[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents Gyre Therapeutics' unaudited condensed consolidated financial statements for Q1 2025, covering Balance Sheets, Operations, Equity, Cash Flows, and notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$129.8 million** from **$125.4 million**, driven by cash, while liabilities decreased and equity grew to **$104.3 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $15,045 | $11,813 | | Total current assets | $68,448 | $64,786 | | Total assets | $129,790 | $125,406 | | **Liabilities & Equity** | | | | Total current liabilities | $18,991 | $19,516 | | Total liabilities | $25,488 | $27,004 | | Total stockholders' equity | $104,302 | $98,402 | | Total liabilities and stockholders' equity | $129,790 | $125,406 | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Q1 2025 revenues decreased to **$22.1 million** and net income to **$3.7 million**, with basic EPS at **$0.03** Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenues | $22,058 | $27,172 | | Income from operations | $2,273 | $8,071 | | Net income | $3,734 | $9,935 | | Net income attributable to common stockholders | $2,698 | $7,532 | | Basic EPS | $0.03 | $0.09 | | Diluted EPS | $0.00 | $0.03 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations was **$0.1 million** in Q1 2025, a significant change from **$2.9 million** provided in Q1 2024, with cash ending at **$15.0 million** Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(129) | $2,884 | | Net cash provided by (used in) investing activities | $1,967 | $(7,220) | | Net cash provided by financing activities | $1,344 | $658 | | Net increase (decrease) in cash and cash equivalents | $3,232 | $(3,724) | | Cash and cash equivalents at end of period | $15,045 | $29,785 | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover accounting policies, business operations, liquidity, fair value, revenue concentration, intangible assets, R&D commitments, and segment reporting - The company is a commercial-stage biotechnology firm focusing on anti-inflammatory and anti-fibrotic drugs, holding a **65.2%** indirect interest in its PRC-based subsidiary, Gyre Pharmaceuticals[16](index=16&type=chunk)[17](index=17&type=chunk) - Management believes existing cash, cash flows from operations, and capital market access are sufficient to fund operations for at least **12 months** from the financial statement issuance date[18](index=18&type=chunk) - For Q1 2025, three customers (Sinopharm, Resources Pharmaceutical, Shanghai Pharmaceuticals) accounted for **50.3%**, **15.5%**, and **12.4%** of total revenue, respectively[30](index=30&type=chunk) - In March 2025, the company acquired technology rights for Nintedanib for approximately **$4.9 million**, which is recorded as an intangible asset[56](index=56&type=chunk) - The company has future commitments including **$12.7 million** for the F351 program and an additional **$20.0 million** for other R&D activities[96](index=96&type=chunk) - The company operates in two reportable segments: Gyre Pharmaceuticals (operations in China) and Gyre (operations in the U.S.). Gyre Pharmaceuticals generated all of the company's **$22.1 million** in revenue for Q1 2025[105](index=105&type=chunk)[109](index=109&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial condition and operations, including commercialization, pipeline, financial results, liquidity, and funding [Overview](index=27&type=section&id=Overview) Gyre, a commercial-stage biotech, focuses on anti-fibrotic drugs, expanding its portfolio and advancing F351 in Phase 3 and Phase 2 trials - The company is planning to initiate commercialization of Nintedanib in the PRC in Q2 2025 to offset declines in ETUARY sales and drive revenue growth[116](index=116&type=chunk) - Topline results for the Phase 3 trial of F351 in CHB-associated liver fibrosis are expected in Q2 2025[120](index=120&type=chunk) - A Phase 2 trial of F351 for MASH-associated liver fibrosis is expected to begin in the U.S. in 2025, pending IND approval[121](index=121&type=chunk) - The company initiated commercialization of avatrombopag maleate tablets in the PRC in March 2025 for treating thrombocytopenia[123](index=123&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q1 2025 revenues decreased **19%** to **$22.1 million**, with R&D and G&A expenses rising, resulting in a **72%** drop in operating income Comparison of Operations for the three months ended March 31 (in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $22,058 | $27,172 | $(5,114) | (19)% | | Gross profit | $21,164 | $26,193 | $(5,029) | (19)% | | Research and development | $3,095 | $2,182 | $913 | 42% | | General and administrative | $4,955 | $3,398 | $1,557 | 46% | | Income from operations | $2,273 | $8,071 | $(5,798) | (72)% | | Net income | $3,734 | $9,935 | $(6,201) | (62)% | - The **19%** decrease in revenue was anticipated, attributed to a one-time marketing campaign in early 2024 that was not repeated, weaker economic conditions in China, and increased competition[151](index=151&type=chunk) - R&D expenses increased by **$0.9 million** (**42%**), mainly due to a **$1.3 million** increase in clinical research expenses for F351 data analysis[155](index=155&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company holds **$15.0 million** in cash and believes current resources are sufficient for 12 months, with future funding dependent on clinical trials and M&A - The company believes its existing cash of **$15.0 million**, plus other deposits and operational cash flow, will be sufficient to fund operations for at least the next **12 months**[161](index=161&type=chunk) Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(129) | $2,884 | | Net cash provided by (used in) investing activities | $1,967 | $(7,220) | | Net cash provided by financing activities | $1,344 | $658 | - As of March 31, 2025, the company has committed **$32.7 million** for future R&D activities and **$4.8 million** for property and equipment purchases[175](index=175&type=chunk)[176](index=176&type=chunk) - PRC regulations restrict the transfer of **$64.3 million** in capital and statutory reserves from the Chinese subsidiary, but this is not expected to materially impact the company's ability to meet cash obligations[171](index=171&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is not required to provide market risk disclosures - As a smaller reporting company, Gyre Therapeutics is not required to provide quantitative and qualitative disclosures about market risk[181](index=181&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2025, with no material changes in internal control over financial reporting - Based on an evaluation as of March 31, 2025, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[183](index=183&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, internal controls[184](index=184&type=chunk) [PART II. OTHER INFORMATION](index=39&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - As of the report date, the company is not involved in any material legal proceedings[186](index=186&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the Annual Report on Form 10-K - The company states there have been no material changes from the risk factors disclosed in its Annual Report[187](index=187&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported during the period - None reported[188](index=188&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No director or executive officer adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2025 - No director or executive officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[191](index=191&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) Lists exhibits filed as part of the Quarterly Report on Form 10-Q, including CEO and CFO certifications - The report includes a list of all exhibits filed, such as agreements and officer certifications pursuant to the Sarbanes-Oxley Act[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)

[Business Highlights and Upcoming Milestones](index=1&type=section&id=Business%20Highlights%20and%20Upcoming%20Milestones) Gyre Therapeutics advanced commercial and clinical strategies in Q1 2025, launching avatrombopag, preparing nintedanib, and progressing pipeline milestones - ETUARY® (pirfenidone) sales were **$21.7 million** in Q1 2025, remaining the market leader for idiopathic pulmonary fibrosis (IPF) in the PRC despite a year-over-year decline[4](index=4&type=chunk) - Commercialization of avatrombopag in China began in March 2025, targeting liver disease specialists, with nintedanib on track for a May 2025 launch to expand IPF treatment options[5](index=5&type=chunk)[6](index=6&type=chunk)[7](index=7&type=chunk) - China's NMPA granted IND approval for a new pirfenidone indication to treat radiation-induced lung injury (RILI), marking the company's entry into oncology supportive care, with an adaptive Phase 2/3 trial planned for the second half of 2025[3](index=3&type=chunk)[5](index=5&type=chunk)[8](index=8&type=chunk) - Database lock was achieved for the pivotal Phase 3 trial of Hydronidone in Chronic Hepatitis B (CHB)-associated liver fibrosis, with topline results expected in Q2 2025[5](index=5&type=chunk) Pipeline Development Status | Candidate | Indication | Stage / Next Milestone | | :--- | :--- | :--- | | **F573** | Acute/Acute on-Chronic Liver Failure (ALF/ACLF) | Phase 2 trial completion expected by end of 2026 | | **F230** | Pulmonary Arterial Hypertension (PAH) | Phase 1 trial expected to begin in Q2 2025 | | **F528** | Chronic Obstructive Pulmonary Disease (COPD) | IND application planned for 2026 | - Ping Zhang was appointed as Executive Chairman of the Board of Directors in March 2025[12](index=12&type=chunk) [Financial Results](index=2&type=section&id=Financial%20Results) Gyre's Q1 2025 financial results showed decreased revenues and net income due to strategic marketing shifts, with the company reaffirming its full-year revenue guidance Q1 2025 Key Financial Metrics | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | | :--- | :--- | :--- | | Revenues | $22.1 million | $27.2 million | | Income from Operations | $2.3 million | $8.1 million | | Net Income | $3.7 million | $9.9 million | | GAAP Basic EPS | $0.03 | $0.09 | | Non-GAAP Adjusted Net Income | $2.9 million | $8.2 million | - The **$5.1 million** year-over-year revenue decrease was primarily due to a **$5.2 million** decline in ETUARY® sales, resulting from a deliberate reallocation of marketing resources to support new product launches[14](index=14&type=chunk) - The company reaffirmed its full-year 2025 revenue guidance of **$118 to $128 million**, anticipating growth driven by the launch of Nintedanib and expansion of avatrombopag[1](index=1&type=chunk)[14](index=14&type=chunk) - As of March 31, 2025, the company held **$51.3 million** in cash, cash equivalents, and short/long-term deposits, deemed sufficient to fund operations for the next 12 months[5](index=5&type=chunk)[13](index=13&type=chunk) Q1 2025 Operating Expense Changes (YoY) | Expense Category | Q1 2025 (in millions) | Q1 2024 (in millions) | Change Driver | | :--- | :--- | :--- | :--- | | Cost of Revenues | $0.9M | $1.0M | Decreased in line with sales decline | | Selling & Marketing | $10.8M | $12.5M | Decreased due to lower commission costs from reduced sales | | Research & Development | $3.1M | $2.2M | Increased due to higher clinical research expenses for F351 | | General & Administrative | $5.0M | $3.4M | Increased due to higher personnel/stock costs and annual meeting expenses | [Financial Statements](index=7&type=section&id=Financial%20Statements) The unaudited condensed consolidated financial statements detail Gyre's Q1 2025 performance, showing revenue and net income declines, balance sheet changes, and GAAP to Non-GAAP reconciliation [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2025, Gyre reported revenues of **$22.1 million** and net income attributable to common stockholders of **$2.7 million**, both decreasing year-over-year Statement of Operations Summary (in thousands) | Line Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenues | $22,058 | $27,172 | | Total operating expenses | $19,785 | $19,101 | | Income from operations | $2,273 | $8,071 | | Net income | $3,734 | $9,935 | | Net income attributable to common stockholders | $2,698 | $7,532 | | Basic EPS | $0.03 | $0.09 | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, Gyre's balance sheet showed total assets of **$129.8 million**, total liabilities of **$25.5 million**, and total stockholders' equity of **$104.3 million**, with increased cash and cash equivalents Balance Sheet Summary (in thousands) | Line Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $15,045 | $11,813 | | Total current assets | $68,448 | $64,786 | | Total assets | $129,790 | $125,406 | | Total current liabilities | $18,991 | $19,516 | | Total liabilities | $25,488 | $27,004 | | Total stockholders' equity | $104,302 | $98,402 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) The company reconciled Q1 2025 GAAP net income of **$3.7 million** to a non-GAAP adjusted net income of **$2.9 million**, primarily by excluding a **$2.3 million** gain from warrant liability and adding **$0.5 million** in stock-based compensation GAAP to Non-GAAP Reconciliation (in thousands) | Line Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income (GAAP) | $3,734 | $9,935 | | Adjustments: | | | | Gain from change in fair value of warrant liability | $(2,255) | $(4,288) | | Stock-based compensation | $507 | $11 | | Provision for income taxes | $901 | $2,546 | | **Non-GAAP adjusted net income** | **$2,887** | **$8,204** | [Company and Product Overview](index=4&type=section&id=Company%20and%20Product%20Overview) Gyre Therapeutics is a biopharmaceutical company focused on organ fibrosis, developing F351 for MASH-associated fibrosis in the U.S. and commercializing ETUARY® (pirfenidone) in the PRC while advancing a diverse pipeline - F351 (Hydronidone), a structural analogue of pirfenidone, inhibits key pathways in liver fibrosis and is being evaluated in a Phase 3 trial for CHB-associated liver fibrosis in the PRC, with topline data expected in Q2 2025[18](index=18&type=chunk)[20](index=20&type=chunk) - Gyre Pharmaceuticals' flagship product, ETUARY® (pirfenidone), was the first approved IPF treatment in the PRC and generated **$105.8 million** in net sales in 2024[20](index=20&type=chunk) - Gyre Therapeutics' primary focus in the U.S. is the development and commercialization of F351 for MASH-associated fibrosis[21](index=21&type=chunk) [Forward-Looking Statements](index=6&type=section&id=Forward-Looking%20Statements) This section contains a standard "safe harbor" provision, cautioning that forward-looking statements regarding clinical trials, regulatory approvals, commercial launches, and financial performance are subject to significant risks and uncertainties - The press release contains forward-looking statements concerning R&D efforts, clinical trial timing, commercial launches, and financial position, which are subject to substantial risks and uncertainties[23](index=23&type=chunk) - Actual results could differ materially from expectations due to various risks, including the ability to execute clinical strategies, unpredictable trial outcomes, regulatory hurdles, competition, and economic conditions[23](index=23&type=chunk)