Consolidated Financial Results for FY2024 (IFRS)

February 14, 2025

Notes:  Provisional accounting treatments for business combinations are being finalized for the fiscal year ending December 2024, and the figures for the fiscal year ending December 2023 reflect the finalization of the provisional accounting treatments.

For details regarding the performance forecasts above, please refer to the attached document “1.  Analysis of Operating Results and Financial Position (5) Outlook for the Fiscal Year Ending December 31,2025”

Notes:

Excluded:  -

(3)	Number of Shares Issued (Ordinary Shares)

Contents

1.	Analysis of Operating Results and Financial Position		2
	(1)	Analysis of Operating Results	2
	(2)	Analysis of Financial Position	4
	(3)	Analysis of Cash Flows	4
	(4)	Research and Dvelopment Ativities	5
	(5)	Outlook for the Fiscal Year Ending December 31, 2025	6
2.	Basic Policy on the Selection of Accounting Standards		6
3.	Consolidated Financial Statements and Notes		7
	(1)	Consolidated Statements of Financial Position	7
	(2)	Consolidated Statements of Income and Consolidated Statements of Comprehensive Income	9
	(3)	Consolidated Statements of Changes in Equity	11
	(4)	Consolidated Statements of Cash Flows	13
	(5)	Notes to the Consolidated Financial Statements	15
		(Notes Related to Going Concern Assumptions)	15
		(Basis of Preparation)	15
		(Segment Information)	19
		(Earnings Per Share)	19
		(Important Subsequent Events)	19

1.	Analysis of Operating Results and Financial Position

(1) Analysis of Operating Results

In 2024, the global economy remained uncertain due to high geopolitical risks such as the prolonged Russian invasion of Ukraine and instability in the Middle East.  In Japan, the Nikkei average stock price has recorded its first 40,000 yen level, and a certain level of growth is being seen against the backdrop of a solid employment environment and a recovery in tourism demand.  However, currency volatility has increased, and price inflation has been driven by rising import costs.  On the other hand, the pace of wage increases continues to be unable to keep up with rising prices, and reducing the burden on households and addressing sustainable economic growth have become issues.  As for the biotechnology sector to which our company belongs and the Tokyo Stock Exchange Growth Market, the situation is not entirely optimistic due to concerns over continued interest rate hikes in Japan.

Under these circumstances, GNI Group Co., Ltd. (“the Company” or “we”) and its affiliated companies (“the Group”) have been steadily promoting projects such as research and development, which the Group has been working on as a stepping stone to future business development, and the listing of subsidiary Cullgen Inc. (“Cullgen”), which have been undertaken by the Group as a whole, in order to become a global mid-sized pharmaceutical company.

In the pharmaceutical and drug discovery Segments, Beijing Continent Pharmaceuticals Co., Ltd. (doing business as Gyre Pharmaceuticals Co., Ltd. “Gyre Pharmaceuticals”), a major subsidiary of the Group, maintained total annual sales of its main product, ETUARY®, at the same level as last year, despite the anti-corruption campaign in the PRC lasting longer than expected.  In order to gain a strong position in the pulmonary fibrosis field, we acquired the rights to manufacture and sell Nintedanib, which is indicated for pulmonary fibrosis other than Idiopathic Pulmonary Fibrosis (IPF) in May 2024.  Furthermore, in the rare disease field (orphan drugs), Gyre Pharmaceuticals received manufacturing and commercial approval in June 2024 for avatrombopag maleate tablets, a treatment for thrombocytopenia due to chronic liver disease that it had been developing in the PRC and in January 2025, approval was granted for an expanded indication to include ITP (chronic idiopathic thrombocytopenia).  As a result, it is expected that future sales revenue will increase by utilizing the existing sales network.

In October 2024, Gyre Pharmaceuticals completed the Phase 3 clinical trial in the PRC for F351, a promising candidate for the next product, targeting liver fibrosis caused by hepatitis B, and is working diligently to disclose top-line data from the clinical trial.  In addition, Gyre Pharmaceuticals is exploring its future global expansion as a treatment for liver fibrosis caused by MASH (metabolic dysfunction-associated steatohepatitis).

As disclosed on November 14, 2024, Cullgen, a U.S. subsidiary that conducts research and development of innovative new drugs mainly in the U.S. and the PRC, announced that it will become a listed company on the Nasdaq market in the U.S. through a reverse merger.  If successfully listed, it will be the second public company after Gyre Therapeutics.

Cullgen continues to advance drug discovery using its proprietary uSMITE™ (ubiquitin-mediated, small molecule induced target elimination) targeted protein degradation inducer technology platform.  Cullgen has signed a joint research and option agreement with Astellas Pharma Inc. (“Astellas Pharma”) to create innovative protein degradation inducers, and the joint research with Astellas Pharma in this strategic alliance is progressing smoothly.

Cullgen is currently conducting clinical trials in the PRC for CG001419 (development number) as the Company’s first TRK degrader anticancer drug candidate, and has begun Phase 1/2 clinical trials.  In addition, Cullgen established a subsidiary in Australia, its third country after the PRC and the U.S., and began the Phase 1 clinical trial for acute and chronic pain in January 2025.  Moreover, as disclosed on October 9, 2024, the IND (Investigational New Drug Application) for CG009301 (development number), a treatment for malignant hematological tumors (leukemia) being developed in the PRC and the U.S. has been approved.  Research and development are also underway for several other programs with the aim of starting clinical trials.

The revenue of the main product of Gyre Pharmaceuticals, ETUARY® , remained steady in the Chinese market.  Cullgen recorded revenue of JPY1,438 million from the joint development of targeted protein degraders with Astellas Pharma.  As a result, the current consolidated fiscal year in the pharmaceutical segment, revenue and segment profit were JPY 18.3 billion down 20.3% YoY, and JPY0.3 billion, down 96.9% YoY, respectively.  However, the segment profit remained steady, excluding a one-time revenue of upfront license fee from Astellas Pharma, and valuation gain on Gyre Therapeutics shares, both incurred in FY2023.

In the Medical Device Segment, due to the inclusion of the newly established subsidiary in the consolidation last year, the segment revenue was JPY 5,307 billion, up 73.5% YoY, and the segment profit was JPY 10 billion, down 4.7% YoY, respectively.

Selling, general and administrative (SG&A) expenses for FY2024 were JPY 15.7 billion, up 3.1% YoY.

Research and development (R&D) expenses for FY2024 were JPY 2.8 billion, up 9.9% YoY.  The increase in R&D expenses was mainly due to the progress of preclinical and clinical trials at Cullgen.

Finance income for FY2024 was JPY 707 million, down 8.3% YoY.  This decrease of Finance Income was mainly due to decreased foreign exchange gain.

Finance costs for 2024 was JPY 1,880 million, up 50.4% YoY.  This increase was mainly due to increased foreign exchange losses and non-cash interest expense related to Cullgen financing.

The provisional accounting treatment for the business combination carried out in the previous consolidated fiscal year was finalized in this consolidated fiscal year.  In accordance with the finalization of this provisional accounting treatment, the comparative information included in the consolidated financial statements for this consolidated fiscal year reflects a review of the initial allocation of the acquisition cost, and for comparison and analysis with the end of the previous consolidated fiscal year, the amount based on the final amount after reflecting this review is used.

Summary of Consolidated Financial Position

As of FY 2024 year-end, total assets stood at 69.9 billion, up 8.8% compared to the previous fiscal year end.  This increase in total assets was mainly due to an increase in Non-current Intangible Assets.

As of FY 2024 year-end, total liabilities stood at 30.2 billion, up 9.0% compared to the previous fiscal year end.  This increase in total liabilities was mainly due to an increase in short-term borrowings.

As of FY 2024 year-end, total equity stood at 39.6 billion, up 8.7% compared to the previous fiscal year end.  This increase decrease was mainly due to increased other components of equity.

Summary of Consolidated Cash Flows

The cash flow from operating activities was 3.1 billion (cash outflow) in FY2024 (it was 6.5 billion cash inflow in FY2023).  This outflow of cash was mainly due to increased payment of corporate income taxes.

The cash flow from investing activities was 10.3 billion (cash outflow) in FY2024 (it was 6.8 billion cash outflow in FY2023).  This was mainly due to an increase in leasehold and guarantee deposits and the purchase of securities.

The cash flow from financing activities was 0.6 billion (cash inflow) in FY2024 (it was 10.6 billion cash inflow in FY2023).  This was mainly due to an increase in short-term borrowings, and inflow from capital contribution from non-controlling interests.

[Research Activities]
The Group’s drug discovery research aims to develop innovative new candidate compounds (NCEs) centered around Cullgen.  Cullgen is conducting research and development to expand its drug discovery pipeline, which includes multiple novel compounds targeting enzyme and non-enzyme proteins for cancer, pain, and autoimmune diseases.

In June 2023, Cullgen entered into a collaboration and exclusive option agreement with Astellas Pharma to create innovative protein degradation inducers.  In this strategic alliance, the two companies will combine Cullgen’s proprietary technology platform uSMITE™ utilizing novel E3 ligands with Astellas Pharma’s drug discovery and commercialization capabilities to create multiple targeted protein degradation inducers.  Cullgen and Astellas Pharma will collaborate to discover compounds for clinical development, and Astellas Pharma will be responsible for the development and commercialization of the discovered degraders.  Collaborative research with Astellas Pharma, including candidate degraders for cell cycle proteins, which are lead programs identified by Astellas Pharma for breast cancer and other solid cancers, is progressing smoothly.

[Development Activities]

■	ETUARY® [Chinese:  艾思瑞® , (Generic name:  Pirfenidone)] - Gyre Pharmaceuticals

Gyre Pharmaceuticals is conducting clinical trials to expand the indications of ETUARY® to the following diseases:

•	Diabetic nephropathy (DKD):  Phase 1 clinical trials completed, discussing further steps with Chinese authorities

•	Connective Tissue Diseases Associated Interstitial Lung Disease (CTD-LID) (systemic sclerosis (SSc-ILD) and dermatomyositis (DM-ILD)):  Phase 3 clinical trials ongoing

•	Pneumoconiosis treatment drug (Pneumoconiosis, PD):  Phase 3 clinical trials ongoing

■	Nintedanib - Gyre Pharmaceuticals

Nintedanib is a treatment drug indicated for IPF, systemic sclerosis-associated interstitial lung disease (SSc-ILD) and progressive fibrotic interstitial lung disease (PF-ILD).  In May 2024, Gyre Pharmaceuticals acquired the rights to manufacturing and commercial rights from Jiangsu Vanguard Pharmaceutical Co., Ltd..

■	F351 (Generic name:  Hydronidone) - Gyre Pharmaceuticals and Gyre Therapeutics

F351 is a potential treatment for liver fibrosis and an important new drug candidate in our pharmaceutical portfolio, which will be a key part of our strategy to enter major pharmaceutical markets around the world.  F351 is a potential blockbuster drug candidate.

Gyre Pharmaceuticals completed the Phase 3 clinical trial in patients with liver fibrosis caused by chronic hepatitis B in the PRC in October 2024.  The top-line results of Phase 3 are expected to be released in Q1 2025.

Gyre Pharmaceuticals is exploring its future global expansion as a treatment for liver fibrosis caused by MASH (metabolic dysfunction-associated steatohepatitis).

■	F573 [for Acute Liver Failure (ALF) and Acute on Chronic Liver Failure (ACLF)] - Gyre Pharmaceuticals

Gyre Pharmaceuticals is conducting the Phase 2 clinical trial of F573 as a treatment for ALF/ACLF, with the Phase 2 clinical trial is expected to be completed by the end of 2026.

■	F230 [for Pulmonary Arterial Hypertension (PAH)] - Gyre Pharmaceuticals

F230 is a drug in collaboration with Eisai for the treatment of PAH, and Gyre Pharmaceuticals received IND (Investigative Drug Application) approval in the PRC in May 2024.  The Phase 1 clinical trial is scheduled to begin in May 2025.

■	F528 [for Chronic Obstructive Pulmonary Disease (COPD)] - Gyre Pharmaceuticals

F528 is a novel anti-inflammatory agent that suppresses multiple inflammatory cytokines, and Gyre Pharmaceuticals is conducting research and development of it as a new drug candidate that may reduce the progression of COPD.  IND application is planned for December 2025.

■	CG001419 (TRK degrader) - Cullgen

CG001419 is an oral drug utilizing the industry’s first selective and potent targeted protein degrader.  In July 2023, Cullgen initiated its first clinical trial (Phase 1/2) for the TRK degrader in the PRC.  In addition, in January 2025, Cullgen began the Phase 1 clinical trial in Australia for acute and chronic pain.

■	CG009301 (malignant hematologic tumor (leukemia) treatment) – Cullgen

CG009301 is a novel degrader targeting the GSPT1 protein, and the National Medical Products Administration (NMPA) approved the IND in October 2024.  We will move to clinical trials promptly.

■	Other Generic Orphan Drugs - Gyre Pharmaceuticals

Gyre Pharmaceuticals obtained sales approval for avatrombopag maleate tablets, a treatment for thrombocytopenia due to chronic liver disease, to expand its pipeline of orphan drugs in June 2024, and received approval to expand the indication to include ITP (chronic idiopathic thrombocytopenia) in January 2025.

In the fiscal year 2025, we expect the sales revenue and profits of our core business, the Pharmaceutical Segment, to remain strong.  Gyre Pharmaceuticals is expected to continue to lead our group by leveraging its existing sales network and expanding its sales lineup.  In addition, we anticipate Cullgen to make steady progress in research and development.  Further, we announced that we expect to record other income of approximately 14,764 million yen (including approximately 10,768 million yen in stock valuation gains) in connection with our listing on the Nasdaq market through a reverse merger with Pulmatrix, Inc..  The timing of converting Cullgen’s preferred shares into common shares and valuing them at market value will be determined by the opening price on the day of Cullgen’s public offering.  Cullgen’s milestone revenue are not included in our earnings forecast for the fiscal year 2025.

2.	Basic Policy on the Selection of Accounting Standards

GNI Group applies International Financial Reporting Standards [IFRS].

3.	Consolidated Financial Statements and Notes

(1)	Consolidated Statements of Financial Position

(2)	Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income

(3)	Consolidated Statements of Changes in Equity

(4)	Consolidated Statements of Cash Flows

(Basis of Preparation)

(Segment Information)

Reportable segment	Company name	Main product
Pharmaceutical	GNI Group Ltd.; Beijing Continent Pharmaceutical Co., Ltd; Shanghai Genomics, Inc.; GNI Hong Kong Limited; Shanghai Genomics Technology, Ltd.; Cullgen (Shanghai), Inc.; GNI USA, Inc.; Cullgen Inc.; Shanghai Rui Fu International Trade Co., Ltd.; Gyre Therapeutics, Inc.	ETUARY®, drug discovery and development, reagents etc.
Medical Device	Berkeley Advanced Biomaterials LLC, Micren Healthcare Co., Ltd., Berkeley Biologics LLC	Biomaterials, Designated Marketing Authorization Holder (DMAH) and in-country caretaker (ICC) service

Notes:

1.

Intra-segment revenue and transfers are based on arm’s-length prices.

Notes:

1.

Intra-segment revenue and transfers are based on arm’s-length prices.

(Earnings Per Share)

Basic earnings per share and Diluted earnings per share and the basis for its calculation are as follows.

(Important Subsequent Events)

No Important Subsequent Event