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Equity and Stock-based Compensation | 12 Months Ended
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Dec. 31, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Equity and Stock-based Compensation |
10. | Equity and Stock-based Compensation
Subsidiary Stock and Non-Controlling Interests FibroGen Europe As of December 31, 2020 and 2019, respectively, FibroGen Europe had a total of 42,619,022 shares of Preferred Stock outstanding, of which there were 1,700,845 shares of Series A Preferred Stock, 1,875,000 shares of Series B Preferred Stock, 1,599,503 shares of Series C Preferred Stock, 1,520,141 shares of Series D Preferred Stock, 459,565 shares of Series E Preferred Stock, 5,714,332 shares of Series F Preferred Stock, 9,927,500 shares of Series G Preferred Stock and 19,822,136 shares of Series H Preferred Stock, all of which shares no longer have any right to be exchanged for FibroGen, Inc. Common Stock. The holders of FibroGen Europe’s shares of Preferred Stock (“Preferred Shares”) have the following rights, preferences and privileges: Dividend Rights — When the assets of FibroGen Europe are distributed (except for distribution in a liquidation), Preferred Shares shall have the same rights to dividend or other forms of distribution as shares of Common Stock of FibroGen Europe. In the event of a merger, holders of Preferred Shares do not have the right to demand FibroGen Europe to redeem all or part of their Preferred Shares. FibroGen Europe may repurchase shares of Common Stock or Preferred Shares for consideration. Pre-emptive Right — Preferred Shares shall have pre-emptive subscription right in accordance with the Finnish Limited Liability Companies Act if additional shares are issued, option rights are given, or convertible loan is taken, provided, however, that the foregoing pre-emptive right does not apply to a directed share issue, for which two thirds (2/3) of the voting shares represented at a general meeting of shareholders approve for an important legitimate cause. Redemption Right — If a Preferred Share can be redeemed by a majority shareholder owning more than ninety percent (90%) of the shares of FibroGen Europe in accordance with the provisions of the Finnish Limited Liability Companies Act, the minority holders of Preferred Shares have the right to request redemption of their shares. Voting Right — Each share has one vote. Preferred Shares have voting rights only in situations that are specifically provided in the Articles of Association, which include a merger transaction and directed share issue. In addition, Preferred Shares have right to vote in a general shareholder meeting for amending the Articles of Association if the amendment will affect the rights of Preferred Shares. Conversion Right (1-for-1 basis into Common Stock of FibroGen Europe):
| • | Voluntary conversion right: Preferred Shares can be converted into common shares upon the written request of a shareholder provided that the conversion is feasible within the maximum and minimum amounts of shares of classes of FibroGen Europe as set forth in its Articles of Association. Such request can be withdrawn before the notification of conversion is filed with the Finnish Trade Register.
| • | Compulsory conversion right: Preferred Shares will be converted into common shares if (i) FibroGen Europe’s shares are listed in a stock exchange or other trading system in the European Economic Area, or (ii) FibroGen Europe’s recombinant collagen and gelatin production technology is being put into commercial use in the area of Europe and certain other European states. Commercial use means there is income generated from the first commercial sale of the products incorporating the above mentioned technology and does not include license fees, development financing, milestone payments or income from test products or equipment used in research. The board of directors of FibroGen Europe shall notify the shareholders of the compulsory conversion in writing, and the shareholders shall request to convert their shares within the timeframe provided in the notification. Should the shareholders fail to make the conversion request within the time limit, FibroGen Europe may redeem the shares of such shareholders.
Liquidation Right — In the event of a dissolution of FibroGen Europe, holders of Preferred Shares are entitled to be paid in an amount equal to the subscription price of the shares before any distribution is made to holders of common shares. Among holders of Preferred Shares, holders of shares of Series F Preferred Stock are entitled to be paid in an amount equal to the subscription price of Series F Preferred Stock before any distribution is made to holders of other Preferred Shares. FibroGen Cayman FibroGen Cayman had 6,758,000 Series A Preference Shares outstanding as of December 31, 2020 and 2019, respectively. The holders of the FibroGen Cayman Series A Preference Shares have the following rights, preferences and privileges: Liquidation — In the event of liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, including by means of a merger, the holders of FibroGen Cayman Series A Preference Shares are entitled to be paid an amount equal to the product of the number of shares held by a holder of shares of FibroGen Cayman Series A Preference Shares and the original issue price of $1.00 (subject to equitable adjustment for any stock dividend, combination, split, reclassification, recapitalization) plus all declared and unpaid dividends thereon. Conversion — Each share of FibroGen Cayman Series A Preference Shares is convertible into the number of fully paid and non-assessable shares of Common Stock of FibroGen Cayman that results from dividing the original issue price by the conversion price in effect at the time of the conversion, subject to adjustments for stock splits, stock dividends, reclassifications and like events. The FibroGen Cayman Series A Preference Shares have a conversion price that is equal to the original issuance price such that the conversion ratio to FibroGen Cayman Common Stock is 1:1 as of all periods presented. Voting — The holders of FibroGen Cayman Series A Preference Shares are entitled to vote together with the FibroGen Cayman Common Stock holders on all matters submitted for a vote of the stockholders. The holder of each share of FibroGen Cayman Series A Preference Shares has the number of votes equal to the number of shares of FibroGen Cayman Common Stock into which it is convertible. Dividends — The holders of FibroGen Cayman Series A Preference Shares are entitled to receive cash dividends when and if declared, at a rate of 6%. Non-Controlling Interests Non-controlling interest positions related to the issuance of subsidiary stock as described above are reported as a separate component of consolidated equity from the equity attributable to the Company’s stockholders at December 31, 2020 and 2019. In addition, the Company does not allocate losses to the non-controlling interests as the outstanding shares representing the non-controlling interest do not represent a residual equity interest in the subsidiary. Upon the initial public offering and as described above, all eligible FibroGen Europe preferred shares were exchanged for 958,996 shares of FibroGen Common Stock. No other FibroGen Europe shares have the right to be exchanged for FibroGen, Inc. Common Stock. Common Stock Each share of Common Stock is entitled to one vote. The holders of Common Stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding. Shares of Common Stock outstanding, shares of stock plans outstanding and shares reserved for future issuance related to stock options and RSU grants and the Company’s Employee Stock Purchase Plan (“ESPP”) purchases are as follows (in thousands):
|  | December 31, |
|  | 2020 |  |  | 2019 |
Common stock outstanding |  |  | 91,441 |  |  |  | 87,657 |
Stock options outstanding |  |  | 9,290 |  |  |  | 10,018 |
RSUs outstanding |  |  | 1,893 |  |  |  | 1,483 |
Shares reserved for future stock options and RSUs grant |  |  | 7,910 |  |  |  | 7,725 |
Shares reserved for future ESPP offering |  |  | 4,070 |  |  |  | 3,337 |
Total shares of common stock reserved |  |  | 114,604 |  |  |  | 110,220 |
Stock Plans Stock Option and RSU Plans Under the Company’s Amended and Restated 2005 Stock Plan (“2005 Stock Plan”), the Company may issue shares of Common Stock and options to purchase Common Stock and other forms of equity incentives to employees, directors and consultants. Options granted under the 2005 Stock Plan may be incentive stock options or nonqualified stock options. Incentive stock options (“ISO”) may be granted only to employees and officers of the Company. Nonqualified stock options (“NSO”) and stock purchase rights may be granted to employees, directors and consultants. The board of directors has the authority to determine to whom options will be granted, the number of options, the term and the exercise price. Options are to be granted at an exercise price not less than fair market value for an ISO or an NSO. Options generally vest over four years. Options expire no more than 10 years after the date of grant. Upon the effective date of the registration statement related to the Company’s initial public offering, the 2005 Plan was amended to cease the grant of any additional awards thereunder, although the Company will continue to issue common stock upon the exercise of previously granted stock options under the 2005 Plan. In September 2014, the Company adopted a 2014 Equity Incentive Plan (the “2014 Plan”) which became effective on November 13, 2014. The 2014 Plan is the successor equity compensation plan to the 2005 Plan. The 2014 Plan will terminate on November 12, 2024. The 2014 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, performance stock awards, performance cash awards, restricted stock units and other stock awards to employees, directors and consultants. Stock options granted must be at prices not less than 100% of the fair market value at date of grant. Option vesting schedules are determined by the Company at the time of issuance and generally have a four year vesting schedule (25% vesting on the first anniversary of the vesting base date and quarterly thereafter over the next 3 years). Options generally expire ten years from the date of grant unless the optionee is a 10% stockholder, in which case the term will be five years from the date of grant. Unvested options exercised are subject to the Company’s repurchase right. Shares reserved for issuance increases on January 1 of each year commencing on January 1, 2016 and ending on January 1, 2024 by the lesser of (i) the amount equal to 4% of the number of shares issued and outstanding on December 31 immediately prior to the date of increase or (ii) such lower number of shares as may be determined by the board of directors. As of December 31, 2020, the Company has reserved 7,909,854 shares of its common stock that remains unissued for issuance under the 2014 Plan. Issuance of shares upon share option exercise or share unit conversion is made through issuance of new shares authorized under the plan. Certain Common Stock option holders have the right to exercise unvested options, subject to a right held by the Company to repurchase the stock, at the original exercise price, in the event of voluntary or involuntary termination of employment of the stockholder. The shares are generally released from repurchase provisions ratably over four years. The Company accounts for the cash received in consideration for the early exercised options as a liability. At December 31, 2020 and 2019, no shares of Common Stock were subject to repurchase by the Company. Stock option transactions, including forfeited options granted under the 2014 Plan as well as prior plans, are summarized below:
|  | Shares (In thousands) |  |  | Weighted Average Exercise per Share |  |  | Weighted Average Remaining Contractual Life (In Years) |  |  | Aggregate Intrinsic Value (In thousands) |
Outstanding at December 31, 2019 |  |  | 10,018 |  |  | $ | 26.63 |  |  |  |  |  |  |  |  |
Granted |  |  | 2,692 |  |  |  | 31.55 |  |  |  |  |  |  |  |  |
Exercised |  |  | (3,113 | ) |  |  | 10.73 |  |  |  |  |  |  |  |  |
Expired |  |  | (73 | ) |  |  | 39.92 |  |  |  |  |  |  |  |  |
Forfeited |  |  | (234 | ) |  |  | 40.11 |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2020 |  |  | 9,290 |  |  |  | 32.94 |  |  |  | 6.60 |  |  | $ | 86,013 |
Vested and expected to vest, December 31, 2020 |  |  | 8,929 |  |  |  | 32.76 |  |  |  | 6.50 |  |  |  | 84,125 |
Exercisable at December 31, 2020 |  |  | 5,576 |  |  | $ | 29.50 |  |  |  | 5.10 |  |  | $ | 66,943 |
The total intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018 was $89.6 million, $59.2 million, and $97.5 million, respectively. The following table summarizes RSU activity:
|  | Shares (In thousands) |  |  | Fair Value at Grant |
Unvested at December 31, 2019 |  |  | 1,483 |  |  | $ | 49.05 |
Granted |  |  | 1,354 |  |  |  | 29.99 |
Vested |  |  | (813 | ) |  |  | 45.55 |
Forfeited |  |  | (131 | ) |  |  | 39.25 |
Unvested at December 31, 2020 |  |  | 1,893 |  |  | $ | 37.60 |
Among the vested RSUs during the year ended December 31, 2020, 526,055 shares were released and issued, while the remaining was withheld for the related payroll taxes. The estimated weighted-average fair value of the awards granted during the years ended December 31, 2020, 2019 and 2018 was $29.99, $54.74 and $53.69, respectively. ESPP In September 2014, the Company adopted a 2014 ESPP that became effective on November 13, 2014. The 2014 ESPP is designed to enable eligible employees to periodically purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan or IRS limitations. At the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the offering period. Purchases are accomplished through participation in discrete offering periods. The 2014 ESPP is intended to qualify as an ESPP under Section 423 of the Internal Revenue Code. The Company has reserved 1,600,000 shares of its common stock for issuance under the 2014 ESPP and shares reserved for issuance increases January 1 of each year commencing January 1, 2016 by the lesser of (i) a number of shares equal to 1% of the total number of outstanding shares of common stock on December 31 immediately prior to the date of increase; (ii) 1,200,000 shares or (iii) such number of shares as may be determined by the board of directors. There were 143,876 shares, 135,115 shares and 230,317 shares purchased by employees under the 2014 Purchased Plan for the years ended December 31, 2020, 2019 and 2018, respectively. The expected term of 2014 ESPP shares is the average of the remaining purchase periods under each offering period. Stock-Based Compensation Stock-based compensation expense was recorded directly to research and development and selling, general and administrative expense for the years ended December 31, 2020, 2019 and 2018 was as follows (in thousands):
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Research and development |  | $ | 46,229 |  |  | $ | 41,015 |  |  | $ | 30,491 |
Selling, general and administrative |  |  | 26,491 |  |  |  | 25,252 |  |  |  | 21,651 |
Total stock-based compensation expense |  | $ | 72,720 |  |  | $ | 66,267 |  |  | $ | 52,142 |
The Company estimates the fair value of stock options using the Black-Scholes option valuation model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair market value of common stock is based on the closing price of the Company’s common stock as reported on the NASDAQ Global Select Market on the date of the grant. The fair value of employee stock-based compensation is estimated using the following assumptions:
• | Expected Term. Expressed as a weighted-average, the expected life of the options is based on the average period the stock options are expected to be outstanding and was based on the Company’s historical information of the option exercise patterns and post-vesting termination behavior as well as contractual terms of the instruments.
• | Expected Volatility. The Company considers its historical volatility data for volatility considerations for its ESPP. Historically, the expected volatility for all other stock-based compensation was based upon a blend of the Company’s and comparable public entities’ historical volatility. Since the third quarter of 2020, the expected volatility for all other stock-based compensation is currently based upon the Company’s historical volatility data.
• | Risk-Free Interest Rate. Expressed as a weighted-average, the risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options.
• | Expected Dividend Yield. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future.
The assumptions used to estimate the fair value of stock options granted and ESPPs using the Black-Scholes option valuation model were as follows:
|  | Years Ended December 31,
|  | 2020 |  |  |  | 2019 |  |  |  | 2018 |  |
Stock Options |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expected term (in years) |  |  | 5.7 |  |  |  |  | 5.3 |  |  |  |  | 5.4 |  |
Expected volatility |  |  | 67.1 |  | % |  |  | 68.0 |  | % |  |  | 67.9 |  | %
Risk-free interest rate |  |  | 0.8 |  | % |  |  | 2.4 |  | % |  |  | 2.7 |  | %
Expected dividend yield |  |  | — |  |  |  |  | — |  |  |  |  | — |  |
Weighted average estimated fair value |  | $ | 18.36 |  |  |  | $ | 31.98 |  |  |  | $ | 32.12 |  |
ESPPs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expected term (in years) |  | 0.5 - 2.0 |  |  |  | 0.5 - 2.0 |  |  |  | 0.5 - 2.0 |  |
Expected volatility |  | 47.5 - 77.1 |  | % |  | 48.1 - 62.1 |  | % |  | 47.3 - 75.3 |  | %
Risk-free interest rate |  | 0.1 - 2.9 |  | % |  | 1.3 - 2.9 |  | % |  | 0.8 - 2.9 |  | %
Expected dividend yield |  |  | — |  |  |  |  | — |  |  |  |  | — |  |
Weighted average estimated fair value |  | $ | 17.53 |  |  |  | $ | 19.27 |  |  |  | $ | 16.27 |  |
As of December 31, 2020, there was $63.9 million of total unrecognized compensation costs, net of estimated forfeitures, related to non-vested stock option awards granted that will be recognized on a straight-line basis over the weighted-average period of 2.59 years. As of December 31, 2020, there was $55.5 million of total unrecognized compensation costs, net of estimated forfeitures, related to non-vested RSUs granted that will be recognized on a straight-line basis over the weighted-average period of 2.73 years. Warrants During the year ended December 31, 2019, a warrant to purchase 4,430 shares of our common stock was exercised and there was no warrant to purchase shares of Common Stock outstanding at December 31, 2020 and 2019.

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