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

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

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

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 ~~July~~October 31, 2021 was ~~92,621,941.~~92,709,943.

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

Risks Related to the Development and Commercialization of Our Product Candidates

	June 30, 2021			December 31, 2020				September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	353,361		$	678,393			$	274,527		$	678,393
Short-term investments		153,851			8,144				211,875			8,144
Accounts receivable, net ($13,352 and $4,127 from related parties)		24,266			41,883
Accounts receivable, net ($23,126 and $4,127 from related parties)									35,994			41,883
Inventories		24,530			16,530				29,315			16,530
Prepaid expenses and other current assets ($0 and $889 from related parties)		8,458			10,160				21,688			10,160
Total current assets		564,466			755,110				573,399			755,110
Restricted time deposits		2,072			2,072				2,072			2,072
Long-term investments		105,758			244				142,636			244
Property and equipment, net		30,670			33,647				29,052			33,647
Finance lease right-of-use assets		861			29,606				771			29,606
Equity method investment in unconsolidated variable interest entity		3,083			2,728				3,421			2,728
Operating lease right-of-use assets		97,091			2,043				94,055			2,043
Other assets		4,617			1,390				5,107			1,390
Total assets	$	808,618		$	826,840			$	850,513		$	826,840

Liabilities, stockholders’ equity and non-controlling interests
Current liabilities:
Accounts payable ($0 and $1,118 to a related party)	$	48,988		$	24,789			$	23,868		$	24,789
Accrued and other current liabilities ($14 and $24 to a related party)		147,801			118,333
Deferred revenue ($10,699 and $2,907 to a related party)		25,234			6,547
Accrued and other current liabilities ($18 and $24 to a related party)									151,346			118,333
Deferred revenue ($9,113 and $2,907 to a related party)									23,256			6,547
Finance lease liabilities, current		23			12,330				15			12,330
Operating lease liabilities, current		10,718			1,188				10,831			1,188
Total current liabilities		232,764			163,187				209,316			163,187
Product development obligations		18,277			18,697				17,914			18,697
Deferred revenue, net of current ($9,381 and $4,636 to a related party)		152,865			138,474
Deferred revenue, net of current ($10,604 and $4,636 to a related party)									162,415			138,474
Finance lease liabilities, non-current		6			25,391				5			25,391
Operating lease liabilities, non-current		94,196			853				91,478			853
Other long-term liabilities		30,659			38,789				24,322			38,789
Total liabilities		528,767			385,391		��		505,450			385,391

Commitments and Contingencies

Stockholders’ equity:
Preferred stock, $0.01 par value; 125,000 shares authorized; 0 shares issued and outstanding at June 30, 2021, and December 31, 2020		0			0
Common stock, $0.01 par value; 225,000 shares authorized at June 30, 2021, and December 31, 2020; 92,609 and 91,441 shares issued and outstanding at June 30, 2021, and December 31, 2020		926			914
Preferred stock, $0.01 par value; 125,000 shares authorized; 0 shares issued and outstanding at September 30, 2021, and December 31, 2020									0			0
Common stock, $0.01 par value; 225,000 shares authorized at September 30, 2021, and December 31, 2020; 92,708 and 91,441 shares issued and outstanding at September 30, 2021, and December 31, 2020									927			914
Additional paid-in capital		1,443,975			1,399,774				1,458,979			1,399,774
Accumulated other comprehensive loss		(4,567	)		(4,499	)			(4,158	)		(4,499	)
Accumulated deficit		(1,179,754	)		(974,011	)			(1,129,956	)		(974,011	)
Total stockholders’ equity		260,580			422,178				325,792			422,178
Non-controlling interests		19,271			19,271				19,271			19,271
Total equity		279,851			441,449				345,063			441,449
Total liabilities, stockholders’ equity and non-controlling interests	$	808,618		$	826,840			$	850,513		$	826,840

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

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020			2021			2020
Revenue:
License revenue	$	0		$	0		$	0		$	0
Development and other revenue (includes $2,645, $4,766, $6,256 and $9,503 from a related party)		19,641			18,957			34,228			38,402
Product revenue, net (includes $11,760, $0, $22,167 and $0 from a related party)		13,371			15,693			28,733			20,648
Drug product revenue (includes $(1,974), $8,238, $2,056 and $8,238 from a related party)		(8,648	)		8,238			(168	)		8,238
License revenue(includes $108,434, $0, $108,434 and $0 from a related party)													$	116,434		$	0		$	116,434		$	0
Development and other revenue (includes $14,127, $4,736, $20,383 and $14,239 from a related party)														26,097			20,663			60,325			59,065
Product revenue, net (includes $10,328, $0, $32,495 and $0 from a related party)														13,442			22,683			42,175			43,331
Drug product revenue (includes $0, $(3,957), $2,056 and $4,281 from a related party)														0			686			(168	)		8,924
Total revenue		24,364			42,888			62,793			67,288			155,973			44,032			218,766			111,320

Operating costs and expenses:
Cost of goods sold		3,078			3,076			6,479			4,047			3,266			2,207			9,746			6,253
Research and development		122,567			61,414			197,243			116,315			75,880			58,476			273,123			174,792
Selling, general and administrative		32,554			63,535			63,334			113,138			25,853			(48,981	)		89,186			64,157
Total operating costs and expenses		158,199			128,025			267,056			233,500			104,999			11,702			372,055			245,202
Loss from operations		(133,835	)		(85,137	)		(204,263	)		(166,212	)
Income (loss) from operations														50,974			32,330			(153,289	)		(133,882	)

Interest and other, net
Interest expense		(355	)		(651	)		(856	)		(1,284	)		(109	)		(580	)		(965	)		(1,864	)
Interest income and other income (expenses), net		(363	)		644			(817	)		3,810			(1,303	)		1,482			(2,120	)		5,292
Total interest and other, net		(718	)		(7	)		(1,673	)		2,526			(1,412	)		902			(3,085	)		3,428

Loss before income taxes		(134,553	)		(85,144	)		(205,936	)		(163,686	)
Provision for (benefit from) income taxes		(3	)		169			130			(25	)
Investment income in unconsolidated variable interest entity		562			0			323			0
Net loss	$	(133,988	)	$	(85,313	)	$	(205,743	)	$	(163,661	)
Income (loss) before income taxes														49,562			33,232			(156,374	)		(130,454	)
Provision for income taxes														106			215			235			190
Investment income (loss) in unconsolidated variable interest entity														342			(13	)		664			(13	)
Net income (loss)													$	49,798		$	33,004		$	(155,945	)	$	(130,657	)

Net loss per share - basic and diluted	$	(1.45	)	$	(0.95	)	$	(2.24	)	$	(1.84	)
Net income (loss) per share:
Basic													$	0.54		$	0.36		$	(1.69	)	$	(1.46	)
Diluted													$	0.54		$	0.35		$	(1.69	)	$	(1.46	)

Weighted average number of common shares used to calculate net loss per share - basic and diluted		92,276			89,451			91,983			88,835
Weighted average number of common shares used to calculate net income (loss) per share:
Basic														92,644			90,558			92,206			89,414
Diluted														92,808			93,678			92,206			89,414

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

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,					Nine Months Ended September 30,
	2021			2020			2021			2020			2021		2020			2021			2020
Net loss	$	(133,988	)	$	(85,313	)	$	(205,743	)	$	(163,661	)
Net income (loss)													$	49,798	$	33,004		$	(155,945	)	$	(130,657	)
Other comprehensive income (loss):
Foreign currency translation adjustments		40			(1,615	)		(30	)		(1,334	)		396		(2,038	)		366			(3,372	)
Available-for-sale investments:
Unrealized gain (loss) on investments, net of tax effect		17			(1,129	)		(38	)		520			13		(657	)		(25	)		(137	)
Other comprehensive income, net of taxes		57			(2,744	)		(68	)		(814	)
Comprehensive loss	$	(133,931	)	$	(88,057	)	$	(205,811	)	$	(164,475	)
Other comprehensive income (loss), net of taxes														409		(2,695	)		341			(3,509	)
Comprehensive income (loss)													$	50,207	$	30,309		$	(155,604	)	$	(134,166	)

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

	For The Three Month Period																	For The Three Month Period
	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Non Controlling					Common Stock				Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Non Controlling
	Shares		Amount		Capital		Income (Loss)			Deficit			Interests		Total			Shares		Amount		Capital			Income (Loss)			Deficit			Interests		Total
Balance at March 31, 2021		92,080,399	$	921	$	1,420,471	$	(4,624	)	$	(1,045,766	)	$	19,271	$	390,273
Net loss		0		0		0		0			(133,988	)		0		(133,988	)
Balance at June 30, 2021																			92,608,929	$	926	$	1,443,975		$	(4,567	)	$	(1,179,754	)	$	19,271	$	279,851
Net income																			0		0		0			0			49,798			0		49,798
Change in unrealized gain or loss on investments		0		0		0		17			0			0		17			0		0		0			13			0			0		13
Foreign currency translation adjustments		0		0		0		40			0			0		40			0		0		0			396			0			0		396
Shares issued from stock plans, net of payroll taxes paid		528,530		5		4,503		0			0			0		4,508			99,023		1		(700	)		0			0			0		(699	)
Stock-based compensation		0		0		19,001		0			0			0		19,001			0		0		15,704			0			0			0		15,704
Balance at June 30, 2021		92,608,929	$	926	$	1,443,975	$	(4,567	)	$	(1,179,754	)	$	19,271	$	279,851
Balance at September 30, 2021																			92,707,952	$	927	$	1,458,979		$	(4,158	)	$	(1,129,956	)	$	19,271	$	345,063

Balance at March 31, 2020		88,895,630	$	889	$	1,319,354	$	1,183		$	(863,068	)	$	19,271	$	477,629
Net loss		0		0		0		0			(85,313	)		0		(85,313	)
Balance at June 30, 2020																			90,228,293	$	902	$	1,344,912		$	(1,561	)	$	(948,381	)	$	19,271	$	415,143
Net income																			0		0		0			0			33,004			0		33,004
Change in unrealized gain or loss on investments		0		0		0		(1,129	)		0			0		(1,129	)		0		0		0			(657	)		0			0		(657	)
Foreign currency translation adjustments		0		0		0		(1,615	)		0			0		(1,615	)		0		0		0			(2,038	)		0			0		(2,038	)
Shares issued from stock plans, net of payroll taxes paid		1,332,663		13		7,914		0			0			0		7,927			656,463		7		7,581			0			0			0		7,588
Stock-based compensation		0		0		17,644		0			0			0		17,644			0		0		17,891			0			0			0		17,891
Balance at June 30, 2020		90,228,293	$	902	$	1,344,912	$	(1,561	)	$	(948,381	)	$	19,271	$	415,143
Balance at September 30, 2020																			90,884,756	$	909	$	1,370,384		$	(4,256	)	$	(915,377	)	$	19,271	$	470,931

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

	For The Six Month Period																	For The Nine Month Period
	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Non Controlling					Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Non Controlling
	Shares		Amount		Capital		Loss			Deficit			Interests		Total			Shares		Amount		Capital		Loss			Deficit			Interests		Total
Balance at December 31, 2020		91,440,633	$	914	$	1,399,774	$	(4,499	)	$	(974,011	)	$	19,271	$	441,449			91,440,633	$	914	$	1,399,774	$	(4,499	)	$	(974,011	)	$	19,271	$	441,449
Net loss		0		0		0		0			(205,743	)		0		(205,743	)		0		0		0		0			(155,945	)		0		(155,945	)
Change in unrealized gain or loss on investments		0		0		0		(38	)		0			0		(38	)		0		0		0		(25	)		0			0		(25	)
Foreign currency translation adjustments		0		0		0		(30	)		0			0		(30	)		0		0		0		366			0			0		366
Shares issued from stock plans, net of payroll taxes paid		1,168,296		12		5,816		0			0			0		5,828			1,267,319		13		5,116		0			0			0		5,129
Stock-based compensation		0		0		38,385		0			0			0		38,385			0		0		54,089		0			0			0		54,089
Balance at June 30, 2021		92,608,929	$	926	$	1,443,975	$	(4,567	)	$	(1,179,754	)	$	19,271	$	279,851
Balance at September 30, 2021																			92,707,952	$	927	$	1,458,979	$	(4,158	)	$	(1,129,956	)	$	19,271	$	345,063

Balance at December 31, 2019		87,657,489	$	877	$	1,300,725	$	(747	)	$	(784,720	)	$	19,271	$	535,406			87,657,489	$	877	$	1,300,725	$	(747	)	$	(784,720	)	$	19,271	$	535,406
Net loss		0		0		0		0			(163,661	)		0		(163,661	)		0		0		0		0			(130,657	)		0		(130,657	)
Change in unrealized gain or loss on investments		0		0		0		520			0			0		520			0		0		0		(137	)		0			0		(137	)
Foreign currency translation adjustments		0		0		0		(1,334	)		0			0		(1,334	)		0		0		0		(3,372	)		0			0		(3,372	)
Shares issued from stock plans, net of payroll taxes paid		2,570,804		25		9,627		0			0			0		9,652			3,227,267		32		17,208		0			0			0		17,240
Stock-based compensation		0		0		34,560		0			0			0		34,560			0		0		52,451		0			0			0		52,451
Balance at June 30, 2020		90,228,293	$	902	$	1,344,912	$	(1,561	)	$	(948,381	)	$	19,271	$	415,143
Balance at September 30, 2020																			90,884,756	$	909	$	1,370,384	$	(4,256	)	$	(915,377	)	$	19,271	$	470,931

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

	Six Months Ended June 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Operating activities
Net loss	$	(205,743	)	$	(163,661	)	$	(155,945	)	$	(130,657	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		5,242			5,737			7,717			8,671
Amortization of finance lease right-of-use assets		4,393			5,247			4,509			7,886
Net accretion of premium and discount on investments		767			(22	)		1,447			103
Unrealized loss on equity investments		4			15			12			(3	)
Investment loss in unconsolidated variable interest entity		(323	)		0
Investment (gain) loss in unconsolidated variable interest entity								(664	)		13
Loss (gain) on disposal of property and equipment		13			0			232			(3	)
Stock-based compensation		38,385			34,560			54,089			52,451
Expense for acquired in-process research and development asset		25,000			0			25,000			0
Tax benefit on unrealized gain on available-for-sale securities		0			(138	)
Realized loss on sales of available-for-sale securities		8			258			8			258
Changes in operating assets and liabilities:
Accounts receivable, net		17,868			1,903			6,131			2,520
Inventories		(7,861	)		(2,016	)		(12,658	)		(5,206	)
Prepaid expenses and other current assets		2,231			126,874			(11,160	)		121,923
Operating lease right-of-use assets		(1,800	)		494			1,232			678
Other assets		(3,066	)		3,529			(3,563	)		6,857
Accounts payable		(1,013	)		(1,060	)		(1,115	)		1,440
Accrued and other liabilities		27,745			(33,331	)		31,997			3,478
Operating lease liabilities, current		295			(170	)		410			(229	)
Deferred revenue		33,078			48,117			40,650			45,925
Accrued interest for finance lease liabilities		(73	)		(115	)		(76	)		(196	)
Operating lease liabilities, non-current		1,388			(359	)		(1,326	)		(479	)
Other long-term liabilities		(8,065	)		64,317			(14,199	)		(26,600	)
Net cash provided by (used in) operating activities		(71,527	)		90,179			(27,272	)		88,830

Investing activities
Purchases of property and equipment		(2,215	)		(1,185	)		(3,790	)		(1,604	)
Payment made for acquired in-process research and development asset								(25,000	)		0
Payment made for investment in unconsolidated variable interest entity		0			(1,419	)		0			(2,145	)
Purchases of available-for-sale securities		(266,647	)		(38	)		(397,909	)		(38	)
Proceeds from sales of available-for-sale securities		4,000			10,606			4,000			10,606
Proceeds from maturities of investments		10,610			201,900			46,294			301,900
Net cash provided by (used in) investing activities		(254,252	)		209,864			(376,405	)		308,719

Financing activities
Repayments of finance lease liabilities		(5,326	)		(5,992	)		(5,359	)		(9,254	)
Repayments of lease obligations		(201	)		(201	)		(302	)		(302	)
Cash paid for payroll taxes on restricted stock unit releases		(5,928	)		(6,858	)		(6,734	)		(9,007	)
Proceeds from issuance of common stock		11,756			16,510			11,863			26,247
Net cash provided by financing activities		301			3,459
Net cash provided by (used in) financing activities								(532	)		7,684
Effect of exchange rate change on cash and cash equivalents		446			(499	)		343			969
Net increase (decrease) in cash and cash equivalents		(325,032	)		303,003			(403,866	)		406,202
Total cash and cash equivalents at beginning of period		678,393			126,266			678,393			126,266
Total cash and cash equivalents at end of period	$	353,361		$	429,269		$	274,527		$	532,468

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

FibroGen, Inc. (“FibroGen” or the “Company”) is headquartered in San Francisco, California, with subsidiary offices in Beijing and Shanghai, People’s Republic of China (“China”). FibroGen is a leading biopharmaceutical company developing and commercializing a pipeline of first-in-class therapeutics. The Company applies its pioneering expertise in hypoxia-inducible factor (“HIF”) biology, 2-oxoglutarate enzymology, connective tissue growth factor (“CTGF”) biology, and clinical developmenttherapeutics to advance innovative medicines for the treatment of anemia, fibrotic disease, and cancer.

Roxadustat, FibroGen’s most advanced product, is an oral small molecule inhibitor of ~~HIF~~hypoxia-inducible factor prolyl hydroxylase (“HIF-PH”) activity that is ~~being commercialized~~approved in ~~China (tradename: 爱瑞卓~~^®)the European Union, Great Britain, Japan, South Korea, and Chile for the treatment of anemia caused by chronic kidney disease (“CKD”) in dialysis and non-dialysis ~~patients.~~patients, under the tradename EVRENZO^® ~~(roxadustat)~~. Roxadustat is also being commercialized in ~~Japan and has been approved in South Korea and Chile~~China for ~~the treatment of~~CKD anemia ~~associated with CKD~~ in dialysis and non-dialysis ~~patients.~~

~~In June 2021,~~patients under the Committee for Medicinal Products for Human Use of the European Medicines Agency (“EMA”) adopted a positive opinion, recommending the granting of Marketing Authorization Application (“MAA”) for the medicinal product Evrenzo (roxadustat), intended for the treatment of adult patients with symptomatic anemia associated with CKD. Our partner Astellas Pharma Inc. (“Astellas”) expects an approval decision on the MAA for roxadustat by the European Commission in August 2021.

In July 2021, the United States (“U.S.”) Food and Drug Administration (“FDA”) Cardiovascular and Renal Drugs Advisory Committee (“CRDAC”) voted to recommend not approving roxadustat, an oral HIF-PH inhibitor, for the treatment of anemia due to CKD in adult patients. The CRDAC vote was 13 to 1 for non-dialysis dependent CKD patients, and 12 to 2 for dialysis-dependent CKD patients. While the FDA is not required to follow CRDAC's vote, the agency considers CRDAC's non-binding recommendations when making its decision.tradename: 爱瑞卓^®.

Roxadustat is in Phase 3 clinical development ~~in the U.S. and Europe and in Phase 3 development in China~~ for anemia associated with myelodysplastic ~~syndromes. Roxadustat is in~~syndromes and Phase 2 clinical development for chemotherapy-induced anemia.

Pamrevlumab, a human monoclonal antibody targeting ~~CTGF,~~connective tissue growth factor, is in Phase 3 clinical development for the treatment of idiopathic pulmonary fibrosis, locally advanced unresectable pancreatic cancer and Duchenne muscular dystrophy.

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. All inter-company transactions and balances have been eliminated in consolidation. For any variable interest entity (“VIE”) for which FibroGen is not the primary beneficiary, the Company uses the equity method of accounting. The Company operates as 1 reportable 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 ~~U.S.~~United States (“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 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 financial information included herein should be read in conjunction with the consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2020 (“2020 Form 10-K”).

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, specifically, estimates in variable consideration for drug product sales, and estimates in transaction price per unit for the China performance obligation (as defined and discussed under Significant Accounting Policies below). 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 the Company’s opinion, the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair statement of 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):

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, 2021 and 2020, 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 ~~11.4~~12.5 million and ~~9.2~~4.2 million for the three months ended ~~June~~September 30, 2021 and 2020, and totaling ~~9.4~~9.7 million and ~~9.0~~8.9 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively, as they were anti-dilutive.

The Company’s business is subject to risks and uncertainties, including those related to Severe Acute Respiratory Syndrome Coronavirus 2 and the resulting Coronavirus Disease (“COVID-19”) and the risk that we may not get approval of roxadustat in the U.S. for CKD anemia given the fact that the CRDAC voted to recommend not approving roxadustat in July 2021.

The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, obtaining second source suppliers, regulatory approval from the ~~FDA~~U.S. Food and Drug Administration (“FDA”) or other regulatory authorities, the results of clinical trials and the achievement of milestones, market acceptance of the Company’s product candidates, competition from other products and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance simplifies the accounting for income taxes by clarifying and amending existing guidance related to the recognition of franchise tax, the evaluation of a step up in the tax basis of goodwill, and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications. This guidance was effective for annual reporting periods beginning after December 15, 2020 including interim periods. The Company adopted this guidance on January 1, 2021, and the adoption of this guidance did not have material impact to the Company’s condensed consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides companies with optional financial reporting alternatives to reduce the cost and complexity associated with the accounting for contracts and hedging relationships affected by reference rate reform. This guidance is effective as of March 12, 2020 through December 31, 2022. Subsequently in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies ASU 2020-04 and provides certain optional expedients that allow derivative instruments impacted by changes in the interest rate used for margining, discounting or contract price alignment to qualify for certain optional relief. ASU 2021-01 is effective in the same timeframe as ASU 2020-04. The relief offered by this guidance, if adopted, is available to companies for the period March 12, 2020 through December 31, 2022. The Company has certain lease arrangements that are linked to LIBOR. The Company is in the process of evaluating options for transitioning away from LIBOR and expects to complete this analysis by the time LIBOR is phased out. The Company did not elect to apply any of the expedients or exceptions as of and for the period ended ~~June~~ September 30, 2021 and is currently evaluating the impact on its consolidated financial statements and related disclosures upon adoption of this guidance.

The accounting policies used by the Company in its presentation of interim financial results are consistent with those presented in Note 2 to the consolidated financial statements included in the 2020 Form 10-K, except for the updates to the following:

Under a license agreement, if the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognize revenues from upfront license fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company determines whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, the Company uses judgment in determining the appropriate method of measuring progress for purposes of recognizing revenue from the up-front license fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Product revenue, net consists of revenues from sales of roxadustat commercial product to Beijing Falikang Pharmaceutical Co., Ltd. (“Falikang”), and directly to pharmaceutical distributors located in a few provinces in China that are not covered by Falikang. Falikang is jointly owned by AstraZeneca AB (“AstraZeneca”) and FibroGen ~~Beijing.~~(China) Medical Technology Development Co., Ltd. (“FibroGen Beijing”). The Company is not the primary beneficiary of Falikang for accounting purposes, as AstraZeneca is the final decision maker for all the roxadustat commercialization activities, and the Company lacks the power criterion to direct the activities of Falikang (see Note 3, Variable Interest Entity).

Falikang became fully operational in January 2021, at which time FibroGen Beijing began selling roxadustat commercial product to Falikang. Falikang is FibroGen Beijing’s primary customer in China and substantially all roxadustat product sales to distributors in China are made by Falikang. Falikang bears inventory risk once it receives and accepts the product from FibroGen Beijing, and is responsible for delivering product to its distributors.

The promises identified under the AstraZeneca China Agreement (as defined in Note 2, Collaboration Agreements, License Agreement and Revenues), including the license, co-development services and manufacturing of commercial supplies have been bundled into a single performance obligation (“China performance obligation”). Amounts of the transaction price allocable to this performance obligation under the Company’s agreements with AstraZeneca as outlined in Note 2, Collaboration Agreements, License Agreement and Revenues, are deferred until control of the manufactured commercial product is transferred to AstraZeneca.

The initiation of roxadustat sales to Falikang marked the beginning of the China performance obligation. Revenue is recognized at a point in time when control of roxadustat commercial product is transferred to Falikang. Revenue is recognized based on the estimated transaction price per unit and actual quantity of product delivered during the reporting period. Specifically, the transaction price per unit is determined based on the overall transaction price over the total estimated sales quantity for the estimated performance period in which the Company believes those sales would occur. The price per unit is subject to reassessment on a quarterly basis, which may result in cumulative catch up adjustments due to changes in estimates.

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

The non-refundable upfront license fees constitute a fixed consideration. The remainder of the above are variable consideration components, which may be constrained, and included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period when the uncertainty associated with the variable consideration is subsequently resolved. The calculation of the above variable consideration includes key estimates such as total sales quantity, performance period, gross transfer price and profit share, which require a substantial degree of judgment.

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

The Company sells roxadustat in China directly to a number of pharmaceutical distributors located in a few provinces in China that are not covered by Falikang. These pharmaceutical distributors are the Company’s customers. 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 the customer in an amount that reflects the consideration ~~to which~~that the Company expects to be entitled to in exchange for the product.

The period between the transfer of control of the promised goods and when the Company receives payment is based on 60-day payment terms. As such, product revenue is not adjusted for the effects of a significant financing component.

Product revenue is recorded at the net sales prices ~~which~~that 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 other available information including estimated channel inventory levels and estimated sales made by the distributor to hospitals, which involve a substantial degree of judgment.

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

On June 16, 2021, the Company entered into an exclusive license and option agreement with HiFiBiO Therapeutics (“HiFiBiO”) (“HiFiBiO Agreement”), pursuant to which the Company exclusively licensed all product candidates in HiFiBiO’s Galectin-9 program and will have the sole right to develop them worldwide. The Company has also obtained exclusive options to license all product candidates in HiFiBiO’s CXCR5 and CCR8 programs. Under the terms of the HiFiBiO Agreement, the Company will make a ~~$25~~$25.0 million upfront payment to HiFiBiO, as well as payments upon option exercise. In addition, HiFiBiO may receive up to a total of an additional $1.1 billion in future option, clinical, regulatory, and commercial milestone payments across all three programs. HiFiBiO will also be eligible to receive royalties based upon worldwide net sales.

The acquisition of these licenses was accounted for as an asset acquisition. The initial upfront payment of $25.0 million related to the license and options acquisition meets the definition of an in-process research and development asset (“IPR&D asset”) under the ASC 730, Research and Development (“ASC 730”). It relates to particular research and development projects and is determined to have no alternative future uses and thus have no separate economic value. Therefore, this upfront payment was recorded as a research and development expense during the second quarter of 2021, and was paid during the three months ended ~~June 30, 2021. As of June~~September 30, 2021, ~~this amount~~which was ~~not paid, and was included~~reflected as ~~accounts payable~~an investing activity in the condensed consolidated ~~balance sheet.~~statement of cash flows.

Contingent consideration payments will be evaluated and recognized when they become probable and reasonably estimable. The related IPR&D asset will only be capitalized if it has an alternative future use other than in a particular research and development project. Otherwise, amounts allocated to IPR&D asset that have no alternative use will be expensed. As of ~~June~~September 30, 2021, all programs were at the early stage of development and the contingencies related to the milestone payments had not been resolved, therefore 0 contingent consideration was recognized. The Company will reassess the probability of future option payments and contingent payments on a quarterly basis.

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 Japan Agreement also provides for tiered payments based on net sales of product (as defined) in the low 20% range of the list price published by Japan’s Ministry of Health, Labour and Welfare, adjusted for certain elements, after commercial launch. The aggregate amount of consideration received through ~~June~~September 30, 2021 totals $105.1 million, excluding drug product revenue that is discussed separately below.

In 2018, FibroGen and Astellas entered into an amendment to the Japan Agreement that allows Astellas to manufacture roxadustat drug product for commercialization in Japan (the “Japan Amendment”). Under this amendment, FibroGen would continue to manufacture and supply roxadustat active pharmaceutical ingredient (“API”) to Astellas for the roxadustat commercial purposes in Japan. The commercial terms of the Japan Agreement relating to the transfer price for roxadustat for commercial use remain substantially the same, reflecting an adjustment for the manufacture of drug product by Astellas rather than FibroGen. The related drug product revenue, as described in details under Drug Product Revenue section below, was ~~$(2.0) million and~~ $2.1 million for the ~~three and six~~nine months ended ~~June~~September 30, ~~2021, respectively.~~2021.

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, comprised of (i) up to $90.0 million in milestone payments upon achievement of 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 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.

During the third quarter of 2021, the European Commission approved EVRENZO^® (roxadustat) for the treatment of adult patients with symptomatic anemia associated with CKD. Astellas has launched EVRENZO in Germany, the United Kingdom, the Netherlands, and Austria. This approval triggered a total of $120.0 million milestone payable to the Company by Astellas under the Europe Agreement. Accordingly, the consideration of $120.0 million associated with these milestones was included in the transaction price and allocated to performance obligations under the Europe Agreement, all of which was recognized as revenue during the third quarter of 2021 from performance obligations satisfied.

The aggregate amount of consideration received under the Europe Agreement through ~~June~~September 30, 2021 totals ~~$540.0~~$660.0 million, excluding drug product revenue that is discussed separately below.

Under the Europe Agreement, Astellas has an option to purchase roxadustat bulk drug product in support of commercial supplies. During the first quarter of 2021, the Company entered into an Astellas EU Supply Agreement (“EU Supply Agreement”) under the Europe Agreement with Astellas to define general forecast, order, supply and payment terms for Astellas to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies. The Company shipped bulk drug product to Astellas as pre-commercial supply for process validation purposes during the first quarter of 2021. The Company ~~recorded~~continued to record the consideration of $11.8 million from this shipment as deferred revenue as of ~~June~~September 30, 2021, as described in details under Drug Product Revenue section below.

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 (such amounts were fully received as of April 2020), (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 under the U.S./RoW Agreement through ~~June~~September 30, 2021 totals $439.0 million, excluding drug product revenue that is discussed separately below.

In 2020, the Company entered into Master Supply Agreement under the U.S./RoW Agreement with AstraZeneca (“Master Supply Agreement”) to define general forecast, order, supply and payment terms for AstraZeneca to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies. The Company shipped bulk drug product to AstraZeneca as commercial supply during 2020, and the first and second quarter of 2021. ~~On July 15,~~In August 2021, the FDA ~~CRDAC voted to recommend not approving roxadustat~~Issued a complete response letter (“CRL”) regarding roxadustat’s New Drug Application for the treatment of anemia due to CKD in adult ~~patients. While the FDA is~~patients, stating that it could not ~~required to follow the CRDAC’s vote, the agency considers the CRDAC’s non-binding recommendations when making~~be approved in its ~~decision.~~present form. The Company evaluated the impact of these developments in revising its estimates of variable consideration associated with drug product ~~revenue. As a result, the Company~~revenue and updated the estimated transaction price, and ~~recorded~~continued to record $11.2 million as deferred revenue as of ~~June~~September 30, 2021. See details under Drug Product Revenue section below.

Effective July 30, 2013, the Company (through its subsidiaries affiliated with China) entered into the China Agreement (“China Agreement”). Under the terms of the China Agreement, AstraZeneca agreed to pay upfront consideration totaling $28.2 million (such amounts were fully received in 2014). Under the China Agreement, the Company is also eligible to receive from AstraZeneca an aggregate of approximately $348.5 million in potential milestone payments, comprised of (i) up to $15.0 million in milestone payments upon achievement of specified clinical and development milestone events, (ii) up to $146.0 million in milestone payments upon achievement of specified regulatory milestone events, and (iii) up to approximately $187.5 million in milestone payments upon the achievement of specified commercial sales and other events. The China Agreement is structured as a 50/50 profit or loss share (as defined), which was amended under the China Amendment discussed below in the third quarter of 2020, and provides for joint development costs (including capital and equipment costs for construction of the manufacturing plant in China), to be shared equally during the development period. The aggregate amount of such consideration received for milestone and upfront payments through ~~June~~September 30, 2021 totals $77.2 million.

In July 2020, FibroGen China Anemia Holdings, Ltd., FibroGen Beijing, and FibroGen International (Hong Kong) Limited (collectively “FibroGen China”) and AstraZeneca (together with FibroGen China, the “Parties”) entered into the China Amendment, effective July 1, 2020, relating to the development and commercialization of roxadustat in China. While the responsibilities of the Parties under the China Agreement remain largely the same, certain changes were made.

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

Under the China Amendment, the interim period is defined as the period from April 1, 2020 to the time when Falikang is fully operational. Falikang became fully operational in January 2021. The calculation for profit or loss share related to sales of roxadustat in China has changed for the period from April 1, 2020 onwards. With effect from April 1, 2020, the Parties have changed the method under which commercial expenses incurred by AstraZeneca are calculated and billed. AstraZeneca’s co-promotion expenses for their sales and marketing efforts are now subject to a cap of a percentage of net sales. Once AstraZeneca has been fully reimbursed for their sales and marketing costs under the cap, AstraZeneca will bill the co-promotion expenses based on actual costs on a prospective basis. 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.

Since Falikang became fully operational in January 2021, substantially all direct roxadustat product sales to distributors in China are made by Falikang, while FibroGen Beijing continues to sell roxadustat product directly in a few provinces in China. FibroGen Beijing manufactures and supplies commercial product to Falikang based on a gross transfer price, which is adjusted for the estimated profit share. In addition, AstraZeneca now bills the co-promotion expenses to Falikang and to FibroGen Beijing, respectively, for its services provided to the respective entity. Development costs continue to be shared 50/50 between the Parties.

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recognized ~~$11.8~~$10.3 million and ~~$22.2~~$32.5 million, respectively, of net product revenue from the sales to Falikang, as described in details under Product Revenue, Net section below.

In addition to sales to Falikang, during the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recognized ~~$1.6~~$3.1 million and ~~6.6~~9.7 million, respectively, of net product revenue from sales directly to distributors in a few provinces in China, as described as direct sales under Product Revenue, Net section below.

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

Under the terms of the agreement with Eluminex (the “Eluminex Agreement”), Eluminex will make an $8.0 million upfront payment to FibroGen. In addition, FibroGen may receive up to a total of $64.0 million in future manufacturing, clinical, regulatory, and commercial milestone payments for the biosynthetic cornea program, as well as $36.0 million in commercial milestones for the first recombinant collagen III product that is not the biosynthetic cornea. FibroGen will also be eligible to receive mid single-digit to low double-digit royalties based upon worldwide net sales of cornea products, and low single-digit to mid single-digit royalties based upon worldwide net sales of other recombinant human collagen type III products that are not cornea products.

The Company accounted for this agreement under ASC 606 and identified 1 performance obligation at inception of the agreement related to the granting of the license rights to the investigational biosynthetic cornea derived from recombinant human collagen Type III. The Company based its assessment on the determination that Eluminex can benefit from the granted license on its own by developing and commercializing the underlying product using its own resources. All components of the transaction price in the agreement were allocated to the single performance obligation. Additionally, the Company will be responsible for supplying the cornea product at 110% of its product manufacturing costs until its manufacturing technology is fully transferred to Eluminex. Supply of the cornea product will be managed by a separate agreement and is considered a separate performance obligation.

During the third quarter of 2021, the $8.0 million upfront license payment was recognized as license revenue for the performance obligation satisfied. This amount was recorded as an unbilled contract asset as of September 30, 2021 in the prepaid expenses and other current assets in the condensed consolidated balance sheets. The remaining future variable consideration related to future manufacturing, clinical, regulatory milestone payments as described above were fully constrained because the Company cannot conclude that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur, given the inherent uncertainties of success with these future milestones. For commercial milestones and royalties, the Company determined that the license is the predominant item to which the royalties or sales-based milestones relate and revenue will be recognized when the corresponding milestones and royalties are earned.

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

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

		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Agreement	Performance Obligation	2021		2020		2021		2020		Performance Obligation	2021		2020		2021		2020
Japan	License revenue	$	0	$	0	$	0	$	0	License revenue	$	0	$	0	$	0	$	0
	Development revenue	$	99	$	164	$	179	$	327	Development revenue	$	66	$	86	$	245	$	413

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

Japan Agreement	Cumulative Revenue Through June 30, 2021		Deferred Revenue at June 30, 2021		Total Consideration Through June 30, 2021		Cumulative Revenue Through September 30, 2021		Deferred Revenue at September 30, 2021		Total Consideration Through September 30, 2021
License	$	100,347	$	0	$	100,347	$	100,347	$	0	$	100,347
Development revenue		16,529		30		16,559		16,595		0		16,595
Total license and development revenue	$	116,876	$	30	$	116,906	$	116,942	$	0	$	116,942

The revenue recognized under the Japan Agreement for the three months ended ~~June~~September 30, 2021 included immaterial revenue resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied or partially satisfied in previous periods. The Company does not expect material variable consideration from estimated future co-development billing beyond the development period in the transaction price related to the Japan Agreement.

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

		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Agreement	Performance Obligation	2021		2020		2021		2020		Performance Obligation	2021		2020		2021		2020
Europe	License revenue	$	0	$	0	$	0	$	0	License revenue	$	108,434	$	0	$	108,434	$	0
	Development revenue	$	2,546	$	4,602	$	6,077	$	9,176	Development revenue	$	14,061	$	4,651	$	20,138	$	13,827

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

Europe Agreement	Cumulative Revenue Through June 30, 2021		Deferred Revenue at June 30, 2021		Total Consideration Through June 30, 2021		Cumulative Revenue Through September 30, 2021		Deferred Revenue at September 30, 2021		Total Consideration Through September 30, 2021
License	$	487,951	$	0	$	487,951	$	596,385	$	0	$	596,385
Development revenue		255,039		333		255,372		269,100		0		269,100
Total license and development revenue	$	742,990	$	333	$	743,323	$	865,485	$	0	$	865,485

The revenue recognized under the Europe Agreement for the three months ended ~~June~~September 30, 2021 included an increase in revenue of ~~$0.4~~$0.2 million resulting from changes to estimated variable consideration. The remainder of the transaction price related to the Europe Agreement includes ~~$10.7~~$15.6 million of variable consideration from estimated future co-development billing and is expected to be recognized over the remaining development service period.

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

		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Agreement	Performance Obligation	2021		2020		2021		2020		Performance Obligation	2021		2020		2021		2020
U.S. / RoW and China	License revenue	$	0	$	0	$	0	$	0	License revenue	$	0	$	0	$	0	$	0
	Development revenue		16,993		13,750		27,969		28,305	Development revenue		11,970		15,220		39,939		43,525
	China performance obligation	$	0	$	441	$	0	$	594	China performance obligation	$	0	$	706	$	0	$	1,300

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 with AstraZeneca, along with any associated deferred revenue as follows (in thousands):

U.S. / RoW and China Agreements	Cumulative Revenue Through June 30, 2021		Deferred Revenue at June 30, 2021			Total Consideration Through June 30, 2021		Cumulative Revenue Through September 30, 2021		Deferred Revenue at September 30, 2021			Total Consideration Through September 30, 2021
License	$	341,844	$	0		$	341,844	$	341,844	$	0		$	341,844
Co-development, information sharing & committee services		582,743		2,309			585,052		594,713		1,428			596,141
China performance obligation *		22,167		149,759			171,926		32,495		160,267			192,762
Total license and development revenue	$	946,754	$	152,068	**	$	1,098,822	$	969,052	$	161,695	**	$	1,130,747

The revenue recognized under the U.S./RoW Agreement for the three months ended ~~June~~September 30, 2021 included a reduction in revenue of ~~$0.2~~$0.8 million resulting from changes to estimated variable consideration. The remainder of the transaction price related to the U.S./RoW Agreement and China Agreement includes ~~$34.1~~$35.3 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. The amount allocated to the U.S./RoW Agreement is expected to be recognized over the remaining development service period. The amount allocated to the China performance obligation is expected to be recognized as the Company transfers control of the commercial products to Falikang.

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

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

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020			2021			2020
Direct Sales:
Gross revenue	$	2,230		$	19,833		$	7,659		$	25,205		$	3,249		$	27,900		$	10,908		$	53,105
Discounts and rebates		(618	)		(4,095	)		(1,181	)		(4,512	)		(133	)		(5,209	)		(1,314	)		(9,721	)
Sales returns		(1	)		(45	)		88			(45	)		(2	)		(8	)		86			(53	)
Direct sales revenue, net		1,611			15,693			6,566			20,648			3,114			22,683			9,680			43,331

Sales to Falikang:
Gross transfer price		26,714			0			51,115			0			31,179			0			82,294			0
Profit share		(9,573	)		0			(19,636	)		0			(12,090	)		0			(31,726	)		0
Net transfer price		17,141			0			31,479						19,089			0			50,568			0
Increase in deferred revenue		(5,381	)		0			(9,312	)					(8,761	)		0			(18,073	)		0
Sales to Falikang revenue, net		11,760			0			22,167			0			10,328			0			32,495			0
Total product revenue, net	$	13,371		$	15,693		$	28,733		$	20,648		$	13,442		$	22,683		$	42,175		$	43,331

Product revenue from direct roxadustat product sales to distributors in China is recognized in an amount that reflects the consideration ~~to which~~that the Company expects to be entitled to in exchange for those products, net of various sales rebates and discounts. The total discounts and rebates were ~~$0.6~~$0.1 million and ~~$4.1~~$5.2 million for the three months ended ~~June~~September 30, 2021 and 2020, and ~~$1.2~~$1.3 million and ~~$4.5~~$9.7 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, ~~respectively, which~~respectively. The discounts and rebates primarily consisted of the contractual sales rebate calculated based on the stated percentage of gross sales by each distributor in the distribution agreement entered between FibroGen and each distributor.

In addition, the discounts and rebates for the three and nine months ended September 30, 2020 primarily included the non-key account hospital listing award calculated based on eligible non-key account hospital listing to date achieved by each distributor with certain requirements met during the period.

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 Company’s legal right to offset, at each balance sheet date, the rebates and discounts are presented as reductions to gross accounts receivable from the distributor, or as a current liability to the distributor to the extent that the total amount exceeds the gross accounts receivable or when the Company expects to settle the discount in cash. The Company’s legal right to offset is calculated at the individual distributor level. The following table includes a roll-forward of the contract liabilities (in thousands):

As of ~~June~~September 30, 2021 and December 31, 2020, the total contract liabilities were ~~$13.8~~$10.3 million and $15.1 million, which were included in accrued and other current liabilities in the condensed consolidated balance sheet. The rebates and discounts reflected as reductions to gross accounts receivable for direct sales was $0.8 million and $0.5 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Since Falikang became fully operational in January 2021, substantially all direct roxadustat product sales to distributors in China are made by Falikang. FibroGen Beijing manufactures and supplies commercial product to Falikang. The net transfer price for FibroGen Beijing’s product sales to Falikang is based on a gross transfer price, which is adjusted to account for the 50/50 profit share for the period.

The roxadustat sales to Falikang marked the beginning of the Company’s China performance obligation under the Company’s agreements with AstraZeneca. Product revenue is based on the transaction price of the China performance obligation. Revenue is recognized when control of the product is transferred to Falikang, in an amount that reflects the allocation of the transaction price to the performance obligation satisfied during the reporting period. Any net transfer price in excess of the revenue recognized is added to the deferred balance to date, and will be recognized over future periods as the performance obligations are satisfied. During the three and ~~six~~nine months ended ~~June~~September 30, 2021, following updates to its estimates, the Company deferred ~~$5.4~~$8.8 million and ~~$9.3~~$18.1 million, respectively, from the net transfer price to Falikang, which was included in the related deferred revenue of the China performance obligation.

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

Deferred revenue includes amounts allocated to the China performance obligation under the AstraZeneca arrangement as revenue recognition associated with this unit of accounting is tied to the commercial launch of the products within China and to when the control of the manufactured commercial products is transferred to AstraZeneca. As of ~~June~~September 30, 2021, approximately ~~$6.3~~$8.5 million of the deferred revenue related to the China unit of accounting was included in short-term deferred revenue, which represents the amount of deferred revenue associated with the China unit of accounting that is expected to be recognized within the next 12 months, associated with the commercial sales in China.

The reductions to gross accounts receivable related to product revenue to Falikang was ~~$10.1~~$23.1 million as of ~~June~~September 30, 2021.

Drug product revenue from commercial-grade API or bulk drug product sales to AstraZeneca and Astellas was as follows (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended September 30,					Nine Months Ended September 30,
	2021			2020		2021			2020		2021		2020			2021			2020
Astellas	$	(1,974	)	$	8,238	$	2,056		$	8,238	$	0	$	(3,957	)	$	2,056		$	4,281
AstraZeneca		(6,674	)		0		(2,224	)		0		0		4,643			(2,224	)		4,643
Drug product revenue	$	(8,648	)	$	8,238	$	(168	)	$	8,238	$	0	$	686		$	(168	)	$	8,924

During ~~three months ended June 30,~~the second quarter of 2021, the Company shipped bulk drug product to AstraZeneca as commercial supply under the terms of the Master Supply Agreement. Based on the ~~above-mentioned~~CRL issued by the FDA ~~CRDAC’s vote on July 15,~~in August 2021, the Company evaluated the impact of these developments in revising its estimates of variable consideration associated with drug product revenue. As a result, the Company updated the estimated transaction price, and ~~recorded~~continued to record $11.2 million as deferred revenue as of ~~June~~September 30, 2021.

During the ~~three~~first six months ~~ended June 30,~~of 2021, the Company updated its estimate of variable consideration and recorded ~~a reduction~~an adjustment of ~~$2.0~~$2.1 million to the drug product revenue related to the API shipments fulfilled under the terms of the Japan Amendment with Astellas in ~~2018, due to a change in estimated variable consideration.~~2018. Specifically, the change in estimated variable consideration was based on the API held by Astellas at ~~June 30, 2021,~~the period end, adjusted to reflect the changes in the estimated bulk product strength mix intended to be manufactured by Astellas, estimated cost to convert the API to bulk product tablets, and estimated yield from the manufacture of bulk product tablets, among others. ~~This amount was recorded under deferred revenue in the condensed consolidated balance sheet as of June 30, 2021.~~

During the first quarter of 2021, the Company recorded $4.0 million drug product revenue related to the same API shipments for the change in estimated variable consideration based on the API held by Astellas at March 31, 2021, under the same methodology. This amount was unbilled to Astellas as of March 31, 2021, and was billed and received from Astellas during the second quarter of 2021.

~~During the three months ended March 31,~~ 2021, the Company shipped bulk drug product from process validation supplies for commercial purposes under the terms of the Europe Agreement and the EU Supply Agreement with Astellas. The Company ~~recorded~~continued to record the consideration of $11.8 million from this shipment as deferred revenue as of ~~June~~September 30, 2021, due to a high degree of uncertainty associated with the final consideration. The deferred revenue will be recognized as and when the uncertainty is resolved.

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

	Balance at December 31, 2020			Additions			Recognized as Revenue		Balance at June 30, 2021			Balance at December 31, 2020			Additions			Recognized as Revenue		Balance at September 30, 2021
Astellas - Japan Agreement	$	0		$	(1,974	)	$	0	$	(1,974	)	$	0		$	(1,974	)	$	0	$	(1,974	)
Astellas - Europe Agreement		(5,984	)		(11,759	)		0		(17,743	)		(5,984	)		(11,759	)		0		(17,743	)
AstraZeneca - U.S. Agreement		0			(11,171	)		0		(11,171	)		0			(11,171	)		0		(11,171	)
Drug product revenue - deferred revenue	$	(5,984	)	$	(24,904	)	$	0	$	(30,888	)	$	(5,984	)	$	(24,904	)	$	0	$	(30,888	)

Falikang is a distribution entity jointly owned by AstraZeneca and FibroGen Beijing. FibroGen Beijing owns 51.1% of the outstanding shares of Falikang.

Pursuant to the guidance under ASC 810, Consolidation (“ASC 810”), the Company concluded that Falikang qualifies as a ~~variable interest entity (“VIE”).~~VIE. As Falikang is a distribution entity and AstraZeneca is the final decision maker for all the roxadustat commercialization activities, the Company lacks the power criterion while AstraZeneca meets both the power and economic criteria under the ASC 810, to direct the activities of Falikang that most significantly impact its performance. Therefore, the Company is not the primary beneficiary of this VIE for accounting purposes. As a result, the Company accounts for its investment in Falikang under the equity method, and Falikang is not consolidated into the Company’s condensed consolidated financial statements. Accordingly, the Company records its total investments in Falikang as an equity method investment in an unconsolidated ~~variable interest entity~~VIE in the condensed consolidated balance sheet. In addition, the Company recognizes its proportionate share of the reported profits or losses of Falikang as investment gain or loss in unconsolidated ~~variable interest entity~~VIE in the condensed consolidated statement of operations, and as an adjustment to its investment in Falikang in the condensed consolidated balance sheet. Falikang has not incurred material profit or loss to date. The Company may provide shareholder loans to Falikang to meet necessary financial obligations as part of its operations. To date, these loans have been immaterial.

The Company’s equity method investment in Falikang was as follows (in thousands):

Entity

Ownership Percentage

Balance at

December 31, 2020

Share of Net Income

Currency

Translation

Balance at

June 30, 2021

Ownership Percentage

Balance at

December 31, 2020

Share of Net Income

Currency

Translation

Balance at

September 30, 2021

Falikang

51.1

2,728

323

3,083

51.1

2,728

664

3,421

Falikang is considered a related party to the Company. See Note 9, Related Party Transactions, for related disclosures.

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

	September 30, 2021
	Level 1		Level 2		Level 3		Total
Money market funds	$	171,628	$	0	$	0	$	171,628
Corporate bonds		0		126,994		0		126,994
Commercial paper		0		107,402		0		107,402
U.S. government bonds		73,108		0		0		73,108
Agency bonds		0		23,399		0		23,399
Asset-backed securities		0		27,256		0		27,256
Foreign government bonds		0		8,127		0		8,127
Equity investments		225		0		0		225
Total	$	244,961	$	293,178	$	0	$	538,139

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Bond and mutual funds	$	0	$	8,144	$	0	$	8,144
Equity investments		244		0		0		244
Money market funds		590,347		0		0		590,347
Total	$	590,591	$	8,144	$	0	$	598,735

June 30, 2021

Level 1

Level 2

Level 3

Total

Money market funds

$
220,627

$
0

$
0

$
220,627

Corporate bonds

0

104,483

0

104,483

Commercial paper

0

72,099

0

72,099

U.S. government bonds

46,568

0

0

46,568

Agency bonds

0

14,284

0

14,284

Asset-backed securities

0

12,490

0

12,490

Foreign government bonds

0

12,151

0

12,151

Equity investments

233

0

0

233

Total

$
267,428

$
215,507

$
0

$
482,935

December 31, 2020

Level 1

Level 2

Level 3

Total

Bond and mutual funds

$
0

$
8,144

$
0

$
8,144

Equity investments

244

0

0

244

Money market funds

590,347

0

0

590,347

Total

$
590,591

$
8,144

$
0

$
598,735

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. There were 0 transfers of assets between levels during the three and ~~six~~nine months ended ~~June~~September 30, 2021.

The Company’s financial liabilities related to lease obligations as of ~~June~~September 30, 2021 and December 31, 2020 were $0.9 million and $1.1 million, respectively. The fair values of the Company’s financial liabilities are carried at historical cost that 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	June 30, 2021			December 31, 2020			Balance Sheet Line Item	September 30, 2021			December 31, 2020
Assets
Finance:
Right-of-use assets - cost		$	2,007		$	50,477
Right-of-use assets cost									$	2,033		$	50,477
Accumulated amortization			(1,146	)		(20,871	)			(1,262	)		(20,871	)
Finance lease right-of-use assets, net	Finance lease right-of-use assets		861			29,606		Finance lease right-of-use assets		771			29,606
Operating:
Right-of-use assets - cost			100,705			3,934
Right-of-use assets cost										100,710			3,934
Accumulated amortization			(3,614	)		(1,891	)			(6,655	)		(1,891	)
Operating lease right-of-use assets, net	Operating lease right-of-use assets		97,091			2,043		Operating lease right-of-use assets		94,055			2,043
Total lease assets		$	97,952		$	31,649			$	94,826		$	31,649

Liabilities
Current:
Finance lease liabilities	Finance lease liabilities, current	$	23		$	12,330		Finance lease liabilities, current	$	15		$	12,330
Operating lease liabilities	Operating lease liabilities, current		10,718			1,188		Operating lease liabilities, current		10,831			1,188
Non-current:
Finance lease liabilities	Finance lease liabilities, non-current		6			25,391		Finance lease liabilities, non-current		5			25,391
Operating lease liabilities	Operating lease liabilities, non-current		94,196			853		Operating lease liabilities, non-current		91,478			853
Total lease liabilities		$	104,943		$	39,762			$	102,329		$	39,762

The Company’s long-term property lease with Alexandria for its corporate headquarters in San Francisco, California, had an initial term of 15 years, scheduled to expire in 2023. The original lease was accounted for as a finance lease upon adoption of ASC 842, Leases (“ASC 842”), at January 1, 2019.

On June 1, 2021, the Company entered into an amendment with Alexandria to extend the lease to 2028 (“Lease Amendment”). Under the terms of the Lease Amendment, the Company has 2 optional rights to each extend the lease for an additional five years. The lease contract provides for a fixed annual rent, with scheduled increases of 2 percent that occur on each anniversary of the rent commencement date through 2023, and with scheduled increases of 3 percent that occur on each anniversary of the rent commencement date through 2028. This lease requires the Company to pay all costs of ownership, operation, and maintenance of the premises, including without limitation all operating costs, insurance costs, and taxes.

Company determined that the Lease Amendment was a lease modification, effective June 1, 2021, and thus reassessed the lease classification, remeasured the related lease liability using an updated discount rate, and adjusted the related right-of-use asset under the lease modification guidance under the ASC 842. Accordingly, on June 1, 2021, the Company determined that the modified lease be accounted for as an operating lease, and therefore derecognized the previous finance lease right-of-use asset of $24.6 million and the related finance lease liability of $32.6 million, and recognized an operating lease right-of-use asset of $93.2 million and the related operating lease liability of $101.2 million. Starting June 1, 2021, the cash payment related to this lease was classified as an operating activity, the impact of which was approximately ~~$1.1~~$4.5 million to the condensed consolidated statement of cash flow for the ~~six~~nine months ended ~~June~~September 30, 2021.

During the ~~three months ended March 31,~~first quarter of 2021, after FibroGen Beijing’s previous long-term lease agreement expired, the Company entered into a new lease agreement with the landlord for the same pilot plant located in Beijing Yizhuang Biomedical Park of BDA. The new lease term is five year, scheduled to expire in 2026, and is treated as an operating lease. Accordingly, the Company recorded $3.4 million in the operating right-of-use assets and total operating lease liabilities, respectively. The lease contract provides for fixed quarterly rent payments, and ~~require~~requires the Company to pay operating and maintenance costs.

		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
	Statement of Operations Line Item	2021			2020			2021			2020			Statement of Operations Line Item	2021			2020			2021			2020
Finance lease cost:
Amortization of right-of-use assets	Cost of goods sold; Research and development; Selling, general and administrative expenses	$	1,777		$	2,653		$	4,393		$	5,247		Cost of goods sold; Research and development; Selling, general and administrative expenses	$	116		$	2,639		$	4,509		$	7,886
Interest on lease liabilities	Interest expense		242			534			627			1,049		Interest expense		0			462			627			1,511
Operating lease cost	Cost of goods sold; Research and development; Selling, general and administrative expenses		1,744			255			2,162			564		Cost of goods sold; Research and development; Selling, general and administrative expenses		4,273			304			6,435			868
Sublease income	Selling, general and administrative expenses		(275	)		(306	)		(575	)		(598	)	Selling, general and administrative expenses		(263	)		(301	)		(838	)		(899	)
Total lease cost		$	3,488		$	3,136		$	6,607		$	6,262			$	4,126		$	3,104		$	10,733		$	9,366

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

	Six Months Ended June 30,					Nine Months Ended September 30,
	2021			2020		2021			2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,246		$	433	$	6,090		$	812
Operating cash flows from finance leases		628			1,010		628			1,468
Financing cash flows from finance leases		5,326			5,992		5,359			9,254
Non-cash: Right-of-use assets obtained in exchange for new lease liabilities:
Finance leases		303			144		330			434
Operating leases		3,498			5		3,509			55
Non-cash: Increase (decrease) resulting from lease modification:
Finance lease right-of-use assets		(24,654	)		0		(24,654	)		0
Operating lease right-of-use assets		93,222			0		93,222			0
Finance lease liabilities, current		(12,587	)		0		(12,587	)		0
Operating lease liabilities, current		9,221			0		9,221			0
Finance lease liabilities, non-current		(20,009	)		0		(20,009	)		0
Operating lease liabilities, non-current	$	91,943		$	0	$	91,943		$	0

	June 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Weighted-average remaining lease term (years):
Finance leases		1.3			2.9			1.2			2.9
Operating leases		7.3			1.8			7.0			1.8
Weighted-average discount rate:
Finance leases		4.55	%		4.39	%		4.58	%		4.39	%
Operating leases		4.75	%		4.74	%		4.75	%		4.74	%

Maturities of lease liabilities as of ~~June~~September 30, 2021 are as follows (in thousands):

Year Ending December 31,	Finance Leases			Operating Leases			Finance Leases			Operating Leases
2021 (remaining six month period)	$	16		$	7,534
2021 (remaining three month period)							$	6		$	3,697
2022		11			15,517			12			15,517
2023		3			13,454			3			13,454
2024		0			16,798			0			16,797
2025		0			18,193			0			18,192
Beyond 2025		0			53,881			0			53,881
Total future lease payments		30			125,377			21			121,538
Less: Interest		(1	)		(20,463	)		(1	)		(19,229	)
Present value of lease liabilities	$	29		$	104,914		$	20		$	102,309

	June 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Cash	$	130,035	$	88,046	$	90,899	$	88,046
Commercial paper		2,699		0		12,000		0
Money market funds		220,627		590,347		171,628		590,347
Total cash and cash equivalents	$	353,361	$	678,393	$	274,527	$	678,393

At ~~June~~September 30, 2021 and December 31, 2020, a total of ~~$85.1~~$77.4 million and $66.0 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 and marketable equity investments. The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s investments by major investments type are summarized in the tables below (in thousands):

	June 30, 2021									September 30, 2021
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value		Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
Corporate bonds	$	104,499	$	27	$	(43	)	$	104,483	$	127,005	$	35	$	(46	)	$	126,994
Commercial paper		69,400		0		0			69,400		95,402		0		0			95,402
U.S. government bonds		46,589		0		(21	)		46,568		73,119		5		(16	)		73,108
Agency bonds		14,288		2		(6	)		14,284		23,399		4		(4	)		23,399
Asset-backed securities		12,489		1		0			12,490		27,261		2		(7	)		27,256
Foreign government bonds		12,151		1		(1	)		12,151		8,127		0		0			8,127
Equity investments		118		115		0			233		118		107		0			225
Total investments	$	259,534	$	146	$	(71	)	$	259,609	$	354,431	$	153	$	(73	)	$	354,511

	December 31, 2020									December 31, 2020
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value		Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
Bond and mutual funds	$	8,147	$	0	$	(3	)	$	8,144	$	8,147	$	0	$	(3	)	$	8,144
Equity investments		125		119		0			244		125		119		0			244
Total investments	$	8,272	$	119	$	(3	)	$	8,388	$	8,272	$	119	$	(3	)	$	8,388

At ~~June~~September 30, 2021, the available-for-sale investments had contractual maturities range from several months to two years. During the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company did 0t recognize any other-than-temporary impairment loss.

	June 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Raw materials	$	1,190	$	2,303	$	820	$	2,303
Work-in-progress		15,541		8,114		20,662		8,114
Finished goods		7,799		6,113		7,833		6,113
Total inventories	$	24,530	$	16,530	$	29,315	$	16,530

The Company capitalizes inventory costs for FibroGen Beijing’s production of roxadustat for commercial sales purposes. The Company started capitalizing ~~pre-launch~~ inventory costs in the U.S. in the second quarter of 2020 prior to regulatory approvals in the U.S., Europe and other territories. As of ~~June~~September 30, 2021 and December 31, 2020, ~~pre-launch~~ inventory capitalized in the U.S. was ~~37%~~40% and 29% of the total inventory balance, ~~respectively.~~respectively, which will be used for commercial launches in Europe and other territories where the Company has received regulatory approvals. The provision to write-down excess and obsolete inventory was immaterial for three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

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

	June 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Unbilled contract assets	$	5,256		$	2,147		$	15,003		$	2,147
Deferred revenues from associated contracts		(5,256	)		(2,147	)		(7,003	)		(2,147	)
Net unbilled contract assets		0			0			8,000			0
Prepaid assets		7,149			8,353			6,598			8,353
Other current assets		1,309			1,807			7,090			1,807
Total prepaid expenses and other current assets	$	8,458		$	10,160		$	21,688		$	10,160

The unbilled contract assets as of ~~June~~September 30, 2021 ~~of $5.3~~included the $8.0 million unbilled upfront license payment under the Eluminex Agreement, and $7.0 million related to unbilled co-development revenue under the China Amendment with AstraZeneca. The unbilled contract assets as of December 31, 2020 were related to unbilled co-development revenue under the China Amendment with AstraZeneca. See Note 2, Collaboration Agreements, License Agreement and Revenues, for details.

	June 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Leasehold improvements	$	102,657		$	102,006		$	102,843		$	102,006
Laboratory equipment		19,247			18,143			18,809			18,143
Machinery		8,387			8,312			8,234			8,312
Computer equipment		9,205			9,545			9,262			9,545
Furniture and fixtures		6,126			6,128			6,175			6,128
Construction in progress		1,407			760			1,920			760
Total property and equipment	$	147,029		$	144,894		$	147,243		$	144,894
Less: accumulated depreciation		(116,359	)		(111,247	)		(118,191	)		(111,247	)
Property and equipment, net	$	30,670		$	33,647		$	29,052		$	33,647

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

	June 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Preclinical and clinical trial accruals	$	65,274	$	44,113	$	64,212	$	44,113
Payroll and related accruals		18,047		22,800		20,121		22,800
Contract liabilities to pharmaceutical distributors		13,793		15,137		10,335		15,137
Accrued co-promotion expenses - current		20,832		11,537		27,071		11,537
Roxadustat profit share to AstraZeneca		7,007		7,007		7,764		7,007
Property taxes and other taxes		10,344		5,970		11,532		5,970
Professional services		7,471		4,869		4,565		4,869
Other		5,033		6,900		5,746		6,900
Total accrued and other current liabilities	$	147,801	$	118,333	$	151,346	$	118,333

The profit share liability ~~of $7.0 million~~ to AstraZeneca as of ~~June~~September 30, 2021 and December 31, 2020 was $7.8 million and $7.0 million, respectively, which represented the profit/loss share between FibroGen Beijing and AstraZeneca that was calculated for the interim period pursuant to the China Amendment. This liability correspondingly reduced the deferred revenue related to the performance obligation in accordance with the China Amendment.

	June 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Accrued long-term co-promotion expenses	$	19,205	$	27,424	$	13,514	$	27,424
Other long-term tax liabilities		8,985		8,675		9,120		8,675
Other		2,469		2,690		1,688		2,690
Total other long-term liabilities	$	30,659	$	38,789	$	24,322	$	38,789

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

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2021		2020		2021		2020
Research and development	$	10,681	$	10,780	$	22,903	$	21,417	$	8,220	$	11,236	$	31,123	$	32,653
Selling, general and administrative		8,320		6,864		15,482		13,143		7,484		6,655		22,966		19,798
Total stock-based compensation expense	$	19,001	$	17,644	$	38,385	$	34,560	$	15,704	$	17,891	$	54,089	$	52,451

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 June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020			2021			2020
Stock Options
Expected term (in years)		5.6			5.5			5.7			5.7			5.8			5.6			5.7			5.7
Expected volatility		63.4	%		69.2	%		59.4	%		68.4	%		68.1	%		59.0	%		61.8	%		67.7	%
Risk-free interest rate		0.9	%		0.4	%		0.7	%		0.8	%		1.2	%		0.3	%		0.9	%		0.8	%
Expected dividend yield		0			0			0			0			0			0			0			0
Weighted average estimated fair value	$	11.91		$	21.72		$	25.38		$	17.75		$	11.08		$	22.48		$	21.45		$	18.11

ESPPs
Expected term (in years)	0.5 - 2.0			0.5 - 2.0			0.5 - 2.0			0.5 - 2.0			0.5 - 2.0			0.5 - 2.0			0.5 - 2.0			0.5 - 2.0
Expected volatility	47.5 - 104.2		%	49.5 - 77.1		%	47.5 - 104.2		%	49.5 - 77.1		%	50.6 - 104.4		%	50.4 - 77.1		%	47.1 - 104.4		%	49.5 - 77.1		%
Risk-free interest rate	0.0 - 2.2		%	0.2 - 2.9		%	0.0 - 2.2		%	0.2 - 2.9		%	0.0 - 1.6		%	0.2 - 2.9		%	0.0 - 2.2		%	0.2 - 2.9		%
Expected dividend yield		0			0			0			0			0			0			0			0
Weighted average estimated fair value	$	13.60		$	17.82		$	14.69		$	18.11		$	12.37		$	17.00		$	13.57		$	17.74

Provision for (benefit from) income tax for the three and ~~six~~nine months ended ~~June~~September 30, 2021 ~~were primarily due to foreign taxes. Provision for (benefit from) income tax for the three~~ and ~~six months ended June 30,~~ 2020 were primarily due to ~~the tax effect arising from other comprehensive income related to available-for-sale securities, and~~ 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 net 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 is considered a related party. The Company recorded revenue related to collaboration agreements with Astellas of ~~$2.6~~$122.6 million and ~~$4.8~~$4.7 million for the three months ended ~~June~~September 30, 2021 and 2020, and ~~$6.3~~$128.8 million and ~~$9.5~~$14.2 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. The Company also recorded drug product revenue from Astellas of ~~$(2.0)~~$2.1 million and ~~$8.2~~$4.3 million for the ~~three~~nine months ended ~~June 30, 2021 and 2020, and $2.1 million and $8.2 million for the six months ended June~~September 30, 2021 and 2020, respectively. See Note 2, Collaboration Agreements, License Agreement and Revenues, for details.

The Company’s expense related to collaboration agreements with Astellas was immaterial for each of the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

As of ~~June~~September 30, 2021 and December 31, 2020, accounts receivable from Astellas were ~~$2.6~~$2.4 million and $4.1 million, respectively.

As of ~~June~~September 30, 2021 and December 31, 2020, total deferred revenue from Astellas was ~~$20.1~~$19.7 million and $7.5 million, respectively.

As of ~~June~~September 30, 2021, the amount due to Astellas was immaterial. As of December 31, 2020, amount due to Astellas was $1.1 million.

Falikang, an entity jointly owned by FibroGen Beijing and AstraZeneca is an unconsolidated VIE accounted for as an equity method investment, and considered as a related party to the Company. FibroGen Beijing owns 51.1% of Falikang’s equity. See Note 3, Variable Interest Entity, for details.

For the three and ~~six~~nine months ended ~~June~~September 30, 2021, the net product revenue from Falikang was ~~$11.8~~$10.3 million and ~~$22.2~~$32.5 million, respectively. See Note 2, Collaboration Agreements, License Agreement and Revenues, for details.

For the three and ~~six~~nine months ended ~~June~~September 30, 2021, the investment income in Falikang was ~~$0.6~~$0.3 million and ~~$0.3~~$0.7 million, respectively. The investment loss in Falikang for the three and nine months ended September 30, 2020 was immaterial. As of ~~June~~September 30, 2021 and December 31, 2020, the Company’s equity method investment in Falikang was ~~$3.1~~$3.4 million and $2.7 million, respectively. See Note 3, Variable Interest Entity, for details.

As of ~~June~~September 30, 2021, accounts receivable, net, from Falikang was of ~~$10.8~~$20.7 million.

As of ~~June~~September 30, 2021, there was 0 miscellaneous receivables from Falikang. As of December 31, 2020, prepaid expenses and other current assets included miscellaneous receivables from Falikang of $0.9 million.

As of ~~June~~September 30, 2021, the Company had outstanding total non-cancelable purchase obligations of ~~$81.9~~$77.4 million, including ~~$29.6~~$22.0 million for manufacture and supply of roxadustat, ~~$47.3~~$46.5 million for manufacture and supply of pamrevlumab, and ~~$5.0~~$8.9 million for other purchases. The Company expects to fulfill ~~our~~its commitments under these agreements in the normal course of business, and as such, no liability has been recorded.

Some of the Company’s license agreements provide for periodic maintenance fees over specified time periods, as well as payments by the Company upon the achievement of development, regulatory and commercial milestones. As of ~~June~~September 30, 2021, future milestone payments for research and pre-clinical stage development programs consisted of up to approximately ~~$359.2~~$359.1 million in total potential future milestone payments under the Company’s license agreements with HiFiBiO (for Galectin-9), Medarex, Inc. and others. These milestone payments generally become due and payable only upon the achievement of certain developmental, clinical, regulatory and/or commercial milestones. The event triggering such payment or obligation has not yet occurred.

From time to time, the Company is a party to various legal actions, both inside and outside the U.S., arising in the ordinary course of its business or otherwise. The Company accrues amounts, to the extent they can be reasonably estimated, that the Company believes will result in a probable loss (including, among other things, probable settlement value), to adequately address any liabilities related to legal proceedings and other loss contingencies. A loss or a range of loss is disclosed when it is reasonably possible that a material loss will incur and can be estimated, or when it is reasonably possible that the amount of a loss, when material, will exceed the recorded provision.

The Company did not have material accruals for any currently active legal action in its condensed consolidated balance sheets as of ~~June~~September 30, 2021, as it could not predict the ultimate outcome of these matters, or reasonably estimate the potential exposure.

In April 2021, 3 putative securities class action complaints were filed against FibroGen and certain of its current and former executive officers (collectively, the “Defendants”) in the U.S. District Court for the Northern District of California. The lawsuits allege that Defendants violated the Securities Exchange Act of 1934 by making materially false and misleading statements regarding FibroGen’s Phase 3 clinical studies data and prospects for FDA approval between November 2019 and December 2020. Plaintiffs seek to represent a class of persons or entities that purchased FibroGen securities between November 8, 2019 and April 6, 2021. In May 2021, 2 additional putative securities class action complaints were filed against Defendants alleging the same claims. One of the lawsuits alleges that Defendants made materially false and misleading statements between October 2017 and December 2020 and seeks to represent a class of persons or entities that purchased FibroGen securities between October 18, 2017 and April 6, 2021. The other lawsuit alleges that Defendants made materially false and misleading statements between December 2018 and February 2020 and seeks to represent a class of persons or entities that purchased FibroGen securities between December 20, 2018 and April 6, 2021. All plaintiffs seek unspecified monetary damages and other relief. ~~Motions for lead plaintiff were filed on June 11,~~On August 30, 2021, the Court consolidated the actions and ~~a hearing on the motion is scheduled for August 19, 2021. Once~~appointed a lead ~~plaintiff~~plaintiff. Plaintiff filed its consolidated amended complaint on October 29, 2021. Defendants’ motion to dismiss the consolidated amended complaint is ~~appointed by the Court, the Company expects to receive an amended consolidated complaint.~~due December 20, 2021.

On July 30, 2021, a purported shareholder derivative complaint was filed in the U.S. District Court for the Northern District of California. The complaint names as defendants ten of the Company’s officers and directors, as well as the Company as nominal defendant, and asserts state and federal claims based on some of the same alleged misstatements as the securities class action complaints. The complaint seeks unspecified damages, attorneys’ fees, and other costs. The ~~Company and individual defendants~~parties have ~~not yet been served.~~agreed to stay the action pending resolution of a forthcoming motion to dismiss the securities class action.

The Company believes that the claims are without merit and it intends to vigorously defend against them. However, any litigation is inherently uncertain, and any judgment or injunctive relief entered against FibroGen or any adverse settlement could materially and adversely impact its business, results of operations, financial condition, and prospects.

The Company enters into standard indemnification arrangements in the ordinary course of business, including for example, service, manufacturing and collaboration agreements. Pursuant to these arrangements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, including in connection with intellectual property infringement claims by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the extent permissible under applicable law. The maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these arrangements is minimal.

On July 15, 2021, the FDA CRDAC voted to recommend not approving roxadustat for the treatment of anemia due to CKD in adult patients. While the FDA is not required to follow the CRDAC’s vote, the agency considers the CRDAC’s non-binding recommendations when making its decision.

The Company evaluated this subsequent event and concluded that it required adjustment and disclosure in the condensed consolidated financial statements, specifically to the drug product revenue related the bulk drug product shipments to AstraZeneca as commercial supply under the terms of the Master Supply Agreement. As a result, the Company recorded $11.2 million as deferred revenue as of June 30 ~~2021. See Note 2,~~ ~~Collaboration Agreements and Revenues, for details.~~

On July 19, 2021, Eluminex Biosciences (Suzhou) Limited (“Eluminex”), an ophthalmology-focused biotechnology company headquartered in Suzhou, China with a US-subsidiary office in San Francisco Bay Area, California, exclusively licensed global rights from FibroGen, Inc. for the development and commercialization of an investigational biosynthetic cornea derived from recombinant human collagen Type III intended to treat patients with corneal blindness.

Under the terms of the agreement, Eluminex will make an $8 million upfront payment to FibroGen. In addition, FibroGen may receive up to a total of $64 million in future manufacturing, clinical, regulatory, and commercial milestone payments for the biosynthetic cornea program, as well as $36 million in commercial milestones for the first recombinant collagen III product that is not the biosynthetic cornea. FibroGen will also be eligible to receive ~~mid single-digit to low double-digit~~ ~~royalties based upon worldwide net sales~~ ~~of cornea products, and low single-digit to mid single-digit royalties based upon worldwide net sales of other recombinant human collagen type III products that are not cornea products~~.

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, 2020 filed with the SEC on March 1, 2021 (“2020 Form 10-K”).

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 are headquartered in San Francisco, California, with subsidiary offices in Beijing and Shanghai, People’s Republic of China (“China”). We are a leading biopharmaceutical company developing and commercializing a pipeline of first-in-class therapeutics. We apply our pioneering expertise in hypoxia-inducible factor (“HIF”) biology, 2-oxoglutarate enzymology, connective tissue growth factor (“CTGF”) biology, and clinical developmenttherapeutics to advance innovative medicines for the treatment of anemia, fibrotic disease, and cancer.

Roxadustat, ~~our~~FibroGen’s most advanced product, is an oral small molecule inhibitor of ~~HIF~~hypoxia-inducible factor prolyl hydroxylase (“HIF-PH”) activity that is ~~being commercialized~~approved in ~~China (tradename: 爱瑞卓~~^®)the European Union, Great Britain, Japan, South Korea, and Chile for the treatment of anemia caused by chronic kidney disease (“CKD”) in dialysis and non-dialysis ~~patients.~~patients, under the tradename EVRENZO^® ~~(roxadustat)~~. Roxadustat is also being commercialized in ~~Japan and has been approved in South Korea and Chile~~China for ~~the treatment of~~CKD anemia ~~associated with CKD~~ in dialysis and non-dialysis ~~patients.~~

In July 2021, the United States (“U.S.”) Food and Drug Administration (“FDA”) Cardiovascular and Renal Drugs Advisory Committee (“CRDAC”) voted to recommend not approving roxadustat, an oral HIF-PH inhibitor, for the treatment of anemia due to CKD in adult patients. The CRDAC vote was 13 to 1 for non-dialysis dependent CKD patients, and 12 to 2 for dialysis-dependent CKD patients. While the FDA is not required to follow CRDAC’s vote, the agency considers CRDAC’s non-binding recommendations when making its decision.tradename: 爱瑞卓^®.

Roxadustat is in Phase 3 clinical development ~~in the U.S. and Europe and in Phase 3 development in China~~ for anemia associated with myelodysplastic syndromes (“MDS”)~~. Roxadustat is in~~ and Phase 2 clinical development for chemotherapy-induced anemia.

Pamrevlumab, a human monoclonal antibody targeting ~~CTGF,~~connective tissue growth factor (“CTGF”), is in Phase 3 clinical development for the treatment of idiopathic pulmonary fibrosis (“IPF”), pancreatic cancer and Duchenne muscular dystrophy (“DMD”).

~~Impact of Severe Acute Respiratory Syndrome Coronavirus 2 and the resulting Coronavirus 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. The rapid spread has resulted in authorities implementing numerous measures to contain the virus.

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. While we have seen some impacts from COVID-19, such as slower enrollment in our clinical trials, particularly our Phase 3 IPF program, 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 beyond those effects described above, including any impact on sales of roxadustat, 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 roll out of vaccines, and the resumption of widespread economic activity. Due to the inherent uncertainty of the largely unprecedented and rapidly evolving situation, we are unable to predict with any confidence the likely impact of the COVID-19 pandemic on our future operations.

The financial results for the three and six months ended June 30, 2021 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 the COVID-19 pandemic on our business.

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,				Nine Months Ended September 30,
	2021			2020			2021			2020			2021		2020		2021			2020
	(in thousands, except for per share data)												(in thousands, except for per share data)
Result of Operations
Revenue	$	24,364		$	42,888		$	62,793		$	67,288		$	155,973	$	44,032	$	218,766		$	111,320
Operating costs and expenses		158,199			128,025			267,056			233,500			104,999		11,702		372,055			245,202
Net loss		(133,988	)		(85,313	)		(205,743	)		(163,661	)
Net loss per share - basic and diluted	$	(1.45	)	$	(0.95	)	$	(2.24	)	$	(1.84	)
Net income (loss)														49,798		33,004		(155,945	)		(130,657	)
Net income (loss) per share - basic														0.54		0.36		(1.69	)		(1.46	)
Net income (loss) per share - diluted													$	0.54	$	0.35	$	(1.69	)	$	(1.46	)


							June 30, 2021			December 31, 2020							September 30, 2021			December 31, 2020
							(in thousands)										(in thousands)
Balance Sheet
Cash and cash equivalents							$	353,361		$	678,393						$	274,527		$	678,393
Short-term and long-term investments								259,609			8,388							354,511			8,388
Accounts receivable							$	24,266		$	41,883						$	35,994		$	41,883

Our revenue for the three and ~~six~~nine months ended ~~June~~September 30, 2021 included the revenue recognized related to the following:

As a comparison, our revenue for the three and ~~six~~nine months ended ~~June~~September 30, 2020 included the revenue recognized related to the following:

Operating costs and expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2021 increased compared to the same periods a year ago as a result of the net effect of the following:

Operating costs and expenses for the nine months ended September 30, 2021 also included an expense of $25.0 million for acquired in-process research and development asset from HiFiBiO Therapeutics (“HiFiBiO”).

Following the complete response letter (“CRL”) for roxadustat in the U.S., we are implementing a cost reduction effort, and as a result, operating expenses may decrease in certain areas in the near future.

For the three ~~and six~~ months ended ~~June~~September 30, 2021, we had net ~~losses~~income of ~~$134.0~~$49.8 million or net income per basic and ~~205.7~~diluted share of $0.54, as compared to a net income of $33.0 million ~~respectively,~~for the same period a year ago, due to increases in revenue, partially offset by increases in operating costs and expenses as discussed above. For the nine months ended September 30, 2021, we had net loss of $155.9 million or net loss per basic and diluted share of ~~$1.45 and $2.24, respectively,~~$1.69, as compared to a net loss of ~~$85.3 million and $163.7~~$130.7 million for the same ~~periods~~period a year ago, due to ~~decreases in revenue, and~~ increases in operating costs and expenses, partially offset by increases in revenue as discussed above.

Cash and cash equivalents, investments and accounts receivable totaled ~~$637.2~~$665.0 million at ~~June~~September 30, 2021, a decrease of ~~$91.5~~$63.7 million from December 31, 2020, primarily due to the cash used in operations.

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

Our collaboration partner AstraZeneca and we continue to expand the commercialization of roxadustat (tradename: 爱瑞卓^®) in China where it is approved for the treatment of anemia caused by CKD in non-dialysis and dialysis patients. As of ~~the second quarter of~~October 2021, ~~roxadustat was listed at hospitals that collectively represent approximately 81% of the CKD anemia market opportunity in China and~~ roxadustat had a ~~32%~~33% value share within the segment of erythropoiesis stimulating agents and HIF-PH inhibitors (roxadustat is the only HIF-PH inhibitor currently on the market in China).

In August 2021, EVRENZO^® (roxadustat) was approved for the treatment of adult patients with symptomatic anemia associated with CKD in the European Union and Great Britain. Astellas has launched EVRENZO in Germany, the United Kingdom, the Netherlands, and Austria.

In Japan, our partner Astellas continues ~~the commercial launch of~~to commercialize EVRENZO^® (roxadustat) for the treatment of anemia associated with CKD in both non-dialysis and dialysis patients.

In ~~June~~August 2021, the ~~Committee for Medicinal Products for Human Use of the EMA adopted~~U.S. Food and Drug Administration (“FDA”) issued a positive opinion, recommending the granting of MAA for the medicinal product Evrenzo (roxadustat), intended for the treatment of adult patients with symptomatic anemia associated with CKD. Our partner Astellas expects an approval decision on the MAA for roxadustat by the European Commission in August 2021.

~~EVRENZO~~^® (roxadustat) has also been approved for the treatment of anemia in CKD patients on dialysis and patients not on dialysis in South Korea and Chile. In collaboration with AstraZeneca, applications for marketing approval of roxadustat in CKD anemia have been submitted in Canada, Australia, Mexico, Brazil, Taiwan, Philippines, Singapore, India, Colombia, and Thailand.

~~In July 2021, the FDA CRDAC voted to recommend not approving roxadustat, an oral HIF-PH inhibitor,~~complete response letter regarding roxadustat’s New Drug Application (“NDA”) for the treatment of anemia due to CKD in adult ~~patients. While~~patients, stating that it could not be approved in its present form. The FDA decision followed a negative advisory vote regarding roxadustat by the Renal Drugs Advisory Committee in July 2021. We are preparing to meet with the FDA ~~is not~~to discuss the potential trial(s) that would be required ~~to follow CRDAC’s vote, the agency considers CRDAC’s non-binding recommendations when making its decision.~~for approval in CKD anemia.

We are continuing to enroll MATTERHORN, our Phase 2/3 placebo controlled, double-blind clinical trial to evaluate the safety and efficacy of roxadustat for treatment of anemia in MDS in the U.S. and Europe. This 160-patient trial is studying roxadustat in transfusion-dependent, lower-risk MDS patients, in which subjects are randomized 3:2 to receive roxadustat or placebo three-times-weekly. The primary endpoint is the proportion of patients who achieve transfusion independence by 28 weeks with secondary endpoints and safety evaluated at 52 weeks. We expect topline data from this study between the second half of 2022 and the first half of 2023.

In China, we are enrolling the randomized, double-blind, placebo-controlled portion of our Phase 3 clinical trial to evaluate the safety and efficacy of roxadustat in non-transfusion dependent, lower-risk MDS patients with anemia. One hundred thirty-five subjects will be randomized 2:1 to receive roxadustat or placebo three-times weekly for 26 weeks. The primary endpoint for this study is the percentage of patients achieving a hemoglobin response.

We have completed enrollment inand announced positive topline results from WHITNEY, 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 92 patients receiving myelosuppressive chemotherapy treatment for non-myeloid malignancies, with a treatment duration of 16 weeks. We expect ~~topline~~to release data from this study ~~in the third quarter of 2021.~~at an upcoming medical meeting.

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

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

In the second quarter of 2021, the FDA granted both Rare Pediatric Disease designation and Fast Track designation for pamrevlumab for the treatment of patients with DMD. In addition, the FDA has granted Orphan Drug Designation to pamrevlumab for the treatment of IPF, locally advanced unresectable pancreatic cancer, and DMD. Pamrevlumab has also received Fast Track designation from the FDA for the treatment of both IPF and locally advanced unresectable pancreatic cancer.

We are conducting ZEPHYRUS-1 and ZEPHYRUS-2, our two Phase 3 ~~trial~~trials of pamrevlumab in IPF ~~patients, as well as our newly initiated ZEPHYRUS-2, a second IPF Phase 3 study.~~patients. Both studies are randomized, double-blind, placebo-controlled Phase 3 trials targeting approximately 340 patients, each with a primary U.S. efficacy endpoint of change from baseline in forced vital capacity. The primary efficacy endpoint in Europe for each study is disease progression (defined by a decline in forced vital capacity percent predicted of greater than or equal to 10% or death). Secondary endpoints will include clinical outcomes of disease progression, patient reported outcomes, and quantitative changes in lung fibrosis volume from baseline. We expect topline data from ZEPHYRUS-1 in mid-2023.

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~~280 patients, randomized at a 1:1 ratio to receive either pamrevlumab or placebo, in each case in combination with chemotherapy (either FOLFIRINOX or gemcitabine plus nab-paclitaxel). ~~Overall~~We currently expect topline overall survival isdata, the primary endpoint, in the first half of ~~this study.~~2024. An interim analysis of event-free survival will be completed in the second half of 2022 for potential accelerated approval.

In June 2021 the Pancreatic Cancer Action Network's (PanCAN) Precision PromiseSM adaptive trial platform included pamrevlumab, with standard of care chemotherapy treatments for pancreatic cancer (gemcitabine and Abraxane^®), in its study for patients with metastatic pancreatic cancer. The combination therapy is offered to patients as either a first- or second-line treatment option, marking the first experimental treatment arm to be offered as a first-line treatment in PanCAN’s innovative Precision Promise trial. The objective of Precision Promise is to expedite the study and approval of promising therapies for pancreatic cancer by bringing multiple stakeholders together, including academic, industry and regulatory entities.

We continue to enroll LELANTOS-1, our Phase 3 clinical trial evaluating pamrevlumab in combination with systemic corticosteroids as a treatment for DMD. ~~LELANTOS~~LELANTOS-1 is a double-blind, placebo-controlled trial in approximately 90 non-ambulatory DMD patients. Patients are 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, cardiac, performance, ~~cardiac,~~ and fibrosis assessments. We expect topline data from this study in the first half of 2023.

We also continue to enroll our double-blind, placebo-controlled Phase 3 clinical trial, ~~LELANTOS 2,~~LELANTOS-2, evaluating pamrevlumab in combination with systemic corticosteroids in approximately 70 ambulatory DMD patients. Patients aged 6-12 will be randomized at a 1:1 ratio to pamrevlumab or placebo and have a treatment period of 52 weeks. The primary efficacy endpoint will assess ambulatory function, measured by the change in North Star Ambulatory Assessment from baseline to Week 52.

~~On June 17, 2021, we announced a partnership with HiFiBiO covering three HiFiBiO programs.~~

FibroGen exclusively licensed all product candidates in the Galectin-9 program and will have sole right to develop them worldwide. FibroGen has also obtained exclusive options to license all product candidates in HiFiBiO’s CXCR5 and CCR8 programs. Each option may be independently exercised following delivery of program-specific data to be generated by HiFiBiO. If an option is exercised, FibroGen will have the sole right to develop products from that program worldwide. Under the terms of the Exclusive License and Option Agreement, dated June 16, 2021 (the “HiFiBiO Agreement”), FibroGen will make a $25 million upfront payment to HiFiBiO, as well as payments upon option exercise. In addition, HiFiBiO may receive up to a total of an additional $1.1 billion in future option, clinical, regulatory, and commercial milestone payments across all three programs. HiFiBiO will also be eligible to receive mid single-digit to low double-digit royalties based upon worldwide net sales. The HiFiBiO Agreement is filed as an exhibit hereto.

OnIn July ~~19,~~ 2021, we ~~announced an exclusive license of our~~exclusively licensed to Eluminex global rights to our investigational biosynthetic cornea derived from recombinant human collagen type ~~III Eluminex Biosciences (Suzhou) Limited (“Eluminex”).~~III.

Under the terms of the agreement with Eluminex (the “Eluminex Agreement”), Eluminex will make an $8$8.0 million upfront payment to FibroGen. In addition, FibroGen may receive up to a total of ~~$64~~$64.0 million in future manufacturing, clinical, regulatory, and commercial milestone payments for the biosynthetic cornea program, as well as ~~$36~~$36.0 million in commercial milestones for the first recombinant collagen III product that is not the biosynthetic cornea. FibroGen will be eligible to receive mid single-digit to low double-digit royalties based upon worldwide net salesof cornea products, and low single-digit to mid single-digit royalties based on worldwide net ~~sale~~sales of other recombinant human collagen type III products that are not cornea products. ~~The Eluminex~~

During the third quarter of 2021, the $8.0 million upfront license payment was recognized as license revenue for the performance obligations satisfied. See Note 2, Collaboration Agreements, License Agreement ~~contains other industry standard license terms including related to exclusivity, sublicensing, manufacturing, milestones, royalties, intellectual property,~~ and ~~termination. The Eluminex Agreement will expire on a product-by-product and country-by-country basis at the end of the applicable royalty term.~~

~~The foregoing description of the Eluminex Agreement is not a complete description thereof, and is qualified in its entirety by reference~~Revenues, to the ~~actual Agreement that will be filed with the SEC as an exhibit to FibroGen’s Quarterly Report on Form 10-Q~~condensed consolidated financial statements for ~~the quarter ending September 30, 2021.~~details.

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. See Note 2, Collaboration Agreements, License Agreement and Revenues, to the condensed consolidated financial statements for details.

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 (“Europe Agreement”). Under these agreements, the aggregate amount of such consideration received through ~~June~~September 30, 2021 totals ~~$645.1~~$765.1 million.

During the third quarter of 2021, the European Commission approved EVRENZO^® (roxadustat) for the treatment of adult patients with symptomatic anemia associated with CKD, which triggered a total of $120.0 million milestone payable to us by Astellas under the Europe Agreement. Accordingly, the consideration of $120.0 million associated with these milestones was included in the transaction price and allocated to performance obligations under the Europe Agreement, all of which was recognized as revenue during the third quarter of 2021 from performance obligations satisfied.

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, the related drug product revenue was ~~$(2.0) and~~ $2.1 million for the ~~three and six~~nine months ended ~~June~~September 30, ~~2021, respectively.~~2021.

During the first quarter of 2021, we entered into an EU Supply Agreement under the Europe Agreement with Astellas to define general forecast, order, supply and payment terms for Astellas to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies. We shipped bulk drug product to Astellas as pre-commercial supply for process validation purposes during the first quarter of 2021. We ~~recorded~~continued to record the consideration of $11.8 million from this shipment as deferred revenue as of ~~June~~September 30, 2021, due to a high degree of uncertainty associated with the final consideration. The deferred revenue will be recognized as and when the uncertainty is resolved.

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 a collaboration agreement with AstraZeneca for roxadustat for the treatment of anemia in China (“China Agreement”). Under the AstraZeneca agreements, aggregate amount of such consideration received through ~~June~~September 30, 2021 totals $516.2 million.

Under the China Agreement, which is conducted through FibroGen China Anemia Holdings, Ltd., FibroGen ~~(China) Medical Technology Development Co., Ltd. (“FibroGen Beijing”),~~Beijing, and FibroGen International (Hong Kong) Limited (collectively, (“FibroGen China”), the commercial collaboration was structured as a 50/50 profit share, which was amended by the China Amendment in the third quarter of 2020, as discussed and defined below in China Amendment.

In 2020, we entered into Master Supply Agreement under the U.S./RoW Agreement with AstraZeneca (“Master Supply Agreement”) to define general forecast, order, supply and payment terms for AstraZeneca to purchase roxadustat bulk drug product from FibroGen in support of commercial supplies. We shipped bulk drug product to AstraZeneca as commercial supply during 2020 and the first and second quarter of 2021. Based on the ~~above-mentioned~~CRL issued by the FDA ~~CRDAC’s vote on July 15,~~in August 2021, we evaluated the impact of these developments in revising our estimates of variable consideration associated with drug product revenue. As a result, we updated the estimated transaction price, and ~~recorded~~continued to record $11.2 million as deferred revenue as of ~~June~~September 30, 2021.

In July 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”).

Under the China Amendment, in September 2020, FibroGen Beijing and AstraZeneca completed the establishment of a jointly owned entity, ~~Beijing~~ Falikang, ~~Pharmaceutical Co., Ltd. (“Falikang”),~~ which performs roxadustat distribution, as well as conduct sales and marketing through AstraZeneca.

Total cash consideration received through ~~June~~September 30, 2021 and potential cash consideration, for upfront payments and milestone payments under our collaboration agreements are as follows:

	Cash Received for Upfront Payments and Milestone Payments Through June 30, 2021		Additional Potential Cash Payment for Milestones		Total Potential Cash Payments for Upfront Payments and Milestones		Cash Received for Upfront Payments and Milestone Payments Through September 30, 2021		Additional Potential Cash Payment for Milestones		Total Potential Cash Payments for Upfront Payments and Milestones
	(in thousands)						(in thousands)
Astellas--related-party:
Japan Agreement	$	105,093	$	67,500	$	172,593	$	105,093	$	67,500	$	172,593
Europe Agreement		540,000		205,000		745,000		660,000		85,000		745,000
Total Astellas		645,093		272,500		917,593		765,093		152,500		917,593
AstraZeneca:
U.S. / RoW Agreement		439,000		810,000		1,249,000		439,000		810,000		1,249,000
China Agreement		77,200		299,500		376,700		77,200		299,500		376,700
Total AstraZeneca		516,200		1,109,500		1,625,700		516,200		1,109,500		1,625,700
Total	$	1,161,293	$	1,382,000	$	2,543,293	$	1,281,293	$	1,262,000	$	2,543,293

The above table does not include development cost reimbursement, transfer price payments, and royalties and profit share under our existing collaboration agreements. 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 June 30,					Change							Six Months Ended June 30,					Change							Three Months Ended September 30,				Change							Nine Months Ended September 30,					Change
	2021			2020		$			%				2021			2020		$			%				2021		2020		$			%				2021			2020		$			%
	(dollars in thousands)																								(dollars in thousands)
Revenue:
License revenue	$	—		$	—	$	—			—		%	$	—		$	—	$	—			—		%	$	116,434	$	—	$	116,434			100		%	$	116,434		$	—	$	116,434			100		%
Development and other revenue		19,641			18,957		684			4		%		34,228			38,402		(4,174	)		(11	)	%		26,097		20,663		5,434			26		%		60,325			59,065		1,260			2		%
Product revenue, net		13,371			15,693		(2,322	)		(15	)	%		28,733			20,648		8,085			39		%		13,442		22,683		(9,241	)		(41	)	%		42,175			43,331		(1,156	)		(3	)	%
Drug product revenue		(8,648	)		8,238		(16,886	)		(205	)	%		(168	)		8,238		(8,406	)		(102	)	%		—		686		(686	)		(100	)	%		(168	)		8,924		(9,092	)		(102	)	%
Total revenue	$	24,364		$	42,888	$	(18,524	)		(43	)	%	$	62,793		$	67,288	$	(4,495	)		(7	)	%	$	155,973	$	44,032	$	111,941			254		%	$	218,766		$	111,320	$	107,446			97		%

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 2019.

Under our revenue recognition policy, license revenue includes amounts from upfront, non-refundable license payments and amounts allocated pursuant to the standalone selling price method from other consideration received during the periods. This revenue is generally recognized as deliverables are met and services are performed. ~~We did not have any license revenue for the three and six months ended June 30, 2021 and 2020.~~

Development revenue includes co-development and other development related services. Co-development services are recognized as revenue in the period in which they are billed to our partners, excluding China. For China co-development services, revenue is deferred until we begin to transfer control of the manufactured commercial product to AstraZeneca, which commenced in the first quarter of 2021 and is expected to continue through 2028. Other development related services are recognized as revenue over the non-contingent development period based on a proportional performance method. As of ~~June~~September 30, 2021, the estimated future non-contingent development periods range from three to 4845 months. Other revenues consist of sales of research and development material and have not been material for any of the periods presented.

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 or bulk drug product sales to AstraZeneca and Astellas in support of pre-commercial preparation prior to the ~~New Drug~~NDA or Marketing Authorization Application ~~(“NDA”) or MAA~~ approval, and to Astellas for ongoing commercial launch in Japan. Drug product revenue is recognized when we fulfill the delivery obligations. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the drug product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period when the uncertainty associated with the variable consideration is subsequently resolved. 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. In the future, we will continue generating revenue 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 due to the uncertain timing and amount of such payments and sales.

Total revenue ~~decreased $18.5~~increased $111.9 million, or ~~43%~~254% for the three months ended ~~June~~September 30, 2021 and ~~$4.5~~$107.4 million, or 7%97% for the ~~six~~nine months ended ~~June~~September 30, 2021, 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
	2021		2020		$		%			2021		2020		$		%
	(dollars in thousands)
License revenue:
Astellas	$	108,434	$	—	$	108,434		100	%	$	108,434	$	—	$	108,434		100	%
AstraZeneca		—		—		—		—	%		—		—		—		100	%
Eluminex		8,000		—		8,000		100	%		8,000		—		8,000		100	%
Total license revenue	$	116,434	$	—	$	116,434		100	%	$	116,434	$	—	$	116,434		100	%

License revenue recognized under our collaboration agreements with Astellas for the three and nine months ended September 30, 2021 represented the allocated revenue of related to a total of $120.0 million regulatory milestones associated with the approval by European Commission of EVRENZO^® (roxadustat) for the treatment of adult patients with symptomatic anemia associated with CKD during the third quarter of 2021.

License revenue recognized under our license agreement with Eluminex for the three and nine months ended September 30, 2021 represented the $8.0 million upfront license payment.

We did not have any license revenue for the three and nine months ended September 30, 2020.

	Three Months Ended June 30,				Change							Six Months Ended June 30,				Change							Three Months Ended September 30,				Change							Nine Months Ended September 30,				Change
	2021		2020		$			%				2021		2020		$			%				2021		2020		$			%				2021		2020		$			%
	(dollars in thousands)																						(dollars in thousands)
Development revenue:
Astellas	$	2,645	$	4,766	$	(2,121	)		(45	)	%	$	6,256	$	9,503	$	(3,247	)		(34	)	%	$	14,127	$	4,737	$	9,390			198		%	$	20,383	$	14,240	$	6,143			43		%
AstraZeneca		16,993		14,191		2,802			20		%		27,969		28,899		(930	)		(3	)	%		11,970		15,926		(3,956	)		(25	)	%		39,939		44,825		(4,886	)		(11	)	%
Total development revenue		19,638		18,957		681			4		%		34,225		38,402		(4,177	)		(11	)	%		26,097		20,663		5,434			26		%		60,322		59,065		1,257			2		%
Other revenue																								—		—		—			—		%		3		—		3			100		%
Total development and other revenue																							$	26,097	$	20,663	$	5,434			26		%	$	60,325	$	59,065	$	1,260			2		%

Development and other revenue increased ~~$0.7~~$5.4 million, or 4%26% for the three months ended ~~June~~September 30, 2021 and ~~decreased $4.2~~$1.3 million, or ~~11%~~2% for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to the same periods a year ago.

~~Co-development~~Development revenue recognized under our collaboration agreements with Astellas included the allocated revenue of $11.6 million related to the above-mentioned $120.0 million associated with the approvals in EU achieved during the third quarter of 2021. The increases were partially offset by the decreased in co-development billings related to the development of roxadustat under our collaboration agreements with Astellas for the three and ~~six~~nine months ended ~~June~~September 30, 2021 ~~decreased~~ as a result of the substantial completion of Phase 3 trials for roxadustat.

Development revenue recognized under our collaboration agreements with AstraZeneca for the three and ~~six~~nine months ended ~~June~~September 30, 2021 was impacted by the increase in CKD related co-development billings in the U.S., offset by the extension of the estimated future non-contingent development period when we were notified of the FDA CRDAC meeting to review the NDA for roxadustat.

Three Months Ended June 30,

Change

Six Months Ended June 30,

Change

2021

2020

$

%

2021

2020

$

%

(dollars in thousands)

Direct Sales:

Gross revenue

$
2,230

$
19,833

$
(17,603
)

(89
)
%

$
7,659

$
25,205

$
(17,546
)

(70
)
%
Discounts and rebates

(618
)

(4,095
)

3,477

(85
)
%

(1,181
)

(4,512
)

3,331

(74
)
%
Sales returns

(1
)

(45
)

44

(98
)
%

88

(45
)

133

(296
)
%
Direct sales revenue, net

1,611

15,693

(14,082
)

(90
)
%

6,566

20,648

(14,082
)

(68
)
%

Sales to Falikang:

Gross transfer price

26,714

—

26,714

100

%

51,115

—

51,115

100

%
Profit share

(9,573
)

—

(9,573
)

100

%

(19,636
)

—

(19,636
)

100

%
Net transfer price

17,141

—

17,141

100

%

31,479

—

31,479

100

%
Increase in deferred revenue

(5,381
)

—

(5,381
)

100

%

(9,312
)

—

(9,312
)

100

%
Sales to Falikang revenue, net

11,760

—

11,760

100

%

22,167

—

22,167

100

%
Total product revenue, net

$
13,371

$
15,693

$
(2,322
)

(15
)
%

$
28,733

$
20,648

$
8,085

39

%

	Three Months Ended September 30,						Change							Nine Months Ended September 30,						Change
	2021			2020			$			%				2021			2020			$			%
	(dollars in thousands)
Direct Sales:
Gross revenue	$	3,249		$	27,900		$	(24,651	)		(88	)	%	$	10,908		$	53,105		$	(42,197	)		(79	)	%
Discounts and rebates		(133	)		(5,209	)		5,076			(97	)	%		(1,314	)		(9,721	)		8,407			(86	)	%
Sales returns		(2	)		(8	)		6			(75	)	%		86			(53	)		139			(262	)	%
Direct sales revenue, net		3,114			22,683			(19,569	)		(86	)	%		9,680			43,331			(33,651	)		(78	)	%

Sales to Falikang:
Gross transfer price		31,179			—			31,179			100		%		82,294			—			82,294			100		%
Profit share		(12,090	)		—			(12,090	)		100		%		(31,726	)		—			(31,726	)		100		%
Net transfer price		19,089			—			19,089			100		%		50,568			—			50,568			100		%
Increase in deferred revenue		(8,761	)		—			(8,761	)		100		%		(18,073	)		—			(18,073	)		100		%
Sales to Falikang revenue, net		10,328			—			10,328			100		%		32,495			—			32,495			100		%
Total product revenue, net	$	13,442		$	22,683		$	(9,241	)		(41	)	%	$	42,175		$	43,331		$	(1,156	)		(3	)	%

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

Product revenue from direct sales to distributors is recognized in an amount that reflects the consideration ~~to which~~that we expect to be entitled to in exchange for those products, net of various sales rebates and discounts. The gross product revenue from direct sales to distributors was ~~$2.3~~$3.2 million and ~~$19.8~~$27.9 million for the three months ended ~~June~~September 30, 2021 and 2020, and ~~$7.7~~$10.9 million and ~~$25.2~~$53.1 million for ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. The total discounts and rebates were ~~$0.6~~$0.1 million and ~~$4.1~~$5.2 million for the three months ended ~~June~~September 30, 2021 and 2020, and ~~$1.2~~$1.3 million and ~~$4.5~~$9.7 million for ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. The discounts and rebates primarily consisted of the contractual sales rebate that were calculated based on the stated percentage of gross sales by each distributor in the distribution agreement, and non-key account hospital listing award that was calculated based on eligible non-key account hospital listing to date achieved by each distributor with certain requirements met during the period. InDuring the ~~second quarter of~~three and nine months ended September 30, 2020, wenon-key account hospital listing award was $2.9 million and $5.5 million, respectively, recorded ~~a $2.6 million~~ as a reduction to the revenue, related to accounting modifications of non-key account hospital listing award, ~~when we amended~~as a result of the amendment to the agreement with our pharmaceutical ~~distributors.~~distributors in the second quarter of 2020.

FibroGen Beijing manufactures and supplies commercial product to Falikang based on an agreed upon transfer price, which includes gross transfer price, net of calculated profit share. Revenue is recognized upon the transfer of control of commercial products to Falikang in an amount that reflects the allocation of the China performance obligation transaction price to the performance obligation satisfied during the reporting period. The variable consideration components that are included in the transaction price may be constrained, and are included in the product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period when the uncertainty associated with the variable consideration is subsequently resolved. During the three and ~~six~~nine months ended ~~June~~September 30, 2021, the gross transfer price was ~~$26.7~~$31.2 million and ~~$51.1~~$82.3 million respectively, net of the calculated profit share of ~~$9.6~~$12.1 million and ~~$19.6~~$31.7 million respectively. Following updates to our estimates, we deferred ~~$5.4~~$8.8 million and ~~$9.3~~$18.1 million from the sales to Falikang for the three and ~~six~~nine months ended ~~June~~September 30, 2021 respectively, which was included in the related deferred revenue of the China performance obligation.

	Three Months Ended June 30,					Change							Six Months Ended June 30,					Change							Three Months Ended September 30,					Change							Nine Months Ended September 30,					Change
	2021			2020		$			%				2021			2020		$			%				2021		2020			$			%				2021			2020		$			%
	(dollars in thousands)																								(dollars in thousands)
Drug product revenue:
Astellas	$	(1,974	)	$	8,238	$	(10,212	)		(124	)	%	$	2,056		$	8,238	$	(6,182	)		(75	)	%	$	—	$	(3,957	)	$	3,957			(100	)	%	$	2,056		$	4,281	$	(2,225	)		(52	)	%
AstraZeneca		(6,674	)		—		(6,674	)		(100	)	%		(2,224	)		—		(2,224	)		(100	)	%		—		4,643			(4,643	)		100		%		(2,224	)		4,643		(6,867	)		148		%
Total drug product revenue:	$	(8,648	)	$	8,238	$	(16,886	)		(205	)	%	$	(168	)	$	8,238	$	(8,406	)		(102	)	%	$	—	$	686		$	(686	)		(100	)	%	$	(168	)	$	8,924	$	(9,092	)		(102	)	%

~~During~~We did not have any drug product revenue for the three months ended ~~June~~September 30, 2021.

During the nine months ended September 30, 2021, we recorded ~~a reduction of $2.0~~$2.1 million toin the drug product revenue related to the API shipments fulfilled under the terms of the Japan Amendment with Astellas in 2018, due to a change in estimated variable consideration. Specifically, the change in estimated variable consideration was based on the API held by Astellas, ~~at June 30, 2021,~~ adjusted to reflect the changes in the estimated bulk product strength mix intended to be manufactured by Astellas, estimated cost to convert the API to bulk product tablets, and estimated yield from the manufacture of bulk product tablets, among others. During the ~~first quarter~~three months ended September 30, 2020, we recorded a reduction of ~~2021, the Company recorded~~ $4.0 million to the drug product revenue related to the same API shipments for the change in estimated variable consideration based on the API held by Astellas ~~at March 31, 2021,~~ under the same methodology.

During the ~~three months ended March 31,~~first quarter of 2021, we shipped bulk drug product from process validation supplies for commercial purposes under the terms of the Europe Agreement with Astellas. We ~~recorded~~continued to record the consideration of $11.8 million from this shipment as deferred revenue as of ~~June~~September 30, 2021, due to a high degree of uncertainty associated towith the final consideration, which will be recognized as and when the uncertainty is resolved.

During ~~three and six months ended June 30,~~the second quarter of 2021, we shipped bulk drug product to AstraZeneca as commercial supply under the terms of the Master Supply Agreement. Based on the above-mentioned FDA ~~CRDAC’s vote on July 15,~~CRL in August 2021, we evaluated the impact of these developments in revising our estimates of variable consideration associated with drug product revenue. As a result, we updated the estimated transaction price, and ~~recorded~~continued to record $11.2 million as deferred revenue as of ~~June~~September 30, 2021.

During the first three quarters of 2020, we delivered process validation product to AstraZeneca as pre-commercial supply under the U.S./RoW Agreement and recorded the related drug product revenue of $4.6 million during the three and nine months ended September 30, 2020.

	Three Months Ended June 30,				Change							Six Months Ended June 30,				Change							Three Months Ended September 30,					Change					Nine Months Ended September 30,				Change
	2021		2020		$			%				2021		2020		$			%				2021		2020			$		%			2021		2020		$		%
	(dollars in thousands)																						(dollars in thousands)
Operating costs and expenses
Cost of goods sold	$	3,078	$	3,076	$	2			—		%	$	6,479	$	4,047	$	2,432			60		%	$	3,266	$	2,207		$	1,059		48	%	$	9,746	$	6,253	$	3,493		56	%
Research and development		122,567		61,414		61,153			100		%		197,243		116,315		80,928			70		%		75,880		58,476			17,404		30	%		273,123		174,792		98,331		56	%
Selling, general and administrative		32,554		63,535		(30,981	)		(49	)	%		63,334		113,138		(49,804	)		(44	)	%		25,853		(48,981	)		74,834		153	%		89,186		64,157		25,029		39	%
Total operating costs and expenses	$	158,199	$	128,025	$	30,174			24		%	$	267,056	$	233,500	$	33,556			14		%	$	104,999	$	11,702		$	93,297		797	%	$	372,055	$	245,202	$	126,853		52	%

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. 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. During the three and six months ended June 30, 2021, some reduction in expenses, such as due to paused or slowed enrollment for trials, were offset by some increased expenses, such as in patient care.

Total operating costs and expenses increased ~~$30.2~~$93.3 million, or ~~24%~~797% for the three months ended ~~June~~September 30, 2021, and ~~$33.6~~$126.9 million, or ~~14%~~52% for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to the same periods a year ago, for the reason discussed in the sections below.

Cost of goods sold was ~~$3.1~~$3.3 million and 2.2 million for ~~each of~~ the three months ended ~~June~~September 30, 2021 and ~~2020.~~2020, respectively. Cost of goods sold was ~~$6.5~~$9.7 million and ~~$4.0~~$6.3 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

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 adjustments. Cost of goods sold, associated with the roxadustat commercial sales in China, was ~~$1.9~~$2.8 million and ~~$2.7~~$2.2 million for the three months ended ~~June~~September 30, 2021 and 2020, and ~~$4.6~~$7.4 million and ~~$3.7~~$5.8 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively, due to the sales to Falikang that started in January 2021, offset by the overall increase in the gross sales.

Cost of goods sold associated with the roxadustat drug product revenue in the U.S. was ~~$1.1~~$0.5 million and immaterial for the three months ended September 30, 2021 and 2020, and $2.3 million and $0.4 million for the ~~three~~nine months ended ~~June 30, 2021 and 2020, and $1.9 million and $0.4 million for the six months ended June~~September 30, 2021 and 2020, respectively. We expect costs of goods sold to increase in relation to drug product revenue as we deplete inventories that we had expensed prior to receiving regulatory approvals.

Research and development expenses consist of third-party research and development costs and the fully-burdened amount of costs associated with work performed under collaboration agreements. Research and development ~~costs~~expenses include employee-related expenses for research and development functions, expenses incurred under agreements with clinical research organizations (“CROs”), other clinical and preclinical costs and allocated direct and indirect overhead costs, such as facilities costs, information technology costs and other overhead. Research and development costs 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. Research and development expenses also include in-process research and development ~~asset~~assets that ~~has~~have no alternative future use other than in a particular research and development project. Following the CRL for roxadustat in the U.S., we are implementing a cost reduction effort, and as a result, research and development expenses may decrease in certain areas in the near future.

The following table summarizes our research and development expenses incurred during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:

			Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended September 30,				Nine Months Ended September 30,
Product Candidate		Phase of Development	2021		2020		2021		2020			Phase of Development	2021		2020		2021		2020
			(in thousands)										(in thousands)
Roxadustat		Phase 3	$	27,313	$	34,332	$	53,641	$	60,344		Phase 3	$	19,822	$	31,222	$	72,989	$	91,586
Pamrevlumab		Phase 2/3		58,277		23,320		93,523		45,401		Phase 2/3		43,780		24,959		137,334		70,374
Other research and development expenses	Other research and development expenses			36,977		3,762		50,079		10,570	Other research and development expenses			12,278		2,295		62,800		12,832
Total research and development expenses	Total research and development expenses		$	122,567	$	61,414	$	197,243	$	116,315	Total research and development expenses		$	75,880	$	58,476	$	273,123	$	174,792

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 increase in the future as we advance our product candidates through clinical trials and expand our product candidate portfolio.

Research and development expenses increased ~~$61.2~~$17.4 million, or ~~100%~~30% for the three months ended ~~June~~September 30, 2021, compared to the same period a year ago, as a result of the net effect of the following:

Research and development expenses increased $98.3 million, or 56% for the nine months ended September 30, 2021, compared to the same period a year ago, as a result of the net effect of the following:

~~Research and development expenses increased $80.9 million, or 70% for the six months ended June 30, 2021, compared to the same period a year ago, as a result of the net effect of the following:~~

We started to incur sales and marketing expenses in 2019 in China to prepare for commercial operations. Selling, general and administrative (“SG&A”) expenses consist primarily of employee-related expenses for executive, operational, finance, legal, compliance, and human resource functions. SG&A expenses also include facility-related costs, professional fees, accounting and legal services, other outside services including co-promotional expenses ~~recruiting~~associated with our commercialization efforts in China, recruiting fees and expenses associated with obtaining and maintaining patents. ~~We anticipate that our~~Following the CRL for roxadustat in the U.S., we are implementing a cost reduction effort, and as a result, SG&A expenses ~~will increase~~may decrease in certain areas in the future as we anticipate an increase in payroll and related expenses associated with an increase in headcount to support the growth of the business in connection with potential commercialization of our product candidates.near future.

SG&A expenses ~~decreased $31.0~~increased $74.8 million, or ~~49%~~153% for the three months ended ~~June~~September 30, 2021, compared to the same period a year ago, as a result of the net effect of the following:

~~SG&A expenses decreased $49.8 million, or 44% for the six months ended June 30, 2021, compared to the same period a year ago, as a result of the net effect of the following:~~

	Three Months Ended June 30,						Change							Six Months Ended June 30,						Change							Three Months Ended September 30,						Change							Nine Months Ended September 30,						Change
	2021			2020			$			%				2021			2020			$			%				2021			2020			$			%				2021			2020			$			%
	(dollars in thousands)																										(dollars in thousands)
Interest and other, net:
Interest expense	$	(355	)	$	(651	)	$	296			(45	)	%	$	(856	)	$	(1,284	)	$	428			(33	)	%	$	(109	)	$	(580	)	$	471			(81	)	%	$	(965	)	$	(1,864	)	$	899			(48	)	%
Interest income and other income (expenses), net		(363	)		644			(1,007	)		(156	)	%		(817	)		3,810			(4,627	)		(121	)	%		(1,303	)		1,482			(2,785	)		(188	)	%		(2,120	)		5,292			(7,412	)		(140	)	%
Total interest and other, net	$	(718	)	$	(7	)	$	(711	)		10,157		%	$	(1,673	)	$	2,526		$	(4,199	)		(166	)	%	$	(1,412	)	$	902		$	(2,314	)		(257	)	%	$	(3,085	)	$	3,428		$	(6,513	)		(190	)	%

Interest expense relates to our finance lease liabilities accretion primarily for our leased facilities in San Francisco and China. Interest expense also includes interest related to the Technology Development Center of the Republic of Finland product development obligations.

Interest expense decreased ~~$0.3~~$0.5 million, or ~~45%~~81% for the three months ended ~~June~~September 30, 2021, and ~~$0.4~~$0.9 million, or ~~33%~~48% for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same periods a year ago. The decrease was primarily due to the lease amendment effective June 1, 2021, related to our long-term property lease in San Francisco, was determined as a lease modification and classified as an operating lease, as compared to a finance lease before the lease modification. In addition, the new lease agreement effective in February 2021 for our long-term property lease in China was classified as an operating lease, as compared to a finance lease for the expired lease. The classification for both leases no longer trigger recognition of interest on the lease liabilities separately in the condensed statement of operations. See Note 5, Leases, to the condensed consolidated financial statements for details.

Interest income and other income (expenses), 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, and other non-operating income and expenses.

Interest income and other income (expenses), net decreased ~~$1.0~~$2.8 million, or ~~156%~~188% for the three months ended ~~June~~September 30, 2021, and ~~$4.6~~$7.4 million, or ~~121%~~140% for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same periods a year ago, primarily due to lower interest earned on our cash, cash equivalents and investments associated with the lower ~~average balances and lower~~ interest ~~rates.~~

~~In addition, on April 1, 2020, FibroGen Beijing adopted Renminbi Yuan (“CNY”)~~rates, as ~~its functional currency based on reassessment of the primary economic environment in which FibroGen Beijing operates,~~well 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 changed resulted in a one-time $1.0 millionunfavorable foreign ~~currency loss during the three and six months ended June 30, 2020.~~exchange impacts.

Provision for ~~(benefit from)~~ income ~~tax~~taxes for the three and ~~six~~nine months ended ~~June~~September 30, 2021 ~~were primarily due to foreign taxes. Provision for (benefit from) income tax for the three~~ and ~~six months ended June 30,~~ 2020 were primarily due to ~~the tax effect arising from other comprehensive income related to available-for-sale securities, and~~ foreign taxes.

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

~~Investment income in unconsolidated variable interest entity~~ (“VIE”) represented our proportionate share of the reported profits or losses of Falikang, an unconsolidated VIE accounted for under the equity method, and was immaterial for the three and ~~six~~nine months ended ~~June~~September 30, ~~2021.~~2021 and 2020. See Note 3, Variable Interest Entity, to the condensed consolidated financial statements for details.

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

As of ~~June~~September 30, 2021, we had cash and cash equivalents of ~~$353.4~~$274.5 million. Cash is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Investments, consisting of available-for-sale debt investments and marketable equity investments, and stated at fair value, are also available as a source of liquidity. As of ~~June~~September 30, 2021, we had short-term and long-term investments of ~~$153.9~~$211.9 million and ~~$105.8~~$142.6 million, respectively. As of ~~June~~September 30, 2021, a total of ~~$85.1~~$77.4 million of our cash and cash equivalents was held outside of the U.S. in our foreign subsidiaries, including ~~$63.8~~$56.0 million of our cash and cash equivalents is held in China, to be used primarily for our China operations.

In the third quarter of 2019, we started generating revenue from commercial sales of roxadustat product in China. Even with the expectation of increases in revenue from product sales, we anticipate that we will continue to generate losses for the foreseeable future. ~~We expect increase~~Following the CRL for roxadustat in ~~our~~the U.S., we are implementing a cost reduction effort, and as a result, operating expenses ~~as we continue~~may decrease in certain areas in the ~~development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products.~~near future. To date, we have funded certain portions of our research and development and manufacturing efforts ~~in China~~globally through collaboration partners, government support, and ~~Europe through outside parties.~~capital investment. 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 are expected to decrease as a result of~~ AstraZeneca is 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, 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 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” 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 (in thousands):

	Six Months Ended June 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net cash provided by (used in):
Operating activities	$	(71,527	)	$	90,179		$	(27,272	)	$	88,830
Investing activities		(254,252	)		209,864			(376,405	)		308,719
Financing activities		301			3,459			(532	)		7,684
Effect of exchange rate changes on cash and cash equivalents		446			(499	)		343			969
Net increase (decrease) in cash and cash equivalents	$	(325,032	)	$	303,003		$	(403,866	)	$	406,202

Net cash used in operating activities was ~~$71.5~~$27.3 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and consisted primarily of net loss of ~~$205.7~~$155.9 million adjusted for non-operating cash items of ~~$73.5~~$92.4 million, offset by a net increase in operating assets and liabilities of ~~$60.7~~$36.3 million. The significant non-operating cash items included stock-based compensation expense of ~~$38.4~~$54.1 million, expense for acquired in-process research and development asset from HiFiBiO of $25.0 million, depreciation expense of ~~$5.2~~$7.7 million and amortization of finance lease right-of-use assets of ~~$4.4~~$4.5 million. The significant items in the changes in operating assets and liabilities included the increases resulting from the following:

The increases were partially offset by the decreases resulting from the following:

Net cash provided by operating activities was ~~$90.2~~$88.8 million for the ~~six~~nine months ended ~~June~~September 30, 2020 and consisted primarily of net loss of ~~$163.7~~$130.7 million adjusted for ~~non-operating cash~~non-cash items of ~~$45.7~~$69.4 million, offset by a net increase in operating assets and liabilities of ~~$208.2~~$150.1 million. The significant ~~non-operating cash~~non-cash items included stock-based compensation expense of ~~$34.6~~$52.5 million, depreciation expense of ~~$5.7~~$8.7 million and amortization of finance lease ~~right-of-use assets~~ROU of ~~$5.2~~$7.9 million. The significant items in the changes in operating assets and liabilities included the increases resulting from the following:

~~The increases were partially offset by the decreases resulting from the following:~~

The increases were partially offset by the decreases resulting from 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 used in investing activities was ~~$254.3~~$376.4 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and consisted primarily of ~~$266.6~~$397.9 million of cash used in purchases of available-for-sale securities, $25.0 million of cash paid for the acquired in-process research and development asset and $3.8 million of cash used in purchases of property and equipment, partially offset by ~~$10.6~~$46.3 million of proceeds from maturities of investments and $4.0 million of proceeds from sales of available-for-sale securities.

Net cash provided by investing activities was ~~$209.9~~$308.7 million for the ~~six~~nine months ended ~~June~~September 30, 2020 and consisted primarily of ~~$201.9~~$301.9 million of proceeds from maturities of investments, and $10.6 million of proceeds from sales of available-for-sale ~~securities.~~securities, partially offset by $2.1 million of purchases of property and equipment and $1.6 million of payment made for investment in Falikang, our unconsolidated VIE.

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

Net cash ~~provided by~~used in financing activities was ~~$0.3~~$0.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and consisted primarily of ~~$11.8~~$11.9 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under our Employee Share Purchase Plan (“ESPP”), partially offset by ~~$5.9~~$6.7 million of cash paid for payroll taxes on restricted stock unit releases, and ~~$5.3~~$5.4 million of repayments of finance lease liabilities.

Net cash provided by financing activities was ~~$3.5~~$7.7 million for the ~~six~~nine months ended ~~June~~September 30, 2020 and consisted primarily of ~~$16.5~~$26.2 million of proceeds from the issuance of common stock upon exercise of stock options and purchases under our ESPP, partially offset by ~~$6.9~~$9.0 million of cash paid for payroll taxes on restricted stock unit releases, and ~~$6.0~~$9.3 million of repayments of finance lease liabilities.

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, 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.

As of ~~June~~September 30, 2021, we had ~~$104.9~~$102.3 million of operating lease liabilities. Our finance lease liabilities were immaterial as of ~~June~~September 30, 2021.

As of ~~June~~September 30, 2021, we had outstanding total non-cancelable purchase obligations of ~~$81.9~~$77.4 million, including ~~$29.6~~$22.0 million for manufacture and supply of roxadustat, ~~$47.3~~$46.5 million for manufacture and supply of pamrevlumab, and ~~$5.0~~$8.9 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.

Some of our license agreements provide for periodic maintenance fees over specified time periods, as well as payments by us upon the achievement of development, regulatory and commercial milestones. As of ~~June~~September 30, 2021, future milestone payments for research and pre-clinical stage development programs consisted of up to approximately ~~$359.2~~$359.1 million in total potential future milestone payments under our license agreements with HiFiBiO (for Galectin-9), Medarex, Inc. and others. These milestone payments generally become due and payable only upon the achievement of certain developmental, clinical, regulatory and/or commercial milestones. The event triggering such payment or obligation has not yet occurred.

For recently issued accounting guidance, see Note 1, Significant Accounting Policies, to the condensed consolidated financial statements.

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 ~~six~~nine months ended ~~June~~September 30, 2021 compared with the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020, except for the updates to the following:

Product revenue, net consists of revenues from sales of roxadustat commercial product to Falikang, and directly to pharmaceutical distributors located in a few provinces in China that are not covered by Falikang. Falikang is jointly owned by AstraZeneca and FibroGen Beijing. We are not the primary beneficiary of Falikang for accounting purposes, as AstraZeneca is the final decision maker for all the roxadustat commercialization activities, and we lack the power criterion to direct the activities of Falikang (see Note 3, Variable Interest Entity, to the condensed consolidated financial statements).

The promises identified under the AstraZeneca China Agreement, including the license, co-development services and manufacturing of commercial supplies have been bundled into the China performance obligation. Amounts of the transaction price allocable to this performance obligation under our agreements with AstraZeneca are deferred until control of the manufactured commercial product is transferred to AstraZeneca.

The initiation of roxadustat sales to Falikang marked the beginning of the China performance obligation. Revenue is recognized at a point in time when control of roxadustat commercial product is transferred to Falikang. Revenue is recognized based on the estimated transaction price per unit and actual quantity of product delivered during the reporting period. Specifically, the transaction price per unit is determined based on the overall transaction price over the total estimated sales quantity for the estimated performance period in which we believe those sales would occur. The price per unit is subject to reassessment on a quarterly basis, which may result in cumulative catch up adjustments due to changes in estimates.

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

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

We sell roxadustat in China directly to a number of pharmaceutical distributors located in a few provinces in China that are not covered by Falikang. These pharmaceutical distributors are our customers. Hospitals order roxadustat through a distributor and we ship 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 the customer in an amount that reflects the consideration ~~to which~~that we expect to be entitled to in exchange for the product.

The period between the transfer of control of the promised goods and when we receive payment is based on 60-day payment terms. As such, product revenue is not adjusted for the effects of a significant financing component.

Product revenue is recorded at the net sales prices ~~which~~that includes the following estimates of variable consideration:

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

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, we believe there were no material changes to our exposure to market risks as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2020.

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 ~~June~~September 30, 2021, 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~~Act) are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on our evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of ~~June~~September 30, 2021 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 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. We have developed a detailed remediation plan and ~~are making~~we continue to make progress ofin what ~~will be~~has been a multi-step ~~remediation~~ process to fully remediate the material weaknesses described above. Specifically, as of ~~June~~September 30, 2021, we have continued with the remediation steps that were initiated in the fourth quarter of 2020, including, but not limited to, the following:

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

The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We believe the measures described above will remediate these material weaknesses and strengthen our internal control over financial reporting. As we continue to evaluate and work to remediate these material weaknesses, we may determine to take additional measures to address these deficiencies or determine to modify certain of the remediation measures described above.

Besides the new procedures and controls implemented to date as described above, there were no changes in our internal control over financial reporting that occurred during the three months ended ~~June~~September 30, 2021 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.

We are a party to various legal actions that arose in the ordinary course of our business. We recognize accruals for any legal action when we conclude that a loss is probable and reasonably estimable. We did not have any material accruals for any currently active legal action in our consolidated balance sheets as of ~~June~~ September 30, 2021, as we could not predict the ultimate outcome of these matters, or reasonably estimate the potential exposure.

In April 2021, three putative securities class action complaints were filed against FibroGen and certain of its current and former executive officers (collectively, the “Defendants”) in the United States (“U.S.”) District Court for the Northern District of California. The lawsuits allege that Defendants violated the Securities Exchange Act of 1934 by making materially false and misleading statements regarding FibroGen’s Phase 3 clinical studies data and prospects for FDA approval between November 2019 and December 2020. Plaintiffs seek to represent a class of persons or entities that purchased FibroGen securities between November 8, 2019 and April 6, 2021. In May 2021, two additional putative securities class action complaints were filed against Defendants alleging the same claims. One of the lawsuits alleges that Defendants made materially false and misleading statements between October 2017 and December 2020 and seeks to represent a class of persons or entities that purchased FibroGen securities between October 18, 2017 and April 6, 2021. The other lawsuit alleges that Defendants made materially false and misleading statements between December 2018 and February 2020 and seeks to represent a class of persons or entities that purchased FibroGen securities between December 20, 2018 and April 6, 2021. All plaintiffs seek unspecified monetary damages and other relief. ~~Motions for lead plaintiff were filed on June 11,~~On August 30, 2021, the Court consolidated the actions and ~~a hearing on the motion is scheduled for August 19, 2021. Once~~appointed a lead ~~plaintiff~~plaintiff. Plaintiff filed its consolidated amended complaint on October 29, 2021. Defendants’ motion to dismiss the consolidated amended complaint is ~~appointed by the Court, the Company expects to receive an amended consolidated complaint.~~due December 20, 2021.

On July 30, 2021, a purported shareholder derivative complaint was filed in the U.S. District Court for the Northern District of California. The complaint names as defendants ten of ~~the Company’s~~FibroGen’s officers and directors, as well as ~~the Company~~FibroGen as nominal defendant, and asserts state and federal claims based on some of the same alleged misstatements as the securities class action complaints. The complaint seeks unspecified damages, attorneys’ fees, and other costs. The ~~Company and individual defendants~~parties have ~~not yet been served.~~agreed to stay the action pending resolution of a forthcoming motion to dismiss the securities class action.

~~The Company believes~~We believe that the claims are without merit and ~~it intends~~we intend to vigorously defend against them. However, any litigation is inherently uncertain, and any judgment or injunctive relief entered against FibroGen or any adverse settlement could materially and adversely impact its business, results of operations, financial condition, and prospects.

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, ~~2020.~~2020 (“2020 Form 10-K”).

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”)~~marketing authorization applications for roxadustat in the European Union, Great Britain, the People’s Republic of China (“China”), Japan, South Korea, and Chile for chronic kidney disease (“CKD”) anemia for patients on dialysis and not on dialysis, ~~our partners and~~ we ~~will need to make substantial additional investments~~received a complete response letter (“CRL”) in the ~~development~~U.S. from the Food and ~~commercialization of roxadustat worldwide and in various indications.~~Drug Administration (“FDA”). Our near-term prospects ~~including~~depend in part on our continued development of roxadustat in the U.S. and maintaining our ~~existing collaborations~~collaboration with ~~Astellas Pharma Inc. (“Astellas”) and~~ AstraZeneca AB (“AstraZeneca”)~~, will depend heavily on successful~~. We are currently in discussions with AstraZeneca to determine a development path forward for CKD anemia and ~~commercialization of~~CIA. We also continue to develop roxadustat ~~including obtaining additional regulatory approvals~~ for the ~~commercialization~~treatment of ~~roxadustat for~~ anemia ~~associated~~in patients with ~~CKD.~~myelodysplastic syndromes (“MDS”).

Our near-term success also depends in large part on our other lead product candidate, pamrevlumab, which is currently in clinical development for idiopathic pulmonary fibrosis (“IPF”), locally advanced pancreatic cancer, metastatic pancreatic cancer, and Duchenne muscular dystrophy (“DMD”). 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.

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.~~Astellas Pharma Inc. (“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, 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 or health care professionals, recruiting sales and marketing personnel or in building a sales and marketing infrastructure, or if the market perception of roxadustat’s safety and efficacy profile is negative, we will have difficulty commercializing roxadustat, which would adversely affect our business and financial condition.

Although regulatory approval has been obtained for roxadustat in the European Union, Great Britain, China, Japan, South Korea, and Chile, we may be unable to obtain regulatory approval 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 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 ultimately 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/~~a New Drug Application (“NDA”)/Biologics License Application submission for approval, the ~~U.S. Food and Drug Administration (“FDA”)~~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, like they did for our roxadustat NDA for the treatment of CKD anemia, 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 (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.

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

In August 2021, the FDA ~~Cardiovascular and Renal Drugs Advisory Committee meeting is expected to have~~issued a ~~significant impact on~~CRL regarding roxadustat’s approvability in CKD anemia in the U.S.*

The Cardiovascular and Renal Drugs Advisory Committee (“CRDAC”) of the FDA voted 13 to 1 for non-dialysis dependent patients with CKD, and 12 to 2 for dialysis-dependent CKD patients to recommend not approving roxadustat, an oral hypoxia-inducible factor prolyl hydroxylase (“HIF-PH”) inhibitor,NDA for the treatment of anemia due to CKD in adult ~~patients. While the FDA is not required to follow CRDAC's vote, the agency considers CRDAC's non-binding recommendations when making its decision, and there is a high risk roxadustat’s NDA will~~patients, stating that it could not be approved ~~or if it is approved, it may be for a more restricted use than the Company has requested.~~in its present form. We ~~do not know how long it will take for~~are preparing to meet with the FDA to ~~make~~discuss the potential trial(s) that would be required for approval in CKD anemia. We are also discussing the overall development and commercialization plan for roxadustat with our partner AstraZeneca and how the CRL and FDA feedback may affect those plans in the U.S. and in other territories licensed to AstraZeneca. The CRL has decreased the likelihood of approval and successful commercialization of roxadustat in the U.S. and therefore will decrease and/or delay expected revenue. It is also possible that the CRL could negatively impact development or commercialization beyond CKD anemia within the U.S. and in CKD anemia and other indications outside the U.S. There is also an increased possibility that our U.S./RoW Collaboration Agreement with AstraZeneca could be amended or terminated. Any of these risks could have a ~~decision~~material impact on our NDA. The FDA may give us a complete response letter (rejecting our NDA) or further delay approval of our NDA if applicable regulatory criteria are not satisfied and/or the FDA requires additional testing or information.business, operating results, and financial condition.

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

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 clinical trials in one indication may not be replicated in other indications.

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.

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~~2020 Form 10-K ~~for the year ended December 31, 2020~~ 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 our manufacturers or we cannot properly manufacture the appropriate ~~amount~~volume of 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 roxadustat and pamrevlumab, 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. In addition, we may experience delays or technical problems associated with technology transfer of manufacturing processes to any new suppliers.

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.

In addition, if we are not able to obtain regulatory approval of roxadustat in the U.S. in CKD anemia, we may have excess supply manufactured in anticipation of commercialization. Such excess supply of roxadustat could be wasted, for example, if it expires prior to being used in other clinical trials or prior to being used in other territories where such formulation of roxadustat is approved. 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 sufficient supply agreements in place for our development and commercialization plan, 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. In addition, if we are not able to obtain regulatory approval of roxadustat in the U.S. in CKD anemia, we may have excess supply manufactured in anticipation of commercialization. Such roxadustat excess supply could be wasted, for example, if it expires prior to being used in other clinical trials or prior to being used in other territories where such roxadustat formulation is approved. 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. Insufficient supply could be a particular risk if we were to obtain regulatory approval of pamrevlumab in all indications being studied (IPF, locally advanced pancreatic cancer, metastatic pancreatic cancer, and DMD). 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 by us or our third-party manufacturers 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, our partners, or regulatory authorities may also request or make changes to our manufacturing processes or to our product or packaging specifications, including in order to accommodate changes in regulations, manufacturing equipment or to account for different processes at new or second source suppliers. If any such changes are made with respect to roxadustat or pamrevlumab we may 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 such changes could also lead to product having an earlier expiration date, shorter shelf life, or failing to meet specifications. 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 sub-populations, 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. For example, while we have received approval of our marketing authorization applications for roxadustat in the European Union, Great Britain, China, Japan, South Korea, and Chile for CKD anemia for patients on dialysis and not on dialysis, we received a CRL in the U.S. from the FDA. Regulatory authorities may approve ~~roxadustat~~one of our product candidates 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 sets of stratification factors and 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. The failure to obtain regulatory approval, or any label, population or other approval limitations in any jurisdiction, may significantly limit or delay 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 boxed warnings on their labels. The safety concerns relating to ESAs may result in labeling for roxadustat containing similar warnings. Any 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 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 or hematology 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 adequately addressed by ESAs. Companies that are currently developing ~~“HIF-PH”~~hypoxia-inducible factor prolyl hydroxylase (“HIF-PH”) inhibitors for anemia in CKD indications include GlaxoSmithKline plc (“GSK”), Bayer Corporation (“Bayer”), Akebia Therapeutics, Inc. (“Akebia”), Otsuka Pharmaceutical, Akebia’s partner in the U.S. and Europe, Japan Tobacco, and Zydus Cadila (India) (“Zydus”). Akebia has completed Phase 3 studies in CKD patients on dialysis and not on dialysis in the U.S., as well as a Phase 3b, randomized, open-label, active-controlled trial evaluating the efficacy and safety of oral vadadustat once daily and three times weekly for the maintenance treatment of anemia in hemodialysis subjects converting from ESAs. The study completion date is estimated to be May 2022. Akebia announced an additional Phase 3 study evaluating the efficacy and safety of dose conversion from a long-acting ESA (Mircera^®) to three times weekly oral vadadustat for the maintenance treatment of anemia in hemodialysis subjects. The estimated study start date is February 2021. OnIn March ~~30,~~ 2021, Akebia submitted an NDA to the FDA for vadadustat for the treatment of anemia due to CKD in patients on dialysis and not on dialysis. The FDA accepted for filing the NDA for the treatment of anemia due to CKD in both adult patients on dialysis and adult patients not on dialysis, with a Prescription Drug User Fee Act (PDUFA) target action date of March 29, 2022. In October 2021, Otsuka submitted an initial marketing authorization application to the EMA for vadadustat for the treatment of anemia associated with CKD in adults.

In July 2021, GSK announced positive ~~headline~~topline results from five Phase 3 studies of daprodustat for non-dialysis and dialysis patients with anemia due to CKD. Full results of the studies are anticipated to be presented at a forthcoming medical meeting later in 2021.

In Japan, Mitsubishi Tanabe Pharmaceutical Corporation, Akebia’s collaboration partner, received approval for vadadustat in June 2020 for the treatment of anemia of CKD patients on and not on dialysis. GSK received approval for daprodustat in Japan in June 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 received approval for molidustat in Japan in January 2021 for the treatment of anemia in CKD patients on and not on dialysis, with pricing in line with roxadustat pricing. 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 started Phase 3 studies of desidustat in dialysis and non-dialysis CKD patients in India in 2019.

In July 2020, Zydus received approval from the FDA to begin a Phase 1 study of desidustat for the treatment of chemotherapy-induced anemia, which could potentially be competitive with roxadustat within this indication.

Reblozyl^® (luspatercept) was approved by the FDA in April 2020 for the treatment of anemia in adults with ~~myelodysplastic syndromes~~MDS with ring sideroblasts or myelodysplastic/myeloproliferative neoplasms with ring sideroblasts and thrombocytosis who need regular red blood cell transfusions and have not responded well to or cannot receive an ESA. It is the first and only erythroid maturation agent approved in the U.S., Europe, and Canada and is part of a global collaboration between Acceleron Pharma, Inc. and Bristol Myers Squibb.

In addition, we will likely face competition from other companies developing biologic therapies for the treatment of other anemia indications that we may also seek to pursue in the future. 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.

In China, ESA is considered the standard of care for treatment of anemia of CKD, and locally manufactured epoetin alfa is offered by 15 local manufacturers including the market leader EPIAO that is marketed by 3SBio Inc. We may face potential competition from other HIF-PH inhibitors. Companies active in the US such as Akebia, Bayer, and GSK have been 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. Domestic companies are also in-licensing global compounds to be developed as domestic drugs, including China Medical System which in-licensed desidustat, a compound that is currently in Phase 3 trials in India, from Zydus for greater China in January 2020. In January 2021, China Medical System Holdings Ltd. was granted approval by the Chinese NMPA to begin trials for desidustat in patients with anemia of CKD, including dialysis and non-dialysis patients. 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. We will also face competition from generics who could enter the market after expiry of our patents in China, and two potential market players have already started bioequivalence studies, including Chia Tai-Tiangqing Pharmaceutical Holdings and CSPA Pharmaceutical Group.

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.

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 more than 80% of U.S. dialysis patients, and therefore have historically executed long-term contracts including rebate terms with Amgen. Successful penetration in this market will likely require our partner AstraZeneca to enter into a definitive agreement with Fresenius, DaVita, or other dialysis organizations, on favorable pricing terms and on a timely basis.

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 that 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 Kadmon Holdings, Inc.’s KD025, Galecto’s GB0139, Liminal BioSciences’ PBI-4050, and Roche/Promedior, Inc.’s PRM-151. Roche is enrolling patients in a Phase 3 trial evaluating the efficacy and safety of PRM-151, a recombinant human pentraxin-2 (rhPTX-2), compared to placebo in patients with IPF. United Therapeutics Corporation is enrolling patients in its Phase 3 trial of treprostinil in IPF.

If pamrevlumab is approved and launched commercially to treat locally advanced pancreatic cancer ~~patients who are not candidates for surgical resection,~~or metastatic pancreatic cancer, 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., European Union, and Japan. On September 19, 2016, the FDA approved Sarepta Therapeutics Inc.’s (“Sarepta”) Exondys 51^TM (eteplirsen). 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’s Vyondys 53^TM (golodirsen) was approved by the FDA in December 2019 for patients with a confirmed genetic mutation that is amenable to exon 53 skipping, which accounts for approximately 8% of the DMD population. Sarepta’s Amondys 45™ (casimersen) was approved by the FDA in February 2021 for patients with a confirmed genetic mutation that is amenable to exon 45 skipping, which accounts for approximately 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~~CRL 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 our collaboration partners and we are not able to compete effectively against existing and potential competitors, our business and financial condition may be materially and adversely affected.

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

Even if our product candidates receive regulatory approval, they may not gain adequate market acceptance among physicians, patients, healthcare payors, and others in the medical community. Demonstrating safety and efficacy of our product candidates and obtaining regulatory approvals will not guarantee future revenue. The degree of market acceptance of any of our approved product candidates will depend on several factors, including:

In addition, see the risk factor titled “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” above. If any product candidate is approved but does not achieve an adequate level of acceptance by such parties, we may not generate or derive sufficient revenue from that product candidate and may not become or remain profitable.

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 governments and 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, the pricing may be subject to re-negotiations or third-party payors may not establish adequate reimbursement amounts, which may reduce the demand for, or the price of, our products. For example, our current National Reimbursement Drug List reimbursement pricing for China is effective for a standard two-year period (between January 1, 2020 to December 31, 2021)~~, after which time we will have to renegotiate~~. We are in the process of finalizing a new reimbursement price with the Chinese government, which will be lower than the current reimbursement price for ~~roxadustat, which we expect to be lower based upon historical precedents.~~roxadustat.

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, our partner or we may elect not to commercialize our products in such countries, and our business and financial condition could be adversely affected.

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

The COVID-19 pandemic 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, ~~government-mandated restrictions, the vaccine penetration rate (globally and in the U.S.),~~ and the efficacy of ~~the COVID-19~~ vaccines and other therapeutics in preventing ~~the spread~~ and ~~effects of~~treating current and future COVID-19 variants.

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, COVID-19 presents a health risk to our employees, including members of senior management.

We have seen impacts from COVID-19 on all of our clinical trials to varying degrees, but COVID-19 has most heavily impacted our clinical trial timelines in IPF, DMD, and MDS. There is a risk that ~~any or all of~~ our clinical trials ~~will~~could be further delayed ~~in particular our studies in IPF, DMD and MDS, due to a new outbreak~~by additional COVID-19 outbreaks, which could slow or pause enrollment or site ~~initiation and other direct COVID-19 impacts to clinical sites and clinical service providers.~~initiation. 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 our manufacturing partners and we are currently continuing manufacturing operations.~~year. 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. COVID-19 has created increased demand for the limited global biologics manufacturing capacity, and ~~as a result, we have faced competition~~ for ~~manufacturing supplies due to prioritization of COVID-19 related manufacturing. We could face additional competition for such~~ manufacturing supplies, including for vials, reagents, supplements and ~~media, and may face competition to use available capacity at our manufacturing partners.~~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~~those outlined above, as well as in regulatory, distribution, or warehousing ~~vendors, or delays to our (and our partners’) clinical trials or~~and other development, ~~efforts, or~~ commercialization and launch ~~activities.~~efforts. The full extent of these effects are unknown, but all of them could have a material impact on our business, operating results, and financial condition.

In addition, COVID-19 presents a health risk to our employees, including members of senior management.

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.*

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. In addition, each of those agreements provides our respective partners the right to terminate any of those agreements upon written notice for convenience. 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. 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. As a result of the CRL, we received for roxadustat for the treatment of anemia due to CKD in adult patients in the U.S. We are currently in discussions with AstraZeneca to determine a potential path forward for the development of roxadustat in the U.S., and there is an increased possibility that our Collaboration Agreement with AstraZeneca could be amended or terminated. We and AstraZeneca plan on meeting with the FDA to discuss what additional data would be required for approval in CKD anemia. In addition, 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 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 regulatory 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 receives regulatory approval, we will remain substantially dependent on the commercialization strategy and efforts of our collaboration partners, and, our collaboration partners have limited or no experience in commercialization of an anemia drug. If our collaboration partners are unsuccessful in their commercialization efforts, our results will be negatively 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 certain portions of our development programs and regulatory ~~activities, including for the NDA in the U.S. and the Marketing Authorization Application in Europe.~~activities. 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, or both, may negatively impact the timing or success of our regulatory approval applications.

We ~~intend to~~may 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.

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.

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.

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 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 plants 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 rely on third parties for distribution, including our collaboration partners and their vendors, except in China where we have established a jointly owned entity with AstraZeneca to manage most of the 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 entered into an initial commercial supply agreement for the manufacture of pamrevlumab with Samsung Biologics Co., Ltd. (“Samsung”). However, we may experience delays or technical problems associated ~~with technology transfer of the manufacturing process to Samsung and the qualification and scale-up thereof.~~ with:

We have made certain manufacturing commitments to Samsung, and there is a contractual risk we will not require the quantities of pamrevlumab we have committed to, particularly if we cease some of our pamrevlumab clinical trials. 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, IRIX and we 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., acquired IRIX, and in 2017, ThermoFisher Scientific Inc. acquired Patheon Pharmaceuticals Inc.

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, active pharmaceutical ingredients (“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 or employees to the extent that our patents, trade secrets, and contractual position allow us to do so. Any disclosure to or misappropriation by third parties or employees 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 proceedings involving our intellectual property initiated by third parties, which proceedings can be associated with significant costs and commitment of management time and attention. As our product candidates continue in development, third parties have attempted and may again 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 are generally considered 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 our licensors or we were the first to make the inventions claimed in our owned and licensed patents or patent applications, or that our licensors or we 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 have, are, and may again 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, use or misappropriation 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, 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 have initiated and may again 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 have challenged and may again challenge our patents and patent applications. For example, various challenges against our HIF anemia-related technologies patent portfolio are ongoing in several territories including the U.S., Europe, the United Kingdom, and Japan. Regardless of final outcome, 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 were filed against our European Patent No. 2872488 (the “`488 Patent”), which claims a crystalline form of roxadustat, and against our European Patent No. 3003284 (the “`284 Patent”), which claims photostable formulations of roxadustat. To date, at oral proceedings, the Opposition Division of the European Patent Office found the ‘488 patent did not meet the grounds for novelty. FibroGen plans to appeal this decision once the Written Decision providing the underlying reasoning has been published. Final resolution of the opposition proceedings will take time, and we cannot be assured of the breadth of the claims that will remain in the `488 Patent or `284 Patent, or that either or both of the patents will not be revoked in their entirety.

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 that we have in place with them. 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.

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

The U.S. Patent and Trademark Office 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 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, 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 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. ~~Except~~For example, while we have received approval of our marketing authorization applications for roxadustat in the European Union, Great Britain, China, Japan, South Korea, and Chile for CKD anemia for patients on dialysis and not on dialysis, we ~~have not obtained regulatory approval for any product candidate, and it~~received a CRL in the U.S. from the FDA. It is possible that ~~neither~~ roxadustat ~~nor~~will not obtain regulatory approval in additional countries or indications. It is possible that neither pamrevlumab, nor any future product candidates we may discover, in-license or acquire and seek to develop in the future, will obtain regulatory approval in ~~additional countries.~~any jurisdiction.

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. For example, in August 2021, the FDA issued a CRL regarding roxadustat’s NDA for the treatment of anemia due to CKD in adult patients, stating that it could not be approved in its present form. We plan on meeting with the FDA to discuss what additional study or studies and data are required for approval in CKD anemia. 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 Risk Evaluation and Mitigation Strategy 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 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. For example, while we have received approval of our marketing authorization applications for roxadustat in the European Union, Great Britain, China, Japan, South Korea, and Chile for CKD anemia for patients on dialysis and not on dialysis, we received a CRL in the U.S. from the FDA. 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.

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

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 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.

Even if resolved in our favor, litigation or other legal proceedings relating to healthcare laws and regulations may cause us to incur significant expenses and could distract our 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 distribution activities. Uncertainties resulting from the initiation and continuation of litigation or other proceedings relating to applicable healthcare laws and regulations could have a material adverse effect on our ability to compete in the marketplace.

We are subject to laws and regulations governing corruption, which will require us to 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 implementation and maintenance of compliance programs is costly and such programs 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 U.S. Securities and Exchange Commission (“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 agents in connection with the prescription of certain pharmaceuticals. If our employees, partners, affiliates, subcontractors, distributors or 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 control over financial reporting. If we are unable to remediate these, or if we otherwise fail to maintain an effective system of internal control, it may result in material misstatements in our financial statements.

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 control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. 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 have developed a detailed remediation plan and are making progress to improve our related internal control over financial reporting. For further discussion of the material weaknesses identified and our remedial efforts, see Part II, Item 9A, “Controls and Procedures” in our ~~Annual Report on~~2020 Form ~~10-K for the year ended December 31, 2020.~~10-K.

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~~In the U.S. and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could affect our operations. In particular, 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.

InFurther, in the U.S., there has been heightened governmental scrutiny over the ~~Medicare Prescription~~manner in which manufacturers set prices for their marketed products, which has resulted in several presidential executive orders, 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. For example, in July 2021, the Biden administration released an executive order that included multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, the U.S. Department of Health and Human Services, or HHS, released a Comprehensive Plan for Addressing High Drug ~~Improvement, and Modernization Act of 2003 (“MMA”) altered Medicare coverage and payments for pharmaceutical products. The legislation expanded Medicare coverage~~Prices that outlines principles for drug ~~purchases by the elderly and introduced~~pricing reform. The plan sets out a ~~new reimbursement methodology based on average sales prices for physician-administered drugs. The MMA also provided authority for limiting the number~~variety of ~~drugs~~potential legislative policies that ~~will be covered in any therapeutic class and~~Congress could pursue as ~~a result, we expect that there will be additional pressure~~well as potential administrative actions HHS can take to ~~reduce costs. For example, the CMS in implementing the MMA has enacted regulations that reduced capitated payments~~advance these principles. No legislation or administrative actions have been finalized to ~~dialysis providers. These cost reduction initiatives and other provisions~~implement these principles. In addition, Congress is considering drug pricing as part of the ~~MMA could decrease~~budget reconciliation process.At the ~~scope~~state level, individual states are increasingly aggressive in passing legislation and implementing 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.

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 End-Stage Renal Disease Prospective Payment System (the “ESRD PPS”) 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 or the timing of inclusion. 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 initially be included in the bundle and would instead be eligible for a Transitional Drug Add-on Payment Adjustment (“TDAPA”) for a 24-month period. At the 24-month mark, CMS would determine if the TDAPA period should be extended for roxadustat or ended. When the TDAPA period ends, CMS ~~will~~would determine if roxadustat should be included in the bundle and, if so, what changes to the ESRD PPS reimbursement should be made. If roxadustat is included in the ESRD PPS bundle, it may have an impact on roxadustat pricing within dialysis organizations. If approved and 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. ~~We currently~~If approved in the U.S., we would expect roxadustat to be granted TDAPA designation one to two calendar quarters after an FDA approval. However, there is a risk that we do not receive TDAPA designation, or when we expect it, in which case, there would be a significant impact on roxadustat revenue from dialysis organizations until TDAPA designation is granted.

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. 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 eliminated the health insurer tax. Additionally, on December 14, 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. The U.S. Supreme Court is currently reviewing this case, but it is unknown when a decision will be reached. Although the U.S. Supreme Court has yet ruled on the constitutionality of the PPACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the PPACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the PPACA. It is unclear how the U.S. Supreme Court ruling, other such litigation, and the healthcare reform measures of the Biden administration 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 used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals. The FDA also 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. Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed pending review by the Biden administration until March 22, 2021. On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the U.S. District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. However, it is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives. 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.~~state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that ~~the U.S.~~ federal ~~government~~and state governments will pay for healthcare products and services, which could result in reduced demand for ~~any future~~our products if approved or additional pricing pressures. Further, it is possible that additional government action is taken in response to the COVID-19 pandemic.

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:

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 or safety laws and regulations, we could incur fines, penalties or other costs.

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 our research, development or manufacturing efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

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. In recent years, many aspects of pharmaceutical industry regulation have undergone significant reform, and reform may continue. For example, the Chinese government implemented regulations that impact distribution of pharmaceutical products in China, where at most two invoices may be issued throughout the distribution chain, a change that required us to change our distribution paradigm. Any regulatory 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 have established a jointly owned entity with AstraZeneca in China, one that has a distribution license. It is subject to a new body of regulations pertaining to distribution with which we have limited experience. 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. There are operational risks associated with the jointly owned entity, such as working capital funding requirements and regulatory challenges, which could impact our ability to operate in China, including increasing sales of roxadustat. 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.

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

We have two manufacturing facilities in China, with one located in Beijing and the other in Cangzhou, Hebei.

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, our product suppliers and we 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, and we do not yet have a secondary source supplier for either roxadustat API or drug product 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 nolimited 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.

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

AstraZeneca and we have a profit sharing arrangement with respect to roxadustat in China and any difficulties we may experience in growing and sustaining sales will affect our bottom line. Difficulties may be related to our ability to maintain reasonable pricing and reimbursement, obtain and maintain hospital listing, or other difficulties related to distribution, marketing, and sales efforts in China. ~~For example, our~~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~~and we ~~will have to renegotiate~~are in the process of finalizing a new reimbursement price with the Chinese government, which will be lower than the current reimbursement price for ~~roxadustat, which we expect to be lower based upon historical precedents.~~roxadustat. Sales of roxadustat in China may ultimately 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 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 (China) Medical Technology Development Co., Ltd. (“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 ~~June~~September 30, 2021, approximately ~~$63.8~~$56.0 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.

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 the value of the Renminbi against the U.S. dollar, Euro and other currencies isare 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 the 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.

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. For example, the Biden administration has proposed to increase the U.S. corporate income tax rate from 21%, increase the U.S. taxation of our international business operations and impose a global minimum tax. Such proposed changes, as well as regulations and legal decisions interpreting and applying these changes, may adversely impact our effective tax rate.

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.

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.

Uncertainties with respect to the China legal system and regulations 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. Furthermore, new laws or regulations may be passed that affect the way we or our collaboration partner do business in China (including the manufacture, sale, or distribution of roxadustat in China). Navigating the uncertainty and change in the China legal ~~system~~and regulatory systems will require the devotion of significant resources and time, and there can be no assurance that our contractual and other rights will ultimately be maintained or enforced.

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

Chinese society and the Chinese economy continue to undergo significant change. Changes in the 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.

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 biopharmaceutical company with two lead product candidates in clinical development, roxadustat for anemia in CKD, ~~myelodysplastic syndromes,~~MDS, and chemotherapy-induced anemia, and pamrevlumab for IPF, pancreatic cancer, and DMD. 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, 2020, 2019 and 2018 were $189.3 million, $77.0 million and $86.4 million, respectively. As of ~~June~~September 30, 2021, we had an accumulated deficit of ~~$1.2~~$1.1 billion. As of ~~June~~September 30, 2021, we had capital resources consisting of cash, cash equivalents and short-term investments of ~~$507.2~~$486.4 million plus ~~$105.8~~$142.6 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 to grow our operations in China, expand our clinical development efforts on pamrevlumab, continue to seek regulatory approval, establish commercialization capabilities 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 our partners and ourselves. 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.

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.

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 potential 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.~~management. Our failure to accomplish any of these steps could prevent us from successfully implementing our strategy and maintaining the confidence of investors in us.

Loss of senior management and key personnel could adversely affect our business.

We are highly dependent on members of our senior management team, including Enrique Conterno, our Chief Executive Officer. The loss of the services of Mr. Conterno or any of our senior management could significantly impact the development and commercialization of our products and product candidates 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, 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 have to limit 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 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 upgraded our disaster and data recovery capabilities in 2019, and have continued to upgrade these capabilities. 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 and could face a cyber-attack or other breach of these 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 upgraded our disaster data recovery program in March 2019, 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.

We and some of the third-party service providers on which we depend for various support functions 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, 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.

After a comprehensive earthquake risk analysis conducted by Marsh Risk, we decided not to purchase earthquake or flood insurance. 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~~deductibles 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, 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.

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

As of ~~July~~October 31, 2021, our executive officers, directors and principal stockholders, together with their respective affiliates, owned approximately ~~40.91%~~37.47% 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 January 31, 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.

We may engage in acquisitions that could dilute stockholders and harm our business.

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 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, 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.

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.

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., state and local, and various foreign jurisdictions. We are subject to audit and assessments by tax authorities with respect to these non-income taxes and the determination of these non-income taxes is subject to varying interpretations arising from the complex nature of tax laws and regulations. Therefore, we may have exposure to additional non-income tax liabilities, which could have an adverse effect on our results of operations and financial condition.

Federal and state tax laws impose substantial restrictions on the utilization of net operating loss and credit carryforwards in the event of an “ownership change” for tax purposes, as defined in IRC Section 382. If additional ownership change occurs, the utilization of net operating loss and credit carryforwards could be significantly reduced.

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 certificate of incorporation designates courts located in Delaware as the sole forum for certain proceedings, 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. This provision would not apply to suits brought to enforce a duty or 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 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 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 a venue other than those designated in the exclusive forum provisions. In such an instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of 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. 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.

We do not plan to pay dividends. Capital appreciation will be your sole possible source of gain, which may never 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.

In a press release on April 6, 2021, the Company clarified that certain previously disclosed cardiovascular safety analyses from the roxadustat Phase 3 program for the treatment of anemia in chronic kidney disease included post-hoc changes to the stratification factors, and provided additional data from the cardiovascular safety analyses with the pre-specified stratification factors. As stated at that time, the Company initiated an internal review to ensure this does not occur in the future. We have now completed that review.

•The underlying data used for cardiovascular safety analyses are accurate, with no data integrity issues with the data used to generate such analyses.

•In its NDA, the Company calculated accurately and described both sets of analyses, including the statistical methodologies and stratification factors utilized. The statistical analyses using post-hoc stratification factors were designated as “primary” analysis, and the statistical analyses using pre-specified stratification factors as a “sensitivity” analysis.

•We believe a number of elements contributed to the fact that the cardiovascular safety analyses designated as primary included post-hoc stratification factors. These include a complex data set with data from multiple clinical studies conducted by three companies, and a lack of clarity in the pooled cardiovascular safety analysis plans which identified multiple statistical methods and assessment periods.

•In addition, this information was compartmentalized within the organization, which relied on the founder and then-CEO to make key decisions and facilitate internal communication between groups. He unfortunately passed away in August 2019 prior to public disclosure of the detailed pooled safety analyses and the NDA filing.

•Those responsible for the statistical analyses believed that it was a reasonable and valid way to analyze and present the data.

Management is taking steps to ensure the Company’s processes are consistent with best practices in all respects. We plan to implement and improve a number of processes and procedures, including independent quality unit oversight of clinical data management, programming, analysis, and reporting.

Those directly responsible for the decision to use post-hoc stratification factors in the primary analyses no longer work for the Company.

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*

Sixth Amendment to the Lease by and between ARE-San Francisco No., 43, LLC and FibroGen, Inc. as of June 1, 2021.

—

—

—

—

10.2*†

Exclusive License and Option Agreement by and between FibroGen, Inc. and HiFiBiO (HK) Limited (D.B.A. HiFiBiO Therapeutics), as of June 16, 2021.

—

—

—

—

21.1*

Subsidiaries of FibroGen, Inc.

—

—

—

—

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.*)

—

—

—

—

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*†	Exclusive License Agreement by and between FibroGen, Inc. and Eluminex Biosciences (Suzhou) Limited as of July 16, 2021.	—	—	—	—

10.2*+	Offer Letter by and between FibroGen, Inc. and Juan Graham, effective as of July 30, 2021.	—	—	—	—

10.3*+	Transition Agreement by and between FibroGen, Inc. and Pat Cotroneo, dated as of August 14, 2021.	—	—	—	—

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.*)	—	—	—	—

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

		Page
PART I—FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2021 and December 31, 2020 (Unaudited)	4
	Condensed Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020 (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020 (Unaudited)	6
	Condensed Consolidated Statements of Changes in Equity for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020 (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020 (Unaudited)	9
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3031
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4749
Item 4.	Controls and Procedures	4849

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	5051
Item 1A.	Risk Factors	5051
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8586
Item 3.	Defaults Upon Senior Securities	8586
Item 4.	Mine Safety Disclosures	8586
Item 5.	Other Information	8687
Item 6.	Exhibits	8788
	Signatures	8889

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

	FibroGen, Inc.

Dated: ~~August~~November 9, 2021	By:	/s/ Enrique Conterno
		Enrique Conterno
		Chief Executive Officer
		(Principal Executive Officer)

Dated: ~~August~~November 9, 2021	By:	/s/ ~~Pat Cotroneo~~Juan Graham
		~~Pat Cotroneo~~Juan Graham
		Senior Vice President ~~Finance~~ and Chief Financial Officer
		(Principal Financial and Accounting Officer)