Gyre Therapeutics(GYRE) - 2020 Q4 - Annual Report

Part I Business Catalyst Biosciences develops engineered proteases for complement and coagulation disorders, with lead candidate MarzAA entering a Phase 3 trial - The company focuses on engineering proteases for complement and coagulation disorders, with its lead candidate MarzAA (a next-gen FVIIa) entering a registrational Phase 3 trial for hemophilia with inhibitors[15][17] - The complement pipeline includes CB 4332 for CFI deficiency and CB 2782-PEG for dry AMD, the latter being developed in collaboration with Biogen[18] - The company's next most advanced hemophilia candidate is DalcA, a next-generation SQ FIX for Hemophilia B, which has completed a Phase 2b trial[19] Product Pipeline and Development Programs The company's pipeline focuses on hemostasis and complement disorders, with lead candidate MarzAA advancing to Phase 3 and DalcA completing Phase 2b - MarzAA is entering a registrational Phase 3 trial (MAA-304) for on-demand treatment of bleeding in hemophilia patients with inhibitors, with a Phase 1/2 trial (MAA-202) also planned for other rare bleeding disorders[17][39][41] - The FDA granted Fast Track designation for MarzAA for treating episodic bleeding in patients with Hemophilia A or B with inhibitors, validating its potential to address an unmet medical need[38] - The complement program CB 2782-PEG for dry AMD is licensed to Biogen, with Catalyst receiving a $15.0 million upfront payment and eligible for up to $340.0 million in milestones plus royalties[24][25][56] - The Factor IX gene therapy candidate, CB 2679d-GT, has shown superior activity in preclinical models compared to the Padua variant, potentially allowing for lower vector doses[65][66] Collaborations Catalyst has key collaborations including a legacy agreement with Pfizer for MarzAA, a partnership with ISU Abxis for DalcA, and a major deal with Biogen for CB 2782-PEG - Collaboration with Biogen for CB 2782-PEG: Catalyst received a $15.0 million upfront payment and is eligible for up to $340.0 million in milestones and tiered royalties[72] - Agreement with Pfizer for MarzAA: Catalyst owes up to $17.5 million in milestone payments and single-digit royalties on net sales, with a $1.0 million milestone paid in February 2018[69] - Partnership with ISU Abxis for DalcA: ISU holds commercial rights in South Korea, and Catalyst owes up to $19.5 million in milestones and low single-digit royalties on sales in other regions[71] Competition The company faces significant competition from larger pharmaceutical companies across its Factor VIIa, Factor IX, and dry AMD programs - Factor VIIa competition for MarzAA includes approved products like Novo Nordisk's NovoSeven RT, Takeda's FEIBA, Roche's Hemlibra, and HEMA Biologics' SEVENFACT[77][78] - Factor IX competition for DalcA includes Pfizer's BeneFIX, Sanofi/SOBI's Alprolix, and CSL Behring's Idelvion, with several companies also developing Factor IX gene therapies[78] - While no treatments are approved for dry AMD, several companies are in clinical studies, including Apellis (APL-2), Iveric Bio (Zimura®), and Gemini Therapeutics (GEM103)[78] Intellectual Property As of year-end 2020, the company's patent portfolio included 72 issued patents and 12 pending applications, covering its lead candidates and novel proteases - As of year-end 2020, the patent portfolio included approximately 72 issued patents and 12 pending applications[82] - Patents covering MarzAA (modified Factor VII) expire in 2029-2031 in the U.S. and patents covering DalcA (modified Factor IX) expire between 2030-2038[91] - A recently issued patent covering the portfolio of engineered C3-degrading proteases, including lead candidate CB 2782-PEG, provides protection until at least 2038[60] Manufacturing and Commercialization Catalyst relies on third-party contract manufacturers for drug substance and product, and plans to retain U.S. commercial rights for hemophilia candidates - The company relies on third parties for manufacturing and does not own any facilities, with key partners including AGC Biologics for drug substance and Catalent and Symbiosis for drug product[95][96][99] - Two large-scale GMP batches of MarzAA have been successfully completed at AGC, sufficient to support the Phase 3 clinical trial (MAA-304)[96] - The company plans to retain U.S. commercial rights for its hemophilia products and may build a specialized sales force, but has not yet developed a commercial strategy outside the U.S[101] Government Regulation The company's biologic products are subject to extensive FDA regulation, including IND/BLA processes, and ongoing compliance with healthcare laws - The company's products are regulated as biologics, requiring an extensive process of preclinical and clinical testing before a Biologics License Application (BLA) can be submitted to the FDA for approval[102][105] - MarzAA has received Orphan Drug designation in the U.S. and E.U. and Fast Track designation from the FDA, while DalcA has received Orphan Drug designation in both the U.S. and E.U[123][128] - The company is subject to numerous other laws, including the federal Anti-Kickback Statute, HIPAA, and the Physician Payments Sunshine Act, which regulate marketing, data privacy, and financial relationships with healthcare providers[139][140][147] Risk Factors The company faces significant risks including COVID-19 impacts, substantial accumulated losses requiring additional capital, reliance on third parties, and intellectual property challenges - The COVID-19 pandemic has caused operational challenges, including delays in clinical trial enrollment for MAA-304 and MAA-202, and poses a risk to manufacturing and supply chains[173][175] - The company has incurred significant losses since inception ($314.8 million accumulated deficit as of Dec 31, 2020) and expects to continue incurring losses, requiring substantial additional capital to fund development programs[174][191][201] - Reliance on third parties is a key risk, including the success of the Biogen collaboration, the performance of contract manufacturers, and the potential for government requisition of manufacturing capacity for COVID-19 vaccines[174][188][222] - There is a risk of intellectual property infringement claims, with a patent family that may read on MarzAA pending, though the company believes the claims are not patentable[257] Properties The company leases approximately 16,208 square feet for its corporate headquarters in South San Francisco, with the current lease expiring in April 2023 - The company leases approximately 16,208 square feet for its corporate headquarters in South San Francisco, California[325] - The current lease term expires on April 30, 2023[325] Legal Proceedings The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business or financial condition - The company is not presently a party to any material legal proceedings[327] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Catalyst Biosciences' common stock trades on Nasdaq under 'CBIO', with no cash dividends ever paid or anticipated, as earnings are retained for development - The company's common stock trades on the Nasdaq Capital Market under the ticker symbol 'CBIO'[331] - The company has never paid cash dividends and does not plan to in the foreseeable future, retaining funds for development[333] Management's Discussion and Analysis of Financial Condition and Results of Operations For 2020, Catalyst reported $20.9 million in revenue, a net loss of $56.2 million, and ended the year with $81.9 million in cash, sufficient for the next 12 months - In 2020, the company raised approximately $60.0 million in net proceeds from two underwritten public offerings of common stock in February and June[373][374][411] - The company believes its existing capital of $81.9 million (as of Dec 31, 2020) is sufficient to fund operations for at least the next 12 months[402][403] Results of Operations In 2020, the company generated $20.9 million in revenue, with R&D and G&A expenses increasing 21%, resulting in a net loss of $56.2 million Results of Operations (in thousands) | | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | License and collaboration revenue | $20,948 | $— | $20,948 | N/A | | License | $15,100 | $— | $15,100 | N/A | | Collaboration | $5,848 | $— | $5,848 | N/A | | Total operating expenses | $78,318 | $57,277 | $21,041 | 37% | | Cost of license and collaboration | $9,163 | $— | $9,163 | N/A | | Research and development | $52,975 | $43,859 | $9,116 | 21% | | General and administrative | $16,180 | $13,418 | $2,762 | 21% | | Loss from operations | ($57,370) | ($57,277) | ($93) | 0% | | Net loss | ($56,241) | ($55,178) | ($1,063) | 2% | - R&D expenses increased by $9.1 million (21%) in 2020, primarily due to a $7.0 million increase in preclinical research and a $2.3 million increase in personnel costs[398] - G&A expenses increased by $2.8 million (21%) in 2020, mainly driven by a $2.8 million increase in professional services[399] Liquidity and Capital Resources As of December 31, 2020, Catalyst had $81.9 million in cash, bolstered by $60.4 million from public offerings, deemed sufficient for at least 12 months Cash Flow Summary (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Cash used in operating activities | $(55,048) | $(43,613) | | Cash provided by investing activities | $9,663 | $27,392 | | Cash provided by financing activities | $60,376 | $327 | | Net increase (decrease) in cash | $14,991 | $(15,894) | - As of December 31, 2020, the company had cash, cash equivalents, and investments of $81.9 million and an accumulated deficit of $314.8 million[402] - In Q1 2021, the company raised approximately $49.3 million in net proceeds from the sale of common stock[405][560] Financial Statements and Supplementary Data The audited financial statements for 2020 show total assets of $94.8 million and a net loss of $56.2 million, with R&D expense estimation noted as a critical audit matter Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $30,360 | $15,369 | | Total current assets | $89,510 | $96,066 | | Total assets | $94,846 | $98,554 | | Total current liabilities | $17,796 | $28,899 | | Total liabilities | $18,777 | $30,218 | | Total stockholders' equity | $76,069 | $68,336 | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | License and collaboration revenue | $20,948 | $— | | Total operating expenses | $78,318 | $57,277 | | Loss from operations | $(57,370) | $(57,277) | | Net loss | $(56,241) | $(55,178) | | Net loss per share | $(2.93) | $(4.60) | - The independent auditor, EisnerAmper LLP, identified the estimation of research and development expenses as a critical audit matter due to the significant judgment required by management[437][439][441] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[563] - Based on the COSO 2013 framework, management assessed internal control over financial reporting to be effective as of December 31, 2020[565] Part III Directors, Executive Officers, Corporate Governance, Compensation, and Security Ownership Information for directors, executive officers, corporate governance, compensation, and security ownership is incorporated by reference from the forthcoming Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accountant Fees (Item 14) is incorporated by reference from the company's forthcoming Proxy Statement[569][570][571] Part IV Exhibits and Financial Statement Schedules This section lists all exhibits filed with the 10-K, including material contracts and certifications from the CEO and CFO - This section contains the list of all exhibits filed with the 10-K, including material contracts like the License and Collaboration Agreement with Biogen and the Amended and Restated License Agreement with ISU Abxis[578][581] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Sections 302 and 906 are included as exhibits[583]