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Collaboration Agreements and Revenues | 6 Months Ended
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Jun. 30, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Collaboration Agreements and Revenues |
2. | Collaboration Agreements and Revenues
Astellas Agreements Japan Agreement In June 2005, the Company entered into a collaboration agreement with Astellas for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in Japan (“Japan Agreement”). Under this agreement, Astellas paid license fees and other consideration totaling $40.1 million (such amounts were fully received as of February 2009). Under the Japan Agreement, the Company is also eligible to receive from Astellas an aggregate of approximately $132.5 million in potential milestone payments, comprised of (i) up to $22.5 million in milestone payments upon achievement of specified clinical and development milestone events (such amounts were fully received as of July 2016), (ii) up to $95.0 million in milestone payments upon achievement of specified regulatory milestone events, and (iii) up to approximately $15.0 million in milestone payments upon the achievement of specified commercial sales milestone. The aggregate amount of consideration received through June 30, 2020 totals $90.1 million. The Japan Agreement also provides for tiered payments based on net sales of roxadustat in the low 20% range after commercial launch. 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 roxadustat in the low 20% range. The aggregate amount of consideration received through June 30, 2020 totals $540.0 million. During the second quarter of 2019, the Company received positive topline results from analyses of pooled major adverse cardiac event (“MACE”) and MACE plus hospitalized unstable angina and hospitalized congestive heart failure (“MACE+”) data from its Phase 3 trials evaluating roxadustat as a treatment for dialysis and non-dialysis CKD patients, enabling Astellas to prepare for an MAA submission to the EMA, following the Company’s NDA submission to the FDA. These milestones became probable of being achieved in the second quarter of 2019, and the total consideration of $130.0 million associated with these milestones was included in the transaction price and allocated to performance obligations under the Europe Agreement in the second quarter of 2019, of which $128.8 million was recognized as revenue during 2019, and $0.6 million was recognized as revenue during the six months ended June 30, 2020, from performance obligations satisfied or partially satisfied. According to the Europe Agreement, these milestone payments were billed to Astellas upon the submission of an MAA in the second quarter of 2020 and the total $130.0 million was received during the same quarter. AstraZeneca Agreements U.S./Rest of World (“RoW”) Agreement Effective July 30, 2013, the Company entered into a collaboration agreement with AstraZeneca AB (“AstraZeneca”) for the development and commercialization of roxadustat for the treatment of anemia in the U.S. and all other countries in the world, other than China, not previously licensed under the Astellas Europe and Astellas Japan Agreements (“U.S./RoW Agreement”). It also excludes China, which is covered by a separate agreement with AstraZeneca described below. Under the terms of the U.S./RoW Agreement, AstraZeneca 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, and the remaining $50.0 million was received in April 2020 as a result of the NDA submission milestone, (ii) up to $325.0 million in milestone payments upon achievement of specified regulatory milestone events, (iii) up to $160.0 million in milestone payments related to activity by potential competitors and (iv) up to approximately $325.0 million in milestone payments upon the achievement of specified commercial sales events. The aggregate amount of consideration received through June 30, 2020 totals $439.0 million. As mentioned above, during the second quarter of 2019, the Company received positive topline results from analyses of pooled MACE and MACE+ data from its Phase 3 trials for roxadustat, enabling the Company’s NDA submission to the FDA. The regulatory milestone payment associated with this NDA submission became probable of being achieved in the second quarter of 2019. Accordingly, the consideration of $50.0 million associated with this milestone was included in the transaction price and allocated to performance obligations under the U.S./ RoW Agreement in the second quarter of 2019, of which $42.4 million was recognized as revenue during 2019, and $0.4 million was recognized as revenue during the six months ended June 30, 2020, from performance obligations satisfied or partially satisfied. The Company submitted such NDA in December 2019, which was accepted by the FDA for review in February 2020. According to the U.S/RoW Agreement, this milestone payment is billable to AstraZeneca when the NDA is accepted by the FDA. Therefore this $50.0 million was billed during the first quarter of 2020, the payment of which was fully received in April 2020. 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 June 30, 2020 totals $77.2 million. In December 2019, roxadustat was included on the updated National Reimbursement Drug List (“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 during fourth quarter of 2019. This milestone payment was received during the first quarter of 2020. AstraZeneca and Astellas approved the development of roxadustat for the treatment of chemotherapy-induced anemia in December 2018 and January 2019, respectively. Costs associated with the development of this indication are expected to be shared 50/50 between AstraZeneca and Astellas. In addition, in December 2018, anemia of chronic inflammation and multiple myeloma was approved for development by AstraZeneca and is expected to be fully funded by them. For revenue recognition purposes, the Company concluded that the addition of these new indications represents a modification to the collaboration agreements and will be accounted for separately, meaning the development costs associated with the new indications are distinct from the original development costs. The development service period for roxadustat for the treatment of chemotherapy-induced anemia, anemia of chronic inflammation and multiple myeloma under the AstraZeneca agreements is estimated to continue through the end of 2024, to allow for development of these additional indications. On July 8, 2020, FibroGen Cayman, FibroGen Beijing and FibroGen International (Hong Kong) Limited (collectively, “FibroGen China”) and AstraZeneca (together with FibroGen China, the “Parties”) entered into an amendment, effective July 1, 2020, to the China Agreement, relating to the development and commercialization of roxadustat in China. See Note 10 for details. 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 condensed consolidated statements of operations. All other elements identified below are included in the “Development and other revenue” line item in the condensed consolidated statements of operations. Amounts recognized as revenue under the Japan Agreement were as follows (in thousands):
|  |  |  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
Agreement |  | Performance Obligation |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Japan |  | License revenue |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
|  | Development revenue |  | $ | 164 |  |  | $ | 369 |  |  | $ | 327 |  |  | $ | 615 |
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 June 30, 2020 |  |  | Deferred Revenue at June 30, 2020 |  |  | Total Consideration Through June 30, 2020 |
License |  | $ | 86,024 |  |  | $ | — |  |  | $ | 86,024 |
Development revenue |  |  | 15,458 |  |  |  | 183 |  |  |  | 15,641 |
Total license and development revenue |  | $ | 101,482 |  |  | $ | 183 |  |  | $ | 101,665 |
The revenue recognized under the Japan Agreement for the three months ended June 30, 2020 included an increase in revenue of $0.1 million resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied or partially satisfied in previous periods. The remainder of the transaction price related to the Japan Agreement includes no further variable consideration from estimated future co-development billing. Amounts recognized as revenue under the Europe Agreement were as follows (in thousands):
|  |  |  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
Agreement |  | Performance Obligation |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Europe |  | License revenue |  | $ | — |  |  | $ | 117,470 |  |  | $ | — |  |  | $ | 117,470 |
|  | Development revenue |  | $ | 4,602 |  |  | $ | 16,854 |  |  | $ | 9,176 |  |  | $ | 21,467 |
The transaction price related to consideration received and accounts receivable has been allocated to each of the following performance obligations under the Europe Agreement, along with any associated deferred revenue as follows (in thousands):
Europe Agreement |  | Cumulative Revenue Through June 30, 2020 |  |  | Deferred Revenue at June 30, 2020 |  |  | Total Consideration Through June 30, 2020 |
License |  | $ | 487,951 |  |  | $ | — |  |  | $ | 487,951 |
Development revenue |  |  | 240,184 |  |  |  | 2,338 |  |  |  | 242,522 |
Total license and development revenue |  | $ | 728,135 |  |  | $ | 2,338 |  |  | $ | 730,473 |
The revenue recognized under the Europe Agreement for the three months ended June 30, 2020 included an increase in revenue of $1.6 million resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied or partially satisfied in previous periods. The remainder of the transaction price related to the Europe Agreement includes $31.7 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 Agreement were as follows (in thousands):
|  |  |  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
Agreement |  | Performance Obligation |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
U.S. / RoW and China |  | License revenue |  | $ | — |  |  | $ | 33,111 |  |  | $ | — |  |  | $ | 33,111 |
|  | Development revenue |  |  | 13,750 |  |  |  | 23,762 |  |  |  | 28,305 |  |  |  | 42,766 |
|  | China performance obligation |  | $ | 441 |  |  | $ | — |  |  | $ | 594 |  |  | $ | — |
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 June 30, 2020 |  |  | Deferred Revenue at June 30, 2020 |  |  | Total Consideration Through June 30, 2020 |
License |  | $ | 341,844 |  |  | $ | — |  |  | $ | 341,844 |
Co-development, information sharing & committee services |  |  | 521,572 |  |  |  | 4,547 |  |  |  | 526,119 |
China performance obligation |  |  | 684 |  |  |  | 140,973 |  |  |  | 141,657 |
Total license and development revenue |  | $ | 864,100 |  |  | $ | 145,520 |  |  | $ | 1,009,620 |
The revenue recognized under the U.S./RoW Agreement for the three months ended June 30, 2020 included a decrease of $0.2 million in revenue resulting from changes to estimated variable consideration in the current period relating to performance obligations satisfied or partially satisfied in previous periods. The remainder of the transaction price related to the U.S./RoW Agreement and China Agreement includes $90.1 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 The Company started roxadustat commercial sales in China in the third quarter of 2019. 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 various sales rebates and discounts. Product revenue, net was as follows (in thousands):
|  | Three Months Ended June 30, 2020 |  |  | Six Months Ended June 30, 2020 |
Gross revenue |  | $ | 19,833 |  |  | $ | 25,205 |
Non-key account hospital listing award |  |  | (2,566 | ) |  |  | (2,566 | )
Contractual sales rebate |  |  | (1,372 | ) |  |  | (1,748 | )
Other discounts and rebates |  |  | (202 | ) |  |  | (243 | )
Product revenue, net |  | $ | 15,693 |  |  | $ | 20,648 |
In the second quarter of 2020, the Company amended the agreement with its pharmaceutical distributors, which triggered accounting modifications particularly related to non-key account hospital listing award. During the three months ended June 30, 2020, a $2.6 million of non-key account hospital listing award was recorded as a reduction to the revenue, which was calculated based on eligible non-key account hospital listing to date achieved by each distributor with certain requirements met during the period. For the three and six months ended June 30, 2020, the contractual sales rebate was $1.4 million and $1.7 million, respectively, which were calculated based on the stated percentage of gross sales by each distributor in the distribution agreement entered between FibroGen and each distributor. All other rebates and discounts, including sales return allowance were immaterial for the period. The rebates and discounts that the Company’s pharmaceutical distributors have earned are eligible to be applied against their future sales order, limited to certain maximums until such rebates and discounts are exhausted. These rebates and discounts are recorded as contract liabilities at the time they become eligible in the same period that the related revenue is recorded. Due to the distributor’s legal right to offset, at each balance sheet date, the rebates and discounts are presented as reductions to gross accounts receivable from the distributor, or as a current liability to the distributor to the extent that the total amount exceeds the gross accounts receivable. The distributor’s legal right of offset is calculated at the individual distributor level. The following table includes a roll-forward of the contract liabilities (in thousands):
|  | Balance at December 31, 2019 |  |  | Additions |  |  | Deduction |  |  | Currency Translation and Other |  |  | Gross Contract Liabilities Balance |  |  | Balance Presented Net Against Accounts Receivable |  |  | Balance at June 30, 2020 |
Contract liabilities |  | $ | (1,102 | ) |  | $ | (4,907 | ) |  | $ | 16 |  |  | $ | 9 |  |  | $ | (5,984 | ) |  | $ | 5,595 |  |  | $ | (389 | )
As of June 30, 2020, the total rebates and discounts as reductions to gross accounts receivable was $5.6 million, and the total contract liabilities was $0.4 million, which was included in accrued and other current liabilities in the condensed consolidated balance sheet. The above-mentioned contra-accounts receivable items related to product revenue consisted of the following (in thousands):
|  | June 30, 2020 |  |  | December 31, 2019 |
Price adjustment |  | $ | 935 |  |  | $ | 936 |
Contractual sales rebate |  |  | 1,878 |  |  |  | 148 |
Non-key account hospital listing award |  |  | 2,567 |  |  |  | — |
Other discounts and rebates |  |  | 260 |  |  |  | 18 |
Provision for credit loss |  |  | 84 |  |  |  | — |
Total reductions to gross accounts receivable |  | $ | 5,724 |  |  | $ | 1,102 |
Drug Product Revenue In 2018, FibroGen and Astellas entered into an amendment to the Japan Agreement that allows Astellas to manufacture roxadustat drug product for commercialization in Japan (the “Japan Amendment”). Under this amendment, FibroGen would continue to manufacture and deliver to Astellas roxadustat active pharmaceutical ingredient (“API”) for the roxadustat commercial launch in Japan. During the three months ended June 30, 2020, the Company fulfilled the delivery obligations under the term of the Japan Amendment, and recognized the related drug product revenue of $8.2 million in the same period. The amount represents variable consideration and was estimated based on the quantity of product shipped, actual listed price for roxadustat issued by the Japanese Ministry of Health, Labour and Welfare and possible future changes to the listed price, adjusted for estimated yield and the related cost to convert the API to bulk product tablets. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the drug product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received in the future may differ from the Company’s estimates, for which the Company will adjust these estimates and affect the drug product revenue in the period such variances become known. Other Revenues Other revenues consist primarily of collagen material sold for research purposes. Other revenues were immaterial for all periods presented. 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 June 30, 2020, approximately $2.7 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, associated with the commercial sales in China.

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