Gyre Therapeutics posts $4.05M Q3 2026 loss
Management believes existing cash, operating cash flows and capital-market access will be sufficient to fund operations and obligations for at least twelve months.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Gyre Therapeutics, Inc. reported third-quarter revenue of $32.934 million for the three months ended September 30, 2026, versus $32.694 million in the 2025 recast period. Net loss attributable to common stockholders was $4.053 million, versus income of $1.025 million in the 2025 quarter. For the nine months ended September 30, 2026, revenue was $86.469 million, versus $92.999 million in the 2025 recast period; common-stockholder net loss was $28.862 million, versus income of $1.151 million.
Net cash used in operating activities was $17.530 million for the nine months ended September 30, 2026, compared with $10.185 million in the 2025 recast period. Cash and cash equivalents were $41.643 million at September 30, 2026. Management believes existing cash, cash flows from operations and access to capital markets will be sufficient to fund operations and obligations for at least twelve months following issuance.
Gyre completed its all-stock merger with Cullgen on May 4, 2026, and Cullgen became wholly owned. Because the companies were under common control before and after the merger, Gyre retrospectively recast the periods presented; transferred assets and liabilities were recorded at historical carrying amounts, with no new accounting basis or goodwill.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- None.
Negative
- Moderate pointNine-month revenue fell to $86.469 million from $92.999 million.
- Moderate pointNine-month common-stockholder result: $28.862 million loss versus $1.151 million income.
- Moderate pointOperating cash use increased to $17.530 million from $10.185 million.
- Minor pointQuarterly common-stockholder result: $4.053 million loss versus $1.025 million income.
Filing Explained
The outstanding Series B balance remains temporary equity, not common shares, until conversion or removal of its settlement feature.
This unaudited quarterly filing reports 3,552,427 Series B preferred shares outstanding at September 30; conversion of that remaining balance into common stock had not yet occurred.
Stockholder approval for conversion was obtained on June 10, but a separate fundamental-transaction feature remained, so the company continued to classify Series B as temporary equity until conversion, removal or amendment of that feature, or another basis for permanent-equity treatment.
Key Figures
Key Terms
common control technical
temporary equity financial
noncontrolling interest financial
available-for-sale securities financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much revenue did GYRE report in the third quarter of 2026?
What was GYRE's nine-month loss attributable to common stockholders?
Who were GYRE's largest customers in the third quarter of 2026?
What is the status of GYRE's Series B preferred stock?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) |
(Zip Code) |
(
(Registrant’s Telephone Number, Including Area Code)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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The |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 1, 2026, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was
GYRE THERAPEUTICS, INC.
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION |
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Item 1. |
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Financial Statements: |
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Unaudited Condensed Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025 |
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Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, 2026 and 2025 |
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Unaudited Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2026 and 2025 |
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Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and 2025 |
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Notes to the Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. |
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Controls and Procedures |
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PART II. OTHER INFORMATION |
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Item 1. |
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Legal Proceedings |
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Item 1A. |
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Risk Factors |
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Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 3. |
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Defaults Upon Senior Securities |
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Item 4. |
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Mine Safety Disclosures |
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Item 5. |
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Other Information |
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Item 6. |
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Exhibits |
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Exhibit Index |
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Signatures |
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Gyre Therapeutics, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
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September 30, 2026 |
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December 31, 2025 |
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(As Recast) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term bank deposits |
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Short-term investment |
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Notes receivable |
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Accounts receivables, net |
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Other receivables from GNI |
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Inventories |
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Prepaid assets and other current assets |
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Total current assets |
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Property and equipment, net |
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Intangible assets, net |
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Long-term prepayments |
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Deferred tax assets |
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Long-term certificates of deposit |
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Other assets, noncurrent |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Due to related parties |
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Accrued expenses and other current liabilities |
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Income tax payable |
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Operating lease liabilities, current |
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Total current liabilities |
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Operating lease liabilities, noncurrent |
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Deferred government grants |
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Warrant liability, noncurrent |
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Other noncurrent liabilities |
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Total liabilities |
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Commitments and Contingencies (Note 11) |
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Series B preferred stock, $ |
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Redeemable convertible preferred stock, $ |
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Redeemable noncontrolling interests — Cullgen redeemable convertible preferred stock |
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Stockholders’ equity: |
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Common stock, $ |
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Additional paid-in capital |
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Statutory reserve |
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Accumulated deficit |
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( |
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Accumulated other comprehensive income (loss) |
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( |
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Total Gyre stockholders’ equity |
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Noncontrolling interest |
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( |
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Total equity |
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Total liabilities, Series B preferred stock, redeemable convertible preferred stock, and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Gyre Therapeutics, Inc.
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
(In thousands, except share and per share amounts)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Revenues |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Cost of revenues |
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Selling and marketing |
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Research and development |
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Research and development-related parties |
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— |
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— |
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General and administrative |
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Transaction costs |
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— |
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— |
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Total operating expenses |
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(Loss) income from operations |
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( |
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Other (loss) income, net: |
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Interest income |
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Other (expense) income, net |
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( |
) |
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( |
) |
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( |
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Change in fair value of warrant liability |
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( |
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( |
) |
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( |
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(Loss) income before income taxes |
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( |
) |
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( |
) |
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Provision for income taxes |
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( |
) |
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( |
) |
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( |
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( |
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Net (loss) income |
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( |
) |
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( |
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Accretion of Cullgen redeemable convertible preferred stock |
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( |
) |
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( |
) |
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( |
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Net income (loss) attributable to noncontrolling interest |
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( |
) |
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( |
) |
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( |
) |
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Net (loss) income attributable to common stockholders |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Net (loss) income per share attributable to common stockholders: |
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Basic |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Diluted |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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Weighted average shares used in calculating net (loss) income per share attributable to common stockholders: |
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Basic |
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Diluted |
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Other comprehensive income (loss) : |
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Reclassification adjustment for (loss) gain included in net (loss) income |
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( |
) |
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( |
) |
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Unrealized gain (loss) on short-term investments |
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( |
) |
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( |
) |
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( |
) |
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Foreign currency translation adjustments |
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Other comprehensive (loss) income attributable to noncontrolling interest: |
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Reclassification adjustment for loss included in net loss attributable to noncontrolling interest |
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( |
) |
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( |
) |
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( |
) |
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Unrealized gain (loss) on short-term investments attributable to noncontrolling interest |
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( |
) |
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Foreign currency translation adjustments attributable to noncontrolling interest |
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Comprehensive income (loss) attributable to noncontrolling interest |
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( |
) |
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( |
) |
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( |
) |
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Comprehensive (loss) income attributable to common stockholders |
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$ |
( |
) |
|
$ |
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|
$ |
( |
) |
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$ |
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||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Gyre Therapeutics, Inc.
Condensed Consolidated Statements of Equity
(In thousands, except share amounts)
(Unaudited)
|
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Series B Convertible Preferred Stock |
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Redeemable convertible preferred stock |
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Redeemable Noncontrolling Interests |
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Common Stock |
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Additional |
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Statutory Reserve |
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Accumulated Deficit |
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Accumulated Other Comprehensive (Loss) Income |
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Total Gyre |
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Non-controlling Interest |
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Total Equity |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Balance at December 31, 2025, as recast |
|
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— |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
) |
$ |
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$ |
( |
) |
$ |
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||||||||||
Appropriation of statutory reserve |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
|
— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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||||
Stock options exercised |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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||||
Accretion of Cullgen redeemable convertible preferred stock |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|
( |
) |
|
— |
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|
( |
) |
|
( |
) |
|
( |
) |
|
Unrealized loss on short-term investments |
|
|
— |
|
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— |
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|
— |
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|
— |
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|
— |
|
|
— |
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— |
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— |
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— |
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|
— |
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|
— |
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|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Reclassification adjustment for loss included in net loss |
|
|
— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
|
( |
) |
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( |
) |
Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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||||
Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
|
( |
) |
|
( |
) |
Balance at March 31, 2026, as recast |
|
|
— |
|
$ |
— |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|||||||||||
Stock-based compensation expense |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Stock options exercised |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
Shares issued upon common control merger with Cullgen |
|
|
|
|
|
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
( |
) |
|
|
|
|
|
|
||||||||
Accretion of Cullgen redeemable convertible preferred stock |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
Unrealized loss on short-term investments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
Balance at June 30, 2026 |
|
|
|
$ |
|
|
— |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
Stock-based compensation expense |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
— |
|
— |
|
— |
|
|
|
|
— |
|
|
|
||||||||||||||
Stock options exercised |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
— |
|
|
|
— |
|
— |
|
— |
|
|
|
|
— |
|
|
|
||||||||||||||
Conversion of Series B Preferred Shares to Common Shares |
|
|
( |
) |
|
( |
) |
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
— |
|
— |
|
— |
|
|
|
|
— |
|
|
|
||||||||||||
Unrealized gain on short-term investments |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||||||||||||
Reclassification adjustment for loss included in net loss |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
— |
|
|
( |
) |
||||||||||
Foreign currency translation adjustments |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
||||||||||||||
Net loss (income) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
— |
|
|
( |
) |
— |
|
|
( |
) |
|
|
|
( |
) |
|||||||||||
Balance at September 30, 2026 |
|
|
|
$ |
|
|
— |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Gyre Therapeutics, Inc.
Condensed Consolidated Statements of Equity
(In thousands, except share amounts)
(Unaudited)
|
|
Redeemable convertible preferred stock |
|
Redeemable Noncontrolling Interests |
|
Common Stock |
|
Additional |
|
Statutory Reserve |
|
Accumulated Deficit |
|
Accumulated Other Comprehensive Loss |
|
Total Gyre |
|
Non-controlling Interest |
|
Total Equity |
|
|||||||||||||||||||
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
|||||||||||||||||||||||||||
Balance at December 31, 2024, as recast |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
$ |
|
|||||||||||
Stock-based compensation expense |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
||||
Stock options exercised |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||||
Accretion of Cullgen redeemable convertible preferred stock |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
Issuance of Common Stock upon ATM program |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
CVR liability settlement |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Deferred financing costs amortization |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Unrealized gain on short-term investments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
||||
Reclassification adjustment for gains included in net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
||||
Net income |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Balance at March 31, 2025, as recast |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
$ |
|
|||||||||||
Stock-based compensation expense |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
||||
Stock options exercised |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||||
Accretion of Cullgen redeemable convertible preferred stock |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
Issuance of common stock |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||||
Deferred financing costs amortization |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Unrealized loss on short-term investments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Reclassification adjustment for gains included in net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
Balance at June 30, 2025, as recast |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
$ |
|
|||||||||||
Stock-based compensation expense |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
||||
Stock options exercised |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
Accretion of Cullgen redeemable convertible preferred stock |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
Deferred financing costs amortization |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Unrealized (loss) gain on short-term investments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
|
|
( |
) |
|
Reclassification adjustment for gains included in net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|||
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
||||
Capital injection in a subsidiary |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
( |
) |
|
— |
|
||
Net income (loss) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|||
Balance at September 30, 2025, as recast |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
$ |
|
|||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Gyre Therapeutics, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Operating Activities |
|
|
|
|
|
|
||
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities: |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Equity in loss of unconsolidated affiliate |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Noncash lease expense |
|
|
|
|
|
|
||
Deferred income taxes, net |
|
|
( |
) |
|
|
( |
) |
Bad debt expense and other non-cash items |
|
|
|
|
|
( |
) |
|
Accrued interest on short-term and long-term certificates of deposit |
|
|
|
|
|
( |
) |
|
Accretion of premium or discount on short-term investments |
|
|
( |
) |
|
|
( |
) |
Change in fair value of financial liabilities, net |
|
|
|
|
|
( |
) |
|
Foreign currency exchange loss |
|
|
— |
|
|
|
|
|
Loss on disposal of property and equipment |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Notes receivable |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
( |
) |
|
|
( |
) |
Prepaid and other assets |
|
|
|
|
|
( |
) |
|
Income tax payable |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
|
||
Deferred revenue |
|
|
— |
|
|
|
( |
) |
Due to related parties |
|
|
|
|
|
— |
|
|
Accrued expenses and other liabilities |
|
|
( |
) |
|
|
( |
) |
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net proceeds from CVR liability settlement |
|
|
— |
|
|
|
|
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Investing Activities |
|
|
|
|
|
|
||
Purchase of short-term investments |
|
|
— |
|
|
|
( |
) |
Acquisition of intangible assets |
|
|
( |
) |
|
|
( |
) |
Purchase of certificates of deposit |
|
|
( |
) |
|
|
( |
) |
Purchase of available-for-sale securities |
|
|
( |
) |
|
|
( |
) |
Proceeds from available-for-sale securities |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of equipment |
|
|
|
|
|
|
||
Proceeds from maturity of certificates of deposit |
|
|
|
|
|
|
||
Net cash provided by investing activities |
|
|
|
|
|
|
||
Financing Activities |
|
|
|
|
|
|
||
Payments of listing expense |
|
|
( |
) |
|
|
( |
) |
Deferred financing costs paid |
|
|
— |
|
|
|
( |
) |
Proceeds from the exercise of stock options |
|
|
|
|
|
|
||
Proceeds from the issuance of common stock |
|
|
— |
|
|
|
|
|
Proceeds from the issuance of common stock in ATM program |
|
|
— |
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash |
|
|
|
|
|
|
||
Net (decrease) increase in cash |
|
|
( |
) |
|
|
|
|
Cash at beginning of the period |
|
|
|
|
|
|
||
Cash at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Supplement disclosure of non-cash operating activities: |
|
|
|
|
|
|
||
Right-of-use asset obtained in exchange for operating lease liabilities |
|
|
|
|
|
|
||
Supplemental Disclosure of Non-Cash Financing and Investing Activities: |
|
|
|
|
|
|
||
Accretion of redeemable convertible preferred stock |
|
|
|
|
|
|
||
Purchase of property and equipment and intangible assets included in accrued expenses and other liabilities |
|
|
|
|
|
|
||
Unpaid listing expense included in accrued expenses |
|
|
— |
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
||
Cash paid for income taxes |
|
|
|
|
|
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Gyre Therapeutics, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Organization and Basis of Presentation
The Company
Gyre Therapeutics, Inc. (the “Company” or “Gyre”), formerly known as Catalyst Biosciences, Inc. (“Catalyst”), is a commercial-stage biopharmaceutical company originally incorporated in Delaware on March 7, 1997 under the name Targacept, Inc.
As of September 30, 2026, the Company holds a
On May 4, 2026 (the “Merger Closing Date”), the Company completed the merger (the “Merger”) with Cullgen Inc. (“Cullgen”) pursuant to the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), dated March 2, 2026, by and among Gyre, Cullgen, and Helix Merger Sub Corp. (“Merger Sub”). Upon consummation of the Merger, Cullgen became a wholly owned subsidiary of Gyre. Cullgen, a biopharmaceutical company dedicated to the development of medicines for the treatment of diseases lacking effective therapeutic approaches, was incorporated in the state of Delaware on January 12, 2018.
Liquidity
For the nine months ended September 30, 2026, the Company had a net loss of $
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its controlled subsidiaries after elimination of all intercompany accounts and transactions among consolidated entities. On May 4, 2026, the Company completed the Merger with Cullgen, an entity under common control with the Company through GNI Japan. The Merger has been accounted for as a transaction between entities under common control. Accordingly, the accompanying unaudited condensed consolidated financial statements have been retrospectively recast for all periods presented during which the Company and Cullgen were under common control to reflect the combined financial position, results of operations, changes in stockholders’ equity, and cash flows of the Company and Cullgen as if the common-control transfer had occurred at the beginning of the earliest period presented.
For periods prior to the Merger Closing Date, the retrospective recast reflects the common-control transfer of Cullgen to the Company but does not give effect to the Company’s acquisition or exchange of Cullgen ownership interests held by parties other than GNI Japan before the date such interests were acquired or exchanged. Accordingly, Cullgen’s historical equity, net income or loss, and comprehensive income or loss attributable to ownership interests held by parties other than GNI Japan have been presented as noncontrolling interests for periods prior to the Merger Closing Date. Upon completion of the Merger, Cullgen became a wholly owned subsidiary of the Company and the related Cullgen noncontrolling interests were eliminated within equity, with no gain or loss recognized in the condensed consolidated statements of operations or comprehensive income.
7
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the requirements of the Securities and Exchange Commission (the “SEC”) for interim reporting. The December 31, 2025 consolidated balance sheet has been derived from the audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC, and has been retrospectively recast to reflect the Merger, which was accounted for as a transaction between entities under common control (see Note 2, Summary of Significant Accounting Policies). The retrospective recast reflects a change in reporting entity resulting from a combination of entities under common control and does not represent the correction of an error in previously issued financial statements. As permitted under the SEC’s interim reporting rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements after giving effect to the retrospective recast described above, and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the Company’s condensed consolidated financial information. These unaudited condensed consolidated results of operations and cash flows for any interim period are not necessarily indicative of the results to be expected for the year ending December 31, 2026, or for any other future annual or interim period.
The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the consolidated financial statements filed with the Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 13, 2026 (the “Annual Report”), together with the disclosures included herein regarding the retrospective recast resulting from the Merger.
8
2. |
Summary of Significant Accounting Policies |
Common Control Merger and Retrospective Recast
The Company acquired Cullgen in an all-stock transaction pursuant to which all outstanding shares of Cullgen capital stock were exchanged for shares of the Company’s common stock or Series B Convertible Preferred Stock in accordance with the exchange terms set forth in the Merger Agreement. The Company evaluated the Merger under ASC 805-50 and determined that the Merger is a combination of entities under common control because both the Company and Cullgen were controlled by GNI Japan before and after the Merger and such control was not transitory. The net assets transferred in the Merger were determined to represent a business, as defined under ASC 805-10-55-4, and the Merger resulted in a change in reporting entity, as defined under ASC 250-10-20. The Company was identified as the receiving entity and Cullgen as the transferring entity for accounting purposes. The assets and liabilities transferred were recognized at their historical carrying amounts on the Merger Closing Date. No new basis of accounting or goodwill was recognized in accordance with ASC 805-50.
In accordance with ASC 805-50 and applicable SEC rules and regulations, the historical periods included in the accompanying interim financial statements have been retrospectively recast to reflect the common control transaction. As such, the financial statements for periods prior to the Merger reflect the combined results of the Company and Cullgen as if Cullgen had been part of the Company during the historical periods presented during which the entities were under common control.
The Merger also resulted in the Company acquiring or exchanging Cullgen ownership interests held by parties other than GNI Japan. The Company accounts for the acquisition or exchange of those non-GNI interests as an equity transaction as of the Merger Closing Date. Accordingly, the retrospective recast of historical periods prior to the Merger Closing Date does not give effect to the acquisition or exchange of such non-GNI interests before the date those interests were acquired or exchanged. For those pre-Merger periods, the Company retained and attributed Cullgen’s historical non-GNI ownership interests as noncontrolling interests, including redeemable preferred stock interests classified outside permanent equity when applicable.
The historical financial data of Cullgen included in the historical recast periods has been derived from the historical financial statements and accounting records of Cullgen, which were prepared on a standalone basis in accordance with GAAP using the historical accounting policies applied by Cullgen. Management reviewed GNI Japan’s historical carrying-basis information for Cullgen and did not identify acquisition-accounting basis differences, pushdown accounting adjustments, or goodwill associated with Cullgen that would require adjustment to Cullgen’s standalone historical financial information for purposes of the retrospective recast.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, allowance of doubtful accounts, long-term receivable, warrant liability, allowance for credit losses, reserves for excess or obsolete inventory, operating lease right-of-use assets and liabilities, recognition of research and development expenses to the appropriate financial reporting period based on the progress of the research and development projects, income taxes, stock-based compensation, preferred stock warrant liabilities, and useful lives of property and equipment and intangibles with definite lives. The Company bases its estimates on various assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.
Noncontrolling Interest
The Company reports noncontrolling interest (“NCI”) in a subsidiary as a separate component of equity in the condensed consolidated balance sheets. The Company also reports the portion of net income or loss and comprehensive income or loss attributable to the Company and NCI separately in the condensed consolidated statements of operations and comprehensive income.
9
In connection with the retrospective recast of the Merger, for periods prior to the Merger Closing Date, the Company attributes Cullgen’s historical equity, net income or loss, and comprehensive income or loss between the controlling interest and NCI based on the applicable ownership interests and contractual or economic rights. Cullgen interests held by GNI Japan or its controlled affiliates are attributed to the controlling interest and eliminated in consolidation. Cullgen interests held by parties other than GNI Japan are presented as NCI. The non-GNI portion of Cullgen’s redeemable convertible preferred stock principal and cumulative accretion is presented as redeemable noncontrolling interests outside permanent equity until the Merger Closing Date when such interests were acquired or exchanged in the Merger.
For pre-Merger periods, accretion of Cullgen redeemable convertible preferred stock held by non-GNI holders is retained in the recast financial statements and considered in the attribution of income or loss between the controlling interest and NCI. The residual Cullgen income or loss after the effect of such preferred stock accretion is attributed between the controlling interest and NCI based on the applicable common ownership interests. On the Merger Closing Date, Cullgen became a wholly owned subsidiary of the Company and the related Cullgen NCI was eliminated within equity, with no gain or loss recognized in net income or comprehensive income.
Series B Convertible Preferred Stock
The Company accounts for its Series B Preferred Stock in accordance with ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), and other applicable GAAP. The Series B Preferred Stock was issued by the Company in connection with the Merger and was initially recognized at the carryover-basis amount determined in the common-control transaction. The Company evaluates the instrument’s redemption, conversion, and other substantive terms at each reporting date to determine whether classification as a liability, temporary equity, or permanent equity is required. Preferred stock that is mandatorily redeemable is classified as a liability and measured at the present value of the redemption amount. Preferred stock that is redeemable upon the occurrence of events not solely within the Company’s control is classified as temporary equity. At all other times, preferred stock is classified within stockholders’ equity. The Company records accretion to redemption value when required by applicable accounting guidance. The Company concluded that the Series B Preferred Stock was classified as temporary equity (mezzanine equity) as of September 30, 2026 under ASC 480-10-S99.
Stockholder approval for conversion of the Series B Preferred Stock was obtained on June 10, 2026, which eliminated the stockholder-approval contingency that had restricted conversion and could have resulted in cash settlement if conversion shares were not deliverable. However, stockholder approval did not eliminate a separate fundamental transaction feature that may require settlement upon events not solely within the Company’s control. Accordingly, while any Series B Preferred Stock remains outstanding, the Company will continue to classify the instrument in temporary equity unless the shares are converted into common stock, the fundamental transaction feature is removed or amended such that temporary equity classification is no longer required, or the Company otherwise concludes that permanent equity classification is appropriate under applicable accounting guidance. Because the Series B Preferred Stock does not have an ultimate redemption amount or earliest redemption date to which the carrying amount should be accreted and was not currently redeemable or probable of becoming redeemable as of September 30, 2026, the Company did not record periodic accretion to redemption value.
Segments
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The CODM uses segment net income or loss generated from segment assets in monitoring budget versus actual results in assessing the performance of the segment.
Following the Merger with Cullgen, the Company's CODM changed from a previous group consisting of (i) the Executive Chairman of Gyre’s Board of Directors, who also served as Gyre’s Interim Chief Executive Officer, and (ii) Gyre’s Chief Operating Officer, who also served as Gyre Pharmaceuticals’ General Manager, to the Company’s Chief Executive Officer. The Company has determined that it has
10
Risks and Uncertainties
The Company is subject to a number of risks associated with companies at a similar stage, including dependence on key individuals, competition from larger and established companies, uncertainty of clinical results, ability to obtain adequate financing to support growth, the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company, and general economic conditions.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, accounts receivable, note receivable, long-term certificates of deposits and short-term bank deposits.
The Company is exposed to United States credit risk in the event of default by the United States institutions holding cash to the extent beyond the amount insured by the United States Federal Depository Insurance Corporation (“FDIC”). In the United States, the FDIC insures deposits at federally insured financial institutions up to a limit of $
In May 2015, a new Deposit Insurance System (“DIS”) managed by the People’s Bank of China was implemented by the Chinese government. Deposits in the licensed banks in mainland China are protected by DIS, up to a limit of Chinese Renminbi (“RMB”)
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Cash and cash equivalents |
|
|
|
|
|
||
Long-term certificates of deposit |
|
|
|
|
|
||
Short-term bank deposits |
|
|
|
|
|
||
Total cash, cash equivalents and bank deposits |
|
|
|
|
|
||
|
|
|
|
|
|
||
Amount exceeding PRC DIS coverage |
|
|
|
|
|
||
Accounts receivable are typically unsecured and are derived from product sales. The Company manages credit risk related to the accounts receivable through ongoing monitoring of outstanding balances and limiting the amount of credit extended based upon payment history and creditworthiness. Historically, the Company has collected receivables from customers within the credit terms with no significant credit losses incurred. Note receivable is also subject to credit risk. The Company monitors the creditworthiness and repayment performance of the borrower on an ongoing basis and has not experienced significant credit losses related to such receivable.
11
The Company’s short-term investments include marketable securities. The Company classifies its marketable securities as available-for-sale securities, which include commercial paper, corporate debt securities and U.S. government agency securities. These securities are recorded at fair value with the related unrealized gains and losses included in accumulated other comprehensive loss. Premiums or discounts from par value are amortized to investment income over the life of the underlying investment and are included in ‘interest income’ within the consolidated statements of comprehensive loss. All the Company’s available-for-sale securities are available to the Company for use in current operations. As a result, the Company classified all these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date. The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in ‘Net loss’ within the consolidated statements of comprehensive loss. If any adjustment is required to reflect a decline in the value of the investment that the Company considers to be “other than temporary”, the Company recognizes a charge to the consolidated statements of comprehensive loss.
Concentration of Customer Risk
For the three months ended September 30, 2026, following the completion of the Merger with Cullgen, the Company’s revenue consists of (i) pharmaceutical product sales primarily generated through its legacy business and (ii) collaboration-based revenue generated by Cullgen’s operations.
Pharmaceutical Product Sales
For the three months ended September 30, 2026, the Company had two customers, Sinopharm Group Co., Ltd. ("Sinopharm"), and China Resources Pharmaceutical Group Ltd (“Resources Pharmaceutical”), who accounted for approximately
For the nine months ended September 30, 2026, the Company had three customers, Sinopharm, Resources Pharmaceutical and Shanghai Pharmaceuticals, who accounted for approximately
Collaboration-Based Revenue
Cullgen’s collaboration-based revenue is generated pursuant to collaboration agreements with customers. For the three months ended September 30, 2026, all of Cullgen’s revenue was from a single customer. For the nine months ended September 30, 2026, the majority of Cullgen’s revenues were from another customer, which also made up all of Cullgen’s revenues for the three and nine months ended September 30, 2025, as further described in Note 6 to the consolidated financial statements.
Accounts Receivable Concentration
As of September 30, 2026 and December 31, 2025, the Company had one customer, Sinopharm, who accounted for approximately
Foreign Currency Risk
Transactions in subsidiaries are recorded in the functional currency of the respective subsidiary. The determination of functional currency is based on the criteria of Accounting Standard Codification (“ASC”) 830, Foreign Currency Matters.
12
Accounting Pronouncements – Recently Adopted
In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides a practical expedient for measuring expected credit losses for current accounts receivable and current contract assets that arise from revenue transactions within the scope of ASC 606, permitting an entity to assume that economic conditions as of the balance sheet date will remain unchanged over the remaining life of the financial assets when developing reasonable and supportable forecasts. ASU 2025-05 is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2025, with early adoption permitted. The amendments in this update should be applied on a prospective basis. The Company
New Accounting Pronouncements Issued and Not Yet Adopted
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 modifies the disclosure or presentation requirements of a variety of Topics in the Financial Accounting Standards Codification (the “Codification”). Certain of the amendments represent clarifications to or technical corrections of the current requirements. Because of the variety of Topics amended, a broad range of entities may be affected by one or more of those amendments. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. The amendments in this update should be applied prospectively. For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. The Company is currently evaluating the potential impact this standard will have on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40) (“ASU 2024-03”). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. In January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Clarifying the Effective Date to clarify the effective date of ASU 2024-03 for non-calendar year-end entities. ASU 2024-03 is effective for the Company's fiscal year 2027, and interim periods starting in fiscal year 2028. Early adoption is permitted. The amendments in this ASU are to be applied retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in the Company's consolidated financial statements, once adopted. The Company has elected not to early adopt ASU 2024-03. The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.
13
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. This ASU provides guidance on the recognition, measurement, presentation and disclosure of government grants received by business entities. The ASU is effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual periods, with early adoption permitted. The Company has elected not to early adopt ASU 2025-10. The Company is currently evaluating the impact that the adoption of ASU 2025-10 will have on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). ASU 2025-11 clarifies the applicability of the interim reporting guidance in Topic 270 and improves the navigability and organization of the guidance. The amendments also introduce a principle requiring entities that issue interim financial statements to disclose events and changes occurring after the end of the most recent annual reporting period that are expected to have a material impact on the entity. ASU 2025-11 does not change the recognition or measurement requirements for interim reporting. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 for public business entities, with early adoption permitted. The Company has elected not to early adopt ASU 2025-11. The Company is currently evaluating the potential impact of this guidance on its interim and annual financial statement disclosures.
Subsequent Events
The Company accounts for subsequent events in accordance with ASC 855, Subsequent Events, which defines subsequent events as events or transactions that occur after the balance sheet date but before the financial statements are issued. Management has evaluated subsequent events through the date the financial statements were issued and filed with the SEC.
14
3. |
Fair Value Measurements and Financial Instruments |
For a description of the fair value hierarchy and the fair value methodology, see Note 2 — Summary of Significant Accounting Policies in the Annual Report. There were no significant changes in these methodologies during the nine months ended September 30, 2026. As of September 30, 2026, the Company’s highly liquid money market funds are included within cash equivalents.
The following tables present the fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025 (in thousands):
|
|
September 30, 2026 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds(1) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
US government agency securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Corporate debt securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liability, noncurrent |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Total financial liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
|
|
December 31, 2025 (As Recast) |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds(1) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
US government agency securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Corporate debt securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liability, noncurrent |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Total financial liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
The carrying amounts of cash, accounts and note receivables, net, other receivables, accounts payable, due to related parties, and accrued liabilities approximate their fair values due to their short maturities.
Money market funds are valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. U.S. Treasury securities, commercial paper, corporate debt securities and U.S. government agency securities are valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy.
15
During the nine months ended September 30, 2026 and the year ended December 31, 2025, there were
Warrant Liability
In October 2023, Catalyst entered into a Securities Purchase Agreement for a private placement with GNI USA (the “Private Placement”). Upon closing of the Private Placement, the Company issued
The Preferred Stock Warrants are freestanding financial instruments classified as a warrant liability on the Company’s condensed consolidated balance sheet. The fair value of the Preferred Stock Warrants is subject to uncertainty due to unobservable inputs, including the expected volatility of the Company’s stock price, the likelihood of warrant exercise, and the estimated term of the warrants. Since there is limited market activity for the Preferred Stock Warrants, their fair value is determined using an option pricing model, which incorporates subjective inputs such as the Company’s stock price volatility, derived from historical and peer company data, as well as management’s expectations regarding future performance. As these assumptions evolve due to market conditions or company specific factors, the warrant liability may experience fluctuations. The Preferred Stock Warrants are revalued each reporting period with the change in fair value recorded as change in fair value of warrant liability in other income, net on the consolidated statement of operations and comprehensive income.
The fair value of the warrant liability is estimated based on the Black-Scholes option-pricing model using the following weighted-average assumptions:
|
September 30, 2026 |
|
|
December 31, 2025 (As Recast) |
|
||
Share price |
$ |
|
|
$ |
|
||
Exercise price |
$ |
|
|
$ |
|
||
Dividend yield |
|
— |
% |
|
|
— |
% |
Risk-free interest |
|
% |
|
|
% |
||
Term (years) |
|
|
|
||||
Expected volatility |
|
% |
|
|
% |
||
The following table sets forth the changes in the estimated fair value of the Company’s Level 3 financial liabilities (in thousands):
|
|
|
Warrant liability |
|
|
Balance at December 31, 2025 (As Recast) |
|
|
$ |
|
|
Changes in fair value |
|
|
|
|
|
Balance at September 30, 2026 |
|
|
$ |
|
|
16
Financial Instruments
Cash equivalents, available-for-sale, and held-to-maturity debt securities consisted of the following (in thousands):
September 30, 2026 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
||||
Money market funds (cash equivalents) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Short-term bank deposits |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Long-term certificates of deposit |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Short-term investments (available-for-sale securities) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
US government agency securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Corporate debt securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Commercial paper |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Classified as: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Short-term bank deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Long-term certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total financial assets |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
December 31, 2025 (As Recast) |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
||||
Money market funds (cash equivalents) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Short-term bank deposits |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Long-term certificates of deposit |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Short-term investments (available-for-sale securities) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
US government agency securities |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Corporate debt securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Commercial paper |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Classified as: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Short-term bank deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Long-term certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total financial assets |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
The fair value and amortized cost of the Company's held-to-maturity debt securities by redemption date were as follows:
|
|
September 30, 2026 |
|
|||||
|
|
Amortized Cost |
|
|
Fair Value |
|
||
Due in one year |
|
$ |
|
|
$ |
|
||
Due in one to five years |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Interest income from the short-term bank deposits is recognized on an accrual basis over the term of the deposits. The accrued interest income for the three months ended September 30, 2026 and 2025 was $
17
4. |
Balance Sheet Components |
Inventories
Inventories as of September 30, 2026 and December 31, 2025, consisted of the following components (in thousands):
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in progress |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Inventories |
|
$ |
|
|
$ |
|
||
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Accrued payroll and other personnel-related expenses |
|
$ |
|
|
$ |
|
||
Accrued expenses - research and development |
|
|
|
|
|
|
||
Payable to property and equipment & intangible asset suppliers |
|
|
|
|
|
|
||
Accrued sales rebates |
|
|
|
|
|
|
||
Accrued expenses - selling, general and administrative |
|
|
|
|
|
|
||
Other accrued liabilities |
|
|
|
|
|
|
||
Contract liabilities |
|
|
|
|
|
|
||
Accrued professional services |
|
|
|
|
|
|
||
Deferred government grants |
|
|
|
|
|
|
||
Accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
Accounts and Note Receivables, Net
Accounts and note receivables, net consisted of the following (in thousands):
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Accounts receivable |
|
$ |
|
|
$ |
|
||
Note receivable |
|
|
|
|
|
|
||
Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
Accounts and note receivables, net |
|
$ |
|
|
$ |
|
||
18
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Buildings |
|
$ |
|
|
$ |
|
||
Construction in progress |
|
|
|
|
|
|
||
Machinery and electronic devices |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Motor vehicles |
|
|
|
|
|
|
||
Equipment |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Property and equipment, gross |
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense was $
Prepaid Assets and Other Current Assets
Prepaid assets and other current assets consisted of the following (in thousands):
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Advances to suppliers |
|
$ |
|
|
$ |
|
||
Other tax recoverable |
|
|
|
|
|
|
||
Prepaid VAT |
|
|
|
|
|
|
||
Other deposits |
|
|
|
|
|
|
||
Interest Receivable |
|
|
|
|
|
|
||
Deferred transaction cost |
|
|
|
|
|
|
||
Prepaid Assets and Other Current Assets |
|
$ |
|
|
$ |
|
||
Other Assets, Noncurrent
Other assets, noncurrent consisted of the following (in thousands):
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Right-of-use assets |
|
$ |
|
|
$ |
|
||
Land use rights, net |
|
|
|
|
|
|
||
Long-term investment |
|
|
|
|
|
|
||
Other assets, noncurrent |
|
|
|
|
|
|
||
Other assets, noncurrent |
|
$ |
|
|
$ |
|
||
Long-Term Investment Measured Under Equity Method
On June 28, 2024, Gyre Pharmaceuticals entered into a partnership agreement as a limited partner with other investors and is obligated to pay $
19
As of September 30, 2026 and December 31, 2025, the Company's total investment in the partnership was $
5. |
Intangible Assets |
Intangible assets with finite lives consist primarily of patents, technological know-how, computer software, and technology rights. Technology rights refer to the intellectual property (“IP”) associated with EtorelTM (nintedanib, ethanesulfonate soft capsules) (the “EtorelTM IP Rights”), which were obtained upon the successful transfer of the marketing authorization holder following approval by the PRC National Medical Products Administration (the “NMPA”) in March 2025, and the commercial sales of EtorelTM commenced in June 2025. As of September 30, 2026, the Company recognized the total consideration for the EtorelTM technology rights in the amount of RMB
The gross carrying amounts and accumulated amortization of the Company’s intangible assets with determinable lives as of September 30, 2026 and December 31, 2025 were as follows (in thousands):
|
|
September 30, 2026 |
|
|||||||||
|
|
Gross carrying amount |
|
|
Accumulated amortization |
|
|
Intangible assets, net |
|
|||
Intangible assets with finite lives: |
|
|
|
|
|
|
|
|
|
|||
Technological know-how |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Computer software |
|
|
|
|
|
( |
) |
|
|
|
||
Technology rights |
|
|
|
|
|
( |
) |
|
|
|
||
Total intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
December 31, 2025 (As Recast) |
|
|||||||||
|
|
Gross carrying amount |
|
|
Accumulated amortization |
|
|
Intangible assets, net |
|
|||
Intangible assets with finite lives: |
|
|
|
|
|
|
|
|
|
|||
Technological know-how |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Computer software |
|
|
|
|
|
( |
) |
|
|
|
||
Technology rights |
|
|
|
|
|
( |
) |
|
|
|
||
Total intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Intangible assets are carried at cost less accumulated amortization and impairment, if applicable, and the amortization expense is recorded in operating expenses. The weighted average amortization period for the intangible assets was
Amortization expense was $
|
|
Estimated amortization expense |
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
20
6. |
Revenue |
The Company’s product revenues were mainly generated from the sale of ETUARYTM. The Company launched two new products: ContivaTM (avatrombopag maleate tablets), which commenced commercialization in March 2025, and EtorelTM, which commenced commercialization in June 2025. The Company also generated collaboration revenue from collaboration agreements with strategic partners. Collaboration revenue consists primarily of upfront nonrefundable payments and reimbursements for research and development services performed under this arrangement.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||
Revenue Composition |
|
2026 |
|
2025 (As Recast) |
|
|
2026 |
|
2025 (As Recast) |
|
||||||||||||||||||
ETUARYTM |
|
$ |
|
|
% |
|
$ |
|
|
% |
|
$ |
|
|
% |
|
$ |
|
|
% |
||||||||
ContivaTM |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
||||||||
EtorelTM |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
||||||||
Other Products |
|
|
— |
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
|||||||
Collaborations |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
||||||||
Total |
|
$ |
|
|
% |
|
$ |
|
|
% |
|
$ |
|
|
% |
|
$ |
|
|
% |
||||||||
Sales of Pharmaceutical Products
The Company generates revenue mostly through sales of ETUARYTM, ContivaTM, EtorelTM and certain generic drugs. The distributors were the Company’s direct customers, and sales to distributors accounted for
Product returns to date have not been significant and the Company has not considered it necessary to record a reserve for product returns. The Company’s product revenues were recognized at a point in time when the underlying product was delivered to the customer, which was when the customer obtained control of the product. Revenue from sales of pharmaceutical products was $
Collaborations
In June 2023, Cullgen entered into a Collaboration, Option and License Agreement (the “Astellas Agreement”) with Astellas Pharma Inc. to discover multiple innovative protein degraders, including cell cycle and DNA repair degraders. Upon execution of the agreement, Cullgen received a nonrefundable upfront payment and is entitled to reimbursement for research and development services performed under the agreement. The Astellas Agreement ended in March 2026.
The Company determined that the Astellas Agreement is within the scope of ASC 606 and identified two performance obligations related to the pre-exercise research activities for the cell cycle and DNA repair programs. The upfront payment was allocated to the performance obligations based on their relative standalone selling prices. Revenue associated with the upfront payment and research reimbursements is recognized over time using a cost-based measure of progress.
21
7. |
Leases |
Operating Leases
As of September 30, 2026, Gyre Pharmaceuticals maintained leases for office spaces in the following locations: in Beijing, comprising approximately
The Company also has multiple short-term leased properties used as offices and employee dormitories. The Company recorded a total of $
As of September 30, 2026, the Company recorded an aggregate right-of-use asset of $
For the three months ended September 30, 2026 and 2025, the Company’s operating lease expense was $
Supplemental cash flow information related to operating leases was as follows (in thousands):
|
Nine Months Ended September 30, |
|
|||||
|
2026 |
|
|
2025 |
|
||
Cash paid for amounts included in the measurement of lease liabilities |
$ |
|
|
$ |
|
||
The present value assumptions used in calculating the present value of the lease payments were as follows:
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Weighted-average remaining lease term |
|
|
|
||||
Weighted-average discount rate |
|
% |
|
|
% |
||
22
As of September 30, 2026, undiscounted future minimum payments under the Company’s operating leases were as follows (in thousands):
|
Amount |
|
|
Remaining in 2026 |
$ |
|
|
2027 |
|
|
|
2028 |
|
|
|
2029 |
|
|
|
2030 |
|
|
|
Thereafter |
|
|
|
Total undiscounted lease payments |
|
|
|
Less: imputed interest |
|
( |
) |
Total lease liabilities |
|
|
|
Less: current portion of lease liabilities |
|
( |
) |
Lease liabilities, net of current portion |
$ |
|
|
The Company is required to maintain security deposits of $
Land Use Rights
As of September 30, 2026, the Company held land use rights for two land parcels in Beijing’s Shunyi District, expiring in 2053, and in Cangzhou, Hebei Province, expiring from 2067 to 2070. These parcels, with a combined area of approximately
8. |
Stockholders’ Equity |
Merger With Cullgen
On May 4, 2026, the Company completed its merger with Cullgen. Pursuant to the Merger Agreement, all outstanding shares of Cullgen common stock and redeemable convertible preferred stock were converted into shares of the Company's common stock or Series B Preferred Stock based on the exchange ratios specified in the Merger Agreement.
23
Common Stock
Common stock reserved for future issuance is as follows:
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Options issued and outstanding |
|
|
|
(1) |
|
|
||
Preferred Stock Warrants issued and outstanding |
|
|
|
|
|
|
||
Series B Preferred Stock issued and outstanding as converted |
|
|
|
(2) |
|
— |
|
|
Total common stock reserved |
|
|
|
|
|
|
||
(1)
(2)
2024 ATM Program
On November 27, 2024, the Company entered into an Open Market Sale Agreement (the “ATM Agreement”) with Jefferies LLC (the “Sales Agent”) as sales agent, pursuant to which the Company may offer and sell, from time to time, through the Sales Agent, shares of common stock with aggregate gross sales proceeds of up to $
Sales of shares of common stock under the ATM Program may be made pursuant to the registration statement on Form S-3 (File No. 333-283237), which was declared effective by the SEC on November 22, 2024 (the “Shelf Registration Statement”), and a related prospectus supplement filed with the SEC on November 27, 2024.
May 2025 Underwritten Public Offering
On May 22, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, as representative of the several underwriters (the “Underwriters”), pursuant to which the Company agreed to issue and sell
The Offering closed on May 27, 2025. On May 29, 2025, the Underwriters exercised the Greenshoe Option in full, and the issuance of the additional
The Offering was made pursuant to the Shelf Registration Statement, as supplemented by a prospectus supplement, dated May 22, 2025, filed with the SEC on May 23, 2025.
Conversion of Series B Preferred Stock
During the nine months ended September 30, 2026, the Company issued
24
Subsequent to September 30, 2026, on October 22, 2026,
Restricted Net Assets
Under PRC laws and regulations, Gyre Pharmaceuticals and Cullgen Shanghai are subject to restrictions on foreign exchange and cross-border cash transfers, including to parent companies and U.S. stockholders. The ability to distribute earnings to the parent companies and U.S. stockholders is also limited. Current PRC regulations permit Gyre Pharmaceuticals to pay dividends to BJContinent Pharmaceuticals Limited (“BJC”) only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. Amounts restricted include paid-in capital and the statutory reserves of Gyre Pharmaceuticals. The aggregate amounts of restricted capital and statutory reserves, which represented the amount of net assets of the relevant subsidiaries not available for distribution were $
Statutory Reserve
Gyre Pharmaceuticals is required to set aside at least
Noncontrolling Interest
The noncontrolling interests in the Company’s consolidated financial statements represent the economic interests in Gyre Pharmaceuticals held by shareholders other than BJC and four other holding company subsidiaries of the Company. As of September 30, 2026, the Company’s indirect ownership in Gyre Pharmaceuticals is
In accordance with ASC 810-10, the noncontrolling interests also reflected Cullgen's net income or loss, accretion of Cullgen redeemable convertible preferred stock, and comprehensive income or loss that are attributable to the
9. Stock Based Compensation
2023 Omnibus Incentive Plan
The Gyre Therapeutics, Inc. 2023 Omnibus Incentive Plan (the “2023 Omnibus Incentive Plan”) was approved by Catalyst’s stockholders in August 2023 and ratified by Gyre’s Board in October 2023. The 2023 Omnibus Incentive Plan became effective on October 30, 2023. The 2023 Omnibus Incentive Plan permits the Company to issue up to
25
On November 20, 2025, the Company granted non-qualified stock options to employees of Gyre Pharmaceuticals, pursuant to the 2023 Omnibus Incentive Sub-Plan for Chinese Participants under the Company’s equity incentive arrangements. The awards covered an aggregate of
The stock options were granted with an exercise price of $
The following table summarizes 2023 Omnibus Incentive Plan activity for the nine months ended September 30, 2026:
|
|
Number of Shares Underlying Outstanding Options |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term (Years) |
|
|||
Outstanding — December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|||
Options granted |
|
|
|
|
|
|
|
|
|
|||
Options exercised |
|
|
( |
) |
|
|
|
|
|
|
||
Options forfeited and cancelled |
|
|
( |
) |
|
|
|
|
|
|
||
Outstanding — September 30, 2026 |
|
|
|
|
$ |
|
|
|
|
|||
Exercisable — September 30, 2026 |
|
|
|
|
$ |
|
|
|
|
|||
26
Valuation Assumptions
The Company estimated the fair value of time-based stock options granted using the Black-Scholes option-pricing formula and a single option award approach. Due to its limited relevant historical data, the Company estimated its volatility considering a number of factors, including the use of the volatility of comparable public companies. The expected term of options granted under the 2023 Omnibus Incentive Plan, all of which qualify as “plain vanilla” per SEC Staff Accounting Bulletin 107, is determined based on the simplified method due to the Company’s limited relevant history. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option. This fair value is being amortized ratably over the requisite service periods of the awards, which is generally the vesting period.
The Company also granted performance-based stock options that vest under two types of independent performance conditions. One condition is tied to a certain sales target that is deemed not probable as of September 30, 2026. The other condition is tied to the approval in the PRC of a New Drug Application (“NDA”) for Hydronidone. The grant-date fair value of these awards was determined using the Black-Scholes Option Pricing Model, which incorporates key inputs such as stock price, exercise price, expected volatility, risk-free interest rate, time to expiration, and a zero-dividend yield.
The following table shows the weighted-average grant date fair value of options and the assumptions used to estimate the fair value for time-based awards, and for performance-based awards during the three and nine months ended September 30, 2026 and 2025:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
Time-based and performance-based awards |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Weighted-average grant-date fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Risk-free interest rate (%) |
|
|
% |
|
|
|
|
|
|
|||||||
Expected option life (in years) |
|
|
|
|
|
|
|
|
|
|||||||
Expected dividend yield (%) |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
Volatility (%) |
|
|
% |
|
|
% |
|
|
|
|
||||||
Amended and Restated 2018 Cullgen Stock Incentive Plan (the “Cullgen Plan”)
The Cullgen Plan provides for the issuance of stock-based awards, including stock options, restricted stock awards, restricted stock units, and other equity-based awards, to officers, directors, employees, and consultants of Cullgen. The plan authorized issuance of up to
In connection with the Merger, the Company assumed and amended and restated the 2018 Cullgen Stock Incentive Plan and all outstanding stock options and other equity awards granted thereunder. Each outstanding Cullgen equity award was converted into the right to receive
As of the Merger Closing Date,
27
The following table summarizes Cullgen stock option activity for the nine months ended September 30, 2026 on a post conversion basis:
|
|
Number of Shares Underlying Outstanding Options |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term (Years) |
|
|||
Outstanding — December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|||
Options granted |
|
|
|
|
|
|
|
|
|
|||
Options exercised |
|
|
( |
) |
(1) |
|
|
|
|
|
||
Options forfeited and cancelled |
|
|
( |
) |
|
|
|
|
|
|
||
Outstanding — September 30, 2026 |
|
|
|
|
$ |
|
|
|
|
|||
Exercisable — September 30, 2026 |
|
|
|
|
$ |
|
|
|
|
|||
(1)
Valuation Assumptions
The Company estimated the fair value of time-based stock options granted using the Black-Scholes option-pricing formula and a single option award approach. Due to its limited relevant historical data, the Company estimated its volatility considering a number of factors, including the use of the volatility of comparable public companies. The expected term of options granted under the Cullgen Plan, all of which qualify as “plain vanilla” per SEC Staff Accounting Bulletin 107, is determined based on the simplified method due to the Company’s limited relevant history. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option. This fair value is being amortized ratably over the requisite service periods of the awards, which is generally the vesting period.
The following table shows the weighted-average grant date fair value of options and the assumptions used to estimate the fair value for time-based awards, and for performance-based awards during the three and nine months ended September 30, 2026:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||
Time-based awards |
|
2026 |
|
2025 |
|
2026 |
|
|
2025 |
|
Weighted-average grant-date fair value |
|
n/a |
|
n/a |
|
$ |
|
|
n/a |
|
Risk-free interest rate (%) |
|
n/a |
|
n/a |
|
|
% |
|
n/a |
|
Expected option life (in years) |
|
n/a |
|
n/a |
|
|
|
|
n/a |
|
Expected dividend yield (%) |
|
n/a |
|
n/a |
|
|
— |
% |
|
n/a |
Volatility (%) |
|
n/a |
|
n/a |
|
|
% |
|
n/a |
|
Total stock-based compensation expense recognized was as follows (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 (As Recast) |
|
|
2026 |
|
|
2025 (As Recast) |
|
||||
Cost of revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of September 30, 2026, the Company had an unrecognized stock-based compensation expense of $
28
10. Net (Loss) Income per Share (“EPS”) Attributable to Common Stockholders
The dilutive effect of outstanding stock options and warrants is calculated using the treasury stock method. Stock options and warrants are excluded from the diluted EPS attributable to common stock calculation if they have an anti-dilutive effect. If there is a net loss for the period, all options are excluded from the diluted EPS calculation.
The following table sets forth the computation of EPS attributable to common stockholders, basic and diluted (in thousands, except share and per share data):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Add: Accretion of Cullgen redeemable convertible preferred stock |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Less: Allocation of undistributed loss to noncontrolling interest |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net (loss) income attributable to common stockholders - basic |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Less: Change in fair value of warrant liability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Net (loss) income attributable to common stockholders - diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares used in calculating net (loss) income per share attributable to common stockholders, basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive potential common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average of common stock options |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Weighted average of preferred stock warrants (as converted) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Weighted average shares used in calculating net loss per share attributable to common stockholders, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
29
Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Options to purchase common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series B preferred stock (as converted) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Redeemable convertible preferred stock (as converted) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Warrants to purchase preferred stock (as converted) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
11. Commitments and Contingencies
Litigation and Legal Matters
The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company’s condensed consolidated financial statements.
Purchasing Commitments
Property and Equipment
The Company’s commitments related to purchase of property and equipment contracted but not yet reflected in the condensed consolidated financial statements were $
EtorelTM IP Rights
In May 2024, the Company entered into an IP rights transfer agreement with a third-party, Jiangsu Wangao Pharmaceuticals Co., Ltd., to acquire the “EtorelTM IP Rights”. The EtorelTM IP Rights are recorded as technology rights in Intangible Assets in Note 5 — Intangible Assets. The commercial sales of EtorelTM commenced in June 2025.
According to the agreement, except for RMB
As of September 30, 2026, the Company assessed the possibility that annual sales commissions in the second year would exceed RMB
As of September 30, 2026, the total accrued contract consideration was $
30
Hydronidone (F351)
In September 2020, Gyre Pharmaceuticals entered into an IP transfer agreement (the “Hydronidone Transfer Agreement”) with GNI Japan and certain of its wholly owned subsidiaries (the “GNI Group”). According to the Hydronidone Transfer Agreement, Gyre Pharmaceuticals acquired the exclusive right to use Hydronidone IP rights in mainland China and the right of first offer for the global IP rights (the “Hydronidone IP Rights”).
Under the Hydronidone Transfer Agreement, in exchange for the Hydronidone IP Rights, Gyre Pharmaceuticals is obligated to pay RMB
Upon Hydronidone product achieving commercialization, the Company will be required to make annual royalty payments based on future product sales. These contingent payments are structured as twelve annual royalties equal to
SDM Service
In December 2025, the Company entered into a clinical trial service agreement with a third-party contract research organization in connection with a Phase 3C confirmatory clinical trial for Hydronidone (the “SDM Clinical Trial Agreement”). The Phase 3C trial is designed to evaluate clinical endpoint events and satisfy the safety exposure requirements for the potential conditional approval and subsequent conventional marketing authorization of Hydronidone capsules.
Under the SDM Clinical Trial Agreement, the Company is obligated to make payments based on the achievement of specified clinical and operational milestones and the performance of clinical trial–related services, including trial preparation, patient enrollment and follow-up, site management, interim analyses, data management–related activities, and preparation of the clinical study report. The aggregate contractual amount under the agreement is approximately RMB
As of September 30, 2026, the Company recognized $
Research and Development Programs
In addition to the $
31
Indemnification Agreements
In the normal course of business, the Company enters into agreements that indemnify others for certain liabilities that may arise in connection with a transaction or certain events and activities. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, the Company may be required to reimburse the loss. These indemnifications are generally subject to various restrictions and limitations. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations.
12. Income Taxes
During the three and nine months ended September 30, 2026 and 2025, the Company recorded the following income tax provision (in thousands) and effective tax rate:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
(Benefit) provision for income tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Effective tax rate |
|
|
- |
% |
|
|
% |
|
|
- |
% |
|
|
% |
||
The change in effective tax rate for the three and nine months ended September 30, 2026 and 2025 was primarily due to the business combination with Cullgen and the increase of research and development expenditures. The Company expects to incur income tax expense for the current period as a result of the impact of valuation allowance. Accordingly, the effective tax rate for the nine months ended September 30, 2026 was negative. The Company’s income tax provision reflects the retrospective presentation of the common-control combination with Cullgen.
As of September 30, 2026, after consideration of certain limitations (see below), the Company had approximately $
If the Company experiences a greater than 50 percentage point aggregate change in ownership over a three-year period (a Section 382 ownership change), utilization of its pre-change NOL carryforwards is subject to annual limitation under Section 382 of the Internal Revenue Code (California has similar provisions). The annual limitation is determined by multiplying the value of the Company’s stock immediately before such ownership change by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization. The Company determined that ownership changes under Section 382 occurred on December 31, 2007, August 20, 2015, April 13, 2017, February 15, 2018, February 18, 2020, and December 26, 2022. Approximately $
32
13. Related Party Transactions
Research and Development with GNI Group
Research and development expenses for the services received from Shanghai Genomics, Inc. (“Shanghai Genomics”), a wholly owned subsidiary of GNI Group, were $
Other Receivables from GNI
As of September 30, 2026 and December 31, 2025, the Company had recorded $
Operating Lease with Shanghai Genomics, Inc.
|
September 30, |
|
|
December 31, |
|
|
||
|
2026 |
|
|
2025 |
|
|
||
Operating lease right-of-use assets |
$ |
|
|
$ |
|
|
||
Operating lease liabilities, current |
|
( |
) |
|
|
( |
) |
|
Operating lease liabilities, non-current |
|
( |
) |
|
|
( |
) |
|
The related lease expense recognized from related parties included in “Research and development expenses” and “General and administrative expenses” in the condensed consolidated statements of operations and comprehensive (loss) income was as follows:
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Research and development expenses |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
33
14. Employee Benefit Plans
Mainland China Contribution Plan
Pursuant to relevant PRC regulations, the Company is required to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contribution for each employee is based on a percentage of the employee’s current compensation as required by the local government. The contributions are charged to profit or loss as they become payable in accordance with the rules of the central pension scheme. The total contributions for such employee benefits were $
Defined-Contribution Savings Plan
In the U.S., the Company maintains a defined-contribution savings plan pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended. The plan is available to employees who meet the minimum age and length of service requirements. The contributions made during the three months ended September 30, 2026 and 2025 were $
15. Segment Information
The Company is a consolidated entity comprised of
Gyre Pharmaceuticals
Gyre Pharmaceuticals has three major commercial drug products ETUARYTM, EtorelTM, and ContivaTM—as well as several product candidates in pre-clinical and clinical development. Gyre Pharmaceuticals’ product revenues are mainly generated from the sale of ETUARYTM, EtorelTM, ContivaTM and certain generic drugs. Gyre Pharmaceuticals primarily sells its pharmaceutical products to distributors in the PRC, who ultimately sell the products to hospitals, other medical institutions and pharmacies.
Gyre
Gyre is a clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of innovative therapies for the treatment of cancer, inflammatory diseases and organ fibrosis. The Company's pipeline includes F351 for the treatment of MASH-associated liver fibrosis in the United States, as well as targeted protein degrader and degrader-antibody conjugate therapies under development including CG001419 for pain and solid tumors and CG009301 for acute myeloid leukemia (“AML”) in China. The Company is primarily engaged in research and development activities and does not currently generate commercial product revenue.
34
Segment information for the three and nine months ended September 30, 2026 and 2025 is as follows (in thousands):
|
|
Three Months Ended September 30, 2026 |
|
|||||||||
|
|
Gyre Pharmaceuticals |
|
|
Gyre |
|
|
Total |
|
|||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Operating expenses |
|
|
|
|
|
|
|
|
|
|||
Cost of revenues |
|
|
|
|
|
|
|
|
|
|||
Selling and marketing |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
Research and development - related parties |
|
|
|
|
|
|
|
|
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Transaction costs |
|
|
|
|
|
|
|
|
|
|||
Total segment operating expenses |
|
|
|
|
|
|
|
|
|
|||
Income (loss) from segment operations |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other segment income (loss), net: |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
|
|
|
|
|
|
|
|||
Other expense, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in fair value of warrant liability |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Provision for income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net segment income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Reconciliation of profit or loss |
|
|
|
|
|
|
|
|
|
|||
Other general and administrative expenses |
|
|
|
|
|
|
|
|
( |
) |
||
Total consolidated net loss |
|
|
|
|
|
|
|
$ |
( |
) |
||
Supplemental disclosure of stock-based compensation expense: |
|
|
|
|
|
|
|
|
|
|||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Selling and marketing |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Stock-based compensation total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
35
|
|
Nine Months Ended September 30, 2026 |
|
|||||||||
|
|
Gyre Pharmaceuticals |
|
|
Gyre |
|
|
Total |
|
|||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Operating expenses |
|
|
|
|
|
|
|
|
|
|||
Cost of revenues |
|
|
|
|
|
|
|
|
|
|||
Selling and marketing |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
Research and development - related parties |
|
|
|
|
|
|
|
|
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Transaction costs |
|
|
|
|
|
|
|
|
|
|||
Total segment operating expenses |
|
|
|
|
|
|
|
|
|
|||
Loss from segment operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other segment income (loss), net: |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
|
|
|
|
|
|
|
|||
Other expense, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in fair value of warrant liability |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
(Provision) benefit for income taxes |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net segment loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Reconciliation of profit or loss |
|
|
|
|
|
|
|
|
|
|||
Other general and administrative expenses |
|
|
|
|
|
|
|
|
( |
) |
||
Total consolidated net loss |
|
|
|
|
|
|
|
$ |
( |
) |
||
Supplemental disclosure of stock-based compensation expense: |
|
|
|
|
|
|
|
|
|
|||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Selling and marketing |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Stock-based compensation total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
36
|
|
Three Months Ended September 30, 2025 (As Recast) |
|
|||||||||
|
|
Gyre Pharmaceuticals |
|
|
Gyre |
|
|
Total |
|
|||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Operating expenses: |
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|
|
|
|
|
|
|
|
|||
Cost of revenues |
|
|
|
|
|
|
|
|
|
|||
Selling and marketing |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
General and administrative |
|
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|
|
|
|
|
|
|
|||
Total segment operating expenses |
|
|
|
|
|
|
|
|
|
|||
Income (loss) from segment operations |
|
|
|
|
|
( |
) |
|
|
|
||
Other segment income (loss), net: |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
|
|
|
|
|
|
|
|||
Other income (expense), net |
|
|
|
|
|
( |
) |
|
|
|
||
Change in fair value of warrant liability |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Provision for income taxes |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net segment income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Reconciliation of profit or loss |
|
|
|
|
|
|
|
|
|
|||
Other general and administrative expenses |
|
|
|
|
|
|
|
|
|
|||
Total consolidated net income |
|
|
|
|
|
|
|
$ |
|
|||
Supplemental disclosure of stock-based compensation expense: |
|
|
|
|
|
|
|
|
|
|||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Selling and marketing |
|
|
|
|
|
|
|
|
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
Stock-based compensation total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
37
|
|
Nine Months Ended September 30, 2025 (As Recast) |
|
|||||||||
|
|
Gyre Pharmaceuticals |
|
|
Gyre |
|
|
Total |
|
|||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Cost of revenues |
|
|
|
|
|
|
|
|
|
|||
Selling and marketing |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Total segment operating expenses |
|
|
|
|
|
|
|
|
|
|||
Income (loss) from segment operations |
|
|
|
|
|
( |
) |
|
|
|
||
Other segment income (loss), net: |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
|
|
|
|
|
|
|
|||
Other (expense) income, net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Change in fair value of warrant liability |
|
|
|
|
|
|
|
|
|
|||
(Provision) benefit for income taxes |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net segment income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Reconciliation of profit or loss |
|
|
|
|
|
|
|
|
|
|||
Other general and administrative expenses |
|
|
|
|
|
|
|
|
|
|||
Total consolidated net income |
|
|
|
|
|
|
|
$ |
|
|||
Supplemental disclosure of stock-based compensation expense: |
|
|
|
|
|
|
|
|
|
|||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Selling and marketing |
|
|
|
|
|
|
|
|
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
Stock-based compensation total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
38
The table below presents total assets as of September 30, 2026 and December 31, 2025.
|
|
September 30, 2026 |
|
|||||||||||||
|
|
Gyre Pharmaceuticals |
|
|
Gyre |
|
|
Other Unallocated Amount |
|
|
Consolidated |
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
December 31, 2025 (As Recast) |
|
|||||||||||||
|
|
Gyre Pharmaceuticals |
|
|
Gyre |
|
|
Other Unallocated Amount |
|
|
Consolidated |
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The table below only includes cash outflows for the purchase of property and equipment and excludes non-cash activities.
|
|
Nine Months Ended September 30, 2026 |
|
|||||||||
|
|
Gyre Pharmaceuticals |
|
|
Gyre |
|
|
Consolidated |
|
|||
Purchase of property and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
Nine Months Ended September 30, 2025 (As Recast) |
|
|||||||||
|
|
Gyre Pharmaceuticals |
|
|
Gyre |
|
|
Consolidated |
|
|||
Purchase of property and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
39
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In this Quarterly Report on Form 10-Q (this “Quarterly Report”), unless otherwise specified, references to “we,” “our,” “us” and “our company” refer to Gyre Therapeutics, Inc. ("Gyre"), its directly owned subsidiary, Cullgen Inc. (“Cullgen”), and our majority indirectly owned subsidiary, Beijing Continent Pharmaceuticals Co., Ltd. (d/b/a Gyre Pharmaceuticals Co., Ltd.) (“Gyre Pharmaceuticals”). The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes that appear in this Quarterly Report and with the audited consolidated financial statements and related notes that are included as part of our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”).
In addition to historical information, this Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“the Exchange Act”). Forward-looking statements are identified by words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will,” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. For example, forward-looking statements include any statements regarding: the strategies, prospects, plans, expectations or objectives of management for future operations or the distribution of cash to Company stockholders, the benefits that may be derived from product candidates or the commercial or market opportunity in any target indication, our ability to protect intellectual property rights, our anticipated operations, financial position, revenues, costs or expenses, future economic conditions or performance, and statements of belief and any assumptions underlying any of the foregoing. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this Quarterly Report in Part II, Item 1A — “Risk Factors,” and in Part I - Item 1A – “Risk Factors” in the Annual Report. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this Quarterly Report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.
Overview
We are a commercial-stage biopharmaceutical company focused on the development and commercialization of small-molecule therapies for the treatment of organ fibrosis and inflammatory diseases. We operate through our majority indirectly owned subsidiary, Gyre Pharmaceuticals, in the People’s Republic of China (the “PRC”), and through our U.S. operations headquartered in San Diego, California.
In May 2026, we acquired Cullgen in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated March 2, 2026 (the “Merger Agreement”), by and among the Company, Helix Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), and Cullgen. Pursuant to the Merger Agreement, among other matters, Merger Sub merged with and into Cullgen, with Cullgen continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger (the “Merger”). The related transaction costs were expensed as incurred.
Cullgen is a clinical-stage biopharmaceutical company focused on the discovery and development of targeted protein degrader and degrader-antibody conjugate therapies designed to improve the lives of patients suffering from critical conditions such as pain, cancer and inflammatory diseases. Cullgen has created a portfolio of highly selective targeted protein degrader product candidates designed to potently and efficiently eliminate therapeutically relevant proteins in patients. By leveraging its expertise in targeted protein degraders, Cullgen believes its product candidates have many distinct advantages over other therapeutic modalities, including higher selectivity, improved therapeutic profile and avoidance of known toxicities.
40
As always, we are in the process of reviewing our programs and evaluating our pipeline and clinical development strategy, including in connection with the Cullgen acquisition, to optimize capital allocation and prioritize programs across the organization. As a result of the Cullgen acquisition, we intend to leverage Cullgen’s capabilities in the PRC for the development and early-stage clinical trials of various product candidates.
Our Commercial Portfolio
ETUARYTM (pirfenidone)
Pirfenidone is a small-molecule anti-fibrotic therapy for the treatment of idiopathic pulmonary fibrosis (“IPF”). It was first approved in Japan and subsequently approved in the PRC, the European Union (“EU”), and the United States. These approvals were obtained by different sponsors in their respective jurisdictions under separate regulatory frameworks.
In the PRC, we conducted independent research and development to support our regulatory submission and received first-in-class approval in 2011 as a National Category 1.1 New Drug. We commercialized pirfenidone under the brand name ETUARYTM, which was included in the National Reimbursement Drug List in 2017 and has since maintained a leading market position.
In addition to IPF, we are pursuing potential label expansion into additional indications in the PRC, including pneumoconiosis, for which, in 2025, we completed enrollment of 272 patients in our 52-week Phase 3 trial, and radiation-induced lung injury (“RILI”), including cases with or without immune-related pneumonitis, for which the National Medical Products Administration (“NMPA”) approved our clinical trial application in March 2025, and we initiated an adaptive Phase 2/3 study in April 2026.
EtorelTM (nintedanib esilate soft capsules)
In May 2024, Gyre Pharmaceuticals entered into a comprehensive agreement with Jiangsu Wangao Pharmaceuticals Co., Ltd. to obtain the drug registration certificate for EtorelTM (nintedanib) and become the marketing authorization holder in the PRC. EtorelTM is approved as a standard-of-care therapy for IPF, systemic sclerosis-associated interstitial lung disease (“SSc-ILD”), and progressive pulmonary fibrosis (“PPF”). The addition of EtorelTM to our commercial portfolio expanded treatment options for patients and strengthened Gyre’s leading position in the pulmonary fibrosis market. Commercialization of EtorelTM in the PRC commenced in June 2025.
On November 7, 2025, the National Healthcare Security Administration in the PRC released the Announcement of the Winning Bids for the National Centralized Drug Procurement, under which EtorelTM was selected. As a result, we signed direct procurement contracts with various participating hospitals under the National Centralized Drug Procurement Program, and implementation commenced in March 2026.
ContivaTM (avatrombopag maleate tablets)
In June 2021, Gyre Pharmaceuticals acquired avatrombopag maleate tablets pursuant to a transfer agreement with Nanjing Healthnice Pharmaceutical Technology Co., Ltd. Avatrombopag is an oral thrombopoietin receptor agonist. In June 2024, the NMPA approved avatrombopag maleate tablets for the treatment of thrombocytopenia (“TP”) associated with chronic liver disease (“CLD”) in adult patients undergoing elective diagnostic procedures or therapy. In January 2025, the NMPA approved an additional indication for chronic immune thrombocytopenic purpura (“ITP”). Gyre Pharmaceuticals commenced commercialization of avatrombopag under the brand name ContivaTM in the PRC in March 2025.
41
Our Product Candidate Pipeline
F351 (hydronidone)
F351 is our lead development candidate for the treatment of liver fibrosis. It is a structurally modified derivative of pirfenidone designed to optimize metabolic properties while targeting the transforming growth factor (“TGF”)-β1 signaling pathway, a key mediator of fibrogenesis. We are developing F351 for two primary indications: chronic hepatitis B (“CHB”)-associated liver fibrosis in the PRC and metabolic dysfunction-associated steatohepatitis (“MASH”)-associated liver fibrosis in the United States. F351 represents our primary liver-focused development program and reflects our commitment to advancing therapies targeting both viral- and metabolic-associated liver fibrosis.
CHB-Associated Liver Fibrosis (PRC)
For CHB-associated liver fibrosis, antiviral therapy may suppress viral infection but is not able to prevent, slow or reverse fibrosis progression, and anti-fibrotic treatment is recommended for intermediate and advanced liver fibrosis and early-stage cirrhosis. As of December 31, 2025, no small molecule or biologic drugs treating CHB-associated liver fibrosis have been approved globally. In recognition of the severity of the disease, lack of current therapies and the preliminary clinical evidence generated to date, the Center for Drug Evaluation (“CDE”) of the NMPA granted F351 Breakthrough Therapy designation in March 2021.
We conducted a Phase 3 randomized, double-blind, placebo controlled, entecavir-based, multi-center trial in the PRC assessing F351 in CHB-associated liver fibrosis. This trial was designed to randomize 248 patients, with a primary endpoint of ≥1-stage reduction in Ishak fibrosis score at Week 52 for F351 in combination with entecavir.
In May 2025, we reported that in the pivotal Phase 3 trial, F351 met its primary endpoint and also met a key secondary endpoint with statistically significant inflammation improvement without fibrosis progression at Week 52 versus placebo. F351 was well tolerated in the study, with a comparable incidence of serious adverse events and no patient discontinuations due to adverse events in the F351 group.
The CDE of the NMPA granted priority review status to the New Drug Application (“NDA”) for F351 in March 2026. On March 22, 2026, Gyre Pharmaceuticals submitted its NDA to the CDE of the NMPA to seek conditional approval for F351, the Company’s lead product candidate, for the treatment of CHB-induced liver fibrosis. On May 12, 2026, the Company announced that the NMPA accepted its NDA. The Company believes a decision from the CDE of the NMPA could occur by the end of 2026 or in the first quarter of 2027.
MASH-Associated Liver Fibrosis (United States)
In the United States, we have completed a Phase 1 clinical trial in healthy volunteers evaluating F351’s safety, tolerability, and pharmacokinetics (“PK”). We continue to engage with the U.S. Food and Drug Administration regarding investigational new drug (“IND”) requirements for a Phase 2 clinical trial in MASH-associated liver fibrosis.
Pipeline Assets Following Cullgen Acquisition
On May 4, 2026, Gyre Therapeutics acquired Cullgen Inc. in an all-stock transaction valued at approximately $300 million, and Cullgen became a wholly owned subsidiary of Gyre. Upon the closing of this transaction, Cullgen's former Chief Executive Officer (“CEO”), Dr. Ying Luo, was appointed President and CEO of Gyre and joined Gyre's Board. Additionally, Yue Xiong, former Chief Scientific Officer (“CSO”) of Cullgen, was appointed CSO of Gyre, Thomas Eastling, former Chief Financial Officer (“CFO”) of Cullgen, was appointed CFO of Gyre, and Ping Zhang was named Chairman. The combined company remains headquartered in San Diego with subsidiaries in Beijing and Shanghai, roughly 740 employees, and numerous announced therapeutic programs spanning inflammation/pain and cancer.
42
TRKA Degrader for Pain (CG001419)
Gyre acquired Cullgen’s most advanced legacy product candidate, CG001419, an oral tropomyosin receptor kinase A (“TRKA”) degrader. CG001419 has been in development as a non-opioid alternative for pain management and, separately, as a treatment for various indications within oncology.
In December 2025, Cullgen completed a Phase 1 study (NCT06636500) that was a single-center, randomized, placebo-controlled, double-blind, single-ascending-dose/food-effect (with or without food) and multiple-ascending-dose trial that evaluated the safety, tolerability and PK characteristics of CG001419 in 78 healthy volunteers. The study was conducted in Australia after receiving ethics committee approval in early 2025. Results from the study showed that all doses were well-tolerated with no drug-related serious adverse events observed. We are now planning a Phase 2 study to further evaluate CG001419 in cancer-induced bone pain (CIBP) or other metastatic cancer pain syndromes in China, which is expected to initiate in the first half of 2027.
TRKA Degrader for Solid Tumors (CG001419)
CG001419 is also currently being studied in a Phase 1 trial for the treatment of solid tumors. TRK proteins also act as oncogenic drivers when mutated or rearranged, leading to uncontrolled cell growth and tumor development. Cullgen’s TRK degrader for cancer is being developed as a selective, clinically active oral TRK degrader for the treatment of adult cancer patients with neurotrophic TRK gene abnormalities. For this indication, CG001419 is being evaluated in a Phase 1 clinical trial in China.
GSPT1 Degrader for AML (CG009301)
Gyre acquired Cullgen’s second product candidate, CG009301, a highly selective degrader targeting the GSPT1 protein for the treatment of cancer, with development initially focused on hematologic malignancies. GSPT1 is a protein translation termination factor and plays a vital role in cancer cell survival and proliferation. Rapidly dividing hematologic cancer cells such as leukemia, including AML and acute lymphoblastic leukemia, high-risk myelodysplastic syndrome (“MDS”) and leukemia stem cells rely on GSPT1 to maintain protein synthesis during oncogenesis. These tumor cells are highly sensitive to GSPT1 depletion, which leads to impaired protein translation, activation of the integrated stress response and TP53-independent cell death. Cullgen initiated a Phase 1, dose-escalation trial in China of CG009301 in patients with high-risk hematologic malignancies in April 2025. We anticipate Phase 1 dose-escalation data to be available in the second half of 2027.
CDK2-Cyclin E Dual Degrader for Solid Tumors (CG923308)
We are developing CG923308, a highly potent and selective dual degrader of both the cyclin dependent kinase 2 (“CDK2”) and cyclin E proteins. In preclinical models of breast cancer resistant to endocrine therapies alone or in combination with a CDK4/6 inhibitor or other solid tumors characterized by cyclin E amplification, CG923308 demonstrated precise target degradation and outperformed the leading, late-stage clinical CDK2 inhibitors in development in blocking cell proliferation and achieving durable tumor suppression. Furthermore, CG923308 exhibits a favorable PK and safety profile. We plan to develop CG923308 for the treatment of solid tumors with CCNE1 amplification or HR+ / HER2- advanced breast cancer with resistance to current therapies. We intend to submit an IND application for CG923308 in the first quarter of 2027.
TYK2-JAK1 Degrader for Autoimmune Diseases (CG620953)
We are developing CG620953, a highly potent and selective dual degrader of Tyrosine kinase 2 (“TYK2”) and Janus kinase 1 (“JAK1”) while sparing JAK2. In preclinical studies, CG620953 demonstrated selective target degradation and outperformed commercialized TYK2 selective inhibitors in reducing disease activity. CG620953 also exhibits a favorable PK and safety profile, providing rationale for further evaluation in the clinic. We intend to submit an IND application for CG620953 in the United States or China around mid-2027.
Degrader – Antibody Conjugates (“DACs”) as the Next-Generation of Antibody-Drug Conjugates (“ADCs”)
We are developing a robust suite of DACs that target both solid tumors and hematological malignancies by pairing distinct protein degraders with tumor-specific antibodies. These preclinical DAC candidates demonstrate tumor associated antigen dependent cytotoxicity in vitro and drive potent, durable tumor regression in vivo, including success in models resistant to standard therapies.
43
Other Product Candidates
We have completed a Phase 1 clinical trial of F573 in healthy volunteers in the PRC and are currently evaluating it in a multi-stage Phase 2 clinical trial initiated in March 2023 in patients with liver injury and liver failure.
F230 is our clinical-stage product candidate for the treatment of pulmonary arterial hypertension (“PAH”) in the PRC. F230 is a selective endothelin receptor A antagonist designed to address vascular remodeling and elevated pulmonary arterial pressure associated with PAH. F230 complements our broader organ-focused portfolio by expanding our development efforts into pulmonary vascular disease while remaining aligned with our strategy of targeting fibrotic and inflammatory pathways across organ systems. We submitted an IND application for F230 to the NMPA in March 2024, and the IND was approved in May 2024. The first subject was enrolled in the Phase 1 clinical trial in June 2025.
F528 is our preclinical-stage product candidate for the treatment of chronic obstructive pulmonary disease in the PRC. F528 is an anti-inflammatory small-molecule compound designed to inhibit multiple inflammatory cytokines and potentially modify disease progression. F528 expands our pulmonary-focused development efforts beyond fibrosis and vascular disease into chronic inflammatory respiratory conditions, supporting our broader strategy of addressing organ diseases driven by inflammatory and fibrotic pathways. We anticipate submitting an IND application to the NMPA for F528 in 2026.
EtorelTM IP Rights
In May 2024, Gyre Pharmaceuticals entered into an agreement with Jiangsu Wangao Pharmaceuticals Co., Ltd. (the “Jiangsu Wangao Agreement”), effective from May 7, 2024 to May 6, 2035. Pursuant to the Jiangsu Wangao Agreement, Gyre Pharmaceuticals obtained the drug registration certificate for and became the marketing authorization holder of EtorelTM (nintedanib, ethanesulfonate soft capsules), a small-molecule drug for the treatment of IPF, SSc-ILD and PPF, within the PRC. The total minimum payments under the Jiangsu Wangao Agreement are Chinese Renminbi (“RMB”) 35.0 million, or approximately $5.2 million, based on the September 30, 2026 spot exchange rate. This includes an upfront transfer fee of RMB 15.0 million, or approximately $2.2 million, payable in three installments, and subsequent payments based on annual sales over eight years following the commencement of commercial sales. Additionally, Gyre Pharmaceuticals will bear the costs associated with relocating the production site to a designated location and will cover all expenses related to the manufacturing process. As of September 30, 2026, we had paid four installments totaling RMB 23.0 million, or approximately $3.4 million, based on the September 30, 2026 spot exchange rate.
Long-Term Investment Measured Under Equity Method
On June 28, 2024, Gyre Pharmaceuticals entered into a partnership agreement as a limited partner and is obligated to pay $4.5 million for an 18.93% equity interest in the partnership. In April 2025, a new investor joined the partnership agreement, and as a result, Gyre Pharmaceuticals’ equity interest was adjusted to 18.35%. Pursuant to the partnership agreement, Gyre Pharmaceuticals, as a limited partner, shall not participate in any activities related to the management of the investment business. However, Gyre Pharmaceuticals may appoint a member to the advisory committee of the partnership.
As of September 30, 2026 and December 31, 2025, our total investment in the partnership was $1.8 million and $1.7 million, respectively, and the carrying value of our long-term investment in this affiliate was $1.6 million and $1.6 million, respectively.
44
Financial Operations Overview
During the three months ended September 30, 2026, we had a net loss of $2.5 million and net loss attributable to common stockholders of $4.1 million. For the nine months ended September 30, 2026, we had net loss of $35.3 million and net loss attributable to common stockholders of $28.9 million. During the three months ended September 30, 2025, we had net income of $1.9 million and net income attributable to common stockholders of $1.0 million. For the nine months ended September 30, 2025, we had net income of $4.6 million and net income attributable to common stockholders of $1.2 million. As of September 30, 2026, we had an accumulated deficit of $142.0 million and cash and cash equivalents of $41.6 million. As of December 31, 2025, we had an accumulated deficit of $112.6 million and cash and cash equivalents of $49.2 million.
Components of Results of Operations
Revenues
Sales of Pharmaceutical Products
We generate revenue primarily through sales of ETUARYTM, ContivaTM, EtorelTM and certain generic drugs in the PRC. Distributors are our direct customers, and sales to distributors accounted for 100% of the revenue. Such distributors sell our pharmaceutical products to certain outlets, including hospitals and other medical institutions, as well as pharmacies.
Collaborations
We also generate revenue through collaboration and license agreements with strategic partners. Revenue consists of upfront nonrefundable payments and reimbursements for research and development services provided under the agreement and is recognized over time as the related research activities are performed.
Operating Expenses
Cost of Revenue
Cost of revenue mainly consists of cost of sales representing direct and indirect costs incurred to bring the product to saleable condition. Cost of sales primarily consists of (i) raw material costs; (ii) staff costs for production employees, including stock-based compensation; (iii) depreciation and amortization related to property and equipment and intangible assets used in production; (iv) taxes and surcharges; (v) transportation costs; and (vi) miscellaneous other costs.
Selling and Marketing Expenses
Selling and marketing expenses primarily relate to selling and marketing our products in the PRC and consist of expenses incurred from hosting academic conferences, seminars and symposia; promotional expenses associated with market education on our products for their use in hospitals; and staff costs primarily consisting of salaries, benefits and stock-based compensation for in-house marketing and promotion staff.
Research and Development Expenses
Research and development costs are expensed as incurred. Nonrefundable advance payments for goods or services used in research and development are initially deferred and capitalized in prepaid and other current assets. The capitalized amounts are then expensed as the related goods are delivered or services are performed, or until it is no longer expected that the goods or services will be delivered.
Research and development costs consist primarily of costs related to the pre-clinical and clinical development of our product candidates, which include payroll and other personnel-related expenses, including stock-based compensation, laboratory supplies and reagents, contract research and development services for pre-clinical research and clinical trials, materials, and consulting costs, as well as allocations of facilities, depreciation, and other overhead costs.
45
We record accrued expenses for estimated costs of the research and development activities conducted by third party service providers, which include outsourced research and development expenses, stock-based compensation and professional services. We record the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced, and include these costs in current liabilities and within research and development expense.
We manage our research and development expenses by identifying the research and development activities we expect to be performed during a given period and then prioritizing efforts based on anticipated probability of successful technical development and regulatory approval, market potential, available human and capital resources, scientific data and other considerations. We regularly review our research and development activities based on unmet medical need and, as necessary, reallocate resources among our research and development portfolio that we believe will best support the long-term growth of our business. Although we do track and allocate certain operational research and development costs, as described above, we do not fully track and allocate research and development expenses at the individual product candidate level.
General and Administrative Expenses
General and administrative expenses consist of (i) accounting, IT, legal, administrative, and other internal service staff costs; (ii) stock-based compensation representing share options granted to our functional employees; (iii) professional service fees, primarily for legal and accounting services; and (iv) other miscellaneous expenses.
Other Income, Net
Change in Fair Value of Warrant Liability
In connection with a private placement conducted in October 2023 with GNI USA, Inc., we issued (i) 811 shares of our Series X Convertible Preferred Stock, par value $0.001 per share (the “Series X Preferred Stock”) and (ii) warrants to purchase up to 811 shares of Series X Preferred Stock (the “Preferred Stock Warrants”), which are freestanding financial instruments classified as warrant liability since the underlying securities are contingently redeemable upon the occurrence of events which are outside of our control. The Preferred Stock Warrants are recorded at fair value upon issuance and are subject to remeasurement at the end of each reporting period, with any change in fair value recognized in our statements of operations as other income.
Other Income, Net
Interest income consists primarily of interest earned on our long-term certificates of deposit. Interest income is recognized on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.
Other income consists mostly of government grants. Government grants are recognized at their fair value where there is reasonable assurance that the grant will be received, and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the costs, for which it is intended to compensate, are expensed. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to profit or loss over the expected useful life of the relevant asset by equal annual installments or deducted from the carrying amount of the asset and released to profit or loss by way of a reduced depreciation charge.
Other expenses consist of any non-operating costs, such as loss from equity method investments.
Provision for Income Taxes
Provision for income taxes is comprised primarily of current income tax provision, mainly attributable to the profitable Gyre Pharmaceuticals operations in the PRC, and deferred income tax provision, mainly including deferred tax recognized for temporary differences in relation to research and development tax credit and net operating loss carryforwards for U.S. tax purposes and fixed and intangible assets, net of valuation allowances.
46
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law, which introduced several U.S. income tax provisions that have impacted and may continue to impact our provision for income taxes. The provisions include, but are not limited to, the immediate expensing of domestic research and development expenses beginning in 2025, as well as a modification to the Global Intangible Low-Taxed Income effective in 2026. We have recognized the effects of the OBBBA provisions on our financial results to the extent they are applicable to the nine months ended September 30, 2026. We will continue to evaluate the impact of the OBBBA on our unaudited condensed consolidated financial statements.
Results of Operations
Comparison of the three months ended September 30, 2026 and 2025
The following table summarizes our results of operations for the periods presented (in thousands, except percentage change):
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 (As Recast) |
|
|
Change ($) |
|
|
Change (%) |
|
||||
Revenues |
|
$ |
32,934 |
|
|
$ |
32,694 |
|
|
$ |
240 |
|
|
|
1 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues |
|
|
1,947 |
|
|
|
1,628 |
|
|
|
319 |
|
|
|
20 |
% |
Selling and marketing |
|
|
15,028 |
|
|
|
15,328 |
|
|
|
(300 |
) |
|
|
(2 |
)% |
Research and development |
|
|
8,484 |
|
|
|
7,797 |
|
|
|
687 |
|
|
|
9 |
% |
Research and development -related parties |
|
|
24 |
|
|
|
— |
|
|
|
24 |
|
|
* |
|
|
General and administrative |
|
|
8,921 |
|
|
|
6,447 |
|
|
|
2,474 |
|
|
|
38 |
% |
Transaction costs |
|
|
50 |
|
|
|
— |
|
|
|
50 |
|
|
* |
|
|
Total operating expenses |
|
|
34,454 |
|
|
|
31,200 |
|
|
|
3,254 |
|
|
|
10 |
% |
(Loss) income from operations |
|
|
(1,520 |
) |
|
|
1,494 |
|
|
|
(3,014 |
) |
|
|
(202 |
)% |
Other income (loss), net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
588 |
|
|
|
954 |
|
|
|
(366 |
) |
|
|
(38 |
)% |
Change in fair value of warrant liability |
|
|
(315 |
) |
|
|
(23 |
) |
|
|
(292 |
) |
|
|
1270 |
% |
Other (expense) income, net |
|
|
(498 |
) |
|
|
95 |
|
|
|
(593 |
) |
|
|
(624 |
)% |
(Loss) income before income taxes |
|
|
(1,745 |
) |
|
|
2,520 |
|
|
|
(4,265 |
) |
|
|
(169 |
)% |
Provision for income taxes |
|
|
(733 |
) |
|
|
(593 |
) |
|
|
(140 |
) |
|
|
24 |
% |
Net (loss) income |
|
|
(2,478 |
) |
|
|
1,927 |
|
|
|
(4,405 |
) |
|
|
(229 |
)% |
Accretion of Cullgen redeemable convertible preferred stock |
|
|
— |
|
|
|
(2,707 |
) |
|
|
2,707 |
|
|
|
(100 |
)% |
Net income (loss) attributable to noncontrolling interest |
|
|
1,575 |
|
|
|
(1,805 |
) |
|
|
3,380 |
|
|
|
(187 |
)% |
Net (loss) income attributable to common stockholders |
|
$ |
(4,053 |
) |
|
$ |
1,025 |
|
|
$ |
(5,078 |
) |
|
|
(495 |
)% |
*Not meaningful
Revenues
Revenues for the three months ended September 30, 2026 and 2025 were $32.9 million and $32.7 million, respectively, representing an increase of $0.2 million, or 1%. Gyre Pharmaceuticals revenue increased during the period, primarily driven by higher ETUARYTM sales volumes resulting from ETUARYTM focused marketing efforts, despite lower ContivaTM and EtorelTM product revenues earned following the implementation of China's national centralized procurement program. The increase was offset by a net $1.6 million decrease in collaboration revenue primarily driven by the Collaboration, Option, and License Agreement with Astellas Pharma Inc. (the “Astellas Agreement”), which ended in March 2026.
47
Cost of Revenues
Cost of revenues for the three months ended September 30, 2026 and 2025 were $1.9 million and $1.6 million, respectively. The $0.3 million, or 20% increase, was primarily driven by a $0.5 million increase in production costs associated with EtorelTM products, partially offset by a $0.1 million decrease in production costs for ETUARYTM, and a $0.1 million decrease in tax and related surcharges.
Selling and Marketing Expenses
Selling and marketing expenses decreased $0.3 million, or 2%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease was primarily attributable to a $1.1 million reduction in promotional and conference expenses, as certain promotional objectives were achieved during the first half of 2026, resulting in lower spending during the third quarter. This decrease was partially offset by a $0.4 million increase in personnel-related costs, primarily due to increased sales commissions resulting from higher sales volumes, and a $0.3 million increase in stock-based compensation expenses.
Research and Development Expenses
The table below details our costs for research and development for the periods presented (in thousands, except percentage change):
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 (As Recast) |
|
|
Change ($) |
|
|
Change (%) |
|
||||
External clinical expenses |
|
$ |
1,559 |
|
|
$ |
1,178 |
|
|
$ |
381 |
|
|
|
32 |
% |
Personnel-related expenses |
|
|
3,225 |
|
|
|
3,297 |
|
|
|
(72 |
) |
|
|
(2 |
)% |
Facilities, depreciation and other expenses |
|
|
1,336 |
|
|
|
794 |
|
|
|
542 |
|
|
|
68 |
% |
External pre-clinical expenses |
|
|
2,278 |
|
|
|
2,383 |
|
|
|
(105 |
) |
|
|
(4 |
)% |
Materials and utilities |
|
|
86 |
|
|
|
140 |
|
|
|
(54 |
) |
|
|
(39 |
)% |
Licensing fee – related party |
|
|
24 |
|
|
|
5 |
|
|
|
19 |
|
|
|
380 |
% |
Total research and development expenses |
|
$ |
8,508 |
|
|
$ |
7,797 |
|
|
$ |
711 |
|
|
|
9 |
% |
Research and development expenses increased by $0.7 million, or 9%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase was primarily related to a $0.4 million increase in external clinical research expenses, mainly attributable to the F351 Phase 3C experimental review expense in connection with the China NMPA’s review of Gyre Pharmaceuticals’ NDA for F351, and a $0.5 million increase in facilities, depreciation and other expenses. The increase was partially offset by a $0.2 million decrease in pre-clinical research expenses, utilities, materials, and personnel-related expenses.
General and Administrative Expenses
General and administrative expenses increased by $2.5 million, or 39%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase was primarily driven by a $0.9 million increase in personnel costs related to Gyre Pharmaceuticals’ internal restructuring, a $1.1 million increase in professional fees, a $0.2 million increase in miscellaneous expenses, and a $0.3 million increase in depreciation and amortization. The increase is partially offset by a $0.1 million decrease in stock-based compensation expenses.
Transaction Costs
For the three months ended September 30, 2026, $0.1 million in transaction costs were incurred in connection with the acquisition of Cullgen which closed in early May 2026.
Change in Fair Value of Warrant Liability
Loss from remeasurement of the preferred stock warrants liability was $315 thousand for the three months ended September 30, 2026 compared with $23 thousand for the three months ended September 30, 2025. The change was related to the remeasurement of the preferred stock warrants liability.
48
Other (Loss) Income, Net
Interest income decreased by $0.4 million, or 38%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease was related to lower average cash balances maintained in interest-bearing accounts during the three month period, as well as lower interest rates earned on the Company's bank deposits.
Net other expense was $0.5 million for the three months ended September 30, 2026 and net other income was $0.1 million for the three months ended September 30, 2025. The change was resulted from a decrease in government grant income at Gyre Pharmaceuticals and costs associated with the early termination of our San Diego office lease in July 2026.
Provision for Income Taxes
Provision for income taxes was $0.7 million and $0.6 million for the three months ended September 30, 2026 and 2025, respectively. The increase was primarily attributable to a lower income tax benefit recognized by Cullgen due to the decrease in taxable income during the three months ended September 30, 2026.
Comparison of the nine months ended September 30, 2026 and 2025
The following table summarizes our results of operations for the periods presented (in thousands, except percentage change):
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 (As Recast) |
|
|
Change ($) |
|
|
Change (%) |
|
||||
Revenues |
|
$ |
86,469 |
|
|
$ |
92,999 |
|
|
$ |
(6,530 |
) |
|
|
(7 |
)% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues |
|
|
5,383 |
|
|
|
3,673 |
|
|
|
1,710 |
|
|
|
47 |
% |
Selling and marketing |
|
|
42,918 |
|
|
|
41,363 |
|
|
|
1,555 |
|
|
|
4 |
% |
Research and development |
|
|
34,265 |
|
|
|
24,239 |
|
|
|
10,026 |
|
|
|
41 |
% |
Research and development -related parties |
|
|
4,860 |
|
|
|
— |
|
|
|
4,860 |
|
|
* |
|
|
General and administrative |
|
|
26,964 |
|
|
|
21,928 |
|
|
|
5,036 |
|
|
|
23 |
% |
Transaction costs |
|
|
6,936 |
|
|
|
— |
|
|
|
6,936 |
|
|
* |
|
|
Total operating expenses |
|
|
121,326 |
|
|
|
91,203 |
|
|
|
30,123 |
|
|
|
33 |
% |
(Loss) income from operations |
|
|
(34,857 |
) |
|
|
1,796 |
|
|
|
(36,653 |
) |
|
|
(2041 |
)% |
Other income (loss), net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
2,071 |
|
|
|
2,751 |
|
|
|
(680 |
) |
|
|
(25 |
)% |
Change in fair value of warrant liability |
|
|
(95 |
) |
|
|
2,444 |
|
|
|
(2,539 |
) |
|
|
(104 |
)% |
Other expense, net |
|
|
(1,328 |
) |
|
|
(206 |
) |
|
|
(1,122 |
) |
|
|
545 |
% |
(Loss) income before income taxes |
|
|
(34,209 |
) |
|
|
6,785 |
|
|
|
(40,994 |
) |
|
|
(604 |
)% |
Provision for income taxes |
|
|
(1,118 |
) |
|
|
(2,156 |
) |
|
|
1,038 |
|
|
|
(48 |
)% |
Net (loss) income |
|
|
(35,327 |
) |
|
|
4,629 |
|
|
|
(39,956 |
) |
|
|
(863 |
)% |
Accretion of Cullgen redeemable convertible preferred stock |
|
|
(3,905 |
) |
|
|
(7,927 |
) |
|
|
4,022 |
|
|
|
(51 |
)% |
Net (loss) income attributable to noncontrolling interest |
|
|
(10,370 |
) |
|
|
(4,449 |
) |
|
|
(5,921 |
) |
|
|
133 |
% |
Net (loss) income attributable to common stockholders |
|
$ |
(28,862 |
) |
|
$ |
1,151 |
|
|
$ |
(30,013 |
) |
|
|
(2608 |
)% |
*Not meaningful
49
Revenues
Revenues for the nine months ended September 30, 2026 and 2025 were $86.5 million and $93.0 million, respectively, representing a decrease of $6.5 million or 7.0%. Revenue from Gyre Pharmaceuticals increased by net $4.7 million during the period, primarily driven by higher ETUARYTM sales volumes resulting from ETUARYTM-focused marketing efforts, despite lower ContivaTM and EtorelTM product revenues following the implementation of China's national centralized procurement program. The overall increase in revenue from Gyre Pharmaceuticals was offset by a net $11.2 million decrease primarily driven by the collaboration revenue under the Astellas Agreement which ended in March 2026.
Cost of Revenues
Cost of revenues for the nine months ended September 30, 2026 and 2025 was $5.4 million and $3.7 million, respectively. The $1.7 million, or 47%, increase was primarily attributable to higher EtorelTM product costs.
Selling and Marketing Expenses
Selling and marketing expenses increased by $1.6 million, or 4%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was primarily attributable to a $1.9 million increase in stock-based compensation expense, partially offset by a $0.3 million decrease in promotional and conference and other expenses.
Research and Development Expenses
The table below details our costs for research and development for the periods presented (in thousands, except percentage change):
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 (As Recast) |
|
|
Change ($) |
|
|
Change (%) |
|
||||
External clinical expenses |
|
$ |
15,472 |
|
|
$ |
6,190 |
|
|
$ |
9,282 |
|
|
|
150 |
% |
Personnel-related expenses |
|
|
9,403 |
|
|
|
9,166 |
|
|
|
237 |
|
|
|
3 |
% |
Facilities, depreciation and other expenses |
|
|
3,112 |
|
|
|
3,327 |
|
|
|
(215 |
) |
|
|
(6 |
)% |
External pre-clinical expenses |
|
|
4,861 |
|
|
|
4,480 |
|
|
|
381 |
|
|
|
9 |
% |
Materials and utilities |
|
|
1,417 |
|
|
|
1,035 |
|
|
|
382 |
|
|
|
37 |
% |
Licensing fee – related party |
|
|
4,860 |
|
|
|
41 |
|
|
|
4,819 |
|
|
|
11754 |
% |
Total research and development expenses |
|
$ |
39,125 |
|
|
$ |
24,239 |
|
|
$ |
14,886 |
|
|
|
61 |
% |
Research and development expenses including related parties increased by $14.9 million, or 61%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was primarily related to a $9.3 million increase in external clinical research expenses, mainly attributable to the F351 Phase 3C experimental review expense in connection with the China NMPA’s review of Gyre pharmaceuticals’ NDA for F351; a $4.8 million increase for the milestone payment Gyre Pharmaceuticals owed to an affiliate of GNI Group related to China's NMPA acceptance of the NDA for F351 as a treatment for CHB-induced liver fibrosis; a $0.4 million increase in pre-clinical expenses; a $0.4 million increase in materials and utilities expenses; and a $0.2 million increase in personnel-related expenses including stock-based compensation expenses. The increase was partially offset by a $0.2 million decrease in facilities, depreciation and other expenses.
General and Administrative Expenses
General and administrative expenses increased by $5.0 million, or 23%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was primarily driven by a $3.6 million increase in personnel costs related to Gyre Pharmaceuticals’ internal restructuring and Gyre’s severance expense associated with the acquisition of Cullgen, a $1.1 million increase in miscellaneous expenses, a $0.5 million increase in stock-based compensation expenses and $0.3 million increase in depreciation expenses, partially offset by a $0.4 million decrease in professional fees.
50
Transaction costs
For the nine months ended September 30, 2026, $3.8 million in transaction costs were incurred in connection with the termination of the proposed merger between Cullgen and Pulmatrix, Inc. in February 2026 and $3.1 million in transaction costs were incurred related to the acquisition of Cullgen, which closed in early May 2026, totaling $6.9 million.
Change in Fair Value of Warrant Liability
Loss from remeasurement of the preferred stock warrants liability was $0.1 million for the nine months ended September 30, 2026 compared with a gain from remeasurement of the preferred stock warrants liability of $2.4 million for the nine months ended September 30, 2025. The change was related to the remeasurement of the preferred stock warrants liability.
Other (Loss) Income, Net
Interest income decreased by $0.7 million, or 25%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The decrease was due to lower average cash balances maintained in interest-bearing accounts during the period, as well as lower interest rates earned on the Company's bank deposits.
Net other expense was $1.3 million for the nine months ended September 30, 2026, compared to net other expense was $0.2 million for the nine months ended September 30, 2025. The net increase resulted from a decrease in government grant income at Gyre Pharmaceuticals. In addition, our net other loss increased primarily due to foreign currency revaluation losses recognized in the first quarter of 2026 and costs associated with the early termination of the San Diego office lease in the third quarter of 2026.
Provision for Income Taxes
Provision for income taxes was $1.1 million and $2.2 million for the nine months ended September 30, 2026 and 2025, respectively. The decrease was mainly due to the Company's pre-tax loss incurred since the first fiscal quarter of 2026, partially offset by income tax expense recognized on certain non-deductible items, including donations, and the impact of other permanent and temporary tax differences.
Recent Accounting Pronouncements
Refer to Note 2 — Summary of Significant Accounting Policies to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for more information about recent accounting pronouncements.
Liquidity and Capital Resources
Sources of Liquidity
As of September 30, 2026, we had cash and cash equivalents of $41.6 million, short-term bank deposits of $15.8 million, short-term investments of $12.6 million, and long-term certificates of deposit of $28.8 million, which are available to fund operations, and an accumulated deficit of $142.0 million. Our net loss during the nine months ended September 30, 2026 was $35.3 million, while cash used in operating activities was $17.5 million. We believe that our existing cash and cash equivalents, cash flows from operations, and access to capital markets will be sufficient to fund our operating activities and obligations for at least the next 12 months following the filing date of this Quarterly Report and thereafter for the foreseeable future.
51
Future Funding Requirements
We expect to use cash provided by operating activities, short-term deposits, and long-term certificates of deposit, as well as potential cash issuances to meet our current and future financial obligations, including funding our operations, research and development activities, clinical pipelines, and capital expenditures. Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic, regulatory, and other factors, many of which we cannot control. In addition, we anticipate that we will incur expenses related to and in connection with the integration between our business and Cullgen. Factors that may affect financing requirements include, but are not limited to:
Future capital requirements will also depend on the extent to which we acquire or invest in additional complementary businesses, products and technologies.
The following table summarizes our cash flows for the periods presented (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 (As Recast) |
|
||
Cash Flow Data: |
|
|
|
|
|
|
||
Net cash used in operating activities |
|
$ |
(17,530 |
) |
|
$ |
(10,185 |
) |
Net cash provided by investing activities |
|
|
8,431 |
|
|
|
6,510 |
|
Net cash provided by financing activities |
|
|
234 |
|
|
|
21,564 |
|
Effect of exchange rate changes on cash |
|
|
1,316 |
|
|
|
149 |
|
Net change in cash and cash equivalents |
|
$ |
(7,549 |
) |
|
$ |
18,038 |
|
52
Cash Flows from Operating Activities
Cash used in operating activities for the nine months ended September 30, 2026 was $17.5 million, reflecting our net loss of $35.3 million and offset by non-cash items of $8.6 million, which was primarily driven by a $6.4 million in stock-based compensation, $2.6 million of depreciation and amortization, $1.5 million of noncash lease expense, and $0.6 million of accrued interest on short-term and long-term certificates of deposit, partially offset by a $2.9 million deferred income tax benefit. Additionally, $9.2 million of cash provided by changes in net operating assets and liabilities was primarily driven by a $4.9 million decrease in notes receivable, a $4.6 million increase in amounts due to related parties, a $2.4 million decrease in prepaid and other assets, and a $1.3 million increase in accounts payable, partially offset by a $1.6 million increase in inventories, a $1.2 million decrease in operating lease liabilities, a $0.4 million increase in accounts receivable, and a $0.8 million decrease in accrued expenses and other liabilities, including income tax payable..
Cash used in operating activities for the nine months ended September 30, 2025 was $10.2 million, reflecting our net income of $4.6 million and non-cash charges of $3.5 million, which primarily included $3.3 million in stock-based compensation and $2.4 million in depreciation and amortization, partially offset by a $2.4 million change in the fair value of warrant liability and $1.0 million in deferred income taxes. Additionally, $18.3 million cash used in changes in net operating assets and liabilities was primarily driven by a $9.9 million increase in accounts receivable, inventories, prepaid and other assets and a $12.5 million decrease in deferred revenue, and other liabilities, including accrued expenses, income tax payable and operating lease liabilities, partially offset by a $3.7 million decrease in notes receivable and a $0.4 million increase in accounts payable.
The increase in cash used in operating activities for the nine months ended September 30, 2026 compared with cash used in operating activities for the nine months ended September 30, 2025 was primarily attributable to less cash received under the Astellas Agreement that ended in March 2026 combined with the transaction costs associated with the Merger that closed in May 2026, as well as overall higher spending in clinical and other research programs.
Cash Flows from Investing Activities
Cash provided by investing activities for the nine months ended September 30, 2026 was $8.4 million, which consisted primarily of $17.2 million of proceeds from available-for-sale securities, $14.5 million of proceeds from the maturity of certificates of deposit, and $0.1 million of proceeds from sale of equipment, partially offset by $18.8 million in purchases of certificates of deposit, $1.1 million in acquisitions of intangible assets, $2.0 million in purchases of available-for-sale securities, and $1.4 million in purchases of property and equipment.
Cash provided by investing activities for the nine months ended September 30, 2025 was $6.5 million, which consisted primarily of $27.2 million of proceeds from the maturity of certificates of deposit and $17.4 million of proceeds from available-for-sale securities, partially offset by $19.2 million in purchases of certificates of deposit, $16.5 million in purchases of available-for-sale securities, $1.2 million in purchases of property and equipment, $0.7 million in acquisitions of intangible assets, and $0.6 million in purchases of short-term investments.
Cash Flows from Financing Activities
Cash provided by financing activities for the nine months ended September 30, 2026 was $0.2 million, primarily due to proceeds from stock options exercised, partially offset by listing expense.
Cash provided by financing activities for the nine months ended September 30, 2025 was $21.6 million, primarily due to $23.0 million in proceeds from the issuance of common stock, $2.0 million in proceeds from the exercise of stock options, and $0.5 million in proceeds from the issuance of common stock under our ATM program with Jefferies LLC, partially offset by $2.5 million in payments of listing expenses and $1.5 million of cash used for deferred financing costs.
53
Restricted Net Assets
Under PRC laws and regulations, Gyre Pharmaceuticals and Cullgen are subject to restrictions on foreign exchange and cross-border cash transfers, including to parent companies and U.S. stockholders. The ability to distribute earnings to the parent companies and U.S. stockholders is also limited. Current PRC regulations permit Gyre Pharmaceuticals to pay dividends to BJC only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. Amounts restricted include paid-in capital and the statutory reserves of Gyre Pharmaceuticals. The aggregate amounts of restricted capital and statutory reserves of the relevant subsidiaries not available for distribution were $132.3 million and $128.1 million as of September 30, 2026 and December 31, 2025. We do not expect the restrictions described above to have a material impact on our ability to meet our cash obligations.
Contractual Obligations and Other Commitments
We expect to satisfy our contractual obligations and commitments through a combination of cash on hand, cash provided by operating activities, short-term deposits, and long-term certificates of deposit.
Leases
We have entered into lease arrangements in (1) San Diego, California for our headquarters and subsidiary, the latest of which expires in July 2028, and (2) the PRC, for office and laboratory spaces through February 2037. As of September 30, 2026, our fixed lease payment obligations were $3.8 million, with $0.4 million payable within the remaining three months.
Research and Development Programs
As of September 30, 2026, we have committed to allocate $45.9 million toward future research and development activities for various programs.
Property and Equipment
Our commitments related to the purchase of property and equipment contracted but not yet reflected in the unaudited condensed consolidated financial statements were $4.9 million as of September 30, 2026 and are expected to be incurred within one year.
EtorelTM IP Rights
The Company is committed to annual payments to the EtorelTM IP Rights transferor over eight years following the commencement of commercial sales. See Note 11 — Commitments and Contingencies to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
Critical Accounting Policies and Estimates
Please refer to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025 and Note 2 — Summary of Significant Accounting Policies in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for a description of significant accounting policies.
54
Smaller Reporting Company and Accelerated Filer Status
We are a “smaller reporting company” as defined in the Exchange Act. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Based on the aggregate market value of our common stock held by non-affiliates as of June 30, 2026, we remain a smaller reporting company and continue to qualify as an “accelerated filer”. As a result of our transition to accelerated filer status, we were required, pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), to include in our Annual Report an attestation report from our independent registered public accounting firm regarding the effectiveness of our internal control over financial reporting, and we have complied with this requirement by including the attestation report in our Annual Report. However, we expect to continue to take advantage of the reduced reporting requirements applicable to smaller reporting companies.
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company, as defined by Rule 12b-2 under the Exchange Act and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of September 30, 2026, our management, with the participation and supervision of our principal executive officer and our principal financial officer, evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2026 to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except that associated with the Merger, management is in the process of implementing new controls and changes to existing controls over financial reporting including but not limited to certain controls in the areas of financial statement close, consolidation and reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are currently not a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors, and there can be no assurances that favorable outcomes will be obtained.
ITEM 1A. RISK FACTORS
You should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report and in Part II, Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 (the “Q2 Quarterly Report), which could materially affect our business, financial position, or future results of operations. The risks described in our Annual Report and our Q2 Quarterly Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial position, or future results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. There have been no material changes from the risk factors disclosed in Part I, Item 1A, “Risk Factors” in our Annual Report and in Part II, Item 1A “Risk Factors” in our Q2 Quarterly Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
Trading Arrangements
During the three months ended September 30, 2026, no director or executive officer
57
ITEM 6. EXHIBITS
The exhibits filed or furnished as part of this Quarterly Report are set forth below.
Exhibit Number |
|
Exhibit Title |
Form |
File No. |
Incorporated by reference Exhibit No. |
Filing Date |
|
|
|
|
|
|
|
2.1(a)†# |
|
Asset Purchase Agreement, dated as of December 26, 2022, by and among Catalyst Biosciences, Inc., GNI Group Ltd., and GNI Hong Kong Limited. |
8-K |
000-51173 |
2.1 |
Dec. 27, 2022 |
|
|
|
|
|
|
|
2.1(b) |
|
Agreement and Amendment to Asset Purchase Agreement, dated as of March 29, 2023, by and among Catalyst Biosciences, Inc., GNI Group Ltd., and GNI Hong Kong Limited. |
8-K |
000-51173 |
2.2 |
Mar. 30, 2023 |
|
|
|
|
|
|
|
2.2(a)# |
|
Business Combination Agreement, dated as of December 26, 2022, by and among Catalyst Biosciences, Inc., GNI USA, Inc., GNI Group Ltd., GNI Hong Kong Limited, Shanghai Genomics, Inc., the individuals listed on Annex A thereto and Continent Pharmaceuticals Inc. |
8-K |
000-51173 |
2.2 |
Dec. 27, 2022 |
|
|
|
|
|
|
|
2.2(b) |
|
Amendment to Business Combination Agreement, dated as of March 29, 2023, by and among Catalyst Biosciences, Inc., GNI USA, Inc., GNI Group Ltd., GNI Hong Kong Limited, Shanghai Genomics, Inc., the Minority Holders and Continent Pharmaceuticals Inc. |
8-K |
000-51173 |
2.1 |
Mar. 30, 2023 |
2.2(c) |
|
Second Amendment to Business Combination Agreement, dated as of August 30, 2023, by and among Catalyst Biosciences, Inc., GNI USA, Inc., GNI Group Ltd., GNI Hong Kong Limited, Shanghai Genomics, Inc. and Continent Pharmaceuticals Inc. |
8-K |
000-51173 |
2.1 |
Aug. 31, 2023 |
2.3
|
|
Agreement and Plan of Merger and Reorganization, dated March 2, 2026, by and among Gyre Therapeutics, Inc., Helix Merger Sub Corp., and Cullgen Inc.
|
8-K
|
000-51173
|
2.1
|
Mar. 2, 2026
|
|
|
|
|
|
|
|
3.1 |
|
Restated Certificate of Incorporation of the Company. |
10-Q |
000-51173 |
3.1 |
Nov. 13, 2024 |
|
|
|
|
|
|
|
3.2 |
|
Amended and Restated Bylaws of the Company. |
8-K |
000-51173 |
3.3 |
Oct. 30, 2023 |
|
|
|
|
|
|
|
3.3(a) |
|
Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, filed with the Delaware Secretary of State on April 10, 2017. |
10-Q |
000-51173 |
3.1 |
Aug. 3, 2017 |
|
|
|
|
|
|
|
58
3.3(b) |
|
Certificate of Elimination of Series A Preferred Stock, filed with the Delaware Secretary of State on March 25, 2024. |
10-K |
000-51173 |
3.6(b) |
Mar. 27, 2024 |
|
|
|
|
|
|
|
3.4(a) |
|
Certificate of Designation of Preferences, Rights and Limitations of Series X Convertible Preferred Stock, filed with the Delaware Secretary of State on December 27, 2022. |
8-K |
000-51173 |
3.1 |
Dec. 27, 2022 |
|
|
|
|
|
|
|
3.4(b) |
|
Amendment to Certificate of Designation of Preferences, Rights and Limitations of Series X Convertible Preferred Stock, filed with the Delaware Secretary of State on October 30, 2023. |
8-K |
000-51173 |
3.2 |
Oct. 30, 2023 |
|
|
|
|
|
|
|
3.5(a) |
|
Certificate of Designation of Preferences, Rights and Limitations of Series Y Preferred Stock, filed with the Delaware Secretary of State on June 20, 2023, with respect to the Series Y Preferred Stock. |
8-K |
000-51173 |
3.1 |
June 20, 2023 |
|
|
|
|
|
|
|
3.5(b) |
|
Certificate of Elimination of Series Y Preferred Stock, filed with the Delaware Secretary of State on August 31, 2023. |
8-K |
000-51173 |
3.1 |
Aug. 31, 2023 |
3.6 |
|
Form of Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock. |
8-K
|
000-51173
|
3.1
|
Mar. 2, 2026
|
|
|
|
|
|
|
|
4.1 |
|
Form of Warrant to Purchase Series X Convertible Preferred Stock. |
8-K |
000-51173 |
4.1 |
Oct. 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1* |
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
|
|
|
|
31.2* |
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
|
|
|
|
32.1** |
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
|
|
|
|
32.2** |
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
|
|
|
|
101.INS* |
|
Inline XBRL (extensible Business Reporting Language) Instance Document |
|
|
|
|
59
|
|
|
|
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Document |
|
|
|
|
|
|
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
|
|
|
* Filed herewith.
** Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.
† The annexes, schedules, and certain exhibits to this Exhibit have been omitted pursuant to Item 601(a)(5).
# Pursuant to Item 601(b)(10) of Regulation S-K, certain confidential portions of this exhibit were omitted by means of marking such portions with an asterisk because the identified confidential portions (i) are not material and (ii) are the type of information that the Company customarily and actually treats as private or confidential.
60
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
GYRE THERAPEUTICS, INC. |
|
|
|
Date: November 6, 2026 |
|
/s/ Ying Luo |
|
|
Ying Luo |
|
|
Chief Executive Officer and President |
|
|
(Principal Executive Officer) |
|
|
|
Date: November 6, 2026 |
|
/s/ Thomas Eastling |
|
|
Thomas Eastling |
|
|
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
61