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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2018
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies |
2. | Summary of Significant Accounting Policies
Basis of Presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its majority-owned subsidiaries, FibroGen Europe and FibroGen China Anemia Holdings, Ltd. (“FibroGen China”). All inter-company transactions and balances have been eliminated in consolidation. The Company operates in one segment — the discovery, development and commercialization of novel therapeutics to treat serious unmet medical needs. Foreign Currency Translation The reporting currency of the Company and its subsidiaries is the United States (“U.S.”) dollar. The functional currency of FibroGen Europe is the Euro. The assets and liabilities of FibroGen Europe are translated to U.S. dollars at exchange rates in effect at the balance sheet date. All income statement accounts are translated at monthly average exchange rates. Resulting foreign currency translation adjustments are recorded directly in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. The functional currency of FibroGen, Inc. and all other subsidiaries is the U.S. dollar. Accordingly, monetary assets and liabilities in the non-functional currency of these subsidiaries are remeasured using exchange rates in effect at the end of the period. Revenues and costs in local currency are remeasured using average exchange rates for the period, except for costs related to those balance sheet items that are remeasured using historical exchange rates. The resulting remeasurement gains and losses are included within interest income and other, net in the consolidated statements of operations as incurred and have not been material for all periods presented. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions include valuation and recognition of revenue, estimates of accruals related to clinical trial costs, valuation allowances for deferred tax assets, and valuation and recognition of stock-based compensation. 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. Concentration of Credit Risk and Other Risks and Uncertainties The Company is subject to risks associated with concentration of credit for cash and cash equivalents. A portion of cash on hand is invested in a diversified portfolio of investment grade corporate bonds issued by U.S. corporations as rated investment grade corporate bonds. Any remaining cash is deposited with major financial institutions in the U.S., Finland, China and the Cayman Islands. At times, such deposits may be in excess of insured limits. The Company has not experienced any loss on its deposits of cash and cash equivalents. Included in current assets are significant balances of accounts receivable as follows:
|  | December 31, |
|  | 2018 |  |  | 2017 |
Astellas Pharma Inc. (“Astellas”)—Related party |  |  | 74 | % |  |  | 47 | %
AstraZeneca AB (“AstraZeneca”) |  |  | 26 | % |  |  | 53 | %
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, 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. Cash, Cash Equivalents and Restricted Time Deposits The Company considers all highly liquid investments with maturities of three months or less and that are used in the Company’s cash management activities at the date of purchase to be cash equivalents. Cash and cash equivalents include money market accounts, various deposit accounts, and money market funds. Restricted time deposits include an irrevocable standby letter of credit as security deposit for a long-term property lease with the Company’s landlord. Restricted time deposits as of December 31, 2018 and 2017 totaled $4.1 million and $5.2 million, respectively. As of December 31, 2018, a total of $21.9 million of the Company’s cash and cash equivalents is held outside of the U.S. in the Company’s foreign subsidiaries to be used primarily for the Company’s China operations. Investments The Company’s investments consist of available-for-sale debt investments, marketable equity investments, a term deposit and a certificate of deposit. Those investments with original maturities of greater than three months and remaining maturities of less than 12 months are considered short-term investments. Those investments with maturities greater than 12 months are considered long-term investments. The Company’s investments classified as available-for-sale are recorded at fair value based upon quoted market prices at period end. Unrealized gains and losses for available-for-sale debt investments that are deemed temporary in nature are recorded in accumulated other comprehensive income (loss) as a separate component of stockholder’ equity. Marketable equity securities are equity securities with readily determinable fair value, and are measured and recorded at fair value. Realized and unrealized gains or losses resulting from changes in value and sale of the Company’s marketable equity investments are recorded in other income (expenses) in the consolidated statement of operations. A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the security. Premiums and discounts are amortized (accreted) over the life of the related security as an adjustment to its yield. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of investments sold. Fair Value of Financial Instruments Carrying amounts of certain of the Company’s financial instruments including cash equivalents, investments, receivables, accounts payable and accrued liabilities approximate fair value (refer to Note 4). Property and Equipment Property and equipment (except for costs of construction of certain long-lived assets — refer to Note 8) are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Computer equipment, laboratory equipment, and furniture and fixtures are depreciated over three to five years. Leasehold improvements are recorded at cost and amortized over the term of the lease or their useful life, whichever is shorter. Impairment of Long-Lived Assets The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets may warrant revision or that the carrying value of these assets may be impaired. If the Company determines that an impairment trigger has been met, the Company evaluates the realizability of its long-lived assets based on a comparison of projected undiscounted cash flows from use and eventual disposition with the carrying value of the related asset. Any write-downs (which are measured based on the difference between the fair value and the carrying value of the asset) are treated as permanent reductions in the carrying amount of the assets (asset group). Based on this evaluation, the Company believes that, as of each of the balance sheet dates presented, none of the Company’s long-lived assets were impaired. Revenue Recognition Substantially all of the Company’s revenues to date have been generated from its collaboration agreements. The Company’s collaboration agreements include multiple performance obligations comprised of promised services, or bundles of services, that are distinct. Services that are not distinct are combined with other services in the agreement until they form a distinct bundle of services. The Company’s process for identifying performance obligations and an enumeration of each obligation for each agreement is outlined in Note 3 “Collaboration Agreements.” Determining the performance obligations within a collaboration agreement often involves significant judgment and is specific to the facts and circumstances contained in each agreement. The Company has identified the following material promises under its collaboration agreements: (1) license of FibroGen technology, (2) the performance of co-development services, including manufacturing of clinical supplies and other services during the development period, and (3) manufacture of commercial supply. The evaluation as to whether these promises are distinct, and therefore represent separate performance obligations, is described in more details in Note 3 “Collaboration Agreements.” For revenue recognition purposes, the Company determines that the term of its collaboration agreements begin on the effective date and ends upon the completion of all performance obligations contained in the agreements. In each agreement, the contract term is defined as the period in which parties to the contract have present and enforceable rights and obligations. The Company believes that the existence of what it considers to be substantive termination penalties on the part of the counterparty create sufficient incentive for the counterparty to avoid exercising its right to terminate the agreement unless in exceptionally rare situations. The transaction price for each collaboration agreement is determined based on the amount of consideration the Company expects to be entitled for satisfying all performance obligations within the agreement. The Company’s collaboration agreements include payments to the Company of one or more of the following: non-refundable upfront license fees; co-development billings; development, regulatory, and commercial milestone payments; payments from sales of active pharmaceutical ingredient (“API”); and royalties on net sales of licensed products. Upfront license fees are non-contingent and non-refundable in nature and are included in the transaction price at the point when the license fees become due to the Company. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. Co-development billings resulting from the Company’s research and development efforts, which are reimbursable under its collaboration agreements, are considered variable consideration. Determining the reimbursable amount of research and development efforts requires detailed analysis of the terms of the collaboration agreements and the nature of the research and development efforts incurred. Determining the amount of variable consideration from co-development billings requires the Company to make estimates of future research and development efforts, which involves significant judgment. Co-development billings are allocated entirely to the co-development services performance obligation when amounts are related specifically to research and development efforts necessary to satisfy the performance obligation, and such an allocation is consistent with the allocation objective. Milestone payments are also considered variable consideration, which requires the Company to make estimates of when achievement of a particular milestone becomes probable. Similar to other forms of variable consideration, milestone payments are included in the transaction price when it becomes probable that such inclusion would not result in a significant revenue reversal. Milestone payments are therefore included in the transaction price when achievement of the milestone becomes probable. Product revenue consists of sales of commercial-grade API used in support of pre-commercial validation work. In 2018, the Company recorded revenue from commercial-grade API sales to Astellas based on a transaction price that is subject to potential future adjustments. This represents a form of variable consideration. With respect to these sales in 2018, the transaction price will be adjusted at the time the roxadustat listed price is issued by the Japanese Ministry of Health, Labour and Welfare to reflect differences between estimated and actual listed price, yield from the manufacture of bulk product tablets, and bulk product manufacturing costs. The Company evaluates the latest available facts and circumstances, including listed prices of comparable drug products in Japan and historical bulk drug product manufacturing yields and costs, to determine whether any adjustments to the estimated transaction price is necessary. As of December 31, 2018, no new facts or circumstances were available to warrant an adjustment to the transaction price. For arrangements that include sales-based royalties and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from its collaboration arrangements. The transaction price is allocated to performance obligations based on their relative standalone selling price (“SSP”), with the exception of co-development billings allocated entirely to co-development services performance obligations. The SSP is determined based on observable prices at which the Company separately sells the products and services. If an SSP is not directly observable, then the Company will estimate the SSP considering marketing conditions, entity-specific factors, and information about the customer or class of customer that is reasonably available. The process for determining SSP involves significant judgment and includes consideration of multiple factors, including assumptions related to the market opportunity and the time needed to commercialize a product candidate pursuant to the relevant license, estimated direct expenses and other costs, which include the rates normally charged by contract research and contract manufacturing organizations for development and manufacturing obligations, and rates that would be charged by qualified outsiders for committee services. Significant judgment may be required in determining whether a performance obligation is distinct, determining the amount of variable consideration to be included in the transaction price, and estimating the SSP of each performance obligation. An enumeration of the Company’s significant judgments is outlined in Note 3 “Collaboration Agreements.” For each performance obligation identified within an arrangement, the Company determines the period over which the promised services are transferred and the performance obligation is satisfied. Service revenue is recognized over time based on progress toward complete satisfaction of the performance obligation. The Company uses an input method to measure progress toward the satisfaction of co-development services and certain other related performance obligations, which is based on costs of labor hours or full time equivalents and out-of-pocket expenses incurred relative to total expected costs to be incurred. The Company believes this measure of progress provides a faithful depiction of the transfer of services because other measures do not measure as accurately how the Company transfers its performance obligations to its collaboration partners. Research and Development Expenses Research and development expenses consist of independent research and development costs and the gross amount of costs associated with work performed under collaboration agreements. Research and development costs include employee-related expenses, 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. All research and development costs are expensed as incurred. Clinical Trial Accruals Clinical trial costs are a component of research and development expenses. The Company accrues and expenses clinical trial activities performed by third parties based upon actual work completed in accordance with agreements established with clinical research organizations and clinical sites. The Company determines the costs to be recorded based upon validation with the external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. General and Administrative Expenses General and administrative expenses consist primarily of employee-related expenses for executive, operational, finance, legal, compliance and human resource functions. Other general and administrative expenses include facility-related costs and professional fees, accounting and legal services, other outside services, recruiting fees and expenses associated with obtaining and maintaining patents. Income Taxes The Company utilizes the asset and liability method of accounting for income taxes which requires the recognition of deferred tax assets and liabilities for expected future consequences of temporary differences between the financial reporting and income tax bases of assets and liabilities using enacted tax rates. Management makes estimates, assumptions and judgments to determine the Company’s provision for income taxes and also for deferred tax assets and liabilities, and any valuation allowances recorded against the Company’s deferred tax assets. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery is not likely, the Company must establish a valuation allowance. The calculation of the Company’s current provision for income taxes involves the use of estimates, assumptions and judgments while taking into account current tax laws, interpretation of current tax laws and possible outcomes of future tax audits. The Company has established reserves to address potential exposures related to tax positions that could be challenged by tax authorities. Although the Company believes its estimates, assumptions and judgments to be reasonable, any changes in tax law or its interpretation of tax laws and the resolutions of potential tax audits could significantly impact the amounts provided for income taxes in the Company’s consolidated financial statements. The calculation of the Company’s deferred tax asset balance involves the use of estimates, assumptions and judgments while taking into account estimates of the amounts and type of future taxable income. Actual future operating results and the underlying amount and type of income could differ materially from the Company’s estimates, assumptions and judgments thereby impacting the Company’s financial position and results of operations. The Company has adopted ASC 740-10, Accounting for Uncertainty in Income Taxes, that prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in the Company’s income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company includes interest and penalties related to unrecognized tax benefits within income tax expense in the Consolidated Statements of Operations. Stock-Based Compensation The Company maintains equity incentive plans under which incentive and nonqualified stock options are granted to employees and non-employee consultants. Compensation expense relating to non-employee stock options has not been material for all the periods presented. The Company measures and recognizes compensation expense for all stock options and restricted stock units (“RSUs”) granted to its employees and directors based on the estimated fair value of the award on the grant date. The Company uses the Black-Scholes valuation model to estimate the fair value of stock option awards. The fair value is recognized as expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award, on a straight-line basis. The Company believes that the fair value of stock options granted to non-employees is more reliably measured than the fair value of the services received. As such, the fair value of the unvested portion of the options granted to non-employees is re-measured each period. The resulting increase in value, if any, is recognized as expense during the period the related services are rendered on a straight-line basis. The determination of the grant date fair value of options using an option pricing model is affected by the Company’s estimated Common Stock fair value and requires management to make a number of assumptions including the expected life of the option, the volatility of the underlying stock, the risk-free interest rate and expected dividends. Comprehensive Income (Loss) The Company is required to report all components of comprehensive income (loss), including net loss, in the consolidated financial statements in the period in which they are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on investments and foreign currency translation adjustments. Comprehensive gains (losses) have been reflected in the consolidated statements of comprehensive income (loss) for all periods presented. Recently Issued and Adopted Accounting Guidance New Revenue Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing; ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients; and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (collectively, the “new revenue standards”). Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The Company adopted the new revenue standards as of January 1, 2018 using the full retrospective method, which required the Company to recast the prior reporting periods presented in the consolidated financial statements. The primary impact upon adoption of the new revenue standards relates to the manner in which revenue is recognized for co-development billings and milestone payments under the Company’s collaboration arrangements. Under the new revenue standards, both of these elements of consideration are considered variable consideration which requires the Company to make estimates of when co-development billings become due or when achievement of a particular milestone becomes probable. Payments are included in the transaction price when it becomes probable that inclusion would not lead to a significant revenue reversal. The Company has recast its consolidated statement of operations and balance sheet from amounts previously reported due to the adoption of the new revenue standards. The adoption of the new revenue standards had no impact to the Company’s previously reported consolidated statement of cash flows. Select line items from the Company’s consolidated statement of operations and balance sheet, which reflect the adoption of the new revenue standards are as follows (in thousands):
|  | Year Ended December 31, 2017 |  |  | Year Ended December 31, 2016 |
|  | As Previously Reported |  |  | New Revenue Standards Adjustment |  |  | As Recast |  |  | As Previously Reported |  |  | New Revenue Standards Adjustment |  |  | As Recast |
Statement of Operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
License revenue |  | $ | 96,056 |  |  | $ | (86,123 | ) |  | $ | 9,933 |  |  | $ | 137,352 |  |  | $ | (86,745 | ) |  | $ | 50,607 |
Development and other revenue |  |  | 29,612 |  |  |  | 91,451 |  |  |  | 121,063 |  |  |  | 42,225 |  |  |  | 90,357 |  |  |  | 132,582 |
Total revenue |  |  | 125,668 |  |  |  | 5,328 |  |  |  | 130,996 |  |  |  | 179,577 |  |  |  | 3,612 |  |  |  | 183,189 |
Net loss |  |  | (126,203 | ) |  |  | 5,328 |  |  |  | (120,875 | ) |  |  | (61,680 | ) |  |  | 3,612 |  |  |  | (58,068 | )
Net loss per share - basic and diluted |  | $ | (1.73 | ) |  | $ | 0.07 |  |  | $ | (1.66 | ) |  | $ | (0.98 | ) |  | $ | 0.05 |  |  | $ | (0.93 | )
|  |  |  |  |  |  |  |  |  |  |  |  |  | December 31, 2017 |
|  |  |  |  |  |  |  |  |  |  |  |  |  | As Previously Reported |  |  | New Revenue Standards Adjustment |  |  | As Recast |
Balance Sheet |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred revenue, current |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 7,968 |  |  | $ | 8,702 |  |  | $ | 16,670 |
Deferred revenue, net of current |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 112,231 |  |  |  | 26,010 |  |  |  | 138,241 |
Accumulated deficit |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (595,945 | ) |  |  | (34,712 | ) |  |  | (630,657 | )
The adoption of the new revenue standards also resulted in the following changes in the accumulated deficit as of December 31, 2016 and 2015:
|  | As Previously Reported |  |  | New Revenue Standards Adjustment |  |  | As Recast |
Accumulated Deficit |  |  |  |  |  |  |  |  |  |  |  |
As of December 31, 2016 |  | $ | (469,742 | ) |  | $ | (40,040 | ) |  | $ | (509,782 | )
As of December 31, 2015 |  | $ | (408,062 | ) |  | $ | (43,652 | ) |  | $ | (451,714 | )
ASU 2016-01 In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10). This guidance requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in net income, simplifies the impairment assessment of certain equity investments, and updates certain presentation and disclosure requirements. This guidance was effective for the annual reporting period beginning after December 15, 2017 and interim periods within those annual periods. The Company adopted this guidance as of January 1, 2018 using the modified retrospective approach. The impacts to the Company’s accumulated other comprehensive loss and accumulated deficit upon adoption of this guidance are as follows (in thousands):
|  | Accumulated Other Comprehensive Loss |  |  | Accumulated Deficit |  |
Balance at December 31, 2017 |  | $ | (1,795 | ) |  | $ | (630,657 | ) | *
Impact of change in accounting principle upon adoption of ASU 2016-01 |  |  | (1,250 | ) |  |  | 1,250 |  |
Opening balance as of January 1, 2018 |  | $ | (3,045 | ) |  | $ | (629,407 | ) |
* | Recast to reflect the adoption of the new revenue standards. See above.
The adoption of this guidance had no impact to the Company’s consolidated statement of cash flows for the year ended December 31, 2018. ASU 2017-09 In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This guidance provides guidance about which changes to the terms or conditions of a stock-based payment award require an entity to apply modification accounting in Topic 718. This guidance was effective for annual reporting period beginning after December 15, 2017, including interim periods. The Company adopted this guidance as of January 1, 2018, and the adoption of this guidance had no impact to the Company’s consolidated financial statements. ASU 2016-16 In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. This guidance requires companies to recognize the income tax effects of intercompany sales or transfer of assets, other than inventory, in the income statement as income tax expense (or benefit) in the period the sale or transfer occurs. The exception to recognizing the income tax effects of intercompany sales or transfer sales or transfer of assets remains in place for intercompany inventory sales and transfers. This guidance was effective for annual reporting period beginning after December 15, 2017, including interim periods. The Company adopted this guidance as of January 1, 2018 using the modified retrospective method. The adoption of this guidance did not result in any recognition of previously unrecognized deferred charges using a modified retrospective method, thus had no impact to the Company’s consolidated financial statements. Recently Issued Accounting Guidance Not Yet Adopted In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance requires capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance should be applied either retrospectively or prospectively, and is effective for annual reporting period beginning after December 15, 2019 including interim periods, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statements upon the adoption of this guidance. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This guidance amends existing fair value measurement disclosure requirements by adding, changing, or removing certain disclosures. This guidance is effective for annual reporting period beginning after December 15, 2019 including interim periods, with early adoption permitted. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company does not anticipate a material impact to its consolidated financial statements upon adoption of this guidance. In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This guidance expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance also specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This guidance is effective for annual reporting period beginning after December 15, 2018, including interim periods. The Company will adopt this guidance on January 1, 2019 and does not anticipate a material impact to its consolidated financial statements upon adoption. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income: Reclassification of Certain Tax effects from Accumulated Other Comprehensive Income. This guidance allows for the reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects arising from the change in the reduction of the United States (“U.S.”) federal statutory income tax rate from 35% to 21%. This guidance is effective for annual reporting period beginning after December 15, 2018, including interim periods, with early adoption permitted. The Company will adopt this guidance on January 1, 2019 and anticipate a reclassification of $0.6 million from its accumulated other comprehensive loss to its accumulated deficit upon adoption. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (“ASU 2018-19”), which clarifies certain topics included within ASU 2016-13. ASU 2016-13 and ASU 2018-19 are effective for the annual reporting period beginning after December 15, 2019, including interim periods within that reporting period. The Company is currently evaluating the impact on its consolidated financial statements upon the adoption of this guidance. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”), which provides entities the option to initially apply ASU 2016-02 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2016-02 and ASU 2018-11 are effective for the annual reporting period beginning after December 15, 2018, including interim periods within that reporting period. The Company will adopt this guidance as of January 1, 2019 and utilize the modified retrospective transition method through a cumulative-effect adjustment at the beginning of the first quarter of 2019. Based on the current evaluation, the Company anticipates a recognition of approximately $47 million to $62 million in right-of-use assets and approximately $57 million to $67 million in lease liabilities, respectively, upon adoption of this guidance, for its operating leases and facility leases disclosed in Note 8 to its consolidated balance sheets. Accordingly, the related balances as of December 31, 2018 in property and equipment, net, and long-term portion of lease financing obligations would be removed. The Company does not anticipate a material impact to its consolidated statement of operations or consolidated statement of cash flows upon adoption of this guidance.

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