What changed in GYRE THERAPEUTICS, INC.'s 10-K — 2022 vs 2023
vs
Paragraph-level year-over-year comparison of GYRE THERAPEUTICS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+813 added−538 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-30)
Top changes in GYRE THERAPEUTICS, INC.'s 2023 10-K
813 paragraphs added · 538 removed · 274 edited across 3 sections
- Item 1A. Risk Factors+807 / −436 · 273 edited
- Item 3. Legal Proceedings+2 / −101
- Item 2. Properties+4 / −1 · 1 edited
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
273 edited+534 added−163 removed33 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
273 edited+534 added−163 removed33 unchanged
2022 filing
2023 filing
Biggest changeFor example, regulatory authorities may suspend, limit or withdraw approvals of such product or seek an injunction against its manufacture or distribution, require additional warnings on the label, including “boxed” warnings, or issue safety alerts, require press releases or other communications containing warnings or other safety information about the product, require Catalyst to change the way the product is administered or conduct additional clinical trials or post-approval studies, require Catalyst to create a risk evaluation and mitigation strategy (“REMS”) which could include a medication guide outlining the risks of such side effects for distribution to patients, impose fines, injunctions or criminal penalties.
Biggest changeSuch consequences may include: • regulatory authorities may order us to cease further development of, or deny approval of, our product candidates for any or all targeted indications; • regulatory authorities may seek an injunction against our product candidates manufacture or distribution; • regulatory authorities may withdraw approvals or revoke licenses of an approved product candidate, or we may determine to do so even if not required; • regulatory authorities may require additional warnings on the label, including “boxed” warnings, of an approved product candidate or impose other limitations on an approved product candidate; • regulatory authorities may issue safety alerts, require press releases or other communications containing warnings or other safety information about the product; • regulatory authorities may require us to change the way such product is administered; • we may be required to develop a REMS for the product candidate, which could include a medication guide outlining the risks of such side effects for distribution to patients, or to incorporate additional requirements under REMS; • we may be required to conduct additional clinical trials or post-market studies; • we could be subject to litigation proceedings and held liable for harm caused to patients; • we could be found in breach of contract with our major customers; • patient enrollment may be insufficient or slower than we anticipate or patients may drop out or fail to return for post-treatment follow-up at a higher rate than anticipated; • our commercialized products could be removed from medical insurance reimbursement lists or be rendered unable to participate in the centralized tender process in the PRC; • regulatory authorities may impose fines, injunctions or criminal penalties; • we may fail to achieve or maintain market acceptance of a particular product candidate, if approved, which may cause serious harm to our business; and • our reputation may suffer.
Department of Health and Human Services, information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations; 49 • the Federal Food, Drug, and Cosmetic Act, which, among other things, strictly regulates drug product marketing, prohibits manufacturers from marketing drug products for off-label use and regulates the distribution of drug samples; and • state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, state laws requiring pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and which may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, and state and foreign laws governing the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws such as HIPAA, thus complicating compliance efforts.
Department of Health and Human Services, information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations; • the Federal Food, Drug, and Cosmetic Act, which, among other things, strictly regulates drug product marketing, prohibits manufacturers from marketing drug products for off-label use and regulates the distribution of drug samples; and • state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, state laws requiring pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and which may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, and state and foreign laws governing the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws such as HIPAA, thus complicating compliance efforts.
Patient enrollment is affected by other factors including: • the severity of the disease under investigation; • the eligibility criteria for the study in question; • the perceived risks and benefits of the product candidate under study; • the efforts to facilitate timely enrollment in clinical trials; • clinical trials of other product candidates in the same indication; • laboratory testing and turnaround time for samples needed for eligibility assessments; • the patient referral practices of physicians; • the ability to monitor patients adequately during and after treatment; and • the proximity and availability of clinical trial sites for prospective patients.
Patient enrollment is affected by other factors including: • the severity of the disease under investigation; • the eligibility criteria for the study in question; • the perceived risks and benefits of the product candidate under study; • the efforts to facilitate timely enrollment in clinical trials; • clinical trials of other product candidates in the same indication; • laboratory testing and turnaround time for samples needed for eligibility assessments; • the patient referral practices of physicians; 72 • the ability to monitor patients adequately during and after treatment; and • the proximity and availability of clinical trial sites for prospective patients.
EU Member States may also impose additional requirements in relation to health, genetic and biometric data through their national legislation. Furthermore , it affords various rights to individuals (e.g., the right to access or erasure of personal data).and imposes potential penalties for breaches of up to 4.0% of the annual worldwide turnover or €20 million, whichever is greater.
EU Member States may also impose additional requirements in relation to health, genetic and biometric data through their national legislation. Furthermore, it affords various rights to individuals ( e.g. , the right to access or erasure of personal data), and imposes potential penalties for breaches of up to 4% of the annual worldwide turnover or €20 million, whichever is greater.
Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.
Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the PRC or United States.
The GDPR includes requirements relating to the legal basis of the processing (such as consent of the individuals to whom the personal data relates), the information provided to the individuals prior to processing their personal data, the notification obligations to the national data protection authorities and or data subjects (in particular in case of a data breach), and the security and confidentiality of the 51 personal data.
The GDPR includes requirements relating to the legal basis of the processing (such as consent of the individuals to whom the personal data relates), the information provided to the individuals prior to processing their personal data, the notification obligations to the national data protection authorities and or data subjects (in particular in case of a data breach), and the security and confidentiality of the personal data.
Those factors may include the design or results of preclinical trials, the likelihood of approval by the FDA or comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for the product candidate, the costs and complexities of manufacturing and delivering the product to patients and the potential of competing products.
Those factors may include the design or results of preclinical trials, the likelihood of approval by the NMPA, FDA or comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for the product candidate, the costs and complexities of manufacturing and delivering the product to patients and the potential of competing products.
A Breakthrough Therapy is defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.
In the United States, Breakthrough Therapy is defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.
However, regulatory regimes vary in different regions, which makes regulatory compliance more complex and costly for companies like Catalyst that plan to operate in each of these regions. Legislative and regulatory actions affecting government prescription drug procurement and reimbursement programs occur relatively frequently. In the United States, the ACA was enacted in 2010 to expand healthcare coverage.
However, regulatory regimes vary in different regions, which makes regulatory compliance more complex and costly for companies like us that plan to operate in each of these regions. United States Legislative and regulatory actions affecting government prescription drug procurement and reimbursement programs occur relatively frequently. In the United States, the ACA was enacted in 2010 to expand healthcare coverage.
The resulting impact on its business is uncertain and could be material. Efforts to control prescription drug prices could also have a material adverse effect on its business. For example, in 2018, President Trump and the Secretary of the U.S. Department of Health and Human Services released the “American Patients First Blueprint” and have begun implementing certain portions.
The resulting impact on our business is uncertain and could be material. Efforts to control prescription drug prices could also have a material adverse effect on our business. For example, in 2018, President Trump and the Secretary of the U.S. Department of Health and Human Services released the “American Patients First Blueprint” and have begun implementing certain portions.
Moreover, increasing efforts by governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for its product candidates.
Moreover, increasing efforts by governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates.
If any of its third-party manufacturers experiences difficulties in scaling production or experiences product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error or improper storage conditions, the potential trials of the affected product candidate would be delayed, perhaps substantially, which could materially and adversely affect its business.
If any of our third-party manufacturers experiences difficulties in scaling production or experiences product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error or improper storage conditions, the potential trials of the affected product candidate would be delayed, perhaps substantially, which could materially and adversely affect our business.
Collaborations are complex and time consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. Catalyst may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all.
Collaborations are complex and time consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all.
For example, the FDA may require a REMS in order to approve Catalyst’s product candidates, which could entail requirements for a medication guide, physician training and communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.
For example, the FDA may require a REMS in order to approve our product candidates, which could entail requirements for a medication guide, physician training and communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of its confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments.
Furthermore, even if they are unchallenged, its patents and patent applications may not adequately protect its intellectual property, provide exclusivity for its product candidates or prevent others from designing around its claims. Certain of its patents also cover processes, for which enforcement can be difficult.
Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product or product candidates or prevent others from designing around our claims. Certain of our patents also cover processes, for which enforcement can be difficult.
Efforts to ensure that its business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that its business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.
HIPAA requires covered entities and business associates, such as Catalyst, to develop and maintain policies with respect to the protection of, use and disclosure of electronic PHI, including the adoption of administrative, physical and technical safeguards to protect such information, and certain notification requirements in the event of a data breach.
HIPAA requires covered entities and business associates, such as us, to develop and maintain policies with respect to the protection of, use and disclosure of electronic PHI, including the adoption of administrative, physical and technical safeguards to protect such information, and certain notification requirements in the event of a data breach.
Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of its competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Period-to-period comparisons of its historical and future financial results may not be meaningful, and investors should not rely on them as an indication of future performance. Fluctuating losses may fail to meet the expectations of securities analysts or investors. Failure to meet these expectations may cause the price of its common stock to decline.
Period-to-period comparisons of our historical and future financial results may not be meaningful, and investors should not rely on them as an indication of future performance. Fluctuating losses may fail to meet the expectations of securities analysts or investors. Failure to meet these expectations may cause the price of our common stock to decline.
In addition, even if one or more of its product candidates qualify as breakthrough therapies, the FDA may later decide that the product candidate no longer meets the conditions for qualification or it may decide that the time period for FDA review or approval will not be shortened.
In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product candidate no longer meets the conditions for qualification or it may decide that the time period for FDA review or approval will not be shortened.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of its common stock.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
It is possible that even if one or more of its product candidates has a beneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of its clinical trials.
It is possible that even if one or more of our product candidates has a beneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials.
Additionally, a clinical trial may be suspended or terminated by Catalyst, the IRBs for the institutions in which the trials are being conducted, the Data Monitoring Committee for the trial, or by the FDA or other regulatory authorities for a number of reasons, including failure to conduct the clinical trial in accordance with regulatory requirements or its clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues, or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.
Additionally, a clinical trial may be suspended or terminated by us, the IRBs for the institutions in which the trials are being conducted, the Data Monitoring Committee for the trial, or by the NMPA, FDA or other regulatory authorities for a number of reasons, including failure to conduct the clinical trial in accordance with regulatory requirements or its clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues, or adverse side effects, failure to demonstrate a benefit from using a product candidate, 96 changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.
The key competitive factors affecting the success of all its product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the level of generic competition, and the availability of reimbursement from government and other third-party payors.
The key competitive factors affecting the success of all our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the level of generic competition, and the availability of reimbursement from government and other third-party payors.
The clinical development of its product candidates is susceptible to the risk of failure at any stage of drug development, including failure to demonstrate efficacy in a clinical trial or across a suitable population of patients, the occurrence of severe or medically or commercially unacceptable adverse events, failure to comply with protocols or applicable regulatory requirements and determination by the FDA or any comparable foreign regulatory authority that a drug product is not approvable.
The clinical development of our product candidates is susceptible to the risk of failure at any stage of drug development, including failure to demonstrate efficacy in a clinical trial or across a suitable population of patients, the occurrence of severe or medically or commercially unacceptable adverse events, failure to comply with protocols or applicable regulatory requirements and determination by the NMPA, FDA or any comparable foreign regulatory authority that a drug product is not approvable.
A certain percentage of patients with HBV-induced liver fibrosis treated with Hydronidone have experienced adverse events, including gastrointestinal diseases, ear and labyrinth diseases, systemic diseases, metabolic and nutritional diseases, skin and subcutaneous tissue diseases, heart organ diseases, and hepatobiliary system diseases.
A certain percentage of patients with HBV-induced liver fibrosis treated with F351 have experienced adverse events, including gastrointestinal diseases, ear and labyrinth diseases, systemic diseases, metabolic and nutritional diseases, skin and subcutaneous tissue diseases, heart organ diseases, and hepatobiliary system diseases.
There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside the United States.
PRC There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the NMPA, FDA or similar regulatory authorities outside the PRC and United States.
Interim data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from Catalyst’s clinical trials continue other treatments.
Interim data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments.
Debt financing, if available at all, may involve agreements that include covenants limiting or restricting its ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Debt financing, if available at all, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
There may be circumstances under which a failure to comply with the GDPR, or the exercise of individual rights under the GDPR, would limit Catalyst’s ability to utilize clinical trial data collected on study subjects.
There may be circumstances under which a failure to comply with the GDPR, or the exercise of individual rights under the GDPR, would limit our ability to utilize clinical trial data collected on study subjects.
In the event of a successful claim of infringement against Catalyst, Catalyst may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, in addition to paying royalties, redesign infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, in addition to paying royalties, redesign infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
The FDA and other agencies also may impose various civil or criminal sanctions for failure to comply with regulatory requirements, including withdrawal of product approval. Regulatory approval from authorities in foreign countries will be needed to market its product candidates in those countries. Approval by one regulatory authority does not ensure approval by regulatory authorities in other jurisdictions.
The NMPA, FDA and other agencies also may impose various civil or criminal sanctions for failure to comply with regulatory requirements, including withdrawal of product approval. Regulatory approval from authorities in foreign countries will be needed to market our product candidates in those countries. Approval by one regulatory authority does not ensure approval by regulatory authorities in other jurisdictions.
In general, the anticipated clinical trials of Hydronidone will include patients with advanced liver fibrosis who are at risk of further progression to cirrhosis and deterioration, but are not critically ill.
In general, the anticipated clinical trials of F351 will include patients with advanced liver fibrosis who are at risk of further progression to cirrhosis and deterioration, but are not critically ill.
The initiative includes proposals to increase generic drug and biosimilar competition, enable the Medicare program to negotiate drug prices more directly and improve transparency regarding drug prices and ways to lower Catalyst consumers’ out-of-pocket costs.
The initiative includes proposals to increase generic drug and biosimilar competition, enable the Medicare program to negotiate drug prices more directly and improve transparency regarding drug prices and ways to lower our consumers’ out-of-pocket costs.
Even if the FDA or other regulatory agency approves its product candidates, the approval may impose significant restrictions on the indicated uses, conditions for use, labeling, advertising, promotion, marketing and/or production of such product and may impose ongoing commitments or requirements for post-approval studies, including additional research and development and clinical trials.
Even if the NMPA, FDA or other regulatory agency approves our product candidates, the approval may impose significant restrictions on the indicated uses, conditions for use, labeling, advertising, promotion, marketing and/or production of such product and may impose ongoing commitments or requirements for post-approval studies, including additional research and development and clinical trials.
However, the risk/benefit of Hydronidone in NASH may differ from that shown in HBV liver fibrosis patients and there is always a risk that the severity and frequency of the adverse events may worsen.
However, the risk/benefit of F351 in NASH may differ from that shown in HBV liver fibrosis patients and there is always a risk that the severity and frequency of the adverse events may worsen.
In addition, the FDA review and approval process could be delayed by any future shutdown of the U.S. government, and its development activities could be harmed or delayed as a result.
In addition, the FDA review and approval process could be delayed by any future shutdown of the U.S. government, and our development activities could be harmed or delayed as a result.
Such misconduct could also involve the improper use of information obtained during clinical studies that could result in regulatory sanctions and cause serious harm to its reputation.
Such misconduct could also involve the improper use of information obtained during clinical studies that could result in regulatory sanctions and cause serious harm to our reputation.
Some of the factors that may cause operating results to fluctuate on a period-to-period basis include the scope, progress, duration results and costs of preclinical and clinical development programs, as well as non-clinical studies and assessments of product candidates and programs, restructuring costs, implementation or termination of collaboration, licensing, manufacturing or other material agreements with third parties, non-recurring revenue or expenses under any such agreement, the cost, timing and outcomes of regulatory compliance, approvals or other regulatory actions and general and industry-specific economic conditions, particularly as it affects the pharmaceutical, biopharmaceutical or biotechnology industries in the United States.
Some of the factors that may cause operating results to fluctuate on a period-to-period basis include the scope, progress, duration results and costs of preclinical and clinical development programs, as well as non-clinical studies and assessments of product candidates and programs, restructuring costs, implementation or termination of collaboration, licensing, manufacturing or other material agreements with third parties, non-recurring revenue or expenses under any such agreement, the cost, timing and outcomes of regulatory compliance, approvals or other regulatory actions, the likelihood of regulatory approval, failure of regulators to grant regulatory approval and general and industry-specific economic conditions, particularly as it affects the pharmaceutical, biopharmaceutical or biotechnology industries in the PRC or United States.
These regulations include: • the Federal Healthcare Anti-Kickback Statute that prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid, and which will constrain its marketing practices and the marketing practices of its licensees, educational programs, pricing policies, and relationships with healthcare providers or other entities; • the federal physician self-referral prohibition, commonly known as the Stark Law, which prohibits physicians from referring Medicare or Medicaid patients to providers of “designated health services” with whom the physician or a member of the physician’s immediate family has an ownership interest or compensation arrangement, unless a statutory or regulatory exception applies; • federal false claims laws that prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other government reimbursement programs that are false or fraudulent, and which may expose entities that provide coding and billing advice to customers to potential criminal and civil penalties, including through civil whistleblower or qui tam actions, and including as a result of claims presented in violation of the Federal Healthcare Anti-Kickback Statute, the Stark Law or other healthcare-related laws, including laws enforced by the FDA; • the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also created federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services that, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; • federal physician sunshine requirements under the ACA, which requires manufacturers of approved drugs, devices, biologics and medical supplies to report annually to the U.S.
These regulations include: • the Federal Healthcare Anti-Kickback Statute that prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid, and which will constrain our marketing practices and the marketing practices of our licensees, educational programs, pricing policies, and relationships with healthcare providers or other entities; • the federal physician self-referral prohibition, commonly known as the Stark Law, which prohibits physicians from referring Medicare or Medicaid patients to providers of “designated health services” with whom the physician or a member of the physician’s immediate family has an ownership interest or compensation arrangement, unless a statutory or regulatory exception applies; • federal false claims laws that prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other government reimbursement programs that are false or fraudulent, and which may expose entities that provide coding and billing advice to customers to potential criminal and civil penalties, including through civil whistleblower or qui tam actions, and including as a result of claims presented in violation of the Federal Healthcare Anti-Kickback Statute, the Stark Law or other healthcare-related laws, including laws enforced by the FDA; • HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also created federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services that, as amended by HITECH, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; 98 • federal physician sunshine requirements under the ACA, which requires manufacturers of approved drugs, devices, biologics and medical supplies to report annually to the U.S.
In addition, in an infringement proceeding, a court may decide that one of Catalyst’s patents is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that its patents do not cover the technology in question.
In addition, in an infringement proceeding, a court may decide that one of our patents is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.
Conversion or exercise of these securities into shares of its common stock will cause dilution to the other holders of its common stock, and all such stock may be sold in the public market after conversion or exercise, subject to restrictions under the securities laws, which may lead to a decline in the market price of its common stock.
Conversion or exercise of these securities into shares of our common stock will cause dilution to the other holders of our common stock, and all such stock may 118 be sold in the public market after conversion or exercise, subject to restrictions under the securities laws, which may lead to a decline in the market price of our common stock.
The approval requirements for Catalyst’s product candidates are likely to vary by jurisdiction such that success in one jurisdiction is not necessarily predicative of success elsewhere.
The approval requirements for our product candidates are likely to vary by jurisdiction such that success in one jurisdiction is not necessarily predicative of success elsewhere.
The regulatory authorities in the United States and the EU have not approved any products for the treatment of NASH, and while there are guidelines issued by the FDA for the development of drugs for the treatment of NASH and an FDA surrogate endpoint table for drug approval, it is unclear whether the requirements for approval will change in the future or whether the FDA will rely on regulatory precedent for future regulatory approvals.
In addition, the regulatory authorities in the PRC, United States and the EU have not approved any products for the treatment of NASH, and while there are guidelines issued by the NMPA and FDA for the development of drugs for the treatment of NASH and an NMPA and FDA surrogate endpoint table for drug approval, respectively, it is unclear whether the requirements for approval will change in the future or whether the NMPA or FDA will rely on regulatory precedent for future regulatory approvals.
The value to employees of stock options that vest over time may be significantly affected by movements in Catalyst’s stock price that are beyond its control and may at any time be insufficient to counteract more lucrative offers from other companies.
The value to employees of stock options that vest over time may be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies.
As a public company, Catalyst has and will continue to incur significant legal, accounting and other expenses, including costs associated with public company reporting and corporate governance requirements, in order to comply with the rules and regulations imposed by the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection, as well as rules implemented by the SEC and Nasdaq.
As a public company, we have and will continue to incur significant legal, accounting and other expenses, including costs associated with public company reporting and corporate governance requirements, in order to comply with the rules and regulations imposed by the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection, as well as rules implemented by the SEC and Nasdaq.
The volume of drug pricing-related bills dramatically increased under the previous Congress, and the resulting impact on its business is uncertain and could be material.
The volume of drug pricing-related bills dramatically increased under the previous Congress, and the resulting impact on our business is uncertain and could be material.
Furthermore, state Medicaid programs could request additional supplemental rebates on its products as a result of an increase in the federal base Medicaid rebate.
Furthermore, state Medicaid programs could request additional supplemental rebates on our products as a result of an increase in the federal base Medicaid rebate.
Other proposed regulatory actions affecting manufacturers could have a material adverse effect on its business. It is difficult to predict the impact, if any, of any such proposed legislative and regulatory actions or resulting state actions on the use and reimbursement of its products in the United States, but its results of operations may be adversely affected.
Other proposed regulatory actions affecting manufacturers could have a material adverse effect on our business. It is difficult to predict the impact, if any, of any such proposed legislative and regulatory actions or resulting state actions on the use and reimbursement of our future products, if approved, in the United States, but our results of operations may be adversely affected.
Any of these outcomes could impair its ability to prevent competition from third parties that may have an adverse impact on its business.
Any of these outcomes could impair our ability to prevent competition from third parties that may have an adverse impact on our business.
Catalyst cannot guarantee that any preclinical studies and clinical trials will be conducted as planned or completed on schedule, if at all.
We cannot guarantee that any preclinical studies and clinical trials will be conducted as planned or completed on schedule, if at all.
Catalyst may experience delays in completing planned clinical trials for a variety of reasons, including delays related to: • the availability of financial resources to commence and complete the planned trials; • inability to reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • obtaining approval at each clinical trial site by an independent institutional review board (“IRB”); • recruiting suitable patients to participate in trials; • having patients complete a trial or return for post-treatment follow-up; • clinical trial sites deviating from trial protocol or dropping out of a trial; • adding new clinical trial sites; and • manufacturing sufficient quantities of qualified materials under Current Good Manufacturing Practice (“cGMPs”) regulations and applying them on a subject-by-subject basis for use in clinical trials.
We may experience delays in completing planned clinical trials for a variety of reasons, including delays related to: • the availability of financial resources to commence and complete the planned trials; • inability to reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • obtaining approval at each clinical trial site by an IRB; • recruiting suitable patients to participate in trials; • having patients complete a trial or return for post-treatment follow-up; • clinical trial sites deviating from trial protocol or dropping out of a trial; • adding new clinical trial sites; and • manufacturing sufficient quantities of qualified materials under Current Good Manufacturing Practice (“cGMPs”) regulations and applying them on a subject-by-subject basis for use in clinical trials.
If Catalyst is unable to prevent material disclosure of the non-patented intellectual property related to its technologies to third parties, and there is no guarantee that Catalyst will have any such enforceable trade secret protection, Catalyst may not be able to establish or maintain a competitive advantage in its market, which could materially adversely affect its business, results of operations and financial condition.
If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.
Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that Catalyst or its collaborators commercialize and, even if these are available, the level of reimbursement may not be satisfactory.
Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that we or our collaborators commercialize and, even if these are available, the level of reimbursement may not be satisfactory.
In the event of contamination or injury resulting from the use or disposal of its hazardous materials, Catalyst could be held liable for any resulting damages, and any liability could exceed its resources. Catalyst also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
Adverse pricing limitations may hinder its ability to recoup its investment in one or more product candidates, even if its product candidates obtain marketing approval.
Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.
The collaborator may also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether such a collaboration could be more attractive than the one with Catalyst. There can also be no assurance that Catalyst will enter into any collaboration agreements, or that any such agreements will be on favorable terms.
The collaborator may also consider alternative products, product candidates or technologies for similar indications that may be available for collaboration and whether such a collaboration could be more attractive than the one with us. There can also be no assurance that we will enter into any collaboration agreements, or that any such agreements will be on favorable terms.
Interference proceedings provoked by third parties or brought by Catalyst may be necessary to determine the priority of inventions with respect to its patents or patent applications or those of its licensors. An unfavorable outcome could require Catalyst to cease using the related technology or to attempt to license rights from the prevailing party.
Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights from the prevailing party.
As a result, the preliminary or top-line results that Catalyst reports may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated or subsequently made subject to audit and verification procedures.
As a result, the preliminary or top-line results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated or subsequently made subject to audit and verification procedures.
Further, if Catalyst encounters delays in regulatory approvals, the period of time during which Catalyst could market a product candidate under patent protection could be reduced. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed.
Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed.
Misappropriation or unauthorized disclosure of its trade secrets could impair its competitive position and may have a material adverse effect on its business. Additionally, if the steps taken to maintain its trade secrets are deemed inadequate, Catalyst may have insufficient recourse against third parties for misappropriating the trade secret.
Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.
If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of its common stock. Intellectual property litigation could cause Catalyst to spend substantial resources and distract its personnel from their normal responsibilities.
If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock. Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Various extensions may be available; however the life of a 43 patent, and the protection it affords, is limited. Once the patent life has expired for a product, Catalyst may be subject to competition from generic medications.
Various extensions may be available; however the life of a patent, and the protection it affords, is limited. Once the patent life has expired for a product, we may be subject to competition from generic medications.
Catalyst’s current trading volumes are modest, and sales of a substantial number of shares of its common stock in the public market, or the perception that these sales could occur, could cause the market price to decline.
Our current trading volumes are modest, and sales of a substantial number of shares of our common stock in the public market, or the perception that these sales could occur, could cause the market price to decline.
Some of its competitors may be able to sustain the costs of such litigation or proceedings more effectively than Catalyst can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise its ability to compete in the marketplace.
Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.
The availability of other approved products and other products in clinical trials have and may limit the number of patients willing to participate in Catalyst’s clinical trials.
The availability of other approved products and other products in clinical trials have and may limit the number of patients willing to participate in our clinical trials.
Such evolution may impact Catalyst’s future clinical trial designs, including trial size and endpoints, in ways that Catalyst cannot predict today. In particular, regulatory authority expectations about liver biopsy data may evolve especially as more information is published about the inherent variability in liver biopsy data.
Such evolution may impact our future clinical trial designs, including trial size and endpoints, in ways that we cannot predict today. In particular, regulatory authority expectations about liver biopsy data may evolve especially as more information is published about the inherent variability in liver biopsy data.
Catalyst’s ability to commercialize any product candidates successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations.
United States Our ability to commercialize any product candidates successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations.
The outcome of preclinical studies and early clinical trials may not be predictive of the success of late-stage clinical trials. Trials of Catalyst’s product candidates in larger numbers of patients may not have similar efficacy results and could result in adverse effects that were not observed in the earlier trials with smaller numbers of patients.
The outcome of preclinical studies and early clinical trials may not be predictive of the success of later-stage clinical trials. Trials of our product candidates in larger numbers of patients may not have similar efficacy results and could result in adverse effects that were not observed in the earlier trials with smaller numbers of patients.
Catalyst’s relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose Catalyst to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
If Catalyst’s operations are found to be in violation of any of these laws or any other governmental regulations that may apply to it, Catalyst may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of its operations.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to it, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations.
Parties making claims against Catalyst may obtain injunctive or other equitable relief that could effectively block its ability to further develop and commercialize one or more of its product candidates unless Catalyst redesigned infringing products (which may be impossible) or obtained a license under the applicable patents (which may not be available on commercially reasonable terms or at all), or until such patents expire.
Parties making claims against us may obtain injunctive or other equitable relief that could effectively block our ability to further develop and commercialize one or more of our product, ETUARY, and our product candidates unless we redesigned infringing products (which may be impossible) or obtained a license under the applicable patents (which may not be available on commercially reasonable terms or at all), or until such patents expire.
If any physicians or other healthcare providers or entities with whom Catalyst expects to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
If any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
If Catalyst does not accurately evaluate the commercial potential or target market for a particular product candidate, Catalyst may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for Catalyst to retain sole development and commercialization rights to such product candidate.
If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
It is not always possible to identify and deter employee misconduct, and the precautions Catalyst takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting Catalyst from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
As other companies are in later stages of clinical trials for their potential NASH therapies, Catalyst expects that the path for regulatory approval for NASH therapies may continue to evolve in the near term as these other companies refine their regulatory approval strategies and interact with regulatory authorities.
As other companies are in later stages of clinical trials for their potential NASH therapies, we expect that the path for regulatory approval for NASH therapies may continue to evolve in the near term as these other companies refine their regulatory approval strategies and interact with regulatory authorities.
Fluctuations in operating results could adversely affect the price of Catalyst’s common stock. Catalyst’s operating results are likely to fluctuate significantly from quarter to quarter and year to year. These fluctuations could cause its stock price to decline.
Fluctuations in operating results could adversely affect the price of our common stock. Our operating results are likely to fluctuate significantly from quarter to quarter and year to year. These fluctuations could cause our stock price to decline.
Catalyst cannot predict whether investors find its common stock less attractive because of its reliance on any of these exemptions. If some investors find its common stock less attractive as a result, there may be a less active trading market for its common stock and its stock price may be more volatile.
We cannot predict whether investors find our common stock less attractive because of our reliance on any of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Catalyst may also seek to access the public or private capital markets whenever conditions are favorable, even if it does not have an immediate need for additional capital at that time. There can be no assurance that Catalyst will be able to obtain additional funding if, and when necessary.
We may also seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. There can be no assurance that we will be able to obtain additional funding if, and when necessary.
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Item 2. Properties
Properties — owned and leased real estate
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Item 2. Properties
Properties — owned and leased real estate
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2022 filing
2023 filing
Biggest changeItem 2. PROPERTIES Our corporate headquarters are in South San Francisco, California, where we lease approximately 2,976 rentable square feet of office space. The lease will expire on April 30, 2023. Catalyst expects to be able to renew this lease or obtain alternative facilities on commercially reasonable terms.
Biggest changeItem 2. PROPERTIES. Gyre Therapeutics’ Properties Our corporate headquarters are in San Diego, California, where we lease approximately 1,643 rentable square feet of office space. The lease commenced on November 11, 2023 and expires on the last day of the 38th full calendar month beginning on or after November 11, 2023.
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Gyre expects to be able to renew this lease or obtain alternative facilities on commercially reasonable terms.
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Gyre Pharmaceuticals’ Properties Owned Properties Gyre Pharmaceuticals has land use right certificates for two parcels of land in Shunyi District, Beijing, PRC and Cangzhou, Hebei province, PRC with an aggregate site area of 66,559 square meters and building ownership certificates for six properties with an aggregate gross floor area of 12,206 square meters.
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Gyre Pharmaceuticals’ two production centers are in Beijing, PRC and Cangzhou, PRC. Leased Properties Gyre Pharmaceuticals leases 21 properties in the PRC. Among Gyre Pharmaceuticals’ 21 leased properties, eight are used as offices, 12 are used as employee dormitories and one is operated as a laboratory.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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2022 filing
2023 filing
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Item 3. LEGAL PROCEEDINGS On June 15, 2022, certain Company stockholders who beneficially held in the aggregate more than five percent (5%) of our common stock filed a lawsuit in Delaware Chancery Court, captioned JDS1, LLC v. Catalyst Biosciences, Inc., et al., C.A. No. 2022-0515-KSJM (Del.
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Item 3. LEGAL PROCEEDINGS. We are currently not a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business.
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Ch.), against the Company and its board of directors alleging, among other things, violations of Section 271 of the Delaware General Corporation Law and breach of fiduciary duty in connection with the Company’s asset sale to Vertex, as well as certain claims related to the alleged failure to disclose information related to the Vertex transaction.
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Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors, and there can be no assurances that favorable outcomes will be obtained. Item 4. MINE SAFETY DISCLOSURES. Not applicable. 124 PART II
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In August 2022, the lawsuit was dismissed with prejudice and we reimbursed JDS1, LLC for its legal and other expenses related to the litigation in the amount of $0.4 million. Item 4 . MINE SAFETY DISCLOSURES Not applicable. 59 PART II I tem 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
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Market Information for Common Stock Catalyst Biosciences, Inc. is listed on the Nasdaq Capital Market under the symbol “CBIO.” Holders of Common Stock As of March 24, 2023, there were approximately 65 holders of record of our common stock.
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In addition, a substantially greater number of stockholders may be “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
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Securities Authorized for Issuance Under Equity Compensation Plans The information required by this Item regarding equity compensation plans is incorporated by reference to the information set forth in Item 12 of this Annual Report on Form 10-K. Dividend Policy We have not historically declared or paid regular cash dividends on our common stock.
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Although our board of directors declared special cash dividends of $45.0 million and $7.6 million, which were payable on September 20, 2022 and January 12, 2023, respectively, to stockholders of record, excluding GNI for the 2023 dividend, as of the close of business on September 6, 2022 and January 5, 2023, respectively, we do not currently intend to pay any regular cash dividends in the foreseeable future.
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Unregistered Sales of Securities; Use of Proceeds from Registered Securities; Issuer Purchases of Equity Securities N/A Purchases of Equity Securities by the Issuer and Affiliated Purchasers. None. I tem 6. [RESERVED]. 60 I tem 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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The following discussion and analysis should be read in conjunction with Catalyst’s consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties, including those set forth under the heading “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
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Actual results and the timing of selected events discussed below could differ materially from those expressed in, or implied by, these forward-looking statements. Overview F351 Asset Acquisition On December 26, 2022, Catalyst acquired the F351 Assets from GNI Group Ltd. and GNI Hong Kong Limited (the “Sellers”) pursuant to that certain F351 Agreement, by and among Catalyst and the Sellers.
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The F351 Assets include 15 issued or pending patents and patent applications outside of the PRC, with the last acquired issued patent expected to expire in August 2037.
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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.
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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.
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Pursuant to the F351 Agreement, Catalyst has agreed to hold a stockholders’ meeting, which is expected to be held in the third quarter of 2023, to submit the following matters to the Company’s stockholders for their consideration: (i) the approval of the conversion of the Catalyst Convertible Preferred Stock into shares of common stock in accordance with Nasdaq rules, or the Conversion Proposal, and (ii) if necessary or appropriate, the approval of 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.
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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.
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Business Combination Agreement On December 26, 2022, Catalyst, the Contributors, the Minority Holders and 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.
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The closing of the Business Combination Agreement will be subject to stockholder approval at a stockholder meeting expected to be held in the third quarter of 2023 and certain customary closing conditions.
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If the transaction is approved by stockholders, Catalyst would 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.
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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. 61 Contingent Value Rights Agreement Concurrent with the signing of the Business Combination Agreement, Catalyst entered into the CVR Agreement, pursuant to which each CVR Holder, 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 its common stock held by such holder at the CVR Record Date.
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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 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.
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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.
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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.
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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.
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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.
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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.
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Any amounts received from Vertex with respect to this hold-back will be distributed to the CVR Holders. On February 27, 2023, Catalyst signed an asset purchase agreement with GC Biopharma Corp.
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(“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, $1.0 million payable on signing and $5.0 million payable on February 28, 2025, subject to satisfaction of post-closing indemnification obligations.
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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.
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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.
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Catalyst has never been profitable and has incurred significant operating losses in each year since inception. Catalyst had net losses of $8.2 million and $87.9 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, Catalyst had an accumulated deficit of $410.9 million.
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As of December 31, 2022, its cash and cash equivalents balance was $21.7 million. Substantially all its operating losses were incurred in its research and development programs and in its general and administrative operations.
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License and Collaboration Revenue License and collaboration revenue consists of revenue earned for performance obligations satisfied pursuant to the License and Collaboration Agreement with Biogen entered into in December 2019 and terminated in May 2022 (the “Biogen Agreement”).
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Catalyst recognized collaboration revenue for reimbursable third-party vendor, out-of-pocket 62 and personnel costs pertaining to the Biogen Agreement , of $ 0.8 million and $ 7.3 million during the year s ended December 31, 202 2 and 202 1 , respectively .
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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 commercialize its product candidates.
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Cost of License and Collaboration Revenue Cost of license and collaboration revenue consists of fees for research and development services payable to third-party vendors and personnel costs, corresponding to the recognition of license and collaboration revenue from Biogen. Cost of license and collaboration revenue does not include any allocated overhead costs.
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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 and $7.4 million during the years ended December 31, 2022 and 2021, respectively, and recorded such costs as cost of collaboration revenue.
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Acquired In-process Research and Development Expenses Acquired in-process research and development (“IPR&D”) expense resulted from the acquisition of the F351 Assets in December 2022. The acquisition costs allocated to acquire IPR&D with no alternative future use was recorded as an expense at the acquisition date.
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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 research and development activities. Research and development expenses represent costs incurred to conduct research, such as the discovery and development of its product candidates.
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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.
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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.
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The table below details its internal and external costs for research and development for the period presented, excluding the acquired IPR&D ( in thousands) . See “ Current Product Development Plans ” included elsewhere in this Annual Form 10-K for further discussion of the current research and development programs.
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Year Ended December 31, 2022 2021 Hemophilia $ 2,433 $ 25,791 Complement 4,139 24,698 Personnel and other 6,135 17,198 Stock-based compensation 330 1,202 Total research and development expenses (excluding IPR&D) $ 13,037 $ 68,889 63 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.
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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.
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As such, Catalyst does not maintain information regarding these costs incurred for these research and development programs on a project-specific basis. Since Catalyst has ceased its research and development activities, Catalyst expects its aggregate research and development expenses will continue after the Business Combination Agreement.
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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.
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Catalyst incurs expenses associated with operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, insurance expenses, audit expenses, investor relations activities, Sarbanes-Oxley compliance expenses and other administrative expenses and professional services.
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Gain on Disposal of Assets Gain on disposal of assets resulted from 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 to transact the sale and losses incurred in connection with the sale of Catalyst’s property and equipment.
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Results of Operations The following table set forth its results of operations data for the periods presented (in thousands) : Year Ended December 31, 2022 2021 Change ($) Change (%) Revenue: Collaboration $ 794 $ 7,338 $ (6,544 ) (89 )% Operating expenses (income): Cost of collaboration 798 7,380 (6,582 ) (89 )% Research and development 13,037 68,889 (55,852 ) (81 )% General and administrative 17,366 18,963 (1,597 ) (8 )% Acquired in-process research and development 35,390 — 35,390 * Gain on disposal of assets, net (57,186 ) — (57,186 ) * Total operating expenses 9,405 95,232 (85,827 ) (90 )% Loss from operations (8,611 ) (87,894 ) 79,283 (90 )% Interest and other income (expense), net 717 (39 ) 756 * Loss before income taxes (7,894 ) (87,933 ) 80,039 (91 )% Income tax expenses 348 — 348 * Net loss $ (8,242 ) $ (87,933 ) $ 79,691 (91 )% * Not meaningful License and Collaboration Revenue License and collaboration revenue for the years ended December 31, 2022 and 2021 consisted of reimbursable collaboration expenses from the Biogen Agreement.
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Cost of License and Collaboration Cost of license and collaboration revenue for the years ended December 31, 2022 and 2021 primarily related to reimbursable third-party vendor and personnel costs incurred pertaining to the Biogen Agreement. 64 Research and Development Expenses Research and development expenses, excluding the acquired IPR&D, were $13.0 million and $68.9 million during the years ended December 31, 2022 and 2021, respectively, a decrease of approximately $55.9 million, or 81%.
Removed
The decrease was due primarily to a decrease of $23.4 million in hemophilia-related costs, a decrease of $20.5 million in complement-related costs, a decrease of $11.1 million in personnel-related costs, and a decrease of $0.9 million in stock-based compensation costs.
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Research and development expenses for the year ended December 31, 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 $17.4 million and $19.0 million during the years ended December 31, 2022 and 2021, respectively, a decrease of approximately $1.6 million, or 8%.
Removed
The decrease was due primarily to a decrease of $2.1 million in professional services, a decrease of $2.1 million in personnel-related costs, partially offset by an increase of $2.2 million in facilities and other administrative costs, which primarily related to transaction costs incurred in connection with the Business Combination Agreement and costs related to the Company’s operating leases, an increase of $0.2 million related to the Company’s allowance for doubtful accounts, and a net increase of $0.2 million related to settlements reached with Biogen and certain contract service vendors.
Removed
General and administrative expenses for the year ended December 31, 2022 include approximately $0.4 million of severance and other costs related to its reduction-in-force. Acquired In-Process Research and Development Acquired IPR&D was $35.4 million for the year ended December 31, 2022, which related to the acquisition of the F351 Assets in December 2022.
Removed
The acquisition cost allocated to acquire IPR&D with no alternative future use was recorded as an expense at the acquisition date. No acquired IPR&D expenses were incurred in 2021.
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Gain on Disposal of Assets, Net Gain on disposal of assets, net was $57.2 million for the year ended December 31, 2022, which primarily consisted of a $57.4 million gain related to the sale of its complement portfolio to Vertex in May 2022.
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Interest and Other Income (Expense), Net The $0.8 million increase in interest and other income (expense), net for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to a $0.2 million gain recognized upon the extinguishment of a liability and an increase in interest income.
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Recent Accounting Pronouncements Refer to Note 3, Summary of Significant Accounting Policies, to Catalyst’s consolidated financial statements included within Item 8 of this Annual Report on Form 10-K for a description of recent accounting pronouncements adopted and not yet adopted for the year ended December 31, 2022.
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Liquidity and Capital Resources On September 20, 2022, Catalyst paid a special, one-time cash dividend of $1.43 per share, or approximately $45.0 million, to holders of the Company’s common stock.
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On December 27, 2022, Catalyst declared another special cash dividend of $0.24 per share, or approximately $7.6 million, to holders of the Company’s common stock, excluding GNI, which was paid on January 12, 2023. As of December 31, 2022, Catalyst had $21.7 million of cash and cash equivalents.
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During the year ended December 31, 2022, Catalyst had a $8.2 million net loss and $33.1 million cash used in operating activities. Catalyst has an accumulated deficit of $410.9 million as of December 31, 2022.
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Catalyst expects that its existing cash and cash equivalents are sufficient to support its operating expenses through 2023, assuming the Company’s stockholders approve the Conversion Proposal.
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Catalyst’s estimate as to how long the Company expects its cash and cash equivalents to be able to fund its operations is based on assumptions that may prove to be wrong, and it could use the Company’s available capital resources sooner than it currently expects.
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Further, changing circumstances, some of 65 which may be beyond Catalyst’s control, could cause it to consume capital significantly faster than currently anticipate d , and the Company may need to seek additional funds sooner than planned. In connection with the F351 Agreement, Catalyst issued Catalyst Convertible Preferred Stock to GNI.
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Catalyst is obligated to seek stockholder approval for the conversion of the Catalyst Convertible Preferred Stock into common stock.
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In the event that the Company fails to timely hold the stockholders’ meeting or fails to obtain stockholder approval of the Conversion Proposal, then the holders of the Catalyst Convertible Preferred Stock would be entitled to require Catalyst to redeem, in cash, the shares of common stock underlying its Catalyst Convertible Preferred Stock at a price per share equal to the fair value of the common stock.
Removed
If Catalyst is forced to redeem a significant amount of shares underlying the Catalyst Convertible Preferred Stock, it could, among other things, materially affect the Company’s results of operations and cash usage forecasts, require Catalyst to raise additional capital and impact its ability to raise additional capital.
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Also, while Catalyst cannot predict the amount with any level of certainty, there is a level of cash settlement at which, if it is exceeded, could require Catalyst to make redemption payments in excess of its current liquidity.
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Catalyst believes that its stockholders who are entitled to vote on the Conversion Proposal at its 2023 Annual Meeting of Stockholders, which is expected to be held in the third quarter of 2023, will vote to approve the proposal.
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However, as the vote of the Company’s stockholders is outside of its control, there is substantial doubt about Catalyst’s ability to continue as a going concern within one year from the filing of this Annual Report on Form 10-K.
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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.
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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.
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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.
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The following table summarizes its cash flows for the periods presented (in thousands): Year Ended December 31, 2022 2021 Cash used in operating activities $ (33,096 ) $ (83,755 ) Cash provided by investing activities 55,426 48,189 Cash (used in) provided by financing activities (45,011 ) 49,553 Net (decrease) increase in cash and cash equivalents $ (22,681 ) $ 13,987 Cash Flows from Operating Activities Cash used in operating activities for the year ended December 31, 2022 was $33.1 million.
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The most significant component of its cash used was a net loss of $8.2 million.
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The net loss included the net gain of $57.2 million from the sale of its complement portfolio and other assets, offset by non-cash expense primarily related to IPR&D of $35.4 million that resulted from the acquisition of the F351 Assets in December 2022 in exchange for shares of the Company’s stock, stock-based compensation of $1.3 million, bad debt expense of $0.2 million, and depreciation and amortization of $0.2 million.
Removed
In addition, net cash outflow of $4.9 million was attributable to the change in its net operating assets and liabilities primarily as a result of a $6.2 million decrease in accounts payable, and a $1.9 million decrease in accrued compensation and other accrued liabilities, partially offset by a $1.6 million decrease in accounts and other receivables and a $1.6 million decrease in prepaid and other current assets.
Removed
Cash used in operating activities for the year ended December 31, 2021 was $83.8 million. The most significant component of its cash used was a net loss of $87.9 million. This included non-cash expenses related to stock-based compensation of $3.4 million and depreciation and amortization of $0.3 million.
Removed
In addition, cash inflow of $0.5 million was attributable to the change in its net operating assets and liabilities primarily as a result of a $3.9 million decrease in prepaid and other assets, a $1.5 million decrease in accounts receivable, and a $0.5 million increase in accounts payable, offset by a $3.7 million decrease in accrued compensation and other accrued liabilities and a $1.8 million decrease in deferred revenue related to the Biogen Agreement. 66 Cash Flows from Investing Activities Cash provided by investing activities for the year ended December 31, 2022 was $55.4 million, due to $55.0 million in cash proceeds from the sale of its complement portfolio to Vertex, $2.5 million due to proceeds from maturities of investments, and $0.5 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.
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