Zeria Pharmaceutical Co., Ltd.

If unexpected side effects or safety concerns arise with pharmaceuticals and other products currently on the market, this may lead to usage restrictions or discontinuation of sales. Should such an event occur with a mainstay product, it could have a material impact on business results and financial condition. The Group works to reduce this risk through collection and reporting of adverse event information to regulatory authorities, as well as through incoming inspection of raw materials and procurement from multiple suppliers.

Pharmaceutical development requires substantial time and cost, the success rate for creating candidate compounds is not high, and development may be abandoned or plans changed due to side effects observed or lack of confirmed efficacy during clinical stages. Such events may result in major changes to business plans and impact business results and financial condition. The Group addresses this through meticulous clinical trial planning and progress management under its global development structure, along with appropriate decisions on continuation or discontinuation at each development stage.

Changes to laws and regulations such as the Pharmaceuticals and Medical Devices Act may force discontinuation or restriction of sales or changes to R&D, and the NHI drug price standard for prescription pharmaceuticals is periodically revised downward to reflect actual market prices. If the extent of price reductions is large, if increases in sales volume cannot be achieved, or if the launch of new drugs is delayed, this could have a severe medium- to long-term impact. The Group addresses this through the rapid collection of regulatory information via industry associations and by implementing sales strategies aimed at reducing raw material and manufacturing costs and achieving sustainable growth.

Partnerships with other companies involving product introduction, joint sales, and joint development may be terminated for various reasons, and if such termination occurs, the expected business results may not be realized. This could impact business results and financial condition. The Group strives to minimize the impact on business results in the event of partnership termination by cultivating multiple mainstay products that serve as pillars of revenue.

The entry of generic pharmaceuticals is anticipated following the expiration of patents or re-examination periods for the Company's prescription pharmaceuticals, and intensified competition may impact business results and financial condition. If the launch of new drugs does not proceed as planned, this could have a severe medium- to long-term impact. The Group seeks to minimize this impact by enhancing information provision activities utilizing digital marketing and through lifecycle management of new drug launches and existing products.

As a result of corporate acquisitions including Tillotts Pharma AG, substantial amounts of goodwill, sales rights, and trademark rights are recorded on the consolidated balance sheet, and if impairment occurs due to underperformance of subsidiaries or other factors, this could have a severe impact on business results and financial condition. The Group conducts due diligence prior to acquisitions, deliberation by the Board of Directors, and post-acquisition follow-up, while intangible fixed assets are evaluated by external experts, with appropriate amortization periods set and asset measurement conducted every period.

If health damage caused by side effects or quality control issues, or disputes over the content, terms, or continuation of partnerships, develop into litigation, the outcome could impact business results and financial condition. Given the nature of the pharmaceutical business, it is difficult to completely eliminate the risk of unexpected health damage, and given the Group's numerous partnerships, the risk of disputes exists as a latent possibility. Disclosure of specific countermeasures in the securities report is limited.

If large-scale disasters or pandemics affect factories, suppliers, or logistics networks, operations and logistics may be temporarily suspended, and if prolonged, this could disrupt product supply and impact business results and financial condition. The Group aims to ensure business continuity through thorough infection prevention measures, securing raw materials through procurement from multiple suppliers, seismic reinforcement of factory facilities, maintaining product inventory at each distribution center, and BCP (business continuity plan) response.

In overseas business operations, changes to laws, tax systems, and pharmaceutical administration in the countries of operation, deteriorating economic conditions, and risks of war or conflict may make expected business expansion difficult, potentially having a material impact on profitability. This risk is particularly significant for the Group, which has set full-scale business expansion in the Asian region as a key management priority. The Group works to minimize the impact on business results through timely collection of information regarding laws, tax systems, pharmaceutical administration, and economic conditions in the countries where it operates.

For the Company, which has expanded its group through domestic and overseas corporate acquisitions, if the post-acquisition performance of subsidiaries falls short of expectations due to various factors, this may impact not only through impairment of goodwill and intangible assets but also the overall management performance of the Group. The Group deliberates on the appropriateness of acquisition deals through the Board of Directors and management meetings, and conducts post-acquisition follow-up aimed at realizing synergies, working to ensure that acquisitions contribute to business development.