# Gyre Therapeutics, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Gyre Therapeutics, Inc.](/companies/gyre.md) (CIK 1124105)
- Form: 10-Q
- Filed: 2023-10-26
- Accepted by EDGAR: Oct 26, 2023, 17:22 ET
- Period: 2023-09-30
- Accession: 0000950170-23-055695
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1124105/000095017023055695/cbio-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1124105/000095017023055695/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $415.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $1.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$1.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$4.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $16.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$1.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$3.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.04 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.10 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.04 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.10 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 37,976,764 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 37,845,900 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$11.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $12.8m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2023-09-30 | $2.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $5.1m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $10.0m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $1.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $6.4m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $3.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,145 characters.

*Unless otherwise indicated, in this Quarterly Report on Form 10-Q, references to “Catalyst,” “we,” “us,” “our” or the “Company” mean Catalyst Biosciences, Inc. and our subsidiary. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes that appear in this Quarterly Report on Form 10-Q (this “Report”) and with the audited consolidated financial statements and related notes that are included as part of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”).*

*In addition to historical information, this Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“the Exchange Act”). Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. 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 future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. For example, forward-looking statements include any statements regarding the strategies, prospects, plans, expectations or objectives of management for future operations or the distribution of cash to Company stockholders, the benefits that may be derived from product candidates or the commercial or market opportunity in any target indication, our ability to protect intellectual property rights, our anticipated operations, financial position, revenues, costs or expenses, statements regarding future economic conditions or performance, statements of belief and any statement of assumptions underlying any of the foregoing. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — “Risk Factors,” elsewhere in this Report and in Part I - Item 1A – “Risk Factors” in the Annual Report. 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 Report, speak only as of their date, and Catalyst undertakes no obligation to update or revise these statements in light of future developments. Catalyst cautions investors that its business and financial performance are subject to substantial risks and uncertainties.*

### Overview

### F351 Asset Acquisition

On December 26, 2022, Catalyst acquired the F351 Assets from GNI Group Ltd. ("GNI Japan") and GNI Hong Kong Limited ("GNI Hong Kong") (collectively, the “Sellers”) pursuant to that certain F351 Agreement, by and among Catalyst and the Sellers. The F351 Assets include 15 issued or pending patents and patent applications outside of the People’s Republic of China, with the last acquired issued patent expected to expire in August 2037. Under the terms of the F351 Agreement and upon the effective time of the transactions contemplated by the F351 Agreement, Catalyst issued to the Sellers equity interests with an aggregate value of $35.0 million in the form of: 6,266,521 shares of the Company’s common stock and 12,340 shares of newly designated Series X convertible preferred stock (“Catalyst Convertible Preferred Stock”), which Catalyst Convertible Preferred Stock is convertible, upon the approval of the stockholders of Catalyst (as further described herein) into shares of common stock at a ratio of one (1) share of Catalyst Convertible Preferred Stock to 10,000 shares of common stock.

Subject to stockholder approval, each share of Catalyst Convertible Preferred Stock issued under the F351 Agreement is convertible into 10,000 shares of common stock. At its 2023 Annual Meeting of Stockholders on August 29, 2023, the Company’s stockholders approved the conversion of the Catalyst Convertible Preferred Stock into shares of common stock in accordance with Nasdaq rules, or the Conversion Proposal, and approved an amendment to Catalyst’s certificate of incorporation to authorize sufficient shares of common stock for the conversion of the Catalyst Convertible Preferred Stock issued pursuant to the F351 Agreement. Following stockholder approval of the Conversion Proposal, each share of Catalyst Convertible Preferred Stock is convertible into shares of the Company’s common stock at any time at the option of the holder thereof, into 10,000 shares of its common stock, subject to certain limitations, including that a holder of Catalyst Convertible Preferred Stock is prohibited from converting shares of Catalyst Convertible Preferred Stock into shares of its common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (to be initially set at 9.99% and thereafter adjustable by the holder to a number between 4.99% and 19.99%) of the total number of shares of Catalyst’s common stock issued and outstanding immediately after giving effect to such conversion.

### Business Combination Agreement

On December 26, 2022, Catalyst, GNI USA, Inc., GNI Japan, GNI Hong Kong, Shanghai Genomics, Inc., the individuals (collectively the “Minority Holders”) listed on an annex to that certain Business Combination Agreement, as amended (the “Business Combination Agreement”) and Continent Pharmaceuticals Inc. (“CPI”) entered into the Business Combination Agreement. The Business Combination Agreement contains the terms and conditions of the proposed business combination pursuant to which Catalyst will acquire an indirect controlling interest in BC. The closing of the transactions under the Business Combination Agreement are subject to stockholder approval and certain customary closing conditions. Catalyst stockholders approved the transactions under the Business Combination Agreement at the stockholder meeting held on August 29, 2023, however, as of September 30, 2023, the transactions had not closed. On October 20, 2023, BC received approval from the China Securities Regulatory Commission("CSRC") with respect to the business combination pursuant to the Business Combination Agreement. Catalyst and GNI anticipate the business combination will be completed by the Outside Date (as defined in the Business Combination Agreement). Once the transaction closes, Catalyst will issue at closing a total of up to 1,110,776,224 shares of its common stock for an indirect controlling interest in BC.

The Business Combination Agreement contains certain termination rights, including the right for it to terminate the Business Combination Agreement to enter into a definitive agreement for a superior proposal. Upon termination of the Business Combination Agreement under specified circumstances, Catalyst may be required to pay a termination fee of $2.0 million and either party, as the case may be, may be required to reimburse the other party for reasonable out-of-pocket fees and expenses incurred by such party in connection with the Business Combination Agreement, up to a maximum amount of $2.0 million.

### Contingent Value Rights Agreement

Concurrent with the signing of the Business Combination Agreement, Catalyst entered into the CVR Agreement, pursuant to which each common stockholder, excluding GNI, received one CVR issued by the Company, subject to and in accordance with the terms and conditions of the CVR Agreement, for each share of common stock held by such holder at the CVR Record Date (the “CVR Holders”). Each CVR entitles the holder thereof to receive (i) certain cash payments from the net proceeds, if any, related to (a) the disposition of its legacy assets within 90 calendar days after the remainder of the Holdback Amount (as defined in the CVR Agreement) is finally determined and received by Catalyst or (b) the resolution of certain legal claims; provided, however, such period will be automatically extended for any Claim (as defined in the CVR Agreement) for an additional one-year period to the extent any Claim is appealed during the initial term, (ii) 100% of the excess cash (net of all current or contingent liabilities, including transaction-related expenses) retained by the Company in excess of $1.0 million as of the closing date of the transactions under the Business Combination Agreement, and (iii) 100% of the amount actually received (net of indemnity claims, if any) by Catalyst pursuant to the asset purchase agreement dated as of May 19, 2022, by and between Catalyst and Vertex. The contingent payments under the CVR Agreement, if they become payable, will become payable to the Rights Agent (as defined in the CVR Agreement) for subsequent distribution to the CVR Holders. In the event that no such proceeds are received, or the permitted deductions under the CVR Agreement are greater than any such proceeds, CVR Holders will not receive any payment pursuant to the CVR Agreement. There can be no assurance that CVR Holders will receive any amounts. The CVRs are not transferable, except in certain limited circumstances as provided for in the CVR Agreement, will not be certificated or evidenced by any instrument, and will not be registered with the SEC or listed for trading on any exchange.

Prior to the F351 acquisition, Catalyst was engaged in the research and development of product candidates from Catalyst’s protein engineering platform. In February 2022, Catalyst announced that it engaged Perella Weinberg Partners as a financial advisor to assist Catalyst in exploring strategic alternatives to monetize its assets. In March 2022, Catalyst ceased research and development activities and in May 2022, Catalyst entered into an asset purchase agreement with Vertex, pursuant to which Vertex purchased Catalyst’s complement portfolio, including CB 2782-PEG and CB 4332, as well as its complement-related intellectual property, including the ProTUNE™ and ImmunoTUNE™ platforms, for $60.0 million in cash consideration. $55.0 million was received upfront and the remaining $5.0 million was retained by Vertex as a hold-back until one year after the closing date to satisfy certain post-closing indemnification obligations. The $5.0 million hold-back amount received from Vertex in May 2023, net of $1.5 million in expenses and a reserve for potential tax liabilities, was distributed to the CVR Holders in June 2023. In August 2023, the Company distributed the remaining $1.5 million to the CVR Holders. On February 27, 2023, Catalyst signed an asset purchase agreement with GC Biopharma Corp. (“GCBP”) pursuant to which GCBP acquired Catalyst’s legacy rare bleeding disorders programs including marzeptacog alpha activated (“MarzAA”), dalcinonacog alpha (“DalcA”) and CB-2679d-GT for a total of $6.0 million in cash consideration, $1.0 million payable on signing and $5.0 million payable on February 28, 2025, subject to satisfaction of post-closing indemnification obligations. In March 2023, Catalyst distributed net proceeds of approximately $0.2 million to the CVR Holders. Once received, any additional net proceeds from the transaction will be distributed to the CVR Holders. Catalyst is also pursuing certain legal claims against a third party related to payments under a 2016 asset purchase agreement, and any net recoveries related to these claims will be distributed to the CVR Holders.

### Financial Operations Overview

Catalyst has no drug products approved for commercial sale and has not generated any revenue from drug product sales.

With the exception of the three months ended March 31, 2023 and the nine months ended September 30, 2022, Catalyst has never been profitable and has incurred significant operating losses in each year since inception. Catalyst had net losses of $1.6 million and $4.9 million for the three months ended September 30, 2023 and 2022, respectively, and a net loss of $3.8 million and net income of $32.2 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, Catalyst had an accumulated deficit of $414.7 million and cash and cash equivalents of $2.2 million. Substantially all its operating losses were incurred in its research and development programs and in its general and administrative operations.

### Collaboration Revenue

Collaboration revenue consists of revenue earned for performance obligations satisfied pursuant to the License and Collaboration Agreement with Biogen which was entered into in December 2019 and terminated in May 2022 (the “Biogen Agreement”). Catalyst recognized collaboration revenue for reimbursable third-party vendor, out-of-pocket and personnel costs pertaining to the Biogen Agreement of $0.8 million for the nine months ended September 30, 2022. No collaboration revenue was recognized for the nine months ended September 30, 2023.

Catalyst has not generated any revenue from the sale of any drug products and Catalyst does not expect to generate any revenue from the sale of drug products until Catalyst obtains regulatory approval of and commercializes its product candidates.

### Cost of Collaboration Revenue

Cost of collaboration revenue consists of fees for research and development services payable to third-party vendors and personnel costs, corresponding to the recognition of collaboration revenue from Biogen. Cost of collaboration revenue does not include any allocated overhead costs. Catalyst recognized third-party vendor, out-of-pocket and personnel costs, most of which were reimbursable, pertaining to the Biogen Agreement of $0.8 million for the nine months ended September 30, 2022, and recorded such costs as cost of collaboration revenue. No cost of collaboration revenue was recognized for the nine months ended September 30, 2023.

### Research and Development Expenses

As of March 2022, Catalyst ceased the development of certain programs and during the quarter ended June 30, 2022, Catalyst ceased all previous research and development activities. In April 2023, Catalyst started to support the development of the F351 Assets acquired. Research and development expenses represent costs incurred to conduct research, such as the discovery and development of its product candidates. Catalyst recognizes all research and development costs as they are incurred. Nonrefundable advance payments for goods or services used in research and development are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered or services are performed, or until it is no longer expected that the goods or services will be delivered.

Research and development expenses have traditionally consisted primarily of the following:

- employee-related expenses, which include salaries, benefits and stock-based compensation;
- laboratory and vendor expenses, including payments to consultants and third parties, related to the execution of preclinical, non-clinical and clinical studies;
- the cost of acquiring and manufacturing preclinical and clinical materials and developing manufacturing processes;
- clinical trial expenses, including costs of third-party clinical research organizations;
- performing toxicity and other preclinical studies; and
- facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation and amortization expense and other supplies.

The table below details the Company’s internal and external costs for research and development for the period presented (*in thousands).*

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Personnel and other | $415 | $505 | $1,254 | $5,648 |
| Stock-based compensation | — | 78 | 67 | 289 |
| Complement | — | — | — | 4,139 |
| Hemophilia | — | 220 | — | 2,301 |
| Total research and development expenses | $415 | $803 | $1,321 | $12,377 |

The largest component of total operating expenses had historically been Catalyst’s investment in research and development activities, including the clinical and manufacturing development of its product candidates. Costs listed for its hemophilia and complement programs above consist of clinical trial, manufacturing and research costs. Its internal resources, employees and infrastructure, identified above as personnel and other, are generally not directly tied to individual product candidates or development programs. As such, Catalyst does not maintain information regarding these costs incurred for these research and development programs on a project-specific basis.

Catalyst has entered into a Cost Sharing and Agency Agreement with GNI USA, Inc. pursuant to which GNI USA, Inc. will be responsible for development expenses related to the F351 Assets until the closing of the transactions under the Business Combination Agreement. Following the closing of the Business Combination Agreement, the Company will be required to reimburse GNI for such costs. If the Business Combination Agreement is terminated, the Company's repayment obligation varies depending on the clinical development of the F351 Assets. Accordingly, since Catalyst has ceased its other research and development activities, it does not expect to incur material research and development expenses until the closing of the transactions under the Business Combination Agreement.

### General and Administrative Expenses

General and administrative expenses consist of personnel costs, allocated expenses, expenses for outside professional services, including legal, human resources, audit and accounting services, and other general expenses. Personnel costs consist of salaries, bonuses, benefits and stock-based compensation. Catalyst incurs expenses associated with operating as a public company, including expenses related to compliance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and Nasdaq Stock Market LLC (“Nasdaq”), insurance expenses, audit expenses, investor relations activities, Sarbanes-Oxley compliance expenses and other administrative expenses and professional services.

### GNI Cost-Sharing Reimbursement

As part of the Business Combination Agreement, the Company agreed to share certain ongoing operating expenses with GNI that are incurred from December 26, 2022 until the Business Combination Agreement closes. All expenses required to be reimbursed as part of this agreement will be paid by GNI within three days prior to the close of the Business Combination Agreement. The GNI cost-sharing reimbursement represents the amount to be received from GNI under this cost share arrangement that is no longer subject to uncertainty and realizable at period end.

### Gain on Disposal of Assets

Gain on disposal of assets resulted from the sale of Catalyst’s legacy rare bleeding disorder program, including MarzAA, DalcA and CB-2679d-GT to GCBP in February 2023 and the sale of Catalyst’s complement portfolio and related intellectual property to Vertex in May 2022. The gain is presented net of the direct costs incurred in connection with the transaction and losses incurred in connection with the sale of Catalyst’s property and equipment.

### Results of Operations

The following table set forth the Company’s results of operations data for the periods presented (*in thousands):*

| Operating expenses: | Three Months Ended September 30, 2023 | 2022 | Change ($) | Change (%) |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $415 | $803 | $(388) | (48)% |
| General and administrative | 2,408 | 4,363 | (1,955) | (45)% |
| GNI cost-sharing reimbursement | (1,200) | — | (1,200) | 100% |
| Total operating expenses | 1,623 | 5,166 | (3,543) | (69)% |
| Loss from operations | (1,623) | (5,166) | 3,543 | (69)% |
| Interest and other income, net | 47 | 282 | (235) | (83)% |
| Net loss and comprehensive loss | $(1,576) | $(4,884) | $3,308 | (68)% |

21

| Revenue: | Nine Months Ended September 30, 2023 | 2022 | Change ($) | Change (%) |
| --- | ---: | ---: | ---: | ---: |
| Collaboration | $— | $794 | $(794) | (100)% |
| Operating expenses (income): |  |  |  |  |
| Cost of collaboration | — | 798 | (798) | (100)% |
| Research and development | 1,321 | 12,377 | (11,056) | (89)% |
| General and administrative | 8,603 | 13,201 | (4,598) | (35)% |
| GNI cost-sharing reimbursement | (1,200) | — | (1,200) | 100% |
| Gain on disposal of assets, net | (4,736) | (57,245) | 52,509 | (92)% |
| Total operating expenses (income) | 3,988 | (30,869) | 34,857 | \* |
| Income (loss) from operations | (3,988) | 31,663 | (35,651) | \* |
| Interest and other income, net | 216 | 549 | (333) | (61)% |
| Income (loss) before income taxes | (3,772) | 32,212 | (35,984) | \* |
| Income tax expenses | 16 | — | 16 | 100% |
| Net income (loss) and comprehensive income (loss) | $(3,788) | $32,212 | $(36,000) | \* |

\*Not meaningful

### Collaboration Revenue

Collaboration revenue for the nine months ended September 30, 2022 consisted of reimbursable collaboration expenses from the Biogen Agreement. No collaboration revenue was recognized for the three months ended September 30, 2023 and 2022 or the nine months ended September 30, 2023.

### Cost of Collaboration

Cost of collaboration revenue for the nine months ended September 30, 2022 primarily related to reimbursable third-party vendor and personnel costs incurred pertaining to the Biogen Agreement. No cost of collaboration revenue was recognized for the three months ended September 30, 2023 and 2022 or the nine months ended September 30, 2023.

### Research and Development Expenses

Research and development expenses were $0.4 million and $0.8 million during the three months ended September 30, 2023 and 2022, respectively, a decrease of $0.4 million, or 48%. The decrease was due primarily to a decrease of $0.2 million in hemophilia-related costs, a decrease of $0.1 million in personnel-related costs, and a decrease of $0.1 million in stock-based compensation costs.

Research and development expenses were $1.3 million and $12.4 million during the nine months ended September 30, 2023 and 2022, respectively, a decrease of $11.1 million, or 89%. The decrease was due primarily to a decrease of $4.4 million in personnel-related costs, a decrease of $4.2 million in complement-related costs, a decrease of $2.3 million in hemophilia-related costs, and a decrease of $0.2 million in stock-based compensation costs. Research and development expenses for the nine months ended September 30, 2022 include approximately $0.6 million of severance and other costs related to its reduction-in-force.

### General and Administrative Expenses

General and administrative expenses were $2.4 million and $4.4 million during the three months ended September 30, 2023 and 2022, respectively, a decrease of $2.0 million, or 45%. The decrease was due primarily to a decrease of $1.6 million in professional services and a $0.4 million decrease in personnel-related costs.

General and administrative expenses were $8.6 million and $13.2 million during the nine months ended September 30, 2023 and 2022, respectively, a decrease of $4.6 million, or 35%. The decrease was due primarily to a decrease of $3.3 million in professional services and a $1.3 million decrease in personnel-related costs. General and administrative expenses for the nine months ended September 30, 2022 include approximately $0.4 million of severance and other costs related to its reduction-in-force.

### GNI Cost-Sharing Reimbursement

The GNI cost-sharing reimbursement was $1.2 million for the three and nine months ended September 30, 2023, which consisted of operating costs to be reimbursed by GNI pursuant to the Business Combination Agreement.

### Gain on Disposal of Assets, Net

Gain on disposal of assets, net was $4.7 million for the nine months ended September 30, 2023, which related to the sale of Catalyst’s legacy rare bleeding disorder program to GCBP in February 2023.

Gain on disposal of assets, net was $57.2 million for the nine months ended September 30, 2022, which primarily consisted of a $57.4 million gain related to the sale of Catalyst’s complement portfolio to Vertex in May 2022.

### Interest and Other Income, Net

The decrease in interest and other income, net for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily due to a decrease in interest income.

The $0.3 million decrease in interest and other income, net for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily due to a gain on extinguishment of $0.2 million recognized in the nine months ended September 30, 2022 where there was no comparable activity in 2023 and a decrease in interest income of $0.1 million.

### Recent Accounting Pronouncements

Refer to “Accounting Pronouncements Recently Adopted” included in Note 2, *Summary of Significant Accounting Policies*, in the “Notes to Condensed Consolidated Financial Statements” in this Report.

### Liquidity and Capital Resources

On January 12, 2023, Catalyst paid a one-time cash dividend of $0.24 per share, or approximately $7.6 million, to the CVR Holders.

On March 8, 2023, the Company distributed the net cash proceeds received from the GCBP asset sale of $0.2 million, or $0.01 per share, to the CVR Holders.

On June 5, 2023, the Company distributed the net cash received from the Vertex hold-back amount of $3.5 million, or $0.11 per share, to the CVR Holders.

On August 21, 2023, the Company distributed the remaining net cash received from the Vertex hold-back amount of $1.5 million, or $0.05 per share, to the CVR Holders.

As of September 30, 2023, Catalyst had $2.2 million of cash and cash equivalents. For the nine months ended September 30, 2023, Catalyst had a net loss of $3.8 million and $11.9 million cash used in operating activities. Catalyst had an accumulated deficit of $414.7 million as of September 30, 2023. Its primary uses of cash are to fund operating expenses and general and administrative expenditures.

As part of the Business Combination Agreement, GNI agreed to share certain ongoing operating expenses incurred by the Company until the Business Combination Agreement closes. See Note 12, *Related Parties*, for additional information regarding this arrangement. The actual amount and timing of the cost sharing payments from GNI is outside of the control of the Company. Given the uncertainties related to the pending Business Combination Agreement, there is substantial doubt about the Company's ability to continue as a going concern for at least 12 months following the issuance of these condensed consolidated financial statements.

Catalyst expects to finance any future cash needs through a combination of divestitures of its product candidates or other assets, equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. There can be no assurance as to the timing, terms or consummation of any divestiture or financing, and the terms of any such financing may adversely affect the Company’s stockholders’ rights. If Catalyst raises funds through collaborations, strategic alliances or licensing arrangements with third parties, it may have to relinquish valuable rights to its technologies, product candidates or to grant licenses on terms that may not be favorable to the Company.

The following table summarizes the Company’s cash flows for the periods presented (*in thousands):*

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Cash used in operating activities | $(11,904) | $(31,621) |
| Cash provided by investing activities | 5,206 | 55,375 |
| Cash used in financing activities | (12,740) | (45,011) |
| Net decrease in cash and cash equivalents | $(19,438) | $(21,257) |

23

### Cash Flows from Operating Activities

Cash used in operating activities for the nine months ended September 30, 2023 was $11.9 million. The most significant component of the Company’s cash used was a net loss of $8.5 million, excluding the net gain of $4.7 million from the sale of Catalyst's legacy rare bleeding disorder program. The net loss included non-cash expense related to stock-based compensation of $0.4 million. In addition, net cash outflow of $3.8 million was attributable to the change in the Company's net operating assets and liabilities primarily as a result of a $2.4 million decrease in accrued compensation and other accrued liabilities, a $1.2 million increase in other receivables from GNI and a $0.1 million increase in prepaid and other current assets.

Cash used in operating activities for the nine months ended September 30, 2022 was $31.6 million. The most significant component of the Company's cash used was a net loss of $25.0 million, excluding the net gain of $57.2 million from the sale of Catalyst's complement portfolio and other assets. The net loss included non-cash expense related to stock-based compensation of $1.1 million, bad debt expense of $0.2 million, depreciation and amortization of $0.2 million, and a $0.1 million loss related to the termination of one of the Company's operating leases. In addition, net cash outflow of $8.2 million was attributable to the change in the Company's net operating assets and liabilities primarily as a result of a $6.4 million decrease in accounts payable, a $4.3 million decrease in accrued compensation and other accrued liabilities, and a $0.2 million decrease in deferred revenue related to the Biogen Agreement, partially offset by a $1.6 million decrease in accounts and other receivables and a $1.0 million decrease in prepaid and other current assets.

### Cash Flows from Investing Activities

Cash provided by investing activities for the nine months ended September 30, 2023 was $5.2 million, due to $5.0 million in cash proceeds from receipt of the hold-back amount related to the Vertex asset sale and $1.0 million in cash proceeds from the sale of the Company’s legacy rare bleeding disorder program to GCBP, offset by $0.8 million in transaction costs related to the sale of its legacy rare bleeding disorder program to GCBP.

Cash provided by investing activities for the nine months ended September 30, 2022 was $55.4 million, due primarily to $55.0 million in cash proceeds from the sale of the Company’s complement portfolio to Vertex, $2.5 million due to proceeds from maturities of investments, and $0.4 million in proceeds from the sale of property and equipment, partially offset by $2.6 million in transaction costs related to the sale of its complement portfolio to Vertex.

### Cash Flows from Financing Activities

Cash used in financing activities for the nine months ended September 30, 2023 was $12.7 million, due primarily to the special dividend paid in January 2023 and the distribution of net proceeds related to the GCBP Agreement and Vertex Agreement to the CVR Holders.

Cash used in financing activities for the nine months ended September 30, 2022 was due to the special dividend issued and paid, offset by the issuance of stock grants and option exercises.

### Critical Accounting Polices and Estimates

There have been no significant changes to Catalyst’s critical accounting policies since December 31, 2022. For a description of critical accounting policies that affect its significant judgments and estimates used in the preparation of its unaudited condensed consolidated financial statements, refer to Item 7 “*Management’s Discussion and Analysis of Financial Condition and Results of Operations”* contained in the Annual Report.

## Controls and procedures

As filed, 2,054 characters.

### Disclosure Controls and Procedures

Management, with the participation of our Chief Executive Officer and our Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on their evaluation of our disclosure controls and procedures as of September 30, 2023, our Chief Executive Officer and Interim Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 4,726 characters.

You should carefully consider the factors discussed in Part I, Item 1A., “Risk Factors” in our Annual Report for the fiscal year ended December 31, 2022, which could materially affect our business, financial position, or future results of operations. The risks described in our Annual Report for the fiscal year ended December 31, 2022, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial position, or future results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. The risk factor set forth below supplements and updates the risk factors previously disclosed and should be read together with the risk factors described in our Annual Report for the fiscal year ended December 31, 2022 and with any risk factors we may include in subsequent periodic filings with the SEC.

### Our common stock may be delisted from Nasdaq.

As previously reported, on November 2, 2022, Catalyst Biosciences, Inc., a Delaware corporation (the “Company” or “Catalyst”), received a letter from the Listing Qualifications Department of The Nasdaq Stock Market, LLC (“Nasdaq”) informing the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company was not in compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Marketplace Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The Company was granted 180 calendar days, or until May 1, 2023, to regain compliance with the Minimum Bid Price Requirement.

On May 2, 2023, the Company was notified by the Listing Qualifications Staff (the “Staff”) of Nasdaq that the Company did not meet the Minimum Bid Price Requirement and was not eligible for a second 180-day period. As previously reported, on April 4, 2023, the Staff notified the Company that it failed to comply with Nasdaq’s $2,500,000 minimum stockholders’ equity requirement for continued listing as set forth in Listing Rule 5550(b)(1) (the “Equity Requirement”). The deficiency with regards to the Equity Requirement serves as an additional and separate basis for delisting. The Company timely submitted a hearing request to Nasdaq’s Hearings Department, which stayed the suspension of the Company’s common stock pending the panel’s conclusion of the hearing process. Following the hearing, the Company was granted until October 30, 2023 to regain compliance with the initial listing requirements of the Nasdaq Capital Market. The Company believes that completion of the pending transactions under the Business Combination Agreement and reverse stock split as described in the definitive proxy statement filed with the U.S. Securities and Exchange Commission on July 20, 2023 will enable the combined company following the transactions under the Business Combination Agreement to meet the applicable Nasdaq initial listing requirements, providing a basis for suspension of delisting. There can be no assurance that the combined company will meet Nasdaq’s initial listing requirements.

Delisting of our common stock from The Nasdaq Capital Market could materially adversely impact the liquidity and value of our common stock and could prevent the closing of the transactions contemplated by the Business Combination Agreement. Catalyst’s ability to publicly or privately sell equity securities and the liquidity of its common stock could be adversely affected if it is delisted from The Nasdaq Capital Market or if it is unable to transfer its listing to another stock market. If Catalyst’s common stock is delisted by Nasdaq, it could lead to a number of negative implications, including an adverse effect on the price of its common stock, increased volatility in its common stock, limited availability of market quotations for its common stock, reduced liquidity in its common stock, the loss of federal preemption of state securities laws and greater difficulty in issuing additional securities and obtaining financing. In addition, delisting of Catalyst’s common stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in its common stock, could result in a loss of current or future coverage by certain sell-side analysts and might deter certain institutions and persons from investing in its securities at all. Delisting could also cause a loss of confidence of Catalyst’s customers, collaborators, vendors, suppliers and employees, which could harm its business and future prospects.

Filed Oct 26, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-055695. Last ingested by Listed: Nov 5, 2026, 18:44 ET. No prices; not investment advice.