aibioGyre Therapeutics sets up $50,000,000 at-the-market stock program with Jefferies
Tickers GYRE
Jefferies LLC is the sales agent for up to $50,000,000 of common stock. Its commission is up to 3.0% of gross proceeds, and a significant part of the business runs through a Chinese subsidiary.
Key facts
- Company
- Gyre Therapeutics, Inc. (NASDAQ: GYRE)
- News type
- Financings
- Primary source
- Gyre Therapeutics, Inc. 424B5 (2024-11-27)
The sales agreement
Gyre Therapeutics, Inc. (Nasdaq: GYRE) entered into an Open Market Sale Agreement with Jefferies LLC on November 27, 2024. The agreement lets the company sell up to $50,000,000 of common stock from time to time through Jefferies as sales agent.
Jefferies will use commercially reasonable efforts to sell the shares, and it is entitled to a commission of up to 3.0% of the aggregate gross sales price of the shares it sells.
The shares are registered under a shelf registration statement on Form S-3 (File No. 333-283237) that was filed on November 14, 2024 and declared effective on November 22, 2024. The prospectus supplement covers up to $50,000,000 within a shelf that can hold up to $150,000,000 of securities in total. Jefferies is the only bank named. The accompanying prospectus says Gibson, Dunn & Crutcher LLP of San Francisco will pass on the legality of the securities for the company.
The offering terms
The prospectus supplement gives the last reported sale price of the common stock on the Nasdaq Capital Market as $11.63 per share on November 25, 2024. The company says it may use the proceeds for research and development, manufacturing and scale-up, working capital and general corporate purposes. It may also use some of the money to license, acquire or invest in new programs, though it has no current commitments to do so.
The company has no obligation to sell any shares and may suspend or end the agreement at any time.
The company and its China structure
The prospectus supplement describes Gyre as a commercial-stage biotechnology company focused on anti-inflammatory and anti-fibrotic drugs for organ diseases, with a focus on organ fibrosis. Its approved product in the People's Republic of China, ETUARY (pirfenidone), is approved there for idiopathic pulmonary fibrosis. The company says it acquired the commercial rights to nintedanib, another drug approved for that condition, in a May 2024 agreement with Jiangsu Wangao Pharmaceuticals, and it plans to start commercial launch in the PRC in 2025.
The lead development candidate, F351, is a structural derivative of ETUARY that the company is prioritizing for liver fibrosis. The company says its Phase 2 trial in the PRC in chronic hepatitis B-associated liver fibrosis showed statistically-significant improvement of liver fibrosis, and that the drug was well tolerated. A confirmatory Phase 3 trial is ongoing, with a primary endpoint of a reduction in the liver fibrosis score (Ishak Scoring System) of at least one stage when F351 is taken with Entecavir. The company says the last patient completed the 52-week pivotal Phase 3 trial in October 2024 and that top-line data are expected by the first quarter of 2025.
The prospectus supplement says a significant portion of the business is operated through Beijing Continent Pharmaceutical Co., Ltd., an indirectly majority-owned subsidiary in the PRC that does business as Gyre Pharmaceuticals. It says that structure involves unique legal and operational risks for investors, and that the company's auditor is headquartered in mainland China, a jurisdiction where the Public Company Accounting Oversight Board has been unable to conduct inspections without PRC approval.
Dilution and what is still unproven
The prospectus supplement counts 85,769,526 shares outstanding as of September 30, 2024. It assumes sales of 4,299,226 shares at $11.63 per share, which would leave up to 90,068,752 shares outstanding. Net tangible book value at September 30, 2024 was approximately $89.7 million, or $1.05 per share. On those assumptions it would be $137.9 million, or $1.53 per share, which the supplement says is an immediate dilution of $10.10 per share to new investors.
The company says a planned U.S. Phase 2 trial of F351 in MASH-associated liver fibrosis is expected to start in 2025 once an investigational new drug application is cleared. It says it cannot guarantee the trial will start, and that it may need to raise additional capital for it. The Phase 3 data in hepatitis B-associated liver fibrosis are expected by the first quarter of 2025, so they are not yet in hand. The Phase 2 results are the company's own description.