SANTEN PHARMACEUTICAL CO., LTD.

The top two products, Eylea (Retinal Disease Treatment) and Cosopt Combination Eye Drops (Glaucoma Treatment), account for 32% of consolidated revenue. Discontinuation of sales or a significant decline in revenue due to product defects or unexpected side effects could have a material impact on business performance and financial condition. High dependence on specific products is a risk factor that undermines revenue stability, and diversification of the product portfolio remains a challenge.

Products licensed from other companies, such as Eylea (Retinal Disease Treatment) (exclusive domestic distribution rights) and Cravit Eye Drops and Tapros Eye Drops (exclusive manufacturing and marketing rights), contribute significantly to revenue. If contract terms expire, conditions change, or sales partnerships are dissolved, this could directly impact business performance, making the continuity of licensing agreements an important premise for business continuity.

For certain items, production is concentrated at a single location or outsourced externally, and some products depend on specific suppliers for raw materials such as active pharmaceutical ingredients and containers. If a pandemic, natural disaster, fire, or other event causes a specific plant or external outsourcing partner to cease functioning, production activities could stagnate or be delayed, and product quality issues could arise, potentially impacting business performance and financial condition. As countermeasures, the company is working on visualization and global centralized management of inventory and building production and supply systems to address the European market.

The company is affected by drug pricing regulations and healthcare insurance system reforms by the Japanese government and governments of other countries. Drug price revisions or generic drug promotion policies beyond predictable ranges could have a medium- to long-term impact on business performance and financial condition. The expansion of generic drug sales both domestically and internationally is also a risk factor that could squeeze revenue, making continuous monitoring of regulatory trends essential.

The creation and development of new products is essential for future growth, and the company makes substantial research and development investments every year. However, the process from research and development to approval and launch requires a long period, and there is a high degree of uncertainty, including possible discontinuation of development or failure to obtain approval. The timing of obtaining sales and manufacturing permits cannot be reliably predicted, and revenue commensurate with the research and development investment may not be realized.

Overseas revenue accounted for approximately 49% of consolidated revenue in the fiscal year under review, and foreign exchange fluctuations directly affect business performance and financial condition as the company expands operations worldwide. As global business expansion continues, foreign exchange exposure is increasing, and there is a risk that yen-converted amounts of overseas revenue will decrease during periods of yen appreciation.

The company relies heavily on various IT systems, and cyberattacks, computer virus infections, or system deficiencies could impact business performance. If sensitive information, such as personal data, is leaked externally, this could lead to a significant loss of trust. As countermeasures, the company implements and maintains an information security management system based on ISO/IEC 27001, conducts security training and drills, and manages risk including throughout the supply chain.

The company actively pursues alliances and M&A to strengthen its pipeline and accelerate global business expansion, but there is a possibility that the initially anticipated effects and benefits may not be realized due to deterioration of the external environment or other factors. In such cases, impairment of property, plant and equipment or intangible assets could occur, impacting business performance. The company is working to improve the transparency and objectivity of investment decisions through the establishment of a strategy review committee and evaluation criteria based on a hurdle rate exceeding the cost of capital.

Sudden changes in the international situation or the occurrence of conflicts between nations could affect business activities in related regions and cause delays in product supply due to disruptions in the supply chain. For a company that operates globally, geopolitical instability is a significant risk to business continuity, and the company is advancing countermeasures such as gathering external information, analyzing impacts, and building backup systems.

If a violation of social norms or laws and regulations occurs, it could significantly impact corporate management through a decline in social credibility and brand image, loss of corporate value due to a decline in stock price, decreased revenue, and payment of damages. As countermeasures, the company has established the "Santen Code of Business Ethics" and "Global Compliance Policy," implements a global education program for all employees, and has introduced the "Santen Speak Up Portal," available 24 hours a day, 365 days a year.