Pharma Foods International Co., Ltd.

New drug development using chicken monoclonal antibodies based on ALAgene technology has no track record of new drug approvals to date and remains at the preclinical trial stage. There is a risk that invested funds may become unrecoverable due to discontinuation or delay of R&D, or failure to secure out-licensing partners. While risk diversification is being pursued through joint research with pharmaceutical companies and public research institutions, the future prospects inherently involve uncertainty.

Since the BtoC business involves the manufacturing and sale of cosmetics and quasi-drugs, marketing and manufacturing licenses under the Pharmaceuticals and Medical Devices Act are essential, and Pharma Foods International Co., Ltd., Future Labo Co., Ltd., Medi Labo Co., Ltd., and Meiji Yakuhin Co., Ltd. have each obtained the relevant licenses (valid through 2028–2030). If the Group violates Article 74-2 or other provisions of the Act and faces business suspension or license revocation, or if there are changes to laws and regulations or introduction of new regulations, business activities could be restricted, potentially materially affecting operating results. The Group is also simultaneously subject to multiple regulations, including the Act against Unjustifiable Premiums and Misleading Representations, the Health Promotion Act, and the Act on Specified Commercial Transactions.

Sales of the flagship product "Nupu Hair Growth Treatment" accounted for 24.0% of consolidated net sales in FY2025 (ended July 2025), indicating a high degree of dependence on a specific product. Should any unforeseen circumstances arise in the procurement or sale of this product, there could be a direct impact on the Group's overall operating results. While efforts are underway to expand the product lineup (Cerepron, HGP, etc.), reducing this dependence remains a work in progress.

The Group has positioned M&A as a pillar of its growth strategy and actively pursues it; however, if the effects of an acquisition fall short of initial expectations, the Group may need to recognize losses such as impairment of goodwill and intangible assets, affecting its financial position and operating results. Additionally, if affiliated companies continue to fail to generate earnings as anticipated, there is a risk of impairment losses on investment and loan funds, goodwill, and other assets. While investment decisions are made after thorough consideration of business viability and future prospects, the risk of failing to achieve plans due to changes in the external environment cannot be eliminated.

The Group outsources all production of its handled products to external partner factories, making securing production partners capable of stable supply a key management issue. There is no guarantee that a suitable alternative can be promptly secured if production at an existing outsourced partner is discontinued, and manufacturing delays or stoppages could affect operating results. While measures such as selecting multiple outsourcing partners, conducting prior due diligence, and entering into confidentiality agreements are in place, risks arising from outsourcing cannot be completely eliminated.

As the BtoC business holds a large amount of customer information, if a personal information leak occurs due to unauthorized external access or similar incidents, this could lead to damage claims and loss of social credibility, affecting operating results. There is also a risk that increasingly sophisticated and advanced cyberattacks could force partial suspension of computer systems or business operations. While technical countermeasures and the selection of reliable external outsourcing partners are implemented, complete protection against attacks exceeding expectations cannot be guaranteed.

Food manufacturers, pharmaceutical manufacturers, and chemical manufacturers are expanding into the functional foods sector, and competition is expected to intensify further. If competitors develop and sell equivalent or superior products ahead of the Group, the competitive advantage of the Group's products could decline, potentially preventing sales activities from proceeding as planned. While the policy is to focus on differentiation, profitability, and fields with less competition, there is also a concurrent risk that research outcomes could become obsolete due to progress in technological innovation.

The Group primarily raises capital expenditure and working capital funds through borrowings from financial institutions; however, there is a possibility that timely fundraising on desired terms may not be possible due to deteriorating market conditions, economic downturns, or declines in creditworthiness. If fundraising becomes difficult, the Group may be unable to execute advertising and R&D investments as planned, affecting its financial position and operating results. Additionally, if equity financing is conducted in the future, the increase in the number of shares issued may dilute the value of shares per unit.

Representative Director and President Kim Moo-jo has played a central role since the company's founding in formulating management policies and business strategies, and in maintaining and building business relationships leveraging his network within academic societies and the food and pharmaceutical industries. Should he become unable to perform his duties for any reason, some disruption to business operations could occur. While efforts are underway to strengthen organizational response, delegate authority, and expand personnel, resolving this state of excessive dependence remains a work in progress.

The Group has built ongoing business relationships in South Korea, Taiwan, China, North America, Southeast Asia, and other regions; however, if changes in the economic, legal, or policy environment in these countries lead to disruptions in business relationships, sales activities may not proceed as planned. While most overseas transactions are denominated in yen, a sharp appreciation of the yen could result in price reduction demands from yen-denominated sales partners, leading to a decline in sales. For foreign-currency-denominated transactions, exchange rate fluctuations at the time of conversion could also result in foreign exchange losses.