[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section details the unaudited consolidated financial statements and management's analysis of financial condition and results of operations [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, detailing financial position, performance, equity, and cash flows, with comprehensive notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20(unaudited)%20and%20December%2031%2C%202024) This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :--------------------------------------- | :------------------------------- | | Total assets | $152,646 | $125,406 | | Cash and cash equivalents | $36,491 | $11,813 | | Total current assets | $91,285 | $64,786 | | Total liabilities | $23,203 | $27,004 | | Total equity | $129,443 | $98,402 | - **Total assets increased by $27.24 million (21.7%)** from December 31, 2024, to June 30, 2025, primarily driven by a significant increase in cash and cash equivalents[8](index=8&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This statement outlines the company's financial performance, including revenues, expenses, and net income | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenues | $26,771 | $25,225 | $48,829 | $52,397 | | Total operating expenses | $24,600 | $22,031 | $44,385 | $41,132 | | Income from operations | $2,171 | $3,194 | $4,444 | $11,265 | | Net income | $1,576 | $4,538 | $5,310 | $14,473 | | Net income attributable to common stockholders | $442 | $3,528 | $3,140 | $11,060 | | Basic EPS | $0.00 | $0.04 | $0.04 | $0.13 | | Diluted EPS | $0.00 | $0.01 | $0.01 | $0.04 | - **Net income attributable to common stockholders decreased significantly by 87%** for the three months ended June 30, 2025, and by **72%** for the six months ended June 30, 2025, compared to the same periods in 2024[10](index=10&type=chunk) [Condensed Consolidated Statements of Convertible Preferred Stock and Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Equity%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This statement details changes in the company's equity components, including common stock, paid-in capital, and deficit | Equity Component | Balance at Dec 31, 2024 (in thousands) | Balance at June 30, 2025 (in thousands) | | :----------------------- | :------------------------------------- | :------------------------------------ | | Common Stock | $86 | $91 | | Additional Paid-In Capital | $136,185 | $161,437 | | Accumulated Deficit | $(73,453) | $(70,313) | | Total Gyre Stockholders' Equity | $63,319 | $92,026 | | Noncontrolling Interest | $35,083 | $37,417 | | Total Equity | $98,402 | $129,443 | - **Total Gyre stockholders' equity increased by $28.7 million** from December 31, 2024, to June 30, 2025, primarily due to an increase in additional paid-in capital from stock issuances and a reduction in accumulated deficit[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This statement summarizes cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by (used in) operating activities | $1,959 | $(2,609) | | Net cash used in investing activities | $(1,075) | $(15,493) | | Net cash provided by financing activities | $23,695 | $814 | | Net increase (decrease) in cash and cash equivalents | $24,678 | $(17,412) | | Cash and cash equivalents at end of the period | $36,491 | $16,097 | - The company generated **$2.0 million in cash from operating activities** in H1 2025, a significant improvement from cash used of **$2.6 million** in H1 2024. Financing activities provided **$23.7 million** in H1 2025, primarily from a public offering[15](index=15&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the consolidated financial statements [1. Nature of Operations and Liquidity](index=8&type=section&id=1.%20Nature%20of%20Operations%20and%20Liquidity) This note describes the company's business activities and assesses its ability to meet short-term obligations - Gyre Therapeutics, Inc. is a commercial-stage biotechnology company focused on small-molecule anti-inflammatory and anti-fibrotic drugs, holding a **65.2% indirect interest** in Beijing Continent Pharmaceuticals Co., Ltd. (Gyre Pharmaceuticals) in the PRC[18](index=18&type=chunk) - As of June 30, 2025, the Company had **$36.5 million in cash and cash equivalents** and an **accumulated deficit of $70.3 million**. Management believes existing cash and cash flows will be sufficient for at least 12 months[19](index=19&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the financial statements - The condensed consolidated financial statements are prepared in accordance with **U.S. GAAP and SEC interim reporting requirements**, with certain footnotes condensed or omitted[20](index=20&type=chunk) - The Company operates in **two distinct reportable segments**: Gyre Pharmaceuticals (PRC operations) and Gyre (U.S. operations)[25](index=25&type=chunk) - The Company adopted **ASU 2023-09 (Improvements to Income Tax Disclosures)** effective January 1, 2025, with no material impact on quarterly financial statements[35](index=35&type=chunk) [3. Fair Value Measurements and Financial Instruments](index=11&type=section&id=3.%20Fair%20Value%20Measurements%20and%20Financial%20Instruments) This note details valuation techniques and inputs for financial instruments measured at fair value | Financial Instrument | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------- | :----------------------------- | :------------------------------- | | Money market funds (Level 1) | $28,645 | $3,300 | | CVR derivative liability (Level 3) | $— | $4,961 | | Warrant liability (Level 3) | $3,201 | $5,668 | - The **CVR derivative liability was fully settled** by June 30, 2025, and the **warrant liability decreased by $2.47 million** during the six months ended June 30, 2025[42](index=42&type=chunk)[46](index=46&type=chunk) [4. Balance Sheet Components](index=15&type=section&id=4.%20Balance%20Sheet%20Components) This note provides disaggregated information for various asset and liability accounts on the balance sheet | Component | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Inventories, net | $8,861 | $6,337 | | Accrued expenses and other current liabilities | $14,924 | $10,615 | | Accounts and note receivables, net | $25,128 | $23,962 | - **Accrued expenses and other current liabilities increased by $4.3 million**, primarily due to higher accrued payroll and welfare, and increased payables to selling expense suppliers[50](index=50&type=chunk) [5. Intangible Assets](index=16&type=section&id=5.%20Intangible%20Assets) This note details the company's intangible assets, including acquisition, amortization, and carrying values | Intangible Asset | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------- | :----------------------------- | :------------------------------- | | Total intangible assets, net | $4,962 | $273 | - The **significant increase in intangible assets** is primarily due to the recognition of **$4.9 million for Etorel technology rights** following NMPA approval and commercial sales commencement in June 2025[55](index=55&type=chunk)[56](index=56&type=chunk) - **Amortization expense for the six months ended June 30, 2025, was $234 thousand**, compared to **$16 thousand** for the same period in 2024[58](index=58&type=chunk) [6. Revenue](index=17&type=section&id=6.%20Revenue) This note provides a breakdown of revenue by product and segment, along with related accounting policies - **ETUARY® sales accounted for 87.8% of total revenue for Q2 2025**, down from 99.3% in Q2 2024, indicating diversification[59](index=59&type=chunk) - New products Contiva and Etorel, launched in March and June 2025 respectively, contributed **5.6% and 6.0% of total revenue for Q2 2025**[59](index=59&type=chunk) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenue from sales of pharmaceutical products | $26,771 | $25,225 | $48,829 | $52,397 | [7. Leases](index=17&type=section&id=7.%20Leases) This note describes the company's lease arrangements, including right-of-use assets and lease liabilities - The Company maintains operating leases for office spaces and staff dormitories in Beijing, Zhengzhou, Shanghai, Nanjing, and San Diego, with **lease expirations ranging from 2026 to 2028**[62](index=62&type=chunk)[63](index=63&type=chunk) - As of June 30, 2025, the Company recorded an aggregate **right-of-use asset of $1.5 million** and an aggregate **lease liability of $1.4 million**[65](index=65&type=chunk) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------- | :-------------------------------------------- | :-------------------------------------------- | | Operating lease expense | $400 | $300 | [8. Stockholders' Equity](index=19&type=section&id=8.%20Stockholders%27%20Equity) This note details changes in common stock, additional paid-in capital, and other equity components - **Outstanding common stock increased to 90,822,828 shares** as of June 30, 2025, from 86,307,544 shares at December 31, 2024[8](index=8&type=chunk) - The Company received net proceeds of **$0.5 million from the ATM Program** (54,734 shares) and **$21.3 million from a May 2025 underwritten public offering** (2,555,555 shares)[70](index=70&type=chunk)[74](index=74&type=chunk) - **Restricted capital and statutory reserves of PRC subsidiaries**, not available for distribution, totaled **$64.7 million** as of June 30, 2025[77](index=77&type=chunk) [9. Convertible Preferred Stock](index=20&type=section&id=9.%20Convertible%20Preferred%20Stock) This note describes the terms and conversion of the company's convertible preferred stock - In January 2024, GNI USA converted all **13,151 shares of Convertible Preferred Stock into 8,767,332 shares of common stock**[82](index=82&type=chunk) [10. Stock Based Compensation](index=20&type=section&id=10.%20Stock%20Based%20Compensation) This note outlines the company's stock-based compensation plans and the related expense recognition - The **2023 Omnibus Incentive Plan automatically increased by 4,315,377 shares of common stock** on January 1, 2025[83](index=83&type=chunk) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total stock-based compensation expense | $906 | $16 | $1,413 | $27 | - As of June 30, 2025, **unrecognized stock-based compensation expense was $14.7 million**, expected to be recognized over an estimated weighted-average period of 3.2 years[88](index=88&type=chunk) [11. Net Income per Share ("EPS") Attributable to Common Stockholders](index=22&type=section&id=11.%20Net%20Income%20per%20Share%20(%22EPS%22)%20Attributable%20to%20Common%20Stockholders) This note provides the calculation of basic and diluted earnings per share for common stockholders | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.00 | $0.04 | $0.04 | $0.13 | | Diluted EPS | $0.00 | $0.01 | $0.01 | $0.04 | - The **decrease in EPS for both basic and diluted measures** reflects the lower net income attributable to common stockholders in 2025 compared to 2024[90](index=90&type=chunk) [12. Commitments and Contingencies](index=23&type=section&id=12.%20Commitments%20and%20Contingencies) This note discloses the company's contractual obligations, legal proceedings, and other potential future liabilities - The Company has **commitments of $4.0 million for property and equipment purchases** as of June 30, 2025, expected within one year[93](index=93&type=chunk) - The **Etorel IP Rights acquisition includes an initial $4.9 million consideration** and contingent annual payments over eight years based on actual sales[95](index=95&type=chunk) - **Future payments for the Hydronidone program to GNI Group total $12.7 million**, contingent upon NDA submission, NMPA inspection, and NMPA approval[97](index=97&type=chunk) - Gyre Pharmaceuticals has committed to allocate **$22.0 million toward future research and development activities** for various programs[98](index=98&type=chunk) [13. Income Taxes](index=24&type=section&id=13.%20Income%20Taxes) This note details the company's income tax provision, deferred taxes, and net operating loss carryforwards | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Income tax provision | $662 | $1,497 | $1,563 | $4,043 | | Effective tax rate | 29.58% | 24.81% | 22.74% | 21.84% | - The Company has approximately **$193.4 million federal and $13.8 million state net operating loss carryforwards (NOLs)** for U.S. tax purposes[101](index=101&type=chunk) [14. Related Party Transactions](index=24&type=section&id=14.%20Related%20Party%20Transactions) This note describes transactions and balances with entities or individuals considered related parties - **No research and development fees were paid to GNI Group** during the three and six months ended June 30, 2025, compared to **$0.1 million** in the prior year periods[103](index=103&type=chunk) - The Company had **$0.2 million in other receivables from GNI Group** as of June 30, 2025, and December 31, 2024[104](index=104&type=chunk) [15. Employee Benefit Plans](index=25&type=section&id=15.%20Employee%20Benefit%20Plans) This note outlines the company's contributions to employee retirement and welfare benefit plans | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total contributions to PRC employee benefits | $1,300 | $1,200 | $2,600 | $2,400 | - **Contributions to the U.S. defined-contribution savings plan (401(k)) were immaterial** for the three and six months ended June 30, 2025[106](index=106&type=chunk) [16. Segment Information](index=25&type=section&id=16.%20Segment%20Information) This note provides financial data for the company's operating segments, including revenues and operating results - The Company operates in **two reportable segments**: Gyre Pharmaceuticals (mainland China) and Gyre (United States)[107](index=107&type=chunk) - **Gyre Pharmaceuticals generated all consolidated revenues ($26.8 million in Q2 2025, $48.8 million in H1 2025)** from sales of ETUARY®, Etorel, Contiva, and generic drugs[111](index=111&type=chunk) - The Gyre segment (U.S.) has not generated any revenue and reported **operating losses of $2.1 million for Q2 2025 and $3.5 million for H1 2025**[109](index=109&type=chunk)[111](index=111&type=chunk) [17. Subsequent Event](index=28&type=section&id=17.%20Subsequent%20Event) This note discloses significant events that occurred after the balance sheet date but before financial statements were issued - In the third quarter of 2025, BJC increased its capital contribution in Gyre Pharmaceuticals by **$1.28 million**, increasing the Company's indirect interest from **65.2% to 69.7%**[115](index=115&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the periods ended June 30, 2025 and 2024 [Overview](index=29&type=section&id=Overview) This section provides a high-level summary of the company's business, strategic focus, and recent operational highlights - Gyre is a commercial-stage biotechnology company focused on developing and commercializing **small-molecule anti-inflammatory and anti-fibrotic drugs**, particularly for organ fibrosis[119](index=119&type=chunk) - The company launched **Etorel (nintedanib) commercially in the PRC in Q2 2025** and initiated commercialization of **Contiva (avatrombopag maleate tablets) in March 2025**, aiming to diversify revenue and offset declines in ETUARY® sales[121](index=121&type=chunk)[124](index=124&type=chunk) - **Hydronidone, the lead development candidate, completed a pivotal Phase 3 trial in the PRC** for CHB-associated liver fibrosis with statistically significant positive results (**P=0.0002 for primary endpoint**)[126](index=126&type=chunk) - Plans include filing a **New Drug Application (NDA) for Hydronidone with the NMPA in Q3 2025** and an **Investigational New Drug (IND) application with the U.S. FDA in Q3 2025** to initiate a Phase 2 trial for MASH-associated fibrosis[127](index=127&type=chunk) [Financial Operations Overview](index=32&type=section&id=Financial%20Operations%20Overview) This section summarizes key financial metrics and trends, including net income, cash position, and accumulated deficit | Metric | Three Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2025 (in millions) | | :----------------------------------- | :--------------------------------------------- | :------------------------------------------- | | Net income | $1.6 | $5.3 | | Net income attributable to common stockholders | $0.4 | $3.1 | - **Cash and cash equivalents increased to $36.5 million** as of June 30, 2025, from **$11.8 million** at December 31, 2024[143](index=143&type=chunk)[144](index=144&type=chunk) - The **accumulated deficit improved to $70.3 million** as of June 30, 2025, from **$73.5 million** at December 31, 2024[143](index=143&type=chunk)[144](index=144&type=chunk) [Components of Results of Operations](index=33&type=section&id=Components%20of%20Results%20of%20Operations) This section explains the primary drivers of revenue, cost of revenues, operating expenses, and other income/expenses - Revenue is primarily generated from sales of **ETUARY®, Contiva, Etorel, and generic drugs** to distributors in the PRC[145](index=145&type=chunk) - **Research and development costs are expensed as incurred** and include expenses for preclinical and clinical development, payroll, laboratory supplies, and contract services[148](index=148&type=chunk)[149](index=149&type=chunk) - Other income includes **interest earned on deposits and government grants**, while other expenses include **losses from equity method investments**[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of financial performance for the current and prior reporting periods [Comparison of the three months ended June 30, 2025 and 2024](index=34&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030%2C%202025%20and%202024) This section compares the company's financial performance for the second quarter of 2025 against the same period in 2024 | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change ($) | Change (%) | | :----------------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Revenues | $26,771 | $25,225 | $1,546 | 6% | | Cost of revenues | $1,151 | $770 | $381 | 49% | | Selling and marketing | $15,194 | $14,414 | $780 | 5% | | Research and development | $3,425 | $3,355 | $70 | 2% | | General and administrative | $4,829 | $3,424 | $1,405 | 41% | | Net income attributable to common stockholders | $442 | $3,528 | $(3,086) | (87)% | - **Revenue increase was driven by new product launches (Etorel and Contiva)**, offsetting a decline in ETUARY® sales[161](index=161&type=chunk) - **General and administrative expenses increased significantly** due to higher professional fees and personnel/stock compensation costs[167](index=167&type=chunk) [Comparison of the six months ended June 30, 2025 and 2024](index=36&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024) This section compares the company's financial performance for the first half of 2025 against the same period in 2024 | Metric | H1 2025 (in thousands) | H1 2024 (in thousands) | Change ($) | Change (%) | | :----------------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Revenues | $48,829 | $52,397 | $(3,568) | (7)% | | Cost of revenues | $2,045 | $1,749 | $296 | 17% | | Selling and marketing | $26,035 | $26,956 | $(921) | (3)% | | Research and development | $6,520 | $5,537 | $983 | 18% | | General and administrative | $9,784 | $6,822 | $2,962 | 43% | | Net income attributable to common stockholders | $3,140 | $11,060 | $(7,920) | (72)% | - **Revenue decrease was primarily due to a $6.8 million decline in ETUARY® sales**, attributed to the absence of a one-time rural marketing campaign from 2024, weaker economic conditions in China, and increased competition[173](index=173&type=chunk) - **Research and development expenses increased by $1.0 million**, mainly due to higher clinical trial costs, particularly for Hydronidone data analysis[177](index=177&type=chunk) [Recent Accounting Pronouncements](index=38&type=section&id=Recent%20Accounting%20Pronouncements) This section discusses the impact of newly adopted and recently issued accounting standards on financial statements - The Company refers to **Note 2 for information on recently adopted and issued but not yet adopted accounting pronouncements**[182](index=182&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's ability to generate and manage cash, including its cash position and funding sources - As of June 30, 2025, the Company had **$36.5 million in cash and cash equivalents**, **$17.9 million in short-term bank deposits**, and **$21.5 million in long-term certificates of deposit**[183](index=183&type=chunk) | Cash Flow Data | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by (used in) operating activities | $1,959 | $(2,609) | | Net cash provided by financing activities | $23,695 | $814 | - Management believes existing liquidity sources will be sufficient to fund operations for at least the next 12 months, but **additional capital may be needed for the Hydronidone Phase 2 trial in the U.S.**[183](index=183&type=chunk)[184](index=184&type=chunk) [Contractual Obligations and Other Commitments](index=40&type=section&id=Contractual%20Obligations%20and%20Other%20Commitments) This section details the company's future payment obligations and other significant contractual agreements - **Fixed lease payment obligations totaled $1.5 million** as of June 30, 2025, with **$0.5 million payable within the remaining six months of 2025**[195](index=195&type=chunk) - The Company has committed **$34.7 million toward future research and development activities** for various programs[198](index=198&type=chunk) - **Commitments related to property and equipment purchases were $4.0 million** as of June 30, 2025, expected to be incurred within one year[199](index=199&type=chunk) [Critical Accounting Policies and Estimates](index=41&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights accounting policies that require significant management judgment and estimation - There have been **no significant changes to the Company's critical accounting policies and estimates** compared to those disclosed in its Annual Report[201](index=201&type=chunk) [Smaller Reporting Company and Accelerated Filer Status](index=41&type=section&id=Smaller%20Reporting%20Company%20and%20Accelerated%20Filer%20Status) This section clarifies the company's SEC filing status and its implications for reporting requirements - The Company is a **'smaller reporting company'** and transitioned to an **'accelerated filer'** as of December 31, 2024, requiring an attestation report on internal control over financial reporting in its Annual Report[203](index=203&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Gyre Therapeutics, Inc. is not required to provide market risk disclosures under this item - The Company is a **smaller reporting company** and is not required to provide information under this item[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective as of June 30, 2025, with no material changes in internal control - The Company's **disclosure controls and procedures were evaluated and concluded to be effective** as of June 30, 2025[206](index=206&type=chunk) - There were **no material changes in internal control over financial reporting** during the quarter ended June 30, 2025[207](index=207&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, commitments, and other relevant disclosures [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not currently a party to any material legal proceedings, though ordinary course claims may arise - The Company is **not currently a party to any material legal proceedings**[208](index=208&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) The Company refers to risk factors in its Annual Report on Form 10-K, noting no material changes to these factors - There have been **no material changes from the risk factors disclosed** in Part I, Item 1A, 'Risk Factors' in the Company's Annual Report[209](index=209&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company reports no unregistered sales of equity securities or use of proceeds for the period - None[210](index=210&type=chunk) [Item 3. Defaults Upon Senior Securities](index=43&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reports no defaults upon senior securities for the period - None[211](index=211&type=chunk) [Item 4. Mine Safety Disclosures](index=43&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Not applicable[212](index=212&type=chunk) [Item 5. Other Information](index=43&type=section&id=Item%205.%20Other%20Information) The Chief Operating Officer entered a Rule 10b5-1 trading arrangement on June 16, 2025, to sell up to 700,000 shares - **Weiguo Ye, the Chief Operating Officer, entered into a Rule 10b5-1 trading arrangement** on June 16, 2025, to sell up to 700,000 shares of common stock[213](index=213&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed or furnished as part of the Quarterly Report on Form 10-Q, including agreements and certifications - The exhibit list includes **Asset Purchase Agreements, Business Combination Agreements, Certificates of Incorporation/Designation, Warrants, and certifications** from the Interim CEO and CFO[216](index=216&type=chunk)[217](index=217&type=chunk) [Signatures](index=47&type=section&id=Signatures) The report is duly signed by the Executive Chairman, Interim CEO, and CFO on August 11, 2025 - The report was signed by **Ping Zhang, Executive Chairman and Interim Chief Executive Officer, and Ruoyu Chen, Chief Financial Officer**, on August 11, 2025[225](index=225&type=chunk)

Core Viewpoint - Gyre Therapeutics reported financial results for Q2 2025, highlighting a net income of $1.6 million and reaffirming full-year revenue guidance of $118-128 million, driven by the expansion of its commercial portfolio and ongoing clinical trials [1][2][22]. Financial Performance - For the three months ended June 30, 2025, revenues were $26.8 million, an increase from $25.2 million in the same period of 2024, primarily due to the launch of Etorel and increased sales of Contiva [18][19]. - For the six months ended June 30, 2025, revenues totaled $48.8 million, down from $52.4 million in 2024, mainly due to a decline in ETUARY® sales [19][25]. - Net income for Q2 2025 was $1.6 million, compared to $4.5 million in Q2 2024, reflecting increased operating expenses [20][21]. Product and Pipeline Updates - The pivotal Phase 3 trial of Hydronidone for CHB-associated liver fibrosis showed statistically significant fibrosis regression after 52 weeks, with an NDA filing expected in Q3 2025 [4][15]. - Gyre launched Etorel in June 2025, generating $1.6 million in sales in its first partial quarter [5][6]. - The company plans to initiate a Phase 2 trial for Hydronidone in MASH-associated liver fibrosis in the second half of 2025 [4][15]. Leadership Changes - Dr. Han Ying transitioned from CEO to Senior Vice President, Science, while Ping Zhang was appointed as interim CEO [3][4][16]. Cash Position - As of June 30, 2025, Gyre held $75.9 million in cash and cash equivalents, reflecting an increase due to proceeds from a public offering [17][33]. Full Year Guidance - Gyre expects full-year 2025 revenues to be between $118 million and $128 million, representing growth of 11.3% to 20.8% over 2024, driven by new product launches [22][26].

[Executive Summary & Business Update](index=1&type=section&id=ExecutiveSummaryBusinessUpdate) Gyre Therapeutics reported Q2 and YTD 2025 financial results, reaffirmed guidance, announced leadership changes, and outlined strategic priorities for global expansion and pipeline advancement [Key Highlights](index=1&type=section&id=KeyHighlights) Gyre Therapeutics reported its second quarter and year-to-date 2025 financial results, reaffirming full-year revenue guidance. Significant business achievements include positive Phase 3 trial results for Hydronidone, successful commercial launches of Etorel and Contiva in the PRC, and the initiation of a Phase 1 clinical trial for F230 Key Financial Highlights (Three and Six Months Ended June 30, 2025): | Metric | Q2 2025 | YTD 2025 | | :-------------------------------- | :------ | :------- | | Net Income | $1.6 million | $5.3 million | | Revenue | $26.8 million | $48.8 million | | GAAP Basic EPS | $0.00 | $0.04 | - Reaffirmed full-year revenue guidance of **$118-128 million**[1](index=1&type=chunk) - Pivotal Phase 3 trial of Hydronidone (F351) in CHB-associated liver fibrosis demonstrated statistically significant fibrosis regression after 52 weeks of treatment[4](index=4&type=chunk) - Successfully launched Etorel (nintedanib ethanesulfonate soft capsules) in the PRC for the treatment of SSc-ILD and PF-ILD[4](index=4&type=chunk) [Leadership Transition](index=1&type=section&id=LeadershipTransition) Ping Zhang, Executive Chairman, has been appointed interim Chief Executive Officer, taking over from Dr. Han Ying, who transitioned to the role of Senior Vice President, Science, to focus on research and discovery activities - Ping Zhang, Executive Chairman, appointed interim CEO[1](index=1&type=chunk)[3](index=3&type=chunk) - Dr. Han Ying transitioned from CEO to Senior Vice President, Science, overseeing research and discovery[1](index=1&type=chunk)[3](index=3&type=chunk) [CEO's Strategic Outlook](index=1&type=section&id=CEOsStrategicOutlook) Interim CEO Ping Zhang expressed commitment to strengthening Gyre's global presence and accelerating the delivery of transformative therapies, highlighting rapid progress in commercial expansion and pipeline advancement, particularly for Hydronidone and pirfenidone - Focus on strengthening Gyre's global footprint and accelerating progress toward delivering transformative therapies[4](index=4&type=chunk) - Intends to file a New Drug Application (NDA) for Hydronidone with the NMPA in the third quarter of 2025[5](index=5&type=chunk) - Planned Phase 2 trial in the United States evaluating Hydronidone for MASH-associated liver fibrosis expected to initiate in 2H 2025, pending regulatory approval[4](index=4&type=chunk)[5](index=5&type=chunk) [Business Highlights and Upcoming Milestones](index=2&type=section&id=BusinessHighlightsUpcomingMilestones) Gyre Therapeutics expanded its commercial portfolio with new product launches and advanced its pipeline with positive Phase 3 results for Hydronidone and new clinical trial initiations [Commercial Portfolio Expansion](index=2&type=section&id=CommercialPortfolioExpansion) Gyre Therapeutics expanded its commercial offerings in the PRC with the recent launches of Etorel and Contiva, which began contributing to sales, while sales of its established product, ETUARY®, saw a slight decrease compared to the prior year [ETUARY® (pirfenidone) Sales](index=2&type=section&id=ETUARYSales) ETUARY® sales experienced a slight year-over-year decrease for the second quarter of 2025 ETUARY® Sales (Three Months Ended June 30): | Year | Sales (Millions) | | :--- | :--------------- | | 2025 | $23.5 | | 2024 | $25.1 | - Sales of ETUARY® decreased by **$1.6 million (6.4% YoY)** for the quarter ended June 30, 2025[6](index=6&type=chunk) [Etorel (nintedanib ethanesulfonate) Launch](index=2&type=section&id=EtorelLaunch) Etorel was successfully launched in the PRC in June 2025, contributing initial sales in its first partial quarter - Launched Etorel in the PRC in June 2025 for the treatment of systemic sclerosis-associated ILD and progressive fibrosing ILD[6](index=6&type=chunk) Etorel Sales (First Partial Quarter of Launch): | Period | Sales (Millions) | | :----- | :--------------- | | Q2 2025 | $1.6 | [Contiva (avatrombopag maleate) Commercialization](index=2&type=section&id=ContivaCommercialization) Contiva commercialization began in the PRC in March 2025, generating initial sales for the second quarter - Initiated commercialization of Contiva in the PRC in March 2025 for thrombocytopenia in adults with chronic liver disease and immune thrombocytopenic purpura[7](index=7&type=chunk) Contiva Sales (Q2 2025): | Period | Sales (Millions) | | :----- | :--------------- | | Q2 2025 | $1.5 | [Pipeline Development Updates](index=2&type=section&id=PipelineDevelopmentUpdates) Gyre Therapeutics reported significant advancements across its pipeline, including positive Phase 3 results for Hydronidone in CHB-associated liver fibrosis, plans for new clinical trials for pirfenidone and Hydronidone, and progress for F573, F230, and F528 [Hydronidone](index=2&type=section&id=Hydronidone) Hydronidone achieved positive Phase 3 trial results in CHB-associated liver fibrosis, with an NDA filing planned for Q3 2025 and a US Phase 2 trial expected in 2H 2025 - Positive results from pivotal Phase 3 trial for CHB-associated liver fibrosis in the PRC, demonstrating statistically significant regression in liver fibrosis and inflammation improvement after 52 weeks[8](index=8&type=chunk) - Plans to submit a New Drug Application (NDA) with the NMPA in Q3 2025 based on Phase 3 results[8](index=8&type=chunk) - Phase 2 trial in the US for MASH-associated liver fibrosis expected to start in 2H 2025, subject to regulatory feedback[9](index=9&type=chunk) [ETUARY® (Pirfenidone) Pipeline](index=3&type=section&id=ETUARYPirfenidonePipeline) An adaptive Phase 2/3 trial for pirfenidone in radiation-induced lung injury (RILI) is planned for initiation in the PRC in 2H 2025 - Plans to initiate an adaptive Phase 2/3 trial of pirfenidone for radiation-induced lung injury (RILI) in the PRC in 2H 2025[10](index=10&type=chunk) [F573](index=3&type=section&id=F573) The Phase 2 clinical trial for F573 in acute/acute on-chronic liver failure (ALF/ACLF) is anticipated to conclude by the end of 2026 - Completion of the Phase 2 clinical trial for acute/acute on-chronic liver failure (ALF/ACLF) is expected by the end of 2026[11](index=11&type=chunk) [F230](index=3&type=section&id=F230) A Phase 1 clinical trial for F230 in pulmonary arterial hypertension (PAH) commenced in the PRC in June 2025 with the first volunteer dosed - First volunteer dosed in a Phase 1 clinical trial evaluating F230 for the treatment of pulmonary arterial hypertension (PAH) in the PRC in June 2025[12](index=12&type=chunk) [F528](index=3&type=section&id=F528) F528 is undergoing preclinical studies as a potential first-line therapy for COPD, with an IND application targeted for 2026 - Undergoing preclinical studies as a potential first-line therapy for chronic obstructive pulmonary disease (COPD), with an IND application planned for 2026[13](index=13&type=chunk) [Corporate Updates](index=3&type=section&id=CorporateUpdates) Gyre Therapeutics announced a leadership transition, successfully completed a public offering, and increased its indirect ownership in Gyre Pharmaceuticals [Key Corporate Developments](index=3&type=section&id=KeyCorporateDevelopments) Gyre Therapeutics announced a leadership change with Ping Zhang becoming interim CEO, successfully completed a public offering that generated approximately $23.0 million, and increased its indirect ownership in Gyre Pharmaceuticals to 69.7% - Ping Zhang was appointed interim CEO in August 2025, having served on Gyre's Board of Directors since January 2025 and as Executive Chairman since March 2025[14](index=14&type=chunk) - Completed an underwritten public offering in May 2025, raising approximately **$23.0 million** in gross proceeds[14](index=14&type=chunk) - Increased indirect interest in Gyre Pharmaceuticals from **65.2% to 69.7%** in Q3 2025 through an increased capital contribution[14](index=14&type=chunk) [Financial Results](index=4&type=section&id=FinancialResults) Gyre Therapeutics reported its cash position and detailed financial performance for the second quarter and year-to-date periods of 2025, highlighting revenue drivers and expense impacts [Cash Position](index=4&type=section&id=CashPosition) As of June 30, 2025, Gyre Therapeutics reported a robust cash position, with total cash, cash equivalents, and deposits amounting to $75.9 million, significantly boosted by net proceeds from a recent public offering Cash and Cash Equivalents (in thousands): | Metric | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Cash and cash equivalents | $36,491 | $11,813 | | Short-term bank deposits | $17,874 | $14,858 | | Long-term certificates of deposit | $21,528 | $24,568 | | **Total Liquid Assets** | **$75,893** | **$51,239** | - The increase in cash and cash equivalents mainly includes net proceeds of approximately **$21.3 million** received from the May 2025 underwritten public offering[15](index=15&type=chunk) [Financial Results for the Three Months Ended June 30, 2025](index=4&type=section&id=FinancialResultsQ22025) For the second quarter of 2025, Gyre Therapeutics experienced a modest increase in revenue driven by new product launches, but saw a decline in net income and income from operations due to a notable rise in total operating expenses, particularly in selling and marketing and general and administrative costs Key Financials (Three Months Ended June 30, in thousands): | Metric | 2025 | 2024 | Change (YoY) | % Change (YoY) | | :-------------------------- | :----- | :----- | :----------- | :------------- | | Revenues | $26,771 | $25,225 | $1,546 | 6.1% | | Cost of Revenues | $1,151 | $770 | $381 | 49.5% | | Selling and Marketing Expense | $15,194 | $14,414 | $780 | 5.4% | | Research and Development Expense | $3,425 | $3,355 | $70 | 2.1% | | General and Administrative Expense | $4,829 | $3,424 | $1,405 | 41.0% | | Income from Operations | $2,171 | $3,194 | $(1,023) | -32.0% | | Net Income | $1,576 | $4,538 | $(2,962) | -65.3% | | Non-GAAP Adjusted Net Income | $2,932 | $3,138 | $(206) | -6.6% | - Revenue increase was primarily driven by a **$1.6 million** increase from Etorel's launch and a **$1.5 million** increase from Contiva sales, offset by a **$1.5 million** decline in ETUARY® sales[16](index=16&type=chunk) - The **$1.0 million** decrease in income from operations was primarily driven by a **$2.6 million** increase in total operating expenses, partially offset by the **$1.6 million** increase in revenue[16](index=16&type=chunk) [Financial Results for the Six Months Ended June 30, 2025](index=5&type=section&id=FinancialResultsYTD2025) For the first half of 2025, Gyre Therapeutics experienced a decrease in revenues, primarily due to a significant decline in ETUARY® sales, which, combined with increased operating expenses, led to substantial year-over-year decreases in both net income and income from operations Key Financials (Six Months Ended June 30, in thousands): | Metric | 2025 | 2024 | Change (YoY) | % Change (YoY) | | :-------------------------- | :----- | :----- | :----------- | :------------- | | Revenues | $48,829 | $52,397 | $(3,568) | -6.8% | | Cost of Revenues | $2,045 | $1,749 | $296 | 16.9% | | Selling and Marketing Expense | $26,035 | $26,956 | $(921) | -3.4% | | Research and Development Expense | $6,520 | $5,537 | $983 | 17.8% | | General and Administrative Expense | $9,784 | $6,822 | $2,962 | 43.4% | | Income from Operations | $4,444 | $11,265 | $(6,821) | -60.6% | | Net Income | $5,310 | $14,473 | $(9,163) | -63.3% | | Non-GAAP Adjusted Net Income | $5,819 | $11,342 | $(5,523) | -48.7% | - Revenue decrease was primarily driven by a **$6.8 million** decline in ETUARY® sales, partially offset by **$1.8 million** from Contiva and **$1.6 million** from Etorel[17](index=17&type=chunk) - The **$6.9 million** decrease in income from operations was primarily driven by a **$3.6 million** decrease in revenue and a **$3.3 million** increase in total operating expenses[23](index=23&type=chunk) [Full Year 2025 Financial Guidance](index=6&type=section&id=FullYear2025FinancialGuidance) Gyre Therapeutics reaffirmed its full-year 2025 revenue guidance, projecting growth driven by new product launches and continued sales of ETUARY® [Revenue Guidance](index=6&type=section&id=RevenueGuidance) Gyre Therapeutics reaffirmed its full-year 2025 revenue guidance, projecting significant growth driven by the anticipated commercial launches of Etorel and Contiva, alongside continued sales of ETUARY® Full Year 2025 Revenue Guidance: | Metric | Range | | :----------- | :---------------- | | Total Revenue | $118 to $128 million | - Represents anticipated growth of **11.3% to 20.8%** over 2024 revenue[20](index=20&type=chunk) - Growth is primarily driven by the anticipated commercial launches of Etorel and Contiva and sales of ETUARY®[20](index=20&type=chunk) [Use of Non-GAAP Financial Measures](index=6&type=section&id=UseOfNonGAAPFinancialMeasures) This section explains the company's use of non-GAAP financial measures, specifically adjusted net income, to provide a clearer view of operational performance [Adjusted Net Income Definition and Purpose](index=6&type=section&id=AdjustedNetIncomeDefinition) Gyre Therapeutics utilizes 'adjusted net income' as a non-GAAP financial measure to provide investors with additional insights into its operational performance, by excluding specific items such as changes in the fair value of warrants, stock-based compensation, and provision for income taxes - Adjusted net income is a non-GAAP financial measure used to supplement GAAP results[22](index=22&type=chunk) - It excludes gain from change in fair value of warrants, stock-based compensation, and provision for income taxes[22](index=22&type=chunk) - Management believes it provides useful information for evaluating the company's performance and valuation[22](index=22&type=chunk) [About the Company](index=7&type=section&id=AboutTheCompany) This section provides an overview of Gyre Therapeutics and its PRC subsidiary, Gyre Pharmaceuticals, detailing their respective focuses and key products [About Gyre Pharmaceuticals (PRC Subsidiary)](index=7&type=section&id=AboutGyrePharmaceuticals) Gyre Pharmaceuticals, a commercial-stage biopharmaceutical company in the PRC, is dedicated to innovative drugs for organ fibrosis. Its flagship product, ETUARY®, holds a prominent market share, and its pipeline includes Hydronidone, which has received Breakthrough Therapy designation and is nearing NDA filing - ETUARY® (pirfenidone capsule) was the first approved treatment for IPF in the PRC in 2011, with 2024 net sales of **$105.0 million**[24](index=24&type=chunk) - Hydronidone received Breakthrough Therapy designation by the NMPA Center for Drug Evaluation in March 2021, with NDA filing expected in Q3 2025[24](index=24&type=chunk) - Gyre Therapeutics increased its indirect interest in Gyre Pharmaceuticals from **65.2% to 69.7%** in Q3 2025[24](index=24&type=chunk) [About Gyre Therapeutics (Parent Company)](index=7&type=section&id=AboutGyreTherapeutics) Headquartered in San Diego, CA, Gyre Therapeutics primarily focuses on the development and commercialization of Hydronidone for liver fibrosis, including MASH, in the United States, while also advancing a broad pipeline in the PRC through its indirect controlling interest in Gyre Pharmaceuticals - Primarily focused on the development and commercialization of Hydronidone for liver fibrosis, including MASH, in the United States[25](index=25&type=chunk) - Strategy builds on experience in mechanistic studies using MASH rodent models and clinical studies in CHB-induced liver fibrosis[25](index=25&type=chunk) - Advancing a broad pipeline in the PRC through its indirect controlling interest in Gyre Pharmaceuticals[25](index=25&type=chunk) [Forward-Looking Statements](index=8&type=section&id=ForwardLookingStatements) This section provides a standard disclaimer regarding forward-looking statements, outlining inherent risks and uncertainties without obligation for future updates [Disclaimer and Associated Risks](index=8&type=section&id=DisclaimerAndRisks) This section contains standard forward-looking statements that are subject to substantial risks and uncertainties, including those related to clinical development, regulatory approvals, market competition, economic conditions, and the sufficiency of capital resources. The company disclaims any obligation to update these statements - Statements are subject to substantial risks and uncertainties, based on estimates and assumptions[26](index=26&type=chunk) - Risks include Gyre's ability to execute clinical development strategies, unpredictability of clinical trial results, timing/likelihood of regulatory filings and approvals, competition, economic conditions, and capital resources[26](index=26&type=chunk) - Gyre expressly disclaims any obligation to update any forward-looking statements except as required by law[27](index=27&type=chunk) [Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=CondensedConsolidatedFinancialStatements) This section presents the unaudited condensed consolidated financial statements, including statements of operations, balance sheets, and reconciliation of GAAP to non-GAAP measures [Condensed Consolidated Statements of Operations](index=9&type=section&id=StatementsOfOperations) This statement provides the unaudited consolidated financial performance for the three and six months ended June 30, 2025, and 2024, detailing revenues, operating expenses, income from operations, and net income attributable to common stockholders Condensed Consolidated Statements of Operations (in thousands, except per share amounts): | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $26,771 | $25,225 | $48,829 | $52,397 | | Total operating expenses | $24,600 | $22,031 | $44,385 | $41,132 | | Income from operations | $2,171 | $3,194 | $4,444 | $11,265 | | Net income | $1,576 | $4,538 | $5,310 | $14,473 | | Net income attributable to common stockholders | $442 | $3,528 | $3,140 | $11,060 | | Basic EPS | $0.00 | $0.04 | $0.04 | $0.13 | | Diluted EPS | $0.00 | $0.01 | $0.01 | $0.04 | [Condensed Consolidated Balance Sheets](index=10&type=section&id=BalanceSheets) This statement presents the unaudited consolidated financial position of Gyre Therapeutics as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (in thousands): | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total current assets | $91,285 | $64,786 | | Total assets | $152,646 | $125,406 | | Total current liabilities | $16,920 | $19,516 | | Total liabilities | $23,203 | $27,004 | | Total Gyre stockholders' equity | $92,026 | $63,319 | | Total equity | $129,443 | $98,402 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=11&type=section&id=GAAPToNonGAAPReconciliation) This section provides a reconciliation of GAAP net income to non-GAAP adjusted net income for the three and six months ended June 30, 2025, and 2024, detailing the specific adjustments made for warrant liability, stock-based compensation, and income taxes Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands): | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $1,576 | $4,538 | $5,310 | $14,473 | | Gain from change in fair value of warrant liability | $(212) | $(2,913) | $(2,467) | $(7,201) | | Stock-based compensation | $906 | $16 | $1,413 | $27 | | Provision for income taxes | $662 | $1,497 | $1,563 | $4,043 | | **Non-GAAP adjusted net income** | **$2,932** | **$3,138** | **$5,819** | **$11,342** |

Company Overview - Gyre Therapeutics is a pioneering fibrosis treatment company with a track record of success, including being the first to receive IPF treatment approval (pirfenidone) in China in 2011[7] - The company has maintained a leading IPF market share in China for 10 consecutive years, with approximately 50% overall market share and over 90% share in pirfenidone in 2024[7] - Gyre Therapeutics has approximately 600 dedicated global employees, including around 400 in commercial teams across China and the U S and about 70 focused on R&D[7] - In 2024, Gyre Therapeutics achieved revenue of $105 8 million[8] Hydronidone (F351) Development - Hydronidone (F351) is Gyre's lead asset with the potential to be a first-in-class therapy for CHB-related liver fibrosis, addressing a significant unmet medical need in China, and is expected to initiate a Phase 2 trial in the U S for the treatment of MASH-associated liver fibrosis[11] - In a Phase 2 trial, Hydronidone demonstrated significant fibrosis improvement, with 54 8% of patients in the combined Hydronidone groups showing ≥1 stage fibrosis improvement at Week 52, compared to 25 6% in the placebo group[17] - The U S MASH fibrosis market is estimated to be 7 2 times larger than the CHB fibrosis market[24] Strategic Acquisitions and Future Outlook - Gyre acquired Nintedanib and Avatrombopag in 2024 to strengthen its pirfenidone franchise and prepare for the potential future launch of Hydronidone[45] - The company forecasts 2025 sales of $118 million to $128 million[45] - Gyre expects to submit a New Drug Application (NDA) for Hydronidone in Q2 2025, with NMPA approval anticipated in 2026[53]

Company Overview - Gyre Therapeutics is a biopharmaceutical company focused on advancing fibrosis-first therapies across various organ systems affected by chronic diseases [1][6] - The company is headquartered in San Diego, CA, and is primarily engaged in the development and commercialization of Hydronidone for liver fibrosis, including metabolic dysfunction-associated steatohepatitis (MASH) [6] Clinical Development - Gyre has successfully dosed the first volunteer in a Phase 1 clinical trial for F230, a novel endothelin A receptor antagonist aimed at treating pulmonary arterial hypertension (PAH) [1][4] - The Phase 1 trial is designed to evaluate the safety, tolerability, and pharmacokinetics of F230 in healthy volunteers [4] - F230 is a fully synthetic small molecule that selectively blocks the ETA receptor, intended to reduce pulmonary vascular remodeling and lower pulmonary pressure, which are critical factors in PAH progression [3] Market Potential - Gyre's entry into the PAH field is significant due to the condition's rarity, progressive nature, and high mortality rate, with limited treatment options available [2] - The PAH market in China was valued at $370 million in 2023 and is projected to grow to $480 million by 2031, highlighting the commercial potential for Gyre's F230 [2] Pipeline and Future Plans - F230 joins Gyre's pipeline alongside its lead candidate Hydronidone (F351), which has met the primary endpoint in a pivotal Phase 3 trial for chronic hepatitis B (CHB)-induced liver fibrosis [5] - A New Drug Application (NDA) submission for F351 to China's National Medical Products Administration (NMPA) is planned for the third quarter of 2025 [5] - Gyre is also planning a pre-IND meeting with the U.S. Food and Drug Administration for an expected Phase 2 trial in MASH fibrosis [5]

Core Viewpoint - Gyre Therapeutics has successfully completed a public offering of 2,555,555 shares at a price of $9.00 per share, raising approximately $23.0 million in gross proceeds to advance its clinical trials and operations [1][3]. Group 1: Offering Details - The public offering included the full exercise of an option by underwriters to purchase an additional 333,333 shares [1]. - Jefferies acted as the lead book-running manager, while H.C. Wainwright & Co. served as co-manager for the offering [2]. Group 2: Use of Proceeds - The net proceeds from the offering will be utilized to advance Gyre's Phase 2 clinical trial of F351 for MASH-associated liver fibrosis, along with funding for research and development, manufacturing scale-up, and general corporate purposes [3]. Group 3: Company Overview - Gyre Therapeutics is focused on developing and commercializing therapies for liver fibrosis, particularly targeting MASH in the U.S. market [6]. - The company leverages its experience in mechanistic studies and clinical trials related to liver fibrosis [6].

Core Viewpoint - Gyre Therapeutics has announced a public offering of 2,222,222 shares at a price of $9.00 per share, aiming to raise approximately $20 million to support its clinical trials and operational needs [1][3]. Group 1: Offering Details - The public offering consists of 2,222,222 shares priced at $9.00 each, with an option for underwriters to purchase an additional 333,333 shares [1]. - The gross proceeds from the offering are expected to be around $20 million before deducting underwriting discounts and commissions [1]. - The offering is anticipated to close on or about May 27, 2025, pending customary closing conditions [1]. Group 2: Use of Proceeds - Gyre plans to utilize the net proceeds from the offering, along with existing cash and cash flows, to advance its Phase 2 clinical trial of F351 for liver fibrosis associated with metabolic dysfunction [3]. - The funds will also be allocated for research and development, manufacturing scale-up, working capital, and general corporate purposes [3]. Group 3: Company Background - Gyre Therapeutics is a biotechnology company based in San Diego, focusing on organ fibrosis, particularly liver fibrosis related to metabolic dysfunction [6]. - The company is advancing a pipeline in China through its indirect controlling interest in Gyre Pharmaceuticals, which includes various therapeutic developments [6].

Core Viewpoint - Gyre Therapeutics has initiated an underwritten public offering of its common stock to fund its clinical trials and operational needs [1][2]. Group 1: Offering Details - Gyre is granting underwriters a 30-day option to purchase additional shares at the public offering price, subject to market conditions [1]. - The offering is made under a shelf registration statement effective since November 22, 2024, and will be conducted via a prospectus [4]. Group 2: Use of Proceeds - The net proceeds from the offering will be used to advance Gyre's Phase 2 clinical trial of F351 for MASH-associated liver fibrosis, along with funding for research, development, manufacturing, and general corporate purposes [2]. Group 3: Management of the Offering - Jefferies is the lead book-running manager for the offering, with H.C. Wainwright & Co. serving as co-manager [3]. Group 4: Company Overview - Gyre Therapeutics is focused on developing and commercializing treatments for liver fibrosis, including MASH, and has a pipeline that includes various therapeutic programs in the U.S. and China [6].

Core Insights - Gyre Therapeutics announced that its lead compound, Hydronidone (F351), successfully met the primary endpoint in a pivotal Phase 3 trial for treating liver fibrosis in patients with chronic hepatitis B in China [1][2][3] Trial Details - The Phase 3 trial was a 52-week, multicenter, double-blind, placebo-controlled study involving 248 patients with CHB fibrosis across 39 hospitals in China [2][12] - Patients were randomized 1:1 to receive either Hydronidone (270 mg/day) or placebo, alongside entecavir antiviral therapy [2][12] - The trial achieved a statistically significant proportion of patients showing a ≥1-stage regression in liver fibrosis with Hydronidone compared to placebo (52.85% vs. 29.84%, P=0.0002) [6][7] Efficacy and Safety Results - Hydronidone demonstrated a statistically significant regression in liver fibrosis and improvement in liver inflammation compared to placebo [5][6] - Key secondary endpoint results showed a ≥1-grade improvement in inflammation (49.57% for Hydronidone vs. 34.82% for placebo, P=0.0246) [6] - The safety profile of Hydronidone was favorable, with serious adverse events occurring in 4.88% of patients compared to 6.45% in the placebo group, and no discontinuations due to adverse events [7][9] Future Plans - Gyre plans to submit a New Drug Application (NDA) to China's NMPA in Q3 2025 for accelerated approval of Hydronidone [7][11] - A Phase 2 trial in the U.S. for MASH-associated liver fibrosis is expected to begin in the second half of 2025 [7][11] Market Opportunity - Approximately 75 million people in China are chronically infected with hepatitis B, with an estimated 2.6 million diagnosed with compensated F2-F4 CHB fibrosis, representing a significant addressable market for Hydronidone [13][14] - Currently, there are no approved anti-fibrotic therapies for CHB fibrosis in China, highlighting the urgent medical need that Hydronidone aims to address [13][14] About Hydronidone - Hydronidone is a structural analogue of Pirfenidone, exhibiting enhanced potency in inhibiting key drivers of liver fibrosis [15][16] - The compound has shown robust anti-fibrotic activity in multiple preclinical models and is positioned to transform the treatment landscape for liver fibrosis [16] Company Overview - Gyre Therapeutics is a biopharmaceutical company focused on developing and commercializing Hydronidone for liver fibrosis, including MASH in the U.S. [18] - The company is advancing a broad pipeline through its indirect controlling interest in Gyre Pharmaceuticals, including therapeutic expansions and development programs [18]

Commercialization and Product Development - Gyre Pharmaceuticals successfully advanced pirfenidone to commercialization in the PRC for the treatment of idiopathic pulmonary fibrosis (IPF) and has acquired commercial rights to Nintedanib, enhancing its position in the pulmonary fibrosis market[116] - Nintedanib is expected to be commercialized in the PRC in Q2 2025, aimed at offsetting declines in ETUARY sales due to increased competition and economic fluctuations[116] - Pirfenidone is undergoing a Phase 3 trial in the PRC for pneumoconiosis and has received approval for a new indication for radiation-induced lung injury[118] - F351, a lead development candidate, has shown statistically significant improvement in liver fibrosis in a Phase 2 trial, with a confirmatory Phase 3 trial ongoing[120] - The Phase 3 trial of Hydronidone in CHB-associated liver fibrosis is on track to report topline results in Q2 2025[120] - The commercialization of avatrombopag in the PRC was initiated in March 2025, targeting thrombocytopenia in chronic liver disease[123] - Gyre Pharmaceuticals is preparing to launch a clinical trial for F230, a selective endothelin receptor agonist for pulmonary arterial hypertension[122] - The company is also evaluating F528, a novel anti-inflammation agent, in preclinical studies for chronic obstructive pulmonary disease[122] Financial Performance - For the three months ended March 31, 2025, the company reported revenues of $22.1 million, a decrease of $5.1 million or 19% compared to $27.2 million in the same period of 2024[150] - The net income for the three months ended March 31, 2025, was $3.7 million, down 62% from $9.9 million in the same period of 2024[137] - Research and development expenses increased by $0.9 million, or 42%, for the three months ended March 31, 2025, totaling $3.1 million compared to $2.2 million in 2024[155] - Selling and marketing expenses decreased by $1.7 million, or 14%, for the three months ended March 31, 2025, totaling $10.8 million compared to $12.5 million in 2024[154] - The cost of revenues for the three months ended March 31, 2025, was $0.9 million, a decrease of 9% from $1.0 million in the same period of 2024[153] - The provision for income taxes was $0.9 million for the three months ended March 31, 2025, down from $2.5 million in 2024, primarily due to lower profits[159] Cash Flow and Financial Position - The company had cash and cash equivalents of $15.0 million as of March 31, 2025, an increase from $11.8 million as of December 31, 2024[137] - The accumulated deficit as of March 31, 2025, was $70.8 million, a slight improvement from $73.5 million as of December 31, 2024[137] - Cash used in operating activities was $0.1 million, reflecting a net income of $3.7 million, offset by non-cash items totaling $0.5 million[166] - Cash provided by investing activities for the same period was $2.0 million, primarily from $11.2 million cash acquired from maturing certificates of deposit, offset by $8.4 million in purchases of certificates of deposit[168] - Cash provided by financing activities for the three months ended March 31, 2025, was $1.3 million, driven by $0.9 million from stock options exercise and $0.5 million from common stock issuance[170] - As of March 31, 2025, the aggregate amounts of restricted capital and statutory reserves not available for distribution were $64.3 million[171] Commitments and Obligations - The company has committed to allocate $32.7 million toward future research and development activities as of March 31, 2025[175] - The company has fixed lease payment obligations of $1.8 million as of March 31, 2025, with $0.8 million payable within 12 months[173] - The company has commitments related to the purchase of property and equipment totaling $4.8 million as of March 31, 2025[176] - The company expects to pay a total of $1.0 million to New Jiyuan for the transfer of minocycline hydrochloride foam, with $0.7 million paid as of March 31, 2025[174] Reporting Status - The company remains a smaller reporting company but became an "accelerated filer" as of December 31, 2024, requiring compliance with additional reporting requirements[180]