Welby Inc.

A large portion of the Group's net sales depends on the medical and healthcare-related fields, so stagnation or contraction of market growth, or failure to respond to new market trends, could affect business performance. In addition, global restructuring and intensifying competition among pharmaceutical companies, which are the Group's major customers, pose a risk that existing customers may request contract revisions. While the Group views pharmaceutical company restructuring as an opportunity to expand its platform services, it also recognizes the risk of contract fluctuations resulting from changes in strategic direction.

The Group's main business is providing self-management support services for patients and their families, and it seeks to enhance competitiveness through UI/UX optimization and distinctive service offerings. However, there is a risk that its competitive advantage could decline due to imitation by established competitors with high brand recognition and a broad customer base, or due to new entrants with strong capital resources and marketing capabilities. It is explicitly noted that maintaining and enhancing the usage value for end users involves elements of uncertainty, and changes in the competitive environment could affect the business and performance.

The Group's revenue is linked to the fiscal year-end of major customers, primarily large pharmaceutical companies, and tends to be concentrated in the fourth quarter, when the fiscal year-ends of foreign-affiliated pharmaceutical companies in particular are concentrated. In the fiscal year ended the 15th consolidated fiscal year, quarterly net sales in the fourth quarter were ¥255,217 thousand, accounting for approximately 40% of full-year net sales of ¥635,724 thousand, while the other quarters recorded significant operating losses. Projects planned for the final month of the fiscal year may experience timing shifts due to unexpected troubles or schedule changes, posing a risk to the Group's financial position and operating results.

The Group handles important personal information of a large number of patients and users, and has established an information protection framework including ISO27001 and ISO27017 certification and GDPR compliance. However, changes in domestic and international laws and regulations concerning the handling of personal information could hinder business operations. Should an unforeseen incident such as a personal information leak occur, it could damage patients' privacy, undermine corporate credibility, and adversely affect performance and financial condition.

The Group has opportunities to access customers' new product development plans and other confidential business information, and has implemented security measures such as confidentiality agreements and the use of secure cloud file servers. Although no confidential information leakage incident has occurred to date, if confidential information were to leak for any reason and cause significant damage to a customer, this could lead to claims for damages and loss of credibility, thereby affecting business performance.

The Group has established a customer support desk to respond immediately to complaints from end users (patients) and to feed such input back into service improvements. However, should a serious complaint occur, it could affect the Group's financial position and operating results. Improving end-user satisfaction and expediting complaint handling are recognized as important challenges for business continuity, and the Group continues to strengthen its response framework.

The PHR Platform Service Business and the insurer-oriented business of the subsidiary Welby Healthcare Solutions have a business structure requiring upfront investment for development costs and outreach activities to promote adoption by medical institutions. If upfront investments fail to produce the expected results, the expansion of the revenue base may not be realized, potentially affecting the business and performance. In the 15th consolidated fiscal year, the Group recorded a full-year operating loss of ¥452,827 thousand.

The Group considers securing and developing excellent talent to expand its business scope to be an extremely important issue, and is strengthening recruitment activities, developing external partners, and pursuing business alliances with companies in other industries. However, if the Group is unable to secure sufficient appropriate talent, or if current employees resign, it may be unable to secure sufficient human resources, which could affect performance or future business plans.

The Group has confirmed with the Ministry of Health, Labour and Welfare that its PHR Platform Service currently does not fall under the category of "medical device program" as defined under the Pharmaceuticals and Medical Devices Act. However, the addition of diagnostic support functions or provision as a companion app could result in the service being classified as a "medical device program." If this were to occur and the Group were unable to respond appropriately, it could affect the business and performance, requiring continuous monitoring of regulatory changes.

The Group strives to comply with the "JPMA Code of Practice" established by the Japan Pharmaceutical Manufacturers Association. As various regulations in the industry are being reviewed, the Group may be forced to respond to revisions, abolitions, or the establishment of new regulations by relevant laws and industry associations. Failure to respond to such regulatory changes could affect the business and performance; the Group continues to consider its response on an ongoing basis, drawing on outside legal counsel and other experts.