10-Q

美国

证券和交易委员会

华盛顿特区 20549

Form 10-Q

（标记一）

☒ 根据1934年证券交易法第13或15(d)节的季度报告

截至季度结束日期的财务报告九月三十日， 2024

或者

☐ 根据1934年证券交易法第13或15(d)节的转型报告书

过渡期从到

委托文件号码：000-51173

Gyre Therapeutics, Inc.

（依据其宪章指定的注册名称）

    特拉华州

    56-2020050

    （注册或组织的）提起诉讼的州或其他司法管辖区（如适用）
组建国的驻地

    （IRS雇主
唯一识别号码）

    12770 High Bluff Drive Suite 150
圣地亚哥, 加利福尼亚

    92130

    (主要领导机构的地址)

    (邮政编码)

(858) 567-7770

(注册人电话号码，包括区号)

根据证券交易法案第12(b)条规定注册或将要注册的证券。


每一类的名称	交易标志	在其上注册的交易所的名称
普通股，面值$0.001每分享	GYRE	The 纳斯达克资本市场

请在复选框内指示注册者是否： 1.在过去的12个月内（或注册者需要提交此类报告的较短期间内）已经提交了根据证券交易所法案第13条或第15(d)条所需提交的全部报告；以及 2.在过去的90天内一直受到此类报告提交要求的规定。是 ☒ 没有 ☐

请在以下选项中勾选是否公司在过去12个月内(或公司需要提交这些文件的较短期间)已经以电子方式提交了根据规则405条和本章第232.405条提交的互动数据文件。是 ☒ 没有 ☐

请通过复选标记表明注册者是大型高速申报者、高速申报者、非高速申报者、较小报告公司还是新兴增长型公司。请参阅《交易所法》第120亿.2条中“大型高速申报者”、“高速申报者”、“较小报告公司”和“新兴增长型公司”的定义。


大型加速报告人	☐	加速文件提交人	☐
非加速文件提交人	☒	较小的报告公司	☒
新兴成长公司	☐

如果是新兴成长型公司，请在复选框中打勾，以确定注册人是否选择不使用在1934年证券交易法第13(a)条项下提供的任何新的或修订的财务会计准准则的延长过渡期。 ☐

请在检查标记处说明申报人是否为外壳公司 (见交易所法案 Rule 12b-2 定义)。是☐ 没有 ☒

截至2024年11月8日，登记人普通股的流通股数量为0.001美元每股， 93,521,434其中包括7,699,162股普通股，发行给注册人名下的股票计划管理员（请参阅注8—股东权益）。

GYRE治疗公司股份有限公司。


		页码。

第一部分财务信息			2

项目 1。	基本报表:		2

	2024年9月30日的简明综合资产负债表（未经审计），以及2023年12月31日		2

	2024年9月30日止三个和九个月的未经审计的汇总综合收入和综合收益表		3

	2024年9月30日止三个和九个月的未经审计的可转换优先股和股权的汇总综合报表		4

	2024年9月30日和2023年截至9月30日的未经审计的简明综合现金流量表		5

	未经审计的简明合并财务报表附注。		6

项目 2。	分销计划		24

项目 3。	有关市场风险的定量和定性披露		37

项目 4。	控制和程序		37

第二部分.其他信息			38

项目 1。	法律诉讼		38

项目1A。	风险因素		38

项目 2。	未注册的股票股权销售和筹款用途		39

项目 3。	对优先证券的违约		39

第4项。	矿山安全披露		39

项目5。	其他信息		39

项目6。	展示资料		40

展览索引			40

签名		43

第一部分。财务信息

项目 1. 财务财务报表

Gyre Therapeutics, Inc.

压缩的综合资产负债表编辑资产负债表

(以千为单位，除每股和每股金额)


	2024年9月30日			2023年12月31日
	（未经审计）
资产
流动资产：
现金及现金等价物	$	15,866		$	33,509
开空期银行存款		9,226			—
应收账款和应收票据净额		19,487			15,552
从GNI的其他应收款		1,287			1,287
净存货		6,379			4,281
预付资产		1,051			1,547
其他流动资产		1,513			1,045
总流动资产		54,809			57,221
物业和设备，净额		24,442			23,288
长期应收款（来自GCBP）		4,900			4,722
无形资产-净额		184			205
使用权资产		1,984			489
土地使用权净额		1,479			1,493
递延税款资产		5,161			4,695
长期存单		29,515			23,431
其他资产，非流动资产		2,766			995
总资产	$	125,240		$	116,539
负债，可转换优先股和股本
流动负债:
应付账款	$	303		$	355
递延收入		36			39
应付关联方		1,288			1,369
CVR超额结算现金应付款项		—			1,085
应计费用和其他流动负债		9,553			11,935
应交所得税		2,842			5,054
经营租赁负债，流动负债		694			210
流动负债合计		14,716			20,047
非流动营业租赁负债		1,101			199
递延政府补助		185			213
CVR衍生物负债，非流动		4,900			4,722
认股权证的负债，非流动		5,862			12,835
其他非流动负债		2			49
总负债		26,766			38,065
承诺和事项（注12）
可转换优先股, $0.001面值， 5,000,000授权股份; 无股份和13,151截至2024年9月30日和2023年12月31日的已发行和流通的股份，分别为		—			64,525
股东权益:
普通股，每股面值为 $0.0001；0.001面值资本 400,000,000授权股份数量; 85,769,526股份和 76,595,616截至2024年9月30日和2023年12月31日，发行股份和流通股份分别为		85			77
其他资本公积		134,296			68,179
法定公积金		3,098			3,098
累积赤字		(73,354	)		(85,538	)
累计其他综合损失		(946	)		(1,644	)
Gyre公司股东权益总额（赤字）		63,179			(15,828	)
非控股权益		35,295			29,777
股东权益总额		98,474			13,949
负债，可转换优先股和股本总额	$	125,240		$	116,539

附带的说明是这些简明合并财务报表不可或缺的一部分。

Gyre Therapeutics, Inc.

压缩的合并现金流量表经营及综合收益表

(以千为单位，除每股和每股金额)

（未经审计）


	截至9月30日的三个月						截至9月30日的九个月
	2024			2023			2024			2023
营收	$	25,488		$	32,042		$	77,885		$	86,302
营业费用：
成本支出		958			1,184			2,707			3,386
销售和市场营销		13,699			13,928			40,655			44,695
研发		2,775			3,009			8,312			9,212
一般行政		3,823			1,157			10,645			4,607
总营业费用		21,255			19,278			62,319			61,900
营业收入		4,233			12,764			15,566			24,402
其他收益（费用），净:
净利息收入		523			283			1,201			718
其他费用，净额		(598	)		(1,333	)		(1,226	)		(1,281	)
权证负债公允价值变动		(228	)		—			6,973			—
用于计算每股普通股股东净收益的加权平均股数：		—			(526	)		(68	)		(526	)
税前收入		3,930			11,188			22,446			23,313
所得税准备		(1,074	)		(3,678	)		(5,117	)		(7,816	)
净利润		2,856			7,510			17,329			15,497
净利润归属于非控股权益		1,732			3,534			5,145			7,424
归属于普通股股东的净利润	$	1,124		$	3,976		$	12,184		$	8,073
归属普通股股东的每股净收入：
基本	$	0.01		$	0.06		$	0.14		$	0.13
稀释	$	0.01		$	0.05		$	0.05		$	0.10
用于计算净利润的加权平均股份归属于普通股股东的分享：
基本		85,643,646			63,588,119			84,807,041			63,588,119
稀释		102,640,373			78,904,324			102,505,585			78,907,695

其他综合收益:
净利润	$	2,856		$	7,510		$	17,329		$	15,497
外币转换调整		1,632			340			1,071			(2,396	)
综合收益		4,488			7,850			18,400			13,101
净利润归属于非控股权益		1,732			3,534			5,145			7,424
归属于非控股权益的外币翻译调整		568			153			373			(1,060	)
归属于非控股股东的综合收益		2,300			3,687			5,518			6,364
归属于普通股股东的综合收益	$	2,188		$	4,163		$	12,882		$	6,737

附带的说明是这些简明合并财务报表不可或缺的一部分。

Gyre Therapeutics, Inc.

压缩合并财务报表可转换优先股和股权的条款

(以千为单位，除每股额外数量)

（未经审计）


	可转换的优先股						普通股票				附加实缴资本		法定						其他综合收益累积额				总旋转股东权益			非控制			总计
	分享			金额			股票		金额		资本		储备			累计亏损			损失				（递延）权益			利息			股权
2023年12月31日的余额		13,151		$	64,525			76,595,616	$	77	$	68,179	$	3,098		$	(85,538	)	$	(1,644	)		$	(15,828	)	$	29,777		$	13,949
基于股票的补偿费用		—			—			—		—		11		—			—			—				11			—			11
股票期权行使		—			—			60,297		—		492		—			—			—				492			—			492
可转换优先股转换		(13,151	)		(64,525	)		8,767,333		8		64,517		—			—			—				64,525			—			64,525
外币转换调整		—			—			—		—		—		—			—			(92	)			(92	)		(49	)		(141	)
净利润		—			—			—		—		—		—			7,532			—				7,532			2,403			9,935
2024年3月31日结存余额		—			—			85,423,246		85		133,199		3,098			(78,006	)		(1,736	)			56,640			32,131			88,771
基于股票的补偿费用		—			—			—		—		16		—			—			—				16			—			16
行使的股票期权		—			—			114,528		—		441		—			—			—				441			—			441
外币兑换调整		—			—			—		—		—		—			—			(274	)			(274	)		(146	)		(420	)
净利润		—			—			—		—		—		—			3,528			—				3,528			1,010			4,538
2024年6月30日余额		—			—			85,537,774		85		133,656		3,098			(74,478	)		(2,010	)			60,351			32,995			93,346
股票依据的薪酬费用		—			—			—		—		237		—			—			—				237			—			237
期权行使		—			—			231,752		—		374		—			—			—				374			—			374
CVR负债结算		—			—			—		—		29		—			—			—				29			—			29
外币换算调整		—			—			—		—		—		—			—			1,064				1,064			568			1,632
净利润		—			—			—		—		—		—			1,124			—				1,124			1,732			2,856
截至2024年9月30日的余额		—		$	—			85,769,526	$	85	$	134,296	$	3,098		$	(73,354	)	$	(946	)		$	63,179		$	35,295		$	98,474


	可转换债券优先股						普通股				其他实收资本		法定			留存收益			累计其他综合				总轮股东的			非控制权			总计
	股份			金额			股份		金额		资本		储备						（损失）收益				股本			利息			股本
2022年12月31日的余额		—		$	—			63,588,119	$	64	$	32,795	$	2,660		$	7,395		$	(392	)		$	42,522		$	29,695		$	72,217
外币换算调整		—			—			—		—		—		—			—			503				503			395			898
净利润		—			—			—		—		—		—			2,244			—				2,244			1,973			4,217
2023年3月31日的余额		—			—			63,588,119		64		32,795		2,660			9,639			111				45,269			32,063			77,332
外币翻译调整		—			—			—		—		—		—			—			(2,026	)			(2,026	)		(1,608	)		(3,634	)
净利润		—			—			—		—		—		—			1,853			—				1,853			1,917			3,770
2023年6月30日的余额		—			—			63,588,119		64		32,795		2,660			11,492			(1,915	)			45,096			32,372			77,468
外币翻译调整		—			—			—		—		—		—			—			187				187			153			340
净利润		—			—			—		—		—		—			3,976			—				3,976			3,534			7,510
2023年9月30日的余额		—		$	—			63,588,119	$	64	$	32,795	$	2,660	—	$	15,468		$	(1,728	)	—	$	49,259		$	36,059		$	85,318

附带的说明是这些简明合并财务报表不可或缺的一部分。

Gyre Therapeutics, Inc.

压缩合并报表现金流量表

(以千为单位)

（未经审计）


	截至9月30日的九个月
	2024			2023
经营活动
净利润	$	17,329		$	15,497
调整净利润以计入经营活动现金流量:
股票奖励		264			—
关联公司未纳入合并范围的投资损失		20			1,166
折旧和摊销		1,088			776
非现金租赁费用		445			346
土地使用权摊销		29			30
递延所得税，净额		(410	)		(757	)
呆账费用和其他非现金项目		99			(62	)
存款凭证上应计利息		(775	)		(455	)
长期应收款公允价值变动		(178	)		—
衍生负债公允价值变动		178			—
权证负债公允价值变动		(6,973	)		—
处置固定资产和设备的损失		68			—
运营资产和负债的变化：
应收账款及票据		(3,813	)		2,651
存货		(2,021	)		1,563
预付款及其他资产		(1,783	)		(649	)
应交所得税		(2,231	)		3,188
应付账款		(55	)		(105	)
其他非流动负债		(3	)		(779	)
应付关联方		(82	)		529
应计费用和其他负债		(3,500	)		(46	)
经营租赁负债		1,421			(361	)
经营活动中提供的净现金流量（流出）		(883	)		22,532
投资活动
购置无形资产		(3	)		(68	)
购买存款证书		(14,074	)		(14,335	)
购置固定资产等资产支出		(2,380	)		(6,193	)
出售设备的收益		263			497
用于股权法下投资的现金支付		(1,686	)		(1,000	)
投资活动所使用的净现金		(17,880	)		(21,099	)
筹资活动
递延融资成本		(169	)		—
行使期权所得款项		1,307			—
筹资活动产生的现金净额		1,138			—
汇率变动对现金及现金等价物的影响		(18	)		(529	)
现金及现金等价物净减少		(17,643	)		904
期间初现金及现金等价物余额		33,509			25,175
期末现金及现金等价物余额	$	15,866		$	26,079

补充披露非现金融资和投资活动：
可转换优先股转换	$	64,525		$	—
通过预付转换的非现金获取物业和设备	$	—		$	371
现金流披露的补充信息：
支付的所得税费用	$	7,757		$	5,385

The accompanying notes are an integral part of these condensed consolidated financial statements.

Gyre Therapeutics, Inc.

简明合并 F 附注财务报表（未经审计）


1.	运营性质和流动性

业务描述

Gyre Therapeutics, Inc.（以下简称“公司”、“Gyre”或“合并公司”），原名Catalyst Biosciences, Inc.（“Catalyst”），是一家生物药品公司，最初于1997年3月7日在特拉华州注册，名为Targacept, Inc. Catalyst是一家专注于蛋白酶工程的生物药品公司。在2022年3月停止研发活动之前，Catalyst拥有多个旨在解决补体或凝血系统疾病中未满足的医疗需求的蛋白酶资产。

2023年10月30日，公司完成了《业务合并协议》中所述的交易（“贡献”），该协议在公司截至2023年12月31日的年度报告（“年度报告”）中进行了说明，交易的会计处理为反向资产收购和购买非控制性权益，符合美国（“U.S.”）公认会计原则（“GAAP”）。Continent Pharmaceuticals Inc.（“CPI”）被视为反向资产收购的会计收购方，并作为后期财务报告的前身。CPI在2002年在中华人民共和国（“中国”）注册成立的商业阶段生物药品公司北京Continent Pharmaceuticals Co., Ltd.（以Gyre Pharmaceuticals Co., Ltd.名义经营，“Gyre Pharmaceuticals”）中持有间接控股权。

在贡献完成后，CPI的直接控股公司变为Gyre。公司合计持有Gyre Pharmaceuticals的间接权益。 65.2% Gyre的主要股东是GNI USA, Inc.（“GNI USA”），其间接全资拥有者为GNI Group Ltd.（“GNI 日本”）。Gyre是一家财务可持续的药品公司，在开发和商业化针对器官疾病的小分子抗炎和抗纤维化药物方面具有成功的记录，特别专注于器官纤维化。纤维化疾病代表了一个具有重大的未满足医疗需求的大型患者群体。

流动性

截至2024年9月30日的九个月内，公司净利润为 $17.3 百万，而用于经营活动的净现金为 $0.9 百万。截至2024年9月30日，公司累计亏损为 $73.4 百万及现金及现金等价物为 $15.9 百万根据公司的当前运营计划，管理层相信现有的现金及现金等价物、运营产生的现金流和对资本市场的访问将足以支持公司的运营活动和义务，在这些简明合并基本报表发布后的至少12个月内。


2.	重要会计政策摘要

呈现基础

附表简明综合财务报表包括公司及其受控子公司的账目。所有合并实体之间的公司内账目和交易在合并时被消除。简明综合财务报表已按照通用会计准则编制，并遵循证券交易委员会（“SEC”）对中期报告的要求。根据这些规则的规定，某些依照通用会计准则通常要求的脚注或其他财务信息可以进行精简或省略。这些简明综合财务报表的编制基础与公司年度综合财务报表相同，并在管理层意见中反映了所有调整，仅包括对公司简明综合财务信息进行公平呈现所必需的常规调整。这些简明综合经营业绩和现金流量对任何中期的结果并不一定能反映预期在2024年12月31日结束的年度或未来任何其他年度或中期的结果。

附表简明综合财务报表及相关财务信息应与已提交的年度报告中的综合财务报表一起阅读。

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, allowance of doubtful accounts, long-term receivable, contingent value right (“CVR”) derivative liability, warrant liability, allowance for credit losses, reserves for excess or obsolete inventory, operating lease right-of-use assets and liabilities, recognition of research and development expenses to the appropriate financial reporting period based on the progress of the research and development projects, income taxes, stock-based compensation and useful lives of property and equipment and intangibles with definite lives. The Company bases its estimates on various assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Risks and Uncertainties

The Company is subject to a number of risks associated with companies at a similar stage, including dependence on key individuals, competition from larger and established companies, uncertainty of clinical results, ability to obtain adequate financing to support growth, the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company, and general economic conditions.

Concentration of Credit Risk

In May 2015, a new Deposit Insurance System (“DIS”) managed by the People’s Bank of China was implemented by the Chinese government. Deposits in the licensed banks in mainland China are protected by DIS, up to a limit of Chinese Renminbi (“RMB”) 500,000. The Company maintains cash and deposits at commercial banks in excess of the amount protected by DIS and the Federal Deposit Insurance Corporation and in the event of bankruptcy of one of these financial institutions, the Company may be unable to claim its deposits back in full. Management believes that these financial institutions are of high credit quality and continually monitors the creditworthiness of these financial institutions. As of September 30, 2024 and December 31, 2023, the Company had cash and cash equivalents of $15.9 million and $33.5 million, and long-term certificates of deposit of $29.5 million and $23.4 million, respectively. In addition, the Company had short-term bank deposits of $9.2 million as of September 30, 2024. For the periods ended September 30, 2024 and December 31, 2023, cash and cash equivalents, short-term bank deposits and long-term certificates of deposits exceeded the PRC DIS coverage by $49.7 million and $49.4 million, respectively.

Accounts receivable are typically unsecured and are derived from product sales. The Company manages credit risk related to the accounts receivable through ongoing monitoring of outstanding balances and limiting the amount of credit extended based upon payment history and creditworthiness. Historically, the Company has collected receivables from customers within the credit terms with no significant credit losses incurred.

Concentration of Customer Risk

For the three months ended September 30, 2024, the Company had three customers, Sinopharm Group Co., Ltd. ("Sinopharm"), China Resources Pharmaceutical Group Ltd. (“Resources Pharmaceutical”), and Shanghai Pharmaceuticals Holding Co., Ltd. (“Shanghai Pharmaceuticals”), who accounted for approximately 44.8%, 12.9% and 12.1% of total revenue, respectively. For the three months ended September 30, 2023, the Company had three customers, Sinopharm, Resources Pharmaceutical, and Shanghai Pharmaceuticals, who accounted for approximately 49.3%, 13.7% and 10.8% of total revenue, respectively.

For the nine months ended September 30, 2024, the Company had three customers, Sinopharm, Resources Pharmaceutical, and Shanghai Pharmaceuticals, who accounted for approximately 47.1%, 14.6% and 12.1% of total revenue, respectively. For the nine months ended September 30, 2023, the Company had three customers, Sinopharm, Resources Pharmaceutical, and Shanghai Pharmaceuticals, who accounted for approximately 50.6%, 13.5% and 11.0% of total revenue, respectively. All customers are located in mainland China.

As of September 30, 2024 and December 31, 2023, the Company had one customer Sinopharm, who accounted for approximately 41.6% and 50.5% of accounts receivable, respectively.

Foreign Currency Risk

The RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into other currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. 72.7% of the Company’s cash and cash equivalents, and 100% of the Company’s short-term bank deposits and long-term certificates of deposit as of September 30, 2024, in the amount of $11.5 million, $9.2 million, and $29.5 million, respectively, were denominated in RMB.

Accounting Pronouncements Recently Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The amendments in this ASU are effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this standard as of January 1, 2024. The adoption of this ASU did not have any material impact on the Company’s interim condensed consolidated financial statements.

New Accounting Pronouncements – Issued But Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is permitted. This ASU will result in the required additional disclosures being included in the Company’s consolidated financial statements, once adopted. The Company plans to adopt ASU 2023-09 and related updates as of January 1, 2025. The Company is in the process of assessing the impact of adoption of this standard on its consolidated financial statements.


3.	Fair Value Measurements and Financial Instruments

For a description of the fair value hierarchy and the Company’s fair value methodology, see Note 2 – Summary of Significant Accounting Policies in the Annual Report. There were no significant changes in these methodologies during the nine months ended September 30, 2024. As of September 30, 2024, the Company’s highly liquid money market funds are included within cash equivalents.

下表展示了截至某日期，按公允价值定期计量的资产和负债的公允价值层次结构。 2024年9月30日和2023年12月31日（单位：千美元）：


	2024年9月30日
	一级		二级		三级		总计
金融资产：
货币市场基金(1)	$	3,183	$	—	$	—	$	3,183
长期应收款（来自GCBP）		—		—		4,900		4,900
所有财务资产	$	3,183	$	—	$	4,900	$	8,083

金融负债：
CVR衍生物负债，非流动	$	—	$	—	$	4,900	$	4,900
认股权证的负债，非流动		—		—		5,862		5,862
总金融负债	$	—	$	—	$	10,762	$	10,762


	2023年12月31日
	一级		二级		三级		总计
金融资产：
货币市场基金(1)	$	5,860	$	—	$	—	$	5,860
长期应收款（来自GCBP）		—		—		4,722		4,722
所有财务资产	$	5,860	$	—	$	4,722	$	10,582

金融负债：
CVR衍生负债	$	—	$	—	$	4,722	$	4,722
认股权证的负债，非流动		—		—		12,835		12,835
总金融负债	$	—	$	—	$	17,557	$	17,557

(1)

在附带的简约合并资产负债表中包含在现金及现金等价物中。

由于这些工具的短期到期，现金、应收账款和票据（净额）、其他应收款、应付账款、应付相关方、CVR超额结算现金应付及应计负债的账面价值近似于其公允价值。

截至2024年9月30日的九个月和截至2023年12月31日的年末。, there were 没有一级和二级之间的公允价值计量转移及没有三级资产和负债的转移。

长期应收款和衍生负债

在2022年12月26日签署的业务合并协议的同时，Catalyst和权利代理人（在CVR协议中定义）签署了一份有条件价值权利协议（“CVR协议”），并于 2023年3月29日根据该协议，截止到2023年1月5日持有Catalyst普通股的每位股东（每位为“CVR持有者”），不包括GNI 日本和GNI 香港有限公司（“GNI HK”），每持有一股Catalyst普通股将收到一个合同CVR。每个CVR使持有者有权在未来获得某些现金支付。

The long-term receivable and the corresponding CVR derivative liability, noncurrent relate to the asset purchase agreement with GC Biopharma Corp. (“GCBP”). The fair value of this long-term receivable and derivative liability is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The estimated fair value of the long-term receivable and CVR derivative liability, noncurrent was determined based on the anticipated amount and timing of projected cash flows to be received from GCBP pursuant to the GCBP asset purchase agreement discounted to their present values using an estimated discount rate of 5.05%. As of September 30, 2024, the Company expects to receive a $5.0 百万 hold-back payment from GCBP in the first quarter of 2025, which will be distributed, net of expenses, to the CVR Holders. The change in fair value of the long-term receivable from GCBP and the corresponding CVR derivative liability, noncurrent was recorded in interest and other income, net on the condensed consolidated statement of operations and comprehensive income.

Warrant Liability

In October 2023, Catalyst entered into a Securities Purchase Agreement for a private placement with GNI USA (the “Private Placement”). The Private Placement closed immediately following the Contributions, on October 30, 2023. Upon closing of the Private Placement, the Company issued 811 shares of Series X Convertible Preferred Stock, par value $0.001 per share (the “Convertible Preferred Stock”), and warrants to purchase up to 811 shares of Convertible Preferred Stock (the “Preferred Stock Warrants”) to GNI USA for an aggregate purchase price of approximately $5.0 million. The Preferred Stock Warrants are immediately exercisable at an exercise price of $4,915.00 per share of Convertible Preferred Stock and expire on October 30, 2033. The number of shares of common stock issuable upon exercise and conversion of the Preferred Stock Warrants is 540,666. The Company accounted for the Private Placement as a non-arm’s length transaction. The Preferred Stock Warrants were initially recognized at fair value upon issuance and the remaining proceeds from the Private Placement were allocated to the Convertible Preferred Stock.

The Preferred Stock Warrants are freestanding financial instruments classified as a warrant liability on the Company’s condensed consolidated balance sheet. The Preferred Stock Warrants are revalued in each reporting period with the change in fair value recorded as change in fair value of warrant liability in other income (expense), net on the condensed consolidated statement of operations and comprehensive income.

The fair value of the warrant liability is estimated based on the Black-Scholes option pricing model using the following weighted-average assumptions:


	September 30, 2024			December 31, 2023
Share price	$	12.54		$	25.70
Exercise price	$	4,915.00		$	4,915.00
Dividend yield		—	%		—	%
Risk-free interest		3.70	%		3.88	%
Term (years)		9.08			9.83
Expected volatility		82.00	%		84.00	%

The following table sets forth the changes in the estimated fair value of the Company’s Level 3 financial assets and liabilities (in thousands):


	Long-term receivable		CVR derivative		Warrant
	from GCBP		liability, noncurrent		liability
Balance at December 31, 2023	$	4,722	$	4,722	$	12,835
Changes in fair value		178		178		(6,973	)
Balance at September 30, 2024	$	4,900	$	4,900	$	5,862

Financial Instruments

现金及现金等价物包括以下内容（以千计）：


2024年9月30日	摊销成本		毛额未实现收益		毛额未实现损失		预估公允价值
货币市场基金（现金等价物）	$	3,183	$	—	$	—	$	3,183
所有财务资产	$	3,183	$	—	$	—	$	3,183
分类为:
现金及现金等价物							$	3,183
所有财务资产							$	3,183


2023 年 12 月 31 日	摊销成本		总计未实现收益		总计未实现损失		估计的公平的价值
货币市场基金（现金等价物）	$	5,860	$	—	$	—	$	5,860
金融资产总额	$	5,860	$	—	$	—	$	5,860
归类为：
现金和现金等价物							$	5,860
金融资产总额							$	5,860


4.	资产负债表成分

净存货

存货净额，减除储备 $5,000 和 $46,000 截至2024年9月30日和2023年12月31日，分别包括以下元件(以千为单位)：


	2024年9月30日		2023年12月31日
原材料	$	1,039	$	919
进行中的工作		3,537		1,997
成品		1,803		1,365
净存货	$	6,379	$	4,281

2024年9月30日和2023年12月31日的存货准备和减值准备金额不大。

应计费用及其他流动负债包括以下方面：

应计费用和其他流动负债如下（以千为单位）：


	2024年9月30日		2023年12月31日
应计工资及福利费用	$	4,914	$	5,790
应计费用 - 销售费用		1,054		44
供应商报销		1,351		2,247
应计费用 - 总务和行政		924		1,190
应计销售折扣		879		903
应计费用 - 研发费用		215		161
递延政府补助		40		40
员工报销		14		648
应计专业服务费		—		837
其他应计负债		162		75
应计费用和其他流动负债	$	9,553	$	11,935

应收账款和票据净额

应收账款和票据净额包括以下内容（以千为单位）：


	2024年9月30日			2023年12月31日
应收账款	$	19,538		$	15,204
应收票据		91			389
信贷损失准备		(142	)		(41	)
应收账款和应收票据净额	$	19,487		$	15,552

固定资产，净值

净的物业和设备包括以下内容（以千为单位）：


	2024年9月30日			2023年12月31日
建筑物	$	19,122		$	12,289
建设中的工程		388			7,875
机械和电子设备		9,400			6,598
家具和固定装置		668			606
汽车		187			185
234,036		29,765			27,553
减：累计折旧		(5,323	)		(4,265	)
物业和设备，净值	$	24,442		$	23,288

开多期投资根据权益法进行评估

2024年6月28日，Gyre制药与其他投资者签订了合伙协议，作为有限合伙人并承担付款义务。 $4.2 百万在2024年2月6日后的某个 18.90% 在合伙企业中的股权投资。根据合伙协议，Gyre制药作为有限合伙人，不得参与任何与投资业务管理相关的活动。然而，Gyre制药可以任命一名成员参加合伙企业的咨询委员会。截至2024年9月30日，公司对合伙企业的总投资和公司在该关联企业的长期投资的账面价值为 $1.7 百万和 $1.7 百万，分别。


5.	Intangible Assets

The gross carrying amounts and accumulated amortization of the Company’s intangible assets with determinable lives as of September 30, 2024 and December 31, 2023 were as follows (in thousands):


	September 30, 2024
	Gross carrying amount		Accumulated amortization			Intangible assets, net
Intangible assets with finite lives:
Technological know-how	$	435	$	(307	)	$	128
Computer software		176		(120	)		56
Total intangible assets	$	611	$	(427	)	$	184


	December 31, 2023
	Gross carrying amount		Accumulated amortization			Intangible assets, net
Intangible assets with finite lives:
Technological know-how	$	430	$	(290	)	$	140
Computer software		171		(106	)		65
Total intangible assets	$	601	$	(396	)	$	205

Intangible assets are carried at cost less accumulated amortization and impairment, if applicable, and the amortization expense is recorded in operating expenses. The weighted average amortization period for the intangible assets as of September 30, 2024 is 4.6 years.

Amortization expense was $10,000 and $14,000 for the three months ended September 30, 2024 and 2023, respectively. Amortization expense was $26,000 and $107,000 for the nine months ended September 30, 2024 and 2023, respectively. Based on finite-lived intangible assets recorded as of September 30, 2024, the estimated future amortization expense is as follows (in thousands):


	Estimated amortization expense
2024	$	9
2025		35
2026		35
2027		34
2028		19
Thereafter		52
Total	$	184


6.	收入

公司的产品收入主要来自ETUARY的销售。ETUARY的销售占 99.2% 和 99.0% 总收入的比例分别为2024年和2023年截至9月30日的三个月，分别占2024年和2023年截至9月30日的九个月 99.2% 和 98.9% 总收入的比例

药品产品的销售

公司主要通过销售ETUARY和某些普通药品来获得营业收入。经销商是公司的直接客户，销售给经销商占了营业收入的 100.0% ETUARY的营业收入。经销商将ETUARY卖给包括医院和其他医疗机构以及药店在内的售点。

迄今为止，产品退货并不显著，公司认为无需记录产品退货准备金。公司的产品收入在交付给客户时被确认，即客户控制产品的时候。药品销售收入分别为2024年和2023年截至于9月30日的三个月内 $25.5 百万和 $32.0 百万。药品销售收入分别为四分之三结束于2024年和2023年的九月三十日。药品销售收入为 $77.9 百万和 $86.3 百万截至2024年和2023年9月30日的九个月，所有销售均在中国大陆产生。截至2024年9月30日的三个月和九个月，确认的递延营业收入都不重要。


7.	租赁

经营租赁

在2024年4月，Gyre制药公司与其新的企业总部达成了一项租赁协议，位于中国北京的办公空间约为 2,130 平方米，租赁于 2027年6月到期。2022年，Gyre制药公司获得了一处位于中国郑州的办公空间的租赁，面积约为 180 平方米，该租赁在 2024年7月并定于到期于 2026年8月2023年11月，公司在加利福尼亚州圣地亚哥为其美国总部 secured 了一份租约，租约定于到期于 2027年第一季度.

公司还有多处开空租赁物业用作办公室和员工宿舍。公司在2024年及2023年截至9月30日的三个月期间录得总共 $19,000 和 $22,000 的营业费用。公司录得总计 $54,000 和 $72,000 在截至2024年9月30日和2023年9月30日的九个月期间，开空租赁费用分别为。开空租赁费用金额记录在附带的综合合并运营和全面收益的报表中的营业费用中。

截至2024年9月30日，公司记录了总计使用权资产为 $2.0 百万及总计租赁负债为 $1.8 百万在附带的综合合并资产负债表中。

截至2024年9月30日和2023年，公司的营运租赁费用分别为 $0.3 百万Just the Cheese $0.1 百万截至2024年9月30日和2023年，公司的营运租赁费用分别为 $0.5 百万和 $0.4 百万分别为。2024年和2023年截至9月30日的三个月和九个月的变量租金支付不重要。

与经营租赁相关的补充现金流信息如下（按千计）：


	截至9月30日的九个月
	2024		2023
用于计量租赁负债的现金支付	$	631	$	364

用于计算租金现值的现值假设如下：


	2024年9月30日			2023年12月31日
加权平均剩余租赁期限	2.6 年			2.2 年
加权平均折扣率		4.76	%		4.78	%

截至 2024年9月30日，公司经营租赁合同未折现的未来最低支付额如下（以千计）：


	金额
2024年剩下的时间。	$	240
2025		766
2026		617
2027		286
总未折现租赁支付		1,909
减去：隐含利息		(114	)
租赁负债的总额		1,795
减：租赁负债的流动部分		(694	)
租赁负债，减去流动部分	$	1,101

公司需要保留安防-半导体押金 $0.3 百万与各种租赁相关的押金金额已包含在公司简明综合资产负债表的其他资产中

土地使用权

截至2024年9月30日，公司持有北京顺义区两个土地使用权，有效期至2053年，以及河北沧州的土地使用权，有效期从2067年至2070年。这些土地共计面积约 66,559 平方米，用作制造业设施。截至2024年9月30日，这些地块的合计土地使用权、净资产为$1.5 百万.


8.	Stockholders’ Equity

Common Stock

Common stock reserved for future issuance is as follows:


	September 30, 2024			December 31, 2023
Options issued and outstanding		18,545,620	[1]		18,280,548
Preferred Stock Warrants issued and outstanding		540,666			540,666
Convertible Preferred Stock issued and outstanding		—			8,767,332
Total common stock reserved		19,086,286			27,588,546

[1] Includes 7,701,462 options exercisable for shares of common stock, which underlying shares of common stock were transferred in the name of the Company to Futu Network Technology Limited, the stock plan administrator of the 2023 Omnibus Incentive Sub-Plan for Chinese Participants.

Restricted Net Assets

Under PRC laws and regulations, Gyre Pharmaceuticals is subject to restrictions on foreign exchange and cross-border cash transfers, including to parent companies and U.S. stockholders. The ability to distribute earnings to the parent companies and U.S. stockholders is also limited. Current PRC regulations permit Gyre Pharmaceuticals to pay dividends to BJContinent Pharmaceuticals Limited (“BJC”) only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. Amounts restricted include paid-in capital and the statutory reserves of Gyre Pharmaceuticals. The aggregate amounts of restricted capital and statutory reserves of the relevant subsidiaries not available for distribution were $64.3 million as of September 30, 2024 and December 31, 2023.

Statutory Reserve

Gyre Pharmaceuticals is required to set aside at least 10% of its after-tax profits as the statutory reserve fund until the cumulative amount of the statutory reserve fund reaches 50% or more of its registered capital, if any, to fund its statutory reserves, which are not available for distribution as cash dividends. At the Company’s discretion, the Company may allocate a portion of after-tax profits based on PRC accounting standards to a discretionary reserve fund.

There were no appropriations to these reserves during the nine months ended September 30, 2024 or during the year ended December 31, 2023.


9.	Convertible Preferred Stock

In December 2022, Catalyst issued an aggregate of 12,340 shares of Convertible Preferred Stock to GNI Japan and GNI HK in connection with the F351 Asset Acquisition (see Note 1 — Organization and Nature of Operations of the Annual Report), which were subsequently transferred to GNI USA in October 2023.

In October 2023, immediately following the closing of the Contributions, the Company issued 811 shares of Convertible Preferred Stock and 811 Preferred Stock Warrants to GNI USA under the Private Placement. For additional information, see Note 3 — Fair Value Measurements and Financial Instruments.

In November 2023, GNI USA provided notice to the Company to convert its 13,151 shares of Convertible Preferred Stock. Each share of Convertible Preferred Stock was convertible into approximately 666.67 shares of common stock. On January 22, 2024, subject to the terms and conditions of the Convertible Preferred Stock Certificate of Designation, 8,767,333 shares of common stock were issued to GNI USA upon such conversion.


10.	Stock Based Compensation

2023 Omnibus Incentive Plan

The 2023 Omnibus Incentive Plan was approved by Catalyst’s stockholders in August 2023 and ratified by Gyre’s board of directors (the “Board”) in October 2023. The 2023 Omnibus Incentive Plan became effective on October 30, 2023. The 2023 Omnibus Incentive Plan permits the Company to issue up to 17,845,496 shares of common stock and will automatically increase by the lesser of (i) 5% of the total number of outstanding shares of common stock on December 31st of the preceding calendar year and (ii) such smaller number of shares of common stock as determined by the Board on the first day of each fiscal year beginning on January 1, 2024. On January 1, 2024, pursuant to the automatic increase in the number of shares reserved, an additional 3,829,780 shares of common stock were reserved and made available for issuance under the 2023 Omnibus Incentive Plan.

The following table summarizes stock option activity considering the conversion of Gyre Pharmaceuticals options to Gyre options to purchase shares of Gyre common stock upon completion of the Contributions:


	Number of Shares Underlying Outstanding Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Outstanding — December 31, 2023		18,280,548		$	1.49		6.9
Options granted		680,732		$	10.00
Options exercised		(406,577	)	$	3.21
Options forfeited and cancelled		(9,083	)	$	16.24
Outstanding — September 30, 2024		18,545,620		$	1.74		6.7
Exercisable — September 30, 2024		17,867,835		$	0.70		6.6

Valuation Assumptions

The Company estimated the fair value of stock options granted using the Black-Scholes option-pricing formula and a single option award approach. Due to its limited relevant historical data, the Company estimated its volatility considering a number of factors, including the use of the volatility of comparable public companies. The expected term of options granted under the 2023 Omnibus Incentive Plan, all of which qualify as “plain vanilla” per SEC Staff Accounting Bulletin 107, is determined based on the simplified method due to the Company’s limited relevant history. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option. This fair value is being amortized ratably over the requisite service periods of the awards, which is generally the vesting period.

Since no stock options were granted during the nine months ended September 30, 2023, all weighted-average assumptions for that period were not applicable. The fair value of employee stock options granted during the three and nine months ended September 30, 2024 and 2023 was estimated using the following weighted-average assumptions:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024			2023	2024			2023
Risk-free interest rate (%)		3.7	%	n/a		3.7	%	n/a
Expected option life (in years)		5.9		n/a		5.9		n/a
Expected dividend yield (%)		—	%	n/a		—	%	n/a
Volatility (%)		84.1	%	n/a		84.1	%	n/a
Weighted average share price of the Company (USD per share)	$	9.98		n/a	$	10.00		n/a

Total stock-based compensation expense recognized was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
General and administrative	$	237	$	—	$	264	$	—
Total stock-based compensation expense	$	237	$	—	$	264	$	—

As of September 30, 2024, the Company had an unrecognized stock-based compensation expense of $4.7 million, related to unvested stock option awards, which is expected to be recognized over an estimated weighted-average period of 3.2 years.


11.	Net Income per Share (“EPS”) Attributable to Common Stockholders

The dilutive effect of outstanding stock options and warrants is calculated using the treasury stock method. Stock options and warrants are anti-dilutive and excluded from the diluted EPS attributable to common stock calculation if the exercise price exceeds the average market price of the common shares.

The following table sets forth the computation of EPS attributable to common stockholders, basic and diluted (in thousands, except share and per share data):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2024			2023		2024		2023
Numerator:
Net income	$	2,856		$	7,510	$	17,329	$	15,497
Less: Allocation of undistributed earnings to noncontrolling interest		1,732			3,534		5,145		7,424
Net income attributable to common stockholders - basic	$	1,124		$	3,976	$	12,184	$	8,073
Less: Change in fair value of warrant liability		(228	)		—		6,973		—
Net income attributable to common stockholders - diluted	$	1,352		$	3,976	$	5,211	$	8,073

Denominator:
Basic common shares outstanding:
Weighted average common shares outstanding		85,643,646			63,588,119		84,807,041		63,588,119
Weighted average shares used in calculating net income per share attributable to common stockholders, basic		85,643,646			63,588,119		84,807,041		63,588,119

Dilutive potential common shares:
Weighted average of common stock options		16,765,219			15,316,205		16,722,627		15,319,576
Weighted average of Convertible Preferred Stock (as converted)		—			—		703,946		—
Weighted average of Preferred Stock Warrants (as converted)		231,508			—		271,971		—
Weighted average shares used in calculating net income per share attributable to common stockholders, diluted		102,640,373			78,904,324		102,505,585		78,907,695

Net income per share attributable to common stockholders:
Basic	$	0.01		$	0.06	$	0.14	$	0.13
Diluted	$	0.01		$	0.05	$	0.05	$	0.10

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Options to purchase common stock		922,960		—		870,386		—
Total		922,960		—		870,386		—


12.	Commitments and Contingencies

Contingent Value Rights Agreement

Each CVR under the CVR Agreement entitles the holder to receive (i) certain cash payments from the net proceeds related to the disposition of Catalyst’s legacy assets, (ii) 100% of the excess cash (net of all current or contingent

liabilities, including transaction-related expenses) retained by the Company in excess of $1.0 million as of the closing date of the Contributions and (iii) 100% of the excess amount, by which the preapproved costs to manage, negotiate, settle and finalize certain third party claims exceed the costs actually incurred with respect to such claims. The CVRs are not transferable, except in certain limited circumstances as provided for in the CVR Agreement, will not be certificated or evidenced by any instrument, and will not be registered with the SEC or listed for trading on any exchange.

In February 2023, Catalyst sold its legacy rare bleeding disorder program to GCBP. As a result, the Company distributed the net cash proceeds received from the GCBP asset sale of $0.2 million to the CVR Holders as well as recorded a $4.5 million long-term CVR derivative liability for the future distribution of the hold-back amount to be received in May 2025. As of December 31, 2023, the carrying value of the CVR derivative liability was $4.7 million on the condensed consolidated balance sheet. Refer to Note 3 — Fair Value Measurements and Financial Instruments for additional information regarding the CVR derivative liability and GCBP asset sale.

On October 30, 2023, pursuant to the CVR Agreement, the Company recorded a $1.1 million CVR excess closing cash payable upon closing of the Contributions. As of September 30, 2024, the CVR Holders have received all requisite cash payable under the CVR Agreement and there are no outstanding distributions.

Litigation and Legal Matters

The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company’s condensed consolidated financial statements.

Purchasing Commitments

Property and Equipment

The Company’s commitments related to purchase of property and equipment contracted but not yet reflected in the condensed consolidated financial statements were $1.6 million as of September 30, 2024 and were expected to be incurred within one year.

F351

In September 2020, Gyre Pharmaceuticals entered into an intellectual property (“IP”) transfer agreement (the “F351 Transfer Agreement”) with GNI Japan and certain of its wholly owned subsidiaries (the “GNI Group” or “GNI”). According to the F351 Transfer Agreement, Gyre Pharmaceuticals acquired the exclusive right to use Hydronidone IP rights in mainland China and the right of first offer for the global IP rights (the “F351 IP Rights”).

Under the F351 Transfer Agreement, in exchange for the F351 IP Rights, Gyre Pharmaceuticals is obligated to pay GNI Group $4.7 million upon submission of the F351 New Drug Application (the “NDA”) to Center for Drug Evaluation of the National Medical Products Administration (the “NMPA”) of the PRC, $1.2 million after the NDA passes the NMPA’s Center for Food and Drug Review and Inspection’s on-site registration inspection for the F351 product, and $7.1 million upon NMPA’s approval of the NDA.

Research and Development Programs

In addition to the F351 program, as of September 30, 2024, Gyre Pharmaceuticals has committed to allocate $21.3 million toward future research and development activities for various programs.


13.	Income Taxes

During the three and nine months ended September 30, 2024 and 2023, the Company recorded the following income tax provision (in thousands) and effective tax rate:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Income tax provision	$	1,074		$	3,678		$	5,117		$	7,816
Effective tax rate		27.33	%		32.87	%		22.80	%		33.53	%

The change of effective tax rate for the three and nine months ended September 30, 2024 and 2023 was primarily due the consummation of the Contributions in October 2023 and the fluctuation of the nondeductible expenses of Gyre Pharmaceuticals.

As of September 30, 2024, after consideration of certain limitations (see below), the Company had approximately $193.5 million federal and $10.5 million state net operating loss (“NOL”) carryforwards for U.S. tax purposes available to reduce future taxable income which, if unused, will begin to expire in 2037 for federal and 2034 for state tax purposes. The federal NOL carryforward includes $191.9 million that have an indefinite life.

If the Company experiences a greater than 50% aggregate change in ownership over a three-year period (a Section 382 ownership change), utilization of its pre-change NOL carryforwards are subject to annual limitation under Section 382 of the Internal Revenue Code (California has similar provisions). The annual limitation is determined by multiplying the value of the Company’s stock at the time of such ownership change by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization. The Company determined that ownership changes under Section 382 occurred on December 31, 2007, August 20, 2015, April 13, 2017, February 15, 2018, February 18, 2020, and December 26, 2022. Approximately $156.5 million and $75.2 million of the NOL carryforwards will expire unutilized for federal and California state income tax purposes, respectively. The ability of the Company to use its remaining NOL and tax credit carryforwards may be further limited if the Company experiences a Section 382 ownership change as a result of future changes in its stock ownership.


14.	Related Party Transactions

Research and Development with GNI

Research and development fees paid to GNI during the three and nine months ended September 30, 2024 were $0.1 million and $0.2 million, respectively. No research and development fees were paid to GNI during the three and nine months ended September 30, 2023. As of September 30, 2024 and December 31, 2023, the Company had $1.3 million and $1.4 million related parties payable due to GNI.

Other Receivables from GNI

As of September 30, 2024 and December 31, 2023, the Company had recorded $1.3 million in other receivables from GNI, of which $0.8 million was from CPI’s restructuring transaction (see Note 8 – Restructuring in the Annual Report) and $0.5 million was from Gyre’s cost sharing with GNI.


15.	Employee Benefit Plans

Mainland China Contribution Plan

Pursuant to relevant PRC regulations, the Company is required to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contribution for each employee is based on a percentage of the employee’s current compensation as required by the local government. The contributions are charged to profit or loss as they become payable in accordance with the rules of the central pension scheme. The total

contributions for such employee benefits were $1.4 million and $1.2 million for the three months ended September 30, 2024 and 2023, respectively. The total contributions for such employee benefits were $3.8 million and $3.2 million for the nine months ended September 30, 2024 and 2023, respectively.

Defined-Contribution Savings Plan

In the U.S., the Company maintains a defined-contribution savings plan pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended. The plan is available to employees who meet the minimum age and length of service requirements. The contributions made during the three and nine months ended September 30, 2024 were immaterial.


16.	Segment Information

The Company is a consolidated entity comprised of two distinct operating segments: Gyre Pharmaceuticals and Gyre after the Contributions. The Company’s reportable segments are based upon internal organizational structure, the manner in which operations are managed, the criteria used by CODM to evaluate segment performance, the availability of separate financial information, and overall materiality considerations. All Gyre’s operations are within the U.S., while all of Gyre Pharmaceuticals’ operations are in mainland China.

Gyre Pharmaceuticals

Gyre Pharmaceuticals has one major commercial drug product, ETUARY, and several product candidates in pre-clinical and clinical development. Gyre Pharmaceuticals’ product revenues are mainly generated from the sale of ETUARY and certain generic drugs. Gyre Pharmaceuticals primarily sells its pharmaceutical products to distributors in the PRC, who ultimately sell the products to hospitals, other medical institutions and pharmacies. Gyre Pharmaceuticals also generates revenue from license agreements. However, the license agreements did not generate any revenue for the three and nine months ended September 30, 2024 and 2023.

Gyre

Gyre is a biopharmaceutical company focused on the development and commercialization of F351 for the treatment of non-alcoholic steatohepatitis-associated liver fibrosis in the United States. Other than the IP associated with F351 in the U.S., Gyre has no other product candidates since the Company sold all of its legacy IP assets prior to the closing of the Contributions. Subsequent to the closing of the Contributions, Gyre has not generated any revenue.

Other

Other represents the financial information from other subsidiaries, consisting of mainly CPI, GNI HK, and Continent Pharmaceuticals U.S., Inc. During the year ended December 31, 2023, prior to the Contributions, CPI divested almost all of its assets other than its 56.0% indirect ownership interest in Gyre Pharmaceuticals (see Note 8 – Restructuring in the Annual Report).

Segment information for the three and nine months ended September 30, 2024 and 2023 is as follows (in thousands):


	Three Months Ended September 30, 2024
	Gyre Pharmaceuticals		Gyre			Other			Consolidated
Revenues	$	25,488	$	—		$	—		$	25,488
Cost of revenues		958		—			—			958
Gross profit		24,530		—			—			24,530
Operating expenses excluding cost of revenues:
Selling and marketing		13,699		—			—			13,699
Research and development		2,553		222			—			2,775
General and administrative		2,225		1,593			5			3,823
Total operating expenses excluding cost of revenues		18,477		1,815			5			20,297
Income (loss) from operations	$	6,053	$	(1,815	)	$	(5	)	$	4,233

Supplemental disclosure of stock-based compensation expense:
General and administrative	$	—	$	237		$	—		$	237
Stock-based compensation total	$	—	$	237		$	—		$	237


	Nine Months Ended September 30, 2024
	Gyre Pharmaceuticals		Gyre			Other			Consolidated
Revenues	$	77,885	$	—		$	—		$	77,885
Cost of revenues		2,707		—			—			2,707
Gross profit		75,178		—			—			75,178
Operating expenses excluding cost of revenues:
Selling and marketing		40,655		—			—			40,655
Research and development		7,639		673			—			8,312
General and administrative		7,031		3,608			6			10,645
Total operating expenses excluding cost of revenues		55,325		4,281			6			59,612
Income (loss) from operations	$	19,853	$	(4,281	)	$	(6	)	$	15,566

Supplemental disclosure of stock-based compensation expense:
General and administrative	$	—	$	264		$	—		$	264
Stock-based compensation total	$	—	$	264		$	—		$	264


	Three Months Ended September 30, 2023
	Gyre Pharmaceuticals		Gyre		Other			Consolidated
Revenues	$	32,042	$	—	$	—		$	32,042
Cost of revenues		1,184		—		—			1,184
Gross profit		30,858		—		—			30,858
Operating expenses excluding cost of revenues:
Selling and marketing		13,928		—		—			13,928
Research and development		3,009		—		—			3,009
General and administrative		1,159		—		(2	)		1,157
Total operating expenses excluding cost of revenues		18,096		—		(2	)		18,094
Income from operations	$	12,762	$	—	$	2		$	12,764

Supplemental disclosure of stock-based compensation expense:
Stock-based compensation total	$	—	$	—	$	—		$	—


	Nine Months Ended September 30, 2023
	Gyre Pharmaceuticals		Gyre		Other			Consolidated
Revenues	$	86,302	$	—	$	—		$	86,302
Cost of revenues		3,386		—		—			3,386
Gross profit		82,916		—		—			82,916
Operating expenses excluding cost of revenues:
Selling and marketing		44,695		—		—			44,695
Research and development		9,212		—		—			9,212
General and administrative		4,055		—		552			4,607
Total operating expenses excluding cost of revenues		57,962		—		552			58,514
Income (loss) from operations	$	24,954	$	—	$	(552	)	$	24,402

Supplemental disclosure of stock-based compensation expense:
Stock-based compensation total	$	—	$	—	$	—		$	—

The table below presents total assets as of September 30, 2024 and December 31, 2023.


	September 30, 2024
	Gyre Pharmaceuticals		Gyre		Other		Consolidated
Total assets	$	113,682	$	10,646	$	912	$	125,240


	December 31, 2023
	Gyre Pharmaceuticals		Gyre		Other		Consolidated
Total assets	$	101,761	$	13,865	$	913	$	116,539

The table below only includes cash outflows for the purchase of property and equipment and excludes non-cash activities.


	Nine Months Ended September 30, 2024
	Gyre Pharmaceuticals		Gyre		Other		Consolidated
Purchase of property and equipment	$	2,366	$	14	$	—	$	2,380


	Nine Months Ended September 30, 2023
	Gyre Pharmaceuticals		Gyre		Other		Consolidated
Purchase of property and equipment	$	6,193	$	—	$	—	$	6,193


17.	Subsequent Events

None.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this Quarterly Report on Form 10-Q (this “Quarterly Report”), unless otherwise specified, references to “we,” “our,” “us” and “our company” refer to Gyre Therapeutics, Inc. and our majority indirectly owned subsidiary, Beijing Continent Pharmaceuticals Co., Ltd. (d/b/a Gyre Pharmaceuticals Co., Ltd.) (“Gyre Pharmaceuticals”). The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes that appear in this Quarterly Report and with the audited consolidated financial statements and related notes that are included as part of our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”).

In addition to historical information, this Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“the Exchange Act”). Forward-looking statements are identified by words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially” “predict,” “should,” “will,” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. For example, forward-looking statements include any statements regarding: the strategies, prospects, plans, expectations or objectives of management for future operations or the distribution of cash to Company stockholders, the benefits that may be derived from product candidates or the commercial or market opportunity in any target indication, our ability to protect intellectual property rights, our anticipated operations, financial position, revenues, costs or expenses, future economic conditions or performance, and statements of belief and any assumptions underlying any of the foregoing. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — “Risk Factors,” and in Part I - Item 1A – “Risk Factors” in the Annual Report. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this Report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Overview

We are a financially-sustainable commercial-stage biotechnology company with a record of success in developing and commercializing small-molecule anti-inflammatory and anti-fibrotic drugs targeting organ diseases, focusing specifically on organ fibrosis. Fibrotic diseases represent a large patient population with significant unmet medical needs. Fibrosis involves a complex, multi-stage process with multiple pathways. While there are numerous potential targets for anti-fibrotic therapy, both established and emerging, addressing a single molecular pathway may not be sufficient to prevent, halt, or reverse fibrosis.

Our strategy is to use our experience in the successful development and commercialization of ETUARY® (Pirfenidone) to expand into new indications and develop similar drug candidates. Pirfenidone, the first anti-fibrotic drug approved for idiopathic pulmonary fibrosis (“IPF”) in Japan, the European Union, the United States, and the People’s Republic of China (“PRC”), is a small molecule drug that inhibits the synthesis of Transforming Growth Factor (“TGF”)-ß1, Tumor Necrosis Factor-α, and other fibrosis and inflammation modulators. We have obtained approval for ETUARY (pirfenidone) in the PRC for IPF.

Gyre Pharmaceuticals successfully advanced Pirfenidone from research and development to commercialization in the PRC for the treatment of IPF. In addition to IPF, Pirfenidone is undergoing three additional Phase 3 clinical trials for connective tissue disease-associated interstitial lung diseases (sclerosis-related interstitial lung disease and dermatomyositis-related interstitial lung disease) and pneumoconiosis to broaden its indications and market. In May 2024, Gyre Pharmaceuticals executed a comprehensive agreement with Jiangsu Wangao Pharmaceuticals Co., Ltd. to acquire the commercial rights to nintedanib, a small-molecule drug for the treatment of IPF. With this acquisition, we acquired the other product approved for the treatment of IPF, which is currently approved globally for the treatment of IPF. Nintedanib is expected to provide patients more choices and benefits, and further enhance Gyre Pharmaceuticals’ leading position in the pulmonary fibrosis market. Gyre Pharmaceutical is planning to initiate commercialization of the nintedanib product in the PRC in 2025, which is anticipated to offset any declines in ETUARY sales as a result of the fluctuations in the Chinese economy significantly affecting demand for anti-fibrosis drugs and decreasing healthcare spending generally.

F351, our lead development candidate in both the United States and the PRC, is a structural derivative of ETUARY (Pirfenidone). It is a new oral chemical entity with an anti-fibrotic, TGF-ß1-targeting mechanism of action. Studies suggest that F351 and its major metabolites have minimal drug-drug interaction risks. We are prioritizing F351 for the treatment of liver fibrosis due to the large potential addressable market and significant unmet need.

Gyre Pharmaceuticals has completed a Phase 2 trial of F351 in the PRC for chronic hepatitis B (“CHB”)-associated liver fibrosis. The Phase 2 trial showed that F351 was well-tolerated without notable toxicity and patients treated showed statistically-significant improvement of liver fibrosis, with the best efficacy results achieved at 270 mg/day dosing. Based on these results, a confirmatory Phase 3 trial is ongoing in the PRC with a primary endpoint of the reduction of the liver fibrosis score (Ishak Scoring System) by at least one stage after taking F351 in combination with Entecavir. In October 2024, the last patient completed the 52-week pivotal Phase 3 trial. Gyre Pharmaceuticals expects to report top-line data from this trial by the first quarter of 2025.

In the United States, we have completed a Phase 1 clinical trial of F351 in healthy volunteers. Following results from the PRC Phase 3 trial in CHB-associated liver fibrosis and pending approval of an IND submission, we expect to initiate a Phase 2 trial to evaluate F351 for the treatment of metabolic dysfunction-associated steatohepatitis (MASH )-associated liver fibrosis in 2025. We cannot guarantee that a Phase 2 trial will be initiated or estimate the funding needed for such trial at this time, but may need to raise additional capital to fund this program.

In parallel, we are also conducting a randomized, double-blind, placebo-controlled Phase 2 clinical trial in the PRC to assess the safety and efficacy of F573, a caspase inhibitor for the treatment of acute/acute on-chronic liver failure. In addition, in May 2024, we obtained the approval from the PRC’s National Medical Products Administration (“NMPA”) for the IND to launch a new clinical trial in the PRC of another new drug candidate, F230, a selective endothelin receptor agonist for the treatment of pulmonary arterial hypertension. We are preparing for the anticipated launch of the clinical trial in the PRC. We are also evaluating F528, a novel anti-inflammation agent that targets the inhibition of multiple inflammatory cytokines, in preclinical studies as a potential first-line therapy for the treatment of chronic obstructive pulmonary disease.

In June 2024, Gyre Pharmaceuticals received approval from the NMPA for avatrombopag maleate tablets for the treatment of thrombocytopenia (“TP”) associated with chronic liver disease (“CLD”) in adult patients undergoing elective diagnostics procedures or therapy. TP is the most common hematologic complication in patients with CLD and can be life threatening in severe cases. Avatrombopag is an oral thrombopoietin receptor agonist. Avatrombopag was approved by the U.S. Food and Drug Administration for the treatment of adults with CLD-associated TP in May 2018, and its indication was subsequently expanded to include the treatment of immune thrombocytopenia in June 2019. Gyre Pharmaceuticals acquired avatrombopag under a transfer agreement with Nanjing Healthnice Pharmaceutical Technology, Co., Ltd. (“Nanjing Healthnice”) in June 2021 and is planning to start commercializing the avatrombopag product by the first half of 2025.

Nasdaq Continued Listing Requirements Compliance

On June 28, 2024, Nassim Usman, Ph.D. resigned from our Board of Directors (the “Board”) and stepped down as a chair of the Audit Committee of the Board (the “Audit Committee”), effective as of June 30, 2024. Dr. Usman’s resignation was not due to any disagreements with the Company relating to our operations, policies or practices. In connection with his resignation, we agreed to a full acceleration of all of Dr. Usman's outstanding stock options (the “Outstanding Option Awards”). On June 30, 2024, we notified Nasdaq that, following Dr. Usman’s resignation as a member of the Board and as a member of the Audit Committee, we have a vacancy on our Audit Committee and intend to rely on the cure period set forth in the Nasdaq Listing Rules while we recruit a new Audit Committee member.

On July 2, 2024, we received a letter from Nasdaq confirming that we are no longer in compliance with Nasdaq’s audit committee composition requirements as set forth in Nasdaq Listing Rule 5605, which requires that the audit committee of a listed company be comprised of at least three “independent directors” (as defined in Nasdaq Listing Rule 5605(a)(2)).

On August 6, 2024, the Board appointed Rodney Nussbaum as the new Audit Committee Chair and David Epstein, Ph.D., as a Class II director. Dr. Epstein will serve until our 2026 Annual Meeting of Stockholders and until his successor is duly elected and qualified. Dr. Epstein was also appointed as a member of the Board’s Audit Committee and Compensation Committee. On August 9, 2024, we informed Nasdaq that, following Dr. Epstein’s appointment as a member of the Board and as a member of the Audit Committee we regained compliance with Nasdaq’s audit committee composition requirements as set forth in Nasdaq Listing Rule 5605, which requires that the audit committee of a listed company be comprised of at least three “independent directors” (as defined in Nasdaq Listing Rule 5605(a)(2)). On October 3, 2024, Nasdaq issued the formal determination which confirmed our compliance with Nasdaq’s audit committee composition requirements as set forth in Nasdaq Listing Rule 5605.

Business Combination Agreement

On December 26, 2022, Catalyst Biosciences, Inc., a Delaware corporation (“Catalyst”) entered into a Business Combination Agreement, as amended on March 29, 2023 and August 30, 2023 (the “Business Combination Agreement”) with GNI USA, Inc., a Delaware corporation (“GNI USA”), GNI Japan, GNI Hong Kong Limited (“GNI HK”), Shanghai Genomics, Inc., a company organized under the laws of the PRC (collectively with GNI USA, GNI Japan and GNI HK, the “Contributors,” and each a “Contributor”), certain individuals and Continent Pharmaceuticals Inc., a Cayman Islands company limited by shares (“CPI”). On October 30, 2023 (the “Effective Time”), the Contributions (as defined below) became effective and Catalyst acquired an indirect controlling interest in Gyre Pharmaceuticals.

Pursuant to the Business Combination Agreement, at the Effective Time of the Contributions:

GNI USA contributed all of its ordinary shares in the capital of CPI to Catalyst in exchange for 45,923,340 shares of Common Stock (the “CPI Contribution”),

GNI USA contributed its interest in Further Challenger International Limited (“Further Challenger”) for 17,664,779 shares of Common Stock (the “FC Contribution” and together with the CPI Contribution, the “GNI USA Contributions”), and

each Minority Holder contributed 100% of the interest he or she held in his or her respective entity in exchange for an aggregate of 10,463,627 shares of Common Stock (the “Minority Holder Contributions” and together with the GNI USA Contributions, the “Contributions”).

As a result of the GNI USA Contributions, Gyre directly and indirectly holds 100% of CPI’s shares. Through Gyre’s ownership of CPI, prior to the Minority Holder Contributions, Gyre held a 56.0% indirect interest in Gyre Pharmaceuticals. Upon completion of the Minority Holder Contributions, Gyre obtained additional indirect interests in Gyre Pharmaceuticals and holds, in aggregate, a 65.2% indirect interest in Gyre Pharmaceuticals. Each share of Common Stock and option to purchase Common Stock that was issued and outstanding at the Effective Time remained issued and outstanding, and such shares and options were unaffected by the Contributions.

At the Effective Time, Gyre Pharmaceuticals terminated its 2021 Stock Incentive Plan (the “2021 Plan”) and the options (the “Gyre Pharmaceuticals Options”) outstanding under the 2021 Plan were terminated and replaced with options granted under a subplan for Chinese participants under the Gyre 2023 Omnibus Incentive Plan (the “2023 Omnibus Incentive Plan”) that are substantially similar in all material respects to the Gyre Pharmaceuticals Options previously outstanding under the 2021 Plan.

The majority shareholder of Gyre Pharmaceuticals is BJContinent Pharmaceuticals Limited (“BJC”). The immediate holding company of BJC is CPI. Immediately following the GNI USA Contributions, the immediate holding company of CPI is Gyre. The majority stockholder of Gyre is GNI USA, which is indirectly wholly owned by GNI Japan.

The GNI USA Contributions were treated as an asset acquisition under U.S. generally accepted accounting principles, with CPI treated as the accounting acquirer and presented as the predecessor for post-acquisition reporting purposes. Since Catalyst is the legal acquirer, the GNI USA Contributions were accounted for as a reverse asset acquisition. This determination was based upon the terms of the Business Combination Agreement and other factors including that, immediately following the GNI USA Contributions: (i) GNI USA (as the parent company of CPI immediately prior to the GNI USA Contributions) owns a substantial majority of the voting power of the combined company; (ii) GNI USA has the ability to control the board of directors of the combined company; and (iii) senior management of

Gyre Pharmaceuticals and GNI USA hold a majority of the key positions in senior management of the combined company. Immediately prior to the closing of the GNI USA Contributions, Catalyst did not meet the definition of a business because Catalyst did not have an organized workforce that significantly contributed to its ability to create output, and substantially all of its fair value was concentrated in in-process research and development (“IPR&D”).

As of the closing date of the GNI USA Contributions, the net assets of Catalyst were recorded at their acquisition-date relative fair values in the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report and the reported operating results prior to the GNI USA Contributions are those of CPI.

The Minority Holder Contributions were treated as an equity transaction, where we obtained additional indirect interests in and maintained our control over Gyre Pharmaceuticals.

Contingent Value Rights Agreement

Concurrent with the signing of the Business Combination Agreement on December 26, 2022, Catalyst and the Rights Agent (as defined in the CVR Agreement) executed a contingent value rights agreement (the “CVR Agreement”), as amended on March 29, 2023, pursuant to which each CVR Holder, excluding GNI Japan and GNI HK, received one contractual contingent value right (a “CVR”) issued by the Company for each share of Catalyst common stock held by such holders. Each CVR entitles the CVR Holder thereof to receive certain cash payments in the future. For additional information, see Note 12 — Commitments and Contingencies to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

Private Placement and Securities Purchase Agreement

On October 27, 2023, we entered into the Securities Purchase Agreement for a private placement with GNI USA (the “Private Placement”). Pursuant to the Securities Purchase Agreement, GNI USA agreed to purchase (i) 811 shares of Series X Convertible Preferred Stock, par value $0.001 per share (the “Convertible Preferred Stock”) and (ii) warrants to purchase up to 811 shares of Convertible Preferred Stock (the “Preferred Stock Warrants”) for an aggregate purchase price of $5.0 million. The Private Placement closed immediately after the closing of the Contributions.

The Preferred Stock Warrants are exercisable at an exercise price of $4,915.00 per share of Convertible Preferred Stock and expire on October 30, 2033. In January 2024, all shares of Convertible Preferred Stock were converted into Gyre common stock. The Preferred Stock Warrants issued are considered freestanding financial instruments and classified as a liability.

Jiangsu Wangao Agreement

In May 2024, Gyre Pharmaceuticals entered into an agreement with Jiangsu Wangao Pharmaceuticals Co., Ltd. (the “Jiangsu Wangao Agreement”), effective from May 7, 2024 to May 6, 2035. Pursuant to the Jiangsu Wangao Agreement, Gyre Pharmaceuticals obtained the drug registration certificate for and became the marketing authorization holder of nintedanib, a small-molecule drug for the treatment of idiopathic pulmonary fibrosis, within the PRC. The total minimum payments under the Jiangsu Wangao Agreement are RMB 35.0 million, or approximately $4.8 million, based on the May 7, 2024 spot exchange rate. This includes an upfront transfer fee of RMB 15.0 million, or approximately $2.1 million, payable in three installments, and subsequent low- to mid-single-digit royalty payments over eight years following the commencement of sales. Additionally, Gyre Pharmaceuticals will bear the costs associated with relocating the production site to a designated location and will cover all expenses related to the manufacturing process.

Financial Operations Overview

During the three months ended September 30, 2024, we had net income of $2.9 million and net income attributable to common stockholders of $1.1 million. For the nine months ended September 30, 2024, we had net income of $17.3 million and a net income attributable to common stockholders of $12.2 million. During the three months ended September 30, 2023, we had net income of $7.5 million and a net income attributable to common stockholders of $4.0 million. During nine months ended September 30, 2023, we had net income of $15.5 million and a net income attributable to common stockholders of $8.1 million. As of September 30, 2024, we had an accumulated deficit of $73.4 million and cash and cash equivalents of $15.9 million. As of December 31, 2023, we had an accumulated deficit of $85.5 million and cash and cash equivalents of $33.5 million.

Components of Results of Operations

Revenues

Sales of Pharmaceutical Products

We generate revenue primarily through sales of ETUARY and certain generic drugs in the PRC. Distributors are our direct customers, and sales to distributors accounted for 100.0% of the revenue from ETUARY. Such distributors sell ETUARY to certain outlets, including hospitals and other medical institutions, as well as pharmacies.

Operating Expenses

Cost of Revenue

Cost of revenue mainly consists of cost of sales representing direct and indirect costs incurred to bring the product to saleable condition. Cost of sales primarily consists of (i) raw material costs; (ii) staff costs for production employees; (iii) depreciation and amortization related to property and equipment and intangible assets used in production; (iv) taxes and surcharges; (v) transportation costs; and (vi) miscellaneous other costs.

Selling and Marketing Expenses

Selling and marketing expenses primarily relate to selling and marketing our product ETUARY in the PRC and consist of expenses incurred from hosting academic conferences, seminars and symposia; promotional expenses associated with market education on ETUARY for its use in hospitals; and staff costs primarily consisting of salaries and benefits for in-house marketing and promotion staff.

Research and Development Expenses

Research and development costs are expensed as incurred. Nonrefundable advance payments for goods or services used in research and development are initially deferred and capitalized in prepaid and other current assets. The capitalized amounts are then expensed as the related goods are delivered or services are performed, or until it is no longer expected that the goods or services will be delivered.

Research and development costs consist primarily of costs related to the pre-clinical and clinical development of our product candidates, which include payroll and other personnel-related expenses, laboratory supplies and reagents, contract research and development services for pre-clinical research and clinical trials, materials, and consulting costs, as well as allocations of facilities, depreciation, and other overhead costs.

General and Administrative Expenses

General and administrative expenses consist of (i) accounting, IT, legal, administrative, and other internal service staff costs; (ii) stock-based compensation representing share options granted to our functional employees; (iii) professional service fees, primarily for legal and accounting services; and (iv) other miscellaneous expenses.

Other Income (Expense), Net

Interest Income, Net

Interest income consists primarily of interest earned on our certificates of deposit. Interest income is recognized on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash

receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.

Other (Expense) Income, Net

Other income consists mostly of government grants. Government grants are recognized at their fair value where there is reasonable assurance that the grant will be received, and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the costs, for which it is intended to compensate, are expensed. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to profit or loss over the expected useful life of the relevant asset by equal annual installments or deducted from the carrying amount of the asset and released to profit or loss by way of a reduced depreciation charge.

Other expenses consist of any non-operating costs, such as loss from equity method investments.

Change in Fair Value of Warrant Liability

In connection with the Private Placement, we issued the Preferred Stock Warrants, which are freestanding financial instruments classified as warrant liability since the underlying securities are contingently redeemable upon the occurrence of events which are outside of our control. The Preferred Stock Warrants are recorded at fair value upon issuance and are subject to remeasurement at the end of each reporting period, with any change in fair value recognized in our statements of operations as other (income) expense.

Provision for Income Taxes

Provision for income taxes are comprised primarily of current income tax provision, mainly attributable to the profitable Gyre Pharmaceuticals operations in the PRC, and deferred income tax provision, mainly including deferred tax recognized for temporary differences in relation to research and development tax credit and net operating loss carryforwards for U.S. tax purposes, deemed income inclusions from controlled foreign corporations for U.S. tax purposes, and fixed and intangible assets, net of valuation allowances.

Results of Operations

Comparison of the three months ended September 30, 2024 and 2023

The following table summarizes our results of operations for the periods presented (in thousands, except percentage change):


	Three Months Ended September 30,
	2024			2023			Change ($)			Change (%)
Revenues	$	25,488		$	32,042		$	(6,554	)		(20	)%
Cost of revenues		958			1,184			(226	)		(19	)%
Gross profit		24,530			30,858			(6,328	)		(21	)%
Operating expenses excluding cost of revenues:
Selling and marketing		13,699			13,928			(229	)		(2	)%
Research and development		2,775			3,009			(234	)		(8	)%
General and administrative		3,823			1,157			2,666			230	%
Total operating expenses excluding cost of revenues		20,297			18,094			2,203			12	%
Income from operations		4,233			12,764			(8,531	)		(67	)%
Other income (expense), net:
Interest income, net		523			283			240			85	%
Other expense, net		(598	)		(1,333	)		735			(55	)%
Change in fair value of warrant liability		(228	)		—			(228	)	*
Loss on disposal of assets, net		—			(526	)		526		*
Income before income taxes		3,930			11,188			(7,258	)		(65	)%
Provision for income taxes		(1,074	)		(3,678	)		2,604			(71	)%
Net income		2,856			7,510			(4,654	)		(62	)%
Net income attributable to noncontrolling interest		1,732			3,534			(1,802	)		(51	)%
Net income attributable to common stockholders	$	1,124		$	3,976		$	(2,852	)		(72	)%

*Not meaningful

Revenues

Revenues for the three months ended September 30, 2024 and 2023 were $25.5 million and $32.0 million, respectively. The $6.5 million decrease was primarily driven by a $6.4 million decrease in anti-fibrosis drug sales and a $0.1 million decrease in generic drug sales due to fluctuations in the Chinese economy significantly affecting demand for anti-fibrosis drugs and decreasing healthcare spending generally. To support future revenue growth, we plan to commercially launch new products, such as nintedanib and avatrombopag, in early 2025, which will be supported by our extensive sales and marketing platform across the PRC.

Cost of Revenues

Cost of revenues for the three months ended September 30, 2024 and 2023 was $1.0 million and $1.2 million, respectively. The decrease was primarily driven by a $0.1 million factory stoppage loss due to factory renovation in 2023 and a $0.1 million decrease in sales quantity.

Selling and Marketing Expenses

Selling and marketing expenses decreased by $0.2 million, or 2%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily driven by a $0.9 million decrease in conference costs due to a decrease in conference activity, a $0.9 million decrease in staff cost as well as a $0.1 million decrease in other expenses, partially offset by a $1.5 million increase in promotional expenses and a $0.2 million increase in travel expense.

Research and Development Expenses

The table below details our costs for research and development for the periods presented (in thousands, except percentage change):


	Three Months Ended September 30,
	2024		2023		Change ($)			Change (%)
Direct program expenses:
Clinical trials	$	764	$	270	$	494			183	%
Materials and utilities		507		524		(17	)		(3	)%
Pre-clinical research		311		811		(500	)		(62	)%
Indirect expenses:
Personnel-related costs		793		1,010		(217	)		(21	)%
Facilities, depreciation and other		400		394		6			2	%
Total research and development expenses	$	2,775	$	3,009	$	(234	)		(8	)%

Research and development expenses decreased by $0.2 million, or 8%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily from Gyre Pharmaceuticals, and was driven by a $0.5 million decrease in pre-clinical research expense and a $0.2 million decrease in staff cost due to the decrease in headcount in the research and development department, partially offset by a $0.5 million increase in our clinical trial expense and clinical trial expense from Gyre Pharmaceuticals.

General and Administrative Expenses

General and administrative expenses increased by $2.7 million, or 230%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily driven by costs associated with being a public company, including a $0.9 million increase in functional and administrative department's personnel and stock compensation costs, a $0.6 million increase in miscellaneous expenses, and a $1.2 million increase in professional expense.

Other Income (Expense), Net

Interest income increased by $0.2 million, or 85%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to additional investments in certificates of deposit.

Other expenses, net decreased by $0.7 million, or 55%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decline was primarily due to a $0.7 million decrease from the combination of equity method investments loss and a $0.3 million decrease in donation expense from Gyre Pharmaceuticals. These decreases were partially offset by a $0.3 million increase in our dividend and miscellaneous non-operating loss.

Loss on disposal of assets was $0.5 million for the three months ended September 30, 2023, which was related to the dispose fixed assets from Gyre Pharmaceuticals. There was no loss on disposal of assets for the three months ended September 30, 2024.

Change in fair value of warrant liability was $0.2 million for the three and nine months ended September 30, 2024. It was related to the remeasurement of the Preferred Stock Warrants liability.

Provision for Income Taxes

Provision for income taxes was $1.1 million and $3.7 million for the three months ended September 30, 2024 and 2023, respectively. The decrease was primarily attributable to a lower profit from Gyre Pharmaceuticals’ operations for the three months ended September 30, 2024.

Comparison of the nine months ended September 30, 2024 and 2023

The following table summarizes our results of operations for the periods presented (in thousands, except percentage change):


	Nine Months Ended September 30,
	2024			2023			Change ($)			Change (%)
Revenues	$	77,885		$	86,302		$	(8,417	)		(10	)%
Cost of revenues		2,707			3,386			(679	)		(20	)%
Gross profit		75,178			82,916			(7,738	)		(9	)%
Operating expenses excluding cost of revenues:
Selling and marketing		40,655			44,695			(4,040	)		(9	)%
Research and development		8,312			9,212			(900	)		(10	)%
General and administrative		10,645			4,607			6,038			131	%
Total operating expenses excluding cost of revenues		59,612			58,514			1,098			2	%
Income from operations		15,566			24,402			(8,836	)		(36	)%
Other income (expense), net:
Interest income, net		1,201			718			483			67	%
Other expense, net		(1,226	)		(1,281	)		55			(4	)%
Change in fair value of warrant liability		6,973			—			6,973		*
Loss on disposal of assets, net		(68	)		(526	)		458			(87	)%
Income before income taxes		22,446			23,313			(867	)		(4	)%
Provision for income taxes		(5,117	)		(7,816	)		2,699			(35	)%
Net income		17,329			15,497			1,832			12	%
Net income attributable to noncontrolling interest		5,145			7,424			(2,279	)		(31	)%
Net income attributable to common stockholders	$	12,184		$	8,073		$	4,111			51	%

Revenues

Revenues for the nine months ended September 30, 2024 and 2023 were $77.9 million and $86.3 million, respectively. The $8.4 million decrease was primarily driven by a $8.0 million decrease in anti-fibrosis drug sales and a $0.4 million decrease in generic drugs due to the same factors mentioned above. If approved by the NMPA for commercial use, we expect that F351 for the treatment of CHB-associated liver fibrosis in the PRC will support revenue growth in the future, which will be supported by our extensive sales and marketing platform across the PRC.

Cost of Revenues

Cost of revenues for the nine months ended September 30, 2024 and 2023 was $2.7 million and $3.4 million, respectively. The decrease was primarily driven by a $0.4 million factory stoppage loss due to factory renovation in 2023, and a $0.4 million decrease in generic drug cost due to the decrease of sales, offset by a $0.1 million increase of the staff cost and new equipment depreciation.

Selling and Marketing Expenses

Selling and marketing expenses decreased by $4.0 million, or 9.0%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was primarily driven by a $5.3 million decrease in conference costs due to a decrease in conference activity, partially offset by a $1.0 million increase in promotional expenses, a $0.2 million increase in staff costs due to an increase in staff headcount, and a $0.1 million increase in other expenses.

Research and Development Expenses

The table below details our costs for research and development for the periods presented (in thousands, except percentage change):


	Nine Months Ended September 30,
	2024		2023		Change ($)			Change (%)
Direct program expenses:
Clinical trials	$	2,749	$	2,421	$	328			14	%
Materials and utilities		1,452		1,793		(341	)		(19	)%
Pre-clinical research		485		1,458		(973	)		(67	)%
Indirect expenses:
Personnel-related costs		2,566		2,789		(223	)		(8	)%
Facilities, depreciation and other		1,060		751		309			41	%
Total research and development expenses	$	8,312	$	9,212	$	(900	)		(10	)%

Research and development expenses decreased by $0.9 million, or 10%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The $1.5 million decrease from Gyre Pharmaceuticals was primarily driven by a $1.0 million decrease in pre-clinical research expenses, a $0.3 million decrease in materials and utilities, and a $0.2 million decrease in staff cost due to the decrease in headcount in the research and development department. These decreases were offset by a $0.6 million increase in our clinical trial costs and research and development consulting costs.

General and Administrative Expenses

General and administrative expenses increased by $6.0 million, or 131%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily driven by costs associated with being a public company, including a $2.9 million increase in functional and administrative department’s personnel and stock compensation costs, a $1.8 million increase in miscellaneous expenses, and a $1.3 million increase in professional expense.

Other Income (Expense), Net

Interest income increased by $0.5 million, or 67%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to additional investments in certificates of deposit.

Other expenses, net decreased by $0.1 million, or 4%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was primarily due to a $0.9 million decrease in government grants, and a $1.1 million decrease from the combination of equity method investments loss, partially offset by a $0.3 million increase in our miscellaneous non-operating loss.

Loss on disposal of assets was $0.5 million for the nine months ended September 30, 2023, which was related to the disposition of fixed assets from Gyre Pharmaceuticals. There was no loss on disposal of assets for the nine months ended September 30, 2024.

Change in fair value of warrant liability was $7.0 million for the nine months ended September 30, 2024, which was related to the remeasurement of the Preferred Stock Warrants liability.

Provision for Income Taxes

Provision for income taxes was $5.1 million and $7.8 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease was primarily due to the projected effective tax rate decreased and a lower profit from Gyre Pharmaceuticals’ operations for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.

Recent Accounting Pronouncements

Refer to Note 2 – Summary of Significant Accounting Policies to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for more information about recent accounting pronouncements.

Liquidity and Capital Resources

Sources of Liquidity

As of September 30, 2024, we had cash and cash equivalents of $15.9 million, short-term bank deposits of $9.2 million and long-term certificates of deposit of $29.5 million, which are available to fund operations, and an accumulated deficit of $73.4 million. Our net income during the three and nine months ended September 30, 2024 was $2.9 million and $17.3 million, respectively, while cash provided by and used in operating activities was $1.7 million and $0.9 million, respectively. We believe that our existing cash and cash equivalents, cash flows from operations, and access to capital markets will be sufficient to fund our operating activities and obligations for at least 12 months following the filing date of this Quarterly Report.

Future Funding Requirements

We expect to use cash flows from operations to meet our current and future financial obligations, including funding our operations, and capital expenditures. Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic, regulatory, and other factors, many of which we cannot control. In particular, following results from the PRC Phase 3 trial in CHB-associated liver fibrosis and pending approval of an IND submission, we expect to initiate a Phase 2 trial to evaluate F351 for the treatment of MASH-associated liver fibrosis in 2025. We cannot guarantee that a Phase 2 trial will be initiated or estimate the funding needed for such trial at this time, but may need to raise additional capital to fund this program. Factors that may affect financing requirements include, but are not limited to:

•

the timing, progress, cost and results of our clinical trials, preclinical studies and other discovery and research and development activities;

•

the timing and outcome of, and costs involved in, seeking and obtaining marketing approvals for our products, and in maintaining quality systems standards for our products;

•

the timing of, and costs involved in, commercial activities, including product marketing, sales and distribution;

•

our ability to successfully commercialize and to obtain regulatory approval for, and successfully commercialize our other or future product candidates;

•

increases or decreases in revenue from our marketed products, including decreases in revenue resulting from generic entrants or health epidemics or pandemics;

•

the number and development requirements of other product candidates that we pursue;

•

our ability to manufacture sufficient quantities of our products to meet expected demand;

•

the costs of preparing, filing, prosecuting, maintaining and enforcing any patent claims and other intellectual property rights, litigation costs and the results of litigation;

•

our ability to enter into collaboration, licensing or distribution arrangements and the terms and timing of these arrangements;

•

the potential need to expand our business, resulting in additional payroll and other overhead expenses;

•

the potential in-licensing of other products or technologies;

•

the emergence of competing technologies or other adverse market or technological developments; and

•

the impacts of inflation and resulting cost increases.

Future capital requirements will also depend on the extent to which we acquire or invest in additional complementary businesses, products and technologies.

The following table summarizes our cash flows for the periods presented (in thousands):


	Nine Months Ended September 30,
	2024			2023
Cash Flow Data:
Net cash (used in) provided by operating activities	$	(883	)	$	22,532
Net cash used in investing activities		(17,880	)		(21,099	)
Net cash provided by financing activities		1,138			—
Effect of exchange rate changes on cash and cash equivalents		(18	)		(529	)
Net change in cash and cash equivalents	$	(17,643	)	$	904

Cash Flows from Operating Activities

Cash used in operating activities for the nine months ended September 30, 2024 was $0.9 million, reflecting our net income of $17.3 million, offset by non-cash items of $6.1 million primarily related to the change in fair value of warrant liability of $7.0 million. Additionally, cash used in operating activities reflected changes in net operating assets and liabilities of $12.1 million.

Cash provided by operating activities for the nine months ended September 30, 2023 was $22.5 million, reflecting our net income of $15.5 million and additional positive non-cash items impact of $1.0 million. Additionally, cash provided by operating activities reflected changes in net operating assets and liabilities of $6.0 million.

Cash Flows from Investing Activities

Cash used in investing activities for the nine months ended September 30, 2024 was $17.9 million, which consisted of $14.1 million in purchases of certificates of deposit, $2.4 million in purchases of property and equipment, and $1.7 million in equity method investment, partially offset by $0.3 million proceeds from sale of equipment.

Cash used in investing activities for the nine months ended September 30, 2023 was $21.1 million, which consisted of $14.3 million in purchases of certificates of deposit, $6.2 million in purchases of property and equipment and $1.0 million in equity method investment, partially offset by $0.5 million in proceeds from sale of equipment.

Cash Flows from Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2024 was $1.1 million due to deferred financing costs, as well as proceeds from the exercise of stock options. The Company did not have cash provided by financing activities for the nine months ended September 30, 2023.

Restricted Net Assets

Under PRC laws and regulations, Gyre Pharmaceuticals is subject to restrictions on foreign exchange and cross-border cash transfers, including to parent companies and U.S. stockholders. The ability to distribute earnings to the parent companies and U.S. stockholders is also limited. Current PRC regulations permit Gyre Pharmaceuticals to pay dividends to BJC only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. Amounts restricted include paid-in capital and the statutory reserves of Gyre Pharmaceuticals. The aggregate amounts of restricted capital and statutory reserves of the relevant subsidiaries not available for distribution were $64.3 million as of September 30, 2024 and December 31, 2023. We do not expect the restrictions described above to have a material impact on our ability to meet our cash obligations.

Contractual Obligations and Other Commitments

Leases

We have entered into lease arrangements in (1) San Diego, California for our headquarters, which expires on the last day of the 38th full calendar month beginning on or after November 11, 2023, and (2) the PRC, for office and laboratory spaces through May 2027. As of September 30, 2024, our fixed lease payment obligations were $1.9 million, with $0.7 million payable within 12 months.

Other Contractual Obligations and Commitments

In June 2021, we entered into a transfer agreement with Nanjing Healthnice, an independent third party, pursuant to which Nanjing Healthnice agreed to transfer to us the avatrombopag maleate tablets for the treatment of CLD-associated thrombocytopenia and all relevant technologies, complete any research or trials and transfer to us all materials necessary for the application of marketing approval by the NMPA. We were approved by the NMPA as the marketing authorization holder of the avatrombopag maleate tablets on June 25, 2024. In exchange, we paid a total of approximately $2.3 million upon certain milestones (e.g., the completion of bioequivalence study, or the registration application to the NMPA) being met. We have completed the bioequivalence study and received NMPA acceptance on August 1, 2022, and as of September 30, 2024, we have made total payments of approximately $2.3 million.

In September 2022, we entered into a transfer agreement with New Jiyuan (Beijing) Pharmaceutical Technology Co., Ltd. (“New Jiyuan”), an independent third party, pursuant to which New Jiyuan agreed to transfer to us the minocycline hydrochloride foam for the treatment of moderate to severe acne and all relevant technologies, complete product development and transfer to us all materials necessary for the application of marketing approval of the NMPA. Upon the completion of the transfer, we expect that we will be approved by the NMPA as the marketing authorization holder of the minocycline hydrochloride foam. In exchange, we will pay a total amount of $1.0 million and the payments will be made by installments conditioned upon certain milestones (e.g., the completion of bioequivalence study, or the registration application to the NMPA) being met. Process verification has been completed. As of September 30, 2024, we have made total payments of approximately $0.7 million.

Research and Development Programs

As of September 30, 2024, we have committed to allocate $34.3 million toward future research and development activities for various programs.

Property and Equipment

Our commitments related to the purchase of property and equipment contracted but not yet reflected in the unaudited consolidated condensed financial statements were $1.6 million as of September 30, 2024 and are expected to be incurred within one year.

Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our Annual Report.

Smaller Reporting Company and Accelerated Filer Status

We are a “smaller reporting company” as defined in the Exchange Act. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

Based on the aggregate market value of our common stock held by non-affiliates as of June 30, 2024, we believe we will remain a smaller reporting company, but will become an “accelerated filer” as of December 31, 2024. Because we believe our non-accelerated filer status will expire on December 31, 2024, we will be required, pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, to include in our Annual Report on Form 10-K for the year ending December 31, 2024 an attestation report as to the effectiveness of our internal control over financial reporting that is issued by our independent registered public accounting firm. However, we expect to continue to take advantage of the reduced reporting requirements applicable to smaller reporting companies.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company, as defined by Rule 12b-2 under the Securities and Exchange Act of 1934 and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of September 30, 2024, our management, with the participation and supervision of our principal executive officer and our principal financial officer, evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure 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 SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2024 to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors, and there can be no assurances that favorable outcomes will be obtained.

ITEM 1A. RISK FACTORS

You should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report, which could materially affect our business, financial position, or future results of operations. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial position, or future results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Except as disclosed below, there have been no material changes from the risk factors disclosed in Part I, Item 1A, “Risk Factors” in our Annual Report.

If we fail to maintain proper and effective internal controls over financial reporting our ability to produce accurate and timely financial statements could be impaired.

Pursuant to Section 404(a) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), our management is required to report upon the effectiveness of our internal control over financial reporting. Beginning with our annual report for our fiscal year ending December 31, 2024, we expect that we will become an “accelerated filer.” By becoming an “accelerated filer,” Section 404(b) of the Sarbanes-Oxley Act will require our independent auditors to express an opinion on our internal control over financial reporting. Ensuring that we have adequate internal controls in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. If we are unable to maintain effective internal control over financial reporting, we may not have adequate, accurate or timely financial information, our independent registered public accounting firm may issue a report that is adverse, and we may be unable to meet our reporting obligations as a public company or comply with the requirements of the SEC or the Sarbanes-Oxley Act. This could result in a restatement of our financial statements, the imposition of sanctions, including the inability of registered broker dealers to make a market in our common stock, or investigation by regulatory authorities. Any such action or other negative results caused by our inability to meet our reporting requirements or comply with legal and regulatory requirements or by disclosure of an accounting, reporting or control issue could adversely affect the trading price of our securities and our business. To achieve compliance with Section 404 within the prescribed period, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. This process will be time-consuming, costly and complicated.

Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations, or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

We may identify material weaknesses or significant deficiencies in our internal control over financial reporting in the future or fail to maintain effective internal control over financial reporting, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies,

in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.

Remediation measures to remediate a material weakness or significant deficiency may be time consuming, may result in us incurring significant costs, and may place significant demands on our financial and operational resources.

Our failure to identify and address any material weaknesses or significant deficiencies that may be identified in the future could result in material misstatements to our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis, which could cause investors to lose confidence in our reported financial information, which may result in volatility in and a decline in the market price of our securities.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Trading Arrangements

On September 15, 2024, the spouse of Songjiang Ma, the President and a director of the Company, entered into a Rule 10b5-1 trading arrangement (as defined in Item 408 of Regulation S-K). Ms. Ma’s plan provides for the potential exercise of vested stock options and the associated sale of up to 700,000 shares of common stock. The trading arrangement terminates upon the sale of all shares pursuant to the trading arrangement. During the three months ended September 30, 2024, no other director or executive officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement, as such terms are defined under Item 408(a) of Regulation S-K.

ITEM 6. EXHIBITS

The exhibits filed or furnished as part of this Quarterly Report are set forth below.


Exhibit Number	Exhibit Title	Form	File No.	Incorporated by reference Exhibit No.	Filing Date

2.1(a)†#	Asset Purchase Agreement, dated as of December 26, 2022, by and among Catalyst Biosciences, Inc., GNI Group Ltd., and GNI Hong Kong Limited.	8-K	000-51173	2.1	Dec. 27, 2022

2.1(b)	Agreement and Amendment to Asset Purchase Agreement, dated as of March 29, 2023, by and among Catalyst Biosciences, Inc., GNI Group Ltd., and GNI Hong Kong Limited.	8-K	000-51173	2.2	Mar. 30, 2023

2.2(a)#	Business Combination Agreement, dated as of December 26, 2022, by and among Catalyst Biosciences, Inc., GNI USA, Inc., GNI Group Ltd., GNI Hong Kong Limited, Shanghai Genomics, Inc., the individuals listed on Annex A thereto and Continent Pharmaceuticals Inc.	8-K	000-51173	2.2	Dec. 27, 2022

2.2(b)	Amendment to Business Combination Agreement, dated as of March 29, 2023, by and among Catalyst Biosciences, Inc., GNI USA, Inc., GNI Group Ltd., GNI Hong Kong Limited, Shanghai Genomics, Inc., the Minority Holders and Continent Pharmaceuticals Inc.	8-K	000-51173	2.1	Mar. 30, 2023

2.2(c)	Second Amendment to Business Combination Agreement, dated as of August 30, 2023, by and among Catalyst Biosciences, Inc., GNI USA, Inc., GNI Group Ltd., GNI Hong Kong Limited, Shanghai Genomics, Inc. and Continent Pharmaceuticals Inc.	8-K	000-51173	2.1	Aug. 31, 2023

3.1*	Restated Certificate of Incorporation of the Company.

3.2	Amended and Restated Bylaws of the Company.	8-K	000-51173	3.3	Oct. 30, 2023

3.3(a)	Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, filed with the Delaware Secretary of State on April 10, 2017.	10-Q	000-51173	3.1	Aug. 3, 2017

3.3(b)	Certificate of Elimination of Series A Preferred Stock, filed with the	10-K	000-51173	3.6(b)	Mar. 27, 2024


	Delaware Secretary of State on March 25, 2024.

3.4(a)	Certificate of Designation of Preferences, Rights and Limitations of Series X Convertible Preferred Stock, filed with the Delaware Secretary of State on December 27, 2022.	8-K	000-51173	3.1	Dec. 27, 2022

3.4(b)	Amendment to Certificate of Designation of Preferences, Rights and Limitations of Series X Convertible Preferred Stock, filed with the Delaware Secretary of State on October 30, 2023.	8-K	000-51173	3.2	Oct. 30, 2023

3.5(a)	Certificate of Designation of Preferences, Rights and Limitations of Series Y Preferred Stock, filed with the Delaware Secretary of State on June 20, 2023, with respect to the Series Y Preferred Stock.	8-K	000-51173	3.1	June 20, 2023

3.5(b)	Certificate of Elimination of Series Y Preferred Stock, filed with the Delaware Secretary of State on August 31, 2023.	8-K	000-51173	3.1	Aug. 31, 2023

4.1	Warrant to Purchase Stock of Catalyst Biosciences, Inc., issued to Silicon Valley Bank on March 3, 2005.	10-K	000-51173	4.4	Mar. 9, 2016

4.2	Form of Warrant to Purchase Stock of Catalyst Biosciences, Inc., issued to purchasers of convertible promissory notes.	10-K	000-51173	4.6	Mar. 9, 2016

4.3	Form of Warrant to Purchase Series X Convertible Preferred Stock.	8-K	000-51173	4.1	Oct. 30, 2023

31.1*	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification of the Interim Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**	Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



32.2**		Certification of the Interim Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		Inline XBRL (extensible Business Reporting Language) Instance Document

101.SCH*		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.

† The annexes, schedules, and certain exhibits to this Exhibit have been omitted pursuant to Item 601(a)(5).

# Pursuant to Item 601(b)(10) of Regulation S-K, certain confidential portions of this exhibit were omitted by means of marking such portions with an asterisk because the identified confidential portions (i) the Company customarily and actually treats that information as private or confidential and (ii) the information was not material.

签名纹样

根据1934年的证券交易法的要求，注册人已经指定代表签署本报告。


		GYRE治疗公司股份有限公司。

日期：2024年11月13日		韩颖博士
		韩颖博士
		首席执行官
		(信安金融执行长)

日期：2024年11月13日		/s/ 陈若雨
		Ruoyu Chen
		首席财务官
		(首席财务和会计官)