Shionogi & Co., Ltd.

If the global growth strategy centered on infectious diseases, QOL diseases, and rare diseases does not progress as planned, future revenue growth may not be realized. Key risk factors include changes in the competitive environment in the HIV and AMR fields, the impact of U.S. pharmaceutical-related policies on the edaravone business, and delays in the social implementation of HaaS solutions. In response, the company continues to invest in ViiV Healthcare, steadily promotes PMI, and is developing a global development and sales structure centered on Europe and the U.S.

If the strategic integration of the research and development pipeline in the rare disease, HIV, and QOL disease areas is insufficient, building medium- to long-term competitive advantage may become difficult. There is a risk that external collaborations and reinforcement of research capabilities may not yield the expected results, and that obsolescence of existing technologies may cause stagnation in forming an attractive pipeline. The company addresses this through strengthening its infectious disease research capabilities, including Shionogi Qpex lab., promoting collaboration with academia, ventures, and government agencies, and pursuing new modalities.

If PMI related to acquisitions such as Torii Pharmaceutical, JT Pharmaceutical Business (Transferred Pipeline/Royalties), and the edaravone business does not proceed as planned, there is a risk that expected business value and synergies may not be realized. As the organization expands, integrating personnel with diverse values and cultures has become an important challenge, and delays in integration may lead to stagnation in business growth. The company addresses this through continuous engagement surveys, activation of internal communication, and steady promotion of PMI.

If employee engagement declines amid organizational expansion through M&A, and the development and retention of core talent do not progress, the execution capability of business strategy may decline, potentially undermining future competitive advantage. There is also a recognized risk that the outflow of talented personnel and the entrenchment of a culture that avoids challenges could lead to a loss of adaptability to change. The company addresses this through personnel placement and development measures aimed at balancing the deepening of expertise with cross-functional experience, and through the operation of a personnel system that evaluates challenge-taking.

If the use of AI and IT remains limited to improving the efficiency of individual operations and does not lead to transformation of overall business processes or more sophisticated decision-making, this could have a significant impact not only on SHIONOGI's business performance but also on corporate value enhancement. There is a risk that a shortage of DX-promoting personnel and digital capabilities, as well as delays in establishing a globally unified IT infrastructure, could cause transformation to stagnate. The company addresses this through building a global IT infrastructure, practicing AI-driven drug discovery, and implementing measures to develop digital core talent.

Rapid changes in political and economic conditions or heightened geopolitical tensions in various countries and regions may give rise to investment restrictions, economic sanctions, and changes in trade policy, potentially constraining business activities such as research and development, manufacturing, logistics, and sales. There is also a risk that disruptions to logistics and supply chain fragmentation could impede the stable supply of pharmaceuticals and access for patients. The company addresses this through continuous monitoring of political, economic, and geopolitical trends, flexible review of business plans, and strengthening the resilience of its global business operation structure.

If quality defects, lot nonconformities, unexpected adverse reactions or malfunctions, or omissions or delays in adverse event reporting occur, this could result in shipment suspension, product recalls, business suspension due to administrative action, the filing of damages lawsuits related to health impacts, and significant impacts on business performance and reputation. Manufacturing and contract manufacturing are conducted under a strict quality control system compliant with pharmaceutical-related laws and regulations such as GMP and ICH guidelines, but there remain fields globally where review standards have not yet been established. The company addresses this through the establishment and promotion of the SHIONOGI Group Quality Policy, fostering a Quality Culture, and management and oversight activities such as manufacturing site audits.

Against the backdrop of increasing and more sophisticated cyberattacks targeting Japanese companies, if core systems are shut down or confidential information including personal data is leaked, this could result in significant impacts such as difficulty continuing business operations, damages claims, and a decline in social trust. Pharmaceuticals are recognized as social infrastructure, and supply disruption is recognized as a risk directly affecting patients and healthcare settings. The company addresses this through strengthening its network systems across the group, reinforcing its IT-BCP structure, and continuously strengthening its information security management structure based on global security assessments.

Intensifying pressure to curb drug costs due to the U.S. Inflation Reduction Act (IRA), Most Favored Nation (MFN) policy, and other measures, as well as annual drug price revisions and healthcare insurance system reforms in Japan, may reduce pharmaceutical sales and profits and lower the predictability of the prescription pharmaceutical business. Changes in policy and international relations accompanying shifts in government administrations in various countries also require close attention, and there is a risk that drug price calculations may diverge from the value of the innovation created. The company addresses this through advocacy for the value of innovation via industry association activities, evidence generation, and promptly obtaining and responding to the latest information on drug pricing systems and regulations.

Due to natural disasters, pandemics, the enactment of the U.S. BIOSECURE Act, heightened geopolitical tensions, and other factors, uncertainty in the supply chain environment for raw materials and products is increasing, which could have a significant impact on plant operations, procurement of raw materials, and the stable supply of pharmaceuticals. Excessive inventory buildup and sharp increases in procurement costs could also affect profitability and capital efficiency, making it an important challenge to balance ensuring stable supply with cost control. The company addresses this through diversifying raw material procurement sources (selecting second vendors for raw materials with high geopolitical risk), designating BCP items, and conducting due diligence and audits of suppliers.