Collaboration Agreements | 2. Collaboration Agreements Astellas Agreements Japan Agreement In June 2005, the Company entered into a collaboration agreement with Astellas Pharma Inc. (“Astellas”) for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in Japan (“Japan Agreement”). Under this agreement, Astellas paid license fees and other consideration totaling $40.1 million (such amounts were fully received as of February 2009). The Japan Agreement also provides for additional development and regulatory approval milestone payments up to $117.5 million, a commercial sales related milestone of $15.0 million and additional consideration based on net sales (as defined) in the low 20% range after commercial launch. A clinical milestone payment of $12.5 million was received in 2013. During the second quarter of 2016, the Company recognized $10.0 million of revenue as a result of the initiation by Astellas of the first Phase 3 clinical study in Japan of roxadustat for treatment of anemia associated with chronic kidney disease in patients on dialysis. The amount was received in early July 2016. The Company evaluated the criteria under ASC 605-28 and concluded that the aforementioned milestone was substantive. Europe Agreement In April 2006, the Company entered into a separate collaboration agreement with Astellas for the development and commercialization of roxadustat for the treatment of anemia in Europe, the Middle East, the Commonwealth of Independent States and South Africa (“Europe Agreement”). Under the terms of the Europe Agreement, Astellas paid license fees and other upfront consideration totaling $320.0 million (such amounts were fully received as of February 2009). The Europe Agreement also provides for additional development and regulatory approval milestone payments up to $425.0 million. Clinical milestone payments of $40.0 million and $50.0 million were received in 2010 and 2012, respectively. The Company evaluated the criteria under ASC 605-28 and concluded that each of those milestones was substantive. Under the Europe Agreement, Astellas committed to fund 50% of joint development costs for Europe and North America, and all territory-specific costs. The Europe Agreement also provides for tiered payments based on net sales of product (as defined) in the low 20% range. AstraZeneca Agreements U.S./Rest of World (“RoW”) Agreement Effective July 30, 2013, the Company entered into a collaboration agreement with AstraZeneca AB (“AstraZeneca”) for the development and commercialization of roxadustat for the treatment of anemia in the U.S. and all other countries in the world, other than China, not previously licensed under the Astellas Europe and Astellas Japan Agreements (“U.S./RoW Agreement”). It also excludes China, which is covered by a separate agreement with AstraZeneca described below. Under the terms of the U.S./RoW Agreement, AstraZeneca has agreed to pay upfront, non-contingent and time-based payments totaling $374.0 million, which were fully received in various amounts through June 2016. In addition, the U.S./RoW Agreement also provides for development and regulatory approval based milestone payments of up to $550.0 million, which include potential future indications which the companies choose to pursue, and commercial related milestone payments of up to $325.0 million. During 2015, the Company received a $15.0 million development milestone payment as a result of the finalization of its two audited pre-clinical carcinogenicity study reports. The Company evaluated the criteria under ASC 605-28 and concluded that the aforementioned milestone was substantive. Under the U.S./RoW Agreement, the Company and AstraZeneca will share equally in the development costs of roxadustat not already paid for by Astellas, up to a total of $233.0 million (i.e. the Company’s share of development costs is $116.5 million, which was reached during the fourth quarter of 2015). Any additional development costs incurred by FibroGen during the development period in excess of the $233.0 million (aggregated spend) will be fully reimbursed by AstraZeneca. AstraZeneca will pay the Company tiered royalty payments on AstraZeneca’s future net sales (as defined in the agreement) of roxadustat in the low 20% range. In addition, the Company will receive a transfer price for delivery of commercial product based on a percentage of AstraZeneca’s net sales (as defined in the agreement) in the low- to mid-single digit range. China Agreement Effective July 30, 2013, the Company (through its subsidiaries affiliated with China) entered into a collaboration agreement with AstraZeneca for the development and commercialization (but not manufacture) of roxadustat for the treatment of anemia in China (“China Agreement”). Under the terms of the China Agreement, AstraZeneca agreed to pay upfront consideration totaling $28.2 million, which were fully received in 2014. In addition, the China Agreement provides for AstraZeneca to pay regulatory approval and other approval related milestones of up to $161.0 million. The China Agreement also provides for sales related milestone payments of up to $167.5 million and contingent payments of $20.0 million related to possible future compounds. The China Agreement is structured as a 50/50 profit or loss share (as defined) and provides for joint development costs (including capital and equipment costs for construction of the manufacturing plant in China), to be shared equally during the development. In September 2016, AstraZeneca approved the protocol related to the development of roxadustat for the treatment of anemia in patients with myelodysplastic syndromes (“MDS”), for which the Company has received approval from the China Food and Drug Administration for its clinical trial application for a Phase 2/3 trial and acceptance of its investigational new drug application from the U.S. Food and Drug Administration for a Phase 3 trial. As a result, for revenue recognition purposes, during the third quarter of 2016, the Company extended the estimated joint development service period for the AstraZeneca agreements from the end of 2018 to the end of 2020, to allow for development of MDS. In October 2017, the China Food and Drug Administration accepted the Company’s recently submitted New Drug Application (“NDA”) for registration of roxadustat for anemia in dialysis-dependent CKD and non-dialysis-dependent CKD (NDD-CKD) patients. This NDA submission triggers a $15.0 million milestone payment to the Company by AstraZeneca, which is expected to be received and fully recognized under the Company’s current revenue recognition policy as license and milestone revenue in the fourth quarter of 2017. Summary of Revenue Recognized Under the Collaboration Agreements The table below summarizes the accounting treatment for the various deliverables pursuant to each of the Astellas and AstraZeneca agreements. License amounts identified below are included in the “License and milestone revenue” line item in the condensed consolidated statements of operations. All other elements identified below are included in the “Collaboration services and other revenue” line item in the condensed consolidated statements of operations. Amounts recognized as revenue under the Japan Agreement were as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Agreement Deliverable 2017 2016 2017 2016 Japan License $ 445 $ 3,041 $ 936 $ 3,159 Milestones — — — 10,000 Total license and milestone revenue 445 $ 3,041 $ 936 $ 13,159 Collaboration services revenue* 22 $ 144 $ 46 $ 151 * When and if available compounds, manufacturing — clinical supplies and committee services have each been identified as separate units of accounting with standalone value and amounts allocable to these elements have been recognized and classified within the Collaboration services revenue line item within the condensed consolidated statements of operations. The total arrangement consideration has been allocated to each of the following deliverables under the Japan Agreement, along with any associated deferred revenue as follows (in thousands): Cumulative Revenue Through September 30, 2017 Deferred Revenue at September 30, 2017 Total Consideration Through September 30, 2017 License $ 46,646 $ — $ 46,646 When and if available compounds 24 24 48 Manufacturing--clinical supplies 2,164 — 2,164 Committee services 21 — 21 Total license and collaboration services revenue $ 48,855 $ 24 $ 48,879 Amounts recognized as revenue under the Europe Agreement were as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Agreement Deliverable 2017 2016 2017 2016 Europe License $ 3,680 $ 1,330 $ 10,716 $ 7,568 Milestones — — — — Total license and milestone revenue 3,680 1,330 10,716 7,568 Collaboration services revenue* $ 423 $ 292 $ 1,184 $ 963 * When and if available compounds, manufacturing — clinical supplies, development services — in progress at the time of signing of the agreement, and committee services have each been identified as a separate unit of accounting with standalone value and amounts allocable to these units have been recognized in revenue as services are performed and classified within the Collaboration services revenue line item within the condensed consolidated statements of operations. The total arrangement consideration has been allocated to each of the following deliverables under the Europe Agreement, along with any associated deferred revenue as follows (in thousands): Cumulative Revenue Through September 30, 2017 Deferred Revenue at September 30, 2017 Total Consideration Through September 30, 2017 License $ 422,988 $ — $ 422,988 When and if available compounds 434 394 828 Manufacturing--clinical supplies 10,132 — 10,132 Development services--in progress 33,892 — 33,892 Committee services 293 — 293 Total license and collaboration services revenue $ 467,739 $ 394 $ 468,133 Amounts recognized as revenue under the U.S./RoW Agreement were as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Agreement Deliverable 2017 2016 2017 2016 U.S. / RoW and China License $ 15,872 $ 16,496 $ 49,278 $ 93,075 Milestones — — — — Total license and milestone revenue 15,872 16,496 49,278 93,075 Collaboration services revenue* 6,830 8,784 20,997 32,723 China single unit of accounting** $ — $ — $ — $ — * Co-development, information sharing, and committee services have been combined into a single unit of accounting because the requirements to share information and serve on committees are useful only in combination with the development services, and because all three items are delivered over the same period while manufacturing — clinical supplies has been identified as a separate unit of accounting with standalone value and amounts allocable to this unit of accounting have been recognized and classified within the Collaboration services revenue line item within the condensed consolidated statements of operations. ** All revenues attributable to the China unit of accounting are deferred until all deliverables are met. The China license and collaboration services elements have been combined into a single unit of accounting and consideration allocable to this unit is being deferred due to FibroGen’s retention of manufacturing rights and lack of standalone value. The total arrangement consideration has been allocated to each of the following deliverables under the U.S./RoW Agreement, along with any associated deferred revenue as follows (in thousands): Cumulative Revenue Through September 30, 2017 Deferred Revenue at September 30, 2017 Total Consideration Through September 30, 2017 License $ 451,974 $ — $ 451,974 Co-development, information sharing & committee services 111,693 25,723 137,416 Manufacturing--clinical supplies 436 34 470 China-single unit of accounting — 92,643 92,643 Total license and collaboration services revenue $ 564,103 $ 118,400 $ 682,503 Other Revenues Other revenues consist of royalty payments received, which are recorded on a monthly basis as they are reported to the Company, and collagen feasibility sales. Other revenues were immaterial for all periods presented. Deferred Revenue Deferred revenue represents amounts billed to the Company’s collaboration partners for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met. The current portion of deferred revenue represents the amount to be recognized within one year from the balance sheet date based on the estimated performance period of the underlying deliverables. The long term portion of deferred revenue represents amounts to be recognized after one year through the end of the non-contingent performance period of the underlying deliverables. The long term portion of deferred revenue also includes amounts allocated to the China unit of accounting under the AstraZeneca arrangement as revenue recognition associated with this unit of accounting is tied to the commercial launch of the products within China, which is not expected to occur within the next year. |