News Release

FY2022 Q3 Analyst Call Q&A Summary

(Held on November 17, 2022)

This presentation contains statements concerning the current plans, expectations and strategies of GNI Group Ltd. (GNI Group). Any statements contained herein that pertain to future operating performance and that are not historic facts are forward-looking statements. Forward-looking statements may include, but are not limited to, words such as “believe,” “plan,” “strategy,” “expect,” “forecast,” “possibility” and similar words that describe future operating activities, business performance, events or conditions. Forward-looking statements, whether spoken or written, are based on judgments made by the management of GNI Group, based on information that is currently available to it. As such, these forward-looking statements are subject to various risks and uncertainties, and actual business results may vary substantially from the forecasts expressed or implied in forward-looking statements. Consequently, investors are cautioned not to place undue reliance on forward-looking statements.

The information contained in this presentation does not constitute or form part of any offer for sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. Any decision to invest in or acquire securities of GNI Group must be based wholly on the information contained in the preliminary offering circular issued or to be issued by GNI Group in connection with any such offer and not on the contents hereof.

This English summary translation is for convenience only. To the extent there is any discrepancy between this English translation and the original Japanese version, please refer to the Japanese version.

Note: In places, pro forma figures in the pages which follow may be rounded to underscore direction of the business.

Q1: When do you plan to finish enrolling F351 (subjects)?

A1: Regarding F351 patient enrollment, we target to complete it in the first half of 2023. In spite of the COVID-19-related lockdowns in China, our enrollment is on track. Collecting results takes approximately 52 weeks, and so far, no safety alert has been reported, while most liver fibrosis drugs fail due to safety concerns.

Q2: Is HKEX still your first choice for BC’s (Beijing Continent) IPO?

A2: We are very sorry, but since BC has to remain quiet at this moment, we cannot discuss this topic. We will disclose more in due course.

Q3: How will the JV with EPS impact sales and profit in the first year?

A3: The impact will be immaterial but positive, and we will include it in our forecast for 2023. It is a very small step in rebuilding our business in Japan, but we are looking into synergies with Berkeley Advanced Materials (BAB) business in and out of Japan. To be clear, this is a regulatory consulting business to help foreign medical device companies to access the Japan market and is not greenfield; rather, it is an established business with 20-25 active offshore customers and products that are Class I-IV certified for sale in Japan.

Q4: One of your goals for 2023 is to increase profitability; do you mean that you will increase your operating profit margin?

A4: Our goal has always been to increase profits. The COVID-19 challenges we face in China make accurately forecasting 2023 difficult. But since the operating profit level recently has been around 12%, that would be the level we will be targeting in 2023. We focus more on the top (revenue) and the bottom (profits attributable to parent’s owners) lines, as many factors affect the middle lines that are out of our control, such as currency exchange rate and COVID-19 pandemic.

Q5: What are the effects of currency fluctuation on your PL?

A5: To assist you to calculate the forex impacts, our largest subsidiary BC’s revenue this year increased by 21% in RMB terms and by 39% in JPY terms YoY. BAB is up 12% in USD terms and 35% in JPY terms over the same period YoY.

Q6: Comparing GNI’s 2021Q3 YTD results and updated 2022 full-year forecast, there seems to be a difference of 600 million yen among finance revenue and expense for the fourth quarter. Do you expect that much finance revenue / expenses in Q4?

A6: For financial income and expenses in the fourth quarter, we assume Cullgen interest expenses of approximately 400 million yen and foreign exchange losses and other expenses of approximately 200 million yen. However, these forecasts may change significantly depending on future exchange rate fluctuations.

Q7: Why is the R&D cost in Cullgen lower than what was disclosed in its financing prospectus? Do you not get pressured to spend more on R&D from other private equity funds who invested in Cullgen?

A7: On the contrary, most private equity firms advise Cullgen to be careful about R&D spending because of the challenging capital market conditions in the global biotech sector now. Yet notwithstanding the difficult market conditions, we can attract the attention of international private equity funds to Cullgen. Protein degraders are revolutionary, so we must proceed cautiously to understand all the physical and chemical features of this modality. Our approach is correct and different from peers who are spending more money and running into problems in clinical development.

Q8: Should you not be focusing on pharmaceutical area than aesthetics?

A8: Biomaterials business is our cash cow, source of stability and comfort, while pharmaceutical business provides us growth. Biomaterials business allows us to comfortably explore drug discovery without worrying about stably funding our drug discovery platform in Cullgen. The new aesthetics business is expected to be profitable from the start because it does not cost us much, as we utilize our existing technology of BAB. We developed derma filler using the same nanoparticles / technology used in our orthopedics implant, except that it is applied under the skin instead of filling the bone void. It is a medical device product rather than cosmetics. We also disclosed in Aug, 2021 and Mar, 2022 that we will be focusing on health care products.

Q9: Regarding your expansion into the aesthetics industry, will BAB conduct the development and manufacturing of your aesthetics products, or will they distribute other companies’ products?

A9: BAB is famous for its nano structure biomaterials, which has so far been used for bones, but can now be applied to derma fillers. It is the same business, and it will be built on the BAB technology platform but developed, manufactured, and sold by our newly in vested company Ruixing Medical. Aesthetics business will provide new growth for our biomaterial business.

Q10: What is bridging study in the US? Do you mean skipping Phase II study and going straight to Phase III, or do you mean you will be utilizing clinical studies in China to move forward?

A10: We have already conducted a bridging study in Phase I for F351 to understand the differences between Caucasians and Asians. We are changing the indication from HBV-induced liver fibrosis to NASH-induced liver fibrosis, so we have to do Phase II. The US FDA has extensive guidelines for developing a drug for NASH; it is critical that we check every step of the way with FDA so that our investments have less risk. Our pre-Phase II communication with the FDA is nearing the end. However, as we previously said, our goal is to obtain proof of concept results in China first to lower the risks associated with our clinical development in the US.

Q11: According to, the only difference between Phase II and III clinical trials is the number of patients. Are there any additional differences?

A11: We increased the number of subjects in 90mg dosage group by about 3-fold compared to Phase II since this dosage was the most responsive and safest in Phase II trial. Aside from that, there are no significant differences between Phase II and III.