GYRE THERAPEUTICS, INC.

Previous wording

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. 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, 2024 (the “Annual Report”).

Current wording

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”) 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, 2024 (the “Annual Report”).

Previous wording

Our strategy is to build on our success in the development and commercialization of ETUARY® (pirfenidone) to expand into new indications and advance our pipeline of innovative drug candidates. Pirfenidone, the first anti-fibrotic drug approved for idiopathic pulmonary fibrosis (“IPF”) in Japan, the EU, the United States, and the PRC, is a small molecule drug that inhibits the synthesis of TGF-ß1, Tumor Necrosis Factor-α, and other fibrosis and inflammation modulators. We have obtained approval for ETUARY (pirfenidone) in the PRC for IPF.

Current wording

Our strategy is to build on our success in the development and commercialization of ETUARY® (pirfenidone) to expand into new indications and advance our pipeline of innovative drug candidates. Pirfenidone, the first anti-fibrotic drug approved for idiopathic pulmonary fibrosis (“IPF”) in Japan, the European Union, the United States, and the People’s Republic of China (the “PRC”), is a small molecule drug that inhibits the synthesis of TGF-ß1, Tumor Necrosis Factor-α, and other fibrosis and inflammation modulators. We have obtained approval for ETUARY® in the PRC for IPF.

Previous wording

Gyre Pharmaceuticals successfully advanced pirfenidone from research and development to commercialization in the PRC for the treatment of IPF. 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 with more choices and benefits, and further enhance Gyre Pharmaceuticals’ leading position in the pulmonary fibrosis market. In addition, Nintedanib has been approved for the treatment of patients with SSc-ILD and PF-ILD. Gyre Pharmaceutical is planning to initiate commercialization of the Nintedanib product in the PRC in the second quarter of 2025, which is to help offset declines in ETUARY sales as a result of increased competition in the IPF treatment market and the fluctuations in the Chinese economy that have weakened overall healthcare spending. We believe that this launch can drive meaningful revenue growth, expand our market penetration, and enhance brand recognition within the respiratory disease space. Additionally, the commercialization of Nintedanib aligns with our broader strategy of building a comprehensive pulmonary care portfolio, potentially creating opportunities for synergies with our existing and future product offerings. We expect to continue to invest in commercialization efforts, including market access, physician education, and patient support programs, to optimize uptake and maximize the long-term value of this product.

Current wording

Gyre Pharmaceuticals successfully advanced pirfenidone from research and development to commercialization in the PRC for the treatment of IPF. In May 2024, Gyre Pharmaceuticals executed a comprehensive agreement with Jiangsu Wangao Pharmaceuticals Co., Ltd. to acquire the commercial rights to Etorel (nintedanib, ethanesulfonate soft capsules). Etorel has been approved for the treatment of patients with SSc-ILD and PF-ILD. Etorel is expected to provide patients with more choices and benefits. Gyre Pharmaceuticals successfully initiated a commercial launch of Etorel in the PRC in the second quarter of 2025, which has and we expect will continue to help offset declines in ETUARY® sales as a result of increased competition in the IPF treatment market and the fluctuations in the Chinese economy that have weakened overall healthcare spending. We believe that this launch can drive meaningful revenue growth, expand our market penetration, and enhance brand recognition within the respiratory disease space. Additionally, the commercialization of Etorel aligns with our broader strategy of building a comprehensive pulmonary care portfolio, potentially creating opportunities for synergies with our existing and future product offerings. We expect to continue to invest in commercialization efforts, including market access, physician education, and patient support programs, to optimize uptake and maximize the long-term value of this product.

Previous wording

In addition to IPF, pirfenidone is undergoing one additional Phase 3 trial in the PRC for the treatment of pneumoconiosis to broaden its indications and market. In March 2025, we received approval from the NMPA for a clinical trial application for a new indication of pirfenidone. The approved indication is for the treatment of radiation-induced lung injury with or without immune-related pneumonitis. We are currently preparing to initiate the anticipated clinical trial.

Current wording

In addition to IPF, pirfenidone is undergoing one additional Phase 3 trial in the PRC for the treatment of pneumoconiosis to broaden its indications and market. In March 2025, we received approval from the PRC’s National Medical Products Administration (the “NMPA”) for a clinical trial application for the treatment of radiation-induced lung injury with or without immune-related pneumonitis. We are currently preparing to initiate the anticipated clinical trial in the second half of 2025.

Previous wording

In June 2024, Gyre Pharmaceuticals received approval from the NMPA for avatrombopag maleate tablets for the treatment of TP with CLD and ITP disease indications. 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, in March 2025, initiated commercialization of the avatrombopag product in the PRC.

Current wording

In March 2025, Gyre Pharmaceuticals initiated commercialization of Contiva in the PRC for thrombocytopenia (“TCP”) in adults with chronic liver disease (“CLD”) and immune thrombocytopenic purpura (“ITP”). Gyre Pharmaceuticals received approval from the NMPA for Contiva maleate tablets for the treatment of CLD-associated TCP and ITP. TCP is the most common hematologic complication in patients with CLD and can be life threatening in severe cases. Contiva is an oral thrombopoietin receptor agonist. Contiva was approved by the U.S. Food and Drug Administration for the treatment of adults with CLD-associated TCP in May 2018, and its indication was subsequently expanded to include the treatment of ITP in June 2019. Gyre Pharmaceuticals acquired Contiva under a transfer agreement with Nanjing Healthnice Pharmaceutical Technology, Co., Ltd. (“Nanjing Healthnice”) in June 2021.

Previous wording

F351, our lead development candidate in both the United States and the PRC, is a structural derivative of ETUARY (pirfenidone). It is a new oral chemical entity with an anti-fibrotic, TGF-ß1-targeting mechanism of action. Studies suggest that F351 and its major metabolites have minimal drug-drug interaction risks. We are prioritizing F351 for the treatment of liver fibrosis due to the large potential addressable market and significant unmet need.

Current wording

Hydronidone, our lead development candidate in both the United States and the PRC, is a structural derivative of ETUARY®. It is a new oral chemical entity with an anti-fibrotic, TGF-ß1-targeting mechanism of action. Studies suggest that Hydronidone and its major metabolites have minimal drug-drug interaction risks. We are prioritizing Hydronidone for the treatment of liver fibrosis due to the large potential addressable market and significant unmet need.

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 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.

Current wording

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. Completion of the Phase 2 clinical trial is expected in 2026. In June 2025, we successfully dosed the first volunteer in a Phase 1 in the PRC trial evaluating F230, a selective endothelin receptor agonist, for the treatment of pulmonary arterial hypertension. 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

The GNI USA Contributions were treated as an asset acquisition under U.S. generally accepted accounting principles (“U.S. GAAP”), 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 (“GAAP”), 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.

Previous wording

Concurrent with the signing of the Business Combination Agreement on December 26, 2022, Catalyst and the Rights Agent (as defined in the CVR Agreement) executed a contingent value rights agreement (the “CVR Agreement”), as amended on March 29, 2023, pursuant to which each CVR Holder, excluding GNI Japan and GNI Hong Kong, received one contractual contingent value right (a “CVR”) issued by the Company for each share of Catalyst common stock held by such holders. Each CVR entitles the CVR Holder thereof to receive certain cash payments in the future.

Current wording

Concurrent with the signing of the Business Combination Agreement on December 26, 2022, Catalyst and the Rights Agent (as defined in the CVR Agreement) executed a contingent value rights agreement (the “CVR Agreement”), as amended on March 29, 2023, pursuant to which each CVR Holder, excluding GNI Japan and GNI Hong Kong, received one contractual contingent value right (a “CVR”) issued by the Company for each share of Catalyst common stock held by such holders. Each CVR entitles the CVR Holder thereof to receive certain cash payments in the future. For additional information, see Note 12 —Commitments and Contingencies to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

Previous wording

The Preferred Stock Warrants are exercisable at an exercise price of $4,915.00 per share of Convertible Preferred Stock and expire on October 30, 2033. In January 2024, all shares of Convertible Preferred Stock were converted into Gyre common stock. The Preferred Stock Warrants issued are considered freestanding financial instruments and classified as a liability.

Current wording

The Preferred Stock Warrants are exercisable at an exercise price of $4,915.00 per share of Convertible Preferred Stock and expire on October 30, 2033. In January 2024, all shares of Convertible Preferred Stock were converted into common stock. The Preferred Stock Warrants issued are considered freestanding financial instruments and classified as a liability.

Previous wording

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 Nintedanib, a small-molecule drug for the treatment of idiopathic pulmonary fibrosis, within the PRC. The total minimum payments under the Jiangsu Wangao Agreement are RMB 35.0 million, or approximately $4.9 million, based on the March 31, 2025 spot exchange rate. This includes an upfront transfer fee of RMB 15.0 million, or approximately $2.1 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 March 31, 2025, we had paid two installments totaling RMB 10.0 million, or approximately $1.4 million, based on the March 31, 2025 spot exchange rate.

Current wording

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 Etorel (nintedanib, ethanesulfonate soft capsules), a small-molecule drug for the treatment of SSc-ILD and PF-ILD, within the PRC. The total minimum payments under the Jiangsu Wangao Agreement are RMB 35.0 million, or approximately $4.9 million, based on the June 30, 2025 spot exchange rate. This includes an upfront transfer fee of RMB 15.0 million, or approximately $2.1 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 June 30, 2025, we had paid three installments totaling RMB 15.0 million, or approximately $2.1 million, based on the June 30, 2025 spot exchange rate.

Previous wording

During the three months ended March 31, 2025, we had net income of $3.7 million and net income attributable to common stockholders of $2.7 million. During the three months ended March 31, 2024, we had net income of $9.9 million and a net income attributable to common stockholders of $7.5 million. As of March 31, 2025, we had an accumulated deficit of $70.8 million and cash and cash equivalents of $15.0 million. As of December 31, 2024, we had an accumulated deficit of $73.5 million and cash and cash equivalents of $11.8 million.

Current wording

During the three months ended June 30, 2025, we had net income of $1.6 million and net income attributable to common stockholders of $0.4 million. For the six months ended June 30, 2025, we had net income of $5.3 million and net income attributable to common stockholders of $3.1 million. 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 net income attributable to common stockholders of $11.1 million. As of June 30, 2025, we had an accumulated deficit of $70.3 million and cash and cash equivalents of $36.5 million. As of December 31, 2024, we had an accumulated deficit of $73.5 million and cash and cash equivalents of $11.8 million.

Previous wording

We generate revenue primarily through sales of ETUARY and certain generic drugs in the PRC. Distributors are our direct customers, and sales to distributors accounted for 100% of the revenue from ETUARY. Such distributors sell ETUARY to certain outlets, including hospitals and other medical institutions, as well as pharmacies.

Current wording

We generate revenue primarily through sales of ETUARY®, Contiva, Etorel 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 pharmaceutical products to certain outlets, including hospitals and other medical institutions, as well as pharmacies.

Previous wording

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. We do not track research and development expenses by product candidate or development phase.

Current wording

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.

Previous wording

We continue to anticipate revenue growth over the remainder of the year, driven by the planned commercial launch of Nintedanib in May 2025 and the continued expansion of avatrombopag.

Current wording

We continue to anticipate revenue growth over the remainder of the year, driven by the commercial launch of Etorel in June 2025 and the continued expansion of Contiva.

Previous wording

Research and development expenses increased by $0.9 million, or 42%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase was primarily attributable to Gyre Pharmaceuticals and was driven by a $1.3 million increase in clinical research expenses, primarily related to data analysis costs for F351. This increase was partially offset by a $0.2 million decrease in materials and utilities and a $0.1 million reduction in staff costs, primarily due to a reduction of headcounts. The overall increase was further offset by a $0.1 million decrease from Gyre Therapeutics, due to the reduction in contract services.

Current wording

Research and development expenses increased by $0.1 million, or 2%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase was primarily attributable a $0.1 million increase in clinical trial costs, primarily related to data analysis costs for Hydronidone, and a $0.1 million increase in staff costs. These increases were partially offset by a $0.1 million decrease in materials and utilities expenses.

Previous wording

Change in fair value of warrant liability decreased $2.0 million, or 47%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease was related to the remeasurement of the Preferred Stock Warrants liability.

Current wording

Change in fair value of warrant liability decreased $2.7 million, or 93%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The decrease was related to the remeasurement of the Preferred Stock Warrants liability.

Previous wording

Other income, net decreased by $15,000, or 12%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decline was primarily due to a decrease in donation expense from Gyre Pharmaceuticals and a decrease in interest income, reflecting a lower interest rate and reduced average cash balance.

Current wording

Other expense, net increased by $0.1 million, or 101%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase was primarily due to an increase in donation expense from Gyre Pharmaceuticals, offset by an increase in interest income.

Previous wording

Provision for income taxes was $0.9 million and $2.5 million for the three months ended March 31, 2025 and 2024, respectively. The decrease was primarily attributable to a lower profit from Gyre Pharmaceuticals’ operations for the three months ended March 31, 2025.

Current wording

Provision for income taxes was $0.7 million and $1.5 million for the three months ended June 30, 2025 and 2024, respectively. The decrease was primarily attributable to a lower profit from Gyre Pharmaceuticals’ operations for the three months ended June 30, 2025.

Previous wording

Revenues for the three months ended March 31, 2025 and 2024 were $22.1 million and $27.2 million, respectively. The $5.1 million, or 19%, decrease was primarily due to a $5.2 million decline in ETUARY® sales. This was anticipated, as early 2024 revenues were elevated by a one-time marketing campaign focused on rural expansion, which we did not repeat in 2025. The shift in marketing resources was deliberate, with funds reallocated to support the upcoming launches of Nintedanib and avatrombopag. Additionally, weaker economic conditions in China and increased competition in the IPF treatment market also contributed to the decline. Revenues from generic products decreased by $0.2 million, partially offset by $0.3 million in initial revenue from the March 2025 launch of avatrombopag.

Current wording

Revenues for the six months ended June 30, 2025 and 2024 were $48.8 million and $52.4 million, respectively. The $3.6 million, or 7%, decrease was primarily due to a $6.8 million decline in ETUARY® sales, partially offset by the increase in new product sales of Contiva by $1.8 million and Etorel by $1.6 million. The decrease in ETUARY® sales was mainly due to lower sales volume compared to the first half of 2024, when revenues were elevated by a one-time rural marketing campaign that was not repeated in 2025. Additionally, weaker economic conditions in China and increased competition in the IPF treatment market also contributed to the decline. During the first half of 2025, marketing efforts were intentionally shifted to support the launches of Etorel and Contiva.

Previous wording

Selling and marketing expenses decreased by $1.7 million, or 14%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease was primarily driven by a reduction in commission costs due to the decrease of sales.

Current wording

Selling and marketing expenses decreased by $0.9 million, or 3%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The decrease was primarily driven by a reduction in commission costs due to the decrease in sales.

Previous wording

General and administrative expenses increased by $1.6 million, or 46%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase was primarily driven by a $0.6 million increase in functional and administrative department's personnel and stock compensation costs, a $0.8 million increase in miscellaneous expense, mainly due to the increase in the annual meeting expense.

Current wording

General and administrative expenses increased by $3.0 million, or 43%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was primarily driven by a $0.6 million increase in professional fees, a $1.6 million increase in functional and administrative department's personnel and stock compensation costs, and a $0.8 million increase in miscellaneous expense, mainly due to the increase for the annual meeting expense.

Previous wording

As of March 31, 2025, we had cash and cash equivalents of $15.0 million, short-term bank deposits of $14.8 million and long-term certificates of deposit of $21.4 million, which are available to fund operations, and an accumulated deficit of $70.8 million. Our net income during the three months ended March 31, 2025 was $3.7 million, while cash provided by and used in operating activities was $0.1 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.

Current wording

As of June 30, 2025, we had cash and cash equivalents of $36.5 million, short-term bank deposits of $17.9 million and long-term certificates of deposit of $21.5 million, which are available to fund operations, and an accumulated deficit of $70.3 million. Our net income during the three and six months ended June 30, 2025 was $1.6 million and $5.3 million, respectively, while cash provided by operating activities was $2.1 million and $2.0 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 the next 12 months following the filing date of this Quarterly Report and thereafter for the foreseeable future.

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. 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.

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 Hydronidone 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.

Previous wording

Cash used in operating activities for the three months ended March 31, 2025 was $0.1 million, reflecting our net income of $3.7 million, offset by non-cash items of $0.5 million primarily driven by a $2.3 million change in the fair value of warrant liability, $0.5 million in stock-based compensation, $0.5 million in depreciation and amortization, $0.5 million in accrued interest, and $0.2 million in non-cash lease expense. Additionally, cash used in operating activities reflected changes in net operating assets and liabilities of $3.3 million.

Current wording

Cash provided by operating activities for the six months ended June 30, 2025 was $2.0 million, reflecting our net income of $5.3 million and non-cash items of $0.3 million, which primarily includes $1.4 million in stock-based compensation and $1.2 million in depreciation and amortization, offset by $2.5 million related to the change in the fair value of warrant liability. Additionally, cash used in operating activities reflected changes in net operating assets and liabilities of $3.6 million.

Previous wording

Cash provided by operating activities for the three months ended March 31, 2024 was $2.9 million, reflecting our net income of $9.9 million, offset by non-cash items impact of $4.3 million. Additionally, cash provided by operating activities reflected changes in net operating assets and liabilities of $2.8 million.

Current 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.

Previous wording

Cash provided by investing activities for the three months ended March 31, 2025 was $2.0 million, which consisted of $11.2 million of cash acquired in connection with the maturity of certificates of deposit, partially offset by $8.4 million in purchases of certificates of deposit, $0.1 million in purchases of property and equipment, and $0.7 million in acquisition of intangible assets.

Current wording

Cash used in investing activities for the six months ended June 30, 2025 was $1.1 million, which consisted of $11.2 million in purchases of certificates of deposit, $0.4 million in purchases of property and equipment, and $0.7 million in acquisition of intangible assets, partially offset by $11.2 million of proceeds from the maturity of certificates of deposit.

Previous wording

Cash used in investing activities for the three months ended March 31, 2024 was $7.2 million, which consisted of $7.0 million in purchases of certificates of deposit, $0.2 million in purchases of property and equipment, partially offset by $0.1 million in proceeds from sale of equipment.

Current 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 in proceeds from sale of equipment.

Previous wording

Cash provided by financing activities for the three months ended March 31, 2025 was $1.3 million due to $0.9 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 $0.1 million of cash used in connection with deferred offering costs. Cash provided by financing activities for the three months ended March 31, 2024 was $0.7 million due to proceeds from the exercise of stock options.

Current wording

Cash provided by financing activities for the six months ended June 30, 2025 was $23.7 million due to $23.0 million in proceeds from the issuance of common stock pursuant to our public offering of 2,555,555 shares 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 at-the-market offering program with Jefferies LLC, partially offset by $1.8 million of cash used in connection with deferred offering costs.

Previous wording

Under PRC laws and regulations, Gyre Pharmaceuticals is 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 $64.3 million as of March 31, 2025 and December 31, 2024. We do not expect the restrictions described above to have a material impact on our ability to meet our cash obligations.

Current wording

Under PRC laws and regulations, Gyre Pharmaceuticals is 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 $64.7 million and $64.3 million as of June 30, 2025 and December 31, 2024, respectively. We do not expect the restrictions described above to have a material impact on our ability to meet our cash obligations.

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 March 31, 2025, our fixed lease payment obligations were $1.8 million, with $0.8 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 June 30, 2025, our fixed lease payment obligations were $1.5 million, with $0.5 million payable within the remaining six months of 2025.

Previous wording

As of March 31, 2025, we have committed to allocate $32.7 million toward future research and development activities for various programs.

Current wording

As of June 30, 2025, we have committed to allocate $34.7 million toward future research and development activities for various programs.

Previous wording

Our commitments related to the purchase of property and equipment contracted but not yet reflected in the unaudited condensed consolidated financial statements were $4.8 million as of March 31, 2025 and are expected to be incurred within one year.

Current wording

Our commitments related to the purchase of property and equipment contracted but not yet reflected in the unaudited condensed consolidated financial statements were $4.0 million as of June 30, 2025 and are expected to be incurred within one year.

Previous wording

The Company is committed to annual payments to the Nintedanib IP Rights transferor over eight years following the commencement of commercial sales. See Note 12 —Commitments and Contingencies. As of March 31, 2025, the commercial sales of Nintedanib have not yet commenced.

Current wording

We are committed to annual payments to the Etorel IP Rights transferor over eight years following the commencement of commercial sales. See Note 12 —Commitments and Contingencies. As of June 30, 2025, the commercial sales of Etorel have commenced.

Previous wording

Based on the aggregate market value of our common stock held by non-affiliates as of June 30, 2024, we remain a smaller reporting company, but became an “accelerated filer” as of December 31, 2024. 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 on Form 10-K for the year ended December 31, 2024 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 Form 10-K. However, we expect to continue 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 remain a smaller reporting company, but became an “accelerated filer” as of December 31, 2024. 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.