GYRE THERAPEUTICS INC

Previous wording

We are a financially-sustainable commercial-stage biotechnology company with a record of financial success that develops and commercializes small-molecule anti-inflammatory and anti-fibrotic drugs targeting organ diseases, focusing specifically on organ fibrosis. Fibrotic diseases represent a large patient population with significant unmet medical needs. Fibrosis involves a complex, multi-stage process with multiple pathways. While there are numerous potential targets for anti-fibrotic therapy, both established and emerging, addressing a single molecular pathway may not be sufficient to prevent, halt, or reverse fibrosis.

Current wording

We are a financially-sustainable commercial-stage biotechnology company with a record of success in developing and commercializing small-molecule anti-inflammatory and anti-fibrotic drugs targeting organ diseases, focusing specifically on organ fibrosis. Fibrotic diseases represent a large patient population with significant unmet medical needs. Fibrosis involves a complex, multi-stage process with multiple pathways. While there are numerous potential targets for anti-fibrotic therapy, both established and emerging, addressing a single molecular pathway may not be sufficient to prevent, halt, or reverse fibrosis.

Previous wording

Gyre Pharmaceuticals successfully advanced Pirfenidone from research and development to commercialization in the PRC for the treatment of IPF. In addition to IPF, Pirfenidone is undergoing three additional Phase 3 clinical trials for connective tissue disease-associated interstitial lung diseases (sclerosis-related interstitial lung disease and dermatomyositis-related interstitial lung disease) and pneumoconiosis to broaden its indications and market. In May 2024, Gyre Pharmaceuticals executed a comprehensive agreement with Jiangsu Wangao Pharmaceuticals Co., Ltd. to acquire the rights to nintedanib, a small-molecule drug for the treatment of IPF. With this acquisition, we acquired a second product approved for the treatment of idiopathic pulmonary fibrosis and expect to provide patients more choices and benefits, and further enhance Gyre Pharmaceuticals’ leading position in the pulmonary fibrosis market.

Current wording

Gyre Pharmaceuticals successfully advanced Pirfenidone from research and development to commercialization in the PRC for the treatment of IPF. In addition to IPF, Pirfenidone is undergoing three additional Phase 3 clinical trials for connective tissue disease-associated interstitial lung diseases (sclerosis-related interstitial lung disease and dermatomyositis-related interstitial lung disease) and pneumoconiosis to broaden its indications and market. In May 2024, Gyre Pharmaceuticals executed a comprehensive agreement with Jiangsu Wangao Pharmaceuticals Co., Ltd. to acquire the commercial rights to nintedanib, a small-molecule drug for the treatment of IPF. With this acquisition, we acquired the other product approved for the treatment of IPF, which is currently approved globally for the treatment of IPF. Nintedanib is expected to provide patients more choices and benefits, and further enhance Gyre Pharmaceuticals’ leading position in the pulmonary fibrosis market. Gyre Pharmaceutical is planning to initiate commercialization of the nintedanib product in the PRC in 2025, which is anticipated to offset any declines in ETUARY sales as a result of thefluctuations in the Chinese economy significantly affecting demand for anti-fibrosis drugs and decreasing healthcare spending generally.

Previous wording

Gyre Pharmaceuticals has completed a Phase 2 trial of F351 in the PRC for chronic hepatitis B (“CHB”)-associated liver fibrosis. The Phase 2 trial showed that F351 was well-tolerated without notable toxicity and patients treated showed statistically-significant improvement of liver fibrosis, with the best efficacy results achieved at 270 mg/day dosing. Based on these results, a confirmatory Phase 3 trial is ongoing in the PRC with a primary endpoint of the reduction of the liver fibrosis score (Ishak Scoring System) by at least one grade after taking F351 in combination with Entecavir. The enrollment of 248 patients for the confirmatory Phase 3 trial has been completed, with the last patient expected to complete the 52-week study by the end of 2024 and clinical results expected by early 2025.

Current wording

Gyre Pharmaceuticals has completed a Phase 2 trial of F351 in the PRC for chronic hepatitis B (“CHB”)-associated liver fibrosis. The Phase 2 trial showed that F351 was well-tolerated without notable toxicity and patients treated showed statistically-significant improvement of liver fibrosis, with the best efficacy results achieved at 270 mg/day dosing. Based on these results, a confirmatory Phase 3 trial is ongoing in the PRC with a primary endpoint of the reduction of the liver fibrosis score (Ishak Scoring System) by at least one stage after taking F351 in combination with Entecavir. In October 2024, the last patient completed the 52-week pivotal Phase 3 trial. Gyre Pharmaceuticals expects to report top-line data from this trial by the first quarter of 2025.

Previous wording

In the United States, we have completed a Phase 1 clinical trial of F351 in healthy volunteers. We are preparing an investigational new drug (“IND”) application and expect to submit it in late 2024. Following results from the PRC Phase 3 trial in CHB-associated liver fibrosis and pending approval of our IND, we expect to initiate a Phase 2a trial to evaluate F351 for the treatment of non-alcoholic steatohepatitis-associated liver fibrosis in 2025.

Current wording

In the United States, we have completed a Phase 1 clinical trial of F351 in healthy volunteers. Following results from the PRC Phase 3 trial in CHB-associated liver fibrosis and pending approval of an IND submission, we expect to initiate a Phase 2 trial to evaluate F351 for the treatment of metabolic dysfunction-associated steatohepatitis (MASH )-associated liver fibrosis in 2025. We cannot guarantee that a Phase 2 trial will be initiated or estimate the funding needed for such trial at this time, but may need to raise additional capital to fund this program.

Previous wording

In parallel, we are also conducting a randomized, double-blind, placebo-controlled Phase 2 clinical trial in the PRC to assess the safety and efficacy of F573, a caspase inhibitor for the treatment of acute/acute on-chronic liver failure. In addition, in May 2024, we obtained the approval from the PRC’s National Medical Products Administration (“NMPA”) for the IND to launch a new clinical trial in the PRC of another new drug candidate, F230, a selective endothelin receptor agonist for the treatment of pulmonary arterial hypertension. We are preparing for the anticipated launch of the clinical trial in the PRC.

Current wording

In parallel, we are also conducting a randomized, double-blind, placebo-controlled Phase 2 clinical trial in the PRC to assess the safety and efficacy of F573, a caspase inhibitor for the treatment of acute/acute on-chronic liver failure. In addition, in May 2024, we obtained the approval from the PRC’s National Medical Products Administration (“NMPA”) for the IND to launch a new clinical trial in the PRC of another new drug candidate, F230, a selective endothelin receptor agonist for the treatment of pulmonary arterial hypertension. We are preparing for the anticipated launch of the clinical trial in the PRC. We are also evaluating F528, a novel anti-inflammation agent that targets the inhibition of multiple inflammatory cytokines, in preclinical studies as a potential first-line therapy for the treatment of chronic obstructive pulmonary disease.

Previous wording

In June 2024, Gyre Pharmaceuticals received approval from the NMPA for avatrombopag maleate tablets for the treatment of thrombocytopenia (“TP”) associated with chronic liver disease (“CLD”) in adult patients undergoing elective diagnostics procedures or therapy. TP is the most common hematologic complication in patients with CLD and can be life threatening in severe cases. Avatrombopag is an oral thrombopoietin receptor agonist. Avatrombopag was approved by the U.S. Food and Drug Administration for the treatment of adults with CLD-associated TP in May 2018, and its indication was subsequently expanded to include the treatment of immune thrombocytopenia in June 2019. Gyre Pharmaceuticals acquired avatrombopag under a transfer agreement with Nanjing Healthnice Pharmaceutical Technology, Co., Ltd. (“Nanjing Healtnice”) in June 2021.

Current wording

In June 2024, Gyre Pharmaceuticals received approval from the NMPA for avatrombopag maleate tablets for the treatment of thrombocytopenia (“TP”) associated with chronic liver disease (“CLD”) in adult patients undergoing elective diagnostics procedures or therapy. TP is the most common hematologic complication in patients with CLD and can be life threatening in severe cases. Avatrombopag is an oral thrombopoietin receptor agonist. Avatrombopag was approved by the U.S. Food and Drug Administration for the treatment of adults with CLD-associated TP in May 2018, and its indication was subsequently expanded to include the treatment of immune thrombocytopenia in June 2019. Gyre Pharmaceuticals acquired avatrombopag under a transfer agreement with Nanjing Healthnice Pharmaceutical Technology, Co., Ltd. (“Nanjing Healthnice”) in June 2021 and is planning to start commercializing the avatrombopag product by the first half of 2025.

Previous wording

On July 2, 2024, we received a letter from Nasdaq confirming that we are no longer in compliance with Nasdaq’s audit committee composition requirements as set forth in Nasdaq Listing Rule 5605, which requires that the audit committee of a listed company be comprised of at least three “independent directors” (as defined in Nasdaq Listing Rule 5605(a)(2)). Pursuant to Nasdaq Listing Rule 5605(c)(4), we intend to rely on the cure period to reestablish compliance with Nasdaq Listing Rule 5605. The cure period is generally defined as until the earlier of our next annual meeting of stockholders or June 30, 2025.

Current wording

On July 2, 2024, we received a letter from Nasdaq confirming that we are no longer in compliance with Nasdaq’s audit committee composition requirements as set forth in Nasdaq Listing Rule 5605, which requires that the audit committee of a listed company be comprised of at least three “independent directors” (as defined in Nasdaq Listing Rule 5605(a)(2)).

Previous wording

On August 6, 2024, the Board appointed David Epstein, Ph.D. as a Class II director to serve until our 2026 Annual Meeting of Stockholders and until his successor is duly elected and qualified. Dr. Epstein was also appointed as a member of the Board’s Audit Committee and Compensation Committee. On August 9, 2024, we informed Nasdaq that, following Dr. Epstein’s appointment as a member of the Board and as a member of the Audit Committee we regained compliance with Nasdaq’s audit committee composition requirements as set forth in Nasdaq Listing Rule 5605, which requires that the audit committee of a listed company be comprised of at least three “independent directors” (as defined in Nasdaq Listing Rule 5605(a)(2)).

Current wording

On August 6, 2024, the Board appointed Rodney Nussbaum as the new Audit Committee Chair and David Epstein, Ph.D., as a Class II director. Dr. Epstein will serve until our 2026 Annual Meeting of Stockholders and until his successor is duly elected and qualified. Dr. Epstein was also appointed as a member of the Board’s Audit Committee and Compensation Committee. On August 9, 2024, we informed Nasdaq that, following Dr. Epstein’s appointment as a member of the Board and as a member of the Audit Committee we regained compliance with Nasdaq’s audit committee composition requirements as set forth in Nasdaq Listing Rule 5605, which requires that the audit committee of a listed company be comprised of at least three “independent directors” (as defined in Nasdaq Listing Rule 5605(a)(2)). On October 3, 2024, Nasdaq issued the formal determination which confirmed our compliance with Nasdaq’s audit committee composition requirements as set forth in Nasdaq Listing Rule 5605.

Previous wording

The GNI USA Contributions were treated as an asset acquisition under U.S. generally accepted accounting principles, with CPI treated as the accounting acquirer and presented as the predecessor for post-acquisition reporting purposes. Since Catalyst is the legal acquirer, the GNI USA Contributions were accounted for as a reverse asset acquisition. This determination was based upon the terms of the Business Combination Agreement and other factors including that, immediately following the GNI USA Contributions: (i) GNI USA (as the parent company of CPI immediately prior to the GNI USA Contributions) owns a substantial majority of the voting power of the combined company; (ii) GNI USA has the ability to control the board of directors of the combined company; and (iii) senior management of Gyre Pharmaceuticals and GNI USA hold a majority of the key positions in senior management of the combined company. Immediately prior to the closing of the GNI USA Contributions, Catalyst did not meet the definition of a business because Catalyst did not have an organized workforce that significantly contributed to its ability to create output, and substantially all of its fair value was concentrated in in-process research and development (“IPR&D”).

Current wording

The GNI USA Contributions were treated as an asset acquisition under U.S. generally accepted accounting principles, with CPI treated as the accounting acquirer and presented as the predecessor for post-acquisition reporting purposes. Since Catalyst is the legal acquirer, the GNI USA Contributions were accounted for as a reverse asset acquisition. This determination was based upon the terms of the Business Combination Agreement and other factors including that, immediately following the GNI USA Contributions: (i) GNI USA (as the parent company of CPI immediately prior to the GNI USA Contributions) owns a substantial majority of the voting power of the combined company; (ii) GNI USA has the ability to control the board of directors of the combined company; and (iii) senior management of

Previous wording

During the three months ended June 30, 2024, we had net income of $4.5 million and net income attributable to common stockholders of $3.5 million. For the six months ended June 30, 2024, we had net income of $14.5 million and a net income attributable to common stockholders of $11.1 million. During the three months ended June 30, 2023, we had net income of $3.8 million and a net income attributable to common stockholders of $1.9 million. During six months ended June 30, 2023, we had net income of $8.0 million and a net income attributable to common stockholders of $4.1 million. As of June 30, 2024, we had an accumulated deficit of $74.5 million and cash and cash equivalents of $16.1 million. As of December 31, 2023, we had an accumulated deficit of $85.5 million and cash and cash equivalents of $33.5 million.

Current wording

During the three months ended September 30, 2024, we had net income of $2.9 million and net income attributable to common stockholders of $1.1 million. For the nine months ended September 30, 2024, we had net income of $17.3 million and a net income attributable to common stockholders of $12.2 million. During the three months ended September 30, 2023, we had net income of $7.5 million and a net income attributable to common stockholders of $4.0 million. During nine months ended September 30, 2023, we had net income of $15.5 million and a net income attributable to common stockholders of $8.1 million. As of September 30, 2024, we had an accumulated deficit of $73.4 million and cash and cash equivalents of $15.9 million. As of December 31, 2023, we had an accumulated deficit of $85.5 million and cash and cash equivalents of $33.5 million.

Previous wording

Revenues for the six months ended June 30, 2024 and 2023 were $52.4 million and $54.3 million, respectively. The $1.9 million decrease was primarily driven by a $0.8 million decrease in sales volume due to normalized anti-fibrosis drug sales. In the first half of 2023, a surge in COVID infection among the overall population in the PRC temporarily increased the anti-fibrosis auxiliary treatment by ETUARY from COVID-19. Further, $1.1 million of revenues were negatively impacted by the foreign currency exchange rate as compared to the same period in the prior year. To support future revenue growth, we acquired the rights to complementary assets and know-how relating to generic nintedanib for the treatment of IPF and plan to commercially launch Avatrombopag, both of which will be supported by our extensive sales and marketing platform across the PRC.

Current wording

Revenues for the three months ended September 30, 2024 and 2023 were $25.5 million and $32.0 million, respectively. The $6.5 million decrease was primarily driven by a $6.4 million decrease in anti-fibrosis drug sales and a $0.1 million decrease in generic drug sales due to fluctuations in the Chinese economy significantly affecting demand for anti-fibrosis drugs and decreasing healthcare spending generally. To support future revenue growth, we plan to commercially launch new products, such as nintedanib and avatrombopag, in early 2025, which will be supported by our extensive sales and marketing platform across the PRC.

Previous wording

Cost of revenues for the three months ended June 30, 2024 and 2023 was $0.8 million and $1.1 million, respectively. The decrease was primarily driven by a $0.1 million in factory stoppage loss due to factory renovation in 2023 and a $0.1 million due to the decrease of sales quantity.

Current wording

Cost of revenues for the three months ended September 30, 2024 and 2023 was $1.0 million and $1.2 million, respectively. The decrease was primarily driven by a $0.1 million factory stoppage loss due to factory renovation in 2023 and a $0.1 million decrease in sales quantity.

Previous wording

Selling and marketing expenses decreased by $3.6 million, or 20%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily driven by a $2.6 million decrease in conference costs due to a decrease in conference activity, a $0.5 million decrease in promotional expenses, a $0.4 million decrease in staff cost as well as a $0.2 million decrease in other expenses, partially offset by a $0.1 million increase in traveling expenses.

Current wording

Selling and marketing expenses decreased by $0.2 million, or 2%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily driven by a $0.9 million decrease in conference costs due to a decrease in conference activity, a $0.9 million decrease in staff cost as well as a $0.1 million decrease in other expenses, partially offset by a $1.5 million increase in promotional expenses and a $0.2 million increase in travel expense.

Previous wording

General and administrative expenses increased by $1.7 million, or 100%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily driven by costs associated with being a public company, including a $0.9 million increase in functional and administrative department's personnel costs, a $0.6 million increase in miscellaneous expenses, and a $0.2 million increase in professional expense.

Current wording

General and administrative expenses increased by $2.7 million, or 230%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily driven by costs associated with being a public company, including a $0.9 million increase in functional and administrative department's personnel and stock compensation costs, a $0.6 million increase in miscellaneous expenses, and a $1.2 million increase in professional expense.

Previous wording

Interest income increased by $0.1 million, or 39%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to additional investments in certificates of deposit.

Current wording

Interest income increased by $0.2 million, or 85%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to additional investments in certificates of deposit.

Previous wording

Other income (expenses), net decreased by $0.7 million, or 1,308%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was primarily due to a $0.9 million decrease in government grants, offset by a $0.2 million increase in miscellaneous non-operating expenses and Gyre Pharmaceuticals’ donation expense.

Current wording

Other expenses, net decreased by $0.7 million, or 55%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decline was primarily due to a $0.7 million decrease from the combination of equity method investments loss and a $0.3 million decrease in donation expense from Gyre Pharmaceuticals. These decreases were partially offset by a $0.3 million increase in our dividend and miscellaneous non-operating loss.

Previous wording

Change in fair value of warrant liability was $2.9 million for the three months ended June 30, 2024. It was related to the remeasurement of the Preferred Stock Warrants liability.

Current wording

Change in fair value of warrant liability was $0.2 million for the three and nine months ended September 30, 2024. It was related to the remeasurement of the Preferred Stock Warrants liability.

Previous wording

Provision for income taxes was $1.5 million and $2.1 million for the three months ended June 30, 2024 and 2023, respectively. The decrease was primarily attributable to a lower profit from Gyre Pharmaceuticals’ operations for the three months ended June 30, 2024.

Current wording

Provision for income taxes was $1.1 million and $3.7 million for the three months ended September 30, 2024 and 2023, respectively. The decrease was primarily attributable to a lower profit from Gyre Pharmaceuticals’ operations for the three months ended September 30, 2024.

Previous wording

Cost of revenues for the six months ended June 30, 2024 and 2023 was $1.7 million and $2.2 million, respectively. The decrease was primarily driven by a $0.3 million factory stoppage loss due to factory renovation in 2023, and a $0.3 million decrease in generic drug cost due to the decrease of sales, offset by a $0.2 million increase due to the increase of the staff cost and new equipment depreciation.

Current wording

Cost of revenues for the nine months ended September 30, 2024 and 2023 was $2.7 million and $3.4 million, respectively. The decrease was primarily driven by a $0.4 million factory stoppage loss due to factory renovation in 2023, and a $0.4 million decrease in generic drug cost due to the decrease of sales, offset by a $0.1 million increase of the staff cost and new equipment depreciation.

Previous wording

Selling and marketing expenses decreased by $3.8 million, or 12%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was primarily driven by a $0.5 million decrease in promotional expenses, and a $4.4 million decrease in conference costs due to a decrease in conference activity, offset by a $1.1 million increase in staff costs due to an increase in staff headcount.

Current wording

Selling and marketing expenses decreased by $4.0 million, or 9.0%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was primarily driven by a $5.3 million decrease in conference costs due to a decrease in conference activity, partially offset by a $1.0 million increase in promotional expenses, a $0.2 million increase in staff costs due to an increase in staff headcount, and a $0.1 million increase in other expenses.

Previous wording

Research and development expenses decreased by $0.2 million, or 6%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The $0.5 million decrease from Gyre Pharmaceuticals was primarily driven by a $0.2 million decrease in staff cost due to the decrease of the headcounts in the department, a $0.1 million decrease in pre-clinical research expense and clinical trial costs, and a $0.2 million decrease in materials and utilities. These decreases were partially offset by a $0.3 million increase in Gyre Therapeutics research costs for F351 stability testing.

Current wording

Research and development expenses decreased by $0.9 million, or 10%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The $1.5 million decrease from Gyre Pharmaceuticals was primarily driven by a $1.0 million decrease in pre-clinical research expenses, a $0.3 million decrease in materials and utilities, and a $0.2 million decrease in staff cost due to the decrease in headcount in the research and development department. These decreases were offset by a $0.6 million increase in our clinical trial costs and research and development consulting costs.

Previous wording

General and administrative expenses increased by $3.4 million, or 98%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was primarily driven by costs associated with being a public company, including a $1.4 million increase in functional and administrative department’s personnel costs from Gyre Pharmaceuticals, and a $2.0 million in general and administrative expenses in Gyre Therapeutics.

Current wording

General and administrative expenses increased by $6.0 million, or 131%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily driven by costs associated with being a public company, including a $2.9 million increase in functional and administrative department’s personnel and stock compensation costs, a $1.8 million increase in miscellaneous expenses, and a $1.3 million increase in professional expense.

Previous wording

Interest income increased by $0.2 million, or 56%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to additional investments in certificates of deposit.

Current wording

Interest income increased by $0.5 million, or 67%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to additional investments in certificates of deposit.

Previous wording

Other income (expenses), net decreased by $1.1 million, or 167%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decline was primarily due to a $0.9 million decrease in government grant, a $0.3 million decrease from the combination of equity method investments loss, foreign exchange losses, and miscellaneous non-operating expenses, offset by a $0.1 million increase in Gyre Pharmaceuticals' donation expense.

Current wording

Other expenses, net decreased by $0.1 million, or 4%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was primarily due to a $0.9 million decrease in government grants, and a $1.1 million decrease from the combination of equity method investments loss, partially offset by a $0.3 million increase in our miscellaneous non-operating loss.

Previous wording

Change in fair value of warrant liability was $7.2 million for the six months ended June 30, 2024. It was related to the remeasurement of the Preferred Stock Warrants liability.

Current wording

Change in fair value of warrant liability was $7.0 million for the nine months ended September 30, 2024, which was related to the remeasurement of the Preferred Stock Warrants liability.

Previous wording

Provision for income taxes was $4.0 million and $4.1 million for the six months ended June 30, 2024 and 2023, respectively. The decrease was primarily due to the projected effective tax rate decreased for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.

Current wording

Provision for income taxes was $5.1 million and $7.8 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease was primarily due to the projected effective tax rate decreased and a lower profit from Gyre Pharmaceuticals’ operations for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $16.1 million, short-term bank deposits of $9.0 million and long-term certificates of deposit of $28.8 million, which are available to fund operations, and an accumulated deficit of $74.5 million. Our net income during the three and six months ended June 30, 2024 was $4.5 million and $14.5 million, while cash used in operating activities was $5.5 million and $2.6 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 12 months following the filing date of this Quarterly Report.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $15.9 million, short-term bank deposits of $9.2 million and long-term certificates of deposit of $29.5 million, which are available to fund operations, and an accumulated deficit of $73.4 million. Our net income during the three and nine months ended September 30, 2024 was $2.9 million and $17.3 million, respectively, while cash provided by and used in operating activities was $1.7 million and $0.9 million, respectively. 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 12 months following the filing date of this Quarterly Report.

Previous wording

We expect to use cash flows from operations to meet our current and future financial obligations, including funding our operations, 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. Factors that may affect financing requirements include, but are not limited to:

Current wording

We expect to use cash flows from operations to meet our current and future financial obligations, including funding our operations, 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 particular, following results from the PRC Phase 3 trial in CHB-associated liver fibrosis and pending approval of an IND submission, we expect to initiate a Phase 2 trial to evaluate F351 for the treatment of MASH-associated liver fibrosis in 2025. We cannot guarantee that a Phase 2 trial will be initiated or estimate the funding needed for such trial at this time, but may need to raise additional capital to fund this program. Factors that may affect financing requirements include, but are not limited to:

Previous wording

Cash used in operating activities for the six months ended June 30, 2024 was $2.6 million, reflecting our net income of $14.5 million, offset by non-cash items of $6.9 million primarily related to the change in fair value of warrant liability of $7.2 million. Additionally, cash used in operating activities reflected changes in net operating assets and liabilities of $10.1 million.

Current wording

Cash used in operating activities for the nine months ended September 30, 2024 was $0.9 million, reflecting our net income of $17.3 million, offset by non-cash items of $6.1 million primarily related to the change in fair value of warrant liability of $7.0 million. Additionally, cash used in operating activities reflected changes in net operating assets and liabilities of $12.1 million.

Previous wording

Cash provided by operating activities for the six months ended June 30, 2023 was $15.0 million, reflecting our net income of $8.0 million and additional positive non-cash items impact of $0.4 million. Additionally, cash provided by operating activities reflected changes in net operating assets and liabilities of $6.6 million.

Current wording

Cash provided by operating activities for the nine months ended September 30, 2023 was $22.5 million, reflecting our net income of $15.5 million and additional positive non-cash items impact of $1.0 million. Additionally, cash provided by operating activities reflected changes in net operating assets and liabilities of $6.0 million.

Previous wording

Cash used in investing activities for the six months ended June 30, 2024 was $15.5 million, which consisted of $14.1 million in purchases of certificates of deposit and $1.7 million in purchases of property and equipment, partially offset by $0.3 million proceeds from sale of equipment.

Current wording

Cash used in investing activities for the nine months ended September 30, 2024 was $17.9 million, which consisted of $14.1 million in purchases of certificates of deposit, $2.4 million in purchases of property and equipment, and $1.7 million in equity method investment, partially offset by $0.3 million proceeds from sale of equipment.

Previous wording

Cash used in investing activities for the six months ended June 30, 2023 was $15.7 million, which consisted of $11.5 million in purchases of certificates of deposit and $4.2 million in purchases of property and equipment.

Current wording

Cash used in investing activities for the nine months ended September 30, 2023 was $21.1 million, which consisted of $14.3 million in purchases of certificates of deposit, $6.2 million in purchases of property and equipment and $1.0 million in equity method investment, partially offset by $0.5 million in proceeds from sale of equipment.

Previous wording

Cash provided by financing activities for the six months ended June 30, 2024 was $0.8 million due to deferred financing costs, as well as proceeds from the exercise of stock options. The Company did not have cash provided by financing activities for the six months ended June 30, 2023.

Current wording

Cash provided by financing activities for the nine months ended September 30, 2024 was $1.1 million due to deferred financing costs, as well as proceeds from the exercise of stock options. The Company did not have cash provided by financing activities for the nine months ended September 30, 2023.

Previous wording

We have entered into lease arrangements in (1) San Diego, California for our headquarters, which expires on the last day of the 38th full calendar month beginning on or after November 11, 2023, and (2) the PRC, for office and laboratory spaces through May 2027. As of June 30, 2024, our fixed lease payment obligations were $2.1 million, with $0.7 million payable within 12 months.

Current wording

We have entered into lease arrangements in (1) San Diego, California for our headquarters, which expires on the last day of the 38th full calendar month beginning on or after November 11, 2023, and (2) the PRC, for office and laboratory spaces through May 2027. As of September 30, 2024, our fixed lease payment obligations were $1.9 million, with $0.7 million payable within 12 months.

Previous wording

In June 2021, we entered into a transfer agreement with Nanjing Healthnice, an independent third party, pursuant to which Nanjing Healthnice agreed to transfer to us the avatrombopag maleate tablets for the treatment of CLD-associated thrombocytopenia and all relevant technologies, complete any research or trials and transfer to us all materials necessary for the application of marketing approval by CDE. We were approved by the NMPA as the marketing authorization holder of the avatrombopag maleate tablets on June 25, 2024. In exchange, we paid a total of approximately $2.3 million upon certain milestones (e.g., the completion of bioequivalence study, or the registration application to CDE) being met. We have completed the bioequivalence study and received CDE acceptance on August 1, 2022, and as of June 30, 2024, we have made total payments of approximately $1.8 million.

Current wording

In June 2021, we entered into a transfer agreement with Nanjing Healthnice, an independent third party, pursuant to which Nanjing Healthnice agreed to transfer to us the avatrombopag maleate tablets for the treatment of CLD-associated thrombocytopenia and all relevant technologies, complete any research or trials and transfer to us all materials necessary for the application of marketing approval by the NMPA. We were approved by the NMPA as the marketing authorization holder of the avatrombopag maleate tablets on June 25, 2024. In exchange, we paid a total of approximately $2.3 million upon certain milestones (e.g., the completion of bioequivalence study, or the registration application to the NMPA) being met. We have completed the bioequivalence study and received NMPA acceptance on August 1, 2022, and as of September 30, 2024, we have made total payments of approximately $2.3 million.

Previous wording

In September 2022, we entered into a transfer agreement with New Jiyuan (Beijing) Pharmaceutical Technology Co., Ltd. (“New Jiyuan”), an independent third party, pursuant to which New Jiyuan agreed to transfer to us the minocycline hydrochloride foam for the treatment of moderate to severe acne and all relevant technologies, complete product development and transfer to us all materials necessary for the application of marketing approval of CDE. Upon the completion of the transfer, we expect that we will be approved by NMPA as the marketing authorization holder of the minocycline hydrochloride foam. In exchange, we will pay a total amount of $1.0 million and the payments will be made by installments conditioned upon certain milestones (e.g., the completion of bioequivalence study, or the registration application to CDE) being met. Process verification has been completed. As of June 30, 2024, we have made total payments of approximately $0.7 million.

Current wording

In September 2022, we entered into a transfer agreement with New Jiyuan (Beijing) Pharmaceutical Technology Co., Ltd. (“New Jiyuan”), an independent third party, pursuant to which New Jiyuan agreed to transfer to us the minocycline hydrochloride foam for the treatment of moderate to severe acne and all relevant technologies, complete product development and transfer to us all materials necessary for the application of marketing approval of the NMPA. Upon the completion of the transfer, we expect that we will be approved by the NMPA as the marketing authorization holder of the minocycline hydrochloride foam. In exchange, we will pay a total amount of $1.0 million and the payments will be made by installments conditioned upon certain milestones (e.g., the completion of bioequivalence study, or the registration application to the NMPA) being met. Process verification has been completed. As of September 30, 2024, we have made total payments of approximately $0.7 million.

Previous wording

As of June 30, 2024, we have committed to allocate $31.7 million toward future research and development activities for various programs.

Current wording

As of September 30, 2024, we have committed to allocate $34.3 million toward future research and development activities for various programs.

Previous wording

Based on the aggregate market value of our common stock held by non-affiliates as of June 30, 2024, we believe we will become a “large accelerated filer” and no longer qualify as a smaller reporting company as of December 31, 2024. Because we believe our non-accelerated filer status will expire on December 31, 2024, we may be required, pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, to include in our Annual Report on Form 10-K for the year ending December 31, 2024 an attestation report as to the effectiveness of our internal control over financial reporting that is issued by our independent registered public accounting firm. In addition, beginning with our Quarterly Report on Form 10-Q for the quarter ending March 31, 2024, we expect to no longer be permitted to take advantage of the reduced reporting requirements applicable to smaller reporting companies.

Current wording

Based on the aggregate market value of our common stock held by non-affiliates as of June 30, 2024, we believe we will remain a smaller reporting company, but will become an “accelerated filer” as of December 31, 2024. Because we believe our non-accelerated filer status will expire on December 31, 2024, we will be required, pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, to include in our Annual Report on Form 10-K for the year ending December 31, 2024 an attestation report as to the effectiveness of our internal control over financial reporting that is issued by our independent registered public accounting firm. However, we expect to continue to take advantage of the reduced reporting requirements applicable to smaller reporting companies.