GNI : Consolidated Financial Results for Q1 FY2023(IFRS)

GNI Group Ltd. (2160)

Consolidated Financail Results for Q1 FY2023

The following information was originally prepared and published by GNI Group Ltd. in Japanese as it contains timely disclosure materials to be submitted to the Tokyo Stock Exchange. This English summary translation is for reference purposes only. To the extent there is any discrepancy between this English translation and the original Japanese version, please refer to the Japanese version The following information was prepared in accordance with International Financial Reporting Standards ("IFRS").

Consolidated Financial Results for Q1 FY2023 (IFRS)

		May 15, 2023
Company Name:	GNI Group Ltd.	Tokyo Stock Exchange
Stock Code:	2160	URL https://www.gnipharma.com
Representative:	Ying Luo, Director, Representative Executive Officer, President, and CEO
Inquiries:	Kanichiro Suzuki, Director, Executive Officer, CFO	TEL: [phone]

Scheduled date of quarterly report filing: May 15, 2023	Scheduled dividend payment commencement date:-
Supplementary materials prepared for financial results:	Yes
Holding of a financial result briefing meeting:	Yes (For institutional investors and analysts)
	(Amounts of less than one million yen are rounded down)

1. Consolidated Financial Results for Q1 FY2023 (January to March)

1. Q1 FY2023 Consolidated Operating Results

(Percentages are shown as year-on-year changes)

																		Quarterly profit	Quarterly
																		attributable to
		Revenue		Operating income	Pre-tax profit		Quarterly profit	comprehensive
				owners of the
																		income
																		parent
		Million		%		Million	%	Million	%		Million	%	Million		%	Million		%
		yen				yen	yen		yen	yen		yen
Q1 FY2023	4,206		6.9		397	(17.0)	(64)	-		(341)	-	(2)		-	(57)		-
Q1 FY2022	3,933		1.6		478	(38.1)	347	(48.6)		72	(83.4)	351	(18.8)	1,101		(9.2)
		Basic earnings per		Diluted earnings per
			share					share
							Yen				Yen
Q1 FY2023				(0.06)			(0.06)
Q1 FY2022						7.40			7.36
(2) Consolidated financial position
												Total equity	Ratio of Total equity			Total equity
														attributable to
		Total assets			Total capital		attributable to	attributable to
									owners of the
											owners of the parent	owners of the parent
													parent per share
		Million yen				Million yen				Million yen			%						Yen
Q1 FY2023				34,070				19,786						21,205		62.2				446.56
FY2022				33,906				19,810						20,969		61.8				441.59
2. Dividends
									Dividends per share
		Q1				Q2			Q3					Year-End	Total
				Yen					Yen			Yen			Yen			Yen
FY2022				-					-			-			0.00			0.00
FY2023				-
FY2023 (Forecast)									-			-			0.00			0.00

Note: Amendment from the forecast most recently published: No

GNI Group Ltd. (2160)

Consolidated Financail Results for Q1 FY2023

3. Consolidated Earnings Forecasts for FY2023 (January to December)

(Percentages are shown as year on year changes)

Profit

Basic

Profit for the

attributable to

Revenue

Operating income

Pre-tax profit

earnings

year

owners of the

per share

parent

Million

%

Million

%

Million

%

Million

%

Million

%

Yen

yen

yen

yen

yen

yen

FY2023

17,100～

(1.8)～

700～

(49.2)～

(100)～

(113.0)～

(500)～

-

1,100～

182.9～

22.30～33.41

20,900

20.0

1,400

1.6

200

(74.0)

0

1,400

260.1

Note: Amendment from the forecast most recently published: No

Notes:

1. Changes in Significant Subsidiaries during the Period under Review
   (Changes in specified subsidiaries resulting in a change in the scope of consolidation): No

New: －	Excluded: －
(2) Changes in Accounting Policies and Changes in Accounting Estimates
①	Changes in accounting policies that are required under IFRS: No
②	Changes in accounting policies other than ① : No
③	Changes in accounting estimates: No
(3) Number of Shares Issued (Common Stock)
①	Number of shares issued as of the end of the	Q1 FY2023		47,487,843 shares	FY2022	47,487,843 shares
	period (including treasury stock)
②	Number of treasury stock as of the end of the	Q1 FY2023		1,391 shares	FY2022	1,391 shares
	period
③	Average number of shares for the period	Q1 FY2023		47,486,452 shares	Q1 FY2022	47,461,630 shares

• This consolidated financial report is not subject to audit procedures by certified public accountants or an auditing firm.
• Explanation Concerning the Proper Use of Financial Results Forecasts and Other Relevant Specific Items
  Forward-looking statements including earnings forecasts contained in this report are based on currently available information and management's assumptions and beliefs regarding uncertainties that may impact future earnings forecasts. The Company cautions readers that actual results may differ materially from forecasts due to a variety of factors. For the assumptions that underpin financial results forecasts as well as other related items, please refer to "1.(4) Outlook for the fiscal year ending December 31, 2023. "
  The Group is planning to conduct a corporate presentation meeting for institutional investors and analysts on May 18, 2023. Briefing materials used at that session will be posted on the Group's website as soon as practicable after the meeting.

GNI Group Ltd. (2160)

Consolidated Financail Results for Q1 FY2023

Contents
1. Analysis of Operating Results and Financial Position ………………………………………………………………	2
(1)	Analysis of operating results ……………………………………………………………………………………	2
(2)	Analysis of financial position …………………………………………………………………………………	3
(3)	Research and development activities …………………………………………………………………………	4
(4)	Outlook for the fiscal year ending December 31, 2023 ………………………………………………………	5
2. Summary of Quarterly Consolidated Financial Statements and Main Notes ………………………………………	6
(1)	Summary of quarterly consolidated statements of financial position …………………………………………	6
(2)	Summary of quarterly consolidated statements of income and summary of quarterly consolidated statements of	7
	comprehensive income …………………………………………………………………………………………
	Summary of quarterly consolidated statements of income ……………………………………………………	7
	Summary of quarterly consolidated statements of comprehensive income ……………………………………	8
(3)	Summary of quarterly consolidated statements of changes in equity …………………………………………	9
(4)	Summary of quarterly consolidated statements of cash flows …………………………………………………	11
(5)	Notes to the summary of quarterly consolidated financial statements …………………………………………	12
	(Notes related to going concern assumptions) …………………………………………………………………	12
	(Basis of preparation) …………………………………………………………………………………………	12
	(Segment information) …………………………………………………………………………………………	12
	(Important subsequent events) …………………………………………………………………………………	13

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GNI Group Ltd. (2160)

Consolidated Financail Results for Q1 FY2023

1. Analysis of Operating Results and Financial Position

(1) Analysis of operating results

Despite various challenges in FY2023 including the sudden lifting of the COVID-19 lockdown in China and the subsequent surge in infections, high global inflation, and volatility of capital markets, GNI Group Co., Ltd. ("the Company" or "we") and its affiliates (collectively "the Group") were still able to achieve revenue YoY growth, partially benefiting from a weakened yen, in our core businesses of pharmaceuticals centered on ETUARY® in China and medical devices (biomaterials) in the US. However, the increase in R&D expenses due to increased clinical development activities, investments in sales and marketing in China, as well as the rise in raw material prices due to inflation resulted in a decrease in YoY operating income. In addition, the Company continues to face pressure on its profits due to the increase in financial expenses related to the funding of its US subsidiary. However, the Company has secured sufficient liquidity in all three operating regions; Japan, the US, and China, and is maintaining a sound financial position for future growth.

Beijing Continent Pharmaceuticals Co., Ltd ("Continent"), a major subsidiary of our group, was unable to avoid the impact of the outbreak of COVID-19 in China from the end of 2022 to the beginning of 2023. Nonetheless, the revenue of the first quarter grew YoY even in terms of the local currency. Moreover, the sales of Continent's primary product, ETUARY®, continued to be robust. The clinical trials of F351 in China faced a delay of approximately three months from the initial schedule due to the outbreak of COVID-19 there, but the current infection situation has stabilized. We are implementing measures, such as adding more clinical trial locations, to catch up with the original schedule.

In December 2022, Catalyst Biosciences, Inc. ("CBIO"), listed on the US Nasdaq market, completed the first transaction to transfer the rights of F351 excluding China. Currently, CBIO is preparing for the second transaction where our group will merge Continent into CBIO, for which GNI USA, Inc. will receive CBIO shares as consideration. (For details on this transaction, please refer to the timely disclosures on December 27, 2022, and the Q&A disclosures on December 30, 2022, and January 18, 2023).

Berkeley Advanced Biomaterials LLC ("BAB"), which is involved in the biological materials business in the US, is also performing well, with its first quarter revenue in local currency roughly at par YoY. OsDerma Medical Inc., a joint venture in China in which we invested in November 2022, is preparing for business expansion in Asia. In addition, Micren Healthcare Co., Ltd., in which we invested in December 2022, is also making steady progress in its business.

Cullgen Inc. ("Cullgen"), which is focused on R&D in the US and China, are continuing to develop drugs using their proprietary targeted protein degradation technology platform, uSMITE™. Cullgen is preparing to register subjects for clinical trials of an oncology drug candidate using its first TRK degrader in China. At the same time, Cullgen is also developing several other programs targeting IND's (Investigational New Drug Application).

• Operating results by segment Pharmaceutical Segment
  Despite COVID-19 lockdown in China, the revenue from Continent achieved growth of drug product ETUARY® in China on a local currency basis. In JPY terms, the Pharmaceutical Segment had ¥3,606 million in revenue, up 6.0% YoY. The segment profit was ¥149 million, down 33.3% YoY. The decrease in profit was mainly due to increased sales and marketing expenses in China and R&D expenses in the US.

Medical Device Segment

In JPY terms, the Medical Device Segment had ¥599 million, up 12.8% YoY. The segment profit was ¥248 million, down 2.7% YoY.

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GNI Group Ltd. (2160)

Consolidated Financail Results for Q1 FY2023

• Selling, General and Administrative Expenses; Research and Development Expenses

			Thousand yen
	Q1 FY2022	Q1 FY2023	Difference
Selling, general and administrative expenses	(2,458,324)	(2,646,363)	(188,039)
Personnel expenses	(964,787)	(965,876)	(1,089)
Research and development expenses	(468,870)	(635,649)	(166,778)

Selling, general and administrative (SG&A) expenses for Q1 FY2023 were ¥2,646 million, up 7.6% YoY. The increase in SG&A expenses reflects the increase in human resources and marketing expenses in the Pharmaceutical Segment.

Research and Development expenses for Q1 FY2023 were ¥635 million, up 35.6% YoY. The increase in R&D expenses reflects our commitment to investments in strengthening R&D activities in the Pharmaceutical Segment.

• Finance Income and Finance Costs

Finance income

Finance costs

				Thousand yen
Q1 FY2022		Q1 FY2023		Difference
54,672		49,329		(5,343)
(186,173)		(239,599)		(53,426)

Finance income

In Q1 FY2023, the Group recorded finance income of ¥49 million, down 9.8% YoY, mainly due to decrease in foreign exchange profit.

Finance costs

In Q1 FY2023, the Group recorded finance costs of ¥239 million, up 28.7% YoY, mainly due to non-cash accrual of interest expenses related to Cullgen's funding.

(2) Analysis of financial position

Summary of Consolidated Financial Position

			Thousand yen
	As of Dec 31, 2022	As of Mar 31, 2023	Difference
Total assets	33,906,981	34,070,943	163,961
Total liabilities	14,096,013	14,284,812	188,798
Total equity	19,810,968	19,786,131	(24,837)

Total assets

As of March 31, 2023, the total assets stood at ¥34,070 million, up 0.5% compared to the previous fiscal year end.

Total liabilities

As of March 31, 2023, the total liabilities stood at ¥14,284 million, up 1.3% compared to the previous fiscal year end, mainly due to additional non-cash accrual of interest expenses related to Cullgen's funding.

Total equity

As of March 31, 2023, the total equity stood at ¥19,786 million, down 0.1% compared to the previous fiscal year end.

Summary of Consolidated Cash Flows

			Thousand yen
	Q1 FY2022	Q1 FY2023	Difference
Cash flows from operating activities	425,628	709,959	284,330
Cash flows from investing activities	(298,202)	(1,239,778)	(941,575)
Cash flows from financing activities	(331,129)	(51,798)	279,331

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