Filing summary
Entity note: The supplied filing is FibroGen, Inc. (Nasdaq: FGEN), not Kyntra Bio, Inc. It is a Form 10-Q for the quarter and six months ended June 30, 2021, filed August 9, 2021.
Business context and reporting period
FibroGen is a biotechnology company developing and commercializing medicines for anemia, fibrotic disease, and cancer. Roxadustat was marketed in China and Japan and approved in South Korea and Chile for CKD anemia; pamrevlumab was in Phase 3 development for idiopathic pulmonary fibrosis, pancreatic cancer, and Duchenne muscular dystrophy. The financial statements are unaudited.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $24.4 million | $42.9 million | $62.8 million | $67.3 million |
| Operating loss | $133.8 million | $85.1 million | $204.3 million | $166.2 million |
| Net loss | $134.0 million | $85.3 million | $205.7 million | $163.7 million |
| Net loss per share, diluted | $1.45 | $0.95 | $2.24 | $1.84 |
- Q2 revenue comprised $19.6 million of development and other revenue, $13.4 million of net product revenue, and negative $8.6 million of drug-product revenue. Six-month figures were $34.2 million, $28.7 million, and negative $0.2 million, respectively.
- Q2 research and development expense rose to $122.6 million from $61.4 million, including a $25 million HiFiBiO in-process research and development charge. Selling, general and administrative expense fell to $32.6 million from $63.5 million, primarily reflecting changes to China co-promotion expense arrangements.
- For the six months, operating cash flow was negative $71.5 million, versus positive $90.2 million a year earlier. Capital expenditures were $2.2 million; cash and cash equivalents declined by $325.0 million, partly as funds were invested in securities.
- At June 30, cash and cash equivalents were $353.4 million; short- and long-term investments totaled $259.6 million. Accounts receivable was $24.3 million. Management reported $637.2 million of cash, investments, and receivables, down $91.5 million from year-end.
- Total liabilities were $528.8 million, including $104.9 million of operating lease liabilities. Finance lease liabilities were immaterial; the filing reports no material conventional borrowings. Total equity was $279.9 million.
Material changes and unusual items
- Q2 revenue fell 43% year over year and six-month revenue fell 7%. The quarter’s drug-product revenue was negative following revisions to estimated consideration for shipments to Astellas and AstraZeneca; China sales to Falikang began in January 2021 and changed the product-sales mix and revenue timing.
- Q2 net loss increased by $48.7 million year over year, reflecting lower revenue and higher operating costs, particularly R&D. Six-month net loss increased by $42.1 million.
- In July 2021, the FDA advisory committee voted against recommending roxadustat approval for CKD anemia. The FDA is not bound by the vote. FibroGen recorded $11.2 million of deferred revenue related to AstraZeneca shipments in response to the development; the filing also describes deferred consideration for Astellas shipments.
- A June lease amendment extended the San Francisco headquarters lease to 2028 and changed its accounting classification from finance to operating lease, substantially increasing reported operating lease assets and liabilities.
Outlook, risks, and contingencies
- Management expected existing cash, investments, and receivables to fund anticipated cash requirements for at least 12 months from the filing date, while noting that losses are expected to continue and additional funding may be needed.
- Management anticipated an August 2021 European Commission decision on roxadustat following a positive EMA committee opinion. Clinical milestones included expected WHITNEY topline data in Q3 2021; MATTERHORN data between H2 2022 and H1 2023; and expected topline results from ZEPHYRUS-1 and LELANTOS-1 in 2023. These are expectations, not assurances.
- COVID-19 had slowed enrollment, particularly in IPF; management said the period’s financial results were not significantly affected relative to prior quarters. Other material risks include U.S. regulatory uncertainty for roxadustat, clinical and safety outcomes, commercialization and reimbursement, reliance on Astellas and AstraZeneca, manufacturing and supply constraints, and China-related regulatory, currency, and cash-transfer risks.
- The company disclosed five putative securities class actions filed in 2021 and a shareholder derivative complaint filed July 30, 2021. It had no material legal accrual and said outcomes and potential exposure could not be estimated clearly.
- Disclosure controls were deemed ineffective due to material weaknesses involving risk assessment and controls over drug-product shipments and variable-consideration estimates. Remediation was underway; the weaknesses were not yet considered remediated.
- A $25 million upfront HiFiBiO license payment was expensed as R&D; the agreement also provides for up to $1.1 billion in potential future milestone payments across three programs, plus royalties. These contingent amounts are not current liabilities as reported.
- The company’s internal review of roxadustat cardiovascular analyses found the underlying data accurate, but said the primary analyses used post-hoc stratification factors. FibroGen said it would strengthen independent quality oversight and that personnel directly responsible for that decision no longer worked at the company.
Important facts for investors to verify
- Confirm the filing entity: this document is FibroGen, Inc., not Kyntra Bio, Inc.
- Track the FDA’s final roxadustat decision and the effect of the advisory committee vote on approvals, product shipments, revenue estimates, and collaboration economics.
- Review the company’s cash burn, investment balances, and stated 12-month liquidity outlook against subsequent filings and financing activity.
- Monitor clinical enrollment and data timelines for pamrevlumab and roxadustat, including the effects of COVID-19 and manufacturing commitments.
- Check progress in remediating material weaknesses and developments in the securities and derivative litigation.