TRANS GENIC INC.

The Group may enter into business alliances or acquisitions to expand its business domains. If issues that could not be identified through prior due diligence arise, or if the intended effects are not achieved due to changes in the business environment, this may impact the financial position and operating results through impairment of goodwill arising from acquisitions, among other factors. In making decisions, the Group conducts detailed prior due diligence on the target company's business operations, financial condition, and business relationships to assess risks.

In pursuing new business development, if the Group infringes on patents or other rights of other companies that could not be identified in advance, and unexpected litigation with third parties arises, this may affect business strategy and performance. As a countermeasure, the Group commissions patent research from patent firms when developing new businesses to proactively prevent such issues.

The Drug Discovery Support Business has a high proportion of sales derived from nonclinical and clinical trial outsourcing from pharmaceutical companies, and domestic pharmaceutical companies tend to curtail R&D spending due to drug price revisions and the spread of generic drugs. If sudden changes occur in the environment surrounding pharmaceutical companies, this could have a significant impact on the Group's performance. The Group pays close attention to trends in pharmaceutical companies' R&D activities.

In the biotechnology industry, technological development is progressing rapidly, and if technological innovation causes sudden changes in the market, the Group may lose its technological advantage over competitors. Such a loss of advantage could have a material impact on performance, and the Group strives daily to develop technology that leverages its unique strengths.

In the Drug Discovery Support Business, the Group conducts joint research with public research institutions and universities for the purpose of introducing and transferring new technologies. However, changes in laws and regulations or organizational restructuring may force changes to the direction of joint research or the rights involved. Such changes could affect business strategy and performance.

In Europe and the United States, particularly in Europe, regulations banning the use of laboratory animals are being considered from an animal welfare perspective, and if similar regulations were introduced in Japan, the laboratory animal market could become constrained, potentially having a significant impact on the Group's performance. The Group strives to care for laboratory animals, including obtaining certifications such as AAALAC accreditation.

The Group complies with laws such as the "Act on the Conservation and Sustainable Use of Biological Diversity through Regulations on the Use of Living Modified Organisms," which governs the facilities and handling required for introducing DNA into organisms. If these regulations are tightened, this may have a significant impact on business operations and performance.

Some subsidiaries in the Investment & Consulting Business procure the majority of their products from overseas, and if sudden exchange rate fluctuations beyond expectations occur, this could have a material impact on performance. The Group strives to minimize the impact of exchange rate fluctuations on performance by, among other measures, conducting foreign exchange forward transactions.

Nonclinical trials consume large amounts of energy during animal husbandry and testing processes, and utility costs have been trending upward due to recent energy price increases. In addition, procurement prices are trending upward due to tight supply and demand for some laboratory animals used in testing, and if price increases beyond expectations occur, this could have a material impact on performance.

Conflicts in the Middle East raise concerns about impacts on raw material prices and logistics costs as well as constraints on procurement volumes. If cost increases continue in the use of heavy fuel oil in the Drug Discovery Support Business and in the procurement of products and raw materials in the Investment & Consulting Business, profitability could decline significantly. Furthermore, if the procurement of heavy fuel oil, products, and raw materials itself becomes difficult, this could lead to reduced operating rates at research facilities and decreased sales volume due to product supply shortages, potentially having a material impact on performance.