Business context and reporting period
Registrant: FibroGen, Inc. (the request metadata names Kyntra Bio, but the supplied filing is FibroGen’s Form 10-Q). The unaudited report covers the quarter and nine months ended September 30, 2017. FibroGen is a clinical-stage biopharmaceutical company; its lead candidates are roxadustat, in Phase 3 for anemia in chronic kidney disease (CKD), and pamrevlumab, in Phase 2 across several indications. It had no revenue from approved product sales.
Key financial metrics
Amounts below are in millions of dollars, except per-share data.
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $27.3 | $30.1 | $83.2 | $147.7 |
| Operating expenses | $63.3 | $52.2 | $182.0 | $170.0 |
| Operating loss | $(36.0) | $(22.1) | $(98.8) | $(22.4) |
| Net loss | $(37.7) | $(24.2) | $(104.1) | $(27.7) |
| Net loss per share, basic and diluted | $(0.50) | $(0.38) | $(1.49) | $(0.44) |
Revenue was predominantly collaboration-related: license and milestone revenue was $20.0 million and collaboration services and other revenue was $7.3 million in Q3. No gross margin was reported. Research and development expense was $50.3 million for the quarter and $144.0 million year to date; general and administrative expense was $13.0 million and $37.9 million, respectively.
For the first nine months, operating cash flow was $(65.3) million, compared with positive $25.7 million in 2016. Investing activities provided $49.9 million, largely from investment maturities and sales; financing activities provided $493.1 million. Cash and cash equivalents were $651.4 million at September 30. Short- and long-term investments totaled $95.4 million, and accounts receivable was $8.6 million. Together these totaled $755.4 million. Total liabilities were $304.1 million, including $97.4 million of long-term lease financing obligations and $16.9 million of product development obligations; the filing does not report conventional borrowings as a separate debt balance.
Material changes versus prior comparable periods
- Q3 revenue decreased 9% year over year; nine-month revenue decreased 44%. The 2016 comparison included a $62.0 million AstraZeneca payment and a $10.0 million Astellas milestone, neither repeated in 2017. Revenue recognition for AstraZeneca arrangements was also spread over a longer estimated development period after MDS development was added.
- Q3 operating expenses rose 21% year over year and nine-month expenses rose 7%. Management cited pamrevlumab manufacturing activity, MDS clinical work, employee costs, and stock-based compensation; lower outside-services spending partly offset the increases.
- Net losses widened to $37.7 million for Q3 and $104.1 million year to date. The company raised $471.2 million net through April and August 2017 follow-on offerings, lifting cash and cash equivalents by $477.6 million since year-end 2016. Common shares outstanding increased from 63.7 million at year-end 2016 to 81.8 million at September 30, 2017.
Outlook, commentary, risks and unusual items
- Management said available cash, investments and receivables were expected to fund anticipated requirements for at least 12 months, while warning that spending or financing needs could change. It expected continuing losses and further R&D investment.
- FibroGen was targeting a U.S. roxadustat NDA filing in 2018, subject to sufficient major adverse cardiac events (MACE) for pooled analyses. The China regulator accepted the roxadustat CKD anemia NDA in October 2017; this triggered a $15.0 million AstraZeneca milestone, expected to be received and recognized in Q4 2017.
- Management reported positive topline Phase 2 IPF results for pamrevlumab in August 2017, including a statistically significant difference versus placebo on the reported lung-function endpoint. Further controlled trials are needed; the candidate remained in clinical development.
- Roxadustat’s success depends on large Phase 3 trials, cardiovascular safety analyses, regulatory review, manufacturing readiness and collaboration partners Astellas and AstraZeneca. Other disclosed risks include competition, clinical or regulatory delays, funding needs, and China-specific manufacturing, regulatory, currency and intellectual-property risks. FibroGen reported no material legal proceedings.
- The company planned to adopt the new revenue standard in Q1 2018 using full retrospective application. Its evaluation was ongoing; it expected certain milestones previously recognized on achievement to be included in overall arrangement consideration and deferred, with possible effects on reported revenue and prior-period results.
Most important facts for investors to verify
- Progress and data from roxadustat Phase 3 trials, including MACE/MACE+ analyses and the basis for the targeted U.S. NDA timing.
- Status, review timeline and any additional requirements for the China NDA, and receipt and recognition of the $15.0 million milestone.
- Cash burn, future R&D spending, and management’s 12-month liquidity assessment, including the effect of collaboration funding and any additional financing.
- The eventual impact of adopting the new revenue standard on collaboration revenue and restated historical periods.
- Pamrevlumab’s confirmatory development plans, manufacturing capacity, and the risks of advancing programs without a collaboration partner.