Leases

6 Months Ended

Jun. 30, 2021

The Company’s lease assets and related lease liabilities were as follows (in thousands):

	Balance Sheet Line Item	June 30, 2021			December 31, 2020
Assets
Finance:
Right-of-use assets - cost		$	2,007		$	50,477
Accumulated amortization			(1,146	)		(20,871	)
Finance lease right-of-use assets, net	Finance lease right-of-use assets		861			29,606
Operating:
Right-of-use assets - cost			100,705			3,934
Accumulated amortization			(3,614	)		(1,891	)
Operating lease right-of-use assets, net	Operating lease right-of-use assets		97,091			2,043
Total lease assets		$	97,952		$	31,649

Liabilities
Current:
Finance lease liabilities	Finance lease liabilities, current	$	23		$	12,330
Operating lease liabilities	Operating lease liabilities, current		10,718			1,188
Non-current:
Finance lease liabilities	Finance lease liabilities, non-current		6			25,391
Operating lease liabilities	Operating lease liabilities, non-current		94,196			853
Total lease liabilities		$	104,943		$	39,762

The Company’s long-term property lease with Alexandria for its corporate headquarters in San Francisco, California, had an initial term of 15 years, scheduled to expire in 2023. The original lease was accounted for as a finance lease upon adoption of ASC 842, Leases (“ASC 842”), at January 1, 2019.

On June 1, 2021, the Company entered into an amendment with Alexandria to extend the lease to 2028 (“Lease Amendment”). Under the terms of the Lease Amendment, the Company has two optional rights to each extend the lease for an additional five years. The lease contract provides for a fixed annual rent, with scheduled increases of two percent that occur on each anniversary of the rent commencement date through 2023, and with scheduled increases of three percent that occur on each anniversary of the rent commencement date through 2028. This lease requires the Company to pay all costs of ownership, operation, and maintenance of the premises, including without limitation all operating costs, insurance costs, and taxes.

Company determined that the Lease Amendment was a lease modification, effective June 1, 2021, and thus reassessed the lease classification, remeasured the related lease liability using an updated discount rate, and adjusted the related right-of-use asset under the lease modification guidance under the ASC 842. Accordingly, on June 1, 2021, the Company determined that the modified lease be accounted for as an operating lease, and therefore derecognized the previous finance lease right-of-use asset of $24.6 million and the related finance lease liability of $32.6 million, and recognized an operating lease right-of-use asset of $93.2 million and the related operating lease liability of $101.2 million. Starting June 1, 2021, the cash payment related to this lease was classified as an operating activity, the impact of which was approximately $1.1 million to the condensed consolidated statement of cash flow for the six months ended June 30, 2021.

During the three months ended March 31, 2021, after FibroGen Beijing’s previous long-term lease agreement expired, the Company entered into a new lease agreement with the landlord for the same pilot plant located in Beijing Yizhuang Biomedical Park of BDA. The new lease term is five year, scheduled to expire in 2026, and is treated as an operating lease. Accordingly, the Company recorded $3.4 million in the operating right-of-use assets and total operating lease liabilities, respectively. The lease contract provides for fixed quarterly rent payments, and require the Company to pay operating and maintenance costs.

The components of lease expense were as follows (in thousands):

		Three Months Ended June 30,						Six Months Ended June 30,
	Statement of Operations Line Item	2021			2020			2021			2020
Finance lease cost:
Amortization of right-of-use assets	Cost of goods sold; Research and development; Selling, general and administrative expenses	$	1,777		$	2,653		$	4,393		$	5,247
Interest on lease liabilities	Interest expense		242			534			627			1,049
Operating lease cost	Cost of goods sold; Research and development; Selling, general and administrative expenses		1,744			255			2,162			564
Sublease income	Selling, general and administrative expenses		(275	)		(306	)		(575	)		(598	)
Total lease cost		$	3,488		$	3,136		$	6,607		$	6,262

Supplemental cash flow information related to leases were as follows (in thousands):

	Six Months Ended June 30,
	2021			2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,246		$	433
Operating cash flows from finance leases		628			1,010
Financing cash flows from finance leases		5,326			5,992
Non-cash: Right-of-use assets obtained in exchange for new lease liabilities:
Finance leases		303			144
Operating leases		3,498			5
Non-cash: Increase (decrease) resulting from lease modification:
Finance lease right-of-use assets		(24,654	)		—
Operating lease right-of-use assets		93,222			—
Finance lease liabilities, current		(12,587	)		—
Operating lease liabilities, current		9,221			—
Finance lease liabilities, non-current		(20,009	)		—
Operating lease liabilities, non-current	$	91,943		$	—

Lease term and discount rate were as follows:

	June 30, 2021			December 31, 2020
Weighted-average remaining lease term (years):
Finance leases		1.3			2.9
Operating leases		7.3			1.8
Weighted-average discount rate:
Finance leases		4.55	%		4.39	%
Operating leases		4.75	%		4.74	%

Maturities of lease liabilities as of June 30, 2021 are as follows (in thousands):

Year Ending December 31,	Finance Leases			Operating Leases
2021 (remaining six month period)	$	16		$	7,534
2022		11			15,517
2023		3			13,454
2024		—			16,798
2025		—			18,193
Beyond 2025		—			53,881
Total future lease payments		30			125,377
Less: Interest		(1	)		(20,463	)
Present value of lease liabilities	$	29		$	104,914