Nippon Shinyaku Co.,Ltd.

The research and development of new drug candidates requires substantial expense and long timeframes, and there is a possibility that development may be discontinued if usefulness cannot be confirmed. In particular, for the multiple in-house developed nucleic acid pharmaceuticals under development as DMD treatments, if development delays, failure to achieve efficacy/safety endpoints, competitor product launches, or delays relative to the sales plan occur, this could have a material impact on business results and financial condition. As countermeasures, the company is promoting global development and conducting introduction activities through a global and agile scouting framework.

There is a risk that competitive advantage may decline due to invalidation determinations of held patents or disputes with third parties, while there is also a possibility that if the company's own business activities infringe on third-party intellectual property rights, this could lead to damages claims or business suspension. The company seeks to minimize risk through multifaceted and strategic patent protection for pharmaceuticals and functional foods, regular investigation of third-party rights, and intellectual property due diligence in licensing-in and licensing-out activities.

If unexpected adverse effects occur after approval, this could impact business results and financial condition through sales suspension, product recalls, and damage to social credibility. The company collects and evaluates safety management information both domestically and overseas, implements safety measures such as revisions to precautions for use in a timely manner, and has established a rapid response committee for serious incidents and recall response procedures, while conducting annual training for officers and all employees.

In Japan, drug price reductions for prescription pharmaceuticals and policies to promote generic drug use continue to be implemented, and overseas, government pressure toward price reductions also tends to continue. Progress in healthcare system reforms and regulatory tightening could have a direct impact on the Group's sales and earnings. The company continuously monitors regulatory trends both domestically and overseas, and conducts impact assessments on business and considers countermeasures.

If quality problems with pharmaceuticals or functional foods result in health harm, this could lead to product recalls, incurrence of compensation costs, shipment suspension, and damage to social credibility, impacting business results and financial condition. The company maintains a manufacturing control system compliant with GQP and GMP standards, engages in consistent quality assurance from raw material procurement through distribution, and for functional foods as well, continuously improves the quality control system through audits of domestic and overseas suppliers and contract manufacturers.

Delays or stoppages in product supply caused by natural disasters, pandemics, international conflicts, etc. at the company's own factories, raw material suppliers, or outsourced manufacturers, as well as issues with suppliers' compliance with laws, human rights, and environmental practices, could impede stable product supply. The company has built and operates SCRM based on the ISO31000 framework, and has established a multi-layered risk management system, including obtaining letters of agreement to the Supplier Code of Conduct from 25 major business partners.

If system outages caused by cyberattacks or computer virus infections, or leakage of confidential information such as personal information or R&D information occur, this could impact business results and financial condition through damages claims and damage to social credibility. Under the Basic Information Security Policy and Basic Regulations, the company has established an ISMS Promotion Committee, and conducts 24/7/365 monitoring of networks and devices, has set up a CSIRT, and conducts targeted attack email training, among other measures.

There are risks of decline in market value of held assets and pension assets due to fluctuations in financial markets such as stock prices, interest rates, and foreign exchange, as well as foreign exchange fluctuation risk in foreign currency-denominated transactions such as royalty receipts and expense payments. The company seeks to reduce risk through regular verification of the holding purpose and economic rationale of cross-shareholdings and their gradual reduction, and through the use of forward exchange contracts for foreign currency-denominated receivables and payables.

If serious violations of legal regulations or voluntary codes applicable to the pharmaceuticals and functional foods businesses, or misconduct by officers or employees occur, this could impact business results and financial condition through legal penalties, sanctions by regulatory authorities, and damage to social credibility. The company works to prevent such occurrences through the establishment of the "Nippon Shinyaku Group Code of Conduct," a dedicated compliance department, monthly training, twice-yearly e-learning and compliance awareness surveys, and the operation of an internal and external whistleblowing hotline (Hot Line).

In the pharmaceutical industry, competition to acquire R&D personnel, highly specialized personnel, and global talent is intensifying both domestically and internationally, and if the company is unable to sufficiently secure and develop diverse talent over the medium to long term, there is a risk that innovation creation, R&D promotion, and sustainable growth could be impeded. The company seeks to retain and secure talent through development programs such as "NS Academy" and "HONKI Juku," the establishment of side-job, flex-time, and telework systems, and strengthened career-track hiring.