v3.26.1
Commitments and Contingencies
6 Months Ended
Jun. 30, 2026
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

11. Commitments and Contingencies

 

Litigation and Legal Matters

 

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

 

Purchasing Commitments

 

Property and Equipment

 

The Company’s commitments related to purchase of property and equipment contracted but not yet reflected in the condensed consolidated financial statements were $1.2 million as of June 30, 2026 and were expected to be incurred within one year.

 

EtorelTM IP Rights

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

 

According to the agreement, except for RMB 35.0 million, or approximately $5.1 million based on the June 30, 2026 spot exchange rate, the Company is committed to additional annual payments over eight years following the commencement of commercial sales in June 2025, which will be contingent consideration based on actual annual sales in future years. For each of the first two years starting from June 2025, the minimum annual commission is RMB 10 million, or approximately $1.5 million, based on the June 30, 2026 spot exchange rate, which has already been included in the IP cost. If the sales-based commission calculated at 5% of annual sales in the first year exceeds RMB 10 million (approximately $1.5 million, based on the June 30, 2026 spot exchange rate) or the commission calculated at 4% of annual sales in the second year exceeds RMB 10 million (approximately $1.5 million, based on the June 30, 2026 spot exchange rate), the excess amount for each year will be recognized as contingent consideration. For the third year through the eighth year, the contingent payments will be calculated at 3%, 2%, 2%, 1%, 1%, and 1% of sales in each year, respectively.

 

As of June 30, 2026, the Company assessed the possibility that annual sales commissions in the second year would exceed RMB 10 million, or approximately $1.5 million, based on the June 30, 2026 spot exchange rate, as remote and did not accrue any contingent consideration.

As of June 30, 2026, the total accrued contract consideration was $1.8 million, which was recorded under accrued expenses and other current liabilities.

 

Hydronidone (F351)

 

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

 

Under the Hydronidone Transfer Agreement, in exchange for the Hydronidone IP Rights, Gyre Pharmaceuticals is obligated to pay RMB 8.3 million, or approximately $1.2 million, based on the June 30, 2026 spot exchange rate, after the NDA passes the NMPA’s Center for Food and Drug Review and Inspection’s on-site registration inspection for the Hydronidone product; and RMB 49.6 million, or approximately $7.3 million, based on the June 30, 2026 spot exchange rate upon NMPA’s approval of the NDA. As of June 30, 2026, the next payment conditions have not been met; as such, no payments have been accrued.

 

Upon Hydronidone product achieving commercialization, the Company will be required to make annual royalty payments based on future product sales. These contingent payments are structured as twelve annual royalties equal to 10%, 14%, 16%, 16%, 16%, 16%, 16%, 15%, 14%, 12%, 10%, and 8% of annual sales. As of June 30, 2026, commercialization has not yet been achieved, and no royalty payments have been incurred or accrued.

 

SDM Service

 

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

 

Under the SDM Clinical Trial Agreement, the Company is obligated to make payments based on the achievement of specified clinical and operational milestones and the performance of clinical trial–related services, including trial preparation, patient enrollment and follow-up, site management, interim analyses, data management–related activities, and preparation of the clinical study report. The aggregate contractual amount under the agreement is approximately RMB 114.0 million, or approximately $16.7 million, based on the June 30, 2026 spot exchange rate.

 

As of June 30, 2026, the Company recognized $2.6 million in research and development expenses and made payments of $4.7 million under the SDM Clinical Trial Agreement.

 

 

Research and Development Programs

 

In addition to the $8.5 million commitment to GNI Group for the Hydronidone program, as of June 30, 2026, Gyre Pharmaceuticals has committed to allocate $44.5 million toward future research and development activities for various programs. Gyre Therapeutics has not committed to allocate any amount toward research and development activities.

 

Indemnification Agreements

 

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