10-K
The
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
For the year ended December 31, 2024
OR
For the transition period from to
Commission file number: 000-51173
Gyre Therapeutics, Inc.
(Exact Name of Registrant as Specified in its Charter)
(Address of principal executive offices) (Zip Code)
(619) 949-3681
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $0.001 per share GYRE The Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting common stock held by non-affiliates of the registrant (based on the closing price of such stock on The Nasdaq Capital Market on June 30, 2024, the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $83.3 million. Shares of common stock held by each officer and director and by each person who is known to own 10% or more of the outstanding common stock have been excluded because such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of March 7, 2025, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was93,612,442, which includes 7,280,230 shares of common stock issued in the name of the registrant to a stock plan administrator of the registrant (see Note 8—Stockholders’ Equity).
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report, to the extent not set forth herein, is incorporated by reference from the registrant’s definitive proxy statement relating to the Annual Meeting of Stockholders to be held in 2025 (the “Proxy Statement”), which shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates.
Gyre Therapeutics, Inc.
Annual Report on Form 10-K
TABLE OF CONTENTS
Page
PART I
Item 1. Business 5
Item 1A. Risk Factors 60
Item 1B. Unresolved Staff Comments 130
Item 1C. Cybersecurity 130
Item 2. Properties 131
Item 3. Legal Proceedings 131
Item 4. Mine Safety Disclosures 131
PART II
Item 6. [Reserved] 132
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 148
Item 8. Financial Statements and Supplementary Data 149
Item 9A. Controls and Procedures 150
Item 9B. Other Information 152
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 152
PART III
Item 10. Directors, Executive Officers and Corporate Governance 153
Item 11. Executive Compensation 153
Item 14. Principal Accountant Fees and Services 153
PART IV
Item 15. Exhibit and Financial Statement Schedules 154
LIST OF EXHIBITS 156
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PART I
Forward-Looking Statements and Market Data
This Annual Report on Form 10-K (this “Annual Report”) and the documents incorporated by reference herein contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical facts, included or incorporated by reference in this Annual Report regarding our strategy, future results of operations, future financial condition, future revenues, projected costs, prospects, plans, intentions and objectives of management, as well as the assumptions that underlie these statements, are forward-looking statements. These forward-looking statements should not be relied upon as predictions of future events as we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. Forward-looking statements are identified by words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “pro forma,” “estimates,” or “anticipates” or the negative of these words and phrases or other variations of these words and phrases or comparable terminology, although not all forward-looking statements contain these identifying words. Such forward-looking statements are based on our management’s assumptions and assessments in light of information currently available to our management, its experience and its perception of historical trends, current conditions, expected future developments and other factors our management believes to be appropriate.
You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. For example, forward-looking statements include any statements regarding:
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our ability to conduct extensive clinical trials to demonstrate safety and efficacy of our product candidates;
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our ability to develop a pipeline of product candidates to address unmet needs in the treatment of organ fibrosis and other inflammatory diseases;
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the timing, progress and results of clinical trials for: (i) F351 (Hydronidone) from the Phase 3 clinical trial in the People’s Republic of China (the “PRC”) for the treatment of liver fibrosis associated with chronic hepatitis B (“CHB”) and Phase 2 trial in the United States for the treatment of metabolic dysfunction-associated steatohepatitis- (“MASH”) associated liver fibrosis; (ii) ETUARY from the Phase 3 clinical trial for pneumoconiosis; (iii) F573 from the Phase 2 clinical trial in the PRC for the treatment of on-chronic liver failure; and (iv) other product candidates we may develop, including F230 and F528, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the studies or trials will become available and research and development programs;
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the timing, scope and likelihood of U.S., PRC and comparable foreign regulatory filings and approvals, including timing of investigational new drug applications (“INDs”) and final FDA and National Medical Products Administration ("NMPA") approval of F351 for the treatment of liver fibrosis associated with MASH and CHB, respectively, ETUARY for the treatment of pneumoconiosis, F528 for the treatment of chronic obstructive pulmonary disease (“COPD”), F230 for the treatment of pulmonary arterial hypertension (“PAH”), and any other future product candidates;
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our expectations regarding the future pursuit of product development efforts, including whether we will pursue such efforts, estimates regarding the expenses, future revenue, timing of any future revenue, capital requirements and need for additional financing related to such efforts, the timing
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of and our ability to pursue such efforts and our plans to develop and, if approved, subsequently commercialize any product candidates resulting from such efforts;
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our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash and investments;
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our ability to develop and advance current product candidates and programs into, and successfully complete, clinical studies;
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our manufacturing, commercialization and marketing capabilities and strategy;
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plans relating to commercializing nintedanib and avatrombopag, and our product candidates, if approved, including the geographic areas of focus and sales strategy;
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the need to hire additional personnel and our ability to attract and retain such personnel;
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the size of the market opportunity for our product candidates, including estimates of the number of patients who suffer from the diseases we are targeting;
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expectations regarding the approval and use of our product candidates in combination with other drugs;
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expectations regarding the potential for accelerated approval or other expedited regulatory designation;
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our competitive position and the success of competing therapies that are or may become available;
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estimates of the number of patients that we will enroll in our clinical trials;
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the beneficial characteristics and the potential safety, efficacy and therapeutic effects of our product candidates;
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our ability to obtain and maintain regulatory approval of our product candidates and our expectations regarding particular lines of therapy;
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plans relating to the further development of our product candidates, including additional indications we may pursue;
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existing regulations and regulatory developments in the PRC, the United States, Europe, and other jurisdictions;
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our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering ETUARY, nintedanib, avatrombopag, F351, F573, F528, and F230, and other product candidates we may develop, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;
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our continued reliance on third parties to conduct additional clinical trials of our product candidates and for the manufacture of our product candidates for clinical trials;
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our relationships with patient advocacy groups, key opinion leaders, regulators, the research community and payors;
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our ability to obtain and negotiate favorable terms of, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates;
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the pricing and reimbursement of ETUARY, nintedanib, avatrombopag, F351, F573, F528, and F230, and other product candidates we may develop, if approved;
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the rate and degree of market acceptance and clinical utility of F351, and other product candidates we may develop;
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our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
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our financial performance;
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the period over which we estimate our existing cash will be sufficient to fund our planned operating expenses and capital expenditure requirements;
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expectations about the continued listing of our common stock on The Nasdaq Capital Market; and
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the impact of laws and regulations.
Any such forward-looking statements are not guarantees of future performance and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in or contemplated by such forward-looking statements. Factors that might cause such a difference include, but are not limited to, the risks and uncertainties described in this Annual Report, including those risks described in Part I, Item 1A, “Risk Factors,” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as others that we may consider immaterial or do not anticipate at this time. The risks and uncertainties described in this Annual Report, including in Part I, Item 1A, “Risk Factors,” and Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” are not exclusive and further information concerning our company and our businesses, including factors that potentially could materially affect our operating results or financial condition, may emerge from time to time. All forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this Annual Report, speak only as of their date, and we undertake no obligation to update or revise these statements considering future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties, and you should carefully consider the factors set forth in other reports or documents that we file from time to time with the Securities and Exchange Commission (the “SEC”).
This Annual Report also contains estimates, projections and other information concerning our industry, our business, and the markets for certain drugs, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in such information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.
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Item 1. BUSINESS.
In this section, 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”).
Overview
We are a commercial-stage pharmaceutical company with a proven track record of financial success 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 and involve complex, multi-stage processes with multiple pathways. While there are numerous potential targets for anti-fibrotic therapy, both established and emerging, addressing a single molecular pathway may not be sufficient to prevent, halt, or reverse fibrosis. 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. By leveraging clinically validated compounds, our goal is to drive a de-risked pipeline through late-stage clinical development and commercialization to provide effective treatments for patients in the United States and globally.
ETUARY (pirfenidone)
Pirfenidone, the first anti-fibrotic drug approved for idiopathic pulmonary fibrosis (“IPF”) in Japan, the European Union (“EU”), the United States, and the PRC, is a small molecule drug that inhibits the synthesis of Tumor Growth Transforming (“TGF”)-ß1, Tumor Necrosis Factor (“TNF”)-α, and other fibrosis and inflammation modulators.We successfully advanced pirfenidone from research and development (“R&D”) to commercialization in the PRC for the treatment of IPF. In 2024, ETUARY’s annual sales reached $105.0 million. In addition to IPF, pirfenidone is undergoing one additional Phase 3 trial in the PRC for the treatment of pneumoconiosis (“PD”) and was undergoing two Phase 3 trials in the PRC for the treatment of dermatomyositis-related interstitial lung disease ("DM-ILD") and sclerosis-related interstitial lung disease ("SSc-ILD") to broaden its indications and market. We are prioritizing the development of our product candidates for other targeted indications and, as a result, have paused our two Phase 3 trials in the PRC for the treatment of DM-ILD and SSc-ILD. We may decide to continue such Phase 3 trials in the future.
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F351 (hydronidone)
F351 (hydronidone), our lead development candidate, is a structural derivative of ETUARY. It is a new oral chemical entity with an anti-fibrotic, TGF-ß1-targeting mechanism of action, for which we hold patents in major markets. Our Phase 2 trial of F351 in the PRC for Chronic Hepatitis B (“CHB”)-associated liver fibrosis showed that F351 was well-tolerated without notable toxicity and patients treated showed statistically-significant improvement of liver fibrosis.
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Our most significant near-term catalyst is the anticipated topline results of F351 for our ongoing Phase 3 trial in the PRC expected in the second quarter of 2025. Our confirmatory 52-week Phase 3 trial enrolled 248 patients and the last patient completed the trial in October 2024. Topline results from our Phase 3 trial will be a critical milestone in our clinical development and commercial strategy. A positive outcome has the potential to enhance our commercial sales, strengthen our market position and drive overall company growth.
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We are preparing a U.S. IND application and expect to submit it in the first half of 2025. In the United States, we have completed a Phase 1 clinical trial of F351 in healthy volunteers. Following results from the PRC Phase 3 trial in CHB-associated liver fibrosis and pending approval of our IND, we expect to initiate a Phase 2 trial to evaluate F351 for the treatment of liver fibrosis associated with MASH in 2025.
Generic Drugs
Nintedanib and avatrombopag are our two commercial-ready drugs that have planned commercial launches in the PRC in 2025.Nintedanib is approved as a standard-of-care drug for IPF, SSc-ILD, and Progressive Fibrosing Interstitial Lung Disease (“PF-ILD”). Avatrombopag has received approval for two indications, the treatment of thrombocytopenia (“TP”) associated with chronic liver disease (“CLD”) and chronic idiopathic thrombocytopenia (“ITP”).
Other Product Candidates
F573 is our clinical-stage product candidate for the treatment of acute/acute-on-chronic liver failure (“ALF/ACLF”) currently in Phase 2 clinical trials in the PRC. F230 is our clinical-stage product candidate for the treatment of PAH, and we expect to initiate a Phase 1 trial in the PRC in 2025. F528 is our preclinical-stage product candidate for the treatment of COPD.
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Commercialization and Development Strategies in Targeted Indications
Overview of Products and Product Candidates
Pulmonary Fibrosis
We are focused on commercializing therapies for the treatment of pulmonary fibrosis and working to solidify our position as a leader in this space.
We are uniquely positioned as the only company with both standard-of-care approved therapies for IPF. Our portfolio includes:
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ETUARY® (pirfenidone) – an antifibrotic agent with anti-inflammatory and antioxidant properties, and one of the first three drugs approved for the treatment of IPF globally. In 2024 and 2023, our revenue from sales of ETUARY was $105.0 million and $112.1 million, respectively
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Nintedanib– a small molecule kinase inhibitor that inhibits lung fibroblast proliferation and migration. In May 2024, Gyre Pharmaceuticals executed a comprehensive agreement with Jiangsu Wangao Pharmaceuticals Co., Ltd. to obtain the drug registration certificate for and become the marketing authorization holder of nintedanib. Gyre Pharmaceuticals is planning to initiate commercialization of the nintedanib product in the PRC in 2025.
Pirfenidone is undergoing one additional Phase 3 trial in the PRC for the treatment of PD and two Phase 3 trials in the PRC for the treatment of DM-ILD and SSc-ILD. We have paused our Phase 3 trials of pirfenidone for the treatment of DM-ILD and SSc-ILD in the PRC to prioritize development of our product candidates in other targeted indications.
Liver Fibrosis
We are also committed to developing effective therapies for the treatment of CHB-associated and MASH-associated liver fibrosis through our lead product candidate, F351 (hydronidone).
F351 is currently in a Phase 3 clinical trial in the PRC for the treatment of CHB-associated liver fibrosis. We commenced patient enrollment for our Phase 3 clinical trial in January 2022 and had our last patient out in October 2024. The topline results of F351 for our Phase 3 trial in the PRC are expected in the second quarter of 2025. In the United States, we are advancing F351 for the treatment of MASH-associated liver fibrosis. We are actively preparing to file an IND application in the first half of 2025. Following results from the PRC Phase 3 trial in CHB-associated liver fibrosis and pending approval of our IND, we expect to initiate a Phase 2 trial to evaluate F351 for the treatment of liver fibrosis associated with MASH in 2025.
F351 has demonstrated a favorable profile for the treatment of CHB-associated liver fibrosis in clinical trials. Due to the severity of the disease and the clinical trial progress of F351, in March 2021, the Center for Drug Evaluation (“CDE”) of the NMPA in the PRC granted F351 a Breakthrough Therapy designation, which helps to accelerate the review of drugs that have early evidence to suggest that the drug may demonstrate a substantial improvement over currently available therapies.
Kidney Fibrosis
We are seeking to advance pirfenidone for the treatment of chronic kidney disease ("DKD"). We completed a Phase 1 trial for DKD in March 2022 and are discussing next steps for this program in 2025 with Chinese authorities.
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Other Indications: ALF/ACLF, PAH, COPD, TP with CLD, ITP
We have also expanded our pipeline to address additional fibrotic and inflammatory diseases with significant unmet medical needs:
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F573 (ALF/ACLF) – A clinical-stage compound for acute and acute-on-chronic liver failure. F573 is currently in a Phase 2 trial in the PRC, initiated in March 2023, to evaluate its safety and efficacy in these severe liver conditions.
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F230 (PAH) – A clinical-stage compound for the treatment of pulmonary arterial hypertension. The NMPA approved the IND application for F230 in May 2024. We expect to initiate a Phase 1 trial in PAH in 2025.
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F528 (COPD) – A preclinical-stage candidate targeting chronic obstructive pulmonary disease. F528 is designed to provide a first-line therapy to reduce long-term lung function decline and improve patient outcomes.
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Avatrombopag – A commercial stage product targeting TP with CLD and ITP disease indications. We expect to begin commercialization in 2025.
Our Products for Pulmonary Fibrosis: ETUARY and Nintedanib
We are focused on commercializing therapies for the treatment of pulmonary fibrosis through our two therapeutic products: ETUARY® (pirfenidone) and nintedanib. These two drugs represent the only approved therapeutics as the current standards of care for IPF, and we are uniquely positioned as the only company offering both treatment options.
Our Commercialized Product: ETUARY
ETUARY (pirfenidone capsule) was approved in the PRC as a National Category 1.1 New Drug in 2011 for the treatment of IPF, a rare disease. Given the absence of an approved IPF treatment in the PRC, ETUARY was included in the National Reimbursement Drug List ("NRDL") in 2017 and has since held a dominant market share. Clinical trials have shown that ETUARY can effectively slow down the decline in lung function and IPF disease progression. Moreover, given that different organ fibroses have similar pathogenic mechanisms and fibrosis processes, we are currently working to expand the therapeutic indications of ETUARY to another pulmonary fibrosis disease, PD, as well as diseases causing renal fibrosis, such as DKD.
ETUARY Mechanism of Action
Pulmonary fibrosis is caused by activation of alveolar cells after epithelial damage, which secretes a series of pro-inflammatory cytokines, activating fibroblast proliferation and myofibroblast differentiation and reducing the rate of apoptosis. ETUARY reduces Type I Collagen expression by inhibiting the expression of pro-fibrogenic mediators, including TGF-ß1, platelet-derived growth factor (“PDGF”) and fibroblast growth factor, which ultimately reduces fibroblast proliferation and collagen fiber synthesis and decreases extracellular matrix accumulation. It also inhibits TNF-α, IL-1 and other inflammatory mediators, thus reducing the inflammatory response.
The diagram below illustrates the mechanism of action of pirfenidone.
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Our Additional IPF Product: Nintedanib
In May 2024, Gyre Pharmaceuticals executed a comprehensive agreement with Jiangsu Wangao Pharmaceuticals Co., Ltd. to obtain 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. Nintedanib is expected to provide patients with more choices and benefits, and further enhance Gyre Pharmaceuticals’ leading position in the pulmonary fibrosis market. Gyre Pharmaceutical is planning to initiate commercialization of nintedanib in the PRC in 2025.
We anticipate that this launch will 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 will 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.
IPF Disease Overview and PRC Market Opportunities
IPF is a rare disease, defined as a chronic, progressive fibrotic interstitial pneumonia of unknown cause to the lungs, occurring primarily in the elderly. It is characterized by progressive worsening of dyspnea and lung function and is associated with a poor prognosis. The average five-year survival rate for patients with IPF is 32%, with the average 10-year survival rate dropping to 16%. According to Frost & Sullivan, the prevalence of IPF in the PRC increased from 89,002 patients in 2018 to 145,776 patients in 2023 at a CAGR of 10.29%, and it is expected to increase to 322,000 patients by 2031 at a CAGR of 10.38% from 2023 to 2031. The total market size of IPF in the PRC increased from $23.9 million in 2018 to $156.8 million in 2023 at a CAGR of 22%, and is expected to reach $344.9 million by 2027 and $698.6 million by 2031 at a CAGR of 20.5% from 2027 to 2031.
The scarring of lung tissues is irreversible. However, proper treatment may slow the rate of fibrosis, increase the patient’s survival rate, alleviate the patient’s symptoms and improve the patient’s quality of life. There are currently two types of IPF drugs approved in the PRC: pirfenidone and nintedanib. They are both clinically shown to slow down the formation of scar tissue in the lungs of IPF patients and are the only drugs that are considered effective for the treatment of organ fibrosis in the PRC. According to the latest guideline for the treatment of IPF issued by the American Thoracic Society, European Respiratory Society, Japanese Respiratory Society and Latin American Thoracic Association, pirfenidone and nintedanib are the only two types of IPF drug conditionally recommended with moderate-quality evidence.
ETUARY Competition in the PRC (IPF)
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Sales of ETUARY reached $105.0 million in 2024. Although still a dominant player in the IPF drug market, the market share of ETUARY declined recently primarily due to the rising market share of new drugs, including avatrombopag, marketed as 安博司, which had $20.4 million of sales in 2023, and OFEV (nintedanib), which had $72.1 million of sales in 2023. In 2023, the annual expenditures per patient in the PRC before NRDL reimbursement for ETUARY, avatrombopag marketed as 安博司, and OFEV were $13,106 to $13,378, $10,553, and $15,132, respectively. Despite the recent decrease of market share of ETUARY in the IPF market, we continue to expect a strong sales performance due to sustained increases in the prevalence of IPF and future indication expansion of ETUARY for the potential treatment of PD and other diseases. In addition, there are various barriers to entry for the potential market entrants. For example, it is difficult for new entrants to build an experienced and specialized sales and marketing team in the short term given that sales and marketing strategies of organ fibrosis drugs significantly differ from that of etiological treatment drugs. In addition, long-term and stable collaboration with KOLs and hospitals is critical to developing and optimizing a product portfolio, including effectively educating and penetrating the market and recruiting patients for clinical trials.
PD Disease Overview and PRC Market Opportunities
PD refers to a spectrum of pulmonary diseases caused by inhalation of mineral dust, usually as the result of certain occupations. The main pathological features include chronic pulmonary inflammation and progressive pulmonary fibrosis, which can eventually lead to death caused by respiratory and/or heart failure. PD is widespread and a serious global public health concern. Its high incidence and mortality result from improper occupational protection and the lack of early diagnostic methods and effective treatments.
According to Frost & Sullivan, in the PRC, the prevalence of PD increased from 873,299 patients in 2018 to 938,163 patients in 2023, and it is expected to increase to 970,000 patients by 2028 and 985,000 patients by 2031. The market size of anti-fibrosis drugs for PD is expected to reach $12.1 million by 2027 and $64.1 million by 2031 a CAGR of 58.1% from 2027 to 2031.
To date, there are two pirfenidone product candidates for the treatment of PD in various clinical stages in the PRC. We enrolled the first patient in our Phase 3 clinical trial of ETUARY for the treatment of PD in June 2022, making ETUARY the most clinically advanced anti-fibrosis drug for the treatment of PD in the PRC. As of December 31, 2024, no small molecule or biologic anti-fibrosis product for the treatment of PD had been approved in the PRC.
Phase 3 ETUARY Clinical Trial (PD)
We are conducting a randomized, double-blind, placebo-controlled, multi-center Phase 3 clinical trial to evaluate the efficacy and safety of pirfenidone in the treatment of pneumoconiosis. The primary endpoint is the change in force vital capacity at 52 weeks of treatment compared to baseline. 272 patients will be enrolled in the trial, with 136 in the treatment group and 136 in the control group.
We obtained ethics committee approval as of January 2022 and enrolled the first patient in June 2022. Currently, we have enrolled 172 patients in our Phase 3 clinical trial of ETUARY for the treatment of PD as of December 31, 2024.
Our Product Candidate For Liver Fibrosis: F351 (Hydronidone)
We are strategically focused on addressing liver fibrosis through the development of our lead product candidate, F351 (Hydronidone) for two key indications: CHB-associated liver fibrosis in the PRC and MASH-associated liver fibrosis in the United States. F351 is advancing through critical stages of development and currently in a Phase 3 clinical trial in the PRC for the treatment of CHB-associated liver fibrosis. In October 2024, the last patient completed such trial, and topline data from the Phase 3 clinical trial in the PRC is
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expected by the second quarter of 2025. Additionally, we completed a Phase 1 trial in the United States for MASH-associated liver fibrosis and are actively preparing to file an IND application in the first half of 2025. We are committed to advancing F351 as a potential first-in-class treatment for these significant unmet needs in liver fibrosis.
CHB Disease Overview and PRC Market Opportunities
CHB is a major cause of liver morbidity and mortality in Asia. Patients chronically infected with the hepatitis B virus tend to experience liver fibrosis and may develop end-stage liver disease, such as decompensated cirrhosis and hepatocellular carcinoma ("HCC"), without intervention. In the PRC, about 70% of cirrhoses were developed from HBV infection, which reflects the significant demand for the treatment of CHB-associated liver fibrosis.
According to Frost & Sullivan, the prevalence of CHB-associated liver fibrosis globally increased from 228.9 million patients in 2018 to 265.0 million patients in 2023. The prevalence of CHB-associated liver fibrosis in the PRC from 2018 to 2023 ranges from 63.6 million to 66.4 million patients and is expected to remain stable in the next 10 years. The anti-liver fibrosis drug market in the PRC has increased from $144.8 million in 2018 to $167.8 million in 2023 with a CAGR of 2.99%. We expect the market to grow to $801.2 million in 2031, at a CAGR of 21.58%.
Etiological treatment is currently the most common treatment of liver fibrosis. For CHB-associated liver fibrosis, antiviral therapy is only able to suppress the viral infection, but is unable to prevent, slow or reverse the progress of fibrosis, suggesting a significant unmet need for effective antifibrotic therapy. Anti-fibrotic treatment is recommended for the treatment of intermediate and advanced liver fibrosis, as well as early-stage cirrhosis. As of December 31, 2024, no chemical or biological drugs treating CHB-associated liver fibrosis have been approved globally. Globally, there are currently a series of drugs that are in late-stage (Phase 2 or later) clinical trials for the treatment of liver fibrosis. Of these clinical-stage drugs, F351 is the most clinically advanced product candidate in the PRC that has the potential to effectively reverse the fibrosis process.
Our CHB-Associated Liver Fibrosis Clinical-Stage Product Candidate: F351 (Hydronidone)
F351, our Phase 3 clinical-stage product candidate in the PRC, has the potential to become the first approved drug to treat CHB-associated liver fibrosis. Of the late clinical-stage drugs for the treatment of liver fibrosis, F351 is the most clinically advanced product candidate in the PRC that has the potential to effectively reverse the fibrosis process.
F351 demonstrated positive results of the reversal of the fibrosis process in our Phase 2 clinical trial in the PRC. Due to the results of the Phase 2 clinical trial and as one of the first drugs in development to treat liver fibrosis, F351 was granted a Breakthrough Therapy designation by the CDE in March 2021 and we commenced patient enrollment for the Phase 3 clinical trial in January 2022. In October 2023, we fully enrolled our 248-patient Phase 3 clinical trial of F351 in the PRC for the treatment of CHB-associated liver fibrosis. In October 2024, the last patient completed this 52-week trial and we expect to report topline data from this trial by the second quarter of 2025.
F351 Mechanism of Action in CHB
When injuries occur and epithelial and/or endothelial cells are damaged, pro-inflammatory cytokines are released by the coagulation cascade for immune cell recruitment, mainly neutrophils and macrophages. These recruited immune cells function as the scavenger to remove tissue debris and dead cells, resulting in acute inflammation. Meanwhile, immune cells themselves release factors like chemokines and cytokines to amplify inflammatory reactions. Next, the released factors, such as TGF-ß1, PDGF, interleukin-13 and interleukin-4, induce the limited activation and proliferation of myofibroblasts. F351 is expected to treat and
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reverse liver fibrosis in chronic viral hepatitis B by inhibiting the proliferation of HSCs and the TGF-ß1 signaling pathway.
The diagram below illustrates the mechanism of action of F351:
Summary of F351 Clinical Results in CHB
As of December 31, 2024, more than five clinical trials sponsored by us or SG were carried out to explore the clinical risk/benefit of F351. Summarized below are the results of selected key clinical trials of F351 for CHB.
Phase 2 PRC Clinical Trial of F351 for CHB-Associated Liver Fibrosis
We conducted a Phase 2 randomized, double-blind, placebo-controlled, Entecavir-based (the first-line drug for the treatment of CHB virus infection), multi-center, dose-escalation trial assessing the safety and efficacy of F351 for treatment of patients in the PRC with CHB-associated liver fibrosis. The Phase 2 trial was randomized in 240 patients divided into four dose-escalating groups (placebo; 180 mg/day; 270 mg/day; and 360 mg/day) with a primary endpoint of the reduction of the liver fibrosis score (Ishak Scoring System) by greater than or equal to one stage after taking F351 in combination with Entecavir.
The trial met its primary endpoint of a statistically-significant improvement in the liver fibrosis score over the 52-week treatment versus placebo (p=0.0245). The percentages of patients who achieved a fibrosis regression of > 1 were 25.58% (placebo), 40.48% (180 mg/day), 56.10% (270 mg/day) and 43.90% (360 mg/day). Accordingly, the 270 mg/day treatment group showed the highest percentage of patients who were able to reach the primary endpoint.
F351 showed better safety results when compared to the placebo in this trial. In the placebo group, 180 mg treatment group, 270 mg treatment group and 360 mg treatment group, rates of SAEs were 4.65%, 2.38%, 2.38% and 7.32%, respectively, with no statistical significance. A total of seven (4.17%) subjects experienced seven SAEs throughout the trial: two (4.6%) in the placebo group, one (2.38%) in the 180 mg group, one (2.38%) in the 270 mg group and three (7.32%) in 360 mg group, with no statistical significance. The SAEs were laboratory abnormalities, elevation of transaminases, embolic infarction, comminuted fracture, osteoporosis, unplanned pregnancy and hypertension. No deaths occurred.
Topline Phase 3 Results of F351 for CHB-Associated Liver Fibrosis
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We are conducting a Phase 3 randomized, double-blind, placebo-controlled, Entecavir-based, multi-center trial assessing the safety and efficacy of F351 for treatment of patients in the PRC with CHB-associated liver fibrosis. The Phase 3 clinical trial was designed to be randomized in 248 patients with a primary endpoint of the reduction of the liver fibrosis score (Ishak Scoring System) by at least one stage after taking F351 in combination with Entecavir.
We commenced patient enrollment for the Phase 3 clinical trials of F351 in January 2022 and completed enrollment in October 2023.
We expect to announce topline results in the second quarter of 2025. Topline results from our Phase 3 trial will be a critical milestone in our clinical development and commercial strategy. A positive outcome has the potential to enhance our commercial sales, strengthen our market position and drive overall company growth.
MASH Disease Overview and U.S. Market Opportunities
MASH, a severe form of metabolic dysfunction-associated steatotic liver disease (“MASLD”), an umbrella of conditions caused by the build-up of extra fat in the liver that is not caused by alcohol intake, is characterized histologically by the additional presence of inflammation and hepatocellular injury, such as visible ballooning, and has a significantly worse prognosis, with the potential to progress to liver fibrosis, cirrhosis or HCC.
MASH represents a large and rapidly growing problem in the U.S. and worldwide. Diagnoses have been on the rise and are expected to increase dramatically in the next decade. The prevalence of MASLD, which affects approximately 25% of the global population, and MASH, which develops in approximately 20% to 30% of MASLD patients, is driven primarily by the worldwide obesity epidemic. As a result, the prevalence of MASH has increased significantly in recent decades, paralleling similar trends in the prevalence of obesity, insulin resistance and Type 2 diabetes. The prevalence of these conditions is expected to increase further due to unhealthy nutrition habits, such as consumption of a diet high in fructose, sucrose and saturated fats, and sedentary behavior.
The critical pathophysiologic mechanisms underlying the development and progression of MASH include reduced ability to metabolize clear lipids, increased insulin resistance, injury to hepatocytes and liver fibrosis in response to hepatocyte injury. MASH patients have an excessive accumulation of fat in the liver resulting primarily from a caloric intake above and beyond energy needs. A healthy liver contains less than 5% fat, but a liver in someone with MASH can contain more than 20% fat. This abnormal liver fat contributes to the progression to MASH, a liver necro-inflammatory state, that can lead to scarring, also known as fibrosis, and, for some, can progress to cirrhosis and liver failure—cirrhosis develops in approximately 20% to 45% of patients. In some cases, cirrhosis progresses to decompensated cirrhosis, which results in permanent liver damage that can lead to liver failure. In addition, it is estimated that 8% of patients with advanced fibrosis will develop HCC. MASH is a complex, multifaceted disease that does not just affect the liver. Patients with MASH frequently have other significant metabolic co-morbidities such as obesity, hyperglycemia, dyslipidemia and systemic hypertension (a constellation of which is commonly referred to as metabolic syndrome) and these further contribute to the risk of cardiovascular disease.
Our MASH-Associated Liver Fibrosis Clinical-Stage Product Candidate: F351 (Hydronidone)
F351, our Phase 1 clinical-stage drug candidate in the United States, has the potential to treat MASH-associated liver fibrosis. We are actively preparing to file an IND application in the first half of 2025. Following IND clearance, we plan to initiate a Phase 2, proof-of-concept clinical trial in 2025 in the United States, subject to positive trends in the Phase 3 clinical trial of F351 in the PRC, to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of F351 for patients with advanced liver fibrosis associated with noncirrhotic MASH.
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F351 is a structural analogue of ETUARY, but with medicinal chemistry that has been modified to potentially reduce the safety liabilities associated with Phase 1 metabolism.
F351 Mechanism of Action in MASH
F351 is designed to treat liver fibrosis by inhibiting the activation of hepatic stellate cells (“HSCs”) through Smad7-mediated TGF-ß degradation, as well as decreasing the expression of fibrosis-related genes. The TGF-ß is acentral mediator of fibrogenesis in tissues. Activation of the HSCs is recognized as a central event in the progression of liver fibrogenesis, with the TGF-ß as one of the key mediators.
F351 has been shown to inhibit in vitro both p38γ kinase activity and TGF-ß1-induced excessive collagen synthesis in HSCs. This is further supported by its anti-proliferative effects on the HSCs in the liver. In vitro anti-fibrotic effects of F351 were also confirmed in several established in vivo rodent models of liver fibrosis, such as carbon tetrachloride (“CCl4”)-induced liver fibrosis mouse model, DMN-induced liver fibrosis rat model, and HSA-induced liver fibrosis rat model, as well as mouse model of MASH fibrosis (CCl4 +Western [High Fat] Diet). In the MASH mouse model, F351 significantly reduced the severity of fibrosis, as well as demonstrated improvements in the functional, biochemical and histopathological attributes of the affected liver tissue, including a significant reduction of hydroxyproline content and liver enzymes (ALT), aspartate (AST), a decrease in liver fat degeneration, and decreases in the levels of several of inflammatory cytokines at doses of 3-10 mg/kg/day, as well as a decrease in the NAS score in the CCl4and WD-induced fibrosis and cell ballooning MASH models at doses of 15-50 mg/kg bid (HEDs of 144 – 480 mg) which are relevant to human exposure. Thus, the key attributes of F351’s molecular mechanisms of action in animal models of liver fibrosis support its efficacy potential in liver fibrosis of various etiologies including those associated with MASH.
Summary of F351 Clinical Results in MASH
Phase 1 U.S. Clinical Trial of F351 for MASH-Associated Liver Fibrosis
We have completed a Phase 1 clinical trial that evaluated the safety, tolerability, and PK of single and multiple doses of F351 in U.S. healthy volunteers, and collected bridging data to the data obtained in healthy volunteers in the PRC. This Phase 1 clinical trial of F351 was conducted on the basis of an IND that was filed in 2016 for F351 as an anti-fibrotic agent with a focus on liver fibrosis associated with a spectrum of chronic liver diseases.
Following single oral doses of F351 (30 mg or 120 mg) in Part I of the trial, F351 was rapidly absorbed, showing a linear PK pattern of exposure with mean elimination half-life of five to six hours, and five to seven hours for M3 and M4 metabolites. Following repeated oral doses of F351 (30 mg or 120 mg TID) for seven days in Part II of the trial, F351 capsules were rapidly absorbed with a similar PK pattern of exposure and similar half-life as seen following single doses of F351. Modest accumulation (less than a 1.5-fold increase) was observed for F351, M3 and M4 with repeated 30 mg or 120 mg TID. Dose-normalized F351 Cmax and AUC values were similar in males and females.
Overall, F351 was well tolerated when administered as a single oral dose of 30 mg or 120 mg and when administered as repeated oral doses of 30 mg or 120 mg TID for seven consecutive days. There were no premature discontinuations due to adverse events (“AEs”), no serious adverse events (“SAEs”), and no deaths reported in this trial. Treatment-emergent AEs reported following single dose administration in Part I of the trial included a single AE of rhinorrhea and scattered, isolated, reversible laboratory abnormalities. Treatment-emergent AEs reported following repeated dose administration in Part II of the trial included headache (25.0%), constipation (16.7%) and somnolence (12.5%). Abdominal discomfort and flatulence were also reported as gastrointestinal AEs in one subject each. There were no clinically significant overall changes in safety laboratory tests that were attributable to trial drug product, including no evidence of any significant drug-induced liver injury or clinically significant overall changes in vital signs, ECG parameters or physical examinations that were attributable to trial drug product.
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Anticipated Phase 2 U.S. Clinical Trial of F351 for MASH-Associated Liver Fibrosis
Following IND clearance, we plan to initiate Phase 2 clinical development of F351 in MASH-associated liver fibrosis. We expect to file the IND in the first half of 2025. The goal of the proposed Phase 2 clinical trial is to obtain early proof-of-concept for F351 in subjects with MASH-associated liver fibrosis as a basis of expansion into a more comprehensive Phase 2/3 clinical program. This trial will be conducted under a new IND, reflecting the distinct risk-benefit profile that the drug may have in a MASH patient population. To support the IND filing and initiation of the proposed Phase 2 clinical trial, we plan to cross-reference all nonclinical and clinical data obtained in trials completed under the currently-active IND in the United States, as well as those previously completed in the PRC. We believe that the results obtained in these nonclinical and clinical studies provide adequate information on the current clinical risk/benefit profile of the drug and allow for safe initiation of the proposed Phase 2 clinical trial of F351 in MASH-associated liver fibrosis.
F351 Competition in the U.S. (MASH)
The biopharmaceutical industry is intensely competitive and subject to rapid innovation and significant technological advancements. We believe the key competitive factors that will affect the development and commercial success of F351 and any future product candidates are efficacy, safety and tolerability profile, reliability, convenience of dosing, price, the level of generic competition and reimbursement. Our competitors include multinational pharmaceutical companies, specialized biotechnology companies, universities and other research institutions. A number of biotechnology and pharmaceutical companies are pursuing the development or marketing of pharmaceuticals that target the same diseases that we are targeting. Smaller or earlier-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Given the high incidence of MASH, it is likely that the number of companies seeking to develop products and therapies for the treatment of liver and cardio-metabolic diseases, such as MASH, will increase.
If F351 is approved for the treatment of MASH-associated liver fibrosis, future competition could arise from five main classes of drugs aiming to reach the market in the current MASH landscape: Farnesoid X receptor agonists, fibroblast grow factor 21, thyroid hormone receptor-β agonists, glucagon-like peptide 1 (“GLP-1”) agonists, and PPAR agonists, but there are others as well. Resmetirom, a beta-thyroid hormone receptor agonist from Madrigal Pharmaceuticals, Inc. became the first drug to be approved by FDA for the treatment of adults with noncirrhotic MASH with moderate to advanced liver fibrosis, to be used along with diet and exercise; other candidates include VK2809 a beta-thyroid hormone receptor agonist from Viking Therapeutics, Inc.; Aldafermin, an FGF19 analog from NGM Biopharmaceuticals, Inc.; denifanstat, a novel fatty acid synthase (FASN) inhibitor from Sagimet Biosciences; MK-3655, an FGFR1c/KLB agonist antibody from Merck & Co., Inc.; Efruxifermin, a FGF21 fusion protein from Akero Therapeutics, Inc.; Pegozafermin, a FGF21 fusion protein from 89bio, Inc.; Belapectin, a Galectin-3 inhibitor from Galectin Therapeutics Inc.; Aramchol, a synthetic conjugate of cholic acid and arachidic acid from Galmed Pharmaceuticals Ltd.; Semaglutide, a GLP-1 receptor agonist from Novo Nordisk A/S; Pemvidutide/ALT-801, a dual GLP-1/glucagon agonist from Altimmune; Tirzepatide, a dual GIP/GLP-1 receptor agonist from Eli Lilly and Company; Lanifibranor, a PPAR alpha/delta/gamma agonist from Inventiva; NNC0194-0499, an FGF21 analog from Novo Nordisk; BOS-580, an FGF21 analog from Boston Pharmaceuticals; and BFKB8488A, and an FGFR1/KLB agonist antibody from Genentech.
F351 Manufacturing and Supply
The manufacturing of F351 active pharmaceutical ingredients (“API”) and drug product supplies required for supporting the Phase 2 clinical trial in MASH-associated liver fibrosis was completed at WuXi STA, based in the PRC. The API and drug product are of current Good Manufacturing Practice (“cGMP”) grade quality, and batch release and stability studies comply with applicable regulatory requirements.
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In light of the legislation known as the BIOSECURE Act, which was proposed in the 118th Congress, we have taken several measures to strengthen our supply chain in the event that Wuxi Biologics, Inc. (“Wuxi Biologics”) or one of our other manufacturers is impacted. The version of the BIOSECURE Act introduced in the U.S. House of Representatives during the 118th Congress would prohibit federal agencies from entering into procurement contracts with, as well as providing grants and loans to, an entity that uses biotechnology equipment or services from a biotechnology company of concern, and includes a grandfathering provision allowing biotechnology equipment and services provided or produced by named “biotechnology companies of concern” under a contract or agreement entered into before the effective date until January 1, 2032. The pathway and timing for the BIOSECURE Act or its provisions to become law are uncertain. We are carefully monitoring and assessing the situation surrounding Wuxi Biologics and deliberating various options, including switching to a different CDMO for F351 clinical trials in the U.S. We will also continue to closely monitor geopolitical risk and implement additional mitigations and supply chain redundancies, as needed. See the risk factor entitled “Manufacturing pharmaceutical products on a large commercial scale is highly exacting and complex, and we and our third-party manufacturers may encounter problems during the process.”
Our Product Candidate For Kidney Fibrosis: Pirfenidone
DKD Disease Overview and PRC Market Opportunities
DKD is a chronic kidney disease (“CKD”) caused by diabetes mellitus. DKD is clinically manifested as specific pathological structural and functional changes in the kidney of diabetes patients. In addition, DKD has become the primary cause of progression from CKD to the end-stage renal disease and one of the main diseases causing renal fibrosis. As one of the serious complications of diabetes, DKD in the PRC is characterized by high prevalence, low awareness rate, low treatment rate and low control rate.
According to Frost & Sullivan, the prevalence of DKD in the PRC increased from 47 million patients in 2018 to 53.6 million patients in 2023, and it is expected to increase to 61.6 million patients by 2031. The DKD market in the PRC increased from $26.4 billion in 2018 to $40.2 billion in 2023 and it is predicted to expand to $54.0 billion by 2028 and $60.5 billion by 2031.
The standard of care for DKD has been blood glucose control, blood pressure control and blood liquid control. However, current therapeutic strategies are far from being completely effective because no available therapy successfully prevents DKD and many patients still progress to end-stage renal disease. The current available drugs for the treatment of DKD include hypoglycemic drugs, antihypertensive drugs and lipid-lowering drugs. As of December 31, 2024, there was one approved treatment for DKD in many parts of the world, finerenone (marketed under the name KERENDIA).
Pirfenidone has demonstrated positive therapeutic effects on DKD due to its unique mechanism of action. Several growth factors or cytokines that are locally produced in the kidney appear to contribute to the extracellular matrix accumulation, inflammation and scarring in progressive DKD. The TGF-ß1 system is activated and plays a pathogenetic role in DKD in animal models of type 1 and type 2 diabetes. In addition, several studies in patients with type 1 and type 2 diabetes indicate increased renal production of TGF-ß1. The TNF-α’ system has also recently been linked with human DKD on the basis of circulating blood levels and gene expression in kidneys from patients with DKD. Pirfenidone has been found to inhibit TGF-ß1 production and consequent matrix deposition in experimental animal models of kidney disease. In animal models and cell culture studies, pirfenidone also reduces TNF-α’ production. Previous studies also showed that oral pirfenidone administered to db/db mice after the onset of established DKD was effective in reducing glomerulosclerosis.
DKD Phase 1 Clinical Trial of Pirfenidone in the PRC
We conducted an open-label, parallel-controlled, single-center clinical trial to evaluate the safety and PK of a single dose of pirfenidone capsules in patients with CKD stages G2 and G3a. 24 subjects were enrolled, consisting of 12 patients with renal insufficiency and 12 healthy volunteers.
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The Phase 1 clinical trial was completed in March 2022. In this trial, pirfenidone was tolerated when used in patients with CKD G2 and G3a, there were no significant changes in the main pharmacokinetic parameters compared with healthy controls, and no dose adjustment was required.
We are currently discussing further steps with Chinese authorities for 2025 plans in DKD.
Our Product Candidate for ALF/ACLF: F573
ALF/ACLF Disease Overview and PRC Market Opportunities
ALF/ACLF is severe liver damage caused by a variety of factors, resulting in severe impairment or loss of synthesis of detoxification, metabolism and biotransformation functions. ALF/ACLF can follow with symptoms of jaundice, coagulation dysfunction, hepatorenal syndrome, hepatic encephalopathy and ascites. The causes of ALF/ACLF are complex and include the hepatitis viruses (especially HBV) and other viruses, drugs, hepatotoxic substances (e.g., alcohol and chemical agents), bacteria and parasites. In the PRC, HBV, drugs and hepatotoxic substances are the most common causes of ALF/ACLF.
According to Frost & Sullivan, the prevalence of ALF/ACLF in the PRC was 42,440 patients in 2018 and 38,130 patients in 2023 and is expected to be 32,940 patients in 2028 and 29,720 patients in 2031. The market size of ALF/ACLF in the PRC was $274.2 million in 2018 and $254.0 million in 2023 and it is expected to be $219.8 million in 2028 and $198.5 million in 2031.
The main treatment options for liver failure include comprehensive medical therapy, non-biological artificial liver support treatment and liver transplantation. Medical treatment mainly includes general supportive therapy, symptomatic treatment, etiological treatment and treatment for complications.
Our ALF/ACLF Clinical-Stage Product Candidate: F573
F573 is a caspase inhibitor and a potential Category 1 new drug for the treatment of ALF/ACLF. We enrolled the first subject for the Phase 1 clinical trial in January 2022 and initiated a Phase 2 clinical trial in March 2023 in the PRC. Our Phase 2 clinical trial of F573 as a treatment for ALF/ACLF is expected to be completed by the end of 2026.
F573 Mechanism of Action in ALF/ACLF
Inflammatory response and immune dysfunction can lead to massive liver cell death, which causes ALF/ACLF. Therefore, inhibiting the apoptosis process of normal hepatocytes helps to delay the progression of ALF/ACLF. The main mediating pathways of hepatocyte apoptosis include the mitochondrial pathway and the death receptors pathway, where the caspase family plays an important role as the main executive molecules. The main mechanism of F573 is to inhibit the activity of the caspase family, including caspases 1, 3, 6, 7, 8 and 9 and to reduce the cleavage effects on poly-ADP-ribose polymerase, thus blocking the cell apoptosis process mediated by endogenous or exogenous signals. As a result, hepatic failure is expected to be alleviated by F573.
The diagram below illustrates the mechanism of action of F573:
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Preclinical Data of F573 for ALF/ACLF
The efficacy profile of F573 has been demonstrated in four preclinical studies. In in vitro studies, F573 had a significant inhibitory effect on apoptosis in a variety of cells. Specifically, F573 had a protective effect on HeLa cells, human normal hepatocytes L02 and Jurkat cells, while inhibiting Caspase-3 enzyme activity and reducing its ability to cleave the substrate AC-DEVD-AMC. F573 improved liver function and alleviated the liver injury caused by D-GalN/LPS-induced fulminant liver failure in rats, which significantly inhibited hepatocyte necrosis and apoptosis and showed a preventive and therapeutic effect on acute and severe liver injury. In a pharmacodynamic acute liver injury experiment on D-Gal/LPS mortality in mice, F573 had a protective effect against acute liver injury caused by D-Gal and LPS in km mice and prolonged the survival time of km mice. F573 has been shown to improve liver function and reduce liver injury in ConA-induced acute liver failure in BALB/c mice. F573 significantly inhibits hepatocyte necrosis and apoptosis and has a preventive and therapeutic effect on acute and severe liver injury.
Phase 1 PRC Clinical Trial of F573 for the treatment of ALF/ACLF
We enrolled the first subject for our Phase 1 clinical trial to assess the tolerance and PK of single and multiple doses of F573 in January 2022. We recruited 100 healthy subjects for this trial and completed the Phase 1 clinical observations of tolerability and PK in July 2022. The Cmax of F573 was not dose-dependent at the dose range from 0.5 mg/kg to 2.0 mg/kg, and AUC0-t and AUC0-∞ of F573 showed linear pharmacokinetics. The rate of absorption of F573 showed sex differences. F573 was administered once a day for seven days without accumulation in the human body.
Phase 2 PRC Clinical Trial of F573 for the treatment of ALF/ACLF
We initiated our Phase 2 clinical trial in March 2023. The main objective of this trial is to assess the efficacy and safety of F573 for injection in the treatment of liver injury/failure. The Phase 2 trial is divided into three stages:
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First Stage: 16 patients with 1/2 grade drug-induced liver injury (“DILI”) or other liver injury patients and 9 patients with CHB were enrolled. First, DILI or other liver injury patients were treated with the trial drug at either 0.5 mg/kg, 1.0 mg/kg, 2.0 mg/kg or placebo in a 1:1:1:1 ratio. CHB patients received the trial drug. The first stage was completed in December 2024.
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Second Stage: 24 patients with liver injury (DILI patients and patients with intrahepatic cholestatic liver injury) are expected to be enrolled. Qualified subjects will be screened and randomly assigned in a 3:1 ratio to receive the investigational drug or placebo, once daily for 14 consecutive days. The dosage is expected to be 0.5 mg/kg and 2.0 mg/kg based on a comprehensive consideration of the
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efficacy and safety test results from the first stage. The 0.5 mg/kg dose group trial will be conducted first, enrolling 12 subjects. After the 0.5 mg/kg dose group trial is completed, the 2.0 mg/kg dose group trial will be conducted, also enrolling 12 subjects.
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Third Stage: The third stage is expected to employ a randomized, double-blind, placebo-controlled design. The trial is divided into a screening period (14 days), a treatment period (28 days), and a follow-up period (90 days). Qualified subjects will be randomly assigned in a 3:1 ratio to receive the investigational drug or placebo, once daily for 28 consecutive days. The dosage will be determined based on a comprehensive consideration of the efficacy and safety test results from the first and second stages. Subjects will also receive concomitant administration of the drug acetylcysteine injection. After discontinuation of treatment, subjects will undergo a 90-day safety follow-up.
Our Product Candidate for PAH: F230
F230 is a selective endothelin-receptor A antagonist to treat PAH. PAH is a rare disease and a progressive, life-threatening disorder characterized by increased pressure in the pulmonary arteries that carry blood from the heart to the lungs. A common pathological hallmark of PAH is vascular remodeling, including increased stiffening and thickening of pulmonary arteries. This restricts blood flow through the lungs, causing pulmonary hypertension and making the heart work harder to pump blood to the lungs. The exact cause of PAH is unknown and there is no known cure for PAH. PAH is a serious disease that has a short life expectancy if left untreated. The prognosis for the treatment of PAH is poor, with a high mortality rate and survival of less than three years in the absence of standard therapy.
According to Frost & Sullivan, the prevalence of PAH in the PRC increased from 50,600 patients in 2018 to 60,600 patients in 2023 and it is expected to increase to 68,600 patients by 2028 and 70,600 patients by 2031. The market size of PAH in the PRC increased from $0.31 billion in 2018 to $0.37 billion in 2023 and it is expected to increase to $0.44 billion by 2028 and $0.48 billion by 2031.
In the study of hypoxia-induced PAH in rats, F230 resulted in significant decreases of, or exhibited a decrease trend based on different dose groups in, mean pulmonary arterial pressure, right ventricular systolic pressure, right ventricular/left ventricular plus septum and pulmonary artery wall thickness. Even at minimum effective dosage, the differences of those indexes between treatment group and PAH group are statistically significant. In March 2024, we submitted an IND application for F230 to the PRC Center for NMPA. In May 2024, we obtained the approval from the NMPA for the IND to launch a new clinical trial in the PRC of F230. We expect to launch the Phase 1 clinical trial in the PRC in 2025.
Our Product Candidate for COPD: F528
F528 is an anti-inflammatory small molecule drug candidate developed for the treatment of COPD. F528 is a novel anti-inflammation agent that targets inhibition of multiple inflammatory cytokines and could modify the progression of COPD with extreme low toxicity in vivo. COPD is a chronic inflammatory lung disease which causes obstructed air flow from the lungs. It consists of three separate illnesses: emphysema, chronic bronchitis and chronic obstructive asthma. COPD causes the destruction of barriers between alveoli inside the lungs, causing airways to get swollen and clogged with mucus. In most cases, COPD develops very slowly and symptoms may emerge for years before being diagnosed.
According to Frost & Sullivan, prevalence of COPD in the PRC increased from 103.5 million patients in 2018 to 107.3 million patients in 2023 and is expected to increase to 113.1 million patients in 2028 and 116.4 million patients in 2031. The COPD market in the PRC was $0.88 billion in 2018 to $1.06 billion in 2023. The market is predicted to expand to $1.29 billion by 2028 and $1.46 billion by 2031.
The drug treatment of COPD is mainly used to relieve symptoms, reduce the frequency and severity of disease deterioration and improve cardio endurance and health. Currently, there is no conclusive clinical trial evidence
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showing that existing drugs can slow down the long-term decline in lung function. For late-stage COPD patients, currently-available treatment options achieve limited therapeutic effects. As clinical research results from external parties indicated, 2% of patients were reported to gain improvement in exercise capability after 24 months of standard medical treatment and none were reported to gain improved health-related quality of life. Thus, there are significant unmet clinical needs for COPD patients.
We believe F528 could become first-line therapy for COPD. In a preclinical study of the effect of F528 in rats with COPD induced by smoke exposure and LPS tracheal injection, the lung index, the alveolar space and the lung injury score were significantly decreased after the treatment of F528. Preclinical validation of F528 is expected to be completed in 2025, including non-Good Laboratory Practices ("GLP") toxicology studies, GLP toxicology studies, and large animal safety studies. IND submission is expected in 2026.
Our Commercialization Plans in TP with CLD and ITP
Our Commercial-Stage Product Candidate: Avatrombopag
Gyre Pharmaceuticals acquired avatrombopag under a transfer agreement with Nanjing Healthnice Pharmaceutical Technology, Co., Ltd. (“Nanjing Healthnice”) in June 2021. In June 2024, Gyre Pharmaceuticals received approval from the NMPA for avatrombopag maleate tablets for the treatment of TP associated with CLD in adult patients undergoing elective diagnostics procedures or therapy. TP is the most common hematologic complication in patients with CLD and can be life threatening in severe cases. Avatrombopag is an oral thrombopoietin receptor agonist. In January 2025, Gyre Pharmaceuticals received approval from the NMPA for avatrombopag maleate tablets to expand the treatment indications of avatrombopag maleate tablets to include ITP. Gyre Pharmaceuticals plans to start commercializing the avatrombopag product in the PRC in 2025.
Our Product Candidate for DM-ILD and SSc-ILD: Pirfenidone
We were previously conducting two Phase 3 clinical trials of pirfenidone for the treatment of DM-ILD and SSc-ILD. We are prioritizing the development of our product candidates for other targeted indications and, as a result, have paused our two Phase 3 trials in the PRC for the treatment of DM-ILD and SSc-ILD. We may decide to continue such Phase 3 trials in the future.
Intellectual Property
Our success depends in part upon our ability to protect our core technology and intellectual property. Our intellectual property is critical to our business and we strive to protect it through a variety of approaches, including by obtaining and maintaining patent protection in the United States and internationally for our product candidates, new targets, indications and applications and other inventions important to our business. For our product candidates, we generally pursue patent protection covering compositions of matter, methods of manufacture and methods of use. As we further develop our product candidates, we plan to identify additional novel candidates for patent protection that may potentially enhance commercial success, including pursuit of claims directed to new therapeutic indications. We enter into collaboration agreements and other relationships with pharmaceutical companies and other industry participants to leverage our intellectual property or gain access to the intellectual property of others.
Patents
As of the date of this Annual Report, Gyre owns 26 granted patents globally, 20 pending patent applications in the PRC and nine Patent Cooperation Treaty (“PCT”) patent applications.As of the date of this Annual Report, we are the owner of all the patents and patent applications that are material to our business.
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The term of individual patents depends on the legal term for patents in the jurisdictions in which they are granted. In most jurisdictions, the patent term for inventions is 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable jurisdiction. The actual protection afforded by a patent varies on a claim-by-claim and country-by-country basis and depends upon many factors, including the type of patent, the scope of its coverage, the availability of any patent term extensions or adjustments, the availability of legal remedies in a particular country and the validity and enforceability of the patent.
Although ETUARY’s (Pirfenidone) substance patent expired in August 1993, Gyre currently holds one process patent that expires in 2038. In addition, Gyre holds a family of patents for methods using Pirfenidone compositions to treat certain cytotoxic- or radiation-induced injuries, such as pneumonitis, consisting of granted patents in Canada, Europe, Japan, the PRC, and the U.S.
Our F351 patent portfolio currently consists of ten patent families, including patents and/or patent applications in various countries and under the PCT. The first patent family is for a method of preparing F351 and consists of one granted patent in the PRC that expires in 2028, two granted pants in Japan, both of which expire in 2037, and 2 PCT patent applications and 6 pending patent applications in the PRC. The second patent family is for a method of preparing a crystal form of F351 and consists of one granted patent in the PRC that expires in 2041. The third patent family relates to methods for using F351 to treat and/or prevent chronic hepatitis B with hepatic fibrosis and consists of one PCT patent application and one pending patent application in each of Australia, Canada, Europe, the PRC, India, Japan and Mexico, and the U.S. The fourth patent family pertains to the use of pharmaceutical compositions or drug kits in the preparation of drugs to treat or relieve pulmonary fibrosis or to improve the symptoms of pulmonary fibrosis and consists of one pending patent application in the PRC and one PCT patent application. The fifth patent family is for F351 compositions and methods of using F351 for treating liver fibrosis, liver cirrhosis, advanced hepatitis B and NASH and consists of one PCT patent application and one pending patent application in each of the PRC, Australia, Canada, Europe, Israel, Japan, Mexico, New Zealand, Singapore, South Korea and the U.S. The sixth patent family pertains to the use of pharmaceutical compositions or drug kits in the preparation of drugs to treat or prevent chronic renal failure and consists of one pending patent application in the PRC. The seventh patent family pertains to the use of pharmaceutical compositions or drug kits in the preparation of drugs to treat or prevent chronic kidney disease and consists of one pending patent application in the PRC. The eighth patent family pertains to the use of pharmaceutical compositions or drug kits in the preparation of drugs to treat or prevent radiation induced pulmonary fibrosis and consists of one pending patent application in the PRC. The ninth patent family pertains to the use of pharmaceutical compositions or drug kits in the preparation of drugs to treat or prevent fibrotic diseases and consists of one pending patent application in the PRC. The tenth patent family pertains to the use of pharmaceutical compositions or drug kits in the preparation of drugs to treat fatty liver disease associated with metabolic dysfunction and consists of one pending patent application in the PRC.
For F573, Gyre owns two granted patents in the PRC, which both expire in 2031, one patent application in the PRC, one PCT patent application, and one patent application in each of Europe, Japan, South Korea, the PRC and the U.S. For F528, Gyre owns one PCT patent application, one patent in each of the PRC and Japan, and pending patent applications in Europe and the U.S.
We expect to continue to file patent applications to cover methods of treating additional indications, as well as new forms, formulations, and methods of manufacturing F351 and other drug candidates.
Gyre Patent Family Tree
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Trade Secrets
We may rely, in some circumstances, on trade secret and/or confidential information to protect aspects of our technology. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with consultants, scientific advisers and contractors. We have entered into confidentiality agreements and non-competition agreements with our senior management and key members of our R&D team and other employees who have access to trade secrets or confidential information about our business.
We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. For details of risks related thereto, see “Risk Factors—Risks Related to Our Intellectual Property”.
Trademarks and Domain Names
We conduct our business under the brand name of “Continent” or “”. As of December 31, 2024, we own four registered artwork copyrights, 24 registered software copyrights and 55 registered trademarks in the PRC. We also own seven registered trademarks in Hong Kong, one international trademark of “ETUARY” and the trademark application of “ETUARY” in seven countries and regions including the United States, EU and Japan. As of the same date, we also hold 15 active domain names.
Our Business Operations in the United States: Gyre Therapeutics, Inc.
In this section, references to “we,” “our,” “us” and “our company” refer to Gyre Therapeutics, Inc.
Our U.S. operations are headquartered in San Diego, CA, and primarily focus on the development and commercialization of F351 for the treatment MASH-associated liver fibrosis.
Employees in the United States
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We consider our ability to recruit, retain and motivate our employees to be critical to our success. We are an equal opportunity employer and are fundamentally committed to creating and maintaining a work environment in which employees are treated with respect and dignity. We strive to administer all human resources policies, practices and actions related to hiring, promotion, compensation, benefits and termination in accordance with the principal of equal employment opportunity, meaning on the basis of individual skills, knowledge, abilities, job performance and other legitimate criteria and without regard to race, color, religion, sex, sexual orientation, gender expression or identity, ethnicity, national origin, ancestry, age, mental or physical disability, genetic information, any veteran status, any military status or application for military service, or membership in any other category protected under applicable law.
As of December 31, 2024, we had five full-time employees in the United States. We have no collective bargaining agreements with our employees, and we have not experienced any work stoppages. We consider our relations with our employees to be good.
We aim to provide our employees with competitive salary and benefits that enable them to achieve a good quality of life and plan for the future. Our benefits are based on local norms and market preferences, but include all salary and social benefits required by local law (including paid time off for vacation and sick leave) and many additional benefits that go beyond legal requirements.
U.S. Business Organization
We commenced operations in 2002 and are a Delaware corporation. On August 20, 2015, we merged with Targacept, Inc. and on October 30, 2023, we completed the Contributions and became Gyre Therapeutics, Inc. Our corporate headquarters are in San Diego, California. We conduct general and administrative functions primarily from our San Diego, California location.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available for free at www.gyretx.com as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. They are also available for free on the SEC’s website at www.sec.gov. The information in or accessible through the SEC and our website are not incorporated into, and are not considered part of, this filing.
Business Combination
On December 26, 2022, Catalyst Biosciences, Inc. (“Catalyst”) entered into an Asset Purchase Agreement with GNI Group Ltd. (“GNI Japan”) and GNI Hong Kong Limited (“GNI Hong Kong”) (collectively, the “Sellers”) to acquire all assets and intellectual property rights primarily related to the proprietary F351 compound, excluding those in the PRC. Under the agreement, Catalyst paid $35 million in consideration, consisting of 6,266,521 shares of Catalyst common stock and 12,340 shares of Series X Convertible Preferred Stock. Concurrently, Catalyst entered into a Business Combination Agreement with GNI USA, Inc. (“GNI USA”), GNI Japan, GNI Hong Kong, Shanghai Genomics, Inc., and certain minority shareholders to acquire an indirect controlling interest in Beijing Continent Pharmaceuticals Co., Ltd. (now Gyre Pharmaceuticals Co., Ltd.) through equity contributions by GNI USA and the minority shareholders.
On October 27, 2023, Catalyst entered into a Securities Purchase Agreement with GNI USA for a private placement of 8,110,000 units, comprising Convertible Preferred Stock and warrants, for an aggregate purchase price of approximately $5 million. Effective October 30, 2023, Catalyst increased its authorized shares of common stock, effected a 1-for-15 reverse stock split, and changed its name to Gyre Therapeutics, Inc. On the same date, the business combination was completed, with GNI USA and the minority shareholders contributing their respective equity interests in exchange for shares of Gyre common stock. Following these transactions, GNI USA owned approximately 85.3% of Gyre’s outstanding shares, the
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minority shareholders owned approximately 12.3%, and pre-combination Catalyst stockholders held approximately 2.5%, assuming full conversion of the Convertible Preferred Stock. As a result, Gyre became primarily engaged in the research, development, manufacturing, and commercialization of innovative therapies for organ fibrosis.
Government Regulation in the United States
Government authorities in the United States, at the federal, state and local levels, and in other countries and jurisdictions, including the EU, extensively regulate, among other things, the research, development, testing, product approval, manufacture, quality control, manufacturing changes, packaging, storage, recordkeeping, labeling, promotion, advertising, sales, distribution, marketing, and import and export of drugs. Our current product candidates are expected to be regulated as pharmaceutical drugs. The processes for obtaining regulatory approval in the United States and in foreign countries and jurisdictions, along with compliance with applicable statutes and regulations and other regulatory authorities both pre- and post-commercialization, are a significant factor in the production and marketing of our products and our R&D activities and require the expenditure of substantial time, human capital and financial resources.
Review and Approval of Drugs
In the United States, the FDA and other government entities regulate drugs under the Federal Food, Drug, and Cosmetic Act ("FDCA") and the regulations promulgated thereunder, as well as other federal and state statutes and regulations. Failure to comply with applicable legal and regulatory requirements in the United States at any time during the product development process, approval process, or after approval, may subject us to a variety of administrative or judicial sanctions, such as a delay in approving or refusal by the FDA to approve pending applications, withdrawal of approvals, delay or suspension of clinical trials, issuance of warning letters and other types of regulatory letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil monetary penalties, refusals of or debarment from government contracts, exclusion from the federal healthcare programs, restitution, disgorgement of profits, civil or criminal investigations by the FDA, U.S. Department of Justice, State Attorneys General, and/or other agencies, False Claims Act suits and/or other litigation, and/or criminal prosecutions.
An applicant seeking approval to market and distribute a new drug in the United States must typically undertake the following:
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completion of pre-clinical laboratory tests, animal studies, chemical synthesis and manufacturing and formulation studies in compliance with the FDA’s GLP, regulations;
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submission to the FDA of an IND for human clinical testing, which must become effective without FDA objection before human clinical trials may begin;
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approval by an independent institutional review board (“IRB”), representing each clinical site before each clinical trial may be initiated;
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performance of adequate and well-controlled human clinical trials in accordance with the FDA’s good clinical practice (“GCP”), regulations, to establish the safety and effectiveness of the proposed drug product for each indication for which approval is sought;
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preparation and submission to the FDA of an NDA;
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review of the NDA by an FDA advisory committee, where applicable;
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satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the drug product, and the active pharmaceutical ingredient or ingredients thereof, are produced to assess compliance with cGMP, regulations and to assure that the facilities, methods, and controls are adequate to ensure the product’s identity, strength, quality, and purity;
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payment of user fees, as applicable, and securing FDA approval of the NDA; and
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compliance with any post-approval requirements, such as any risk evaluation and mitigation strategy (“REMS”), or post-approval studies required by the FDA.
Preclinical Studies and an IND
To file an IND, an organization must produce batches of the actual material of drug substance and drug product to be used in the clinical trial. The batches of drug substance and drug product need to be characterized analytically before release and placed on stability. At least one month of stability data must be included in the IND upon submission.
Preclinical studies can include in vitro and animal studies to assess the potential for adverse events and, in some cases, to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. Other studies include laboratory evaluation of the purity, stability and physical form of the manufactured drug substance or API and the physical properties, stability and reproducibility of the formulated drug or drug product. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND to justify that the proposed clinical study may safely proceed. Some preclinical testing, such as longer-term toxicity testing, animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to a proposed clinical trial and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.
Following commencement of a clinical trial under an IND, the FDA may place a clinical hold on that trial. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a delay or suspension of only part of the clinical work requested under the IND. For example, a specific protocol or part of a protocol is not allowed to proceed, while other protocols may do so. No more than 30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide the sponsor a written explanation of the basis for the hold. Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA has notified the sponsor that the investigation may proceed. The FDA will base that determination on information provided by the sponsor correcting the deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed.
Human Clinical Studies in Support of an NDA
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations.
Information about certain clinical trials must be submitted within specific timeframes to the NIH for public dissemination on its ClinicalTrials.gov website.
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Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
Phase 1: The product candidate is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.
Phase 2: The product candidate is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
Phase 3: The product candidate is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase 1, Phase 2, and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites in late-stage clinical trials to assure compliance with GCP and the integrity of the clinical data submitted.
A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. In the United States, when a foreign clinical study is conducted under an IND, all IND requirements must be met unless waived, and some of the requirements may be waived upon the FDA’s decision. When the foreign clinical study is not conducted under an IND, the sponsor must ensure that the study complies with applicable FDA regulatory requirements in order to use the study as support for an IND or application for marketing approval or licensure, including that the study was conducted in accordance with GCP, including review and approval by an independent ethics committee and use of proper procedures for obtaining informed consent from subjects, and the FDA is able to validate the data from the study through an onsite inspection if the FDA deems such inspection necessary. The GCP requirements encompass both ethical and data integrity standards for clinical studies.
Submission of an NDA to the FDA
Assuming successful completion of required clinical testing and other requirements, the results of the preclinical and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug product for one or more indications.
Under certain circumstances, the FDA will waive the application fee for the first human drug application that a small business, defined as a company with less than 500 employees, including employees of affiliates, submits for review. An affiliate is defined as a business entity that has a relationship with a second business entity if one business entity controls, or has the power to control, the other business entity, or a third-party controls, or has the power to control, both entities. In addition, an application to market a prescription drug product that has received orphan designation is not subject to a prescription drug user fee unless the application includes an indication for other than the rare disease or condition for which the drug was designated. Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a disease or condition that affects fewer than 200,000 individuals in the United States, or for which there is no reasonable expectation that U.S. sales will be sufficient to recoup the development and production costs.
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The FDA conducts a preliminary review of an NDA within 60 days of its receipt and informs the sponsor by the 74th day after the FDA’s receipt of the submission to determine whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified performance goals in the review process of NDAs. Most such applications are meant to be reviewed within ten months from the date of filing, and most applications for “priority review” products are meant to be reviewed within six months of filing. The review process may be extended by the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with GMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.
The FDA also may require submission of a REMS plan to mitigate any identified or suspected serious risks. The REMS plan could include medication guides, physician communication plans, assessment plans, and elements to assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools.
The FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
The FDA’s Decision on an NDA
On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information for the FDA to reconsider the application. If those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies be conducted to further assess the drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. After approval, the FDA may seek to prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. Some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.
Fast Track Designation, Accelerated Approval, Priority Review, Orphan Drug Designation and Breakthrough Therapy Programs
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Fast Track
There are several FDA programs intended to help facilitate the development of new drugs that meet certain criteria. Specifically, new drugs are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and data demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new drug may request the FDA to designate the drug as a Fast Track product at any time during the clinical development of the product. Under a Fast Track designation, the FDA may consider for review sections of the marketing application on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable and the sponsor pays any required user fees upon submission of the first section of the application.
Priority Review
A product is eligible for priority review if it is for a drug that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness of the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for priority review to facilitate the review.
Accelerated Approval
A product that is being studied for safety and effectiveness in treating serious or life-threatening illnesses and provides meaningful advantage over existing treatments may receive accelerated approval, which means that it may be approved on the basis of adequate and well-controlled clinical trials establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on an intermediate clinical endpoint that can be measured earlier than, and is reasonably likely to predict an effect on, irreversible morbidity or mortality. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. Under the Food and Drug Omnibus Reform Act of 2022, the FDA may require, as appropriate, that such studies be underway prior to approval or within a specific time period after the date of approval for a product granted accelerated approval. The FDA also has increased authority for expedited procedures to withdraw approval of a product or indication approved under accelerated approval if the sponsor fails to conduct the required post-marketing studies or if such studies fail to verify the predicted clinical benefit. In addition, the FDA currently requires pre-approval of promotional materials as a condition for accelerated approval, which could adversely impact the timing of the commercial launch of the product.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, for seven years. These circumstances are an inability to supply the drug in sufficient quantities or a situation in which a new formulation of the drug has shown superior safety or efficacy or a major contribution to patient care. This exclusivity, however, could also block the approval of its product for seven years if a competitor obtains earlier approval of the same drug for the same indication.
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The FDA’s interpretation of the scope of orphan drug exclusivity may change. The FDA’s longstanding interpretation of the Orphan Drug Act is that exclusivity is specific to the orphan indication for which the drug was actually approved. As a result, the scope of exclusivity has been narrow and protected only against competition from the same “use or indication” rather than the broader “disease or condition.” In the September 2021 case Catalyst Pharmaceuticals, Inc. v. FDA, a federal circuit court set aside the FDA’s narrow interpretation and ruled that orphan drug exclusivity covers the full scope of the orphan-designated disease or condition regardless of whether the drug obtains approval only for a narrower use. The decision concerned amifampridine, a drug used to treat Lambert-Eaton myasthenic syndrome (LEMS). Depending on how the FDA applies the decision beyond this case, it may limit the drugs that can receive exclusivity.
Breakthrough Therapy Designation
A product may also be eligible for receipt of a Breakthrough Therapy designation. The Breakthrough Therapy designation is intended to expedite the FDA’s review of a potential new drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease where “preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.” The designation of a drug as a Breakthrough Therapy provides the same benefits as are available under the Fast Track program, as well as intensive FDA guidance on the product’s development program. Fast Track designation, priority review, accelerated approval and Breakthrough Therapy designation do not change the standards for approval, but they may expedite the development or approval process.
Post-Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented.
FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events or problems with manufacturing processes of unanticipated severity or frequency, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or
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clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
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fines, warning letters or holds on post-approval clinical trials;
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refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;
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product seizure or detention, or refusal to permit the import or export of products; or
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injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant criminal and civil liability.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, (“PDMA”), which regulates the distribution of drugs and drug samples at the federal level and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.
Abbreviated New Drug Applications for Generic Drugs
In 1984, with passage of the Drug Price Competition and Patent Term Restoration Act of 1984 (commonly referred to as the “Hatch-Waxman Amendments”) amending the FDCA, Congress authorized the FDA to approve generic drugs that are the same as drugs previously approved by the FDA under the NDA provisions of the statute. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application (“ANDA”) to the agency. Upon approval of an ANDA, the FDA indicates that the generic product is “therapeutically equivalent” to the drug product previously approved under an NDA, known as the reference listed drug (“RLD”), and it assigns a therapeutic equivalence rating to the approved generic drug in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider the therapeutic equivalence rating to mean that a generic drug is fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of a therapeutic equivalence rating often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.
Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period of nonpatent exclusivity for the RLD has expired. The FDCA provides a period of five years of data exclusivity for NDAs containing a new chemical entity. In cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification (discussed further below), in which case the applicant may submit its application four years following the original product approval. The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication.
Hatch-Waxman Patent Certification and the 30 Month Stay
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Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that cover the applicant’s product or a method of using the product. When an ANDA applicant files its application with the FDA, the applicant is required to certify to the FDA concerning any patents listed for the reference product in the Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval.
A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed patents or indicate that it is not seeking approval of a patented method of use, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant.
505(b)(2) New Drug Applications
As an alternative path to FDA approval for modifications to formulations or uses of products previously approved by the FDA pursuant to an NDA, an applicant may submit an NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) was enacted as part of the Hatch-Waxman Amendments and permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by, or for, the applicant, and for which the applicant has not obtained a right of reference. If the 505(b)(2) applicant can establish that reliance on the FDA’s previous findings of safety and effectiveness is scientifically and legally appropriate, it may eliminate the need to conduct certain preclinical studies or clinical trials of the new product. The FDA may also require companies to perform additional bridging studies or measurements, including clinical trials, to support the change from the previously approved reference drug. The FDA may then approve the new drug candidate for all, or some, of the label indications for which the reference drug has been approved, as well as for any new indication sought by the 505(b)(2) applicant.
To the extent that a Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would. As a result, approval of a 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.
Patent Term Extension
In the U.S., after an NDA is approved, owners of relevant drug patents may apply for up to a five-year patent extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory process. The allowable patent term extension is typically calculated as one-half the time between, the latter of the effective date of an IND and issue date of the patent for which extension is sought, and the submission date of an NDA, plus the time between NDA submission date and the NDA approval date up to a maximum of five years. The time can be shortened if the FDA determines that the applicant did not pursue licensure with due diligence. The total patent term after the extension may not exceed 14 years from the date of product licensure. Only one patent applicable to a licensed biological product is eligible for extension and only those claims covering the product, a method for using it, or a method for manufacturing it may be
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extended and the application for the extension must be submitted prior to the expiration of the patent in question. However, we may not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Some, but not all, foreign jurisdictions possess patent term extension or other additional patent exclusivity mechanisms that may be more or less stringent and comprehensive than those of the U.S.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, are required to register and disclose certain clinical trial information. Information related to the product, patient population, phase of investigation, trial sites and investigators and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to the Centers for Medicare and Medicaid Services, other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the U.S. Department of Justice (“DOJ”) and individual U.S. Attorney offices within the DOJ and state and local governments. For example, sales, marketing and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the privacy provisions of the Health Insurance Portability and Accountability Act (“HIPAA”) and similar state laws, each as amended.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers and formulary managers on the other. There are statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Our practices may not in all cases meet all the criteria for protection under a statutory exception or regulatory safe harbor.
Additionally, the intent standard under the Anti-Kickback Statute was amended by the Affordable Care Act (“ACA”) to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act (discussed below).
The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
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The federal False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved and thus non-reimbursable, uses. HIPAA created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of, or payment for healthcare benefits, items or services.
Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
Additionally, the federal Physician Payments Sunshine Act within the ACA and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to various healthcare professionals including physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, certified nurse-midwives and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members. To distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of drug products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing and to prohibit certain other sales and marketing practices. All our activities are potentially subject to federal and state consumer protection and unfair competition laws. If our operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including without limitation, civil, criminal and/or administrative penalties, damages, fines, disgorgement, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
Data Privacy and Security
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We may be subject to data privacy and security regulations by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and its implementing regulations, imposes requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to business associates, independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
In addition, state health information privacy laws, such as California’s Confidentiality of Medical Information Act and Washington’s My Health My Data Act, govern the privacy and security of health-related information, specifically, may apply even when HIPAA does not and impose additional requirements.
Even when HIPAA and state health information privacy laws do not apply, according to the FTC and state Attorneys General, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act and state consumer protection laws.
There are also a number of U.S. state privacy laws, such as the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (“CCPA”), that govern the privacy and security of personal information in certain circumstances, some of which are more stringent than HIPAA and in various ways. Numerous other states have passed similar laws, but many differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. The CCPA applies to personal data of consumers, business representatives, and employees, and imposes obligations on certain businesses that do business in California, including to provide specific disclosures in privacy notices, and affords rights to California residents in relation to their personal information. Health information falls under the CCPA’s definition of personal information where it identifies, relates to, describes, or is reasonably capable of being associated with or could reasonably be linked, directly or indirectly, with a particular consumer or household—unless it is subject to HIPAA—and is included under a new category of personal information, “sensitive personal information,” which is offered greater protection. Some of these laws and regulations impose different, and in certain instances, more stringent requirements than HIPAA. Failing to comply with these laws and regulations can result in significant civil and/or criminal penalties, as well as exposure to private litigation, all of which can result in financial and reputational risks. The numerous other comprehensive privacy laws that have passed or are being considered in other states, as well as at the federal and local levels, also exempt some data processed in the context of clinical trials; but others exempt covered entities and business associates subject to HIPAA altogether, further complicating compliance efforts, and increasing legal risk and compliance costs for us and the third parties upon whom we rely.
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors provide coverage and establish adequate reimbursement levels for such products. In the United States, third-party payors include federal and state healthcare programs, privately managed care providers, health insurers and other organizations. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to
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specific products on an approved list, also known as a formulary, which might not include all the FDA-approved products for a particular indication. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy. We may need to conduct expensive pharmaco-economic studies to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. This is also true of Medicare reimbursement, where different vendors process payments, so that coverage by one vendor does not assure that all other vendors will provide coverage. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. In addition, the United States federal government position on matters related to drug pricing is evolving and uncertain and any changes could have a material impact on drug pricing generally in the United States, including for our product candidates if approved. Recently, the U.S. government passed the Inflation Reduction Act, which authorizes the U.S. Department of Health and Human service to negotiate prices of certain drugs with participating manufacturers in federal healthcare programs.
Different pricing and reimbursement schemes exist in other countries. In the EU, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines but monitor and control company profits. The National Institute for Health and Care Excellence (NICE) in the United Kingdom also requires consideration of cost-benefit analysis. The downward pressure on healthcare costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect will continue to increase the pressure on healthcare pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act (“FCPA”), prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries and to devise and maintain an adequate system of internal accounting controls for international operations.
Additional Regulation
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In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern the use, handling and disposal of various biological, chemical and radioactive substances used in and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.
Our Operations in the PRC: Gyre Pharmaceuticals
In this section, references to “we,” “our,” “us” and “our company” refer to Beijing Continent Pharmaceuticals Co., Ltd. (d/b/a Gyre Pharmaceuticals Co., Ltd.) (“Gyre Pharmaceuticals”).
Gyre Pharmaceuticals was founded in 2002 and is an innovative drug development enterprise in the PRC committed to the treatment of organ fibrosis diseases, integrated R&D, production and commercialization. Gyre Pharmaceuticals is an indirect, majority-owned subsidiary of Gyre Therapeutics, Inc.
Overview of our PRC Operations
We are a commercial-stage biopharmaceutical company committed to the research, development, manufacturing and commercialization of innovative drugs for organ fibrosis. We initially focused on the treatment of IPF and have gradually broadened our therapeutic field and R&D efforts to other areas of organ fibrosis. Our flagship product, ETUARY, was approved in the PRC in 2011 and is among the first three approved drugs for IPF worldwide.
As the PRC’s first approved treatment for IPF, ETUARY has been included in the NRDL of the PRC since 2017. Filling a vacuum in the PRC as the first approved IPF treatment, ETUARY has developed rapidly and maintained a dominant market share in the PRC. The total estimated market size for IPF treatments in the PRC was $156.8 million in 2023 and is expected to grow to $698.6 million by 2031, according to Frost & Sullivan. Moreover, as different organ fibrosis diseases share a similar pathogenic mechanism and fibrosis process, we are seeking to expand the use of ETUARY to include other pulmonary fibrosis diseases, such as PD, as well as diseases causing renal fibrosis, such as DKD. The success of ETUARY in the IPF drug market lays the foundation for our R&D and registration strategy to further expand the use of such drugs to indications with large patient populations.
We are one of a limited number of biopharmaceutical companies in the PRC that has grown from a development-stage company to achieving sustained profitability. This growth was primarily attributable to the increased market demand for ETUARY, which is the first IPF drug marketed in the PRC. We face limited competition in the IPF drug market and we direct our marketing resources to encourage physician adoption of ETUARY.
Through in-house R&D efforts and collaborative arrangements with GNI Japan, we have developed, in addition to ETUARY, a pipeline of pharmaceutical product candidates at various phases of clinical development, including F351, F528, F230 and F573.
Based on our years of research into organ fibrosis, we have also expanded our R&D to include potential treatments for COPD, PAH and ALF/ACLF.
While advancing the R&D of our pipeline products, we are one of only a few biopharmaceutical companies focusing on organ fibrosis drugs in the PRC with manufacturing and commercialization capabilities and an established track record. For further details about our two manufacturing centers, manufacturing capabilities
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and processes, see “—Properties—Gyre Pharmaceuticals’ Properties” and “—Production and Quality Control—In-House Manufacturing Facilities.” For further details about our professional sales team and a comprehensive sales network, see “—Sales, Marketing and Distribution.”
Employees in the PRC
As of December 31, 2024, we had 574 total employees, including 165 employees in Beijing, 41 employees in Cangzhou and 368 employees in other regions, which were primarily our sales and marketing employees located across the nation. We recruit our employees based on a number of factors, including work experience, educational background and the requirements of a relevant vacancy. We provide internal and external training for our management staff and other employees in various areas, such as product knowledge, project development and team building. We provide our employees with regular feedback and assess our employees based on their performance to determine their salary, promotion and career development.
In compliance with the relevant PRC labor laws, we enter into individual employment contracts with our employees covering matters such as terms, wages, bonuses, employee benefits, workplace safety and grounds for termination. The remuneration package of our employees includes salary and bonus, which are generally based on their qualifications, industry experience, position and performance. We consider the remuneration package of our employees to be competitive among our domestic competitors. The social insurance and housing provident funds for our employees have been paid in full during the years ended December 31, 2024 and 2023.
We are also subject to safety laws and regulations of the PRC. We have implemented various internal occupational health and safety procedures to maintain a safe work environment, including adopting protective measures at our production centers, inspecting our equipment and facilities regularly to identify and address safety hazards and providing regular training to our employees on safety awareness.
As of December 31, 2024, we have formed a labor union to represent our employees. We believe that we have maintained good working relationships with our employees. During the year ended December 31, 2024, we were not subject to any material claims, lawsuits, penalties or administrative actions relating to non-compliance with occupational health and safety laws or regulations and had not experienced any strikes, labor disputes or industrial actions which have had a material effect on our business.
Occupational, Health, Safety and Environmental Matters
We are subject to various health, safety, social and environmental laws and regulations and our operations are regularly inspected by local government authorities. We are committed to social responsibility and consider environmental, social and governance essential to our continuous development and we believe we have adequate policies to promote compliance with applicable health, safety, social and environmental protection regulations.
Under the oversight of the senior management, we actively identify and monitor the actual and potential impact of environmental, social and climate-related risks on our business, strategy and financial performance and incorporate considerations for these issues into our business, strategic and financial planning with a particular focus on areas such as employee responsibility, environment responsibility and public responsibility. Corporate social responsibility is viewed as part of our core growth philosophy and pivotal to our ability to create sustainable value for our stockholders.
In addition, we monitor and enforce the compliance of our operations with environment, health and safety laws and regulations. This responsibility is executed through training, formulation and implementation of strategies, policies, standards and metrics, communication of environmental, health and safety policies and procedures through a team of coordinators, environmental, health and safety audits and incident response
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planning and implementation. With the oversight of our management, our quality control team assesses the likelihood of such risks occurring and the estimated magnitude of any potential impact.
Permits and Other Approvals
As of December 31, 2024, we have received all material permissions and approvals required for our business operations. As of December 31, 2024, our wholly-owned subsidiary (Beijing Continent Biomedical Technology Co., Ltd., a company organized under the laws of the PRC) has obtained a business license but has no business operations. The following table sets forth the details of material licenses, permits and approvals:
License/Permit Validity Period Authority
Our Research and Development
We consistently devote resources to R&D to achieve long-term growth. We believe the diversification and expansion of our product pipeline through both in-house R&D and external collaboration are critical to our long-term competitiveness and success.
We have a dedicated in-house R&D team of 69 employees in the PRC as of December 31, 2024. Our R&D department is comprised of the following departments: drug discovery, chemistry, manufacturing and control (“CMC”), clinical development, medical affairs and regulatory affairs. Our R&D employees possess significant expertise in molecular biology, chemistry regulatory affairs and clinical development. Through cross-functional collaboration, our R&D organization has enabled us to develop new drug products to address unmet clinical needs.
We employ a clinical-demand-oriented and market-driven approach to our R&D efforts. We first identify suitable drug development targets and carry out project evaluation and overall project design based on our development strategies and then explore and establish experimental methodology by coordinating across
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different experimental platforms. We carefully select drug development programs by balancing the commercial potential of each drug candidate and its likelihood of successful development, its potential competition, and the ultimate market size.
Drug Discovery
Our molecule screening and design capabilities increase the possibility of success of advancing molecules from preclinical studies to market, enable innovative therapeutic approaches and support rich pipeline assets built around key pathways and targets. We have built an efficient system to conduct target identification and validation, compound design and screen and lead compound optimization. During the discovery stage, drug candidates are tested for their absorption, distribution, metabolism, excretion and toxicological properties, and promising compounds are optimized through structure modification to achieve maximum efficacy and minimum toxicity. Our R&D centers support a targeted drug discovery and screening platform, which can efficiently complete target identification and validation, compound design and lead optimization.
During the drug discovery stage, we explore new R&D opportunities, conduct feasibility research and provide evaluation for the opportunities. We also design and prepare new chemical compounds, conduct systematic research related to the manufacturing process and quality management of the new drugs and develop technology platforms to support, manage and supervise the related technologies.
Chemistry, Manufacturing and Controls
CMC Group
The CMC group is a critical link between discovery and clinical study. It is responsible for developing chemical and pharmaceutical processes, so that drug substances can be made with the desired physical and chemical properties and formulated to achieve maximum bio availability and stability. During the CMC stage, the synthesis of each API molecule is investigated thoroughly to ensure that the drug substance can reach pre-determined quality standards, the manufacturing processes are safe, robust, economical and environmentally friendly and the drug products have good stability and suitable storage conditions and shelf life.
Clinical Development Group
Our clinical development team oversees clinical trials for drug development, sets up the procedural standard of clinical affairs and handles clinical medicine matters. Our clinical development team also focuses on clinical development strategy, clinical trial protocol design, clinical trial operation coordination, pharmacovigilance and clinical trial quality control. Our clinical development team members specialize in management of all stages of our clinical trials, including clinical trial design, implementation, drug supply and the collection and analysis of trial data. We collaborate with top clinical experts in various areas as our principal investigators, leverage the operational capabilities of industry leading clinical research organizations and rely on well-known academic medical institutions and clinical trial centers in the PRC and abroad to promote the high quality and efficient implementation of our clinical trials in the PRC.
Clinical Trial Design and Implementation
Our clinical development group manages all stages of clinical trials, including protocol design, operation and the collection and analysis of clinical data. Our rapid trial advancements are driven by (i) our strategic decision to initiate clinical phase trials with our outstanding preclinical results, (ii) rigorous trial design, (iii) long-term partnership with numerous hospitals and principal investigators from different regions and (iv) high-quality execution. Leveraging our extensive knowledge and experience in clinical trials, our clinical development experts identify unique therapeutic opportunities for our drug candidates based on the differentiating properties observed in clinical trials and improve clinical plans accordingly.
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Competition
The organ fibrosis market is subject to rapid change. While we believe that our robust pipeline of innovative products and drug candidates, strong sales and marketing capability and experienced leadership team provide us with competitive advantages, we face potential competition from many different sources working to develop therapies targeting the same indications which our marketed drug or our drug candidates target. These include major pharmaceutical companies, specialty pharmaceutical and biotechnology companies of various sizes, academic institutions, government agencies and research institutions. Any drug candidates that we successfully develop and commercialize will compete both with existing drugs and with any new drugs that may become available in the future.
Our products primarily compete with products that are indicated for similar conditions on the basis of efficacy, price and general market acceptance by medical professionals and hospitals. The identities of our key competitors vary by product or drug candidate, and in certain cases, our competitors may have greater financial resources and expertise in R&D, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved drugs than we do.