DAIICHI SANKYO COMPANY, LIMITED

Research and development of new drug candidates requires substantial expense and lengthy periods, and there is a risk that development may be discontinued due to unconfirmed usefulness or that approval may not be obtained due to changes in approval review standards. In the strategic alliances with AstraZeneca and Merck & Co., Inc. (U.S.), delays in research and development, regulatory filing, or launch, or failure to achieve the expected efficacy or safety, could adversely affect operating results and financial position. As countermeasures, the Company has established various joint committees to promote vision formulation, profit and loss management, milestone management, and reduction of regulatory risk.

In the biopharmaceutical market including ADC products, the Company faces an intense competitive environment due to new drug launches by competitors and the emergence of next-generation technologies, and drug price containment measures and updates to treatment guidelines may significantly affect product demand. The Company has entered into long-term manufacturing outsourcing agreements, including annual minimum purchase obligations, with multiple CMOs for the manufacture of ADC products, and fluctuations in demand forecasts may result in compensation payments if minimum purchase obligations cannot be met. As countermeasures, the Company is continuously monitoring the market environment, improving demand forecast accuracy, discussing revisions to contract terms with CMOs, and optimizing its production system.

Quality issues arising from the production and supply process, or unexpected adverse reactions occurring after sale, may occur, which could adversely affect operating results and financial position through product recalls, discontinuation of sales, business suspension measures, or litigation and damages claims. As countermeasures, the Company is strengthening management systems compliant with GMP and GDP, conducting regular audits of group companies and business partners, and collecting and evaluating safety management information both in Japan and overseas and providing such information to medical institutions. Safety management information training is conducted annually for all employees to minimize risks to patient safety.

In global business development, there are geopolitical risks, risks of conflict with local laws and regulations, administrative guidance, and labor relations risks, and trends in global trade policy, including U.S. tariff policy, may affect the supply chain and manufacturing and procurement costs, adversely affecting profitability and competitiveness. As countermeasures, the Company has appointed risk management contact persons at overseas subsidiaries to regularly collect and exchange information, and is considering requests to governments through industry associations as well as flexible reviews of its supply chain structure.

Natural disasters such as earthquakes and floods, fires, social infrastructure failures, wars, and terrorism may cause damage to facilities such as plants and laboratories and disruption of business activities, and reliance on specific suppliers for raw materials creates a risk of delay or suspension of the supply of pharmaceuticals and investigational drugs in the event of quality issues. As countermeasures, the Company has established an all-hazard type BCP and has built backup systems including diversification of production and logistics sites, multiple sourcing of key raw materials, installation of private power generation equipment, and duplication of key systems.

Trends in domestic and overseas pharmaceutical administration, revisions to drug pricing standards, and healthcare system policies may adversely affect operating results and financial position, and in particular, the introduction of most-favored-nation drug pricing policy in the United States and reviews of the operation of the Inflation Reduction Act (IRA) may significantly affect sales and profitability in the United States, including for ADC products. As countermeasures, the Company is implementing revisions to invoice prices and rebates based on drug pricing system reforms, expanding sales centered on products eligible for the new drug creation premium and priority products, and considering requests to the government through industry associations.

There is a risk that the Group's business activities may be alleged to infringe upon third-party patents or other rights, leading to business withdrawal or disputes, as well as a risk of infringement of the Group's intellectual property rights by third parties, and intellectual property risk may further increase against the backdrop of an increasing pipeline of biopharmaceuticals and new modalities, exemplified by ADCs, and the expansion of the generic drug market. The patent dispute with Seagen Inc. concluded in March 2026, but as countermeasures, the Company is working to maximize value and minimize risk through the creation and protection of intellectual property, and to minimize business impact through coordination with internal and external stakeholders.

A downturn in the stock market may result in losses on the sale or valuation of held shares, interest rate trends may increase retirement benefit obligations, and fluctuations in foreign exchange rates may adversely affect the operating results and financial position of global business operations. As countermeasures, the Company is working to reduce losses through reduction of policy-held shares, mid-period review of pension fund asset allocation, and foreign exchange hedging transactions, while also monitoring retirement benefit risk and the real estate market.

Unexpected IT system failures, malware infection, system shutdowns due to cyberattacks, and leakage of confidential information or personal information may occur, which could adversely affect operating results, financial position, and social credibility. As countermeasures, the CDXO oversees information and cybersecurity measures for the entire Group, and the Company is developing security systems including defense, detection, and response functions, adapting to cloud environments, introducing security measures for OT systems, and monitoring the proper management of personal information.

As the use of generative AI becomes essential in drug discovery research and development processes, delays in responding to AI technology innovation may lead to a loss of advantage and reduced competitiveness in research and development, and inadequate response to strengthened international AI regulations, such as the EU AI Act, poses a risk of fines and business restrictions. If inadequate AI governance systems result in adverse effects on patient health or life, this could adversely affect operating results and financial position through loss of social credibility or payment of damages. As countermeasures, the Company is proceeding with the formulation of a global AI governance policy and the development of global guidelines for AI development and operation according to risk classification.