Hisamitsu Pharmaceutical Co.,Inc.

Changes in regulations such as the drug pricing system and the healthcare insurance system may affect the business performance of the Group. In particular, drug price revisions directly impact the revenue structure, making this a perennial management challenge for pharmaceutical companies. As a countermeasure, the Company monitors trends in amendments to pharmaceutical-related regulations at an early stage and conducts advance preparations, including consideration of the need for additional responses.

The occurrence of quality issues or unexpected adverse reactions may develop into situations such as product discontinuation or recall. Product recalls entail direct financial losses as well as risks of brand damage and loss of trust. The Company has established thorough quality control in compliance with relevant laws and internal regulations, including the Pharmaceuticals and Medical Devices Act and GxP ministerial ordinances, as well as a system for prompt recall measures in the event of an adverse event.

If development is discontinued due to factors such as failure to achieve expected results in the research and development of new products or new technologies, the Company may be unable to recover its R&D investment. Since pharmaceutical development requires long periods and substantial investment, pipeline failures can have a material impact on business performance. The Company implements risk diversification and portfolio management through expansion of the development pipeline, as well as feasibility confirmation at the time of stage transitions.

If manufacturing or procurement is disrupted for any reason, the business performance of the Group may be affected. Disruptions to raw material procurement or damage to manufacturing sites may undermine the stability of product supply, leading to lost sales opportunities and diminished customer trust. The Company strives to maintain a stable supply system through the formulation and training of BCPs (Business Continuity Plans) at manufacturing sites and the maintenance of safety stock.

The Company holds a large amount of internal corporate information, including personal information and trade secrets, and if such information is leaked externally due to unauthorized system intrusion, system failure, or accident, it may affect business performance. Information leaks carry risks of legal liability, loss of trust, and loss of competitive advantage. The Company has established a management system based on the "Information Security Management Regulations," implements measures against cyberattacks, and conducts ongoing awareness-raising activities for employees.

If the market environment surrounding the Company's products changes due to the launch of competing products or generic drugs, the business performance of the Group may be affected. Intensified price competition due to the entry of generic drugs is a factor that directly reduces the sales and profitability of existing products. The Company gathers information on the launch of competing and generic products while working to reduce the impact through efforts such as drug discovery and lifecycle management.

In overseas operations, changes in the political, social, and economic environment of the countries or regions in which the Company operates may impair the profits initially expected or result in unexpected losses. Geopolitical risks, regulatory changes, and deteriorating economic conditions can destabilize the revenue base of overseas operations. The Company addresses this through the collection and recognition of risk information regarding the countries or regions of operation, as well as the formulation and continuous improvement of BCPs (Business Continuity Plans).

If the Group's business activities infringe on the intellectual property rights of other companies, such as patents, this may lead to business discontinuation or litigation. Conversely, if other companies infringe on the Group's intellectual property rights, litigation may be initiated; either case entails substantial costs and business risk. The Company has established a system in cooperation with external experts such as attorneys, and is prepared to take the best course of action.

If the Company is unable to secure sufficient human resources, or if the environment in which employees can continue to work safely, securely, and healthily is impaired, business continuity may become difficult or stagnant, affecting business performance. A shortage of specialized personnel can have a cross-functional impact on research and development, sales, manufacturing, and other functions. The Company supports improved job satisfaction and the realization of autonomous careers by creating growth opportunities for employees and fostering a comfortable working environment.

If the business activities of the Company or its business partners are damaged by critical natural phenomena such as weather events, volcanic eruptions, earthquakes, or landslides, business performance may be affected. The risk that the frequency and scale of natural disasters will increase due to the worsening of climate change is also recognized. The Company seeks to minimize disaster risk through the formulation and continuous improvement of BCPs (Business Continuity Plans), including the establishment of a "Disaster Response Manual."