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Collaboration Agreements and Revenues | 12 Months Ended
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Dec. 31, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Collaboration Agreements and Revenues |
3. | Collaboration Agreements and Revenues
Astellas Agreements Japan Agreement 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 after commercial launch. The aggregate amount of such consideration received through December 31, 2019 totals $90.1 million. In September 2019, Japan’s Ministry of Health, Labour and Welfare approved Evrenzo® (generic name: roxadustat; tradename Evrenzo® in Japan) for the treatment of anemia associated with CKD in dialysis patients. This approval triggered a $12.5 million milestone payable to the Company by Astellas under the Japan Agreement. Accordingly, the consideration of $12.5 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Japan Agreement in the third quarter of 2019, substantially all of which was recognized as revenue during the year ended December 31, 2019 from performance obligations satisfied or partially satisfied. During the second quarter of 2018, Astellas reported positive results from the final phase 3 CKD-dialysis trial of roxadustat in Japan, indicating that Astellas was ready to make an NDA submission for the treatment of anemia with roxadustat in CKD-dialysis patients in 2018. The Company evaluated the regulatory milestone payment associated with NDA submission in Japan based on variable consideration requirements under the current revenue standards and concluded that this milestone became probable of being achieved in the second quarter of 2018. Accordingly, the consideration of $15.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the Japan Agreement in the second quarter of 2018, substantially all of which was recognized as revenue during the year ended December 31, 2018 from performance obligations satisfied or partially satisfied. On November 30, 2018, FibroGen and Astellas entered into an amendment to the Japan Agreement that will allow Astellas to manufacture roxadustat drug product for commercialization in Japan (the “Japan Amendment”). Under this amendment, FibroGen would continue to manufacture and deliver to Astellas roxadustat API. 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. This amendment obligates Astellas to purchase API from the Company, of which $20.9 million was delivered to Astellas in the second quarter of 2018 under a material transfer agreement to conduct commercial scale manufacturing validation for roxadustat drug product in anticipation of commercial launch in Japan. The remaining $43.9 million of API was delivered to Astellas in December 2018. The transaction price of such API product was adjusted in 2019 at the time the listed price for roxadustat was issued by the Japanese Ministry of Health, Labour and Welfare to reflect a total difference of $36.3 million between estimated and actual listed price and yield from the manufacture of bulk product tablets. Europe Agreement In April 2006, the Company entered into a separate collaboration agreement with Astellas for the development and commercialization of roxadustat for the treatment of anemia in Europe, the Middle East, the Commonwealth of Independent States and South Africa (“Europe Agreement”). Under the terms of the Europe Agreement, Astellas paid license fees and other upfront consideration totaling $320.0 million (such amounts were fully received as of February 2009). The Europe Agreement also provides for additional development and regulatory approval milestone payments up to $425.0 million, 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. The aggregate amount of such consideration received through December 31, 2019 totals $410.0 million. During the second quarter of 2019, the Company received positive topline results from analyses of pooled major adverse cardiac event (“MACE”) and MACE+ data from its Phase 3 trials evaluating roxadustat as a treatment for dialysis and non-dialysis CKD patients, enabling Astellas to prepare for an MAA submission to the EMA in the second quarter of 2020, following the Company’s NDA submission to the FDA that was accepted for review in February 2020. The Company evaluated the two regulatory milestone payments associated with the planned MAA submission and concluded that these milestones became probable of being achieved in the second quarter of 2019. Accordingly, the total consideration of $130.0 million associated with these milestones was included in the transaction price and allocated to performance obligations under the Europe Agreement in the second quarter of 2019, of which $128.8 million was recognized as revenue during the year ended December 31, 2019 from performance obligations satisfied or partially satisfied. According to the Europe Agreement, these milestone payments are not billable to Astellas until the submission of an MAA, therefore this $130.0 million remained as an unbilled contract asset as of December 31, 2019. In the fourth quarter of 2018, the Company’s was engaged in the final stages of review with its partners over the proposed development of roxadustat for the treatment of chemotherapy induced anemia (“CIA”). AstraZeneca and Astellas approved the program in December 2018 and January 2019, respectively. Costs associated with the development of this indication are expected to be shared 50-50 between the Company’s two partners. For revenue recognition purposes, the Company concluded that this new indication represents a modification to the Europe agreements and will be accounted for separately, meaning the development costs associated with the new indications are distinct from the original development costs. The development service period for roxadustat for the treatment of CIA under the Europe Agreement is estimated to continue through the end of 2023 to allow for development of this indication. AstraZeneca Agreements U.S./Rest of World (“RoW”) Agreement Effective July 30, 2013, the Company entered into a collaboration agreement with AstraZeneca for the development and commercialization of roxadustat for the treatment of anemia in the U.S. and all other countries in the world, other than China, not previously licensed under the Astellas Europe and Astellas Japan Agreements (“U.S./RoW Agreement”). It also excludes China, which is covered by a separate agreement with AstraZeneca described below. Under the terms of the U.S./RoW Agreement, AstraZeneca paid upfront, non-contingent, non-refundable and time-based payments totaling $374.0 million (such amounts were fully received as of June 2016). Under the U.S./RoW Agreement, the Company is also eligible to receive from AstraZeneca an aggregate of approximately $875.0 million in potential milestone payments, comprised of (i) up to $65.0 million in milestone payments upon achievement of specified clinical and development milestone events, $15.0 million of which was received in 2015 as a result of the finalization of its two audited pre-clinical carcinogenicity study reports, (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 such consideration received through December 31, 2019 totals $389.0 million. Under the U.S./RoW Agreement, the Company and AstraZeneca will share equally in the development costs of roxadustat not already paid for by Astellas, up to a total of $233.0 million (i.e. the Company’s share of development costs is $116.5 million, which was reached in 2015). Development costs incurred by FibroGen during the development period in excess of the $233.0 million (aggregated spend) are fully reimbursed by AstraZeneca. AstraZeneca will pay the Company tiered royalty payments on AstraZeneca’s future net sales (as defined in the agreement) of roxadustat in the low 20% range. In addition, the Company will receive a transfer price for delivery of commercial product based on a percentage of AstraZeneca’s net sales (as defined in the agreement) in the low- to mid-single digit range. As mentioned above, during the second quarter of 2019, the Company received positive topline results from analyses of pooled MACE and MACE+ data from its Phase 3 trials for roxadustat, enabling the Company’s NDA submission to the FDA. The Company evaluated the regulatory milestone payment associated with this planned NDA submission and concluded that this milestone became probable of being achieved in the second quarter of 2019. Accordingly, the consideration of $50.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the U.S./ RoW Agreement in the second quarter of 2019, of which $42.4 million was recognized as revenue during the year ended December 31, 2019 from performance obligations satisfied or partially satisfied. On December 23, 2019, the Company submitted such NDA, which was accepted by FDA in February 2020. According to the U.S/RoW Agreement, this milestone payment is not billable to AstraZeneca until the NDA is accepted by the FDA, therefore this $50.0 million remained as an unbilled contract asset as of December 31, 2019, and will be billed during the first quarter of 2020. China Agreement Effective July 30, 2013, the Company (through its subsidiaries affiliated with China) entered into a collaboration agreement with AstraZeneca for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in China (“China Agreement”). Under the terms of the China Agreement, AstraZeneca agreed to pay upfront consideration totaling $28.2 million (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) and provides for joint development costs (including capital and equipment costs for construction of the manufacturing plant in China), to be shared equally during the development. The aggregate amount of such consideration received through December 31, 2019 totals $55.2 million. In December 2019, roxadustat has been included on the updated NRDL released by China’s NHSA for the treatment of anemia in CKD, covering patients who are non-dialysis dependent as well as those who are dialysis-dependent. The inclusion on the NRDL triggered a total of $22.0 million milestones payable to the Company by AstraZeneca. Accordingly, the total consideration of $22.0 million associated with these milestones was included in the transaction price and allocated to performance obligations under the China Agreement, of which $18.7 million was recognized as revenue during the year ended December 31, 2019 from performance obligations satisfied or partially satisfied. As mentioned above, in the fourth quarter of 2018, the Company was engaged in the final stages of review with its partners over the proposed development of roxadustat for the treatment of CIA. AstraZeneca and Astellas approved the program in December 2018 and January 2019, respectively. Costs associated with the development of this indication are expected to be shared 50-50 between the Company’s two partners. In addition to CIA, in December 2018, anemia of chronic inflammation (“ACI”) and multiple myeloma (“MM”) have been approved for development by AstraZeneca and is expected to be fully funded by them. For revenue recognition purposes, the Company concluded that the addition of these new indications represents a modification to the collaboration agreements and will be accounted for separately, meaning the development costs associated with the new indications are distinct from the original development costs. The development service period for roxadustat for the treatment of CIA, ACI and MM under the AstraZeneca agreements is estimated to continue through the end of 2024, to allow for development of these additional indications. On December 17, 2018, FibroGen (China) Medical Technology Development Co., Ltd. (“FibroGen China”), received marketing authorization from the NMPA for roxadustat, a first-in-class hypoxia-inducible factor prolyl hydroxylase inhibitor, for the treatment of anemia caused by CKD in patients on dialysis. This approval triggered a $6.0 million milestone payable to the Company by AstraZeneca. On December 29, 2018, FibroGen China received First Manufacturing Approval for a Product in the Field in the Territory , which allows production for Phase 4 clinical studies, patients’ early experience programs, donation programs, as well as to supply products for testing and assessments required prior to launch. This approval triggered a $6.0 million milestone payable to the Company by AstraZeneca. Approximately $9.9 million of the total $12.0 million milestone payables was recognized as revenue during the year ended December 31, 2018 from performance obligations satisfied or partially satisfied. Accounting for the Astellas Agreements For each of the Astellas agreements, the Company has evaluated the promised services within the respective arrangements and has identified performance obligations representing those services and bundles of services that are distinct. Promised services that were not distinct have been combined with other promised services to form a distinct bundle of promised services, with revenue being recognized on the bundle of services rather than the individual services. There are no right-of-return provisions for the delivered items in the Astellas agreements. As of December 31, 2019, the transaction price for the Japan Agreement included $40.1 million of non-contingent upfront payments, $50.0 million of variable consideration related to payments for milestones considered probable of being achieved, and $11.4 million of variable consideration related to co-development billings. The transaction price for the Europe Agreement included $320.0 million of non-contingent upfront payments, $220.0 million of variable consideration related to payments for milestones considered probable of being achieved, and $229.2 million of variable consideration related to co-development billings. For revenue recognition purposes, the Company determined that the term of each collaboration agreement with Astellas begins on the effective date and ends upon the completion of all performance obligations contained in the 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 requirement to continue funding development for a substantive period of time and loss of product rights, along with non-refundable upfront payments already remitted by Astellas, create significant disincentive for Astellas to exercise its right to terminate the agreements. For the Astellas agreements, the Company allocated the transaction price to the various performance obligations based on the relative SSP of each performance obligation, with the exception of co-development billings allocated entirely to co-development services performance obligations. For the technology license under the Japan Agreement and Europe Agreement, SSP was determined primarily by using the discounted cash flow (“DCF”) method, which aggregates the present value of future cash flows to determine the valuation as of the effective date of each of the agreements. The DCF method involves the following key steps: 1) the determination of cash flow forecasts and 2) the selection of a range of comparative risk-adjusted discount rates to apply against the cash flow forecasts. The discount rates selected were based on expectations of the total rate of return, the rate at which capital would be attracted to the Company and the level of risk inherent within the Company. The discounts applied in the DCF analysis ranged from 17.5% to 20.0%. The Company’s cash flow forecasts were derived from probability-adjusted revenue and expense projections by territory. Such projections included consideration of taxes and cash flow adjustments. The probability adjustments were made after considering the likelihood of technical success at various stages of clinical trials and regulatory approval phases. SSP also considered certain future royalty payments associated with commercial performance of the Company’s compounds, transfer prices and expected gross margins. The promised services that were analyzed, along with their general timing of satisfaction and recognition as revenue, are as follows:
(1) | License to the Company’s technology existing at the effective date of the agreements. For both of the Astellas agreements, the license was delivered at the beginning of the agreement term. In both cases, the Company concluded at the time of the agreement that its collaboration partner, Astellas, would have the knowledge and capabilities to fully exploit the licenses without the Company’s further involvement. However, the Japan Agreement has contractual limitations that might affect Astellas’ ability to fully exploit the license and therefore, potentially, the conclusion as to whether the license is capable of being distinct. In the Japan Agreement, Astellas does not have the right to manufacture commercial supplies of the drug. In order to determine whether this characteristic of the agreement should lead to a conclusion that the license was not distinct in the context of the agreement, the Company considered the ability of Astellas to benefit from the license together with other resources readily available to Astellas. Finally, the Company considered the fact that at the time of delivery of the license, the development services were beyond the preclinical development phase and any remaining development work in either agreement would not be expected to result in any significant modification or customization to the licensed technology. As such, the development services are separately identifiable from the licensed technology, indicating that the license is a distinct performance obligation.
Manufacturing rights. In the case of the Japan Agreement, the Company retained manufacturing rights largely because of the way the parties chose for FibroGen to be compensated under the agreement. At the time the agreement was signed, the Company believed that it was more advantageous upon commercialization to have a transfer price revenue model in place as opposed to a traditional sales-based model. The manufacturing process does not require specialized knowledge or expertise uniquely held by FibroGen, and notwithstanding contractual restrictions, Astellas could employ manufacturing services from readily available third parties in order to benefit from the license. Therefore, along with the foregoing paragraph, the Company determined that the license in Japan is a distinct performance obligation despite the retention of manufacturing rights by the Company. In summary, the Company concludes that item (1) represents a performance obligation. The portion of the transaction price allocated to this performance obligation based on a relative SSP basis is recognized as revenue in its entirety at the point in time the license transfers to Astellas.
(2) | Co-development services (Europe Agreement). This promise relates to co-development services that were reasonably expected to be performed by the Company at the time the collaboration agreement was signed and is considered distinct. Co-development billings are allocated entirely to the co-development services performance obligation as 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. 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 the performance obligation, which is based on costs of labor hours and out-of-pocket expenses incurred relative to total expected costs to be incurred. The measure of progress is updated each reporting period. Co-development services are expected to continue over the development period that is currently estimated to continue through the end of 2019. In addition, the Company concluded that the new indication related to CIA approved in January 2019 represents a modification to the Europe agreements at that time and will be accounted for separately, for which the development service period is estimated to continue through the end of 2023. There was no provision for co-development services in the Japan Agreement.
(3) | License to the Company’s technology developed during the term of the agreement and development (referred to as “when and if available”) and information sharing services. These promises are generally satisfied throughout the term of the agreements.
(4) | Manufacturing of clinical supplies of products. This promise is satisfied as supplies for clinical product are delivered for use in the Company’s clinical trial programs during the development period, or pre-commercialization period.
(5) | Committee service. This promise is satisfied throughout the course of the agreements as meetings are attended.
Items (3)-(5) are bundled into a single performance obligation which is distinct given the fact that all are highly interrelated during the development period (pre-commercial phase of development) such that satisfying them independently is not practicable. 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 the performance obligation, 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 measure of progress is updated each reporting period.
(6) | Manufacturing commercial supplies of products. This promised service is distinct as services are not interrelated with any of the other performance obligations. Payments received for commercial supplies of products represent sales-based payments related predominately to the license of intellectual property under both Astellas agreements. Revenue is recognized as supplies are shipped for commercial use during the commercialization period. To date, no such revenue has been recognized.
In 2018, the Company recorded revenue from commercial-grade API sales to Astellas to conduct commercial scale manufacturing validation based on a transaction price that was subject to potential future adjustments. This represents a form of variable consideration. The Company evaluated the latest available facts and circumstances in 2018, 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 was necessary. As of December 31, 2018, no new facts or circumstances were available to warrant an adjustment to the transaction price. The transaction price was later adjusted in 2019 at the time the listed price for roxadustat was issued by the Japanese Ministry of Health, Labour and Welfare to reflect the difference between estimated and actual listed price and yield from the manufacture of bulk product tablets. Accounting for the AstraZeneca Agreements The Company evaluated whether the U.S./RoW Agreement and China Agreement should be accounted for as a single or separate arrangements and concluded that the agreements should be accounted for as a single arrangement with the presumption that two or more agreements executed with a single customer at or around the same time should be presumed to be a single arrangement. The key points the Company considered in reaching this conclusion are as follows:
1. | While the two agreements were largely negotiated separately, those negotiations proceeded concurrently, and were intended to be completed contemporaneously, presuming AstraZeneca decided to proceed with licenses in all regions available.
2. | Throughout negotiations for both agreements, the Company and the counterparties understood and considered the possibility that one arrangement may be executed without the execution of the other arrangement. However, the preference for the Company and the counterparties during the negotiations was to execute both arrangements concurrently.
3. | The two agreements were executed as separate agreements because different development, regulatory and commercial approaches required certain terms of the agreements to be structured differently, rather than because the Company or the counterparties considered the agreements to be fundamentally separate negotiations.
Accordingly, as the agreements are being accounted for as a single arrangement, upfront and other non-contingent consideration received and to be received has been and will be pooled together and allocated to each of the performance obligations in both the U.S./RoW Agreement and China Agreement based on their relative SSPs. For each of the AstraZeneca agreements, the Company has evaluated the promised services within the respective arrangements and has identified performance obligations representing those services and bundled services that are distinct. Promised services that were not distinct have been combined with other promised services to form a distinct bundle of promised services, with revenue being recognized on the bundle of services rather than the individual promised services. There are no right-of-return provisions for the delivered items in the AstraZeneca agreements. As of December 31, 2019, the transaction price for the U.S./RoW Agreement and China Agreement included $402.2 million of non-contingent upfront payments, $114.0 million of variable consideration related to payments for milestones considered probable of being achieved, and $598.8 million of variable consideration related to co-development billings. For the AstraZeneca agreements, the Company allocated the transaction price to the various performance obligations based on the relative SSP of each performance obligation, with the exception of co-development billings. Co-development billings under the U.S./RoW Agreement were allocated entirely to the U.S./RoW co-development services performance obligation, and co-development billings under the China Agreement were allocated entirely to the combined performance obligation under the China Agreement. For revenue recognition purposes, the Company determined that the term of its collaboration agreements with AstraZeneca begin on the effective date and ends upon the completion of all performance obligations contained in the agreements. 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 requirement to continue funding development for a substantive period of time and the loss of product rights, along with non-refundable upfront payments already remitted by AstraZeneca, represent substantive termination penalties that create significant disincentive for AstraZeneca to exercise its right to terminate the agreement. For the technology license under the AstraZeneca U.S./RoW Agreement, SSP was determined based on a two-step process. The first step involved determining an implied royalty rate that would result in the net present value of future cash flows to equal to zero (i.e. where the implied royalty rate on the transaction would equal the target return for the investment). This results in an upper bound estimation of the magnitude of royalties that a hypothetical acquirer would reasonably pay for the forecasted cash flow stream. The Company’s cash flow forecasts were derived from probability-adjusted revenue and expense projections. Such projections included consideration of taxes and cash flow adjustments. The probability adjustments were made after considering the likelihood of technical success at various stages of clinical trials and regulatory approval phases. The second step involved applying the implied royalty rate, which was determined to be 40%, against the probability-adjusted projected net revenues by territory and determining the value of the license as the net present value of future cash flows after adjusting for taxes. The discount rate utilized was 17.5%. U.S./RoW Agreement: The promised services that were analyzed, along with their general timing of satisfaction and recognition as revenue, are as follows:
(1) | License to the Company’s technology existing at the effective date of the agreements. For the U.S./RoW Agreement, the license was delivered at the beginning of the agreement term. The Company concluded that AstraZeneca has the knowledge and capabilities to fully exploit the license under the U.S./RoW Agreement without the Company’s further involvement. Finally, the Company considered the fact that at the time of delivery of the license, the development services were beyond the preclinical development phase and any remaining development work would not be expected to result in any significant modification or customization to the licensed technology. As such, the development services are separately identifiable from the licensed technology, indicating that the license is a distinct performance obligation. Therefore, the Company has concluded that the license is distinct and represents a performance obligation. The portion of the transaction price allocated to this performance obligation based on a relative SSP basis is recognized as revenue in its entirety at the point in time the license transfers to AstraZeneca.
(2) | Co-development services. This promise relates to co-development services that were reasonably expected to be performed by the Company at the time the collaboration agreement was signed and is distinct. Co-development billings are allocated entirely to the co-development services performance obligation as 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. 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 the performance obligation, 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. Co-development services are expected to continue over the development period that is currently estimated to continue through the end of 2020. In addition, the Company concluded that the addition of the new indications related to CIA, ACI and MM approved during the fourth quarter of 2018 represents a modification to the collaboration agreements and will be accounted for separately, for which the joint development service period is estimated to continue through the end of 2024.
(3) | Manufacturing of clinical supplies of products. This promise is satisfied as supplies for clinical product are delivered for use in the Company’s clinical trial programs during the development period, or pre-commercialization period.
(4) | Information sharing and committee service. These promises are satisfied throughout the course of the agreement as services are provided.
Items (3)-(4) are bundled into a single performance obligation which is distinct given the fact that all are highly interrelated during the development period (pre-commercial phase of development) such that delivering them independently is not practicable. 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 the performance obligation, 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 measure of progress is updated each reporting period.
(5) | Manufacturing commercial supplies of products. This promise is distinct as services are not interrelated with any of the other performance obligations. Payments received for commercial supplies of products represent sales-based royalties related predominately to the license of intellectual property under the agreement. Revenue is recognized as supplies are shipped for commercial use during the commercialization period. To date, no such revenue has been recognized.
China Agreement: The performance obligation that were analyzed, along with their general timing of satisfaction and recognition as revenue, are as follows:
• | License to the Company’s technology existing at the effective date of the agreement. The license was delivered at the beginning of the agreement term. However, the China Agreement with AstraZeneca has contractual limitations that might affect AstraZeneca’s ability to fully exploit the license and therefore, potentially, the conclusion as to whether the license is distinct in the context of the agreement. In the China Agreement, AstraZeneca does not have the right to manufacture commercial supplies of the drug. In order to determine whether this characteristic of the arrangement should lead to a conclusion that the license was not distinct in the context of the agreement, the Company considered the ability of AstraZeneca to benefit from the license on its own or together with other resources readily available to AstraZeneca.
For the China Agreement, the Company retained manufacturing rights as an essential part of a strategy to pursue domestic regulatory pathway for product approval which requires the regulatory licensure of the manufacturing facility in order to commence commercial shipment. The prospects for the collaboration as a whole would have been substantially different had manufacturing rights been provided to AstraZeneca. Due to certain regulatory restrictions in China, manufacturing services of commercial drug product in China are not readily available to AstraZeneca or any other parties. Therefore, AstraZeneca cannot benefit from the license on its own or together with other readily available resources. Accordingly, all the promises identified, including co-development services, under the China Agreement have been bundled into a single performance obligation and amounts of the transaction price allocable to this performance obligation are deferred until control of the manufactured commercial drug product has begun to transfer to AstraZeneca. Upon commencement of the transfer of control to commercial drug product, revenue would be recognized in a pattern consistent with estimated deliveries of the commercial drug product. Summary of revenue recognized under the collaboration agreements The table below summarizes the accounting treatment for the various performance obligations pursuant to each of the Astellas and AstraZeneca agreements. License amounts identified below are included in the “License revenue” line item in the consolidated statements of operations. All other elements identified below are included in the “Development and other revenue” line item in the consolidated statements of operations. Amounts recognized as revenue under the Japan Agreement with Astellas were as follows (in thousands):
|  |  |  | Years Ended December 31, |
Agreement |  | Performance Obligation |  | 2019 |  |  | 2018 |  |  | 2017 |
Japan |  | License revenue |  | $ | 11,935 |  |  | $ | 14,323 |  |  | $ | — |
|  | Development revenue |  | $ | 1,222 |  |  | $ | 2,400 |  |  | $ | 1,588 |
The transaction price related to consideration received and accounts receivable has been allocated to each of the following performance obligations under the Japan Agreement, along with any associated deferred revenue as follows (in thousands):
Japan Agreement |  | Cumulative Revenue Through December 31, 2019 |  |  | Deferred Revenue at December 31, 2019 |  |  | Total Consideration Through December 31, 2019 |
License |  | $ | 86,024 |  |  | $ | — |  |  | $ | 86,024 |
Development revenue |  |  | 15,130 |  |  |  | 375 |  |  |  | 15,505 |
Total license and development revenue |  | $ | 101,154 |  |  | $ | 375 |  |  | $ | 101,529 |
The revenue recognized under the Japan Agreement for the year ended December 31, 2019 included an increase of $12.1 million resulting from changes to estimated variable consideration in the current year relating to performance obligations satisfied or partially satisfied in previous periods. The remainder of the transaction price related to the Japan Agreement includes no further variable consideration from estimated future co-development billing. Amounts recognized as revenue under the Europe Agreement with Astellas were as follows (in thousands):
|  |  |  | Years Ended December 31, |
Agreement |  | Performance Obligation |  | 2019 |  |  | 2018 |  |  | 2017 |
Europe |  | License revenue |  | $ | 117,470 |  |  | $ | — |  |  | $ | — |
|  | Development revenue |  | $ | 28,172 |  |  | $ | 18,503 |  |  | $ | 18,523 |
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 December 31, 2019 |  |  | Deferred Revenue at December 31, 2019 |  |  | Total Consideration Through December 31, 2019 |
License |  | $ | 487,951 |  |  | $ | — |  |  | $ | 487,951 |
Development revenue |  |  | 231,008 |  |  |  | 4,790 |  |  |  | 235,798 |
Total license and development revenue |  | $ | 718,959 |  |  | $ | 4,790 |  | * | $ | 723,749 |
* | Contract assets and liabilities related to rights and obligations in the same contract are recorded net on the condensed consolidated balance sheets. As of December 31, 2019, prepaid expenses and other current assets included a net unbilled contract asset of $125.2 million related to the Europe Agreement, which represents the net of the above-mentioned unbilled contract asset of $130.0 million, and $4.8 million of deferred revenue presented above.
The revenue recognized under the Europe Agreement for the year ended December 31, 2019 included an increase in revenue of $124.7 million resulting from changes to estimated variable consideration in the current year relating to performance obligations satisfied or partially satisfied in previous periods. The remainder of the transaction price related to the Europe Agreement includes $45.4 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 Agreements with AstraZeneca were as follows (in thousands):
|  |  |  | Years Ended December 31, |
Agreement |  | Performance Obligation |  | 2019 |  |  | 2018 |  |  | 2017 |
U.S. / RoW and China |  | License revenue |  | $ | 47,681 |  |  | $ | 7,946 |  |  | $ | 9,933 |
|  | Development revenue |  |  | 84,629 |  |  |  | 104,970 |  |  |  | 100,928 |
|  | China performance obligation |  | $ | 90 |  |  | $ | — |  |  | $ | — |
The transaction price related to consideration received and accounts receivable has been allocated to each of the following performance obligations under the U.S./RoW Agreement and China Agreement, along with any associated deferred revenue as follows (in thousands):
U.S. / RoW and China Agreements |  | Cumulative Revenue Through December 31, 2019 |  |  | Deferred Revenue at December 31, 2019 |  |  | Total Consideration Through December 31, 2019 |
License |  | $ | 341,844 |  |  | $ | — |  |  | $ | 341,844 |
Co-development, information sharing & committee services |  |  | 493,266 |  |  |  | 8,452 |  |  |  | 501,718 |
China performance obligation |  |  | 90 |  |  |  | 140,872 |  |  |  | 140,962 |
Total license and development revenue |  | $ | 835,200 |  |  | $ | 149,324 |  | * | $ | 984,524 |
* | Contract assets and liabilities related to rights and obligations in the same contract are recorded net on the condensed consolidated balance sheets. As of December 31, 2019, long-term deferred revenue included $99.3 million related to the U.S./RoW and China Agreement, which represents the net of $149.3 million of deferred revenue presented above and the above-mentioned $50.0 million unbilled contract asset.
The revenue recognized under the U.S./RoW Agreement and China Agreement for the year ended December 31, 2019 included an increase in revenue of $62.6 million resulting from changes to estimated variable consideration in the current year relating to performance obligations satisfied or partially satisfied in previous periods. The remainder of the transaction price related to the U.S./RoW Agreement and China Agreement includes $130.4 million of variable consideration from estimated future co-development billing and is expected to be recognized over the remaining development service period, except for amounts allocated to the China performance obligation, which are expected to be recognized in a pattern consistent with estimated deliveries of the commercial drug product. Product Revenue, Net
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |
|  | (dollars in thousands) |
Product revenue, net: |  |  |  |  |  |  |  |
API product |  | $ | (36,324 | ) |  | $ | 64,776 |
Drug product |  |  |  |  |  |  |  |
Gross revenue |  |  | 2,803 |  |  |  | — |
Price adjustment |  |  | (936 | ) |  |  | — |
Sales rebates and other discounts |  |  | (167 | ) |  |  | — |
Drug product revenue, net |  |  | 1,700 |  |  |  | — |
Total product revenue, net |  | $ | (34,624 | ) |  | $ | 64,776 |
As described above, the Japan Amendment obligates Astellas to purchase API from the Company to conduct commercial scale manufacturing validation for roxadustat drug product in anticipation of commercial launch in Japan. The Company fulfilled all the delivery obligations under the term of the Japan Amendment during the year ended December 31, 2018, and recognized the related product revenue of $64.8 million in the same period based on a transaction price that was subject to potential future adjustments, which represented a form of variable consideration. A change in estimated variable consideration incurred in 2019 at the time the actual listed price for roxadustat was issued by the Japanese Ministry of Health, Labour and Welfare, which resulted in a total difference of $36.3 million between the estimated and the actual listed price and yield from the manufacture of bulk product tablets. In addition, the Company started commercial sales of roxadustat drug product in China in the third quarter of 2019. Drug product revenue is recognized in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those products, net of price adjustment, contractual sales rebate and other discounts. For the year ended December 31, 2019, a $0.9 million of price adjustment was recorded based on government-listed price guidance and estimated channel inventory levels. The contractual sales rebate and other discounts were immaterial for the year ended December 31, 2019. Other Revenues Other revenues consist primarily of collagen material sold for research purposes. Other revenues were immaterial for each of the three years ended December 31, 2019. Deferred Revenue Deferred revenue represents amounts billed, or in certain cases, yet to be billed to the Company’s collaboration partners for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met. The current portion of deferred revenue represents the amount to be recognized within one year from the balance sheet date based on the estimated performance period of the underlying performance obligations. The long-term portion of deferred revenue represents amounts to be recognized after one year through the end of the non-contingent performance period of the underlying performance obligations. Deferred revenue includes amounts allocated to the China unit of accounting under the AstraZeneca arrangement as revenue recognition associated with this unit of accounting is tied to the commercial launch of the products within China. As of December 31, 2018, such deferred revenue was included in long-term deferred revenue. As of December 31, 2019, following receipt of the Chinese Good Manufacturing Practices license by FibroGen Beijing in the second quarter of 2019, approximately $0.8 million of the related deferred revenue 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, as a result of the transfer of control of commercial drug product in China.

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