FibroGen
Annual Report 2016

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K (Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016OR☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the transition period from to .Commission file number: 001-36740 FIBROGEN, INC.(Exact name of registrant as specified in its charter) Delaware 77-0357827(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)409 Illinois StreetSan Francisco, CA 94158(Address of principal executive offices) (zip code) Registrant’s telephone number, including area code:(415) 978-1200 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Exchange on Which RegisteredCommon Stock, $0.01 par value The NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act: Large accelerated filer ☒ Accelerated filer ☐Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☐ Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐ No ☒The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed by reference to the closing price as of the lastbusiness day of the registrant’s most recently completed second fiscal quarter, June 30, 2016, was approximately $858.3 million. Shares of Common Stock held by each executiveofficer and director and stockholders known by the registrant to own 10% or more of the outstanding stock based on public filings and other information known to the registrant havebeen excluded since such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.The number of shares of common stock outstanding as of January 31, 2017 was 63,888,452.DOCUMENTS INCORPORATED BY REFERENCEItems 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K incorporate information by reference from the definitive proxy statement for the registrant’s 2017Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than after 120 days after the end of the fiscal yearcovered by this Annual Report on Form 10-K. TABLE OF CONTENTS PagePART I Item 1. Business 3Item 1A. Risk Factors 79Item 1B. Unresolved Staff Comments 117Item 2. Properties 117Item 3. Legal Proceedings 117Item 4. Mine Safety Disclosures 117 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 118Item 6. Selected Financial Data 119Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 121Item 7A. Quantitative and Qualitative Disclosure About Market Risk 139Item 8. Consolidated Financial Statements and Supplementary Data 140Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 175Item 9A. Controls and Procedures 175Item 9B. Other Information 175 PART III Item 10. Directors, Executive Officers and Corporate Governance 176Item 11. Executive Compensation 176Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 176Item 13. Certain Relationships and Related Transactions, and Director Independence 176Item 14. Principal Accounting Fees and Services 176 PART IV Item 15. Exhibits and Financial Statement Schedules 177 Signatures 178 Exhibit Index 180 1FORWARD-LOOKING STATEMENTSThis Annual Report filed on Form 10-K and the information incorporated herein by reference, particularly in the sections captioned “Risk Factors,”“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements, whichinvolve substantial risks and uncertainties. In this Annual Report, all statements other than statements of historical or present facts contained in this AnnualReport, including statements regarding our future financial condition, business strategy and plans and objectives of management for future operations, areforward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “will,” “may,” “estimate,”“continue,” “anticipate,” “contemplate,” “intend,” “target,” “project,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative ofthese terms or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements appear in anumber of places throughout this Annual Report and include statements regarding our intentions, beliefs, projections, outlook, analyses or currentexpectations concerning, among other things, our ongoing and planned preclinical development and clinical trials, the timing of and our ability to makeregulatory filings and obtain and maintain regulatory approvals for roxadustat, FG-3019 and our other product candidates, our intellectual propertyposition, the potential safety, efficacy, reimbursement, convenience clinical and pharmaco-economic benefits of our product candidates, the potentialmarkets for any of our product candidates, our ability to develop commercial functions, our ability to operate in China, expectations regarding clinicaltrial data, our results of operations, cash needs, spending of the proceeds from our initial public offering and the concurrent private placement, financialcondition, liquidity, prospects, growth and strategies, the industry in which we operate and the trends that may affect the industry or us. We have basedthese forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affectour financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks,uncertainties and assumptions described in the section of this Annual Report captioned “Risk Factors” and elsewhere in this Annual Report.These risks are not exhaustive. Other sections of this Annual Report may include additional factors that could adversely impact our business and financialperformance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is notpossible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, orcombination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected inthe forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements arereasonable, we cannot guarantee future results, levels of activity, performance or achievements. The forward-looking statements made in this Annual Reportare based on circumstances as of the date on which the statements are made. Except as required by law, we undertake no obligation to update publicly anyforward-looking statements for any reason after the date of this Annual Report or to conform these statements to actual results or to changes in ourexpectations.This Annual Report also contains market data, research, industry forecasts and other similar information obtained from or based on industry reports andpublications, including information concerning our industry, our business, and the potential markets for our product candidates, including data regardingthe estimated size and patient populations of those and related markets, their projected growth rates and the incidence of certain medical conditions, aswell as physician and patient practices within the related markets. Such data and information involve a number of assumptions and limitations, and you arecautioned not to give undue weight to such estimates.You should read this Annual Report with the understanding that our actual future results, levels of activity, performance and achievements may bematerially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. 2PART IITEM 1. BUSINESSOVERVIEWWe are a science-based biopharmaceutical company discovering and developing first-in-class therapeutics. Roxadustat (FG-4592), our most advancedproduct candidate, is an oral small molecule inhibitor of HIF prolyl hydroxylase (“HIF-PH”) activity in Phase 3 clinical development for the treatment ofanemia in chronic kidney disease (“CKD”). Pamrevlumab (FG-3019), a fully-human monoclonal antibody that inhibits the activity of connective tissuegrowth factor (“CTGF”) is in Phase 2 clinical development for the treatment of idiopathic pulmonary fibrosis (“IPF”), pancreatic cancer, and Duchennemuscular dystrophy (“DMD”). We have taken a global approach to the development and future commercialization of our product candidates, and thisincludes development and commercialization in the People’s Republic of China (“China”).We are capitalizing on our extensive experience in fibrosis and hypoxia inducible factor (“HIF”) biology and clinical development to advance a pipeline ofinnovative medicines for the treatment of anemia, fibrotic disease, and cancer, corneal blindness and other serious unmet medical needs. The chart below is asummary of our most advanced product candidates:3ROXADUSTAT FOR THE TREATMENT OF ANEMIA IN CHRONIC KIDNEY DISEASERoxadustat is an internally discovered HIF-PH inhibitor that acts by stimulating the body’s natural pathway of erythropoiesis, or red blood cell production.Roxadustat, the first HIF-PH inhibitor to enter Phase 3 clinical development, represents a new paradigm for the treatment of anemia in CKD patients, with thepotential to offer a safer, more effective, more convenient and more accessible therapy than the current therapies available for anemia in CKD, such asinjectable erythropoiesis stimulating agents (“ESAs”).Roxadustat is currently in Phase 3 global development for the treatment of anemia in patients with CKD. Over 1,400 subjects have participated in 26completed Phase 1 and 2 clinical studies for roxadustat in North America, Europe and Asia. These studies have demonstrated roxadustat’s potential for afavorable safety and efficacy profile in anemic CKD patients, both those who are dialysis-dependent (“DD-CKD’), including hyporesponsive patients, andthose who are not dialysis-dependent (“NDD-CKD”). According to IMS Health, 2013 global ESA sales in all anemia indications totaled $8.6 billion. Whilethe use of ESAs to treat anemia in CKD has largely been limited to use in DD-CKD patients, we and our partners believe that, as an oral agent with apotentially more favorable safety profile, roxadustat could increase accessibility and expand the market for anemia treatment by penetrating the NDD-CKDmarket. In the longer term, we believe roxadustat has the potential to address non-CKD anemia markets, including chemotherapy-induced anemia, anemiarelated to inflammation (such as inflammatory bowel disease, lupus and rheumatoid arthritis), myelodysplastic syndrome (“MDS”), and surgical proceduresrequiring transfusions.We, along with our collaboration partners Astellas Pharma Inc. (“Astellas”) and AstraZeneca AB (“AstraZeneca”), have designed a global Phase 3 program tosupport regulatory approval of roxadustat in both NDD-CKD and DD-CKD patients in the United States (“U.S.”), the European Union (“EU”), Japan andChina. Our U.S. and EU Phase 3 program has an aggregate target enrollment of over 8,000 patients worldwide and is the largest Phase 3 clinical program everconducted for an anemia product candidate. In addition, our Phase 3 program in China has approximately 450 patients participating and our partner’s Phase 3program in Japan will study approximately 1,000 additional patients. Our U.S. Phase 3 program is designed for and is incorporating major adverse cardiacevent (“MACE”) composite safety endpoints that we believe will be required for approval in the U.S. for all new anemia therapies. These Phase 3 programsare studying multiple patient populations, including patients within the first four months of initiating dialysis, or incident dialysis, and non-incident, orstable, dialysis patients and include multiple NDD-CKD studies comparing roxadustat against placebo control.Background of Anemia in CKDAnemia is a serious medical condition in which patients have insufficient red blood cells and low levels of hemoglobin (“Hb”), a protein in red blood cellsthat carries oxygen to cells throughout the body. Anemia is associated with increased risks of hospitalization, cardiovascular complications, need for bloodtransfusion, exacerbation of other serious medical conditions and death. In addition, anemia frequently leads to significant fatigue, cognitive dysfunction,and decreased quality of life. The more severe the anemia, as measured in lower Hb levels, the greater the health impact on patients. Severe anemia is commonin patients with CKD, cancer, MDS, inflammatory diseases, and other serious illnesses. Even when it accompanies prevalent and serious diseases, anemia isoften not effectively treated.Anemia is particularly prevalent in patients with CKD, which is a critical healthcare problem and is most commonly caused by diabetes and hypertension inthe U.S. and Europe. CKD affects over 200 million people worldwide and anemia significantly increases healthcare costs for those patients. CKD is generallya progressive disease characterized by the gradual loss of kidney function that may eventually lead to kidney failure, also known as end stage renal disease(“ESRD”). Patients with ESRD require renal replacement therapy — either dialysis treatment or kidney transplantation. CKD accompanied by anemia isassociated with worse health outcomes than CKD alone, including more rapid progression of CKD and increased death rate. There are 5 stages of CKD whichare primarily defined by a measure of the filtration function of the kidney (GFR).4Stages of CKD and Prevalence in the United States *U.S. prevalence is estimated for adults 20 years of age or older†GFR: Glomerular Filtration Rate (ml/min/1.73m2)Sources: The prevalence of stage 1 through stage 4 CKD was calculated based on 2014 estimates by the United States Renal Data System (“USRDS”)presented in the 2016 USRDS annual data report: Epidemiology of kidney disease in the United States (“2016 USRDS ADR”), using data from the NationalHealth and Nutrition Examination Survey (“NHANES”) 2011-2014 and 2014 data from the U.S. Census Bureau. The prevalence of stage 5 CKD wascalculated based on 2014 data from the 2016 USRDS ADR using data from the U.S. National ESRD database, NHANES 2011-2014 and 2014 data from theU.S. Census Bureau.The prevalence rate of anemia in patients with Hb<12 g/dL is set forth below.Sources: The prevalence of anemia in stage 1 through stage 4 CKD and stage 5 NDD-CKD were derived from Stauffer and Fan, Prevalence of Anemia inChronic Kidney Disease in the United States, PLoS ONE (2014). The prevalence of anemia in patients undergoing dialysis was derived from Goodkin et al,Naturally Occurring Higher Hemoglobin Concentration Does Not Increase Mortality among Hemodialysis Patients, J Am Soc Nephrol (2011).In the U.S., according to the USRDS, a majority of dialysis eligible CKD patients are currently on dialysis. According to USRDS data as of 2014,approximately 475,000 patients were receiving dialysis in the U.S., of whom approximately 83% were being treated with ESAs for anemia. Despite thepresence of anemia in stages 3 and 4 CKD patients, in clinical practice, patients typically do not receive ESA treatment for their anemia until they initiatedialysis. Approximately 14% of U.S. NDD-CKD patients were being treated with ESAs prior to initiation of dialysis as of 2014 (2016 USRDS ADR). In manyCKD patients, the disease progresses gradually over decades and, therefore, patients can spend years suffering from the symptoms and negative healthimpacts of anemia before they receive treatment. Many of these patients die from cardiovascular events before they initiate dialysis.5Limitations of the Current Standard of Care for Anemia in CKDCurrent therapies to treat anemia in CKD include injectable ESAs, intravenous (“IV”) iron, oral iron and blood transfusions. ESAs have been used in thetreatment of anemia in CKD for over 20 years and are administered intravenously or subcutaneously, typically in conjunction with IV iron. NDD-CKDpatients who are not under the care of nephrologists, including those with diabetes and hypertension, do not typically receive ESAs and are often leftuntreated. ESAs currently on the market are all synthetic recombinant versions of human erythropoietin (“EPO”), a hormone that stimulates erythropoiesisand increases Hb levels by binding to receptors on red blood cell precursors in the bone marrow.The introduction of the first ESA in 1989 was viewed as a major advance in the treatment of anemia in CKD because it significantly decreased the need forblood transfusions. Since then, ESAs have become one of the most commercially successful drug classes. However, because ESAs were never studied relativeto placebo in large randomized clinical trials prior to approval, it was not until years later that their safety profile became better elucidated. Studies publishedin 2006 to 2009 demonstrated the safety risks of higher ESA doses used to target Hb levels of 13 to 15 g/dL, prompting physicians to balance serious safetyconcerns against the efficacy of ESAs. The safety concerns observed with injectable ESAs in these studies included an increased risk of cardiovascularadverse events and death as well as a potentially increased rate of tumor recurrence in patients with cancer.The emergence of the safety issues resulted in several changes to ESA drug labeling. This combination of safety concerns and labeling changes, in additionto the subsequent reimbursement changes, described below, was followed by a decline in ESA sales revenues beginning in 2007. While we believe thisdecline in ESA sales is primarily due to complete suspension of the label for use of ESAs in anemias associated with cancer, and restrictions on use inchemotherapy induced anemia, we believe the decline in sales is also partly due to the progressive decline in ESA dose administered to CKD patients.Compared to the average ESA dose at the end of 2006, the mean monthly ESA dose in patients on hemodialysis dropped by 18%, 36%, 45% and 45% by theend of 2010, 2011, 2012 and 2013 respectively (2015 USRDS ADR).Safety Issues of ESAsSeveral large clinical trials were designed to demonstrate that targeting higher as opposed to lower Hb levels results in better outcomes. However, theyinstead generated data showing that targeting higher Hb levels with ESAs resulted in an increase in adverse events, including cardiovascular adverse events.These adverse events were initially observed in 1998 in the NHCT (Normal Hematocrit Cardiac Trial) in CKD patients on dialysis, where the high Hb leveltreatment arm targeted Hb levels of 13 to 15 g/dL. Additional safety concerns emerged following the CHOIR (Correction of Hemoglobin in Outcomes andRenal Insufficiency), CREATE (Cardiovascular Risk Reduction by Early Anemia Treatment with Epoetin Beta), and TREAT (Trial to Reduce CardiovascularEvents with Aranesp Therapy) studies in NDD-CKD patients, which were published between 2006 and 2009.Secondary analyses of NHCT, CHOIR and TREAT, as well as subsequent observational studies in dialysis patients, suggest that these safety concerns,particularly the increased cardiovascular risk associated with ESAs, may result from the high ESA doses used to target higher Hb levels rather than theachieved Hb levels themselves. For example, a secondary analysis of CHOIR showed that patients who achieved the desired Hb level with the lowest amountsof ESA have the lowest risk of adverse cardiovascular outcomes as measured by composite endpoints consisting of hospitalization for heart failure, heartattack, stroke, and death. Patients who were treated with the highest ESA doses and, particularly those who achieved the lowest Hb levels, had the greatestrisk for these events. In addition, observational studies in patients undergoing dialysis highlighted these risks with high ESA doses and also indicated thathigher Hb levels achieved with lower ESA doses were associated with better outcomes.6For example, in an analysis of data from the USRDS of 94,569 hemodialysis patients, increased mortality was found in patients with increased epoetin alfadose. Patients who achieved the highest hematocrit level (which is a measure of the percentage of volume of whole blood made up of red blood cells; undertypical conditions, Hb level can be estimated as one-third the hematocrit level) and received the lowest ESA doses (lowest dose quartile, Q1) had the lowestmortality rate, and, at any particular ESA dose quartile, patients with higher hematocrit levels tended to have lower mortality levels, according to Zhang et al(Am J Kidney Dis 44:866-876) as illustrated in the chart below.Unadjusted 1-Year Mortality Rates (per 1000)by Hematocrit and ESA dosing quartileWarnings about these risks have been incorporated into guidelines and position papers from major kidney societies and thought leaders. Kidney Disease:Improving Global Outcomes (“KDIGO”), a non-profit foundation established in 2003 and operated by the National Kidney Foundation, committed toimproving global clinical guidelines for kidney patients, for example, states that, “[t]here may be toxicity from high doses of ESA, as suggested, though notproven, by recent post-hoc analyses of major ESA randomized controlled trials, especially in conjunction with the achievement of high Hb levels. Therefore,in general ESA dose escalation should be avoided.” In addition, the European Renal Best Practices Group specified in a recent position statement thatcaution should be used in ESA therapy in patients with specific risk factors.Limited Effectiveness of ESAs in Certain Patient PopulationsHb responses to ESA doses are on a continuum with some patients responding with a satisfactory Hb increase to a small ESA dose and others responding verypoorly to very high doses. In addition, patients’ responsiveness to ESAs can change over time and as a result of circumstances such as acute illness or surgery.In an attempt to reach target Hb level, ESA doses are increased in treatment-resistant patients (“hyporesponders”), which can result in up to a 40-folddifference in ESA doses between the most ESA-resistant and the most ESA-responsive DD-CKD patients. Even with high doses of ESAs and concomitant IViron, some of these hyporesponders are unable to reach target Hb levels.Hyporesponsiveness is a significant problem in incident dialysis patients, for whom ESA doses are typically high, and is associated with a combination ofcritically low kidney function and accompanying illnesses, such as infections and chronic inflammation. Incident dialysis patients are generally moreanemic, and have a higher risk of death, than patients who have been on dialysis for many months.7A major cause of ESA hyporesponsiveness is an underlying chronic inflammatory state that exists in many CKD patients. Chronic inflammation has asuppressive effect on erythropoiesis in CKD via two main mechanisms. Firstly, pro-inflammatory cytokines such as tumor necrosis factor alpha (“TNF-alpha”), and interleukin-6 (“IL-6”), have been implicated in the suppression of erythropoiesis through inhibition of the response of erythroid progenitor cellsto EPO. Secondly, pro-inflammatory cytokines such as IL-6 elevate the levels of hepcidin, the major hormone that regulates iron metabolism. Theconsequence of elevated hepcidin levels is a reduction in iron absorption from the gastrointestinal tract (“GI tract”), and the trapping of iron in cellular stores.Together this leads to inadequate availability of iron to keep pace with the demands of the bone marrow for erythropoiesis, despite adequate total body ironstores. This condition is referred to as functional iron deficiency.In the presence of inflammation, even high doses of ESAs may be ineffective to achieve target Hb levels, and to the extent Hb levels are raised, the risksassociated with the higher ESA doses required may outweigh the benefits of any increased Hb levels.Requirement for IV Iron to Support ESA Activity and Associated Safety RisksIV iron supplementation is used to support anemia correction in a majority of hemodialysis patients treated with ESAs in the U.S. ESA labeling indicates thatphysicians should evaluate the iron status in all patients before and during CKD anemia treatment and maintain iron repletion. Many CKD patients havedeficient iron stores, or absolute iron deficiency, and cannot absorb enough iron from diet or oral iron supplements to correct this deficiency. Physiciansadminister IV iron to ensure patients are iron replete prior to initiating ESA treatment and continue IV iron to mitigate iron depletion caused by ESA-mediated erythropoiesis.Additionally, many CKD patients who have adequate iron stores suffer from functional iron deficiency. IV iron is administered in an attempt to address thisshortage of available iron in these CKD patients, resulting in many patients having elevated body iron stores. While IV iron can help correct anemia whenused with ESAs, published studies have suggested acute and chronic risks of both morbidity and mortality associated with the use of IV iron. The acute risksof IV iron supplementation include hypersensitivity reactions (which can be life-threatening and the warning of anaphylaxis risk appears in every IV ironproduct package insert in the U.S.), infection, as well as less severe but more common side-effects, such as skin problems, hypotension and GI tract symptoms.In addition to acute side-effects, there may also be chronic adverse effects on organ systems related to the cumulative deposits of iron resulting from thevolume of iron administered.Increased use of IV iron has been associated with increased risk of hospitalization and death. Using data from 12 countries obtained over the past twelveyears, Bailie et al. demonstrated a direct dose risk relationship between the amount of IV iron administered per month to dialysis patients and the risk ofhospitalization and death (Kidney International (2014)). The study identified that, even after controlling for other risk factors and adjusting for differentpractice patterns globally, dialysis patients receiving greater than 300 mg of IV iron per month had a greater risk of hospitalization or death than thosereceiving less than 300 mg. Mortality was 13% greater among those receiving between 300 and 400 mg of IV iron per month and 18% greater among thosereceiving greater than 400 mg of IV iron per month. Furthermore, hospitalization risk was 12% greater among those who received greater than 300 mg permonth. The current paradigm of administrating greater doses of IV iron to decrease ESA doses in light of this recently described associated risk underscoresthe significant unmet need in the treatment of anemia. However, new and purportedly safer and more effective iron supplementation therapies are beingdeveloped and introduced, and if such new therapies are accepted by patients and physicians as a superior alternative to traditional IV iron supplementationtherapies, they may help maintain or increase the attractiveness of ESA therapy.Elevated Blood PressureESAs have long been associated with increased blood pressure, including new onset hypertension and exacerbation of pre-existing hypertension. As a result,ESA labeling carries a warning for the potential for increased blood pressure with ESA usage. Hypertension has been shown to accelerate CKD progressionand significantly increase the risk of death in CKD patients due to the increased risk of heart attack or stroke.Increased Thromboembolism and Vascular Access ThrombosisESA use has been associated with thromboembolic events, including stroke, vascular access thrombosis (where the dialysis access shunt is blocked due toblood-clotting), blood clots in the leg, which may in part be due to increases in circulating platelet levels. As a result, ESA labeling carries a warning for anincreased risk of thromboembolic events.8FDA Restrictions on ESA UsageIn response to safety concerns elucidated in the large clinical studies described above, the U.S. Food and Drug Administration (“FDA”), steadily increasedrestrictions on the use of injectable ESAs from 2007 through 2011. During 2007, following the NHCT, CHOIR and CREATE studies and several oncologystudies, the FDA mandated the inclusion of a boxed warning, or “Black Box” warning, in the package insert for ESAs. A Black Box warning is the strongestwarning that the FDA can require in the package insert of prescription drugs. In June 2011, the FDA required further modification to the package insert forESAs. The current boxed warning states that ESAs increase the risk of death, myocardial infarction, or heart attack, stroke, venous thromboembolism,thrombosis of vascular access and tumor progression or recurrence. In addition, the package insert changes include more conservative dosing guidelines forthe use of injectable ESAs in anemic CKD patients. Specifically, the FDA removed the prior target Hb range of 10 to 12 g/dL and recommends that physiciansinitiate treatment of CKD patients when the Hb level is less than 10 g/dL and reduce or interrupt ESA dosing if the Hb level approaches or exceeds 10 g/dLfor NDD-CKD patients and 11 g/dL for DD-CKD patients. In addition, physicians are advised to use only the lowest dose needed to avoid red blood celltransfusions.Reimbursement Challenges Associated with ESAsIn addition to the safety concerns and labeling changes for ESAs, the reimbursement applicable to dialysis, including associated drugs such as ESAs, has alsochanged significantly in recent years, which made ESAs less economically attractive for providers to administer. Prior to January 2011, the Centers forMedicare and Medicaid Services (“CMS”) reimbursed dialysis centers and other healthcare providers for use of ESAs at average selling price plus a premiumto their cost, which enabled providers to realize a profit on the administration of ESAs, regardless of the quantity dosed. Under the Medicare Improvementsfor Patients and Providers Act (“MIPPA”), a basic case-mix adjusted composite, or bundled, payment system commenced in January 2011 and transitionedfully by January 2014 to a single reimbursement rate for drugs and all services furnished by renal dialysis centers for Medicare beneficiaries with end-stagerenal disease. Specifically, under MIPPA the bundle now covers drugs, services, lab tests and supplies under a single treatment base rate for reimbursement byCMS based on the average cost per treatment, including the cost of ESAs and IV iron doses, typically without adjustment for usage.ESAs administered to NDD-CKD patients have long been reimbursed under Medicare Part B, which requires providers to purchase and store ESAs in advanceof being reimbursed, and in many healthcare practices, the amount reimbursed does not cover the cost of ESA administration. For many of these providers,including in nephrology practices where purchase and storing is most common, due to label changes and related reduction in patients available for treatment,ESA administration in NDD-CKD has become economically unattractive. Furthermore, non-nephrologists generally have elected not to provide ESAs.Accordingly, ESA treatment has been limited outside of dialysis centers.Inconvenience of ESAsIn addition to safety, labeling, reimbursement and efficacy limitations, ESAs must be administered intravenously or subcutaneously, often with IV iron inorder for ESAs to be effective at treating to target Hb levels. ESAs are therefore inconvenient for the NDD-CKD population, the peritoneal dialysispopulation, for whom treatment is often administered at home, and other non-CKD anemia patients who are not already regularly visiting a hospital ordialysis center.Our SolutionWe believe that there is a significant need for a safer, more effective, more convenient and more accessible alternative to injectable ESAs for the treatment ofanemia in CKD patients. In addition, we believe there is a significant opportunity for treatment of anemia in markets not effectively addressed by ESAs, suchas in the NDD-CKD population, DD-CKD in the presence of inflammation, and non-CKD anemia markets.9Roxadustat — A Novel, Orally Administered Treatment for AnemiaRoxadustat is an orally administered small molecule that corrects anemia by a different mechanism of action from that of ESAs. As a HIF-PH inhibitor,roxadustat activates a response that is naturally activated when the body responds to reduced oxygen levels in the blood, such as when a person adapts tohigh altitude. The response activated by roxadustat involves the regulation of multiple, complementary processes to promote erythropoiesis and increase theblood’s oxygen carrying capacity.This coordinated erythropoietic response includes both the stimulation of red blood cell progenitors, by increasing the body’s production of EPO, and anincrease in iron availability for Hb synthesis. Patients taking roxadustat typically have circulating endogenous EPO levels at peak concentration within ornear the physiologic range naturally experienced by people adapting to hypoxic conditions such as at high altitude, following blood donation or impairedlung function, such as pulmonary edema. By contrast, ESAs act only to stimulate red blood cell progenitors without a corresponding increase in ironavailability, and are typically dosed at well above the natural physiologic range of EPO. The sudden demand for iron stimulated by ESA-inducederythropoiesis can lead to functional or absolute iron deficiency. We believe these high doses of ESAs are a main cause of the significant safety issues thathave been attributed to this class of drugs. In contrast, the differentiated mechanism of action of roxadustat, which involves induction of the body’s ownnatural pathways to achieve a more complete erythropoiesis, has the potential to provide a safer and more effective treatment of anemia, including in thepresence of inflammation, which normally limits iron availability.10Our HIF-PH inhibitor technology relies on the natural mechanism by which the body responds to low oxygen levels. HIF is a transcription factor comprised ofa HIF-alpha and a HIF-beta subunit, both of which are required to stimulate erythropoiesis. Under normal oxygen conditions, the HIF-alpha subunit istargeted for rapid degradation through the activity of a family of HIF-PH enzymes. However, under low oxygen conditions, the HIF-PH enzymes cannotfunction and HIF-alpha accumulates. HIF-alpha then combines with HIF-beta, and the newly formed HIF complex initiates transcription of a number of genesinvolved in the erythropoietic process, which ultimately leads to increased oxygen delivery to tissues. Roxadustat works by reversibly inhibiting the HIF-PHenzymes, thus mimicking this coordinated natural erythropoietic response through genes transcribing the proteins shown below involved in iron absorption,mobilization and transport as well as stimulation of red blood cell progenitors.11Our discovery and development of roxadustat resulted from years of experience working with prolyl hydroxylase enzymes, such as those that regulate HIF,and a deep understanding of the complexities of HIF biology. We have explored therapeutic activation of HIF to treat anemia from an integrated perspectivewith a focus on applying our HIF-PH inhibitor technology to produce coordinated effects on erythropoiesis and iron homeostasis and metabolism. As part ofthese progressive efforts, we have explored the ability of our HIF-PH inhibitor technology to increase sensitivity to endogenous EPO by increasing EPOreceptor expression on red blood cell progenitors. We have investigated multiple effects of HIF-PH inhibitors on iron metabolism, including their ability toregulate genes that can increase iron bioavailability. We have also shown that administration of HIF-PH inhibitors can decrease expression of hepcidin, thekey hormone that regulates iron metabolism. Hepcidin is elevated under conditions of chronic inflammation, leading to reduced iron availability forerythropoiesis. Based on our gene expression and hepcidin data, we believe HIF-PH inhibitors can increase intestinal iron absorption and enhance themobilization and uptake of iron. In addition, we have shown that HIF-PH inhibitors can improve transferrin saturation (a measure of circulating iron availablefor erythropoiesis) and can correct anemia associated with chronic inflammation by overcoming the hepcidin-mediated sequestration of iron that cannot beovercome by ESA therapy.We selected roxadustat from our extensive library of compounds from various chemical classes of HIF-PH inhibitors, including heterocyclic carboxamidesand 2-oxoglutarate mimetics. Roxadustat was selected based on our belief that stabilizing the two main forms of HIF in the cell, HIF-1 and HIF-2, leads to amore complete erythropoietic response.Although HIF-PH inhibitor programs have been subsequently initiated at several other companies, we expect to remain the leader in the development of HIF-PH inhibitors for anemia, with more patients dosed and more studies conducted with roxadustat than with any other HIF-PH inhibitor.Potential Advantages of Roxadustat for Treatment of Anemia in CKDWe believe that roxadustat has the potential to offer several safety, efficacy, reimbursement, and convenience advantages over ESAs.Potential Safety and Efficacy AdvantagesOur clinical trials to date have shown that roxadustat can treat anemia in CKD with much lower circulating EPO levels than with treatment by ESAs, mitigatethe need for IV iron and treat anemia in the presence of inflammation, thereby offering potential safety and efficacy benefits over ESAs. We have incorporatedseveral endpoints into our Phase 3 studies to further elucidate and demonstrate these and other potential clinical benefits of roxadustat.Potential Cardiovascular BenefitsThe CKD patient population is at high risk for cardiovascular events such as heart attacks and strokes. One known side effect of ESAs is elevation of bloodpressure, which is particularly dangerous in this high risk patient population. In contrast, we did not observe increases in blood pressure in patients treatedwith roxadustat beyond the background levels observed for the comparable placebo-treated patients in a NDD-CKD Phase 2 trial. However, these data shouldbe cautiously assessed due to the limited number of patients exposed. In Study 041, the NDD-CKD patients treated with roxadustat three times weekly formore than 12 weeks had a modest decrease in blood pressure in a subgroup analysis of our Phase 2 NDD-CKD study.In our Phase 2 studies, we did not observe a safety signal for thromboembolic risk. In contrast to the platelet increase with ESA treatment, platelet countsreported in roxadustat-treated patients did not increase, as those with platelet levels in the top 25th percentile at baseline saw their platelet levels decreasetowards normal levels while those with platelet levels in the lower 75th percentile at baseline saw their platelet levels remain stable. This finding supports ourbelief in a potential safety benefit over ESAs since the platelet increase with ESAs could be a contributing factor in the thromboembolic risk associated withESAs.In addition, in our Phase 2 clinical trials, we observed reductions in total cholesterol and an improvement in average high-density lipoprotein (“HDL”) / low-density lipoprotein (“LDL”) ratio. Since many CKD patients have high cholesterol levels, which contribute to cardiovascular-related morbidity andmortality, the improvement in the average HDL / LDL ratio observed with roxadustat treatment could confer a benefit to patients.Based on our preclinical and clinical data generated to date, we believe roxadustat could offer cardiovascular benefits to a CKD patient population thattypically has cardiovascular-related co-morbidities and is at a high risk for cardiovascular events.12Potential for Anemia Correction with Moderate EPO LevelsRandomized trials have suggested that high doses of ESAs administered in an attempt to achieve a target Hb level may cause the safety issues associated withESA therapy. These high doses result in serum EPO levels much higher than physiological range. In contrast, the level of endogenous EPO elevation amongpatients treated with roxadustat is typically within or near the range observed when ascending to a higher elevation or giving blood. Treating anemia whilemaintaining lower circulating EPO levels may mitigate, or even avoid, the risks from ESA therapy, including cardiovascular events and death.The following graph depicts: 1)the circulating endogenous EPO levels in natural physiologic adaptations, such as adjustment to high altitude, blood loss, or pulmonary edema[left, ]; 2)transient peak endogenous EPO levels estimated for CKD patients who achieved a Hb response to therapeutic doses of roxadustat in ourPhase 2 clinical studies [middle, ]; 3)the estimated peak circulating recombinant EPO levels resulting from IV ESA doses in distributions reported by the Dialysis Outcomes andPractice Patterns Study (“DOPPS”), for the fourth quarter of 2011 in the U.S. (after bundling was initiated and when the Hb target in ESAlabeling was in the range of 10-11 g/dL [right, ]).1Milledge & Cotes (1985) J Appl Physiol 59:360; 2Goldberg et al. (1993), Clin Biochem 26:183, Maeda et al. (1992) Int J Hematol 55:111; 3Kato et al.(1994) Ren Fail 16:645; 4The transient peak endogenous EPO concentrations (“Cmax”), data for roxadustat was derived from a subset of 243 patients whoachieved a Hb response to roxadustat in our Phase 2 studies for whom we believe doses depicted approximated therapeutic doses. Hb target ranges for thesepatients were above the Hb levels specified in the current ESA package insert for CKD patients. Only doses in those patients whose Hb responded in Phase 2studies are reflected in the figure. The subset of patients included 134 NDD-CKD patients treated to thrice-weekly, twice-weekly, or weekly doses ofroxadustat for >16 weeks. The subset also included 109 DD-CKD patients, including incident dialysis patients whose anemia was corrected with therapeuticdoses, and stable dialysis patients who received maintenance doses. Cmax of endogenous EPO levels were not measured in all patients; instead the range ofEPO Cmax levels were estimated based on data derived from a more limited number of patients in whom EPO levels were measured at various roxadustatdoses and among whom there was substantial variation in measured EPO levels. Accordingly, individual patients who received roxadustat may have realizedEPO Cmax levels significantly above or below these estimated levels. Moreover, the estimates reflected in the graph may not be reflective or predictive ofactual EPO Cmax levels or ranges that will be realized in larger populations of patients receiving roxadustat in our Phase 3 clinical trials. 5EPO C max wascomputed from ESA dose distributions based on Flaherty et al. (1990) Clin Pharmacol Ther 47:557.13Potential for Anemia Correction for Patient Populations that are Hyporesponsive to ESAsIncident dialysis patients and patients who have chronic inflammation are often hyporesponsive to ESAs, which necessitates the use of higher doses of ESAsto increase Hb levels, thus increasing both safety risk and treatment cost. In contrast, the dose of roxadustat may not need to be increased in incident dialysispatients or to overcome the suppressive effects of inflammation on erythropoiesis, which we believe may confer significant safety and efficacy benefits.As a result of roxadustat’s different mechanism of action, the ability of roxadustat to stimulate erythropoiesis does not appear to be impaired by chronicinflammation.Our preclinical studies indicate that roxadustat can overcome the direct suppressive effects of inflammatory cytokines on erythropoiesis. In addition, in ourpreclinical studies, we have seen an ability of roxadustat to reduce hepcidin expression, thus increasing absorption of iron from the GI tract and the release ofiron from intracellular stores and mitigating the functional iron deficiency associated with chronic inflammation.In our Phase 2 studies, patients’ Hb response to roxadustat was independent of the degree of underlying inflammation, as assessed by circulating levels of C-reactive protein (“CRP”), a well-recognized marker of inflammation. Incident dialysis patients have the highest levels of mortality of all dialysis patients. Theincident dialysis period is also the period during which mean ESA doses are generally highest. To the extent the increased levels of mortality are associatedwith high ESA doses, roxadustat may offer a benefit to incident dialysis patients. The median roxadustat dose in our dialysis Study 053 was 1.3 mg/kg; theCmax of endogenous EPO levels usually associated with this dose level are comparable to the physiologic range naturally experienced by people adapting tohigh altitude or following blood donation. Refer to additional information on endogenous EPO levels under the heading “Potential for Anemia Correctionwith Moderate EPO Levels.”Potential for Reduced Hepcidin Levels and Anemia Correction Without IV IronAn important differentiator of roxadustat from ESAs is that roxadustat is expected to correct anemia and maintain Hb without IV iron supplementation.Patients with chronic illness, such as CKD, often suffer from absolute iron deficiency or functional iron deficiency. We believe that elevated levels ofhepcidin, the major hormone that regulates iron metabolism, contributes to both absolute and functional iron deficiency.Our Phase 2 clinical trials have shown that roxadustat can significantly reduce hepcidin levels in patients with DD-CKD and NDD-CKD. The following figureshows a reduction in serum hepcidin level of approximately two thirds, observed at week 5, in 52 incident dialysis patients treated with roxadustat.Reduction of Serum Hepcidin Levels (Study 053) in Incident Dialysis PatientsIn addition, we believe roxadustat increases the levels of proteins involved in iron uptake, release and transport. Data from our Phase 2 clinical trials indicatethat oral iron supplementation alone is adequate to correct anemia during treatment with roxadustat, in contrast to ESAs which typically require IV ironsupplementation. Additionally, our data indicate that unlike ESAs, roxadustat treatment does not require that patients be iron replete before initiatingtherapy.14Avoiding IV iron helps to avoid the significant safety risks associated with IV iron described above, and, because the cost of oral iron is significantly lessthan the cost of IV iron, could also confer significant costs savings.Potential Reimbursement and Convenience AdvantagesPotentially Differentiated Reimbursement FrameworkESAs are included in the MIPPA bundled payment system in the DD-CKD setting and reimbursed under Medicare Part B in the NDD-CKD setting. Based onour roxadustat data to date, we believe roxadustat has the potential to correct anemia through a differentiated mechanism of action and different therapeuticeffects that create the potential to displace multiple drugs in current use (such as ESAs and IV iron), or those in development (such as agents for suppressionof hepcidin). Although the bundle currently covers ESAs or oral equivalents of ESAs or other IV products encompassed by the bundle, due to thedifferentiated nature of roxadustat and a lack of definition in the regulations on oral equivalency, for which there may be a CMS determination later this year,it is unclear whether roxadustat will be included in or excluded from the bundle. Under MIPPA, agents that have no IV equivalent in the bundle are currentlyexpected to be excluded from the bundle until 2024. We believe that there may be commercial benefits in either event but are unable to predict the potentialbenefits until further guidance from CMS becomes available.In the NDD-CKD setting, we expect that roxadustat, an oral treatment, should be subject to Medicare Part D, which would allow physicians to prescriberoxadustat without the financial and reimbursement risk associated with purchasing and storing injectable ESAs. We believe that this should encouragesignificantly greater usage outside of the dialysis setting.Potential Reduction of Other MedicationsIn addition to potentially eliminating the need for IV iron, based on our Phase 2 clinical trial results to date, we believe that roxadustat has the potential toreduce the use of other medications frequently required in some CKD anemia patients, such as anti-hypertensives, anti-coagulants, and statins.Oral AdministrationMany physicians that treat CKD patients, particularly cardiologists, endocrinologists, and internists, do not typically stock or administer ESAs. An easilyaccessible oral agent that is dispensed by pharmacies could significantly increase the number of physicians treating anemia in patients with CKD andtherefore the number of patients receiving treatment.In addition, the oral administration of roxadustat potentially offers a significant convenience advantage for CKD patients who have yet to initiate dialysisand are therefore not regularly visiting a dialysis center. Patients can more easily self-administer medicine in any setting, rather than being subject to theinconvenience and restrictions of regular visits to physicians’ offices or infusion centers for treatment with ESAs.Potential Pharmacoeconomic AdvantagesBased on our Phase 2 clinical trial results to date, we believe that roxadustat’s potential pharmacoeconomic advantages over ESA therapy may include safety(with a potential decrease in cardiovascular events and consequently lower associated treatment costs), lower administrative cost, reduction or elimination ofIV iron and potentially other medications. If we can demonstrate any of these pharmacoeconomic advantages in our Phase 3 studies, they may help supportreimbursement worldwide, including Europe and China.The Market Opportunity for RoxadustatWe believe that there is a significant opportunity for roxadustat to address markets currently served by injectable ESAs. According to IMS Health, 2013global ESA sales in all indications totaled $8.6 billion, driven primarily by $6.2 billion in the U.S. and Europe. We believe that a substantial portion of ESAsales are for CKD anemia. For example, in the U.S., EPOGEN, which is primarily used in the DD-CKD patient population, had 2014 sales of approximately$2 billion. We further believe that the number of patients requiring anemia therapy will grow steadily as the global CKD population and access to dialysiscare continue to expand, particularly in China and other emerging markets including the rest of Asia, Latin America, Eastern Europe, the Middle East and theCommonwealth of Independent States.15Furthermore, we believe that there is a significant opportunity for roxadustat to address patient segments that are currently not effectively served by ESAs,such as anemia in the NDD-CKD patient population, which is substantially larger than the DD-CKD patient population. Diabetes and hypertension are theleading causes of secondary CKD. Although we estimate approximately 36% of diabetic and 20% of hypertensive CKD patients are anemic (Hb<12g/dL), webelieve the majority of these patients are currently untreated for anemia since they are under the care of non-nephrology specialists, such as endocrinologists,diabetologists, cardiologists and internists, where ESA therapies are not readily available.We also believe that roxadustat may provide a safer option to re-establish the chemotherapy induced anemia market, which was once a market of comparablesize to the DD-CKD anemia market. Other non-CKD anemias, including anemia related to inflammatory diseases, MDS and surgical procedures requiringtransfusions, which are not addressed adequately with currently available therapies, could form another opportunity.OUR DEVELOPMENT PROGRAM FOR ROXADUSTATWe along with our partners, Astellas and AstraZeneca, have designed our global Phase 3 programs to support regulatory approval of roxadustat in both NDD-CKD and DD-CKD patients in the U.S., the EU, Japan and China. These Phase 3 programs are studying multiple patient populations, including incidentdialysis patients and stable dialysis patients being compared to epoetin alfa as an active comparator, and include multiple NDD-CKD studies comparingroxadustat against placebo controls.For our U.S. and European programs, we have completed initial target enrollment for our three Phase 3 studies and we continue to enroll non-dialysis and U.S.incident dialysis patients in support of overall enrollment goals among the partners. We currently anticipate filing the NDA for roxadustat for the treatment ofanemia associated with CKD in the U.S. in 2018.We and our Chinese subsidiary FibroGen (China) Medical Technology Development Co., Ltd. (“FibroGen Beijing”) recently reported topline results fromour two Phase 3 CKD anemia studies in China. Primary efficacy endpoints were met in both the NDD-CKD trial and the DD-CKD trial. Results are includedbelow in the section titled “Roxadustat for the Treatment of Anemia in Chronic Kidney Disease in China”. We expect to complete the 52-week safetyexposure in the China Phase 3 studies in the second quarter, and plan to complete a new drug application submission for roxadustat in China in the thirdquarter of 2017.In Japan, Astellas is currently conducting six Phase 3 anemia studies, four in DD-CKD and two in NDD-CKD. These studies include conversion studies andstudies in ESA-naïve patients, studies in hemodialysis and peritoneal dialysis, and studies comparing roxadustat to active control. 16The table below summarizes our ongoing Phase 3 clinical trials of roxadustat for the treatment of anemia associated with CKD, all of which include Hb levelmaintenance as a study objective once correction or conversion is achieved. The chart emphasizes the differences, by regulatory approval region in estimatedpatient enrollment numbers. The studies supporting both U.S. and EU approval (marked as: “----- # -----“) have extended treatment durations in the U.S. (52+weeks) as compared with the EU (36+ weeks).Roxadustat Phase 3 Clinical Trials Estimated or Completed # of Patients Enrolled Study Sponsor, Number Comparator U.S. Europe China Japan Non-Dialysis FibroGen - FGCL-4592-060* Placebo -------- 900 -------- Astellas - 1517-CL-0608 Placebo -------- 597 -------- AstraZeneca - D5740C00001* Placebo 2,700 Astellas - 1517-CL-0610* Darbepoetin alfa 570 FibroGen - FGCL-4592-808 Placebo 151 Astellas - 1517-CL-0310* Darbepoetin alfa 325 Astellas - 1517-CL-0314* None 100 NDD-CKD Sub Total by Region ~4,200 ~2,100 151 425 Incident Dialysis FibroGen - FGCL-4592-063* Epoetin alfa -------- 900 -------- Stable and Incident Dialysis AstraZeneca - D5740C00002* Epoetin alfa 2,100 Stable Dialysis FibroGen - FGCL-4592-064* Epoetin alfa -------- 820 -------- Astellas - 1517-CL-0613 Epoetin alfa orDarbepoetin alfa -------- 838 -------- FibroGen - FGCL-4592-806 Epoetin alfa 304 Astellas - 1517-CL-0302* None 50 Astellas - 1517-CL-0307* Darbepoetin alfa 300 Astellas - 1517-CL-0308* None 70 Astellas - 1517-CL-0312 None 164 DD-CKD Sub Total by Region ~4,700 ~2,600 304 584 Total by Approval Region ~8,900 ~4,700 455** ~1,000 Combined U.S. and EU total ~ 9,500 *Currently recruiting.**Mandatory post-approval safety study of approximately 2,000 patients expected to be required in China.To maximize the commercial potential for roxadustat, we have incorporated several unique elements into our Phase 3 program. We are performing the firstplacebo-controlled Phase 3 studies in NDD-CKD patients to potentially demonstrate the benefits of anemia therapy and safety of roxadustat compared toplacebo. We are also performing the largest Phase 3 study in incident dialysis anemia patients, who have the highest risk for death, and are the most difficultpatients to stabilize and treat for anemia in CKD. Based on data from our Phase 2 studies, we believe that roxadustat may offer a safer alternative to ESAs forthis particularly vulnerable patient population. We are also evaluating the cardiovascular safety of roxadustat compared to placebo in NDD-CKD patients tofirst demonstrate a lack of increased risk to qualify for marketing approval by the FDA, and in these patients we will have an opportunity to measureimprovements in patient outcomes with anemia therapy. Separately, we are evaluating cardiovascular safety of roxadustat compared to ESA in DD-CKDpatients.Our U.S. and European Phase 3 ProgramOur U.S. and European Phase 3 program has an aggregate target enrollment of over 8,000 patients worldwide. Our U.S. Phase 3 program is also designed andsized for demonstrating non-inferiority to comparators for the MACE composite safety endpoints in17separate patient pools of NDD-CKD and DD-CKD. Five of the six Phase 3 studies supporting approval in the EU will also support approval in the U.S.However, the EU requires shorter treatment duration and less overall patient exposure than the U.S.Primary and Secondary Endpoints of Our U.S. and European Phase 3 ProgramWith our partners, we have designed our Phase 3 studies to evaluate the following endpoints, most of which were evaluated in our Phase 2 studies. •Primary efficacy endpoints for anemia correction studies: oU.S.: Hb change from baseline to the average Hb level during weeks 28-52. oEU: Cumulative % patients with Hb response by week 24. Hb response is defined as Hb of 11 g/dL and an increase of at least 1 g/dL frombaseline. •Primary efficacy endpoints for conversion and maintenance studies: oU.S.: Hb change from baseline to the average Hb level during weeks 28-52. oEU: Hb change from baseline to the average Hb level during weeks 28-36. •The primary safety endpoints for U.S. approval will be MACE, which is a composite endpoint designed to identify major safety concerns, inparticular relating to cardiovascular events such as cardiovascular death, myocardial infarction and stroke, and will be pooled across multiplestudies and evaluated separately in our NDD-CKD trials and our DD-CKD trials. •We expect that our Phase 3 clinical trials supporting approval in Europe will be required to include MACE+ as a safety endpoint which, inaddition to the MACE endpoints, also incorporates measurements of hospitalization rates due to heart failure or unstable angina. •We also plan to evaluate secondary endpoints, including the following: oIV iron usage in roxadustat-treated patients relative to ESA-treated patients with DD-CKD. oRed blood cell transfusion rate in roxadustat-treated relative to placebo treated patients with NDD-CKD. oHypertension adverse events in roxadustat-treated patients relative to ESA-treated patients with DD-CKD, and blood pressure inroxadustat-treated patients relative to placebo-treated patients with NDD-CKD. oTotal cholesterol, LDL-cholesterol and very low-density-cholesterol levels in roxadustat-treated patients relative to placebo-treatedpatients with NDD-CKD and relative to ESA-treated patients in all three anemic CKD patient populations. oQuality of life in roxadustat-treated patients relative to placebo-treated patients with NDD-CKD. oCKD progression in roxadustat-treated patients relative to placebo-treated patients with NDD-CKD. oHospitalization rate in roxadustat-treated patients relative to placebo-treated patients with NDD-CKD and relative to ESA-treatedpatients in all three anemic CKD patient populations. oRate of vascular access thrombosis in roxadustat-treated patients relative to ESA-treated patients in DD-CKD.Dosing RegimenOur Phase 3 studies incorporate dosing regimens that were extensively tested in our six Phase 2 studies. •Identified Dosing Regimen. The dosing regimens for our Phase 3 studies are designed to achieve an appropriate rate and magnitude of Hb rise.In our Phase 2 studies, we explored ranges of therapeutic doses under several dosing regimens, including both tier-weight and fixed startingdoses and conversion doses. Our Phase 3 program is using two tier-weight starting doses for ESA-naive patients (70 mg for patients between 45and 70 kg and 100 mg for patients between 70 and 160 kg). Our Phase 3 dosing strategies are based on our understanding of effectiveapproaches, derived from our Phase 2 studies, tested in modeling and simulation, and were designed to achieve Hb correction for patients withvarying dose requirements in a manner that is optimal for both patients and physicians. •Dose Titration. Our Phase 3 program is using a pre-determined sequence of dose steps to titrate to a patient’s particular response to roxadustat,which we found to be simple to use and sufficient to correct anemia in our Phase 2 studies. In our Phase 2 anemia correction studies, only one ortwo cycles of dose titration were necessary to achieve Hb correction in at least 80% of patients on average.18 •Dose Conversion for Dialysis Patients Previously Treated with ESAs. In our Phase 2 conversion studies, we tested a variety of starting dosesand developed a mathematical relationship between baseline ESA dose and roxadustat dose required to maintain Hb levels. We use doseconversion tables derived from these Phase 2 studies to formulate starting roxadustat doses in our Phase 3 trials for patients who switch toroxadustat from ESAs. •Dose Frequency. In preclinical and Phase 1 studies, we observed that intermittent dosing yielded optimal responses to roxadustat. Our Phase 2studies indicated that three times weekly, twice weekly and weekly dosing regimens achieved Hb maintenance. In our Phase 3 program we aredosing three times weekly for all studies except two (060 and 0608) which are dosing some patients twice per week and some patients once perweek. We believe that intermittent dosing may help ensure a consistent and durable treatment effect for several reasons: oGreater Hb Response While Minimizing Total Drug Exposure. Early preclinical studies in rodents with a HIF-PH inhibitor (that was notFG-4592) indicated that a greater Hb response could be achieved using a lower total weekly dose with intermittent dosing compared todaily dosing. In the studies shown below, rats were dosed with HIF-PH inhibitor using either a daily or twice weekly dosing regimen.Both a higher Hb response and a better dose response were observed in animals dosed with HIF-PH inhibitor twice weekly compared toanimals that were dosed daily. Furthermore, the total weekly dose required to achieve this greater Hb response was lower than with dailydosing exposure.In addition, our previous preclinical studies suggested that a wider therapeutic window was achieved with intermittent dosing comparedwith daily dosing. Preclinical observations such as these led us to conclude that intermittent dosing could enable a better Hb responsewith a lower overall drug exposure and offer a potentially wider therapeutic window. oReduce the Risk of Changing the HIF Set Point. The HIF system has a built-in negative feedback mechanism. Genes for two of the prolylhydroxylase domain (“PHD”) enzymes that are responsible for degrading HIF under normal oxygen conditions are actually HIF targetgenes. Thus, while these PHD enzymes are inhibited by hypoxia (or by a HIF-PH inhibitor), the resulting HIF activation leads to anincrease in the very enzymes that are responsible for its degradation following the re-oxygenation (or potentially removal of the HIF-PHinhibitor). This negative feedback mechanism is important in enabling the HIF system to reset. However, under chronically hypoxicconditions, it has been shown that the elevation in PHD enzyme levels is maintained, leading to a change in the HIF set-point. Based onthis knowledge of HIF biology, it is our belief that prolonged HIF activation by a HIF-PH inhibitor drug could similarly lead to a changein the HIF set-point, which we believe may then require an increased HIF-PH inhibitor dose to elicit the same HIF response. In an effortto avoid this potential risk, and to potentially prolong drug effectiveness, we have undertaken an intermittent dosing regimen.19 oIncrease Intervals Between HIF Activation. The kinetics of HIF target gene induction (including genes encoding PHD enzymes) arevariable, with some HIF target genes being induced very quickly after HIF activation and others requiring longer periods of HIFactivation for significant induction. We believe that increasing the intervals between HIF activation using an intermittent dosingregimen has the potential to limit the HIF target gene response. oPotential Commercial Advantages. We expect that a dosing regimen that enables dosing concurrently with hemodialysis treatment,typically administered on a thrice weekly basis, will be more commercially attractive in the dialysis market.Our Phase 2 studies indicated that intermittent dosing enabled anemia correction up to 24 weeks and Hb maintenance up to 19 weeks when converting apatient from ESA.Clinical Trial Eligibility, Iron Status, and Iron Supplementation During TreatmentUnlike ESA clinical trials where patient study eligibility criteria included a requirement of adequate iron availability (measured by ferritin ≥ 100 ng/mL andtransferrin saturation (“TSAT “) ≥ 20%) and encouraged IV iron use, roxadustat Phase 2 studies included anemic NDD-CKD patients with ferritin ≥ 30 ng/mLand TSAT ≥ 5% and anemic DD-CKD patients with ferritin ≥ 50 ng/mL and TSAT ≥ 10%, which permits the inclusion of patients who are iron deficient. Hbresponse was generally achieved in iron deficient NDD-CKD and DD-CKD patients (ferritin <100 ng/mL and TSAT< 20%) despite the fact that IV iron wasnot allowed during roxadustat treatment.Our placebo-controlled Phase 3 NDD-CKD studies are using iron eligibility criteria employed in our Phase 2 studies, allowing oral iron, but prohibiting theuse of IV iron (except as a rescue medication). In our Phase 3 DD-CKD studies, since ESA serves as the comparator and similar treatment conditions arerequired for roxadustat and ESA, study eligibility criteria include ferritin ≥ 100 ng/mL and TSAT ≥ 20%. Patients are randomized to roxadustat or ESA, andare encouraged to take oral iron as a first line supplemental agent. IV iron is permitted if there is inadequate Hb response to treatment and if the patient is irondeficient (ferritin <100 ng/mL and TSAT< 20%).Our Phase 2 ProgramWe and our partner have completed eight roxadustat Phase 2 studies, four in NDD-CKD patients and four in DD-CKD patients, to assess the efficacy ofroxadustat to both correct anemia (“correction”) and maintain the Hb response (“maintenance”). Two of the six completed Phase 2 studies were conducted inChina and are discussed in the section below titled “Roxadustat for the Treatment of Anemia in Chronic Kidney Disease in China”. The efficacy and safetydata generated from our China studies were consistent with our U.S. Phase 2 studies and further contributed to the promising efficacy and safety results todate. In addition, we announced positive Hb correction and maintenance data from Astellas’ Phase 2 DD-CKD and NDD-CKD studies in Japan in July of 2016and these studies are discussed in the section below titled “Roxadustat for the Treatment of Anemia in Chronic Kidney Disease in Japan”.Of the remaining four studies, data have been published and presented at various medical conferences and medical journals. The data from our completedPhase 2 studies demonstrated that roxadustat achieved a clinically meaningful increase in Hb levels in anemic NDD-CKD and DD-CKD patients andmaintained Hb levels in DD-CKD patients who were converted from ESA therapy. Roxadustat corrected anemia without the need for IV iron supplementationand exhibited an acceptable safety profile. Specifically, our Phase 2 studies achieved the following objectives: • Identified optimal roxadustat dosing regimens for anemia correction and maintenance of Hb response. • Demonstrated roxadustat’s potential to treat anemia in both NDD-CKD and DD-CKD patients, including incidentdialysis patients, the most unstable and high risk CKD patient population. • Generated substantial safety data, indicating that roxadustat is well tolerated, appears safe and could offer animproved cardiovascular profile relative to ESAs. Including our Phase 1, 2 and 3 studies over 1,500 subjects havebeen exposed to roxadustat. • Demonstrated that roxadustat may be able to treat anemia without the need for IV iron supplementation. • Demonstrated that roxadustat can reduce hepcidin levels and potentially treat anemia in a significant subset ofpatients with inflammation.20The following chart summarizes the design of our completed Phase 2 studies outside of Japan and China (discussed in their respective sections below) andindicates the primary objectives of each study.Completed Phase 2 Studies Number of Study Number, Number of Comparator Treatment Study CKD Patient Study Roxadustat Patients Total Number of Duration Location Population Objective Patients Placebo ESA Patients in Study (Weeks) Dose FrequenciesFGCL-4592-017 US Non-dialysis Correction,Pharmacokinetics 88 29 117 4 TIW, BIWFGCL-4592-041 US Non-dialysis Correction &Maintenance 145 145 16;24 TIW, BIW, QWFGCL-4592-040 US Stable Dialysis Conversion &Maintenance 117 4 40 161 6;19 TIWFGCL-4592-053 Russia, US,Hong Kong IncidentDialysis Correction 60 60 12 TIWFGCL- 4592-059 US* Non-dialysis& Dialysis Long Term Safety &Maintenance 15 15 Up to 5years TIW, BIW, QWTotal 425 498 *Study conducted by Astellas**5 patients remain in ongoing study QW = weekly; BIW = twice weekly; TIW = three times weeklyStudy 017: Dose Escalating Study in NDD-CKD patientsStudy 017 established proof of concept for roxadustat by showing a significant increase in Hb in a dose-dependent manner, and provided data on therelationship between roxadustat dose and Hb response. This formed the basis for the dosing rules that we applied in subsequent studies of longer duration andin a larger number of patients.This study, a randomized, single-blind, placebo-controlled, dose-escalation study, was the first Phase 2 study to assess the safety and efficacy of a range ofroxadustat doses in the correction of anemia in NDD-CKD stage 3 and 4 patients, over four weeks of treatment, and a 12-week safety follow-up period. A totalof 117 patients (of which 96 were evaluable) were randomized sequentially into four weight-based dose cohorts: 1 mg/kg, 1.5 mg/kg, 2 mg/kg, and 0.7mg/kg, respectively. Roxadustat was administered either twice weekly or three times weekly.Weight Based, Three Times Weekly and Twice Weekly Dosing Leads to Hb Improvement. We tested 4 different roxadustat weight-based doses administered forfour weeks with Hb measurements over a six week period. As shown in the table below, all of the patients in the highest weight-based dose cohort met thecriteria for response in that they achieved Hb rise > 1 g/dL in four weeks. As roxadustat achieved 100% Hb response at the 2 mg/kg dose, higher doses werenot pursued in this study despite the absence of dose limiting toxicity. Roxadustat was well tolerated without any safety concerns.Significant, Dose Dependent Increases in Hb. As shown in the table below, the dose-dependent change in Hb from baseline in roxadustat patients wasstatistically significant from placebo by Day 8 (p=0.025) and remained so at each assessment through Week 6 (p=0.0001 at Day 22; p<0.0001 at Day 26–29/end of treatment).21A p-value is a statistical measure of the probability that the difference in two values could have occurred by chance. The smaller the p-value, the greater thestatistical significance and confidence in the result. Typically, results are considered statistically significant if they have a p-value less than 0.05, meaningthat there is less than a one-in-20 likelihood that the observed results occurred by chance. The FDA requires that sponsors demonstrate the effectiveness andsafety of their product candidates through the conduct of adequate and well-controlled studies in order to obtain marketing approval. Typically, the FDArequires a p-value of less than 0.05 to establish the statistical significance of a clinical trial, although there are no laws or regulations requiring that clinicaldata be statistically significant, or that require a specific p-value, in order for the FDA to grant approval.Hb Responses to a Range of Roxadustat Doses in FGCL-4592-017 0.7 mg/kg 1 mg/kg 1.5 mg/kg Placebo BIW TIW BIW TIW BIW TIW N 23 10 12 5 5 10 11 Mean Maximum Change in Hb 0.44 0.82 1.22 1.12 0.81 1.74 2.03 Standard Error of the Mean 0.11 0.28 0.37 0.26 0.45 0.32 0.26 % Hb Responder 13% 30% 58% 60% 40% 80% 91%Median Time to Response (Days) NA NA 26.5 42 NA 24.5 14 BIW = twice weekly; TIW = three times weeklyStandard error of the mean (“SE”), is a statistical measure of the amount that an observed mean may be expected to differ by chance from the true mean. For apopulation that follows a normal distribution, 68% of observed means will be within one standard error of the mean.Dose-Dependent Reduction in Hepcidin Levels. Roxadustat reduced serum hepcidin levels in a dose-dependent fashion.Study 041: Study for Optimization of Starting Dose and Dose Titration in NDD-CKD PatientsStudy 041 demonstrated that both tier-weight and fixed starting doses can initiate anemia correction. In tier-weight based dosing for this study, we usedstarting doses based on the patient’s body weight category: high, middle or low. This randomized, open-label Phase 2 study was designed to evaluate theefficacy and safety of roxadustat over 16 to 24 weeks in 145 NDD-CKD patients (of which 143 were efficacy evaluable), and to evaluate the effects of dosingregimens in order to determine an optimized approach to anemia correction. In this trial, we tested six different starting dose regimens: three fixed doses, andthree tier-weight doses. In fixed dosing, all patients in the same cohort were given the same starting dose. Results from this study were published in the June2016 Clinical Journal of the American Society of Nephrology.We tested both three times weekly and twice weekly dosing frequencies for anemia correction, similar to Study 017, and further demonstrated that Hb levelscan be maintained using 3 dosing frequencies (three times weekly, twice weekly and weekly) once target Hb ≥11 g/dL was achieved. We also studied variousdose adjustment rules, with dose adjustment decisions made from 5 weeks onward, and every 4 weeks thereafter, to seek the best dose titration scheme.22Hb Correction. We met the primary efficacy endpoint of cumulative number (%) of patients with a Hb response, defined as an increase in Hb ≥ 1.0 g/dL frombaseline and Hb ≥ 11.0 g/dL at the end of treatment. Regardless of the starting dose or dose titration scheme, 92% of patients collectively from all cohortsachieved an Hb increase of at least 1 g/dL from baseline. These data suggest the doses studied are of adequate range for anemia correction. The followingfigure shows mean Hb levels for the six dose groups.FGCL-4592-041 Hb Response Over Various Dosing Regimens*n at baselineTIW = three times weekly; BIW = twice weekly; QW= once weeklyHb Correction was Independent of Inflammation Status. In this study, in a post-hoc analysis, we observed that the magnitude of increases in Hb in responseto roxadustat treatment was comparable for both patients with inflammation (elevated CRP levels) and without inflammation (normal CRP levels).FGCL-4592-041 Mean (± SE) Maximum Change in Hb (g/dL) in 12 Weeks23This stands in contrast to treatments with ESAs, where elevated CRP is frequently associated with lower Hb response to ESAs. We observed a 38% reductionin mean hepcidin level from baseline with eight weeks of roxadustat treatment (p≤0.0001), which supports our belief in roxadustat’s ability to overcomeinflammation and to maintain iron availability for erythropoiesis.FGCL-4592-041 Mean (± SE) Serum Hepcidin Level (ng/mL)Hb Correction Without IV Iron and in Patients Who Have Low Iron Levels at Study Initiation. In connection with the conduct of the study, we also evaluatedseveral iron parameters to assess roxadustat’s ability to improve Hb without the use of IV iron. At baseline, 49% of the efficacy evaluable patients did nothave sufficient iron levels in the body to qualify for initiation of ESA treatment under current practice guidelines and would have been excluded fromparticipation in all prior ESA Phase 3 trials. These patients would not be considered iron replete and are typically first treated with IV iron prior to ESAtreatment initiation in an effort to ensure an adequate response to ESA and to minimize the risk of iron depletion. Of all patients in this study receivingroxadustat, only 38% were taking oral iron supplements. A mean Hb increase of 1.8 g/dL was achieved in the first 16 weeks of treatment without IV ironsupplementation. There was no evidence for iron depletion as CHr, reticulocyte Hb content or the amount of Hb in newly formed red blood cells, wasmaintained. Furthermore, there was evidence for improved iron utilization with increases in the MCV and increase in mean corpuscular Hb concentration(MCHC) over the first 16 weeks of treatment with roxadustat from baseline (p=0.0018 and p<0.0001, respectively); both MCV and MCHC typically decreasewhen there is iron deficiency.Despite the minimal use of oral iron and lack of IV iron usage, patients who were not iron replete had similar Hb responses at Week 16 as patients who wereiron replete.Reduction in Cholesterol Levels. In a post-hoc analysis of all cohorts, total cholesterol decreased during treatment with roxadustat by a mean of 26 (SD+/- 30)mg/dL after 8 weeks of therapy. Mean reductions in total cholesterol were greater for patients with abnormally high cholesterol levels (> 200mg/dL).Decreases in cholesterol levels were independent of whether patients were taking statins or other lipid lowering agents. Furthermore, the HDL/LDL ratioimproved with roxadustat treatment in the subgroup of patients in whom lipid profiles were conducted.Improvement in Quality of Life. Finally, in an analysis of exploratory endpoints we observed improved quality of life in patients treated with roxadustat usinga standard questionnaire called the SF-36 HRQOL. The largest positive changes from baseline occurred in the Vitality subscale (>4 points, p<0.0001) andPhysical Component (>1.6 points, p<0.005) subscales of the questionnaire. We believe these data demonstrate that by correcting patients’ anemia, roxadustatmay improve quality of life.Study 040: ESA Conversion Study in DD-CKD PatientsStudy 040 was designed to evaluate the short- and long-term dosing of roxadustat in patients on hemodialysis (“HD”) treatment. These results established aconversion dose relationship between ESAs and roxadustat that will be used for Phase 3 trials. Roxadustat maintained Hb without the use of IV iron, which isgenerally required for the treatment of anemia by ESAs.24This randomized, single-blind study was the first roxadustat study in patients on HD treatment. Part 1 was a six week open-label Phase 2 dose ranging studyin 54 patients (of which 42 were efficacy evaluable) to evaluate the impact of 4 sequential doses of roxadustat on dialysis patients’ Hb levels over six weeksupon switching from epoetin alfa, in comparison to those continuing prior epoetin alfa doses. Part 2 was a 19 week treatment study in 90 patients (of which83 were efficacy evaluable) to establish optimal conversion doses and dose adjustments. Patients included had previously demonstrated a wide range of ESA-responsiveness. Study 040 met its primary endpoint in Part 1 of maintaining Hb in patients previously treated with epoetin alfa at Week 6, indicating thatroxadustat can replace ESAs in DD-CKD. Study 040 also met its primary endpoint in Part 2 of maintaining Hb at Week 19, indicating that roxadustat may beeffective at long-term maintenance of Hb. IV iron was prohibited in both roxadustat treated patients and ESA treated control patients during this study.Maintenance of Hb Levels Following Conversion from ESAs. In Part 1 of this study (six week treatment), 41 patients were randomized to one of fourroxadustat dose cohorts, and 13 were randomized to continue on epoetin alfa treatment. The primary endpoint was maintaining an Hb level equal to or above0.5 g/dL below baseline Hb by the end of six weeks. As shown in the figure below, roxadustat had a dose-response effect for maintaining Hb levels. Thelowest roxadustat dose cohort of 1.0 mg/kg was comparable to epoetin alfa with maintenance in 44% of roxadustat patients and 33% of the control arm,patients who continued treatment with epoetin alfa (but who were required to stop concomitant treatment with IV iron). Roxadustat doses of 1.5 mg/kg orhigher were better than epoetin alfa at maintaining Hb, with 79.2% overall maintenance and with 80% maintenance at the 1.5 mg/kg roxadustat dose, 80%maintenance at the 1.8 mg/kg roxadustat dose and 77.8% maintenance at 2 mg/kg roxadustat dose.In Part 2 of the study (19 week treatment), 67 patients (with baseline ESA dose requirements ranging from 7 to 164.5 U/kg three times weekly) wererandomized to seven cohorts of roxadustat (with various starting doses) and 23 patients were randomized to continue on epoetin alfa. Hb correction in theroxadustat treated patients pooled across all treatment cohorts was maintained over the 19 week treatment period and was comparable to epoetin alfa. Theaverage roxadustat dose requirement for Hb maintenance was approximately 1.70 mg/kg three times weekly.In Part 1, which was dose ranging, we observed an increase in Hb level at doses of 1.5 to 2.0 mg/kg TIW as shown in the figures below. In Part 2, which was toestablish the optimal conversion dose, we observed similar Hb maintenance between roxadustat and epoetin alfa.FGCL-4592-040 Mean: (± SE) Hb Over Time During Anemia Treatment with Roxadustat or Epoetin Alfa in Dialysis Patients Part 1 (6 Weeks Dosing) Part 2 (19 Weeks Dosing)In addition, in an exploratory analysis of this study we observed a dose dependent decrease in hepcidin in Part 1 of this study.25FGCL-4592-040: Change in Hepcidin Level from Baseline (ng/mL)*n at baseline**p<0.05 (comparing hepcidin change from baseline between the 2.0 mg/kg roxadustat group and the epoetin alfa group).DD-CKD patients who switched from ESA treatment to treatment with 2.0 mg/kg roxadustat had significantly greater reduction in serum hepcidin level thanthose who continued ESA treatment (p=0.038).FGCL-4592-040 Mean (± SE) Serum Hepcidin Level (ng/mL)26Roxadustat Doses are Associated with Lower Circulating EPO Levels than Epoetin Alfa. The following chart shows the result of six patients who were highlyresponsive to epoetin alfa and participated in a substudy in which their EPO levels during treatment with roxadustat were compared to EPO levels when thepatients were receiving epoetin alfa prior to randomization. Their mean peak EPO concentration after an average dose of 44 U/kg was significantly higherwhen patients were receiving epoetin alfa relative to when they were receiving a mean roxadustat dose of 1.3 mg/kg as illustrated below. This observation isconsistent with the mechanisms of action of ESA and roxadustat, respectively, and we believe the lower EPO exposure observed with roxadustat offerspotential safety benefits.FGCL-4592-040: Mean (+SE) Plasma EPO Levels During Treatment With Roxadustat Compared With Prior Epoetin Alfa Dosing In the Same Patients(n=6)Maintenance of Adequate Iron Supply. The concentrations of Hb within newly formed red blood cells (“CHr”) is a measure of iron availability forerythropoiesis. In an exploratory analysis of this study, without IV iron supplementation (which was prohibited in this study), CHr was maintained duringroxadustat treatment but declined in patients who continued treatment with epoetin alfa. This finding indicates that unlike epoetin alfa, roxadustat allowsendogenous stores of iron to provide an adequate supply to newly forming red blood cells without any IV iron supplementation.27FGCL-4592-040: Mean Reticulocyte Hb Content (CHr) Over Time in Subjects Treated with Roxadustat and Epoetin Alfa*n at baselineReduction in Total Cholesterol. Consistent with our Phase 2 studies in NDD-CKD patients, we observed in a post-hoc analysis that roxadustat reduced totalcholesterol levels in stable dialysis patients, and this effect appeared durable throughout the 19 week treatment period as depicted below.FGCL-4592-040: Mean (±SE) Total Cholesterol Over Time During Treatment of Dialysis Patients with Roxadustat or epoetin alfa-Treated28Study 053: Correction of Anemia in Incident Dialysis PatientsResults from this study were published in the April 2016 Journal of the American Society of Nephrology. Incident dialysis patients are at increased risk ofserious cardiovascular events and death as compared to stable dialysis patients. The mortality rate among dialysis patients is highest during the first fewmonths of dialysis initiation, and on average, patients also require the highest doses of ESA in this period. These patients typically have high levels ofsystemic inflammation and require IV iron supplementation for ESA to be effective.This randomized, open-label study was designed to evaluate the safety and efficacy of roxadustat for correction of anemia in 60 incident dialysis patients (ofwhich 55 were efficacy evaluable) who were on dialysis for at least two weeks and not more than four months and had not been treated with ESAs, and tocompare the treatment responses to roxadustat under the different iron supplementation conditions. All treatment groups in Study 053 met their primaryendpoint in increasing Hb level during treatment: each cohort achieved maximum mean Hb increases from baseline, ranging between 2.8 g/dL to 3.5 g/dL,resulting from 12 weeks of roxadustat treatment. We observed that at week 12 in excess of 90% of the patients achieved a greater than 1 g/dL increase in Hbfrom baseline. In addition, while roxadustat corrected anemia without iron supplementation, oral iron enabled an optimal Hb response. More importantly,oral iron was as effective as IV iron for Hb correction by roxadustat. In contrast, ESA therapy requires IV iron supplementation in this patient population.This study also showed that roxadustat can correct anemia regardless of the patient’s level of inflammation as measured by CRP. At Week 12, the medianweekly dose of roxadustat was 4.0 mg/kg in this trial of incident dialysis patients and is similar to the median weekly dose of 4.45 mg/kg at Week 12 inStudy 040, our trial of roxadustat in stable dialysis patients. In contrast, ESA therapy typically involves higher doses at the time of dialysis initiation.The 48 HD patients were randomized to one of the three iron supplementation options: oral iron, IV iron or no iron. Included in the 60 patients were12 peritoneal dialysis (“PD”), patients who received oral iron. This study incorporated the same tier-weight based dosing regimen utilized in Study 041.Hb Correction in Incident Dialysis Patients Without IV Iron Administration. All three cohorts of roxadustat treated HD patients (no iron, oral iron or IV ironsupplementation) and PD patients (oral iron) achieved a significant increase in the maximum Hb change from baseline, the primary efficacy endpoint. Mostimportantly, the maximum increase in Hb was not significantly different between roxadustat treated HD patients supplemented with oral iron (3.5 g/dL) andthose supplemented with IV iron (3.5 g/dL). In contrast, a published study of ESAs in this patient population showed that patients supplemented with oraliron achieved a Hb response comparable to no iron supplementation and significantly lower Hb response than those supplemented with IV iron. These Phase2 data demonstrate that roxadustat, unlike ESAs, may eliminate the need for IV iron and thus avoid the side effects of IV iron in DD-CKD patients.29FGCL-4592-053: Hb Over Time During Anemia Correction with Roxadustat in Incident Dialysis Patients, with No Iron, Oral Iron, or IV IronSupplementationNote: Hb = hemoglobin; HD = hemodialysis; PD = peritoneal dialysis; n= number of patientsNote: *p<0.05 compared to IV iron and oral ironMaintenance of Iron Stores. In an exploratory analysis of this study, TSAT, a marker of iron stores, was well maintained during this period of intensiveproduction of red blood cells with oral iron alone, indicating that iron stores can be maintained without IV iron.FGCL-4592-053: TSAT Over Time During Anemia Correction With Roxadustat In Incident Dialysis Patients, With No Iron, Oral Iron, or IV IronSupplementationHb Correction Independent of Inflammation Status. As is typical of incident dialysis patients, about half of all patients had elevated CRP levels at baseline.In a post-hoc analysis of this study, we observed that Hb responses following roxadustat treatment were independent of baseline CRP levels. These datademonstrate that, unlike the ESAs, roxadustat has the potential to overcome the suppressive effects of inflammation on Hb responsiveness to treatment.30Significant Reduction in Hepcidin. Consistent with our other studies, in an exploratory analysis of this study we observed that patients’ hepcidin levels weresignificantly reduced, most notably in the no iron and oral iron cohorts, by > 50% from baseline, and to a lesser extent in the IV iron cohort. At follow-up (4weeks after stopping roxadustat), hepcidin levels returned towards baseline values. Hepcidin reduction may be one of the mechanisms for overcoming the Hbsuppressive effects of inflammation by making iron more available for roxadustat-induced erythropoiesis.Safety SummaryIn addition to the over 1,100 subjects who have been exposed to roxadustat in Phase 1 and Phase 2 clinical studies, including treatment of some patients for24 weeks in Phase 2 studies and several patients for approximately 4 years in a safety extension study, our ongoing Phase 3 program, which requires aminimum treatment duration of a year, provides additional long term safety data.A range of roxadustat doses, up to 3.0 mg/kg in DD-CKD patients and up to 5.0 mg/kg in healthy volunteers, have been administered and all roxadustat doseshave been well-tolerated. In January 2016, the roxadustat data safety monitoring board (“DSMB”) completed its scheduled review of the data from all activePhase 3 roxadustat clinical trials and recommended that the program proceed with no protocol changes. The following summarizes the safety findings of ourpreclinical, Phase 1 and Phase 2 studies: •No Overall Safety Signals. An independent data monitoring committee consisting of external experts in nephrology, hepatology, and biostatisticsreviewed safety data from all U.S. and Europe Phase 2 studies, and determined there were no safety signals. The overall frequency and type oftreatment-emergent adverse events (“TEAEs”) and serious adverse events (“SAEs”) observed in these clinical studies reflect events that would beexpected to occur in each of the NDD-CKD and DD-CKD patient populations. Safety analyses did not reveal any association between the rates ofoccurrence of cardiovascular events with roxadustat dose, rate of Hb rise or Hb level. The SAEs experienced in our studies identified by the principalinvestigator as possibly related to roxadustat were a stroke in a patient with a prior history of multiple strokes, one incident of vomiting, and oneincident of deep venous thrombosis. The most commonly reported TEAE in the Phase 2 studies were diarrhea, nausea, urinary tract infection,nasopharyngitis, peripheral edema, hyperkalemia, headache, hypertension and upper respiratory tract infection.Of our completed Phase 2 clinical studies outside of Japan and China (discussed in their respective sections below), two (Studies 017 and 040) werecontrolled, and two were not, one with placebo and one with ESA.For Study 017, which had a treatment period of 4 weeks, for 88 subjects on roxadustat, and 28 subjects on placebo, we observed treatment emergentSAEs (“TSAEs”), in 4 patients (4.5%) on roxadustat, with 0 cardiovascular SAEs and 0 SAEs for the composite safety endpoint. There were alsoTSAEs in 1 patient (3.6%) in the placebo arm of the study, including 1 cardiovascular SAE and 0 SAEs for the composite safety endpoint. Thecomposite safety endpoint (exploratory analysis) includes death, myocardial infarction, congestive heart failure, subendocardial ischaemia,cerebrovascular accident, thrombosis (fistula), arteriovenous fistula occlusion, angina pectoris, and vascular graft thrombosis. A patient mayexperience more than one SAE, in which case a patient is only counted once in this analysis. TSAEs observed in patients treated with roxadustat werearteriovenous fistula site complications, dyspnea, femoral neck fracture and non-cardiac chest pain. SAEs observed in patients treated with placebowere acute renal failure and pericarditis.For Study 040, for those who had a treatment period of 19 weeks, for 66 subjects on roxadustat, and 23 subjects on ESAs, we observed TSAEs in 15patients on roxadustat (22.7%), including 1 cardiovascular SAEs (1.5%), and 8 SAEs for the composite safety endpoint (12.1%), and TSAEs in4 patients on ESAs (17.4%), including 2 cardiovascular SAEs (8.7%), and 4 SAEs (17.4%) for the composite safety endpoint. TSAEs categorized bySystem Organ Class, a standard event classification, observed in patients treated with roxadustat were infections and infestations (5), metabolism andnutrition disorders (2), cardiac disorders (1), gastrointestinal disorders (1), nervous system disorders (2), respiratory, thoracic and mediastinal disorders(2), skin and subcutaneous tissue disorders (1), injury, poisoning and procedural complications (2), and psychiatric disorders (1). TSAEs categorizedby System Organ Class observed in patients treated with ESA were infections and infestations (3), metabolism and nutrition disorders (3), cardiacdisorders (1), respiratory, thoracic and mediastinal disorders (1), blood and lymphatic system disorders (1) and vascular disorders (1).The differences in the SAE percentages described are not considered statistically significant.The three SAEs described above that were considered by the principal investigator to be possibly related to roxadustat did not occur in these fourstudies.•No Liver Enzyme Safety Signal. Liver enzymes were monitored closely in the roxadustat Phase 2 clinical development program. No evidence ofhepatotoxicity was observed in any of the roxadustat clinical trials, and the independent data monitoring committee concluded that there was noconcern for hepatotoxicity to date. Liver enzymes are being monitored in Phase 3 according to current FDA guidelines, without any specialrequirements.31 •Extensive Evaluation of Cancer Risk. Furthermore, to assess the potential cancer risk of roxadustat, we conducted 12 tumor studies in rodents. Thesestudies included xenograft, syngeneic, or spontaneous tumors of lung, colon, breast, pancreas, melanoma, ovarian, renal, prostate and leukemic origin,several of which are reported to be dependent on vascular endothelial growth factor (“VEGF”), a protein that can be regulated by HIF for whichincreased levels have potentially been linked to increased tumor growth. No effect on tumor promotion was observed with roxadustat in any of thestudies. In addition, roxadustat had no effect on tumor initiation or metastasis in the studies in which these end-points were also measured. Five otherHIF-PH inhibitors from our library have been evaluated in many of the same rodent tumor models as roxadustat, as well as some additional ones(35 studies of six HIF-PH inhibitors in 18 models total), with no observed effect on tumor initiation, promotion or metastasis. Finally, no significantincreases in plasma VEGF levels have been observed in any of our nonclinical studies at clinically relevant erythropoietic doses of roxadustat.In March 2015, we received final reports for two-year rat and mouse carcinogenicity studies of roxadustat. Roxadustat treatment had no adverse effecton survival and did not cause carcinogenic effects in either species. Two-year rodent carcinogenicity studies that were conducted with one of theother HIF-PH inhibitors evaluated in the tumor models showed no effect on mortality or incidence of tumors.In clinical studies to date, we and our independent data monitoring committee have not identified any evidence to suggest tumor risk in the use ofroxadustat. •No QT Prolongation. We conducted a Thorough QT study evaluating roxadustat doses up to 5 mg/kg (approximately four times the averagemaintenance dose studied in the NDD-CKD patient population). A lengthened QT interval is a biomarker for certain ventricular arrhythmias and a riskfactor for sudden death. Our results demonstrate that roxadustat did not affect the QT interval in this study. Based on the extensive safety datacollected to date, we believe that roxadustat has a favorable safety profile that supports its further development in Phase 3 clinical studies.ROXADUSTAT FOR THE TREATMENT OF ANEMIA IN CHRONIC KIDNEY DISEASE IN CHINAWe believe there is a particularly significant unmet medical need for the treatment of anemia in CKD in China. Specifically, anemia is undertreated in therapidly growing number of dialysis stage patients and anemia is not treated in non-dialysis patients including patients who are eligible for dialysis but arenot treated due to a shortage of dialysis facilities, and cannot easily obtain anemia treatment outside of the dialysis system. In the context of the rapidlygrowing Chinese pharmaceutical market, we believe that the demand for anemia therapy will continue to grow as a result of an expanding CKD population,as well as the central government’s mandate to make dialysis, which is still in the early stages of infrastructure development, more available throughexpansion of government reimbursement and build-out of dialysis facilities. We believe that roxadustat is a particularly promising product candidate for thismarket. China’s approved generic drug name for roxadustat (also referred to as FG-4592) is 罗沙司他.Phase 3 Studies in ChinaWe and our Chinese subsidiary FibroGen Beijing recently reported topline results from our two Phase 3 CKD anemia studies in China. We are encouragedthat roxadustat met the primary endpoints in both our DD-CKD and NDD-CKD Phase 3 trials in China. We plan to complete the ongoing safety extension ofthese two studies in at least 100 patients in the second quarter of 2017 and complete a new drug application submission for roxadustat in China in the thirdquarter of 2017.Study 4592-808: 8 Week Placebo-Controlled Portion of 26 Week Correction in China NDD-CKD PatientsIn the double-blind, placebo-controlled eight-week portion of the 26-week NDD-CKD clinical trial in China, 151 anemia patients were randomized 2:1 toreceive roxadustat (n=101) or placebo (n=50). Roxadustat met its primary efficacy endpoint of correcting anemia, by achieving a statistically significantincrease in Hb levels compared to placebo over eight weeks. Furthermore, the secondary endpoint of Hb response was met as Hb response was achieved by ahigher proportion of patients in the roxadustat arm than in the placebo arm.Roxadustat-treated patients achieved a mean Hb increase of 1.9g/dL from baseline (8.9g/dL) over eight weeks of treatment vs. a mean change in Hb of -0.4g/dL (from 8.9 g/dL baseline) in the placebo arm; the least square mean (“LS Mean”) difference of the two arms is significant, p<0.000000000000001.A significantly higher proportion of roxadustat patients achieved Hb response (an increase ≥1g/dL from baseline) after eight weeks vs. placebo patients,84.2% compared to 0.0% (p<0.000000000000001). 67% of the roxadustat treated patients vs 6% of placebo- patients achieved Hb correction to be at orabove the desired range of Hb≥10 g/dL within 8 weeks, p=0.000000000000077.32There is a significant increase in Hb level from baseline at every weekly measurement between Weeks 2 to 8 per figure below.FGCL-4592-808: Mean (+/- SE) Change from Baseline in Hemoglobin (Hb)Study 4592-806: 26 Week Maintenance in China DD-CKD PatientsIn the Phase 3 DD-CKD study, 304 patients (271 hemodialysis and 33 peritoneal dialysis patients) previously on epoetin alfa were randomized to and treatedwith roxadustat (n=204) or epoetin alfa (n=100) for 26 weeks. Prior to randomization, patients in this study were previously treated with stable doses of EPO:7% patients were treated with 利血宝® (“Li Xue Bao”) epoetin alfa, manufactured in Japan and marketed in China by Kyowa Hakko Kirin ChinaPharmaceutical Co., Ltd. (“Kirin EPO”) and 93% of patients were treated with one of 8 other brands of EPO commercially available in China. All the patientsrandomized to the active comparator arm were treated with Kirin EPO.The primary endpoint was mean change in Hb from baseline to the average level during the final five weeks of the 26-week treatment period. Roxadustat metthe predefined non-inferiority criterion for this primary endpoint in comparison to Kirin EPO in both full analysis set and per protocol set (“PPS”) analysis. Ina pre-specified sequential analysis, roxadustat also showed statistical superiority over Kirin EPO for the primary endpoint, the mean Hb increase observed inthe roxadustat arm was higher than in the Kirin EPO arm, 0.75g/dL vs. 0.46g/dL, with a significant difference in the LS Mean Hb change in the two treatmentarms, p=0.037, in PPS analysis; baseline Hb was 10.4 g/dL in both treatment arms.Anemia in patients treated with roxadustat was corrected earlier than in Kirin EPO patients and roxadustat maintained Hb levels at a higher level (between10-12 g/dL) than those receiving Kirin EPO despite the increase in average dose of Kirin EPO (relative to average baseline EPO dose) received by patients inthe comparator arm (as shown in the inflammation figures below).FGCL-4592-806: Mean (+/- SE) Change from Baseline in Hemoglobin (Hb)33We performed a subgroup analysis based on patients’ levels of inflammation, a common co-morbidity with CKD patients. Roxadustat raised and maintainedhemoglobin levels in patients with inflammation (defined as having baseline C-reactive protein levels > ULN 4.9 µg/L) at doses that were equal to or lowerthan those received by the patients without inflammation. In contrast, patients with inflammation in the Kirin EPO arm realized lower Hb levels than patientswith normal CRP levels (despite receiving higher doses of EPO than patients without inflammation), reflecting roxadustat’s potential to overcome thehyporesponsiveness seen in ESA treatment, as discussed in the section above titled “Limitations of the Current Standard of Care for Anemia in CKD”. Thetwo figures below show mean change in Hb with mean patient dose, and mean Hb levels with mean patient dose, in patients with and without inflammation.FGCL-4592-806: Mean (+/- SE) Change in Hemoglobin (Hb) from Baseline andMean (+/- SE) Dose for Patients With and Without Inflammation34FGCL-4592-806: Mean (+/- SE) Hemoglobin (Hb) andMean (+/- SE) Dose for Patients With and Without InflammationInitial findings suggest that adverse events in these Phase 3 China studies were consistent with previous clinical trials of roxadustat in the CKD patientpopulation with no new or unexpected safety signals identified. The 52-week safety assessment in at least 100 patients is ongoing with expected studycompletion in the second quarter of 2017. Full results from these Phase 3 trials are expected to be reported thereafter.China Phase 2 StudiesWe performed two Phase 2 studies in China, one trial in NDD-CKD patients, and another trial in DD-CKD patients. In these trials, Hb correction in NDD-CKDpatients and Hb maintenance in DD-CKD patients replicated the results seen in the U.S. trials. SAEs were progression of CKD, infection and high potassiumlevels and the most common adverse events were infections, high potassium levels, nausea and dizziness. There were no dose-related trends or imbalances inthe nature of adverse events between patients treated with roxadustat compared to patients treated with either placebo (study 047) or epoetin alfa control(study 048) groups.Study 047: 8 Week Placebo-Controlled Correction in China NDD-CKD PatientsIn this multi-center, double-blind, placebo-controlled study, 91 anemic CKD patients were randomized 2:1 to roxadustat or placebo treatment groups,respectively, in two sequential dose cohorts or placebo. Results from this study were published in the August 2015 journal of Nephrology DialysisTransplantation. Iron repletion at baseline was not required and IV iron supplementation was prohibited during the trial; oral iron supplementation wasallowed during the trial, similar to the corresponding U.S. Study 041. The study used tier-weight starting dose for four weeks after which the roxadustat dosewas adjusted, depending upon the initial response to treatment. Study 047 met its primary endpoint of a mean maximum increase from baseline Hb at the endof Week 8. The mean Hb increases at the end of eight weeks of treatment were 1.6 g/dL and 2.4 g/dL in the low-dose and the high dose cohort, respectively,compared to 0.4 g/dL for placebo, p < 0.0001 for each cohort compared to placebo.35FGCL-4592-047: Hb Over Time (g/dL) in Chinese NDD-CKD Patientsn at baseline For Study 047, which had a treatment period of 8 weeks, for 61 subjects on roxadustat, and 30 subjects on placebo, we observed TSAEs in 8 patients onroxadustat (13.1%), with 0 cardiovascular SAEs, and 0 SAEs for the composite safety endpoint, and TSAEs in 4 patients on placebo (13.3%), including1 cardiovascular SAE (3.3%), and 1 SAE (3.3%) for the composite safety endpoint. TSAEs observed in patients treated with roxadustat were chronic renalfailure (4), upper respiratory tract infection (1), hyperkalaemia (2) and urinary tract infection (1). TSAEs observed in patients treated with placebo wereunstable angina (1), anemia (1), retinal detachment (1), pneumonia (1) and gastritis (1).Study 048: 6 Week Conversion in China DD-CKD PatientsIn this multi-center, open-label, ESA-controlled study, 87 HD patients (of which 82 were efficacy evaluable) with Hb 9 to 12 g/dL previously maintained withESAs were randomized 3:1 to roxadustat or epoetin alfa treatment groups, respectively, in three sequential dose cohorts of increasing starting doses ofroxadustat. Results from this study were published in the February 2016 American Journal of Kidney Disease. This study design was similar to Part 1 ofStudy 040. Study 048, an exploratory study, achieved its objective of number (%) of patients with successful dose conversion whose Hb levels aremaintained at no lower than 0.5 g/dL below their mean baseline value at the end of Weeks 5 and 6 (59.1% for the low-dose, 88.9% for the mid-dose, and100% for the high dose). The Hb responses to the roxadustat treatment of Chinese dialysis patients, with the low dose cohort were numerically similar toepoetin alfa, while the mid-dose and the high-dose cohorts each had a statistically significantly higher Hb response rate than epoetin alfa. Hb responses to theroxadustat treatment of Chinese dialysis patients (as shown in the figure below) were similar to Part 1 of Study 040 in the U.S.FGCL-4592-048: Hb Over Time in Chinese Stable Dialysis PatientsFor Study 048 which had a treatment period of 6 weeks, for 74 subjects on roxadustat, and 22 subjects on ESAs, we observed 0 TSAEs in patients onroxadustat, including cardiovascular SAEs and for the composite safety endpoint. There were also 0 TSAEs in the patients taking ESAs.36Phase 1 TrialsWe completed Phase 1 trials of single and multiple ascending doses of roxadustat. Key findings were: •Roxadustat pharmacokinetic parameters in Chinese are similar to those in Caucasians and Japanese. •Stimulation of endogenous EPO, a marker of roxadustat pharmacodynamics, in Chinese is similar to stimulation in Caucasians and Japanese. •Roxadustat was well tolerated and there were no negative safety signals.Addressable Patient Populations in ChinaBased on a cross-sectional survey performed between September 2009 and September 2010 published in the Lancet (Zhang, et al. Lancet (2012)), there are anestimated 119.5 million CKD patients in China. There were approximately 19 million patients in CKD stage 3, stage 4 and stage 5 which we have groupedinto three categories: DD-CKD patients; Dialysis Eligible patients who need dialysis under treatment guidelines but are not dialyzed (“Dialysis EligibleNDD-CKD”); and stages 3 and 4 patients as well as stage 5 patients who are not eligible for dialysis (“Other NDD-CKD”).DD-CKD (Dialysis)Dialysis can be delivered in the form of HD, or peritoneal dialysis (“PD”). In China, HD is mostly performed at dialysis clinics within hospitals, not atfreestanding dialysis centers outside of hospitals which is the common practice in the U.S. PD is self-administered at home by patients, and they visit theirnephrologists on a monthly basis at the hospital for monitoring and follow-up.Dialysis Eligible NDD-CKDDialysis Eligible NDD-CKD refers to patients who need dialysis under Chinese treatment guidelines but are not dialyzed. The Chinese treatment guidelinesrecommend initiation of dialysis at eGFR<10 mL/min/1.73 m 2 (and eGFR<15 mL/min/1.73m 2 for diabetic nephropathy patients). The Minister of Healthestimated that one to two million people in China were eligible for dialysis in 2011, and of those we believe that only 300,000 to 400,000 are on dialysis.While the size of dialysis population is large and approaches that of the U.S., it nevertheless falls far short of the number who require dialysis treatment. Webelieve that this Dialysis Eligible NDD-CKD population is characteristic of developing markets like China and is at risk for severe anemia.Other NDD-CKDOther NDD-CKD refers to the other sub-groups of CKD patients within non-dialysis who are earlier stage: CKD patients in stage 3 and stage 4, as well as stage5 who are not eligible for dialysis. Many of these patients receive medical care in endocrinology, cardiology or internal medicine clinics where they aretreated for their primary disease.Unmet Medical NeedDD-CKD Patients are Under-Treated for AnemiaWe believe there is chronic under-treatment for anemia within the DD-CKD patient population, as many patients do not reach target Hb levels despite ESAtherapy. The consensus opinion of the expert panel assembled by the Chinese Journal of Nephrology in 2013 advocated treating to Hb 11.0 g/dL to 13.0g/dL, whereas we believe, based on our key opinion leader Advisory Board Meeting in Shanghai in March 2013 that in clinical practice, nephrologistsgenerally use Hb 10.0 g/dL to 12.0 g/dL as the target. However, according to the 2012 Shanghai Dialysis Registry, approximately 50% of patients inShanghai did not exceed a Hb level of 10.0 g/dL and approximately 75% did not exceed Hb 11.0 g/dL. Over 19% of dialysis patients failed to reach aseverely low Hb level of 8.0 g/dL. The Chinese Renal Data System reported that in 2011, the most recently reported data, the average Hb level of DD-CKDpatients in the registry was approximately 9.1 g/dL and the percentage of patients who reached Hb levels greater than or equal to 11.0 g/dL was only about21%.37We believe there are a number of factors that have led to under-treatment of anemia in the dialysis population, including: •The ESA doses used are generally not sufficient to treat to target Hb levels for certain patient populations. We believe that the reasons includeconstraints on reimbursement for anemia treatment and fixed hospital pharmacy budgets, as well as safety and efficacy limitations of thesedrugs. Lower dose levels are particularly ineffective in the hypo-responsive patient population. •The use of IV iron, which is often needed to correct Hb to target levels with ESAs, is limited due to limited reimbursement and perceivedclinical risk. According to the Shanghai Dialysis Registry, in 2011, less than 9% of dialysis patients in Shanghai were treated with IV iron. •For the PD population, where patients are not already visiting the hospital for HD and are receiving ESA treatment during dialysis, similarlogistical and financial issues that impede ESA use in the NDD-CKD population discussed below apply to these patients.Dialysis Eligible NDD-CKD and Other NDD-CKD Patients are Largely Un-Treated for AnemiaApart from the ESAs used by the dialysis patients in China, we believe that there is a low level of use of ESAs in the non-dialysis population. Based on ourclinical trial experience in China, we believe use of ESAs in this population is generally limited to “CKD Clinics” at major research hospitals in top citieswhere CKD patients are admitted into programs for academic research purposes. We believe there are a number of significant impediments that inhibit the useof ESAs in the outpatient setting, for patients who are not already visiting the hospital for dialysis treatment on a regular basis. •Generally, under the Chinese healthcare system, patients do not have a personal physician but rather are seen by the physician on the scheduleon the day of the visit. This limited continuity of care makes managing the potential risks of ESAs and the titration of ESA treatment needed tomaintain Hb within target range particularly difficult. •Hypertension and associated co-morbidities are top risk factors for the CKD population. Many physicians in China believe that for theoutpatient NDD-CKD population, the risk of developing new or exacerbating existing hypertension from ESA with the attendant risk ofworsening renal failure outweigh the benefits of treating anemia. •Injectable drugs like ESAs present a challenge in China because even subcutaneous administration is performed at hospitals and not in thehome. Frequent hospital visits for injections, for the sole purpose of receiving ESA treatment, can present a substantial logistical and financialburden on patients. •Nephrologists are the primary prescribers of ESAs. Those CKD patients with hypertension or diabetes who are treated by other physicians, suchas cardiologists and endocrinologists, are generally not treated with ESAs. •Non-dialysis patients are covered under outpatient reimbursement, unlike dialysis patients who are covered under Severe Diseasereimbursement, when available. The lower level of reimbursement coverage means a higher patient co-pay, which further limits ESA use andcompliance.We believe that these impediments have contributed to a low rate of ESA use in the NDD-CKD population in China, and that roxadustat, as an oral agenttriggering the HIF mechanism of action, has the potential to make this population accessible for effective anemia treatment in CKD.Growing Market OpportunityHealthcare expenditures in China have more than doubled between 2006 and 2011, from $156 billion to $357 billion. China is projected by IMS Health tobecome the world’s second largest pharmaceutical market after the U.S. by 2016 (IMS Market Prognosis, May 2012). We believe several factors will continueto drive the growth of the overall pharmaceutical market in China as well as the market for the treatment of anemia in CKD. These factors include continuingurbanization, an aging population and the increasing prevalence of chronic diseases (particularly diabetes and hypertension which are common causes ofCKD), and income growth. We also believe that the increasing standard of living will drive higher rates of disease awareness, leading to greater rates ofdiagnosis and treatment.38The strong growth in the China healthcare sector is a direct result of central government policy. In 2009, the Chinese government implemented healthcarereform that greatly expanded reimbursement coverage across population, scope, and level of coverage, and in 2011, the 12th Five Year Plan placed thebiomedical industry and development of innovative medicines as a strategic priority for the country. The following table shows the growth and size of theChina healthcare market: 2006($US) 2011($US)Total Healthcare Expenditures $156 billion $357 billionPer Capita Healthcare Expenditures $119 $261Market Size for Pharmaceuticals $27 billion $71 billionPercentage of Population with Health Insurance 43% >95%China in Global Ranking of Pharmaceutical Markets 9th 3rd Source: Health care in China: Entering “uncharted waters,” McKinsey & Company, healthcare systems and services practice,November 2012Current ESA Market Size and Drivers of Market Growth in ChinaTotal ESA sales in China were approximately $145 million in 2013, and the ESA market in China has grown at a 25% compound annual growth rate between2006 and 2013 based on data from IMS Health.We believe that given the limited availability of dialysis in China, the dialysis market is still in the early stages of development relative to the U.S., and hasthe potential for sustained long-term growth. We believe growth of dialysis will be driven by the expansion of reimbursement and expansion of dialysisfacilities. We further believe that the growing pipeline of CKD patients and expansion of reimbursement will drive growth in demand for anemia treatment inCKD patients. •Expansion of Reimbursement. Reimbursement exists for the use of ESAs in the treatment of anemia in CKD and the coverage levels areexpanding. Under Basic Medical Insurance, the reimbursement program for the urban population, coverage for healthcare and drugs iscategorized into one of three categories: outpatient, inpatient, and Severe Disease. Both the Dialysis Eligible and Other NDD-CKD patients arereimbursed under outpatient coverage. As an example, coverage levels for outpatient are in the 60-85% range in Shanghai, depending on levelof hospital visited and patient age. Dialysis patients, on the other hand, receive reimbursement under the more generous Severe Diseasecoverage, which is reimbursement for catastrophic healthcare expenditures. Coverage levels are set at a minimum level of 50% by policy andare as high as 85% for employees and 92% for retirees in Shanghai. We expect the availability of Severe Disease reimbursement to significantlydrive the utilization of dialysis services and ESAs in the coming years. •Expansion of Dialysis Infrastructure. The number of DD-CKD patients increased from approximately 70,000 in 2007 to an estimated 300,000to 400,000 in 2013 and has grown at a compound annual growth rate of 25% to 30% per year from 2007 to 2013. Despite this substantial rateof growth, the Ministry of Health and the Chinese Society of Nephrology have publicly recognized the need for further investment in dialysisinfrastructure to accommodate the expected continued growth of the patient population requiring dialysis. PD is an alternative to HD and doesnot require the level of capital investment in facilities and equipment that is necessary to enable HD. At the end of 2012, PD was estimated toaccount for 10% of the current dialysis population. •Demographics-Driven Growth. Diabetes and hypertension are common causes of CKD, the rates of which have been growing in China over pasttwo decades. China is experiencing epidemiological changes in metabolic diseases due to economic development, urbanization and an agingpopulation. We believe the increase in diabetes and hypertension prevalence will result in increasing numbers of patients with CKD in thefuture.Our China SolutionWe believe that roxadustat, if approved, has the potential to address the unmet medical need for the treatment of anemia in each of the three categories ofCKD patients in China. Several of the safety, efficacy, reimbursement and convenience advantages that roxadustat, our oral therapeutic, potentially offersover ESAs (refer to “— Our Solution — Roxadustat — A Novel, Orally Administered Treatment for Anemia”) are particularly applicable in the China market.39Roxadustat May Address Chronic Under-Treatment in DD-CKD PatientsWe expect roxadustat to be viewed as more attractive than ESAs, and particularly attractive within certain categories of the dialysis population — patientswho are not treated to target Hb levels for any reason, patients who are hyporesponsive to ESAs, patients on PD, which is home-based, and DD-CKD patientswho have not previously received ESA treatment. •Roxadustat May Increase Rate of Successful Anemia Treatment. We believe that the level of ESA dosing generally used in China is notadequate to achieve target Hb levels for many dialysis patients, especially with minimal use of IV iron. The dose levels used are within a verynarrow range due to clinical concerns over ESA safety at higher doses. Moreover, reimbursement limits may cap ESA dose. In contrast,assuming roxadustat is approved, we believe we can price roxadustat so that reimbursable doses of roxadustat will be sufficient to treat mostpatients to target Hb levels. •Roxadustat May Address Hyporesponsiveness. Hyporesponsive patients, who often fail to respond to ESA treatment, in particular are ofteninadequately treated due to need for significantly higher doses of ESAs. Our data suggest that roxadustat may be safe and effective in thispatient population without the use of high doses. •Roxadustat May Reduce Requirements for IV Iron. ESAs generally require IV iron for effective anemia treatment, and IV iron use is limited inChina due to limited reimbursement and perceived clinical risk. Roxadustat potentially eliminates the need for IV iron to reach treatmenttarget.Roxadustat May Address Lack of Access of ESA Treatment in NDD-CKD PatientsWe view NDD-CKD as the segment where roxadustat, with the benefits of the HIF mechanism of action and being an orally administered small molecule,could potentially represent the only viable treatment solution for this patient population. •Roxadustat May Make Treatment Accessible and Feasible. As an oral agent, roxadustat eliminates the need for frequent hospital visits whichare needed for ESA administration, decreasing the overall cost and inconvenience of treatment, particularly for DD-CKD patients undergoingPD who are otherwise treated in the home, as well as Dialysis Eligible NDD-CKD and Other NDD-CKD patients. •Roxadustat May Have an Improved Safety Profile. ESA treatment is associated with an increased risk of severe adverse events includinghypertension, stroke, myocardial infarction and death. Our data suggest that roxadustat may not increase the risk of these events and thereforemay be safer than ESAs thereby potentially removing a significant deterrent to anemia therapy in China.Roxadustat May Add Value in Both the NDD-CKD and DD-CKD Patient Populations •Roxadustat May Reduce Overall Cost of Treatment Associated With Anemia. For the equivalent reimbursement cost to the government, webelieve that roxadustat may deliver a higher potential clinical benefit compared to ESAs. Roxadustat, if approved, could treat patients to targetHb level. Roxadustat could also potentially lower the use of IV iron and anti-hypertensives. Moreover, the total cost of care would be reducedby lowering loss of time and cost of hospital-based ESA injections, and eliminating the infrastructure costs necessary to store ESAs in a coldstorage environment. Finally, patients would benefit by reducing the cost of travel to the hospital and the potential lost wages for hospitalvisits.CommercializationRegulatory StrategyWe are committed to bringing first-in-class innovative medicines to China on an accelerated basis, and consistent with this commitment, roxadustat is beingadvanced in China as a Domestic Class 1 applicant under the China Food and Drug Administration (“CFDA”) designations. Innovation by domesticcompanies has become a top priority for the Chinese government. “Domestic” means that all clinical data for approval is generated from within China, andmanufacturing for both drug substance and drug product is conducted in China. Whereas any new chemical entity (“NCE”) that has not yet been approvedanywhere in the world can be designated as Class 1, roxadustat is also first-in-class, defined as the first NCE for a brand new mechanism of action.Given that roxadustat will be considered for market approval in China independent of approvals elsewhere in the world, we currently expect China to be thefirst NDA filing worldwide. To our knowledge, this would represent one of the first instances where China is the first approval country for a first-in-class drug.40Manufacturing CertificationAs a Domestic Class 1 applicant, FibroGen will be performing commercial manufacturing for both drug substance and drug product in China. FibroGenBeijing has been operating a 4,800 square meter manufacturing facility in Beijing after we received a Pharmaceutical Production Permit (PPP) from theBeijing CFDA in August 2014. The PPP is a general certification by the CFDA that the facility is deemed ready for current good manufacturing practices(“cGMP”) production. We expect to be granted the Manufacturing License for Drug Substance and Drug Product for roxadustat at the time of NDA approval,and will become the sole licensed manufacturer for each in China. Under the current regulatory system in China, it is the manufacturer, not the sponsor, who has the right to sell the manufactured product to the market andbook revenues. A recently implemented CFDA regulation has opened up manufacturing and supply chain options that were previously not possible. InNovember 2015, China announced a three-year pilot program - Marketing Authorization Holder System (“MAH”) - in certain regions, and implemented theprogram in August 2016. Under this system, a sponsor of a compound such as roxadustat has the right to obtain additional drug supply from contractmanufacturing organizations without giving up its manufacturing license. We intend to participate in this program and if accepted, we may be able tooutsource drug product or active pharmaceutical ingredient (“API”) manufacturing to third parties to support commercialization. In addition, there are new and evolving environmental and manufacturing regulations in China limiting manufacturing in large cities such as Beijing. Inorder to prevent or mitigate delay in commercialization, we are establishing a 5,500 square meter commercial manufacturing facility in Cangzhou, China, andexpect it to be operational shortly after NDA approval.Market SegmentationWe believe DD-CKD market in China is readily addressable in the near term, and we believe roxadustat has the potential to deliver a compelling valueproposition in particular to certain subgroups within DD-CKD: patients who are not treated to target Hb levels for any reason, patients who are hypo-responsive to ESAs, and patients on PD, which is performed at home. In addition, we believe that roxadustat, if approved, would have the potential to be thepreferred anemia treatment for newly-initiated dialysis patients who have not been previously treated with ESA. With the expected expansion of SevereDisease reimbursement, we believe that the number of DD-CKD patients will increase steadily. We believe that it could require more than a decade for Chinato address the treatment gap between patients who need dialysis and those who are actually dialyzed.If roxadustat is approved, we believe the Dialysis Eligible NDD-CKD population could represent another readily accessible and potentially new marketsegment for anemia therapy. There is an urgent and severe unmet medical need for these very sick patients, and the current low rate of treatment within thispatient group could be addressed by an approved anemia treatment such as roxadustat. We view the Other NDD-CKD population as a longer term marketopportunity where the potential number of patients could be substantial.We believe the hospital-based nature of the China healthcare system is a very attractive feature of this market as it lends itself to rapid adoption of roxadustatwithin nephrology practices and across specialties, unlike in the U.S. where dialysis is performed separately at freestanding dialysis centers and CKD istreated at widely dispersed clinics and primary care offices across the country. In China, within nephrology, the same physicians care for dialysis, DialysisEligible NDD-CKD and Other NDD-CKD patients. Moreover, cardiologists and endocrinologists are located at the same hospitals as nephrologists, andprescriptions from all specialties are often filled at the same hospital pharmacy; as a result, the points of sale are highly concentrated.ReimbursementAs roxadustat is potentially a chronic use drug that addresses an unmet medical need and is intended to benefit large numbers of Chinese patients, we intendto apply for reimbursement by the Chinese government. Pricing for drugs sold without reimbursement is determined by the drug manufacturer, whereaspricing for drugs under reimbursement is determined by the government. We believe the compelling pharmaco-economic value proposition will support fairpricing for roxadustat.AstraZenecaWe have entered into an agreement with AstraZeneca relating to roxadustat in China. Under the agreement, FibroGen Beijing will hold all of the regulatorylicenses issued by China regulatory authorities and be primarily responsible for regulatory, clinical and manufacturing activities.AstraZeneca will conduct commercialization activities as well as serve as the national distributor for roxadustat, sourcing the distribution of roxadustat to anetwork of regional and local distributors. FibroGen Beijing will be responsible for medical affairs and physician education.41We believe that the collaboration will not only help to accelerate market access and patient adoption, but also reduce our risks associated with roxadustatlaunch in China, as AstraZeneca has significant experience with the China market and will be paying for launch-related commercialization costs in advanceand recouping 50% of these expenses from initial roxadustat profits.Planned Phase 4 StudiesThe CFDA imposes a five-year monitoring surveillance period after NDA approval on all Class 1.1 innovative drugs like roxadustat. Based on current CFDAguidelines, we believe we will need to conduct a 2,000 subject post-marketing study to demonstrate the long-term safety of roxadustat as well as provideadditional information related to the quality of the manufacturing process for roxadustat. The study design and patient size will be determined after Phase 3data become available.ROXADUSTAT FOR THE TREATMENT OF ANEMIA IN CHRONIC KIDNEY DISEASE IN JAPANIn Japan, Astellas is currently conducting six Phase 3 anemia studies, four in DD-CKD and two in NDD-CKD. These studies include conversion studies andstudies in ESA-naïve patients, studies in hemodialysis and peritoneal dialysis, and studies comparing roxadustat to active control. Japan Phase 2 Studies In 2016 we, along with our partner, announced positive data from Astellas’ two Phase 2 studies in Japan of DD-CKD and NDD-CKD patients. Roxadustat waswell tolerated and met the primary objective of demonstrating dose-related rates of Hb increase measured over the first six weeks of treatment, as well asanemia correction and Hb maintenance over the 24-week treatment period. Study 1517-CL-0303: 24 Week Placebo-Controlled Correction in Japan NDD-CKD PatientsIn this multi-center, randomized, parallel-group, placebo-controlled, double-blind study over 24 weeks, 107 NDD-CKD patients were randomized to one ofthree roxadustat treatment arms (50 mg, 70 mg, 100 mg) or to a placebo arm, with roxadustat orally administered TIW for the first six weeks of the study toevaluate dose response of efficacy and safety. This was followed by dose titration every four weeks until Hb response was achieved, at which point Hb wasmaintained with patients randomized to one of two dosing regimens (continuation of TIW dosing or a change to weekly dosing). Results showedachievement in the full analysis set of dose response in the three roxadustat treatment arms, with a mean rate of Hb increase of 0.200, 0.453, and 0.570 g/dLper week (50 mg, 70 mg, 100 mg, respectively), as measured over the first six weeks of the study, compared to a mean Hb decrease of 0.052 g/dL per week insubjects receiving placebo. Of note, 93.8% of roxadustat-treated subjects achieved Hb correction as measured by Hb response defined as Hb more than orequal to 10 g/dL and Hb increase of at least 1 g/dL from baseline. In the placebo arm, Hb response was achieved in 14.8% of the subjects. Results werepresented at the American Society of Nephrology Kidney Week in November 2016.Study 1517-CL-0304: 24 Week Trial in Japan DD-CKD PatientsThis was a multi-center, randomized, parallel-group, darbepoetin-controlled, double blind (roxadustat arms)/open-label (darbepoetin) study over 24 weeks inDD-CKD patients on chronic stable dialysis. The 120 subjects discontinued previous standard-of-care therapy (erythropoiesis-stimulating agents) to reach Hblevels of < 9.5 g/dL and were then randomized to one of three roxadustat arms (administered orally TIW at a fixed dose) or to the darbepoetin arm(darbepoetin administered intravenously QW) over the first six weeks of the study to evaluate dose response of efficacy and safety, followed by dose titrationto the desired Hb level every four weeks. During weeks 18 to 24, average Hb levels achieved (a secondary endpoint) in the full analysis set were 10.31 g/dL(1.33 g/dL Hb increase), 10.20 g/dL (1.37 g/dL Hb increase), and 10.53 g/dL (1.57 g/dL Hb increase), respectively, in the roxadustat treatment arms,compared to 10.25 g/dL (1.42 g/dL Hb increase) in the darbepoetin arm. Status with Regulatory AgenciesIn the last five years, we and our collaboration partners have had interactions with regulatory agencies in multiple territories regarding the planneddevelopment and potential path to approval of roxadustat.We met with the FDA in May, June and July of 2014 to discuss the overall scope of our Phase 3 development program. In order to comply with FDA’srecommendation, we have designed and sized our Phase 3 program for, and have included MACE composite safety endpoints that we believe will be requiredfor approval in the U.S. for all new anemia therapies.42We have also discussed our Phase 3 clinical development program with three National Health Authorities in the EU and obtained scientific advice from theEuropean Medicines Agency, which was confirmed in writing in January 2014 with respect to the adequacy of our current clinical development program tosupport the indication for the treatment of anemia in NDD-CKD and DD-CKD patients. We expect the Marketing Authorization Application submission inEurope to precede our NDA filing in the U.S.Between 2014 and 2016, we and our partner Astellas also met with the Pharmaceuticals and Medical Devices Agency and reached agreement on the Phase 3program required for roxadustat for the treatment of DD-CKD anemia and NDD-CKD in Japan.Investigational New Drug and Clinical Trial ApplicationsRoxadustat is being studied under one Investigational New Drug Application (“IND”), and several Clinical Trial Applications (“CTAs”), all with a specifiedindication of treatment of anemia in CKD. We originally submitted the IND in the U.S. to the FDA in April 2006. Our collaboration partner, Astellas,submitted the CTA in Japan to the Pharmaceuticals and Medical Devices Agency in June 2009. We and our collaboration partners Astellas and AstraZenecahave also submitted CTAs in Europe, Latin America, Canada, Russia, and Asia, beginning in 2013.Anemia In Patients with Myelodysplastic SyndromeBased on roxadustat’s safety and efficacy profile to date and other potential advantages over ESAs, we believe that in addition to treating anemia in CKD,roxadustat has the potential to treat anemia associated with many other conditions.We have submitted to the CFDA a clinical trial application to evaluate roxadustat in a Phase 2/3 clinical trial for the treatment of anemia in patients withMDS. In the U.S., the U.S. Food and Drug Administration (“FDA”) accepted our Initial Drug Application for a Phase 3 clinical trial to evaluate the safety andefficacy of roxadustat in anemia associated with MDS and we plan on initiating this study in the third quarter of 2017. We believe that roxadustat, ifsuccessful, could potentially address the significant unmet need in these anemia markets.HIF-PH Inhibitor PlatformWe have been a world leader in prolyl hydroxylase inhibition since the mid-nineties. Over the past two decades, we have built a robust drug discoveryplatform based on our deep understanding of the inhibition of prolyl hydroxylase enzymes using small molecules. Our platform is supported not only byinternal research but also by numerous academic collaborations, including a long-standing funded collaboration with a research group at the University ofOulu, Finland, headed for many years by our scientific co-founder, Dr. Kari I. Kivirikko. Dr. Kivirikko is one of the world’s leading experts in collagen prolylhydroxylases, and he remains an advisor to us.Prior to the discovery of HIF regulation by prolyl hydroxylase activity, we had acquired compound collections from several pharmaceutical companies andassembled a diverse library of prolyl hydroxylase inhibitors to target collagen prolyl hydroxylase enzymes for fibrosis. Consequently, we were particularlywell positioned to rapidly generate proof-of-concept for a number of aspects of HIF biology, and to direct medicinal chemistry efforts towards increasingpotency and selectivity for the newly identified HIF-PH enzymes.We have applied our expertise in the field of HIF-PH inhibition to develop an understanding, not only of the role of HIF in erythropoiesis, but also of otherareas of HIF biology with important therapeutic implications. This consistent progression of discovery has led to findings relating to HIF-mediated effectsassociated with inflammatory pathways, various aspects of iron metabolism, insulin sensitivity and glucose and fat metabolism, neurological disease, andstroke. The extensive patent portfolio covering our discoveries represents an important competitive advantage.The strength of our platform capitalizes on these internal discoveries, as well as some of the complexities of HIF biology that we and the scientificcommunity have uncovered over the past decade. There are at least three different HIF-PH enzymes that are known to regulate the stability of HIF — theseenzymes are commonly referred to in the scientific literature as PHD1, PHD2 and PHD3. Studies of genetically modified mice, in which the individual HIF-PHenzymes have been deleted, have revealed that PHD2 plays a major role in the regulation of erythropoiesis by HIF. In contrast, PHD1 and PHD3 appear toplay less important roles in HIF-mediated erythropoiesis, but instead have been implicated in other important biological pathways.43We believe that inhibitors selectively targeting PHD1 or PHD3 could have important therapeutic applications beyond anemia. For example, as PHD1 hasbeen implicated in ischemic tissue injury, it has been proposed that PHD1 inhibitors may provide a novel therapeutic approach to protect organs and tissuesfrom ischemic damage. PHD3 on the other hand has been implicated in insulin signaling, raising the possibility that PHD3 inhibitors may have therapeuticutility in the treatment of diabetes. Despite the challenges associated with selectively inhibiting just one enzyme from a closely related family, we have madeimportant advances in the identification of selective HIF-PH inhibitors.We currently have active research programs focused on exploring the therapeutic utility of selective prolyl hydroxylase inhibitors.PAMREVLUMAB FOR THE TREATMENT OF FIBROSIS AND CANCERWe were founded to discover and develop therapeutics for fibrosis. We began studying connective tissue growth factor (“CTGF”), shortly after its discovery.Our ongoing internal research, efforts with collaboration partners and the work of other investigators have consistently demonstrated elevated CTGF levels inpathologic fibrotic conditions characterized by sustained production of extracellular matrix (“ECM”), elements that are key molecular components offibrosis. Our accumulated discovery research efforts indicate that CTGF is a critical common element in the progression of serious diseases associated withfibrosis.From our library of fully-human monoclonal antibodies that bind to different parts of the CTGF protein and block various aspects of CTGF biologicalactivity, we selected pamrevlumab, for which we have exclusive worldwide rights. We believe that pamrevlumab blocks CTGF and inhibits its central role incausing diseases associated with fibrosis. Our data to date indicate that pamrevlumab is a promising and highly differentiated product with broad potential totreat a number of fibrotic diseases and cancers. We are currently conducting Phase 2 trials in IPF, pancreatic cancer and DMD. Pamrevlumab has receivedorphan drug designation in IPF in the U.S.Based on its ability to block CTGF, pamrevlumab may be a treatment for a broad array of fibrotic disorders of nearly every organ system. In animal studies,such as radiation-induced pulmonary fibrosis in mice, we have demonstrated that pamrevlumab is capable of reversing fibrosis. In clinical trials, we have usedadvanced medical imaging technology to quantify changes in fibrosis throughout the lungs. Our data to date using these measures demonstrate thatpamrevlumab may stabilize and in some instances reverse pulmonary fibrosis and improve pulmonary function in IPF patients.Certain cancers have a prominent ECM component that contributes to metastasis and progressive disease. Specifically, ECM is the connective tissueframework of an organ or tissue; all tumors have ECM. In the case of fibrotic tumors, ECM is more pronounced and there is more fibrosis than in other tumortypes. In mouse models of pancreatic cancer, pamrevlumab treatment has demonstrated reduction of tumor mass, slowing of metastasis and improvement insurvival. In an open-label Phase 2 study of pamrevlumab plus gemcitabine and erlotinib, pamrevlumab demonstrated a dose-dependent improvement in oneyear survival rate. We are also currently conducting a randomized, active-control, neoadjuvant clinical trial combining pamrevlumab with nab-paclitaxelplus gemcitabine in approximately 42 patients with locally advanced pancreatic cancer.DMD is an inherited disorder of the dystrophin gene that leads to progressive muscle loss and results in early death due to pulmonary or cardiac failure.Numerous pre-clinical studies including those in the mdx model of DMD suggest that CTGF contributes to the process by which muscle is replaced byfibrosis and fat and that CTGF may also impair muscle cell differentiation during muscle repair after injury. pamrevlumab treatment has improved musclestrength and exercise endurance in the mdx model of DMD. We recently began an open label single arm trial in non-ambulatory boys with DMD.Results to date indicate that pamrevlumab has broad potential to address unmet needs for the treatment of fibrotic diseases and cancers. Specifically, givenour preclinical and clinical data to date, our primary focus for clinical development of pamrevlumab is in IPF, pancreatic cancer and DMD.Overview of FibrosisFibrosis is an aberrant response of the body to tissue injury that may be caused by trauma, inflammation, infection, cell injury, or cancer. The normal responseto injury involves the activation of cells that produce collagen and other components of the ECM that are part of the healing process. This healing processhelps to fill in tissue voids created by the injury or damage, segregate infections or cancer, and provide strength to the recovering tissue. Under normalcircumstances, where the cause of the tissue injury is limited, the scarring process is self-limited and the scar resolves to approximate normal tissuearchitecture. However, in certain disease states, this process is prolonged and excessive and results in progressive tissue scarring, or fibrosis, which can causeorgan dysfunction and failure as well as, in the case of certain cancers, promote cancer progression.44Excess CTGF Causes Fibrosis. Pamrevlumab Blocks CTGF and Can Reverse FibrosisExcess CTGF levels are associated with fibrosis. CTGF increases the abundance of myofibroblasts, a cell type that drives wound healing, and stimulates themto deposit ECM proteins such as collagen at the site of tissue injury. In the case of normal healing of a limited tissue injury, myofibroblasts eventually die byprogrammed cell death, or apoptosis, and the fibrous scarring process recedes. In fibrotic conditions, excess CTGF results in chronic activation ofmyofibroblasts, which leads to chronic ECM deposition and fibrosis (refer to figure above).Multiple biological agents and pathways have been implicated in the fibrotic process (Wynn J Pathol (2008)). Many fibrosis pathways converge on CTGF(refer to figure below), which the scientific literature demonstrates to be a central mediator of fibrosis (Oliver et al, J Inv Derm (2010)). In the case of cancer,the sustained tumor-associated fibrotic tissue promotes tumor cell survival and metastasis. The figure below shows the commonality of cellular mechanismsthat may result in fibrosis and cancer.Most Biological Factors Implicated in Fibrosis Work Through CTGF45CTGF is a secreted glycoprotein produced by fibroblasts, endothelium, mesangial cells and other cell types, including cancers, and is induced by a variety ofregulatory modulators, including TGF-ß and VEGF. CTGF expression has been demonstrated to be up-regulated in fibrotic tissues. Thus, we believe thattargeting CTGF to block or inhibit its activity could stop or reverse tissue fibrosis. In addition, since CTGF is implicated in nearly all forms of fibrosis, webelieve pamrevlumab has the potential to provide clinical benefit in a wide range of clinical indications that are characterized by fibrosis.Until recently, it was believed that fibrosis was an irreversible process. It is now generally understood that the process is dynamic and potentially amenable toreversal. Based on studies in animal models of fibrosis of the liver, kidney, muscle and cardiovascular system, it has been shown that fibrosis can be reversed.It has also been demonstrated in humans that fibrosis caused by hepatitis virus can be reversed (Chang et al. Hepatology (2010)). Additionally, we havegenerated data in human and animal studies that lung fibrosis can be reversed in some instances upon treatment with pamrevlumab. We do not believe thatthere is clinical evidence that therapies currently on the market directly prevent or reverse fibrosis in IPF. While certain other companies are working ontopical inhibition of CTGF, we are not aware of other products in development that target CTGF inhibition for deep organ fibrosis and cancer.Clinical Development of Pamrevlumab — OverviewWe have performed clinical trials of pamrevlumab in IPF, pancreatic cancer, liver fibrosis and diabetic kidney disease. In eleven Phase 1 and Phase 2 clinicalstudies involving pamrevlumab to date, including more than 450 patients who were treated with pamrevlumab (about half of patients dosed for more than6 months), pamrevlumab has been well-tolerated across the range of doses studied, and there have been no dose-limiting toxicities seen thus far.In IPF, we completed enrollment of our randomized, double-blind, placebo-controlled Phase 2 trial of pamrevlumab for first-line treatment of IPF in patientswith mild-to-moderate disease. This protocol includes a sub-study that examines safety and efficacy of pamrevlumab in combination with approvedtherapies. Both components of the Phase 2 trial are designed to evaluate the safety of pamrevlumab and the effects of pamrevlumab on pulmonary function,extent of fibrosis and health-related quality of life. We expect to report topline data from the entire study in the third quarter of 2017.We also recently completed our open-label Phase 2 trial of pamrevlumab in 89 patients with IPF and presented at the 19th International Colloquium on Lungand Airway Fibrosis and published results in the European Respiratory Journal.In pancreatic cancer, we are currently conducting a randomized, active-control, neoadjuvant Phase 2 trial combining pamrevlumab with nab-paclitaxel plusgemcitabine in approximately 42 patients with locally advanced pancreatic cancer. Interim results were reported at ASCO 2017 Gastrointestinal CancersSymposium in San Francisco, showing an improvement in survival among patients in the combination arm, as compared to chemotherapy alone. In addition,a greater proportion of subjects treated on the combination arm containing pamrevlumab were converted from unresectable to fully resectable status. Weexpect to complete enrollment in first half of 2017 and complete the six-month treatment period in this trial by year end. Previously we performed an open-label, dose-finding Phase 2 trial in a total of 75 patients with advanced pancreatic cancer.We are continuing to enroll patients in an exploratory single arm trial of the safety and efficacy of pamrevlumab in non-ambulatory subjects with DMD. Theprimary endpoint is change in forced vital capacity; other endpoints include changes in arm function and in muscle and heart fibrosis.Actual dates depend on a variety of factors and are subject to numerous risks and uncertainties, including with respect to patient enrollment, safety results,manufacturing, third party contractors, and government regulators, some of which are out of our control. Also refer to “Risk Factors,” and particularly thoserisk factors under the heading “Risks Related to the Development and Commercialization of Our Product Candidates.”46The table below provides a summary of our clinical trials involving pamrevlumab:Completed and Ongoing Pamrevlumab Clinical TrialsStudy, Study # StudyDesign Dose(mg/kg) Frequency TreatmentDuration(weeks) SubjectsPhase 1—IPF, FGCL-MC3019-002 Open-label,dose-escalation 1, 3, or 10 Single 21Phase 2—IPF, FGCL-3019-049 Open-label, dose-escalation 15 or 30 Every 3 weeks 45 weeks 89*Phase 2—IPF, FGCL-3019-067 Double-blind,placebo-controlled(1:1) 30 mg/kg Every 3 weeks 45 weeks 103 '067 Sub-study Double-blind,active-controlled(2:1) 30 mg/kg Every 3 weeks 24 weeks 57Phase 1/2 —Pancreatic Cancer, FGCL-MC3019- 028 Open-label,dose-escalation 3, 10, 15,25, 35, or4517.5 or22.5 Every other weekWeekly Until diseaseprogression1 to 89weeks 75Phase 2—Pancreatic Cancer, FGCL-3019-069 Open-label,active control(1:1) 35 Cycle 1 = Days 1, 8and 15SubsequentCycles =Every other week 24 weeks Target 42*Phase 2—Liver Fibrosis, due to HBV, FGCL-3019- 801 Double-blind,placebo-controlled(2:1) 15 or 45 Every 3 weeks 45 weeks 114Phase 2 – Duchenne muscular dystrophy, non-ambulatory FGCL-3019-079 Open-label,single arm 45 Every 2 weeks 45 weeks Target 22*Phase 1—Diabetic Kidney Disease, FGCL- MC3019-003 Open-label,dose-escalation 3 or 10 Days 0, 14, 28 and 42 6 weeks 24Phase 2—Diabetic Kidney Disease, FGCL- 3019-029 Double-blind,placebo-controlled(1:1:1) 5 or 10 Every 2 weeks Every4 weeks 12 weeks12 weeks 38Phase 2—Diabetic Kidney Disease, FGCL- 3019-032 Double-blind,placebo-controlled 3 or 10 Every 2 weeks 26 weeks 46Phase 1—Focal Segmental Glomerular Sclerosis,FGCL- MC3019-026 Open-label,single arm 5 Every 2 weeks 8 weeks 2*Currently enrolling.47Idiopathic Pulmonary FibrosisUnderstanding IPF and the Limitations of Current TherapiesIPF is a form of progressive pulmonary fibrosis, or abnormal scarring, which destroys the structure and function of the lungs. As tissue scarring progresses inthe lungs, transfer of oxygen into the bloodstream is increasingly impaired. Average life expectancy at the time of confirmed diagnosis of IPF is estimated tobe between 3 to 5 years, with approximately two-thirds of patients dying within five years of diagnosis. Thus, the survival rates are comparable to some of themost deadly cancers. The cause of IPF is unknown but is believed to be related to unregulated cycles of injury, inflammation and fibrosis.Patients with IPF experience debilitating symptoms, including shortness of breath and difficulty performing routine functions, such as walking and talking.Other symptoms include chronic dry, hacking cough, fatigue, weakness, discomfort in the chest, loss of appetite and weight loss. Over the last decade,refinements in diagnosis criteria and enhancements in high-resolution computed tomography, (“HRCT”), imaging technology have enabled more reliablediagnosis of IPF without the need for a lung biopsy more clear distinction from other interstitial lung diseases.The U.S. prevalence and incidence of IPF are estimated to be 44,000 to 135,000 cases, and 21,000 new cases per year, respectively, based on Raghu et al. (AmJ Respir Crit Care Med (2006)) and on data from the United Nations Population Division. We believe that with the availability of technology to enable moreaccurate diagnoses, the number of individuals diagnosed per year with IPF will continue to increase. In 2011, Decision Resources Group estimated that therewill be approximately $4.6 billion in sales of IPF drugs in the U.S. and Europe in 2020.There are currently two therapies approved to treat IPF in Europe and the U.S., pirfenidone and nintedanib. To our knowledge, neither has been shown toreverse pulmonary fibrosis. We believe that pamrevlumab has the potential to stabilize or reverse lung fibrosis in a subset of IPF patients and if approved,improve the prognosis for patients with IPF.Clinical Development of Pamrevlumab in IPFWe have fully enrolled study 067, our ongoing Phase 2, randomized, double-blind, placebo-controlled study to evaluate the safety and efficacy ofpamrevlumab in IPF patients with mild to moderate disease (baseline forced vital capacity (“FVC”) percentage predicted between 55% and 90%). As with ouropen-label Phase 2 trial described below, Study 049, the primary efficacy endpoint for Study 067 is change in FVC from baseline. Secondary endpoints areextent of pulmonary fibrosis as measured by quantitative HRCT, other pulmonary function assessments and measures of health-related quality of life. Thistrial was initially a placebo-only controlled study targeting 90 subjects. We expanded the trial to enable enrollment of both first-line and second-linetreatment, as well as adding a 57 patient substudy to test pamrevlumab in combination with either of the therapies approved for IPF. We expect to reporttopline data in the third quarter of 2017.Completed Clinical Trials of Pamrevlumab in IPFStudy 002 was a Phase 1 open-label study to determine the safety and pharmacokinetics of escalating single doses of pamrevlumab. Patients with a diagnosisof IPF by clinical features and surgical lung biopsy received a single IV dose of pamrevlumab at 1, 3, or 10 mg/kg. A total of 21 patients were enrolled in thestudy; 6 patients received a dose of 1 mg/kg, 9 patients received 3 mg/kg, and 6 patients received 10 mg/kg. Pamrevlumab was well tolerated across the rangeof doses studied; and there were no dose-limiting toxicities. TEAE that were considered to be possibly related by the principal investigator to pamrevlumabwere mild and self-limited, consisting of pyrexia, cough and headache.We recently completed the open-label extension of Study 049, a Phase 2 open-label, dose-escalation study to evaluate the safety, tolerability, and efficacy ofpamrevlumab in 89 patients with IPF. During the initial one-year treatment period, pamrevlumab was administered at a dose of 15 mg/kg in Cohort 1(53 patients) and 30 mg/kg in Cohort 2 (36 patients) by IV infusion every 3 weeks for 45 weeks. After 45 weeks of dosing, subjects whose FVC declined lessthan predicted were allowed to continue dosing in an extension study until they had disease progression. Nineteen patients from Cohort 1 (35.8%) and 18patients from Cohort 2 (50.0%) entered the extension study. Efficacy endpoints were pulmonary function assessments, extent of pulmonary fibrosis asmeasured by quantitative imaging and measures of health-related quality of life. We presented data from our open-label Phase 2 IPF extension study (049) atthe International Colloquium on Lung and Airway Fibrosis, reporting that no safety issues were observed during prolonged treatment with pamrevlumab.Some of the 37 patients who were initially enrolled in the extension study have now been treated with pamrevlumab for up to five years. Trends regardingimproved or stable pulmonary function and stable fibrosis observed during the initial one-year study were also observed in the extension study.48HRCT is typically used to diagnose IPF based on visual assessments of computed tomography (“CT”), images of lung fibrosis. We used quantitative HRCT tomeasure changes in fibrosis in this Study 049 using software to quantify whole lung fibrosis from the compilation of 1 mm HRCT sections of the entire lung.The computer algorithm, which has been validated by the clinical research organization used for the study, provides an overall determination of thepercentage of the lung that contains individually the three characteristic forms of IPF fibrosis, including reticular IPF fibrosis which is expected to make themost dynamic contribution to overall lung fibrosis.The extent of lung fibrosis as measured by quantitative HRCT has been shown to be accurate and reproducible (Kim et al. Eur Radiol (2011)). Recentpublications based on similar quantitative HRCT methods have identified an association between worsening pulmonary fibrosis and mortality in IPF(Maldonado et al. Eur Resp J (2014); Oda et al. Respiratory Research (2014)). However, HRCT has not been used by the FDA to establish efficacy in IPF.Eighty-nine patients in this Phase 2 open label study received at least one dose of pamrevlumab. We defined disease severity in terms of baseline pulmonaryfunction, measured as the FVC percent of the predicted value for a healthy matched person of the same age, or FVC percent predicted. Severe disease wasFVC percent predicted < 55%, moderate disease was FVC percent predicted between 55% and 80%, and mild disease was FVC percent predicted >80%.In Cohort 1, we enrolled patients with a wide range of disease severity to assess safety and efficacy. Baseline FVC percent predicted for Cohort 1 was 43% to90%, with a mean of 62.8%. In contrast, other IPF clinical trials, such as those for pirfenidone and nintedanib, have enrolled patients who on average hadmild to moderate disease (mean FVC percent predicted 73.1% to 85.5%). Fourteen patients in Cohort 1 withdrew, and ten of the 14 had severe disease.In order to enroll IPF patients similar to those in other IPF trials, we amended the protocol for Cohort 2 to include only patients with mild to moderate disease(FVC ≥ 55% predicted). Baseline FVC percent predicted for Cohort 2 was 53% to 112%, with a mean of 72.7%. Based on this definition of disease severity,37 patients in Cohort 1 and 32 patients in Cohort 2 had mild to moderate disease.Disease Severity in Enrolled and Evaluated Patients Treated with Pamrevlumab in FGCL-3019-049 Cohort 1 Cohort 2 Severe Moderate Mild Severe Moderate Mild FVC % Predicted < 55% 55% to 80% > 80% < 55% 55% to 80% > 80% N Total N Total Total Enrolled 16 34 3 53 4 22 10 36 Complete 5 30 3 38 1 17 10 28 Evaluated Enrolled 34 3 37 22 10 32 Complete 30 3 33 17 10 27 The table below provides a summary of the observed quantitative change in fibrosis for mild to moderate patients in Cohorts 1 and 2 as measured by HRCT.Twenty-four percent of these patients had improved fibrosis at Week 48. We believe that this is the first trial to demonstrate reversal of fibrosis in a subset ofIPF patients. Stable fibrosis has been considered the only achievable favorable outcome in IPF. The table below sets forth the number of patients who showedstable or improved fibrosis at Weeks 24 and 48 compared to the amount of fibrosis at the start of the trial.Changes in Fibrosis in Patients with Mild to Moderate IPF Treated with Pamrevlumab in FGCL-3019-049 Stable or ImprovedCompared to Baseline Improved Compared toBaseline Improved Comparedto Week 24 Week 24 Week 48 Week 24 Week 48 Week 48Cohort 1 21/45(47%) 14/38(37%) 12/45(27%) 12/38(32%) 8/38(21%)Cohort 2 12/29(41%) 9/28(32%) 5/29(17%) 4/28(14%) 8/26(31%)Combined 33/75(44%) 23/66(35%) 17/74(23%) 16/66(24%) 16/64(25%) Fibrosis improvement or stabilization in patients with mild to moderate disease as measured as reticular fibrosis by HRCT correlated with improvement orstabilization of pulmonary function measured by FVC (p<0.0001; r=-0.59 Cohorts 1 and 2 combined). The figure below shows FVC changes up to Week 48for mild to moderate patients with stable or improved fibrosis versus patients with worsening fibrosis. Patients with stable or improved fibrosis showedimproved pulmonary function, on average, which was significantly different or better than patients with worsening fibrosis who showed a substantial declinein FVC (p= 0.0001, Cohorts 1 and 2 combined). Patients with worsening fibrosis had pulmonary function that was similar to the annual decline in pulmonaryfunction for typical IPF patients.49Categorical Analysis of FVC Change from Baseline (BL) (mean ±SE) in FGCL-3019-049Eighty-nine patients had at least one adverse event. The most common reported events were cough, fatigue, shortness of breath, upper respiratory tractinfection, sore throat, bronchitis, nausea, dizziness and urinary tract infection. To date, including the open-label extension, there have been 45 SAEs in 31patients, four of which were considered possibly related by the principal investigator to study treatment. During the first year of treatment there were 38treatment-emergent SAEs in 24 patients. Adverse events observed to date are consistent with typical conditions observed in this patient population.In aggregate, the data from the Phase 2 open-label, dose-escalation study indicate that a subset of pamrevlumab treated IPF patients experiencedimprovements in lung fibrosis with commensurate improvement in pulmonary function and a potential for prolonged benefit with continued treatment. Theseresults are consistent with the mouse disease model results which showed that pamrevlumab treatment can reverse lung fibrosis and result in improvedpulmonary function. We believe that our patient data showing correlated improvements in both fibrosis and lung function in some patients have not beenseen in previously published IPF clinical studies.Pancreatic CancerUnderstanding Pancreatic Cancer and the Limitations of Current TherapiesPancreatic ductal adenocarcinoma, or pancreatic cancer, is the fourth leading cause of cancer deaths in the U.S. According to the World Health Organization,and based on data from the United Nations Population Division, there were approximately 79,000 new cases of pancreatic cancer and approximately 78,000deaths in the EU in 2012. The National Cancer Center of Japan estimated that in 2010 (latest year available) there were 32,330 new cases of pancreaticcancer. In 2013, Decision Resources Group estimated that there will be approximately $1.3 billion in sales of pancreatic cancer drugs in 2022. According tothe U.S. National Cancer Institute, in 2016, there were approximately 53,000 new cases of pancreatic cancer projected in the U.S. Fifty percent of new casesare metastatic. Another 15-20% have localized resectable tumors. The remaining 30-35% have localized but unresectable tumors. For those with non-resectable tumors, median survival is 8 to 12 months post-diagnosis, and about 7% realize 5 years of survival; similar to metastatic cases. For those withresectable tumors, 50% survive 17 to 27 months post-diagnosis and ~20% report 5-year survival.Pancreatic cancer is aggressive and typically not diagnosed until it is largely incurable. Most patients are diagnosed after the age of 45, and according to theAmerican Cancer Society, 94% of patients die within five years from diagnosis. The majority of patients are treated with chemotherapy, but pancreatic canceris highly resistant to chemotherapy. Approximately 15% to 20% of patients are treated with surgery; however, even for those with successful surgicalresection, the median survival is approximately two years, with a five year survival rate of 15% to 20% (Neesse et al. Gut (2011)). Radiation treatment may beused for locally advanced diseases, but it is not curative.The duration of effect of approved anti-cancer agents to treat pancreatic cancer is limited. Gemcitabine demonstrated improvement in median overall survivalfrom approximately four to six months, and erlotinib in combination with gemcitabine demonstrated an additional ten days of survival. Nab-paclitaxel incombination with gemcitabine was recently approved by the FDA for the treatment of pancreatic cancer, having demonstrated median survival of 8.5 months.The combination of folinic acid, 5-fluorouracil, irinotecan and oxaliplatin (FOLFIRINOX) was reported to increase survival to 11.1 months from 6.8 monthswith gemcitabine. These drugs illustrate that progress in treatment for pancreatic cancer has been modest, and there remains a need for substantialimprovement in patient survival and quality of life.50The approved chemotherapeutic treatments for pancreatic cancer target the cancer cells themselves. Tumors are composed of cancer cells and associated non-cancer tissue, or stroma, of which ECM is a major component. In certain cancers such as pancreatic cancer, both the stroma and tumor cells produce CTGFwhich in turn promotes the proliferation and survival of stromal and tumor cells. CTGF also induces ECM deposition that provides advantageous conditionsfor tumor cell adherence and proliferation, promotes blood vessel formation, or angiogenesis, and promotes metastasis, or tumor cell migration, to other partsof the body.Pancreatic cancers are generally resistant to powerful chemotherapeutic agents, and there is now growing interest in the use of an anti-fibrotic agent todiminish the supportive role of stroma in tumor cell growth and metastasis. The anti-tumor effects observed with pamrevlumab in preclinical models indicatethat it has the potential to inhibit tumor expansion through effects on tumor cell proliferation and apoptosis as well as reduce metastasis.Clinical Development of Pamrevlumab in Pancreatic CancerFor pancreatic cancer, we continue to enroll an open-label, randomized (2:1) Phase 1/2 trial (FGCL-3019-069) of pamrevlumab combined with gemcitabineplus nab-paclitaxel chemotherapy versus the chemotherapy regimen alone in patients with inoperable locally advanced pancreatic cancer that has not beenpreviously treated. Approximately 42 patients are expected to be treated for up to 6 months. The overall goal of the trial is to determine whether thepamrevlumab combination can convert inoperable pancreatic cancer to operable, or resectable, cancer. Tumor removal is the only chance for cure ofpancreatic cancer, but only approximately 15% to 20% of patients are eligible for surgery. The patients are then followed for disease progression and overallsurvival. Patients are only eligible for this trial if they have confirmed unresectable tumors (and lack of metastases).We reported on 23 evaluable patients at the 2017 American Society of Clinical Oncology GastroIntestinal Cancer Meeting. Of the 22 patients randomized topamrevlumab plus standard of care (gemcitabine and nab-paclitaxel), 10 continue on treatment, three discontinued therapy due to serious adverse eventsunrelated to study drug and seven were reassessed as eligible for resection based on standard scoring criteria set forth in the protocol; three having completeresection (R0) and one having an R1 resection (microscopic evidence of residual tumor cells at the resection margins), while the remaining patients’ tumorswere not resected due to the presence of metastatic disease observed during surgery. Of the eleven patients randomized to gemcitabine and nab-paclitaxelalone, five experienced progressive disease, as defined in the protocol, prior to completing treatment, five remained inoperable and one was converted tooperable cancer having an R0 resection. After 6 cycles of treatment, plasma levels of CA19.9, a non-specific tumor marker, showed a mean reduction of78.3% with pamrevlumab plus chemotherapy compared to 48.7% with chemotherapy alone. In addition, this interim data showed improvement in survivalamong patients in the combination arm, as compared to chemotherapy alone. Patients with locally advanced unresectable pancreatic cancer have mediansurvival of less than 12 months, only slightly better than patients with metastatic pancreatic cancer, whereas patients with resectable pancreatic cancer have amuch better prognosis with median survival of approximately 23 months and some patients being cured. If pamrevlumab in combination with chemotherapycontinues to demonstrate an enhanced rate of conversion from unresectable cancer to resectable cancer, it may support the possibility that pamrevlumabcould provide a substantial survival benefit for locally advanced pancreatic cancer patients. We expect to complete enrollment in the first half of 2017 andcomplete the six-month treatment period in this trial by year end.Completed Clinical Trials of Pamrevlumab in Pancreatic CancerWe completed an open-label Phase 1/2 (FGCL-MC3019-028) dose finding trial of pamrevlumab combined with gemcitabine plus erlotinib in patients withpreviously untreated locally advanced (stage 3) or metastatic (stage 4) pancreatic cancer. These study results were published in the Journal of Cancer ClinicalTrials (Picozzi et al., J Cancer Clin Trials 2017, 2:123). The trial tested pamrevlumab doses of 3 mg/kg, 10 mg/kg, 15 mg/kg, 25 mg/kg, 35 mg/kg and 45mg/kg administered every two weeks, and pamrevlumab doses of 17.5 mg/kg and 22.5 mg/kg administered weekly after a double loading dose. On Day 15,treatment began with gemcitabine 1000 mg/m 2 weekly for three weeks in a four week cycle and erlotinib 100 mg daily. Treatment continued untilprogression of the cancer or the patient withdrew for other reasons. Patients were then followed until death. Tumor status was evaluated by CT imaging everyeight weeks until disease progression to assess changes in tumor mass.Seventy-five patients were enrolled in this study with 66 (88%) having stage 4 metastatic cancer. The study demonstrated a dose-related increase in survival,as described in the figure below. At the lowest doses, no patients survived for even one year while at the highest doses up to 31% of patients survived oneyear.51Effect of Pamrevlumab Dose on One Year Survival in Pancreatic Cancer*QW = weekly; Q2W = twice weeklyA post-hoc analysis found that there was a significant relationship between survival and trough levels of plasma pamrevlumab measured immediately beforethe second dose (Cmin), as illustrated below. Cmin greater than or equal to 150 µg/mL was associated with significantly improved progression-free survival(p=0.01) and overall survival (p=0.03) versus those patients with Cmin less than 150 µg/mL. For patients with Cmin > 150 µg/mL median survival was 9.0months compared to median survival of 4.4 months for patients with Cmin < 150 µg/mL. Similarly, 34.2% of patients with Cmin > 150 µg/mL survived forlonger than one year compared to 10.8% for patients with Cmin < 150 µg/mL. These data suggest that sufficient blockade of CTGF requires pamrevlumabthreshold blood levels of approximately 150 µg/mL in order to improve survival in patients with advanced pancreatic cancer.Increased Pancreatic Cancer Survival Associated with Increased Plasma Levels of PamrevlumabThe Kaplan-Meier plot provides a representation of survival of all patients in the clinical trial. Each vertical drop in the curve represents a recorded event(death) of one or more patients. When a patient’s event cannot be determined either because he or she has withdrawn from the study or because the analysis iscompleted before the event has occurred, that patient is “censored” and denoted by a symbol (●) on the curve at the time of the last reliable assessment of thatpatient.52In the study, the majority of adverse events were mild to moderate, and were consistent with those observed for erlotinib plus gemcitabine treatment withoutpamrevlumab. There were 99 treatment emergent SAEs; six of which were assessed as possibly related by the principal investigator, and 93 as not related tostudy treatment. We did not identify any evolving dose-dependent pattern, and higher doses of pamrevlumab were not associated with higher numbers ofSAEs or greater severity of the SAEs observed.In both the KPC mouse study and in this clinical trial, pamrevlumab treatment had a substantial effect on survival with no apparent increase to the toxicity ofthe chemotherapeutic regimen.Pamrevlumab for Duchenne Muscular DystrophyUnderstanding DMD and the Limitations of Current TherapiesIn the U.S., 1 in 3,500 boys have DMD, and there are currently no approved disease-modifying treatments. Most children, despite taking steroids to mitigateprogressive muscle loss, are wheelchair bound by age 12, and median survival is age 25. DMD is caused by absence of the dystrophin protein resulting inabnormal muscle structure and function and buildup of fibrosis in muscle, leading to diminished mobility, pulmonary function and cardiac function.Constant myofiber breakdown results in persistent activation of myofibroblasts and altered production of ECM resulting in extensive fibrosis in skeletalmuscles of DMD patients. Desguerre et al. (2009) showed that muscle fibrosis was the only myo-pathologic parameter that significantly correlated with poormotor outcome as assessed by quadriceps muscle strength, manual muscle testing of upper and lower limbs, and age at ambulation loss.Clinical Development of Pamrevlumab for DMDWe continue to enroll patients in our Phase 2 22-patient open-label trial of pamrevlumab in non-ambulatory patients. The primary endpoint is change inpulmonary function compared to each individual subject’s historical decline in lung function. Other endpoints include assessments of cardiac fibrosis andfunction assessed by magnetic resonance imaging (“MRI”), arm muscle fibrosis and fat assessed by MRI and upper body strength. We have amended ourprotocol and inclusion criteria with the aim of increasing enrollment.Other Potential Indications for PamrevlumabWe believe that pamrevlumab has potential to be a treatment for cancers and a broad array of fibrotic disorders, including: •Cancers — melanoma, breast cancer, hepatoma •Liver — non-alcoholic steatohepatitis •Lung — scleroderma lung disease •Radiation induced fibrosis •Muscular dystrophies other than Duchenne muscular dystrophy •Kidney — diabetic nephropathy, focal segmental glomerular sclerosis •Cardiovascular system — congestive heart failure, pulmonary arterial hypertensionInvestigational New Drug and Clinical Trial ApplicationsPamrevlumab is being studied in the U.S. for the treatment of IPF under an IND that we submitted to the FDA in August 2003. Pamrevlumab is being studiedin the U.S. for the treatment of locally advanced or metastatic pancreatic cancer under an IND that we submitted to the FDA in September 2004. Pamrevlumabis being studied in the U.S. for the treatment of DMD under an IND that we submitted to the FDA in June 2015.Commercialization Strategy for PamrevlumabOur goal, if pamrevlumab is successful, is to be a leader in the development and commercialization of novel approaches for inhibiting deep organ fibrosis andtreating some forms of cancer. To date, we have retained exclusive worldwide rights for pamrevlumab. We plan to retain commercial rights to pamrevlumab inNorth America and will also continue to evaluate the opportunities to establish co-development partnerships for pamrevlumab as well as commercializationcollaborations for territories outside of North America.53FG-5200 FOR THE TREATMENT OF CORNEAL BLINDNESS IN CHINACorneal blindness, defined as visual acuity of 3/60 or less, is caused by various factors, including scarring resulting from infections, such as herpes simplex,physical trauma, chemical injury and genetic diseases affecting the function of the cornea. In countries with sufficient tissue banks and skilled surgeons, thetreatment for corneal blindness is the replacement of the damaged cornea with a corneal graft from donor corneas from human cadavers. Despite use ofimmunosuppressive drugs, graft rejection remains a serious problem, resulting in graft failure within five years in approximately 35% of cases in the U.S. Weare developing FG-5200 for the treatment of corneal blindness resulting from partial thickness corneal damage.In China, there are ethical or religious beliefs, cultural norms and significant infrastructure barriers that limit organ donation or tissue banking possibilities,resulting in an extreme shortage of cadaver corneas. In April 2015, a subsidiary of China Regenerative Medicine International Limited received approval fortheir acellular porcine cornea stroma medical device for the indication of repair of corneal ulcers in China. However, alternatives to cadaver corneas, such assynthetic corneas using collagen derived from porcine tissue or fish scales, are either experimental or to our knowledge, have not yielded satisfactory resultsfor restoration of vision in patients with corneal blindness. In many cases of corneal blindness, infection and other factors lead to serious risks to the patient.Market OpportunityApproximately 40,000 corneal grafts were performed in the U.S. in 2011 using tissue from human cadavers. In contrast, while there are approximately 4 to5 million patients in China with corneal blindness and an incidence of 100,000 cases of corneal blindness each year, there were only about 3,000 cornealgrafts performed in China in 2007 using tissue from human cadavers. We believe the number of corneal grafts using cadaver tissue in China may decreasesignificantly due to recent changes in government policy.FG-5200 as a Potential Solution to This Unmet Medical NeedFG-5200 Corneal ImplantOur expertise in fibrosis and extracellular matrix proteins has allowed us to develop processes for producing human collagen types I, II and III, as well ascoordinate expression of several enzymes involved in assembly of collagen. We have successfully produced a proprietary version of recombinant humancollagen III that is suitable for use in cornea repair.FG-5200, a corneal implant medical device we are developing in China, is designed to serve as an immediately functional replacement cornea as well as ascaffold to allow for regeneration of the native corneal tissue for the primary purpose of restoration of vision. In contrast, cadaver graft tissue is never “turnedover”; in fact, only limited integration occurs over the life of the graft. Our FG-5200 implant is made of recombinant human collagen that has been formedinto a highly concentrated fibrillar matrix to provide physical characteristics optimal for corneal implantation.In animal models, FG-5200 persists for less than one year, at which time native tissue has completely regrown, including both epithelium (the outer cell layerof the cornea) and stroma. The stroma in these animal models is seen to be infiltrated with nerve fibers, leading to the reacquisition of the touch responsecritical to the avoidance of additional corneal damage.Corneal implants using human donor tissue are currently being reimbursed by the government, and similar to many other implantable Class III devices inChina (including stents and bone grafts), we would expect that FG-5200 could be added to the reimbursement list for medical devices, if approved.54Clinical Testing of FG-5200An initial clinical study outside of China has been conducted to test the safety and feasibility of using a biosynthetic implant composed of our recombinanthuman collagen, and substantially similar to FG-5200, for the treatment of severe corneal damage as an alternative to human donor tissue. Ten patients withadvanced keratoconus, or severe corneal scarring, were implanted with the recombinant collagen implants and have been followed for more than five years.Two-year follow-up data were reported in Science Translational Medicine (Fagerholm et al., (2010)) and four-year follow-up data were reported inBiomaterials (Fagerholm et al., Biomaterials (2014)). Key clinical findings include the following: •Patients with biosynthetic implants had a 4-year mean corrected visual acuity of 20/54 and gained on average more than 5 Snellen lines ofvision on an eye chart. •Nerve re-growth and touch sensitivity was closer to that of healthy corneas and significantly better in corneas with biosynthetic implants thanin human donor corneas. •Corneas with biosynthetic implants maintained a stable shape and thickness without any need for a long course of immunosuppression therapy. •There has been no recruitment of inflammatory dendritic cells into the biosynthetic implant area and no episodes of rejection, in contrast to thecontrol arm of human donor cornea transplantation, where a rejection episode was observed.FG-5200 StrategyIn January 2016, our subsidiary FibroGen Beijing received CFDA’s written notice of classification of our FG-5200 corneal implant as a Domestic Class IIImedical device. This allows FibroGen to develop, and if approved, to market FG-5200 corneal implants fabricated in China without any prior referenceapproval outside of China.We currently plan to manufacture FG-5200 preclinical and clinical trial material in our aseptic good manufacturing practices production suite located at ourBeijing manufacturing plant. We have completed process technology transfer and expect to complete the registration campaign in the first quarter of 2017. Materials from this campaign will be used in preclinical studies which will commence in China in the second half of this year. We expect to file a CTA atthe end of 2017 and to commence the pivotal clinical trial thereafter.We plan to develop FG-5200 in China first. If FG-5200 is successful in China, we believe there is a future opportunity to develop FG-5200 in other Asiancountries where cadaver materials are in short supply, in part because cultural norms and infrastructure and other challenges in tissue banking limit tissuedonations. We also believe there is an opportunity to obtain CE Marking to facilitate entry into other markets, such as Latin America. We may develop FG-5200 in the U.S. and Europe as well, where cadaver corneas are available but the required immunosuppressive therapy may make FG-5200 a potentiallyattractive alternative.COLLABORATIONSOur Collaboration Partnerships for RoxadustatAstellasWe have two agreements with Astellas for the development and commercialization of roxadustat, one for Japan, and one for Europe, the Commonwealth ofIndependent States, the Middle East and South Africa. Under these agreements we provided Astellas the right to develop and commercialize roxadustat foranemia in these territories.We share responsibility with Astellas for clinical development activities required for U.S. and EU regulatory approval of roxadustat, and share equally thosedevelopment costs under the agreed development plan for such activities. Astellas will be responsible for clinical development activities and all associatedcosts required for regulatory approval in all other countries in the Astellas territories. Astellas will own and have responsibility for regulatory filings in itsterritories. We are responsible, either directly or through our contract manufacturers, for the manufacture and supply of all quantities of roxadustat to be usedin development and commercialization under the agreements.The Astellas agreements will continue in effect until terminated. Either party may terminate the agreements for certain material breaches by the other party. Inaddition, Astellas will have the right to terminate the agreements for certain specified technical product failures, upon generic sales reaching a particularthreshold, upon certain regulatory actions, or upon our entering into a settlement admitting the invalidity or unenforceability of our licensed patents. Astellasmay also terminate the agreements for convenience upon advance written notice to us. In the event of any termination of the agreements, Astellas will transferand assign to us the regulatory filings for roxadustat and will assign or license us the relevant trademarks used with the products in the Astellas territories.Under certain terminations, Astellas is also obligated to pay us a termination fee.55Consideration under these agreements includes a total of $360.1 million in upfront and non-contingent payments, and milestone payments totaling $557.5million, of which $542.5 million are development and regulatory milestones, and $15.0 million are commercial-based milestones. Total consideration,excluding development cost reimbursement and product sales-related payments, could reach $917.6 million. During the second quarter of 2016, werecognized $10.0 million revenue as a result of the initiation by Astellas of the first Phase 3 clinical study in Japan of roxadustat for treatment of anemiaassociated with CKD in patients on dialysis. The amount was received in early July 2016. The aggregate amount of such consideration received throughDecember 31, 2016 totals $472.6 million.Additionally, under these agreements, Astellas pays 100% of the commercialization costs in their territories. Astellas will pay us a transfer price for ourmanufacture and delivery of roxadustat based on a calculation based on net sales of roxadustat in the low 20% range.In addition, Astellas has separately invested $80.5 million in the equity of FibroGen, Inc. to date.AstraZenecaWe also have two agreements with AstraZeneca for the development and commercialization of roxadustat for anemia, one for China (the “China Agreement”),and one for the U.S. and all other countries not previously licensed to Astellas (the “U.S./RoW Agreement”). Under these agreements we providedAstraZeneca the right to develop and commercialize roxadustat for anemia in these territories. We share responsibility with AstraZeneca for clinicaldevelopment activities required for U.S. regulatory approval of roxadustat.Now that we have reached the $116.5 million cap on our initial funding obligations (under which we shared 50% of the initial development costs), all futuredevelopment and commercialization costs for roxadustat for the treatment of anemia in CKD in the U.S., Europe, Japan and all other markets outside of Chinawill be paid by Astellas and AstraZeneca.In China, our subsidiary FibroGen Beijing will conduct the development work for CKD anemia and will hold all of the regulatory licenses issued by Chinaregulatory authorities and be primarily responsible for regulatory, clinical and manufacturing. China development costs are shared 50/50. AstraZeneca is alsoresponsible for 100% of development expenses in all other licensed territories outside of China. We are responsible, through our contract manufacturers, forthe manufacture and supply of all quantities of roxadustat to be used in development and commercialization under the agreements.Under the AstraZeneca agreements, we receive upfront and subsequent non-contingent payments totaling $402.2 million. Potential milestone paymentsunder the agreements total $1.2 billion, of which $571.0 million are development and regulatory milestones, and $652.5 million are commercial-basedmilestones. Total consideration under the agreements, excluding development cost reimbursement, transfer price payments, royalties and profit share, couldreach $1.6 billion. During the second quarter of 2016, we received an upfront payment of $62.0 million time based development milestone. The aggregateamount of such consideration received through December 31, 2016 totals 417.2 million.Payments under these agreements include over $500 million in upfront, non-contingent and other payments received or expected to be received prior to thefirst U.S. approval, excluding development expense reimbursement.AstraZeneca purchased 1,111,111 shares of our common stock at the initial public offering (“IPO”) price for an aggregate purchase price of $20.0 million in aprivate placement concurrent with our IPO. In connection with the purchase of our shares of common stock in the private placement, AstraZeneca has alsoentered into a standstill agreement which provides that, until November 2019, neither AstraZeneca nor its representatives will, directly or indirectly, amongother things, acquire any additional securities or assets of ours, solicit proxies for our securities, participate in a business combination involving us, or seek toinfluence our management or policies, except with the prior consent of our board of directors and in certain other specified circumstances involving a changeof control of our company. In addition, AstraZeneca has agreed to vote its shares in favor of nominees to our board of directors, increases in the authorizedcapital stock of the company and amendments to our equity plans approved by the board of directors, in each case as recommended by a majority of ourboard of directors. AstraZeneca has also agreed, subject to specified exceptions, not to sell shares purchased by it in the private placement for the two-yearperiod following such purchase and to limitations on the volume of its sales of such shares thereafter.Under the U.S./RoW Agreement, AstraZeneca will pay for all commercialization costs in the U.S. and RoW, AstraZeneca will be responsible for the U.S.commercialization of roxadustat, with FibroGen undertaking specified promotional activities in the ESRD segment in the U.S. In addition, we will receive atransfer price for delivery of commercial product based on a percentage of net sales in the low- to mid-single digit range and AstraZeneca will pay us a tieredroyalty on net sales of roxadustat in the low 20% range.56Under the China Agreement, which is conducted through FibroGen China, the commercial collaboration is structured as a 50/50 profit share. AstraZenecawill conduct commercialization activities in China as well as serve as the master distributor for roxadustat and will fund roxadustat launch costs in Chinauntil FibroGen Beijing has achieved profitability. At that time, AstraZeneca will recoup 50% of their historical launch costs out of initial roxadustat profits inChina.AstraZeneca may terminate the U.S./RoW Agreement upon specified events, including our bankruptcy or insolvency, our uncured material breach, technicalproduct failure, or upon 180 days prior written notice at will. If AstraZeneca terminates the U.S/RoW Agreement at will, in addition to any unpaid non-contingent payments, it will be responsible to pay for a substantial portion of the post-termination development costs under the agreed development planuntil regulatory approval.AstraZeneca may terminate the China Agreement upon specified events, including our bankruptcy or insolvency, our uncured material breach, technicalproduct failure, or upon advance prior written notice at will. If AstraZeneca terminates our China Agreement at will, it will be responsible to pay for transitioncosts as well as make a specified payment to FibroGen China.In the event of any termination of the agreements, but subject to modification upon termination for technical product failure, AstraZeneca will transfer andassign to us any regulatory filings and approvals for roxadustat in the affected territories that they may hold under our agreements, grant us licenses andconduct certain transition activities.Additional Information Related to Collaboration AgreementsOf the $1,113.5 million in development and regulatory milestones payable in the aggregate under our Astellas and AstraZeneca collaboration agreements,$425.0 million is payable upon achievement of milestones relating to the submission and approval of roxadustat in DD-CKD and NDD-CKD in the U.S. andEurope.Information about collaboration partners that accounted for more than 10% of our total revenue or accounts receivable for the last three fiscal years is setforth in Note 14 to our consolidated financial statements under Item 8 of this Annual Report.COMPETITIONThe pharmaceutical and biotechnology industries are highly competitive, particularly in some of the indications we are developing drug candidates,including anemia in CKD, IPF, pancreatic cancer, liver fibrosis and DMD. We face competition from multiple other pharmaceutical and biotechnologycompanies, many of which have significantly greater financial, technical and human resources and experience in product development, manufacturing andmarketing. These potential advantages of our competitors are particularly a risk in IPF, pancreatic cancer, liver fibrosis and DMD, where we do not currentlyhave a development or commercialization partner.We expect any products that we develop and commercialize to compete on the basis of, among other things, efficacy, safety, convenience of administrationand delivery, price, the level of generic competition and the availability of reimbursement from government and other third party payors.If either of our lead product candidates is approved, they will compete with currently marketed products, and product candidates that may be approved formarketing in the future, for treatment of the following indications:Roxadustat — Anemia in CKDIf roxadustat is approved for the treatment of anemia in patients with CKD and launched commercially, competing drugs are expected to include ESAs,particularly in those patient segments where ESAs are used. Currently available ESAs include epoetin alfa (EPOGEN ® marketed by Amgen Inc. in theUnited States, Procrit ® and Erypo®/Eprex®, marketed by Johnson & Johnson, Inc. and Espo ® marketed by Kyowa Hakko Kirin (“KHK”), in Japan andChina), darbepoetin (Amgen/KHK’s Aranesp ® and NESP ® ) and Mircera ® marketed by Hoffmann-La Roche (“Roche”) outside the U.S. and by Galenica, aRoche licensee, in the U.S. and Puerto Rico, as well as biosimilar versions of these currently marketed ESA products. ESAs have been used in the treatment ofanemia in CKD for over 20 years, serving a significant majority of dialysis patients. While NDD-CKD patients who are not under the care of nephrologists,including those with diabetes and hypertension, do not typically receive ESAs and are often left untreated, some patients under nephrology care may bereceiving ESA therapy. Healthcare providers and patients currently treated with ESAs may be reluctant to switch to roxadustat from products with which theyhave become familiar.57We, and our collaboration partners, may also face competition from potential new anemia therapies currently in clinical development, including in thosepatients segments not currently addressed by ESAs. Companies such as GlaxoSmithKline plc (“GSK”), Bayer Corporation, Akebia Pharmaceuticals, Inc.(“Akebia”), and Japan Tobacco, who are currently developing HIF-PH inhibitors for anemia in CKD indications. We may face competition for patientrecruitment and enrollment for clinical trials and potentially in commercial sales. Akebia is currently conducting two Phase 3 studies in NDD-CKD, onestarted in December 2015 and the other in February 2016, and two Phase 3 studies in DD-CKD, one in July and the other in August 2016, primarily in the U.S.GSK started Phase 3 studies in NDD-CKD and DD-CKD in the U.S. in September 2016, and in Japan in June 2016. Bayer has completed global Phase 2studies and recently announced its HIF-PH inhibitor is now in continued development in Japan only, currently in Phase 2. Japan Tobacco is in Phase 2b inJapan. Some of these product candidates may enter the market prior to roxadustat. There may also be new therapies for renal-related diseases that could limitthe market or level of reimbursement available for roxadustat if and when it is commercialized.In addition, there are other companies developing biologic therapies for the treatment of other anemia indications that we may also seek to pursue in thefuture, including anemia of myelodysplastic syndrome, for which we submitted a Clinical Trial Application in China in the first half of 2016 and anInvestigational New Drug application to the FDA in the fourth quarter of 2016. For example, Acceleron Pharma Inc., in partnership with Celgene Corporation,is in Phase 3 development of protein therapeutic candidates to treat anemia and associated complications in patients with ß-thalassemia and MDS, and hasreceived orphan drug status from the EMA and FDA for these indications. Noxxon Pharma AG has conducted Phase 2 studies with an anti-hepcidinSpiegelmer ® lexaptepid pegol (NOX-H94), a mirror image of a natural oligonucleotide, in cancer patients for the treatment of anemia associated withchronic disease, as well as in ESA-hyporesponsive patients on dialysis.In China, biosimilars of epoetin alfa are offered by Chinese pharmaceutical companies such as EPIAO marketed by 3SBio Inc. as well as over 15 other localmanufacturers. We may also face competition by HIF-PH inhibitors from other companies such as Akebia, Bayer, and GSK who recently was authorized bythe CFDA to conduct trials in China to support its ex-China regulatory filings. Akebia announced in December 2015 that it has entered into a developmentand commercialization partnership with Mitsubishi Tanabe Pharmaceutical Corporation for its HIF-PH inhibitor vadadustat in Japan, Taiwan, South Korea,India and certain other countries in Asia. 3SBio Inc. also plans on beginning a Phase 1 clinical trial of a HIF-PH inhibitor for the China market in 2016. The introduction of biosimilar ESAs into the U.S. market may occur by the time roxadustat enters the market and may alter the competitive and pricinglandscape of anemia therapy in DD-CKD patients under the end stage renal disease bundle. The patents for Amgen’s epoetin alfa (EPOGEN) expired in 2004in the EU, and the final material patents in the United States expired in May 2015. Several biosimilar versions of currently marketed ESAs are available forsale in the EU, China and other territories. In the U.S., a few ESA biosimilars are currently under development or regulatory review, including Retacrit®(epoetin zeta), marketed by Pfizer in Europe, and for which Pfizer has said it plans to resubmit a Biologics License Application (“BLA”) after receiving acomplete response letter from the FDA denying approval of its BLA submitted in October 2015. Sandoz, a division of Novartis, markets Binocrit® (epoetinalfa) in Europe and plans to file a biosimilar BLA in 2017 in the U.S.The majority of the current CKD anemia market focuses on dialysis patients, who visit dialysis centers on a regular basis, typically three times a week, andanemia therapies are administered as part of the visit. Two of the largest operators of dialysis clinics in the U.S., DaVita Healthcare Partners Inc. (“DaVita”),and Fresenius Medical Care AG & Co. KGaA (“Fresenius”), collectively represent more than 70% of the US dialysis patients, and therefore have historicallywon long-term contracts including rebate terms with Amgen. DaVita recently entered into a new 6-year sourcing and supply agreement with Amgen effectivethrough 2022. Fresenius’ contract with Amgen expired in 2015, and Fresenius is now administering Mircera® in a significant portion of its U.S. dialysispatients since Mircera was made available by Galenica. Successful penetration in this market may require a significant agreement with Fresenius or DaVita,on favorable terms and on a timely basis. The currently marketed ESA products are also supported by large pharmaceutical companies with greater experienceand expertise in commercialization in the anemia market, including securing reimbursement, government contracts and relationships with key opinionleaders. We expect that significant resources will be required from us and our collaboration partners, AstraZeneca and Astellas, to overcome the challenges ofbringing a new product into an established market with concentrated buyers.PamrevlumabWe are currently in Phase 2 development of pamrevlumab to treat DMD, IPF, pancreatic cancer, and liver fibrosis. Most of our competitors have significantlymore resources and expertise in development, commercialization and manufacturing, particularly due to the fact that we have not yet established a co-development partnership for pamrevlumab. For example, both Roche (through its acquisition of InterMune) and Boehringer Ingelheim Pharma GmbH & Co.KG, who have received approval for product candidates for the treatment of IPF in the U.S., have successfully developed and commercialized drugs in variousindications and have built sales organizations that we do not currently have; both have more resources and more established relationships when competingwith us for patient recruitment and enrollment for clinical trials or, if we are approved, in the market.58Idiopathic Pulmonary FibrosisIf approved to treat IPF, pamrevlumab would compete with pirfenidone, which is approved for marketing in Europe, Canada and Japan. As of October 2014,Roche (through its acquisition of InterMune) has obtained approval in the U.S. for pirfenidone for the treatment of IPF and Boehringer Ingelheim hasobtained approval in the U.S. and the EU for nintedanib for the treatment of IPF. We believe that if pamrevlumab can be shown to safely stabilize or reverselung fibrosis in a subset of IPF patients, and thus stabilize or improve lung function, it can compete with pirfenidone and nintedanib for market share in IPF.However, it may be difficult to encourage treatment providers and patients to switch to pamrevlumab from a product they are already familiar with. We willalso likely face competition from potential new IPF therapies.Pamrevlumab is an injectable protein, which may be more expensive and less convenient than small molecules such as nintedanib and pirfenidone. Otherpotential competitive product candidates in various stages of Phase 2 development for IPF include Promedior, Inc.’s PRM-151, Bristol-Myers Squibb’s BMS-986020 and Biogen-Idec’s STX-100.Pancreatic CancerWe are developing pamrevlumab to be used in combination with Abraxane® (nab-paclitaxel) and gemcitabine in pancreatic cancer. Celgene’s Abraxane waslaunched in the U.S. and Europe in 2013 and 2014, respectively, and was the first drug approved in this disease in nearly a decade. In 2015, MerrimackPharmaceuticals Inc. (“Merrimack”) received FDA approval for the use of ONIVYDE (irinotecan liposome injection) for the treatment of patients withmetastatic adenocarcinoma of the pancreas after disease progression following gemcitabine-based therapy. In addition, treatments for cancer are often used incombination instead of as monotherapy; thus, we also face competition for pamrevlumab from other agents seeking approval in conjunction withgemcitabine and Abraxane. NewLink Genetics Corporation’s Indoximod and Merrimack’s MM-141 are examples.There are a number of other product candidates in clinical trials for pancreatic cancer, many of which are in combination with existing chemotherapies, asboth first-line and second-line therapy for metastatic pancreatic cancer. We will not only face a large number of product candidates competing for patientrecruitment and enrollment for our clinical trials, but we could also face a substantial number of competitors if pamrevlumab is approved for the treatment ofpancreatic cancer.Duchenne Muscular DystrophyIf approved and launched commercially to treat DMD in the U.S., pamrevlumab will face competition from two recently approved drugs.On September 19, 2016 the FDA approved Sarepta Therapeutics’s Exondys 51 (eteplirsen). This was the first drug approved to treat Duchenne MuscularDystrophy. Exondys 51 is approved to treat patients who have a mutation of the dystrophin gene amenable to exon 51 skipping therapy. This mutationrepresents a subset of approximately 13% of patients with Duchenne Muscular Dystrophy.On February 9, the FDA approved Marathon Pharmaceuticals’ corticosteroid Emflaza (deflazacort) for the treatment of patients 5 years and older withDuchenne Muscular Dystrophy. Although approved for other indications outside of the US, this was the first approval for deflazacort in the U.S. and the firstapproval in the U.S. for the use of a corticosteroid to treat Duchenne Muscular Dystrophy.If approved and launched commercially in Europe, pamrevlumab will face competition from PTC Therapeutics’ product ataluren (Translarna TM ). Atalurenreceived conditional approval in Europe in 2014.Translarna targets a different set of DMD patients from those targeted by Sarepta’s drug; however, it is alsolimited to a subset of patients who carry a specific mutation. Conversely, pamrevlumab is intended to treat DMD patients without limitation to type ofmutation. Pavrevlumab may also face competition from other drugs currently in clinical development which have filed regulatory approval in Europe,including Santhera Pharmaceuticals’ drug idebenone (Raxone ® /Catena ® ) and Sarepta Therapeutics Exondys-51 which has not yet been approved inEurope. Pamrevlumab could also face competition from other drugs in clinical development including drugs from Pfizer, Summit plc and TivorsanPharmaceuticals. Pfizer’s product candidate, which is in Phase 2 development, is an antibody targeting myostatin which is a protein that regulates musclegrowth. The goal of the program is to increase muscle growth and muscle strength in patients with DMD. Summit plc and Tivorsan Pharmaceuticals are bothworking on drugs involving the utrophin pathway. The goal of these programs is to increase the production the utrophin protein to compensate for thenonfunctional dystrophin protein produced by DMD patients. Utrophin is a protein similar to dystrophin that is potentially implicated in all DMD patients.Summit is conducting a Phase 2 trial and Tivorsan intends to submit an IND and start Phase 1 in 2017. Summit and Sarepta recently announced acollaboration in which the companies have agreed to collaborate on Summit’s utrophin modulator pipeline including its lead candidate ezutromid. Thecompanies will co-develop the pipeline and Sarepta will receive the rights to the compounds in Europe, Turkey, and the Commonwealth of IndependentStates. Sarepta also has an option on the rights to the program for Latin America. Summit will retain commercialization rights in all other countriesincluding the U.S.59MANUFACTURE AND SUPPLYWe have historically and in the future plan to continue to enter into contractual arrangements with qualified third-party manufacturers to manufacture andpackage our products and product candidates for territories outside of China. We believe that this manufacturing strategy enables us to more efficiently directfinancial resources to the research, development and commercialization of product candidates rather than diverting resources to establishing a significantinternal manufacturing infrastructure, unless there is additional strategic value for establishing manufacturing capabilities, such as in China. As our productcandidates proceed through development, we are discussing the timing of entry into longer term commercial supply agreements with key suppliers andmanufacturers in order to meet the ongoing and planned clinical and commercial supply needs for ourselves and our partners. Our timing of entry into theseagreements is based on the current development plans for roxadustat, pamrevlumab and FG-5200.RoxadustatRoxadustat is a small-molecule drug manufactured from generally available commercial starting materials and chemical technologies and multi-purposeequipment available from many third party contract manufacturers. Our third party manufacturers of roxadustat Phase 3 study material include ShanghaiSynTheAll Pharmaceutical Co., Ltd. and STA Pharmaceutical Hong Kong Limited and their respective affiliates (collectively “WuXi STA”) and Catalent, Inc.(“Catalent”). WuXi STA is located in China and currently supplies our active pharmaceutical ingredient (“API”), and intermediate needs for those materialsused in our Phase 3 clinical trials. WuXi STA has passed inspections by several regulatory agencies, including the FDA and CFDA, and is cGMP compliant.Catalent is located in the U.S. and supplies our Phase 3 tablet materials and provides tablet development services. Catalent has passed several regulatoryinspections, including by the FDA, and manufactures commercial products for other clients.To date, we believe that roxadustat has been manufactured under cGMP and in compliance with applicable regulatory requirements for the manufacture ofdrug substance and drug product used in clinical trials and we and Astellas have performed audits of the existing roxadustat manufacturers. The intendedcommercial manufacturing route outside of China has been successfully scaled up to multiple hundred kilogram scale and produced several metric tons ofroxadustat drug substance. We are in discussions with multiple parties regarding longer term commercial supply arrangements.In China, we plan to use the clinical material from WuXi STA and will conduct bioequivalence tests before NDA product is manufactured at the FibroGenBeijing manufacturing facility. Until our FibroGen Beijing manufacturing facility is qualified and licensed for manufacture of roxadustat for the Chinamarket, we will continue to rely on external contract manufacturers for both API and drug product manufacturing. We plan to use drug product from ourFibroGen Beijing manufacturing facility upon commercialization. We plan on using API from contract manufacturers or our own facility for commercialsupply, depending on evolving manufacturing and environmental regulations.Irix Pharmaceuticals, Inc.In July 2002, we and IRIX Pharmaceuticals, Inc. (“IRIX”), a third party manufacturer, entered into a Letter of Agreement for IRIX Pharmaceuticals SingleSource Manufacturing Agreement (the “Letter of Agreement”), in connection with a contract manufacturing arrangement for clinical supplies of HIF-PHinhibitors, including roxadustat. The Letter of Agreement contained a service agreement that included terms and schedule for the delivery of clinicalmaterials, and also included a term sheet for a single source agreement for the cGMP manufacture of HIF-PH inhibitors, including roxadustat. Specifically,pursuant to the Letter of Agreement, we and IRIX agreed to negotiate a single source manufacturing agreement that included a first right to negotiate amanufacturing contract for HIF-PH inhibitors, including roxadustat, provided that IRIX is able to match any third party bids within 5%, and the exclusiveright to manufacture extends for five years after approval of an NDA. Any agreement would provide that no minimum amounts would be specified untilappropriate by forecast, that we and our commercialization partner would have the rights to contract with independent third parties that exceed IRIX’sinternal capabilities or in the event that we or our commercialization partner determines for reasons of continuity and security that such a need exists,provided that IRIX would supply a majority of the product if it is able to meet the requirements and the schedule required by us and our partner. Subsequentto the Letter of Agreement, we and IRIX have entered into several additional service agreements. IRIX has requested in writing that we honor the Letter ofAgreement with respect to the single source manufacturing agreement. To date, we have offered to IRIX opportunities to bid for the manufacture of HIF-PHinhibitors, including roxadustat. In 2015, Patheon Pharmaceuticals Inc., a business unit of DPx Holdings B.V., acquired IRIX.60PamrevlumabTo date, pamrevlumab has been manufactured using specialized biopharmaceutical process techniques under an agreement with a qualified third partycontract manufacturer, Boehringer Ingelheim. Our contract manufacturer is the sole source for the current clinical supply of the drug substance and drugproduct for pamrevlumab. Our contract manufacturer is only obligated to supply the amounts of pamrevlumab as agreed on pursuant to work orders that areexecuted from time to time under our agreement as we determine need for clinical material, and we are not required to make fixed or minimum annualpurchases. Our existing agreement allows us to transfer the cell line manufacturing process to another third party manufacturer at our expense, and ourcontractor is obligated to provide reasonable technology transfer assistance in the event of such a transfer.FG-5200The manufacture of FG-5200 requires three distinct steps under cGMP and involves three parties in three locations. Our proprietary recombinant humancollagen is produced under contract by a third party in Finland. After quality assurance release, we freeze-dry the material in our U.S. facility. We are stilldetermining any facility licensing requirements for this step. The final step is the production of FG-5200, which will be done in a qualified asepticmanufacturing suite at the FibroGen Beijing manufacturing facility. After completion of the final validation of the sterile process (currently in progress),implants will be manufactured there for product registration testing, clinical testing, as well as for commercial use in the future.GOVERNMENT REGULATIONThe clinical testing, manufacturing, labeling, storage, distribution, record keeping, advertising, promotion, import, export and marketing, among otherthings, of our product candidates are subject to extensive regulation by governmental authorities in the U.S. and other countries. The process of obtainingregulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations, including in Europe andChina, requires the expenditure of substantial time and financial resources. Failure to comply with the applicable requirements at any time during the productdevelopment process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions,including refusal by the applicable regulatory authority to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuanceof warning letters and other types of letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines,refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by FDA and the Department ofJustice, or other governmental entities.U.S. Product Approval ProcessIn the U.S., the FDA regulates drugs and biological products, or biologics, under the Public Health Service Act, as well as the FDCA which is the primary lawfor regulation of drug products. Both drugs and biologics are subject to the regulations and guidance implementing these laws. Pharmaceutical products arealso subject to regulation by other governmental agencies, such as the Federal Trade Commission, the Office of Inspector General of the U.S. Department ofHealth and Human Services, the Consumer Product Safety Commission and the Environmental Protection Agency. The clinical testing, manufacturing,labeling, storage, distribution, record keeping, advertising, promotion, import, export and marketing, among other things, of our product candidates aresubject to extensive regulation by governmental authorities in the U.S. and other countries. The steps required before a drug or biologic may be approved formarketing in the U.S. generally include: •Preclinical laboratory tests and animal tests conducted under Good Laboratory Practices. •The submission to the FDA of an IND for human clinical testing, which must become effective before each human clinical trial commence. •Adequate and well-controlled human clinical trials to establish the safety and efficacy of the product and conducted in accordance with GoodClinical Practices. •The submission to the FDA of an NDA, in the case of a small molecule drug product, or a BLA, in the case of a biologic product. •FDA acceptance, review and approval of the NDA or BLA, as applicable. •Satisfactory completion of an FDA inspection of the manufacturing facilities at which the product is made to assess compliance with cGMPs.The testing and approval process requires substantial time, effort and financial resources, and the receipt and timing of any approval is uncertain. The FDAmay suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to a potentially unacceptablehealth risk.61Preclinical studies include laboratory evaluations of the product candidate, as well as animal studies to assess the potential safety and efficacy of the productcandidate. Preclinical studies must be conducted in compliance with FDA regulations regarding GLPs. The results of the preclinical studies, together withmanufacturing information and analytical data, are submitted to the FDA as part of the IND, which includes the results of preclinical testing and a protocoldetailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluatedif the first phase or phases of the clinical trial lends themselves to an efficacy determination. The IND will become effective automatically 30 days afterreceipt by the FDA, unless the FDA raises concerns or questions about the conduct of the trials as outlined in the IND prior to that time. In this case, the INDsponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed. The IND must become effective before clinical trials may becommenced.Clinical trials involve the administration of the product candidates to healthy volunteers, or subjects, or patients with the disease to be treated under thesupervision of a qualified principal investigator. Clinical trials must be conducted under the supervision of one or more qualified principal investigators inaccordance with GCPs and in accordance with protocols detailing the objectives of the applicable phase of the trial, dosing procedures, research subjectselection and exclusion criteria and the safety and effectiveness criteria to be evaluated. Progress reports detailing the status of clinical trials must besubmitted to the FDA annually. Sponsors must also timely report to the FDA serious and unexpected adverse events, any clinically important increase in therate of a serious suspected adverse event over that listed in the protocol or investigator’s brochure, or any findings from other studies or tests that suggest asignificant risk in humans exposed to the product candidate. Further, the protocol for each clinical trial must be reviewed and approved by an independentinstitutional review board (“IRB”), either centrally or individually at each institution at which the clinical trial will be conducted. The IRB will consider,among other things, ethical factors, and the safety of human subjects and the possible liability of the institution.Clinical trials are typically conducted in three sequential phases prior to approval, but the phases may overlap and different trials may be initiated with thesame drug candidate within the same phase of development in similar or different patient populations. These phases generally include the following:Phase 1. Phase 1 clinical trials represent the initial introduction of a product candidate into human subjects, frequently healthy volunteers. In Phase 1, theproduct candidate is usually tested for pharmacodynamic and pharmacokinetic properties such as safety, including adverse effects, dosage tolerance,absorption, distribution, metabolism and excretion.Phase 2. Phase 2 clinical trials usually involve studies in a limited patient population to (1) evaluate the efficacy of the product candidate for specificindications, (2) determine dosage tolerance and optimal dosage and (3) identify possible adverse effects and safety risks.Phase 3. If a product candidate is found to be potentially effective and to have an acceptable safety profile in Phase 2 studies, the clinical trial program willbe expanded to Phase 3 clinical trials to further evaluate clinical efficacy, optimal dosage and safety within an expanded patient population atgeographically dispersed clinical study sites.Phase 4. Phase 4 clinical trials are conducted after approval to gain additional experience from the treatment of patients in the intended therapeuticindication and to document a clinical benefit in the case of drugs approved under accelerated approval regulations, or when otherwise requested by the FDAin the form of post-market requirements or commitments. Failure to promptly conduct any required Phase 4 clinical trials could result in withdrawal ofapproval.The results of preclinical studies and clinical trials, together with detailed information on the manufacture, composition and quality of the product candidate,are submitted to the FDA in the form of an NDA (for a drug) or BLA (for a biologic), requesting approval to market the product. The application must beaccompanied by a significant user fee payment. The FDA has substantial discretion in the approval process and may refuse to accept any application ordecide that the data is insufficient for approval and require additional preclinical, clinical or other studies.62Review of ApplicationOnce the NDA or BLA submission has been accepted for filing, which occurs, if at all, 60 days after submission, the FDA informs the applicant of the specificdate by which the FDA intends to complete its review. This is typically 12 months from the date of submission. The review process is often extended by FDArequests for additional information or clarification. The FDA reviews NDAs and BLAs to determine, among other things, whether the proposed product is safeand effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity,strength, quality and purity. Before approving an NDA or BLA, the FDA may inspect the facilities at which the product is manufactured and will not approvethe product unless the manufacturing facility complies with cGMPs and will also inspect clinical trial sites for integrity of data supporting safety andefficacy. During the approval process, the FDA also will determine whether a risk evaluation and mitigation strategy (“REMS”), is necessary to assure the safeuse of the product. If the FDA concludes a REMS is needed, the sponsor of the application must submit a proposed REMS; the FDA will not approve theapplication without an approved REMS, if required. A REMS can substantially increase the costs of obtaining approval. The FDA may also convene anadvisory committee of external experts to provide input on certain review issues relating to risk, benefit and interpretation of clinical trial data. The FDA maydelay approval of an NDA if applicable regulatory criteria are not satisfied and/or the FDA requires additional testing or information. The FDA may requirepost-marketing testing and surveillance to monitor safety or efficacy of a product. FDA will issue either an approval of the NDA or BLA or a CompleteResponse Letter detailing the deficiencies and information required in order for reconsideration of the application.Pediatric Exclusivity and Pediatric UseUnder the Best Pharmaceuticals for Children Act, certain drugs or biologics may obtain an additional six months of exclusivity in an indication, if thesponsor submits information requested in writing by the FDA (“Written Request”), relating to the use of the active moiety of the drug or biologic in children.The FDA may not issue a Written Request for studies on unapproved or approved indications or where it determines that information relating to the use of adrug or biologic in a pediatric population, or part of the pediatric population, may not produce health benefits in that population.We have not received a Written Request for such pediatric studies with respect to our product candidates, although we may ask the FDA to issue a WrittenRequest for studies in the future. To receive the six-month pediatric market exclusivity, we would have to receive a Written Request from the FDA, conductthe requested studies in accordance with a written agreement with the FDA or, if there is no written agreement, in accordance with commonly acceptedscientific principles, and submit reports of the studies. A Written Request may include studies for indications that are not currently in the labeling if the FDAdetermines that such information will benefit the public health. The FDA will accept the reports upon its determination that the studies were conducted inaccordance with and are responsive to the original Written Request, agreement, or commonly accepted scientific principles, as appropriate, and that thereports comply with the FDA’s filing requirements.In addition, the Pediatric Research Equity Act (“PREA”) requires a sponsor to conduct pediatric studies for most drugs and biologicals, for a new activeingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs, BLAs and supplementsthereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must include the evaluation of thesafety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for eachpediatric subpopulation for which the product is safe and effective. The FDA, on its own initiative or at the request of the sponsor, may request a deferral ofpediatric studies for some or all of the pediatric subpopulations. A deferral may be granted by FDA if they believe that additional safety or effectiveness datain the adult population needs to be collected before the pediatric studies begin. After April 2013, the FDA must send a non-compliance letter to any sponsorthat fails to submit the required assessment, keep a deferral current or fails to submit a request for approval of a pediatric formulation.Post-Approval RequirementsEven after approval, drugs and biologics manufactured or distributed pursuant to FDA approvals are subject to continuous regulation by the FDA, including,among other things, requirements relating to recordkeeping, periodic reporting, product distribution, advertising and promotion and reporting of adverseexperiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject toprior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which suchproducts are manufactured, as well as new application fees for supplemental applications with clinical data.The FDA may impose a number of post-approval requirements as a condition of approval of an NDA or BLA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness aftercommercialization.63In addition, entities involved in the manufacture and distribution of approved drugs and biologics are required to register their establishments with the FDAand state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements.Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also requireinvestigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-partymanufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production andquality control to maintain cGMP compliance.Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problemsoccur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipatedseverity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may also result in revisions to the approvedlabeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or otherrestrictions under a REMS program. Other potential consequences include, among other things: •Restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls. •Fines, warning letters or holds on post-approval clinical trials. •Refusal of the FDA to approve pending NDAs or BLAs or supplements to approved NDAs or BLAs, or suspension or revocation of productlicense approvals. •Product seizure or detention, or refusal to permit the import or export of products. •Injunctions or the imposition of civil or criminal penalties.The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for theapproved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulationsprohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.Prescription Drug Marketing ActThe distribution of pharmaceutical products is subject to the Prescription Drug Marketing Act (“PDMA”), which regulates the distribution of drugs and drugsamples at the federal level and sets minimum standards for the registration and regulation of drug distributors at the state level. Under the PDMA and statelaw, states require the registration of manufacturers and distributors who provide pharmaceuticals in that state, including in certain states manufacturers anddistributors who ship pharmaceuticals into the state even if such manufacturers or distributors have no place of business within the state. The PDMA and statelaws impose requirements and limitations upon drug sampling to ensure accountability in the distribution of samples. The PDMA sets forth civil and criminalpenalties for violations of these and other provisions.Federal and State Fraud and Abuse and Data Privacy and Security and Transparency Laws and RegulationsIn addition to FDA restrictions on marketing of pharmaceutical products, federal and state healthcare laws restrict certain business practices in thebiopharmaceutical industry. These laws include, but are not limited to, anti-kickback, false claims, data privacy and security, and transparency statutes andregulations.64The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly orindirectly, to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any good, facility, item or servicereimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything ofvalue, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payment, ownershipinterests and providing anything at less than its fair market value. The Anti-Kickback Statute has been interpreted to apply to arrangements betweenpharmaceutical manufacturers on one hand and prescribers, purchasers and formulary managers on the other. Although there are a number of statutoryexemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and ourpractices may not in all cases meet all of the criteria for a statutory exception or safe harbor protection. Practices that involve remuneration that may bealleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal underthe Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its factsand circumstances. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remunerationis to induce referrals of federal healthcare covered business, the statute has been violated. The intent standard under the Anti-Kickback Statute was amendedby the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 (collectively “PPACA”), to astricter intent standard such that a person or entity no longer needs to have actual knowledge of this statute or the specific intent to violate it in order to havecommitted a violation. In addition, PPACA codified case law that a claim including items or services resulting from a violation of the federal Anti-KickbackStatute constitutes a false or fraudulent claim for purposes of the civil False Claims Act (discussed below). Further, civil monetary penalties statute imposespenalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health programthat the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.The federal false claims laws prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulentclaim for payment or approval to the federal government or knowingly making, using or causing to be made or used a false record or statement material to afalse or fraudulent claim to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes“any request or demand” for money or property presented to the U.S. government. Recently, several pharmaceutical and other healthcare companies havebeen prosecuted under these laws for, among other things, allegedly providing free product to customers with the expectation that the customers would billfederal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of theproduct for unapproved, and thus non-reimbursable, uses. The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), created newfederal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program,including private third-party payers and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false,fictitious or fraudulent statement in connection with the delivery of, or payment for, healthcare benefits, items or services.In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and its implementing regulations, imposescertain requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makesHIPAA’s privacy and security standards directly applicable to business associates — independent contractors or agents of covered entities that receive orobtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civilmonetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general newauthority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated withpursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differfrom each other in significant ways and may not have the same effect, thus complicating compliance efforts.Additionally, the federal Physician Payments Sunshine Act within the PPACA, and its implementing regulations, require that certain manufacturers of drugs,devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certainexceptions) to report information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entitiesor individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investmentinterests held by physicians and their immediate family members.65Also, many states have similar healthcare statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, inseveral states, apply regardless of the payer. Some states require the posting of information relating to clinical studies. In addition, California requirespharmaceutical companies to implement a comprehensive compliance program that includes a limit on expenditures for, or payments to, individual medicalor health professionals. If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us,we may be subject to penalties, including potentially significant criminal, civil and/or administrative penalties, damages, fines, disgorgement, individualimprisonment, exclusion of products from reimbursement under government programs, contractual damages, reputational harm, administrative burdens,diminished profits and future earnings and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate ourbusiness and our results of operations. To the extent that any of our products will be sold in a foreign country, we may be subject to similar foreign laws andregulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws andimplementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.Pharmaceutical Coverage, Pricing and ReimbursementIn both domestic and foreign markets, our sales of any approved products will depend in part on the availability of coverage and adequate reimbursementfrom third-party payers. Third-party payers include government health administrative authorities, managed care providers, private health insurers and otherorganizations. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-partypayers to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided and reimbursement isadequate to cover a significant portion of the cost of our products. Sales of our products will therefore depend substantially, both domestically and abroad, onthe extent to which the costs of our products will be paid by third-party payers. These third-party payers are increasingly focused on containing healthcarecosts by challenging the price and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to thecoverage and reimbursement status of newly approved healthcare product candidates. The market for our products and product candidates for which we mayreceive regulatory approval will depend significantly on access to third-party payers’ drug formularies, or lists of medications for which third-party payersprovide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures onpharmaceutical companies. Also, third-party payers may refuse to include a particular branded drug in their formularies or otherwise restrict patient access toa branded drug when a less costly generic equivalent or other alternative is available.Because each third-party payer individually approves coverage and reimbursement levels, obtaining coverage and adequate reimbursement is a time-consuming, costly and sometimes unpredictable process. We may be required to provide scientific and clinical support for the use of any product to eachthird-party payer separately with no assurance that approval would be obtained, and we may need to conduct expensive pharmacoeconomic studies in orderto demonstrate the cost-effectiveness of our products. This process could delay the market acceptance of any product and could have a negative effect on ourfuture revenues and operating results. We cannot be certain that our products and our product candidates will be considered cost-effective. Because coverageand reimbursement determinations are made on a payer-by-payer basis, obtaining acceptable coverage and reimbursement from one payer does not guaranteethat we will obtain similar acceptable coverage or reimbursement from another payer. If we are unable to obtain coverage of, and adequate reimbursement andpayment levels for, our product candidates from third-party payers, physicians may limit how much or under what circumstances they will prescribe oradminister them and patients may decline to purchase them. This in turn could affect our ability to successfully commercialize our products and impact ourprofitability, results of operations, financial condition and future success.In addition, in many foreign countries, particularly the countries of the EU and China, the pricing of prescription drugs is subject to government control. Insome non-U.S. jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricingvary widely from country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which theirnational health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve aspecific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of a company placing the medicinalproduct on the market. We may face competition for our product candidates from lower-priced products in foreign countries that have placed price controlson pharmaceutical products. In addition, there may be importation of foreign products that compete with our own products, which could negatively impactour profitability.66Healthcare ReformIn the U.S. and foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to thehealthcare system that could affect our future results of operations as we begin to directly commercialize our products. In particular, there have been andcontinue to be a number of initiatives at the U.S. federal and state level that seek to reduce healthcare costs. If a drug product is reimbursed by Medicare orMedicaid, pricing and rebate programs must comply with, as applicable, the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of1990, as amended, and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”). The MMA imposed new requirements forthe distribution and pricing of prescription drugs for Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plansoffered by private entities that provide coverage of outpatient prescription drugs. Part D plans include both stand-alone prescription drug benefit plans andprescription drug coverage as a supplement to Medicare Advantage plans. Unlike Medicare Part A and B, Part D coverage is not standardized. Part Dprescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifieswhich drugs it will cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category andclass of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must bedeveloped and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs may increase demand forour products for which we receive marketing approval. However, any negotiated prices for our future products covered by a Part D prescription drug plan willlikely be lower than the prices we might otherwise obtain from non-governmental payers. Moreover, while the MMA applies only to drug benefits forMedicare beneficiaries, private payers often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction inpayment that results from Medicare Part D may result in a similar reduction in payments from non-governmental payers.Moreover, the recently enacted federal Drug Supply Chain Security Act, imposes new obligations on manufacturers of pharmaceutical products, amongothers, related to product tracking and tracing. Among the requirements of this new federal legislation, manufacturers will be required to provide certaininformation regarding the drug product to individuals and entities to which product ownership is transferred, label drug product with a product identifier, andkeep certain records regarding the drug product. Further, under this new legislation, manufacturers will have drug product investigation, quarantine,disposition, and notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products, as well as products that are thesubject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious healthconsequences or death.Furthermore, political, economic and regulatory influences are subjecting the healthcare industry in the U.S. to fundamental change. Initiatives to reduce thefederal budget and debt and to reform healthcare coverage are increasing cost-containment efforts. We anticipate that Congress, state legislatures and theprivate sector will continue to review and assess alternative healthcare benefits, controls on healthcare spending through limitations on the growth of privatehealth insurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups, price controls on pharmaceuticals andother fundamental changes to the healthcare delivery system. Any proposed or actual changes could limit or eliminate our spending on development projectsand affect our ultimate profitability. In March 2010, PPACA was signed into law. PPACA has the potential to substantially change the way healthcare isfinanced by both governmental and private insurers. Among other cost containment measures, PPACA established: an annual, nondeductible fee on anyentity that manufactures or imports certain branded prescription drugs and biologic agents; revised the methodology by which rebates owed bymanufacturers to the state and federal government for covered outpatient drugs under the Medicaid Drug Rebate Program are calculated; increased theminimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; and extended the Medicaid Drug Rebate program toutilization of prescriptions of individuals enrolled in Medicaid managed care organizations. In the future, there may continue to be additional proposalsrelating to the reform of the U.S. healthcare system, some of which could further limit the prices we are able to charge for our products, or the amounts ofreimbursement available for our products. If future legislation were to impose direct governmental price controls and access restrictions, it could have asignificant adverse impact on our business. Managed care organizations, as well as Medicaid and other government agencies, continue to seek pricediscounts. Some states have implemented, and other states are considering, price controls or patient access constraints under the Medicaid program, and somestates are considering price-control regimes that would apply to broader segments of their populations that are not Medicaid-eligible. Due to the volatility inthe current economic and market dynamics, we are unable to predict the impact of any unforeseen or unknown legislative, regulatory, payer or policy actions,which may include cost containment and healthcare reform measures. Such policy actions could have a material adverse impact on our profitability.67Regulation in ChinaThe pharmaceutical industry in China is highly regulated. The primary regulatory authority is the CFDA, including its provincial and local branches. As adeveloper, manufacturer and supplier of drugs, we are subject to regulation and oversight by the CFDA and its provincial and local branches. The DrugAdministration Law of China provides the basic legal framework for the administration of the production and sale of pharmaceuticals in China and covers themanufacturing, distributing, packaging, pricing and advertising of pharmaceutical products. Its implementing regulations set forth detailed rules with respectto the administration of pharmaceuticals in China. In addition, we are, and we will be, subject to other Chinese laws and regulations that are applicable tobusiness operators, manufacturers and distributors in general.Pharmaceutical Clinical DevelopmentA new drug must be registered and approved by the CFDA before it can be manufactured and marketed for sale. To obtain CFDA approval, the applicant mustconduct clinical trials, which must be approved by the CFDA and are subject to the CFDA’s supervision and inspection. There are four phases of clinicaltrials. Application for registration of new drugs requires completion of Phase 1, 2 and 3 of clinical trials, similar to the U.S. In addition, the CFDA may requirethe conduct of Phase 4 studies as a condition to approval.Phase 4 studies are post-marketing studies to assess the therapeutic effectiveness of and adverse reactions to the new drug, including an evaluation of thebenefits and risks, when used among the general population or specific groups, with findings used to inform adjustments to dosage, among other things.NDA and Approval to MarketChina requires approval of the NDA as well as the manufacturing facility before a drug can be marketed in China. Approval and oversight are performed at anational and provincial levels of the CFDA, involve multiple agencies and consist of various stages of approval.Under the applicable drug registration regulations, drug registration applications are divided into three different types, namely Domestic New DrugApplication, Domestic Generic Drug Application, and Imported Drug Application. Drugs fall into one of three categories, namely chemical medicine,biological product or traditional Chinese or natural medicine.FibroGen Beijing as a domestic entity will be submitting a Domestic New Drug Application under the Domestic Class 1 designation which refers to a newdrug which has never been marketed in any country.In order to obtain market authorization, FibroGen Beijing must submit to the CFDA an NDA package that contains information similar to what is necessaryfor a U.S. NDA, including preclinical data, clinical data, technical data on API and drug product and related stability data. The stability data must begenerated from a three-batch registration campaign that is conducted at our Beijing facility, from which samples will be tested by the CFDA.If the NDA package is acceptable, FibroGen Beijing will be granted a New Drug License confirming the drug as suitable for marketing. In addition, FibroGenBeijing will be granted a Manufacturing License which lists the Drug Approval Code as well as the name and address of the Manufacturing License holder.Manufacturing further requires a Pharmaceutical Production Permit (“PPP”), as well as cGMP certification. We recently received a PPP, certifying that ourmanufacturing facility and manufacturing process in that facility are suitable for the manufacture of a drug for clinical or commercial purposes. A PPPrequires demonstration that the facility has: (i) legally qualified pharmaceutical and engineering professionals and necessary technical workers; (ii) thepremises, facilities and hygienic environment required for drug manufacturing; (iii) institutions, personnel, instruments and equipment necessary to conductquality control and testing for drugs to be produced; and (iv) rules and regulations to ensure the quality of drugs. The PPP is required prior to conducting theregistration campaign for stability and other data for the NDA.After NDA approval, FibroGen Beijing will be required to conduct a three-batch validation campaign, one of which will be observed onsite by the CFDA. Atthe successful completion of the validation campaign and associated inspection, FibroGen Beijing will be granted a cGMP certification for the commercialproduction of roxadustat at our Beijing manufacturing facility. Only after the issuance of the cGMP license can roxadustat be manufactured and soldcommercially to the China market.68Drug Price ControlsThe administration of price control of pharmaceutical products is vested in the national and provincial price administration authorities. Depending on thecategories of pharmaceutical products in question, the prices of pharmaceutical products listed in the Medical Insurance Catalogs, drugs with patents andother drugs whose production or trading may constitute monopolies are subject to the control of the National Development and Reform Commission ofChina (“the NDRC”), and the relevant provincial or local price administration authorities. With respect to pharmaceutical products manufactured in China,the national price administration authority from time to time publishes price control lists setting out the names of pharmaceutical products and theirrespective price ceilings. The provincial price administration authorities also publish price control lists in respect of the pharmaceutical products which aremanufactured within their respective areas. The main purpose of the price control policy is to set an upper limit to the prices of pharmaceutical products toprevent excessive increases in the prices of such products. Price controls on medicines are determined based on profit margins that the relevant authoritydeems acceptable, the type and quality of the medicine, its production costs, the prices of substitutes and the manufacturer’s compliance with applicablecGMP standards. Drug companies may apply for an increase in the retail price of their drug to the relevant national or provincial authority if their product hassuperior effectiveness or other advantages.Tendering Process for Hospital Purchases of MedicinesProvincial and municipal government agencies such as provincial or municipal health departments also operate a mandatory tender process for purchases byhospitals of a medicine included in provincial medicine catalogs. These government agencies organize tenders in their province or city and typically invitemanufacturers of provincial catalog medicines that are on the hospitals’ formularies and are in demand by these hospitals to participate in the tender process.A government-approved committee consisting of physicians, experts and officials is delegated by these government agencies the power to review bids andselect one or more medicines for the treatment of a particular medical condition. The selection is based on a number of factors, including bid price, qualityand a manufacturer’s reputation and service. The bidding price of a wining medicine will become the price required for purchases of that medicine by allhospitals in that province or city. This price, however, is effective only until the next tender, where the manufacturer of the winning medicine must submit anew bid. Increasingly, large hospitals are forming purchasing networks in order to increase their purchasing power. In addition, hospitals of certain provinceshave begun to implement collective tender processes through online bidding, which is expected to increase the transparency and competitiveness of thetendering system and allow greater access to new entrants.Device RegulationIn China, medical devices are classified into three different categories, Class I, Class II and Class III, depending on the degree of risk associated with eachmedical device and the extent of control needed to ensure safety and effectiveness. Classification of a medical device is important because the class to whicha medical device is assigned determines, among other things, whether a manufacturer needs to obtain a production permit and whether clinical trials arerequired. Classification of a medical device also determines the types of registration required and the level of regulatory authority involved in effecting theproduct registration. In January 2016, we received CFDA’s approval of our device classification application to designate FG-5200 corneal implants as aDomestic Class III medical device. Class III devices also require product registration and are regulated by the CFDA under the strictest regulatory control.Before a Class III medical device can be manufactured for commercial distribution, a manufacturer must effect medical device registration by proving thesafety and effectiveness of the medical device to the satisfaction of respective levels of the food and drug administration and clinical trials are required forregistration of Class III medical devices. In order to conduct a clinical trial on a Class III medical device, the CFDA requires manufacturers to apply for andobtain in advance a favorable inspection result for the device from an inspection center jointly recognized by the CFDA and the State Administration ofQuality Supervision, Inspection and Quarantine. The application for clinical trials involving a Class III medical device with high risk must be approved bythe CFDA before the manufacturer may begin clinical trials. A registration application for a Class III medical device must provide required pre-clinical andclinical trial data and information about the medical device and its components regarding, among other things, device design, manufacturing and labeling.The CFDA must provide the application data to the technical evaluation institute for an evaluation opinion within three working days after its acceptance ofthe application package and decide, within twenty business days after its receipt of the evaluation opinion, whether the application for registration isapproved. However, the time for conducting any detection, expert review and hearing process, if necessary, will not be counted in the abovementioned timelimit. If the CFDA requires supplemental information, the approval process may take much longer. The registration is valid for five years and application isrequired for renewal upon expiration of the existing registration certificate. Once a device is approved, a manufacturer must possess a production permit fromthe provincial level food and drug administration before manufacturing Class III medical devices.69Foreign Regulation Outside of ChinaWe are planning on seeking approval for roxadustat, and potentially for our other product candidates, in Europe, Japan and China as well as other countries.In order to market any product outside of the U.S., we would need to comply with numerous and varying regulatory requirements of other countries andjurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, manufacturing, marketing authorization, commercialsales and distribution of our products. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by thecomparable foreign regulatory authorities before we can commence clinical trials or marketing of the product in foreign countries and jurisdictions. Althoughmany of the issues discussed above with respect to the U.S. apply similarly in the context of other countries we are seeking approval in, including Europe andChina, the approval process varies between countries and jurisdictions and can involve different amounts of product testing and additional administrativereview periods. For example, in Europe, a sponsor must submit a CTA, much like an IND prior to the commencement of human clinical trials. A CTA must besubmitted to each national health authority and an independent ethics committee.For other countries outside of the EU, such as China and the countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct ofclinical trials, product licensing, pricing, and reimbursement vary from country to country. The time required to obtain approval in other countries andjurisdictions might differ from or be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensureregulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatoryapproval process in other countries.Regulatory Exclusivity for Approved ProductsU.S. Patent Term RestorationDepending upon the timing, duration, and specifics of the FDA approval of our product candidates, some of our U.S. patents may be eligible for limitedpatent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act. TheHatch-Waxman Act permits a patent restoration term of up to 5 years as compensation for patent term lost during product development and the FDAregulatory review process. The patent term restoration period is generally one-half the time between the effective date of an initial IND and the submissiondate of an NDA or BLA, plus the time between the submission date of the NDA or BLA and the approval of that product candidate application. Patent termrestoration cannot, however, extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. In addition, only one patentapplicable to an approved product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent.The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves applications for any patent term extension or restoration. In thefuture, we expect to apply for restoration of patent term for patents relating to each of our product candidates in order to add patent life beyond the currentexpiration date of such patents, depending on the length of the clinical trials and other factors involved in the filing of the relevant NDA or BLA.Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain applications of companies seeking to referenceanother company’s NDA or BLA. The Hatch-Waxman Act provides a 5-year period of exclusivity to any approved NDA for a product containing a NCE neverpreviously approved by FDA either alone or in combination with another active moiety. No application or abbreviated new drug application directed to thesame NCE may be submitted during the 5-year exclusivity period, except that such applications may be submitted after 4 years if they contain a certificationof patent invalidity or non-infringement of the patents listed with the FDA by the innovator NDA.Biologic Price Competition and Innovation ActThe Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), established an abbreviated pathway for the approval of biosimilar andinterchangeable biological products. The abbreviated regulatory approval pathway establishes legal authority for the FDA to review and approve biosimilarbiologics, including the possible designation of a biosimilar as “interchangeable” based on similarity to an existing branded product. Under the BPCIA, anapplication for a biosimilar product cannot be approved by the FDA until 12 years after the original branded product was approved under a BLA. However,an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDAby the innovator BLA holder. The BPCIA is complex and is only beginning to be interpreted and implemented by the FDA. As a result, its ultimate impact,implementation, and interpretation are subject to uncertainty.70Orphan Drug ActPamrevlumab has received orphan drug designation in IPF in the U.S. Under the Orphan Drug Act, the FDA may grant orphan designation to a drug orbiological product intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the U.S., or if itaffects more than 200,000 individuals in the U.S. there is no reasonable expectation that the cost of developing and making a drug product available in theU.S. for this type of disease or condition will be recovered from sales of the product. Orphan product designation must be requested before submitting anNDA. After the FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, theproduct is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biologicalproduct for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphanexclusivity. The designation of such drug also entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, taxadvantages and user-fee waivers. Competitors, however, may receive approval of different products for the indication for which the orphan product hasexclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivityalso could block the approval of one of our products for seven years if a competitor obtains approval of the same drug or biological product as defined by theFDA or if our drug candidate is determined to be contained within the competitor’s product for the same indication or disease. If a drug product designated asan orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity in anyindication.Orphan designation status in the EU has similar but not identical benefits in that jurisdiction.Products receiving orphan designation in the EU can receive ten years of market exclusivity, during which time no similar medicinal product for the sameindication may be placed on the market. The ten-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that theproduct no longer meets the criteria for orphan designation; for example, if the product is sufficiently profitable not to justify maintenance of marketexclusivity. Additionally, marketing authorization may be granted to a similar product for the same indication at any time if the second applicant canestablish that its product, although similar, is safer, more effective or otherwise clinically superior; the initial applicant consents to a second orphanmedicinal product application; or the initial applicant cannot supply enough orphan medicinal product. An orphan product can also obtain an additional twoyears of market exclusivity in the EU for pediatric studies. No extension to any supplementary protection certificate can be granted on the basis of pediatricstudies for orphan indications.Foreign Country Data ExclusivityThe EU also provides opportunities for additional market exclusivity. For example, in the EU, upon receiving marketing authorization, an NCE generallyreceives eight years of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in theEU from referencing the innovator’s data to assess a generic application. During the additional two-year period of market exclusivity, a generic marketingauthorization can be submitted, and the innovator’s data may be referenced, but no generic product can be marketed until the expiration of the marketexclusivity.In China, there is also an opportunity for data exclusivity for a period of six years for data included in an NDA applicable to a NCE. According to theProvisions for Drug Registration, the Chinese government protects undisclosed data from drug studies and prevents the approval of an application made byanother company that uses the undisclosed data for the approved drug. In addition, if an approved drug manufactured in China qualifies as an innovativedrug, such as Domestic Class 1, and the CFDA determines that it is appropriate to protect public health with respect to the safety and efficacy of the approveddrug, the CFDA may elect to monitor such drug for up to five years. During this post-marketing observation period, the CFDA will not grant approval toanother company to produce, change dosage form of or import the drug while the innovative drug is under observation. The approved manufacturer isrequired to provide an annual report to the regulatory department of the province, autonomous region or municipality directly under the central governmentwhere it is located. Each of the data exclusivity period and the observation period runs from the date of approval for production of the NCE or innovativedrug, as the case may be.INTELLECTUAL PROPERTYOur success depends in part upon our ability to obtain and maintain patent and other intellectual property protection for our product candidates includingcompositions-of-matter, dosages, and formulations, manufacturing methods, and novel applications, uses and technological innovations related to ourproduct candidates and core technologies. We also rely on trade secrets, know-how and continuing technological innovation to further develop and maintainour competitive position.71Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietarytechnologies, inventions and any improvements that we consider important to the development and implementation of our business and strategy. Our abilityto maintain and solidify our proprietary position for our products and technologies will depend, in part, on our success in obtaining and enforcing validpatent claims. Additionally, we may benefit from a variety of regulatory frameworks in the U.S., Europe, China, and other territories that provide periods ofnon-patent-based exclusivity for qualifying drug products. Refer to “Government Regulation — Regulatory Exclusivity for Approved Products.”We cannot ensure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications that may befiled by us in the future, nor can we ensure that any of our existing or subsequently granted patents will be useful in protecting our drug candidates,technological innovations, and processes. Additionally, any existing or subsequently granted patents may be challenged, invalidated, circumvented orinfringed. We cannot guarantee that our intellectual property rights or proprietary position will be sufficient to permit us to take advantage of current markettrends or otherwise to provide or protect competitive advantages. Furthermore, our competitors may be able to independently develop and commercializesimilar products, or may be able to duplicate our technologies, business model, or strategy, without infringing our patents or otherwise using our intellectualproperty.Our extensive worldwide patent portfolio includes multiple granted and pending patent applications relating to roxadustat and pamrevlumab. Currentlygranted patents relating to composition-of-matter for roxadustat and for pamrevlumab are expected, for each product candidate, to expire in 2024 or 2025, ineach case exclusive of any patent term extension that may be available. U.S. patents, and any corresponding foreign patents that may grant relating tocrystalline forms of roxadustat, are expected to expire in 2033, exclusive of any extension. Additional patents and patent applications relating tomanufacturing processes, formulations, and various therapeutic uses, including treatment of specific indications and improvement of clinical parameters,provide further protection for product candidates.The protection afforded by any particular patent depends upon many factors, including the type of patent, scope of coverage encompassed by the grantedclaims, availability of extensions of patent term, availability of legal remedies in the particular territory in which the patent is granted, and validity andenforceability of the patent. Changes in either patent laws or in the interpretation of patent laws in the U.S. and other countries could diminish our ability toprotect our inventions and to enforce our intellectual property rights. Accordingly, we cannot predict with certainty the enforceability of any granted patentclaims or of any claims that may be granted from our patent applications.The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Ourability to maintain and solidify our proprietary position for our products and core technologies will depend on our success in obtaining effective claims andenforcing those claims once granted. We have been in the past and are currently involved in various administrative proceedings with respect to our patentsand patent applications and may, as a result of our extensive portfolio, be involved in such proceedings in the future. Additionally, in the future, we mayclaim that a third party infringes our intellectual property or a third party may claim that we infringe its intellectual property. In any of the administrativeproceedings or in litigation, we may incur significant expenses, damages, attorneys’ fees, costs of proceedings and experts’ fees, and management andemployees may be required to spend significant time in connection with these actions.Because of the extensive time required for clinical development and regulatory review of a product candidate we may develop, it is possible that any patentrelated to our product candidates may expire before any of our product candidates can be commercialized, or may remain in force for only a short period oftime following commercialization, thereby reducing the advantage afforded by any such patent.The patent positions for our most advanced programs are summarized below.Roxadustat Patent PortfolioOur roxadustat patent portfolio includes multiple granted U.S. patents offering protection for roxadustat, including protection for roxadustat composition-of-matter, for pharmaceutical compositions containing roxadustat, and for methods for treating anemia using roxadustat or its analogs. Exclusive of any patentterm extension, the granted U.S. patents relating to the composition-of-matter of roxadustat are due to expire in 2024 or 2025. Corresponding patents havebeen granted in Europe and in multiple territories worldwide. Exclusive of any patent term extension, these granted foreign patents, and any pending patentapplications, if granted, are due to expire in 2024. Patents issued by the U.S. Patent and Trademark Office relating to crystalline forms of roxadustat are due toexpire in 2033, as are patents granted from the corresponding foreign patent applications currently pending worldwide.We believe that, if roxadustat is approved, a full five-year patent term extension under the Hatch-Waxman act will be available for a granted U.S. patentrelating to roxadustat, which extension would expire in 2029 or 2030, depending on the patent extended. Refer to “Government Regulation — RegulatoryExclusivity for Approved Products — U.S. Patent Term Restoration.”72We also hold various U.S. and foreign granted patents and pending patent applications directed to manufacturing processes, formulations, and methods foruse of roxadustat.Roxadustat China Patent PortfolioOur China patent portfolio relating to roxadustat includes granted patents covering composition-of-matter, pharmaceutical compositions, methods of use,and manufacturing processes for roxadustat, as well as medicaments containing roxadustat for treating conditions including anemia of chronic disease, irondeficiency, and ischemic disorders.These granted patents are due to expire in 2022 through 2024. Our roxadustat patent portfolio in China also includes pending patent applications relating tomanufacturing processes for roxadustat, crystalline forms of roxadustat, and various methods for use relating to the treatment of anemia or improvement ofanemia-related parameters using roxadustat.We believe that roxadustat, as a new chemical entity, would be eligible for six years of data exclusivity in China. Furthermore, upon approval as a new drug,roxadustat may receive up to five years of market exclusivity under a CFDA-imposed new drug monitoring period. Refer to “Government Regulation —Regulatory Exclusivity for Approved Products — Foreign Country Data Exclusivity.”HIF Anemia-related Technologies Patent PortfolioWe also have an extensive worldwide patent portfolio providing broad protection for proprietary technologies relating to the treatment of anemia. Thisportfolio currently contains granted patents and pending patent applications providing exclusivity for use of compounds falling within various andoverlapping classes of HIF-PH inhibitors to achieve various therapeutic effects.This portfolio reflects a series of discoveries we made from the initial days of our HIF program through the present time. Our research efforts have resulted inprogressive innovation, and the corresponding patents and patent applications reflect the success of our HIF program. Such discoveries include the ability ofHIF-PH inhibitors: •To induce endogenous EPO in anemic CKD patients. •To increase efficacy of EPO signaling. •To enhance EPO responsiveness of the bone marrow, for example, by increasing EPO receptor expression. •To overcome the suppressive and inhibitory effects of inflammatory cytokines, such as members of the interleukin-1 (“IL-1”) and interleukin-6(“IL-6”) cytokine families, on EPO production and responsiveness. •To increase effective metabolism of iron. •To increase iron absorption and bioavailability, as measured using clinical parameters such as percent transferrin saturation (“TSAT%”). •To overcome iron deficiency through effects on iron regulatory factors such as ferroportin and hepcidin. •To provide coordinated erythropoiesis resulting in increased reticulocyte Hb content (“CHr”), and increased mean corpuscular volume(“MCV”). •To improve kidney function.The table below sets forth representative granted U.S. patents relating to these and other inventions, including the projected expiration dates of these patents. PATENT NO. TITLE DUE TO EXPIRE 6,855,510 Pharmaceuticals and Methods for Treating Hypoxia and Screening Methods Therefor July 2022 8,466,172 Stabilization of Hypoxia Inducible Factor (HIF) Alpha December 2022 8,629,131 Enhanced Erythropoiesis and Iron Metabolism June 2024 8,604,012 Enhanced Erythropoiesis and Iron Metabolism June 2024 8,609,646 Enhanced Erythropoiesis and Iron Metabolism June 2024 8,604,013 Enhanced Erythropoiesis and Iron Metabolism June 2024 8,614,204 Enhanced Erythropoiesis and Iron Metabolism June 2026 7,713,986 Compounds and Methods for Treatment of Chemotherapy-Induced Anemia June 2026 8,318,703 Methods for Improving Kidney Function February 2027 73In addition to the U.S. patents listed above, our HIF anemia-related technologies portfolio includes corresponding foreign patents granted and patentapplications pending in various territories worldwide.On June 30, 2016, GlaxoSmithKline LLC (“GSK”) filed with the U.S. Patent and Trademark Office petitions for inter partes review of six of the above-listedU.S. patents (U.S. Patent Nos. 8,466,172; 8,614,204; 8,629,131; 8,604,012; 8,609,646; and 8,604,013). Inter partes review (“IPR”) is a process throughwhich a third party can challenge the validity of an issued U.S. patent. We previously stated that, even in the case that these patents are narrowed in scope orrevoked in their entirety, these actions do not challenge FibroGen’s exclusivity or freedom-to-operate for roxadustat.In its IPR petitions, GSK presented challenges against each of the claims of these patents. We filed preliminary patent owner responses explaining why eachpetition failed to demonstrate that any of the claims were unpatentable. On January 11, 2017, a panel of the Patent Trial and Appeal Board agreed withFibroGen and denied each of the six petitions, refusing to institute any of the requested IPR challenges against these FibroGen patents. These decisions arefinal and non-appealable.Akebia Therapeutics, Inc., and others have filed oppositions against certain European patents corresponding to some of the above-listed cases. An oppositionis a European Patent Office mechanism providing for a third-party challenge to a granted European patent. These oppositions are currently ongoing or areunder appeal. While we believe our patents will be upheld, the ultimate outcomes of the oppositions remain uncertain, and ultimate resolution of each ofthese proceedings may take two to four years or longer. However, we note that narrowing or even revocation of these patents would not affect our exclusivityfor roxadustat or our freedom-to-operate with respect to use of roxadustat for the treatment of anemia.Pamrevlumab Patent PortfolioOur pamrevlumab patent portfolio includes U.S. patents providing composition-of-matter protection for pamrevlumab and related antibodies, and formethods of using such in the treatment of fibroproliferative disorders, including IPF, liver fibrosis, and pancreatic cancer. Exclusive of any patent termextension, U.S. patents relating to pamrevlumab composition-of-matter are due to expire in 2024 or 2025. Corresponding patents have been granted inEurope and in multiple territories worldwide. Exclusive of any patent term extension, these foreign patents are due to expire in 2024.We believe that, if pamrevlumab is approved, a full five-year patent term extension under the Hatch-Waxman act will be available for a granted patentrelating to pamrevlumab, which extension would expire in 2029 or 2030, depending on the patent extended . In addition, we believe that pamrevlumab, ifapproved under a BLA, should qualify for the 12-year period of exclusivity currently permitted by the BPCIA. Refer to “Government Regulation —Regulatory Exclusivity for Approved Products.”We also hold additional granted U.S. and foreign patents and pending patent applications directed to the use of pamrevlumab to treat IPF, DMD, pancreaticcancer, liver fibrosis, and other disorders.Trade Secrets and Know-HowIn addition to patents, we rely upon proprietary trade secrets and know-how and continuing technological innovation to develop and maintain ourcompetitive position. We seek to protect our proprietary information, in part, using confidentiality and other terms in agreements with our commercialpartners, collaboration partners, consultants and employees. Such agreements are designed to protect our proprietary information, and may also grant usownership of technologies that are developed through a relationship with a third party, such as through invention assignment provisions. Agreements mayexpire and we could lose the benefit of confidentiality, or our agreements may be breached and we may not have adequate remedies for any breach. Inaddition, our trade secrets may otherwise become known or be independently discovered by competitors.To the extent that our commercial partners, collaboration partners, employees and consultants use intellectual property owned by others in their work for us,disputes may arise as to the rights in related or resulting know-how and inventions.In-LicensesDana-Farber Cancer InstituteEffective March 2006, we entered into a license agreement with the Dana-Farber Cancer Institute (“DFCI”), under which we obtained an exclusive license tocertain patent applications, patents and biological materials for all uses. The patent rights relate to inhibition of prolyl hydroxylation of the alpha subunit ofhypoxia-inducible factor (HIFα), and include granted U.S. and foreign patents due to expire in 2022, exclusive of possible patent term extension. Thelicensed patents relate to use of HIF-PH inhibitors such as roxadustat.74Under the DFCI agreement, we are obligated to pay DFCI for past and ongoing patent prosecution expenses for the licensed patents. We are also obligated topay DFCI annual maintenance fees, development milestone payments of up to $425,000, sales milestone payments of up to $3 million, and a sub-single digitroyalty on net sales by us or our affiliates or sublicensees of products that are covered by the licensed patents or incorporate the licensed biological materials.In addition, each sublicense we grant is subject to a one-time fixed amount payment to DFCI.Unless earlier terminated, the agreement will continue in effect, on a country-by-country basis, until the expiration of all licensed patents in a country or, ifthere is no patent covering a licensed product incorporating the licensed biological materials, until 20 years after the effective date of the agreement. DFCImay terminate the agreement for our uncured material breach, if we cease to carry on our business and development activities with respect to all licensedproducts, if we fail to comply with our insurance obligations, or if we are convicted of a felony related to the manufacture, use, sale or importation of licensedproducts. We may terminate the agreement at any time on prior written notice to DFCI.University of MiamiIn May 1997, we entered into a license agreement with the University of Miami (the “University”), amended in July 1999, under which we obtained anexclusive, worldwide license to certain patent applications and patents for all uses. The current patent rights include U.S. and foreign patents that relate tobiologically active fragments of CTGF, and corresponding nucleic acids, proteins, and antibodies, and are due to expire in 2019, exclusive of any patent termextension that may be available. The licensed patents relate to pamrevlumab and related products.Under the University agreement, we are obligated to pay for all ongoing patent prosecution expenses for the licensed patents. We are also obligated to pay anupfront licensing fee of $21,500, all of which has been paid, and development milestone payments of up to $450,000, of which $50,000 has been paid, aswell as an additional milestone payment, in the low hundreds of thousands of dollars, for each new indication for which we obtain approval for a licensedproduct, and a single digit royalty, subject to certain reductions, on net sales of licensed products by us or our affiliates or sublicensees.Unless earlier terminated, the agreement will continue in effect, on a country-by-country basis, until the expiration of all licensed patents in a country. TheUniversity may terminate the agreement for our uncured material breach or bankruptcy. We may terminate the agreement for the University’s uncuredmaterial breach or at any time on prior written notice to the University.Bristol-Myers Squibb Company (Medarex, Inc.)Effective July 9, 1998 and as amended on June 30, 2001 and January 28, 2002, we entered into a research and commercialization agreement with Medarex,Inc. and its wholly-owned subsidiary GenPharm International, Inc. (now, collectively, part of Bristol-Myers Squibb Company (“Medarex”)) to develop fullyhuman monoclonal antibodies for potential anti-fibrotic therapies. Under the agreement, Medarex was responsible for using its proprietary immunizabletransgenic mice or HuMAb-Mouse technology during a specified research period (“the Research Period”), to produce fully human antibodies against ourproprietary antigen targets, including CTGF, for our exclusive use.The agreement granted us an option to obtain an exclusive worldwide, royalty-bearing, commercial license to develop antibodies derived from Medarex’sHuMAb-Mouse technology, for use in the development and commercialization of diagnostic and therapeutic products. In December 2002, we exercised thatoption with respect to twelve antibodies inclusive of the antibody from which pamrevlumab is derived. We granted back to Medarex an exclusive,worldwide, royalty-free, perpetual, irrevocable license, with the right to sublicense, to certain inventions created during the parties’ research collaboration,with such license limited to use by Medarex outside the scope of our licensed antibodies.As a result of the exercise of our option to obtain the commercial license, Medarex is precluded from (i) knowingly using any technology involvingimmunizable transgenic mice containing unrearranged human immunoglobulin genes with any of our antigen targets that were the subject of the agreement,(ii) granting to a third party a commercial license that covers such antigen targets or those antibodies derived by Medarex during the Research Period, and(iii) using any antibodies derived by Medarex during the Research Period, except as permitted under the agreement for our benefit or to prosecute patentapplications in accordance with the agreement.75Medarex retained ownership of the patent rights relating to certain mice, mice materials, antibodies and hybridoma cell lines used by Medarex in connectionwith its activities under the agreement, and Medarex also owns certain claims in patents covering inventions that arise during the Research Period, whichclaims are directed to (i) compositions of matter (e.g., an antibody) except formulations of antibodies for therapeutic or diagnostic use, or (ii) methods ofproduction. We own the patent rights to any inventions that arise during the Research Period that relate to antigens, as well as claims in patents coveringinventions directed to (a) methods of use of an antibody, or (b) formulations of antibodies for therapeutic or diagnostic use. Upon exercise of our option toobtain the commercial license, we obtained the sole right but not obligation to control prosecution of patents relating solely to the licensed antibodies orproducts. Medarex has back-up patent prosecution rights in the event we decline to further prosecute or maintain such patents.In addition to research support payments by us to Medarex during the Research Period, and an upfront commercial license fee in the form of 181,819 sharesof FibroGen Series D Convertible Preferred Stock paid upon exercise of our option, we committed development-related milestone payments of up to $11million per therapeutic product containing a licensed antibody, and we have paid a $1 million development-related milestone, in the form of 133,333 sharesof FibroGen Series G Convertible Preferred Stock, for pamrevlumab to date. At our election, the remaining milestone payments may be paid in common stockof FibroGen, Inc., or cash.With respect to our sales and sales by our affiliates, the agreement also requires us to pay Medarex low single-digit royalties for licensed therapeutic productsand low double-digit royalties plus certain capped sales-based bonus royalties for licensed diagnostic products. With respect to sales of licensed products bya sublicensee, we may elect to pay the foregoing royalties based on our sublicensee’s sales, or a percentage (in the high-teens) of all payments received by usfrom such sublicensee. We are also required to reimburse Medarex any pass-through royalties, if any, payable under Medarex’s upstream license agreementswith Medical Research Council and DNX. Royalties payable by us under the agreement are on a licensed product-by-licensed product and country-by-country basis and subject to reductions in specified circumstances, and royalties are payable for a period until either expiration of patents covering theapplicable licensed product or a specified number of years following the first commercial sale of such product in the applicable country.Unless earlier terminated, the agreement will continue in effect for as long as there are royalty payment obligations by us or our sublicensees. Either partymay terminate the agreement for certain material breaches by the other party, or for bankruptcy, insolvency or similar circumstances. In addition, we may alsoterminate the agreement for convenience upon written notice.Third Party FilingsNumerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developingproducts. Because patent applications can take many years to issue, there may be currently pending applications, unknown to us, which may later result ingranted patents that use of our product candidates or proprietary technologies may infringe.If a third party claims that we infringe its intellectual property rights, we may face a number of issues, including but not limited to, litigation expenses,substantial damages, attorney fees, injunction, royalty payments, cross-licensing of our patents, redesign of our products, or processes and related fees andcosts.We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that our products,product candidates, and/or proprietary technologies infringe their intellectual property rights. If one of these patents were to be found to cover our products,product candidates, proprietary technologies, or their uses, we could be required to pay damages and could be restricted from commercializing our products,product candidates or using our proprietary technologies unless we obtain a license to the patent. A license may not be available to us on acceptable terms, ifat all. In addition, during litigation, the patent holder might obtain a preliminary injunction or other equitable right, which could prohibit us from making,using or selling our products, technologies, or methods.EMPLOYEESAs of January 31, 2017, we had 364 full-time employees, 91 of whom held Ph.D. or M.D. degrees, 283 of whom were engaged in research and developmentand 81 of whom were engaged in business development, finance, information systems, facilities, human resources or administrative support. None of our U.S.employees are represented by a labor union. The employees of FibroGen Beijing are represented by a labor union under the China Labor Union Law. None ofour employees have entered into a collective agreement with us. We consider our employee relations to be good.76FACILITIESOur corporate and research and development operations are located in San Francisco, California, where we lease approximately 234,000 square feet of officeand laboratory space with approximately 35,000 square feet subleased. The lease for our San Francisco headquarters expires in 2023. We also leaseapproximately 67,000 square feet of office and manufacturing space in Beijing, China. Our lease in China expires in 2021. We believe our facilities areadequate for our current needs and that suitable additional or substitute space would be available if needed.LEGAL PROCEEDINGSWe are not currently a party to any material legal proceedings.FINANCIAL INFORMATIONInformation regarding our revenues, net loss and total assets is contained in our consolidated financial statements under Item 8 of this Annual Report, whichinformation is incorporated by reference here. For the specifics of our segment and geographic revenue, refer to Note 14 to our consolidated financialstatements.Research and development expenses for fiscal years ended December 31, 2016, 2015 and 2014 were $187.2 million, $214.1 million and $150.8 million,respectively. We expect our research and development expenses to continue to increase in the future as we advance our product candidates through clinicaltrials and expand our product candidate portfolio.Our revenue to date has been generated primarily from our collaboration agreements with Astellas and AstraZeneca for the development andcommercialization of roxadustat. For fiscal years ended December 31, 2016, 2015 and 2014, substantially all of our revenue was related to our collaborationagreements.AVAILABLE INFORMATIONOur internet website address is www.fibrogen.com. In addition to the information about us and our subsidiaries contained in this Annual Report, informationabout us can be found on our website. Our website and information included in or linked to our website are not part of this Annual Report.Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant toSection 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge through our website as soon asreasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). The public may read andcopy the materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain informationon the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally the SEC maintains an internet site that contains reports,proxy and information statements and other information. The address of the SEC’s website is www.sec.gov.CORPORATE INFORMATIONWe were incorporated in 1993 in Delaware. Our headquarters are located at 409 Illinois Street, San Francisco, California 94158 and our telephone number is(415) 978-1200. Our website address is www.FibroGen.com. The information contained on, or that can be accessed through, our website is not part of, and isnot incorporated into, this Annual Report.Our subsidiaries consist of the following: 1) FibroGen Europe Oy (“FibroGen Europe”), a majority owned entity incorporated in Finland in 1996; 2) SkinSciences, Inc., a majority owned entity incorporated in the State of Delaware in 1995; 3) FibroGen International (Cayman) Limited, a wholly owned entityincorporated in the Cayman Islands in 2011; 4) FibroGen China Anemia Holdings Ltd., a majority owned entity incorporated in the Cayman Islands in 2012;5) FibroGen International (Hong Kong) Limited, a majority owned entity incorporated in Hong Kong in 2011; and 6) FibroGen (China) Medical TechnologyDevelopment Co., Ltd., a majority owned entity incorporated in China in 2011.“FibroGen,” the FibroGen logo and other trademarks or service marks of FibroGen, Inc. appearing in this Annual Report are the property of FibroGen, Inc.This Annual Report contains additional trade names, trademarks and service marks of others, which are the property of their respective owners. We do notintend our use of display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by,these other companies.77Until the end of 2015, we were an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (”JOBS Act”). Based on theaggregate market value of the outstanding common stock held by non-affiliates as of June 30, 2015, the Company meets the criteria for a large acceleratedfiler. We are no longer exempt, as an “emerging growth company,” from various reporting requirements applicable to other public companies, howeverthrough a permitted transition period until the third anniversary of our IPO, we may still choose to take advantage of the exemption from the requirements ofholding a nonbinding advisory vote on executive compensation. 78ITEM 1A. RISK FACTORSInvesting in our common stock involves a high degree of risk. You should carefully consider the risks described below in addition to the other informationincluded or incorporated by reference in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. Theoccurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects.In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Although we have discussed allknown material risks, the risks described below are not the only ones that we may face. Additional risks and uncertainties not presently known to us or thatwe currently deem immaterial may also impair our business operations.Risks Related to Our Financial Condition and History of Operating LossesWe have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable future and may neverachieve or sustain profitability. We may require additional financings in order to fund our operations.We are a clinical-stage biopharmaceutical company with two lead product candidates in clinical development, roxadustat in anemia in chronic kidneydisease (“CKD”) and pamrevlumab (FG-3019), in idiopathic pulmonary fibrosis (“IPF”), pancreatic cancer, Duchenne muscular dystrophy (“DMD”) and liverfibrosis. Pharmaceutical product development is a highly risky undertaking. To date, we have focused our efforts and most of our resources on hypoxia-inducible factor (“HIF”), and fibrosis biology research, as well as developing our lead product candidates. We are not profitable and, other than in 2006 and2007 due to income received from our Astellas Pharma Inc. (“Astellas”) collaboration, have incurred losses in each year since our inception. We have notgenerated any significant revenue based on product sales to date. We continue to incur significant research and development and other expenses related toour ongoing operations. Our net loss for the years ended December 31, 2016, 2015 and 2014 was approximately $61.7 million, $85.8 million and $59.5million, respectively. As of December 31, 2016, we had an accumulated deficit of $469.7 million. As of December 31, 2016, we had capital resourcesconsisting of cash, cash equivalents and short-term investments of $253.2 million plus $71.0 million of long-term investments classified as available for salesecurities. Despite contractual development and cost coverage commitments from our collaboration partners, AstraZeneca AB (“AstraZeneca”) and Astellas,and the potential to receive milestone and other payments from these partners, we anticipate we will continue to incur losses for the foreseeable future, and weanticipate these losses will increase as we continue our development of, and seek regulatory approval for our product candidates. If we do not successfullydevelop and obtain regulatory approval for our existing or any future product candidates and effectively manufacture, market and sell any product candidatesthat are approved, we may never generate product sales, and even if we do generate product sales, we may never achieve or sustain profitability on a quarterlyor annual basis. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity andworking capital. Our failure to become and remain profitable would depress the market price of our common stock and could impair our ability to raisecapital, expand our business, diversify our product offerings or continue our operations.We believe that we will continue to expend substantial resources for the foreseeable future as we continue late-stage clinical development of roxadustat, growour operations in the People’s Republic of China (“China”), expand our clinical development efforts on pamrevlumab, seek regulatory approval, prepare forthe commercialization of our product candidates, and pursue additional indications. These expenditures will include costs associated with research anddevelopment, conducting preclinical trials and clinical trials, obtaining regulatory approvals in various jurisdictions, and manufacturing and supplyingproducts and product candidates for ourselves and our partners. In particular, in our planned Phase 3 clinical trial program for roxadustat, which we believewill be the largest Phase 3 program ever conducted for an anemia product candidate, we are expecting to enroll approximately 7,000 to 8,000 patientsworldwide. We are conducting this Phase 3 program in conjunction with Astellas and AstraZeneca, and we are substantially dependent on Astellas andAstraZeneca for the funding of this large program. The outcome of any clinical trial and/or regulatory approval process is highly uncertain and we are unableto fully estimate the actual costs necessary to successfully complete the development and regulatory approval process for our compounds in developmentand any future product candidates. We believe that the net proceeds from our initial public offering (“IPO”), our existing cash and cash equivalents, short-term and long-term investments and accounts receivable, and expected third party collaboration revenues will allow us to fund our operating plans through atleast the next 12 months. Our operating plans or third party collaborations may change as a result of many factors, which are discussed in more detail below,and other factors that may not currently be known to us, and we therefore may need to seek additional funds sooner than planned, through offerings of publicor private securities, debt financings or other sources, such as royalty monetization or other structured financings. Such financings may result in dilution tostockholders, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business. We may also seekadditional capital due to favorable market conditions or strategic considerations even if we currently believe that we have sufficient funds for our current orfuture operating plans.79Our future funding requirements will depend on many factors, including, but not limited to: •the rate of progress in the development of our product candidates; •the costs of development efforts for our product candidates, such as pamrevlumab, that are not subject to reimbursement from our collaborationpartners; •the costs necessary to obtain regulatory approvals, if any, for our product candidates in the United States (“U.S.”), China and otherjurisdictions, and the costs of post-marketing studies that could be required by regulatory authorities in jurisdictions where approval isobtained; •the continuation of our existing collaborations and entry into new collaborations; •the time and unreimbursed costs necessary to commercialize products in territories in which our product candidates are approved for sale; •the revenues from any future sales of our products as well as revenue earned from profit share, royalties and milestones; •the level of reimbursement or third party payor pricing available to our products; •the costs of establishing and maintaining manufacturing operations and obtaining third party commercial supplies of our products, if any,manufactured in accordance with regulatory requirements; •the costs we incur in maintaining domestic and foreign operations, including operations in China; •regulatory compliance costs; and •the costs we incur in the filing, prosecution, maintenance and defense of our extensive patent portfolio and other intellectual property rights.Additional funds may not be available when we require them, or on terms that are acceptable to us. If adequate funds are not available to us on a timely basis,we may be required to delay, limit, reduce or terminate our research and development efforts or other operations or activities that may be necessary tocommercialize our product candidates.All of our recent revenue has been earned from collaboration partners for our product candidates under development.During the years ended December 2016, 2015 and 2014, substantially all of our revenues recognized were from our collaboration partners.We will require substantial additional capital to achieve our development and commercialization goals, which for our lead product candidate, roxadustat, iscurrently contemplated to be provided under our existing third party collaborations with Astellas and AstraZeneca.If either or both of these collaborations were to be terminated, we could require significant additional capital in order to proceed with development andcommercialization of our product candidates, or we may require additional partnering in order to help fund such development and commercialization. Ifadequate funds or partners are not available to us on a timely basis or on favorable terms, we may be required to delay, limit, reduce or terminate our researchand development efforts or other operations.If we are unable to continue to progress our development efforts and achieve milestones under our collaboration agreements, our revenues may decreaseand our activities may fail to lead to commercial products.Substantially all of our revenues to date have been, and a significant portion of our future revenues are expected to be, derived from our existingcollaboration agreements. Revenues from research and development collaborations depend upon continuation of the collaborations, reimbursement ofdevelopment costs, the achievement of milestones and royalties and profits from our product sales, if any, derived from future products developed from ourresearch. If we are unable to successfully advance the development of our product candidates or achieve milestones, revenues under our collaborationagreements will be substantially less than expected.80Risks Related to the Development and Commercialization of Our Product CandidatesWe are substantially dependent on the success of our lead product candidate, roxadustat, and our second compound in development, pamrevlumab.To date, we have invested a substantial portion of our efforts and financial resources in the research and development of roxadustat, which is currently ourlead product candidate. Roxadustat is our only product candidate that has advanced into a potentially pivotal trial, and it may be years before the studiesrequired for its approval are completed, if ever. Our other product candidates are less advanced in development and may never enter into pivotal studies. Wehave completed 26 Phase 1 and 2 clinical studies with roxadustat in North America, Europe and Asia, in which over 1,400 subjects have participated and forwhich we reported favorable primary and secondary safety and efficacy endpoint results. Based on our discussions with regulatory authorities, we believe thatwe have an acceptable plan for the conduct of our Phase 3 clinical programs to support NDA submissions in the U.S. and China. We have discussed ourPhase 3 clinical development program with three national health authorities in the EU and obtained scientific advice from the European Medicines Agency.Our near-term prospects, including maintaining our existing collaborations with Astellas and AstraZeneca, will depend heavily on successful Phase 3development and commercialization of roxadustat.Our other lead product candidate, pamrevlumab, is currently in clinical development for IPF, pancreatic cancer, DMD, and liver fibrosis. Pamrevlumabrequires substantial further development and investment. We do not have a collaboration partner for support of this compound, and, while we have promisingopen-label safety data and potential signals of efficacy, we would need to complete larger and more extensive controlled clinical trials to validate the resultsto date in order to continue further development of this product candidate. In addition, although there are many potentially promising indications beyondIPF, pancreatic cancer and liver fibrosis, we are still exploring indications for which further development of, and investment for, pamrevlumab may beappropriate. Accordingly, the costs and time to complete development and related risks are currently unknown. Moreover, pamrevlumab is a monoclonalantibody, which may require experience and expertise that we may not currently possess as well as financial resources that are potentially greater than thoserequired for our small molecule lead compound, roxadustat.The clinical and commercial success of roxadustat and pamrevlumab will depend on a number of factors, many of which are beyond our control, and wemay be unable to complete the development or commercialization of roxadustat or pamrevlumab.The clinical and commercial success of roxadustat and pamrevlumab will depend on a number of factors, including the following: •the timely initiation, continuation and completion of our Phase 3 clinical trials for roxadustat, which will depend substantially uponrequirements for such trials imposed by the U.S. Food and Drug Administration (“FDA”) and other regulatory agencies and bodies and thecontinued commitment and coordinated and timely performance by our third party collaboration partners, AstraZeneca and Astellas; •the timely initiation and completion of our Phase 2 clinical trials for pamrevlumab, including in IPF, pancreatic cancer, DMD, and liverfibrosis; •our ability to demonstrate the safety and efficacy of our product candidates to the satisfaction of the relevant regulatory authorities; •whether we are required by the FDA or other regulatory authorities to conduct additional clinical trials, and the scope and nature of suchclinical trials, prior to approval to market our products; •the timely receipt of necessary marketing approvals from the FDA and foreign regulatory authorities, including pricing and reimbursementdeterminations; •the ability to successfully commercialize our product candidates, if approved, for marketing and sale by the FDA or foreign regulatoryauthorities, whether alone or in collaboration with others; •our ability and the ability of our third party manufacturing partners to manufacture quantities of our product candidates at quality levelsnecessary to meet regulatory requirements and at a scale sufficient to meet anticipated demand at a cost that allows us to achieve profitability; •our success in educating health care providers and patients about the benefits, risks, administration and use of our product candidates, ifapproved; •acceptance of our product candidates, if approved, as safe and effective by patients and the healthcare community; •the success of efforts to enter into relationships with large dialysis organizations involving the administration of roxadustat to dialysis patients; •the achievement and maintenance of compliance with all regulatory requirements applicable to our product candidates; •the maintenance of an acceptable safety profile of our products following any approval;81 •the availability, perceived advantages, relative cost, relative safety, and relative efficacy of alternative and competitive treatments; •our ability to obtain and sustain an adequate level of pricing or reimbursement for our products by third party payors; •our ability to enforce successfully our intellectual property rights for our product candidates and against the products of potential competitors;and •our ability to avoid or succeed in third party patent interference or patent infringement claims.Many of these factors are beyond our control. Accordingly, we cannot assure you that we will ever be able to achieve profitability through the sale of, orroyalties from, our product candidates. If we or our collaboration partners are not successful in obtaining approval for and commercializing our productcandidates, or are delayed in completing those efforts, our business and operations would be adversely affected.We may be unable to obtain regulatory approval for our product candidates, or such approval may be delayed or limited, due to a number of factors, manyof which are beyond our control.The clinical trials and the manufacturing of our product candidates are and will continue to be, and the marketing of our product candidates will be, subjectto extensive and rigorous review and regulation by numerous government authorities in the U.S. and in other countries where we intend to develop and, ifapproved, market any product candidates. Before obtaining regulatory approval for the commercial sale of any product candidate, we must demonstratethrough extensive preclinical trials and clinical trials that the product candidate is safe and effective for use in each indication for which approval is sought.The regulatory review and approval process is expensive and requires substantial resources and time, and in general very few product candidates that enterdevelopment receive regulatory approval. In addition, our collaboration partners for roxadustat have final control over development decisions in theirrespective territories and they may make decisions with respect to development or regulatory authorities that delay or limit the potential approval ofroxadustat, or increase the cost of development or commercialization. Accordingly, we may be unable to successfully develop or commercialize roxadustat orpamrevlumab or any of our other product candidates.We have not obtained regulatory approval for any of our product candidates and it is possible that roxadustat and pamrevlumab will never receive regulatoryapproval in any country. Regulatory authorities may take actions or impose requirements that delay, limit or deny approval of roxadustat or pamrevlumab formany reasons, including, among others: •our failure to adequately demonstrate to the satisfaction of regulatory authorities that roxadustat is safe and effective in treating anemia in CKDor that pamrevlumab is safe and effective in treating IPF, pancreatic cancer, DMD or liver fibrosis; •our failure to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; •the determination by regulatory authorities that additional clinical trials are necessary to demonstrate the safety and efficacy of roxadustat orpamrevlumab, or that ongoing clinical trials need to be modified in design, size, conduct or implementation; •our product candidates may exhibit an unacceptable safety signal as they advance through clinical trials, in particular controlled Phase 3 trials; •the clinical research organizations (“CROs”) that conduct clinical trials on our behalf may take actions outside of our control that materiallyadversely impact our clinical trials; •we or third party contractors manufacturing our product candidates may not maintain current good manufacturing practices (“cGMP”),successfully pass inspection or meet other applicable manufacturing regulatory requirements; •regulatory authorities may not agree with our interpretation of the data from our preclinical trials and clinical trials; •collaboration partners may not perform or complete their clinical programs in a timely manner, or at all; or •principal investigators may determine that one or more serious adverse events (“SAEs”), is related or possibly related to roxadustat, and anysuch determination may adversely affect our ability to obtain regulatory approval, whether or not the determination is correct.Any of these factors, many of which are beyond our control, could jeopardize our or our collaboration partners’ abilities to obtain regulatory approval for andsuccessfully market roxadustat. Because our business and operations in the near-term are almost entirely dependent upon roxadustat, any significant delaysor impediments to regulatory approval could have a material adverse effect on our business and prospects.82Furthermore, in both the U.S. and China, we also expect to be required to perform additional clinical trials in order to obtain approval or as a condition tomaintaining approval due to post-marketing requirements. If the FDA requires a risk evaluation and mitigation strategy (“REMS”), for any of our productcandidates if approved, the substantial cost and expense of complying with a REMS or other post-marketing requirements may limit our ability tosuccessfully commercialize our product candidates.Preclinical, Phase 1 and Phase 2 clinical trial results may not be indicative of the results that may be obtained in larger, controlled Phase 3 clinical trialsrequired for approval.Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during theclinical trial process. Success in preclinical and early clinical trials, which are often highly variable and use small sample sizes, may not be predictive ofsimilar results in humans or in larger, controlled clinical trials, and successful results from early or small clinical trials may not be replicated or show asfavorable an outcome, even if successful. For example, in the past we developed an earlier generation product candidate aimed at treating anemia in CKD thatresulted in a clinical hold for a safety signal seen in that product in Phase 2 clinical trials. The clinical hold applied to that product candidate and roxadustatwas lifted for both product candidates after submission of the requested data to the FDA. While we have not seen similar safety concerns involving roxadustatto date, our Phase 2 clinical trials have involved a relatively small number of patients exposed to roxadustat for a relatively short period of time compared tothe Phase 3 clinical trials that we will be conducting, and only a fraction of the patients in the Phase 2 clinical trials were randomized to placebo.Accordingly, the Phase 2 clinical trials that we have conducted may not have uncovered safety issues, even if they exist. In addition, some of the safetyconcerns associated with the treatment of patients with anemia in CKD using Erythropoiesis Stimulating Agents (“ESAs”) did not emerge for many yearsuntil placebo-controlled studies had been conducted in large numbers of patients. The biochemical pathways that we believe are affected by roxadustat areimplicated in a variety of biological processes and disease conditions, and it is possible that the use of roxadustat to treat larger numbers of patients willdemonstrate unanticipated adverse effects, including possible drug interactions, which may negatively impact the safety profile, use and market acceptanceof roxadustat. We studied the potential interaction between roxadustat and three statins (atorvastatin, rosuvastatin and simvastatin), which are used to lowerlevels of lipids in the blood. An adverse effect associated with increased statin plasma concentration is myopathy, which typically presents in a form ofmyalgia. The studies indicated the potential for increased exposure to those statins when roxadustat is taken simultaneously with those statins and suggestedthe need for statin dose reductions for patients receiving higher statin doses. We performed additional clinical pharmacology studies to evaluate if the effectof any such interaction could be minimized or eliminated by a modification of the dosing schedule that would separate the administration of roxadustat andthe statin, however, such studies showed no minimization of effect. It is possible that the potential for interaction between roxadustat and statins could leadto label provisions for statins or roxadustat relating, for example, to dose scheduling or recommended statin dose limitations. In CKD patients statin therapyis often initiated earlier than treatment for anemia, and risks of myopathy have been shown to decrease with increased time on drug. While we believe theprior statin treatment history of such patients at established doses may reduce the risk of adverse effects from any interaction with roxadustat and facilitateany appropriate dose adjustments, we cannot be sure that this will be the case.The FDA has informed us that our Phase 3 trials must include, as a safety endpoint, a major adverse cardiac events (“MACE”), endpoint, which is a compositeendpoint designed to identify major safety concerns, in particular relating to cardiovascular events such as cardiovascular death, myocardial infarction andstroke. In addition, we expect that our Phase 3 clinical trials supporting approval in Europe will be required to include MACE+ as a safety endpoint which, inaddition to the MACE endpoints, also incorporates measurements of hospitalization rates due to heart failure or unstable angina. As a result, our ongoing andplanned Phase 3 clinical trials may identify unanticipated safety concerns in the patient population under study. The FDA has also informed us that theMACE endpoint will need to be evaluated separately for our Phase 3 trials in non-dialysis dependent-CKD patients and our Phase 3 trials in dialysisdependent-CKD patients. The MACE endpoint will be evaluated in pooled analysis across Phase 3 studies of similar study populations and requiresdemonstration of non-inferiority relative to comparator, which means that the MACE event rate in roxadustat-treated patients must have less than a specifiedprobability of exceeding the rate in the comparator trial by a specified hazard ratio. The number of patients necessary in order to permit a statistical analysiswith adequate ability to detect the relative risk of MACE or MACE+ events in different arms of the trial, referred to as statistical power, depends on a numberof factors, including the rate at which MACE or MACE+ events occur per patient-year in the trial, treatment duration of the patients, the required hazard ratio,and the required statistical power and confidence intervals.83In addition, we cannot be sure that the potential advantages that we believe roxadustat may have for treatment of patients with anemia in CKD as comparedto the use of ESAs will be substantiated by our Phase 3 clinical trials or that we will be able to include a discussion of such advantages in our labeling shouldwe obtain approval. We believe that roxadustat may have certain benefits as compared to ESAs based on the data from our Phase 2 clinical trials conducted todate, including safety benefits, the absence of a hypertensive effect, the potential to lower cholesterol levels and the potential to correct anemia without theuse of IV iron. However, our belief that roxadustat may offer those benefits is based on a limited amount of data from our Phase 2 clinical trials and ourunderstanding of the likely mechanisms of action for roxadustat. Some of these benefits, such as those associated with the apparent effects on blood pressureand cholesterol, are not fully understood and, even if roxadustat receives marketing approval, we do not expect that it will be approved for the treatment ofhigh blood pressure or high cholesterol based on the data from our Phase 3 trials, and we may not be able to refer to any such benefits in the labeling. Whilethe data from our Phase 2 trials suggests roxadustat may reduce low-density lipoprotein (“LDL”), and reduce the ratio of LDL to high-density lipoprotein(“HDL”), the data show it may also reduce HDL, which may be a risk to patients. In addition, causes of the safety concerns associated with the use of ESAs toachieve specified target Hb levels have not been fully elucidated. While we believe that the issues giving rise to these concerns with ESAs are likely due tofactors other than the Hb levels achieved, we cannot be certain that roxadustat will not be associated with similar, or more severe, safety concerns.Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positiveresults in early stage development, and we may face similar setbacks. In addition, the CKD patient population has many afflictions that may cause severeillness or death, which may be attributed to roxadustat in a manner that negatively impacts the safety profile of our product candidate. If the results of ourongoing or future clinical trials for roxadustat are inconclusive with respect to efficacy, if we do not meet our clinical endpoints with statistical significance,or if there are unanticipated safety concerns or adverse events that emerge during clinical trials, we may be prevented from or delayed in obtaining marketingapproval for roxadustat, and even if we obtain marketing approval, any sales of roxadustat may suffer.Our preclinical and Phase 2 results to date for pamrevlumab may not be indicative of the results that may be obtained in larger, controlled Phase 2 clinicaltrials or Phase 3 clinical trials required for approval.Success in preclinical and early clinical trials, which are often highly variable and use small sample sizes, may not be predictive of similar results in humansor in larger, controlled clinical trials, and successful results from early or small clinical trials may not be replicated or show as favorable an outcome, even ifsuccessful. We have conducted only a limited number of Phase 2 clinical trials with pamrevlumab. We have conducted an open-label Phase 2 dose escalationstudy of pamrevlumab for IPF in 89 patients, a Phase 2 dose finding trial of pamrevlumab combined with gemcitabine plus erlotinib in 75 patients withpancreatic cancer and a randomized double-blind placebo controlled study for liver fibrosis in subjects with hepatitis B. We cannot be sure that the results ofthese trials will be substantiated in double-blinded trials with larger numbers of patients, that larger trials will demonstrate the efficacy of pamrevlumab forthese or other indications or that safety issues will not be uncovered in further trials. In the Phase 2 clinical trial for IPF, we used quantitative high resolutioncomputed tomography (“HRCT”), to measure the extent of lung fibrosis. While we believe that quantitative HRCT is an accurate measure of lung fibrosis, itis a novel technology that has not yet been accepted by the FDA as a primary endpoint in pivotal clinical trials. In addition, while we believe that the animalstudies that we have conducted to date suggest that pamrevlumab has the potential to arrest or reverse fibrosis and reduce tumor mass, we cannot be sure thatthese results will be indicative of the effects of pamrevlumab in human trials. In addition, the IPF and pancreatic cancer patient populations are extremely illand routinely experience SAEs, including death, which may be attributed to pamrevlumab in a manner that negatively impacts the safety profile of ourproduct candidate. If the additional Phase 2 clinical trials that we are planning for pamrevlumab do not show favorable efficacy results or result in safetyconcerns, or if we do not meet our clinical endpoints with statistical significance, or demonstrate an acceptable risk-benefit profile, we may be prevented fromor delayed in obtaining marketing approval for pamrevlumab in one or both of these indications.84We do not know whether our ongoing or planned Phase 3 clinical trials in roxadustat or Phase 2 clinical trials in pamrevlumab will need to be redesignedbased on interim results, be able to achieve sufficient enrollment or be completed on schedule, if at all.Clinical trials can be delayed or terminated for a variety of reasons, including delay or failure to: •address any physician or patient safety concerns that arise during the course of the trial; •obtain required regulatory or institutional review board (“IRB”) approval or guidance; •reach timely agreement on acceptable terms with prospective CROs and clinical trial sites; •recruit, enroll and retain patients through the completion of the trial; •maintain clinical sites in compliance with clinical trial protocols; •initiate or add a sufficient number of clinical trial sites; and •manufacture sufficient quantities of product candidate for use in clinical trials.In addition, we could encounter delays if a clinical trial is suspended or terminated by us, by the relevant IRBs at the sites at which such trials are beingconducted, or by the FDA or other regulatory authorities. A suspension or termination of clinical trials may result from any number of factors, includingfailure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial siteby the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, changes in laws orregulations, or a principal investigator’s determination that a serious adverse event could be related to our product candidates. Any delays in completing ourclinical trials will increase the costs of the trial, delay the product candidate development and approval process and jeopardize our ability to commencemarketing and generate revenues. Any of these occurrences may materially and adversely harm our business and operations and prospects.Our product candidates may cause or have attributed to them undesirable side effects or have other properties that delay or prevent their regulatoryapproval or limit their commercial potential.Undesirable side effects caused by our product candidates or that may be identified as related to our product candidates by physician investigatorsconducting our clinical trials or even competing products in development that utilize a similar mechanism of action or act through a similar biologicaldisease pathway could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the delay or denial of regulatory approvalby the FDA or other regulatory authorities and potential product liability claims. Adverse events and SAEs that emerge during treatment with our productcandidates or other compounds acting through similar biological pathways may be deemed to be related to our product candidate and may result in: •our Phase 3 clinical trial development plan becoming longer and more extensive; •regulatory authorities increasing the data and information required to approve our product candidates and imposing other requirements; and •our collaboration partners terminating our existing agreements.The occurrence of any or all of these events may cause the development of our product candidates to be delayed or terminated, which could materially andadversely affect our business and prospects. Refer to “Business — Our Development Program for Roxadustat” and “Business — Pamrevlumab for theTreatment of Fibrosis and Cancer” for a discussion of the adverse events and SAEs that have emerged in clinical trials of roxadustat and pamrevlumab.85Clinical trials of our product candidates may not uncover all possible adverse effects that patients may experience.Clinical trials are conducted in representative samples of the potential patient population which may have significant variability. Clinical trials are by designbased on a limited number of subjects and of limited duration for exposure to the product used to determine whether, on a potentially statistically significantbasis, the planned safety and efficacy of any product candidate can be achieved. As with the results of any statistical sampling, we cannot be sure that all sideeffects of our product candidates may be uncovered, and it may be the case that only with a significantly larger number of patients exposed to the productcandidate for a longer duration, may a more complete safety profile be identified. Further, even larger clinical trials may not identify rare serious adverseeffects or the duration of such studies may not be sufficient to identify when those events may occur. There have been other products, including ESAs, thathave been approved by the regulatory authorities but for which safety concerns have been uncovered following approval. Such safety concerns have led tolabeling changes or withdrawal of ESAs products from the market, and any of our product candidates may be subject to similar risks. For example, roxadustatfor use in anemia in CKD is being developed to address a very diverse patient population expected to have many serious health conditions at the time ofadministration of roxadustat, including diabetes, high blood pressure and declining kidney function.Although to date we have not seen evidence of significant safety concerns with our product candidates currently in clinical trials, patients treated with ourproducts, if approved, may experience adverse reactions and it is possible that the FDA or other regulatory authorities may ask for additional safety data as acondition of, or in connection with, our efforts to obtain approval of our product candidates. If safety problems occur or are identified after our productcandidates reach the market, we may, or regulatory authorities may require us to amend the labeling of our products, recall our products or even withdrawapproval for our products.We may fail to enroll a sufficient number of patients in our clinical trials in a timely manner, which could delay or prevent clinical trials of our productcandidates.Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials dependson the rate at which we can recruit and enroll patients in testing our product candidates. Patients may be unwilling to participate in clinical trials of ourproduct candidates for a variety of reasons, some of which may be beyond our control: •severity of the disease under investigation; •availability of alternative treatments; •size and nature of the patient population; •eligibility criteria for and design of the study in question; •perceived risks and benefits of the product candidate under study; •ongoing clinical trials of competitive agents; •physicians’ and patients’ perceptions as to the potential advantages of our product candidates being studied in relation to available therapiesor other products under development; •our, our CRO’s, and our trial sites’ efforts to facilitate timely enrollment in clinical trials; •patient referral practices of physicians; and •ability to monitor patients and collect patient data adequately during and after treatment.Patients may be unwilling to participate in our clinical trials for roxadustat due to adverse events observed in other drug treatments of anemia in CKD, andpatients currently controlling their disease with existing ESAs may be reluctant to participate in a clinical trial with an investigational drug. We may not beable to successfully initiate or continue clinical trials if we cannot rapidly enroll a sufficient number of eligible patients to participate in the clinical trialsrequired by regulatory agencies. If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay,limit or terminate on-going or planned clinical trials, any of which could have a material and adverse effect on our business and prospects.86If we or third party manufacturers on which we rely cannot manufacture sufficient quantities of our product candidates, or at sufficient quality, we mayexperience delays in development, regulatory approval, launch or commercialization.Completion of our clinical trials and commercialization of our product candidates require access to, or development of, facilities to manufacture our productcandidates at sufficient yields and at commercial scale. We have not yet entered into any commercial supply agreements with third-party manufacturers. Wehave limited experience manufacturing, or managing third parties in manufacturing any of our product candidates in the volumes that are expected to benecessary to support large-scale clinical trials and sales. In addition, we have limited experience forecasting or coordinating forecasting supply for launch orcommercialization, which is a complex process involving our third-party manufacturers and for roxadustat our collaboration partners. We may not be able tosufficiently forecast supplies for commercial launch, or do so in a timely manner and our efforts to establish these manufacturing capabilities may not meetour requirements as to quantities, scale-up, yield, cost, potency or quality in compliance with cGMP.We have a limited amount of roxadustat and pamrevlumab in storage, limited capacity reserved at our third-party manufacturers, and there are long lead timesrequired to manufacture and scale-up the manufacture of additional supply. If we are unable to forecast, order or manufacture sufficient quantities ofroxadustat or pamrevlumab on a timely basis, it may delay our development, launch or commercialization in some or all indications we are currentlypursuing. Any delay or interruption in the supply of our product candidates or products could have a material adverse effect on our business and operations.Our clinical trials must be conducted with product produced under applicable cGMP regulations. Failure to comply with these regulations may require us torepeat clinical trials, which would delay the regulatory approval process. We and even an experienced third party manufacturer may encounter difficulties inproduction, which difficulties may include: •costs and challenges associated with scale-up and attaining sufficient manufacturing yields, in particular for biologic products such aspamrevlumab, which is a monoclonal antibody; •supply chain issues, including coordination of multiple contractors in our supply chain; •the timely availability and shelf life requirements of raw materials and supplies; •quality control and assurance; •shortages of qualified personnel and capital required to manufacture large quantities of product; •compliance with regulatory requirements that vary in each country where a product might be sold; •capacity or forecasting limitations and scheduling availability in contracted facilities; and •natural disasters, such as floods, storms, earthquakes, tsunamis, and droughts, or accidents such as fire, that affect facilities, possibly limit orpostpone production, and increase costs.Even if we are able to obtain regulatory approval of our product candidates, the label we obtain may limit the indicated uses for which our productcandidates may be marketed.With respect to roxadustat, we expect that regulatory approvals, if obtained at all, will limit the approved indicated uses for which roxadustat may bemarketed, as ESAs have been subject to significant safety limitations on usage as directed by the “Black Box” warnings included in their labels. Refer to“Business — Roxadustat for the Treatment of Anemia in Chronic Kidney Disease — Limitations of the Current Standard of Care for Anemia in CKD”. Inaddition, in the past, an approved ESA was voluntarily withdrawn due to serious safety issues discovered after approval. The safety concerns relating to ESAsmay result in labeling for roxadustat containing similar warnings even if our Phase 3 clinical trials do not suggest that roxadustat has similar safety issues.Even if the label for roxadustat does not contain all of the warnings contained in the Black Box warning for ESAs, the label for roxadustat may contain otherwarnings that limit the market opportunity for roxadustat. These warnings could include warnings against exceeding specified Hb targets and other warningsthat derive from the lack of clarity regarding the basis for the safety issues associated with ESAs, even if our Phase 3 clinical trials do not themselves raisesafety concerns.87As an organization, we have never completed a Phase 3 clinical trial or submitted a New Drug Application (“NDA”) before, and may be unable to do soefficiently or at all for roxadustat or any product candidate we are developing.We are currently conducting Phase 2 clinical trials for pamrevlumab and we may need to conduct additional Phase 2 clinical trials before initiating our Phase3 clinical trials for pamrevlumab. We have initiated Phase 3 clinical trials of roxadustat, and if our Phase 2 clinical trials are successful for pamrevlumab, weintend to conduct Phase 3 clinical trials for pamrevlumab. The conduct of Phase 3 clinical trials and the submission of a successful NDA is a complicatedprocess. As an organization, we have not completed a Phase 3 clinical trial before, have limited experience in preparing, submitting and prosecutingregulatory filings, and have not submitted an NDA before. Consequently, we may be unable to successfully and efficiently execute and complete necessaryclinical trials in a way that leads to NDA submission and approval of roxadustat or for any other product candidate we are developing, even if our earlierstage clinical trials are successful. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatoryapprovals of product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials would prevent us from or delay usin commercializing roxadustat or any other product candidate we are developing.In addition, in order for any Phase 3 clinical trial to support an NDA submission for approval, the FDA and foreign regulatory authorities require compliancewith regulations and standards, including good clinical practices (“GCP”) requirements for designing, conducting, monitoring, recording, analyzing andreporting the results of clinical trials to ensure that the data and results from trials are credible and accurate and that the rights, integrity and confidentiality oftrial participants are protected. Although we rely on third parties to conduct our clinical trials, we as the sponsor remain responsible for ensuring that each ofthese clinical trials is conducted in accordance with its general investigational plan and protocol under legal and regulatory requirements, including GCP.Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any ofour CROs, trial sites, principal investigators or other third parties fail to comply with applicable GCP requirements, the clinical data generated in our clinicaltrials may be deemed unreliable and the FDA or other regulatory authorities may require us to exclude the use of patient data from our clinical trials notconducted in compliance with GCP or perform additional clinical trials before approving our marketing applications. They may even reject our applicationfor approval or refuse to accept our future applications for an extended time period. For example in China, the CFDA recently issued guidance related to itsclinical trial data integrity regulations. While trial sites and CROs bear liability for the accuracy and authenticity of data they are directly responsible for, thesponsor ultimately bears full responsibility for submitted clinical data and the drug application dossier. Fraudulent clinical data could result in a ban inChina of a sponsor’s product-related NDA applications for three years and other NDA applications for one year. We have taken extensive steps to ensure theintegrity of our China clinical data. However, we cannot assure you that upon inspection by a regulatory authority, such regulatory authority will determinethat any of our clinical trials comply with GCP requirements or that our results will be deemed authentic or may be used in support of our regulatorysubmissions.If we are unable to establish sales, marketing and distribution capabilities or enter into or maintain agreements with third parties to market and sell ourproduct candidates, we may not be successful in commercializing our product candidates if and when they are approved.We do not have a sales or marketing infrastructure and have no experience in the sales, marketing or distribution of pharmaceutical products in any country.To achieve commercial success for any product for which we obtain marketing approval, we will need to establish sales and marketing capabilities or makeand maintain our existing arrangements with third parties to perform these services at a level sufficient to support our commercialization efforts.To the extent that we would undertake sales and marketing of any of our products directly, there are risks involved with establishing our own sales, marketingand distribution capabilities. Factors that may inhibit our efforts to commercialize our products on our own include: •our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel; •the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future products; •our inability to effectively manage geographically dispersed sales and marketing teams; •the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companieswith more extensive product lines; and •unforeseen costs and expenses associated with creating an independent sales and marketing organization.88With respect to roxadustat, we are dependent on the commercialization capabilities of our collaboration partners, AstraZeneca and Astellas. If either suchpartner were to terminate its agreement with us, we would have to commercialize on our own or with another third party. We will have limited or little controlover the commercialization efforts of such third parties, and any of them may fail to devote the necessary resources and attention to sell and market ourproducts, if any, effectively. If they are not successful in commercializing our product candidates, our business and financial condition would suffer.We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully, than we do.The development and commercialization of new pharmaceutical products is highly competitive. Our future success depends on our ability to achieve andmaintain a competitive advantage with respect to the development and commercialization of our product candidates. Our objective is to discover, developand commercialize new products with superior efficacy, convenience, tolerability and safety. We expect that in many cases, the products that wecommercialize will compete with existing, market-leading products of companies that have large, established commercial organizations.If roxadustat is approved and launched commercially, competing drugs are expected to include ESAs, particularly in those patient segments where ESAs areused. Currently available ESAs include epoetin alfa (EPOGEN ®, marketed by Amgen Inc. in the U.S., Procrit ® and Erypo ®/Eprex ® , marketed byJohnson & Johnson Inc., and Espo ® marketed by Kyowa Hakko Kirin (“KHK”), in Japan and China), darbepoetin (Amgen/KHK’s Aranesp ® and NESP ® )and Mircera ® marketed by Hoffmann-La Roche (“Roche”) outside of the U.S. and by Galenica, a Roche licensee, in the U.S. and Puerto Rico, as well asbiosimilar versions of these currently marketed ESA products. ESAs have been used in the treatment of anemia in CKD for over 20 years, serving a significantmajority of dialysis dependent CKD patients. While NDD-CKD patients who are not under the care of nephrologists, including those with diabetes andhypertension, do not typically receive ESAs and are often left untreated, some patients under nephrology care may be receiving ESA therapy. It may bedifficult to encourage healthcare providers and patients to switch to roxadustat from products with which they have become familiar.We may also face competition from potential new anemia therapies currently in clinical development, including those patient segments not currentlyaddressed by ESAs. Companies such as GlaxoSmithKline plc (“GSK”), Bayer Corporation (“Bayer”), Akebia Therapeutics, Inc. (“Akebia”), and JapanTobacco, who are currently developing HIF prolyl hydroxylase (“HIF-PH”) inhibitors for anemia in CKD indications, may be in competition with roxadustatfor patient recruitment and enrollment for clinical trials and may be in direct competition with roxadustat if and when it is approved and launchedcommercially. Akebia is currently conducting two Phase 3 studies in non-dialysis dependent CKD patients primarily in the U.S., one started in December2015 and the other in February 2016, and more recently initiated two Phase 3 studies in DD-CKD, one in July 2016 and the other in August 2016, alsoprimarily in the U.S. GSK started Phase 3 studies in NDD-CKD and DD-CKD in the U.S. in September 2016, and in Japan in June 2016. Bayer has completedglobal Phase 2 studies and recently announced its HIF-PH inhibitor is now in continued development in Japan only, currently in Phase 2. Japan Tobacco isin Phase 2b in Japan. Some of these product candidates may enter the market prior to roxadustat.In addition, there are other companies developing biologic therapies for the treatment of other anemia indications that we may also seek to pursue in thefuture, including anemia of myelodysplastic syndrome (“MDS”), for which we submitted a Clinical Trial Application in China in the first half of 2016 and anInvestigational New Drug application to the FDA in the fourth quarter of 2016. For example, Acceleron Pharma Inc., in partnership with Celgene Corporation,is in Phase 3 development of protein therapeutic candidates to treat anemia and associated complications in patients with ß-thalassemia and MDS, and hasreceived orphan drug status from the EMA and FDA for these indications. Noxxon Pharma AG has conducted Phase 2 studies with an anti-hepcidinSpiegelmer ® lexaptepid pegol (NOX-H94), a mirror image of a natural oligonucleotide, in cancer patients for the treatment of anemia associated withchronic disease, as well as in ESA-hyporesponsive patients on dialysis. There may also be new therapies for renal-related diseases that could limit the marketor level of reimbursement available for roxadustat if and when it is commercialized.In China, biosimilars of epoetin alfa are offered by Chinese pharmaceutical companies such as EPIAO marketed by 3SBio Inc. as well as over 15 other localmanufacturers. We may also face competition by HIF-PH inhibitors from other companies such as Akebia, Bayer, and GSK who recently was authorized bythe CFDA to conduct trials in China to support its ex-China regulatory filings. Akebia announced in December 2015 that it has entered into a developmentand commercialization partnership with Mitsubishi Tanabe Pharmaceutical Corporation for its HIF-PH inhibitor vadadustat in Japan, Taiwan, South Korea,India and certain other countries in Asia. 3SBio Inc. also plans on beginning a Phase 1 clinical trial of a HIF-PH inhibitor for the China market in 2016.89The introduction of biosimilar ESAs into the market in the U.S. may occur by the time roxadustat enters the market and may alter the competitive and pricinglandscape of anemia therapy in DD-CKD patients under the end stage renal disease bundle. The patents for Amgen’s epoetin alfa, EPOGEN, expired in 2004in the European Union (“EU”), and the final material patents in the U.S. expired in May 2015. Several biosimilar versions of currently marketed ESAs areavailable for sale in the EU, China and other territories. In the U.S., a few ESA biosimilars are currently under development or regulatory review, includingRetacrit® (epoetin zeta), marketed by Pfizer in Europe and for which Pfizer has said it plans to resubmit a Biologics License Application (“BLA”) for afterreceiving a complete response letter from the FDA denying approval of its BLA submitted in October 2015. Sandoz, a division of Novartis, markets Binocrit® (epoetin alfa) in Europe and plans to file a biosimilar BLA in 2017 in the U.S.The majority of the current CKD anemia market focuses on dialysis patients, who visit dialysis centers on a regular basis, typically three times a week, andanemia therapies are administered as part of the visit. Two of the largest operators of dialysis clinics in the U.S., DaVita Healthcare Partners Inc. (“DaVita”),and Fresenius Medical Care AG & Co. KGaA (“Fresenius”), collectively, provide dialysis care to approximately 70% of the U.S. dialysis patients, andtherefore have historically won long-term contracts including rebate terms with Amgen. DaVita recently entered into a new 6-year sourcing and supplyagreement with Amgen effective through 2022. Fresenius’ contract with Amgen expired in 2015, and Fresenius is now administering Mircera ® in asignificant portion of its U.S. dialysis patients since Mircera was made available by Galenica. Successful penetration of this market may require AstraZenecato reach a significant agreement with Fresenius or DaVita on favorable terms and on a timely basis.If pamrevlumab is approved and launched commercially to treat IPF, competing drugs are expected to include Roche’s pirfenidone, which is approved formarketing in Europe, Canada, Japan and the U.S., and Boehringer Ingelheim’s nintedanib which has been approved in the U.S. and EU. Nintedanib is also indevelopment for non-small cell lung cancer and ovarian cancer. Other potential competitive product candidates in various stages of Phase 2 development forIPF include Promedior Inc.’s PRM-151, Bristol-Myers Squibb’s BMS-986020 and Biogen-Idec’s STX-100.If pamrevlumab is approved and launched commercially to treat pancreatic cancer, we expect it to be used in combination instead of as monotherapy, and,likely competition for pamrevlumab would be from other agents also seeking approval in combination with gemcitibine and nab-paclitaxel from companiessuch as NewLink Genetics Corporation, Merrimack Pharmaceuticals, Inc. (“Merrimack”) and Halozyme Therapeutics, Inc. Gemcitabine and/or nab-paclitaxelare the current standard of care in the first-line treatment of metastatic pancreatic cancer. Celgene Corporation’s Abraxane ® (nab-paclitaxel) was launched inthe U.S. and Europe in 2013 and 2014, and was the first drug approved in this disease in nearly a decade. In 2015, Merrimack received FDA approval for theuse of ONIVYDE (irinotecan liposome injection) for the treatment of patients with metastatic adenocarcinoma of the pancreas after disease progressionfollowing gemcitabine-based therapy.If pamrevlumab is approved and launched commercially to treat DMD, pamrevlumab may face competition for some patients from Marathon Pharmaceuticals(“Marathon”), Sarepta Therapeutics, Inc. (“Sarepta”), as well as PTC Therapeutics, Santhera Pharmaceuticals, Pfizer, Summit plc and TivorsanPharmaceuticals. Sarepta is researching and developing clinical candidates for many of the specific mutations in the dystrophin gene and recently receivedaccelerated approval in the United States for its first drug Exondys 51 (eteplirsen). The approval is limited to patients who have a confirmed mutation in theDMD gene that is amenable to exon 51 skipping. This mutation represents a subset of approximately 13% of patients with DMD. Marathon received approvalfor its drug Emflaza (deflazacort) on February 9, 2017. PTC Therapeutics’ product ataluren (Translarna TM ) received conditional approval in Europe in 2014and a Refuse to File letter from the FDA in March 2016. Translarna targets a different set of DMD patients from those being targeted by Sarepta’s existingexon-skipping therapeutic candidate; however it is also limited to a subset of patients who carry a specific mutation.Conversely, pamrevlumab and some other potential competitors are intended to treat DMD patients regardless of the specific mutation. For example, SantheraPharmaceuticals recently reported positive Phase 3 data with its drug idebenone (Raxone ® /Catena ® ) in a trial measuring changes in lung function for DMDpatients, however the FDA has asked for additional data from an ongoing trial prior to considering Raxone for approval. Previously the company hadexpected this additional trial to be confirmatory rather than necessary for submission. Separately, the EMEA has accepted Santhera’s filing for Raxone inDMD patients. Idebenone is a synthetic short-chain benzoquinone and a cofactor for the enzyme NAD(P)H:quinone oxidoreductase (NQO1). Pfizer’s productcandidate, which is in Phase 2 development to treat DMD, is an antibody targeting myostatin which is a protein that regulates muscle growth. The goal of theprogram is to increase muscle growth and muscle strength in patients with DMD. Summit plc and Tivorsan Pharmaceuticals are both working on drugsinvolving the utrophin pathway. Utrophin is a protein similar to dystrophin that is potentially implicated in all DMD patients. Summit is conducting a Phase2 trial and Tivorsan intends to submit an IND and start Phase 1 in 2017.. Summit and Sarepta recently announced a collaboration in which the companieshave agreed to collaborate on Summit’s utrophin modulator pipeline including its lead candidate ezutromid. The companies will co-develop the pipelineand Sarepta will receive the rights to the compounds in Europe, Turkey, and the Commonwealth of Independent States. Sarepta also has an option on therights to the program for Latin America. Summit will retain commercialization rights in all other countries including the U.S.90If FG-5200 is approved and launched to treat corneal blindness resulting from partial thickness corneal damage without active inflammation and infection inChina, it is likely to compete with other products designed to treat corneal damage. For example, in April 2015, a subsidiary of China Regenerative MedicineInternational Limited received approval for their acellular porcine cornea stroma medical device to treat patients in China with corneal ulcers and in April2016, Guangzhou Yourvision Biotech Co. Ltd, a subsidiary of Guanhao Biotech, received approval for their acellular porcine cornea medical device to treatpatients in China with infectious keratitis that does not respond to drug treatment.The success of any or all of these potential competitive products may negatively impact the development and potential for success of pamrevlumab. Inaddition, any competitive products that are on the market or in development may compete with pamrevlumab for patient recruitment and enrollment forclinical trials or may force us to change our clinical trial comparators, whether placebo or active, in order to compare pamrevlumab against another drug,which may be the new standard of care.Moreover, many of our competitors have significantly greater resources than we do. Large pharmaceutical companies, in particular, have extensiveexperience in clinical testing, obtaining regulatory approvals, recruiting patients, manufacturing pharmaceutical products, and commercialization. In thepotential anemia market for roxadustat, for example, large and established companies such as Amgen and Roche, among others, compete aggressively tomaintain their market shares. In particular, the currently marketed ESA products are supported by large pharmaceutical companies have greater experienceand expertise in commercialization in the anemia market, including in securing reimbursement, government contracts and relationships with key opinionleaders; conducting testing and clinical trials; obtaining and maintaining regulatory approvals and distribution relationships to market products; andmarketing approved products. These companies also have significantly greater research and marketing capabilities than we do and may also have productsthat have been approved or are in later stages of development, and have collaboration agreements in our target markets with leading dialysis companies andresearch institutions. These competitors have in the past successfully prevented new and competing products from entering into the anemia market, and weexpect that their resources will represent challenges for us and our collaboration partners, AstraZeneca and Astellas. If we and our collaboration partners arenot able to compete effectively against existing and potential competitors, our business and financial condition may be materially and adversely affected.Our future commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, patients,third party payors and others in the health care community.Even if we obtain marketing approval for roxadustat, pamrevlumab or any other product candidates that we may develop or acquire in the future, theseproduct candidates may not gain market acceptance among physicians, third party payors, patients and others in the health care community. Marketacceptance of any approved product depends on a number of other factors, including: •the clinical indications for which the product is approved and the labeling required by regulatory authorities for use with the product,including any warnings that may be required in the labeling; •acceptance by physicians and patients of the product as a safe and effective treatment and the willingness of the target patient population to trynew therapies and of physicians to prescribe new therapies; •the cost, safety, efficacy and convenience of treatment in relation to alternative treatments; •the restrictions on the use of our products together with other medications, if any; •the availability of adequate coverage and reimbursement or pricing by third party payors and government authorities; •the ability of treatment providers, such as dialysis clinics, to enter into relationships with us without violating their existing agreement; and •the effectiveness of our sales and marketing efforts.91Limited reimbursement or insurance coverage of our approved products, if any, by third party payors may render our products less attractive to patientsand healthcare providers.Market acceptance and sales of any approved products will depend significantly on reimbursement or coverage of our products by third party payors and maybe affected by existing and future healthcare reform measures or the prices of related products for which third party reimbursement applies. Coverage andreimbursement by a third party payor may depend upon a number of factors, including the third party payor’s determination that use of a product is: •a covered benefit under its health plan; •safe, effective and medically necessary; •appropriate for the specific patient; •cost-effective; and •neither experimental nor investigational.Obtaining coverage and reimbursement approval for a product from a government or other third party payor is a time consuming and costly process thatcould require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor, which we may not be able toprovide. Furthermore, the reimbursement policies of third party payors may significantly change in a manner that renders our clinical data insufficient foradequate reimbursement or otherwise limits the successful marketing of our products. Even if we obtain coverage for our product candidates, third partypayors may not establish adequate reimbursement amounts, which may reduce the demand for, or the price of, our products. If reimbursement is not availableor is available only to limited levels, we may not be able to commercialize certain of our products.Price controls may limit the price at which products such as roxadustat, if approved, are sold. For example, reference pricing is used by various EU memberstates and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we or our partnermay be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our product candidates to other available products in orderto obtain or maintain reimbursement or pricing approval. Publication of discounts by third party payors or authorities may lead to further pressure on theprices or reimbursement levels within the country of publication and other countries. If reimbursement of our products is unavailable or limited in scope oramount, or if pricing is set at unacceptable levels, we or our partner may elect not to commercialize our products in such countries, and our business andfinancial condition could be adversely affected.Risks Related to Our Reliance on Third PartiesIf our collaborations with Astellas or AstraZeneca were terminated, or if Astellas or AstraZeneca were to prioritize other initiatives over theircollaborations with us, whether as a result of a change of control or otherwise, our ability to successfully develop and commercialize our lead productcandidate, roxadustat, would suffer.We have entered into collaboration agreements with respect to the development and commercialization of our lead product candidate, roxadustat, withAstellas and AstraZeneca. These agreements provide for reimbursement of our development costs by our collaboration partners and also provide forcommercialization of roxadustat throughout the major territories of the world.Our agreements with Astellas and AstraZeneca provide each of them with the right to terminate their respective agreements with us, upon the occurrence ofnegative clinical results, delays in the development and commercialization of our product candidates or adverse regulatory requirements or guidance. Thetermination of any of our collaboration agreements would require us to fund and perform the further development and commercialization of roxadustat in theaffected territory, or pursue another collaboration, which we may be unable to do, either of which could have an adverse effect on our business andoperations. In addition, each of those agreements provides our respective partners the right to terminate any of those agreements upon written notice forconvenience. Moreover, if Astellas or AstraZeneca, or any successor entity, were to determine that their collaborations with us are no longer a strategicpriority, or if either of them or a successor were to reduce their level of commitment to their collaborations with us, our ability to develop and commercializeroxadustat could suffer. In addition, some of our collaborations are exclusive and preclude us from entering into additional collaboration agreements withother parties in the area or field of exclusivity.If we fail to establish and maintain strategic collaborations related to our product candidates, we will bear all of the risk and costs related to the developmentand commercialization of any such product candidate, and we may need to seek additional financing, hire additional employees and otherwise developexpertise at significant cost. This in turn may negatively affect the development of our other product candidates as we direct resources to our most advancedproduct candidates.92Conflicts with our collaboration partners could jeopardize our collaboration agreements and our ability to commercialize product candidates.Our collaboration partners have certain rights to control decisions regarding the development and commercialization of our product candidates with respectto which they are providing funding. If we have a disagreement over strategy and activities, our plans for obtaining approval may be revised and negativelyaffect the anticipated timing and potential for success of our product candidates. Even if a product under a collaboration agreement is approved, we willremain substantially dependent on the commercialization strategy and efforts of our collaboration partners, and neither of our collaboration partners hasexperience in commercialization of a novel drug such as roxadustat in the dialysis market.With respect to our collaboration agreements for roxadustat, there are additional complexities in that we and our collaboration partners, Astellas andAstraZeneca, must reach consensus on our Phase 3 development program. Multi-party decision-making is complex and involves significant time and effort,and there can be no assurance that the parties will cooperate or reach consensus, or that one or both of our partners will not ask to proceed independently insome or all of their respective territories or functional areas of responsibility in which the applicable collaboration partner would otherwise be obligated tocooperate with us. Any disputes or lack of cooperation with us by either Astellas or AstraZeneca may negatively impact the timing or success of our plannedPhase 3 clinical studies.We intend to conduct proprietary research programs in specific disease areas that are not covered by our collaboration agreements. Our pursuit of suchopportunities could, however, result in conflicts with our collaboration partners in the event that any of our collaboration partners takes the position that ourinternal activities overlap with those areas that are exclusive to our collaboration agreements, and we should be precluded from such internal activities.Moreover, disagreements with our collaboration partners could develop over rights to our intellectual property. In addition, our collaboration agreementsmay have provisions that give rise to disputes regarding the rights and obligations of the parties. Any conflict with our collaboration partners could lead tothe termination of our collaboration agreements, delay collaborative activities, reduce our ability to renew agreements or obtain future collaborationagreements or result in litigation or arbitration and would negatively impact our relationship with existing collaboration partners.Certain of our collaboration partners could also become our competitors in the future. If our collaboration partners develop competing products, fail to obtainnecessary regulatory approvals, terminate their agreements with us prematurely or fail to devote sufficient resources to the development andcommercialization of our product candidates, the development and commercialization of our product candidates and products could be delayed.We rely on third parties for the conduct of most of our preclinical and clinical trials for our product candidates, and if our third party contractors do notproperly and successfully perform their obligations under our agreements with them, we may not be able to obtain or may be delayed in receivingregulatory approvals for our product candidates.We rely heavily on university, hospital, dialysis centers and other institutions and third parties, including the principal investigators and their staff, to carryout our clinical trials in accordance with our clinical protocols and designs. We also rely on a number of third party CROs to assist in undertaking, managing,monitoring and executing our ongoing clinical trials, including those for roxadustat. We expect to continue to rely on CROs, clinical data managementorganizations, medical institutions and clinical investigators to conduct our development efforts in the future, including our Phase 3 development programfor roxadustat. We compete with many other companies for the resources of these third parties, and large pharmaceutical companies often have significantlymore extensive agreements and relationships with such third party providers, and such third party providers may prioritize the requirements of such largepharmaceutical companies over ours. The third parties on whom we rely may terminate their engagements with us at any time, which may cause delay in thedevelopment and commercialization of our product candidates. If any such third party terminates its engagement with us or fails to perform as agreed, we maybe required to enter into alternative arrangements, which would result in significant cost and delay to our product development program. Moreover, ouragreements with such third parties generally do not provide assurances regarding employee turnover and availability, which may cause interruptions in theresearch on our product candidates by such third parties.Moreover, while our reliance on these third parties for certain development and management activities will reduce our control over these activities, it will notrelieve us of our responsibilities. For example, the FDA and foreign regulatory authorities require compliance with regulations and standards, including GCPrequirements for designing, conducting, monitoring, recording, analyzing and reporting the results of clinical trials to ensure that the data and results fromtrials are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Although we rely on third parties to conductour clinical trials, we, as the sponsor, remain responsible for ensuring that each of these clinical trials is conducted in accordance with its generalinvestigational plan and protocol under legal and regulatory requirements, including GCP. Regulatory authorities enforce these GCP requirements throughperiodic inspections of trial sponsors, principal investigators and trial sites.93If any of our CROs, trial sites, principal investigators or other third parties fail to comply with applicable GCP requirements, other regulations, trial protocolor other requirements under their agreements with us, the quality or accuracy of the data they obtain may be compromised or unreliable, and the trials of ourproduct candidates may not meet regulatory requirements. If trials do not meet regulatory requirements or if these third parties need to be replaced, thedevelopment of our product candidates may be delayed, suspended or terminated, regulatory authorities may require us to exclude the use of patient datafrom our approval applications or perform additional clinical trials before approving our marketing applications. Regulatory authorities may even reject ourapplication for approval or refuse to accept our future applications for an extended time period. We cannot assure you that upon inspection by a regulatoryauthority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements or that our results may be used in support ofour regulatory submissions. If any of these events occur, we may not be able to obtain regulatory approval for our product candidates on a timely basis, at areasonable cost, or at all. We currently rely, and expect to continue to rely, on third parties to conduct many aspects of our clinical studies and product manufacturing, and thesethird parties may not perform satisfactorily.We do not have any operating manufacturing facilities at this time, and our current manufacturing facility plans in China are not expected to satisfy therequirements necessary to support roxadustat development and commercialization outside of China. Other than in and for China specifically, we do notexpect to independently manufacture our products. We currently rely, and expect to continue to rely, on third parties to scale-up, manufacture and supplyroxadustat and our other product candidates outside of China. Risks arising from our reliance on third party manufacturers include: •reduced control and additional burdens of oversight as a result of using third party manufacturers for all aspects of manufacturing activities,including regulatory compliance and quality control and assurance; •termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that may negatively impact our planneddevelopment and commercialization activities; •the possible misappropriation of our proprietary technology, including our trade secrets and know-how; and •disruptions to the operations of our third party manufacturers or suppliers unrelated to our product, including the bankruptcy of themanufacturer or supplier or a catastrophic event affecting our manufacturers or suppliers.Any of these events could lead to development delays or failure to obtain regulatory approval, or affect our ability to successfully commercialize our productcandidates. Some of these events could be the basis for action by the FDA or another regulatory authority, including injunction, recall, seizure or total orpartial suspension of production.The facilities used by our contract manufacturers to manufacture our product candidates must pass inspections by the FDA and other regulatory authorities.Although, except for China, we do not control the manufacturing operations of, and expect to remain completely dependent on, our contract manufacturersfor manufacture of drug substance and finished drug product, we are ultimately responsible for ensuring that our product candidates are manufactured incompliance with cGMP requirements. If our contract manufacturers cannot successfully manufacture material that conforms to our or our collaborationpartners’ specifications, or the regulatory requirements of the FDA or other regulatory authorities, we may not be able to secure and/or maintain regulatoryapproval for our product candidates and our development or commercialization plans may be delayed. In addition, we have no control over the ability of ourcontract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. In addition, although our longer-term agreements areexpected to provide for requirements to meet our quantity and quality requirements to manufacture our products candidates for clinical studies andcommercial sale, we will have minimal direct control over the ability of our contract manufacturers to maintain adequate quality control, quality assuranceand qualified personnel and we expect to rely on our audit rights to ensure that those qualifications are maintained to meet our requirements. If our contractmanufacturers’ facilities do not pass inspection by regulatory authorities, or if regulatory authorities do not approve these facilities for the manufacture of ourproducts, or withdraw any such approval in the future, we would need to identify and qualify alternative manufacturing facilities, which would significantlyimpact our ability to develop, obtain regulatory approval for or market our products, if approved. Moreover, any failure of our third party manufacturers, tocomply with applicable regulations could result in sanctions being imposed on us or adverse regulatory consequences, including clinical holds, warnings oruntitled letters, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidatesor products, operating restrictions and criminal prosecutions, any of which would be expected to significantly and adversely affect supplies of our products tous and our collaboration partners.94Any of our third party manufacturers may terminate their engagement with us at any time and we have not yet entered into any commercial supplyagreements for the manufacture of active pharmaceutical ingredients (“APIs”) or drug products. With respect to roxadustat, AstraZeneca and Astellas havecertain rights to assume manufacturing of roxadustat and the existence of those rights may limit our ability to enter into favorable long-term supplyagreements, if at all, with other third party manufacturers. In addition, our product candidates and any products that we may develop may compete with otherproduct candidates and products for access and prioritization to manufacture. Certain third party manufacturers may be contractually prohibited frommanufacturing our product due to non-compete agreements with our competitors or a commitment to grant another party priority relative to our products.There are a limited number of third party manufacturers that operate under cGMP and that might be capable of manufacturing to meet our requirements. Dueto the limited number of third party manufacturers with the contractual freedom, expertise, required regulatory approvals and facilities to manufacture ourproducts on a commercial scale, identifying and qualifying a replacement third party manufacturer would be expensive and time-consuming and may causedelay or interruptions in the production of our product candidates or products, which in turn may delay, prevent or impair our development andcommercialization efforts.We have a letter agreement with IRIX Pharmaceuticals, Inc. (“IRIX”), a third party manufacturer that we have used in the past, pursuant to which we agreed tonegotiate a single source manufacturing agreement that included a right of first negotiation for the cGMP manufacture of HIF-PH inhibitors, includingroxadustat, provided that IRIX is able to match any third party bids within 5%. The exclusive right to manufacture extends for five years after approval of anNDA for those compounds, and any agreement would provide that no minimum amounts would be specified until appropriate by forecast and that we and acommercialization partner would have the rights to contract with independent third parties that exceed IRIX’s internal manufacturing capabilities or in theevent that we or our commercialization partner determines for reasons of continuity of supply and security that such a need exists, provided that IRIX wouldsupply no less than 65% of the product if it is able to provide this level of supply. Subsequent to the letter agreement, we and IRIX have entered into severaladditional service agreements. IRIX has requested in writing that we honor the letter agreement with respect to the single source manufacturing agreement,and if we were to enter into any such exclusive manufacturing agreement, there can be no assurance that IRIX will not assert a claim for right to manufactureroxadustat or that IRIX could manufacture roxadustat successfully and in accordance with applicable regulations for a commercial product and thespecifications of our collaboration partners. In 2015, Patheon Pharmaceuticals Inc., a business unit of DPx Holdings B.V., acquired IRIX.If any third party manufacturer terminates its engagement with us or fails to perform as agreed, we may be required to find replacement manufacturers, whichwould result in significant cost and delay to our development programs. Although we believe that there are several potential alternative manufacturers whocould manufacture our product candidates, we may incur significant delays and added costs in identifying, qualifying and contracting with any such thirdparty or potential second source manufacturer. In any event, with any third party manufacturer we expect to enter into technical transfer agreements and shareour know-how with the third party manufacturer, which can be time-consuming and may result in delays. These delays could result in a suspension or delayof our Phase 3 clinical trials or, if roxadustat is approved and marketed, a failure to satisfy patient demand.Certain of the components of our product candidates are acquired from single-source suppliers and have been purchased without long-term supplyagreements. The loss of any of these suppliers, or their failure to supply us with supplies of sufficient quantity and quality to complete our drug substanceor finished drug product of acceptable quality and an acceptable price, would materially and adversely affect our business.We do not have an alternative supplier of certain components of our product candidates. To date, we have used purchase orders for the supply of materialsthat we use in our product candidates. We may be unable to enter into long-term commercial supply arrangements with our vendors, or do so on commerciallyreasonable terms, which could have a material adverse impact upon our business. In addition, we currently rely on our contract manufacturers to purchasefrom third-party suppliers some of the materials necessary to produce our product candidates. We do not have direct control over the acquisition of thosematerials by our contract manufacturers. Moreover, we currently do not have any agreements for the commercial production of those materials.The logistics of our supply chain, which include shipment of materials and intermediates from countries such as China and India add additional time and riskto the manufacture of our product candidates. While we have in the past maintained sufficient inventory of materials, API, and drug product to meet our andour collaboration partners’ needs for roxadustat to date, the lead time and regulatory approvals required to source from and into countries outside of the U.S.increase the risk of delay and potential shortages of supply.95Risks Related to Our Intellectual PropertyIf our efforts to protect our proprietary technologies are not adequate, we may not be able to compete effectively in our market.We rely upon a combination of patents, trade secret protection and contractual arrangements to protect the intellectual property related to our technologies.We will only be able to protect our products and proprietary information and technology by preventing unauthorized use by third parties to the extent thatour patents, trade secrets, and contractual position allow us to do so. Any disclosure to or misappropriation by third parties of our trade secrets or confidentialinformation could compromise our competitive position. Moreover, we are involved in, have in the past been involved in, and may in the future be involvedin legal or administrative proceedings involving our intellectual property initiated by third parties, and which proceedings can result in significant costs andcommitment of management time and attention. As our product candidates continue in development, third parties may attempt to challenge the validity andenforceability of our patents and proprietary information and technologies.We also are involved in, have in the past been involved in, and may in the future be involved in initiating legal or administrative proceedings involving theproduct candidates and intellectual property of our competitors. These proceedings can result in significant costs and commitment of management time andattention, and there can be no assurance that our efforts would be successful in preventing or limiting the ability of our competitors to market competingproducts.Composition-of-matter patents relating to the API are generally considered to be the strongest form of intellectual property protection for pharmaceuticalproducts, as such patents provide protection not limited to any one method of use. Method-of-use patents protect the use of a product for the specifiedmethod(s), and do not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope ofthe patented method. We rely on a combination of these and other types of patents to protect our product candidates, and there can be no assurance that ourintellectual property will create and sustain the competitive position of our product candidates.Biotechnology and pharmaceutical product patents involve highly complex legal and scientific questions and can be uncertain. Any patent applications thatwe own or license may fail to result in issued patents. Even if patents do successfully issue from our applications, third parties may challenge their validity orenforceability, which may result in such patents being narrowed, invalidated, or held unenforceable. Even if our patents and patent applications are notchallenged by third parties, those patents and patent applications may not prevent others from designing around our claims and may not otherwiseadequately protect our product candidates. If the breadth or strength of protection provided by the patents and patent applications we hold with respect to ourproduct candidates is threatened, competitors with significantly greater resources could threaten our ability to commercialize our product candidates.Discoveries are generally published in the scientific literature well after their actual development, and patent applications in the U.S. and other countries aretypically not published until 18 months after their filing, and in some cases are never published. Therefore, we cannot be certain that we or our licensors werethe first to make the inventions claimed in our owned and licensed patents or patent applications, or that we or our licensors were the first to file for patentprotection covering such inventions. Subject to meeting other requirements for patentability, for U.S. patent applications filed prior to March 16, 2013, thefirst to invent the claimed invention is entitled to receive patent protection for that invention while, outside the U.S., the first to file a patent applicationencompassing the invention is entitled to patent protection for the invention. The U.S. moved to a “first to file” system under the Leahy-Smith AmericaInvents Act (“AIA”), effective March 16, 2013. This system also includes procedures for challenging issued patents and pending patent applications, whichcreates additional uncertainty. We may become involved in opposition or interference proceedings challenging our patents and patent applications or thepatents and patent applications of others, and the outcome of any such proceedings are highly uncertain. An unfavorable outcome in any such proceedingscould reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology and compete directly with us, or result in ourinability to manufacture, develop or commercialize our product candidates without infringing the patent rights of others.In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how,information, or technology that is not covered by our patents. Although our agreements require all of our employees to assign their inventions to us, and werequire all of our employees, consultants, advisors and any third parties who have access to our trade secrets, proprietary know-how and other confidentialinformation and technology to enter into appropriate confidentiality agreements, we cannot be certain that our trade secrets, proprietary know-how and otherconfidential information and technology will not be subject to unauthorized disclosure or that our competitors will not otherwise gain access to orindependently develop substantially equivalent trade secrets, proprietary know-how and other information and technology. Furthermore, the laws of someforeign countries, in particular, China, where we have operations, do not protect proprietary rights to the same extent or in the same manner as the laws of theU.S. As a result, we may encounter significant problems in protecting and defending our intellectual property globally. If we are unable to preventunauthorized disclosure of our intellectual property related to our product candidates and technology to third parties, we may not be able to establish ormaintain a competitive advantage in our market, which could materially adversely affect our business and operations.96Intellectual property disputes with third parties and competitors may be costly and time consuming, and may negatively affect our competitive position.Our commercial success may depend on our avoiding infringement of the patents and other proprietary rights of third parties as well as on enforcing ourpatents and other proprietary rights against third parties. Pharmaceutical and biotechnology intellectual property disputes are characterized by complex,lengthy and expensive litigation over patents and other intellectual property rights. We may initiate or become party to, or be threatened with, futurelitigation or other proceedings regarding intellectual property rights with respect to our product candidates and competing products.As our product candidates progress toward commercialization, we or our collaboration partners may be subject to patent infringement claims from thirdparties. We attempt to ensure that our product candidates do not infringe third party patents and other proprietary rights. However, the patent landscape incompetitive product areas is highly complex, and there may be patents of third parties of which we are unaware that may result in claims of infringement.Accordingly, there can be no assurance that our product candidates do not infringe proprietary rights of third parties, and parties making claims against usmay seek and obtain injunctive or other equitable relief, which could potentially block further efforts to develop and commercialize our product candidatesincluding roxadustat or pamrevlumab. Any litigation involving defense against claims of infringement, regardless of the merit of such claims, would involvesubstantial litigation expense and would be a substantial diversion of management time.We intend, if necessary, to vigorously enforce our intellectual property in order to protect the proprietary position of our product candidates, includingroxadustat and pamrevlumab. Active efforts to enforce our patents may include litigation, administrative proceedings, or both, depending on the potentialbenefits that might be available from those actions and the costs associated with undertaking those efforts against third parties. We carefully review andmonitor publicly available information regarding products that may be competitive with our product candidates and assert our intellectual property rightswhere appropriate. We previously prevailed in an administrative challenge initiated by a major biopharmaceutical company regarding our intellectualproperty rights, maintaining our intellectual property in all relevant scope, and will continue to protect and enforce our intellectual property rights.Moreover, third parties may continue to initiate new proceedings in the U.S. and foreign jurisdictions to challenge our patents from time to time.We may consider administrative proceedings and other means for challenging third party patents and patent applications. Third parties may also challengeour patents and patent applications, through interference, reexamination, inter partes review, and post-grant review proceedings before the U.S. Patent andTrademark Office (“USPTO”) or through other comparable proceedings, such as oppositions or invalidation proceedings, before foreign patent offices. Anunfavorable outcome in any such challenge could require us to cease using the related technology and to attempt to license rights to it from the prevailingthird party, which may not be available on commercially reasonable terms, if at all, in which case our business could be harmed. Even if we are successful,participation in administrative proceedings before the USPTO or a foreign patent office may result in substantial costs and time on the part of ourmanagement and other employees. For example, Akebia Therapeutics, Inc., and others have filed oppositions against certain European patents correspondingto some of the above-listed cases. An opposition is a European Patent Office mechanism providing for a third-party challenge to a granted European patent.These oppositions are currently ongoing or under appeal. While we believe our patents will be upheld, the ultimate outcomes of the oppositions remainuncertain, and ultimate resolution of each of these proceedings may take two to four years or longer. However, we note that narrowing or even revocation ofthese patents would not affect our exclusivity for roxadustat or our freedom-to-operate with respect to use of roxadustat for the treatment of anemia.Furthermore, there is a risk that any public announcements concerning the status or outcomes of intellectual property litigation or administrative proceedingsmay adversely affect the price of our stock. If securities analysts or our investors interpret such status or outcomes as negative or otherwise creatinguncertainty, our common stock price may be adversely affected.Our reliance on third parties and agreements with collaboration partners requires us to share our trade secrets, which increases the possibility that acompetitor may discover them or that our trade secrets will be misappropriated or disclosed.Our reliance on third party contractors to develop and manufacture our product candidates is based upon agreements that limit the rights of the third partiesto use or disclose our confidential information, including our trade secrets and know-how. Despite the contractual provisions, the need to share trade secretsand other confidential information increases the risk that such trade secrets and information are disclosed or used, even if unintentionally, in violation ofthese agreements. In the highly competitive markets in which our product candidates are expected to compete, protecting our trade secrets, including ourstrategies for addressing competing products, is imperative, and any unauthorized use or disclosure could impair our competitive position and may have amaterial adverse effect on our business and operations.In addition, our collaboration partners are larger, more complex organizations than ours, and the risk of inadvertent disclosure of our proprietary informationmay be increased despite their internal procedures and contractual obligations in place with our collaboration partners. Despite our efforts to protect our tradesecrets and other confidential information, a competitor’s discovery of such trade secrets and information could impair our competitive position and have anadverse impact on our business.97We have an extensive worldwide patent portfolio. The cost of maintaining our patent protection is high and maintaining our patent protection requirescontinuous review and compliance in order to maintain worldwide patent protection. We may not be able to effectively maintain our intellectual propertyposition throughout the major markets of the world.The USPTO and foreign patent authorities require maintenance fees and payments as well as continued compliance with a number of procedural anddocumentary requirements. Noncompliance may result in abandonment or lapse of the subject patent or patent application, resulting in partial or completeloss of patent rights in the relevant jurisdiction. Non-compliance may result in reduced royalty payments for lack of patent coverage in a particularjurisdiction from our collaboration partners or may result in competition, either of which could have a material adverse effect on our business.We have made, and will continue to make, certain strategic decisions in balancing costs and the potential protection afforded by the patent laws of certaincountries. As a result, we may not be able to prevent third parties from practicing our inventions in all countries throughout the world, or from selling orimporting products made using our inventions in and into the U.S. or other countries. Third parties may use our technologies in territories in which we havenot obtained patent protection to develop their own products and, further, may infringe our patents in territories which provide inadequate enforcementmechanisms, even if we have patent protection. Such third party products may compete with our product candidates, and our patents or other intellectualproperty rights may not be effective or sufficient to prevent them from competing.The laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the U.S., and we may encounter significantproblems in securing and defending our intellectual property rights outside the U.S.Many companies have encountered significant problems in protecting and defending intellectual property rights in certain countries. The legal systems ofcertain countries, particularly certain developing countries such as China, do not always favor the enforcement of patents, trade secrets, and other intellectualproperty rights, particularly those relating to pharmaceutical and biotechnology products, which could make it difficult for us to stop infringement of ourpatents, misappropriation of our trade secrets, or marketing of competing products in violation of our proprietary rights. In China, our intended establishmentof significant operations will depend in substantial part on our ability to effectively enforce our intellectual property rights in that country. Proceedings toenforce our intellectual property rights in foreign countries could result in substantial costs and divert our efforts and attention from other aspects of ourbusiness, and could put our patents in these territories at risk of being invalidated or interpreted narrowly, or our patent applications at risk of not beinggranted, and could provoke third parties to assert claims against us. We may not prevail in all legal or other proceedings that we may initiate and, if we wereto prevail, the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual propertyrights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.Intellectual property rights do not address all potential threats to any competitive advantage we may have.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and intellectualproperty rights may not adequately protect our business or permit us to maintain our competitive advantage. The following examples are illustrative: •Others may be able to make compounds that are the same as or similar to our current or future product candidates but that are not covered bythe claims of the patents that we own or have exclusively licensed. •We or any of our licensors or strategic partners might not have been the first to make the inventions covered by the issued patent or pendingpatent application that we own or have exclusively licensed. •We or any of our licensors or strategic partners might not have been the first to file patent applications covering certain of our inventions. •Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights. •The prosecution of our pending patent applications may not result in granted patents. •Granted patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors. •Patent protection on our product candidates may expire before we are able to develop and commercialize the product, or before we are able torecover our investment in the product. •Our competitors might conduct research and development activities in the U.S. and other countries that provide a safe harbor from patentinfringement claims for such activities, as well as in countries in which we do not have patent rights, and may then use the information learnedfrom such activities to develop competitive products for sale in markets where we intend to market our product candidates.98The existence of counterfeit pharmaceutical products in pharmaceutical markets may compromise our brand and reputation and have a material adverseeffect on our business, operations and prospects.Counterfeit products, including counterfeit pharmaceutical products, are a significant problem, particularly in China. Counterfeit pharmaceuticals areproducts sold or used for research under the same or similar names, or similar mechanism of action or product class, but which are sold without proper licensesor approvals. Such products may be used for indications or purposes that are not recommended or approved or for which there is no data or inadequate datawith regard to safety or efficacy. Such products divert sales from genuine products, often are of lower cost, often are of lower quality (having differentingredients or formulations, for example), and have the potential to damage the reputation for quality and effectiveness of the genuine product. If counterfeitpharmaceuticals illegally sold or used for research result in adverse events or side effects to consumers, we may be associated with any negative publicityresulting from such incidents. Consumers may buy counterfeit pharmaceuticals that are in direct competition with our pharmaceuticals, which could have anadverse impact on our revenues, business and results of operations. In addition, the use of counterfeit products could be used in non-clinical or clinicalstudies, or could otherwise produce undesirable side effects or adverse events that may be attributed to our products as well, which could cause us orregulatory authorities to interrupt, delay or halt clinical trials and could result in the delay or denial of regulatory approval by the FDA or other regulatoryauthorities and potential product liability claims. With respect to China, although the government has recently been increasingly active in policingcounterfeit pharmaceuticals, there is not yet an effective counterfeit pharmaceutical regulation control and enforcement system in China. As a result, we maynot be able to prevent third parties from selling or purporting to sell our products in China. The proliferation of counterfeit pharmaceuticals has grown inrecent years and may continue to grow in the future. The existence of and any increase in the sales and production of counterfeit pharmaceuticals, or thetechnological capabilities of counterfeiters, could negatively impact our revenues, brand reputation, business and results of operations.Risks Related to Government RegulationThe regulatory approval process is highly uncertain and we may not obtain regulatory approval for the commercialization of our product candidates.The time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable, but typically takes many years followingthe commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of the regulatoryauthorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of aproduct candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate, and it ispossible that neither roxadustat nor pamrevlumab, nor any future product candidates we may discover, in-license or acquire and seek to develop in the future,will ever obtain regulatory approval.Our product candidates could fail to receive regulatory approval from the FDA or other regulatory authorities for many reasons, including: •disagreement over the design or implementation of our clinical trials; •failure to demonstrate that a product candidate is safe and effective for its proposed indication; •failure of clinical trials to meet the level of statistical significance required for approval; •failure to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; •disagreement over our interpretation of data from preclinical studies or clinical trials; •disagreement over whether to accept efficacy results from clinical trial sites outside the U.S. where the standard of care is potentially differentfrom that in the U.S.; •the insufficiency of data collected from clinical trials of our present or future product candidates to support the submission and filing of anNDA or other submission or to obtain regulatory approval; •disapproval of the manufacturing processes or facilities of either our manufacturing plant or third party manufacturers with whom we contractfor clinical and commercial supplies; or •changes in the approval policies or regulations that render our preclinical and clinical data insufficient for approval.99The FDA or other regulatory authorities may require more information, including additional preclinical or clinical data to support approval, which may delayor prevent approval and our commercialization plans, or we may decide to abandon the development program altogether. Even if we do obtain regulatoryapproval, our product candidates may be approved for fewer or more limited indications than we request, approval may be contingent on the performance ofcostly post-marketing clinical trials, or approval may require labeling that does not include the labeling claims necessary or desirable for the successfulcommercialization of that product candidate. In addition, if our product candidates produce undesirable side effects or safety issues, the FDA may require theestablishment of REMS or other regulatory authorities may require the establishment of a similar strategy, that may, restrict distribution of our approvedproducts, if any, and impose burdensome implementation requirements on us. Any of the foregoing scenarios could materially harm the commercial prospectsfor our product candidates.Even if we believe our current or planned clinical trials are successful, regulatory authorities may not agree that our completed clinical trials provideadequate data on safety or efficacy. Approval by one regulatory authority does not ensure approval by any other regulatory authority. However, a failure ordelay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. We may not be able to file forregulatory approvals and even if we file we may not receive the necessary approvals to commercialize our product candidates in any market.If our product candidates obtain marketing approval, we will be subject to more extensive healthcare laws, regulation and enforcement and our failure tocomply with those laws could have a material adverse effect on our results of operations and financial condition.If we obtain approval for any of our product candidates, the regulatory requirements applicable to our operations, in particular our sales and marketing efforts,will increase significantly with respect to our operations and the potential for civil and criminal enforcement by the federal government and the states andforeign governments will increase with respect to the conduct of our business. The laws that may affect our operations in the U.S. include: •the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering orpaying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable undera federal healthcare program, such as the Medicare and Medicaid programs; •federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities fromknowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third party payors that are false orfraudulent; •the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created new federal criminal statutes that prohibit executinga scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters; •HIPAA, as amended by Health Information Technology and Clinical Health Act, and its implementing regulations, which imposes certainrequirements relating to the privacy, security, and transmission of individually identifiable health information; •the federal physician sunshine requirements under the Patient Protection and Affordable Care Act (“PPACA”), which requires manufacturers ofdrugs, devices, biologics, and medical supplies to report annually to the CMS, information related to payments and other transfers of value tophysicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcareproviders and their immediate family members;100 •foreign and state law equivalents of each of the above federal laws, such as the U.S. Foreign Corrupt Practices Act (“FCPA”), anti-kickback andfalse claims laws that may apply to items or services reimbursed by any third party payor, including commercial insurers; state laws that requirepharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the applicable complianceguidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potentialreferral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physiciansand other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in certaincircumstances, many of which differ from each other in significant ways, thus complicating compliance efforts; and •the Trade Agreements Act (“TAA”), which requires that drugs sold to the United States Government must be manufactured in the United Statesor in TAA approved and designated countries. Drugs manufactured in countries not approved under the TAA, may not be sold to the UnitedStates without specific regulatory approval. We have little experience with this regulation and there is a risk that drugs made from Chinese-made API may not be sold to an entity of the United States such as the Veterans Health Administration (“VA”) due to our inability to obtainregulatory approval. While there have been recent VA policy changes that appear to allow for sale of drugs from non-TAA approved countries,this policy may change or there may be additional policies or legislation that affect our ability to sell drug to the U.S. Government.The scope of these laws and our lack of experience in establishing the compliance programs necessary to comply with this complex and evolving regulatoryenvironment increases the risks that we may violate the applicable laws and regulations. If our operations are found to be in violation of any of such laws orany other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, the curtailment orrestructuring of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment, any of which could materiallyadversely affect our ability to operate our business and our financial results.The impact of recent U.S. healthcare reform, its potential partial or full repeal, and other changes in the healthcare industry and in healthcare spending iscurrently unknown, and may adversely affect our business model.The commercial potential for our approved products, if any, could be affected by changes in healthcare spending and policy in the U.S. and abroad. Weoperate in a highly regulated industry and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, relatedto healthcare availability, the method of delivery or payment for healthcare products and services could negatively impact our business, operations andfinancial condition.In the U.S., the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) altered Medicare coverage and payments forpharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodologybased on average sales prices for physician-administered drugs. The MMA also provided authority for limiting the number of drugs that will be covered inany therapeutic class and as a result, we expect that there will be additional pressure to reduce costs. For example, the CMS in implementing the MMA hasenacted regulations that reduced capitated payments to dialysis providers. These cost reduction initiatives and other provisions of the MMA could decreasethe scope of coverage and the price that may be received for any approved dialysis products and could seriously harm our business and financial condition.While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policies and payment limitations insetting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may cause a similar reduction in payments from privatepayors. Similar regulations or reimbursement policies have been enacted in many international markets which could similarly impact the commercialpotential for our products.Under the Medicare Improvements for Patients and Providers Act (“MIPPA”), a basic case-mix adjusted composite, or bundled, payment system commencedin January 2011 and transitioned fully by January 2014 to a single reimbursement rate for drugs and all services furnished by renal dialysis centers forMedicare beneficiaries with end-stage renal disease. Specifically, under MIPPA the bundle now covers drugs, services, lab tests and supplies under a singletreatment base rate for reimbursement by the Centers for Medicare and Medicaid Services (“CMS”) based on the average cost per treatment, including thecost of ESAs and IV iron doses, typically without adjustment for usage. It is unknown whether roxadustat, if approved, will be included in the paymentbundle. Under MIPPA, agents that have no IV equivalent in the bundle are currently expected to be excluded from the bundle until 2025. If roxadustat wereincluded in the bundle, it may reduce the price that could be charged for roxadustat, and therefore potentially limit our profitability. Based on roxadustat’sdifferentiated mechanism of action and therapeutic effects, and discussions with our collaboration partner, we currently believe that roxadustat might not beincluded in the bundle. If roxadustat is reimbursed outside of the bundle, it may potentially limit or delay market penetration of roxadustat.101More recently, the PPACA was enacted in 2010 with a goal of reducing the cost of healthcare and substantially changing the way healthcare is financed byboth government and private insurers. The PPACA, among other things, increases the minimum Medicaid rebates owed by manufacturers under the MedicaidDrug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, establishes annual fees and taxes onmanufacturers of certain branded prescription drugs, and creates a new Medicare Part D coverage gap discount program, in which manufacturers must agree tooffer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition forthe manufacturer’s outpatient drugs to be covered under Medicare Part D. In addition, other legislative changes have been proposed and adopted in the U.S.since the PPACA was enacted. On August 2, 2011, the Budget Control Act of 2011 created measures for spending reductions by Congress. A Joint SelectCommittee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unableto reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions ofMedicare payments to providers of up to 2% per fiscal year, which went into effect on April 1, 2013.It is likely that federal and state legislatures within the U.S. and foreign governments will continue to consider changes to existing healthcare legislation. Wecannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. Thecontinuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs ofhealthcare may adversely affect: •the demand for any products that may be approved for sale; •the price and profitability of our products; •pricing, coverage and reimbursement applicable to our products; •the ability to successfully position and market any approved product; and •the taxes applicable to our pharmaceutical product revenues.Some of the provisions of the PPACA have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges.In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, that while not a law, is widely viewed as the first step toward the passageof legislation that would repeal certain aspects of the PPACA. Further, on January 20, 2017, President Trump signed an Executive Order directing federalagencies with authorities and responsibilities under the Affordable Care Act to waive, defer, grant exemptions from, or delay the implementation of anyprovision of the Affordable Care Act that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcareproviders, health insurers, or manufacturers of pharmaceuticals or medical devices. Congress also could consider subsequent legislation to replace elementsof the Affordable Care Act that are repealed. Given these possibilities and others we may not anticipate, the full extent to which our business, results ofoperations and financial condition could be adversely affected by the recent proposed legislation and the Executive Order is uncertain. The implementationof cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our drugs.Furthermore, legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities forpharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretationswill be changed, or what the impact of such changes on the regulatory approvals of our product candidates, if any, may be. In addition, increased scrutiny bythe U.S. Congress of the FDA’s approval process may significantly delay or prevent regulatory approval, as well as subject us to more stringent productlabeling and post-marketing testing and other requirements.We may not be able to conduct, or contract others to conduct, animal testing in the future, which could harm our research and development activities.Certain laws and regulations relating to drug development require us to test our product candidates on animals before initiating clinical trials involvinghumans. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individualshave attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protestsand other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted or delayed.Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which couldresult in significant liability for us and harm our reputation.We are exposed to the risk of employee fraud or other misconduct, including intentional failure to:102 •comply with FDA regulations or similar regulations of comparable foreign regulatory authorities; •provide accurate information to the FDA or comparable foreign regulatory authorities; •comply with manufacturing standards we have established; •comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced bycomparable foreign regulatory authorities; •comply with the FCPA and other anti-bribery laws; •report financial information or data accurately; •or disclose unauthorized activities to us.Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions,delays in clinical trials, or serious harm to our reputation. We have adopted a code of conduct for our directors, officers and employees, but it is not alwayspossible to identify and deter employee misconduct. The precautions we take to detect and prevent this activity may not be effective in controlling unknownor unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliancewith such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, thoseactions could harm our business, results of operations, financial condition and cash flows, including through the imposition of significant fines or othersanctions.If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that couldharm our business.We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use,storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicalsand biological materials. Our operations also produce hazardous waste products. We contract with third parties for the disposal of these materials and wastes.We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardousmaterials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associatedwith civil or criminal fines and penalties for failure to comply with such laws and regulations. We do not maintain insurance for environmental liability ortoxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations applicable to ouroperations in the U.S. and foreign countries. These current or future laws and regulations may impair our research, development or manufacturing efforts. Ourfailure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.Risks Related to Our International OperationsWe are establishing international operations and seeking approval to commercialize our product candidates outside of the U.S., in particular in China,and a number of risks associated with international operations could materially and adversely affect our business.We expect to be subject to a number of risks related with our international operations, many of which may be beyond our control. These risks include: •different regulatory requirements for drug approvals in foreign countries; •different standards of care in various countries that could complicate the evaluation of our product candidates; •different U.S. and foreign drug import and export rules; •reduced protection for intellectual property rights in certain countries; •unexpected changes in tariffs, trade barriers and regulatory requirements; •different reimbursement systems and different competitive drugs indicated to treat the indications for which our product candidates are beingdeveloped; •economic weakness, including inflation, or political instability in particular foreign economies and markets;103 •compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; •compliance with the FCPA, and other anti-corruption and anti-bribery laws; •foreign taxes, including withholding of payroll taxes; •foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident todoing business in another country; •workforce uncertainty in countries where labor unrest is more common than in the U.S.; •production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; •a reliance on CROs, clinical trial sites, principal investigators and other third parties that may be less experienced with clinical trials or havedifferent methods of performing such clinical trials than we are used to in the U.S.; •potential liability resulting from development work conducted by foreign distributors; and •business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters.The pharmaceutical industry in China is highly regulated and such regulations are subject to change.The pharmaceutical industry in China is subject to comprehensive government regulation and supervision, encompassing the approval, registration,manufacturing, packaging, licensing and marketing of new drugs. Refer to “Business — Government Regulation — Regulation in China” for a discussion ofthe regulatory requirements that are applicable to our current and planned business activities in China. In recent years, the regulatory framework in Chinaregarding the pharmaceutical industry has undergone significant changes, and we expect that it will continue to undergo significant changes. Any suchchanges or amendments may result in increased compliance costs on our business or cause delays in or prevent the successful development orcommercialization of our product candidates in China. Chinese authorities have become increasingly vigilant in enforcing laws in the pharmaceuticalindustry, in some cases launching industry-wide investigations, oftentimes appearing to focus on foreign companies. The costs and time necessary to respondto an investigation can be material. Any failure by us or our partners to maintain compliance with applicable laws and regulations or obtain and maintainrequired licenses and permits may result in the suspension or termination of our business activities in China.Patients’ use of traditional Chinese medicine in violation of study protocols in our China studies may lead the China Food and Drug Administration(“CFDA”) and regulators in other jurisdictions in which we are seeking approval to suspend our studies, reject our study data and withhold approval forroxadustat.A common issue encountered in conducting clinical studies in China is patients’ use of traditional Chinese medicine in violation of study protocols. Webelieve that many patients with anemia in CKD are currently being treated with traditional Chinese medicine, and it is possible that such patients maycontinue their use of traditional Chinese medicine after enrollment in our studies and in violation of study protocols. If the patients participating in ourChina clinical studies do not comply with study protocols and continue to use traditional Chinese medicine, adverse events may emerge in our studies thatare due to such traditional Chinese medicine or the interaction between such traditional Chinese medicine and roxadustat. In addition, the use of traditionalChinese medicine by patients in our studies may confound our study results. The occurrence of such adverse events or the confounding of our study resultsmay lead the CFDA and regulators in other jurisdictions in which we are seeking approval to, among other things, suspend our studies, reject our study dataand withhold approval for roxadustat.We are planning on using our own manufacturing facility in China to produce roxadustat drug product, and possibly API, and FG-5200 for cornealimplants. As an organization, we have limited experience in the construction, licensure, or operation of a manufacturing plant, and, accordingly we cannotassure you we will be able to meet regulatory requirements to operate our plant and to sell our products.In 2014, we received a Pharmaceutical Production Permit (“PPP”) for our facility in China in which we intend to manufacture roxadustat. The PPP allowed usto produce the NDA registration campaign of roxadustat according to cGMP. However, we have not yet received a license for commercial manufacture ofroxadustat. As an organization, we have limited experience building a manufacturing facility in the past and our facility must be constructed, licensed andoperated in conformity with applicable cGMP requirements. We will be obligated to comply with continuing cGMP requirements and there can be noassurance that we will receive and maintain all of the appropriate licenses required to manufacture our product candidates for clinical and commercial use inChina. In addition, we and our product suppliers must continually spend time, money and effort in production, record-keeping and quality assurance andappropriate controls in order to ensure that any products manufactured in our facility meet applicable specifications and other requirements for productsafety, efficacy and quality and there can be no assurance that our efforts will succeed for licensure or continue to be successful in meeting theserequirements.104We would require separate approval for the manufacture of FG-5200. In addition, we may convert our existing manufacturing process of FG-5200 to a semi-automated process which may require us to show that implants from our new manufacturing process are comparable to the implants from our existingmanufacturing process. There can be no assurance that we will successfully receive licensure and maintain approval for the manufacture of either or both ofroxadustat or FG-5200, either of which would be expected to delay or preclude our ability to develop and commercialize those product candidates in Chinaand may materially adversely affect our business and operations and prospects in China.Manufacturing facilities in China are subject to periodic unannounced inspections by the CFDA and other regulatory authorities. We expect to depend onthese facilities for our product candidates and business operations in China. Natural disasters or other unanticipated catastrophic events, including powerinterruptions, water shortages, storms, fires, earthquakes, terrorist attacks, government appropriation of our facility, and wars, could significantly impair ourability to operate our manufacturing facility. Certain equipment, records and other materials located in these facilities would be difficult to replace or wouldrequire substantial replacement lead time that would impact our ability to successfully commercialize our product candidates in China. The occurrence ofany such event could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects.Our decision to seek approval in China for roxadustat prior to approval in the U.S. or Europe is largely unprecedented and could be subject to significantrisk, delay and expense.Our subsidiary FibroGen (China) Medical Technology Development Co., Ltd. (“FibroGen Beijing”), plans to seek approval for roxadustat in China as aDomestic Class 1 Drug, which we believe, if approved, would be the first CFDA approval of a first in class drug candidate while Phase 3 trials are ongoing inthe U.S. and Europe. Because of this largely novel regulatory pathway, the CFDA approval process may take longer than we currently expect, or the CFDAmay require us to submit additional data including data from the U.S. or European Phase 3 trials. In addition, negative data from the U.S. or European Phase 3trials could impact the CFDA approval process. Any such development delays would result in significant delay in our commercialization plans for roxadustatin China. Elements of our plan for approval of roxadustat and other product candidates in China are based on communications with the CFDA, some of whichare not reflected in formal written communications, regulations, findings or determinations. Accordingly, while we believe we have understandings with theCFDA regarding the domestic drug approval process and the clinical and manufacturing (including bio-equivalency) data currently required for approval andthe timing and process of a potential approval, the regulatory authorities may later determine that changes are required in the drug approval process, or thatadditional or different clinical or manufacturing data must be generated, any of which could significantly delay approval of roxadustat or any of our otherproduct candidates, and materially and adversely affect our plans and operations in China. It is possible that other unforeseen delays in the China regulatoryprocess could have a material adverse effect on our development and commercialization of roxadustat in China.For example, prior to enrolling our Phase 3 studies, the Ministry of Science and Technology established a new approval process to obtain routine blood andurine samples that contain genetic information. Our Phase 3 CKD clinical trial sites have received such approval, but applications are reviewed only on aquarterly basis, thus new studies or work at additional clinical trial sites could be delayed until they receive such approval.In addition, there are new and evolving environmental and manufacturing regulations in China. The application thereof may impact our API manufacturinglocation or strategy. In order to prevent or mitigate any delay in commercialization, we are establishing a 5,500 square meter commercial manufacturingfacility in Cangzhou, Hebei, with the intention of being operational shortly after NDA approval. Any delays related to these regulations or our newmanufacturing facility could adversely affect the cost timing of our commercialization in China.In May 2016, China announced implementation of a three-year pilot program for the Marketing Authorization Holder System (“MAH”) in certain pilotedregions. We are considering applying to participate in this program, and if accepted, we may be able to outsource drug product or API manufacturing to thirdparties while retaining the manufacturing license. However, we cannot know if we will be accepted into the MAH program, or how long such program will beavailable.Even if roxadustat is approved in China, we and our collaboration partner in China, AstraZeneca, may experience difficulties in successfully generatingsales of roxadustat in China.We and AstraZeneca have a profit sharing arrangement with respect to roxadustat in China. Even if roxadustat is approved for sale in China, we andAstraZeneca may experience difficulties in our marketing, commercialization and sales efforts in China, and our business and operations could be adverselyaffected. In particular, sales of roxadustat in China may be limited due to the complex nature of the healthcare system, low average personal income, lack ofpatient cost reimbursement, pricing controls, poorly developed infrastructure and potentially rapid competition from other products.105The market for treatments of anemia in CKD in China is highly competitive.Even if roxadustat is approved in China, it will face intense competition in the market for treatments of anemia in CKD. Roxadustat would compete withESAs, which are offered by established multinational pharmaceutical companies such as Kyowa Hakko Kirin China Pharmaceutical Co., Ltd. and Roche andChinese pharmaceutical companies such as 3SBio Inc. and Di’ao Group Chengdu Diao Jiuhong Pharmaceutical Factory. Many of these competitors havesubstantially greater name recognition, scientific, financial and marketing resources as well as established distribution capabilities than we do. Many of ourcompetitors have more resources to develop or acquire, and more experience in developing or acquiring, new products and in creating market awareness forthose products. Many of these competitors have significantly more experience than we have in navigating the Chinese regulatory framework regarding thedevelopment, manufacturing and marketing of drugs in China, as well as in marketing and selling anemia products in China. Additionally, we believe thatmost patients with anemia in CKD in China are currently being treated with traditional Chinese medicine, which is widely accepted and highly prevalent inChina. Traditional Chinese medicine treatments are often oral and thus convenient and low-cost, and practitioners of traditional Chinese medicine arenumerous and accessible in China. As a result, it may be difficult to persuade patients with anemia in CKD to switch from traditional Chinese medicine toroxadustat.There is no assurance that roxadustat will be included in the Medical Insurance Catalogs.Eligible participants in the national basic medical insurance program in China, which consists of mostly urban residents, are entitled to reimbursement fromthe social medical insurance fund for up to the entire cost of medicines that are included in the Medical Insurance Catalogs. Refer to “Business —Government Regulation — Regulation in China.” We believe that the inclusion of a drug in the Medical Insurance Catalogs can substantially improve thesales of a drug. The Ministry of Labor and Social Security in China (“MLSS”) together with other government authorities, select medicines to be included inthe Medical Insurance Catalogs based on a variety of factors, including treatment requirements, frequency of use, effectiveness and price. The MLSS alsooccasionally removes medicines from such catalogs. There can be no assurance that roxadustat will be included, and once included, remain in the MedicalInsurance Catalogs. The exclusion or removal of roxadustat from the Medical Insurance Catalogs may materially and adversely affect sales of roxadustat.We may not be successful in the tender processes for the purchase of medicines by state-owned and state-controlled hospitals.Most hospitals in China participate in collective tender processes for the purchase of medicines listed in the Medical Insurance Catalogs and medicines thatare consumed in large volumes and commonly prescribed for clinical uses. During a collective tender process, the hospitals will establish a committeeconsisting of recognized pharmaceutical experts. The committee will assess the bids submitted by the various participating pharmaceutical manufacturers,taking into consideration, among other things, the quality and price of the drug product and the service and reputation of the manufacturer. Only drugproducts that have been selected in the collective tender processes may be purchased by participating hospitals. If we are unable to win purchase contractsthrough the collective tender processes in which we decide to participate, there will be limited demand for roxadustat, and sales revenues from roxadustat willbe materially and adversely affected.Even if FG-5200 can be manufactured successfully and achieve regulatory approval, we may not achieve commercial success.We have not yet received a license to manufacture FG-5200 in our China manufacturing facility or at scale, and we will have to show that FG-5200 from ourChina manufacturing facility meets the applicable regulatory requirements. There can be no assurance that we can meet these requirements or that FG-5200can be approved for development, manufacture and sale in China.Even if we are able to manufacture and develop FG-5200 as a medical device in China, the size and length of any potential clinical trials required forapproval are uncertain and we are unable to predict the time and investment required to obtain regulatory approval. Moreover, even if FG-5200 can besuccessfully developed for approval in China, our product candidate would require extensive training and investment in assisting physicians in the use ofFG-5200.The retail prices of any product candidates that we develop may be subject to control, including periodic downward adjustment, by Chinese governmentauthorities.The price for pharmaceutical products is highly regulated in China, both at the national and provincial level. Price controls may reduce prices to levelssignificantly below those that would prevail in less regulated markets or limit the volume of products which may be sold, either of which may have a materialand adverse effect on potential revenues from sales of roxadustat in China. Moreover, the process and timing for the implementation of price restrictions isunpredictable, which may cause potential revenues from the sales of roxadustat to fluctuate from period to period.106If our planned business activities in China fall within a restricted category under the China Catalog for Guidance for Foreign Investment, we will need tooperate in China through a variable interest entity (“VIE”) structure.The China Catalog for Guidance for Foreign Investment sets forth the industries and sectors that the Chinese government encourages and restricts withrespect to foreign investment and participation. The Catalog for Guidance for Foreign Investment is subject to revision from time to time by the ChinaMinistry of Commerce. While we currently do not believe the development and marketing of roxadustat falls within a restricted category under the Catalogfor Guidance for Foreign Investment, if roxadustat does fall under such a restricted category, we will need to operate in China through a VIE structure. A VIEstructure involves a wholly foreign-owned enterprise that would control and receive the economic benefits of a domestic Chinese company through variouscontractual relationships. Such a structure would subject us to a number of risks that may have an adverse effect on our business, including that the Chinesegovernment may determine that such contractual arrangements do not comply with applicable regulations, Chinese tax authorities may require us to payadditional taxes, shareholders of our VIEs may have potential conflicts of interest with us, and we may lose the ability to use and enjoy assets held by ourVIEs that are important to the operations of our business if such entities go bankrupt or become subject to dissolution or liquidation proceedings. VIEstructures in China have come under increasing scrutiny from accounting firms and the SEC staff. If we do attempt to use a VIE structure and are unsuccessfulin structuring it so as to qualify as a VIE, we would not be able to consolidate the financial statements of the VIE with our financial statements, which couldhave a material adverse effect on our operating results and financial condition.FibroGen Beijing would be subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy ourliquidity requirements.We plan to conduct all of our business in China through FibroGen China Anemia Holdings, Ltd. and FibroGen Beijing. We may rely on dividends androyalties paid by FibroGen Beijing for a portion of our cash needs, including the funds necessary to service any debt we may incur and to pay our operatingexpenses. The payment of dividends by FibroGen Beijing is subject to limitations. Regulations in China currently permit payment of dividends only out ofaccumulated profits as determined in accordance with accounting standards and regulations in China. FibroGen Beijing is not permitted to distribute anyprofits until losses from prior fiscal years have been recouped and in any event must maintain certain minimum capital requirements. FibroGen Beijing is alsorequired to set aside at least 10.0% of its after-tax profit based on Chinese accounting standards each year to its statutory reserve fund until the cumulativeamount of such reserves reaches 50.0% of its registered capital. Statutory reserves are not distributable as cash dividends. In addition, if FibroGen Beijingincurs debt on its own behalf in the future, the agreements governing such debt may restrict its ability to pay dividends or make other distributions to us. Asof December 31, 2016, approximately $2.3 million of our cash and cash equivalents is held in China.Any capital contributions from us to FibroGen Beijing must be approved by the Ministry of Commerce in China, and failure to obtain such approval maymaterially and adversely affect the liquidity position of FibroGen Beijing.The Ministry of Commerce in China or its local counterpart must approve the amount and use of any capital contributions from us to FibroGen Beijing, andthere can be no assurance that we will be able to complete the necessary government registrations and obtain the necessary government approvals on a timelybasis, or at all. If we fail to do so, we may not be able to contribute additional capital to fund our Chinese operations, and the liquidity and financial positionof FibroGen Beijing may be materially and adversely affected.We may be subject to currency exchange rate fluctuations and currency exchange restrictions with respect to our operations in China, which couldadversely affect our financial performance.If roxadustat is approved for sale in China, most of our product sales will occur in local Chinese currency and our operating results will be subject tovolatility from currency exchange rate fluctuations. To date, we have not hedged against the risks associated with fluctuations in exchange rates and,therefore, exchange rate fluctuations could have an adverse impact on our future operating results. Changes in value of the Renminbi against the U.S. dollar,Euro and other currencies is affected by, among other things, changes in China’s political and economic conditions. Currently, the Renminbi is permitted tofluctuate within a narrow and managed band against a basket of certain foreign currencies. Any significant currency exchange rate fluctuations may have amaterial adverse effect on our business and financial condition.107In addition, the Chinese government imposes controls on the convertibility of the Renminbi into foreign currencies and the remittance of foreign currencyout of China for certain transactions. Shortages in the availability of foreign currency may restrict the ability of FibroGen Beijing to remit sufficient foreigncurrency to pay dividends or other payments to us, or otherwise satisfy their foreign currency-denominated obligations. Under existing Chinese foreignexchange regulations, payments of current account items, including profit distributions, interest payments and balance of trade, can be made in foreigncurrencies without prior approval from the State Administration of Foreign Exchange (“SAFE”) by complying with certain procedural requirements. However,approval from SAFE or its local branch is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expensessuch as the repayment of loans denominated in foreign currencies. The Chinese government may also at its discretion restrict access in the future to foreigncurrencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy ouroperational requirements, our liquidity and financial position may be materially and adversely affected.Because FibroGen Beijing’s funds are held in banks that do not provide insurance, the failure of any bank in which FibroGen Beijing deposits its fundscould adversely affect our business.Banks and other financial institutions in China do not provide insurance for funds held on deposit. As a result, in the event of a bank failure, FibroGenBeijing may not have access to funds on deposit. Depending upon the amount of money FibroGen Beijing maintains in a bank that fails, its inability to haveaccess to cash could materially impair its operations.We may be subject to tax inefficiencies associated with our offshore corporate structure.The tax regulations of the U.S. and other jurisdictions in which we operate are extremely complex and subject to change. New laws, new interpretations ofexisting laws, such as the Base Erosion Profit Shifting project initiated by the Organization for Economic Co-operation and Development and any legislationproposed by the relevant taxing authorities, or limitations on our ability to structure our operations and intercompany transactions may lead to inefficient taxtreatment of our revenue, profits, royalties and distributions, if any are achieved. In the U.S., comprehensive tax reform has been announced as a priority bythe new President’s administration and the U.S. Congress. Various proposals are under evaluation and consideration but it is not possible to accuratelyascertain at this time the overall impact of such proposals on our future effective tax rate and corporate structure.In addition, we and our foreign subsidiaries have various intercompany transactions. We may not be able to obtain certain benefits under relevant tax treatiesto avoid double taxation on certain transactions among our subsidiaries. If we are not able to avail ourselves of the tax treaties, we could be subject toadditional taxes, which could adversely affect our financial condition and results of operations.Our foreign operations, particularly those in China, are subject to significant risks involving the protection of intellectual property.We seek to protect the products and technology that we consider important to our business by pursuing patent applications in China and other countries,relying on trade secrets or pharmaceutical regulatory protection or employing a combination of these methods. We note that the filing of a patent applicationdoes not mean that we will be granted a patent, or that any patent eventually granted will be as broad as requested in the patent application or will besufficient to protect our technology. There are a number of factors that could cause our patents, if granted, to become invalid or unenforceable or that couldcause our patent applications not to be granted, including known or unknown prior art, deficiencies in the patent application, or lack of originality of thetechnology. Furthermore, the terms of our patents are limited. The patents we hold and the patents that may be granted from our currently pending patentapplications have, absent any patent term adjustment or extension, a twenty-year protection period starting from the date of application.Intellectual property rights and confidentiality protections in China may not be as effective as those in the U.S. or other countries for many reasons, includinglack of procedural rules for discovery and evidence, low damage awards, and lack of judicial independence. Implementation and enforcement of Chinaintellectual property laws have historically been deficient and ineffective and may be hampered by corruption and local protectionism. Policingunauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or defend patents issued to us or todetermine the enforceability and validity of our proprietary rights or those of others. The experience and capabilities of China courts in handling intellectualproperty litigation varies and outcomes are unpredictable. An adverse determination in any such litigation could materially impair our intellectual propertyrights and may harm our business.108We are subject to laws and regulations governing corruption, which will require us to develop and implement costly compliance programs.We must comply with a wide range of laws and regulations to prevent corruption, bribery, and other unethical business practices, including the FCPA, anti-bribery and anti-corruption laws in other countries, particularly China. The creation and implementation of international business practices complianceprograms is costly and such programs are difficult to enforce, particularly where reliance on third parties is required.Anti-bribery laws prohibit us, our employees, and some of our agents or representatives from offering or providing any personal benefit to coveredgovernment officials to influence their performance of their duties or induce them to serve interests other than the missions of the public organizations inwhich they serve. Certain commercial bribery rules also prohibit offering or providing any personal benefit to employees and representatives of commercialcompanies to influence their performance of their duties or induce them to serve interests other than their employers. The FCPA also obligates companieswhose securities are listed in the U.S. to comply with certain accounting provisions requiring us to maintain books and records that accurately and fairlyreflect all transactions of the corporation, including international subsidiaries, and devise and maintain an adequate system of internal accounting controlsfor international operations. The anti-bribery provisions of the FCPA are enforced primarily by the Department of Justice. The SEC is involved withenforcement of the books and records provisions of the FCPA.Compliance with these anti-bribery laws is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, theanti-bribery laws present particular challenges in the pharmaceutical industry because in many countries including China, hospitals are state-owned oroperated by the government, and doctors and other hospital employees are considered foreign government officials. Furthermore, in certain countries (Chinain particular), hospitals and clinics are permitted to sell pharmaceuticals to their patients and are primary or significant distributors of pharmaceuticals.Certain payments to hospitals in connection with clinical studies, procurement of pharmaceuticals and other work have been deemed to be improperpayments to government officials that have led to vigorous anti-bribery law enforcement actions and heavy fines in multiple jurisdictions, particularly in theU.S. and China.It is not always possible to identify and deter violations, and the precautions we take to detect and prevent this activity may not be effective in controllingunknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be incompliance with such laws or regulations.In the pharmaceutical industry, corrupt practices include, among others, acceptance of kickbacks, bribes or other illegal gains or benefits by the hospitals andmedical practitioners from pharmaceutical manufacturers, distributors or their third party agents in connection with the prescription of certainpharmaceuticals. If our employees, affiliates, distributors or third party marketing firms violate these laws or otherwise engage in illegal practices with respectto their sales or marketing of our products or other activities involving our products, we could be required to pay damages or heavy fines by multiplejurisdictions where we operate, which could materially and adversely affect our financial condition and results of operations. The Chinese government hasalso sponsored anti-corruption campaigns from time to time, which could have a chilling effect on any future marketing efforts by us to new hospitalcustomers. There have been recent occurrences in which certain hospitals have denied access to sales representatives from pharmaceutical companies becausethe hospitals wanted to avoid the perception of corruption. If this attitude becomes widespread among our potential customers, our ability to promote ourproducts to hospitals may be adversely affected.As we expand our operations in China and other jurisdictions internationally, we will need to increase the scope of our compliance programs to address therisks relating to the potential for violations of the FCPA and other anti-bribery and anti-corruption laws. Our compliance programs will need to includepolicies addressing not only the FCPA, but also the provisions of a variety of anti-bribery and anti-corruption laws in multiple foreign jurisdictions,including China, provisions relating to books and records that apply to us as a public company, and include effective training for our personnel throughoutour organization. The creation and implementation of anti-corruption compliance programs is costly and such programs are difficult to enforce, particularlywhere reliance on third parties is required. Violation of the FCPA and other anti-corruption laws can result in significant administrative and criminal penaltiesfor us and our employees, including substantial fines, suspension or debarment from government contracting, prison sentences, or even the death penalty inextremely serious cases in certain countries. The SEC also may suspend or bar us from trading securities on U.S. exchanges for violation of the FCPA’saccounting provisions. Even if we are not ultimately punished by government authorities, the costs of investigation and review, distraction of companypersonnel, legal defense costs, and harm to our reputation could be substantial and could limit our profitability or our ability to develop or commercialize ourproduct candidates. In addition, if any of our competitors are not subject to the FCPA, they may engage in practices that will lead to their receipt ofpreferential treatment from foreign hospitals and enable them to secure business from foreign hospitals in ways that are unavailable to us.109Uncertainties with respect to the China legal system could have a material adverse effect on us.The legal system of China is a civil law system primarily based on written statutes. Unlike in a common law system, prior court decisions may be cited forreference but are not binding. Because the China legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are notalways uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections available to us. Moreover,decision makers in the China judicial system have significant discretion in interpreting and implementing statutory and contractual terms, which may renderit difficult for FibroGen Beijing to enforce the contracts it has entered into with our business partners, customers and suppliers. Different governmentdepartments may have different interpretations of certain laws and regulations, and licenses and permits issued or granted by one government authority maybe revoked by a higher government authority at a later time. Navigating the uncertainty and change in the China legal system will require the devotion ofsignificant resources and time, and there can be no assurance that our contractual and other rights will ultimately be enforced.Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.The Chinese economy and Chinese society continue to undergo significant change. Adverse changes in the political and economic policies of the Chinesegovernment could have a material adverse effect on the overall economic growth of China, which could adversely affect our ability to conduct business inChina. The Chinese government continues to adjust economic policies to promote economic growth. Some of these measures benefit the overall Chineseeconomy, but may also have a negative effect on us. For example, our financial condition and results of operations in China may be adversely affected bygovernment control over capital investments or changes in tax regulations. As the Chinese pharmaceutical industry grows and evolves, the Chinesegovernment may also implement measures to change the structure of foreign investment in this industry. We are unable to predict the frequency and scope ofsuch policy changes, any of which could materially and adversely affect FibroGen Beijing’s liquidity, access to capital and its ability to conduct business inChina. Any failure on our part to comply with changing government regulations and policies could result in the loss of our ability to develop andcommercialize our product candidates in China.Our operations in China subject us to various Chinese labor and social insurance laws, and our failure to comply with such laws may materially andadversely affect our business, financial condition and results of operations.We are subject to China Labor Contract Law, which became effective in 2008 and provides stronger protections for employees and imposes more obligationson employers. The Labor Contract Law places certain restrictions on the circumstances under which employers may terminate labor contracts and requireeconomic compensation to employees upon termination of employment, among other things. In addition, companies operating in China are generallyrequired to contribute to labor union funds and the mandatory social insurance and housing funds. Any failure by us to comply with Chinese labor and socialinsurance laws may subject us to late fees, fines and penalties, or cause the suspension or termination of our ability to conduct business in China, any ofwhich could have a material and adverse effect on business, results of operations and prospects.Recent developments relating to the United Kingdom’s referendum vote in favor of leaving the European Union could adversely affect us.The United Kingdom held a referendum on June 23, 2016 in which a majority voted for the United Kingdom’s withdrawal from the EU, commonly referred toas “Brexit”. As a result of this vote, negotiations are expected to commence to determine the terms of the United Kingdom’s withdrawal from the EU as wellas its relationship with the EU going forward, including the terms of trade between the United Kingdom and the EU. The effects of the United Kingdom’swithdrawal from the EU, and the perceptions as to its impact, are expected to be far-reaching and may adversely affect business activity and economicconditions in Europe and globally and could continue to contribute to instability in global financial markets, including foreign exchange markets. TheUnited Kingdom’s withdrawal from the EU could also have the effect of disrupting the free movement of goods, services and people between the UnitedKingdom and the EU and could also lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determineswhich EU laws to replace or replicate, including laws that could impact our ability, or our collaborator’s ability in the case of roxadustat, to obtain approvalof our products or sell our products in the United Kingdom. However, the full effects of such withdrawal are uncertain and will depend on any agreements theUnited Kingdom may make to retain access to EU markets. Lastly, as a result of the United Kingdom’s withdrawal from the EU, other European countries mayseek to conduct referenda with respect to their continuing membership with the EU. Given these possibilities and others we may not anticipate, as well as thelack of comparable precedent, the full extent to which our business, results of operations and financial condition could be adversely affected by the UnitedKingdom’s withdrawal from the EU is uncertain.110Risks Related to the Operation of Our BusinessWe may encounter difficulties in managing our growth and expanding our operations successfully.As we seek to advance our product candidates through clinical trials and commercialization, we will need to expand our development, regulatory,manufacturing, commercialization and administration capabilities or contract with third parties to provide these capabilities for us. As our operations expandand we continue to undertake the efforts and expense to operate as a public reporting company, we expect that we will need to increase the responsibilities onmembers of management in order to manage any future growth effectively. Our failure to accomplish any of these steps could prevent us from successfullyimplementing our strategy and maintaining the confidence of investors in our company.If we fail to attract and keep senior management and key personnel, in particular our chief executive officer, we may be unable to successfully develop ourproduct candidates, conduct our clinical trials and commercialize our product candidates.We are highly dependent on our chief executive officer, Thomas B. Neff, and other members of our senior management team. The loss of the services ofMr. Neff or any of these other individuals would be expected to significantly negatively impact the development and commercialization of our productcandidates, our existing collaborative relationships and our ability to successfully implement our business strategy.Recruiting and retaining qualified commercial, development, scientific, clinical and manufacturing personnel are and will continue to be critical to oursuccess. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limitednumber of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of andcommercialize product candidates. We may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the intense competitionamong numerous biopharmaceutical companies for similar personnel.There is also significant competition, in particular in the San Francisco Bay Area, for the hiring of experienced and qualified personnel, which increases theimportance of retention of our existing personnel. If we are unable to continue to attract and retain personnel with the quality and experience applicable toour product candidates, our ability to pursue our strategy will be limited and our business and operations would be adversely affected.If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our productcandidates.We face an inherent risk of product liability as a result of the clinical testing, manufacturing and commercialization of our product candidates. Any suchproduct liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in a product, negligence,strict liability or breach of warranty. Claims could also be asserted under state consumer protection acts. If we are unable to obtain insurance coverage atlevels that are appropriate to maintain our business and operations, or if we are unable to successfully defend ourselves against product liability claims, wemay incur substantial liabilities or otherwise cease operations. Product liability claims may result in: •termination of further development of unapproved product candidates or significantly reduced demand for any approved products; •material costs and expenses to defend the related litigation; •a diversion of time and resources across the entire organization, including our executive management; •product recalls, withdrawals or labeling restrictions; •termination of our collaboration relationships or disputes with our collaboration partners; and •reputational damage negatively impacting our other product candidates in development.If we fail to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims, we may not beable to continue to develop our product candidates. We maintain product liability insurance in a customary amount for the stage of development of ourproduct candidates. Although we believe that we have sufficient coverage based on the advice of our third party advisors, there can be no assurance that suchlevels will be sufficient for our needs. Moreover, our insurance policies have various exclusions, and we may be in a dispute with our carrier as to the extentand nature of our coverage, including whether we are covered under the applicable product liability policy. If we are not able to ensure coverage or arerequired to pay substantial amounts to settle or otherwise contest the claims for product liability, our business and operations would be negatively affected.111Our business and operations would suffer in the event of computer system failures.Despite the implementation of security measures, our internal computer systems, and those of our CROs, collaboration partners, and other third parties onwhich we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, fire, terrorism, war and telecommunication andelectrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug developmentprograms. For example, the loss of clinical trial data from completed, ongoing or planned clinical trials could result in delays in our regulatory approvalefforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of, or damageto, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of ourproduct candidates could be delayed.We depend on sophisticated information technology systems to operate our business and a cyber-attack or other breach of these systems could have amaterial adverse effect on our business.We rely on information technology systems to process, transmit and store electronic information in our day-to-day operations. The size and complexity of ourinformation technology systems makes them vulnerable to a cyber-attack, malicious intrusion, breakdown, destruction, loss of data privacy or othersignificant disruption. Any such successful attacks could result in the theft of intellectual property or other misappropriation of assets, or otherwisecompromise our confidential or proprietary information and disrupt our operations. Cyber-attacks are becoming more sophisticated and frequent. We haveinvested in our systems and the protection of our data to reduce the risk of an intrusion or interruption, and we monitor and test our systems on an ongoingbasis for any current or potential threats. There can be no assurance that these measures and efforts will prevent future interruptions or breakdowns. If we failto maintain or protect our information technology systems and data integrity effectively or fail to anticipate, plan for or manage significant disruptions tothese systems, we could have difficulty preventing, detecting and controlling such cyber-attacks and any such attacks could result in losses described aboveas well as disputes with physicians, patients and our partners, regulatory sanctions or penalties, increases in operating expenses, expenses or lost revenues orother adverse consequences, any of which could have a material adverse effect on our business, results of operations, financial condition, prospects and cashflows.Our headquarters and data storage facilities are located near known earthquake fault zones. The occurrence of an earthquake, fire or any othercatastrophic event could disrupt our operations or the operations of third parties who provide vital support functions to us, which could have a materialadverse effect on our business, results of operations and financial condition.We and some of the third party service providers on which we depend for various support functions, such as data storage, are vulnerable to damage fromcatastrophic events, such as power loss, natural disasters, terrorism and similar unforeseen events beyond our control. Our corporate headquarters and otherfacilities are located in the San Francisco Bay Area, which in the past has experienced severe earthquakes and fires.We do not carry earthquake insurance. Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on ourbusiness, results of operations, financial condition and prospects.If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, damaged criticalinfrastructure, such as our data storage facilities, enterprise financial systems or manufacturing resource planning and enterprise quality systems, or otherwisedisrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recoveryand business continuity plans we have in place currently are limited and are unlikely to prove adequate protection in the event of a serious disaster or similarevent. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly whentaken together with our lack of earthquake insurance, could have a material adverse effect on our business.Furthermore, integral parties in our supply chain are operating from single sites, increasing their vulnerability to natural disasters or other sudden, unforeseenand severe adverse events. If such an event were to affect our supply chain, it could have a material adverse effect on our business.112Risks Related to Our Common StockThe market price of our common stock may be highly volatile, and you may not be able to resell your shares at or above your purchase price.In general, pharmaceutical, biotechnology and other life sciences company stocks have been highly volatile in the current market. The volatility ofpharmaceutical, biotechnology and other life sciences company stocks is sometimes unrelated to the operating performance of particular companies andbiotechnology and life science companies stocks often respond to trends and perceptions rather than financial performance. In particular, the market price ofshares of our common stock could be subject to wide fluctuations in response to the following factors: •results of clinical trials of our product candidates, including roxadustat and pamrevlumab; •the timing of the release of results of and regulatory updates regarding our clinical trials; •the level of expenses related to any of our product candidates or clinical development programs; •results of clinical trials of our competitors’ products; •safety issues with respect to our product candidates or our competitors’ products; •regulatory actions with respect to our product candidates and any approved products or our competitors’ products; •fluctuations in our financial condition and operating results, which will be significantly affected by the manner in which we recognize revenuefrom the achievement of milestones under our collaboration agreements; •adverse developments concerning our collaborations and our manufacturers; •the termination of a collaboration or the inability to establish additional collaborations; •the publication of research reports by securities analysts about us or our competitors or our industry or negative recommendations orwithdrawal of research coverage by securities analysts; •the inability to obtain adequate product supply for any approved drug product or inability to do so at acceptable prices; •disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection forour technologies; •the ineffectiveness of our internal controls; •our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; •additions and departures of key personnel; •announced strategic decisions by us or our competitors; •changes in legislation or other regulatory developments affecting our product candidates or our industry; •fluctuations in the valuation of the biotechnology industry and particular companies perceived by investors to be comparable to us; •sales of our common stock by us, our insiders or our other stockholders; •speculation in the press or investment community; •announcement or expectation of additional financing efforts; •announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; •changes in accounting principles; •activities of the government of China, including those related to the pharmaceutical industry as well as industrial policy generally; •performance of other U.S. publicly traded companies with significant operations in China; •terrorist acts, acts of war or periods of widespread civil unrest; •natural disasters such as earthquakes and other calamities; •changes in market conditions for biopharmaceutical stocks;113 •changes in general market and economic conditions; and •the other factors described in this “Risk Factors” section.As a result of fluctuations caused by these and other factors, comparisons of our operating results across different periods may not be accurate indicators ofour future performance. Any fluctuations that we report in the future may differ from the expectations of market analysts and investors, which could cause theprice of our common stock to fluctuate significantly. Moreover, securities class action litigation has often been initiated against companies following periodsof volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could alsorequire us to make substantial payments to satisfy judgments or to settle litigation.If securities or industry analysts do not continue to publish research or reports about our business, or if they change their recommendations regarding ourstock adversely, our stock price and trading volume could decline.The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. Ifone or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of ourcompany or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or tradingvolume to decline.Our principal stockholders and management own a significant percentage of our stock and will be able to exercise significant influence over matterssubject to stockholder approval.As of January 31, 2017, our executive officers, directors and principal stockholders, together with their respective affiliates, owned approximately 24.87% ofour common stock, including shares subject to outstanding options that are exercisable within 60 days after such date and shares issuable upon settlement ofrestricted stock units that will vest within 60 days after such date. This percentage is based upon information supplied by officers, directors and principalstockholders and Schedules 13D and 13G, if any, filed with the SEC, which information may not be accurate as of January 31, 2017. Accordingly, thesestockholders will be able to exert a significant degree of influence over our management and affairs and over matters requiring stockholder approval,including the election of our board of directors and approval of significant corporate transactions. The interests of this group may differ from those of otherstockholders and they may vote their shares in a way that is contrary to the way other stockholders vote their shares. This concentration of ownership couldhave the effect of entrenching our management and/or the board of directors, delaying or preventing a change in our control or otherwise discouraging apotential acquirer from attempting to obtain control of us, which in turn could have a material and adverse effect on the fair market value of our commonstock.Additional remedial measures that may be imposed in the proceedings instituted by the SEC against five China based accounting firms, including theChinese affiliate of our independent registered public accounting firm, could result in our consolidated financial statements being determined to not be incompliance with the requirements of the Exchange Act.In late 2012, the SEC commenced administrative proceedings under Rule 102(e) of its Rules of Practice and also under the Sarbanes-Oxley Act of 2002against the Chinese affiliates of the “big four” accounting firms, including PricewaterhouseCoopers Zhong Tian CPAs Limited, the Chinese affiliate of ourindependent registered public accounting firm. The Rule 102(e) proceedings initiated by the SEC relate to these firms’ failure to produce documents,including audit work papers, in response to the request of the SEC pursuant to Section 106 of the Sarbanes-Oxley Act of 2002, as the auditors located inChina are not in a position lawfully to produce documents directly to the SEC because of restrictions under Chinese law and specific directives issued by theChina Securities Regulatory Commission (“CSRC”). The issues raised by the proceedings are not specific to our auditors or to us.In January 2014, an administrative law judge reached an initial decision that the Chinese affiliates of the “big four” accounting firms should be barred frompracticing before the SEC for a period of six months. In February 2015, the Chinese affiliates of the “big four” accounting firms each agreed to a censure andto pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC and audit U.S.-listed companies. The settlementrequired the firms to follow detailed procedures and to seek to provide the SEC with access to Chinese firms’ audit documents via the CSRC. If futuredocument productions fail to meet specified criteria, the SEC retains authority to impose a variety of additional remedial measures on the firms depending onthe nature of the failure.114We cannot predict if the SEC will further review the four firms’ compliance with specified criteria or if such further review would result in the SEC imposingadditional penalties such as suspensions or commencing any further administrative proceedings. Although it does not play a substantial role (as definedunder PCAOB standards) in the audit of our consolidated financial statements, if PricewaterhouseCoopers Zhong Tian CPAs Limited were denied,temporarily, the ability to practice before the SEC, our ability to produce audited consolidated financial statements for our company could be affected and wecould be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the delisting of ourshares from the NASDAQ Global Select Market or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the tradingof our stock.We may engage in future acquisitions that could disrupt our business, cause dilution to our stockholders and harm our business, results of operations,financial condition and cash flows and future prospects.While we currently have no specific plans to acquire any other businesses, we may, in the future, make acquisitions of, or investments in, companies that webelieve have products or capabilities that are a strategic or commercial fit with our present or future product candidates and business or otherwise offeropportunities for our company. In connection with these acquisitions or investments, we may: •issue stock that would dilute our existing stockholders’ percentage of ownership; •incur debt and assume liabilities; and •incur amortization expenses related to intangible assets or incur large and immediate write-offs.We may not be able to complete acquisitions on favorable terms, if at all. If we do complete an acquisition, we cannot assure you that it will ultimatelystrengthen our competitive position or that it will be viewed positively by customers, financial markets or investors. Furthermore, future acquisitions couldpose numerous additional risks to our operations, including: •problems integrating the purchased business, products or technologies, or employees or other assets of the acquisition target; •increases to our expenses; •disclosed or undisclosed liabilities of the acquired asset or company; •diversion of management’s attention from their day-to-day responsibilities; •reprioritization of our development programs and even cessation of development and commercialization of our current product candidates; •harm to our operating results or financial condition; •entrance into markets in which we have limited or no prior experience; and •potential loss of key employees, particularly those of the acquired entity.We may not be able to complete any acquisitions or effectively integrate the operations, products or personnel gained through any such acquisition.Provisions in our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if anacquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current directors ormanagement.Provisions in our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may have the effect ofdiscouraging, delaying or preventing a change in control of us or changes in our management. These provisions could also limit the price that investorsmight be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because ourboard of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by ourstockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Amongother things, these provisions: •authorize “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may containvoting, liquidation, dividend and other rights superior to our common stock; •create a classified board of directors whose members serve staggered three-year terms; •specify that special meetings of our stockholders can be called only by our board of directors pursuant to a resolution adopted by a majority ofthe total number of directors;115 •prohibit stockholder action by written consent; •establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, includingproposed nominations of persons for election to our board of directors; •provide that our directors may be removed prior to the end of their term only for cause; •provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; •require a supermajority vote of the holders of our common stock or the majority vote of our board of directors to amend our bylaws; and •require a supermajority vote of the holders of our common stock to amend the classification of our board of directors into three classes and toamend certain other provisions of our certificate of incorporation.These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management by making it moredifficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.Moreover, because we are incorporated in Delaware, we are governed by certain anti-takeover provisions under Delaware law which may discourage, delay orprevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders. We are subject to the provisions ofSection 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging orcombining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock,unless the merger or combination is approved in a prescribed manner.Any provision of our amended and restated certificate of incorporation, our amended and restated bylaws or Delaware law that has the effect of delaying ordeterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could alsoaffect the price that some investors are willing to pay for our common stock.Our ability to use net operating losses (“NOLs”) to offset future taxable income may be subject to certain limitations.In general, under Section 382 of the Internal Revenue Code of 1986, as amended (“Code”), a corporation that undergoes an “ownership change” is subject tolimitations on its ability to utilize its pre-change NOL or tax credits (“credits”), to offset future taxable income. Our existing NOLs or credits may be subjectto substantial limitations arising from previous ownership changes, and if we undergo an ownership change our ability to utilize NOLs or credits could befurther limited by Section 382 of the Code. In addition, future changes in our stock ownership, many of which are outside of our control, could result in anownership change under Section 382 of the Code. Our NOLs or credits may also be impaired under state law. Accordingly, we may not be able to utilize amaterial portion of our NOLs or credits. Furthermore, our ability to utilize our NOLs or credits is conditioned upon our attaining profitability and generatingU.S. federal and state taxable income. As described above under “— Risks Related to Our Financial Condition and History of Operating Losses,” we haveincurred significant net losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future; thus, we do notknow whether or when we will generate the U.S. federal or state taxable income necessary to utilize our NOLs or credits. A full valuation allowance has beenprovided for all of our NOLs and credits.Changes in our tax provision or exposure to additional tax liabilities could adversely affect our earnings and financial condition.As a multinational corporation, we are subject to income taxes in the U.S. and various foreign jurisdictions. Significant judgment is required in determiningour global provision for income taxes and other tax liabilities. In the ordinary course of a global business, there are intercompany transactions andcalculations where the ultimate tax determination is uncertain. Our income tax returns are subject to audits by tax authorities. Although we regularly assessthe likelihood of adverse outcomes resulting from these examinations to determine our tax estimates, a final determination of tax audits or tax disputes couldhave an adverse effect on our results of operations and financial condition. In the U.S., comprehensive tax reform has been announced as a priority by the newPresident’s administration and the U.S. Congress. Various proposals are under evaluation and consideration but it is not possible to accurately ascertain atthis time the overall impact of such proposals on our future tax liabilities, profitability, and financial condition.We are also subject to non-income taxes, such as payroll, sales, use, value-added, net worth, property, gross receipts, and goods and services taxes in the U.S,state and local, or various foreign jurisdictions. We are subject to audit and assessments by tax authorities with respect to these non-income taxes and mayhave exposure to additional non-income tax liabilities which could have an adverse effect on our results of operations and financial condition.​116Our amended and restated certificate of incorporation designates the state or federal courts located in the State of Delaware as the sole and exclusiveforum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain afavorable judicial forum for disputes with us or our directors, officers or employees.Our amended and restated certificate of incorporation provides that, subject to limited exceptions, the state and federal courts located in the State of Delawarewill be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciaryduty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim against us arising pursuant to anyprovision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated by-laws, or (4) anyother action asserting a claim against us that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interestin shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate ofincorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable fordisputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees.Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of,one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions,which could adversely affect our business and financial condition.Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole sourceof gain and you may never receive a return on your investment.You should not rely on an investment in our common stock to provide dividend income. We do not anticipate that we will pay any cash dividends to holdersof our common stock in the foreseeable future and investors seeking cash dividends should not purchase our common stock. We plan to retain any earningsto invest in our product candidates and maintain and expand our operations. Therefore, capital appreciation, or an increase in your stock price, which maynever occur, may be the only way to realize any return on your investment.ITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESOur corporate and research and development operations are located in San Francisco, California, where we lease approximately 234,000 square feet of officeand laboratory space with approximately 35,000 square feet subleased. The lease for our San Francisco headquarters expires in 2023. We also leaseapproximately 67,000 square feet of office and manufacturing space in Beijing, China. Our lease in China expires in 2021. We believe our facilities areadequate for our current needs and that suitable additional or substitute space would be available if needed.ITEM 3. LEGAL PROCEEEDINGSWe are not currently a party to any material legal proceedings.ITEM 4. MINE SAFETY DISCLOSURESNot applicable. 117PART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket Information for Common StockOur common stock has been listed on the NASDAQ Global Select Market (“NASDAQ”) since November 14, 2014, under the symbol “FGEN.” Prior to ourinitial public offering, there was no public market for our common stock.The following table sets forth for the indicated periods the high and low closing sales prices of our common stock as reported on the NASDAQ. High Low 2016: Quarter ended March 31, 2016 $30.50 $14.76 Quarter ended June 30, 2016 22.15 14.85 Quarter ended September 30, 2016 22.46 16.44 Quarter ended December 31, 2016 23.40 15.60 2015: Quarter ended March 31, 2015 $36.23 $27.48 Quarter ended June 30, 2015 30.99 17.36 Quarter ended September 30, 2015 29.76 21.66 Quarter ended December 31, 2015 31.36 20.53Stock Price Performance GraphThe following graph illustrates a comparison of the total cumulative stockholder return for our common stock since November 14, 2014, which is the date ourcommon stock first began trading on the NASDAQ Global Select Market, to two indices: the NASDAQ Composite Index and the NASDAQ BiotechnologyIndex. The graph assumes an initial investment of $100 on November 14, 2014, in our common stock, the stocks comprising the NASDAQ Composite Index,and the stocks comprising the NASDAQ Biotechnology Index. The stockholder return shown in the graph below is not necessarily indicative of futureperformance, and we do not make or endorse any predictions as to future stockholder returns.118The above Stock Price Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and ExchangeCommission, nor shall such information be incorporated by reference into any future filing under the Securities Actor Exchange Act, except to the extent thatwe specifically incorporate it by reference into such filing.Dividend PolicyWe have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to supportour operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeablefuture. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend on then-existingconditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our boardof directors may deem relevant.StockholdersAs of January 31, 2017, there were 272 registered stockholders of record for our common stock. This number of registered stockholders does not includestockholders whose shares are held in street name by brokers and other nominees, or may be held in trust by other entities. Therefore, the actual number ofstockholders is greater than this number of registered stockholders of record.Use of Proceeds from Initial Public Offering of Common StockOn November 13, 2014, our Registration Statement on Form S-1, as amended (Reg. Nos. 333-199069 and 333-200189) was declared effective in connectionwith the initial public offering of our common stock. There has been no material change in the planned use of proceeds from our initial public offering asdescribed in our final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act on November 14, 2014.Recent Sales of Unregistered SecuritiesDuring the year ended December 31, 2016, warrants to purchase 1,600 shares and 1,108 shares of our common stock were net exercised at a per share price of$4.38 and $15.00, respectively.During the year ended December 31, 2015, warrants to purchase 72,000 shares, 49,842 shares, 26,880 shares and 17,256 shares of our common stock were netexercised at a per share price of $4.38, $15.00, $3.13 and $4.38, respectively.These shares issued pursuant to the warrants were not registered under the Securities Act of 1933, as amended, in reliance upon the exemption set forth inSection 4(a)(2) of such Act for transactions not involving a public offering.Purchases of Equity Securities by the Issuer and Affiliated PurchasersNone.ITEM 6. SELECTED FINANCIAL DATAThe selected consolidated results of operations data for the years ended December 31, 2016, 2015 and 2014, and the consolidated balance sheet data as ofDecember 31, 2016 and 2015 should be read together with Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and in conjunction with the consolidated financial statements, related notes, and other financial information included elsewhere in this AnnualReport. The selected consolidated results of operations data for the years ended December 31, 2013 and 2012 and the consolidated balance sheet data as ofDecember 31, 2014, 2013 and 2012 have been derived from audited financial statements not included herein. Our historical results are not necessarilyindicative of the results to be expected in the future.119 Years Ended December 31, 2016 2015 2014 2013 2012 (in thousands, except for per share data) Result of Operations Revenue: License and milestone revenue $137,352 $148,093 $117,191 $94,961 $62,845 Collaboration services and other revenue 42,225 32,735 20,410 7,209 3,088 Total revenue 179,577 180,828 137,601 102,170 65,933 Operating expenses: Research and development (1) 187,206 214,089 150,794 85,710 74,222 General and administrative (1) 46,025 44,364 36,909 24,409 18,934 Total operating expenses 233,231 258,453 187,703 110,119 93,156 Loss from operations (53,654) (77,625) (50,102) (7,949) (27,223) Total interest and other, net (8,097) (7,912) (9,402) (6,994) (5,448) Loss before income taxes (61,751) (85,537) (59,504) (14,943) (32,671) Provision for (benefit from) income taxes (71) 242 — — (100) Net loss $(61,680) $(85,779) $(59,504) $(14,943) $(32,571) Net loss per share—basic and diluted $(0.98) $(1.42) $(3.17) $(1.13) $(2.48) Weighted-average number of common shares used in net loss per share— basic and diluted 62,744 60,337 18,775 13,186 13,128 (1)Stock-based compensation expense is included in our results ofoperations as follows (in thousands): Years Ended December 31, 2016 2015 2014 2013 2012 (in thousands) Research and development $19,070 $16,987 $10,893 $1,925 $2,277 General and administrative 13,062 10,694 7,805 1,519 2,284 Total stock-based compensation expense $32,132 $27,681 $18,698 $3,444 $4,561 December 31, 2016 2015 2014 2013 2012 (in thousands) Balance Sheet Data: Cash and cash equivalents $173,782 $153,324 $165,455 $76,332 $38,872 Short-term and long-term investments 150,407 159,567 158,633 61,833 82,630 Working capital 201,391 133,383 135,484 106,164 29,125 Total assets 469,552 470,574 483,528 296,952 265,588 Deferred revenue 114,697 97,860 70,206 36,649 5,764 Lease financing obligations 97,856 97,445 97,221 96,809 92,902 Product development obligations 14,854 15,085 16,465 18,257 17,152 Senior preferred stock — — — 168,436 168,436 Junior preferred stock — — — 136,313 136,313 Accumulated deficit (469,742) (408,062) (322,283) (262,779) (247,836)Total stockholders’ equity (deficit) 155,838 177,554 221,405 (88,708) (73,952)Non-controlling interests 19,271 19,271 19,271 27,875 27,700 Total equity (deficit) $175,109 $196,825 $240,676 $(60,833) $(46,252) 120ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSYou should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financialstatements and related notes and other financial information included in Item 15 of this Annual Report on Form 10-K. Some of the information contained inthis discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business,international operations and product candidates, includes forward-looking statements that involve risks and uncertainties. You should review the “RiskFactors” section of this Annual Report for a discussion of important factors that could cause our actual results to differ materially from the resultsdescribed in or implied by the forward-looking statements contained in the following discussion and analysis.BUSINESS OVERVIEWWe were incorporated in 1993 in Delaware and are a science-based biopharmaceutical company discovering and developing first-in-class therapeutics.Roxadustat (FG-4592), our most advanced product candidate, is an oral small molecule inhibitor of HIF prolyl hydroxylase (“HIF-PH”) activity in Phase 3clinical development for the treatment of anemia in chronic kidney disease (“CKD”). Pamrevlumab (FG-3019), a fully-human monoclonal antibody thatinhibits the activity of connective tissue growth factor (“CTGF”) is in Phase 2 clinical development for the treatment of idiopathic pulmonary fibrosis(“IPF”), pancreatic cancer, and Duchenne muscular dystrophy (“DMD”). We have taken a global approach to the development and future commercializationof our product candidates, and this includes development and commercialization in the People’s Republic of China (“China”).Financial Highlights Years Ended December 31, 2016 2015 2014 (in thousands, except for per share data) Result of Operations Revenue $179,577 $180,828 $137,601 Operating expenses 233,231 258,453 187,703 Net loss (61,680) (85,779) (59,504)Net loss per share - basic and diluted $(0.98) $(1.42) $(3.17) December 31, 2016 December 31, 2015 (in thousands) Balance Sheet Cash and cash equivalents $173,782 $153,324 Short-term and long-term investments $150,407 $159,567 Accounts receivable $10,448 $15,405During the fourth quarter of 2015, the $116.5 million cap on our share of development costs for roxadustat was reached. As such, all development andcommercialization costs thereafter for roxadustat for the treatment of anemia in CKD in the United States (“U.S.”), Europe, Japan and all other markets outsideof China will be paid by Astellas Pharma Inc. (“Astellas”) and AstraZeneca AB (“AstraZeneca”). All development and commercialization costs for roxadustatin China will be shared equally, and AstraZeneca will pay for all of our commercialization costs until profitability and AstraZeneca will recoup such costs outof product sales, if any. Any termination of any of our collaboration agreements would require us to fund the further development and commercialization ofroxadustat in the affected territory or pursue another collaboration, which we may be unable to do, either of which could have an adverse effect on ourbusiness and operations.Our revenue for the year ended December 31, 2016 decreased compared to the prior year primarily due to an upfront payment of $62.0 million received underour collaboration agreements with AstraZeneca and a $10.0 million development milestone revenue recorded under our collaboration agreements withAstellas during the second quarter of 2016, as compared to an upfront payment of $120.0 million and a development milestone payment of $15.0 millionreceived under our collaboration agreements with AstraZeneca during the second quarter of 2015, as well as a decrease in reimbursable co-development costsallocated to license and milestone revenues. The decreases were partially offset by the fact that we had reached the cap with AstraZeneca during the fourthquarter of 2015 on our initial funding obligations as discussed above. Therefore during the year ended December 31, 2016, we billed and were reimbursed for100% of our U.S., Europe and Japanese CKD anemia development costs, as compared to only 50% during the majority of the prior year.121Operating expenses decreased for the year ended December 31, 2016 compared to the prior year primarily due to lower research and development outsideservices expense, as we had reached the cap with AstraZeneca during the fourth quarter of 2015 as discussed above, therefore we no longer reimbursed the50% portion of AstraZeneca’s development costs. The decrease was partially offset by higher clinical trial expenses related to roxadustat, and higher stock-based compensation and employee-related expenses.Our research and development expenses were $187.2 million, $214.1 million and $150.8 million for the years ended December, 31, 2016, 2015 and 2014,respectively. Since inception and through December 31, 2016, we have incurred a total of $1,319.7 million in research and development expenses, a majorityof which relates to the development of roxadustat, FG-3019 and other HIF-PH inhibitors. We expect to continue to incur significant expenses and operatinglosses over at least the next several years and we expect our research and development expenses to continue to increase in the future as we advance ourproduct candidates through clinical trials and expand our product candidate portfolio. We will not generate revenue based on product sales unless and untilwe or one of our partners successfully complete development of and obtain regulatory approval for one or more of our product candidates, which we expectwill take a number of years and is subject to significant uncertainty. In addition, we expect to incur significant expenses relating to seeking regulatoryapproval for our product candidates. We consider the active management and development of our clinical pipeline to be crucial to our long-term success. Theprocess of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming.The actual probability of success for each of our product candidates and clinical programs, and our ability to generate product revenue and becomeprofitable, depends upon a variety of factors, including the quality of the product candidate, clinical results, investment in the program, competition,manufacturing capability, commercial viability, and our and our partners’ ability to successfully execute our development and commercialization plans. Fora description of the numerous risks and uncertainties associated with product development, refer to “Risk Factors.”During the year ended December 31, 2016, we had a net loss of $61.7 million, or net loss per basic and diluted share of $0.98, as compared to a net loss of$85.8 million, or net loss per basic and diluted share of $1.42 for the prior year, primarily due to a decrease in operating expenses.Cash and cash equivalents, investments and accounts receivable totaled $334.6 million at December 31, 2016, an increase of $6.3 million from December 31,2015, primarily due to cash provided by operations and financing activities.ProgramsWe continued to make progress in the development of our lead clinical programs this year.Roxadustat, the first HIF-PH inhibitor to enter Phase 3 clinical development, acts by stimulating the natural pathway of erythropoiesis, or red blood cellproduction. We, along with our collaboration partners Astellas and AstraZeneca, continue to advance roxadustat through our global Phase 3 developmentprogram for the treatment of anemia in both dialysis-dependent chronic kidney disease (“DD-CKD”) patients and chronic kidney disease patients who are notdialysis-dependent (“NDD-CKD”). There are a total of 15 Phase 3 studies, with programs supporting independent regulatory approvals in the U.S., Europe,Japan, and China.For our U.S. and European programs, we have completed initial target enrollment for all three FibroGen-sponsored Phase 3 studies and we continue to enrollpatients in each study in support of overall enrollment goals among the partners. We anticipate filing a New Drug Application (“NDA”) for roxadustat in theU.S. in 2018.We and our Chinese subsidiary FibroGen (China) Medical Technology Development Co., Ltd. (“FibroGen Beijing”) recently reported topline results fromour two Phase 3 CKD anemia studies in China. Primary efficacy endpoints were met in both the NDD-CKD trial and the DD-CKD trial. Results are includedabove in the section titled “Roxadustat for the Treatment of Anemia in Chronic Kidney Disease in China”. We currently plan to complete a new drugapplication submission for roxadustat in China in the third quarter of 2017.In Japan, Astellas is currently conducting six Phase 3 anemia studies, four in DD-CKD and two in NDD-CKD.The China Food and Drug Administration (“CFDA”) is reviewing our clinical trial application to evaluate roxadustat for the treatment of anemia in patientswith myelodysplastic syndrome (“MDS”). In the U.S., we filed an Investigational New Drug application with the U.S. Food and Drug Administration (“FDA”)for a Phase 3 trial to evaluate the safety and efficacy of roxadustat in anemia associated with MDS.Pamrevlumab (FG-3019) is our fully human monoclonal antibody that inhibits the activity of connective tissue growth factor, a critical common element inthe progression of fibrosis and associated serious diseases. We have completed enrollment of our ongoing Phase1222, randomized, double-blind study (067) to evaluate the safety and efficacy of pamrevlumab in idiopathic pulmonary fibrosis (“IPF”) patients with mild-to-moderate disease. We expect to report topline data from the study in the third quarter of 2017.We continue to enroll an open-label, randomized Phase 2 trial in approximately 42 previously untreated pancreatic cancer patients to evaluate safety and theproportion of subjects receiving pamrevlumab, in combination with gemcitabine and nab-paclitaxel, that convert from stage 3 inoperable cancer toresectable, or operable, cancer. We expect to complete the treatment period of this study by the end of 2017. We continue to enroll patients in an open-label trial of pamrevlumab in approximately 22 non-ambulatory patients with DMD. The primary endpoint ischange in pulmonary function compared to each subject’s historical decline in lung function. Other endpoints include assessments of cardiac fibrosis andfunction assessed by magnetic resonance imaging (“MRI”), arm muscle fibrosis and fat assessed by MRI, and upper body strength.Collaboration Partnerships For RoxadustatOur current and future research, development, manufacturing and commercialization efforts with respect to roxadustat and our other product candidatescurrently in development depend on funds from our collaboration agreements with Astellas and AstraZeneca as described below.AstellasIn June 2005, we entered into a collaboration agreement with Astellas for roxadustat for the treatment of anemia in Japan (“Japan Agreement”). In April 2006,we entered into a collaboration agreement with Astellas for roxadustat for the treatment of anemia in Europe, the Commonwealth of Independent States, theMiddle East, and South Africa (“Europe Agreement”). Under these agreements, we provided Astellas the right to develop and commercialize roxadustat foranemia in these territories.We share responsibility with Astellas for clinical development activities required for U.S. and the European Union (“EU”) regulatory approval of roxadustat,and share equally those development costs under the agreed development plan for such activities. Astellas will be responsible for clinical developmentactivities and all associated costs required for regulatory approval in all other countries in the Astellas territories. Astellas will own and have responsibilityfor regulatory filings in its territories. We are responsible, either directly or through our contract manufacturers, for the manufacture and supply of allquantities of roxadustat to be used in development and commercialization under the agreements.The Astellas agreements will continue in effect until terminated. Either party may terminate the agreements for certain material breaches by the other party. Inaddition, Astellas will have the right to terminate the agreements for certain specified technical product failures, upon generic sales reaching a particularthreshold, upon certain regulatory actions, or upon our entering into a settlement admitting the invalidity or unenforceability of our licensed patents. Astellasmay also terminate the agreements for convenience upon advance written notice to us. In the event of any termination of the agreements, Astellas will transferand assign to us the regulatory filings for roxadustat and will assign or license to us the relevant trademarks used with the products in the Astellas territories.Under certain terminations, Astellas is also obligated to pay us a termination fee.Consideration under these agreements includes a total of $360.1 million in upfront and non-contingent payments, and milestone payments totaling $557.5million, of which $542.5 million are development and regulatory milestones, and $15.0 million are commercial-based milestones. Total consideration,excluding development cost reimbursement and product sales-related payments, could reach $917.6 million. During the second quarter of 2016, werecognized $10.0 million revenue as a result of the initiation by Astellas of the first Phase 3 clinical study in Japan of roxadustat for treatment of anemiaassociated with CKD in patients on dialysis. The amount was received in early July 2016. The aggregate amount of such consideration received throughDecember 31, 2016 totals $472.6 million.Additionally, under these agreements, Astellas pays 100% of the commercialization costs in its territories. Astellas will pay us a transfer price, based on netsales, in the low 20% range for our manufacture and delivery of roxadustat.In addition, as of December 31, 2016, Astellas has separately invested $80.5 million in the equity of FibroGen, Inc.123AstraZenecaIn July 2013, we entered into a collaboration agreement with AstraZeneca for roxadustat for the treatment of anemia in the U.S. and all territories notpreviously licensed to Astellas, except China (“U.S./RoW Agreement”). In July 2013, through our China subsidiary and related affiliates, we entered into acollaboration agreement with AstraZeneca for roxadustat for the treatment of anemia in China (“China Agreement”). Under these agreements we providedAstraZeneca the right to develop and commercialize roxadustat for anemia in these territories. We share responsibility with AstraZeneca for clinicaldevelopment activities required for U.S. regulatory approval of roxadustat.Now that we have reached the $116.5 million cap on our initial funding obligations (during which time we shared 50% of the joint initial developmentcosts), all future development and commercialization costs for roxadustat for the treatment of anemia in CKD in the U.S., Europe, Japan and all other marketsoutside of China will be paid by Astellas and AstraZeneca.In China, FibroGen Beijing will conduct the development work for CKD anemia, will hold all of the regulatory licenses issued by China regulatoryauthorities, and will be primarily responsible for regulatory, clinical and manufacturing. China development costs are shared 50/50. AstraZeneca is alsoresponsible for 100% of development expenses in all other licensed territories outside of China. We are responsible, through our contract manufacturers, forthe manufacture and supply of all quantities of roxadustat to be used in development and commercialization under the AstraZeneca agreements.Under the AstraZeneca agreements, we will receive upfront and subsequent non-contingent payments totaling $402.2 million. Potential milestone paymentsunder the agreements total $1.2 billion, of which $571.0 million are development and regulatory milestones, and $652.5 million are commercial-basedmilestones. Total consideration under the agreements, excluding development cost reimbursement, transfer price payments, royalties and profit share, couldreach $1.6 billion. During the second quarter of 2016, we received an upfront payment of $62.0 million time based development milestone. The aggregateamount of such consideration received through December 31, 2016 totals $417.2 million.Payments under these agreements include over $500.0 million in upfront, non-contingent and other payments received or expected to be received prior to thefirst U.S. approval, excluding development expense reimbursement.Under the U.S./RoW Agreement, AstraZeneca will pay for all commercialization costs in the U.S. and RoW and AstraZeneca will be responsible for the U.S.commercialization of roxadustat, with FibroGen undertaking specified promotional activities in the end stage renal disease segment in the U.S. In addition,we will receive a transfer price for delivery of commercial product based on a percentage of net sales in the low- to mid-single digit range and AstraZenecawill pay us a tiered royalty on net sales of roxadustat in the low 20% range.Under the China Agreement, which is conducted through FibroGen China Anemia Holdings, Ltd. (“FibroGen China”), the commercial collaboration isstructured as a 50/50 profit share. AstraZeneca will conduct commercialization activities in China as well as serve as the master distributor for roxadustat andwill fund roxadustat launch costs in China until FibroGen Beijing has achieved profitability. At that time, AstraZeneca will recoup 50% of their historicallaunch costs out of initial roxadustat profits in China.In September 2016, AstraZeneca approved the protocol related to the development of roxadustat for the treatment of anemia in patients with myelodysplasticsyndrome (“MDS”), for which we have submitted a Clinical Trial Application in China in the first half of 2016 and an Investigational New Drug application(“NDA”) to the U.S. Food and Drug Administration in the fourth quarter of 2016. As a result, for revenue recognition purposes, during the third quarter of2016, we extended the estimated joint development service period for the AstraZeneca agreements from the end of 2018 to the end of 2020, to allow fordevelopment of MDS. This extension resulted in a higher portion of deferred revenue which remained as non-current as of September 30, 2016, as comparedto December 31, 2015, with an additional $7.1 million of deferred revenue being classified as non-current as of September 30, 2016.AstraZeneca may terminate the U.S./RoW Agreement upon specified events, including our bankruptcy or insolvency, our uncured material breach, technicalproduct failure, or upon 180 days prior written notice at will. If AstraZeneca terminates the U.S./RoW Agreement at will, in addition to any unpaid non-contingent payments, it will be responsible to pay for a substantial portion of the post-termination development costs under the agreed development planuntil regulatory approval.AstraZeneca may terminate the China Agreement upon specified events, including our bankruptcy or insolvency, our uncured material breach, technicalproduct failure, or upon advance prior written notice at will. If AstraZeneca terminates our China Agreement at will, it will be responsible to pay for transitioncosts as well as make a specified payment to FibroGen China.In the event of any termination of the agreements, but subject to modification upon termination for technical product failure, AstraZeneca will transfer andassign to us any regulatory filings and approvals for roxadustat in the affected territories that they may hold under our agreements, grant us licenses andconduct certain transition activities.124Additional Information Related to Collaboration AgreementsOf the $1,113.5 million in development and regulatory milestones payable in the aggregate under our Astellas and AstraZeneca collaboration agreements,$425.0 million is payable upon achievement of milestones relating to the submission and approval of roxadustat in DD-CKD and NDD-CKD in the U.S. andEurope.For more detailed discussions on the accounting for these agreements, refer to Note 3 to the consolidated financial statements. In addition, refer to “Business— Collaborations” for a more detailed description of our collaboration agreements.Total cash consideration received through December 31, 2016 and potential cash consideration, other than development cost reimbursement, transfer pricepayments, royalties and profit share, pursuant to our existing collaboration agreements are as follows: CashReceivedThroughDecember 31, 2016 AdditionalPotentialCash Payments TotalPotentialCash Payments (in thousands) Astellas--related-party: Japan Agreement $62,593 $110,000 $172,593 Europe Agreement 410,000 335,000 745,000 Total Astellas 472,593 445,000 917,593 AstraZeneca: U.S. / RoW Agreement 389,000 860,000 1,249,000 China Agreement 28,200 348,500 376,700 Total AstraZeneca 417,200 1,208,500 1,625,700 Total revenue $889,793 $1,653,500 $2,543,293These collaboration agreements also provide for reimbursement of certain fully burdened research and development costs as well as direct out of pocketexpenses.RESULTS OF OPERATIONSRevenue Years Ended December 31, Change 2016 vs. 2015 Change 2015 vs. 2014 2016 2015 2014 $ % $ % Revenue: License and milestone revenue $137,352 $148,093 $117,191 $(10,741) (7)% $30,902 26 %Collaboration services and other revenue 42,225 32,735 20,410 9,490 29 % 12,325 60 %Total revenue $179,577 $180,828 $137,601 $(1,251) (1)% $43,227 31 %Our revenue to date has been generated substantially from our collaboration agreements with Astellas and AstraZeneca.Under our revenue recognition policy, license revenue includes amounts from upfront, non-refundable license payments and amounts allocated pursuant tothe relative selling price method from other consideration received (other than substantive milestone payments) during the periods. This revenue is generallyrecognized as deliverables are met and services are performed. Milestone revenue includes payments from milestones which are deemed to be substantive innature and is recognized in its entirety in the period in which the milestone is achieved. License and milestone revenues represented 76%, 82% and 85% oftotal revenues for the years ended December 31, 2016, 2015 and 2014, respectively.Collaboration services include co-development services, manufacturing of clinical supplies, committee services and information sharing. Collaborationservices revenues are recognized over the non-contingent performance period, ranging from 36 to 89 months. Other revenues consist of royalty paymentsreceived, which are recorded on a monthly basis as they are reported to us, and have been included with collaboration services and other revenue in thecondensed consolidated statements of operations, as they have not been material for any of the years presented. Collaboration services and other revenuesrepresented 24%, 18% and 15% of total revenues for the years ended December 31, 2016, 2015 and 2014, respectively.125We have not generated any revenues based on the sale of FDA or CFDA approved products. In the future, we may generate revenue from product sales andfrom collaboration agreements in the form of license fees, milestone payments, reimbursements for collaboration services and royalties on product sales. Weexpect that any revenues we generate will fluctuate from quarter to quarter as a result of the uncertain timing and amount of such payments and sales.Total revenue decreased by $1.3 million, or 1%, for the year ended December 31, 2016 compared to the year ended December 31, 2015 and increased by$43.2 million, or 31% for the year ended December 31, 2015 compared to the year ended December 31, 2014, for the reasons discussed in the sections below.License and Milestone Revenue Years Ended December 31, Change 2016 vs. 2015 Change 2015 vs. 2014 2016 2015 2014 $ % $ % (dollars in thousands)License and milestone revenue: Astellas $24,421 $18,701 $14,453 $5,720 31 % $4,248 29 %AstraZeneca 112,931 129,392 102,738 (16,461) (13)% 26,654 26 %Total license and milestone revenue $137,352 $148,093 $117,191 $(10,741) (7)% $30,902 26 %Comparison of the years ended December 31, 2016 and 2015License and milestone revenue decreased by $10.7 million, or 7% for the year ended December 31, 2016 compared to the year ended December 31, 2015 dueto a decrease in the license and milestone revenue recognized under our collaboration agreements with AstraZeneca, partially offset by an increase in thelicense and milestone revenue recognized under our collaboration agreements with Astellas.License and milestone revenue recognized under our collaboration agreements with AstraZeneca decreased for the year ended December 31, 2016 due to anupfront payment of $62.0 million received during the second quarter of 2016, as compared to an upfront payment of $120.0 million and a developmentmilestone payment of $15.0 million received during the second quarter of 2015, as well as a decrease in reimbursable co-development costs allocated tolicense and milestone revenues. The decreases were partially offset by the fact that we had reached the cap during fourth quarter of 2015 on our initialfunding obligations as discussed above. Therefore during 2016, we billed and were reimbursed for 100% of the our development costs, as compared to only50% during the majority of the prior year, for roxadustat for the treatment of anemia in CKD in the U.S., Europe, Japan and all other markets outside of China.License and milestone revenue recognized under our collaboration agreements with Astellas increased for the year ended December 31, 2016 primarily due toa $10.0 million of development milestone revenue recorded during the second quarter of 2016, partially offset by a decrease in reimbursable co-developmentcosts allocated to license and milestone revenues.Comparison of the years ended December 31, 2015 and 2014License and milestone revenue increased by $30.9 million, or 26% for the year ended December 31, 2015 compared to the year ended December 31, 2014.License and milestone revenue recognized under our collaboration agreements with both Astellas and AstraZeneca increased compared to the year endedDecember 31, 2014 primarily due to an increase in reimbursable co-development costs allocated to license and milestone revenues. In addition, license andmilestone revenue recognized under our collaboration agreements with AstraZeneca increased due to an upfront payment of $120.0 million and adevelopment milestone payment of $15.0 million received and fully recognized during the second quarter of 2015 compared to an upfront payment of$110.0 million received during the second quarter of 2014. A portion of each of the upfront payments received under the collaboration agreements withAstraZeneca were deferred as a result of applying the relative selling price method and assessing the timing of the provision of various deliverables. Themilestone payment was recognized in its entirety upon receipt.126Collaboration Services and Other Revenue Years Ended December 31, Change 2016 vs. 2015 Change 2015 vs. 2014 2016 2015 2014 $ % $ % (dollars in thousands)Collaboration services revenue: Astellas $1,357 $2,895 $3,535 $(1,538) (53)% $(640) (18)%AstraZeneca 40,738 29,731 16,820 11,007 37 % 12,911 77 %Total collaboration services revenue 42,095 32,626 20,355 9,469 29 % 12,271 60 %Other revenue 130 109 55 21 19 % 54 98 %Total collaboration services and other revenue $42,225 $32,735 $20,410 $9,490 29 % $12,325 60 %Comparison of the years ended December 31, 2016 and 2015Collaboration services and other revenue increased $9.5 million, or 29%, for the year ended December 31, 2016 compared to the year ended December 31,2015, due to an increase in the collaboration services revenue recognized under our collaboration agreements with AstraZeneca, partially offset by a decreasein the collaboration services revenue recognized under our collaboration agreements with Astellas.Collaboration services revenue recognized under our collaboration agreements with AstraZeneca increased primarily due to the fact that we had reached thecap during fourth quarter of 2015 on our initial funding obligations. Therefore during 2016, we billed 100% of our development costs, as compared to only50% during the majority of the prior year, for roxadustat for the treatment of anemia in CKD in the U.S., Europe, Japan and all other markets outside of China.This increase was partially offset by a decrease in reimbursable co-development costs allocated to collaboration services revenues, as well as the decrease incollaboration services revenue recognized under our collaboration agreements with AstraZeneca resulting from the allocation of the upfront payment of$62.0 million during the second quarter of 2016, as compared to from the allocation of the upfront payment of $120.0 million during the prior year.Collaboration services revenue recognized under our collaboration agreements with Astellas decreased due to a decrease in reimbursable co-developmentcosts allocated to collaboration services.Comparison of the years ended December 31, 2015 and 2014Collaboration services and other revenue increased $12.3 million, or 60%, for the year ended December 31, 2015 compared to the year ended December 31,2014, primarily due to the allocation of the upfront payment of $120.0 million received during the second quarter of 2015 under the AstraZenecacollaboration agreements and an increase in reimbursable co-development costs under our collaboration agreements with AstraZeneca.Operating Expenses Years Ended December 31, Change 2016 vs. 2015 Change 2015 vs. 2014 2016 2015 2014 $ % $ % (dollars in thousands)Operating expenses Research and development $187,206 $214,089 $150,794 $(26,883) (13)% $63,295 42 %General and administrative 46,025 44,364 36,909 1,661 4 % 7,455 20 %Total operating expenses $233,231 $258,453 $187,703 $(25,222) (10)% $70,750 38 %Total operating expenses decreased by $25.2 million, or 10%, for the year ended December 31, 2016 compared to the year ended December 31, 2015, andincreased by $70.8 million, or 38%, for the year ended December 31, 2015 compared to December 31, 2014, for the reasons discussed in the sections below.127Research and Development ExpensesResearch and development expenses consist of third party research and development costs and the fully-burdened amount of costs associated with workperformed under collaboration agreements. Research and development costs include employee-related expenses for research and development functions,expenses incurred under agreements with clinical research organizations, other clinical and preclinical costs and allocated direct and indirect overhead costs,such as facilities costs, information technology costs and other overhead. Research and development costs are expensed as incurred. Costs for certaindevelopment activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us byour vendors and our clinical sites.The following table summarizes our research and development expenses incurred during the years ended December 31, 2016, 2015 and 2014: Years Ended December 31, 2016 2015 2014 Product Candidate Phase of Development (in thousands) Roxadustat Phase 3 $132,562 $151,342 $94,969 Pamrevlumab Phase 2 34,876 35,651 25,381 FG-6874 Phase 1 179 1,425 3,048 FG-5200 Preclinical 4,989 5,620 4,284 Other research and development expenses 14,600 20,051 23,112 Total research and development expenses $187,206 $214,089 $150,794The program-specific expenses summarized in the table above include costs we directly attribute to our product candidates. We allocate research anddevelopment salaries, benefits, stock-based compensation and other indirect costs to our product candidates on a program-specific basis, and we includethese costs in the program-specific expenses. We expect our research and development expenses to continue to increase in the future as we advance ourproduct candidates through clinical trials and expand our product candidate portfolio. Comparison of the years ended December 31, 2016 and 2015Research and development expenses decreased by $26.9 million, or 13%, for the year ended December 31, 2016 compared to the year ended December 31,2015. The decrease was primarily due to a decrease in outside services of $40.1 million partially offset by increases in clinical trial costs of $10.8 million,stock-based compensation of $2.1 million, and employee-related costs of $1.3 million. Outside services costs decreased primarily due to the fact that we hadreached the cap with AstraZeneca during the fourth quarter of 2015 on our initial funding obligations as discussed above, therefore during 2016, we nolonger reimbursed the 50% portion of AstraZeneca’s development costs. Clinical trial costs increased as a result of the progression of the Phase 3 trials forroxadustat and the ongoing Phase 2 trials for pamrevlumab. Employee-related costs increased as a result of higher headcount and average compensationlevel. Stock-based compensation increased due to cumulative impact of stock option grant activities, partially offset by the impact of higher expense in prioryear period associated with the first implementation of our 2014 Employee Stock Purchase Plan (“ESPP”) in November 2014.Comparison of the years ended December 31, 2015 and 2014Research and development expenses increased by $63.3 million, or 42%, for the year ended December 31, 2015 compared to the year ended December 31,2014. The increase was primarily due to increases in clinical trial, outside services and drug development related costs of $47.3 million, stock-basedcompensation expense of $6.1 million, employee-related costs of $6.5 million and depreciation expense of $0.6 million. Clinical trial, outside services anddrug development related costs increased as a result of the progression of the Phase 3 trials for FG-4592 and the ongoing Phase 2 trials for FG-3019. Stock-based compensation expense increased primarily due to expense related to our ESPP, a higher valuation for stock option grants and the delay in the timing ofgranting annual awards in 2014. Employee-related costs increased as a result of higher average compensation level.General and Administrative ExpensesGeneral and administrative expenses consist primarily of employee-related expenses for executive, operational, finance, legal, compliance and humanresource functions. Other general and administrative expenses include facility-related costs and professional fees, accounting and legal services, other outsideservices, recruiting fees and expenses associated with obtaining and maintaining patents.128We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research anddevelopment and potential commercialization of our product candidates. We also anticipate increased expenses, including exchange listing and SECrequirements, director and officer insurance premiums, legal, audit and tax fees, regulatory compliance programs and investor relations costs associated withbeing a public company and ceasing to be an emerging growth company. Additionally, if and when we believe the first regulatory approval of one of ourproduct candidates appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations,especially as it relates to the sales and marketing of our product candidates.Comparison of the years ended December 31, 2016 and 2015General and administrative expenses increased $1.7 million, or 4%, for the year ended December 31, 2016 compared to the year ended December 31, 2015.The increase was primarily due to increases in stock-based compensation expense of $2.4 million, partially offset by a decrease in employee-related costs of$0.5 million. Stock-based compensation expense increased primarily due to cumulative impact of stock option grant activities, partially offset by the impactof higher expense in prior year period associated with the first implementation of ESPP in November 2014. Employee-related costs decreased as a result oflower recruiting expenses, partially offset by higher average compensation level.Comparison of the years ended December 31, 2015 and 2014General and administrative expenses increased $7.5 million, or 20%, for the year ended December 31, 2015 compared to the year ended December 31, 2014.The increase was primarily due to increases in facility expenses of $3.7 million, stock-based compensation expense of $2.9 million, outside services of $2.0million, employee-related costs of $0.7 million. Facility expenses increased primarily due to the additional assessed property tax during the fourth quarter of2015. Stock-based compensation expense increased primarily due to expense related to ESPP, a higher valuation for stock option grants and the delay in thetiming of granting annual awards in 2014. Outside services expenses increased for the year ended December 31, 2015 compared to the same period a year agoprimarily as a result of incremental maintenance costs associated with our intellectual property portfolio and expenses related to being a publicly tradedcompany. Employee-related costs increased primarily as a result of additional headcount and other costs to support being a public company.Operating Expenses for Roxadustat Covered Under Collaboration AgreementsWe share responsibility with AstraZeneca for clinical development activities required for U.S. regulatory approval of roxadustat. During the fourth quarter of2015, the $116.5 million cap on our share of development costs for roxadustat has been reached. As such, all future development and commercializationcosts for roxadustat for the treatment of anemia in CKD in the U.S., Europe, Japan and all other markets outside of China will be paid by Astellas andAstraZeneca. In China, our subsidiary FibroGen Beijing will conduct the development work for CKD anemia, will hold all of the regulatory licenses issuedby China regulatory authorities, and be primarily responsible for regulatory, clinical and manufacturing. All development and commercialization costs forroxadustat in China will be shared equally with AstraZeneca.Sublease IncomeWe sublease approximately 34,400 square feet of space within our corporate headquarters facility to certain subtenants on a short-term basis. These subleasesinclude invoices for base rent and reimbursement of various expenses. Sublease income is included as an offset to our facilities expenses for both general andadministrative and research and development expenses. In addition, we had a leased facility located in South San Francisco, California, coveringapproximately 106,000 square feet of space that was fully subleased. This lease and associated subleases expired in February 2015. For the years endedDecember 31, 2016, 2015 and 2014, we had sublease income of $3.8 million, $3.4 million and $5.0 million, respectively.Interest and Other, Net Years Ended December 31, Change 2016 vs. 2015 Change 2015 vs. 2014 2016 2015 2014 $ % $ % (dollars in thousands) Interest and other, net: Interest expense $(10,725) $(11,033) $(11,108) $308 (3)% $75 (1)%Interest income and other, net 2,628 3,121 1,706 (493) (16)% 1,415 83 %Total interest and other, net $(8,097) $(7,912) $(9,402) $(185) 2 % $1,490 (16)%129Interest ExpenseIn connection with our long-term lease for our corporate headquarters in San Francisco, California, which was entered into in September 2006, and the leasefor our pilot plant located in Beijing Yizhuang Biomedical Park (“BYBP”), which was entered into in February 2013, as the monthly lease payments aremade, we record interest expense and an increase or reduction in the corresponding lease financing obligation for any amounts allocated to or deficienciesbeing applied to the principal value of these obligations.Interest expense includes payments made for imputed interest related to the facility lease financing obligations for our leased facilities in San Francisco andChina (see Note 8 to the consolidated financial statements) as well as interest related to the Technology Development Center of the Republic of Finlandproduct development obligations (see Note 6 to the consolidated financial statements).Comparison of the years ended December 31, 2016 and 2015Interest expense increased $0.3 million, or 3%, for the year ended December 31, 2016 compared to the year ended December 31, 2015 due to a reduction inthe imputed interest resulting from the government rent subsidy received by FibroGen Beijing during the second quarter of 2016.Comparison of the years ended December 31, 2015 and 2014Interest expense stayed relatively flat for the year ended December 31, 2015 compared to the year ended December 31, 2014.Interest Income and Other, NetInterest income and other, net primarily include interest income earned on our cash, cash equivalents and investments, foreign currency transaction gains(losses), remeasurement of certain monetary assets and liabilities in non-functional currency of our subsidiaries into the functional currency, and realizedgains (losses) on sales of investments.Comparison of the years ended December 31, 2016 and 2015Interest income and other, net decreased $0.5 million, or 16%, for the year ended December 31, 2016 compared to the year ended December 31, 2015primarily due to lower interest income resulting from lower average balances of investments during 2016, as well as lower realized gains on sales ofinvestments.Comparison of the years ended December 31, 2015 and 2014Interest income and other, net increased $1.4 million, or 83%, for the year ended December 31, 2015 compared to the year ended December 31, 2014primarily due to higher average balances of cash equivalents and investments and foreign currency translation adjustments on our cash and cash equivalentaccounts denominated in currencies other than our functional currency.Provision for (Benefit from) Income Taxes Years Ended December 31, 2016 2015 2014 (dollars in thousands) Loss before income taxes $(61,751) $(85,537) $(59,504)Provision for (benefit from) income taxes (71) 242 — Effective tax rate 0.1% (0.3)% 0.0% The benefit from income taxes for the year ended December 31, 2016 was due to the tax effect arising from unrealized gains recognized during the currentyear in other comprehensive income related to available-for-sale securities, partially offset by foreign taxes. The provision for income taxes for the year endedDecember 31, 2015 was primarily due to foreign taxes. Based upon the weight of available evidence, which includes our historical operating performance, reported cumulative net losses since inception andexpected continuing net loss, we have established a full valuation allowance against our net deferred tax assets as we do not currently believe that realizationof those assets is more likely than not. We will continue to maintain a full valuation allowance on our net deferred tax assets until there is sufficient evidenceto support the reversal of all or some portion of this allowance.130SELECTED QUARTERLY FINANCIAL DATAThe following tables present unaudited quarterly results for 2016 and 2015. These tables include all adjustments, consisting only of normal recurringadjustments that we consider for the fair statement of our consolidated financial position and operating results for the quarters presented. Payments from ourcollaboration partners have caused, and are likely to continue to cause, fluctuations in our quarterly results. These unaudited quarterly results of operationsshould be read in conjunction with the consolidated financial statements and notes included in Item 8 of this Annual Report on Form 10-K. We haveprepared the unaudited information on the same basis as our audited consolidated financial statements. Our operating results for any quarter are notnecessarily indicative of results for any future quarters or for a full year. 2016 Fourth Quarter Third Quarter Second Quarter First Quarter (in thousands, except for per share data) Revenue (a) $31,913 $30,102 $89,280 $28,282 Operating expenses 63,192 52,204 62,768 55,067 Net income (loss) (34,001) (24,154) 24,316 (27,841)Net income (loss) per share (b): Basic (0.54) (0.38) 0.39 (0.45)Diluted $(0.54) $(0.38) $0.35 $(0.45) 2015 Fourth Quarter Third Quarter Second Quarter First Quarter (in thousands, except for per share data) Revenue (a) $24,442 $19,538 $120,550 $16,298 Operating expenses 72,889 63,308 61,235 61,021 Net income (loss) (51,369) (45,098) 57,055 (46,367)Net income (loss) per share (b): Basic (0.83) (0.74) 0.95 (0.78)Diluted $(0.83) $(0.74) $0.83 $(0.78) (a)Revenue for the second quarter in both 2016 and 2015 was higher compared to other quarters due to revenue recognized on non-contingent upfrontpayments based on our revenue recognition methodology as explained in Note 2 in the notes to our consolidated financial statements.(b)Basic and diluted net income (loss) per share is computed independently for each of the quarters presented. Therefore, the sum of quarterly basic anddiluted net income (loss) per share may not equal annual basic and diluted net income (loss) per share.LIQUIDITY AND CAPITAL RESOURCESFinancial ConditionsWe have historically funded our operations principally from the sale of convertible preferred stock and common stock (including our initial public offeringproceeds) and from the execution of collaboration agreements involving license payments, milestones and reimbursement for development services.During the second quarter of 2016, we received a $62.0 million upfront payment under U.S./RoW Agreement. During the second quarter of 2016, we alsorecognized $10.0 million milestone revenue under Japan Agreement, the amount of which was received in early July 2016. During the year ended December31, 2015, we received a $120.0 million upfront payment and a $15.0 million development milestone payment under the U.S./RoW Agreement. Thedevelopment milestone payment was related to the finalization of our two audited pre-clinical carcinogenicity study reports.As of December 31, 2016, we had cash and cash equivalents of approximately $173.8 million. Cash is invested in accordance with our investment policy,primarily with a view to liquidity and capital preservation. Investments, consisting principally of corporate and government debt securities and stated at fairvalue, are also available as a source of liquidity. As of December 31, 2016 we had short-term and long-term investments of approximately $79.4 million and$71.0 million, respectively. As of December 31, 2016, a total of $24.3 million of our cash and cash equivalents was held outside of the U.S. in our foreignsubsidiaries to be used primarily for our China operations.131Operating Capital RequirementsTo date, we have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do notexpect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one or more of our current orfuture product candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as wecontinue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. To date, wehave funded certain portions of our research and development and manufacturing efforts in China and Europe through outside parties. There is no guaranteethat sufficient funds will be available to continue to fund these development efforts through commercialization or otherwise. Although our share of expensesfor roxadustat will decrease as a result of AstraZeneca funding all non-China collaboration expenses not reimbursed by Astellas, we expect our research anddevelopment expenses to continue to increase as we invest in our other programs. We are subject to all the risks related to the development andcommercialization of novel therapeutics, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that mayadversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.We believe that our existing cash and cash equivalents, short-term and long-term investments and accounts receivable will be sufficient to meet ouranticipated cash requirements for at least the next 12 months. However, our liquidity assumptions may change over time, and we could utilize our availablefinancial resources sooner than we currently expect. In addition, we may elect to raise additional funds at any time through equity, equity-linked or debtfinancing arrangements. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate onassumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future capital requirementsand the adequacy of available funds will depend on many factors, including those set forth under Part I, Item 1A “Risk Factors” in this Annual Report onForm 10-K. We may not be able to secure additional financing to meet our operating requirements on acceptable terms, or at all. If we raise additional fundsby issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence ofindebtedness, we will be subject to increased fixed payment obligations and could also be subject to restrictive covenants, such as limitations on our abilityto incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to obtain neededadditional funds, we will have to reduce our operating expenses, which would impair our growth prospects and could otherwise negatively impact ourbusiness. Cash Sources and UsesThe following table sets forth the primary sources and uses of cash for each of the periods set forth below: Years Ended December 31, 2016 2015 2014 Net cash provided by (used in): Operating activities $7,108 $(18,571) $22,414 Investing activities 6,622 (5,868) (107,289)Financing activities 6,738 12,346 174,092 Effect of exchange rate changes on cash and cash equivalents (10) (38) (94)Net increase (decrease) in cash and cash equivalents $20,458 $(12,131) $89,123Operating ActivitiesNet cash provided by operating activities was $7.1 million for the year ended December 31, 2016, which consisted primarily of net loss of $61.7 million,adjusted for non-cash items of $40.7 million and a net increase in operating assets and liabilities of $28.1 million. The significant non-cash items includedstock-based compensation expense of $32.1 million, depreciation expense of $6.0 million and amortization of the premium on investments of $2.7 million.The significant items in the changes in operating assets and liabilities included increases resulted from deferred revenue of $16.8 million, accounts receivableof $5.0 million, accrued liabilities of $3.0 million, other long-term liabilities of $1.9 million, and prepaid expenses and other current assets of $1.1 million.The changes in deferred revenue and accounts receivable were related to the timing of the receipt of upfront payments and recognition of revenues under ourcollaboration agreements with Astellas and AstraZeneca. The change in accounts payable and accrued liabilities were primarily driven by clinical trialactivities and the timing of payments. The changes in other long-term liabilities and prepaid expenses and other current assets were driven by the timing ofinvoicing and payments.132Net cash used in operating activities was $18.6 million for the year ended December 31, 2015, which consisted primarily of net loss of $85.8 million,adjusted for non-cash items of $36.3 million and a net increase in operating assets and liabilities of $31.0 million. The significant non-cash items includedstock-based compensation expense of $27.7 million, depreciation expense of $5.7 million and amortization of the premium on investments of $3.0 million.The significant items in the changes in operating assets and liabilities included increases resulted from deferred revenue of $27.7 million, other long-termliabilities of $4.2 million and accounts payable of $2.0 million, partially offset by decreases resulted from accounts receivable of $2.0 million and accruedliabilities of $2.1 million. The change in deferred revenue and accounts receivable were related to the timing of the receipt of upfront payments andrecognition of revenues under our collaboration agreements with Astellas and AstraZeneca. The changes in prepaid expenses and other current assets wererelated to the timing of payments. The changes in other long-term liabilities, accounts payable and accrued liabilities were driven by clinical trial activityrelated to upcoming Phase 3 trials for roxadustat and the timing of payments.Net cash provided by operating activities was $22.4 million for the year ended December 31, 2014, which consisted primarily of net loss of $59.5 million,adjusted for non-cash items of $23.8 million and a net increase in operating assets and liabilities of $58.1 million. The significant non-cash items includedstock-based compensation expense of $18.7 million, depreciation expense of $4.5 million and amortization of bond premium/discount of $0.7 million. Thesignificant items in the changes in operating assets and liabilities included increases resulted from deferred revenue of $33.6 million, accounts payable andaccrued expenses of $22.4 million, and a accounts receivable of $4.0 million, partially offset by decreased resulted from prepaid expenses of $1.6 million.The changes in deferred revenue and accounts receivable were related to the timing of upfront payments and recognition of revenues under our collaborationagreements with Astellas and AstraZeneca. The changes in accounts payable and accrued expenses were driven by the increase in clinical trial activity relatedto ongoing Phase 3 trials for roxadustat.Investing ActivitiesInvesting activities primarily consist of purchases of property and equipment, purchases of investments, and proceeds from the maturity and sale ofinvestments.Net cash provided by investing activities for the year ended December 31, 2016 was $6.6 million, which consisted of proceeds from maturities and sales ofavailable-for-sale securities of $16.9 million, partially offset by cash used in purchases of available-for-sale securities of $9.0 million and purchases ofproperty and equipment of $1.3 million.Net cash used in investing activities for the year ended December 31, 2015 was $5.9 million, which consisted of $41.7 million in purchases of available-for-sale securities and $2.0 million in purchases of property and equipment, offset by proceeds from maturities and sales of available-for-sale securities of$37.8 million.Net cash used in investing activities for the year ended December 31, 2014 was $107.3 million, which consisted of $144.7 million in purchases of available-for-sale securities and $8.1 million in purchases of property and equipment, offset by proceeds from maturities of available-for-sale securities of$45.5 million.Financing ActivitiesFinancing activities primarily reflect proceeds from the issuance of our common stock, cash paid for payroll taxes on restricted stock unit releases,repayments of our lease liability.Net cash provided by financing activities for the year ended December 31, 2016 was $6.7 million, which consisted of $9.9 million of proceeds from theissuance of common stock upon exercise of stock options and purchases under ESPP, partially offset by $2.7 million of cash paid for payroll taxes onrestricted stock unit releases and $0.4 million of repayments on our lease liability.Net cash provided by financing activities for the year ended December 31, 2015 was $12.3 million, which consisted of $15.0 million in proceeds from theissuance of common stock upon exercise of stock options and purchases under ESPP, partially offset by $2.2 million of cash paid for payroll taxes onrestricted stock unit releases, offset by $0.4 million of repayments on our lease liability.Net cash provided by financing activities for the year ended December 31, 2014 was $174.1 million, which consisted of $175.9 million in proceeds from ourinitial public offering, net of offering costs, and the concurrent private placement of shares of our common stock with AstraZeneca, and $1.7 million inproceeds from the issuance of common stock upon exercise of stock options, offset by $3.1 million of deferred offering costs (costs paid associated with theplanned public offering of our securities) and $0.4 million of repayments on our lease liability.133Off-Balance Sheet ArrangementsDuring the year ended December 31, 2016, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structuredfinance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements.Indemnification AgreementsIn the ordinary course of business, we provide indemnifications of varying scope and terms to vendors, lessors, business partners and other parties withrespect to certain matters, including, but not limited to, losses arising out of breach of such agreements, solutions to be provided by us or from intellectualproperty infringement claims made by third parties. In addition, we have entered into indemnification agreements with directors and certain officers andemployees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors,officers or employees.Contractual Obligations and CommitmentsContractual ObligationsAt December 31, 2016, our contractual obligations were as follows: Payments Due In Less Than 1Year 1 - 3 Years 3 - 5 Years More Than 5Years Total (In thousands) Operating lease obligations $131 $72 $— $— $203 Lease financing obligations 13,977 28,614 28,802 27,208 98,601 Total contractual obligations $14,108 $28,686 $28,802 $27,208 $98,804 The contractual obligations table excludes uncertain tax benefits of approximately $19.7 million that are disclosed in Note 12 in the notes to ourconsolidated financial statements because these uncertain tax positions, if recognized, would be an adjustment to the deferred tax assets.Clinical TrialsAs of December 31, 2016, we have several on-going clinical studies in various stages. Under agreements with various CROs, and clinical study sites, we incurexpenses related to clinical studies of our product candidates and potential other clinical candidates. The timing and amounts of these disbursements arecontingent upon the achievement of certain milestones, patient enrollment and services rendered or as expenses are incurred by the CROs or clinical trialsites. Therefore we cannot estimate the potential timing and amount of these payments and they have been excluded from the table above. Although ourmaterial contracts with CROs are cancellable, we have historically not cancelled such contracts.Product Development ObligationsAs of December 31, 2016, our FibroGen Europe Oy (“FibroGen Europe”) subsidiary had $9.9 million of principal outstanding and $4.9 million of interestaccrued related to the TEKES loans, respectively, which have been included as product development obligations on our consolidated balance sheet.There is no stated maturity date related to these loans and each loan may be forgiven if the research work funded by TEKES does not result in aneconomically profitable business or does not meet its technological objectives. In addition, we are not a guarantor of the TEKES loans, and these loans arenot repayable by FibroGen Europe until it has distributable funds. We do not expect FibroGen Europe to have such funds for at least the next five years. Forthe foregoing reasons, we cannot estimate the potential timing and the amounts of repayments (if required) or forgiveness. As a result, the TEKES loans havebeen excluded from the table above.134CRITICAL ACCOUNTING POLICIES AND ESTIMATESOur management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have beenprepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimatesand judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financialstatements. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience, known trends and events, andvarious other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carryingvalues of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions orconditions.While our significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this Annual Report, webelieve the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements.Revenue RecognitionSubstantially all of our revenues to date have been generated from our collaboration agreements.Our collaboration agreements include multiple deliverables, and we follow the guidance in Accounting Standards Codification Topic 605-25, RevenueRecognition—Multiple-Element Arrangements, or ASC Topic 605-25 (“ASC 605-25”). ASC 605-25:•provides guidance on how revenue arrangements with multiple deliverables should be separated and how the arrangement consideration should beallocated among the separate units of accounting;•requires an entity to determine the selling price of a separate deliverable using a hierarchy of (i) vendor-specific objective evidence (“VSOE”),(ii) third-party evidence (“TPE”), or (iii) best estimate of selling price (“BESP”); and•requires the allocation of the arrangement consideration, at the inception of the arrangement, to the separate units of accounting based on relativeselling price.We evaluate all deliverables within an arrangement to determine whether or not they provide value on a stand-alone basis. Based on this evaluation, thedeliverables are separated into units of accounting. The arrangement consideration that is fixed or determinable at the inception of the arrangement isallocated to the separate units of accounting based on their relative selling prices. Significant judgment may be required in determining whether a deliverableprovides stand-alone value, determining the amount of arrangement consideration that is fixed or determinable, and estimating the stand-alone selling priceof each unit of accounting.To date, we have determined that the selling price for the deliverables within our collaboration agreements should be determined using BESP, as neitherVSOE nor TPE is available. The process for determining BESP involves significant judgment on our part and includes consideration of multiple factors,including assumptions related to the market opportunity and the time needed to commercialize a product candidate pursuant to the relevant license,estimated direct expenses and other costs, which include the rates normally charged by contract research and contract manufacturing organizations fordevelopment and manufacturing obligations, and rates that would be charged by qualified outsiders for committee services.For each unit of accounting identified within an arrangement, we determine the period over which the deliverables are provided and the performanceobligation is satisfied. The period over which the co-development deliverables are provided requires us to estimate the expected development period ofproduct candidates covered under the agreement; such expected period is subject to change as additional information regarding the completion of ourresearch and development efforts becomes available and which would impact the amortization of our deferred revenue balances. Service revenue isrecognized using a proportional performance method. Direct labor hours or full time equivalents are used as the measurement of performance. Revenue maybe recognized using a straight line method when performance is expected to occur consistently over a period of time.Payments or reimbursements resulting from our research and development efforts for those arrangements where such efforts are considered as deliverables arerecognized as the services are performed and are presented on a gross basis. To the extent payments are required to be made to our collaboration partnerspursuant to research and development efforts, those costs are charged to research and development using the guidance pursuant to ASC 605-250, CustomerPayments and Incentives, which states that cash consideration given by a vendor to a customer is presumed to be a reduction of the selling prices unless thevendor receives an identifiable benefit in exchange for the consideration that is sufficiently separable from the recipient’s purchase of the vendor’s products,and the vendor can reasonably estimate the fair value of the benefit.135Each of our collaboration agreements includes milestones for which we follow ASC Topic 605-28, Revenue Recognition—Milestone Method (“ASC 605-28”). ASC 605-28 establishes the milestone method as an acceptable method of revenue recognition for certain contingent event-based payments underresearch and development arrangements. Under the milestone method, a payment that is contingent upon the achievement of a substantive milestone isrecognized in its entirety in the period in which the milestone is achieved. A milestone is an event (i) that can only be achieved based in whole or in part oneither our performance or on the occurrence of a specific outcome resulting from our performance, (ii) for which there is substantive uncertainty at the date thearrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to us. Determining whether amilestone is substantive is a matter of judgment and that assessment must be made at the inception of the arrangement. Milestones are considered substantivewhen the consideration earned from the achievement of the milestone (i) is commensurate with either our performance to achieve the milestone or theenhancement of the value of the item delivered as a result of a specific outcome resulting from our performance to achieve the milestone, (ii) relates solely topast performance and (iii) is reasonable relative to all deliverables and payment terms in the arrangement. Payments for achieving milestones which are notconsidered substantive are treated as additional arrangement consideration and are allocated following the relative selling price method previouslydescribed.Clinical Trial AccrualsClinical trial costs are a component of research and development expenses. We accrue and expense clinical trial activities performed by third parties basedupon actual work completed in accordance with agreements established with clinical research organizations and clinical sites. We determine the actual coststhrough external service providers as well as confirmation with internal personnel as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.Income TaxesWe account for income taxes using an asset and liability approach. Deferred income taxes reflect the net tax effects of temporary differences between thecarrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Operating loss and tax creditcarryforwards are measured by applying currently enacted tax laws. We record a valuation allowance to reduce our deferred tax assets to reflect the netamount that we believe is more likely than not to be realized. Realization of our deferred tax assets is dependent upon the generation of future taxableincome, the amount and timing of which are uncertain. The valuation allowance requires an assessment of both positive and negative evidence whendetermining whether it is more likely than not that deferred tax assets are recoverable; such assessment is required on a jurisdiction by jurisdiction basis.Based upon the weight of available evidence at December 31, 2016, we continue to maintain a full valuation allowance against all of our deferred tax assetsafter management considered all available evidence, both positive and negative, including but not limited to our historical operating results, income or lossin recent periods, cumulative income in recent years, forecasted earnings, future taxable income, and significant risk and uncertainty related to forecasts.We recognize the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on its technical merits as of thereporting date and only in an amount more likely than not to be sustained upon review by the tax authorities. We evaluate uncertain tax positions on aquarterly basis and adjust the liability for changes in facts and circumstances, such as new regulations or interpretations by the taxing authorities, newinformation obtained during a tax examination, significant amendment to an existing tax law, or resolution of an examination. To the extent that the final taxoutcome of these matters is different than the amounts recorded, such differences will impact the income tax provision in the period in which suchdetermination is made. The resolution of our uncertain income tax positions is dependent on uncontrollable factors such as law changes, new case law, andthe willingness of the income tax authorities to settle, including the timing thereof and other factors. Although we do not anticipate significant changes toour uncertain income tax positions in the next twelve months, items outside of our control could cause our uncertain income tax positions to change in thefuture, which would be recorded in our consolidated statements of operations. Interest and/or penalties related to income tax matters are recognized as acomponent of income tax expense.Stock-Based CompensationWe measure and recognize compensation expense for all stock options granted to our employees, directors and non-employees based on the estimated fairvalue of the award on the grant date. We use the Black-Scholes valuation model to estimate the fair value of stock option awards. The fair value is recognizedas expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award, on a straight-linebasis. We believe that the fair value of stock options granted to non-employees is more reliably measured than the fair value of the services received. As such,the fair value of the unvested portion of the options granted to non-employees is re-measured as of each reporting date. The resulting increase in value, if any,is recognized as expense during the requisite service period on a straight-line basis. The determination of the grant date fair value of options using an optionpricing model is affected by our estimated common stock fair value and requires management to make a number of assumptions, including the expected lifeof the option, the volatility of the underlying stock, the risk-free interest rate and expected dividends.136Recently Issued and Adopted Accounting GuidanceIn November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows(Topic 230): Restricted Cash. This guidance requires that the statement of cash flows explain the change during the period in the total of cash, cashequivalents, and amounts generally described as restricted cash or restricted cash equivalents. In August 2016, the FASB issued ASU 2016-15, Statement ofCash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This guidance clarifies how entities should classify certain cashreceipts and cash payments on the statement of cash flows with the objective of reducing the existing diversity in practice related to eight specific cash flowissues. ASU 2016-18 and ASU 2016-15 are effective for the annual period beginning after December 15, 2017, including interim periods within that reportingperiod, with early adoption permitted. We early adopted both guidance as of December 31, 2016 and the adoption of the guidance had no impact on ourconsolidated financial statements.In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertaintiesabout an Entity’s Ability to Continue as a Going Concern. This guidance requires management to evaluate, at each interim and annual reporting period,whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date thefinancial statements are issued, and provide related disclosures. This guidance is effective for annual period ending after December 15, 2016, and for annualand interim periods thereafter. We adopted this guidance as of December 31, 2016. The adoption of this guidance did not have a material impact on ourconsolidated financial statements upon the adoption of this guidance.Recently Issued Accounting Guidance Not Yet AdoptedIn June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement ofexpected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability. Thisguidance is effective for the annual reporting period beginning after December 15, 2019, including interim periods within that reporting period. We arecurrently evaluating the impact on our consolidated financial statements upon the adoption of this guidance.In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718). This guidance identifies areas for simplification involvingseveral aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity orliabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on thestatement of cash flows. This guidance is effective for the annual reporting period beginning after December 15, 2016, including interim periods within thatreporting period, with early adoption permitted. We are currently evaluating the impact on our consolidated financial statements upon the adoption of thisguidance.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under this guidance, an entity is required to recognize right-of-use assets and leaseliabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, alessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements toenable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annualreporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption,with early adoption permitted. We are currently evaluating the impact on our consolidated financial statements upon the adoption of this guidance.In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10), which requires equity investments that are not accountedfor under the equity method of accounting to be measured at fair value with changes recognized in net income, simplifies the impairment assessment ofcertain equity investments, and updates certain presentation and disclosure requirements. This guidance is effective for annual reporting periods beginningafter December 15, 2017 and interim periods within those annual periods. We are currently evaluating the impact on our consolidated financial statementsupon the adoption of this guidance.In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenuerecognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. ASU 2014-09 is based on the principle that revenue isrecognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cashflows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain orfulfill a contract.Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606):Principal versus Agent Considerations (“ASU 2016-08”); ASU No. 2016-10, Revenue from Contracts with137Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); ASU No. 2016-12, Revenue from Contracts with Customers(Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”); and ASU No. 2016-20, Technical Corrections and Improvements toTopic 606, Revenue from Contracts with Customers (“ASU 2016-20”). We must adopt ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 withASU 2014-09 (collectively, the “new revenue standards”). The amendments may be applied retrospectively to each prior period (full retrospective) orretrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). We have commenced our implementationactivities related to the adoption of ASU 2014-09 and are in the process of applying the five-step model of the new standard to our various revenue relatedarrangements. We have completed step 1 (Identify the contract(s) with a customer) and concluded that our collaboration agreements with Astellas andAztraZeneca are the only material contracts which will be impacted by the adoption of the new revenue standards. We are in the process of completing step 2(Identify the performance obligations in the contract) and have not yet reached a conclusion on whether the distinct criteria evaluated under ASC 605-25 foreach performance obligation would result in a similar conclusion under the new revenue standards. With respect to milestones that were previouslyrecognized under ASC 605-28, the milestone method is not applicable under the new revenue standards and are considered part of the overall arrangementconsideration which will result in a deferral of revenue under the new revenue standards as part of the adoption. We will adopt the new revenue standards inthe first quarter of 2018 and apply the full retrospective method to restate each prior reporting period presented in the consolidated financial statements. Thenew revenue standard is principle based and interpretation of those principles may vary from company to company based on their unique circumstances. It ispossible that interpretation, industry practice, and guidance may evolve as companies and the accounting profession work to implement this new standard.As we complete our evaluation of this new standard, new information may arise that could change our current understanding of the impact to revenuesrecognized and our views on the expected impact to the periods prior to adoption. 138ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKSWe are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due toadverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates. Thefunctional currency of our FibroGen Europe Oy subsidiary is the local currency. Most of our revenue from collaboration agreements are denominated in U.S.dollars, and therefore our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of thecountries in which our operations are located, which are primarily in the United States, China, and Europe. Our consolidated results of operations and cashflows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes inforeign exchange rates.As of December 31, 2016, we had EUR 0.4 million of cash and cash equivalent and EUR 11.7 million of short-term investment that are subject to fluctuationin the exchange rate with the U.S. dollar. The effect of a hypothetical 10% change in foreign currency exchange rates would have resulted in a gain or loss onforeign currency of approximately $1.3 million for the year ended December 31, 2016.The primary objective of our investment activities is to preserve our capital to fund our operations. We also seek to maximize income from our cash and cashequivalents without assuming significant risk. To achieve our objectives, we invest our non-operating cash and cash equivalents in high quality and highlyliquid U.S. government money market funds and in other money market funds in stable economies. A portion of our investments are invested in high qualitycorporate bonds and may be subject to interest rate risk and could fall in value if market interest rates increase. However, because we generally hold ourbonds to maturity, we believe that our exposure to interest rate risk is not significant and a 1% change in market interest rates would not have a materialimpact on the total fair value of our portfolio. We actively monitor changes in interest rates.To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments. 139ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page FibroGen, Inc. Report of Independent Registered Public Accounting Firm 141 Financial Statements: Consolidated Balance Sheets 142 Consolidated Statements of Operations 143 Consolidated Statements of Comprehensive Loss 144 Consolidated Statements of Redeemable Convertible Preferred Stock and Equity (Deficit) 145 Consolidated Statements of Cash Flows 147 Notes to Consolidated Financial Statements 148 Financial Statement Schedule: II Valuation and Qualifying Accounts for each of the three years ended December 31, 2016 174 The supplementary financial information required by this Item 8 is included in Item 7 under the caption “Quarterly Results of Operations”. 140Report of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders ofFibroGen, Inc.In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive loss, of redeemableconvertible preferred stock and equity (deficit) and of cash flows present fairly, in all material respects, the financial position of FibroGen, Inc. and itssubsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December31, 2016 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statementschedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the relatedconsolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting asof December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statementschedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financialreporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to expressopinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on ouraudits (which were integrated audits in 2016 and 2015). We conducted our audits in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financialstatements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our auditsof the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing theaccounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ PricewaterhouseCoopers LLPSan Jose, CaliforniaMarch 1, 2017 141FIBROGEN, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except per share amounts) December 31, 2016 December 31, 2015 Assets Current assets: Cash and cash equivalents $173,782 $153,324 Short-term investments 79,397 27,847 Accounts receivable ($4,102 and $4,455 from a related party) 10,448 15,405 Prepaid expenses and other current assets 2,889 3,988 Total current assets 266,516 200,564 Restricted time deposits 6,217 7,254 Long-term investments 71,010 131,720 Property and equipment, net 123,657 129,020 Other assets 2,152 2,016 Total assets $469,552 $470,574 Liabilities, stockholders’ equity and non-controlling interests Current liabilities: Accounts payable $6,223 $6,521 Accrued liabilities ($1,615 and $2,045 to related parties) 50,914 47,932 Deferred revenue 7,988 12,728 Total current liabilities 65,125 67,181 Long-term portion of lease financing obligations 97,352 97,042 Product development obligations 14,854 15,085 Deferred rent 4,212 4,702 Deferred revenue, net of current 106,709 85,132 Other long-term liabilities 6,191 4,607 Total liabilities 294,443 273,749 Commitments and Contingencies (Note 8) Stockholders’ equity: Preferred stock, $0.01 par value; 125,000 shares authorized at December 31, 2016 and December 31, 2015; no shares issued and outstanding at December 31, 2016 and December 31, 2015 — — Common stock, $0.01 par value; 225,000 shares authorized at December 31, 2016 and December 31, 2015; 63,665 and 61,985 shares issued and outstanding at December 31, 2016 and December 31, 2015 637 620 Stockholders' notes receivable — — Additional paid-in capital 625,903 586,647 Accumulated other comprehensive loss (960) (1,651)Accumulated deficit (469,742) (408,062)Total stockholders’ equity 155,838 177,554 Non-controlling interests 19,271 19,271 Total equity 175,109 196,825 Total liabilities, stockholders’ equity and non-controlling interests $469,552 $470,574 The accompanying notes are an integral part of these Consolidated Financial Statements. 142FIBROGEN, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts) Years Ended December 31, 2016 2015 2014 Revenue: License and milestone revenue (includes $24,421, $18,701 and $14,453 from arelated party) $137,352 $148,093 $117,191 Collaboration services and other revenue (includes $1,357, $2,895 and $3,535from a related party) 42,225 32,735 20,410 Total revenue 179,577 180,828 137,601 Operating expenses: Research and development 187,206 214,089 150,794 General and administrative 46,025 44,364 36,909 Total operating expenses 233,231 258,453 187,703 Loss from operations (53,654) (77,625) (50,102) Interest and other, net Interest expense (10,725) (11,033) (11,108)Interest income and other, net 2,628 3,121 1,706 Total interest and other, net (8,097) (7,912) (9,402) Loss before income taxes (61,751) (85,537) (59,504)Provision for (benefit from) income taxes (71) 242 — Net loss $(61,680) $(85,779) $(59,504) Net loss per share - basic and diluted $(0.98) $(1.42) $(3.17)Weighted average number of common shares used to calculate net loss per share - basicand diluted 62,744 60,337 18,775 The accompanying notes are an integral part of these Consolidated Financial Statements. 143 FIBROGEN, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(In thousands) Years Ended December 31, 2016 2015 2014 Net loss $(61,680) $(85,779) $(59,504)Other comprehensive income (loss): Foreign currency translation adjustments 532 1,662 2,082 Available-for-sale investments: Unrealized gain (loss) on investments, net of tax effect 140 30 (965)Reclassification from accumulated other comprehensive gain (loss) 19 (194) (758)Net change in unrealized gain (loss) on available-for-sale investments 159 (164) (1,723)Other comprehensive income, net of taxes 691 1,498 359 Comprehensive loss $(60,989) $(84,281) $(59,145) The accompanying notes are an integral part of these Consolidated Financial Statements. 144 FIBROGEN, INC.CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY (DEFICIT)(In thousands, except share data) Senior Preferred Stock Junior Preferred Stock Common Stock AdditionalPaid-in AccumulatedOtherComprehensive Accumulated NonControlling Shares Amount Shares Amount Shares Amount Capital Loss Deficit Interests Total Balance atDecember 31,2013 38,340,182 $168,436 46,460,057 $136,313 13,201,264 $132 $41,134 $(3,508) $(262,779) $27,875 $(60,833)Net loss — — — — — — — — (59,504) — (59,504)Change inunrealized loss on investments — — — — — — — (1,723) — — (1,723)Foreign currencytranslation adjustments — — — — — — — 2,082 — — 2,082 Stock optionsexercised — — — — 539,971 5 1,689 — — — 1,694 Stock-basedcompensation — — — — — — 18,698 — — — 18,698 Conversion ofpreferred stock to common stockin November 2014 inconnection withthe Initial PublicOffering (38,340,182) (168,436) (46,460,057) (136,313) 33,919,954 339 304,410 — — — 168,436 Exchange ofFibroGen Europe preferred sharesto common stock inNovember 2014in connection withthe Initial Public Offering — — — — 958,996 10 8,594 — — (8,604) — Initial PublicOffering, net of underwritingdiscounts, commission andissuance costs — — — — 9,315,000 93 151,733 — — — 151,826 Astra Zenecaprivate placement — — — — 1,111,111 11 19,989 — — — 20,000 Balance atDecember 31,2014 — — — — 59,046,296 590 546,247 (3,149) (322,283) 19,271 240,676 Net loss — — — — — — — — (85,779) — (85,779)Change inunrealized loss on investments — — — — — — — (164) — — (164)Foreign currencytranslation adjustments — — — — — — — 1,662 — — 1,662 Stock optionsexercised — — — — 2,361,633 24 10,088 — — — 10,112 Shares issuedupon vesting ofrestricted stockunits, net ofpayroll taxes paid,and purchasesmade under theemployee stockpurchase plan — — — — 456,355 5 2,590 — — — 2,595 145 FIBROGEN, INC.CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY (DEFICIT)(CONTINUED)(In thousands, except share data) True up of issuancecosts related to initialpublic offering andcommon stock soldby FibroGen Europe — — — — — — 42 — — — 42 Stock-basedcompensation — — — — — — 27,681 — — — 27,681 Warrants exercised — — — — 120,795 1 (1) — — — — Balance at December31, 2015 — — — — 61,985,079 620 586,647 (1,651) (408,062) 19,271 196,825 Net loss — — — — — — — — (61,680) — (61,680)Change in unrealizedloss on investments — — — — — — — 159 — — 159 Foreign currencytranslation adjustments — — — — — — — 532 — — 532 Stock optionsexercised — — — — 1,169,103 12 5,895 — — — 5,907 Shares issued uponvesting of restrictedstock units, net ofpayroll taxes paid,and purchases madeunder the employeestock purchase plan — — — — 491,656 5 1,229 — — — 1,234 Stock appreciationrights settled — — — — 17,855 — — — — — — Stock-basedcompensation — — — — — — 32,132 — — — 32,132 Warrants exercised — — — — 1,591 — — — — — — Balance at December31, 2016 — $— — $— 63,665,284 $637 $625,903 $(960) $(469,742) $19,271 $175,109 The accompanying notes are an integral part of these Consolidated Financial Statements. 146 FIBROGEN, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Years Ended December 31, 2016 2015 2014 Operating activities Net loss $(61,680) $(85,779) $(59,504)Adjustments to reconcile net loss to net cash provided by / (used in) operating activities: Depreciation 6,040 5,679 4,470 Amortization of premium on investments 2,729 2,997 658 Loss on disposal of property and equipment — 98 (10)Stock-based compensation 32,132 27,681 18,698 Tax benefit on unrealized gain on available-for-sale securities (211) — — Realized gain on sales of available-for-sale securities (37) (203) — Changes in operating assets and liabilities: Accounts receivable ($353, $578 and $979 from related party) 4,957 (1,952) 4,041 Prepaid expenses and other current assets 1,099 978 (1,628)Other assets (136) (420) (795)Accounts payable (298) 1,970 3,485 Accrued liabilities ($(430), $(2,549) and $1,828 from related party) 2,965 (2,126) 18,878 Deferred revenue 16,837 27,654 33,557 Lease financing liability 814 627 814 Other long-term liabilities 1,897 4,225 (250)Net cash provided by (used in) operating activities 7,108 (18,571) 22,414 Investing activities Purchases of property and equipment (1,252) (1,977) (8,118)Proceeds from sale of property and equipment — 2 10 Purchases of available-for-sale securities (9,041) (41,736) (144,727)Proceeds from sales of available-for-sale securities 4,298 15,342 — Proceeds from maturities of available-for-sale securities 12,617 22,501 45,546 Net cash provided by (used in) investing activities 6,622 (5,868) (107,289) Financing activities Repayments of lease liability (403) (403) (403)Proceeds from initial public offering, net of underwriting discounts and commission costs — — 155,933 Proceeds from AstraZeneca private placement — — 20,000 Cash paid for payroll taxes on restricted stock unit releases (2,740) (2,243) — Proceeds from issuance of common stock 9,881 14,992 1,697 Payments of deferred offering costs — — (3,135)Net cash provided by financing activities 6,738 12,346 174,092 Effect of exchange rate change on cash and cash equivalents (10) (38) (94)Net increase (decrease) in cash and cash equivalents 20,458 (12,131) 89,123 Total cash and cash equivalents at beginning of period 153,324 165,455 76,332 Total cash and cash equivalents at end of period $173,782 $153,324 $165,455 Supplemental cash flow information: Interest payments 295 335 377 Balance in accounts payable and accrued liabilities related to purchases of property and equipment 356 931 280 Deferred offering costs recorded in accounts payable and accrued liabilities — — 974 The accompanying notes are an integral part of these Consolidated Financial Statements.147 FIBROGEN, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1.The CompanyFibroGen, Inc. (“FibroGen” or the “Company”) was incorporated in 1993 in Delaware and is a research-based biopharmaceutical company focused on thediscovery, development and commercialization of novel therapeutics agents to treat serious unmet medical needs. The Company’s focus in the areas offibrosis and hypoxia-inducible factor (“HIF”) biology has generated multiple programs targeting various therapeutic areas. The Company’s most advancedproduct candidate, roxadustat, or FG-4592, is an oral small molecule inhibitor of HIF prolyl hydroxylases (“HIF-PHs”) in Phase 3 clinical development for thetreatment of anemia in chronic kidney disease (“CKD”). Pamrevlumab, or FG-3019, is the Company’s monoclonal antibody in Phase 2 clinical developmentfor the treatment of idiopathic pulmonary fibrosis (“IPF”), pancreatic cancer, Duchenne muscular dystrophy (“DMD”) and liver fibrosis. The Company hastaken a global approach with respect to the development and future commercialization of its product candidates, and this includes development andcommercialization in the People’s Republic of China (“China”).On November 19, 2014, the Company closed the initial public offering (“IPO”) of its common stock. In its IPO, the Company sold 9,315,000 shares of itscommon stock at a public offering price of $18.00 per share. Net proceeds from the Company’s IPO and concurrent private placement were $171.8 million,after deducting underwriting discounts and commissions of $11.7 million and offering expenses of $4.1 million. Concurrent with the closing of the IPO,AstraZeneca AB (“AstraZeneca”), one of the Company’s collaboration partners, purchased shares of FibroGen common stock in a private placement at a priceper share equal to the IPO price for an aggregate purchase price of $20.0 million. Upon the closing of the IPO, all outstanding shares of the Company’sconvertible preferred stock automatically converted into 33,919,954 shares of common stock and 958,996 shares of FibroGen Europe Oy (“FibroGenEurope”) convertible preferred stock were converted into shares of FibroGen common stock. The Company’s proceeds from the sale of the common stock soldin the concurrent private placement were $20.0 million. 2.Summary of Significant Accounting PoliciesBasis of PresentationThe consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.GAAP”). The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its majority-owned subsidiaries,FibroGen Europe and FibroGen China Anemia Holdings, Ltd. (“FibroGen China”). All inter-company transactions and balances have been eliminated inconsolidation.The Company operates in one segment — the discovery, development and commercialization of novel therapeutics to treat serious unmet medical needs.Based upon the current status of, and plans for, its product development, the Company believes that its existing cash and cash equivalents and its short termand long term investments, in addition to expected milestone payments related to certain collaboration agreements, will be adequate to satisfy theCompany’s capital needs through at least the next twelve months. However, the process of developing and commercializing products requires significantresearch and development, preclinical testing and clinical trials, manufacturing arrangements as well as regulatory approvals. These costs, together with theCompany’s general and administrative expenses, are expected to result in operating losses until the commercialization of the Company’s products or partnercollaborations generate sufficient revenue to cover expenses. To achieve sustained profitability, the Company, alone or with others, must successfullydevelop its product candidates, obtain required regulatory approvals and successfully manufacture and market its products.To conform to the current year presentation, on the statement of cash flows for the year ended December 2015 and 2014, the Companyreclassified the cash paid for payroll taxes on restricted stock unit releases of $2.2 million and $0, to present the gross proceeds from issuance ofcommon stock. This reclassification had no impact on previously reported financial position, results of operations, or cash flows.Foreign Currency TranslationThe reporting currency of the Company and its subsidiaries is the United States (“U.S.”) dollar. The functional currency of FibroGen Europe is the Euro. Theassets and liabilities of FibroGen Europe are translated to U.S. dollars at exchange rates in effect at the balance sheet date. All income statement accounts aretranslated at monthly average exchange rates. Resulting foreign currency translation adjustments are recorded directly in accumulated other comprehensiveincome (loss) as a separate component of stockholders’ equity.148 The functional currency of FibroGen, Inc. and all other subsidiaries is the U.S. dollar. Accordingly, monetary assets and liabilities in the non-functionalcurrency of these subsidiaries are remeasured using exchange rates in effect at the end of the period. Revenues and costs in local currency are remeasuredusing average exchange rates for the period, except for costs related to those balance sheet items that are remeasured using historical exchange rates. Theresulting remeasurement gains and losses are included within interest income and other, net in the consolidated statements of operations as incurred and havenot been material for all periods presented.Use of EstimatesThe preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts ofrevenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions include valuationand recognition of revenue, estimates of accruals related to clinical trial costs, valuation allowances for deferred tax assets, and valuation and recognition ofstock-based compensation. On an ongoing basis, management reviews these estimates and assumptions. Changes in facts and circumstances may alter suchestimates and actual results could differ from those estimates.Concentration of Credit Risk and Other Risks and UncertaintiesThe Company is subject to risks associated with concentration of credit for cash and cash equivalents. A portion of cash on hand is invested in a diversifiedportfolio of investment grade corporate bonds issued by U.S. corporations as rated investment grade corporate bonds. Any remaining cash is deposited withmajor financial institutions in the U.S., Finland, China and the Cayman Islands. At times, such deposits may be in excess of insured limits. The Company hasnot experienced any loss on its deposits of cash and cash equivalents. Included in current assets are significant balances of accounts receivable as follows: As of December 31, 2016 2015 Astellas Pharma Inc. (“Astellas”)—Related party 39% 29%AstraZeneca AB (“AstraZeneca”) 61% 71% The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results andcause actual results to vary materially from expectations include, but are not limited to, rapid technological change, the results of clinical trials and theachievement of milestones, market acceptance of the Company’s product candidates, competition from other products and larger companies, protection ofproprietary technology, strategic relationships and dependence on key individuals.Cash, Cash Equivalents and Restricted Time DepositsThe Company considers all highly liquid investments with maturities of three months or less and that are used in the Company’s cash management activitiesat the date of purchase to be cash equivalents. Cash and cash equivalents include money market accounts, various deposit accounts, and money market funds.Restricted time deposits include an irrevocable standby letter of credit as security deposit for a long-term property lease with the Company’s landlord.Restricted time deposits as of December 31, 2016 and 2015 totaled $6.2 million and $7.3 million, respectively. As of December 31, 2016, a total of $24.3million of the Company’s cash and cash equivalents is held outside of the U.S. in the Company’s foreign subsidiaries to be used primarily for the Company’sChina operations.InvestmentsThe Company classifies its investments as available-for-sale. Those investments with maturities less than 12 months are considered short-term investments.Those investments with maturities greater than 12 months are considered long-term investments. The Company’s investments classified as available-for-saleare recorded at fair value based upon quoted market prices at period end. Unrealized gains and losses that are deemed temporary in nature are recorded inaccumulated other comprehensive income (loss) as a separate component of stockholders’ equity.A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the corresponding establishmentof a new cost basis for the security. Premiums and discounts are amortized (accreted) over the life of the related security as an adjustment to its yield.Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specificidentification method for determining the cost of investments sold.149 Fair Value of Financial InstrumentsCarrying amounts of certain of the Company’s financial instruments including cash equivalents, investments, receivables, accounts payable and accruedliabilities approximate fair value (refer to Note 4).Property and EquipmentProperty and equipment (except for costs of construction of certain long-lived assets — refer to Note 8) are recorded at cost and depreciated over theirestimated useful lives using the straight-line method. Computer equipment, laboratory equipment, and furniture and fixtures are depreciated over three to fiveyears. Leasehold improvements are recorded at cost and amortized over the term of the lease or their useful life, whichever is shorter.Impairment of Long-Lived AssetsThe Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-livedassets may warrant revision or that the carrying value of these assets may be impaired. If the Company determines that an impairment trigger has been met, theCompany evaluates the realizability of its long-lived assets based on a comparison of projected undiscounted cash flows from use and eventual dispositionwith the carrying value of the related asset. Any write-downs (which are measured based on the difference between the fair value and the carrying value of theasset) are treated as permanent reductions in the carrying amount of the assets (asset group). Based on this evaluation, the Company believes that, as of eachof the balance sheet dates presented, none of the Company’s long-lived assets were impaired.Revenue RecognitionSubstantially all of the Company’s revenues to date have been generated from its collaboration agreements.The Company’s collaboration agreements include multiple deliverables, and the Company therefore follows the guidance in Accounting StandardsCodification (“ASC”) Topic 605-25, Revenue Recognition—Multiple-Element Arrangements, (“ASC 605-25”), which:•provides guidance on how deliverables in an arrangement should be separated and how the arrangement consideration should be allocated to theseparate units of accounting;•requires an entity to determine the selling price of a separate deliverable using a hierarchy of (i) vendor-specific objective evidence (“VSOE”), (ii) third-party evidence (“TPE”), or (iii) best estimate of selling price (“BESP”); and•requires the allocation of the arrangement consideration, at the inception of the arrangement, to the separate units of accounting based on relativeselling price.The Company evaluates all deliverables within an arrangement to determine whether or not they provide value on a stand-alone basis. Based on thisevaluation, the deliverables are separated into units of accounting. The arrangement consideration that is fixed or determinable at the inception of thearrangement is allocated to the separate units of accounting based on their relative selling prices. Significant judgment may be required in determiningwhether a deliverable provides stand-alone value, determining the amount of arrangement consideration that is fixed or determinable, and estimating thestand-alone selling price of each unit of accounting.To date, the Company has determined that the selling price for the deliverables within its collaboration agreements should be determined using BESP, asneither VSOE nor TPE is available. The process for determining BESP involves significant judgment on the Company’s part and includes consideration ofmultiple factors, including assumptions related to the market opportunity and the time needed to commercialize a product candidate pursuant to the relevantlicense, estimated direct expenses and other costs, which include the rates normally charged by contract research and contract manufacturing organizationsfor development and manufacturing obligations, and rates that would be charged by qualified outsiders for committee services.For each unit of accounting identified within an arrangement, the Company determines the period over which the deliverables are provided and theperformance obligation is satisfied. Service revenue is recognized using a proportional performance method. Direct labor hours or full time equivalents aretypically used as the measurement of performance. Revenue may be recognized using a straight line method when performance is expected to occur roughlyconsistently over a period of time.150 Payments or reimbursements resulting from the Company’s research and development efforts for those arrangements where such efforts are considered asdeliverables are recognized as the services are performed and are presented on a gross basis. To the extent payments are required to be made to thecollaboration partners pursuant to research and development efforts, those costs are charged to research and development using the guidance pursuant to ASC605-250, Customer Payments and Incentives, which states that cash consideration given by a vendor to a customer is presumed to be a reduction of theselling prices unless the vendor receives an identifiable benefit in exchange for the consideration that is sufficiently separable from the recipient’s purchaseof the vendor’s products, and the vendor can reasonably estimate the fair value of the benefit.Each of the Company’s collaboration agreements includes milestones for which the Company follows ASC 605-28, Revenue Recognition—MilestoneMethod (“ASC 605-28”). ASC 605-28 establishes the milestone method as an acceptable method of revenue recognition for certain contingent event-basedpayments under research and development arrangements. Under the milestone method, a payment that is contingent upon the achievement of a substantivemilestone is recognized in its entirety in the period in which the milestone is achieved. A milestone is an event (i) that can only be achieved based in wholeor in part on either the Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance, (ii) for which there issubstantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being dueto the Company. Determining whether a milestone is substantive is a matter of judgment and that assessment must be made at the inception of thearrangement. Milestones are considered substantive when the consideration earned from the achievement of the milestone is (i) commensurate with either theCompany’s performance to achieve the milestone or the enhancement of the value of the item delivered as a result of a specific outcome resulting from theCompany’s performance to achieve the milestone, (ii) relates solely to past performance and (iii) is reasonable relative to all deliverables and payment termsin the arrangement. Payments for achieving milestones which are not considered substantive are treated as additional arrangement consideration and areallocated following the relative selling price method previously described.Research and Development ExpensesResearch and development expenses consist of independent research and development costs and the gross amount of costs associated with work performedunder collaboration agreements. Research and development costs include employee-related expenses, expenses incurred under agreements with clinicalresearch organizations (“CROs”), other clinical and preclinical costs and allocated direct and indirect overhead costs, such as facilities costs, informationtechnology costs and other overhead. All research and development costs are expensed as incurred.Clinical Trial AccrualsClinical trial costs are a component of research and development expenses. The Company accrues and expenses clinical trial activities performed by thirdparties based upon actual work completed in accordance with agreements established with clinical research organizations and clinical sites. The Companydetermines the costs to be recorded based upon validation with the external service providers as to the progress or stage of completion of trials or services andthe agreed-upon fee to be paid for such services.General and Administrative ExpensesGeneral and administrative expenses consist primarily of employee-related expenses for executive, operational, finance, legal and human resource functions.Other general and administrative expenses include facility-related costs and professional service fees, other outside services, recruiting fees and expensesassociated with obtaining and maintaining patents.Income TaxesThe Company utilizes the asset and liability method of accounting for income taxes which requires the recognition of deferred tax assets and liabilities forexpected future consequences of temporary differences between the financial reporting and income tax bases of assets and liabilities using enacted tax rates.Management makes estimates, assumptions and judgments to determine the Company’s provision for income taxes and also for deferred tax assets andliabilities, and any valuation allowances recorded against the Company’s deferred tax assets. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent the Company believes that recovery is not likely, the Company must establish a valuationallowance.The calculation of the Company’s current provision for income taxes involves the use of estimates, assumptions and judgments while taking into accountcurrent tax laws, interpretation of current tax laws and possible outcomes of future tax audits. The Company has established reserves to address potentialexposures related to tax positions that could be challenged by tax authorities. Although the Company believes its estimates, assumptions and judgments tobe reasonable, any changes in tax law or its interpretation of tax laws and the resolutions of potential tax audits could significantly impact the amountsprovided for income taxes in the Company’s consolidated financial statements.151 The calculation of the Company’s deferred tax asset balance involves the use of estimates, assumptions and judgments while taking into account estimates ofthe amounts and type of future taxable income. Actual future operating results and the underlying amount and type of income could differ materially from theCompany’s estimates, assumptions and judgments thereby impacting the Company’s financial position and results of operations.The Company has adopted ASC 740-10, Accounting for Uncertainty in Income Taxes, that prescribes a recognition threshold and measurement attribute forthe financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in the Company’s income tax return, and alsoprovides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.The Company includes interest and penalties related to unrecognized tax benefits within income tax expense in the Consolidated Statements of Operations.Stock-Based CompensationThe Company maintains equity incentive plans under which incentive and nonqualified stock options are granted to employees and non-employeeconsultants. Compensation expense relating to non-employee stock options has not been material for the years ended December 31, 2016, 2015 and 2014.The Company measures and recognizes compensation expense for all stock options and restricted stock units (“RSUs”) granted to its employees and directorsbased on the estimated fair value of the award on the grant date. The Company uses the Black-Scholes valuation model to estimate the fair value of stockoption awards. The fair value is recognized as expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period ofthe respective award, on a straight-line basis. The Company believes that the fair value of stock options granted to non-employees is more reliably measuredthan the fair value of the services received. As such, the fair value of the unvested portion of the options granted to non-employees is re-measured eachperiod. The resulting increase in value, if any, is recognized as expense during the period the related services are rendered on a straight-line basis. Thedetermination of the grant date fair value of options using an option pricing model is affected by the Company’s estimated Common Stock fair value andrequires management to make a number of assumptions including the expected life of the option, the volatility of the underlying stock, the risk-free interestrate and expected dividends.Comprehensive Income (Loss)The Company is required to report all components of comprehensive income (loss), including net loss, in the consolidated financial statements in the periodin which they are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events andcircumstances from non-owner sources, including unrealized gains and losses on investments and foreign currency translation adjustments. Comprehensivegains (losses) have been reflected in the consolidated statements of comprehensive income (loss) for all periods presented.Recently Issued and Adopted Accounting GuidanceIn November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows(Topic 230): Restricted Cash. This guidance requires that the statement of cash flows explain the change during the period in the total of cash, cashequivalents, and amounts generally described as restricted cash or restricted cash equivalents. In August 2016, the FASB issued ASU 2016-15, Statement ofCash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This guidance clarifies how entities should classify certain cashreceipts and cash payments on the statement of cash flows with the objective of reducing the existing diversity in practice related to eight specific cash flowissues. ASU 2016-18 and ASU 2016-15 are effective for the annual period beginning after December 15, 2017, including interim periods within that reportingperiod, with early adoption permitted. The Company early adopted both guidance as of December 31, 2016 and the adoption of the guidance had no impacton the Company’s consolidated financial statements.152 In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertaintiesabout an Entity’s Ability to Continue as a Going Concern. This guidance requires management to evaluate, at each interim and annual reporting period,whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date thefinancial statements are issued, and provide related disclosures. This guidance is effective for annual period ending after December 15, 2016, and for annualand interim periods thereafter. The Company adopted this guidance as of December 31, 2016. The adoption of this guidance did not have a material impacton the Company’s consolidated financial statements.Recently Issued Accounting Guidance Not Yet AdoptedIn June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement ofexpected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability. Thisguidance is effective for the annual reporting period beginning after December 15, 2019, including interim periods within that reporting period. TheCompany is currently evaluating the impact on its consolidated financial statements upon the adoption of this guidance.In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718). This guidance identifies areas for simplification involvingseveral aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity orliabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on thestatement of cash flows. This guidance is effective for the annual reporting period beginning after December 15, 2016, including interim periods within thatreporting period, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statements upon the adoptionof this guidance.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under this guidance, an entity is required to recognize right-of-use assets and leaseliabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, alessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements toenable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for theannual reporting period beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospectiveadoption, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statements upon the adoption of thisguidance.In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10). This guidance requires equity investments that are notaccounted for under the equity method of accounting to be measured at fair value with changes recognized in net income, simplifies the impairmentassessment of certain equity investments, and updates certain presentation and disclosure requirements. This guidance is effective for the annual reportingperiod beginning after December 15, 2017 and interim periods within those annual periods. The Company is currently evaluating the impact on itsconsolidated financial statements upon the adoption of this guidance.In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenuerecognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. ASU 2014-09 is based on the principle that revenue isrecognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cashflows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain orfulfill a contract. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts withCustomers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606):Identifying Performance Obligations and Licensing (“ASU 2016-10”); ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”); and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenuefrom Contracts with Customers (“ASU 2016-20”). The Company must adopt ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 with ASU 2014-09 (collectively, the “new revenue standards”). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectivelywith the cumulative effect recognized as of the date of initial application (modified retrospective). The Company has commenced its implementationactivities related to the adoption of ASU 2014-09 and is in the process of applying the five-step model of the new standard to its various revenue relatedarrangements. The Company has completed step 1 (Identify the contract(s) with a customer) and concluded that its collaboration agreements with Astellasand AztraZeneca are the only material contracts which will be impacted153 by the adoption of the new revenue standards. The Company is in the process of completing step 2 (Identify the performance obligations in the contract) andhas not yet reached a conclusion on whether the distinct criteria evaluated under ASC 605-25 for each performance obligation would result in a similarconclusion under the new revenue standards. With respect to milestones that were previously recognized under ASC 605-28, the milestone method is notapplicable under the new revenue standards and are considered part of the overall arrangement consideration which will result in a deferral of revenue underthe new revenue standards as part of the adoption. The Company will adopt the new revenue standards in the first quarter of 2018 and apply the fullretrospective method to restate each prior reporting period presented in the consolidated financial statements. The new revenue standard is principle basedand interpretation of those principles may vary from company to company based on their unique circumstances. It is possible that interpretation, industrypractice, and guidance may evolve as companies and the accounting profession work to implement this new standard. As the Company completes itsevaluation of this new standard, new information may arise that could change the Company's current understanding of the impact to revenues recognized andits views on the expected impact to the periods prior to adoption.3.Collaboration AgreementsAstellas AgreementsJapan AgreementIn June 2005, the Company entered into a collaboration agreement with Astellas Pharma Inc. (“Astellas”) for the development and commercialization (butnot manufacture) of roxadustat for the treatment of anemia in Japan (“Japan Agreement”). Under this agreement, Astellas paid license fees and otherconsideration totaling $40.1 million (such amounts were fully received as of February 2009). The Japan Agreement also provides for additional developmentand regulatory approval milestone payments up to $117.5 million, a commercial sales related milestone of $15.0 million and additional consideration basedon 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 thesecond quarter of 2016, the Company recognized $10.0 million revenue as a result of the initiation by Astellas of the first Phase 3 clinical study in Japan ofroxadustat for treatment of anemia associated with chronic kidney disease in patients on dialysis. The amount was received in early July 2016. The Companyevaluated the criteria under ASC 605-28 and concluded that the aforementioned milestone was substantive.Europe AgreementIn April 2006, the Company entered into a separate collaboration agreement with Astellas for the development and commercialization of roxadustat for thetreatment of anemia in Europe, the Middle East, the Commonwealth of Independent States and South Africa (“Europe Agreement”). Under the terms of theEurope 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 milestonepayments of $40.0 million and $50.0 million were received in 2010 and 2012, respectively. The Company evaluated the criteria under ASC 605-28 andconcluded that each of those milestones was substantive. Under the Europe Agreement, Astellas committed to fund 50% of joint development costs forEurope 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 AgreementsU.S./Rest of World AgreementEffective July 30, 2013, the Company entered into a collaboration agreement with AstraZeneca for the development and commercialization of roxadustat forthe 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 AstellasJapan Agreements (“U.S./RoW Agreement”). It also excludes China, which is covered by a separate agreement with AstraZeneca described below. Under theterms of the U.S./RoW Agreement, AstraZeneca has agreed to pay upfront, non-contingent and time-based payments totaling $374.0 million, which werefully received in various amounts through June 2016. In addition, the U.S./RoW Agreement also provides for development and regulatory approval basedmilestone payments of up to $550.0 million, which include potential future indications which the companies choose to pursue, and commercial relatedmilestone payments of up to $325.0 million. During the second quarter of 2015, the Company received a $15.0 million development milestone payment as aresult of the finalization of its two audited pre-clinical carcinogenicity study reports. The Company evaluated the criteria under ASC 605-28 and concludedthat the aforementioned milestone was substantive.154 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, upto 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). Anyadditional development costs incurred by FibroGen during the development period in excess of the $233.0 million (aggregated spend) will be fullyreimbursed by AstraZeneca. AstraZeneca will pay the Company tiered royalty payments on AstraZeneca’s future net sales (as defined in the agreement) ofroxadustat in the low 20% range. In addition, the Company will receive a transfer price for delivery of commercial product based on a percentage ofAstraZeneca’s net sales (as defined in the agreement) in the low- to mid-single digit range.China AgreementEffective July 30, 2013, the Company (through its subsidiaries affiliated with China) entered into a collaboration agreement with AstraZeneca for thedevelopment and commercialization (but not manufacture) of roxadustat for the treatment of anemia in China (“China Agreement”). Under the terms of theChina Agreement, AstraZeneca agreed to pay upfront consideration totaling $28.2 million, which were fully received in 2014. In addition, the ChinaAgreement provides for AstraZeneca to pay regulatory approval and other approval related milestones of up to $161.0 million. The China Agreement alsoprovides for sales related milestone payments of up to $167.5 million and contingent payments of $20.0 million related to possible future compounds. TheChina Agreement is structured as a 50/50 profit or loss share (as defined) and provides for joint development costs (including capital and equipment costs forconstruction 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 myelodysplasticsyndrome (“MDS”), for which the Company has submitted a Clinical Trial Application in China in the first half of 2016 and an Investigational New Drugapplication (“NDA”) to the U.S. Food and Drug Administration in the fourth quarter of 2016. As a result, for revenue recognition purposes, during the thirdquarter of 2016, the Company extended the estimated joint development service period for the AstraZeneca agreements from the end of 2018 to the end of2020, to allow for development of MDS. This extension resulted in a higher portion of deferred revenue which remained as non-current as compared toDecember 31, 2015, with an additional $7.1 million of deferred revenue being classified as non-current during the third quarter of 2016.Accounting for the Astellas AgreementsFor each of the Astellas agreements, the Company has evaluated the deliverables within the respective arrangements and has separated them into variousunits of accounting.Deliverables that did not provide standalone value have been combined with other deliverables to form a unit of accounting that collectively has standalonevalue, with revenue being recognized on the combined unit of accounting, rather than the individual deliverables. There are no right-of-return provisions forthe delivered items in the Astellas agreements.For the Astellas agreements, the Company allocated arrangement consideration to various units of accounting based on BESP of each deliverable within eachunit of accounting using the relative selling price method as the Company did not have VSOE or TPE of selling price for such deliverables. Arrangementconsideration includes non-contingent upfront payments of $360.1 million and cumulative co-development billings of $136.2 million (for EuropeAgreement) as of December 31, 2016.For the technology license under the Japan Agreement and Europe Agreement, BESP was determined primarily by using the discounted cash flow (“DCF”)method, which aggregates the present value of future cash flows to determine the valuation as of the effective date of each of the agreements. The DCFmethod involves the following key steps: 1) the determination of cash flow forecasts and 2) the selection of a range of comparative risk-adjusted discountrates to apply against the cash flow forecasts. The discount rates selected were based on expectations of the total rate of return, the rate at which capital wouldbe attracted to the Company and the level of risk inherent within the Company. The discounts applied in the DCF analysis ranged from 17.5% to 20.0%. TheCompany’s cash flow forecasts were derived from probability-adjusted revenue and expense projections by territory. Such projections included considerationof taxes and cash flow adjustments. The probability adjustments were made after considering the likelihood of technical success at various stages of clinicaltrials and regulatory approval phases. BESP also considered certain future royalty payments associated with commercial performance of the Company’scompounds, transfer prices and expected gross margins.155 The units of accounting that were analyzed, along with their general timing of delivery or performance of service and general timing of revenue recognition,are as follows: •License to the Company’s technology existing at the effective date of the agreements. For both of the Astellas agreements, the license was delivered atthe beginning of the agreement terms, or when the agreements were signed, and any contingencies had been removed. In both cases, the Companyconcluded at the time of the agreement that its collaboration partner, Astellas, would have the knowledge and capabilities to exploit the licenseswithout the Company’s further involvement. However, the Japan Agreement with Astellas has contractual limitations that might affect Astellas’ abilityto exploit the license and therefore, potentially, the conclusion as to whether the license provides stand-alone value. In the Japan agreement, Astellasdoes not have the right to manufacture commercial supplies of the drug. In order to determine whether this characteristic of the agreement should lead toa conclusion that the license did not have stand-alone value, the Company considered the intent of the parties and the substantive reasons that led tothat feature of the agreement.•Manufacturing rights. In the case of the Japan Agreement, the Company retained manufacturing rights largely because of the way the parties chose forFibroGen to be compensated under the agreement. At the time the agreement was signed, the Company believed that it was more advantageous uponcommercialization to have a transfer price revenue model in place as opposed to a traditional sales-based model. The Company and Astellas could havestructured the arrangement with a transfer of manufacturing rights and compensated the Company through a royalty or other feature withoutsignificantly diminishing the prospects of the drug product. Therefore, the Company determined that the license in Japan provides stand-alone value tothe customer despite the lack of manufacturing rights.•License to the Company’s technology developed during the term of the agreement and development (referred to as “when and if available”) andinformation sharing services. These deliverables are generally delivered throughout the term of the agreements and are recognized as revenue as theservices are provided.•Co-development services (Europe Agreement). This deliverable relates to co-development services that were reasonably expected to be performed by theCompany at the time the collaboration agreement was signed. Revenue is recognized as reimbursements for such co-development services are earned.The period related to this deliverable represented the Company’s determination of the non-contingent performance period, which was estimated to be 36months for the Europe Agreement from the signing of the agreement. There was no provision for co-development services in the Japan agreement.•Manufacturing of clinical supplies of products. This deliverable is satisfied as supplies for clinical product are delivered for use in the Company’sclinical trial programs during the development period, or pre-commercialization period. Revenue is recognized based on the estimated proportion of thedevelopment services performed during the development period. These estimates are made at the beginning of each accounting period and will likelychange throughout the course of the terms of both agreements. As new information related to these estimates becomes available, the Company mayadjust the timing of revenue recognition related to this unit of accounting.•Manufacturing commercial supplies of products. This deliverable is satisfied and revenue is recognized as supplies are shipped for commercial useduring the commercialization period. As this deliverable is considered a contingent deliverable, it is outside the scope of the initial allocation of upfrontand other consideration.•Committee service. This deliverable is satisfied and revenue is recognized throughout the course of the various agreements as meetings are attended.Any consideration received for each Astellas agreement after the initial proceeds on the agreement signing date were also (and will be also) allocated to thevarious units of accounting above per agreement using the relative selling price method under ASC 605-25.Under the Japan Agreement, the Company is also eligible to receive from Astellas an aggregate of approximately $132.5 million in potential milestonepayments, comprised of (i) up to $22.5 million in substantive milestone payments upon achievement of specified clinical and development milestone events,(ii) up to $95.0 million in substantive milestone payments upon achievement of specified regulatory milestone events, and (iii) up to approximately$15.0 million in milestone payments upon the achievement of specified commercial sales milestone.Under the Europe Agreement, the Company is also eligible to receive from Astellas an aggregate of approximately $425.0 million in potential milestonepayments, comprised of (i) up to $90.0 million in substantive milestone payments upon achievement of specified clinical and development milestone events,(ii) up to $335.0 million in substantive milestone payments upon achievement of specified regulatory milestone events, including up to $25.0 million inmilestone payments in connection with receipt of marketing approval in Russia.156 Accounting for the AstraZeneca AgreementsThe Company evaluated whether the U.S./RoW and China Agreements should be accounted for as a single arrangement and concluded that the agreementsshould be accounted for as a single arrangement with the presumption that two or more agreements executed with a single customer at or around the sametime should be presumed to be a single arrangement. Accordingly, upfront and other non-contingent arrangement consideration received and to be receivedhas been and will be pooled together and allocated to each of the units of accounting in both the U.S./RoW and China Agreements based on their relative fairvalues.The Company evaluated the deliverables within the arrangement and has separated them into various units of accounting. Deliverables that did not providestand-alone value have been combined with other deliverables to form a unit of accounting that collectively has stand-alone value, with revenue beingrecognized on the combined unit of accounting, rather than the individual deliverables. There are no right-of-return provisions for the delivered items in theagreements.For the technology license under the AstraZeneca U.S./RoW Agreement, BESP was determined based on a two-step process. The first step involveddetermining an implied royalty rate that would result in the net present value of future cash flows to equal to zero (i.e. where the implied royalty rate on thetransaction would equal the target return for the investment). This results in an upper bound estimation of the magnitude of royalties that a hypotheticalacquirer would reasonably pay for the forecasted cash flow stream. The Company’s cash flow forecasts were derived from probability-adjusted revenue andexpense projections. Such projections included consideration of taxes and cash flow adjustments. The probability adjustments were made after consideringthe likelihood of technical success at various stages of clinical trials and regulatory approval phases. The second step involved applying the implied royaltyrate, which was determined to be 40%, against the probability-adjusted projected net revenues by territory and determining the value of the license as the netpresent value of future cash flows after adjusting for taxes. The discount rate utilized was 17.5%.U.S./RoW Agreement:The units of accounting that were analyzed, along with their general timing of delivery or performance of service and general timing of revenue recognition,are as follows:•License to the Company’s technology existing at the effective date of the agreements. For the U.S./RoW Agreement, the license was delivered at thebeginning of the agreement terms as all contingencies had been removed. The Company concluded that AstraZeneca has the knowledge andcapabilities to exploit the U.S./RoW license without the Company’s further involvement.•Co-development services. This deliverable relates to co-development services which were reasonably expected to be performed by the Company at thetime the Agreement was signed. Revenue is recognized as reimbursements for such co-development services are earned. The period related to thisdeliverable represented the Company’s determination of the non-contingent performance period, which was estimated to be 89 months from the signingof the U.S./RoW Agreement.•Manufacturing of clinical supplies of products. This deliverable is satisfied as supplies for clinical product are delivered for use in the Company’sclinical trial programs during the development period, or pre-commercialization period. Revenue is recognized based on the estimated proportion of thedevelopment services performed during the development period. These estimates are made at the beginning of each accounting period and will likelychange throughout the course of the agreements. As new information related to these estimates becomes available, the Company may adjust the timingof revenue recognition related to this unit of accounting.•Manufacturing commercial supplies of products. This deliverable is satisfied and revenue is recognized as supplies are shipped for commercial useduring the commercialization period. As this deliverable is considered a contingent deliverable, it is outside the scope of the initial allocation of upfrontand other consideration.•Committee service. This deliverable is satisfied and revenue is recognized throughout the course of the various agreements as meetings are attended.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. Outof this amount, $82.0 million was determined to be fixed and determinable upon the execution of the collaboration agreement. Out of the remainingpayments of $292.0 million, which are contractually due, $230.0 million had extended payment terms and, accordingly, were not considered to be fixed ordeterminable upon the execution of the agreement. As such, for these remaining payments, the amount of revenue recognized was limited to the amount ofcash consideration received; additionally, for each of the amounts received, the amount of revenue recognized was determined on the basis of applying therelative selling price method to each of the units of accounting underlying the agreement. Further, $62.0 million of the remaining payment was contingentupon the occurrence of a specified event and accordingly was also not considered fixed or determinable. The payments of totaling $374.0 million were fullyreceived in various amounts through June 2016.157 Under the U.S./RoW Agreement, the Company is also eligible to receive from AstraZeneca an aggregate of approximately $875.0 million in potentialmilestone payments, comprised of (i) up to $65.0 million in substantive milestone payments upon achievement of specified clinical and developmentmilestone events, (ii) up to $325.0 million in substantive milestone payments upon achievement of specified regulatory milestone events, (iii) up to$160.0 million in non-substantive deferred approval milestone, which would be paid if certain competitors do not launch an HIF compound in the U.S. on orbefore January 1, 2023 and (iv) up to approximately $325.0 million in milestone payments upon the achievement of specified commercial sales events.China Agreement:The units of accounting that were analyzed, along with their general timing of delivery or performance of service and general timing of revenue recognition,are as follows:•License to the Company’s technology existing at the effective date of the agreement. The license was delivered at the beginning of the agreement termas all contingencies had been removed. However, the China Agreement with AstraZeneca has contractual limitations that might affect AstraZeneca’sability to exploit the license and therefore, potentially, the conclusion as to whether the license provides stand-alone value. In the China Agreement,AstraZeneca does not have the right to manufacture commercial supplies of the drug. In order to determine whether this characteristic of the arrangementshould lead to a conclusion that the license did not have stand-alone value, the Company considered the intent of the parties and the substantivereasons that led to that feature of the agreement.For the China Agreement, the Company retained manufacturing rights as an essential part of a strategy to pursue domestic regulatory pathway forproduct approval which requires the regulatory licensure of the manufacturing facility in order to commence commercial shipment. The prospects for thecollaboration as a whole would have been substantially different had manufacturing rights been provided to AstraZeneca. Because the retention ofmanufacturing rights by the Company was a significant factor in the collaboration strategy, rather than simply a mechanism to properly compensateFibroGen, management concluded that the license and development services do not have stand-alone value apart from the manufacturing rights.Accordingly, all the deliverables identified, including co-development services, under the China Agreement have been treated as a single unit ofaccount and all revenue allocable to this unit of account is deferred until delivery of commercial drug product has begun. Upon commencement ofdelivery of commercial drug product, revenue would be recognized in a pattern consistent with estimated deliveries of the commercial drug product.Under the terms of the China Agreement, AstraZeneca agreed to pay upfront consideration totaling $28.2 million, of which $16.2 million was received as ofDecember 31, 2013 and was determined to be fixed and determinable upon the execution of the collaboration agreement. The remainder of the upfrontpayments of $12.0 million had extended payment terms and, accordingly, was not considered to be fixed or determinable upon the execution of theagreement. This payment of $12.0 million was received as of March 31, 2014.Under the China Agreement, the Company is also eligible to receive from AstraZeneca an aggregate of approximately $328.5 million in potential milestonepayments, comprised of (i) up to $15.0 million in substantive milestone payments upon achievement of specified clinical and development milestone events,(ii) up to $146.0 million in substantive milestone payments upon achievement of specified regulatory milestone events, and (iii) up to approximately $167.5million in milestone payments upon the achievement of specified commercial sales events.As the Company is accounting for both the U.S./RoW and China Agreements as one arrangement, any consideration received after the initial proceeds on theagreement signing date were also (and will be also) allocated to the various units of accounting above using the relative selling price method under ASC 605-25.Summary of revenue recognized under the collaboration agreementsThe table below summarizes the accounting treatment for the various deliverables pursuant to each of the Astellas and AstraZeneca agreements. Licenseamounts identified below are included in the “License and milestone revenue” line item in the consolidated statements of operations. All other elementsidentified below are included in the “Collaboration services and other revenue” line item in the consolidated statements of operations.158 Amounts recognized as revenue under the Japan Agreement are shown below (in thousands): Years Ended December 31, Agreement Deliverable 2016 2015 2014 Japan License $3,465 $1,024 $518 Milestones 10,000 — — Total license and milestone revenue $13,465 $1,024 $518 Collaboration services revenue* $166 $198 $356 *When and if available compounds, manufacturing — clinical supplies and committee services have each been identified as separate units ofaccounting with standalone value and amounts allocable to these elements have been recognized and classified within the Collaboration servicesrevenue line item within the 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 deferredrevenue as follows (in thousands): CumulativeRevenueThroughDecember 31, 2016 DeferredRevenue atDecember 31, 2016 TotalConsiderationThroughDecember 31, 2016 License $45,710 $— $45,710 When and if available compounds 21 26 47 Manufacturing--clinical supplies 2,121 — 2,121 Committee services 20 — 20 Total license and collaboration services revenue $47,872 $26 $47,898Amounts recognized as revenue under the Europe Agreement were as follows (in thousands): Years Ended December 31, Agreement Deliverable 2016 2015 2014 Europe License $10,956 $17,677 $13,935 Milestones — — — Total license and milestone revenue $10,956 $17,677 $13,935 Collaboration services revenue* $1,191 $2,697 $3,179 *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 havebeen recognized in revenue as services are performed and classified within the Collaboration services revenue line item within the consolidatedstatements of operations.The total arrangement consideration has been allocated to each of the following deliverables under the Europe Agreement, along with any associateddeferred revenue as follows (in thousands): CumulativeRevenueThroughDecember 31, 2016 DeferredRevenue atDecember 31, 2016 TotalConsiderationThroughDecember 31, 2016 License $412,272 $— $412,272 When and if available compounds 376 409 785 Manufacturing--clinical supplies 9,875 — 9,875 Development services--in progress 33,032 — 33,032 Committee services 285 — 285 Total license and collaboration services revenue $455,840 $409 $456,249159 Amounts recognized as revenue under the U.S./RoW and China Agreements were as follows (in thousands): Years Ended December 31, Agreement Deliverable 2016 2015 2014 U.S. / RoWand China License $112,931 $114,392 $102,738 Milestones — 15,000 — Total license and milestone revenue $112,931 $129,392 $102,738 Collaboration services revenue* $40,738 $29,731 $16,820 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 shareinformation and serve on committees are useful only in combination with the development services, and because all three items are delivered over thesame period while manufacturing — clinical supplies has been identified as a separate unit of accounting with standalone value and amountsallocable to this unit of accounting have been recognized and classified within the Collaboration services revenue line item within the consolidatedstatements of operations.**All revenues attributable to the China unit of accounting are deferred until all deliverables are met. The China license and collaboration serviceselements have been combined into a single unit of accounting and consideration allocable to this unit is being deferred due to FibroGen’s retention ofmanufacturing rights and lack of standalone value.The total arrangement consideration has been allocated to each of the following deliverables under the U.S./RoW and China Agreements, along with anyassociated deferred revenue as follows (in thousands): CumulativeRevenueThroughDecember 31, 2016 DeferredRevenue atDecember 31, 2016 TotalConsiderationThroughDecember 31, 2016 License $402,697 $— $402,697 Co-development, information sharing & committee services 90,775 31,659 122,434 Manufacturing--clinical supplies 357 61 418 China-single unit of accounting — 82,542 82,542 Total license and collaboration services revenue $493,829 $114,262 $608,091 Other RevenuesOther revenues consist of royalty payments received, which are recorded on a monthly basis as they are reported to the Company and collagen feasibilitysales. Other revenues were immaterial for each of the three years ended December 31, 2016.Deferred RevenueDeferred revenue represents amounts billed to the Company’s collaboration partners for which the related revenues have not been recognized because one ormore of the revenue recognition criteria have not been met. The current portion of deferred revenue represents the amount to be recognized within one yearfrom the balance sheet date based on the estimated performance period of the underlying deliverables. The long term portion of deferred revenue representsamounts to be recognized after one year through the end of the non-contingent performance period of the underlying deliverables. The long term portion ofdeferred revenue also includes amounts allocated to the China unit of accounting under the AstraZeneca arrangement as revenue recognition associated withthis unit of accounting is tied to the commercial launch of the products within China, which is not expected to occur within the next year. 160 4.Fair Value MeasurementsIn accordance with the authoritative guidance on fair value measurements and disclosures under U.S. GAAP, the Company presents all financial assets andliabilities and any other assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. The guidance defines fair value,establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair-value measurements. Theguidance also requires fair value measurements be classified and disclosed in one of the following three categories:Level 1: Quoted prices in active markets for identical assets or liabilities.Level 2: Observable inputs other than quoted prices in active markets for identical assets or liabilities.Level 3: Unobservable inputs.The Company values certain assets and liabilities, focusing on the inputs used to measure fair value, particularly in instances where the measurement usessignificant unobservable (Level 3) inputs. The Company’s financial instruments are valued using quoted prices in active markets (Level 1) or based uponother observable inputs (Level 2). The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requiresmanagement to make judgments and considers factors specific to the asset or liability. In addition, the categories presented do not suggest how prices may beaffected by the size of the purchases or sales, particularly with the largest highly liquid financial issuers who are in markets continuously with non-equityinstruments, or how any such financial assets may be impacted by other factors such as U.S. government guarantees. Assets and liabilities measured at fairvalue are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.The fair values of the Company’s financial assets that are measured on a recurring basis are as follows (in thousands): December 31, 2016 Level 1 Level 2 Level 3 Total Corporate bonds $— $126,683 $— $126,683 Bond and mutual funds 22,462 — — 22,462 Equity investments 225 — — 225 Money market funds 94,543 — — 94,543 Certificate of deposits — 1,037 — 1,037 Total $117,230 $127,720 $— $244,950 December 31, 2015 Level 1 Level 2 Level 3 Total Corporate bonds $— $126,103 $— $126,103 Bond and mutual funds 25,052 — — 25,052 Equity investments 197 — — 197 Money market funds 77,639 — — 77,639 Certificate of deposits — 8,215 — 8,215 Total $102,888 $134,318 $— $237,206 The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, includingboth income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputsinclude reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/defaultprojections based on historical data and other observable inputs.The fair values of the Company’s financial liabilities that are carried at historical cost are as follows (in thousands): December 31, 2016 Level 1 Level 2 Level 3 Total Lease financing obligations $— $— $97,856 $97,856 December 31, 2015 Level 1 Level 2 Level 3 Total Lease financing obligations $— $— $97,445 $97,445 161 The fair value of the Company’s financial liabilities were each derived by using an income approach which required Level 3 inputs such as discountedestimated future cash flows.There were no transfers of assets or liabilities between levels for the years ended December 31, 2016, 2015 or 2014. 5.Balance Sheet ComponentsCash and Cash EquivalentsCash and cash equivalents consisted of the following (in thousands): December 31, 2016 2015 Cash $79,239 $75,685 Money market funds 94,543 77,639 Total cash and cash equivalents $173,782 $153,324 Property and EquipmentProperty and equipment consisted of the following (in thousands): December 31, 2016 2015 Laboratory equipment $18,533 $18,233 Computer equipment 5,678 5,701 Furniture and fixtures 5,533 5,361 Leasehold improvements 93,564 93,380 Building shell (Refer to Note 8) 53,879 53,879 Construction in progress 109 193 Total property and equipment $177,296 $176,747 Less: accumulated depreciation (53,639) (47,727)Property and equipment, net $123,657 $129,020Depreciation expense for the years ended December 31, 2016, 2015 and 2014 was $6.0 million, $5.7 million, and $4.5 million, respectively.InvestmentsAll investments are classified as available-for-sale. The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s available-for-sale investments by major investments type are summarized in the tables below (in thousands): December 31, 2016 Amortized Cost Gross UnrealizedHolding Gains Gross UnrealizedHolding Losses Fair Value Corporate bonds $126,550 $182 $(49) $126,683 Certificate of deposits 1,037 — — 1,037 Bond and mutual funds 22,305 157 — 22,462 Equity investments 125 100 — 225 Total investments $150,017 $439 $(49) $150,407 December 31, 2015 Amortized Cost Gross UnrealizedHolding Gains Gross UnrealizedHolding Losses Fair Value Corporate bonds $126,522 $54 $(473) $126,103 Certificate of deposits 8,217 — (2) 8,215 Bond and mutual funds 25,052 — — 25,052 Equity investments 126 71 — 197 Total investments $159,917 $125 $(475) $159,567 162 The contractual maturities of available-for-sale investments were as follows (in thousands): December 31, 2016 Within one year $67,075 After one year through four years 60,645 Total debt investments 127,720 Bond and mutual funds 22,462 Equity investments 225 Total investments 150,407 Available-for-sale investments are reported at fair value and as such, their associated unrealized gains and losses are reported as a separate component ofstockholders’ equity within accumulated other comprehensive income (loss).Accrued LiabilitiesAccrued liabilities consisted of the following (in thousands): December 31, 2016 2015 Preclinical and clinical trial accruals $29,550 $27,973 Payroll and related accruals 14,232 13,535 Professional services 1,252 1,662 Other 5,880 4,762 Total accrued liabilities $50,914 $47,932 6.Product Development ObligationsThe Technology Development Center of the Republic of Finland (“TEKES”) product development obligations consist of 11 separate advances (each in theform of a note agreement) received by FibroGen Europe between 1996 and 2008 from TEKES. These advances are granted on a project by project basis tofund various product development efforts undertaken by FibroGen Europe only. Each separate note bears interest (not compounded) calculated as onepercentage point less than the Bank of Finland rate in effect at the time of the note, but no less than 3.0%.If the research work funded by TEKES does not result in an economically profitable business or does not meet its technological objectives, TEKES may, onapplication from FibroGen Europe, forgive each of these loans, including accrued interest, either in full or in part. As of December 31, 2016 and 2015, theCompany had $9.9 million and $10.3 million of principal outstanding, respectively, and $4.9 million and $4.8 million of interest accrued, respectively,which were presented in the product development obligations line on the consolidated balance sheets.The Company is not a guarantor of these loans, and these loans are not repayable by FibroGen Europe until it has distributable funds.7.Convertible Note PayableIn January 2013, FibroGen China entered into a $0.6 million convertible promissory note. The note bears simple interest at a rate of two percent (2.00%) perannum, accrued on an annual basis in arrears. The outstanding principal balance and unpaid accrued interest on the note is due and payable upon the earlierof (a) the effectiveness of the initial public offering of FibroGen China or (b) the eight year anniversary of the date of the note. The total outstanding principalbalance and unpaid accrued interest on the note will be converted into Series A Preferred Stock of FibroGen China at the option of the lender or by theCompany at its discretion.8.Commitments and ContingenciesOperating LeasesFuture minimum lease payments under all non-cancelable operating lease obligations as of December 31, 2016 are as follows (in thousands):Year Ending Operating Leases 2017 $131 2018 51 163 2019 21 Total minimum payments $203 Facility Lease Financing ObligationsFibroGen, Inc.In September 2006, the Company entered into a long-term property lease with Shorenstein Properties LLC (“Alexandria” or “landlord”) providing theCompany with 234,249 square feet of space for an initial term of 15 years. Upon signing, a stand-by letter of credit was established in the amount of $7.3million which has been included in restricted time deposits. During the fourth quarter of 2016, a portion of this letter of credit was released. As a result, therestriction of $1.0 million was removed, and the amount was reclassified from restricted time deposits to short-term investment as of December 31, 2016. Theagreement included an expansion option to occupy part of an adjacent building within 31 months of the lease commencement date of November 20, 2008. InJune 2012, the Company gave notice to its landlord that it would not exercise this expansion option, which resulted in a $5.0 million payment liability to thelandlord which is being financed over the remaining lease term of its lease.In connection with this lease, the Company was responsible for approximately 60% of the construction costs for the tenant improvements. The Company isdeemed, for accounting purposes only, to be the accounting owner of the entire project including the building shell, even though it is not the legal owner.The balance of the tenant improvements were paid by Alexandria in the form of a tenant improvement allowance of $140.50 per square foot of rentable space,or $32.5 million.In connection with the Company’s accounting for this transaction, the Company capitalized Alexandria’s costs of constructing the building shell whichtotaled $50.8 million, and recognized a corresponding lease financing obligation. The Company also recognized, as an additional lease financing obligation,the reimbursements totaling $32.5 million from landlord for tenant improvements since these reimbursements are also deemed to be a financing obligation.A portion of the monthly lease payment is allocated to land rent and recorded as an operating lease expense and the non-interest portion of the amortizedlease payments to the landlord related to rent of the building is applied to the lease financing liability.In addition, the Company had a leased facility located in South San Francisco, California, which was used as its corporate headquarters prior to moving to itscurrent facility in 2008. The South San Francisco facility is approximately 106,000 square feet and was fully subleased. This lease and associated subleasesterminated in February 2015.FibroGen ChinaIn February 2013, the Company entered into a long-term property lease with Beijing Economic-Technological Development Area (“BDA”) ManagementCommittee for a pilot plant located in Beijing Yizhuang Biomedical Park (“BYBP”) of BDA. The leased space is 4,820 square meters over an eight (8) yearterm starting February 1, 2013.In connection with this lease, the Company was responsible for approximately 100% of the construction costs for the tenant improvements. The Company isdeemed, for accounting purposes only, to be the accounting owner of the entire project, including the building shell, even though it is not the legal owner.In connection with the Company’s accounting for this transaction, the Company capitalized BDA Management Committee’s costs of constructing thebuilding shell which totaled $3.1 million, and recognized a corresponding lease financing obligation. The Company also recognized, as an additional leasefinancing obligation, the reimbursements totaling $0.5 million from BYBP for a rent subsidy since this reimbursement is also deemed to be a financingobligation.A portion of the monthly lease payment is allocated to land rent and recorded as an operating lease expense and the non-interest portion of the amortizedlease payments to the landlord related to rent of the building is applied to the lease financing liability.Future minimum lease payments, on a consolidated basis, under the Company’s facility lease financing obligations as of December 31, 2016 are as follows(in thousands):Year Ending Lease financingobligations 2017 $13,977 2018 14,199 2019 14,415 2020 14,636 164 2021 14,166 Thereafter 27,208 Total minimum payments $98,601 Apart from the property leases with Alexandria and BDA Management Committee, rent expense for leased facilities under operating lease commitments was$2.8 million, $2.7 million, and $2.9 million for the years ended December 31, 2016, 2015 and 2014, respectively. The Company received sublease income of$3.8 million, $3.4 million, and $5.0 million for the years ended December 31, 2016, 2015 and 2014, respectively, which were recorded as a reduction ofresearch and development expenses and general and administrative expenses for the respective periods.Indemnification AgreementsThe Company enters into standard indemnification arrangements in the ordinary course of business, including for example, service, manufacturing andcollaboration agreements. Pursuant to these arrangements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified parties forlosses suffered or incurred by the indemnified party, including in connection with intellectual property infringement claims by any third party with respect toits technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potentialamount of future payments the Company could be required to make under these arrangements is not determinable. The Company has never incurred costs todefend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these arrangementsis minimal.The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors andofficers against liabilities that may arise by reason of their status or service as directors or officers to the extent permissible under applicable law.9.Equity and Stock-based CompensationConvertible Preferred Stock (“Preferred Stock”)As of December 31, 2013 and immediately prior to the initial public offering, the Company had authorized 125,000,000 shares of Preferred Stock. All sharesof Preferred Stock had a par value of $0.01 per share.Upon the closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 33,919,954 shares of commonstock. As of December 31, 2016 and 2015, there was no outstanding convertible preferred stock.Subsidiary Stock and Non-Controlling InterestsFibroGen EuropeAs of December 31, 2016 and 2015, respectively, FibroGen Europe had a total of 42,619,022 shares of Preferred Stock outstanding, of which there were1,700,845 shares of Series A Preferred Stock, 1,875,000 shares of Series B Preferred Stock, 1,599,503 shares of Series C Preferred Stock, 1,520,141 shares ofSeries D Preferred Stock, 459,565 shares of Series E Preferred Stock, 5,714,332 shares of Series F Preferred Stock, 9,927,500 shares of Series G Preferred Stockand 19,822,136 shares of Series H Preferred Stock, all of which shares no longer have any right to be exchanged for FibroGen, Inc. Common Stock. The holders of FibroGen Europe’s shares of Preferred Stock (“Preferred Shares”) have the following rights, preferences and privileges:Dividend Rights — When the assets of FibroGen Europe are distributed (except for distribution in a liquidation), Preferred Shares shall have the samerights to dividend or other forms of distribution as shares of Common Stock of FibroGen Europe. In the event of a merger, holders of Preferred Sharesdo not have the right to demand FibroGen Europe to redeem all or part of their Preferred Shares. FibroGen Europe may repurchase shares of CommonStock or Preferred Shares for consideration.Pre-emptive Right — Preferred Shares shall have pre-emptive subscription right in accordance with the Finnish Limited Liability Companies Act ifadditional shares are issued, option rights are given, or convertible loan is taken, provided, however, that the foregoing pre-emptive right does notapply to a directed share issue, for which two thirds (2/3) of the voting shares represented at a general meeting of shareholders approve for animportant legitimate cause.Redemption Right — If a Preferred Share can be redeemed by a majority shareholder owning more than ninety percent (90%) of the shares of FibroGenEurope in accordance with the provisions of the Finnish Limited Liability Companies Act, the minority holders of Preferred Shares have the right torequest redemption of their shares.165 Voting Right — Each share has one vote. Preferred Shares have voting rights only in situations that are specifically provided in the Articles ofAssociation, which include a merger transaction and directed share issue. In addition, Preferred Shares have right to vote in a general shareholdermeeting for amending the Articles of Association if the amendment will affect the rights of Preferred Shares.Conversion Right (1-for-1 basis into Common Stock of FibroGen Europe): •Voluntary conversion right: Preferred Shares can be converted into common shares upon the written request of a shareholder provided that theconversion is feasible within the maximum and minimum amounts of shares of classes of FibroGen Europe as set forth in its Articles ofAssociation. Such request can be withdrawn before the notification of conversion is filed with the Finnish Trade Register. •Compulsory conversion right: Preferred Shares will be converted into common shares if (i) FibroGen Europe’s shares are listed in a stockexchange or other trading system in the European Economic Area, or (ii) FibroGen Europe’s recombinant collagen and gelatin productiontechnology is being put into commercial use in the area of EU and certain other European states. Commercial use means there is incomegenerated from the first commercial sale of the products incorporating the above mentioned technology and does not include license fees,development financing, milestone payments or income from test products or equipment used in research. The board of directors of FibroGenEurope shall notify the shareholders of the compulsory conversion in writing, and the shareholders shall request to convert their shares withinthe timeframe provided in the notification. Should the shareholders fail to make the conversion request within the time limit, FibroGen Europemay redeem the shares of such shareholders.Liquidation Right — In the event of a dissolution of FibroGen Europe, holders of Preferred Shares are entitled to be paid in an amount equal to thesubscription price of the shares before any distribution is made to holders of common shares. Among holders of Preferred Shares, holders of shares ofSeries F Preferred Stock are entitled to be paid in an amount equal to the subscription price of Series F Preferred Stock before any distribution is madeto holders of other Preferred Shares.FibroGen ChinaFibroGen China had 6,758,000 Series A Preference Shares outstanding as of December 31, 2016 and 2015, respectively. The holders of the FibroGen ChinaSeries A Preference Shares have the following rights, preferences and privileges:Liquidation — In the event of liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, including by means of amerger, the holders of FibroGen China Series A Preference Shares are entitled to be paid an amount equal to the product of the number of shares heldby a holder of shares of FibroGen China Series A Preference Shares and the original issue price of $1.00 (subject to equitable adjustment for any stockdividend, combination, split, reclassification, recapitalization) plus all declared and unpaid dividends thereon.Conversion — Each share of FibroGen China Series A Preference Shares is convertible into the number of fully paid and non-assessable shares ofCommon Stock of FibroGen China that results from dividing the original issue price by the conversion price in effect at the time of the conversion,subject to adjustments for stock splits, stock dividends, reclassifications and like events. The FibroGen China Series A Preference Shares have aconversion price that is equal to the original issuance price such that the conversion ratio to FibroGen China Common Stock is 1:1 as of all periodspresented.Voting — The holders of FibroGen China Series A Preference Shares are entitled to vote together with the FibroGen China Common Stock holders onall matters submitted for a vote of the stockholders. The holder of each share of FibroGen China Series A Preference Shares has the number of votesequal to the number of shares of FibroGen China Common Stock into which it is convertible.Dividends — The holders of FibroGen China Series A Preference Shares are entitled to receive cash dividends when and if declared, at a rate of 6%.Non-Controlling InterestsNon-controlling interest positions related to the issuance of subsidiary stock as described above are reported as a separate component of consolidated equityfrom the equity attributable to the Company’s stockholders at December 31, 2016 and 2015. In addition, the Company does not allocate losses to the non-controlling interests as the outstanding shares representing the non-controlling interest do not represent a residual equity interest in the subsidiary. Upon theinitial public offering and as described above, all eligible FibroGen Europe preferred shares were exchanged for 958,996 shares of FibroGen Common Stock.No other FibroGen Europe shares have the right to be exchanged for FibroGen, Inc. Common Stock.166 Common StockEach share of Common Stock is entitled to one vote. The holders of Common Stock are also entitled to receive dividends whenever funds are legallyavailable and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding.Shares of Common Stock outstanding, shares of stock plans outstanding and shares reserved for future issuance related to stock options and RSUs grant andEmployee Stock Purchase Plan (“ESPP”) purchases are as follows (in thousands): December 31, 2016 2015 Common stock outstanding 63,665 61,985 Stock options outstanding 13,660 13,583 RSUs outstanding 1,211 865 Common stock warrants outstanding 4 7 Shares reserved for future stock options and RSUs grant 4,032 3,394 Shares reserved for future ESPP offering 1,638 1,285 Total shares of common stock reserved 84,210 81,119 Stock PlansStock Option and RSU PlansUnder the Company’s Amended and Restated 2005 Stock Plan (“2005 Stock Plan”), the Company may issue shares of Common Stock and options topurchase Common Stock and other forms of equity incentives to employees, directors and consultants. Options granted under the 2005 Stock Plan may beincentive stock options or nonqualified stock options. Incentive stock options (“ISO”) may be granted only to employees and officers of the Company.Nonqualified stock options (“NSO”) and stock purchase rights may be granted to employees, directors and consultants. The board of directors has theauthority to determine to whom options will be granted, the number of options, the term and the exercise price. Options are to be granted at an exercise pricenot less than fair market value for an ISO or an NSO. Options generally vest over four years. Options expire no more than 10 years after date of grant. Upon theeffective date of the registration statement related to the Company’s initial public offering, the 2005 Plan was amended to cease the grant of any additionalawards thereunder, although the Company will continue to issue common stock upon the exercise of previously granted stock options under the 2005 Plan.In September 2014, the Company adopted a 2014 Equity Incentive Plan (the “2014 Plan”) which became effective on November 13, 2014. The 2014 Plan isthe successor equity compensation plan to the 2005 Plan. The 2014 Plan will terminate on November 12, 2024. The 2014 Plan provides for the grant ofincentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, performance stock awards, performance cash awards,restricted stock units and other stock awards to employees, directors and consultants. Stock options granted must be at prices not less than 100% of the fairmarket value at date of grant. Option vesting schedules are determined by the Company at the time of issuance and generally have a four year vestingschedule (25% vesting on the first anniversary of the vesting base date and quarterly thereafter over the next 3 years). Options generally expire ten years fromthe date of grant unless the optionee is a 10% stockholder, in which case the term will be five years from the date of grant. Unvested options exercised aresubject to the Company’s repurchase right. Shares reserved for issuance increases on January 1 of each year commencing on January 1, 2016 and ending onJanuary 1, 2024 by the lesser of (i) the amount equal to 4% of the number of shares issued and outstanding on December 31 immediately prior to the date ofincrease or (ii) such lower number of shares as may be determined by the board of directors. As of December 31, 2016, the Company has reserved 4,032,496shares of its common stock that remains unissued for issuance under the 2014 Plan.Issuance of shares upon share option exercise or share unit conversion is made through issuance of new shares authorized under the plan.Certain Common Stock option holders have the right to exercise unvested options, subject to a right held by the Company to repurchase the stock, at theoriginal exercise price, in the event of voluntary or involuntary termination of employment of the stockholder. The shares are generally released fromrepurchase provisions ratably over four years. The Company accounts for the cash received in consideration for the early exercised options as a liability. AtDecember 31, 2016 and 2015, no shares of Common Stock were subject to repurchase by the Company.167 Stock option transactions, including forfeited options granted under the 2014 Plan as well as prior plans, are summarized below: Shares(In thousands) WeightedAverageExercise perShare WeightedAverageRemainingContractualLife(In Years) AggregateIntrinsic Value(In thousands) Outstanding at December 31, 2015 13,583 $10.12 Granted 1,743 19.41 Exercised (1,193) 5.06 Expired (41) 21.48 Forfeited (432) 21.81 Outstanding at December 31, 2016 13,660 11.35 5.60 $147,627 Vested and expected to vest, December 31, 2016 13,660 11.35 5.60 147,627 Exercisable at December 31, 2016 10,592 $8.50 4.72 $141,120The total intrinsic value of options exercised during the years ended December 31, 2016, 2015, and 2014 was $17.9 million, $48.7 million, and $6.5 million,respectively.The following table summarizes restricted stock unit activity: Shares(In thousands) Fair Value at Grant Unvested at December 31, 2015 865 $25.58 Granted 831 19.37 Vested (370) 25.58 Forfeited (115) 22.63 Unvested at December 31, 2016 1,211 $21.60 The estimated weighted-average fair value of the awards granted during the years ended December 31, 2016, 2015 and 2014 was $19.37, $29.66 and $18.00,respectively.ESPPIn September 2014, the Company adopted a 2014 Employee Stock Purchase Plan (the “2014 Purchase Plan”) which became effective on November 13, 2014.The 2014 Purchase Plan is designed to enable eligible employees to periodically purchase shares of the Company’s common stock at a discount throughpayroll deductions of up to 15% of their eligible compensation, subject to any plan or IRS limitations. At the end of each offering period, employees are ableto purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the lastday of the offering period. Purchases are accomplished through participation in discrete offering periods. The 2014 Purchase Plan is intended to qualify as anESPP under Section 423 of the Internal Revenue Code. The Company has reserved 1,600,000 shares of its common stock for issuance under the 2014Purchase Plan and shares reserved for issuance increases January 1 of each year commencing January 1, 2016 by the lesser of (i) a number of shares equal to1% of the total number of outstanding shares of common stock on December 31 immediately prior to the date of increase; (ii) 1,200,000 shares or (iii) suchnumber of shares as may be determined by the board of directors. There were no shares purchased by employees under the 2014 Purchase Plan for the yearended December 31, 2014. There were 266,720 shares and 315,385 shares purchased by employees under the 2014 Purchased Plan for the years endedDecember 31, 2016 and 2015, respectively.The expected term of 2014 Purchase Plan shares is the average of the remaining purchase periods under each offering period.Stock-Based CompensationStock-based compensation expense allocated to research and development and general and administrative expense for the years ended December 31, 2016,2015, and 2014 was as follows (in thousands): Years Ended December 31, 2016 2015 2014 Research and development $19,070 $16,987 $10,893 General and administrative 13,062 10,694 7,805 Total stock-based compensation expense $32,132 $27,681 $18,698168 The Company estimates the fair value of stock options using the Black-Scholes option valuation model. The fair value of employee stock options is beingamortized on a straight-line basis over the requisite service period of the awards.The Company, in making its determinations of the fair value of its Common Stock, considered a variety of quantitative and qualitative factors, including(i) net present value of the Company’s projected earnings, (ii) fair market value of the stock of comparable publicly-traded companies, (iii) any third partytransactions involving the Company’s convertible preferred stock, (iv) liquidation preferences of the Company’s preferred stock and the likelihood ofconversion of the preferred stock, (v) changes in the Company’s business operations, financial condition and results of operations over time, including cashbalances and burn-rate, (vi) the status of new product development, and (vii) general financial market conditions. Subsequent to the IPO, the fair market valueof common stock is based on the closing price of the Company’s common stock as reported on the NASDAQ Global Select Market on the date of the grant.The fair value of employee stock options was estimated using the following assumptions:Expected Term. Expressed as a weighted-average, the expected life of the options is based on the average period the stock options are expected to beoutstanding and was based on the Company’s historical information of the option exercise patterns and post-vesting termination behavior as well ascontractual terms of the instruments.Expected Volatility. Since the Company has very little historical data regarding the volatility of its Common Stock, the expected volatility is based upon thehistorical volatility of comparable public entities. In evaluating comparable companies, the Company considered factors such as industry, stage of life cycle,size and duration as a public company.Risk-Free Interest Rate. Expressed as a weighted-average, the risk-free interest rate assumption is based on the U.S. Treasury instruments whose term wasconsistent with the expected term of the Company’s stock options.Expected Dividend Yield. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future.The assumptions used to estimate the fair value of stock options granted and ESPPs using the Black-Scholes option valuation model were as follows: Years Ended December 31, 2016 2015 2014 Stock Options Expected term (in years) 5.3 5.2 5.1 Expected volatility 69.9% 69.9% 62.8%Risk-free interest rate 1.4% 1.7% 1.7%Expected dividend yield — — — Weighted average estimated fair value $11.49 $16.12 $9.51 ESPPs Expected term (in years) 0.5 - 2.0 0.4 - 2.0 0.5 - 2.0 Expected volatility 61.9 - 80.7% 58.5 - 69.0% 61.9 - 69.0% Risk-free interest rate 0.2 - 1.0% 0.1 - 0.6% 0.1 - 0.6% Expected dividend yield — — — Weighted average estimated fair value $9.94 $13.03 $13.22As of December 31, 2016, there was $29.7 million of total unrecognized compensation costs, net of estimated forfeitures, related to non-vested stock optionawards granted that will be recognized on a straight-line basis over the weighted-average period of 2.31 years. As of December 31, 2016, there was $20.2million of total unrecognized compensation costs, net of estimated forfeitures, related to non-vested RSUs granted that will be recognized on a straight-linebasis over the weighted-average period of 2.73 years.169 WarrantsThe following warrants to purchase shares of Common Stock were issued in connection with certain facility and equipment lease financing arrangements andare outstanding at December 31, 2016: Year of Issuance Number of Shares Exercise Price perShare Reason for Issuance Expiration Date2000 4,430 $15.00 Issued in connection withlease agreement Five years after initial public offering or upon merger or saleof the Company’s assets, whichever occurs first 10.Net Loss Per ShareThe Company applies the two-class method to calculate basic and diluted net loss per share of Common Stock. The Junior Preferred Stock was participatingsecurity due to its dividend rights and the Senior Preferred Stock had stated dividend rates. The two-class method is an earnings allocation method underwhich earnings per share is calculated for Common Stock considering a participating security’s rights to undistributed earnings as if all such earnings hadbeen distributed during the period. The Company’s participating securities were not included in the computation of net loss per share in periods of net lossbecause the preferred stockholders had no contractual obligation to participate in losses.The following securities were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the three yearspresented (in thousands): Years Ended December 31, 2016 2015 2014 Employee stock options 13,660 13,583 14,427 RSUs outstanding 1,211 865 560 Warrants 4 7 173 14,875 14,455 15,160 11.FibroGen, Inc. 401(k) PlanSubstantially all of the Company’s full-time United States of America-based employees are eligible to make contributions to the Company’s 401(k) Plan.Under this plan, participating employees may defer up to 60% of their pretax salary during the year, but not more than statutory limits. The Company mayelect to match employee contributions. Matching contributions of $2.3 million, $2.5 million and $1.9 million were made during years ended December 31,2016, 2015 and 2014, respectively.12.Income TaxesThe components of loss before income taxes are as follows (in thousands): Years Ended December 31, 2016 2015 2014 Domestic $(38,156) $(66,411) $(46,998)Foreign (23,595) (19,126) (12,506)Loss before provision for income taxes $(61,751) $(85,537) $(59,504) 170 The provision for (benefit from) income taxes consists of the following (in thousands): Years Ended December 31, 2016 2015 2014 Current: Federal $— $— $— State 2 2 — Foreign 139 240 — Total current $141 $242 $— Deferred: Federal $(212) $— $— State — — — Foreign — — — Total deferred $(212) $— $— Total provision for (benefit from) income taxes $(71) $242 $— The following is the reconciliation between the statutory federal income tax rate and the Company’s effective tax rate: Years Ended December 31, 2016 2015 2014 Tax at statutory federal rate 34.0% 34.0% 34.0%State tax —% —% —%Stock-based compensation expense (7.9)% (4.6)% (4.6)%Net operating losses not benefitted (12.9)% (21.7)% (22.4)%Foreign net operating losses benefitted (13.0)% (7.6)% (7.1)%Other (0.1)% (0.4)% 0.1%Total 0.1% (0.3)% —%Significant components of the Company’s deferred tax assets are as follows (in thousands): December 31, 2016 2015 Federal and state net operating loss carryforwards $42,900 $53,393 Tax credit carryforwards 29,846 26,620 Foreign net operating loss carryforwards 11,704 8,421 Stock-based compensation 11,231 8,512 Lease obligations 4,414 4,335 Reserves and accruals 5,465 4,891 Deferred revenue 22,909 10,484 Other 741 915 Subtotal 129,210 117,571 Less: Valuation allowance (128,995) (116,718)Net deferred tax assets 215 853 Fixed assets (122) (853)Other (93) — Net deferred tax liabilities (215) (853)Total net deferred tax assets $— $—A valuation allowance has been provided to reduce the deferred tax assets to an amount management believes is more likely than not to be realized. Expectedrealization of the deferred tax assets for which a valuation allowance has not been recognized is based on upon the reversal of existing temporary differencesand future taxable income.The valuation allowance increased by $12.3 million, $22.0 million and $21.6 million for the years ended December 31, 2016, 2015 and 2014, respectively.Due to uncertainty surrounding the realization of the favorable tax attributes in the future tax returns, the Company has established a valuation allowanceagainst its otherwise recognizable net deferred tax assets.171 At December 31, 2016, the Company had net operating loss carryforwards available to offset future taxable income of approximately $170.1 million and$138.2 million for federal and state tax purposes, respectively. These carryforwards will begin to expire in 2026 for federal and 2018 for state purposes, if notutilized before these dates. The Company also had foreign net operating loss carryforwards of approximately $48.3 million which expire between 2017 and2026 if not utilized.At December 31, 2016, the Company had approximately $31.5 million of federal and $20.8 million of California research and development tax credit andother tax credit carryforwards available to offset future taxable income. The federal credits begin to expire in 2018 and the California research credits have noexpiration dates.The Company tracks a portion of its deferred tax assets attributable to stock option benefits in a separate memorandum account. Therefore, these amounts arenot included in the Company’s gross or net deferred tax assets. The benefit of these stock options will not be recorded in equity unless it reduces taxespayable. As of December 31, 2016, the impact related to stock option benefits was approximately $19.5 million.Federal and state tax laws impose substantial restrictions on the utilization of net operating loss and credit carryforwards in the event of an “ownershipchange” for tax purposes, as defined in IRC Section 382. The Company reviewed its stock ownership for year ended December 31, 2016 and concluded noownership changes occurred which would result in a reduction of its net operating loss or in its research and development credits expiring unused. Ifadditional ownership change occurs, the utilization of net operating loss and credit carryforwards could be significantly reduced.Uncertain Tax PositionsThe Company had unrecognized tax benefits of approximately $19.7 million as of December 31, 2016. These unrecognized tax benefits, if recognized, wouldnot affect the effective tax rate. The interest accrued as of December 31, 2016 and 2015 was immaterial.A reconciliation of the beginning and ending amounts of unrecognized income tax benefits during the three years ended December 31, 2016 is as follows (inthousands): Federal and State Balance as of January 1, 2014 $13,519 Increase due to prior positions 1,493 Increase due to current year position 4,110 Balance as of December 31, 2014 19,122 Decrease due to prior positions (2,382)Increase due to current year position 7,473 Balance as of December 31, 2015 24,213 Decrease due to prior positions (7,109)Increase due to current year position 2,550 Balance as of December 31, 2016 $19,654 Unrecognized tax benefits may change during the next twelve months for items that arise in the ordinary course of business. The Company does notanticipate a material change to its unrecognized tax benefits over the next twelve months that would affect the Company’s effective tax rate.The Company classifies interest and penalties as a component of tax expense, if any.The Company files income tax returns in the U.S. federal jurisdiction, U.S. state and other foreign jurisdictions. The U.S. federal and U.S. state taxingauthorities may choose to audit tax returns for tax years beyond the statute of limitation period due to significant tax attribute carryforwards from prior years,making adjustments only to carryforward attributes. The foreign statute of limitation generally remains open from 2007 to 2016. The Company is notcurrently under audit in any tax jurisdiction.13.Related Party TransactionsAstellas is an equity investor in the Company and considered a related party. During the years ended December 31, 2016, 2015 and 2014, the Companyrecorded revenue related to collaboration agreements with Astellas of $25.8 million, $21.6 million, and $18.0 million, respectively. During the years endedDecember 31, 2016, 2015 and 2014, the Company recorded expense related to collaboration agreements with Astellas of $6.4 million, $9.8 million and$11.4 million, respectively.172 As of December 31, 2016 and 2015, accounts receivable from Astellas were $4.1 million and $4.5 million, respectively, and amounts due to Astellas were$1.6 million and $2.0 million, respectively. The amounts due are included in accrued liabilities on the consolidated balance sheets.Julian N. Stern, a director of the Company since November 1996, is of counsel to the law firm of Goodwin Procter LLP, which he joined in 2008. He hasreceived, and continues to receive, no compensation from Goodwin Procter LLP since joining it as of counsel. The Company retains Goodwin Procter LLP aslegal counsel for various matters, primarily consisting of intellectual property matters. During the year ended December 31, 2016, the Company’s payment toGoodwin Procter LLP was immaterial. During the year ended December 31, 2015, the Company made payments to Goodwin Procter LLP of $0.4 million. Asof December 31, 2016, there was no accrued liability due to Goodwin Procter LLP in the consolidated balance sheet. As of December 31, 2015, the balance ofaccrued liability for Goodwin Procter LLP was immaterial.14.Segment and Geographic InformationThe Company has determined that the chief executive officer is the chief operating decision maker (“CODM”). The CODM reviews financial informationpresented for the Company’s various clinical trial programs as well as results on a consolidated basis. License, milestone and collaboration services revenuesreceived are not allocated to various programs for purposes of determining a profit measure and resource allocation decisions are made by the CODM basedprimarily on consolidated results. As such, the Company has concluded that it operates as one segment. Supplemental enterprise-wide information has beenpresented below.Geographic RevenuesGeographic revenues, which are based on the bill to region, are as follows (in thousands): Years Ended December 31, 2016 2015 2014 Europe $153,669 $159,123 $119,559 Japan (related party) 25,778 21,596 17,987 All other 130 109 55 Total revenue $179,577 $180,828 $137,601 Geographic Long-Lived AssetsProperty and equipment, net by geographic location are as follows (in thousands): December 31, 2016 2015 United States $109,886 $113,628 China 13,771 15,392 Total property and equipment $123,657 $129,020 Customer ConcentrationSubstantially all of the Company’s revenues to date have been generated from the following collaboration partners that respectively accounted for more than10% of the Company’s total revenue and accounts receivable: Percentage of Revenue Percentage of Accounts Receivable Years Ended December 31, December 31, 2016 2015 2014 2016 2015 Astellas—Related party 14% 12% 13% 39% 29%AstraZeneca 86% 88% 87% 61% 71% 173 Schedule II: Valuation and Qualifying Accounts(in thousands) Charged Balance at (Credited) Beginning of to Statement Deductions, Balance at Year of Operation Net End of Year Valuation allowances for deferred tax assets Year ended December 31, 2016 $116,718 $12,277 $— $128,995 Year ended December 31, 2015 $94,731 $21,987 $— $116,718 Year ended December 31, 2014 $73,144 $21,587 $— $94,731 174 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURESNone.ITEM 9A. CONTROLS AND PROCEDURESAttached as exhibits 31.1 and 31.2 to this Annual Report on Form 10-K are certifications of our Chief Executive Officer and our Chief Financial Officerrequired by Rule 13a-14(a) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Rule 13a-14(a) and 15d-15(e)Certifications”). This Controls and Procedures section of the Annual Report on Form 10-K includes the information concerning the controls evaluationreferred to in the Rule 13a-14(a) and 15d-15(e) Certifications.Evaluation of Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosurecontrols and procedures as of December 31, 2016, the end of the period covered by this Annual Report on Form 10-K. Disclosure controls and procedures (asdefined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to provide reasonableassurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed,summarized and reported, within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and that such information isaccumulated and communicated to the company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allowtimely decisions regarding required disclosure.Based on management’s evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedureswere effective as of December 31, 2016 at the reasonable assurance level.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f)of the Exchange Act. Our internal control over financial reporting is a process established under the supervision of and with the participation of ourmanagement, including our Chief Executive Officer and our Chief Financial Officer. Because of its inherent limitations, internal control over financialreporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controlsmay become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Management, with the participation and under the supervision of our Chief Executive Officer and our Chief Financial Officer, evaluated our internal controlover financial reporting as of December 31, 2016, the end of our fiscal year, using the criteria established in Internal Control - Integrated Framework (2013)set forth by the Committee of Sponsoring Organizations of the Treadway Commission.Based on management’s evaluation of our internal control over financial reporting, management concluded that, our internal control over financial reportingwas effective as of December 31, 2016.The effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their report which appears herein.Changes in Internal Control over Financial ReportingThere was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the most recent fiscal quarter ended December 31, 2016 that materially affected, or is reasonably likely tomaterially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone. 175 PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by this item is incorporated by reference to our Proxy Statement for our 2017 Annual Meeting of Stockholders to be filed with the SEC within 120 daysafter the end of the fiscal year ended December 31, 2016.Code of ConductWe have adopted a Code of Business Conduct which applies to all of our directors, officers and employees. A copy of our Code of Business Conduct can be found on our website(www.FibroGen.com) under “Corporate Governance.” The contents of our website are not a part of this report.In addition, we intend to promptly disclose the nature of any amendment to, or waiver from, our Code of Business Conduct that applies to our principalexecutive officer, principal financial officer, principal accounting officer or persons performing similar functions on our website in the future.ITEM 11. EXECUTIVE COMPENSATIONThe information required by this item is incorporated by reference to our Proxy Statement for our 2017 Annual Meeting of Stockholders to be filed with the SEC within 120 daysafter the end of the fiscal year ended December 31, 2016.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe information required by this item is incorporated by reference to our Proxy Statement for our 2017 Annual Meeting of Stockholders to be filed with the SEC within 120 daysafter the end of the fiscal year ended December 31, 2016.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this item is incorporated by reference to our Proxy Statement for our 2017 Annual Meeting of Stockholders to be filed with the SEC within 120 daysafter the end of the fiscal year ended December 31, 2016.ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by this item is incorporated by reference to our Proxy Statement for our 2017 Annual Meeting of Stockholders to be filed with the SEC within 120 daysafter the end of the fiscal year ended December 31, 2016. 176 PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a) We have filed the following documents as part of this Annual Report on Form 10-K:1. Consolidated Financial StatementsInformation in response to this Item is included in Part II, Item 8 of this Annual Report on Form 10-K.2. Financial Statement SchedulesSchedule II is included on page 174. All other schedules are omitted because they are not required or the required information is included in theconsolidated financial statements or notes thereto.3. ExhibitsSee Item 15(b) below.(b) Exhibits—We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the Index to Exhibits immediatelyfollowing the Signatures page of this Annual Report on Form 10-K.(c) Financial Statement Schedules—See (a) 2 above. All other financial statement schedules are omitted because they are not applicable because therequested information is included in the consolidated financial statements or notes thereto. 177 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report onForm 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California. FIBROGEN, INC. Date: March 1, 2017 By: /s/ Thomas B. Neff Thomas B. NeffChief Executive Officer Date: March 1, 2017 By: /s/ Pat Cotroneo Pat CotroneoVice President, Finance and Chief Financial Officer 178 POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas B. Neff and PatCotroneo, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign anyamendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securitiesand Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be doneby virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date /s/ Thomas B. Neff Chief Executive Officer and Chairman of the Board(Principal Executive Officer) March 1, 2017Thomas B. Neff /s/ Pat Cotroneo Vice President, Finance and Chief Financial Officer(Principal Financial and Accounting Officer) March 1, 2017Pat Cotroneo /s/ Jeffrey L. Edwards Director March 1, 2017Jeffrey L. Edwards /s/ Jeffrey W. Henderson Director March 1, 2017Jeffrey W. Henderson /s/ Thomas F. Kearns Jr. Director March 1, 2017Thomas F. Kearns Jr. /s/ Kalevi Kurkijärvi, Ph.D. Director March 1, 2017Kalevi Kurkijärvi, Ph.D. /s/ Rory B. Riggs Director March 1, 2017Rory B. Riggs /s/ Roberto Pedro Rosenkranz, Ph.D. M.B.A. Director March 1, 2017Roberto Pedro Rosenkranz, Ph.D. M.B.A. /s/ Jorma Routti, Ph.D. Director March 1, 2017Jorma Routti, Ph.D. /s/ James A. Schoeneck Director March 1, 2017James A. Schoeneck /s/ Julian N. Stern Director March 1, 2017Julian N. Stern /s/ Toshinari Tamura, Ph.D. Director March 1, 2017Toshinari Tamura, Ph.D. 179 EXHIBIT INDEXThe following exhibits are filed as part of this Annual Report on Form 10-K or are incorporated herein by reference. Where an exhibit is incorporated byreference, the number in parentheses indicates the document to which cross-reference is made. Refer to the end of this exhibit index for a listing of cross-reference documents. Exhibit Incorporation By ReferenceNumber Exhibit Description Form SEC File No. Exhibit Filing Date 3.1 Amended and Restated Certificate of Incorporation of FibroGen,Inc. 8-K 001-36740 3.1 11/21/2014 3.2 Amended and Restated Bylaws of FibroGen, Inc. S-1/A 333-199069 3.4 10/23/2014 4.1 Form of Common Stock Certificate. 8-K 001-36740 4.1 11/21/2014 4.2 Investor Rights Agreement by and among FibroGen, Inc. andcertain of its stockholders, dated as of December 1995. S-1 333-199069 4.2 10/1/2014 4.3 Investor Rights Agreement by and among FibroGen, Inc. andcertain of its warrant holders, dated as of February 8, 2000. S-1 333-199069 4.7 10/1/2014 4.4 Warrant to Purchase 11,076 Shares of Common Stock issued toBristow Investments, L.P, dated as of February 8, 2000. S-1 333-199069 4.12 10/1/2014 4.5 Shareholders’ Agreement by and among FibroGen China AnemiaHoldings, Ltd. and certain of its shareholders, dated as of July 11,2012. S-1 333-199069 4.15 10/1/2014 4.6 Share Purchase Agreement by and among FibroGen China AnemiaHoldings, Ltd. and the purchasers party thereto, dated as of July 11,2012. S-1 333-199069 4.16 10/1/2014 4.7 Common Stock Purchase Agreement by and between FibroGen,Inc. and AstraZeneca AB, dated as of October 20, 2014. S-1/A 333-199069 4.17 10/24/2014 10.1(i)+ FibroGen, Inc. Amended and Restated 2005 Stock Plan. S-1 333-199069 10.3(i) 10/1/2014 10.1(ii)+ Forms of stock option agreement, restricted stock purchaseagreement and stock appreciation right agreement under theFibroGen, Inc. Amended and Restated 2005 Stock Plan. S-1 333-199069 10.3(ii) 10/1/2014 10.1(iii)+ Form of stock option agreement under the FibroGen, Inc. Amendedand Restated 2005 Stock Plan applicable to options exchangedpursuant to FibroGen, Inc.’s 2010 amendment and exchange offer. S-1 333-199069 10.3(iii) 10/1/2014 10.1(iv)+ Form of 2010 amendment to the form of stock option agreementunder the FibroGen, Inc. Amended and Restated 2005 Stock Planapplicable to options amended pursuant to FibroGen, Inc.’s 2010amendment and exchange offer. S-1 333-199069 10.3(iv) 10/1/2014 10.1(v)+ Form of 2013 amendment to the form of stock option agreementunder the FibroGen, Inc. Amended and Restated 2005 Stock Planapplicable to options amended or exchanged pursuant toFibroGen, Inc.’s 2010 amendment and exchange offer. S-1 333-199069 10.3(v) 10/1/2014180 10.2+ FibroGen, Inc. 2014 Equity Incentive Plan and forms of agreementthereunder. S-1/A 333-199069 10.4 11/12/2014 10.3+ FibroGen, Inc. 2014 Employee Stock Purchase Plan. S-1/A 333-199069 10.5 11/12/2014 10.4+ FibroGen, Inc. Non-Employee Director Compensation Policy, asamended. 10-K 001-36740 10.5 3/26/2015 10.5+ FibroGen, Inc. 2014 Employee Compensation and Bonus Plan. S-1/A 333-199069 10.7 10/30/2014 10.6 Lease Agreement by and between FibroGen, Inc. and X-4 DolphinLLC, dated as of September 22, 2006; as amended by FirstAmendment to Lease by and between FibroGen, Inc. and X-4Dolphin LLC, dated as of October 10, 2007; as amended bySecond Amendment to Lease by and between FibroGen, Inc. andX-4 Dolphin LLC, dated as of June 29, 2009; as amended by ThirdAmendment to Lease by and between FibroGen, Inc. and Are-SanFrancisco No. 43, LLC (as successor in interest to X-4 DolphinLLC), dated as of May 19, 2011; as amended by FourthAmendment to Lease by and between FibroGen, Inc. and Are-SanFrancisco No. 43, LLC, dated as of September 8, 2011. S-1 333-199069 10.8 10/1/2014 10.7 Lease for Premises in Beijing BDA Biomedical Park by and amongBeijing FibroGen Medical Technology Development Co., Ltd.,Beijing Economic and Technology Investment DevelopmentParent Company and Beijing BDA International BiologicalPharmaceutical Investment Management Co., Ltd., effective as ofFebruary 1, 2013, as supplemented by the SupplementaryAgreement to Lease of Premises in Beijing BDA Biomedical Parkby and among Beijing FibroGen Medical TechnologyDevelopment Co., Ltd., Beijing Economic Technology InvestmentDevelopment Parent Company and Beijing BDA InternationalBiological Pharmaceutical Investment Management Co., Ltd.,dated as of January 30, 2013. S-1 333-199069 10.9 10/1/2014 10.8+ Form of Employment Offer Letter. S-1 333-199069 10.1 10/1/2014 10.9† Collaboration Agreement, by and between FibroGen, Inc. andAstellas Pharma Inc., effective as of June 1, 2005. S-1 333-199069 10.11 10/1/2014 10.10† Anemia License and Collaboration Agreement, by and betweenFibroGen, Inc. and Astellas Pharma Inc., effective as of April 28,2006. S-1 333-199069 10.12 10/1/2014 10.11† Amendment to Anemia License and Collaboration Agreement, byand between FibroGen, Inc. and Astellas Pharma Inc., effective asof August 31, 2006. S-1 333-199069 10.13 10/1/2014 10.12 Amendment No. 2 to Anemia License and CollaborationAgreement, by and between FibroGen, Inc. and Astellas PharmaInc., effective as of December 1, 2006. S-1 333-199069 10.14 10/1/2014 10.13† Supplement to Anemia License and Collaboration Agreement, byand between FibroGen, Inc. and Astellas Pharma Inc., effective asof April 28, 2006. S-1 333-199069 10.15 10/1/2014 181 10.14† Amendment No. 3 to Anemia License and CollaborationAgreement, by and between FibroGen, Inc. and Astellas PharmaInc., dated as of May 10, 2012. S-1 333-199069 10.16 10/1/2014 10.15† Amended and Restated License, Development andCommercialization Agreement (China) by and among FibroGenChina Anemia Holdings, Ltd., Beijing FibroGen MedicalTechnology Development Co., Ltd., FibroGen International (HongKong) Limited and AstraZeneca AB, effective as of July 30, 2013. S-1/A 333-199069 10.17 10/23/2014 10.16† Amended and Restated License, Development andCommercialization Agreement by and between Registrant andAstraZeneca AB, effective as of July 30, 2013. S-1/A 333-199069 10.18 11/12/2014 10.17† License Agreement by and between FibroGen, Inc. and theUniversity of Miami and its School of Medicine, dated as ofMay 23, 1997. S-1 333-199069 10.19 10/1/2014 10.18† First Amendment to May 23, 1997 License Agreement by andbetween FibroGen, Inc. and University of Miami, effective as ofJuly 29, 1999. S-1 333-199069 10.20 10/1/2014 10.19 Research and Commercialization Agreement by and amongFibroGen, Inc., GenPharm International Inc., Medarex, Inc. andFibroPharma, Inc., effective as of July 9, 1998. S-1 333-199069 10.21 10/1/2014 10.20 Amendment No. 1 to Research and Commercialization Agreementby and among FibroGen, Inc., GenPharm International Inc.,Medarex, Inc. and FibroPharma, Inc., effective as of June 30, 2001. S-1 333-199069 10.22 10/1/2014 10.21† Amendment No. 2 to Research and Commercialization Agreementby and among FibroGen, Inc., GenPharm International Inc.,Medarex, Inc. and FibroPharma, Inc., effective as of January 28,2002. S-1 333-199069 10.23 10/1/2014 10.22† License Agreement by and between FibroGen, Inc. and the Dana-Farber Cancer Institute, Inc., effective as of March 29, 2006. S-1 333-199069 10.24 10/1/2014 10.23 Amendment No. 1 to License agreement by and between FibroGen,Inc. and Dana-Farber Cancer Institute, Inc., effective as ofFebruary 28, 2006. S-1 333-199069 10.25 10/1/2014 10.24 Amendment No. 2 to License Agreement by and betweenFibroGen, Inc. and Dana-Farber Cancer Institute, Inc., effective asof March 14, 2006. S-1 333-199069 10.26 10/1/2014 10.25+ Form of Indemnity Agreement by and between FibroGen, Inc. andits directors and officers. S-1/A 333-199069 10.27 10/23/2014 10.26(i)† Process Development and Clinical Supply Agreement by andbetween FibroGen, Inc. and Boehringer Ingelheim Pharma GmbH& Co. KG, effective as of November 29, 2007. S-1 333-199069 10.28(i) 10/1/2014 10.26(ii)† Letter Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of June 26, 2008. S-1 333-199069 10.28(ii) 10/1/2014 182 10.26(iii)† Letter Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of August 18,2008. S-1 333-199069 10.28(iii) 10/1/2014 10.26(iv)† Amendment No. 1 to the Process Development and Clinical SupplyAgreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of May 28, 2009. S-1 333-199069 10.28(iv) 10/1/2014 10.26(v)† Amendment No. 3 to the Process Development and Clinical SupplyAgreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of November 5,2010. S-1 333-199069 10.28(v) 10/1/2014 10.26(vi)† Amendment No. 4 to the Process Development and Clinical SupplyAgreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of January 24,2011. S-1 333-199069 10.28(vi) 10/1/2014 10.26(vii)† Amendment No. 5 to the Process Development and Clinical SupplyAgreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of April 15, 2011. S-1 333-199069 10.28(vii) 10/1/2014 10.26(viii)† Amendment No. 6 to the Process Development and Clinical SupplyAgreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of May 26, 2011. S-1 333-199069 10.28(viii) 10/1/2014 10.26(ix)† Amendment No. 7 to the Process Development and Clinical SupplyAgreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of January 1,2012. S-1 333-199069 10.28(ix) 10/1/2014 10.26(x)† Amendment No. 8 to the Process Development and Clinical SupplyAgreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of July 10, 2012. S-1 333-199069 10.28(x) 10/1/2014 10.26(xi)† Amendment No. 9 to the Process Development and Clinical SupplyAgreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of November 26,2012. S-1 333-199069 10.28(xi) 10/1/2014 10.26(xii)† Amendment No. 10 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of June 21, 2013. S-1 333-199069 10.28(xii) 10/1/2014 10.26(xiii)† Amendment No. 11 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of July 9, 2013. S-1 333-199069 10.28(xiii) 10/1/2014 10.26(xiv)† Amendment No. 12 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of August 1, 2013. S-1 333-199069 10.28(xiv) 10/1/2014 183 10.26(xv)† Amendment No. 13 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of March 6, 2014. S-1 333-199069 10.28(xv) 10/1/2014 10.26(xvi)† Amendment No. 14 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of February 5,2014. S-1 333-199069 10.28(xvi) 10/1/2014 10.26(xvii)† Amendment No. 15 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of October 20,2014. 10-Q 001-36740 10.28(xvii) 11/12/2015 10.26(xviii)† Amendment No. 16 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of December 8,2014. 10-Q 001-36740 10.28(xviii) 11/12/2015 10.26(xix)† Amendment No. 17 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of December 8,2014. 10-Q 001-36740 10.28(xix) 11/12/2015 10.26(xx)† Amendment No. 18 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of February 15,2015. 10-Q 001-36740 10.28(xx) 11/12/2015 10.26(xxi)† Amendment No. 19 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of March 1, 2015. 10-Q 001-36740 10.28(xxi) 11/12/2015 10.26(xxii)† Amendment No. 20 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of June 1, 2015. 10-Q 001-36740 10.28(xxii) 11/12/2015 10.26(xxiii)† Amendment No. 21 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of May 29, 2015. 10-Q 001-36740 10.28(xxiii) 11/12/2015 10.26(xxiv)† Amendment No. 23 to the Process Development and ClinicalSupply Agreement by and between FibroGen, Inc. and BoehringerIngelheim Pharma GmbH & Co. KG, effective as of September 1,2015. 10-Q 001-36740 10.28(xxiv) 11/12/2015 10.26(xxv)† Amendment No. 22 to the Process Development and ClinicalSupply Agreement, by and between FibroGen, Inc. and BoehringerIngelheim Biopharmaceuticals GmbH, effective as of April 14,2016. 10-Q 001-36740 10.28(xxv) 8/8/2016 10.26(xxvi)† Amendment No. 24 to the Process Development and ClinicalSupply Agreement, by and between Fibrogen, Inc. and BoehringerIngelheim Biopharmaceuticals GmbH, retroactively effective as ofSeptember 15, 2015. 10-Q 001-36740 10.28(xxvi) 8/8/2016 184 10.26(xxvii)† Amendment No. 25 to the Process Development and ClinicalSupply Agreement, by and between FibroGen, Inc. and BoehringerIngelheim Biopharmaceuticals GmbH, retroactively effective as ofOctober 15, 2015. 10-Q 001-36740 10.28(xxvii) 8/8/2016 10.26(xxviii)† Amendment No. 26 to the Process Development and ClinicalSupply Agreement, by and between FibroGen, Inc. and BoehringerIngelheim Biopharmaceuticals GmbH, effective as of June 30,2016. 10-Q 001-36740 10.28(xxviii) 8/8/2016 10.26(xxix)† Amendment No. 27 to the Process Development and ClinicalSupply Agreement, by and between FibroGen, Inc. and BoehringerIngelheim Biopharmaceuticals GmbH, effective as of July 25,2016. 10-Q 001-36740 10.28(xxix) 11/8/2016 10.26(xxx)† Amendment No. 28 to the Process Development and ClinicalSupply Agreement, by and between FibroGen, Inc. and BoehringerIngelheim Biopharmaceuticals GmbH, effective as of September22, 2016. 10-Q 001-36740 10.28(xxx) 11/8/2016 10.26(xxxi)*† Amendment No. 29 to the Process Development and ClinicalSupply Agreement, by and between FibroGen, Inc. and BoehringerIngelheim Biopharmaceuticals GmbH, effective as of December 20,2016. — — — — 10.26(xxxii)*† Amendment No. 30 to the Process Development and ClinicalSupply Agreement, by and between FibroGen, Inc. and BoehringerIngelheim Biopharmaceuticals GmbH, effective as of December 20,2016. — — — — 10.27+ Offer Letter, by and between FibroGen, Inc. and Frank Valone,dated as of November 3, 2008. S-1 333-199069 10.29 10/1/2014 10.28+ Offer Letter, by and between FibroGen, Inc. and K. Peony Yu, datedas of November 21, 2008. S-1 333-199069 10.3 10/1/2014 10.29+ Offer Letter, by and between FibroGen, Inc. and Pat Cotroneo,dated as of October 23, 2000. S-1 333-199069 10.31 10/1/2014 10.30+ Form of Change in Control and Severance Agreement by andbetween FibroGen, Inc. and its officers. S-1/A 333-199069 10.32 10/24/2014 10.31+ FibroGen, Inc. Non-Employee Director Compensation Plan, asamended. 10-Q 001-36740 10.4 5/9/2016 10.32+ Incentive Compensation Plan, effective as of June 8, 2016. 8-K 001-36740 10.1 6/10/2016 21.1 Subsidiaries of FibroGen, Inc. S-1/A 333-199069 21.1 10/24/2014 23.1* Consent of PricewaterhouseCoopers LLP. — — — — 24.1* Power of Attorney (included in signature pages). — — — — 31.1* Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a). — — — — 31.2* Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a). — — — — 185 32.1* Certification of Principal Executive Officer and Principal FinancialOfficer, as required by Rule 13a-14(b) or Rule 15d-14(b) andSection 1350 of Chapter 63 of Title 18 of the United States Code(18 U.S.C. §1350)(1). — — — — 101.INS* XBRL Instance Document — — — — 101.SCH* XBRL Taxonomy Schema Linkbase Document — — — — 101.CAL* XBRL Calculation Linkbase Document — — — — 101.DEF* XBRL Definition Linkbase Document — — — — 101.LAB* XBRL Labels Linkbase Document — — — — 101.PRE* XBRL Taxonomy Presentation Linkbase Document — — — — *Filed herewith.†Confidential Treatment Requested.+Indicates a management contract or compensatory plan.(1)This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to beincorporated by reference into any filing of FibroGen, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, asamended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing. 186 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.Exhibit 10.26(xxxi)Amendment No. 29 to the Process Development and Clinical Supply AgreementThis Amendment No. 29 (the “29th Amendment”), effective as of December 20, 2016 (the “29th Amendment Effective Date”) by and between BoehringerIngelheim Biopharmaceuticals GmbH, Binger Str. 173, 55216 Ingelheim, Germany (“BI”) and FibroGen, Inc., 409 Illinois Street, San Francisco, CA 94158,USA (“FibroGen”), amends the Process Development and Clinical Supply Agreement entered into by and between Boehringer Ingelheim Pharma GmbH &Co. KG, Birkendorfer Str. 65, 88397 Biberach an der Riss, Germany (“BI Pharma”) and on November 29, 2007, as amended pursuant to the letter agreementsentered into as of June 26, 2008 and August 18, 2008, Amendment No. 1, effective as of May 28, 2009, Amendment No. 3, effective as of November 5, 2010,Amendment No. 4, effective as of January 24, 2011, Amendment No. 5, effective as of April 15, 2011, Amendment No. 6, effective as of May 26, 2011,Amendment No. 7, effective as of January 01, 2012, Amendment No. 8, effective as of July 10, 2012, Amendment No. 9, effective as of November 26, 2012,Amendment No. 10, effective as of June 21, 2013, Amendment No. 11, effective as of July 9, 2013, Amendment No. 12, effective as of August 01, 2013 andsubsequently assigned by BI Pharma to BI, Amendment No. 13, effective as of March 06, 2014, Amendment No. 14, effective as of February 05, 2014,Amendment No. 15, effective as of October 20, 2014, Amendment No. 16, effective as of December 08, 2014, Amendment No. 17, effective as of December08, 2014, Amendment No. 18, effective as of February 15, 2015, Amendment No. 19, effective as of March 01, 2015, Amendment No. 20, effective as of June01, 2015, Amendment No. 21, effective as of May 29, 2015, Amendment No. 22, effective as of April 14, 2016, Amendment No. 23, effective as of September01, 2015, Amendment No. 24, effective as of September 15, 2015, Amendment No. 25, effective as of September 15, 2015, Amendment No. 26, effective as ofJune 30, 2016, Amendment No. 27, effective as of July 25, 2016 and Amendment No. 28, effective as of September 22, 2016 (hereinafter together the “SupplyAgreement”). BI and FIBROGEN shall be referred to individually herein as a “Party”, and collectively as the “Parties”.Whereas, FibroGen wishes BI to [*] manufactured at BI in compliance with the terms of the Supply Agreement as set forth in and as amended by this 29thAmendment. The activities hereunder will be performed by BI Pharma on behalf of BI.Now, Therefore, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows: (1)Unless otherwise defined herein, all capitalized terms and phrases used in this 29th Amendment shall have the meaning ascribed to them inthe Supply Agreement. (2)The Parties agree that pursuant to Section 2.2 of the Supply Agreement, the work plan entitled “[*]”, attached hereto as Exhibit A, is herebyadded as an amendment to Appendix 2 to the Supply Agreement. Pursuant thereto BI will in accordance with the Supply Agreement, [*](defined in the Supply Agreement). (3)This 29th Amendment, together with the Supply Agreement, contains the entire understanding of the Parties with respect to the subjectmatter hereof. Except as otherwise provided herein, the Supply Agreement has not been modified or amended and remains in full force andeffect. All express or implied agreements and understandings that conflict with the terms of this 29th Amendment, either oral or written,heretofore made with respect to subject matter herein are expressly superseded by this 29th Amendment. (4)This 29th Amendment may be executed in counterparts, each of which shall be deemed an original, and all of which together shallconstitute one and the same instrument. Counterparts may be signed and delivered by facsimile and/or via portable document format (pdf)(or similar format), each of which shall be binding when sent.page 1 / 3 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.Exhibit 10.26(xxxi)IN WITNESS WHEREOF, the Parties have executed this 29th Amendment to the Supply Agreement as of the 29th Amendment Effective Date.Biberach, February 13, 2017Boehringer Ingelheim Biopharmaceuticals GmbHppa. ppa.[*] [*][*] [*]VP Business & Contracts Legal CounselSan Francisco, January 19, 2017FibroGen, Inc/s/ David Dimmick Name: David Dimmick Title: VP Quality page 2 / 3 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.Exhibit 10.26(xxxi)Exhibit AWork Scope[*](Version of November 24, 2016)[*]page 3 / 3 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.Exhibit 10.26(xxxii)Amendment No. 30 to the Process Development and Clinical Supply AgreementThis Amendment No. 30 (the “30th Amendment”), effective as of December 20, 2016 (the “30th Amendment Effective Date”) by and between BoehringerIngelheim Biopharmaceuticals GmbH, Binger Str. 173, 55216 Ingelheim, Germany (“BI”) and FibroGen, Inc., 409 Illinois Street, San Francisco, CA 94158,USA (“FibroGen”), amends the Process Development and Clinical Supply Agreement entered into by and between Boehringer Ingelheim Pharma GmbH &Co. KG, Birkendorfer Str. 65, 88397 Biberach an der Riss, Germany (“BI Pharma”) and on November 29, 2007, as amended pursuant to the letter agreementsentered into as of June 26, 2008 and August 18, 2008, Amendment No. 1, effective as of May 28, 2009, Amendment No. 3, effective as of November 5, 2010,Amendment No. 4, effective as of January 24, 2011, Amendment No. 5, effective as of April 15, 2011, Amendment No. 6, effective as of May 26, 2011,Amendment No. 7, effective as of January 01, 2012, Amendment No. 8, effective as of July 10, 2012, Amendment No. 9, effective as of November 26, 2012,Amendment No. 10, effective as of June 21, 2013, Amendment No. 11, effective as of July 9, 2013, Amendment No. 12, effective as of August 01, 2013 andsubsequently assigned by BI Pharma to BI, Amendment No. 13, effective as of March 06, 2014, Amendment No. 14, effective as of February 05, 2014,Amendment No. 15, effective as of October 20, 2014, Amendment No. 16, effective as of December 08, 2014, Amendment No. 17, effective as of December08, 2014, Amendment No. 18, effective as of February 15, 2015, Amendment No. 19, effective as of March 01, 2015, Amendment No. 20, effective as of June01, 2015, Amendment No. 21, effective as of May 29, 2015, Amendment No. 22, effective as of April 14, 2016, Amendment No. 23, effective as of September01, 2015, Amendment No. 24, effective as of September 15, 2015, Amendment No. 25, effective as of September 15, 2015, Amendment No. 26, effective as ofJune 30, 2016, Amendment No. 27, effective as of July 25, 2016, Amendment No. 28, effective as of September 22, 2016 and Amendment No. 29, effective asof December 20, 2016 (hereinafter together the “Supply Agreement”). BI and FibroGen shall be referred to individually herein as a “Party”, and collectivelyas the “Parties”.Whereas, FibroGen wishes BI to provide additional services regarding the [*] in compliance with the terms of the Supply Agreement as set forth in and asamended by this 30th Amendment. The activities hereunder will be performed by BI Pharma on behalf of BI.Now, Therefore, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows: (1)Unless otherwise defined herein, all capitalized terms and phrases used in this 30th Amendment shall have the meaning ascribed to them inthe Supply Agreement. (2)The Parties agree that pursuant to Section 2.2 of the Supply Agreement, the work plan entitled “[*], Version of September 02, 2016 ”,attached hereto as Exhibit A, is hereby added as an amendment to Appendix 2 to the Supply Agreement. Pursuant thereto BI will inaccordance with the Supply Agreement, perform additional services of [*]. (3)This 30th Amendment, together with the Supply Agreement, contains the entire understanding of the Parties with respect to the subjectmatter hereof. Except as otherwise provided herein, the Supply Agreement has not been modified or amended and remains in full force andeffect. All express or implied agreements and understandings that conflict with the terms of this 30th Amendment, either oral or written,heretofore made with respect to subject matter herein are expressly superseded by this 30th Amendment. (4)This 30th Amendment may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constituteone and the same instrument. Counterparts may be signed and delivered by facsimile and/or via portable document format (pdf) (or similarformat), each of which shall be binding when sent.page 1 / 3 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.Exhibit 10.26(xxxii)IN WITNESS WHEREOF, the Parties have executed this 30th Amendment to the Supply Agreement as of the 30th Amendment Effective Date.Biberach, February 13, 2017Boehringer Ingelheim Biopharmaceuticals GmbHppa. ppa.[*] [*][*] [*]VP Business & Contracts Legal CounselSan Francisco, January 30, 2017FibroGen, Inc/s/ James Polarek Name: James Polarek Title: Vice President page 2 / 3 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.Exhibit 10.26(xxxii)Exhibit AWork Scope[*](Version of September 02, 2016)[*]page 3 / 3Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-200348 and 333-213816) of FibroGen, Inc. of ourreport dated March 1, 2017 relating to the consolidated financial statements, financial statement schedule and the effectiveness of internal control overfinancial reporting, which appears in this Form 10 K./s/ PricewaterhouseCoopers LLPSan Jose, CaliforniaMarch 1, 2017 Exhibit 31.1CERTIFICATIONI, Thomas B. Neff., certify that;1. I have reviewed this annual report on Form 10-K of FibroGen, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) forthe registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 1, 2017 /s/ Thomas B. Neff Thomas B. Neff Chief Executive Officer and Chairman of the Board (Principal Executive Officer) Exhibit 31.2CERTIFICATIONI, Pat Cotroneo, certify that;1. I have reviewed this annual report on Form 10-K of FibroGen, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) forthe registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 1, 2017 /s/ Pat Cotroneo Pat Cotroneo Vice President, Finance and Chief Financial Officer (Principal Financial Officer) Exhibit 32.1CERTIFICATIONPursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 ofChapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Thomas B. Neff, Chief Executive Officer of FibroGen, Inc. (the “Company”), and PatCotroneo, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:1.The Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “Annual Report”), to which this Certification is attached asExhibit 32.1, fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, and2.The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.In Witness Whereof, the undersigned have set their hands hereto as of the 1st day of March, 2017. /s/ Thomas B. Neff /s/ Pat CotroneoThomas B. NeffChief Executive Officer Pat CotroneoChief Financial OfficerThis certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to beincorporated by reference into any filing of FibroGen, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended(whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing. 

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