Gyre Therapeutics(GYRE) - 2020 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The unaudited financial statements show total assets of $123.7 million and a net loss of $21.3 million for the six months ended June 30, 2020 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $59,273 | $15,369 | | Total current assets | $121,345 | $96,066 | | Total assets | $123,684 | $98,554 | | Liabilities & Equity | | | | Total current liabilities | $13,664 | $28,899 | | Total liabilities | $14,723 | $30,218 | | Total stockholders' equity | $108,961 | $68,336 | | Total liabilities and stockholders' equity | $123,684 | $98,554 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | License and collaboration revenue | $1,658 | $18,024 | | Total operating expenses | $19,019 | $40,453 | | Loss from operations | $(17,361) | $(22,429) | | Net loss | $(17,248) | $(21,301) | | Net loss per share, basic and diluted | $(0.96) | $(1.31) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(19,926) | $(26,424) | | Net cash provided by investing activities | $3,379 | $12,324 | | Net cash provided by financing activities | $60,451 | $235 | | Net increase (decrease) in cash | $43,904 | $(13,865) | Notes to Financial Statements The notes detail key accounting policies, the Biogen collaboration, recent public offerings, and significant commitments - The company believes its existing cash, cash equivalents, and short-term investments of $117.4 million as of June 30, 2020, are sufficient to fund its cash requirements for at least the next 12 months[24] - In December 2019, the company entered into a collaboration with Biogen, receiving a $15.0 million upfront payment in January 2020 and is eligible for up to $340.0 million in milestones, plus royalties[52][53] - The company completed two underwritten public offerings in February and June 2020, raising total net proceeds of approximately $60.0 million[59][60] - Subsequent to the quarter end, the company entered into new work orders for clinical trial services with total payment commitments of approximately $7.2 million and $14.0 million[70][71] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses operational results, program developments, the Biogen collaboration's financial impact, and recent financing activities - The company is a clinical development biopharmaceutical firm focused on rare hematologic and complement-mediated disorders, with key programs including MarzAA, DalcA, and a partnered anti-C3 protease program[74][75] - The company acknowledges that the COVID-19 pandemic presents operational challenges that could delay or halt development programs, potentially impacting clinical trial enrollment, timelines, and costs[78][98] - In the first half of 2020, the company raised approximately $60.0 million in net proceeds from two public offerings of its common stock in February and June[101][102] - As of June 30, 2020, the company had an accumulated deficit of $279.8 million and cash, cash equivalents, and short-term investments of $117.4 million[104] Results of Operations The company's net loss decreased to $21.3 million in H1 2020, driven by $18.0 million in new revenue from the Biogen agreement Comparison of Results of Operations (in thousands) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | License and collaboration revenue | $18,024 | $— | $18,024 | 100% | | Research and development | $26,170 | $23,138 | $3,032 | 13% | | General and administrative | $8,062 | $6,956 | $1,106 | 16% | | Total operating expenses | $40,453 | $30,094 | $10,359 | 34% | | Net loss | $(21,301) | $(28,862) | $7,561 | (26)% | - Revenue of $18.0 million for the first six months of 2020 was generated from the Biogen Agreement entered into in December 2019[123] - The 13% increase in R&D expenses for the six months ended June 30, 2020 was primarily due to a $3.6 million increase in preclinical spending, partially offset by a $1.5 million decrease in clinical manufacturing costs[127] Liquidity and Capital Resources The company held $117.4 million in cash and investments as of June 30, 2020, which is deemed sufficient for at least the next 12 months - The company's cash, cash equivalents, and short-term investments totaled $117.4 million as of June 30, 2020[133] - Management believes existing capital resources are sufficient to meet projected operating requirements for at least the next 12 months from the filing date[134] Summary of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Cash used in operating activities | $(19,926) | $(26,424) | | Cash provided by investing activities | $3,379 | $12,324 | | Cash provided by financing activities | $60,451 | $235 | - Cash provided by financing activities of $60.5 million in H1 2020 was primarily from net proceeds of public offerings in February ($32.0 million) and June ($28.0 million)[139] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity, which is not expected to have a material impact on its financial position - The company's primary market risk is interest income sensitivity related to its investment portfolio of cash, cash equivalents, and short-term investments[143] - Due to the short-term nature of the instruments in its portfolio, a sudden change in market interest rates is not expected to have a material impact on the fair market value of its investments[145] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal controls - Based on an evaluation as of June 30, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[147] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[148] PART II. OTHER INFORMATION Legal Proceedings The company reports that it is not a party to any material legal proceedings - The company is not a party to any material legal proceedings[150] Risk Factors A new significant risk factor has been added concerning the potential adverse impact of the COVID-19 pandemic on business operations - A new risk factor has been added to address the potential adverse impact of the COVID-19 pandemic on the business, preclinical studies, and clinical trials[153] - Potential COVID-19 disruptions include delays in enrolling trial participants, interruption of key clinical trial activities, delays in receiving supplies, and interruptions in regulatory authority operations[154] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[156] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[157] Mine Safety Disclosures This item is not applicable to the company - Not applicable[158] Other Information The company reported no other information - None[159] Exhibits This section lists all exhibits filed with the report, including key agreements and officer certifications - The report includes an Amended and Restated Collaboration Agreement with Mosaic Biosciences, Inc. dated May 8, 2020[163] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 are included as exhibits[163]