Fuji Pharma Co.,Ltd.

The Company Group operates under strict regulation of the Pharmaceuticals and Medical Devices Act and related laws and regulations, and holds multiple licenses including pharmaceutical manufacturing licenses, marketing authorization licenses, and wholesale distribution licenses. If licenses are revoked due to violations of laws and regulations, the Group may be required to recall affected products or cease manufacturing and sales, which could have a material impact on business activities. In addition, future revisions to related laws and regulations may also affect financial condition and business results.

The listed prices of prescription pharmaceuticals are set based on the drug price standard under the Health Insurance Act, and the business environment has become increasingly severe with annual drug price revisions implemented every year since April 2021. Periodic price reviews aimed at narrowing the gap with actual market prices may result in reductions to the listed prices of the Company's products, affecting sales and profits. In the most recent revision, the overall reduction was limited to 1.1%, partly due to the impact of the unprofitable product repricing scheme, among other factors.

If clinical trials fail to produce the expected results, if development plans need to be revised due to guidance from regulatory authorities, or if problems arise with external parties such as co-development partners, alliance partners, or outsourcing contractors, research and development of new products in development may not proceed as planned. This could result in escalating costs, extended development periods, or the discontinuation/suspension of development, which could affect the Group's business results. As a countermeasure, the Company incorporates response measures for when problems arise into contractual terms with external parties, working to minimize risk damage.

For certain products, competition among numerous manufacturers may cause market prices to decline significantly, and various measures taken by domestic new drug manufacturers to secure market share may prevent the Group from achieving its planned budget. As a countermeasure, the Company implements cross-departmental initiatives to secure profitability, such as reducing raw material procurement costs and reviewing manufacturing methods to reduce costs.

The Company Group procures raw materials both domestically and internationally, and rising raw material prices may affect product costs. In addition, fluctuations in the supply-demand balance of raw materials, domestic or international regulations, or quality problems arising at raw material manufacturers may make it difficult to procure raw materials over the long term, potentially making it impossible to manufacture or sell products. For raw materials of key products, the Company is addressing this by progressively diversifying its supply chain.

The occurrence of unexpected side effects after products are marketed, contamination of impurities into products, quality changes due to changes in raw materials or manufacturing methods, or changes in regulations by government authorities may force the Group to recall products or discontinue manufacturing and sales. This could have a material impact on the Group's business results. As a countermeasure, the Company has introduced a "Quality Management Review" system, with a dedicated department established within the Quality Assurance division monitoring and confirming the potential occurrence of quality problems.

Dependence on various information systems creates the possibility that business operations could be disrupted by system failures, computer viruses, cyberattacks, or similar incidents. In addition, if confidential information including personal data is leaked externally, this could have a material impact on business results and financial condition through damages, administrative sanctions, or loss of social trust. As a countermeasure, the Company conducts regular information security training for all employees.

The Company Group records contractually based exclusive distribution rights as "distribution rights" and advance payments related to exclusive distribution rights as "long-term advance payments," and must periodically evaluate whether there are indications of impairment. If impairment is determined to have occurred, recording an impairment loss may affect business results and financial condition. As a countermeasure, the Sales Division and Business Development Department evaluate and verify sales plans based on regular reports, and conduct evaluations by external experts as necessary.

Regarding investments in alliance partners, declines in the standard prices of listed shares and derivative receivables may result in the recording of valuation losses on investment securities and derivative valuation losses, which could affect the Group's business results and financial condition. As a countermeasure, the Company conducts appropriate valuations by external experts as necessary at the time of recording, and continues to conduct appropriate valuations each period thereafter.

While securing appropriate human resources is necessary in line with future business expansion, if it becomes difficult to secure human resources or if their development does not proceed smoothly, this could affect business results and financial condition. Since its founding, the Company has focused on securing and developing human resources based on a corporate culture that values its people.