JCR Pharmaceuticals Co.,Ltd

Human growth hormone preparations account for 44.5% of total net sales, raising concerns about a decline in market share due to market contraction from the declining birthrate and the entry of competing products such as sustained-release formulations. The Company itself recognizes a high likelihood that the market will eventually shift to decline, which would have a significant impact on business performance. The Company aims to reduce this dependence by nurturing IZCARGO®, a new drug leveraging J-Brain Cargo® technology, and by advancing progress across multiple pipelines.

In research and development in the field of rare diseases, if efficacy or safety is found not to meet approval standards, development may be discontinued or delayed, making it difficult to recoup R&D expenses or secure expected revenue. Since contract revenue based on technology licensing significantly affects operating profit and other results, discontinuation or delay of pipelines could have a material impact on business performance. The Group seeks to diversify this risk by advancing multiple pipelines in parallel.

While the Company aims to become a global specialty pharma based on its J-Brain Cargo® technology platform, there is a risk of unforeseen circumstances arising from differences in laws, regulations, patents, and healthcare systems unique to each country. The timing and existence of royalties to be received from partners may fluctuate, and depending on their scale, this could affect business performance. The progress of overseas launch plans is a key factor driving fluctuations in business performance.

The prices of prescription drugs are set as NHI drug price listing prices determined by the Minister of Health, Labour and Welfare under the Health Insurance Act, and there is a risk of declining sales due to increasingly frequent price revisions and intensifying competition with rival products. If a license or approval is revoked due to a violation of laws or regulations, the Company may be required to recall products or suspend manufacturing and sales, which could have a material impact on the business. The Company continuously evaluates product-specific pricing risks and takes measures such as setting wholesale prices commensurate with product value.

If technical or regulatory issues, large-scale disasters, or political turmoil due to international conflicts occur at manufacturing facilities or raw material suppliers, this may disrupt the stable supply of products. Amid continued shortages of natural resources, building materials, and electronic components due to the Russia-Ukraine situation and U.S. tariff policy and currency fluctuations, there is also a possibility of impact on delivery schedules for new facility construction and research and production equipment orders. As countermeasures, the Company regularly checks the status of securing materials and raw materials and pursues dual sourcing wherever possible.

The Company has extensive business alliances with its largest shareholder, Medipal Holdings Corporation, including development investment agreements for multiple pipelines, the establishment of a joint venture in the U.S., the granting of exclusive negotiation rights for global commercialization of an ultra-rare disease treatment, and a licensing agreement for a fucosidosis treatment drug. If the strategic alliance changes for any reason, this could have a material impact on business performance and financial position. The Group states that it will strive to maintain its strategic alliance with Medipal Holdings and to enhance the corporate value of both companies.

The pipeline includes substances unknown to the human body, such as fusion proteins, which carry a risk of undesirable adverse reactions arising from antigen-antibody reactions. To date, no risks requiring particular attention have emerged in clinical trials, but if adverse reactions that cannot be overlooked occur upon long-term administration, this could affect business performance. The risk of unknown adverse reactions associated with new pharmaceutical products is consistently recognized and managed.

Regarding blood-brain barrier crossing technology (J-Brain Cargo®), the Company acquired intellectual property rights in the U.S. and other regions through its 2020 acquisition of ArmaGen, Inc., and currently judges the risk of infringing other companies' intellectual property rights to be low. However, as other companies advance development of products using similar technology, litigation over intellectual property rights may arise in the future. Should litigation occur, it could affect business performance, and the Company continues to work to secure intellectual property rights in a competitive manner.

Since active pharmaceutical ingredient and formulation plants are concentrated in Nishi-ku, Kobe City, a large-scale power outage or a natural disaster exceeding expectations could halt operations for a certain period, affecting business performance. While the location is considered resilient against earthquakes and wind and flood damage, the geographic concentration of manufacturing facilities remains a risk factor. There is currently no mention of specific countermeasures such as diversification, and addressing this concentration risk remains a challenge.

While the Company is expanding human resources, primarily in the R&D and production divisions, in line with increased net sales and R&D progress, demand for personnel is expected to continue rising due to the expansion of global clinical trials and launch plans. If it becomes difficult to recruit personnel or if the turnover rate rises, this could affect business performance. The Company is working to secure personnel with global experience and to formulate plans for developing personnel who will lead JCR in the future.