FibroGen, Inc. — Q3 2021 Form 10-Q
Entity note: The supplied filing is for FibroGen, Inc. (Nasdaq: FGEN), not Kyntra Bio, Inc. It covers the quarter and nine months ended September 30, 2021; filed November 9, 2021. Figures below are in U.S. dollars unless stated otherwise.
Business context and reporting period
FibroGen is a biopharmaceutical company developing and commercializing treatments for anemia, fibrotic disease and cancer. Roxadustat was commercialized for CKD-related anemia in China and approved in several non-U.S. markets; pamrevlumab remained in Phase 3 development for IPF, pancreatic cancer and Duchenne muscular dystrophy. The company relies substantially on Astellas and AstraZeneca for roxadustat development and commercialization.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $156.0 million | $44.0 million | $218.8 million | $111.3 million |
| Operating costs and expenses | $105.0 million | $11.7 million | $372.1 million | $245.2 million |
| Operating income (loss) | $51.0 million | $32.3 million | $(153.3) million | $(133.9) million |
| Net income (loss) | $49.8 million | $33.0 million | $(155.9) million | $(130.7) million |
| Basic/diluted earnings (loss) per share | $0.54 / $0.54 | $0.36 / $0.35 | $(1.69) / $(1.69) | $(1.46) / $(1.46) |
- Q3 revenue included $120.0 million of Astellas regulatory milestones tied to European Commission approval of roxadustat, plus an $8.0 million Eluminex license payment. The milestone was recognized in Q3 and is not a recurring sales run rate.
- China roxadustat product revenue was $13.4 million in Q3 and $42.2 million year to date. Q3 product revenue fell 41% year over year, partly reflecting the shift of most China distribution sales to Falikang.
- Research and development expense was $75.9 million in Q3 and $273.1 million year to date. Year-to-date costs included a $25.0 million HiFiBiO in-process R&D charge.
- Cash and cash equivalents were $274.5 million at September 30; short- and long-term investments totaled $354.5 million, and accounts receivable was $36.0 million. These resources plus receivables totaled $665.0 million.
- Working capital was approximately $364.1 million (current assets of $573.4 million less current liabilities of $209.3 million). Net cash used in operating activities was $27.3 million for nine months, versus $88.8 million provided in the prior-year period. Cash declined $403.9 million, largely reflecting purchases of investments.
- The balance sheet reported $102.3 million of lease liabilities, predominantly operating leases, and only immaterial finance lease liabilities. No conventional borrowings are identified in the supplied balance sheet.
Material changes versus the prior comparable period
- Nine-month revenue rose 97%, principally due to the $120.0 million European approval milestone and Eluminex license revenue; development revenue was broadly steady.
- Nine-month net loss widened to $155.9 million from $130.7 million as operating expenses grew 52%, including higher pamrevlumab trial and manufacturing costs and the HiFiBiO charge.
- Q3 2020 SG&A included a large prior-period reversal, producing a reported expense credit of $49.0 million. This makes the year-over-year increase in Q3 2021 SG&A unusually large and the comparison not representative of underlying spending trends.
- Cash and cash equivalents declined from $678.4 million at year-end 2020, while investments increased from $8.4 million to $354.5 million, reflecting substantial cash reallocation into investments.
Outlook, commentary and risks
- The FDA issued a complete response letter in August 2021, stating roxadustat’s U.S. CKD-anemia application could not be approved in its present form. FibroGen said it was preparing to discuss with FDA what additional trials may be required and was discussing the development path with AstraZeneca. The CRL may delay or reduce U.S. revenue and raises the possibility of amendment or termination of the collaboration.
- Management expected existing cash, investments and receivables to fund anticipated requirements for at least 12 months from the filing date, while anticipating continued losses and substantial funding needs. Following the CRL, the company was implementing cost reductions; it also expected R&D spending to rise as programs advanced.
- Management projected topline results for the U.S./Europe MDS roxadustat study between the second half of 2022 and first half of 2023; pamrevlumab IPF and DMD trial readouts were expected in 2023, and pancreatic cancer topline overall-survival data in the first half of 2024. These are forward-looking estimates, not assurances.
- Key risks include clinical and regulatory uncertainty, COVID-19-related enrollment and supply disruption, reliance on collaboration partners and third-party manufacturers, competition and pricing/reimbursement pressure, and China operating, regulatory, currency and cash-transfer risks.
- Disclosure controls were deemed ineffective at quarter-end because material weaknesses remained in risk assessment and controls over drug-product shipments and variable-consideration estimates. Remediation was underway but not yet considered complete.
- FibroGen disclosed consolidated securities class actions and a shareholder derivative action relating to alleged misleading statements about roxadustat trial data and FDA prospects. No material legal accrual was recorded; outcomes and potential exposure were not estimable.
- Eluminex agreement provided an $8.0 million upfront payment and potential milestone and royalty payments. HiFiBiO agreement included up to $1.1 billion in potential milestone payments plus royalties; those contingent amounts were not recognized as liabilities at quarter-end.
Important facts for investors to verify
- Confirm the issuer identity: this document is FibroGen’s 10-Q, not a filing for Kyntra Bio.
- Track FDA feedback, any required additional roxadustat studies, and developments in the AstraZeneca collaboration.
- Separate milestone and upfront-license revenue from recurring product and collaboration revenue when assessing trends.
- Review China roxadustat sales, Falikang-related deferred revenue and receivables, and the pending reimbursement-price reset.
- Monitor cash consumption, investment liquidity, lease commitments and management’s stated 12-month liquidity outlook.
- Check subsequent filings for remediation of internal-control material weaknesses and developments in the securities and derivative litigation.