Sumitomo Pharma Co., Ltd.

North American sales revenue from Orgovyx and Gemtesa accounts for 55% of consolidated sales revenue, and if sales decline due to the emergence of competing products (including both branded and generic products) or supply chain disruptions, this could have a material impact on business performance. The high dependence of the revenue base on specific products and regions constitutes a structural risk. The Company is addressing this through diversification of its product portfolio and establishment of a stable supply system.

As the difficulty of new drug development increases, development may be delayed or discontinued due to efficacy or safety issues, and if this occurs for products expected to become large-scale, it could have a material impact on business performance. The Company is proceeding with selection and concentration in areas such as oncology and neuroscience/psychiatry, and appropriately manages its portfolio through a review body that confirms plan revisions at each development stage transition.

In the United States, there is a patent infringement litigation system associated with applications for generic drugs and biosimilars, and depending on the outcome of such litigation, competing products may enter the market before patent expiration. There is also a risk of losing competitive advantage due to insufficient rights protection for proprietary technology or leakage of trade secrets. The Company builds a patent portfolio that includes not only substance patents but also related patents for uses, manufacturing processes, and formulations, thereby achieving comprehensive product protection.

In Japan, drug price reduction measures such as annual drug price revisions and the introduction of selective treatment cost systems for long-listed products continue, while in the United States, new rules and policies aimed at curbing prices of branded pharmaceuticals have been proposed. In China as well, price reductions through inclusion in the National Reimbursement Drug List and promotion of generic drug use through centralized procurement systems are progressing. Depending on the direction of drug pricing and healthcare system reforms in each country, this could have a material impact on the business performance of the Company Group.

The Company records intangible assets such as goodwill, patent rights, and development in progress in connection with corporate acquisitions and in-licensing of development products, and in the previous consolidated fiscal year, recorded an impairment loss totaling ¥5.5 billion, including patent rights related to Twymeeg (Type 2 Diabetes Treatment). If the recoverable amount falls below the book value due to development discontinuation, decline in future profits, or an increase in the discount rate resulting from rising interest rates, additional impairment losses may occur, which could have a material impact on business performance. The Company grasps valuation amounts through regular impairment testing and processes them appropriately.

In connection with past corporate acquisitions, the Company has raised funds through financial institution borrowings and corporate bonds, and there is a possibility that raising funds as planned may become difficult due to a deterioration in financial condition leading to a credit rating downgrade or changes in the global economic situation. In such a case, an increase in interest expenses or difficulty in raising funds on desired terms may occur, which could have a material impact on business performance and financial condition. Note that, as a result of refinancing into a bridge loan, as of the filing date of this Annual Securities Report, the previous borrowing agreement with financial covenants and the debt guarantee by the parent company have been resolved.

If factories, raw material suppliers, or outsourced manufacturing partners are closed or halt operations due to quality issues, disasters, cyberattacks, or the spread of infectious diseases, this could result in delays or suspension of product supply, which could have a material impact on business performance. Additionally, sudden demand fluctuations exceeding forecasts could also hinder stable supply. The Company works to reduce risk across the entire supply chain through regular review of its BCP, diversification of raw material suppliers, and promotion of risk assessments by product.

Cyberattacks on various information systems or system failures may disrupt business operations, and if confidential information, including personal information, is leaked outside the company, this could have a material impact on business performance through damages compensation, administrative sanctions, or loss of social credibility. The risk extends broadly, including impacts on business partners' systems. The Company has established a CSIRT to continuously monitor unauthorized external access, while also developing IT security rules and conducting ongoing employee training.

As the Company conducts global business centered on North America, China, and Southeast Asia, risks are inherent, including regulatory and institutional changes in each country, deterioration of diplomatic relations, political instability, and conflicts. In particular, the introduction or modification of tariff policies affecting the pharmaceutical business and supply chain in the United States, as well as retaliatory measures, could raise costs and have a material impact on business performance. The Company has established risk management rules and has built a risk management promotion system for each type of risk under a structure overseen by the President.

The Company has entered into contracts with its parent company, Sumitomo Chemical, for land leases, services, and raw material purchases, and if changes occur in the content of these contracts or transactions, this could have a material impact on the business performance of the Company Group. Note that, as a result of refinancing into a bridge loan, the debt guarantee by the parent company has been resolved as of the filing date of this Annual Securities Report. The Company ensures the fairness and reasonableness of transactions through a mechanism whereby approval is obtained from the Board of Directors following deliberation by the Intercompany Transaction Conflict of Interest Oversight Committee.