Matters related to business conditions and accounting conditions that may have a significant impact on investors' decisions include the following.
1. Risks Related to Research and Development
Research and development of pharmaceuticals requires a large amount of money and many years, but the probability that it will result in the creation of a new product or technology is not high. If the expected efficacy of a drug currently under development cannot be proven, or if a safety issue becomes apparent, the Group may have to abandon the development of the drug. In such cases, depending on the drug under development, there may be a significant impact on the Group's business performance and financial position.
2. Risks Related to Side Effects
Pharmaceuticals are approved and marketed only after adequate safety testing and rigorous reviews. However, if, after marketing, new side effects are discovered that were not anticipated at the time of launch and the product must be discontinued or recalled, this could have a significant impact on the Group's business performance and financial position.
3. Risks Related to Legal and Institutional Reforms
Prescription pharmaceutical products, which account for the majority of the Group's sales, are subject to various regulations by the pharmaceutical affairs administration. Trends in NHI drug price standard revisions and other administrative measures related to the medical care system and health insurance may have a significant impact on the Group's business performance and financial position.
4. Risks Related to Intellectual Property Rights
The Group's business is protected by a number of patents. The Group appropriately manages its patents and other intellectual property rights and takes precautions against infringement by third parties. However, if the intellectual property rights held by the Group are infringed by a third party, the Group may lose expected profits. In addition, if the Group's business activities infringe on a third party's intellectual property rights, the Group's business activities may lead to disputes or the discontinuation of the relevant business, which may have a significant impact on the Group's business performance and financial position.
5. Risks Related to Alliances with Other Companies
In research, development, and manufacturing, the Group collaborates with other companies to conduct joint research, out-licensing / in-licensing of products, contract manufacturing, etc. However, in the event of a change or termination of contracts for some reason, or in the event of business integration, organizational changes, changes in management policies, or changes in shareholders of the partner companies, our Group's business performance and financial position may be significantly affected.
6. Risks Related to Manufacturing and Stable Supply
In the event that the supply of pharmaceutical products is suspended or significantly slowed down owing to the occurrence of technical or legal problems or shutdowns caused by fire or other disasters at the manufacturing or distribution facilities of the Group or its business partners, this could have a significant impact on the Group's business performance and financial position.
7. Relationship with Specific Business Partners
The Group's top business partner accounts for approximately 90% of the Group's sales. We intend to continue to do business with this company in the future, but in the unlikely event of a major change in the business relationship, it could have a significant impact on the Group's business performance and financial position.
8. Risks Related to Large-Scale Disasters, etc.
The Group promotes developing a disaster management system and a business continuity plan (BCP). However, in the event of a large-scale disaster, accident, or pandemic that exceeds expectations and damages the Group's head office, factory, research center, or business sites, or causes stagnation or suspension of business activities, the Group's business performance and financial position could be significantly affected.
The spread of COVID-19 that has manifested itself since January 2020 continues to be reported with increasing numbers around the world. To prevent the spread of infection, the Group is implementing efficient business operations, including thorough hygiene management, staggered work hours, and telecommuting. However, if the infection spreads further than expected or the situation persists for a long period of time, the Group's business performance and financial position could be significantly affected owing to the suspension of operations or stagnation of the supply chain as a result of employee infection.
9. Risks Related to Litigation
In the course of its business activities, the Group may be subject to lawsuits related to the side effects of pharmaceuticals, product liability, labor issues, fair trade, and other issues. This could have a significant impact on the Group's business performance and financial position.
10. Risks Related to Information Security and Information Management
Since the Group uses various information systems, system failures, computer viruses, and other problems could disrupt operations. In addition, the Group holds a great deal of confidential information, including personal data, which, if leaked outside the Group, could have a significant impact on the Group's business performance and financial position due to compensation for damages, administrative penalties, or damage to public trust.