Takeda Pharmaceutical Company Limited

If the efficacy or safety of a candidate substance fails to meet approval standards, R&D may need to be discontinued midway or additional trials conducted, resulting in unrecovered investment costs and delays in product launch. The Company seeks to improve success probability through strengthened partnerships with external parties and the construction of a high-quality pipeline, but the risk cannot be completely eliminated.

For many products, generic entry following the loss of patent or regulatory exclusivity leads to a rapid shift from originator products to generics in the U.S. and Europe, resulting in a significant decline in revenue. In Japan as well, authorities are promoting the use of generics and reducing prices of long-listed products, and the competitive environment is becoming increasingly severe with the emergence of competitor generics and switch OTC drugs.

In the U.S., pressure to reduce prices for originator products is intensifying further due to the granting of Medicare price negotiation authority under the Inflation Reduction Act (IRA) and the executive order concerning the introduction of Most Favored Nation (MFN) pricing issued in May 2025. In Japan, Europe, China, and other emerging markets, annual reductions in official drug prices and the spread of international reference pricing systems are expanding, and global price pressure may adversely affect the Company's business performance and financial condition. The Company is pursuing solutions such as value-based pricing, but there is no guarantee that the impact can be completely avoided.

The Company has recorded substantial goodwill and intangible assets in connection with strategic transactions such as corporate acquisitions and licensing agreements, and impairment losses may occur due to unfavorable clinical trial results or performance contributions falling short of expectations, which could adversely affect business performance, financial condition, and distributable profit. The Company carries substantial interest-bearing debt arising from past transactions, and deterioration in financial condition poses risks of credit rating downgrades or worsened financing conditions. Breach of covenants under commitment lines could also result in a demand for immediate repayment.

Overseas revenue accounts for 90.4% of consolidated revenue (of which the U.S. accounts for 48.0%), meaning that exchange rate fluctuations have a significant impact on business performance. While yen depreciation is a factor increasing revenue, it also increases costs such as foreign-currency-denominated R&D expenses, and rising financing costs due to interest rate fluctuations and progressing global inflation may put pressure on profits. The Company hedges through derivative transactions, but there may be cases where it cannot fully respond to market fluctuations that exceed expectations.

With increasing dependence on large-scale and complex IS/IT systems, the risks of system outages and cyberattacks are expanding, and the introduction of AI and agentic technologies also brings new threats such as prompt injection and unintended leakage of confidential information. If digital and AI governance is fragmented or insufficient, risks related to compliance, business operations, and social trust increase. The Company is working on cloud migration and formulating a global cybersecurity strategy, but due to the rapid pace of technological change, adopted solutions may become obsolete within a short period.

In addition to diverse laws and regulations such as pharmaceutical regulations, GMP, antitrust laws, and personal information protection laws, extensive contact with healthcare professionals and government officials, as well as transactions through third parties, inherently carry compliance risks. Risks are further heightened by stricter enforcement by regulatory authorities, fragmented changes in legal systems across multiple jurisdictions, and rapid changes in digital engagement models. If a violation occurs, it may result in monetary sanctions, litigation, operational disruption, and adverse effects on social trust. The Company has established a Global Ethics & Compliance department and introduced a third-party risk management framework, but it is difficult to completely eliminate the risk.

Changes in management, including the Chief Executive Officer, and extensive transformation of organizational and business operating models are underway, and during the transition and adaptation period, there may be impacts on strategic priorities, delays and increased complexity in decision-making, and temporary weakening of governance and internal controls. There are also risks of loss of key personnel and organizational knowledge and deterioration in employee engagement, and the resulting operational disruption and negative impact on social trust could adversely affect the Company's long-term strategic objectives. The Company has implemented measures such as interim leadership arrangements and monitoring of organizational health indicators, but these may not function as intended.

In connection with its global business operations, the Company is exposed to risks such as political instability, deteriorating economic conditions, trade restrictions including tariffs on pharmaceuticals, and heightened geopolitical tensions in the countries and regions where it operates, which may result in delays in approval procedures due to regulatory authority dysfunction and impacts on the continuity of product supply. Geopolitical risk has a compound nature that can amplify other risks such as product supply, compliance, and cross-border data regulations. The Company conducts cross-functional monitoring systems and regular testing of business continuity plans, but should unforeseen circumstances arise, its business performance, financial condition, and social trust could be affected.

If cost increases from suppliers due to the introduction of carbon taxes, or physical risks to manufacturing sites and contract manufacturing organizations (CMOs) from heat stress, water scarcity, and flooding materialize, this may affect business operations, business performance, and financial condition. There is also a risk that changes in environmental laws and regulations and shifting societal expectations will impose stricter requirements on research, manufacturing, and other business activities. The Company updated its climate-related risk scenario analysis in fiscal year 2024 and is advancing its net-zero roadmap, but failure to achieve sustainability goals could lead to a decline in stakeholder trust and adversely affect talent recruitment and investor relations.