GNI Group Q2 FY2026 Earnings Analysis: Establishing a Japanese Revenue Base via Ayumi Pharmaceutical Acquisition and Progress on F351 Priority Review

GNI Group (TSE Growth: 2160) has released its financial results for the second quarter of the fiscal year ending December 2026. This period marked a significant milestone in the group's restructuring, highlighted by the completion of the acquisition of Ayumi Pharmaceutical Holdings and Gyre Therapeutics' full consolidation of Cullgen . These moves signal a transition from a structure led by Chinese and U.S. operations to a comprehensive global biopharma framework spanning Japan, the U.S., and China, leading to a substantial upward revision of the full-year consolidated revenue forecast.

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1. Earnings Highlights and Growth Trends

The historical performance of GNI Group and the trajectory of revenue growth following this major M&A are illustrated in the chart below.

The slide above shows the trend in revenue and operating profit built through the company's core businesses in drug discovery, pharmaceuticals, and medtech . Since 2023, following Gyre's Nasdaq listing and the expansion of U.S.-China operations, the company has grown to a revenue scale of 20 billion yen. However, with the consolidation of Ayumi Pharmaceutical (reflected from Q3) , the full-year revenue forecast for FY2026 is expected to surge to 47,327 million yen . The company has indicated a pro-forma reference value of 68,482 million yen if Ayumi Pharmaceutical had contributed for the full year, signaling a phase of discontinuous expansion in the revenue base.

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2. Q2 FY2026 Consolidated Results and Segment Performance

The summary of the cumulative second-quarter results and the profit/loss status of each business segment are as follows.

[Key Points of Consolidated P&L]

• Revenue : 11,937 million yen (down 315 million yen YoY, -2.6%)
• Gross Profit : 8,630 million yen (down 203 million yen YoY)
• Operating Profit : 534 million yen (a turnaround to profit from a loss of 1,179 million yen in the same period last year, +1,713 million yen)
• Profit Attributable to Owners of Parent : -1,988 million yen (compared to -915 million yen in the same period last year)

Regarding operating profit, despite incurring one-time M&A-related costs (738 million yen in advisory fees for the Ayumi acquisition, 472 million yen for the Cullgen consolidation, and approximately 1,110 million yen in stock-based compensation) and increased R&D expenses (up 528 million yen, primarily for F351 in the U.S.), the company secured an operating profit, largely due to the recognition of 6,596 million yen in gains from the reversal of accrued interest related to Cullgen preferred shares.

[Performance by Key Segment]

1. Pharmaceutical Business : Revenue of 8,202 million yen (+14.3% YoY), operating profit of 879 million yen . Sales of the flagship product "Icariin" remained robust, and with tailwinds from foreign exchange, quarterly revenue reached a record high. The operating margin for Q2 (April-June) recovered to approximately 19.8% .
2. Drug Discovery Business : Revenue of 177 million yen , operating profit of 7,183 million yen (driven by the reversal of accrued interest on preferred shares).
3. Medtech Business : Revenue of 2,928 million yen , operating loss of 1,837 million yen . An impairment loss of 667 million yen was recorded in anticipation of a review of future plans for the restructuring of Berkeley Biologics (BB).

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3. Changes in Financial Foundation and Balance Sheet Restructuring

The full consolidation of Cullgen and the reorganization of capital funding have led to significant structural changes in the balance sheet.

• Total Liabilities : Halved from 31,948 million yen at the end of the previous year to 15,263 million yen (down 16,685 million yen) . Financial liabilities related to Cullgen preferred shares (totaling 16,825 million yen in principal and accumulated accrued interest) were extinguished and converted into equity.
• Total Equity : Increased from 51,842 million yen at the end of the previous year to 66,497 million yen (+14,655 million yen) . As capital was strengthened, non-controlling interests expanded to 26,055 million yen.
• Increase in Intangible Assets : Due to NDA filing costs for F351 by Gyre Pharmaceuticals and progress in Phase 3c development, capitalized development costs increased, bringing intangible assets to 14,736 million yen (+2,389 million yen).

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4. Strategic Significance: Monetizing Japanese Operations and Global Synergies

The acquisition of Ayumi Pharmaceutical is positioned as a strategic move to fundamentally resolve the "structural deficit of the Japanese headquarters" that GNI Group has faced for many years.

• Acquisition of Revenue Base : Ayumi Pharmaceutical possesses stable operating cash flow through products with high domestic brand recognition, such as the antipyretic analgesic "Calonal" (17.4 billion yen in revenue for the fiscal year ended March 2026) and treatments for rheumatoid arthritis (21.7 billion yen).
• Synergies with Proprietary Pipeline :
  • Pain Management : Future domestic introduction and sales collaboration are expected for the group's novel non-opioid, non-NSAID pain treatment candidate "CG001419 (TRK degrader)" within Ayumi's robust distribution and medical institution network.
  • Rheumatism and Autoimmune Diseases : The acquisition serves as an introduction platform for products such as "CG620953 (TYK2/JAK1 degrader)" currently being developed by Cullgen, in addition to the existing anti-rheumatic drug portfolio.

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5. Development Progress of Flagship Pipeline "F351"

The company's most critical pipeline, the liver fibrosis treatment candidate "F351 (Hydronidone)," is in the final stages toward commercialization.

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As shown in the slide above, F351 for liver fibrosis caused by chronic hepatitis B in China was designated for priority review in March 2026 , and the formal acceptance notice for the New Drug Application (NDA) was received on May 13 of the same year.

Currently, the "technical review (main review)" is underway, and the application of the priority review system is accelerating the schedule compared to standard review periods. Future steps include NDA approval, GMP compliance verification, and the process for drug pricing and insurance reimbursement applications, leading to market launch. Note that the full-year earnings forecast does not include revenue from F351 due to a conservative approach.

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6. Revision of Full-Year Consolidated Forecast and Outlook

Reflecting the consolidation of Ayumi Pharmaceutical, the full-year revenue forecast for the fiscal year ending December 2026 has been raised to 47,327 million yen (an increase of 20,169 million yen from the previous forecast, with the pharmaceutical business revised upward to 40,622 million yen).

Regarding profit items, the company is continuing to scrutinize figures as it evaluates the progress of R&D expenses in the drug discovery business, the timing of upfront investments following F351 approval, and the total amount of acquisition-related costs (estimated at approximately 2,437 million yen).

GNI Group is advancing the establishment of a global healthcare value chain by leveraging the stable domestic cash flow generated by the Ayumi Pharmaceutical acquisition alongside the clinical development of innovative pipelines, led by F351.