FibroGen(FGEN) - 2021 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Unaudited Q1 2021 consolidated financial statements report a net loss of $71.8 million, with decreased assets and increased product revenue Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $433,508 | $678,393 | | Total current assets | $621,694 | $755,110 | | Total assets | $787,301 | $826,840 | | Liabilities & Equity | | | | Total current liabilities | $167,047 | $163,187 | | Total liabilities | $397,028 | $385,391 | | Total stockholders' equity | $371,002 | $422,178 | | Total liabilities, stockholders' equity and non-controlling interests | $787,301 | $826,840 | Condensed Consolidated Statement of Operations Data (in thousands) | Account | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Total revenue | $38,429 | $24,401 | | Total operating costs and expenses | $108,856 | $105,475 | | Loss from operations | $(70,427) | $(81,074) | | Net loss | $(71,755) | $(78,348) | | Net loss per share - basic and diluted | $(0.78) | $(0.89) | Condensed Consolidated Statement of Cash Flows Data (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(44,984) | $(59,486) | | Net cash provided by (used in) investing activities | $(196,719) | $56,009 | | Net cash used in financing activities | $(2,080) | $(1,190) | | Net decrease in cash and cash equivalents | $(244,885) | $(4,706) | Notes to the Condensed Consolidated Financial Statements (Unaudited) Notes detail accounting policies, collaboration agreements, and financial components, highlighting roxadustat revenue, Falikang joint venture, and legal proceedings - The company's lead product, roxadustat, is being commercialized in China and Japan for anemia caused by CKD. An NDA is under review by the U.S. FDA, with an advisory committee meeting scheduled for July 15, 2021. Pamrevlumab is in Phase 3 development for IPF, pancreatic cancer, and DMD[36][37][38] - In January 2021, the joint venture Falikang (with AstraZeneca) became operational and began handling most roxadustat distribution in China. FibroGen recognizes revenue from sales to Falikang based on a complex transaction price calculation that includes upfront fees, milestones, and profit sharing[52][54][93] Product Revenue, Net (in thousands) | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Direct sales revenue, net | $4,956 | $4,955 | | Sales to Falikang revenue, net | $10,406 | $0 | | Total product revenue, net | $15,362 | $4,955 | - FibroGen accounts for its 51.1% owned joint entity, Falikang, as a variable interest entity (VIE) under the equity method, as AstraZeneca is deemed to have the power to direct its most significant activities. FibroGen is not the primary beneficiary and does not consolidate Falikang[102][103] - As of March 31, 2021, the company had non-cancelable purchase obligations of $93.9 million, primarily for the manufacture and supply of roxadustat ($30.4 million) and pamrevlumab ($57.5 million)[135] - In April and May 2021, multiple securities class action complaints were filed against FibroGen and certain officers, alleging false and misleading statements regarding Phase 3 clinical data and FDA approval prospects for roxadustat[140][302] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial results, noting increased revenue, decreased net loss, and progress in key drug candidates and collaborations Financial Highlights (in thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total Revenue | $38,429 | $24,401 | | Operating Costs & Expenses | $108,856 | $105,475 | | Net Loss | $(71,755) | $(78,348) | | Net Loss Per Share | $(0.78) | $(0.89) | - Roxadustat commercialization is expanding in China, reaching hospitals representing ~74% of the CKD anemia market opportunity. In the U.S., an FDA advisory committee meeting is scheduled for July 15, 2021. An EMA approval decision is expected mid-2021[160][162][163] - Pamrevlumab is advancing in Phase 3 trials for IPF (ZEPHYRUS-1 & 2), locally advanced pancreatic cancer (LAPIS), and DMD (LELANTOS-1 & 2). The FDA granted Rare Pediatric Disease and Fast Track designations for DMD[170][171][172] Research and Development Expenses by Program (in thousands) | Product Candidate | Phase of Development | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | :--- | | Roxadustat | Phase 3 | $26,524 | $26,038 | | Pamrevlumab | Phase 2/3 | $35,370 | $22,100 | | Other R&D expenses | | $12,782 | $6,764 | | Total R&D expenses | | $74,676 | $54,902 | - SG&A expenses decreased by $18.8 million (38%) YoY, primarily due to a $24.6 million reduction in outside service expenses related to a change in the calculation of co-promotion expenses with AstraZeneca in China following the China Amendment[238] - The company believes its cash, cash equivalents, investments, and receivables of $678.5 million as of March 31, 2021, are sufficient to fund operations for at least the next 12 months[158][254] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk exposure were reported for Q1 2021 compared to the 2020 Annual Report - There were no material changes to the company's market risk exposure during Q1 2021[288] Item 4. Controls and Procedures Disclosure controls and procedures were deemed ineffective as of March 31, 2021, due to material weaknesses in risk assessment and revenue recognition controls - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2021[290] - The ineffectiveness is due to material weaknesses identified as of September 30, 2020, related to risk assessment and controls over drug product revenue recognition. These weaknesses did not result in material misstatements[292][294] - A remediation plan is underway, which includes a comprehensive risk assessment process, designing and implementing new controls, and hiring additional accounting and internal audit staff[296][297] PART II—OTHER INFORMATION Item 1. Legal Proceedings Multiple securities class action lawsuits were filed in Q2 2021 alleging false statements regarding roxadustat's clinical data and FDA approval prospects - In April and May 2021, five putative securities class action complaints were filed against FibroGen and certain executives[302] - The lawsuits allege materially false and misleading statements regarding roxadustat's Phase 3 data and FDA approval prospects between late 2017 and April 2021[302] - The company believes the claims are without merit and intends to vigorously defend against them, but notes that litigation is inherently uncertain[302] Item 1A. Risk Factors Key risks include product dependence, regulatory uncertainty, competition, supply chain issues, COVID-19 impact, and internal control weaknesses - The company is substantially dependent on the success of its lead products, roxadustat and pamrevlumab, and has limited commercialization experience[305][308] - The upcoming FDA Cardiovascular and Renal Drugs Advisory Committee meeting for roxadustat, tentatively scheduled for July 15, 2021, could significantly affect its approvability and label in CKD anemia[320] - The ongoing COVID-19 pandemic could continue to adversely affect business by delaying clinical programs and timelines, disrupting the supply chain, and impacting productivity[370] - The company has identified material weaknesses in its internal control over financial reporting related to risk assessment and revenue recognition, which could result in material misstatements if not remediated[440][441] - The company faces substantial competition for roxadustat from established ESAs and other HIF-PH inhibitors in development by companies like GSK, Bayer, and Akebia[343][345] - Operations in China are subject to significant risks, including a highly regulated and changing pharmaceutical industry, pricing controls, restrictions on cash repatriation, and difficulties in protecting intellectual property[460][468][469] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds All proceeds from the 2014 initial public offering have been fully utilized as described in the prospectus - All proceeds from the company's 2014 initial public offering have been fully used as described in the prospectus[527] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported Item 4. Mine Safety Disclosures No mine safety disclosures are applicable to the company's operations Item 5. Other Information No other material information was reported Item 6. Exhibits This section lists exhibits filed with the quarterly report, including certifications and new agreements - Lists exhibits filed, including CEO/CFO certifications (31.1, 31.2, 32.1) and new material contracts like the Astellas EU Supply Agreement (10.2)[532]