Updating for Ayumi Acquisition, Reiterating Buy

Research evidence excerpt

Updating for Ayumi Acquisition, Reiterating Buy

lonal (acetaminophen), holds more Exhibit 1 - GNI SOTP - Value per share by asset

than 80% of Japan’s domestic acetaminophen market.

Financial impact. Consolidation of Ayumi expands GNI's revenues by ~2x. The impact on

profits is likely to be negative in the very short term because of estimated transaction costs of

~¥2bn and inventory revaluation effects, which we think could hurt reported profits by ~¥6bn.

There might also be heavier-than-expected intangible amortization costs associated with the

deal. But since the majority of these costs are non-cash, we expect investors to focus on the .

Source: Jef est.

improving fundamentals and potential topline synergies.

Reiterating Buy. We update our Sum-of-the-Parts (SOTP) valuation and arrive at a fair value of

¥3,800 per share, and since this represents 46% potential upside we reiterate Buy. The biggest

component of our SOTP is F351, which we expect Chinese authorities to approve for liver

fibrosis, possibly this year. We value this asset at 2.1x estimated peak sales of $800m. After

adjusting for GNI's effective 49% ownership stake in the China operating company that controls

China rights to F351, we value GNI's stake in this asset at ¥133bn or about ~¥2,000 per share.

We estimate that GNI will have 65.7m outstanding shares following its acquisition of Ayumi,

which is being funded with shares and cash (¥26.7bn from ~10m shares and ¥18bn cash).

The next biggest component of our SOTP is Ayumi, which we value at ¥103bn, in line with our

estimate of the deal value, including estimated assumed debt of ~¥58bn. We value Cullgen at

¥49bn and the firm's Medical Device operations at ¥36bn, and estimate net debt of ~¥71bn.

FY (Dec) FY12/25A FY12/26E FY12/27E FY12/28E

Rev.