion-dependent, lower risk MDS patients. Patients are randomized 3:2 to receive roxadustat or placebo three-times-weekly. The primary endpoint is the proportion of patients who achieve 8-week transfusion independence by 28 weeks with safety evaluated up to 52 weeks. We expect topline data from this study in the first half of 2022.

In China, the Phase 2/3 clinical trial to evaluate the safety and efficacy of roxadustat in non-transfusion dependent, lower risk MDS patients with anemia is ongoing.

We continue to enroll our Phase 2 clinical trial of roxadustat in the U.S. in chemotherapy-induced anemia. This is a single-arm open label study investigating the efficacy and safety of roxadustat for the treatment of anemia in ~~MDS~~up to 100 patients receiving myelosuppressive chemotherapy treatment for non-myeloid malignancies, with a treatment duration of 16 weeks. We expect topline data from this study in the ~~United States in the fourth quarter~~second half of ~~2017. We also plan on initiating a Phase 2/3 MDS clinical trial in China in the fourth quarter of 2017 or the first quarter of 2018.~~2021.

Pamrevlumab (FG-3019) – Monoclonal Antibody Against Connective Tissue Growth Factor (CTGF)

Pamrevlumab is our ~~fully~~ human monoclonal antibody that inhibits the activity of CTGF, a central mediator and critical common element ofin the progression of ~~fibrosis~~fibrotic and ~~associated serious~~fibro-proliferative diseases. ~~We are currently conducting Phase 2 trials in~~

In the U.S., the FDA has granted Orphan Drug Designation to pamrevlumab for the treatment of IPF, locally advanced unresectable pancreatic cancer, and ~~DMD~~DMD. Pamrevlumab has also received Fast Track designation from the FDA for the treatment of both IPF and ~~recently concluded~~locally advanced unresectable pancreatic cancer.

We are conducting ZEPHYRUS, our Phase 23 trial of pamrevlumab in IPF patients, and plan to initiate ZEPHYRUS-2, a second IPF Phase 3 study, as conditions improve with the COVID-19 pandemic. Both studies are double-blind, placebo-controlled Phase 3 trials targeting approximately 340 patients with a primary U.S. efficacy endpoint of change from baseline in forced vital capacity.

We continue to enroll LAPIS, our double-blind placebo controlled Phase 3 clinical program for pamrevlumab as a neoadjuvant therapy for locally advanced unresectable pancreatic cancer. We intend to enroll approximately 260 patients, randomized at a 1:1 ratio to receive either pamrevlumab or placebo, in each case in combination with gemcitabine and nab-paclitaxel. We expect topline resection data from this study in the second half of 2022.

In the third quarter of 2020, we initiated a Phase 3 clinical trial, LELANTOS, evaluating pamrevlumab as a treatment for DMD. LELANTOS is a double-blind, placebo-controlled trial in ~~IPF.~~approximately 90 non-ambulatory DMD patients. Patients will be randomized at a 1:1 ratio to pamrevlumab or placebo and have a treatment period of 52 weeks. The primary endpoint will assess change in upper limb strength and additional endpoints will include pulmonary, performance, cardiac, and fibrosis assessments. We expect topline data from this study in the second half of 2022. We also plan to initiate a Phase 3 clinical trial, LELANTOS 2, evaluating pamrevlumab in 70 ambulatory DMD patients.

~~In August 2017, we reported positive topline results from our~~Severe Acute Respiratory Syndrome Coronavirus 2019 Disease (“COVID-19”)

We are conducting an open-label, randomized, parallel-arm study investigating the efficacy and safety of pamrevlumab versus standard of care in patients with COVID-19 infection in Italy. This study is a Phase 2/3 investigator-initiated clinical trial investigating the efficacy and safety of pamrevlumab in approximately 68 patients hospitalized with COVID-19.

We are also conducting a randomized, double-blind, placebo-controlled Phase 2 ~~clinical trial designed to evaluate~~study investigating the ~~safety~~efficacy and ~~efficacy~~safety of pamrevlumab in hospitalized patients with ~~mild-to-moderate IPF. We also reported topline results from two sub-studies that were added to evaluate the safety of combining pamrevlumab with recently approved IPF therapies.~~

Pamrevlumab met the primary efficacy endpoint of change of forced vital capacity (“FVC”) percent predicted, a measure of a patient’s lung volume as a percentage of what would be expected for such patient’s age, race, sex and height. The average decline (least squares mean) in FVC percent predicted from baseline to week 48 was 2.85acute COVID-19 infection in the pamrevlumab arm (n=50) as compared to an average decline of 7.17 in the placebo arm (n=51), a statistically significant difference of 4.33 (p=0.0331, using a linear slope analysis in the Intent to Treat (“ITT”) population). U.S.

Pamrevlumab-treated patients had an average decrease (least squares mean) in FVC of 129 ml at week 48 compared to an average decrease of 308 ml in patients receiving placebo, a statistically significant difference of 178 ml (p=0.0249, using a linear slope analysis in the ITT population). In addition, the pamrevlumab-treated arm had a lower proportion of patients (10%) who experienced a decline in FVC percent predicted of greater than or equal to 10% or death than did the placebo arm (31.4%) at week 48 (p=0.0103). The percentage of pamrevlumab patients who experienced decline in lung function of FVC percent predicted of 10% or more and discontinued therapy was less than 15% of that in the placebo arm.

Pamrevlumab was well tolerated in the placebo-controlled study. The treatment emergent adverse events were comparable between the pamrevlumab and placebo arms and the adverse events in the pamrevlumab arm were consistent with the known safety profile of pamrevlumab.

The double-blind, active-controlled combination sub-studies were designed to assess the safety of combining pamrevlumab with standard of care medication in IPF patients. Study subjects were on stable doses of pirfenidone or nintedanib for at least three months and were randomized 2:1 to receive 30 mg/kg of pamrevlumab or placebo every three weeks for 24 weeks. Thirty-six patients were enrolled in the pirfenidone sub-study and 21 patients were enrolled in the nintedanib sub-study. Pamrevlumab appeared to be well tolerated when given in combination with either pirfenidone or nintedanib.

In pancreatic cancer, we continue to follow patients in our ongoing open-label, randomized (2:1) Phase 2 trial designed to determine if pamrevlumab in combination with gemcitabine and nab-paclitaxel, can convert stage 3 inoperable cancer to resectable, or operable, cancer. We expect to define a registrational strategy in the first half of 2018.

~~We continue to enroll patients in our Phase 2 open-label trial of pamrevlumab in up to 22 non-ambulatory DMD patients.~~

Our current and future research, development, manufacturing and commercialization efforts with respect to roxadustat and our other product candidates currently in development depend on funds from our collaboration agreements with Astellas and AstraZeneca as described below.

In June 2005, we entered into a collaboration agreement with Astellas for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in Japan (“Japan Agreement”). In April 2006, we entered into the Europe Agreement with Astellas for roxadustat for the treatment of anemia in Europe, the Commonwealth of Independent States, the Middle East, and South Africa. Under these agreements, we provide Astellas the right to develop and commercialize roxadustat for anemia indications in these territories.

We share responsibility with Astellas for clinical development activities required for the U.S. and the ~~European Union (“EU”)~~EU regulatory approval of roxadustat and share equally those development costs under the agreed development plan for such activities. Astellas will be responsible for clinical development activities and all associated costs required for regulatory approval in all other countries in the Astellas territories. Astellas will own and have responsibility for regulatory filings in its territories. We are responsible, either directly or through our contract manufacturers, for the manufacture and supply of all quantities of roxadustat to be used in development and commercialization under the agreements.

The Astellas agreements will continue in effect until terminated. Either party may terminate the agreements for certain material breaches by the other party. In addition, Astellas will have the right to terminate the agreements for certain specified technical product failures, upon generic sales reaching a particular threshold, upon certain regulatory actions, or upon our entering into a settlement admitting the invalidity or unenforceability of our licensed patents. Astellas may also terminate the agreements for convenience upon advance written notice to us. In the event of any termination of the agreements, Astellas will transfer and assign to us the regulatory filings for roxadustat and will assign or license to us the relevant trademarks used with the products in the Astellas territories. Under certain terminations, Astellas is also obligated to pay us a termination fee.

Consideration under these agreements includes a total of $360.1 million in upfront and non-contingent payments, and milestone payments totaling $557.5 million, of which $542.5 million are development and regulatory milestones and $15.0 million are commercial-based milestones. Total consideration, excluding development cost reimbursement and product sales-related payments, could reach $917.6 million. During the second quarter of 2016, we recognized $10.0 million of revenue as a result of the initiation by Astellas of the first Phase 3 clinical study in Japan of roxadustat for treatment of anemia associated with CKD in patients on dialysis. The amount was received in early July 2016. The aggregate amount of such consideration received through September 30, ~~2017~~2020 totals ~~$472.6~~$630.1 million.

Additionally, under these agreements, Astellas pays 100% of the commercialization costs in its territories. Astellas will pay us a transfer price, based on net sales, in the low 20% range for our manufacture and delivery of roxadustat.

During the second quarter of 2019, we received positive topline results from analyses of pooled 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, following our NDA submission to the FDA in 2019. These milestones became probable of being achieved in the second quarter of 2019, and substantially all of 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 2019, and $0.6 million was recognized as revenue during the nine months ended September 30, 2020, from performance obligations satisfied or partially satisfied. According to the Europe Agreement, these milestone payments were billed to Astellas upon the submission of an MAA in the second quarter of 2020 and the total $130.0 million was received during the same quarter.

In September 2019, Japan’s Ministry of Health, Labour and Welfare approved roxadustat for the treatment of anemia associated with dialysis CKD patients. 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. This milestone payment was received in October 2019.

In addition, as of September 30, ~~2017,~~2020, Astellas had separate investments of $80.5 million in the equity of FibroGen, Inc.

In July 2013, we entered into the U.S./RoW Agreement, a collaboration agreement with AstraZeneca for roxadustat for the treatment of anemia in the U.S. and all territories not previously licensed to Astellas, except China. In July 2013, through our China subsidiary and related affiliates, we entered into the China Agreement, a collaboration agreement with AstraZeneca for roxadustat for the treatment of anemia in China. Under these agreements, we provide AstraZeneca the right to develop and commercialize roxadustat for anemia in these territories. We share responsibility with AstraZeneca for clinical development activities required for U.S. regulatory approval of roxadustat.

~~Now that~~In 2015, we ~~have~~ reached the $116.5 million cap on our initial funding obligations (during which time we shared 50% of the joint initial development costs), therefore all development and commercialization costs for roxadustat for the treatment of anemia in CKD in the U.S., Europe, Japan and all other markets outside of China have been paid by Astellas and AstraZeneca since reaching the cap.

In China, FibroGen (China) Medical Technology Development Co., Ltd. (“FibroGen Beijing”) will conduct the development work for CKD anemia, will hold all of the regulatory licenses issued by China regulatory authorities, and will be primarily responsible for regulatory, clinical and manufacturing. China development costs are shared 50/50. AstraZeneca is also responsible for 100% of development expenses in all other licensed territories outside of China. WeOutside of China, we are responsible, through our contract manufacturers, for the manufacture and supply of all quantities of roxadustat to be used in development and commercialization under the AstraZeneca agreements.

Under the AstraZeneca agreements, we will receive upfront and subsequent non-contingent payments totaling $402.2 million. Potential milestone payments under the agreements total $1.2 billion, of which $571.0 million are development and regulatory milestones and $652.5 million are commercial-based milestones. Total consideration under the agreements, excluding development cost reimbursement, transfer price payments, royalties and profit share, could reach $1.6 billion. ~~During the second quarter of 2016, we received an upfront payment of $62.0 million as a time based development milestone.~~ The aggregate amount of such consideration received throughSeptember 30, ~~2017~~2020 totals ~~$417.2~~$516.2 million.

Payments under these agreements include over $500.0 million in upfront, non-contingent and other payments received or expected to be received prior to the first U.S. approval, excluding development expense reimbursement.

Under the U.S./RoW Agreement, AstraZeneca will pay for all commercialization costs in the U.S. and RoW and AstraZeneca will be responsible for the U.S. commercialization of roxadustat, with FibroGen undertaking specified promotional activities in the ~~end stage~~end-stage renal disease segment in the U.S. In addition, we will receive a transfer price for delivery of commercial product based on a percentage of net sales in the low- to mid-single digit range and AstraZeneca will pay us a tiered royalty on net sales of roxadustat in the low 20% range.

Under the China Agreement, which is conducted through FibroGen China Anemia Holdings, Ltd., FibroGen Beijing, and FibroGen International (Hong Kong) Limited (collectively, (“FibroGen China”), the commercial collaboration iswas structured as a 50/50 profit share. AstraZeneca will conduct commercialization activities in China as well as serve as the master distributor for roxadustat and will fund roxadustat launch costs in China until FibroGen Beijing has achieved profitability. At that time, AstraZeneca will recoup 50% of their historical launch costs out of initial roxadustat profits in China.

~~In September 2016, AstraZeneca approved the protocol related to the development of roxadustat for the treatment of anemia in patients with MDS, for~~share, which ~~we have received approval from~~is amended by the China ~~Food and Drug Administration (“CFDA”) for our clinical trial application~~Amendment discussed below in ~~China for a Phase 2/3 trial and acceptance of our investigational new drug application (“IND”) from the FDA for a Phase 3 trial in the U.S. As a result, for revenue recognition purposes, during~~ the third quarter of ~~2016, we extended the estimated joint development service period for the AstraZeneca~~2020.

Payments under these agreements ~~from the end of 2018 to the end of 2020, to allow for development of MDS.~~

~~In October 2017, the China Food~~include over $500.0 million in upfront, non-contingent and Drug Administration accepted our recently submitted NDA for registration of roxadustat for anemia in dialysis-dependent CKD and NDD-CKD patients. This NDA submission triggers a $15.0 million milestone payment to FibroGen by AstraZeneca, which isother payments received or expected to be received ~~and fully recognized under our revenue recognition policy as license and milestone revenue in~~prior to the ~~fourth quarter~~first U.S. approval, excluding development expense reimbursement.

AstraZeneca may terminate the U.S./RoW Agreement upon specified events, including our bankruptcy or insolvency, our uncured material breach, technical product failure, or upon 180 days prior written notice at will. If AstraZeneca terminates the U.S./RoW Agreement at will, in addition to any unpaid non-contingent payments, it will be responsible for paying for a substantial portion of the post-termination development costs under the agreed development plan until regulatory approval.

AstraZeneca may terminate the China Agreement upon specified events, including our bankruptcy or insolvency, our uncured material breach, technical product failure, or upon advance prior written notice at will. If AstraZeneca terminates our China Agreement at will, it will be responsible for paying for transition costs as well as make a specified payment to FibroGen China.

In the event of any termination of the agreements, but subject to modification upon termination for technical product failure, AstraZeneca will transfer and assign to us any regulatory filings and approvals for roxadustat in the affected territories that they may hold under our agreements, grant us licenses and conduct certain transition activities.

22As mentioned above, during the second quarter of 2019, we received positive topline results from analyses of pooled MACE and MACE+ data from its Phase 3 trials for roxadustat, enabling our NDA submission to the FDA. The regulatory milestone payment associated with this NDA submission became probable of being achieved in the second quarter of 2019. Accordingly, the consideration of $50.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the U.S./ RoW Agreement in the second quarter of 2019, of which $42.4 million was recognized as revenue during 2019, and $0.6 million was recognized as revenue during the nine months ended September 30, 2020, from performance obligations satisfied or partially satisfied. We submitted such NDA in December 2019, which was accepted by the FDA for review 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 milestone was billed during the first quarter of 2020, the payment of which was fully received in April 2020.

In December 2019, roxadustat was 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 us 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 U.S./ RoW Agreement in the fourth quarter of 2019. This milestone payment was fully received during the first quarter of 2020.

On July 8, 2020, FibroGen China and AstraZeneca (together with FibroGen China, the “Parties”) entered into an amendment, effective July 1, 2020, to the China Agreement, relating to the development and commercialization of roxadustat in China (the “China Amendment”). While the responsibilities of the Parties under the China Agreement remain largely the same, certain changes are being made under 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 Beijing Kangda Yongfu Pharmaceutical Co., LTD (“Kangda”). The purpose of the acquisition was to acquire a distribution license owned by Kangda for commercializing and distributing roxadustat in China. FibroGen Beijing will continue to hold all of the regulatory licenses issued by China regulatory authorities and will continue to be primarily responsible for regulatory, clinical, manufacturing, medical affairs and pharmacovigilance. In September 2020, FibroGen Beijing and AstraZeneca entered into an equity transfer agreement and shareholders agreement related to Kangda. Concurrently with the equity transfer, the two parties renamed Kangda to Beijing Falikang Pharmaceutical Co. Ltd. (“Falikang”). See Note 2, Acquisition and Variable Interest Entity, to the condensed consolidated financial statements for details.

As Falikang is a distribution entity for roxadustat and AstraZeneca is the final decision maker for all the roxadustat commercialization activities, we lack 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, we are not the primary beneficiary of Falikang. As a result, we accounted for our investment in Falikang under the equity method, and Falikang is not consolidated into our condensed consolidated financial statements. In addition, we recognized our proportionate share of the reported profits or losses of Falikang, as other income (loss) in the condensed 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.

In accordance with the China Amendment, we are 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, expected in early 2021. During the interim period, FibroGen will continue to sell product directly to the distributors, who remain as our 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.

FibroGen, Inc. and AstraZeneca concurrently amended the U.S./RoW Agreement to reflect minor changes in the governance structure under the China Agreement.

Total cash consideration received through September 30, ~~2017~~2020 and potential cash consideration, other than development cost reimbursement, transfer price payments, royalties and profit share, pursuant to our existing collaboration agreements are as follows:

	Cash Received Through September 30, 2017		Additional Potential Cash Payments		Total Potential Cash Payments		Cash Received Through September 30, 2020		Additional Potential Cash Payments		Total Potential Cash Payments
	(in thousands)						(in thousands)
Astellas--related-party:
Japan Agreement	$	62,593	$	110,000	$	172,593	$	90,093	$	82,500	$	172,593
Europe Agreement		410,000		335,000		745,000		540,000		205,000		745,000
Total Astellas		472,593		445,000		917,593		630,093		287,500		917,593
AstraZeneca:
U.S. / RoW Agreement		389,000		860,000		1,249,000		439,000		810,000		1,249,000
China Agreement		28,200		348,500		376,700		77,200		299,500		376,700
Total AstraZeneca		417,200		1,208,500		1,625,700		516,200		1,109,500		1,625,700
Total revenue	$	889,793	$	1,653,500	$	2,543,293	$	1,146,293	$	1,397,000	$	2,543,293

These collaboration agreements also provide for reimbursement of certain fully burdened research and development costs as well as direct out of pocket expenses.

	Three Months Ended September 30,				Change							Nine Months Ended September 30,				Change							Three Months Ended September 30,				Change							Nine Months Ended September 30,				Change
	2017		2016		$			%				2017		2016		$			%				2020		2019		$			%				2020		2019		$			%
	(dollars in thousands)																						(dollars in thousands)
Revenue:
License and milestone revenue	$	19,997	$	20,867	$	(870	)		(4	)	%	$	60,930	$	113,802	$	(52,872	)		(46	)	%
Collaboration services and other revenue		7,275		9,235		(1,960	)		(21	)	%		22,230		33,863		(11,633	)		(34	)	%
License revenue																							$	—	$	11,935	$	(11,935	)		(100	)	%	$	—	$	162,517	$	(162,517	)		(100	)	%
Development and other revenue																								20,663		20,660		3			—		%		59,065		85,507		(26,442	)		(31	)	%
Product revenue, net																								22,683		579		22,104			3,818		%		43,331		579		42,752			7,384		%
Drug product revenue																								686		—		686			100		%		8,924		—		8,924			100		%
Total revenue	$	27,272	$	30,102	$	(2,830	)		(9	)	%	$	83,160	$	147,665	$	(64,505	)		(44	)	%	$	44,032	$	33,174	$	10,858			33		%	$	111,320	$	248,603	$	(137,283	)		(55	)	%

Our revenue to date has been generated substantially from our collaboration agreements with Astellas and AstraZeneca. In addition, we started roxadustat commercial sales in China in the third quarter of 2019.

Under our revenue recognition policy, license revenue includes amounts from upfront, non-refundable license payments and amounts allocated pursuant to the ~~relative~~standalone selling price method from other consideration received ~~(other than substantive milestone payments)~~ during the periods. This revenue is generally recognized as deliverables are met and services are performed. ~~Milestone~~We did not have any license revenue for the three and nine months ended September 30, 2020.

Development and other revenue includes ~~payments from milestones which~~co-development and other development related services. Co-development services are ~~deemed to be substantive in nature and is~~ recognized ~~in its entirety~~as revenue in the period in which the milestone is achieved. License and milestone revenues represented 73% and 69% of total revenue for the three months ended September 30, 2017 and 2016, respectively, and 73% and 77% of total revenue for the nine months ended September 30, 2017 and 2016, respectively.

~~Collaboration services include~~they are billed to our partners, excluding China. For China co-development services, ~~manufacturing~~revenue is deferred until the end of ~~clinical supplies, committee~~the development period once all performance obligations have been satisfied. Other development related services ~~and information sharing. Collaboration services revenues~~ are recognized as revenue over the non-contingent development period based on a proportional performance ~~period, ranging~~method. As of September 30, 2020, the future non-contingent development periods range from 3612 to 8960 months. Other revenues consist of ~~royalty payments received, which are recorded on a monthly basis as they are reported to us,~~sales of research and development material and have been included with ~~collaboration services~~development and other revenue in the ~~condensed~~ consolidated statements of operations, as they have not been material for any of the ~~years~~periods presented. ~~Collaboration~~

Product revenue is recognized when our customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services.

Drug product revenue includes commercial-grade API sales to AstraZeneca in support of pre-commercial validation work prior to the NDA approval, and ~~other revenues represented 27%~~to Astellas for purpose of roxadustat commercial launch in Japan, and ~~31% of total revenue for~~is recognized when we fulfill all the ~~three months ended September 30, 2017 and 2016, respectively, and 27% and 23% of total revenue for the nine months ended September 30, 2017 and 2016, respectively.~~delivery obligations.

~~We have not generated any revenues based on the sale of FDA or CFDA approved products.~~ In the future, we ~~may generate~~will continue generating revenue ~~from product sales and~~ from collaboration agreements in the form of license fees, milestone payments, reimbursements for collaboration services and royalties on drug product sales, and from product sales. We expect that any revenues we generate will fluctuate from quarter to quarter ~~as a result of~~due to the uncertain timing and amount of such payments and sales.

In addition, for the nine months ended September 30, 2020, our $43.3 million of net product revenue from roxadustat sales in China was affected by the COVID-19 pandemic and by the fact that patient and physician interaction was limited during a significant portion of the time, particularly in February and March. However, since we have limited history of roxadustat product revenue, it is difficult to estimate how much sales were affected by COVID-19.

Total revenue ~~decreased $2.8~~increased $10.9 million, or 9%33% for the three months ended September 30, ~~2017,~~2020, and decreased ~~$64.5~~$137.3 million, or ~~44%~~55% for the nine months ended September 30, ~~2017,~~2020, compared to the same periods a year ago for the reasons discussed in the sections below.

	Three Months Ended September 30,				Change							Nine Months Ended September 30,				Change							Three Months Ended September 30,				Change							Nine Months Ended September 30,				Change
	2017		2016		$			%				2017		2016		$			%				2020		2019		$			%				2020		2019		$			%
	(dollars in thousands)																						(dollars in thousands)
License and milestone revenue:
License revenue:
Astellas	$	4,125	$	4,371	$	(246	)		(6	)	%	$	11,652	$	20,727	$	(9,075	)		(44	)	%	$	—	$	11,935	$	(11,935	)		(100	)	%	$	—	$	129,405	$	(129,405	)		(100	)	%
AstraZeneca		15,872		16,496		(624	)		(4	)	%		49,278		93,075		(43,797	)		(47	)	%		—		—		—			—		%		—		33,112		(33,112	)		(100	)	%
Total license and milestone revenue	$	19,997	$	20,867	$	(870	)		(4	)	%	$	60,930	$	113,802	$	(52,872	)		(46	)	%
Total license revenue																							$	—	$	11,935	$	(11,935	)		(100	)	%	$	—	$	162,517	$	(162,517	)		(100	)	%

~~License and milestone~~We did not have any license revenue decreased $0.9 million, or 4% for the three months ended September 30, 2017, and decreased $52.9 million, or 46% for the nine months ended September 30, 2017, compared to the same periods a year ago due to decreases in the license and milestone revenue recognized under both of our collaboration agreements with AstraZeneca and with Astellas.

License and milestone revenue recognized under our collaboration agreements with AstraZeneca decreased due to the impact of the extension of the estimated joint development service period for the AstraZeneca agreements, for revenue recognition purposes, from the end of 2018 to the end of 2020. We made this extension in the third quarter of 2016 due to the approval of the development budget for the treatment of anemia in patients with MDS. License and milestone revenue for the nine months ended September 30, 2017 was also impacted by an upfront payment of $62.0 million received during the second quarter of 2016, with no corresponding milestones in the current year periods.

License and milestone revenue recognized under our collaboration agreements with Astellas decreased primarily due to a $10.0 million of development milestone revenue recorded during the second quarter of 2016, with no corresponding milestones in the current year periods.

Three Months Ended September 30,

Change

Nine Months Ended September 30,

Change

2017

2016

$

%

2017

2016

$

%

(dollars in thousands)

Collaboration services revenue:

Astellas

$
445

$
436

$
9

2

%

$
1,230

$
1,114

$
116

10

%
AstraZeneca

6,830

8,784

(1,954
)

(22
)
%

20,997

32,723

(11,726
)

(36
)
%
Total collaboration services revenue

7,275

9,220

(1,945
)

(21
)
%

22,227

33,837

(11,610
)

(34
)
%
Other revenue

—

15

(15
)

(100
)
%

3

26

(23
)

(88
)
%
Total collaboration services and other revenue

$
7,275

$
9,235

$
(1,960
)

(21
)
%

$
22,230

$
33,863

$
(11,633
)

(34
)
%

Collaboration services and other revenue decreased $2.0 million, or 21%, for the three months ended September 30, 2017, and decreased $11.6 million, or 34%, for the nine months ended September 30, 2017, compared to the same periods a year ago primarily due to a decrease in the collaboration services revenue recognized under our collaboration agreements with AstraZeneca from the impact of the extension of the estimated joint development service period for the AstraZeneca agreements, for revenue recognition purposes, from the end of 2018 to the end of 2020. We made this extension in the third quarter of 2016 due to the approval of the development budget for the treatment of anemia in patients with MDS. Collaboration services and other revenue for the nine months ended September 30, 2017 was also impacted by the allocation of the upfront payment of $62.0 million during the second quarter of 2016, with no corresponding milestones in the current year periods.

~~Collaboration services revenue recognized under our collaboration agreements with Astellas remained relatively flat~~ for the three and nine months ended September 30, ~~2017, compared~~2020.

License revenue recognized under our collaboration agreements with Astellas in the three and nine months ended September 2019 was related to a regulatory milestone of $12.5 million associated with the ~~same periods~~NDA approval in Japan achieved during the third quarter of 2019. Of this amount, $11.9 million was allocated to license revenue and recognized during the third quarter of 2019. License revenue recognized under our collaboration agreements with Astellas in the nine months ended September 2019 was also related to two regulatory milestones totaling $130.0 million associated with the planned MAA submission in Europe that were included in the transaction price during the second quarter of 2019 when these milestones became probable of being achieved. Of this amount, $117.5 million was allocated to license revenue and recognized during the second quarter of 2019.

License revenue recognized under our collaboration agreements with AstraZeneca in the three and nine months ended September 2019 was related to a ~~year ago.~~regulatory milestone of $50.0 million associated with the planned NDA submission in the U.S. that was included in the transaction price during the second quarter of 2019 when this milestone became probable of being achieved. Of this amount, $33.1 million was allocated to license revenue and recognized during the second quarter of 2019.

Three Months Ended September 30,

Change

Nine Months Ended September 30,

Change

2017

2016

$

%

2017

2016

$

%

(dollars in thousands)

Operating expenses

Research and development

$
50,336

$
40,558

$
9,778

24

%

$
144,049

$
136,599

$
7,450

5

%
General and administrative

12,953

11,646

1,307

11

%

37,908

33,440

4,468

13

%
Total operating expenses

$
63,289

$
52,204

$
11,085

21

%

$
181,957

$
170,039

$
11,918

7

%

	Three Months Ended September 30,				Change							Nine Months Ended September 30,				Change
	2020		2019		$			%				2020		2019		$			%
	(dollars in thousands)
Development revenue:
Astellas	$	4,737	$	3,533	$	1,204			34		%	$	14,240	$	25,614	$	(11,374	)		(44	)	%
AstraZeneca		15,926		17,125		(1,199	)		(7	)	%		44,825		59,891		(15,066	)		(25	)	%
Total development revenue		20,663		20,658		5			—		%		59,065		85,505		(26,440	)		(31	)	%
Other revenue		—		2		(2	)		(100	)	%		—		2		(2	)		(100	)	%
Total development and other revenue	$	20,663	$	20,660	$	3			—		%	$	59,065	$	85,507	$	(26,442	)		(31	)	%

~~Total operating expenses increased $11.1 million, or 21%,~~Development and other revenue remained flat for the three months ended September 30, ~~2017,~~2020, Development and ~~$11.9~~other revenue decreased $26.4 million, or ~~7%,~~31% for the nine months ended September 30, ~~2017,~~2019, compared to the same period a year ago.

Development revenue recognized under our collaboration agreements with Astellas for the three and nine months ended September 30, 2020 increased related to higher medical affairs activities under the Europe Agreement.

Development revenue recognized under our collaboration agreements with Astellas for the nine months ended September 30, 2019 included the allocated revenue of $11.6 million related to the above-mentioned $130.0 million associated with the regulatory milestones of the planned MAA submission in Europe.

Development revenue recognized under our collaboration agreements with AstraZeneca for the nine months ended September 30, 2019 included the allocated revenue of $9.0 million related to the above-mentioned $50.0 million associated with the regulatory milestone of the planned NDA submission in the U.S.

In addition, development revenue recognized under our collaboration agreements for the three and nine months ended September 30, 2020 decreased in co-development billings related to the development of roxadustat as a result of the substantial completion of Phase 3 trials for roxadustat.

	Three Months Ended September 30,						Change						Nine Months Ended September 30,						Change
	2020			2019			$			%			2020			2019			$			%
	(dollars in thousands)
Gross revenue	$	27,900		$	622		$	27,278			4,386	%	$	53,105		$	622		$	52,483			8,438	%
Non-key account hospital listing award		(2,930	)		—			(2,930	)		100	%		(5,495	)		—			(5,495	)		100	%
Contractual sales rebate		(1,966	)		(43	)		(1,923	)		4,472	%		(3,714	)		(43	)		(3,671	)		8,537	%
Other discounts and rebates		(313	)		—			(313	)		100	%		(512	)		—			(512	)		100	%
Sales return		(8	)		—			(8	)		100	%		(53	)		—			(53	)		100	%
Product revenue, net	$	22,683		$	579		$	22,104			3,818	%	$	43,331		$	579		$	42,752			7,384	%

We started roxadustat commercial sales in China in the third quarter of 2019; therefore the year-over-year comparison would not be meaningful as the prior year period was the first period of such sales with limited sales volume. Product revenue is recognized in an amount that reflects the consideration to which we expect to be entitled in exchange for those products, net of various sales rebates and discounts.

The gross product revenue for the three and nine months ended September 30, 2020 was $27.9 million and $53.1 million, respectively.

In the second quarter of 2020, we amended the agreement with our pharmaceutical distributors, which triggered accounting modifications particularly related to non-key account hospital listing award. During the three and nine months ended September 30, 2020, non-key account hospital listing award was $2.9 million and $5.5 million, respectively, recorded as a reduction to the revenue, which was calculated based on eligible non-key account hospital listing to date achieved by each distributor with certain requirements met during the period.

The contractual sales rebate for the three and nine months ended September 30, 2020 was $2.0 million and $3.7 million, respectively, which was calculated based on the stated percentage of gross sales by each distributor in the distribution agreement entered between us and each distributor. All other rebates and discounts, and sales return allowance, were immaterial for the periods.

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 deliver to Astellas roxadustat API for the roxadustat commercial launch in Japan. Related to the API shipments in 2018 under the Japan Amendment, during the three months ended September 30, 2020, we recorded a $4.0 million reduction to drug product revenue, related to a change in estimated variable consideration incurred in the first quarter of 2020. Specially, the change in estimated variable consideration was based on Astellas’ inventory level at March 31, 2020, with the updated listed price for roxadustat issued by the Japanese Ministry of Health, Labour and Welfare, adjusted for 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 three months ended June 30, 2020, we fulfilled the delivery obligations under the term of the Japan Amendment, and recognized the related drug product revenue of $8.2 million in the same period.The amount represents variable consideration and was 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 product tablets, and estimated yield from the manufacture of bulk product tablets, among others.

Under the U.S./RoW Agreement, we would manufacture and deliver to AstraZeneca roxadustat bulk drug product in support of commercial supplies. We delivered process validation product to AstraZeneca as pre-commercial supply in the three months ended March 31, 2020, June 30, 2020 and September 30, 2020, respectively. The related drug product revenue of $4.6 million was recognized in the three months ended September 30, 2020. The drug product revenue amount represents variable consideration and was estimated based on the quantity of product shipped and an estimated price.

The amount of variable consideration that is included in the transaction price may be constrained, and is included in the drug product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received in the future may differ from our estimates, for which we will adjust these estimates and affect the drug product revenue in the period such variances become known.

	Three Months Ended September 30,					Change							Nine Months Ended September 30,				Change
	2020			2019		$			%				2020		2019		$			%
	(dollars in thousands)
Operating costs and expenses
Cost of goods sold	$	2,207		$	242	$	1,965			812		%	$	6,253	$	242	$	6,011			2,484		%
Research and development		58,476			49,963		8,513			17		%		174,792		152,467		22,325			15		%
Selling, general and administrative		(48,981	)		35,823		(84,804	)		(237	)	%		64,157		84,772		(20,615	)		(24	)	%
Total operating costs and expenses	$	11,702		$	86,028	$	(74,326	)		(86	)	%	$	245,202	$	237,481	$	7,721			3		%

We have taken measures to minimize the health risks of COVID-19 to our staff, patients, healthcare providers and their communities, as their safety and well-being are our top priority. In the U.S., our employees are working remotely when possible, while in China they have returned to work in our offices, manufacturing plants, and are performing medical affairs out in the field. We have also seen some reduced enrollment in our clinical trials, particularly for our IPF pamrevlumab trial. However, the overall impact of COVID-19 on our expenses was not significant. In the three and nine months ended September 30, 2020, some reduction in expenses, such as due to reduced travel and paused or slowed enrollment for trials, were offset by some increased expenses, such as in patient care.

Total operating costs and expenses decreased $74.3 million, or 86% for the three months ended September 30, 2020, and increased $7.7 million, or 3%, compared to the same periods a year ago, for the ~~reasons~~reason discussed in the sections below.

Cost of goods sold, associated with the roxadustat commercial sales in China, consists of direct costs to manufacture commercial product, as well as indirect costs including factory overhead, storage, shipping, quality assurance, idle capacity charges, and inventory valuation reserve. The year-over-year comparison would not be meaningful as the prior year period was the first period for roxadustat commercial sales with limited sales volume. Cost of goods sold was $2.2 million and $6.3 million for the three and nine months ended September 30, 2020, primarily consisted of costs associated with the manufacturing of roxadustat product.

Research and development expenses consist of ~~third party~~third-party research and development costs and the fully-burdened amount of costs associated with work performed under collaboration agreements. Research and development costs include employee-related expenses for research and development functions, 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. Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.

The following table summarizes our research and development expenses incurred during the three and nine months ended September 30, ~~2017~~2020 and ~~2016:~~2019:

			Three Months Ended September 30,				Nine Months Ended September 30,
			2017		2016		2017		2016				Three Months Ended September 30,				Nine Months Ended September 30,
Product Candidate		Phase of Development	(in thousands)									Phase of Development	2020		2019		2020		2019
													(in thousands)
Roxadustat		Phase 3	$	32,493	$	30,880	$	92,595	$	94,953		Phase 3	$	31,222	$	27,686	$	91,586	$	91,733
Pamrevlumab		Phase 2		12,230		5,206		37,366		26,898		Phase 2/3		24,959		16,152		70,374		45,310
FG-6874		Phase 1		18		—		41		123
FG-5200		Preclinical		1,319		1,040		3,457		3,602		Preclinical		942		1,302		2,999		4,070
Other research and development expenses	Other research and development expenses			4,276		3,432		10,590		11,023	Other research and development expenses			1,353		4,823		9,833		11,354
Total research and development expenses	Total research and development expenses		$	50,336	$	40,558	$	144,049	$	136,599	Total research and development expenses		$	58,476	$	49,963	$	174,792	$	152,467

The program-specific expenses summarized in the table above include costs we directly attribute to our product candidates. We allocate research and development salaries, benefits, stock-based compensation and other indirect costs to our product candidates on a program-specific basis, and we include these costs in the program-specific expenses. We expect our research and development expenses to ~~continue to~~ increase in the future as we advance our product candidates through clinical trials and expand our product candidate portfolio.

Research and development expenses increased ~~$9.8~~$8.5 million, or ~~24%,~~17% for the three months ended September 30, ~~2017,~~2020, compared to the same period a year ago. The increase was primarily due to increases in drug development expenses of $6.8 million, employee-related costs of $3.4 million, clinical trial costs of $0.7 million, and stock-based compensation expense of $0.5 million, partially offset by a decrease in outside services of $2.0 million. Drug development expenses increased primarily due to higher drug substance manufacturing activities related to pamrevlumab. ~~Employee-related costs increased due to higher headcount and higher average compensation level. Clinical trial costs increased~~ago, as a result of the ~~progression~~net effect of the ~~MDS studies. Stock-based compensation expense increased due to cumulative impact~~following:

Research and development expenses increased ~~$7.5~~$22.3 million, or ~~5%,~~15% for the nine months ended September 30, ~~2017,~~2020, compared to the same period a year ago. The increase was primarily due to increases in employee-related costs of $4.7 million, clinical trial costs of $4.2 million, drug development expenses of $4.0 million, and stock-based compensation of $1.4 million, partially offset by decreases in outside services of $4.9 million, and allocated facility related expense of $2.0 million. ~~Employee-related costs increased due to higher headcount and higher average compensation level. Clinical trial costs increased~~ago, as a result of the ~~progression~~net effect of the following:

We started to incur sales and marketing expenses increased due to higher drug substance manufacturing activities related to pamrevlumab. Stock-based compensation increased due to cumulative impact of stock option grant activities. Outside services costs decreased due to lower scientific contract work related to other HIF-PH inhibitors. Facility related expenses, as part of the allocated overhead costs, decreased due to the final assessment we obtained duringin the first quarter of ~~2017, resulting~~2019 in ~~a total of $3.0 million reduction in assessed property tax.~~

~~General~~China to prepare for commercial operations. Selling, general and ~~Administrative Expenses~~

~~General and~~ administrative (“SG&A”) expenses consist primarily of employee-related expenses for executive, operational, finance, legal, compliance, and human resource functions. ~~Other general and administrative~~SG&A expenses also include facility-related costs, ~~and~~ professional fees, accounting and legal services, other outside services including co-promotion expenses, recruiting fees and expenses associated with obtaining and maintaining patents.

We anticipate that our ~~general and administrative~~SG&A expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our product candidates. We also anticipate increased expenses, including exchange listing and SEC requirements, director and officer insurance premiums, legal, audit and tax fees, regulatory compliance programs, and investor relations costs associated with being a public company and ceasing to be an emerging growth company. Additionally, if and when we believe the first regulatory approval of one of our product candidates appears likely, we anticipate an increase in payroll and related expenses ~~as a result~~associated with an increase in headcount to support the growth of ~~our preparation for commercial operations, especially as it relates to~~ the ~~sales and marketing~~business in connection with potential commercialization of our product candidates.

~~General and administrative~~SG&A expenses ~~increased $1.3~~decreased $84.8 million, or ~~11%,~~237% for the three months ended September 30, ~~2017,~~2020 compared to the same period a year ago, ~~primarily due to increases in employee-related costs~~as a result of ~~$1.2 million, stock-based compensation expense~~the net effect of ~~$0.7 million, partially offset by a decrease in outside services expenses of $0.4 million.~~ ~~Employee-related costs increased due to higher average compensation level, higher headcount, and increased recruiting activities. Stock-based compensation expense increased due to cumulative impact of stock option grant activities. Outside services~~the following:

SG&A expenses decreased ~~primarily due to the lower administrative consulting activities.~~

~~General and administrative expenses increased $4.5~~$20.6 million, or ~~13%,~~24% for the nine months ended September 30, ~~2017,~~2020 compared to the same period a year ago, ~~primarily due to increases in employee-related costs of $2.9 million and stock-based compensation expense of $1.9 million, partially offset by~~as a ~~decrease in facility related expense of $0.9 million.~~ ~~Employee-related costs increased due to higher average compensation level, higher headcount, and increased recruiting activities~~. Stock-based compensation expense increased due to cumulative impact of stock option grant activities. Facility related expenses decreased due to the final assessment we obtained during the first quarter of 2017, resulting in a total of $3.0 million reduction in assessed property tax.

We share responsibility with AstraZeneca for clinical development activities required for U.S. regulatory approval of roxadustat. During the fourth quarter of 2015, the $116.5 million cap on our share of development costs for roxadustat was reached. As such, all development and commercialization costs for roxadustat for the treatment of anemia in CKD in the U.S., Europe, Japan and all other markets outside of China have been paid by Astellas and AstraZeneca since reaching the cap. In China, our subsidiary FibroGen Beijing will conduct the development work for CKD anemia, will hold allresult of the regulatory licenses issued by China regulatory authorities, and be primarily responsible for regulatory, clinical and manufacturing. All development and commercialization costs for roxadustat in China will be shared equally with AstraZeneca.net effect of the following:

	Three Months Ended September 30,						Change							Nine Months Ended September 30,						Change						Three Months Ended September 30,						Change							Nine Months Ended September 30,						Change
	2017			2016			$			%				2017			2016			$		%				2020			2019			$			%				2020			2019			$			%
	(dollars in thousands)																									(dollars in thousands)
Interest and other, net:
Interest expense	$	(2,769	)	$	(2,760	)	$	(9	)		—		%	$	(7,901	)	$	(7,975	)	$	74		(1	)	%	$	(580	)	$	(702	)	$	122			(17	)	%	$	(1,864	)	$	(2,209	)	$	345			(16	)	%
Interest income and other, net		1,106			866			240			28		%		2,783			2,411			372		15		%		1,469			4,193			(2,724	)		(65	)	%		5,279			12,496			(7,217	)		(58	)	%
Total interest and other, net	$	(1,663	)	$	(1,894	)	$	231			(12	)	%	$	(5,118	)	$	(5,564	)	$	446		(8	)	%	$	889		$	3,491		$	(2,602	)		(75	)	%	$	3,415		$	10,287		$	(6,872	)		(67	)	%

Interest expense ~~includes payments made for imputed interest related~~relates to ~~the facility~~our finance lease ~~financing obligations~~liabilities accretion primarily for our leased facilities in San Francisco and ~~China, as well as~~China. Interest expense also includes interest related to the Technology Development Center of the Republic of Finland product development obligations. ~~Interest expense remained relatively flat for the three and nine months ended September 30, 2017, compared to the same period a year ago, with no significant offsetting impacts.~~

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

Interest income and other, net ~~increased $0.2~~decreased $2.7 million, or ~~28%, increased $0.4 million, or 15%,~~65% for the three months ended September 30, 2020, and $7.2 million, or 58% for the nine months ended September 30, ~~2017,~~2020, compared to the same periods a year ago, primarily due to ~~higher~~lower interest earned on our cash, cash equivalents and investments of $2.7 million and $6.9 million, respectively, associated with the ~~higher~~lower average ~~balances, partially offset by~~balances.

On April 1, 2020, FibroGen Beijing adopted Renminbi Yuan (“CNY”) as its functional currency based on reassessment of the primary economic environment in which FibroGen Beijing operates, as such environment was mainly associated with its growing manufacturing and product sales activities conducted in CNY. Prior to April 1, 2020, FibroGen Beijing’s functional currency was the U.S. dollar. This change did not result in material impact to unrealized foreign currency ~~translation~~ gain ~~on our monetary assets denominated in foreign currency as a result of U.S. Dollar weakening.~~or loss during the three and nine months ended September 30, 2020.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(dollars in thousands)

Loss before income taxes

$
(37,680
)

$
(23,996
)

$
(103,915
)

$
(27,938
)
Provision for (benefit from) income taxes

57

158

166

(260
)
Effective tax rate

(0.2
)%

(0.7
)%

(0.2
)%

0.9
%

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(dollars in thousands)
Income (loss) before income taxes	$	33,219		$	(49,363	)	$	(130,467	)	$	21,409
Provision for income taxes		215			76			190			256
Effective tax rate		0.6	%		(0.2	)%		(0.1	)%		1.2	%

~~The provisions~~Provision for income ~~taxes~~tax for the three and nine months ended September 30, ~~2017~~2020 and 2019 were primarily due to foreign taxes.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted and signed into law. The ~~provision for income taxes for the three months ended September 30, 2016 was due~~CARES Act includes changes to the ~~discrete~~ tax ~~effect arising from an unrealized loss in other comprehensive income (loss) related to available-for-sale securities,~~provisions that benefits business entities, and ~~foreign taxes. The benefit from income taxes for the nine months ended September 30, 2016 was due~~makes certain technical corrections to the ~~discrete~~2017 Tax Cuts and Jobs Act. U.S. GAAP requires recognition of the tax ~~effect arising from cumulative unrealized gains in other comprehensive income (loss) related to available-for-sale securities, partially offset by foreign taxes.~~effects of new legislation during the reporting period that includes the enactment date. We evaluated and determined that the impact is immaterial.

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

We have historically funded our operations principally from the sale of ~~convertible preferred stock and~~ common stock (including our public offering proceeds) and from the execution of certain collaboration agreements involving license payments, milestones and reimbursement for development services.

On April 11, 2017, we closed an offering of our common stock. In this offering, we sold 5,228,750 shares of our common stock at a public offering price of $22.95 per share. Net proceeds from this offering were $115.1 million, after deducting underwriting discounts and commissions of $4.9 million. In addition, the total offering expenses were approximately $0.6 million. On August 24, 2017, the Company completed another follow-on offering of its common stock. In this offering, the Company sold a total of 9,200,000 shares of its common stock at a public offering price of $40.75 per share. Net proceeds from this offering were $356.2 million, after deducting underwriting discounts and commissions of $18.7 million. In addition, the offering expenses were approximately $0.4 million in total

As of September 30, ~~2017,~~2020, we had cash and cash equivalents of ~~$651.4~~$532.5 million. Cash is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Investments, consisting ~~principally~~ of ~~corporate~~available-for-sale debt investments, marketable equity investments, and ~~government debt securities~~certificate of deposit, and stated at fair value, are also available as a source of liquidity. As of September 30, ~~2017,~~2020, we had short-term and long-term investments of ~~$78.6~~$155.4 million and ~~$16.8~~$0.2 million, respectively. As of September 30, ~~2017,~~2020, a total of ~~$19.1~~$51.2 million of our cash and cash equivalents was held outside of the U.S. in our foreign subsidiaries, including $29.5 million of our cash and cash equivalents is held in China, to be used primarily for our China operations.

~~To date,~~In the third quarter of 2019, we ~~have not generated any~~started generating revenue from commercial sales of roxadustat product ~~sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate significant~~in China. Even with the expectation of increases in revenue from product sales, ~~unless and until~~ we ~~obtain regulatory approval of and commercialize one or more of our current or future product candidates. We~~ anticipate that we will continue to generate losses for the foreseeable ~~future, and we~~future. We expect ~~the losses to~~ increase in our operating expenses as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. To date, we have funded certain portions of our research and development and manufacturing efforts in China and Europe through outside parties. There is no guarantee that sufficient funds will be available to continue to fund these development efforts through commercialization or otherwise. Although our share of expenses for roxadustat will decrease as a result of AstraZeneca funding all non-China collaboration expenses not reimbursed by Astellas, we expect our research and development expenses to continue to increase as we invest in our other programs. We are subject to all the risks related to the development and commercialization of novel therapeutics, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our ~~business.~~business, such as from the COVID-19 pandemic or other factors outlined under Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q. We anticipate that we will need substantial additional funding in connection with our continuing operations.

We believe that our existing cash and cash equivalents, short-term and long-term investments and accounts receivable will be sufficient to meet our anticipated cash requirements for at least the next 12 ~~months.~~months from the date of this Quarterly Report on Form 10-Q. However, our liquidity assumptions may change over time, and we could utilize our available financial resources sooner than we currently expect. In addition, we may elect to raise additional funds at any time through equity, equity-linked or debt financing arrangements. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under Part II, Item 1A “Risk ~~Factors”~~Factors” in this Quarterly Report on Form 10-Q. We may not be able to secure additional financing to meet our operating requirements on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we will be subject to increased fixed payment obligations and could also be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to obtain needed additional funds, we will have to reduce our operating costs and expenses, which would impair our growth prospects and could otherwise negatively impact our business.

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

							Nine Months Ended September 30,
	Nine Months Ended September 30,						2020		2019
	2017			2016			(in thousands)
Net cash provided by (used in):
Operating activities	$	(65,327	)	$	25,653		$	88,830	$	(33,655	)
Investing activities		49,869			15,737			308,719		145,051
Financing activities		493,059			3,593			7,684		(4,016	)
Effect of exchange rate changes on cash and cash equivalents		(10	)		(24	)		969		(46	)
Net increase in cash and cash equivalents	$	477,591		$	44,959		$	406,202	$	107,334

Net cash ~~used in~~provided by operating activities was ~~$65.3~~$88.8 million for the nine months ended September 30, ~~2017~~2020 and consisted primarily of net loss of ~~$104.1~~$130.7 million adjusted for non-cash items of ~~$33.6~~$69.4 million, ~~and~~offset by a net increase in operating assets and liabilities of ~~$5.2~~$150.1 million. The significant non-cash items included stock-based compensation expense of ~~$27.6~~$52.5 million, depreciation expense of ~~$4.6~~$8.7 million and amortization of ~~premium on investments~~finance lease ROU of ~~$1.5~~$7.9 million. The significant items in the changes in operating assets and liabilities included the increases ~~resulted~~resulting from ~~deferred revenue of $4.1 million and accounts receivable of $1.8~~the following:

The increases were partially offset by ~~a decrease resulted~~the decreases resulting from ~~other assets of $1.7 million. The changes in deferred revenue and accounts receivable were related to~~ the timing of the receipt of upfront payments and recognition of revenues under our collaboration agreements with Astellas and AstraZeneca. The change in other assets was primarily driven by the payment during the current year period for the land use right fee for the commercial active pharmaceutical ingredients manufacturing facility that we are establishing in China.following:

Net cash ~~provided by~~used in operating activities was ~~$25.7~~$33.7 million for the nine months ended September 30, ~~2016~~2019 and consisted primarily of net ~~loss~~income of ~~$27.7~~$21.2 million adjusted for non-cash items of ~~$30.0~~$61.9 million, ~~and~~offset by a net ~~increase~~decrease in operating assets and liabilities of ~~$23.3~~$116.7 million. The significant non-cash items included stock-based compensation expense of ~~$24.3~~$48.9 million, depreciation expense of ~~$4.5~~$8.7 million, amortization of finance lease ROU of $7.7 million, and net amortization of premium and discount on investments of ~~$2.1~~$3.4 million. The significant items in the changes in operating assets and liabilities included ~~increases resulted~~decreases resulting from ~~deferred revenue of $14.7 million, accounts receivable of $7.7 million and accrued liabilities of $4.2~~the following:

The decreases were partially offset by ~~a decrease resulted~~increases resulting from ~~accounts payable~~the following:

Investing activities primarily consist of purchases of property and equipment, purchases of investments, and proceeds from the maturity and sale of investments.

Net cash provided by investing activities was ~~$49.9~~$308.7 million for the nine months ended September 30, ~~2017~~2020 and consisted primarily of $301.9 million of proceeds from maturities of ~~available-for-sale securities~~investments, and $10.6 million of ~~$33.8 million and~~proceeds from sales of available-for-sale securities, ~~of $21.1 million,~~ partially offset by ~~cash used in~~$2.1 million of purchases of property and equipment, and $1.6 million of ~~$5.0 million.~~payment made for acquisition of Kangda.

Net cash provided by investing activities was ~~$15.7~~$145.1 million for the nine months ended September 30, ~~2016~~2019 and consisted of $305.0 million of proceeds from maturities of ~~available-for-sale securities of $12.6 million and sales of available-for-sale securities of $4.3 million,~~investments, partially offset by $155.9 million of cash used in purchases of ~~fixed assets~~available-for-sale securities and term deposit, and $4.0 million of ~~$1.1 million.~~purchase of property and equipment.

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

Net cash provided by financing activities was ~~$493.1~~$7.7 million for the ~~three~~nine months ended September 30, ~~2017~~2020 and consisted primarily of ~~$471.2 million of total proceeds from follow-on offerings in April and August of 2017, net of underwriting discounts and commission costs, $28.6~~$26.2 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under ~~ESPP,~~our Employee Share Purchase Plan (“ESPP”), partially offset by ~~$6.0~~$9.0 million of cash paid for payroll taxes on restricted stock unit ~~releases.~~releases, and $9.3 million of repayments of finance lease liabilities.

Net cash ~~provided by~~used in financing activities was ~~$3.6~~$4.0 million for the nine months ended September 30, ~~2016~~2019 and consisted primarily of ~~$6.1~~$10.6 million of cash paid for payroll taxes on restricted stock unit releases and $8.8 million of repayments of finance lease liabilities, partially offset by $15.7 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under ~~ESPP, partially offset by $2.2 million of cash paid for payroll taxes on restricted stock unit releases and $0.3 million of repayments on~~ our ~~lease liability.~~2014 ESPP.

During the three and nine months ended September 30, ~~2017,~~2020, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements.

During the first quarter of 2020, we entered into a Master Supply Agreement with Shanghai SynTheAll Pharmaceutical Co., Ltd. and STA Pharmaceutical Hong Kong Limited for the manufacture and supply of bulk roxadustat (as API), and other intermediates for use in the commercialization and development of products containing roxadustat.

As of September 30, 2020, we had outstanding total non-cancelable contract obligations of $33.1 million, including $16.7 million for manufacture and supply of roxadustat (including $14.4 million for the above-mentioned agreement), $10.9 million for future milestone payments for research and pre-clinical stage development programs, and $5.5 million for other purchases. We expect to fulfill our commitments under these agreements in the normal course of business, and as such, no liability has been recorded.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance requires capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance was effective for annual reporting periods beginning after December 15, 2019, including interim periods. We adopted this guidance on January 1, 2020 using the prospective method, and the adoption of this guidance did not have material impact to our consolidated financial statements.

~~Contractual Obligations~~In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This guidance is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and ~~Commitments~~other commitments to extend credit held by a reporting entity at each reporting date. This guidance requires the measurement of financial assets with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance requires an impairment model, known as the current expected credit loss model, which is based on expected losses rather than incurred losses. Entities are required to carry an allowance for expected credit losses for financial assets, including most debt instruments (except those carried at fair value) and trade receivables. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (“ASU 2019-11”), which has the same effective dates and transition requirements as ASU 2016-13. ASU 2016-13 and ASU 2019-11 were effective for annual reporting periods beginning after December 15, 2019 including interim periods. Our investment portfolio primarily consists of U.S. Treasury bills and notes carried at fair value, which is required to follow the impairment model under Topic 326. We adopted this guidance on January 1, 2020. Based on the composition of our trade receivables and investment portfolio, economic conditions and historical credit loss activity, the adoption of this guidance did not have material impact to our consolidated financial statements.

~~There have been no material~~Recently Issued Accounting Guidance Not Yet Adopted

In December 2019, the FASB issued 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 is effective for annual reporting periods beginning after December 15, 2020 including interim periods, with early adoption permitted. We do not plan to early adopt this guidance and do not anticipate a material impact to our ~~contractual obligations compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.~~consolidated financial statements upon adoption of this guidance.

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes in our critical accounting policies, estimates and judgments during the three and nine months ended September 30, ~~2017~~2020 compared with the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~In March 2016, the Financial Accounting Standards Board (“FASB”) issued~~ ~~Accounting Standards Update (“ASU”)~~ ~~2016-09,~~ ~~Compensation - Stock Compensation (Topic 718)~~. This guidance identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This guidance was effective2019, except for the ~~annual reporting period beginning after December 15, 2016, including interim periods within that reporting period.~~ following:

We ~~adopted this guidance as~~sell roxadustat in China through a number of ~~January 1, 2017~~pharmaceutical distributors located in China. These pharmaceutical distributors are our customers. Hospitals order roxadustat through a distributor and ~~have elected~~we ship the product directly to ~~continue with our existing policy to estimate forfeitures expected to occur when calculating stock compensation expense. Upon adoption, we recorded a retrospective increase~~the distributors. The delivery of $19.5 million in deferred tax assets for previously unrecognized excess tax benefits that existed as of December 31, 2016, and a corresponding increase of $19.5 million in the valuation allowance against these deferred tax assets, as substantially all of our U.S. and foreign deferred tax assets, net of deferred tax liabilities, are subjectroxadustat to a ~~full valuation allowance. As such,~~distributor represents a single performance obligation. Distributors are responsible for delivering product to end users, primarily hospitals. Distributors bear inventory risk once they receive and accept the net impact from these retrospective adjustments was zero to our accumulated deficit. The adoption of this guidance had no impact to our consolidated financial statements for the three and nine months ended September 30, 2017.

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting~~. This guidance provides guidance about which changes to the terms or conditions of a stock-based payment award require an entity to apply modification accounting in Topic 718. This guidance is effective for annual reporting period beginning after December 15, 2017, including interim periods, with early adoption permitted. We are currently evaluating the impact on our consolidated financial statements upon the adoption of this guidance.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~. This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability. This guidance is effective for the annual reporting period beginning after December 15, 2019, including interim periods within that reporting period. We are currently evaluating the impact on our consolidated financial statements upon the adoption of this guidance.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~. Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. We are currently evaluating the impact on our consolidated financial statements upon the adoption of this guidance.

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments-Overall (Subtopic 825-10)~~, which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in net income, simplifies the impairment assessment of certain equity investments, and updates certain presentation and disclosure requirements. This guidance is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. We are currently evaluating the impact on our consolidated financial statements upon the adoption of this guidance.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ ~~(“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605,~~ ~~Revenue Recognition. ASU 2014-09 is based on the principle that~~product. Product revenue is recognized when control of the promised good is transferred to ~~depict~~ the ~~transfer of goods or services to customers~~customer in an amount that reflects the consideration to which ~~the entity expects~~we expect to be entitled to in exchange for ~~those~~the product.

The period between the transfer of control of the promised goods ~~or services. ASU 2014-09 also requires additional disclosure about~~and when we receive payment is based on a general 60-day payment term. As such, product revenue is not adjusted for the ~~nature, amount, timing and uncertainty~~effects of a significant financing component.

Product drug revenue ~~and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. Subsequently,~~is recorded at the ~~FASB has issued~~net sales prices (transaction price) which includes the following ~~standards related~~estimates of variable consideration:

The calculation of the above variable consideration is based on gross sales to ~~ASU 2014-09: ASU No. 2016-08,~~ ~~Revenue~~the distributor, or estimated utilizing best available information from ~~Contracts with Customers (Topic 606): Principal versus Agent Considerations~~ ~~(“ASU 2016-08”); ASU No. 2016-10,~~ ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations~~the distributor, maximum known exposures and ~~Licensing~~ ~~(“ASU 2016-10”); ASU No. 2016-12,~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements~~other available information including estimated channel inventory levels and ~~Practical Expedients~~ ~~(“ASU 2016-12”);~~estimated sales made by the distributor to hospitals, which involve a substantial degree of judgment.

The above rebates and ~~ASU No. 2016-20, Technical Corrections and Improvements~~discounts all together are eligible to ~~Topic 606, Revenue from Contracts with Customers~~ ~~(“ASU 2016-20”). We must adopt ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 with ASU 2014-09 (collectively, the “new revenue standards”). The amendments may~~ be applied ~~retrospectively~~against the distributor’s future sales order, limited to ~~each prior~~certain maximums until such rebates and discounts are exhausted. These rebates and discounts are recorded as contract liabilities at the time they become eligible in the same period ~~(full retrospective) or retrospectively with~~that the ~~cumulative effect recognized as of the date of initial application (modified retrospective). We have commenced our implementation activities~~ related revenue is recorded. Due to the ~~adoption~~distributor’s legal right to offset, at each balance sheet date, the rebates and discounts are presented as reductions of ~~ASU 2014-09 and are in~~gross accounts receivable from the ~~process of applying the five-step model of the new standard to our various revenue related arrangements. We have completed step 1 (Identify the contract(s) with~~distributor, or as a customer) and concluded that our collaboration agreements with Astellas and AstraZeneca are the only material contracts which will be impacted by the adoption of the new revenue standards. We are in the process of completing step 2 (Identify the performance obligations in the contract) and have not yet reached a conclusion on whether the distinct criteria evaluated under ASC 605-25 for each performance obligation would result in a similar conclusion under the new revenue standards. With respect to milestones that were previously recognized under ASC 605-28, the milestone method is not applicable under the new revenue standards, and they are considered part of the overall arrangement consideration which will result in a deferral of revenue under the new revenue standards as part of the adoption. We will adopt the new revenue standards in the first quarter of 2018 and apply the full retrospective method to restate each prior reporting period presented in the consolidated financial statements. The new revenue standard is principle based and interpretation of those principles may vary from company to company based on their unique circumstances. It is possible that interpretation, industry practice, and guidance may evolve as companies and the accounting profession work to implement this new standard. As we complete our evaluation of this new standard, new information may arise that could change our current ~~understanding of the impact to revenues recognized and our views on the expected impact~~liability to the ~~periods prior~~distributor to ~~adoption.~~the extent that the total amount exceeds the gross accounts receivable. The distributor’s legal right of offset is calculated at the individual distributor level.

We believe there has been no material change in our exposure to market risks as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019, other than as a result of the COVID-19 pandemic and described in the section above titled “Risks and Uncertainties”.

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 the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under 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 ~~management’s~~our evaluation, ~~our principal executive officer~~the Chief Executive Officer and ~~principal financial officer~~Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, ~~2017 at~~2020 because of the material weaknesses in our internal control over financial reporting described below.

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

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.

Our Board of Directors and management are committed to maintaining a strong internal control environment. While we are still developing a full detailed remediation plan and are in the early phase of what will be a multi-step remediation process to fully remediate the material weaknesses described above, we are devoting substantial effort in performing a comprehensive risk assessment process to identify, design, implement, and re-evaluate our control activities related to the above mentioned material weaknesses in our internal control over financial reporting. 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.

There were no changes in our internal control over financial reporting that occurred during the three months ended September 30, ~~2017~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below in addition to the other information included or incorporated by reference in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Although we have discussed all known material risks, the risks described below are not the only ones that we may face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

We have marked with an asterisk (*) those risks described below that reflect substantive changes from the risks described under Part I, Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

~~Risks Related to Our Financial Condition and History of Operating Losses~~SUMMARY RISK FACTOR

We have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable future and may never achieve or sustain profitability. We may require additional financings in order to fund our operations.*

We are a clinical-stage biopharmaceutical company with two lead product candidates in clinical development, roxadustat in anemia in chronic kidney disease (“CKD”) and pamrevlumab (FG-3019), in idiopathic pulmonary fibrosis (“IPF”), pancreatic cancer, Duchenne muscular dystrophy (“DMD”) and liver fibrosis. Pharmaceutical product development is a highly risky undertaking. To date, we have focused our efforts and most of our resources on hypoxia-inducible factor (“HIF”), and fibrosis biology research, as well as developing our lead product candidates. We are not profitable and, other than in 2006 and 2007 due to income received from our Astellas Pharma Inc. (“Astellas”) collaboration, have incurred losses in each year since our inception. We have not generated any significant revenue based on product sales to date. We continue to incur significant research and development and other expenses related to our ongoing operations. Our net loss for the years ended December 31, 2016, 2015 and 2014 was approximately $61.7 million, $85.8 million and $59.5 million, respectively. As of September 30, 2017, we had an accumulated deficit of $573.8 million. As of September 30, 2017, we had capital resources consisting of cash, cash equivalents and short-term investments of $730.0 million plus $16.8 million of long-term investments classified as available for sale securities. Despite contractual development and cost coverage commitments from our collaboration partners, AstraZeneca AB (“AstraZeneca”) and Astellas, and the potential to receive milestone and other payments from these partners, we anticipate we will continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue our development of, and seek regulatory approval for our product candidates. If we do not successfully develop and obtain regulatory approval for our existing or any future product candidates and effectively manufacture, market and sell any product candidates that are approved, we may never generate product sales, and even if we do generate product sales, we may never achieve or sustain profitability on a quarterly or annual basis. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Our failure to become and remain profitable would depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations.

We believe that we will continue to expend substantial resources for the foreseeable future as we continue late-stage clinical development of roxadustat, grow our operations in the People’s Republic of China (“China”), expand our clinical development efforts on pamrevlumab, seek regulatory approval, prepare for the commercialization of our product candidates, and pursue additional indications. These expenditures will include costs associated with research and development, conducting preclinical trials and clinical trials, obtaining regulatory approvals in various jurisdictions, and manufacturing and supplying products and product candidates for ourselves and our partners. In particular, in our planned Phase 3 clinical trial program for roxadustat, which we believe will be the largest Phase 3 program ever conducted for an anemia product candidate, we are expecting to enroll over 8,000 patients for our U.S. and European programs alone. We are conducting this Phase 3 program in conjunction with Astellas and AstraZeneca, and we are substantially dependent on Astellas and AstraZeneca for the funding of this large program. The outcome of any clinical trial and/or regulatory approval process is highly uncertain and we are unable to fully estimate the actual costs necessary to successfully complete the development and regulatory approval process for our compounds in development and any future product candidates. We believe that the net proceeds from our 2017 public offerings, our existing cash and cash equivalents, short-term and long-term investments and accounts receivable, and expected third party collaboration revenues will allow us to fund our operating plans through at least the next

12 months. Our operating plans or third party collaborations may change as a result of many factors, which are discussed in more detail below, and other factors that may not currently be known to us, and we therefore may need to seek additional funds sooner than planned, through offerings of public or private securities, debt financings or other sources, such as royalty monetization or other structured financings. Such financings may result in dilution to stockholders, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business. We may also seek additional capital due to favorable market conditions or strategic considerations even if we currently believe that we have sufficient funds for our current or future operating plans.

~~Our future funding requirements will depend on many factors, including, but not limited to:~~

Additional funds may not be available when we require them, or on terms that are acceptable to us. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate our research and development efforts or other operations or activities that may be necessary to commercialize our product candidates.

~~All of our recent revenue has been earned from collaboration partners for our product candidates under development.~~

~~During the years ended December 2016, 2015 and 2014, substantially all of our revenues recognized were from our collaboration partners.~~

We will require substantial additional capital to achieve our development and commercialization goals, which for our lead product candidate, roxadustat, is currently contemplated to be provided under our existing third party collaborations with Astellas and AstraZeneca.

If either or both of these collaborations were to be terminated, we could require significant additional capital in order to proceed with development and commercialization of our product candidates, or we may require additional partnering in order to help fund such development and commercialization. If adequate funds or partners are not available to us on a timely basis or on favorable terms, we may be required to delay, limit, reduce or terminate our research and development efforts or other operations.

If we are unable to continue to progress our development efforts and achieve milestones under our collaboration agreements, our revenues may decrease and our activities may fail to lead to commercial products.

Substantially all of our revenues to date have been, and a significant portion of our future revenues are expected to be, derived from our existing collaboration agreements. Revenues from research and development collaborations depend upon continuationsuccess of the collaborations, reimbursement of development costs, the achievement of milestones and royalties and profits from our product sales, if any, derived from future products developed from our research. If we are unable to successfully advance the development of our product candidates or achieve milestones, revenues under our collaboration agreements will be substantially less than expected.

~~Risks Related to the Development and Commercialization of Our Product Candidates~~

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

To date, we have invested a substantial portion of our efforts and financial resources in the research and development of roxadustat, which is currently our lead product candidate. Roxadustat is our only product candidate that has advanced into a potentially pivotal trial, and it may be years before the studies required for its approval are completed, if ever. Our other product candidates are less advanced in development and may never enter into pivotal studies. We have completed 26 Phase 1 and 2 clinical studies with roxadustat in North America, Europe and Asia, in which over 1,400 subjects have participated and for which we reported favorable primary and secondary safety and efficacy endpoint results. Based on our discussions with regulatory authorities, we believe that we have an acceptable plan for the conduct of our Phase 3 clinical programs to support NDA submissions in the U.S. and China. We have discussed our Phase 3 clinical development program with three national health authorities in the EU and obtained scientific advice from the European Medicines Agency. Our near-term prospects, including maintaining our existing collaborations with Astellas and AstraZeneca, will depend heavily on successful Phase 3 development and commercialization of roxadustat.

Our other lead product candidate, pamrevlumab, is currently in clinical development for IPF, pancreatic cancer, DMD, and liver fibrosis. Pamrevlumab requires substantial further development and investment. We do not have a collaboration partner for support of this compound, and, while we have promising open-label safety data and potential signals of efficacy, we would need to complete larger and more extensive controlled clinical trials to validate the results to date in order to continue further development of this product candidate. In addition, although there are many potentially promising indications beyond IPF, pancreatic cancer and liver fibrosis, we are still exploring indications for which further development of, and investment for, pamrevlumab may be appropriate. Accordingly, the costs and time to complete development and related risks are currently unknown. Moreover, pamrevlumab is a monoclonal antibody, which may require experience and expertise that we may not currently possess as well as financial resources that are potentially greater than those required for our small molecule lead compound, roxadustat.

~~The clinical and commercial success of roxadustat and pamrevlumab~~Company will depend on a number of factors, many of which are beyond our control and ~~we may be unable to complete the development or commercialization of roxadustat or pamrevlumab.~~

~~The clinical and commercial success of roxadustat and pamrevlumab will depend on a number of factors,~~involve risks, including ~~the following:~~

Many of these factors are beyond our control. Accordingly, we cannot assure you that we will ever be able to achieve profitability through the sale of, or royalties from, our product candidates. If we or our collaboration partners are not successful in obtaining approval for and commercializing our product candidates, or are delayed in completing those efforts, our business and operations would be adversely affected.

We may be unable to obtain regulatory approval for our product candidates, or such approval may be delayed or limited, due to a number of factors, many of which are beyond our control.*

The clinical trials and the manufacturing of our product candidates are and will continue to be, and the marketing of our product candidates will be, subject to extensive and rigorous review and regulation by numerous government authorities in the U.S. and in other countries where we intend to develop and, if approved, market any product candidates. Before obtaining regulatory approval for the commercial sale of any product candidate, we must demonstrate through extensive preclinical trials and clinical trials that the product candidate is safe and effective for use in each indication for which approval is sought. The regulatory review and approval process is expensive and requires substantial resources and time, and in general very few product candidates that enter development receive regulatory approval. In addition, our collaboration partners for roxadustat have final control over development decisions in their respective territories and they may make decisions with respect to development or regulatory authorities that delay or limit the potential approval of roxadustat, or increase the cost of development or commercialization. Accordingly, we may be unable to successfully develop or commercialize roxadustat or pamrevlumab or any of our other product candidates.

We have not obtained regulatory approval for any of our product candidates and it is possible that roxadustat and pamrevlumab will never receive regulatory approval in any country. Regulatory authorities may take actions or impose requirements that delay, limit or deny approval of roxadustat or pamrevlumab for many reasons, including, among others:

~~principal investigators may determine that one or more serious adverse events (“SAEs”), is related or possibly related~~Risks Related to ~~roxadustat, and any such determination may adversely affect our ability to obtain regulatory approval, whether or not the determination is correct.~~

Any of these factors, many of which are beyond our control, could jeopardize our or our collaboration partners’ abilities to obtain regulatory approval for and successfully market roxadustat. Because our business and operations in the near-term are almost entirely dependent upon roxadustat, any significant delays or impediments to regulatory approval could have a material adverse effect on our business and prospects.

Furthermore, in both the U.S. and China, we also expect to be required to perform additional clinical trials in order to obtain approval or as a condition to maintaining approval due to post-marketing requirements. If the FDA requires a risk evaluation and mitigation strategySevere Acute Respiratory Syndrome Coronavirus 2019 Disease (“~~REMS”~~COVID-19”), for any of our product candidates if approved, the substantial cost and expense of complying with a REMS or other post-marketing requirements may limit our ability to successfully commercialize our product candidates.

~~Preclinical, Phase 1 and Phase 2 clinical trial results may not be indicative of the results that may be obtained in larger, controlled Phase 3 clinical trials required for approval.~~

Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Success in preclinical and early clinical trials, which are often highly variable and use small sample sizes, may not be predictive of similar results in humans or in larger, controlled clinical trials, and successful results from early or small clinical trials may not be replicated or show as favorable an outcome, even if successful. For example, in the past we developed an earlier generation product candidate aimed at treating anemia in CKD that resulted in a clinical hold for a safety signal seen in that product in Phase 2 clinical trials. The clinical hold applied to that product candidate and roxadustat was lifted for both product candidates after submission of the requested data to the FDA. While we have not seen similar safety concerns involving roxadustat to date, our Phase 2 clinical trials have involved a relatively small number of patients exposed to roxadustat for a relatively short period of time compared to the Phase 3 clinical trials that we will be conducting, and only a fraction of the patients in the Phase 2 clinical trials were randomized to placebo. Accordingly, the Phase 2 clinical trials that we have conducted may not have uncovered safety issues, even if they exist. In addition, some of the safety concerns associated with the treatment of patients with anemia in CKD using Erythropoiesis Stimulating Agents (“ESAs”) did not emerge for many years until placebo-controlled studies had been conducted in large numbers of patients. The biochemical pathways that we believe are affected by roxadustat are implicated in a variety of biological processes and disease conditions, and it is possible that the use of roxadustat to treat larger numbers of patients will demonstrate unanticipated adverse effects, including possible drug interactions, which may negatively impact the safety profile, use and market acceptance of roxadustat. We studied the potential interaction between roxadustat and three statins (atorvastatin, rosuvastatin and simvastatin), which are used to lower levels of lipids in the blood. An adverse effect associated with increased statin plasma concentration is myopathy, which typically presents in a form of myalgia. The studies indicated the potential for increased exposure to those statins when roxadustat is taken simultaneously with those statins and suggested the need for statin dose reductions for patients receiving higher statin doses. We performed additional clinical pharmacology studies to evaluate if the effect of any such interaction could be minimized or eliminated by a modification of the dosing schedule that would separate the administration of roxadustat and the statin, however, such studies showed no minimization of effect. It is possible that the potential for interaction between roxadustat and statins could lead to label provisions for statins or roxadustat relating, for example, to dose scheduling or recommended statin dose limitations. In CKD patients statin therapy is often initiated earlier than treatment for anemia, and risks of myopathy have been shown to decrease with increased time on drug. While we believe the prior statin treatment history of such patients at established doses may reduce the risk of adverse effects from any interaction with roxadustat and facilitate any appropriate dose adjustments, we cannot be sure that this will be the case.

The FDA has informed us that our Phase 3 trials must include, as a safety endpoint, a major adverse cardiac events (“MACE”), endpoint, which is a composite endpoint designed to identify major safety concerns, in particular relating to cardiovascular events such as cardiovascular death, myocardial infarction and stroke. In addition, we expect that our Phase 3 clinical trials supporting approval in Europe will be required to include MACE+ as a safety endpoint which, in addition to the MACE endpoints, also incorporates measurements of hospitalization rates due to heart failure or unstable angina. As a result, our ongoing and planned Phase 3 clinical trials may identify unanticipated safety concerns in the patient population under study. The FDA has also informed us that the MACE endpoint will need to be evaluated separately for our Phase 3 trials in non-dialysis dependent-CKD patients and our

Phase 3 trials in dialysis dependent-CKD patients. The MACE endpoint will be evaluated in pooled analysis across Phase 3 studies of similar study populations and requires demonstration of non-inferiority relative to comparator, which means that the MACE event rate in roxadustat-treated patients must have less than a specified probability of exceeding the rate in the comparator trial by a specified hazard ratio. The number of patients necessary in order to permit a statistical analysis with adequate ability to detect the relative risk of MACE or MACE+ events in different arms of the trial, referred to as statistical power, depends on a number of factors, including the rate at which MACE or MACE+ events occur per patient-year in the trial, treatment duration of the patients, the required hazard ratio, and the required statistical power and confidence intervals.

In addition, we cannot be sure that the potential advantages that we believe roxadustat may have for treatment of patients with anemia in CKD as compared to the use of ESAs will be substantiated by our Phase 3 clinical trials or that we will be able to include a discussion of such advantages in our labeling should we obtain approval. We believe that roxadustat may have certain benefits as compared to ESAs based on the data from our Phase 2 clinical trials conducted to date, including safety benefits, the absence of a hypertensive effect, the potential to lower cholesterol levels and the potential to correct anemia without the use of IV iron. However, our belief that roxadustat may offer those benefits is based on a limited amount of data from our Phase 2 clinical trials and our understanding of the likely mechanisms of action for roxadustat. Some of these benefits, such as those associated with the apparent effects on blood pressure and cholesterol, are not fully understood and, even if roxadustat receives marketing approval, we do not expect that it will be approved for the treatment of high blood pressure or high cholesterol based on the data from our Phase 3 trials, and we may not be able to refer to any such benefits in the labeling. While the data from our Phase 2 trials suggests roxadustat may reduce low-density lipoprotein (“LDL”), and reduce the ratio of LDL to high-density lipoprotein (“HDL”), the data show it may also reduce HDL, which may be a risk to patients. In addition, causes of the safety concerns associated with the use of ESAs to achieve specified target Hb levels have not been fully elucidated. While we believe that the issues giving rise to these concerns with ESAs are likely due to factors other than the Hb levels achieved, we cannot be certain that roxadustat will not be associated with similar, or more severe, safety concerns.

Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early stage development, and we may face similar setbacks. In addition, the CKD patient population has many afflictions that may cause severe illness or death, which may be attributed to roxadustat in a manner that negatively impacts the safety profile of our product candidate. If the results of our ongoing or future clinical trials for roxadustat are inconclusive with respect to efficacy, if we do not meet our clinical endpoints with statistical significance, or if there are unanticipated safety concerns or adverse events that emerge during clinical trials, we may be prevented from or delayed in obtaining marketing approval for roxadustat, and even if we obtain marketing approval, any sales of roxadustat may suffer.

Our preclinical and Phase 2 results to date for pamrevlumab may not be indicative of the results that may be obtained in larger, controlled Phase 2 clinical trials or Phase 3 clinical trials required for approval.*

Success in preclinical and early clinical trials, which are often highly variable and use small sample sizes, may not be predictive of similar results in humans or in larger, controlled clinical trials, and successful results from early or small clinical trials may not be replicated or show as favorable an outcome, even if successful. We have conducted only a limited number of Phase 2 clinical trials with pamrevlumab. We have conducted ~~a randomized placebo-controlled study in 103 IPF patients with substudies comparing pamrevlumab to 57 IPF patients receiving one of two standards of care,~~ an open-label Phase 2 dose escalation study of pamrevlumab for IPF in 89 patients, a Phase 2 dose finding trial of pamrevlumab combined with gemcitabine plus erlotinib in 75 patients with pancreatic cancer and a randomized double-blind placebo controlled study for liver fibrosis in subjects with hepatitis B. We cannot be sure that the results of these trials will be substantiated in double-blinded trials with larger numbers of patients, that larger trials will demonstrate the efficacy of pamrevlumab for these or other indications or that safety issues will not be uncovered in further trials. In the Phase 2 clinical trial for IPF, we used quantitative high resolution computed tomography (“HRCT”), to measure the extent of lung fibrosis. While we believe that quantitative HRCT is an accurate measure of lung fibrosis, it is a novel technology that has not yet been accepted by the FDA as a primary endpoint in pivotal clinical trials. In addition, while we believe that the animal studies that we have conducted to date suggest that pamrevlumab has the potential to arrest or reverse fibrosis and reduce tumor mass, we cannot be sure that these results will be indicative of the effects of pamrevlumab in human trials. In addition, the IPF and pancreatic cancer patient populations are extremely ill and routinely experience SAEs, including death, which may be attributed to pamrevlumab in a manner that negatively impacts the safety profile of our product candidate. If the additional clinical trials that we are planning or are currently conducting for pamrevlumab do not show favorable efficacy results or result in safety concerns, or if we do not meet our clinical endpoints with statistical significance, or demonstrate an acceptable risk-benefit profile, we may be prevented from or delayed in obtaining marketing approval for pamrevlumab in one or both of these indications.

We do not know whether our ongoing or planned Phase 3 clinical trials in roxadustat or Phase 2 clinical trials in pamrevlumab will need to be redesigned based on interim results, be able to achieve sufficient enrollment or be completed on schedule, if at all.

~~Clinical trials can be delayed or terminated for a variety of reasons, including delay or failure to:~~

In addition, we could encounter delays if a clinical trial is suspended or terminated by us, by the relevant IRBs at the sites at which such trials are being conducted, or by the FDA or other regulatory authorities. A suspension or termination of clinical trials may result from any number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, changes in laws or regulations, or a principal investigator’s determination that a serious adverse event could be related to our product candidates. Any delays in completing our clinical trials will increase the costs of the trial, delay the product candidate development and approval process and jeopardize our ability to commence marketing and generate revenues. Any of these occurrences may materially and adversely harm our business and operations and prospects.

~~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.~~

Undesirable side effects caused by our product candidates or that may be identified as related to our product candidates by physician investigators conducting our clinical trials or even competing products in development that utilize a similar mechanism of action or act through a similar biological disease pathway could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the delay or denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims. Adverse events and SAEs that emerge during treatment with our product candidates or other compounds acting through similar biological pathways may be deemed to be related to our product candidate and may result in:

The occurrence of any or all of these events may cause the development of our product candidates to be delayed or terminated, which could materially and adversely affect our business and prospects. Refer to “~~Business — Our Development Program for Roxadustat” and “Business — Pamrevlumab for the Treatment of Fibrosis and Cancer” for a discussion of the adverse events and SAEs that have emerged in clinical trials of roxadustat and pamrevlumab.~~

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

Clinical trials are conducted in representative samples of the potential patient population which may have significant variability. Clinical trials are by design based on a limited number of subjects and of limited duration for exposure to the product used to determine whether, on a potentially statistically significant basis, the planned safety and efficacy of any product candidate can be achieved. As with the results of any statistical sampling, we cannot be sure that all side effects of our product candidates may be uncovered, and it may be the case that only with a significantly larger number of patients exposed to the product candidate for a longer duration, may a more complete safety profile be identified. Further, even larger clinical trials may not identify rare serious adverse effects or the duration of such studies may not be sufficient to identify when those events may occur. There have been other products, including ESAs, that have been approved by the regulatory authorities but for which safety concerns have been uncovered following approval. Such safety concerns have led to labeling changes or withdrawal of ESAs products from the market, and any of our product

candidates may be subject to similar risks. For example, roxadustat for use in anemia in CKD is being developed to address a very diverse patient population expected to have many serious health conditions at the time of administration of roxadustat, including diabetes, high blood pressure and declining kidney function.

Although to date we have not seen evidence of significant safety concerns with our product candidates currently in clinical trials, patients treated with our products, if approved, may experience adverse reactions and it is possible that the FDA or other regulatory authorities may ask for additional safety data as a condition of, or in connection with, our efforts to obtain approval of our product candidates. If safety problems occur or are identified after our product candidates reach the market, we may, or regulatory authorities may require us to amend the labeling of our products, recall our products or even withdraw approval for our products.

~~We may fail to enroll a sufficient number of patients in our clinical trials in a timely manner, which could delay or prevent clinical trials of our product candidates.~~

Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on the rate at which we can recruit and enroll patients in testing our product candidates. Patients may be unwilling to participate in clinical trials of our product candidates for a variety of reasons, some of which may be beyond our control:

Patients may be unwilling to participate in our clinical trials for roxadustat due to adverse events observed in other drug treatments of anemia in CKD, and patients currently controlling their disease with existing ESAs may be reluctant to participate in a clinical trial with an investigational drug. We may not be able to successfully initiate or continue clinical trials if we cannot rapidly enroll a sufficient number of eligible patients to participate in the clinical trials required by regulatory agencies. If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate on-going or planned clinical trials, any of which could have a material and adverse effect on our business and prospects.

If we or third party manufacturers on which we rely cannot manufacture sufficient quantities of our product candidates, or at sufficient quality, we may experience delays in development, regulatory approval, launch or commercialization.

Completion of our clinical trials and commercialization of our product candidates require access to, or development of, facilities to manufacture our product candidates at sufficient yields and at commercial scale. We have not yet entered into any commercial supply agreements with third-party manufacturers. We have limited experience manufacturing, or managing third parties in manufacturing any of our product candidates in the volumes that are expected to be necessary to support large-scale clinical trials and sales. In addition, we have limited experience forecasting or coordinating forecasting supply for launch or commercialization, which is a complex process involving our third-party manufacturers and for roxadustat our collaboration partners. We may not be able to sufficiently forecast supplies for commercial launch, or do so in a timely manner and our efforts to establish these manufacturing capabilities may not meet our requirements as to quantities, scale-up, yield, cost, potency or quality in compliance with cGMP.

We have a limited amount of roxadustat and pamrevlumab in storage, limited capacity reserved at our third-party manufacturers, and there are long lead times required to manufacture and scale-up the manufacture of additional supply, as required for both late-stage clinical trials and commercial supply. If we are unable to forecast, order or manufacture sufficient quantities of roxadustat or pamrevlumab on a timely basis, it may delay our development, launch or commercialization in some or all indications we are currently pursuing. ~~For example, prior to agreement with regulatory authorities on the scope of our~~ ~~Phase 3 IPF trial design, there is uncertainty as to whether our supply plans will meet our clinical requirements in a timely manner~~. ~~Any delay or interruption in the supply of our product candidates or products could have a material adverse effect on our business and operations~~.

Our clinical trials must be conducted with product produced under applicable cGMP regulations. Failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. We and even an experienced third party manufacturer may encounter difficulties in production, which difficulties may include:

~~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.~~

With respect to roxadustat, we expect that regulatory approvals, if obtained at all, will limit the approved indicated uses for which roxadustat may be marketed, as ESAs have been subject to significant safety limitations on usage as directed by the “Black Box” warnings included in their labels. Refer to “~~Business — Roxadustat for the Treatment of Anemia in Chronic Kidney Disease — Limitations of the Current Standard of Care for Anemia in CKD~~”. In addition, in the past, an approved ESA was voluntarily withdrawn due to serious safety issues discovered after approval. The safety concerns relating to ESAs may result in labeling for roxadustat containing similar warnings even if our Phase 3 clinical trials do not suggest that roxadustat has similar safety issues. Even if the label for roxadustat does not contain all of the warnings contained in the Black Box warning for ESAs, the label for roxadustat may contain other warnings that limit the market opportunity for roxadustat. These warnings could include warnings against exceeding specified Hb targets and other warnings that derive from the lack of clarity regarding the basis for the safety issues associated with ESAs, even if our Phase 3 clinical trials do not themselves raise safety concerns.

As an organization, we have never completed a Phase 3 clinical trial or received approval for a New Drug Application (“NDA”) before, and may be unable to do so efficiently or at all for roxadustat or any product candidate we are developing.

We are currently conducting Phase 2 clinical trials for pamrevlumab and plan on initiating Phase 3 clinical trials for pamrevlumab in the future. We have initiated Phase 3 clinical trials of roxadustat. The conduct of Phase 3 clinical trials and the submission of a successful NDA is a complicated process. As an organization, we have not completed a Phase 3 clinical trial before, have limited experience in preparing, submitting and prosecuting regulatory filings, and have not received approval for an NDA before. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to NDA submission and approval of roxadustat or for any other product candidate we are developing, even if our earlier stage clinical trials are successful. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials would prevent us from or delay us in commercializing roxadustat or any other product candidate we are developing.

In addition, in order for any Phase 3 clinical trial to support an NDA submission for approval, the FDA and foreign regulatory authorities require compliance with regulations and standards, including good clinical practices (“GCP”) requirements for designing, conducting, monitoring, recording, analyzing and reporting the results of clinical trials to ensure that the data and results from trials are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Although we rely on third parties to conduct our clinical trials, we as the sponsor remain responsible for ensuring that each of these clinical trials is conducted in accordance with its general investigational plan and protocol under legal and regulatory requirements, including GCP. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs, trial sites, principal investigators or other third parties fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or other regulatory authorities may require us to exclude the use of patient data from our clinical trials not conducted in compliance with GCP or perform additional clinical trials before approving our marketing applications. They may even reject our application for approval or refuse to accept our future applications for an extended time period. For example in China, the China Food and Drug Administration (“CFDA”) recently issued guidance related to its clinical trial data integrity regulations. While trial sites and CROs bear liability for the accuracy and authenticity of data they are directly responsible for, the sponsor ultimately bears full responsibility for submitted clinical data and the drug application dossier. Fraudulent clinical data could result in a ban in China of a sponsor’s product-related NDA applications for three years and other NDA applications for one year. We have taken extensive steps to ensure the integrity of our China clinical data. However, we cannot assure you that upon inspection by a regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements or that our results will be deemed authentic or may be used in support of our regulatory submissions.

If we are unable to establish sales, marketing and distribution capabilities or enter into or maintain agreements with third parties to market and sell our product candidates, we may not be successful in commercializing our product candidates if and when they are approved.

We do not have a sales or marketing infrastructure and have no experience in the sales, marketing or distribution of pharmaceutical products in any country. To achieve commercial success for any product for which we obtain marketing approval, we will need to establish sales and marketing capabilities or make and maintain our existing arrangements with third parties to perform these services at a level sufficient to support our commercialization efforts.

To the extent that we would undertake sales and marketing of any of our products directly, there are risks involved with establishing our own sales, marketing and distribution capabilities. Factors that may inhibit our efforts to commercialize our products on our own include:

With respect to roxadustat, we are dependent on the commercialization capabilities of our collaboration partners, AstraZeneca and Astellas. If either such partner were to terminate its agreement with us, we would have to commercialize on our own or with another third party. We will have limited or little control over the commercialization efforts of such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products, if any, effectively. If they are not successful in commercializing our product candidates, our business and financial condition would suffer.

We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully, than we do.*

The development and commercialization of new pharmaceutical products is highly competitive. Our future success depends on our ability to achieve and maintain a competitive advantage with respect to the development and commercialization of our product candidates. Our objective is to discover, develop and commercialize new products with superior efficacy, convenience, tolerability and safety. We expect that in many cases, the products that we commercialize will compete with existing, market-leading products of companies that have large, established commercial organizations.

If roxadustat is approved and launched commercially, competing drugs are expected to include ESAs, particularly in those patient segments where ESAs are used. Currently available ESAs include epoetin alfa (EPOGEN^®~~, marketed by Amgen Inc. in the U.S., Procrit~~^® ~~and Erypo~~^®~~/Eprex~~^® ~~, marketed by Johnson & Johnson Inc., and Espo~~ ^® ~~marketed by Kyowa Hakko Kirin (“KHK”), in Japan and China), darbepoetin (Amgen/KHK’s Aranesp~~^® ~~and NESP~~^® ~~) and Mircera~~ ^® marketed by Hoffmann-La Roche (“Roche”) outside of the U.S. and by Vifor Pharma (formerly a company of Galenica Group (“Vifor”)), a Roche licensee, in the U.S. and Puerto Rico, as well as biosimilar versions of these currently marketed ESA products. ESAs have been used in the treatment of anemia in CKD for over 20 years, serving a significant majority of dialysis dependent CKD patients. While NDD-CKD patients who are not under the care of nephrologists, including those with diabetes and hypertension, do not typically receive ESAs and are often left untreated, some patients under nephrology care may be receiving ESA therapy. It may be difficult to encourage healthcare providers and patients to switch to roxadustat from products with which they have become familiar.

We may also face competition from potential new anemia therapies currently in clinical development, including those patient segments not currently addressed by ESAs. Companies such as GlaxoSmithKline plc (“GSK”), Bayer Corporation (“Bayer”), Akebia Therapeutics, Inc. (“Akebia”), and Japan Tobacco, who are currently developing HIF prolyl hydroxylase (“HIF-PH”) inhibitors for anemia in CKD indications, may be in competition with roxadustat for patient recruitment and enrollment for clinical trials and may be in direct competition with roxadustat if and when it is approved and launched commercially. Akebia is currently conducting two Phase 3 studies in non-dialysis-dependent CKD patients primarily in the U.S., one started in December 2015 and the other in February 2016, and initiated two Phase 3 studies in DD-CKD, one in July 2016 and the other in August 2016, also primarily in the U.S. More recently, Akebia started a Phase 2 study with three-times-weekly 20-week dosing in dialysis patients in May 2017. In September 2017, Mitsubishi Tanabe Pharmaceutical Corporation, Akebia’s collaboration partner, announced topline results from a vadadustat Japan Phase 2 study in 51 NDD patients, and its plan to start a Japan Phase 3 development program, rather than including Japan sites in their global Phase 3 program. GSK started Phase 3 studies in NDD-CKD and DD-CKD in the U.S. in September 2016, and in Japan in June 2016. Bayer has completed global Phase 2 studies and recently announced its HIF-PH inhibitor is now in continued development in Japan only, currently in Phase 2. In September 2017, Japan Tobacco started two Phase 3 open label studies in Japan, one in 30 peritoneal dialysis patients and one in 26 ESA naïve hemodialysis patients. Some of these product candidates may enter the market prior to roxadustat.

In addition, there are other companies developing biologic therapies for the treatment of other anemia indications that we may also seek to pursue in the future, including anemia of myelodysplastic syndromes (“MDS”), for which we ~~received approval from the~~ ~~CFDA~~ ~~for our~~ ~~Phase 2/3~~ ~~clinical trial application in China and acceptance of our investigational new drug application (“IND”)~~ ~~and the Phase 3 pivotal study protocol~~ ~~from the FDA~~, and expected to start those studies in the second half of 2017. For example, Acceleron Pharma Inc., in partnership with Celgene Corporation, is in Phase 3 development of protein therapeutic candidates to treat anemia and associated complications in patients with ß-thalassemia and MDS, and has received orphan drug status from the EMA and FDA for these indications. There may also be new therapies for renal-related diseases that could limit the market or level of reimbursement available for roxadustat if and when it is commercialized.

In China, biosimilars of epoetin alfa are offered by Chinese pharmaceutical companies such as EPIAO marketed by 3SBio Inc. as well as over 15 other local manufacturers. We may also face competition by HIF-PH inhibitors from other companies such as Akebia, Bayer, and GSK who recently was authorized by the CFDA to conduct trials in China to support its ex-China regulatory filings. Akebia announced in December 2015 that it has entered into a development and commercialization partnership with Mitsubishi Tanabe Pharmaceutical Corporation for its HIF-PH inhibitor vadadustat in Japan, Taiwan, South Korea, India and certain other countries in Asia, and recently announced an expansion of their U.S. collaboration with Otsuka to add markets, including China. 3SBio Inc. also ~~announced in 2016 its~~ ~~plan on beginning a Phase 1 clinical trial of a HIF-PH inhibitor for the China market.~~

The introduction of biosimilar ESAs into the market in the U.S. may occur by the time roxadustat enters the market and may alter the competitive and pricing landscape of anemia therapy in DD-CKD patients under the end stage renal disease bundle. The patents for Amgen’s epoetin alfa, EPOGEN, expired in 2004 in the European Union (“EU”), and the final material patents in the U.S. expired in May 2015. Several biosimilar versions of currently marketed ESAs are available for sale in the EU, China and other territories. In the U.S., a few ESA biosimilars are currently under development or regulatory review, including Retacrit® (epoetin zeta), marketed by Pfizer in Europe and for which Pfizer resubmitted a Biologics License Application (“BLA”) after receiving a complete response letter (“CRL”) from the FDA denying approval of its BLA submitted in October 2015. While FDA’s Advisory Committee recommended approving the BLA in May 2017, FDA issued another CRL on June 22, 2017. Sandoz, a division of Novartis, markets Binocrit^® ~~(epoetin alfa) in Europe and plans to file a biosimilar BLA in 2017 in the U.S~~.

The majority of the current CKD anemia market focuses on dialysis patients, who visit dialysis centers on a regular basis, typically three times a week, and anemia therapies are administered as part of the visit. Two of the largest operators of dialysis clinics in the U.S., DaVita Healthcare Partners Inc. (“DaVita”), and Fresenius Medical Care AG & Co. KGaA (“Fresenius”), collectively, provide dialysis care to approximately 70% of the U.S. dialysis patients, and therefore have historically won long-term contracts including rebate terms with Amgen. DaVita recently entered into a new 6-year sourcing and supply agreement with Amgen effective through 2022. Fresenius’ contract with Amgen expired in 2015, and Fresenius is now administering Mircera^® in a significant portion of its U.S. dialysis patients since Mircera was made available by Vifor. Successful penetration of this market may require AstraZeneca to reach a significant agreement with Fresenius or DaVita on favorable terms and on a timely basis.

If pamrevlumab is approved and launched commercially to treat IPF, competing drugs are expected to include Roche’s pirfenidone, which is approved for marketing in Europe, Canada, Japan and the U.S., and Boehringer Ingelheim’s nintedanib which has been approved in the U.S. and EU. Nintedanib is also in development for non-small cell lung cancer and ovarian cancer. Other potential competitive product candidates in various stages of Phase 2 development for IPF include Promedior Inc.’s PRM-151, Biogen-Idec’s STX-100, and Prometic Life Sciences Inc.’s PBI-4050.

If pamrevlumab is approved and launched commercially to treat pancreatic cancer, we expect it to be used in combination instead of as monotherapy, and, likely competition for pamrevlumab would be from other agents also seeking approval in combination with gemcitibine and nab-paclitaxel from companies such as NewLink Genetics Corporation, Merrimack Pharmaceuticals, Inc. (“Merrimack”) and Halozyme Therapeutics, Inc. Gemcitabine and/or nab-paclitaxel are the current standard of care in the first-line treatment of metastatic pancreatic cancer. Celgene Corporation’s Abraxane ^® (nab-paclitaxel) was launched in the U.S. and Europe in 2013 and 2014, and was the first drug approved in this disease in nearly a decade. In 2015, Merrimack received FDA approval for the use of ONIVYDE (irinotecan liposome injection) for the treatment of patients with metastatic adenocarcinoma of the pancreas after disease progression following gemcitabine-based therapy.

If pamrevlumab is approved and launched commercially to treat DMD, pamrevlumab may face competition for some patients from Sarepta Therapeutics, Inc. (“Sarepta”), as well as PTC Therapeutics, Santhera Pharmaceuticals, Pfizer, Summit plc and Tivorsan Pharmaceuticals. Sarepta is researching and developing clinical candidates for many of the specific mutations in the dystrophin gene and recently received accelerated approval in the United States for its first drug Exondys 51 (eteplirsen). The approval is limited to patients who have a confirmed mutation in the DMD gene that is amenable to exon 51 skipping. This mutation represents a subset of approximately 13% of patients with DMD. Marathon Pharmaceuticals received approval for its drug Emflaza (deflazacort) on February 9, 2017 and on March 16, 2017 announced that it had sold the commercialization rights to Emflaza to PTC Therapeutics. PTC Therapeutics’ product ataluren (Translarna^TM ) received conditional approval in Europe in 2014 and a complete response letter from the FDA in October of 2017 stating that the FDA is unable to approve the application in its current form. Translarna targets a different set of DMD patients from those being targeted by Sarepta’s existing exon-skipping therapeutic candidate; however it is also limited to a subset of patients who carry a specific mutation.

Conversely, pamrevlumab and some other potential competitors are intended to treat DMD patients regardless of the specific mutation. For example, Santhera Pharmaceuticals recently reported positive Phase 3 data with its drug idebenone (Raxone^®~~/Catena~~^®) in a trial measuring changes in lung function for DMD patients, however the FDA has asked for additional data from an ongoing trial prior to considering Raxone for approval. Previously we had expected this additional trial to be confirmatory rather than necessary for submission. Idebenone is a synthetic short-chain benzoquinone and a cofactor for the enzyme NAD(P)H:quinone oxidoreductase (NQO1). Pfizer’s product candidate, which is in Phase 2 development to treat DMD, is an antibody targeting myostatin which is a protein that regulates muscle growth. The goal of the program is to increase muscle growth and muscle strength in patients with DMD. Summit plc and Tivorsan Pharmaceuticals are both working on drugs involving the utrophin pathway. Utrophin is a protein similar to dystrophin that is potentially implicated in all DMD patients. ~~Summit is conducting a Phase 2 trial and Tivorsan intends to submit an IND and start Phase 1 in 2017~~. In October 2016, Summit and Sarepta announced a collaboration in which the companies have agreed to collaborate on Summit’s utrophin modulator pipeline including its lead candidate ezutromid. The companies will co-develop the pipeline and Sarepta will receive the rights to the compounds in Europe, Turkey, and the Commonwealth of Independent States. Sarepta also has an option on the rights to the program for Latin America. Summit will retain commercialization rights in all other countries including the ~~U.S.~~

If FG-5200 is approved and launched to treat corneal blindness resulting from partial thickness corneal damage without active inflammation and infection in China, it is likely to compete with other products designed to treat corneal damage. For example, in April 2015, a subsidiary of China Regenerative Medicine International Limited received approval for their acellular porcine cornea stroma medical device to treat patients in China with corneal ulcers and in April 2016, Guangzhou Yourvision Biotech Co. Ltd, a subsidiary of Guanhao Biotech, received approval for their acellular porcine cornea medical device to treat patients in China with infectious keratitis that does not respond to drug treatment.

The success of any or all of these potential competitive products may negatively impact the development and potential for success of pamrevlumab. In addition, any competitive products that are on the market or in development may compete with pamrevlumab for patient recruitment and enrollment for clinical trials or may force us to change our clinical trial comparators, whether placebo or active, in order to compare pamrevlumab against another drug, which may be the new standard of care.

Moreover, many of our competitors have significantly greater resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients, manufacturing pharmaceutical products, and commercialization. In the potential anemia market for roxadustat, for example, large and established companies such as Amgen and Roche, among others, compete aggressively to maintain their market shares. In particular, the currently marketed ESA products are supported by large pharmaceutical companies have greater experience and expertise in commercialization in the anemia market, including in securing reimbursement, government contracts and relationships with key opinion leaders; conducting testing and clinical trials; obtaining and maintaining regulatory approvals and distribution relationships to market products; and marketing approved products. These companies also have significantly greater scale research and marketing capabilities than we do and may also have products that have been approved or are in later stages of development, and have collaboration agreements in our target markets with leading dialysis companies and research institutions. These competitors have in the past successfully prevented new and competing products from entering into the anemia market, and we expect that their resources will represent challenges for us and our collaboration partners, AstraZeneca and Astellas. If we and our collaboration partners are not able to compete effectively against existing and potential competitors, our business and financial condition may be materially and adversely affected.

Our future commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, patients, third party payors and others in the health care community.

Even if we obtain marketing approval for roxadustat, pamrevlumab or any other product candidates that we may develop or acquire in the future, these product candidates may not gain market acceptance among physicians, third party payors, patients and others in the health care community. Market acceptance of any approved product depends on a number of other factors, including:

~~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.~~

Market acceptance and sales of any approved products will depend significantly on reimbursement or coverage of our products by third party payors and may be affected by existing and future healthcare reform measures or the prices of related products for which third party reimbursement applies. Coverage and reimbursement by a third party payor may depend upon a number of factors, including the third party payor’s determination that use of a product is:

Obtaining coverage and reimbursement approval for a product from a government or other third party payor is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor, which we may not be able to provide. Furthermore, the reimbursement policies of third party payors may significantly change in a manner that renders our clinical data insufficient for adequate reimbursement or otherwise limits the successful marketing of our products. Even if we obtain coverage for our product candidates, third party payors may not establish adequate reimbursement amounts, which may reduce the demand for, or the price of, our products. If reimbursement is not available or is available only to limited levels, we may not be able to commercialize certain of our products.

Price controls may limit the price at which products such as roxadustat, if approved, are sold. For example, reference pricing is used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we or our partner may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our product candidates to other available products in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unacceptable levels, we or our partner may elect not to commercialize our products in such countries, and our business and financial condition could be adversely affected.

If our collaborations with Astellas or AstraZeneca were terminated, or if Astellas or AstraZeneca were to prioritize other initiatives over their collaborations with us, whether as a result of a change of control or otherwise, our ability to successfully develop and commercialize our lead product candidate, roxadustat, would suffer.

We have entered into collaboration agreements with respect to the development and commercialization of our lead product candidate, roxadustat, with Astellas and AstraZeneca. These agreements provide for reimbursement of our development costs by our collaboration partners and also provide for commercialization of roxadustat throughout the major territories of the world.

Our agreements with Astellas and AstraZeneca provide each of them with the right to terminate their respective agreements with us, upon the occurrence of negative clinical results, delays in the development and commercialization of our product candidates or adverse regulatory requirements or guidance. The termination of any of our collaboration agreements would require us to fund and perform the further development and commercialization of roxadustat in the affected territory, or pursue another collaboration, which we may be unable to do, either of which could have an adverse effect on our business and operations. In addition, each of those agreements provides our respective partners the right to terminate any of those agreements upon written notice for convenience. Moreover, if Astellas or AstraZeneca, or any successor entity, were to determine that their collaborations with us are no longer a strategic priority, or if either of them or a successor were to reduce their level of commitment to their collaborations with us, our ability to develop and commercialize roxadustat could suffer. In addition, some of our collaborations are exclusive and preclude us from entering into additional collaboration agreements with other parties in the area or field of exclusivity.

If we fail to establish and maintain strategic collaborations related to our product candidates, we will bear all of the risk and costs related to the development and commercialization of any such product candidate, and we may need to seek additional financing, hire additional employees and otherwise develop expertise at significant cost. This in turn may negatively affect the development of our other product candidates as we direct resources to our most advanced product candidates.

~~Conflicts with our collaboration partners could jeopardize our collaboration agreements and our ability to commercialize product candidates.~~

Our collaboration partners have certain rights to control decisions regarding the development and commercialization of our product candidates with respect to which they are providing funding. If we have a disagreement over strategy and activities, our plans for obtaining approval may be revised and negatively affect the anticipated timing and potential for success of our product candidates. Even if a product under a collaboration agreement is approved, we will remain substantially dependent on the commercialization strategy and efforts of our collaboration partners, and neither of our collaboration partners has experience in commercialization of a novel drug such as roxadustat in the dialysis market.

With respect to our collaboration agreements for roxadustat, there are additional complexities in that we and our collaboration partners, Astellas and AstraZeneca, must reach consensus on our Phase 3 development program. Multi-party decision-making is complex and involves significant time and effort, and there can be no assurance that the parties will cooperate or reach consensus, or that one or both of our partners will not ask to proceed independently in some or all of their respective territories or functional areas of responsibility in which the applicable collaboration partner would otherwise be obligated to cooperate with us. Any disputes or lack of cooperation with us by either Astellas or AstraZeneca may negatively impact the timing or success of our planned Phase 3 clinical studies.

We intend to conduct proprietary research programs in specific disease areas that are not covered by our collaboration agreements. Our pursuit of such opportunities could, however, result in conflicts with our collaboration partners in the event that any of our collaboration partners takes the position that our internal activities overlap with those areas that are exclusive to our collaboration agreements, and we should be precluded from such internal activities. Moreover, disagreements with our collaboration partners could develop over rights to our intellectual property. In addition, our collaboration agreements may have provisions that give rise to disputes regarding the rights and obligations of the parties. Any conflict with our collaboration partners could lead to the termination of our collaboration agreements, delay collaborative activities, reduce our ability to renew agreements or obtain future collaboration agreements or result in litigation or arbitration and would negatively impact our relationship with existing collaboration partners.

Certain of our collaboration partners could also become our competitors in the future. If our collaboration partners develop competing products, fail to obtain necessary regulatory approvals, terminate their agreements with us prematurely or fail to devote sufficient resources to the development and commercialization of our product candidates, the development and commercialization of our product candidates and products could be delayed.

We rely on third parties for the conduct of most of our preclinical and clinical trials for our product candidates, and if our third party contractors do not properly and successfully perform their obligations under our agreements with them, we may not be able to obtain or may be delayed in receiving regulatory approvals for our product candidates.

We rely heavily on university, hospital, dialysis centers and other institutions and third parties, including the principal investigators and their staff, to carry out our clinical trials in accordance with our clinical protocols and designs. We also rely on a number of third party CROs to assist in undertaking, managing, monitoring and executing our ongoing clinical trials, including those for roxadustat. We expect to continue to rely on CROs, clinical data management organizations, medical institutions and clinical investigators to conduct our development efforts in the future, including our Phase 3 development program for roxadustat. We compete with many other companies for the resources of these third parties, and large pharmaceutical companies often have significantly more extensive agreements and relationships with such third party providers, and such third party providers may prioritize the requirements of such large pharmaceutical companies over ours. The third parties on whom we rely may terminate their engagements with us at any time, which may cause delay in the development and commercialization of our product candidates. If any such third party terminates its engagement with us or fails to perform as agreed, we may be required to enter into alternative arrangements, which would result in significant cost and delay to our product development program. Moreover, our agreements with such third parties generally do not provide assurances regarding employee turnover and availability, which may cause interruptions in the research on our product candidates by such third parties.

Moreover, while our reliance on these third parties for certain development and management activities will reduce our control over these activities, it will not relieve us of our responsibilities. For example, the FDA and foreign regulatory authorities require compliance with regulations and standards, including GCP requirements for designing, conducting, monitoring, recording, analyzing and reporting the results of clinical trials to ensure that the data and results from trials are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Although we rely on third parties to conduct our clinical trials, we, as the sponsor, remain responsible for ensuring that each of these clinical trials is conducted in accordance with its general investigational plan and protocol under legal and regulatory requirements, including GCP. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators and trial sites.

If any of our CROs, trial sites, principal investigators or other third parties fail to comply with applicable GCP requirements, other regulations, trial protocol or other requirements under their agreements with us, the quality or accuracy of the data they obtain may be compromised or unreliable, and the trials of our product candidates may not meet regulatory requirements. If trials do not meet regulatory requirements or if these third parties need to be replaced, the development of our product candidates may be delayed, suspended or terminated, regulatory authorities may require us to exclude the use of patient data from our approval applications or perform additional clinical trials before approving our marketing applications. Regulatory authorities may even reject our application for approval or refuse to accept our future applications for an extended time period. We cannot assure you that upon inspection by a regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements or that our results may be used in support of our regulatory submissions. If any of these events occur, we may not be able to obtain regulatory approval for our product candidates on a timely basis, at a reasonable cost, or at all.

We currently rely, and expect to continue to rely, on third parties to conduct many aspects of our clinical studies and product manufacturing, and these third parties may not perform satisfactorily.*

We do not have any operating manufacturing facilities at this time other than our roxadustat and FG-5200 manufacturing facility in China, and our current commercial manufacturing facility plans in China are not expected to satisfy the requirements necessary to support development and commercialization outside of China. Other than in and for China specifically, we do not expect to independently manufacture our products. We currently rely, and expect to continue to rely, on third parties to scale-up, manufacture and supply roxadustat and our other product candidates outside of China. Risks arising from our reliance on third party manufacturers include:

Any of these events could lead to development delays or failure to obtain regulatory approval, or affect our ability to successfully commercialize our product candidates. Some of these events could be the basis for action by the FDA or another regulatory authority, including injunction, recall, seizure or total or partial suspension of production.

The facilities used by our contract manufacturers to manufacture our product candidates must pass inspections by the FDA and other regulatory authorities. Although, except for China, we do not control the manufacturing operations of, and expect to remain completely dependent on, our contract manufacturers for manufacture of drug substance and finished drug product, we are ultimately responsible for ensuring that our product candidates are manufactured in compliance with cGMP requirements. If our contract manufacturers cannot successfully manufacture material that conforms to our or our collaboration partners’ specifications, or the regulatory requirements of the FDA or other regulatory authorities, we may not be able to secure and/or maintain regulatory approval for our product candidates and our development or commercialization plans may be delayed. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. In addition, although our longer-term agreements are expected to provide for requirements to meet our quantity and quality requirements to manufacture our products candidates for clinical studies and commercial sale, we will have minimal direct control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel and we expect to rely on our audit rights to ensure that those qualifications are maintained to meet our requirements. If our contract manufacturers’ facilities do not pass inspection by regulatory authorities, or if regulatory authorities do not approve these facilities for the manufacture of our products, or withdraw any such approval in the future, we would need to identify and qualify alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our products, if approved. Moreover, any failure of our third party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us or adverse regulatory consequences, including clinical holds, warnings or untitled letters, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which would be expected to significantly and adversely affect supplies of our products to us and our collaboration partners.

Any of our third party manufacturers may terminate their engagement with us at any time and we have not yet entered into any commercial supply agreements for the manufacture of active pharmaceutical ingredients (“APIs”) or drug products. With respect to roxadustat, AstraZeneca and Astellas have certain rights to assume manufacturing of roxadustat and the existence of those rights may limit our ability to enter into favorable long-term supply agreements, if at all, with other third party manufacturers. In addition, our product candidates and any products that we may develop may compete with other product candidates and products for access and prioritization to manufacture. Certain third party manufacturers may be contractually prohibited from manufacturing our product due to non-compete agreements with our competitors or a commitment to grant another party priority relative to our products. There are a limited number of third party manufacturers that operate under cGMP and that might be capable of manufacturing to meet our requirements. Due to the limited number of third party manufacturers with the contractual freedom, expertise, required regulatory approvals and facilities to manufacture our products on a commercial scale, identifying and qualifying a replacement third party manufacturer would be expensive and time-consuming and may cause delay or interruptions in the production of our product candidates or products, which in turn may delay, prevent or impair our development and commercialization efforts.

We have a letter agreement with IRIX Pharmaceuticals, Inc. (“IRIX”), a third party manufacturer that we have used in the past, pursuant to which we agreed to negotiate a single source manufacturing agreement that included a right of first negotiation for the cGMP manufacture of HIF-PH inhibitors, including roxadustat, provided that IRIX is able to match any third party bids within 5%. The exclusive right to manufacture extends for five years after approval of an NDA for those compounds, and any agreement would provide that no minimum amounts would be specified until appropriate by forecast and that we and a commercialization partner would have the rights to contract with independent third parties that exceed IRIX’s internal manufacturing capabilities or in the event that we or our commercialization partner determines for reasons of continuity of supply and security that such a need exists, provided that IRIX would supply no less than 65% of the product if it is able to provide this level of supply. Subsequent to the letter agreement, we and IRIX have entered into several additional service agreements. IRIX has requested in writing that we honor the letter agreement with respect to the single source manufacturing agreement, and if we were to enter into any such exclusive manufacturing agreement, there can be no assurance that IRIX will not assert a claim for right to manufacture roxadustat or that IRIX could manufacture roxadustat successfully and in accordance with applicable regulations for a commercial product and the specifications of our collaboration partners. In 2015, Patheon Pharmaceuticals Inc., a business unit of DPx Holdings B.V. (“Patheon”), acquired IRIX, and in 2017 ThermoFisher Scientific Inc. acquired Patheon.

If any third party manufacturer terminates its engagement with us or fails to perform as agreed, we may be required to find replacement manufacturers, which would result in significant cost and delay to our development programs. Although we believe that there are several potential alternative manufacturers who could manufacture our product candidates, we may incur significant delays and added costs in identifying, qualifying and contracting with any such third party or potential second source manufacturer. In any event, with any third party manufacturer we expect to enter into technical transfer agreements and share our know-how with the third party manufacturer, which can be time-consuming and may result in delays. These delays could result in a suspension or delay of our Phase 3 clinical trials or, if roxadustat is approved and marketed, a failure to satisfy patient demand.

Certain of the components of our product candidates are acquired from single-source suppliers and have been purchased without long-term supply agreements. The loss of any of these suppliers, or their failure to supply us with supplies of sufficient quantity and quality to complete our drug substance or finished drug product of acceptable quality and an acceptable price, would materially and adversely affect our business.

We do not have an alternative supplier of certain components of our product candidates. To date, we have used purchase orders for the supply of materials that we use in our product candidates. We may be unable to enter into long-term commercial supply arrangements with our vendors, or do so on commercially reasonable terms, which could have a material adverse impact upon our business. In addition, we currently rely on our contract manufacturers to purchase from third-party suppliers some of the materials necessary to produce our product candidates. We do not have direct control over the acquisition of those materials by our contract manufacturers. Moreover, we currently do not have any agreements for the commercial production of those materials.

The logistics of our supply chain, which include shipment of materials and intermediates from countries such as China and India add additional time and risk to the manufacture of our product candidates. While we have in the past maintained sufficient inventory of materials, API, and drug product to meet our and our collaboration partners’ needs for roxadustat to date, the lead time and regulatory approvals required to source from and into countries outside of the U.S. increase the risk of delay and potential shortages of supply.

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

We rely upon a combination of patents, trade secret protection and contractual arrangements to protect the intellectual property related to our technologies. We will only be able to protect our products and proprietary information and technology by preventing unauthorized use by third parties to the extent that our patents, trade secrets, and contractual position allow us to do so. Any disclosure to or misappropriation by third parties of our trade secrets or confidential information could compromise our competitive position. Moreover, we are involved in, have in the past been involved in, and may in the future be involved in legal or administrative proceedings involving our intellectual property initiated by third parties, and which proceedings can result in significant costs and commitment of management time and attention. As our product candidates continue in development, third parties may attempt to challenge the validity and enforceability of our patents and proprietary information and technologies.

We also are involved in, have in the past been involved in, and may in the future be involved in initiating legal or administrative proceedings involving the product candidates and intellectual property of our competitors. These proceedings can result in significant costs and commitment of management time and attention, and there can be no assurance that our efforts would be successful in preventing or limiting the ability of our competitors to market competing products.

Composition-of-matter patents relating to the API are generally considered to be the strongest form of intellectual property protection for pharmaceutical products, as such patents provide protection not limited to any one method of use. Method-of-use patents protect the use of a product for the specified method(s), and do not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. We rely on a combination of these and other types of patents to protect our product candidates, and there can be no assurance that our intellectual property will create and sustain the competitive position of our product candidates.

Biotechnology and pharmaceutical product patents involve highly complex legal and scientific questions and can be uncertain. Any patent applications that we own or license may fail to result in issued patents. Even if patents do successfully issue from our applications, third parties may challenge their validity or enforceability, which may result in such patents being narrowed, invalidated, or held unenforceable. Even if our patents and patent applications are not challenged by third parties, those patents and patent applications may not prevent others from designing around our claims and may not otherwise adequately protect our product candidates. If the breadth or strength of protection provided by the patents and patent applications we hold with respect to our product candidates is threatened, competitors with significantly greater resources could threaten our ability to commercialize our product candidates. Discoveries are generally published in the scientific literature well after their actual development, and patent applications in the U.S. and other countries are typically not published until 18 months after their filing, and in some cases are never published. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned and licensed patents or patent applications, or that we or our licensors were the first to file for patent protection covering such inventions. Subject to meeting other requirements for patentability, for U.S. patent applications filed prior to March 16, 2013, the first to invent the claimed invention is entitled to receive patent protection for that invention while, outside the U.S., the first to file a patent application encompassing the invention is entitled to patent protection for the invention. The U.S. moved to a “first to file” system under the Leahy-Smith America Invents Act (“AIA”), effective March 16, 2013. This system also includes procedures for challenging issued patents and pending patent applications, which creates additional uncertainty. We may become involved in opposition or interference proceedings challenging our patents and patent applications or the patents and patent applications of others, and the outcome of any such proceedings are highly uncertain. An unfavorable outcome in any such proceedings could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology and compete directly with us, or result in our inability to manufacture, develop or commercialize our product candidates without infringing the patent rights of others.

In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how, information, or technology that is not covered by our patents. Although our agreements require all of our employees to assign their inventions to us, and we require all of our employees, consultants, advisors and any third parties who have access to our trade secrets, proprietary know-how and other confidential information and technology to enter into appropriate confidentiality agreements, we cannot be certain that our trade secrets, proprietary know-how and other confidential information and technology will not be subject to unauthorized disclosure or that our competitors will not otherwise gain access to or independently develop substantially equivalent trade secrets, proprietary know-how and other information and technology. Furthermore, the laws of some foreign countries, in particular, China, where we have operations, do not protect proprietary rights to the same extent or in the same manner as the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our intellectual property globally. If we are unable to prevent unauthorized disclosure of our intellectual property related to our product candidates and technology to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business and operations.

Intellectual property disputes with third parties and competitors may be costly and time consuming, and may negatively affect our competitive position.*

Our commercial success may depend on our avoiding infringement of the patents and other proprietary rights of third parties as well as on enforcing our patents and other proprietary rights against third parties. Pharmaceutical and biotechnology intellectual property disputes are characterized by complex, lengthy and expensive litigation over patents and other intellectual property rights. We may initiate or become party to, or be threatened with, future litigation or other proceedings regarding intellectual property rights with respect to our product candidates and competing products.

As our product candidates progress toward commercialization, we or our collaboration partners may be subject to patent infringement claims from third parties. We attempt to ensure that our product candidates do not infringe third party patents and other proprietary rights. However, the patent landscape in competitive product areas is highly complex, and there may be patents of third parties of which we are unaware that may result in claims of infringement. Accordingly, there can be no assurance that our product candidates do not infringe proprietary rights of third parties, and parties making claims against us may seek and obtain injunctive or other equitable relief, which could potentially block further efforts to develop and commercialize our product candidates including roxadustat or pamrevlumab. Any litigation involving defense against claims of infringement, regardless of the merit of such claims, would involve substantial litigation expense and would be a substantial diversion of management time.

We intend, if necessary, to vigorously enforce our intellectual property in order to protect the proprietary position of our product candidates, including roxadustat and pamrevlumab. Active efforts to enforce our patents may include litigation, administrative proceedings, or both, depending on the potential benefits that might be available from those actions and the costs associated with undertaking those efforts against third parties. We carefully review and monitor publicly available information regarding products that may be competitive with our product candidates and assert our intellectual property rights where appropriate. We previously prevailed in an administrative challenge initiated by a major biopharmaceutical company regarding our intellectual property rights, maintaining our intellectual property in all relevant scope, and will continue to protect and enforce our intellectual property rights. Moreover, third parties may continue to initiate new proceedings in the U.S. and foreign jurisdictions to challenge our patents from time to time.

We may consider administrative proceedings and other means for challenging third party patents and patent applications. Third parties may also challenge our patents and patent applications, through interference, reexamination, ~~inter partes~~ review, and post-grant review proceedings before the U.S. Patent and Trademark Office (“USPTO”) or through other comparable proceedings, such as oppositions or invalidation proceedings, before foreign patent offices. An unfavorable outcome in any such challenge could require us to cease using the related technology and to attempt to license rights to it from the prevailing third party, which may not be available on commercially reasonable terms, if at all, in which case our business could be harmed. Even if we are successful, participation in administrative proceedings before the USPTO or a foreign patent office may result in substantial costs and time on the part of our management and other employees. For example, oppositions have been filed against four FibroGen European patents within our HIF Anemia-related Technologies Patent Portfolio. (An opposition is a European Patent Office mechanism providing for a third-party challenge to a granted European patent.) In three of these proceedings, for FibroGen European Patent Nos. 1463823, 1633333 and 2322155, the European Patent Office has handed down decisions unfavorable to FibroGen. These decisions are currently under appeal, and these three patents are valid and enforceable pending resolution of the appeals. In the fourth of the challenged cases, the European Patent Office issued a decision favorable to FibroGen, maintaining FibroGen European Patent No. 2322153. An appeal of this decision may be filed by one or more parties to the opposition. The ultimate outcomes of these proceedings remain uncertain, and ultimate resolution of each of the appeal proceedings may take two to four years or longer. While we believe these FibroGen patents will be upheld in relevant part, we note that narrowing or even revocation of any of these patents would not affect our exclusivity for roxadustat or our freedom-to-operate with respect to use of roxadustat for the treatment of anemia.

Furthermore, there is a risk that any public announcements concerning the status or outcomes of intellectual property litigation or administrative proceedings may adversely affect the price of our stock. If securities analysts or our investors interpret such status or outcomes as negative or otherwise creating uncertainty, our common stock price may be adversely affected.

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.

Our reliance on third party contractors to develop and manufacture our product candidates is based upon agreements that limit the rights of the third parties to use or disclose our confidential information, including our trade secrets and know-how. Despite the contractual provisions, the need to share trade secrets and other confidential information increases the risk that such trade secrets and information are disclosed or used, even if unintentionally, in violation of these agreements. In the highly competitive markets in which our product candidates are expected to compete, protecting our trade secrets, including our strategies for addressing competing products, is imperative, and any unauthorized use or disclosure could impair our competitive position and may have a material adverse effect on our business and operations.

In addition, our collaboration partners are larger, more complex organizations than ours, and the risk of inadvertent disclosure of our proprietary information may be increased despite their internal procedures and contractual obligations in place with our collaboration partners. Despite our efforts to protect our trade secrets and other confidential information, a competitor’s discovery of such trade secrets and information could impair our competitive position and have an adverse impact on our business.

We have an extensive worldwide patent portfolio. The cost of maintaining our patent protection is high and maintaining our patent protection requires continuous review and compliance in order to maintain worldwide patent protection. We may not be able to effectively maintain our intellectual property position throughout the major markets of the world.

The USPTO and foreign patent authorities require maintenance fees and payments as well as continued compliance with a number of procedural and documentary requirements. Noncompliance may result in abandonment or lapse of the subject patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance may result in reduced royalty payments for lack of patent coverage in a particular jurisdiction from our collaboration partners or may result in competition, either of which could have a material adverse effect on our business.

We have made, and will continue to make, certain strategic decisions in balancing costs and the potential protection afforded by the patent laws of certain countries. As a result, we may not be able to prevent third parties from practicing our inventions in all countries throughout the world, or from selling or importing products made using our inventions in and into the U.S. or other countries. Third parties may use our technologies in territories in which we have not obtained patent protection to develop their own products and, further, may infringe our patents in territories which provide inadequate enforcement mechanisms, even if we have patent protection. Such third party products may compete with our product candidates, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

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.

Many companies have encountered significant problems in protecting and defending intellectual property rights in certain countries. The legal systems of certain countries, particularly certain developing countries such as China, do not always favor the enforcement of patents, trade secrets, and other intellectual property rights, particularly those relating to pharmaceutical and biotechnology products, which could make it difficult for us to stop infringement of our patents, misappropriation of our trade secrets, or marketing of competing products in violation of our proprietary rights. In China, our intended establishment of significant operations will depend in substantial part on our ability to effectively enforce our intellectual property rights in that country. Proceedings to enforce our intellectual property rights in foreign countries could result in substantial costs and divert our efforts and attention from other aspects of our business, and could put our patents in these territories at risk of being invalidated or interpreted narrowly, or our patent applications at risk of not being granted, and could provoke third parties to assert claims against us. We may not prevail in all legal or other proceedings that we may initiate and, if we were to prevail, the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

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

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and intellectual property rights may not adequately protect our business or permit us to maintain our competitive advantage. The following examples are illustrative:

~~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.~~

Counterfeit products, including counterfeit pharmaceutical products, are a significant problem, particularly in China. Counterfeit pharmaceuticals are products sold or used for research under the same or similar names, or similar mechanism of action or product class, but which are sold without proper licenses or approvals. Such products may be used for indications or purposes that are not recommended or approved or for which there is no data or inadequate data with regard to safety or efficacy. Such products divert sales from genuine products, often are of lower cost, often are of lower quality (having different ingredients or formulations, for example), and have the potential to damage the reputation for quality and effectiveness of the genuine product. If counterfeit pharmaceuticals illegally sold or used for research result in adverse events or side effects to consumers, we may be associated with any negative publicity resulting from such incidents. Consumers may buy counterfeit pharmaceuticals that are in direct competition with our pharmaceuticals, which could have an adverse impact on our revenues, business and results of operations. In addition, the use of counterfeit products could be used in non-clinical or clinical studies, or could otherwise produce undesirable side effects or adverse events that may be attributed to our products as well, which could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the delay or denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims. With respect to China, although the government has recently been increasingly active in policing counterfeit pharmaceuticals, there is not yet an effective counterfeit pharmaceutical regulation control and enforcement system in China. As a result, we may not be able to prevent third parties from selling or purporting to sell our products in China. The proliferation of counterfeit pharmaceuticals has grown in recent years and may continue to grow in the future. The existence of and any increase in the sales and production of counterfeit pharmaceuticals, or the technological capabilities of counterfeiters, could negatively impact our revenues, brand reputation, business and results of operations.

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.*

To date, we have invested a substantial portion of our efforts and financial resources in the research and development of roxadustat and pamrevlumab. While we have received approval of our New Drug Applications (“NDA”) for roxadustat in the People’s Republic of China (“China”) for chronic kidney disease (“CKD”) anemia for patients on dialysis and not on dialysis, and for roxadustat in Japan for CKD anemia in dialysis patients, we and our partners will need to make substantial additional investments in the development of roxadustat worldwide and in various indications. Our near-term prospects, including maintaining our existing collaborations with Astellas Pharma Inc. (“Astellas”) and AstraZeneca AB (“AstraZeneca”), will depend heavily on successful development and commercialization of roxadustat, including obtaining additional regulatory approvals for the commercialization of roxadustat for anemia associated with CKD.

Our other lead product candidate, pamrevlumab, is currently in clinical development for idiopathic pulmonary fibrosis (“IPF”), pancreatic cancer, Duchenne muscular dystrophy (“DMD”), and COVID-19. Pamrevlumab requires substantial further development and investment and we do not have a collaboration partner for support of this compound. In addition, pamrevlumab is a monoclonal antibody, which may require greater financial resources than for our small molecule, roxadustat.

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.*

We do not have a sales or marketing infrastructure and have limited experience in the sales, marketing or distribution of pharmaceutical products in any country. To achieve commercial success for any product for which we obtain marketing approval, we will need to establish sales and marketing capabilities or make and maintain our existing arrangements with third parties to perform these services at a level sufficient to support our commercialization efforts.

With respect to roxadustat, we are dependent on the commercialization capabilities of our collaboration partners, AstraZeneca and Astellas. If either such partner were to terminate its agreement with us, we would have to commercialize on our own or with another third party. We will have limited control over the commercialization efforts of such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products, if any, effectively. If they are not successful in commercializing our product candidates, our business and financial condition would suffer.

Commercializing roxadustat requires us to establish commercialization systems, including but not limited to, medical affairs, sales, pharmacovigilance, supply-chain, and distribution capabilities to perform our portion of the collaborative efforts. These efforts require resources and time. If we, along with Astellas and AstraZeneca, are not successful in our marketing, pricing and reimbursement strategies, facilitating adoption by dialysis organizations, health care professionals, and physicians, recruiting sales and marketing personnel or in building a sales and marketing infrastructure, we will have difficulty commercializing roxadustat, which would adversely affect our business and financial condition.

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

The clinical trials and the manufacturing of our product candidates are and will continue to be, and the marketing of our product candidates will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States (“U.S.”) and in other countries where we intend to develop and, if approved, market any product candidates. Before obtaining regulatory approval for the commercial sale of any product candidate, we must demonstrate through extensive preclinical trials and clinical trials that the product candidate is safe and effective for use in each indication for which approval is sought. The regulatory review and approval process is expensive and requires substantial resources and time, and in general, very few product candidates that enter development receive regulatory approval. In addition, our collaboration partners for roxadustat have final control over development decisions in their respective territories and they may make decisions with respect to development or regulatory authorities that delay or limit the potential approval of roxadustat, or increase the cost of development or commercialization. Accordingly, we may be unable to successfully develop or commercialize roxadustat, pamrevlumab, or any of our other product candidates in one or more indications and jurisdictions.

Moreover, for any Phase 3 clinical trial to support an NDA/Biologics License Application submission for approval, the U.S. Food and Drug Administration (“FDA”) and foreign regulatory authorities require compliance with regulations and standards (including good clinical practices (“GCP”) requirements for designing, conducting, monitoring, recording, analyzing, and reporting the results of clinical trials) to ensure that (1) the data and results from trials are credible and accurate; and (2) that the rights, integrity and confidentiality of trial participants are protected. Although we rely on third parties to conduct our clinical trials, we as the sponsor remain responsible for ensuring that each of these clinical trials is conducted in accordance with its general investigational plan and protocol under legal and regulatory requirements, including GCP. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our clinical research organizations (“CROs”), trial sites, principal investigators or other third parties fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable. Accordingly, the FDA or other regulatory authorities may require us to exclude the use of patient data from these unreliable clinical trials, or perform additional clinical trials before approving our marketing applications. The FDA or other regulatory authorities may even reject our application for approval or refuse to accept our future applications.

Regulatory authorities may take actions or impose requirements that delay, limit or deny approval of our product candidates for many reasons, including, among others:

Any of these factors, many of which are beyond our control, could jeopardize our or our collaboration partners’ abilities to obtain regulatory approval for our product candidates in one or more indications.

The FDA or other regulatory authorities may require more information (including additional preclinical or clinical data to support approval), which may delay or prevent approval or cause us to abandon the development program altogether. In addition, if our product candidates produce undesirable side effects or safety issues, the FDA may require the establishment of Risk Evaluation and Mitigation Strategy (“REMS”) (or other regulatory authorities may require the establishment of a similar strategy), that may restrict distribution of our approved products, if any, and impose burdensome implementation requirements on us.

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.*

Clinical trials can be delayed or terminated for a variety of reasons, including delay or failure to:

In particular, identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on the rate at which we can recruit and enroll patients in testing our product candidates. Patients may be unwilling to participate in clinical trials of our product candidates for a variety of reasons, some of which may be beyond our control, including:

If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate on-going or planned clinical trials.

In addition, we could encounter delays if a clinical trial is suspended or terminated by us, by the relevant institutional review boards at the sites at which such trials are being conducted, or by the FDA or other regulatory authorities. A suspension or termination of clinical trials may result from any number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, changes in laws or regulations, or a principal investigator’s determination that a serious adverse event could be related to our product candidates. Any delays in completing our clinical trials will increase the costs of the trial, delay the product candidate development and approval process and jeopardize our ability to commence marketing and generate revenues. Any of these occurrences may materially and adversely harm our business, operations, and prospects.

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.

Undesirable side effects caused by our product candidates or that may be identified as related to our product candidates by physician investigators conducting our clinical trials or even competing products in development that utilize a similar mechanism of action or act through a similar biological disease pathway could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the delay or denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims. If we determine that there is a likely causal relationship between a serious adverse event and our product candidate, and such safety event is material or significant enough, it may result in:

The occurrence of any or all of these events may cause the development of our product candidates to be delayed or terminated, which could materially and adversely affect our business and prospects. Refer to “Business — Overview” in our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of the adverse events and serious adverse events that have emerged in clinical trials of roxadustat and pamrevlumab.

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

Clinical trials are conducted in representative samples of the potential patient population, which may have significant variability. Clinical trials are by design based on a limited number of subjects and of limited duration for exposure to the product used to determine whether, on a potentially statistically significant basis, the planned safety and efficacy of any product candidate can be achieved. As with the results of any statistical sampling, we cannot be sure that all side effects of our product candidates may be uncovered, and it may be the case that only with a significantly larger number of patients exposed to the product candidate for a longer duration, that a more complete safety profile is identified. Further, even larger clinical trials may not identify rare serious adverse effects or the duration of such studies may not be sufficient to identify when those events may occur. There have been other products, including erythropoiesis stimulating agents (“ESAs”), for which safety concerns have been uncovered following approval by regulatory authorities. Such safety concerns have led to labeling changes or withdrawal of ESAs products from the market. While our most advanced product candidate is chemically unique from ESAs, it or any of our product candidates may be subject to known or unknown risks. Patients treated with our products, if approved, may experience adverse reactions and it is possible that the FDA or other regulatory authorities may ask for additional safety data as a condition of, or in connection with, our efforts to obtain approval of our product candidates. If safety problems occur or are identified after our product candidates reach the market, we may, or regulatory authorities may require us to amend the labeling of our products, recall our products or even withdraw approval for our products.

If we or our manufacturers cannot properly manufacture sufficient product, we may experience delays in development, regulatory approval, launch or successful commercialization.*

Completion of our clinical trials and commercialization of our products require access to, or development of, facilities to manufacture and manage our product candidates at sufficient yields, quality and at commercial scale. Although we have entered into commercial supply agreements for the manufacture of some of our drug candidates, active pharmaceutical ingredients (“API”), intermediates or raw materials, we will need to enter into additional commercial supply agreements, including for backup or second source third-party manufacturers. We may not be able to enter into these agreements with satisfactory terms or on a timely manner.

We have limited experience manufacturing or managing third parties in manufacturing any of our product candidates in the volumes that are expected to be necessary to support large-scale clinical trials and sales. In addition, we have limited experience forecasting supply requirements or coordinating supply chain (including export management) for launch or commercialization, which is a complex process involving our third-party manufacturers and logistics providers, and for roxadustat, our collaboration partners. We may not be able to accurately forecast supplies for commercial launch, or do so in a timely manner and our efforts to establish these manufacturing and supply chain management capabilities may not meet our requirements as to quantities, scale-up, yield, cost, potency or quality in compliance with cGMP, particularly if the marketing authorization or market uptake is more rapid than anticipated or we have an unanticipated surge in demand.

We have a limited amount of roxadustat and pamrevlumab in storage, limited capacity reserved at our third-party manufacturers, and, even if we have or are able to put supply agreements in place for our products, there are long lead times required to manufacture and scale-up the manufacture of additional supply, as required for both late-stage clinical trials, post-approval trials, and commercial supply. If we are unable to forecast, order or manufacture sufficient quantities of roxadustat or pamrevlumab on a timely basis, it may delay our development, launch or commercialization in some or all indications we are currently pursuing. Any delay or interruption in the supply of our product candidates or products could have a material adverse effect on our business and operations.

Our commercial drug product and the product we use for clinical trials must be produced under applicable cGMP regulations. Failure to comply with these regulations may require us to recall commercial product or repeat clinical trials, which would impact sales revenue or delay the regulatory approval process.

We may add or change manufacturers for our products. We may also make changes to our manufacturing processes or to our product specifications, including in order to accommodate changes in regulations, manufacturing equipment or to account for different processes at new or second source suppliers. If we make any such changes with respect to roxadustat or pamrevlumab we will need to demonstrate comparability to the products and processes already approved or in approval by various regulatory authorities, including potentially through the conduct of additional clinical trials. Even if we do demonstrate comparability, a regulatory agency could challenge that result which could delay our development or commercialization progress. Any of these occurrences may materially impact our operations and potential profitability.

We, and even an experienced third-party manufacturer, may encounter difficulties in production. Difficulties may include:

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 believe we have achieved positive clinical results, such as superiority or non-inferiority, in certain endpoints, populations or subpopulations, or using certain statistical methods of analysis, the FDA and European Medicines Agency (“EMA”) will each conduct their own benefit-risk analysis and may reach different conclusions, using different statistical methods, different endpoints or definitions thereof, or different patient populations or sub-populations, and regulatory authorities may change their approvability criteria based on their internal analyses and discussions with expert advisors. Regulatory authorities may approve roxadustat for fewer or more limited indications than we request or may grant approval contingent on the performance of costly post-approval clinical trials. While we will present to regulatory authorities certain pre-specified and not pre-specified sub-populations and sub-group analyses (for example, incident dialysis), multiple secondary endpoints, and multiple analytical methods (such as long-term follow up analyses), including adjusted and censored data, regulatory authorities may reject these analyses, methods, or even parts of our trial design or certain data from our studies, the rationale for our pre-specified non-inferiority margins or other portions of our statistical analysis plans. In addition, even if we are able to provide positive data with respect to certain analyses, such as incident dialysis, estimated glomerular filtration rate, hepcidin, or quality of life measures, regulatory authorities may not include such claims on any approved labeling for roxadustat, which may limit the commercialization or market opportunity for roxadustat. The failure to obtain regulatory approval, or any label, population or other approval limitations in any jurisdiction, may significantly limit our ability to generate revenues, and any failure to obtain such approval for all of the indications and labeling claims we deem desirable could reduce our potential revenue.

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.

With respect to roxadustat, regulatory approvals obtained, could limit the approved indicated uses for which roxadustat may be marketed. For example, our label approved in Japan, includes the following warning: “Serious thromboembolism such as cerebral infarction, myocardial infarction, and pulmonary embolism may occur, possibly resulting in death, during treatment with roxadustat.” Additionally, in the U.S., ESAs have been subject to significant safety warnings, including the “Black Box” warnings on their labels. The safety concerns relating to ESAs may result in labeling for roxadustat containing similar warnings even if our Phase 3 clinical trials do not suggest that roxadustat has similar safety issues. Even if the label for roxadustat does not contain all of the warnings contained in the “Black Box” warning for ESAs, the label for roxadustat may contain other warnings or limit the market opportunity or approved indications for roxadustat. These warnings could include warnings against exceeding specified hemoglobin targets and other warnings that derive from the lack of clarity regarding the safety issues associated with ESAs, even if our Phase 3 clinical trials do not themselves raise safety concerns.

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

The development and commercialization of new pharmaceutical products is highly competitive. Our future success depends on our ability and/or the ability of our collaboration partners to achieve and maintain a competitive advantage with respect to the development and commercialization of our product candidates. Our objective is to discover, develop and commercialize new products with superior efficacy, convenience, tolerability, and safety. We expect that in many cases, the products that we commercialize will compete with existing, market-leading products of companies that have large, established commercial organizations.

If roxadustat is approved and launched commercially, competing drugs are expected to include ESAs, particularly in those patient segments where ESAs are used. Currently available ESAs include epoetin alfa (EPOGEN^®, marketed by Amgen Inc. in the U.S., Procrit^® and Erypo^®/Eprex^®, marketed by Johnson & Johnson Inc., and Espo^® marketed by Kyowa Hakko Kirin in Japan and China), darbepoetin (Amgen/Kyowa Hakko Kirin’s Aranesp^® and NESP^®) and Mircera^® marketed by Hoffmann-La Roche (“Roche”) outside of the U.S. and by Vifor Pharma, a Roche licensee, in the U.S. and Puerto Rico, as well as biosimilar versions of these currently marketed ESA products. ESAs have been used in the treatment of anemia in CKD for more than 30 years, serving a significant majority of dialysis CKD patients. While non-dialysis CKD patients who are not under the care of nephrologists, including those with diabetes and hypertension, do not typically receive ESAs and are often left untreated, some non-dialysis patients under nephrology care may be receiving ESA therapy. It may be difficult to encourage healthcare providers and patients to switch to roxadustat from products with which they have become familiar.

We may also face competition from potential new anemia therapies currently in clinical development, including in those patient segments not currently addressed by ESAs. Companies that are currently developing hypoxia-inducible factor (“HIF”) prolyl hydroxylase (“HIF-PH”) inhibitors for anemia in CKD indications include GlaxoSmithKline plc (“GSK”), Bayer Corporation (“Bayer”), Akebia Therapeutics, Inc. (“Akebia”), Japan Tobacco, and Zydus Cadila. Akebia is currently conducting Phase 3 studies in CKD patients on dialysis and not on dialysis, as well as a Phase 2 study evaluating pharmacokinetics and pharmacodynamics in dialysis patients with three-times weekly versus once-a-day dosing. In Japan, Mitsubishi Tanabe Pharmaceutical Corporation, Akebia’s collaboration partner, received approval for vadadustat on June 29, 2020 for the treatment of anemia of CKD patients on and not on dialysis. GSK received approval for daprodustat in Japan on June 29, 2020 for the treatment of anemia of CKD patients on and not on dialysis. Price listing for the launch in Japan of both vadadustat and daprodustat occurred in the third quarter of 2020, with pricing in line with roxadustat pricing. GSK is also conducting global Phase 3 studies in CKD patients on dialysis and not on dialysis, and expects to complete those studies by March 2022. GSK and Kyowa Hakko Kirin announced in November 2018 that the two companies signed a strategic commercialization deal in Japan for daprodustat. Bayer has completed global Phase 2 studies and its HIF-PH inhibitor is now in Phase 3 development in CKD populations on dialysis and not on dialysis in Japan. Japan Tobacco received approval in Japan for enarodustat for the treatment of anemia in CKD patients on dialysis and not on dialysis, to be sold by Torii Pharmaceuticals Ltd as ENAROY^®. Japan Tobacco and its partner JW Pharmaceuticals started a Phase 3 study in dialysis patients in Korea in 2019. Zydus Cadila (India) started Phase 3 studies in dialysis and non-dialysis CKD patients in India in 2019. In July 2020, Zydus received approval from the FDA to begin studies of desidustat for the treatment of chemotherapy-induced anemia, which could potentially be competitive with roxadustat within this indication.

In addition, there are other companies developing or that have developed biologic therapies for the treatment of other anemia indications that we may also seek to pursue in the future, including anemia of myelodysplastic syndromes (“MDS”). For example, Acceleron Pharma, Inc., in partnership with Celgene Corporation, a Bristol-Myers Squibb company (“Celgene”), developed Reblozyl^® (luspatercept), a protein therapeutic. Reblozyl was approved for treatment of anemia in adult patients with ß-thalassemia in November 2019, and in April 2020 for treatment of anemia failing an ESA therapy and requiring two or more red blood cell transfusions over eight weeks in adult patients with very low- to intermediate-risk MDS with ring sideroblast or with myelodysplastic or myeloproliferative neoplasm with ring sideroblasts and thrombocytosis. In June 2020, Acceleron received European Commission approval for luspatercept for the treatment of transfusion-dependent anemia in adult patients with MDS or ß-thalassemia. In Japan, Celgene started a luspatercept Phase 2 study in May 2019. We may face competition for patient recruitment, enrollment for clinical trials, and potentially in commercial sales. There may also be new therapies for renal-related diseases that could limit the market or level of reimbursement available for roxadustat if and when it is commercialized.

In China, locally manufactured epoetin alfa are offered by Chinese pharmaceutical companies such as EPIAO marketed by 3SBio Inc. as well as more than 15 other local manufacturers. We may also face competition by HIF-PH inhibitors from other companies such as Akebia, Bayer, and GSK, which was authorized by the National Medical Products Administration (“NMPA”) to conduct trials in China to support its ex-China regulatory filings. A number of domestic companies, including Jiangsu Hengrui Medicine Co., Ltd., Guandong Sunshine Health Investment Co., Ltd., 3SBio Inc., and Hangzhou Andao Pharmaceutical Co. have been permitted by the NMPA to conduct clinical trials in their locally-developed HIF-PH inhibitor investigational compounds for the treatment of anemia in CKD. Another domestic company, China Medical System, in-licensed desidustat, a compound that is currently in Phase 3 trials in India, from Zydus Cadila for greater China in January 2020. Shenzhen Salubris Pharmaceutical Co., Ltd., a domestic company in China, has in-licensed enarodustat from Japan Tobacco and received NMPA approval in the third quarter of 2020 to initiate Phase 3 studies. Akebia announced in December 2015 that it had entered into a development and commercialization partnership with Mitsubishi Tanabe Pharmaceutical Corporation for its HIF-PH inhibitor vadadustat in Japan, Taiwan, South Korea, India and certain other countries in Asia, and announced in April 2017 an expansion of their U.S. collaboration with Otsuka to add markets, including China. 3SBio Inc. announced in 2016 its plan to begin a Phase 1 clinical trial of a HIF-PH inhibitor for the China market.

The first biosimilar ESA, Pfizer’s Retacrit^® (epoetin zeta), entered the U.S. market in November 2018. Market penetration of Retacrit and the potential addition of other biosimilar ESAs currently under development may alter the competitive and pricing landscape of anemia therapy in CKD patients on dialysis under the end-stage renal disease bundle. The patents for Amgen’s EPOGEN^® (epoetin alfa) expired in 2004 in Europe, and the final material patents in the U.S. expired in May 2015. Several biosimilar versions of currently marketed ESAs are available for sale in Europe, China and other territories. In the U.S., a few ESA biosimilars are currently under development. Sandoz, a division of Novartis, markets Binocrit^® (epoetin alfa) in Europe and may file a biosimilar Biologics License Application in the U.S.

If approved and launched commercially to treat IPF, pamrevlumab is expected to compete with Roche’s Esbriet^® (pirfenidone), and Boehringer Ingelheim’s Ofev^® (nintedanib). We believe that if pamrevlumab can be shown to safely stabilize or reverse lung fibrosis, and thus stabilize or improve lung function in IPF patients, it can compete with pirfenidone and nintedanib for market share in IPF. However, it may be difficult to encourage treatment providers and patients to switch to pamrevlumab from an oral product with which they are already familiar to a product delivered via in-office infusion. Furthermore, pirfenidone and nintedanib may be produced as generics in the near future. We may also face competition from potential new IPF therapies in recruitment and enrollment in our clinical trials and potentially in commercialization.

Pamrevlumab is a monoclonal antibody which may be more expensive and less convenient than oral small molecules such as nintedanib and pirfenidone. Other potential competitive product candidates in various stages of development for IPF include Galapagos NV’s GLPG1690 and GLPG1205, Kadmon Holdings, Inc.’s KD025, Liminal BioSciences’ PBI-4050, and Roche/Promedior, Inc.’s PRM-151. In particular, GLPG1690 is in a Phase 3 program consisting of two clinical trials with 750 subjects each, intended to support both the U.S. NDA and Marketing Authorization Application (“MAA”) in Europe.

If pamrevlumab is approved and launched commercially to treat locally advanced pancreatic cancer patients who are not candidates for surgical resection, pamrevlumab may face competition from products currently used for pancreatic cancer. These include FOLFRINOX, a combination chemotherapy regimen of folic acid, 5-fluouracil, oxaliplatin and irinotecan, and agents seeking approval in combination with gemcitibine and nab-paclitaxel from companies such as Rafael Pharma’s defactinib/CPI-613 and Merrimack’s istiratumab. Gemcitabine and/or nab-paclitaxel are the current standard of care in the first-line treatment of metastatic pancreatic cancer.

Celgene Corporation’s Abraxane^® (nab-paclitaxel) was launched in the U.S. and Europe in 2013 and 2014, and was the first drug approved in this disease in nearly a decade.

If approved and launched commercially to treat DMD, pamrevlumab is expected to face competition from drugs that have been approved in major markets such as the U.S., EU, and Japan. On September 19, 2016, the FDA approved Sarepta Therapeutics Inc.’s (“Sarepta”) Exondys 51^TM (eteplirsen). This was the first drug approved to treat DMD. Exondys 51 is approved to treat patients who have a mutation of the dystrophin gene amenable to exon 51 skipping, representing approximately 13% of patients with DMD. In Europe, Sarepta received a negative opinion for its marketing application for eteplirsen from the EMA in September 2018. Sarepta has reported a full year Exondys 51 revenue of $380 million in 2019. Sarepta’s Vyondys 53^TM (golodirsen) was also approved by the FDA in December 2019 for patients with a confirmed genetic mutation that is amenable to exon 53 skipping, which accounts for 8% of the DMD population.

PTC Therapeutics’ product Translarna^TM received a conditional approval in Europe in 2014, which was renewed in November 2016 with a request for a new randomized placebo-controlled 18-month study by the Committee for Medicinal Products for Human Use of the EMA; however, the FDA informed the sponsor in a complete response letter in October 2017, as well as in its response to PTC Therapeutics’ appeal, that the FDA is unable to approve the application in its current form. An additional Phase 3 study is currently ongoing. While Translarna^TM targets a different set of DMD patients from those targeted by Sarepta’s Exondys 51^®, it is also limited to a subset of patients who carry a specific mutation. Conversely, pamrevlumab is intended to treat DMD patients without limitation to type of mutation.

Pamrevlumab may also face competition from other drugs currently in clinical development in patient recruiting and enrollment in clinical trials, and, if approved, in commercialization. Examples of those compounds currently under clinical development are the drug candidates from Pfizer, Pliant, Galecto, and Sarepta. Pfizer initiated a Phase 3 study with PF-06939926, its AAV9 mini-dystrophin gene therapy for DMD in February 2020. Pliant’s PLN-74809 and Galecto’s lead candidate GB0139, are in Phase 2 development for IPF.

The success of any or all of these potential competitive products may negatively impact the development and potential for success of pamrevlumab. In addition, any competitive products that are on the market or in development may compete with pamrevlumab for patient recruitment and enrollment for clinical trials or may force us to change our clinical trial design, including, in order to compare pamrevlumab against another drug, which may be the new standard of care.

Moreover, many of our competitors have significantly greater resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients, manufacturing pharmaceutical products, and commercialization. In the potential anemia market for roxadustat, for example, large and established companies such as Amgen and Roche, among others, compete aggressively to maintain their market shares. In particular, the currently marketed ESA products are supported by large pharmaceutical companies that have greater experience and expertise in commercialization in the anemia market, including in securing reimbursement, government contracts and relationships with key opinion leaders; conducting testing and clinical trials; obtaining and maintaining regulatory approvals and distribution relationships to market products; and marketing approved products. These companies also have significantly greater scale, research and marketing capabilities than we do and may also have products that have been approved or are in later stages of development and have collaboration agreements in our target markets with leading dialysis companies and research institutions. If we and our collaboration partners are not able to compete effectively against existing and potential competitors, our business and financial condition may be materially and adversely affected.

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.*

Market acceptance and sales of any approved products will depend significantly on reimbursement or coverage of our products by government or third-party payors and may be affected by existing and future healthcare reform measures or prices of related products for which the government or third-party reimbursement applies. Coverage and reimbursement by the government or a third-party payor may depend upon a number of factors, including the payor’s determination that use of a product is:

Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor, which we may not be able to provide. Furthermore, the reimbursement policies of third-party payors may significantly change in a manner that renders our clinical data insufficient for adequate reimbursement or otherwise limits the successful marketing of our products. Even if we obtain coverage for our product candidates, third-party payors may not establish adequate reimbursement amounts, which may reduce the demand for, or the price of, our products. For example, the initial roxadustat reimbursement prices set by the Ministry of Health, Labour and Welfare in Japan in November 2019 did not reflect innovation premium over the current ESA therapy, despite roxadustat’s advantages observed in our clinical programs. We believe the Japanese authority’s decision was primarily based on the comparability of roxadustat shown in the Japan Phase 3 studies that supported the Japan NDA, that was not designed to evaluate the outcome and additional efficacy and safety data observed in the large global Phase 3 programs that included over 8,000 patients. We have no control over whether the agency will revisit the pricing once they review the comprehensive data from the global Phase 3 program including the major adverse cardiac event /major adverse cardiac event plus hospitalized unstable angina and hospitalized congestive heart failure outcomes. If reimbursement is not available or is available only to limited levels or only in subsets of the dialysis and non-dialysis populations, we may not be able to successfully commercialize certain of our products, or in particular jurisdictions.

Price controls may limit the price at which products such as roxadustat, if approved, are sold. For example, reference pricing is used by various Europe member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, our partner or we may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our product candidates to other available products in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unacceptable levels, we or our partner may elect not to commercialize our products in such countries, and our business and financial condition could be adversely affected.

Our business could be adversely affected by the ongoing COVID-19 global pandemic.*

Our business could be adversely affected by the effects of the COVID-19 pandemic, which has resulted in various and evolving restrictions in order to reduce the spread of the disease.

The effects of the COVID-19 pandemic, the associated government-mandated restrictions and the other effects on healthcare systems, the economy, and society as a whole, may negatively impact productivity, disrupt our business, and delay our clinical programs and timelines, the magnitude of which will depend, in part, on the progression of the disease, the length and severity of the restrictions, and other impacts and limitations on our ability to conduct our business in the ordinary course. These disruptions in our operations could negatively impact our business, operating results, and financial condition. The number of COVID-19 cases has recently been increasing in the U.S., Europe and certain other territories, and certain jurisdictions have begun re-opening only to return to restrictions due to increasing numbers of COVID-19 cases. The extent of the impact on the COVID-19 pandemic on our business and financial results will continue to depend on numerous evolving factors that we are not able to accurately predict and which will vary by market, including the duration and scope of the pandemic, global economic conditions during and after the pandemic, and governmental actions that have been taken, or may be taken in the future, in response to the pandemic.

We have taken measures to minimize the health risks of COVID-19 to our staff, patients, healthcare providers, and their communities, as their safety and well-being are our top priority. Despite these efforts, there is a risk that one or more of our employees, including members of senior management, could contract COVID-19. Our U.S. employees are working remotely when possible, and we may experience reduced productivity due to the remote work environment. In addition, there are other risks from remote work including but not limited to the potential for reduced oversight of third parties we work with, such as manufacturing and clinical sites.

In China, most of our partner’s and our activities have been resumed after the government shutdown during February and March of 2020. However, if there are any further COVID-19 outbreaks, we or our partners may need to re-institute or tighten restrictions on our operations.

Our clinical trials for MDS, chemotherapy-induced anemia and locally advanced pancreatic cancer have continued to enroll and enrollment for IPF has resumed. However, we have seen impacts from COVID-19 on all of our clinical trials to varying degrees. There is a risk that any or all of our clinical trials will be delayed due to a continued or further outbreak slowing or pausing enrollment or site initiation, and direct COVID-19 impacts to clinical sites and clinical service providers. In addition, while we are trying to mitigate the effect of COVID-19 on existing patients, it is possible that some patients may not be able to continue to comply with protocols, which could further delay our clinical trial progress.

We believe we have sufficient roxadustat and pamrevlumab supplies for our expected commercial and clinical requirements over the next year and we and our manufacturing partners are currently continuing manufacturing operations. However, we only have a limited stockpile of these drug supply products, and therefore, if there is a greater impact from the COVID-19 pandemic than we have expected, or if manufacturing operations are halted again, or if drug product expires due to slowed clinical trials, we could face shortages in our global supply chains. We could also face additional competition to use available capacity at our manufacturing partners or for manufacturing supplies including reagents and media. Any such supply disruptions could adversely impact our clinical development and ability to generate revenues from our approved products and our business, financial condition, results of operations and growth prospects could be materially adversely affected. There may be unexpected regulatory delays due to the COVID-19 pandemic including due to travel restrictions impacting pre-approval inspections.

Due to these and potentially additional business disruptions, there may be delays to any of our business areas including our drug supply chains, problems with our distribution or warehousing vendors, or delays to our (and our partners’) clinical trials or other development efforts, or commercialization and launch activities. The full extent of these effects are unknown, but all of them could have a material impact on our operations and revenue.

In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described in this “Risk Factors” section.

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 we do not establish and maintain strategic collaborations related to our product candidates, we will bear all of the risk and costs related to the development and commercialization of any such product candidate, and we may need to seek additional financing, hire additional employees and otherwise develop expertise at significant cost. This in turn may negatively affect the development of our other product candidates as we direct resources to our most advanced product candidates.

Our collaboration partners also have certain rights to control decisions regarding the development and commercialization of our product candidates with respect to which they are providing funding. If we have a disagreement over strategy and activities with our collaboration partners, our plans for obtaining approval may be revised and negatively affect the anticipated timing and potential for success of our product candidates. Even if a product under a collaboration agreement is approved, we will remain substantially dependent on the commercialization strategy and efforts of our collaboration partners, and neither of our collaboration partners has experience in commercialization of an anemia drug, or novel drug such as roxadustat in the dialysis market. If our collaboration partners are unsuccessful in their commercialization efforts, our results will be affected.

With respect to our collaboration agreements for roxadustat, there are additional complexities in that our collaboration partners, Astellas and AstraZeneca, and we must reach consensus on our development programs and regulatory activities, including for the NDA in the U.S. and the MAA in Europe. In addition, there are aspects of commercial operations that require cooperation among the collaboration partners, including safety data reporting. Multi-party decision-making is complex and involves significant time and effort, and there can be no assurance that the parties will cooperate or reach consensus, or that one or both of our partners will not ask to proceed independently in some or all of their respective territories or functional areas of responsibility in which the applicable collaboration partner would otherwise be obligated to cooperate with us. Any disputes or lack of cooperation with us by either Astellas or AstraZeneca may negatively impact the timing or success of our regulatory approval applications.

We intend to conduct proprietary research programs in specific disease areas that are not covered by our collaboration agreements. Our pursuit of such opportunities could, however, result in conflicts with our collaboration partners in the event that any of our collaboration partners takes the position that our internal activities overlap with those areas that are exclusive to our collaboration agreements. Moreover, disagreements with our collaboration partners could develop over rights to our intellectual property, including the enforcement of those rights. In addition, our collaboration agreements may have provisions that give rise to disputes regarding the rights and obligations of the parties. Any conflict with our collaboration partners could lead to the termination of our collaboration agreements, delay collaborative activities, reduce our ability to renew agreements or obtain future collaboration agreements or result in litigation or arbitration and would negatively impact our relationship with existing collaboration partners, and could impact our commercial results.

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 rely heavily on university, hospital, dialysis centers and other institutions and third parties, including the principal investigators and their staff, to carry out our clinical trials in accordance with our clinical protocols and designs. We also rely on a number of third-party CROs to assist in undertaking, managing, monitoring and executing our ongoing clinical trials, including those for roxadustat. We expect to continue to rely on CROs, clinical data management organizations, medical institutions and clinical investigators to conduct our development efforts in the future, including our continued development of roxadustat. We compete with many other companies for the resources of these third parties, and large pharmaceutical companies often have significantly more extensive agreements and relationships with such third-party providers, and such third-party providers may prioritize the requirements of such large pharmaceutical companies over ours. The third parties on whom we rely may terminate their engagements with us at any time, which may cause delay in the development and commercialization of our product candidates. If any such third party terminates its engagement with us or fails to perform as agreed, we may be required to enter into alternative arrangements, which would result in significant cost and delay to our product development program. Moreover, our agreements with such third parties generally do not provide assurances regarding employee turnover and availability, which may cause interruptions in the research on our product candidates by such third parties.

If any of our CROs, trial sites, principal investigators or other third parties fail to comply with applicable GCP requirements, other regulations, trial protocol or other requirements under their agreements with us, the quality or accuracy of the data they obtain may be compromised or unreliable, and the trials of our product candidates may not meet regulatory requirements. If trials do not meet regulatory requirements or if these third parties need to be replaced, the development of our product candidates may be delayed, suspended or terminated, regulatory authorities may require us to exclude the use of patient data from our approval applications or perform additional clinical trials before approving our marketing applications. Regulatory authorities may even reject our application for approval or refuse to accept our future applications for an extended period of time. We cannot assure that upon inspection by a regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements or that our results may be used in support of our regulatory submissions. If any of these events occur, we may not be able to obtain regulatory approval for our product candidates on a timely basis, at a reasonable cost, or at all.

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.*

We do not have operating manufacturing facilities at this time other than our roxadustat manufacturing facilities in China, and our current commercial manufacturing plans in China are not expected to satisfy the requirements necessary to support development and commercialization outside of China. Other than in and for China specifically, we do not expect to independently manufacture our products. We currently rely, and expect to continue to rely, on third parties to scale-up, manufacture and supply roxadustat and our other product candidates outside of China. We also rely entirely on third parties for distribution in China. Risks arising from our reliance on third-party manufacturers include:

Any of these events could lead to development delays or failure to obtain regulatory approval or affect our ability to successfully commercialize our product candidates. Some of these events could be the basis for action by the FDA or another regulatory authority, including injunction, recall, seizure or total or partial suspension of production.

The facilities used by our contract manufacturers to manufacture our product candidates must pass inspections by the FDA and other regulatory authorities. Although, except for China, we do not control the manufacturing operations of, and expect to remain completely dependent on, our contract manufacturers for manufacture of drug substance and finished drug product, we are ultimately responsible for ensuring that our product candidates are manufactured in compliance with cGMP requirements. If our contract manufacturers cannot successfully manufacture material that conforms to our or our collaboration partners’ specifications, or the regulatory requirements of the FDA or other regulatory authorities, we may not be able to secure and/or maintain regulatory approval for our product candidates and our development or commercialization plans may be delayed. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. In addition, although our longer-term agreements are expected to provide for requirements to meet our quantity and quality requirements to manufacture our products candidates for clinical studies and commercial sale, we will have minimal direct control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel and we expect to rely on our audit rights to ensure that those qualifications are maintained to meet our requirements. If our contract manufacturers’ facilities do not pass inspection by regulatory authorities, or if regulatory authorities do not approve these facilities for the manufacture of our products, or withdraw any such approval in the future, we would need to identify and qualify alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our products, if approved. Moreover, any failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us or adverse regulatory consequences, including clinical holds, warnings or untitled letters, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which would be expected to significantly and adversely affect supplies of our products to us and our collaboration partners.

We have not yet entered into any commercial supply agreements for the manufacture of pamrevlumab drug substance or drug products, and our third party manufacturer could terminate their engagement with us at any time. With respect to roxadustat, AstraZeneca and Astellas have certain rights to assume manufacturing of roxadustat and the existence of those rights may limit our ability to enter into favorable long-term supply agreements, if at all, with other third-party manufacturers. In addition, our product candidates and any products that we may develop may compete with other product candidates and products for access and prioritization to manufacture. Certain third-party manufacturers may be contractually prohibited from manufacturing our product due to non-compete agreements with our competitors or a commitment to grant another party priority relative to our products. There are a limited number of third-party manufacturers that operate under cGMP and that might be capable of manufacturing to meet our requirements. Due to the limited number of third-party manufacturers with the contractual freedom, expertise, required regulatory approvals and facilities to manufacture our products on a commercial scale, identifying and qualifying a replacement third-party manufacturer would be expensive and time-consuming and may cause delay or interruptions in the production of our product candidates or products, which in turn may delay, prevent or impair our development and commercialization efforts.

We have a letter agreement with IRIX Pharmaceuticals, Inc. (“IRIX”), a third-party manufacturer that we have used in the past, pursuant to which we agreed to negotiate a single source manufacturing agreement that included a right of first negotiation for the cGMP manufacture of HIF-PH inhibitors, including roxadustat, provided that IRIX is able to match any third-party bids within 5%. The exclusive right to manufacture extends for five years after approval of an NDA for those compounds, and any agreement would provide that no minimum amounts would be specified until appropriate by forecast and that we and a commercialization partner would have the rights to contract with independent third parties that exceed IRIX’s internal manufacturing capabilities or in the event that we or our commercialization partner determines for reasons of continuity of supply and security that such a need exists, provided that IRIX would supply no less than 65% of the product if it is able to provide this level of supply. Subsequent to the letter agreement, we and IRIX have entered into several additional service agreements. IRIX has requested in writing that we honor the letter agreement with respect to the single source manufacturing agreement, and if we were to enter into any such exclusive manufacturing agreement, there can be no assurance that IRIX will not assert a claim for right to manufacture roxadustat or that IRIX could manufacture roxadustat successfully and in accordance with applicable regulations for a commercial product and the specifications of our collaboration partners. In 2015, Patheon Pharmaceuticals Inc., a business unit of DPx Holdings B.V. (“Patheon”), acquired IRIX, and in 2017, ThermoFisher Scientific Inc. acquired Patheon.

If any third-party manufacturer terminates its engagement with us or fails to perform as agreed, we may be required to find replacement manufacturers, which would result in significant cost and delay to our development programs. Although we believe that there are several potential alternative manufacturers who could manufacture our product candidates, we may incur significant delays and added costs in identifying, qualifying and contracting with any such third party or potential second source manufacturer. In any event, with any third-party manufacturer we expect to enter into technical transfer agreements and share our know-how with the third-party manufacturer, which can be time-consuming and may result in delays. These delays could result in a suspension or delay of marketing roxadustat.

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.

We do not have an alternative supplier of certain components of our product candidates. We may be unable to enter into long-term commercial supply arrangements for some of our products, or do so on commercially reasonable terms, which could have a material adverse impact upon our business. In addition, we currently rely on our contract manufacturers to purchase from third-party suppliers some of the materials necessary to produce our product candidates. We do not have direct control over the acquisition of those materials by our contract manufacturers.

The logistics of our supply chain, which include shipment of materials and intermediates from countries such as China and India add additional time and risk (including risk of loss) to the manufacture of our product candidates. While we have in the past maintained sufficient inventory of materials, API, and drug product to meet our and our collaboration partners’ needs for roxadustat to date, the lead-time and regulatory approvals required to source from and into countries outside of the U.S. increase the risk of delay and potential shortages of supply.

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

We rely upon a combination of patents, trade secret protection, and contractual arrangements to protect the intellectual property related to our technologies. We will only be able to protect our products and proprietary information and technology by preventing unauthorized use by third parties to the extent that our patents, trade secrets, and contractual position allow us to do so. Any disclosure to or misappropriation by third parties of our trade secrets or confidential information could compromise our competitive position. Moreover, we are involved in, have in the past been involved in, and may in the future be involved in legal or administrative proceedings involving our intellectual property initiated by third parties, and which proceedings can result in significant costs and commitment of management time and attention. As our product candidates continue in development, third parties may attempt to challenge the validity and enforceability of our patents and proprietary information and technologies.

Biotechnology and pharmaceutical product patents involve highly complex legal and scientific questions and can be uncertain. Any patent applications that we own or license may fail to result in issued patents. Even if patents do successfully issue from our applications, third parties may challenge their validity or enforceability, which may result in such patents being narrowed, invalidated, or held unenforceable. Even if our patents and patent applications are not challenged by third parties, those patents and patent applications may not prevent others from designing around our claims and may not otherwise adequately protect our product candidates. If the breadth or strength of protection provided by the patents and patent applications we hold with respect to our product candidates is threatened, competitors with significantly greater resources could threaten our ability to commercialize our product candidates. Discoveries are generally published in the scientific literature well after their actual development, and patent applications in the U.S. and other countries are typically not published until 18 months after their filing, and in some cases are never published. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned and licensed patents or patent applications, or that we or our licensors were the first to file for patent protection covering such inventions. Subject to meeting other requirements for patentability, for U.S. patent applications filed prior to March 16, 2013, the first to invent the claimed invention is entitled to receive patent protection for that invention while, outside the U.S., the first to file a patent application encompassing the invention is entitled to patent protection for the invention. The U.S. moved to a “first to file” system under the Leahy-Smith America Invents Act, effective March 16, 2013. This system also includes procedures for challenging issued patents and pending patent applications, which creates additional uncertainty. We may become involved in opposition or interference proceedings challenging our patents and patent applications or the patents and patent applications of others, and the outcome of any such proceedings are highly uncertain. An unfavorable outcome in any such proceedings could reduce the scope of or invalidate our patent rights, allow third parties to commercialize our technology and compete directly with us, or result in our inability to manufacture, develop or commercialize our product candidates without infringing the patent rights of others.

In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how, information, or technology that is not covered by our patents. Although our agreements require all of our employees to acknowledge ownership by us of inventions conceived as a result of employment from the point of conception and, to the extent necessary, perfect such ownership by assignment, and we require all of our employees, consultants, advisors and any third parties who have access to our trade secrets, proprietary know-how and other confidential information and technology to enter into appropriate confidentiality agreements, we cannot be certain that our trade secrets, proprietary know-how and other confidential information and technology will not be subject to unauthorized disclosure or that our competitors will not otherwise gain access to or independently develop substantially equivalent trade secrets, proprietary know-how and other information and technology. Furthermore, the laws of some foreign countries, in particular, China, where we have operations, do not protect proprietary rights to the same extent or in the same manner as the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our intellectual property globally. If we are unable to prevent unauthorized disclosure of our intellectual property related to our product candidates and technology to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business and operations.

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

Our commercial success may depend on our avoiding infringement of the patents and other proprietary rights of third parties as well as on enforcing our patents and other proprietary rights against third parties. Pharmaceutical and biotechnology intellectual property disputes are characterized by complex, lengthy and expensive litigation over patents and other intellectual property rights. We may initiate or become party to or be threatened with future litigation or other proceedings regarding intellectual property rights with respect to our product candidates and competing products.

As our product candidates progress toward commercialization, our collaboration partners or we may be subject to patent infringement claims from third parties. We attempt to ensure that our product candidates do not infringe third-party patents and other proprietary rights. However, the patent landscape in competitive product areas is highly complex, and there may be patents of third parties of which we are unaware that may result in claims of infringement. Accordingly, there can be no assurance that our product candidates do not infringe proprietary rights of third parties, and parties making claims against us may seek and obtain injunctive or other equitable relief, which could potentially block further efforts to develop and commercialize our product candidates including roxadustat or pamrevlumab. Any litigation involving defense against claims of infringement, regardless of the merit of such claims, would involve substantial litigation expense and would be a substantial diversion of management time.

We may consider administrative proceedings and other means for challenging third-party patents and patent applications. An unfavorable outcome in any such challenge could require us to cease using the related technology and to attempt to license rights to it from the prevailing third party, which may not be available on commercially reasonable terms, if at all, in which case our business could be harmed.

We intend, if necessary, to vigorously enforce our intellectual property in order to protect the proprietary position of our product candidates, including roxadustat and pamrevlumab. In addition, our collaboration partners who have been granted licenses to our patents may also have rights related to enforcement of those patents. Active efforts to enforce our patents by us or by our partners may include litigation, administrative proceedings, or both, depending on the potential benefits that might be available from those actions and the costs associated with undertaking those efforts against third parties. We carefully review and monitor publicly available information regarding products that may be competitive with our product candidates and assert our intellectual property rights where appropriate.

Third parties may also challenge our patents and patent applications, through interference, reexamination, inter partes review, and post-grant review proceedings before the U.S. Patent and Trademark Office (“USPTO”) or through comparable proceedings in other territories. For example, various administrative and court challenges have been filed in several territories including the U.S., Europe, the United Kingdom, Canada, and Japan, against our HIF anemia-related technologies patent portfolio. In the U.S., we have previously prevailed in administrative challenges to various patents in in this portfolio that are owned or exclusively licensed by us, maintaining our intellectual property in all relevant scope.

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. We and our partner Astellas have filed an appeal of the decision in the United Kingdom Court of Appeal. Notwithstanding the final outcome of this action, the potential narrowing or revocation of any of the HIF anemia-related technology patents does not affect our exclusivity for roxadustat or our freedom-to-operate with respect to use of roxadustat for the treatment of anemia in these or other territories.

Oppositions have also recently been filed against our European Patent No. 2872488, which claims a crystalline form of roxadustat. Final resolution of the opposition proceedings will take considerable time, and we cannot be assured of the breadth of the claims that will remain in the ’488 European patent or that the patent will not be revoked in its entirety.

Our reliance on third-party contractors to develop and manufacture our product candidates is based upon agreements that limit the rights of the third parties to use or disclose our confidential information, including our trade secrets and know-how. Despite the contractual provisions, the need to share trade secrets and other confidential information increases the risk that such trade secrets and information are disclosed or used, even if unintentionally, in violation of these agreements. In the highly competitive markets in which our product candidates are expected to compete, protecting our trade secrets, including our strategies for addressing competing products, is imperative, and any unauthorized use or disclosure could impair our competitive position and may have a material adverse effect on our business and operations.

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.

We have made, and will continue to make, certain strategic decisions in balancing costs and the potential protection afforded by the patent laws of certain countries. As a result, we may not be able to prevent third parties from practicing our inventions in all countries throughout the world, or from selling or importing products made using our inventions in and into the U.S. or other countries. Third parties may use our technologies in territories in which we have not obtained patent protection to develop their own products and, further, may infringe our patents in territories which provide inadequate enforcement mechanisms, even if we have patent protection. Such third-party products may compete with our product candidates, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in certain countries. The legal systems of certain countries do not always favor the enforcement of patents, trade secrets, and other intellectual property rights, particularly those relating to pharmaceutical and biotechnology products, which could make it difficult for us to stop infringement of our patents, misappropriation of our trade secrets, or marketing of competing products in violation of our proprietary rights. In China, our intended establishment of significant operations will depend in substantial part on our ability to effectively enforce our intellectual property rights in that country. Proceedings to enforce our intellectual property rights in foreign countries could result in substantial costs and divert our efforts and attention from other aspects of our business, and could put our patents in these territories at risk of being invalidated or interpreted narrowly, or our patent applications at risk of not being granted, and could provoke third parties to assert claims against us. We may not prevail in all legal or other proceedings that we may initiate and, if we were to prevail, the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

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.

Counterfeit products, including counterfeit pharmaceutical products, are a significant problem, particularly in China. Counterfeit pharmaceuticals are products sold or used for research under the same or similar names, or similar mechanism of action or product class, but which are sold without proper licenses or approvals, and are often lower cost, lower quality, different potency, or have different ingredients or formulations, and have the potential to damage the reputation for quality and effectiveness of the genuine product. Such products may be used for indications or purposes that are not recommended or approved or for which there is no data or inadequate data with regard to safety or efficacy. Such products divert sales from genuine products. If counterfeit pharmaceuticals illegally sold or used for research result in adverse events or side effects to consumers, we may be associated with any negative publicity resulting from such incidents. Consumers may buy counterfeit pharmaceuticals that are in direct competition with our pharmaceuticals, which could have an adverse impact on our revenues, business and results of operations. In addition, the use of counterfeit products could be used in non-clinical or clinical studies, or could otherwise produce undesirable side effects or adverse events that may be attributed to our products as well, which could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the delay or denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims. With respect to China, although the government has recently been increasingly active in policing counterfeit pharmaceuticals, there is not yet an effective counterfeit pharmaceutical regulation control and enforcement system in China. As a result, we may not be able to prevent third parties from selling or purporting to sell our products in China. The proliferation of counterfeit pharmaceuticals has grown in recent years and may continue to grow in the future. The existence of and any increase in the sales and production of counterfeit pharmaceuticals, or the technological capabilities of counterfeiters, could negatively impact our revenues, brand reputation, business and results of operations.

The regulatory approval process is highly uncertain and we may not obtain regulatory approval for ~~the commercialization of~~ our product candidates.

The time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable, but typically takes many years following the commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. WeExcept for roxadustat in China for patients on dialysis and not on dialysis, and Japan for patients on dialysis, we have not obtained regulatory approval for any product candidate, and it is possible that neither roxadustat nor pamrevlumab, nor any future product candidates we may discover, in-license or acquire and seek to develop in the future, will ~~ever~~ obtain regulatory ~~approval.~~approval in additional countries.

Our product candidates could fail to receive regulatory approval from the FDA or other regulatory authorities for many reasons, including:

The FDA or other regulatory authorities may require more information, including additional preclinical or clinical data to support approval, or different analyses, which may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program altogether. Even if we do obtain regulatory approval, our product candidates may be approved for fewer or more limited indications than we request, approval may be contingent on the performance of costly post-marketing clinical trials, or approval may require labeling that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. In addition, if our product candidates produce undesirable side effects or safety issues, the FDA may require the establishment of REMS or other regulatory authorities may require the establishment of a similar strategy, that may restrict distribution of our approved products, if any, and impose burdensome implementation requirements on us. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

Even if we believe our ~~current or planned~~ clinical trials are successful, regulatory authorities may not agree that our completed clinical trials provide adequate data on safety or efficacy. Approval by one regulatory authority does not ensure approval by any other regulatory authority. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. We may not be able to file for regulatory approvals and even if we file we may not receive the necessary approvals to commercialize our product candidates in any market.

~~If our product candidates obtain marketing approval, we will be~~Our current and future relationships with customers, physicians, and third-party payors are subject to ~~more extensive~~ healthcare fraud and abuse laws, ~~regulation~~false claims laws, transparency laws, privacy and ~~enforcement~~security laws, and ~~our failure~~other regulations. If we are unable to comply with ~~those~~such laws, we could ~~have a material adverse effect on our results of operations~~face substantial penalties.

Our current and future relationships with customers, physicians, and third-party payors are subject to health care laws and regulations, which may constrain the business or financial ~~condition.~~

arrangements and relationships through which we research, as well as, sell, market and distribute any products for which we obtain marketing approval. If we obtain approval in the U.S. for any of our product candidates, the regulatory requirements applicable to our operations, in particular our sales and marketing efforts, will increase significantly with respect to our operations and the potential for administrative, civil and criminal enforcement by the federal government and the states and foreign governments will increase with respect to the conduct of our business. The laws that may affect our operations in the U.S. include:

The scope of these laws and our lack of experience in establishing the compliance programs necessary to comply with this complex and evolving regulatory environment increases the risks that we may unknowingly violate the applicable laws and regulations. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment, any of which could materially adversely affect our ability to operate our business and our financial results.

~~The impact of recent U.S. healthcare reform, its potential partial~~Even if resolved in our favor, litigation or ~~full repeal, and~~ other ~~changes in the healthcare industry and in healthcare spending is currently unknown, and may adversely affect our business model.~~

The commercial potential for our approved products, if any, could be affected by changes in healthcare spending and policy in the U.S. and abroad. We operate in a highly regulated industry and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, relatedlegal proceedings relating to healthcare ~~availability, the method of delivery or payment for healthcare products and services could negatively impact our business, operations and financial condition.~~

In the U.S., the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) altered Medicare coverage and payments for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. The MMA also provided authority for limiting the number of drugs that will be covered in any therapeutic class and as a result, we expect that there will be additional pressure to reduce costs. For example, the CMS in implementing the MMA has enacted regulations that reduced capitated payments to dialysis providers. These cost reduction initiatives and other provisions of the MMA could decrease the scope of coverage and the price that may be received for any approved dialysis products and could seriously harm our business and financial condition. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may cause a similar reduction in payments from private payors. Similar regulations or reimbursement policies have been enacted in many international markets which could similarly impact the commercial potential for our products.

Under the Medicare Improvements for Patients and Providers Act (“MIPPA”), a basic case-mix adjusted composite, or bundled, payment system commenced in January 2011 and transitioned fully by January 2014 to a single reimbursement rate for drugs and all services furnished by renal dialysis centers for Medicare beneficiaries with end-stage renal disease. Specifically, under MIPPA the bundle now covers drugs, services, lab tests and supplies under a single treatment base rate for reimbursement by the Centers for Medicare and Medicaid Services (“CMS”) based on the average cost per treatment, including the cost of ESAs and IV iron doses, typically without adjustment for usage. It is unknown whether roxadustat, if approved, will be included in the payment bundle. Under MIPPA, agents that have no IV equivalent in the bundle are currently expected to be excluded from the bundle until 2025. If roxadustat were included in the bundle, it may reduce the price that could be charged for roxadustat, and therefore potentially limit our profitability. Based on roxadustat’s differentiated mechanism of action and therapeutic effects, and discussions with our collaboration partner, we currently believe that roxadustat might not be included in the bundle. If roxadustat is reimbursed outside of the bundle, it may potentially limit or delay market penetration of roxadustat.

More recently, the PPACA was enacted in 2010 with a goal of reducing the cost of healthcare and substantially changing the way healthcare is financed by both government and private insurers. The PPACA, among other things, increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, establishes annual fees and taxes on manufacturers of certain branded prescription drugs, and creates a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D. In addition, other legislative changes have been proposed and adopted in the U.S. since the PPACA was enacted. On August 2, 2011, the Budget Control Act of 2011 created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect on April 1, 2013.

It is likely that federal and state legislatures within the U.S. and foreign governments will continue to consider changes to existing healthcare legislation. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:

Some of the provisions of the PPACA have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges. In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, that while not a law, is widely viewed as the first step toward the passage of legislation that would repeal certain aspects of the PPACA. Further, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the Affordable Care Act to waive, defer, grant exemptions from, or delay the implementation of any provision of the Affordable Care Act that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Congress also could consider subsequent legislation to replace elements of the Affordable Care Act that are repealed. Given these possibilities and others we may not anticipate, the full extent to which our business, results of operations and financial condition could be adversely affected by the recent proposed legislation and the Executive Order is uncertain. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our drugs.

Furthermore, legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the regulatory approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent regulatory approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

~~We may not be able to conduct, or contract others to conduct, animal testing in the future, which could harm our research and development activities.~~

Certain laws and regulations relating to drug development require us to test our product candidates on animals before initiating clinical trials involving humans. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted or delayed.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could result in significant liability for us and harm our reputation.

~~We are exposed to the risk of employee fraud or other misconduct, including intentional failure to:~~

Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions, delays in clinical trials, or serious harm to our reputation. We have adopted a code of conduct for our directors, officers and employees, but it is not always possible to identify and deter employee misconduct. The precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could harm our business, results of operations, financial condition and cash flows, including through the imposition of significant fines or other sanctions.

~~If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.~~

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations applicable to our operations in the U.S. and foreign countries. These current or future laws and regulations may ~~impair~~cause us to incur significant expenses and could distract our ~~research,~~technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common shares. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development, manufacturing, sales, marketing or ~~manufacturing efforts. Our failure~~distribution activities. Uncertainties resulting from the initiation and continuation of litigation or other proceedings relating to ~~comply with these~~applicable healthcare laws and regulations ~~also may result in substantial fines, penalties or other sanctions.~~

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

~~We expect to be subject to a number of risks related with our international operations, many of which may be beyond our control. These risks include:~~

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

Patients’ use of traditional Chinese medicine in violation of study protocols in our China studies may lead the China Food and Drug Administration (“CFDA”) and regulators in other jurisdictions in which we are seeking approval to suspend our studies, reject our study data and withhold approval for roxadustat.

A common issue encountered in conducting clinical studies in China is patients’ use of traditional Chinese medicine in violation of study protocols. We believe that many patients with anemia in CKD are currently being treated with traditional Chinese medicine, and it is possible that such patients may continue their use of traditional Chinese medicine after enrollment in our studies and in violation of study protocols. If the patients participating in our China clinical studies do not comply with study protocols and continue to use traditional Chinese medicine, adverse events may emerge in our studies that are due to such traditional Chinese medicine or the interaction between such traditional Chinese medicine and roxadustat. In addition, the use of traditional Chinese medicine by patients in our studies may confound our study results. The occurrence of such adverse events or the confounding of our study results may lead the CFDA and regulators in other jurisdictions in which we are seeking approval to, among other things, suspend our studies, reject our study data and withhold approval for roxadustat.

We are planning on using our own manufacturing facilities in China to produce roxadustat drug product, FG-5200 corneal implants, and possibly roxadustat API. As an organization, we have limited experience in the construction, licensure, or operation of a manufacturing plant, and, accordingly we cannot assure you we will be able to meet regulatory requirements to operate our plant and to sell our products.*

In 2014, we received a Pharmaceutical Production Permit (“PPP”) for our facility in Beijing, China, and are currently building a manufacturing facility in Cangzhou, Hebei, in which we intend to manufacture roxadustat for commercial sale. The PPP allowed us to produce the NDA registration campaign of roxadustat according to cGMP. However, we have not yet received a license for commercial manufacture of roxadustat. As an organization, we have limited experience building and licensing manufacturing facilities which must be constructed, licensed and operated in conformity with applicable cGMP requirements. We will be obligated to comply with continuing cGMP requirements and there can be no assurance that we will receive and maintain all of the appropriate licenses required to manufacture our product candidates for clinical and commercial use in China. In addition, we and our product suppliers must continually spend time, money and effort in production, record-keeping and quality assurance and appropriate controls in order to ensure that any products manufactured in our facilities meet applicable specifications and other requirements for product safety, efficacy and quality and there can be no assurance that our efforts will succeed for licensure or continue to be successful in meeting these requirements.

We would require separate approval for the manufacture of FG-5200. In addition, we may convert our existing manufacturing process of FG-5200 to a semi-automated process which may require us to show that implants from our new manufacturing process are comparable to the implants from our existing manufacturing process. There can be no assurance that we will successfully receive licensure and maintain approval for the manufacture of either or both of roxadustat or FG-5200, either of which would be expected to delay or preclude our ability to develop and commercialize those product candidates in China and may materially adversely affect our business and operations and prospects in China.

Manufacturing facilities in China are subject to periodic unannounced inspections by the CFDA and other regulatory authorities. We expect to depend on these facilities for our product candidates and business operations in China. Natural disasters or other unanticipated catastrophic events, including power interruptions, water shortages, storms, fires, earthquakes, terrorist attacks, government appropriation of our facilities, and wars, could significantly impair our ability to operate our manufacturing facilities. Certain equipment, records and other materials located in these facilities would be difficult to replace or would require substantial replacement lead time that would impact our ability to successfully commercialize our product candidates in China. The occurrence of any such event could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects.

Our decision to seek approval in China for roxadustat prior to approval in the U.S. or Europe is largely unprecedented and could be subject to significant risk, delay and expense.*

Our subsidiary FibroGen (China) Medical Technology Development Co., Ltd. (“FibroGen Beijing”), plans to seek approval for roxadustat in China as a Domestic Class 1 Drug, which we believe, if approved, would be the first CFDA approval of a first in class drug candidate while Phase 3 trials are ongoing in the U.S. and Europe. Because of this largely novel regulatory pathway, the CFDA approval process may take longer than we currently expect, or the CFDA may require us to submit additional data including data from the U.S. or European Phase 3 trials. In addition, negative data from the U.S. or European Phase 3 trials could impact the CFDA approval process. Any such development delays would result in significant delay in our commercialization plans for roxadustat in China. Elements of our plan for approval of roxadustat and other product candidates in China are based on communications with the CFDA, some of which are not reflected in formal written communications, regulations, findings or determinations. Accordingly, while we believe we have understandings with the CFDA regarding the domestic drug approval process and the clinical and manufacturing

(including bio-equivalency) data currently required for approval and the timing and process of a potential approval, the regulatory authorities may later determine that changes are required in the drug approval process, or that additional or different clinical or manufacturing data must be generated, any of which could significantly delay approval of roxadustat or any of our other product candidates, and materially and adversely affect our plans and operations in China. It is possible that other unforeseen delays in the China regulatory process could have a material adverse effect on our ~~development and commercialization of roxadustat in China.~~

~~For example, prior~~ability to enrolling our Phase 3 studies, the Ministry of Science and Technology established a new approval process to obtain routine blood and urine samples that contain genetic information. Our Phase 3 CKD clinical trial sites have received such approval, but applications are reviewed only on a quarterly basis, thus new studies or work at additional clinical trial sites could be delayed until they receive such approval.

In addition, there are new and evolving environmental and manufacturing regulations in China. The application thereof may impact our API manufacturing location or strategy. In order to prevent or mitigate any delay in commercialization, we are establishing a 5,500 square meter commercial API manufacturing facility in Cangzhou, Hebei, with the intention of being operational shortly after NDA approval. Any delays related to these regulations or our new manufacturing facility ~~could adversely affect~~ ~~the~~ ~~cost timing~~ of ~~our commercialization in China~~.

In May 2016, China announced implementation of a three-year pilot program for the Marketing Authorization Holder System (“MAH”) in certain piloted regions. We are considering applying to participate in this program, and if accepted, we may be able to outsource drug product or API manufacturing to third parties while retaining the manufacturing license. However, we cannot know if we will be accepted into the MAH program, or how long such program will be available.

~~Even if roxadustat is approved in China, we and our collaboration partner in China, AstraZeneca, may experience difficulties in successfully generating sales of roxadustat in China.~~

We and AstraZeneca have a profit sharing arrangement with respect to roxadustat in China. Even if roxadustat is approved for sale in China, we and AstraZeneca may experience difficulties in our marketing, commercialization and sales efforts in China, and our business and operations could be adversely affected. In particular, sales of roxadustat in China may be limited due to the complex nature of the healthcare system, low average personal income, lack of patient cost reimbursement, pricing controls, poorly developed infrastructure and potentially rapid competition from other products.

~~Even if roxadustat is approved in China, it will face intense competition~~compete in the market for treatments of anemia in CKD. Roxadustat would compete with ESAs, which are offered by established multinational pharmaceutical companies such as Kyowa Hakko Kirin China Pharmaceutical Co., Ltd. and Roche and Chinese pharmaceutical companies such as 3SBio Inc. and Di’ao Group Chengdu Diao Jiuhong Pharmaceutical Factory. Many of these competitors have substantially greater name recognition, scientific, financial and marketing resources as well as established distribution capabilities than we do. Many of our competitors have more resources to develop or acquire, and more experience in developing or acquiring, new products and in creating market awareness for those products. Many of these competitors have significantly more experience than we have in navigating the Chinese regulatory framework regarding the development, manufacturing and marketing of drugs in China, as well as in marketing and selling anemia products in China. Additionally, we believe that most patients with anemia in CKD in China are currently being treated with traditional Chinese medicine, which is widely accepted and highly prevalent in China. Traditional Chinese medicine treatments are often oral and thus convenient and low-cost, and practitioners of traditional Chinese medicine are numerous and accessible in China. As a result, it may be difficult to persuade patients with anemia in CKD to switch from traditional Chinese medicine to roxadustat.

~~There is no assurance that roxadustat will be included in the Medical Insurance Catalogs.~~

Eligible participants in the national basic medical insurance program in China, which consists of mostly urban residents, are entitled to reimbursement from the social medical insurance fund for up to the entire cost of medicines that are included in the Medical Insurance Catalogs. Refer to “~~Business — Government Regulation — Regulation in China~~.” We believe that the inclusion of a drug in the Medical Insurance Catalogs can substantially improve the sales of a drug. The Ministry of Labor and Social Security in China (“MLSS”) together with other government authorities, select medicines to be included in the Medical Insurance Catalogs based on a variety of factors, including treatment requirements, frequency of use, effectiveness and price. The MLSS also occasionally removes medicines from such catalogs. There can be no assurance that roxadustat will be included, and once included, remain in the Medical Insurance Catalogs. The exclusion or removal of roxadustat from the Medical Insurance Catalogs may materially and adversely affect sales of roxadustat.

~~We may not be successful in the tender processes for the purchase of medicines by state-owned and state-controlled hospitals.~~

Most hospitals in China participate in collective tender processes for the purchase of medicines listed in the Medical Insurance Catalogs and medicines that are consumed in large volumes and commonly prescribed for clinical uses. During a collective tender process, the hospitals will establish a committee consisting of recognized pharmaceutical experts. The committee will assess the bids submitted by the various participating pharmaceutical manufacturers, taking into consideration, among other things, the quality and price of the drug product and the service and reputation of the manufacturer. Only drug products that have been selected in the collective tender processes may be purchased by participating hospitals. If we are unable to win purchase contracts through the collective tender processes in which we decide to participate, there will be limited demand for roxadustat, and sales revenues from roxadustat will be materially and adversely affected.

~~Even if FG-5200 can be manufactured successfully and achieve regulatory approval, we may not achieve commercial success.~~

We have not yet received a license to manufacture FG-5200 in our Beijing manufacturing facility or at scale, and we will have to show that FG-5200 from our China manufacturing facility meets the applicable regulatory requirements. There can be no assurance that we can meet these requirements or that FG-5200 can be approved for development, manufacture and sale in China.

Even if we are able to manufacture and develop FG-5200 as a medical device in China, the size and length of any potential clinical trials required for approval are uncertain and we are unable to predict the time and investment required to obtain regulatory approval. Moreover, even if FG-5200 can be successfully developed for approval in China, our product candidate would require extensive training and investment in assisting physicians in the use of FG-5200.

~~The retail prices of any product candidates that we develop may be subject to control, including periodic downward adjustment, by Chinese government authorities.~~

The price for pharmaceutical products is highly regulated in China, both at the national and provincial level. Price controls may reduce prices to levels significantly below those that would prevail in less regulated markets or limit the volume of products which may be sold, either of which may have a material and adverse effect on potential revenues from sales of roxadustat in China. Moreover, the process and timing for the implementation of price restrictions is unpredictable, which may cause potential revenues from the sales of roxadustat to fluctuate from period to period.

If our planned business activities in China fall within a restricted category under the China Catalog for Guidance for Foreign Investment, we will need to operate in China through a variable interest entity (“VIE”) structure.

The China Catalog for Guidance for Foreign Investment sets forth the industries and sectors that the Chinese government encourages and restricts with respect to foreign investment and participation. The Catalog for Guidance for Foreign Investment is subject to revision from time to time by the China Ministry of Commerce. While we currently do not believe the development and marketing of roxadustat falls within a restricted category under the Catalog for Guidance for Foreign Investment, if roxadustat does fall under such a restricted category, we will need to operate in China through a VIE structure. A VIE structure involves a wholly foreign-owned enterprise that would control and receive the economic benefits of a domestic Chinese company through various contractual relationships. Such a structure would subject us to a number of risks that may have an adverse effect on our business, including that the Chinese government may determine that such contractual arrangements do not comply with applicable regulations, Chinese tax authorities may require us to pay additional taxes, shareholders of our VIEs may have potential conflicts of interest with us, and we may lose the ability to use and enjoy assets held by our VIEs that are important to the operations of our business if such entities go bankrupt or become subject to dissolution or liquidation proceedings. VIE structures in China have come under increasing scrutiny from accounting firms and the SEC staff. If we do attempt to use a VIE structure and are unsuccessful in structuring it so as to qualify as a VIE, we would not be able to consolidate the financial statements of the VIE with our financial statements, which could have a material adverse effect on our operating results and financial condition.

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.*

We plan to conduct all of our business in China through FibroGen China Anemia Holdings, Ltd. and FibroGen Beijing. We may rely on dividends and royalties paid by FibroGen Beijing for a portion of our cash needs, including the funds necessary to service any debt we may incur and to pay our operating expenses. The payment of dividends by FibroGen Beijing is subject to limitations. Regulations in China currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. FibroGen Beijing is not permitted to distribute any profits until losses from prior fiscal years have been recouped and in any event must maintain certain minimum capital requirements. FibroGen Beijing is also required to set aside at least 10.0% of its after-tax profit based on Chinese accounting standards each year to its statutory reserve fund until the cumulative amount of such reserves reaches 50.0% of its registered capital. Statutory reserves are not distributable as cash dividends. In addition, if FibroGen Beijing incurs debt on its own behalf in the future, the agreements governing such debt may restrict its ability to pay dividends or make other distributions to us. As of September 30, 2017, approximately $2.4 million of our cash and cash equivalents is held in China.

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.

The Ministry of Commerce in China or its local counterpart must approve the amount and use of any capital contributions from us to FibroGen Beijing, and there can be no assurance that we will be able to complete the necessary government registrations and obtain the necessary government approvals on a timely basis, or at all. If we fail to do so, we may not be able to contribute additional capital to fund our Chinese operations, and the liquidity and financial position of FibroGen Beijing may be materially and adversely affected.

~~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.~~

If roxadustat is approved for sale in China, most of our product sales will occur in local Chinese currency and our operating results will be subject to volatility from currency exchange rate fluctuations. To date, we have not hedged against the risks associated with fluctuations in exchange rates and, therefore, exchange rate fluctuations could have an adverse impact on our future operating results. Changes in value of the Renminbi against the U.S. dollar, Euro and other currencies is affected by, among other things, changes in China’s political and economic conditions. Currently, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Any significant currency exchange rate fluctuations may have a material adverse effect on our business and financial condition.

In addition, the Chinese government imposes controls on the convertibility of the Renminbi into foreign currencies and the remittance of foreign currency out of China for certain transactions. Shortages in the availability of foreign currency may restrict the ability of FibroGen Beijing to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency-denominated obligations. Under existing Chinese foreign exchange regulations, payments of current account items, including profit distributions, interest payments and balance of trade, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange (“SAFE”) by complying with certain procedural requirements. However, approval from SAFE or its local branch is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The Chinese government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our operational requirements, our liquidity and financial position may be materially and adversely affected.

~~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.~~

Banks and other financial institutions in China do not provide insurance for funds held on deposit. As a result, in the event of a bank failure, FibroGen Beijing may not have access to funds on deposit. Depending upon the amount of money FibroGen Beijing maintains in a bank that fails, its inability to have access to cash could materially impair its operations.

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

The tax regulations of the U.S. and other jurisdictions in which we operate are extremely complex and subject to change. New laws, new interpretations of existing laws, such as the Base Erosion Profit Shifting project initiated by the Organization for Economic Co-operation and Development and any legislation proposed by the relevant taxing authorities, or limitations on our ability to structure our operations and intercompany transactions may lead to inefficient tax treatment of our revenue, profits, royalties and distributions, if any are achieved. In the U.S., comprehensive tax reform has been announced as a priority by the new President’s administration and the U.S. Congress. Various proposals are under evaluation and consideration but it is not possible to accurately ascertain at this time the overall impact of such proposals on our future effective tax rate and corporate structure.

In addition, we and our foreign subsidiaries have various intercompany transactions. We may not be able to obtain certain benefits under relevant tax treaties to avoid double taxation on certain transactions among our subsidiaries. If we are not able to avail ourselves of the tax treaties, we could be subject to additional taxes, which could adversely affect our financial condition and results of operations.

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

We seek to protect the products and technology that we consider important to our business by pursuing patent applications in China and other countries, relying on trade secrets or pharmaceutical regulatory protection or employing a combination of these methods. We note that the filing of a patent application does not mean that we will be granted a patent, or that any patent eventually granted will be as broad as requested in the patent application or will be sufficient to protect our technology. There are a number of factors that could cause our patents, if granted, to become invalid or unenforceable or that could cause our patent applications not to be granted, including known or unknown prior art, deficiencies in the patent application, or lack of originality of the technology. Furthermore, the terms of our patents are limited. The patents we hold and the patents that may be granted from our currently pending patent applications have, absent any patent term adjustment or extension, a twenty-year protection period starting from the date of application.

Intellectual property rights and confidentiality protections in China may not be as effective as those in the U.S. or other countries for many reasons, including lack of procedural rules for discovery and evidence, low damage awards, and lack of judicial independence. Implementation and enforcement of China intellectual property laws have historically been deficient and ineffective and may be hampered by corruption and local protectionism. Policing unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability and validity of our proprietary rights or those of others. The experience and capabilities of China courts in handling intellectual property litigation varies and outcomes are unpredictable. An adverse determination in any such litigation could materially impair our intellectual property rights and may harm our business.marketplace.

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

We must comply with a wide range of laws and regulations to prevent corruption, bribery, and other unethical business practices, including the FCPA, anti-bribery and anti-corruption laws in other countries, particularly China. The ~~creation~~implementation and ~~implementation~~maintenance of ~~international business practices~~ compliance programs is costly and such programs ~~are~~may be difficult to enforce, particularly where reliance on third parties is required.

Anti-bribery laws prohibit us, our employees, and some of our agents or representatives from offering or providing any personal benefit to covered government officials to influence their performance of their duties or induce them to serve interests other than the missions of the public organizations in which they serve. Certain commercial bribery rules also prohibit offering or providing any personal benefit to employees and representatives of commercial companies to influence their performance of their duties or induce them to serve interests other than their employers. The FCPA also obligates companies whose securities are listed in the U.S. to comply with certain accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and devise and maintain an adequate system of internal accounting controls for international operations. The anti-bribery provisions of the FCPA are enforced primarily by the Department of Justice. The SEC is involved with enforcement of the books and records provisions of the FCPA.

Compliance with these anti-bribery laws is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the anti-bribery laws present particular challenges in the pharmaceutical industry because in many countries including China, hospitals are state-owned or operated by the government, and doctors and other hospital employees are considered foreign government officials. Furthermore, in certain countries (China in particular), hospitals and clinics are permitted to sell pharmaceuticals to their patients and are primary or significant distributors of pharmaceuticals. Certain payments to hospitals in connection with clinical studies, procurement of pharmaceuticals and other work have been deemed to be improper payments to government officials that have led to vigorous anti-bribery law enforcement actions and heavy fines in multiple jurisdictions, particularly in the U.S. and China.

It is not always possible to identify and deter violations, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.

In the pharmaceutical industry, corrupt practices include, among others, acceptance of kickbacks, bribes or other illegal gains or benefits by the hospitals and medical practitioners from pharmaceutical manufacturers, distributors or their ~~third party~~third-party agents in connection with the prescription of certain pharmaceuticals. If our employees, affiliates, distributors or ~~third party~~third-party marketing firms violate these laws or otherwise engage in illegal practices with respect to their sales or marketing of our products or other activities involving our products, we could be required to pay damages or heavy fines by multiple jurisdictions where we operate, which could materially and adversely affect our financial condition and results of operations. The Chinese government has also sponsored anti-corruption campaigns from time to time, which could have a chilling effect on any future marketing efforts by us to new hospital customers. There have been recent occurrences in which certain hospitals have denied access to sales representatives from pharmaceutical companies because the hospitals wanted to avoid the perception of corruption. If this attitude becomes widespread among our potential customers, our ability to promote our products to hospitals may be adversely affected.

As we expand our operations in China and other jurisdictions internationally, we will need to increase the scope of our compliance programs to address the risks relating to the potential for violations of the FCPA and other anti-bribery and anti-corruption laws. Our compliance programs will need to include policies addressing not only the FCPA, but also the provisions of a variety of anti-bribery and anti-corruption laws in multiple foreign jurisdictions, including China, provisions relating to books and records that apply to us as a public company, and include effective training for our personnel throughout our organization. The creation and implementation of anti-corruption compliance programs is costly and such programs are difficult to enforce, particularly where reliance on third parties is required. Violation of the FCPA and other anti-corruption laws can result in significant administrative and criminal penalties for us and our employees, including substantial fines, suspension or debarment from government contracting, prison sentences, or even the death penalty in extremely serious cases in certain countries. The SEC also may suspend or bar us from trading securities on U.S. exchanges for violation of the FCPA’s accounting provisions. Even if we are not ultimately punished by government authorities, the costs of investigation and review, distraction of our personnel, legal defense costs, and harm to our reputation could be substantial and could limit our profitability or our ability to develop or commercialize our product candidates. In addition, if any of our competitors are not subject to the FCPA, they may engage in practices that will lead to their receipt of preferential treatment from foreign hospitals and enable them to secure business from foreign hospitals in ways that are unavailable to us.

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

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on the effectiveness of our system of internal control. Our internal controls over financial reporting is a process designed to provide reasonable assurances regarding the reliability of our financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the U.S. As a public company, we are required to comply with the Sarbanes-Oxley Act and other rules that govern public companies.

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. 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.

We are taking certain remedial steps to improve our related internal controls over financial reporting. For further discussion of the material weaknesses identified and our remedial efforts, see Part I, Item 4, “Controls and Procedures” in this Quarterly Report on Form 10-Q.

Remediation efforts place a significant burden on management and add increased pressure on our financial resources and processes. If we are unable to successfully remediate our existing or any future material weaknesses or other deficiencies in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected, our liquidity, our access to capital markets may be adversely affected, we may be unable to maintain or regain compliance with applicable securities laws, and the Nasdaq Stock Market LLC listing requirements, we may be subject to regulatory investigations and penalties, investors may lose confidence in our financial reporting, and our stock price may decline.

The impact of recent U.S. healthcare reform, its potential partial or full repeal, and other changes in the healthcare industry and in healthcare spending is currently unknown, and may adversely affect our business model.*

The commercial potential for our approved products could be affected by changes in healthcare spending and policy in the U.S. and abroad. We operate in a highly regulated industry and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to healthcare availability, the method of delivery or payment for healthcare products and services could negatively impact our business, operations and financial condition.

In the U.S., the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) altered Medicare coverage and payments for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. The MMA also provided authority for limiting the number of drugs that will be covered in any therapeutic class and as a result, we expect that there will be additional pressure to reduce costs. For example, the CMS in implementing the MMA has enacted regulations that reduced capitated payments to dialysis providers. These cost reduction initiatives and other provisions of the MMA could decrease the scope of coverage and the price that may be received for any approved dialysis products and could seriously harm our business and financial condition. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may cause a similar reduction in payments from private payors. Similar regulations or reimbursement policies have been enacted in many international markets that could similarly impact the commercial potential for our products.

Under the Medicare Improvements for Patients and Providers Act (“MIPPA”), a basic case-mix adjusted composite, or bundled, payment system commenced in January 2011 and transitioned fully by January 2014 to a single reimbursement rate for drugs and all services furnished by renal dialysis centers for Medicare beneficiaries with end-stage renal disease. Specifically, under MIPPA the bundle now covers drugs, services, lab tests and supplies under a single treatment base rate for reimbursement by the CMS based on the average cost per treatment, including the cost of ESAs and IV iron doses, typically without adjustment for usage. It is unknown whether roxadustat, if approved in the U.S., will be included in the payment bundle. Under MIPPA, agents that have no IV equivalent in the bundle are currently expected to be excluded from the bundle until 2025. If roxadustat were included in the bundle, it may reduce the price that could be charged for roxadustat, and therefore potentially limit our profitability. Based on roxadustat’s differentiated mechanism of action and therapeutic effects, and discussions with our collaboration partner, we currently believe that roxadustat might not be included in the bundle and would instead be eligible for a Transitional Drug Add-on Payment Adjustment (“TDAPA”) for a 24-month period. After this 24-month period, CMS would determine if roxadustat should be included in the bundle and, if so, what changes to end-stage renal disease prospective payment system reimbursement should be made. If roxadustat is not included in the bundle after the TDAPA period, and would therefore be reimbursed outside of the bundle, it may potentially limit further market penetration of roxadustat.

In March 2010, the PPACA was passed, which substantially changed the way healthcare is financed by both governmental and private payors in the U.S. There remain judicial and Congressional challenges to certain aspects of the PPACA as well as efforts by the Trump administration to repeal or replace certain aspects of the PPACA. For example, the Tax Cuts and Jobs Act of 2017, (the “Tax Act”), was enacted, which includes a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” In addition, the 2020 federal spending package permanently eliminates, effective January 1, 2020, the PPACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. Additionally, on December 15, 2018, a Texas U.S. District Court Judge ruled that the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the PPACA are invalid as well. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case. It is unclear how such litigation and other efforts to repeal and replace the PPACA will impact the PPACA and our business.

Further, in the U.S. there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under government payor programs, and review the relationship between pricing and manufacturer patient programs. At the federal level, the Trump administration’s budget proposals for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. In addition, the Trump administration previously released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contained proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. The Department of Health and Human Services has solicited feedback on some of these measures and has implemented others under its existing authority. Additionally, on July 24, 2020, President Trump announced four executive orders related to prescription drug pricing that attempt to implement several of the Trump administration proposals, including (i) a policy that would tie certain Medicare Part B drug prices to international drug prices, or the “most favored nation price,” the details of which were released on September 13, 2020 and also expanded the policy to cover certain Part D drugs; (ii) an order that directs HHS to finalize the Canadian drug importation proposed rule previously issued by HHS and makes other changes allowing for personal importation of drugs from Canada; (iii) an order that directs HHS to finalize the rulemaking process on modifying the Anti-Kickback Statute safe harbors for discounts for plans, pharmacies, and pharmaceutical benefit managers; (iv) a policy that reduces costs of insulin and epipens to patients of federally qualified health centers. The FDA also recently released a final rule, effective November 30, 2020, implementing a portion of the importation executive order providing guidance for states to build and submit importation plans for drugs from Canada. While some of these measures may require additional authorization to become effective, the U.S. Congress and the Trump administration have indicated that they will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We expect that additional U.S. healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for any future products or additional pricing pressures.

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.*

Roxadustat is considered a Class 2 substance on the World Anti-Doping Agency Prohibited List. There are enhanced security and distribution procedures we and our collaboration partners and third-party contractors will have to take to limit the risk of loss of product in the supply chain. As a result, our distribution, manufacturing and sales costs for roxadustat, as well as for our partners, will be increased which will reduce profitability. In addition, there is a risk of reduced sales due to patient access to this drug.

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

We are exposed to the risk of employee fraud or other misconduct, including intentional failure to:

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

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.*

We expect to be subject to a number of risks related with our international operations, many of which may be beyond our control. These risks include:

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

The pharmaceutical industry in China is subject to comprehensive government regulation and supervision, encompassing the approval, registration, manufacturing, packaging, licensing and marketing of new drugs. Refer to “Business — Government Regulation — Regulation in China” in our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of the regulatory requirements that are applicable to our current and planned business activities in China. In recent years, the regulatory framework in China regarding the pharmaceutical industry has undergone significant changes, and we expect that it will continue to undergo significant changes. For example, the Chinese government has implemented regulations that impact distribution of pharmaceutical products in China. These regulations generally require that at most two invoices may be issued throughout the distribution chain. Failure to comply with the “Two-Invoices” regulations would prevent us from accessing the market in China. We have established a jointly owned entity with AstraZeneca to manage distribution in China, and there are complexities involved in establishing proper systems to perform distribution with which we have limited experience. We expect to continue to manage distribution in certain provinces in China. We have limited experience managing distribution of pharmaceutical products, and this new distribution structure may impose higher costs or limit or delay our ability to sell products to our principal customers, and may limit the near term sales of our products. Any other such changes or amendments may result in increased compliance costs to our business or cause delays in or prevent the successful development or commercialization of our product candidates in China. Any failure by us or our partners to maintain compliance with applicable laws and regulations or obtain and maintain required licenses and permits may result in the suspension or termination of our business activities in China.

We use our own manufacturing facilities in China to produce roxadustat API and drug product. We have limited experience with manufacturing plants and may not be able to continually meet regulatory requirements.*

We have two manufacturing facilities in China, with one located in Beijing and the other in Cangzhou, Hebei. However, as an organization, we have limited experience licensing and operating commercial manufacturing facilities.

We will be obligated to comply with continuing cGMP requirements and there can be no assurance that we will maintain all of the appropriate licenses required to manufacture our product candidates for clinical and commercial use in China. In addition, we and our product suppliers must continually spend time, money and effort in production, record-keeping and quality assurance and appropriate controls in order to ensure that any products manufactured in our facilities meet applicable specifications and other requirements for product safety, efficacy and quality and there can be no assurance that our efforts will continue to be successful in meeting these requirements.

Manufacturing facilities in China are subject to periodic unannounced inspections by the NMPA and other regulatory authorities. We expect to depend on these facilities for our product candidates and business operations in China. Natural disasters or other unanticipated catastrophic events, including power interruptions, water shortages, storms, fires, pandemics (including the COVID-19 pandemic), earthquakes, terrorist attacks, government appropriation of our facilities, and wars, could significantly impair our ability to operate our manufacturing facilities. Certain equipment, records and other materials located in these facilities would be difficult to replace or would require substantial replacement lead-time that would impact our ability to successfully commercialize our product candidates in China. The occurrence of any such event could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects.

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.

We are responsible for commercial manufacturing, pharmacovigilance, medical affairs, and management of the third-party distribution logistics (with AstraZeneca through a jointly owned entity that will perform roxadustat distribution) for roxadustat commercial activities in China. While we have been increasing our staffing in these areas, as a company, we have no experience managing or operating these functions for a commercial product and there can be no guarantee that we will do so efficiently or effectively. Mistakes or delays in these areas could limit our ability to successfully commercialize roxadustat in China, could limit our eventual market penetration, sales and profitability, and could subject us to significant liability in China.

We and our collaboration partner in China, AstraZeneca, may experience difficulties in successfully generating sales of roxadustat in China.

We and AstraZeneca have a profit sharing arrangement with respect to roxadustat in China and any difficulties we may experience in generating sales will affect our bottom line. Difficulties may be related to our ability to maintain reasonable pricing and reimbursement, obtain hospital listing, or other difficulties related to distribution, marketing, and sales efforts in China. For example, our current National Reimbursement Drug List reimbursement pricing is effective for a standard two-year period (between January 1, 2020 to December 31, 2021), after which time we will have to renegotiate a new price for roxadustat, which may be lower. Sales of roxadustat in China may be limited due to the complex nature of the healthcare system, low average personal income, pricing controls, still developing infrastructure and potentially rapid competition from other products. The hospital listing process is critical to roxadustat’s near-term commercial success in China and may take many years to obtain the majority of hospital listings.

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

The price for pharmaceutical products is highly regulated in China, both at the national and provincial level. Price controls may reduce prices to levels significantly below those that would prevail in less regulated markets or limit the volume of products that may be sold, either of which may have a material and adverse effect on potential revenues from sales of roxadustat in China. Moreover, the process and timing for the implementation of price restrictions is unpredictable, which may cause potential revenues from the sales of roxadustat to fluctuate from period to period.

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.*

We plan to conduct all of our business in China through FibroGen China Anemia Holdings, Ltd. and FibroGen Beijing. We may rely on dividends and royalties paid by FibroGen Beijing for a portion of our cash needs, including the funds necessary to service any debt we may incur and to pay our operating costs and expenses. The payment of dividends by FibroGen Beijing is subject to limitations. Regulations in China currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. FibroGen Beijing is not permitted to distribute any profits until losses from prior fiscal years have been recouped and in any event must maintain certain minimum capital requirements. FibroGen Beijing is also required to set aside at least 10.0% of its after-tax profit based on Chinese accounting standards each year to its statutory reserve fund until the cumulative amount of such reserves reaches 50.0% of its registered capital. Statutory reserves are not distributable as cash dividends. In addition, if FibroGen Beijing incurs debt on its own behalf in the future, the agreements governing such debt may restrict its ability to pay dividends or make other distributions to us. As of September 30, 2020, approximately $29.5 million of our cash and cash equivalents is held in China.

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.

Most of our product sales will occur in local Chinese currency and our operating results will be subject to volatility from currency exchange rate fluctuations. To date, we have not hedged against the risks associated with fluctuations in exchange rates and, therefore, exchange rate fluctuations could have an adverse impact on our future operating results. Changes in value of the Renminbi against the U.S. dollar, Euro and other currencies is affected by, among other things, changes in China’s political and economic conditions. Currently, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Any significant currency exchange rate fluctuations may have a material adverse effect on our business and financial condition.

In addition, the Chinese government imposes controls on the convertibility of the Renminbi into foreign currencies and the remittance of foreign currency out of China for certain transactions. Shortages in the availability of foreign currency may restrict the ability of FibroGen Beijing to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency-denominated obligations. Under existing Chinese foreign exchange regulations, payments of current account items, including profit distributions, interest payments and balance of trade, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from State Administration of Foreign Exchange or its local branch is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The Chinese government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our operational requirements, our liquidity and financial position may be materially and adversely affected.

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.*

In addition, our foreign subsidiaries and we have various intercompany transactions. We may not be able to obtain certain benefits under relevant tax treaties to avoid double taxation on certain transactions among our subsidiaries. If we are not able to avail ourselves to the tax treaties, we could be subject to additional taxes, which could adversely affect our financial condition and results of operations.

On December 22, 2017, the Tax Cuts and Jobs Act (Tax Act) was enacted which instituted various changes to the taxation of multinational corporations. Since inception, various regulations and interpretations have been issued by governing authorities and we continue to examine the impacts to our business, which could potentially have a material adverse effect on our business, results of operations or financial conditions.

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 could have a material adverse effect on us.

The legal system of China is a civil law system primarily based on written statutes. Unlike in a common law system, prior court decisions may be cited for reference but are not binding. Because the China legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections available to us. Moreover, decision makers in the China judicial system have significant discretion in interpreting and implementing statutory and contractual terms, which may render it difficult for FibroGen Beijing to enforce the contracts it has entered into with our business partners, customers and suppliers. Different government departments may have different interpretations of certain laws and regulations, and licenses and permits issued or granted by one government authority may be revoked by a higher government authority at a later time. Navigating the uncertainty and change in the China legal system will require the devotion of significant resources and time, and there can be no assurance that our contractual and other rights will ultimately be enforced.

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

~~The~~the Chinese economy ~~and Chinese society~~ continue to undergo significant change. ~~Adverse changes~~Changes in the ~~political~~regulatory structure, regulations, and economic policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could adversely affect our ability to conduct business in China. The Chinese government continues to adjust economic policies to promote economic growth. Some of these measures benefit the overall Chinese economy, but may also have a negative effect on us. For example, our financial condition and results of operations in China may be adversely affected by government control over capital investments or changes in tax regulations. As the Chinese pharmaceutical industry grows and evolves, the Chinese government may also implement measures to change the regulatory structure and structure of foreign investment in this industry. We are unable to predict the frequency and scope of such policy changes and structural changes, any of which could materially and adversely affect FibroGen Beijing’s development and commercialization timelines, liquidity, access to capital, and its ability to conduct business in China. Any failure on our part to comply with changing government regulations and policies could result in the loss of our ability to develop and commercialize our product candidates in China. In addition, the changing government regulations and policies could result in delays and cost increases to our development, manufacturing, approval, and commercialization timelines in China.

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.

We are subject to China Labor Contract Law, which provides strong protections for employees and imposes many obligations on employers. The Labor Contract Law places certain restrictions on the circumstances under which employers may terminate labor contracts and require economic compensation to employees upon termination of employment, among other things. In addition, companies operating in China are generally required to contribute to labor union funds and the mandatory social insurance and housing funds. Any failure by us to comply with Chinese labor and social insurance laws may subject us to late fees, fines and penalties, or cause the suspension or termination of our ability to conduct business in China, any of which could have a material and adverse effect on business, results of operations and prospects.

Developments relating to the United Kingdom’s referendum vote in favor of leaving the European Union could adversely affect us.

~~The~~Effective January 31, 2020, the United Kingdom ~~held a referendum on June 23, 2016 in which a majority voted for the United Kingdom’s withdrawal~~commenced an exit from the ~~EU,~~European Union, commonly referred to as ~~“Brexit”. As~~“Brexit.” During a ~~result of this vote, negotiations are expected~~transition period (set to ~~commence~~expire on December 31, 2020), the British government will continue to ~~determine~~negotiate the terms of the United ~~Kingdom’s withdrawal from the EU as well as its~~Kingdom's future relationship with the ~~EU going forward, including~~European Union. The outcome of these negotiations is uncertain, and we do not know to what extent Brexit will ultimately impact the ~~terms of trade between~~business and regulatory environment in the United Kingdom, ~~and~~ the ~~EU.~~rest of Europe, or other countries. The effects of the United Kingdom’s withdrawal from the ~~EU,~~European Union, and the perceptions as to its impact, are expected to be far-reaching and may adversely affect business activity and economic conditions in Europe and globally and could continue to contribute to instability in global financial markets, including foreign exchange markets. The United Kingdom’s withdrawal from the EUEuropean Union could also have the effect of disrupting the free movement of goods, services and people between the United Kingdom and ~~the EU~~Europe and could also lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which EUEuropean laws to replace or replicate, including laws that could impact our ability, or our collaborator’s ability in the case of roxadustat, to obtain approval of our products or sell our products in the United Kingdom. ~~However, the full effects of such withdrawal are uncertain and will depend on any agreements~~Changes impacting our ability to conduct business in the United Kingdom ~~may make to retain access to EU markets. Lastly, as a result of the United Kingdom’s withdrawal from the EU,~~or other European countries, ~~may seek~~or changes to ~~conduct referenda~~the regulatory regime applicable to our operations in those countries (such as with respect to ~~their continuing membership with~~ the ~~EU. Given these possibilities~~approval of our product candidates), may materially and ~~others we may not anticipate, as well as the lack of comparable precedent, the full extent to which~~adversely impact our business, prospects, operating results, ~~of operations~~ and financial ~~condition could be adversely affected by the United Kingdom’s withdrawal from the EU is uncertain.~~condition.

We are a biopharmaceutical company with two lead product candidates in clinical development, roxadustat in anemia in CKD, MDS, and chemotherapy-induced anemia, and pamrevlumab in IPF, pancreatic cancer, DMD, and COVID-19. Most of our revenue generated to date has been based on our collaboration agreements and we have limited commercial drug product sales to date. We continue to incur significant research and development and other expenses related to our ongoing operations. Our net loss for the year ended December 31, 2019, 2018 and 2017 were $77.0 million, $86.4 million and $120.9 million, respectively. As of September 30, 2020, we had an accumulated deficit of $915.4 million. As of September 30, 2020, we had capital resources consisting of cash, cash equivalents and short-term investments of $687.9 million plus $0.2 million of long-term investments classified as available for sale securities. Despite contractual development and cost coverage commitments from our collaboration partners, AstraZeneca and Astellas, and the potential to receive milestone and other payments from these partners, and despite commercialization efforts in the China and Japan for roxadustat for the treatment of anemia caused by CKD, we anticipate we will continue to incur losses on an annual basis for the foreseeable future. If we do not successfully develop and continue to obtain regulatory approval for our existing or any future product candidates and effectively manufacture, market and sell the product candidates that are approved, we may never achieve or sustain profitability on a quarterly or annual basis. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Our failure to become and remain profitable would depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations.

We believe that we will continue to expend substantial resources for the foreseeable future as we continue late-stage clinical development of roxadustat, grow our operations in China, expand our clinical development efforts on pamrevlumab, continue to seek regulatory approval, launch commercialization of our product candidates, and pursue additional indications. These expenditures will include costs associated with research and development, conducting preclinical trials and clinical trials, obtaining regulatory approvals in various jurisdictions, and manufacturing and supplying products and product candidates for ourselves and our partners. The outcome of any clinical trial and/or regulatory approval process is highly uncertain and we are unable to fully estimate the actual costs necessary to successfully complete the development and regulatory approval process for our compounds in development and any future product candidates. We believe that the net proceeds from our 2017 public offerings, our existing cash and cash equivalents, short-term and long-term investments and accounts receivable, and expected third-party collaboration revenues will allow us to fund our operating plans through at least the next 12 months. Our operating plans or third-party collaborations may change as a result of many factors, including the success of our development and commercialization efforts, operations costs (including manufacturing and regulatory), competition, and other factors that may not currently be known to us, and we therefore may need to seek additional funds sooner than planned, through offerings of public or private securities, debt financings or other sources, such as royalty monetization or other structured financings. Such financings may result in dilution to stockholders, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business. We may also seek additional capital due to favorable market conditions or strategic considerations even if we currently believe that we have sufficient funds for our current or future operating plans.

Most of our recent revenue has been earned from collaboration partners for our product candidates under development.

If either or both of our Astellas and AstraZeneca collaborations were to be terminated, we could require significant additional capital in order to proceed with development and commercialization of our product candidates, including with respect to our commercialization of roxadustat for the treatment of anemia caused by CKD, or we may require additional partnering in order to help fund such development and commercialization. If adequate funds or partners are not available to us on a timely basis or on favorable terms, we may be required to delay, limit, reduce or terminate our development or commercialization efforts or other operations.

We may encounter difficulties in managing our growth and expanding our operations successfully.

As we seek to advance our product candidates through clinical trials and commercialization, we will need to expand our development, regulatory, manufacturing, commercialization and administration capabilities or contract with third parties to provide these capabilities for us. As our operations expand and we continue to undertake the efforts and expense to operate as a public reporting company, we expect that we will need to increase the responsibilities on members of management in order to manage any future growth effectively. Our failure to accomplish any of these steps could prevent us from successfully implementing our strategy and maintaining the confidence of investors in ~~our company.~~us.

~~If we fail to attract and keep~~ senior management and key personnel ~~in particular~~could adversely affect our ~~chief executive officer, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize our product candidates.~~business.*

We are highly dependent on ~~our chief executive officer, Thomas B. Neff, and other~~ members of our senior management ~~team.~~team, including Enrique Conterno, our Chief Executive Officer. The loss of the services of Mr. ~~Neff~~Conterno or any of ~~these other individuals would be expected to~~our senior management could significantly ~~negatively~~ impact the development and commercialization of our products and product candidates ~~our existing collaborative relationships~~ and our ability to successfully implement our business strategy.

Recruiting and retaining qualified commercial, development, scientific, clinical, and manufacturing personnel are and will continue to be critical to our ~~success.~~success, particularly as we expand our commercialization operations. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize product candidates. We may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the intense competition among numerous biopharmaceutical companies for similar personnel.

There is also significant competition, in particular in the San Francisco Bay Area, for the hiring of experienced and qualified personnel, which increases the importance of retention of our existing personnel. If we are unable to continue to attract and retain personnel with the quality and experience applicable to our product candidates, our ability to pursue our strategy will be limited and our business and operations would be adversely affected.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may ~~be required~~have to limit ~~commercialization of our product candidates.~~commercial operations.

We face an inherent risk of product liability as a result of the clinical testing, manufacturing and commercialization of our product candidates. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in a product, negligence, strict liability or breach of warranty. Claims could also be asserted under state consumer protection acts. If we are unable to obtain insurance coverage at levels that are appropriate to maintain our business and operations, or if we are unable to successfully defend ourselves against product liability claims, we may incur substantial liabilities or otherwise cease operations. Product liability claims may result in:

If we fail to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims, we may not be able to continue to develop our product candidates. We maintain product liability insurance in a customary amount for the stage of development of our product candidates. Although we believe that we have sufficient coverage based on the advice of our ~~third party~~third-party advisors, there can be no assurance that such levels will be sufficient for our needs. Moreover, our insurance policies have various exclusions, and we may be in a dispute with our carrier as to the extent and nature of our coverage, including whether we are covered under the applicable product liability policy. If we are not able to ensure coverage or are required to pay substantial amounts to settle or otherwise contest the claims for product liability, our business and operations would be negatively affected.

Our business and operations would suffer in the event of computer system failures.*

Despite the implementation of security measures, our internal computer systems, and those of our CROs, collaboration partners, and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, fire, terrorism, war and telecommunication and electrical failures. We ~~have recently~~ upgraded our disaster and data recovery ~~program,~~capabilities in 2017, however, to the extent that any disruption or security breach, in particular with our partners’ operations, results in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and it could result in a material disruption and delay of our drug development programs. For example, the loss of clinical trial data from completed, ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

We depend on sophisticated information technology systems ~~to operate our business~~ and could face a cyber-attack or other breach of these systems could have a material adverse effect on our business.*systems.

We rely on information technology systems to process, transmit and store electronic information in our day-to-day operations. The size and complexity of our information technology systems makes them vulnerable to a cyber-attack, malicious intrusion, breakdown, destruction, loss of data privacy or other significant disruption. While we have recently upgraded our disaster data recovery program, a successful attack could result in the theft or destruction of intellectual property, data, or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations. Cyber-attacks are becoming more sophisticated and frequent. We have invested in our systems and the protection and recoverability of our data to reduce the risk of an intrusion or interruption, and we monitor and test our systems on an ongoing basis for any current or potential threats. There can be no assurance that these measures and efforts will prevent future interruptions or breakdowns. If we fail to maintain or protect our information technology systems and data integrity effectively or fail to anticipate, plan for or manage significant disruptions to these systems, we could have difficulty preventing, detecting and controlling such cyber-attacks and any such attacks could result in losses described above as well as disputes with physicians, patients and our partners, regulatory sanctions or penalties, increases in operating costs and expenses, expenses or lost revenues or other adverse consequences, any of which could have a material adverse effect on our business, results of operations, financial condition, prospects and cash flows.

Our headquarters ~~and data storage facilities~~ are located near known earthquake fault zones. The occurrence of an earthquake, fire or any other catastrophic event could disrupt our operations or the operations of third parties who provide vital support functions to us, which could have a material adverse effect on our business, results of operations and financial condition.*

We and some of the ~~third party~~third-party service providers on which we depend for various support functions ~~such as data storage,~~ are vulnerable to damage from catastrophic events, such as power loss, natural disasters, terrorism and similar unforeseen events beyond our control. Our corporate headquarters and other facilities are located in the San Francisco Bay Area, which in the past has experienced severe earthquakes and ~~fires.~~fires, and has been affected by the COVID-19 pandemic, including economic disruption resulting from the related shelter-in-place and stay-at-home governmental orders.

~~We do~~After a comprehensive earthquake risk analysis conducted by Marsh Risk, we decided not ~~carry~~to purchase earthquake or flood insurance. ~~Earthquakes~~Based upon (among other factors) the Marsh Risk analysis, the design and construction of our building, the expected potential loss, and the costs and deductible associated with earthquake and flood insurance, we chose to self-insure. However, earthquakes or other natural disasters could severely disrupt our operations, or have a larger cost than expected, and have a material adverse effect on our business, results of operations, financial condition and prospects.

If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, damaged critical infrastructure, or otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place are unlikely to provide adequate protection in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business.

Furthermore, integral parties in our supply chain are operating from single sites, increasing their vulnerability to natural disasters or other sudden, unforeseen and severe adverse ~~events.~~events, such as the COVID-19 pandemic. If such an event were to affect our supply chain, it could have a material adverse effect on our business.

The market price of our common stock may be highly volatile, and you may not be able to resell your shares at or above your purchase price.

In general, pharmaceutical, biotechnology and other life sciences company stocks have been highly volatile in the current market. The volatility of pharmaceutical, biotechnology and other life sciences company stocks is sometimes unrelated to the operating performance of particular companies and biotechnology and life science companies stocks often respond to trends and perceptions rather than financial performance. In particular, the market price of shares of our common stock could be subject to wide fluctuations in response to the following factors:

As a result of fluctuations caused by these and other factors, comparisons of our operating results across different periods may not be accurate indicators of our future performance. Any fluctuations that we report in the future may differ from the expectations of market analysts and investors, which could cause the price of our common stock to fluctuate significantly. Moreover, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources and could also require us to make substantial payments to satisfy judgments or to settle litigation.

We have broad discretion in the use of the net proceeds from our underwritten public offerings of common stock completed on April 11, 2017 (the “April 2017 Offering”)and completed on August 24, 2017 (the “August 2017 Offering”) and may not use them effectively.*

The net proceeds from the April 2017 Offering is intended to be used to fund the expansion of product development in China, including developing roxadustat in additional indications beyond CKD, manufacturing and commercialization activities, as well as for general corporate purposes. The net proceeds from the August 2017 Offering is intended to be used to fund the expansion of product development, including our development of pamrevlumab beyond current Phase 2 programs, manufacturing and commercialization activities, as well as for general corporate purposes. These general corporate purposes, may include, among other things, funding research and development, clinical trials, vendor payables, potential regulatory submissions, hiring additional personnel and capital expenditures. However, we have no current commitments or obligations to use the net proceeds in the manner described above. Our management has broad discretion in the application of the balance of the net proceeds from the April 2017 Offering and the August 2017 Offering, and could spend the proceeds in ways our stockholders may not agree with or that fails to improve our business or enhance the value of our common stock. The failure by our management to use these funds effectively could result in financial losses that could harm our business, cause the price of our common stock to decline and delay the development of our product candidates.

If securities or industry analysts do not continue to publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Our principal stockholders ~~and management~~ own a significant percentage of our stock and will be able to exercise ~~significant~~ influence over ~~matters subject to~~ stockholder ~~approval.~~approvals.*

As of October 31, ~~2017,~~2020, our executive officers, directors and principal stockholders, together with their respective affiliates, owned approximately ~~21.21%~~46.42% of our common stock, including shares subject to outstanding options that are exercisable within 60 days after such date and shares issuable upon settlement of restricted stock units that will vest within 60 days after such date. This percentage is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G, if any, filed with the SEC, which information may not be accurate as of ~~July~~January 31, ~~2017.~~2020. Accordingly, these stockholders will be able to exert a significant degree of influence over our management and affairs and over matters requiring stockholder approval, including the election of our board of directors and approval of significant corporate transactions. The interests of this group may differ from those of other stockholders and they may vote their shares in a way that is contrary to the way other stockholders vote their shares. This concentration of ownership could have the effect of entrenching our management and/or the board of directors, delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could have a material and adverse effect on the fair market value of our common stock.

Additional remedial measures that may be imposed in the proceedings instituted by the SEC against five China based accounting firms, including the Chinese affiliate of our independent registered public accounting firm, could result in our consolidated financial statements being determined to not be in compliance with the requirements of the Exchange Act.

In late 2012, the SEC commenced administrative proceedings under Rule 102(e) of its Rules of Practice and also under the Sarbanes-Oxley Act of 2002 against the Chinese affiliates of the “big four” accounting firms, including PricewaterhouseCoopers Zhong Tian CPAs Limited, the Chinese affiliate of our independent registered public accounting firm. The Rule 102(e) proceedings initiated by the SEC relate to these firms’ failure to produce documents, including audit work papers, in response to the request of the SEC pursuant to Section 106 of the Sarbanes-Oxley Act of 2002, as the auditors located in China are not in a position lawfully to produce documents directly to the SEC because of restrictions under Chinese law and specific directives issued by the China Securities Regulatory Commission (“CSRC”). The issues raised by the proceedings are not specific to our auditors or to us.

In January 2014, an administrative law judge reached an initial decision that the Chinese affiliates of the “big four” accounting firms should be barred from practicing before the SEC for a period of six months. In February 2015, the Chinese affiliates of the “big four” accounting firms each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailed procedures and to seek to provide the SEC with access to Chinese firms’ audit documents via the CSRC. If future document productions fail to meet specified criteria, the SEC retains authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure.

We cannot predict if the SEC will further review the four firms’ compliance with specified criteria or if such further review would result in the SEC imposing additional penalties such as suspensions or commencing any further administrative proceedings. Although it does not play a substantial role (as defined under PCAOB standards) in the audit of our consolidated financial statements, if PricewaterhouseCoopers Zhong Tian CPAs Limited were denied, temporarily, the ability to practice before the SEC, our ability to produce audited consolidated financial statements for our company could be affected and we could be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the delisting of our shares from the NASDAQ Global Select Market or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our stock.

We may engage in ~~future~~ acquisitions that could ~~disrupt our business, cause dilution to our~~dilute stockholders and harm our ~~business, results of operations, financial condition and cash flows and future prospects.~~business.

~~While we currently have no specific plans to acquire any other businesses, we~~We may, in the future, make acquisitions of, or investments in, companies that we believe have products or capabilities that are a strategic or commercial fit with our present or future product candidates and business or otherwise offer opportunities for ~~our company.~~us. In connection with these acquisitions or investments, we may:

We may not be able to complete acquisitions on favorable terms, if at all. If we do complete an acquisition, we cannot assure you that it will ultimately strengthen our competitive position or that it will be viewed positively by customers, financial markets or investors. Furthermore, future acquisitions could pose numerous additional risks to our operations, including:

We may not be able to complete any acquisitions or effectively integrate the operations, products or personnel gained through any such acquisition.

Provisions in our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, ~~even if an acquisition would be beneficial to our stockholders,~~ and may prevent attempts by our stockholders to replace or remove our current directors or management.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may have the effect of discouraging, delaying or preventing a change in control of us or changes in our management. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

Moreover, because we are incorporated in Delaware, we are governed by certain anti-takeover provisions under Delaware law which may discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders. We are subject to the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Any provision of our amended and restated certificate of incorporation, our amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

~~Our ability to use net operating losses (“NOLs”) to offset future taxable income may be subject to certain limitations.~~

In general, under Section 382 of the Internal Revenue Code of 1986, as amended (“Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOL or tax credits (“credits”), to offset future taxable income. Our existing NOLs or credits may be subject to substantial limitations arising from previous ownership changes, and if we undergo an ownership change our ability to utilize NOLs or credits could be further limited by Section 382 of the Code. In addition, future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Section 382 of the Code. Our NOLs or credits may also be impaired under state law. Accordingly, we may not be able to utilize a material portion of our NOLs or credits. Furthermore, our ability to utilize our NOLs or credits is conditioned upon our attaining profitability and generating U.S. federal and state taxable income. As described above under “— ~~Risks Related to Our Financial Condition and History of Operating Losses~~,” we have incurred significant net losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future; thus, we do not know whether or when we will generate the U.S. federal or state taxable income necessary to utilize our NOLs or credits. A full valuation allowance has been provided for all of our NOLs and credits.

Changes in our tax provision or exposure to additional tax liabilities could adversely affect our earnings and financial condition.*

As a multinational corporation, we are subject to income taxes in the U.S. and various foreign jurisdictions. Significant judgment is required in determining our global provision for income taxes and other tax liabilities. In the ordinary course of a global business, there are intercompany transactions and calculations where the ultimate tax determination is uncertain. Our income tax returns are subject to audits by tax authorities. Although we regularly assess the likelihood of adverse outcomes resulting from these examinations to determine our tax estimates, a final determination of tax audits or tax disputes could have an adverse effect on our results of operations and financial condition. In the U.S., comprehensive tax reform has been announced as a priority by the new President’s administration and the U.S. Congress. Various proposals are under evaluation and consideration but it is not possible to accurately ascertain at this time the overall impact of such proposals on our future tax liabilities, profitability, and financial condition.

We are also subject to non-income taxes, such as payroll, excise, customs and duties, sales, use, value-added, net worth, property, gross receipts, and goods and services taxes in the ~~U.S,~~U.S., state and local, orand various foreign jurisdictions. We are subject to audit and assessments by tax authorities with respect to these non-income taxes and may have exposure to additional non-income tax liabilities, which could have an adverse effect on our results of operations and financial ~~condition~~.condition.

In addition, our judgment in providing for the possible impact of the Tax Act remains subject to developing interpretations of the provisions of the Tax Act. As regulations and guidance evolve with respect to the Tax Act, we continue to examine the impact to our tax provision or exposure to additional tax liabilities, which could have a material adverse effect on our business, results of operations or financial condition.

Tariffs imposed by the U.S. and those imposed in response by other countries could have a material adverse effect on our business.

Changes in U.S. and foreign governments’ trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from the U.S. Throughout 2018 and 2019, the U.S. imposed tariffs on imports from several countries, including China. In response, China has proposed and implemented their own tariffs on certain products, which may impact our supply chain and our costs of doing business. If we are impacted by the changing trade relations between the U.S. and China, our business and results of operations may be negatively impacted. Continued diminished trade relations between the U.S. and other countries, including potential reductions in trade with China and others, as well as the continued escalation of tariffs, could have a material adverse effect on our financial performance and results of operations.

Our ~~amended and restated~~ certificate of incorporation designates ~~the state or federal~~ courts located in ~~the State of~~ Delaware as the sole ~~and exclusive~~ forum for certain ~~types of actions and~~ proceedings, ~~that may be initiated by our stockholders,~~ which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.*

Our amended and restated certificate of incorporation provides that, subject to limited exceptions, the state and federal courts located in the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated by-laws, or (4) any other action asserting a claim against us that is governed by the internal affairs doctrine. ~~Any person~~This provision would not apply to suits brought to enforce a duty or ~~entity purchasing~~liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or ~~otherwise acquiring~~contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation further provides that the U.S. federal district courts will be the exclusive forum for resolving any ~~interest~~complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in ~~shares~~a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of ~~our capital stock shall be deemed to have notice of and to have consented to~~ the exclusive forum provisions of our amended and restated certificate of ~~incorporation described above.~~ incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. ~~Alternatively, if~~If a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

~~Because we~~We do not ~~anticipate paying any cash dividends on our capital stock in the foreseeable future, capital~~plan to pay dividends. Capital appreciation ~~if any,~~ will be your sole possible source of gain, ~~and you~~which may never ~~receive a return on your investment.~~occur.

You should not rely on an investment in our common stock to provide dividend income. We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future and investors seeking cash dividends should not purchase our common stock. We plan to retain any earnings to invest in our product candidates and maintain and expand our operations. Therefore, capital appreciation, or an increase in your stock price, which may never occur, may be the only way to realize any return on your investment.

On November 13, 2014, our Registration Statement on Form S-1, as amended (Reg. Nos. 333-199069 and 333-200189) was declared effective in connection with the initial public offering of our common stock. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act on November 14, 2014.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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


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

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐
		Emerging growth company	☐

		Page
PART I—FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	32
	Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019 (Unaudited)	32
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019 (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	4
	Condensed Consolidated Statements of ~~Comprehensive Loss~~Changes in Equity for the Three and Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019 (Unaudited)	6
	~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~	7
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1728
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3151
Item 4.	Controls and Procedures	3151

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	3353
Item 1A.	Risk Factors	3353
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7290
Item 3.	Defaults Upon Senior Securities	7290
Item 4.	Mine Safety Disclosures	7291
Item 5.	Other Information	7291
Item 6.	Exhibits	7391
	Signatures	7493

Japan Agreement	Cumulative Revenue Through September 30, 2020		Deferred Revenue at September 30, 2020		Total Consideration Through September 30, 2020
License	$	86,024	$	0	$	86,024
Development revenue		15,543		164		15,707
Total license and development revenue	$	101,567	$	164	$	101,731

		Three Months Ended September 30,				Nine Months Ended September 30,
Agreement	Performance Obligation	2020		2019		2020		2019
Japan	License revenue	$	0	$	11,935	$	0	$	11,935
	Development revenue	$	86	$	537	$	413	$	1,151

U.S. / RoW and China Agreements	Cumulative Revenue Through September 30, 2020		Deferred Revenue at September 30, 2020		Total Consideration Through September 30, 2020
License	$	341,844	$	0	$	341,844
Co-development, information sharing & committee services		536,792		2,435		539,227
China performance obligation		1,390		141,171		142,561
Total license and development revenue	$	880,026	$	143,606	$	1,023,632

	September 30, 2020		December 31, 2019
Price adjustment	$	529	$	936
Contractual sales rebate		3,479		148
Non-key account hospital listing award		5,238		0
Other discounts and rebates		513		18
Sales return		53		0
Provision for credit loss		102		0
Total reductions to gross accounts receivable	$	9,914	$	1,102

	Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
Astellas	$	(3,957	)	$	4,281
AstraZeneca		4,643			4,643
Drug product revenue	$	686		$	8,924

	Cumulative Revenue Through September 30, 2017		Deferred Revenue at September 30, 2017		Total Consideration Through September 30, 2017
License	$	46,646	$	—	$	46,646
When and if available compounds		24		24		48
Manufacturing--clinical supplies		2,164		—		2,164
Committee services		21		—		21
Total license and collaboration services revenue	$	48,855	$	24	$	48,879

		Three Months Ended September 30,						Nine Months Ended September 30,
	Statement of Operations Line Item	2020			2019			2020			2019
Finance lease cost:
Amortization of right-of-use assets	Cost of goods sold; Research and development; Selling, general and administrative expenses	$	2,639		$	2,580		$	7,886		$	7,720
Interest on lease liabilities	Interest expense		462			578			1,511			1,826
Operating lease cost	Cost of goods sold; Research and development; Selling, general and administrative expenses		304			290			868			579
Sublease income	Selling, general and administrative expenses		(301	)		(310	)		(899	)		(1,135	)
Total lease cost		$	3,104		$	3,138		$	9,366		$	8,990

	September 30, 2020			December 31, 2019
Weighted-average remaining lease term (years):
Finance leases		3.1			3.6
Operating leases		1.6			2.1
Weighted-average discount rate:
Finance leases		4.39	%		4.42	%
Operating leases		4.73	%		4.75	%

Year Ending	Finance Leases			Operating Leases
2020 (Remaining three month period)	$	3,542		$	245
2021		13,683			714
2022		13,883			329
2023		12,524			0
Total future lease payments		43,632			1,288
Less: Interest		(2,807	)		(46	)
Present value of lease liabilities	$	40,825		$	1,242

	September 30, 2020		December 31, 2019
Cash	$	80,551	$	40,715
Money market funds		451,917		85,551
Total cash and cash equivalents	$	532,468	$	126,266

	September 30, 2020		December 31, 2019
Raw materials	$	1,152	$	325
Work-in-progress		5,616		2,264
Finished goods		5,034		4,298
Total inventories	$	11,803	$	6,887

	September 30, 2020		December 31, 2019
Unbilled contract assets	$	0	$	180,000
Deferred revenues from associated contracts		0		(54,790	)
Net unbilled contract assets		0		125,210
Prepaid assets		5,549		6,464
Other current assets		6,014		1,717
Total prepaid expenses and other current assets	$	11,563	$	133,391

	September 30, 2020			December 31, 2019
Leasehold improvements	$	101,162		$	101,548
Laboratory equipment		17,890			17,329
Machinery		8,012			8,217
Computer equipment		9,124			8,399
Furniture and fixtures		6,110			5,822
Construction in progress		1,506			1,792
Total property and equipment	$	143,804		$	143,107
Less: accumulated depreciation		(107,651	)		(100,364	)
Property and equipment, net	$	36,153		$	42,743

	September 30, 2020		December 31, 2019
Preclinical and clinical trial accruals	$	29,396	$	16,279
API product price adjustment		3,957		36,324
Payroll and related accruals		19,606		19,784
Accrued co-promotion expenses - current		14,836		0
Property taxes and other		6,057		2,044
Professional services		7,384		4,842
Other		9,336		4,543
Total accrued and other current liabilities	$	90,572	$	83,816

	September 30, 2020		December 31, 2019
Accrued long-term co-promotion expenses	$	26,344	$	53,071
Other long-term tax liabilities		8,637		8,913
Operating lease liabilities, non-current		472		942
Other		2,186		1,340
Total other long-term liabilities	$	37,639	$	64,266

	Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
	(dollars in thousands)
Drug product revenue:
Astellas	$	(3,957	)	$	4,281
AstraZeneca		4,643			4,643
Total drug product revenue:	$	686		$	8,924

Exhibit		Incorporation By Reference
Number	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date

3.1	Amended and Restated Certificate of Incorporation of FibroGen, Inc.	8-K	001-36740	3.1	11/21/2014

3.2	Amended and Restated Bylaws of FibroGen, Inc.	S-1/A	333-199069	3.4	10/23/2014

4.1	Form of Common Stock Certificate.	8-K	001-36740	4.1	11/21/2014

4.2	Shareholders’ Agreement by and among FibroGen International (Cayman) Limited and certain of its shareholders, dated as of September 8, 2017.	10-Q	001-36740	4.6	11/8/2017

4.3	Common Stock Purchase Agreement by and between FibroGen, Inc. and AstraZeneca AB, dated as of October 20, 2014.	S-1/A	333-199069	4.17	10/24/2014

10.1*†	Collaboration Agreement by and between FibroGen, Inc. and Astellas Pharma Inc., effective June 1, 2005.	—	—	—	—

10.2*†	Amended and Restated License, Development and Commercialization Agreement (for the U.S. and Certain Other Territories) by and between FibroGen, Inc. and AstraZeneca AB, effective as of July 30, 2013.	—	—	—	—

10.3*†	Amended and Restated License, Development and Commercialization Agreement (China) by and among FibroGen China Anemia Holdings, Ltd., Beijing FibroGen Medical Technology Development Co., Ltd., FibroGen International (Hong Kong) Limited and AstraZeneca AB, effective July 30, 2013.	—	—	—	—

10.4*†	License Agreement by and between FibroGen, Inc. and the University of Miami and its School of Medicine, effective as of May 23, 1997.	—	—	—	—


10.5*†	First Amendment to May 23, 1997 License Agreement by and between FibroGen, Inc. and the University of Miami, effective as of July 29, 1999.	—	—	—	—

10.6*†	Amendment No. 2 to Research and Commercialization Agreement by and among FibroGen, Inc., Medarex, Inc., GenPharm International Inc., and FibroPharma, Inc., effective as of January 28, 2002.	—	—	—	—

10.7*†	License Agreement by and between FibroGen, Inc. and the Dana-Farber Cancer Institute, Inc., effective as of March 29, 2006.	—	—	—	—

10.8*†	Amendment No. 2 to Master Supply Agreement by and among FibroGen, Inc., Shanghai SynTheAll Pharmaceutical Co., Ltd., and STA Pharmaceutical Hong Kong Limited, effective as of July 24, 2020.	—	—	—	—

10.9*†	Master Supply Agreement by and between FibroGen, Inc. and AstraZeneca UK Limited, effective as of September 10, 2020.	—	—	—	—

10.10†	Second Amended and Restated License, Development and Commercialization Agreement by and among FibroGen China Anemia Holdings, Ltd., FibroGen China Medical Technology Development Co., Ltd., FibroGen International (Hong Kong) Limited, and AstraZeneca AB, effective as of July 1, 2020.	10-Q	001-36740	10.3	08/06/2020

10.11†	Amendment No. 1 to the Amended and Restated License, Development and Commercialization Agreement by and between FibroGen, Inc. and AstraZeneca AB, effective as of July 1, 2020.	10-Q	001-36740	10.4	08/06/2020

31.1*	Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a).	—	—	—	—

31.2*	Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a).	—	—	—	—

32.1*	Certification of Principal Executive Officer and Principal Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350)(1)).	—	—	—	—

101.INS	Inline XBRL Instance Document: the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document	—	—	—	—

101.SCH	Inline XBRL Taxonomy Extension Schema Document	—	—	—	—

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	—	—	—	—

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	—	—	—	—

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	—	—	—	—

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	—	—	—	—

104	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)	—	—	—	—

	FibroGen, Inc.

Dated: November ~~8, 2017~~5, 2020	By:	/s/ ~~Thomas B. Neff~~Enrique Conterno
		~~Thomas B. Neff~~Enrique Conterno
		~~Chairman of the Board and~~ Chief Executive Officer
		(Principal Executive Officer)

Dated: November ~~8, 2017~~5, 2020	By:	/s/ Pat Cotroneo
		Pat Cotroneo
		Senior Vice President, Finance and Chief Financial Officer
		(Principal Financial and Accounting Officer)