Catalyst Biosciences, Inc.(CBIO) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section details the unaudited consolidated financial statements and management's analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited consolidated financial statements, detailing financial position, performance, equity, and cash flows, with comprehensive notes Condensed Consolidated Balance Sheets 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] Condensed Consolidated Statements of Operations and Comprehensive Income 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] Condensed Consolidated Statements of Convertible Preferred Stock and Equity 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] Condensed Consolidated Statements of Cash Flows 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] Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the consolidated financial statements 1. Nature of Operations and Liquidity 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] - 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] 2. Summary of Significant Accounting Policies 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] - The Company operates in two distinct reportable segments: Gyre Pharmaceuticals (PRC operations) and Gyre (U.S. operations)[25] - The Company adopted ASU 2023-09 (Improvements to Income Tax Disclosures) effective January 1, 2025, with no material impact on quarterly financial statements[35] 3. Fair Value Measurements and Financial Instruments 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][46] 4. Balance Sheet Components 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] 5. Intangible Assets 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][56] - Amortization expense for the six months ended June 30, 2025, was $234 thousand, compared to $16 thousand for the same period in 2024[58] 6. Revenue 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] - 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] | 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 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][63] - 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] | 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 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] - 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][74] - Restricted capital and statutory reserves of PRC subsidiaries, not available for distribution, totaled $64.7 million as of June 30, 2025[77] 9. Convertible Preferred Stock 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] 10. Stock Based Compensation 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] | 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] 11. Net Income per Share ("EPS") Attributable to Common Stockholders 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] 12. Commitments and Contingencies 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] - The Etorel IP Rights acquisition includes an initial $4.9 million consideration and contingent annual payments over eight years based on actual sales[95] - Future payments for the Hydronidone program to GNI Group total $12.7 million, contingent upon NDA submission, NMPA inspection, and NMPA approval[97] - Gyre Pharmaceuticals has committed to allocate $22.0 million toward future research and development activities for various programs[98] 13. Income Taxes 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] 14. Related Party Transactions 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] - The Company had $0.2 million in other receivables from GNI Group as of June 30, 2025, and December 31, 2024[104] 15. Employee Benefit Plans 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] 16. Segment Information 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] - 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] - 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][111] 17. Subsequent Event 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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][124] - 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] - 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] Financial Operations Overview 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][144] - The accumulated deficit improved to $70.3 million as of June 30, 2025, from $73.5 million at December 31, 2024[143][144] Components of Results of Operations This section explains the primary drivers of revenue, cost of revenues, operating expenses, and other income/expenses - Revenue is primarily generated from sales of ETUARY®, Contiva, Etorel, and generic drugs to distributors in the PRC[145] - Research and development costs are expensed as incurred and include expenses for preclinical and clinical development, payroll, laboratory supplies, and contract services[148][149] - Other income includes interest earned on deposits and government grants, while other expenses include losses from equity method investments[154][155][156] Results of Operations This section provides a detailed comparison of financial performance for the current and prior reporting periods Comparison of the three months ended June 30, 2025 and 2024 This section compares the company's financial performance for the second quarter of 2025 against the same period in 2024 | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change ($) | 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 | $(3,086) | (87)% | - Revenue increase was driven by new product launches (Etorel and Contiva), offsetting a decline in ETUARY® sales[161] - General and administrative expenses increased significantly due to higher professional fees and personnel/stock compensation costs[167] Comparison of the six months ended June 30, 2025 and 2024 This section compares the company's financial performance for the first half of 2025 against the same period in 2024 | Metric | H1 2025 (in thousands) | H1 2024 (in thousands) | Change ($) | 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] - Research and development expenses increased by $1.0 million, mainly due to higher clinical trial costs, particularly for Hydronidone data analysis[177] Recent Accounting Pronouncements 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] Liquidity and Capital Resources 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] | 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][184] Contractual Obligations and Other Commitments 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] - The Company has committed $34.7 million toward future research and development activities for various programs[198] - Commitments related to property and equipment purchases were $4.0 million as of June 30, 2025, expected to be incurred within one year[199] Critical Accounting Policies and Estimates 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] Smaller Reporting Company and Accelerated Filer Status 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[207] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, commitments, and other relevant disclosures Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company reports no unregistered sales of equity securities or use of proceeds for the period - None[210] Item 3. Defaults Upon Senior Securities The Company reports no defaults upon senior securities for the period - None[211] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not applicable[212] Item 5. Other Information 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] Item 6. Exhibits 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][217] 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]