Linical Co., Ltd.

With a high proportion of sales concentrated in specific customers, if such a customer suspends or cancels a project, the resulting decline in CRA utilization rates and other factors could have a material impact on business performance. As countermeasures, the Company is promoting diversification of its customer base through expansion of its global business, enhancement of its drug discovery support business, and expansion into medical device and SaMD development companies.

Expansion into Japan and Asia by global CROs from Europe and the U.S., as well as low-price strategies by local CROs, could lead to a decrease in the number of contracted projects and a decline in contract prices. As countermeasures, the Company is pursuing differentiation through a focus on high-difficulty disease areas, securing and developing talented personnel, and providing global one-stop support.

Amid the ongoing globalization of pharmaceutical development, if changes in key markets cause a rapid decline in the scale or number of clinical trials in Japan, Europe, or the U.S., business performance could be affected. As countermeasures, the Company is expanding its global contract acceptance framework by developing its own offices in Japan, the U.S., Europe, Australia, and Asia, and building collaborative arrangements with other CROs in regions where it lacks its own offices.

If pharmaceutical companies and others change their development strategies (such as reviewing priority areas, promoting joint development or licensing, or changing in-house development policies), or if development efficiency improvements driven by AI and DX progress faster than expected, this could lead to a decrease in the number of contracts and a reduction in trial scale, affecting business performance. As countermeasures, the Company is expanding its customer base through new customer acquisition, improving operational efficiency through the use of AI and DX, and expanding global partnering to support decentralized clinical trials (DCT).

As the Group's business is primarily labor-intensive, if it is unable to secure sufficient personnel according to trial scale or to timely acquire specialized talent, it may become difficult to undertake commissioned work. As countermeasures, the Company is improving retention rates through engagement activities, enhancing utilization rate visibility and staffing accuracy by revising resource management methods in Japan, the U.S., and Europe, and promoting the use of AI and DX.

If a material violation of relevant laws and regulations occurs in the course of commissioned operations, the Company could bear liability for damages to the pharmaceutical companies and others that commissioned the work, and a loss of industry-wide credibility could lead to a decrease in the number of contracted projects, affecting business performance. As countermeasures, the Company has established a risk-based quality management process, conducts regular reviews of operating procedures, and provides ongoing case-based training for employees.

As digitalization of pharmaceutical development operations progresses, if IT service disruptions or information leaks occur due to cyberattacks exceeding expectations, this could have a material impact on business operations and on the operations of customers and clinical trial sites. As countermeasures, the Company has established and operates an ISMS across the Group, obtained and maintained ISO/IEC 27001 certification in FY2024 (ended March 2024), and conducts regular security training for all employees.

If personal information is leaked, disclosed, or misused, this could result in liability for damages from clients and a loss of industry-wide credibility, leading to a decrease in the number of contracted projects and affecting business performance. As countermeasures, in addition to operating an ISMS compliant with ISO/IEC 27001, the Company has established procedures based on personal information protection laws in each country and conducts regular personal information protection training for all Group employees.

If the utilization of real-world data and advancements in AI and DX lead to faster-than-expected improvements in clinical trial development efficiency, the scale of trials commissioned to the Group could shrink, affecting business performance. As countermeasures, the Company is promoting the use of AI and DX to improve efficiency in its own development operations, while expanding global partnering and considering in-house development capabilities to respond to new trial methodologies such as DCT.

As the Company expands its own offices in Japan, the U.S., Europe, Australia, and Asia, changes in the regulatory or market environment in each country or region, or inadequate coordination between offices, could impair the functioning of the global contract acceptance framework and affect business performance. As countermeasures, the Company builds collaborative arrangements with other CROs in countries and regions where it has no offices of its own, and considers establishing its own offices to bring operations in-house according to customer needs, thereby expanding its global contract acceptance framework.