GYRE THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Description of Business

Gyre Therapeutics, Inc. (the “Company” or “Gyre”), formerly known as Catalyst Biosciences, Inc. (“Catalyst”), is a commercial-stage biopharmaceutical company originally incorporated in Delaware on March 7, 1997 under the name Targacept, Inc.

As of March 31, 2026, the Company holds a 69.7% indirect interest in Beijing Continent Pharmaceuticals Co., Ltd. (d/b/a Gyre Pharmaceuticals Co., Ltd., “Gyre Pharmaceuticals”), a commercial-stage biopharmaceutical company registered and established in the People’s Republic of China (“PRC”) in 2002. The majority shareholder of Gyre is GNI USA, Inc. (“GNI USA”), which is indirectly wholly owned by GNI Group Ltd. (“GNI Japan”). Gyre is a financially sustainable commercial-stage biotechnology company with a proven track 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.

On November 7, 2025, the National Healthcare Security Administration in the PRC released the Announcement of the Winning Bids for the National Centralized Drug Procurement, under which Etorel TM was selected. As a result, Gyre Pharmaceuticals signed direct procurement contracts with various participating hospitals and distributors together under the National Centralized Drug Procurement Program, and implementation commenced in March 2026.

On May 4, 2026 (the "Merger Closing Date"), the Company acquired Cullgen Inc., a Delaware corporation (“Cullgen”), in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated March 2, 2026 (the “Merger Agreement”), by and among the Company, Helix Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), and Cullgen. Pursuant to the Merger Agreement, among other matters, Merger Sub merged with and into Cullgen, with Cullgen continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger (the “Merger”). The related transaction costs were expensed as incurred. See Note 16 — Subsequent Events.

Liquidity

For the three months ended March 31, 2026, the Company had a net loss of$9.9 million, while net cash provided by operating activities was$3.2 million. As of March 31, 2026, the Company had an accumulated deficit of$77.7 million and cash and cash equivalents of$37.5 million. Based on the Company’s current operating plan, management believes that existing cash and cash equivalents, cash flows from operations, and access to capital markets will be sufficient to fund the Company’s operating activities and obligations for at least 12 months following the issuance of these condensed consolidated financial statements.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and its controlled subsidiaries. All intercompany accounts and transactions among consolidated entities were eliminated upon consolidation. The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and following the requirements of the Securities and Exchange Commission (the “SEC”) for interim reporting. The December 31, 2025 consolidated balance sheet was derived from the audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the Company’s condensed consolidated financial information. These condensed consolidated results of operations and cash flows for any interim period are not necessarily indicative of the results to be expected for the year ending December 31, 2026, or for any other future annual or interim period.

The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the consolidated financial statements filed with the Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 13, 2026 (the “Annual Report”).

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, allowance of doubtful accounts, long-term receivable, warrant liability, allowance for credit losses, reserves for excess or obsolete inventory, operating lease right-of-use assets and liabilities, recognition of research and development expenses to the appropriate financial reporting period based on the progress of the research and development projects, income taxes, stock-based compensation and useful lives of property and equipment and intangibles with definite lives. The Company bases its estimates on various assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Noncontrolling Interest

The Company reports noncontrolling interest (“NCI”) in a subsidiary as a separate component of equity in the condensed consolidated balance sheets. Additionally, the Company reports the portion of net income and comprehensive income attributed to the Company and NCI separately in the condensed consolidated statements of operations and comprehensive income.

Segments

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The measure of segment profit or loss is reported on the income statement as consolidated net income. The CODM uses net income to evaluate income generated from segment assets in deciding whether to reinvest profits and monitor budget versus actual results in assessing the performance of the segment.

The Company’s CODM, as a group, includes (i) the Executive Chairman of Gyre’s Board of Directors (“Gyre’s Board”) who also serves as Gyre’s Interim Chief Executive Officer and (ii) Gyre's Chief Operating Officer who also serves as Gyre Pharmaceuticals’ General Manager. The Company has determined that it operates intwo distinct operating segments and hastwo reportable segments. On the Merger Closing Date, Ying Luo was appointed as Gyre's Chief Executive Officer.

Risks and Uncertainties

The Company is subject to a number of risks associated with companies at a similar stage, including dependence on key individuals, competition from larger and established companies, uncertainty of clinical results, ability to obtain adequate financing to support growth, the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company, and general economic conditions.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, accounts receivable, note receivable, long-term certificates of deposits and short-term bank deposits.

The Company is exposed to United States credit risk in the event of default by the United States institutions holding cash to the extent beyond the amount insured by the United States federal depository insurance corporation. In the United States, the Federal Deposit Insurance Corporation (“FDIC”) insures deposits at federally insured financial institutions up to a limit of $250,000 per depositor, per insured bank, for each account ownership category. The Securities Investor Protection Corporation (“SIPC”) protects customer assets held by registered broker‑dealers, with a standard limit of $500,000 per customer. The Company maintains cash and deposits in excess of the amount protected by FDIC and SIPC insurance. In the event of failure or insolvency of one of these financial institutions, the Company may be unable to recover its deposits in full. Management believes that these financial institutions are of high credit quality and continually monitors the creditworthiness of these financial institutions. As of March 31, 2026 and December 31, 2025, the Company had cash and cash equivalents held in U.S. financial institutions of $23.0 million and $25.9 million, respectively. Of the 2026 balance, $2.5 million represented general bank deposits and $20.5 million represented investment related cash. At March 31, 2026, the Company’s U.S. cash balances exceeded FDIC insurance coverageby$2.3 million and exceeded SIPC coverage by$20.0 million.

In May 2015, a new Deposit Insurance System (“DIS”) managed by the People’s Bank of China was implemented by the Chinese government. Deposits in the licensed banks in mainland China are protected by DIS, up to a limit of Chinese Renminbi (“RMB”)500,000, or approximately$72,261, based on the March 31, 2026 spot exchange rate. The Company maintains cash and deposits in excess of the amount protected by DIS and in the event of bankruptcy of one of these financial institutions, the Company may be unable to claim its deposits back in full. Management believes that these financial institutions are of high credit quality and continually monitors the creditworthiness of these financial institutions. As of March 31, 2026 and December 31, 2025, the Company had cash and cash equivalents of$37.5 million and$37.1 million, and long-term certificates of deposit of$29.4 million and$23.5 million, respectively. In addition, the Company had short-term bank deposits of$12.3 million and$15.4 million as of March 31, 2026 and December 31, 2025, respectively. At March 31, 2026 and December 31, 2025, cash and cash equivalents, short-term bank deposits and long-term certificates of deposit exceeded the PRC DIS coverage by$55.6 million and$49.4 million, respectively.

Accounts receivable are typically unsecured and are derived from product sales. The Company manages credit risk related to the accounts receivable through ongoing monitoring of outstanding balances and limiting the amount of credit extended based upon payment history and creditworthiness. Historically, the Company has collected receivables from customers within the credit terms with no significant credit losses incurred. Note receivable is also subject to credit risk. The Company monitors the creditworthiness and repayment performance of the borrower on an ongoing basis and has not experienced significant credit losses related to such receivable.

Concentration of Customer Risk

For the three months ended March 31, 2026, the Company had three customers, Sinopharm Group Co., Ltd. (“Sinopharm”), China Resources Pharmaceutical Group Ltd. (“Resources Pharmaceutical”), and Shanghai Pharmaceuticals Holding Co., Ltd. (“Shanghai Pharmaceuticals”), who accounted for approximately 42.8%,14.4% and 13.2% of total revenue, respectively. For the three months ended March 31, 2025, the Company had three customers, Sinopharm, Resources Pharmaceutical, and Shanghai Pharmaceuticals, who accounted for approximately 50.3%,15.5% and 12.4% of total revenue, respectively. All customers are located in mainland China.

As of March 31, 2026 and December 31, 2025, the Company had one customer, Sinopharm, who accounted for approximately 47.2% and 53.3% of accounts receivable, respectively.

Foreign Currency Risk

The RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into other currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.38.4% of the Company’s cash and cash equivalents,100.0% of the Company’s short-term bank deposits and 100% of the Company's long-term certificates of deposit as of March 31, 2026 in the amount of$14.4 million,$12.3 million and$29.4 million, respectively, were denominated in RMB.

Accounting Pronouncements – Recently Adopted

In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides a practical expedient for measuring expected credit losses for current accounts receivable and current contract assets that arise from revenue transactions within the scope of ASC 606, permitting an entity to assume that economic conditions as of the balance sheet date will remain unchanged over the remaining life of the financial assets when developing reasonable and supportable forecasts. ASU 2025-05 is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2025, with early adoption permitted. The amendments in this update should be applied on a prospective basis. The Company adopted the provisions of the amendments as of January 1, 2026. The adoption of this amendment didnot have a material impact on the Company’s consolidated financial statements.

New Accounting Pronouncements – Issued But Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 modifies the disclosure or presentation requirements of a variety of Topics in the Financial Accounting Standards Codification (the “Codification”). Certain of the amendments represent clarifications to or technical corrections of the current requirements. Because of the variety of Topics amended, a broad range of entities may be affected by one or more of those amendments. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. The amendments in this update should be applied prospectively. For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. The Company is currently evaluating the potential impact this standard will have on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40)(“ASU 2024-03”). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. In January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Clarifying the Effective Date to clarify the effective date of ASU 2024-03 for non-calendar year-end entities. ASU 2024-03 is effective for the Company's fiscal year 2028, and interim periods starting in fiscal year 2029. Early adoption is permitted. The amendments in this ASU are to be applied retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted. The Company has elected not to early adopt ASU 2024-03. The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. This ASU provides guidance on the recognition, measurement, presentation and disclosure of government grants received by business entities. The ASU is effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual periods, with early adoption permitted. The Company has elected not to early adopt ASU 2025-10. The Company is currently evaluating the impact that the adoption of ASU 2025-10 will have on its consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). ASU 2025-11 clarifies the applicability of the interim reporting guidance in Topic 270 and improves the navigability and organization of the guidance. The amendments also introduce a principle requiring entities that issue interim financial statements to disclose events and changes occurring after the end of the most recent annual reporting period that are expected to have a material impact on the entity. ASU 2025-11 does not change the recognition or measurement requirements for interim reporting. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 for public business entities, with early adoption permitted. The Company has elected not to early adopt ASU 2025-11. The Company is currently evaluating the potential impact of this guidance on its interim and annual financial statement disclosures.

Subsequent Events

The Company accounts for subsequent events in accordance with ASC 855, Subsequent Events, which defines subsequent events as events or transactions that occur after the balance sheet date but before the financial statements are issued. Management has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. There were no subsequent events that required recognition or disclosure other than those disclosed in Note 16 —Subsequent Events.

For a description of the fair value hierarchy and the fair value methodology, see Note 2 —Summary of Significant Accounting Policies in the Annual Report. There were no significant changes in these methodologies during the three months ended March 31, 2026. As of March 31, 2026, the Company’s highly liquid money market funds are included within cash equivalents.

The following tables present the fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025 (in thousands):

(1)

Included in cash and cash equivalents on the accompanying condensed consolidated balance sheets.

The carrying amounts of cash, accounts and note receivables, net, other receivables, accounts payable, due to related parties, and accrued liabilities approximate their fair values due to their short maturities.

During the three months ended March 31, 2026 and the year ended December 31, 2025, there wereno transfers of fair value measurement between Level 1 and Level 2 andno transfers into or out of Level 3 for both financial assets and liabilities.

Warrant Liability

In October 2023, Catalyst entered into a Securities Purchase Agreement for a private placement with GNI USA (the “Private Placement”). Upon closing of the Private Placement, the Company issued 811 shares of Series X Convertible Preferred Stock, par value $0.001 per share (the "Series X Preferred Stock"), and 811 warrants to purchase Series X Preferred Stock (the “Preferred Stock Warrants") to GNI USA for an aggregate purchase price of approximately $5.0 million. The Preferred Stock Warrants are immediately exercisable at an exercise price of $4,915.00 per share of Series X Preferred Stock and expire on October 30, 2033. The number of shares of Common Stock, par value $0.001 per share (“common stock”), issuable upon exercise and conversion of the Preferred Stock Warrants is 540,666. The Company accounted for the Private Placement as a non-arm’s length transaction. The Preferred Stock Warrants were initially recognized at fair value upon issuance and the remaining proceeds from the Private Placement were allocated to the Series X Preferred Stock.

The Preferred Stock Warrants are freestanding financial instruments classified as a warrant liability on the Company’s condensed consolidated balance sheet. The fair value of the Preferred Stock Warrants is subject to uncertainty due to unobservable inputs, including the expected volatility of the Company’s stock price, the likelihood of warrant exercise, and the estimated term of the warrants. Since there is limited market activity for the Preferred Stock Warrants, their fair value is determined using an option pricing model, which incorporates subjective inputs such as the Company’s stock price volatility, derived from historical and peer company data, as well as management’s expectations regarding future performance. As these assumptions evolve due to market conditions or company specific factors, the warrant liability may experience fluctuations. The Preferred Stock Warrants are revalued each reporting period with the change in fair value recorded as change in fair value of warrant liability in other income, net on the consolidated statement of operations and comprehensive income.

The fair value of the warrant liability is estimated based on the Black-Scholes option-pricing model using the following weighted-average assumptions:

The following table sets forth the changes in the estimated fair value of the Company’s Level 3 financial liabilities (in thousands):

Financial Instruments

Cash equivalents and held-to-maturity debt securities consisted of the following (in thousands):

The fair value and amortized cost of the Company's held-to-maturity debt securities and redemption date were as follows:

Interest income from the short-term bank deposits is recognized on an accrual basis over the term of the deposits. The accrued interest income for the three months ended March 31, 2026 and 2025 was$0.1 million and$0.1 million, respectively.

Interest income from the long-term certificates of deposit is recognized on an accrual basis over the term of the deposits. The accrued interest income for the three months ended March 31, 2026 and 2025 was$0.2 million and$0.1 million, respectively.

Inventories

Inventories as of March 31, 2026 and December 31, 2025, respectively, consisted of the following components (in thousands):

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

Accounts and Note Receivables, Net

Accounts and note receivables, net consisted of the following (in thousands):

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Long-Term Investment Measured Under Equity Method

On June 28, 2024, Gyre Pharmaceuticals entered into a partnership agreement as a limited partner with other investors and is obligated to pay$4.2 million for an 18.93% equity interest in the partnership. In April 2025, a new investor joined the partnership agreement, and as a result, Gyre Pharmaceuticals’ equity interest was adjusted to 18.35%. Pursuant to the partnership agreement, Gyre Pharmaceuticals, as a limited partner, shall not participate in any activities related to the management of the investment business. However, Gyre Pharmaceuticals may appoint a member to the advisory committee of the partnership.

As of March 31, 2026 and December 31, 2025, the Company's total investment into the partnership was$1.7 million and $1.7 million, respectively, and the carrying value of the Company’s long-term investment in this affiliate, which was included in “Other assets, noncurrent” on the balance sheet, was$1.6 million and $1.6 million, respectively.

Intangible assets with finite lives consist primarily of patents, technological know-how, computer software, and technology rights. Technology rights refer to the intellectual property (“IP”) associated with Etorel TM (nintedanib, ethanesulfonate soft capsules) (the “Etorel TM IP Rights”), which were obtained upon the successful transfer of the marketing authorization holder following approval by the PRC National Medical Products Administration (the “NMPA”) in March 2025, and the commercial sales of Etorel TM commenced in June 2025. As of March 31, 2026, the Company recognized the total consideration for the Etorel TM technology rights in the amount of RMB 35.0 million, or approximately$5.1 million, based on the March 31, 2026 spot exchange rate.

The gross carrying amounts and accumulated amortization of the Company’s intangible assets with determinable lives as of March 31, 2026 and December 31, 2025 were as follows (in thousands):

Intangible assets are carried at cost less accumulated amortization and impairment, if applicable, and the amortization expense is recorded in operating expenses. The weighted average amortization period for the intangible assets was 6.7 yearsas of March 31, 2026, compared to 7.0 years as of December 31, 2025.

Amortization expense was$175 thousand and$67 thousand for the three months ended March 31, 2026 and 2025, respectively. Based on finite-lived intangible assets recorded as of March 31, 2026, the estimated future amortization expense is as follows (in thousands):

The Company’s product revenues were mainly generated from the sale of ETUARYTM. The Company launched two new products: Contiva TM (avatrombopag maleate tablets), which commenced commercialization in March 2025, and Etorel TM, which commenced commercialization in June 2025. The following table summarizes the composition of product revenuesfor the three months ended March 31, 2026 and 2025.

Sales of Pharmaceutical Products

The Company generates revenue mostly through sales of ETUARYTM, Contiva TM, Etorel TM and certain generic drugs. The distributors were the Company’s direct customers, and sales to distributors accounted for 100.0% of revenue. The distributors sell pharmaceutical products to outlets, including hospitals and other medical institutions, as well as pharmacies.

Product returns to date have not been significant and the Company has not considered it necessary to record a reserve for product returns. The Company’s product revenues were recognized at a point in time when the underlying product was delivered to the customer, which was when the customer obtained control of the product. Revenue from sales of pharmaceutical products was$22.5 million and$22.1 million for the three months ended March 31, 2026 and 2025, respectively. All sales are generated in the PRC. Contract liabilities recognized for the three months ended March 31, 2026 were immaterial.

Operating Leases

As of March 2026, Gyre Pharmaceuticals maintained leases for office spaces in the following locations: in Beijing, comprising approximately 2,130 square meters with a lease expiration in June 2027; in Zhengzhou, comprising approximately 180 square meters with a lease expiration in August 2026; in Shanghai, comprising approximately 224 square meters with a lease expiration in December 2026; in Nanjing, comprising approximately 70 square meters with a lease expiration in February 2027; and in Beijing, for a staff dormitory comprising approximately 249 square meters with a lease expiration in March 2028. The Company also holds a lease for its U.S. headquarters in San Diego, California, which was secured in November 2023 and is set to expire in thefirst quarter of 2027.

The Company also has multiple short-term leased properties used as offices and employee dormitories. The Company recorded a total of$17 thousand and$16 thousand in short-term rent expenses during the three months ended March 31, 2026 and 2025, respectively. The short-term rent expense amounts are recorded in operating expenses in the accompanying condensed consolidated statements of operations and comprehensive income.

As of March 31, 2026, the Company recorded an aggregate right-of-use asset of$2.4 million, and an aggregate lease liability of$0.8 million in the accompanying condensed consolidated balance sheets.

For the three months ended March 31, 2026 and 2025, the Company’s operating lease expense was$0.2 million and$0.2 million, respectively. Variable lease payments for the three months ended March 31, 2026 and 2025 were immaterial.

Supplemental cash flow information related to operating leases was as follows (in thousands):

The present value assumptions used in calculating the present value of the lease payments were as follows:

As of March 31, 2026, undiscounted future minimum payments under the Company’s operating leases were as follows (in thousands):

The Company is required to maintain security deposits of$0.3 million in connection with various leases, which amounts are included in other assets, noncurrent on the Company’s condensed consolidated balance sheets.

Land Use Rights

As of March 31, 2026, the Company held land use rights for two land parcels in Beijing’s Shunyi District, expiring in 2053, and in Cangzhou, Hebei Province, expiring from 2067 to 2070. These parcels, with a combined area of approximately 66,559 square meters, are utilized as manufacturing facilities. As of March 31, 2026, the aggregate recorded land use rights, net assets for these parcels was$1.4 million.

Common Stock

Common stock reserved for future issuance is as follows:

[1]Includes 5,656,880 options exercisable for shares of common stock, which underlying shares of common stock were transferred in the name of the Company to Futu Network Technology Limited, the stock plan administrator of the 2023 Omnibus Incentive Sub-Plan for Chinese participants.

2024 ATM Program

On November 27, 2024, the Company entered into an Open Market Sale Agreement (the “ATM Agreement”) with Jefferies LLC (the “Sales Agent”) as sales agent, pursuant to which the Company may offer and sell, from time to time, through the Sales Agent, shares of common stock with aggregate gross sales proceeds of up to$50.0 million through an at-the-market offering program (the “ATM Program”). The Company will pay the Sales Agent a commission of up to 3% of the gross proceeds of any shares sold. The Company also agreed to reimburse the Sales Agent for certain expenses incurred in connection with its services under the ATM Agreement, including up to $135,000 for legal expenses in connection with the establishment of the ATM Program. During the three months ended March 31, 2025, the Company sold 54,734 shares of common stock under ATM Program and received net proceeds of$0.5 million, after deducting commissions and offering costs of$8.6 thousand. During the three months ended March 31, 2026, there were no sales under the ATM Program.

Sales of shares of common stock under the ATM Program may be made pursuant to the registration statement on Form S-3 (File No. 333-283237), which was declared effective by the SEC on November 22, 2024 (the “Shelf Registration Statement”), and a related prospectus supplement filed with the SEC on November 27, 2024.

May 2025 Underwritten Public Offering

On May 22, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, as representative of the several underwriters (the “Underwriters”), pursuant to which the Company agreed to issue and sell 2,222,222 shares of common stock, at a public offering price of $9.00 per share (the “Offering”). In addition, the Company granted the Underwriters an option for a period of 30 days to purchase up to an additional 333,333 shares of common stock at the public offering price, less the underwriting discounts and commissions (the “Greenshoe Option”).

The Offering closed on May 27, 2025. On May 29, 2025, the Underwriters exercised the Greenshoe Option in full, and the issuance of the additional 333,333 shares was settled on the same day.

The Offering was made pursuant to the Shelf Registration Statement, as supplemented by a prospectus supplement, dated May 22, 2025, filed with the SEC on May 23, 2025.

Restricted Net Assets

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 BJContinent Pharmaceuticals Limited (“BJC”) only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. Amounts restricted include paid-in capital and the statutory reserves of Gyre Pharmaceuticals. The aggregate amounts of restricted capital and statutory reserves, which represented the amount of net assets of the relevant subsidiaries not available for distribution were$72.4 million and $70.1 million as of March 31, 2026 and December 31, 2025, respectively.

Statutory Reserve

Gyre Pharmaceuticals is required to set aside at least 10% of its after-tax profits as the statutory reserve fund until the cumulative amount of the statutory reserve fund reaches 50% or more of its registered capital, if any, to fund its statutory reserves, which are not available for distribution as cash dividends. At the Company’s discretion, the Company may allocate a portion of after-tax profits based on PRC accounting standards to a discretionary reserve fund. Appropriations to these reserves were$0.6 million and $0 forthe three months ended March 31, 2026 and 2025, respectively.

Noncontrolling Interest

The noncontrolling interests in the Company’s consolidated financial statements represent the economic interests in Gyre Pharmaceuticals held by shareholders other than BJC and four other holding company subsidiaries of the Company. As of March 31, 2026, the Company’s indirect ownership in Gyre Pharmaceuticals is 69.7%.

9. Stock Based Compensation

2023 Omnibus Incentive Plan

The Gyre Therapeutics, Inc. 2023 Omnibus Incentive Plan (the “2023 Omnibus Incentive Plan”) was approved by Catalyst’s stockholders in August 2023 and ratified by Gyre’s Board in October 2023. The 2023 Omnibus Incentive Plan became effective on October 30, 2023. The 2023 Omnibus Incentive Plan permits the Company to issue up to 17,845,496 shares of common stock and will automatically increase by the lesser of (i)5% of the total number of outstanding shares of common stock on December 31st of the preceding calendar year and (ii) such smaller number of shares of common stock as determined by Gyre's Board on the first day of each fiscal year beginning on January 1, 2024. On January 1, 2024, pursuant to the automatic increase in the number of shares reserved, an additional 3,829,780 shares of common stock were reserved and made available for issuance under the 2023 Omnibus Incentive Plan. On January 1, 2025, pursuant to the automatic increase in the number of shares reserved, an additional 4,315,377 shares of common stock were reserved and made available for issuance under the 2023 Omnibus Incentive Plan. During the three months ended March 31, 2025, certain members of senior management were granted both awards subject solely to time-based vesting requirements and awards that are subject to the achievement of certain levels of specific performance, in addition to time-based vesting requirements (the “Performance-Based Awards”). The Performance-Based Awards are subject to the achievement of certain sales metrics and approval of Hydronidone for commercialization. The Performance-Based Awards may vest in full after two or three years. The awards become eligible to vest only if the goals are achieved and will vest only if the grantee remains employed by us through each applicable vesting date.

On November 20, 2025, the Company granted non-qualified stock options to employees of Gyre Pharmaceuticals, pursuant to the 2023 Omnibus Incentive Sub-Plan for Chinese Participants under the Company’s equity incentive arrangements. The awards covered an aggregate of 2,100,000 shares of common stock and were granted as part of the Company’s employee compensation program.

The stock options were granted with an exercise price of $7.57 per share and have a contractual term often years from the grant date, subject to earlier termination upon cessation of employment. The awards generally vest based on a combination of time-based and performance-based vesting conditions. Specifically,25% of the options vest immediately on the grant date,35% vest in substantially equal monthly installments over a 24-month service period, and the remaining options are subject to the achievement of specified performance targets related to the Company’s consolidated revenue and the employee’s individual performance for the 2025 and 2026 calendar years. Performance-Based Awards vest only if the applicable performance conditions are achieved and the employee remains in service through the applicable vesting determination date.

The following table summarizes stock option activity for thethree months ended March 31, 2026:

Valuation Assumptions

The Company estimated the fair value of time-based stock options granted using the Black-Scholes option-pricing formula and a single option award approach. Due to its limited relevant historical data, the Company estimated its volatility considering a number of factors, including the use of the volatility of comparable public companies. The expected term of options granted under the 2023 Omnibus Incentive Plan, all of which qualify as “plain vanilla” per SEC Staff Accounting Bulletin 107, is determined based on the simplified method due to the Company’s limited relevant history. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option. This fair value is being amortized ratably over the requisite service periods of the awards, which is generally the vesting period.

The Company also granted performance-based stock options that vest under two types of independent performance conditions. One condition is tied to a certain sales target that is deemed not probable as of March 31, 2026. The other condition is tied to the approval in the PRC of a New Drug Application (“NDA”) for Hydronidone. The grant-date fair value of these awards was determined using the Black-Scholes Option Pricing Model, which incorporates key inputs such as stock price, exercise price, expected volatility, risk-free interest rate, time to expiration, and a zero-dividend yield.

The following table showsthe weighted-average grant date fair value of options and the assumptions used to estimate the fair value for time-based awards, and for performance-based awards during the three months ended March 31, 2026 and 2025:

Total stock-based compensation expense recognized was as follows (in thousands):

As of March 31, 2026, the Company had an unrecognized stock-based compensation expense of$12.6 million, related to unvested stock option awards, which is expected to be recognized over an estimated weighted-average period of 2.3 years.

10. Net (Loss) Income per Share ("EPS") Attributable to Common Stockholders

The dilutive effect of outstanding stock options and warrants is calculated using the treasury stock method. Stock options and warrants are excluded from the diluted EPS attributable to common stock calculation if they have an anti-dilutive effect. If there is a net loss for the period, all options are excluded from the diluted EPS calculation.

The following table sets forth the computation of EPS attributable to common stockholders, basic and diluted (in thousands, except share and per share data):

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:

11. Commitments and Contingencies

Litigation and Legal Matters

The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company’s condensed consolidated financial statements.

Purchasing Commitments

Property and Equipment

The Company’s commitments related to purchase of property and equipment contracted but not yet reflected in the condensed consolidated financial statements were$1.5 million as of March 31, 2026 and were expected to be incurred within one year.

In May 2024, the Company entered into an IP rights transfer agreement with a third-party, Jiangsu Wangao Pharmaceuticals Co., Ltd., to acquire the “Etorel TM IP Rights”. The Etorel TM IP Rights are recorded as technology rights in Intangible Assets in Note 5 — Intangible Assets. The commercial sales of Etorel TM commenced in June 2025.

According to the agreement, except for RMB 35.0 million, or approximately$5.1 million, based on the March 31, 2026 spot exchange rate, the Company is committed to additional annual payments over eight years following the commencement of commercial sales in June 2025, which will be contingent consideration based on actual annual sales in future years. For each of the first two years starting from June 2025, the minimum annual commission is RMB 10 million, or approximately $1.4 million, based on the March 31, 2026 spot exchange rate, which has already been included in the IP cost. If the sales-based commission calculated at 5% of annual sales in the first year exceeds RMB 10 million (approximately $1.4 million, based on the March 31, 2026 spot exchange rate) or the commission calculated at 4% of annual sales in the second year exceeds RMB 10 million (approximately $1.4 million, based on the March 31, 2026 spot exchange rate), the excess amount for each year will be recognized as contingent consideration. For the third year through the eighth year, the contingent payments will be calculated at 3%,2%,2%,1%,1%, and 1% of sales in each year, respectively.

As of March 31, 2026, the Company assessed the possibility that annual sales commissions in either of the first two years would exceed RMB 10 million, or approximately $1.4 million, based on the March 31, 2026 spot exchange rate, as remote and did not accrue any contingent consideration.

As of March 31, 2026, the total accrued contract consideration was$2.9 million, which was recorded under accrued expenses and other current liabilities, and other noncurrent liabilities.

Hydronidone

In September 2020, Gyre Pharmaceuticals entered into an IP transfer agreement (the “Hydronidone Transfer Agreement”) with GNI Japan and certain of its wholly owned subsidiaries (the “GNI Group”). According to the Hydronidone Transfer Agreement, Gyre Pharmaceuticals acquired the exclusive right to use Hydronidone IP rights in mainland China and the right of first offer for the global IP rights (the “Hydronidone IP Rights”).

Under the Hydronidone Transfer Agreement, in exchange for the Hydronidone IP Rights, Gyre Pharmaceuticals is obligated to pay GNI Group three payments based on the achievement of the respective milestones: RMB 33.1 million, or approximately$4.8 million, based on the March 31, 2026 spot exchange rate upon submission of the Hydronidone NDA to the Center for Drug Evaluation (“CDE”) of the NMPA and its acceptance by CDE; RMB 8.3 million, or approximately$1.2 million, based on the March 31, 2026 spot exchange rate, after the NDA passes the NMPA’s Center for Food and Drug Review and Inspection’s on-site registration inspection for the Hydronidone product; and RMB 49.6 million, or approximately$7.2 million, based on the March 31, 2026 spot exchange rate upon NMPA’s approval of the NDA. As of March 31, 2026, the next payment conditions have not been met, as such, no payments have been accrued.

Upon Hydronidone product achieving commercialization, the Company will be required to make annual royalty payments based on future product sales. These contingent payments are structured as twelve annual royalties equal to 10%,14%,16%,16%,16%,16%,16%,15%,14%,12%,10%, and 8% of annual sales. As of March 31, 2026, commercialization has not yet been achieved, and no royalty payments have been incurred or accrued.

SDM Service

In December 2025, the Company entered into a clinical trial service agreement with a third-party contract research organization in connection with a Phase 3c confirmatory clinical trial for Hydronidone (the “SDM Clinical Trial Agreement”). The Phase 3c trial is designed to evaluate clinical endpoint events and satisfy the safety exposure requirements for the potential conditional approval and subsequent conventional marketing authorization of Hydronidone capsules.

Under the SDM Clinical Trial Agreement, the Company is obligated to make payments based on the achievement of specified clinical and operational milestones and the performance of clinical trial–related services, including trial preparation, patient enrollment and follow-up, site management, interim analyses, data management–related activities, and preparation of the clinical study report. The aggregate contractual amount under the agreement is approximately RMB 114.0 million, or approximately$16.5 million, based on the March 31, 2026 spot exchange rate.

As of March 31, 2026, the Company recognized$0.8 million in research and development expenses and made payments of$1.6 million under the SDM Clinical Trial Agreement.

Research and Development Programs

In addition to the$13.1 million commitment to GNI Group for the Hydronidone program, as of March 31, 2026, Gyre Pharmaceuticals has committed to allocate$51.0 million toward future research and development activities for various programs. Gyre Therapeutics has committed to allocate$1.2 million toward research and development activities.

Indemnification Agreements

In the normal course of business, the Company enters into agreements that indemnify others for certain liabilities that may arise in connection with a transaction or certain events and activities. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, the Company may be required to reimburse the loss. These indemnifications are generally subject to various restrictions and limitations. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations.

12. Income Taxes

During thethree months ended March 31, 2026 and 2025, the Company recorded the following income tax provision (in thousands) and effective tax rate:

The change in effective tax rate for the three months ended March 31, 2026 and 2025 was primarily due to the Company experiencing a loss before income tax. The Company expects to incur income tax expense for the current period as a result of the impact of valuation allowance. Accordingly, the effective tax rate for the three months ended March 31, 2026 was negative.

As of March 31, 2026, after consideration of certain limitations (see below), the Company had approximately$193.3 million federal and$21.7 million state net operating loss (“NOL”) carryforwards for U.S. tax purposes available to reduce future taxable income which, if unused, will begin to expire in 2037 for federal and 2034 for state tax purposes. The federal net operating loss carryforward includes$191.9 million that have an indefinite life.

If the Company experiences a greater than 50 percentage point aggregate change in ownership over a three-year period (a Section 382 ownership change), utilization of its pre-change NOL carryforwards is subject to annual limitation under Section 382 of the Internal Revenue Code (California has similar provisions). The annual limitation is determined by multiplying the value of the Company’s stock immediately before such ownership change by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization. The Company determined that ownership changes under Section 382 occurred on December 31, 2007, August 20, 2015, April 13, 2017, February 15, 2018, February 18, 2020, and December 26, 2022. Approximately$156.5 million and$75.2 million of the NOLs will expire unutilized for federal and California state income tax purposes, respectively. The ability of the Company to use its remaining NOL and credit carryforwards may be further limited if the Company experiences a Section 382 ownership change as a result of future changes in its stock ownership.

13. Related Party Transactions

Research and Development with GNI Group

No research and development fees were paid to GNI Group during thethree months ended March 31, 2026 and 2025. As of March 31, 2026 and December 31, 2025, the Company had$0.2 million related parties payable due to GNI Group.

Other Receivables from GNI

As of March 31, 2026 and December 31, 2025, the Company had recorded$0.2 million in other receivables from GNI Group, all of which related to Continent Pharmaceuticals Inc.'s (“CPI”) restructuring transaction.

14. Employee Benefit Plans

Mainland China Contribution Plan

Pursuant to relevant PRC regulations, the Company is required to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contribution for each employee is based on a percentage of the employee’s current compensation as required by the local government. The contributions are charged to profit or loss as they become payable in accordance with the rules of the central pension scheme. The total contributions for such employee benefits were$1.5 million and$1.3 million for the three months ended March 31, 2026 and 2025, respectively.

Defined-Contribution Savings Plan

In the U.S., the Company maintains a defined-contribution savings plan pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended. The plan is available to employees who meet the minimum age and length of service requirements. The contributions made during the three months ended March 31, 2026 and the year ended December 31, 2025 were immaterial.

15. Segment Information

The Company is a consolidated entity comprised oftwo distinct operating segments: Gyre Pharmaceuticals and Gyre. The Company’s reportable segments are based upon internal organizational structure, the manner in which operations are managed, the criteria used by the CODM to evaluate segment performance, the availability of separate financial information, and overall materiality considerations. All Gyre’s operations are within the United States, while all of Gyre Pharmaceuticals’ operations are in mainland China.

Gyre Pharmaceuticals

Gyre Pharmaceuticals has three major commercial drug products, ETUARYTM, Etorel TM, and Contiva TM—as well as several product candidates in pre-clinical and clinical development. Gyre Pharmaceuticals’ product revenues are mainly generated from the sale of ETUARYTM, Etorel TM, Contiva TM and certain generic drugs. Gyre Pharmaceuticals primarily sells its pharmaceutical products to distributors in the PRC, who ultimately sell the products to hospitals, other medical institutions and pharmacies.

Gyre

Gyre is a biopharmaceutical company focused on the development and commercialization of Hydronidone for the treatment of metabolic dysfunction-associated steatohepatitis (“MASH”)-associated liver fibrosis in the United States. Other than the IP associated with Hydronidone, Etorel TM, Contiva TM in the United States, Gyre has no other product candidates since the Company sold all of its legacy IP assets. Subsequent to October 2023, Gyre has not generated any revenue.

Other

Other represents the financial information from other subsidiaries, consisting of mainly CPI and BJC. As of March 31, 2026, CPI holds a 61.7% indirect ownership interest in Gyre Pharmaceuticals.

Segment information for thethree months ended March 31, 2026 and 2025 is as follows (in thousands):

The table below presents total assets as of March 31, 2026 and December 31, 2025.

The table below only includes cash outflows for the purchase of property and equipment and excludes non-cash activities.

16. Subsequent Events

On the Merger Closing Date, the Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the condensed consolidated financial statements were issued. Other than as set forth below, there were no material subsequent events that required recognition or additional disclosure in the condensed consolidated financial statements presented.

Agreement and Plan of Merger and Reorganization

On the Merger Closing Date, the Company acquired Cullgen in accordance with the terms of the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub merged with and into Cullgen, with Cullgen continuing as a wholly owned subsidiary of the Company and the surviving corporation of the Merger. The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended.

Under the terms of the Merger Agreement, the Company acquired Cullgen in an all-stock transaction that valued Cullgen at approximately $300 million. At the effective time of the Merger (the “Effective Time”), each then outstanding share of Cullgen capital stock (the “Cullgen Capital Stock”), excluding shares of Cullgen Capital Stock held as treasury stock immediately prior to the Effective Time and any dissenting shares, converted into (1) with respect to shares of Cullgen Capital Stock held by certain designated holders, (i) for each share of Cullgen common stock (“Cullgen Common Stock”) held by such holders, a number of shares of the Company's Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), equal to (x)0.4753 (the “Exchange Ratio”) divided by five, and (ii) for each share of Cullgen preferred stock (“Cullgen Preferred Stock”) held by such designated holders, a number of shares of Series B Preferred Stock equal to (x) the number of shares of Cullgen Common Stock issuable upon conversion of each share of Cullgen Preferred Stock, multiplied by the Exchange Ratio, and divided by five, and (2) with respect to shares of Cullgen Capital Stock held by each other holder, (i) for each share of Cullgen Common Stock held by such holders, a number of shares of common stock equal to the Exchange Ratio, and (ii) for each share of Cullgen Preferred Stock held by such holders, a number of shares of common stock equal to the number of shares of Cullgen Common Stock issuable upon conversion of each share of Cullgen Preferred Stock, multiplied by the Exchange Ratio. Each share of Series B Preferred Stock received in the Merger is convertible into five shares of common stock, subject to certain conditions described below with respect to the Conversion Proposal (as defined below). Notwithstanding anything herein to the contrary, in no event will the Company issue greater than 19.99% of its issued and outstanding common stock or its voting power prior to the approval of the Conversion Proposal.

In addition, at the Effective Time (1) each then-outstanding in-the-money option to purchase shares of Cullgen Common Stock that was outstanding and unexercised immediately prior to the Effective Time, whether vested or unvested, ceased to represent a right to acquire shares of Cullgen Common Stock and converted into and became an option to purchase shares of common stock on the existing terms and conditions (including with respect to vesting and accelerated vesting), subject to adjustment as set forth in the Merger Agreement, (2) each then-outstanding option to purchase shares of Cullgen Common Stock that was not an in-the-money option and was outstanding and unexercised immediately prior to the Effective Time was cancelled at the Effective Time for no consideration, and (3) each Cullgen restricted stock unit will vest and be settled for Cullgen Common Stock and the holder thereof received a number of shares of common stock calculated in accordance with the Merger Agreement.

Pursuant to the Merger Agreement, the Company has agreed to convene a meeting of its stockholders to submit to its stockholders for their consideration the approval of the conversion of the Series B Preferred Stock into shares of common stock in accordance with certain of the rules of the Nasdaq Stock Market LLC (the “Conversion Proposal”). In connection with these matters, the Company filed with the SEC its Definitive Proxy Statement on Schedule 14A on April 27, 2026 and will hold the meeting of its stockholders on June 10, 2026.

With respect to the Merger, we have evaluated the transaction in accordance with the guidance in ASC Subtopic 850-50, Business Combinations - Related Issues, and have determined that the Merger is a combination of entities under common control. Specifically, the Company and Cullgen were controlled by the same parent, GNI Japan, both prior to and subsequent to the Merger, and such control was not considered transitory. As a result, the Merger does not meet the definition of a business combination under the guidance outlined in ASC 805-10 because the acquired net assets have already been included in GNI Japan’s consolidated group structure. We determined that the net assets to be transferred in the Merger represent a business, as defined under ASC 805-10-55-4, which will result in a change in reporting entity, as defined under ASC 250-10-20. In this context, the Company has been identified as the receiving entity for accounting purposes that will issue its equity interests in exchange for the net assets of Cullgen. The assets and liabilities to be transferred will be recognized by the Company at their historical carrying amounts on the Merger Closing Date, and the Company's financial statements will be retrospectively adjusted to reflect the combination as if it had occurred at the beginning of the earliest period presented. This presentation reflects the continuity of control and is consistent with the accounting and disclosure requirements of ASC 805-50 and applicable SEC rules and regulations. As of the date the Company's unaudited condensed consolidated financial statements were issued, the method of accounting applied or to be applied was incomplete.