GNI : Consolidated Financial Results for Q2 FY2019 (IFRS)

The following information was originally prepared and published by the Company 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 Q2 FY2019 (IFRS)
		August 14, 2019
Company Name:	GNI Group Ltd.	Tokyo Stock Exchange
Stock Code:	2160	URL http://www.gnipharma.com
Representative:	Ying Luo, Director, Representative Executive Officer, President and CEO
Inquiries:	Thomas Eastling, Director, Representative Executive Officer, CFO	TEL: [phone]

Scheduled filing date of the securities report:	August 14, 2019
Scheduled dividend payment commencement date:	－
Supplementary materials prepared for financial results:	No
Holding of a financial results briefing meeting:	Yes (For analysts)
	(Amounts of less than one million yen are rounded down)

1. Consolidated Financial Results for Q2 FY2019 (January 1, 2019 to June 30, 2019)

1. Q2 FY2019 Consolidated Operating Results

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

											Quarterly profit	Profit (loss)		Total comprehensive
	Revenue			Operating profit		Profit before tax	attributable to		income (loss) for the
				(loss)
												owners of the parent	quarter
	Million yen	%		Million yen		%		Million yen	%	Million yen	%	Million yen	%	Million yen	%
Q2 FY2019	3,419	58.4		681		184.5		603	837.8	501	－	178		－		－
				141
Q2 FY2018	2,158	203.2		239		－		64	－	(6)	－	(176)		－	(88)	－
	Basic earnings (loss) per	Diluted earnings
		share				per share
				Yen				Yen
Q2 FY2019			12.88				12.78
Q2 FY2018			(13.06)				―

Note: GNI Group consolidated its shares (consolidating 10 shares into 1 share) on July 1, 2018. Basic earnings (loss) per share and Diluted earnings per share for Q2 FY2018 have been calculated assuming consolidation as of January 1, 2018.

(2) Consolidated Financial Position

			Total equity attributable to	Ratio of total equity	Total equity attributable to
	Total assets	Total equity	attributable to owners of the
	owners of the parent	owners of the parent per share
			parent to total assets
	Million yen	Million yen	Million yen	%	Yen
As of June 30, 2019	19,063	11,983	10,071	52.8	724.50
As of December 31, 2018	17,100	10,007	9,015	52.7	650.45

Note: GNI Group consolidated its shares (consolidating 10 shares into 1 share) on July 1, 2018. Total equity attributable to owners of the parent per share has been calculated assuming consolidation as of January 1, 2018.

2．Dividends

			Dividends per share
	Q1	Q2	Q3	Year-end	Total
	Yen	Yen	Yen	Yen	Yen
FY2018	―	―	―	0.00	0.00
FY2019	―	―
FY2019 (Forecast)			―	0.00	0.00

Note: Revision to the most recently announced forecasts of dividends per share: No

3．Consolidated Earnings Forecasts for FY2019 (January 1, 2019 to December 31, 2019)

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

	Revenue		Operating profit	Profit before tax	Profit for the year	Profit attributable to owners	Basic earnings per share
									of the parent
	Million yen	％ Million yen	％ Million yen	％ Million yen	％ Million yen	％	Yen
FY2019	7,119	41.8	757	33.2	742	103.6	453	135.9	100	―	7.41

Note: Revision to the most recently announced forecasts of financial results: No

Notes:

1. Changes in Significant Subsidiaries during the Period under Review: No

(Changes in specified subsidiaries resulting in a change in the scope of consolidation)

New: ―

Excluded: ―

1. Changes in Accounting Policies and Changes in Accounting Estimates
2. 1. Changes in accounting policies that are required under IFRS : Yes
   2. Changes in accounting policies other than 1) above: 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 period (including treasury stock)
2. Number of treasury stock as of the end of the period
3. Average number of shares for the period

As of June 30,	13,902,083 shares	As of December	13,860,083 shares
2019	31, 2018
As of June 30,	397 shares	As of December	397 shares
2019	31, 2018
Six months		Six months
ended	13,873,326 shares	ended	13,491,514 shares
June 30, 2019		June 30, 2018

Note: GNI Group consolidated its shares (consolidating 10 shares into 1 share) on July 1, 2018. Average number of shares for the six months ended June 30, 2018 has been calculated assuming consolidation as of January 1, 2018.

* Regarding the Status of Audit Procedure Implementation

This report on the Company's consolidated financial results is not subject to the audit procedures stipulated under the Financial Instruments and Exchange Act of Japan.

* 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 "Earnings forecast" on page 6 of this report.

The Company is planning to conduct a corporate presentation meeting for institutional investors and analysts on August 16, 2019. Briefing materials used at that session will be posted on the Company's website as soon as practicable after the meeting.

GNI Group Ltd. (2160) Consolidated Financial Results for Q2 FY2019

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

1. Earnings forecast ……………………………………………………………………………………………………………………. 6

2. Summary of Quarterly Consolidated Financial Statements and Notes …………………………………………………………..	7
(1)	Summary of quarterly consolidated statements of financial position ……………………………………………………….	7
(2)	Summary of quarterly consolidated statements of income and summary of quarterly consolidated statements of	8
	comprehensive income ………………………………………………………………………………………………………………
	Summary of quarterly consolidated statements of income ……………………………………………………………………	8
	Summary of quarterly consolidated statements of comprehensive income …………………………………………………	9

1. Summary of quarterly consolidated statements of changes in equity ………………………………………………………. 10
2. Summary of quarterly consolidated statements of cash flows ……………………………………………………………….. 12
3. Notes to the summary of quarterly consolidated financial statements …………………………………………………….. 13

(Notes related to going concern assumptions) …………………………………………………………………………………..	13
(Basis of preparation) ………………………………………………………………………………………………………………	13
(Segment information) ………………………………………………………………………………………………………………	14
(Important subsequent events) ……………………………………………………………………………………………………	16

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GNI Group Ltd. (2160) Consolidated Financial Results for Q2 FY2019

1. Analysis of Operating Results and Financial Position

Corporate profile

GNI Group Ltd. (GNI Group or the Company) is a multinational pharmaceutical company, headquartered in Tokyo, Japan with the primary business units of pharmaceuticals and biomaterials/medical devices operating via subsidiaries in China and the United States.

In the first six months of FY2019, GNI Group continued to execute its business plan, achieving year-on-year revenue growth, increased profitability and advances in our drug development programs. Our Continental Pharmaceutical Inc. (the Cayman Islands reincorporation of our Beijing Continent Pharmaceuticals Co., Ltd subsidiary) again attained record Etuary® sales in Q2 FY2019. Our Berkeley Advanced Biomaterials LLC medical device business earned higher profitability on a quarter-to-quarter basis compared to FY2018. Moreover, investments continued in our pivotal drug discovery activities at Cullgen Inc. (Cullgen), with support from a USD $16 million capital contribution by two leading global venture capital firms.

Additional key events during the period under review included submission in April of a listing application by Continent Pharmaceuticals Inc. (CPI) to the Stock Exchange of Hong Kong Limited and the approval in May of the Etuary® Investigational New Drug (IND) application by Beijing Continent Pharmaceutical Co, Ltd ("Beijing Continent", CPI's sole operating entity in China) for the treatment of Pneumoconiosis from the National Medical Products Administration (NMPA, formerly CFDA of China).

Provided below is a summary of the GNI Group's consolidated operating results, financial position, cash flows and research and development activities for Q2 FY 2019 from January 1, 2019 to June 30, 2019.

1. Analysis of operating results

The Company recorded the following consolidated operating results for Q2 FY2019.

Quarterly Consolidated Operating Results Summary

			Thousand yen
	Q2 FY2018	Q2 FY2019	Difference
Revenue	2,158,783	3,419,440	1,260,656
Gross profit	1,845,173	3,025,150	1,179,976
Operating profit	239,566	681,451	441,884
Quarterly profit (loss)	(6,203)	501,145	507,349

Revenue and gross profit

In Q2 FY2019, Revenue was ¥3,419,440 thousand, an increase of approximately 58.4% over the corresponding period in FY2018. Profit margins improved, with the Gross profit for Q2 FY2019 coming in at ¥3,025,150 thousand, an increase of approximately 63.9% compared with Q2 FY2018. These results were primarily due to record Etuary® sales by Beijing Continent.

Operating profit

In Q2 FY2019, GNI Group's Operating profit was ¥681,451 thousand, an increase of approximately 184.5% over the corresponding period in FY2018. The strong contributions of GNI Group's two business units provided improved margins and operational profitability for the period under review.

Quarterly profit (loss)

For Q2 FY2019, the Company posted a profit of ¥501,145 thousand, an improvement of ¥507,349 thousand compared to a loss of ¥6,203 thousand in Q2 FY2018.

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GNI Group Ltd. (2160) Consolidated Financial Results for Q2 FY2019

Selling, General and Administrative Expenses; Research and Development Expenses

			Thousand yen
	Q2 FY2018	Q2 FY2019	Difference
Selling, general and administrative expenses	(1,337,278)	(2,045,143)	(707,864)
Personnel expenses	(648,937)	(756,007)	(107,070)
Research and development expenses	(249,362)	(304,360)	(54,997)

Selling, general and administrative (SG&A) expenses for Q2 FY2019 were ¥2,045,143 thousand, an increase of ¥707,864 thousand compared with Q2 FY2018. The year-on-year increase in SG&A expenses reflects in part costs at Beijing Continent related to the CPI IPO preparations. Research and development expenses increased on a year-on-year basis due to Etuary® new indications and F351 clinical trials, as well as ongoing Cullgen degrader development programs.

Finance Income and Finance Costs

			Thousand yen
	Q2 FY2018	Q2 FY2019	Difference
Finance income	13,424	31,190	17,766
Finance costs	(188,586)	(108,657)	79,928

Finance income

In Q2 FY2019, GNI Group recorded Finance income of ¥31,190 thousand, an increase of ¥17,766 thousand compared with ¥13,424 thousand in Q2 FY2018.

Finance costs

In Q2 FY2019, GNI Group recorded Finance costs of ¥108,657 thousand, a decrease of ¥79,928 thousand compared with ¥188,586 thousand in Q2 FY2018. The costs in the current quarter mainly reflect non-cash foreign exchange losses from foreign currency- denominated assets and liabilities of the Company and consolidated subsidiaries.

1. Analysis of financial position

Summary of Consolidated Financial Position

			Thousand yen
	As of December 31, 2018	As of June 30, 2019	Difference
Total assets	17,100,806	19,063,497	1,962,691
Total liabilities	7,092,869	7,079,745	(13,123)
Total equity	10,007,936	11,983,751	1,975,815

Total assets

As of June 30, 2019, Total assets stood at ¥19,063,497 thousand, an increase of ¥1,962,691 thousand compared with the end of the previous fiscal year.

Total liabilities

As of June 30, 2019, Total liabilities stood at ¥7,079,745 thousand, a decrease of ¥13,123 thousand compared with the end of the previous fiscal year.

Total equity

As of June 30, 2019, Total equity stood at ¥11,983,751 thousand, an increase of ¥1,975,815 thousand compared with the end of the previous fiscal year.

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