FibroGen, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023; unaudited. The filing is for FibroGen, Inc. (Nasdaq: FGEN), not the company named in the request metadata. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted.
Business context and key financial metrics
FibroGen is a biopharmaceutical company commercializing roxadustat in China and developing pamrevlumab for pancreatic cancer, among other programs. Roxadustat is approved for chronic kidney disease anemia in several countries; pamrevlumab remains in clinical development.
| Metric | Q3 2023 | Nine months 2023 | Comparable 2022 period |
|---|---|---|---|
| Revenue | $40.1 | $120.6 | $15.7 quarter; $106.4 nine months |
| Operating costs and expenses | $103.6 | $348.2 | $109.4 quarter; $341.2 nine months |
| Loss from operations | $63.5 | $227.6 | $93.7 quarter; $234.9 nine months |
| Net loss | $63.6 | $228.0 | $91.7 quarter; $227.5 nine months |
| Net loss per share | $0.65 | $2.35 | $0.98 quarter; $2.43 nine months |
| Cash used in operating activities | Not stated for quarter | $296.7 | $93.4 used in nine months |
- Q3 revenue was led by China roxadustat product sales of $29.4 million; nine-month product revenue was $77.4 million. Q3 sales volume in China increased more than 37% year over year, according to management.
- Gross profit calculated as revenue less cost of goods sold was $35.9 million in Q3 and $107.2 million for the nine-month period. The filing does not present a consolidated gross margin measure.
- At September 30, cash and cash equivalents were $120.9 million and short-term investments were $130.4 million; accounts receivable was $31.7 million. These three items totaled $283.0 million, down $159.6 million from year-end 2022.
- Current assets were $364.1 million and current liabilities were $209.4 million. Total liabilities were $575.6 million. The company reported a $136.7 million total deficit, including redeemable non-controlling interests outside stockholders’ deficit.
- Debt included a $75.0 million senior secured term loan, carried at $71.7 million net of unamortized costs, with a 14% stated interest rate and May 2026 maturity. The separate revenue-interest financing liability was $55.0 million, including current and non-current portions.
Material changes versus prior periods
- Q3 revenue rose 155% year over year, primarily reflecting higher China roxadustat sales and development and license revenue. Nine-month revenue rose 13%, helped by higher product and drug-product revenue, partly offset by lower license and development revenue.
- Q3 net loss narrowed to $63.6 million from $91.7 million. For nine months, net loss was broadly flat at $228.0 million versus $227.5 million.
- Nine-month operating expenses increased 2%. They included a one-time, non-cash $24.6 million acquired in-process R&D charge for FG-3246 and a $12.6 million restructuring charge. Lower manufacturing and development costs partly offset these items.
- Operating cash use increased to $296.7 million from $93.4 million. Working-capital movements, including decreases in accrued liabilities and deferred revenue and increases in receivables and prepaid assets, contributed to the higher use.
- Financing provided $123.0 million in the first nine months, including $71.3 million net term-loan proceeds and $48.4 million net proceeds from an at-the-market share issuance. Outstanding shares increased from 94.2 million at year-end 2022 to 98.3 million at September 30, 2023.
Outlook, management commentary, risks and unusual items
- Management expects existing cash, investments, receivables, financing proceeds and cost reductions to fund anticipated requirements for at least 12 months from issuance of the financial statements. It also states that substantial additional funding will be needed thereafter and warns actual cash needs could exceed its estimates. No specific revenue or earnings guidance is provided.
- FibroGen expects topline overall-survival data from the Phase 3 LAPIS pamrevlumab study in locally advanced pancreatic cancer in Q1 2024, and topline data from the metastatic pancreatic cancer study in the first half of 2024. It plans a PET-biomarker-driven FG-3246 Phase 2 trial in the second half of 2024. China accepted the roxadustat supplemental application for chemotherapy-induced anemia in August 2023.
- Pamrevlumab’s Phase 3 LELANTOS-2 trial in ambulatory Duchenne muscular dystrophy failed its primary and reported secondary endpoints; preliminary safety was described as generally well tolerated. This follows earlier unsuccessful pamrevlumab programs noted in the risk disclosures.
- The July restructuring reduced the U.S. workforce by approximately 32%; $7.9 million was paid during Q3, with $4.7 million accrued at quarter-end and expected to be substantially paid by early 2024.
- On October 17, 2023, after quarter-end, the company reached an agreement in principle to settle a securities class action for $28.5 million. It recorded the liability and an equal insurance receivable; collection depends on insurance coverage. Related derivative cases remain pending, and an SEC investigation concerning roxadustat cardiovascular safety data is ongoing.
- Nasdaq notified the company on October 24, 2023 that its share price had been below the $1 minimum bid for 30 consecutive business days. The stated compliance deadline was April 22, 2024.
- Key risks include continued losses and cash burn, dependence on roxadustat sales and collaboration partners, clinical and regulatory uncertainty, high-cost secured borrowing, China-related operational and regulatory risks, patent challenges, and the potential impact of litigation and the SEC investigation.
Important facts for investors to verify
- Cash runway assumptions and the pace of operating cash use, especially given $296.7 million of operating cash used in the first nine months.
- Roxadustat China sales growth, reimbursement pricing after the 2023 reimbursement period, and the extent to which reported revenue depends on related-party Falikang and deferred-revenue estimates.
- Results and timing for the LAPIS and Precision Promise pamrevlumab studies, and the consequences of the failed LELANTOS-2 trial.
- Loan covenant compliance, the 14% term-loan cost, revenue-interest financing obligations and any need for further equity issuance or financing.
- Insurance recovery for the $28.5 million settlement, the status of other litigation and the SEC investigation, and progress toward Nasdaq minimum-bid compliance.