Gyre Therapeutics, Inc 10-Q for FY2024 Q2

About this 10-Q

Headline figures

Gyre Therapeutics, Inc. (GYRE)

10-Q 2024-08-13 For: 2024-06-30

Added on April 08, 2026

Gyre Therapeutics, Inc filed this 10-Q on August 13, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).

Date: August 13, 2024

/s/ Han Ying, Ph.D.

Han Ying, Ph.D.
Chief Executive Officer and Director
(Principal Executive Officer)

Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $25.23M; down 14.0% from $29.33M a year earlier
Net income: $4.54M; up 20.4% from net income of $3.77M a year earlier
Diluted EPS: $0.01; down 50.0% from $0.02 a year earlier

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	GYRE	The Nasdaq Capital Market


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐


		Page No.

PART I. FINANCIAL INFORMATION			2

Item 1.	Financial Statements:		2

	Condensed Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023		2

	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2024 and 2023 (unaudited)		3

	Condensed Consolidated Statements of Convertible Preferred Stock and Equity for the three and six months ended June 30, 2024 and 2023 (unaudited)		4

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited)		5

	Notes to the Unaudited Condensed Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		37

Item 4.	Controls and Procedures		37

PART II. OTHER INFORMATION			38

Item 1.	Legal Proceedings		38

Item 1A.	Risk Factors		38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		38

Item 3.	Defaults Upon Senior Securities		38

Item 4.	Mine Safety Disclosures		38

Item 5.	Other Information		38

Item 6.	Exhibits		39

Exhibit Index			39

Signatures		42


	June 30, 2024			December 31, 2023
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	16,097		$	33,509
Short-term bank deposits		9,003			—
Accounts and note receivables, net		18,622			15,552
Other receivables from GNI		1,287			1,287
Inventories, net		5,635			4,281
Prepaid assets		1,153			1,547
Other current assets		1,722			1,045
Total current assets		53,519			57,221
Property and equipment, net		23,672			23,288
Long-term receivable from GCBP		4,839			4,722
Intangible assets, net		186			205
Right-of-use assets		2,097			489
Land use rights, net		1,464			1,493
Deferred tax assets		5,075			4,695
Long-term certificates of deposit		28,799			23,431
Other assets, noncurrent		1,278			995
Total assets	$	120,929		$	116,539
Liabilities, convertible preferred stock, and equity
Current liabilities:
Accounts payable	$	271		$	355
Deferred revenue		57			39
Due to related parties		1,484			1,369
CVR excess closing cash payable		328			1,085
Accrued expenses and other current liabilities		10,513			11,935
Income tax payable		2,262			5,054
Operating lease liabilities, current		659			210
Total current liabilities		15,574			20,047
Operating lease liabilities, noncurrent		1,297			199
Deferred government grants		192			213
CVR derivative liability, noncurrent		4,839			4,722
Warrant liability, noncurrent		5,634			12,835
Other noncurrent liabilities		47			49
Total liabilities		27,583			38,065
Commitments and Contingencies (Note 12)
Convertible Preferred Stock, $0.001 par value, 5,000,000 shares authorized; nil shares and 13,151 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		—			64,525
Stockholders’ equity:
Common stock, $0.001 par value, 400,000,000 shares authorized; 85,537,774 shares and 76,595,616 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		85			77
Additional paid-in capital		133,656			68,179
Statutory reserve		3,098			3,098
Accumulated deficit		(74,478	)		(85,538	)
Accumulated other comprehensive loss		(2,010	)		(1,644	)
Total Gyre stockholders’ equity (deficit)		60,351			(15,828	)
Noncontrolling interest		32,995			29,777
Total equity		93,346			13,949
Total liabilities, convertible preferred stock, and equity	$	120,929		$	116,539


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Revenues	$	25,225		$	29,329		$	52,397		$	54,260
Operating expenses:
Cost of revenues		770			1,077			1,749			2,202
Selling and marketing		14,414			17,999			26,956			30,767
Research and development		3,355			3,568			5,537			6,203
General and administrative		3,424			1,711			6,822			3,450
Total operating expenses		21,963			24,355			41,064			42,622
Income from operations		3,262			4,974			11,333			11,638
Other income (expense), net:
Interest income, net		350			251			678			435
Other (expense) income, net		(422	)		629			(628	)		52
Change in fair value of warrant liability		2,913			—			7,201			—
Loss on disposal of assets, net		(68	)		—			(68	)		—
Income before income taxes		6,035			5,854			18,516			12,125
Provision for income taxes		(1,497	)		(2,084	)		(4,043	)		(4,138	)
Net income		4,538			3,770			14,473			7,987
Net income attributable to noncontrolling interest		1,010			1,917			3,413			3,890
Net income attributable to common stockholders	$	3,528		$	1,853		$	11,060		$	4,097
Net income per share attributable to common stockholders:
Basic	$	0.04		$	0.03		$	0.13		$	0.06
Diluted	$	0.01		$	0.02		$	0.04		$	0.05
Weighted average shares used in calculating net income per share attributable to common stockholders:
Basic		85,502,403			63,588,119			84,384,141			63,588,119
Diluted		104,325,463			78,904,324			102,421,084			78,909,408

Other comprehensive income:
Net income	$	4,538		$	3,770		$	14,473		$	7,987
Foreign currency translation adjustments		(420	)		(3,634	)		(561	)		(2,736	)
Comprehensive income		4,118			136			13,912			5,251
Net income attributable to noncontrolling interest		1,010			1,917			3,413			3,890
Foreign currency translation adjustments attributable to noncontrolling interest		(146	)		(1,608	)		(195	)		(1,213	)
Comprehensive income attributable to noncontrolling interest		864			309			3,218			2,677
Comprehensive income (loss) attributable to common stockholders	$	3,254		$	(173	)	$	10,694		$	2,574


	Convertible Preferred Stock						Common Stock				Additional Paid-In		Statutory					Accumulated Other Comprehensive			Total Gyre Stockholders’			Non-controlling			Total
	Shares			Amount			Shares		Amount		Capital		Reserve		Accumulated Deficit			Loss			(Deficit) Equity			Interest			Equity
Balance at December 31, 2023		13,151		$	64,525			76,595,616	$	77	$	68,179	$	3,098	$	(85,538	)	$	(1,644	)	$	(15,828	)	$	29,777		$	13,949
Stock-based compensation expense		—			—			—		—		11		—		—			—			11			—			11
Stock options exercised		—			—			60,297		—		492		—		—			—			492			—			492
Convertible preferred stock conversion		(13,151	)		(64,525	)		8,767,333		8		64,517		—		—			—			64,525			—			64,525
Foreign currency translation adjustments		—			—			—		—		—		—		—			(92	)		(92	)		(49	)		(141	)
Net income		—			—			—		—		—		—		7,532			—			7,532			2,403			9,935
Balance at March 31, 2024		—			—			85,423,246		85		133,199		3,098		(78,006	)		(1,736	)		56,640			32,131			88,771
Stock-based compensation expense		—			—			—		—		16		—		—			—			16			—			16
Stock options exercised		—			—			114,528		—		441		—		—			—			441			—			441
Foreign currency translation adjustment		—			—			—		—		—		—		—			(274	)		(274	)		(146	)		(420	)
Net income		—			—			—		—		—		—		3,528			—			3,528			1,010			4,538
Balance at June 30, 2024		—		$	—			85,537,774	$	85	$	133,656	$	3,098	$	(74,478	)	$	(2,010	)	$	60,351		$	32,995		$	93,346

	Convertible Preferred Stock						Common Stock				Additional Paid-In		Statutory		Retained Earnings			Accumulated Other Comprehensive			Total Gyre Stockholders’			Non-controlling			Total
	Shares			Amount			Shares		Amount		Capital		Reserve					(Loss) Income			Equity			Interest			Equity
Balance at December 31, 2022		—		$	—			63,588,119	$	64	$	32,795	$	2,660	$	7,395		$	(392	)	$	42,522		$	29,695		$	72,217
Foreign currency translation adjustments		—			—			—		—		—		—		—			503			503			395			898
Net income		—			—			—		—		—		—		2,244			—			2,244			1,973			4,217
Balance at March 31, 2023		—		$	—			63,588,119	$	64	$	32,795	$	2,660	$	9,639		$	111		$	45,269		$	32,063		$	77,332
Foreign currency translation adjustment		—			—			—		—		—		—		—			(2,026	)		(2,026	)		(1,608	)		(3,634	)
Net income		—			—			—		—		—		—		1,853			—			1,853			1,917			3,770
Balance at June 30, 2023		—		$	—			63,588,119	$	64	$	32,795	$	2,660	$	11,492		$	(1,915	)	$	45,096		$	32,372		$	77,468


	June 30, 2024
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds(1)	$	2,884	$	—	$	—	$	2,884
Long-term receivable from GCBP		—		—		4,839		4,839
Total financial assets	$	2,884	$	—	$	4,839	$	7,723

Financial liabilities:
CVR derivative liability, noncurrent	$	—	$	—	$	4,839	$	4,839
Warrant liability, noncurrent		—		—		5,634		5,634
Total financial liabilities	$	—	$	—	$	10,473	$	10,473


	June 30, 2024			December 31, 2023
Share price	$	11.93		$	25.70
Exercise price	$	4,915.00		$	4,915.00
Dividend yield		—	%		—	%
Risk-free interest		4.35	%		3.88	%
Term (years)		9.33			9.83
Expected volatility		83.00	%		84.00	%


	Long-term receivable		CVR derivative		Warrant
	from GCBP		liability, noncurrent		liability
Balance at December 31, 2023	$	4,722	$	4,722	$	12,835
Changes in fair value		117		117		(7,201	)
Balance at June 30, 2024	$	4,839	$	4,839	$	5,634


June 30, 2024	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Money market funds (cash equivalents)	$	2,884	$	—	$	—	$	2,884
Total financial assets	$	2,884	$	—	$	—	$	2,884
Classified as:
Cash and cash equivalents							$	2,884
Total financial assets							$	2,884


	June 30, 2024		December 31, 2023
Raw materials	$	1,173	$	919
Work in progress		2,916		1,997
Finished goods		1,546		1,365
Inventories, net	$	5,635	$	4,281


	June 30, 2024		December 31, 2023
Accrued payroll and welfare	$	5,658	$	5,790
Accrued expenses - selling expenses		1,793		44
Supplier reimbursement		1,355		2,247
Accrued sales discount		850		903
Accrued expenses - general and administrative		472		1,190
Accrued expenses - research and development		94		161
Deferred government grants		40		40
Employee reimbursement		61		648
Accrued professional services		113		837
Other accrued liabilities		77		75
Accrued expenses and other current liabilities	$	10,513	$	11,935


	June 30, 2024			December 31, 2023
Accounts receivable	$	18,460		$	15,204
Note receivable		302			389
Allowance for credit losses		(140	)		(41	)
Allowance and note receivables, net	$	18,622		$	15,552


	June 30, 2024			December 31, 2023
Buildings	$	18,278		$	12,289
Construction in progress		301			7,875
Machinery and electronic devices		9,073			6,598
Furniture and fixtures		640			606
Motor vehicles		184			185
Property and equipment, gross		28,476			27,553
Less: Accumulated depreciation		(4,804	)		(4,265	)
Property and equipment, net	$	23,672		$	23,288


	June 30, 2024
	Gross carrying amount		Accumulated amortization			Intangible assets, net
Intangible assets with finite lives:
Technological know-how	$	428	$	(298	)	$	130
Computer software		170		(114	)		56
Total intangible assets	$	598	$	(412	)	$	186


1.	Nature of Operations and Liquidity


2.	Summary of Significant Accounting Policies


3.	Fair Value Measurements and Financial Instruments


4.	Balance Sheet Components


	Estimated amortization expense
2024	$	17
2025		34
2026		34
2027		33
2028		18
Thereafter		50
Total	$	186


	June 30, 2024			December 31, 2023
Weighted-average remaining lease term	2.9 years			2.2 years
Weighted-average discount rate		4.76	%		4.78	%


	Amount
Remaining in 2024	$	474
2025		735
2026		598
2027		281
Total undiscounted lease payments		2,088
Less: imputed interest		(132	)
Total lease liabilities		1,956
Less: current portion of lease liabilities		(659	)
Lease liabilities, net of current portion	$	1,297


	June 30, 2024			December 31, 2023
Options issued and outstanding		18,103,967	[1]		18,280,548
Preferred Stock Warrants issued and outstanding		540,666			540,666
Convertible Preferred Stock issued and outstanding		—			8,767,332
Total common stock reserved		18,644,633			27,588,546


	Number of Shares Underlying Outstanding Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Outstanding — December 31, 2023		18,280,548		$	1.49		6.9
Options granted		1,866		$	17.86
Options exercised		(174,825	)	$	5.33
Options forfeited and cancelled		(3,622	)	$	22.85
Outstanding — June 30, 2024		18,103,967		$	1.45		6.6
Exercisable — June 30, 2024		18,092,771		$	1.44		6.6


11.	Net Income per Share (“EPS”) Attributable to Common Stockholders


	Three Months Ended June 30, 2024
	Gyre Pharmaceuticals		Gyre			Other			Consolidated
Revenues	$	25,225	$	—		$	—		$	25,225
Cost of revenues		770		—			—			770
Gross profit		24,455		—			—			24,455
Operating expenses excluding cost of revenues:
Selling and marketing		14,414		—			—			14,414
Research and development		3,077		278			—			3,355
General and administrative		2,549		874			1			3,424
Total operating expenses excluding cost of revenues		20,040		1,152			1			21,193
Income (loss) from operations	$	4,415	$	(1,152	)	$	(1	)	$	3,262

Supplemental disclosure of stock-based compensation expense:
General and administrative	$	—	$	16		$	—		$	16
Stock-based compensation total	$	—	$	16		$	—		$	16


	Six Months Ended June 30, 2024
	Gyre Pharmaceuticals		Gyre			Other			Consolidated
Revenues	$	52,397	$	—		$	—		$	52,397
Cost of revenues		1,749		—			—			1,749
Gross profit		50,648		—			—			50,648
Operating expenses excluding cost of revenues:
Selling and marketing		26,956		—			—			26,956
Research and development		5,086		451			—			5,537
General and administrative		4,806		2,015			1			6,822
Total operating expenses excluding cost of revenues		36,848		2,466			1			39,315
Income (loss) from operations	$	13,800	$	(2,466	)	$	(1	)	$	11,333

Supplemental disclosure of stock-based compensation expense:
General and administrative	$	—	$	27		$	—		$	27
Stock-based compensation total	$	—	$	27		$	—		$	27


	Three Months Ended June 30, 2023
	Gyre Pharmaceuticals		Gyre		Other			Consolidated
Revenues	$	29,329	$	—	$	—		$	29,329
Cost of revenues		1,077		—		—			1,077
Gross profit		28,252		—		—			28,252
Operating expenses excluding cost of revenues:
Selling and marketing		17,999		—		—			17,999
Research and development		3,568		—		—			3,568
General and administrative		1,174		—		537			1,711
Total operating expenses excluding cost of revenues		22,741		—		537			23,278
Income (loss) from operations	$	5,511	$	—	$	(537	)	$	4,974

Supplemental disclosure of stock-based compensation expense:
Stock-based compensation total	$	—	$	—	$	—		$	—


	Six Months Ended June 30, 2023
	Gyre Pharmaceuticals		Gyre		Other			Consolidated
Revenues	$	54,260	$	—	$	—		$	54,260
Cost of revenues		2,202		—		—			2,202
Gross profit		52,058		—		—			52,058
Operating expenses excluding cost of revenues:
Selling and marketing		30,767		—		—			30,767
Research and development		6,203		—		—			6,203
General and administrative		2,896		—		554			3,450
Total operating expenses excluding cost of revenues		39,866		—		554			40,420
Income (loss) from operations	$	12,192	$	—	$	(554	)	$	11,638

Supplemental disclosure of stock-based compensation expense:
Stock-based compensation total	$	—	$	—	$	—		$	—


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

3.1	Fourth Amended and Restated Certificate of Incorporation of the Company.	S-8	333-133881	4.1	May 8, 2006

3.2	Certificate of Amendment to Fourth the Amended and Restated Certificate of Incorporation of the Company.	8-K	000-51173	3.1	Aug. 20, 2015

3.3	Second Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation of the Company.	8-K	000-51173	3.1	Feb. 10, 2017


3.4	Third Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation of the Company.	8-K	000-51173	3.1	Oct. 30, 2023

3.5	Fourth Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation of the Company.	8-K	000-51173	3.1	June 17, 2024

3.6	Amended and Restated Bylaws of the Company.	8-K	000-51173	3.3	Oct. 30, 2023

3.7(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

3.7(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

3.8(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

3.8(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

3.9(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

3.9(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

4.1	Warrant to Purchase Stock of Catalyst Biosciences, Inc., issued to Silicon Valley Bank on March 3, 2005.	10-K	000-51173	4.4	Mar. 9, 2016

4.2	Form of Warrant to Purchase Stock of Catalyst Biosciences, Inc., issued to purchasers of convertible promissory notes.	10-K	000-51173	4.6	Mar. 9, 2016

4.3	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 Interim 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 Interim 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

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)


		GYRE THERAPEUTICS, INC.

Date: August 13, 2024		/s/ Han Ying, Ph.D.
		Han Ying, Ph.D.
		Chief Executive Officer
		(Principal Executive Officer)

Date: August 13, 2024		/s/ Ruoyu Chen
		Ruoyu Chen
		Chief Financial Officer
		(Principal Financial and Accounting Officer)