KYORIN Pharmaceutical Co., Ltd.

The development of prescription pharmaceuticals requires substantial investment and a long time horizon, and there is a risk that development may be delayed or discontinued due to safety issues or unconfirmed efficacy. In addition, if changes to or termination of collaboration agreements with third parties occur, this could have a material impact on business results and financial condition. In response, the Group is promoting the expansion of its development pipeline and strengthening its capability to acquire in-licensed products.

The Group depends on specific business partners for some products and raw materials, and delays or suspensions in production or procurement caused by unforeseen events may adversely affect stable supply. Product recalls resulting from quality control issues could also have a material impact on business results and financial condition. The Group addresses this risk by strengthening supply chain management resilience and diversifying its sources of procurement.

In Japan, healthcare system reforms, including revisions to prescription drug prices, are continuously implemented, and if drug price revisions or health insurance system reforms beyond a predictable range are implemented, this could have a material impact on business results and financial condition. The Group addresses this by improving profitability through maximizing the penetration of new drugs and by reducing manufacturing costs and optimizing costs.

If collaborative relationships with domestic and overseas pharmaceutical companies, such as technology licensing in/out, sales consignment, and joint research, are dissolved, or if a partner's business strategy or business environment changes significantly, this could have a material impact on business results and financial condition. In alliances with biotech ventures, which have increased in recent years, there is also a risk that the partner's financial condition may affect the continuity of the relationship. The Group addresses this by strengthening relationships based on partners' business strategies and financial conditions.

Competition with other companies' products in the same therapeutic area, the entry of generic drugs following the expiration of originator drug patents, and intensifying entry from other industries could have a material impact on business results and financial condition. The Group addresses this through solution-oriented sales activities to maximize new drug penetration, and through the development of its generic drug business centered on authorized generics.

If unexpected serious adverse reactions occur after a product is marketed, restrictions on usage, product recalls, or discontinuation of sales may result, which could have a material impact on business results and financial condition. Although pharmaceuticals are marketed after undergoing approval review, risks not detected in clinical trials may become apparent after launch. The Group addresses this by broadly collecting and analyzing post-marketing safety information and promptly providing appropriate information to healthcare providers.

If the Group's business activities infringe on the intellectual property rights of other companies, or if the Group's intellectual property rights are infringed by third parties, this could result in business suspension or litigation, which could have a material impact on business results and financial condition. The Group addresses this through strict management of intellectual property rights and continuous monitoring for infringement by third parties.

As the Group uses numerous IT systems in its operations and handles highly confidential information and personal data, if operations are disrupted or information is leaked due to cyberattacks, computer viruses, or similar causes, this could significantly damage social trust and have a material impact on business results and financial condition. The Group addresses this through the introduction of IT security services, regular data backups, the establishment of information management regulations, and employee training.

If natural disasters such as earthquakes or typhoons, fires, or pandemics such as COVID-19 occur, prolonged factory closures or production suspensions at the production subsidiary Kyorin Pharmaceutical Group Factory Co., Ltd. or at suppliers could have a material impact on business results and financial condition. The Group addresses this by preparing various response manuals, conducting drills, and securing a certain level of product inventory.

Fluctuations in exchange rates affect import/export transactions and technology licensing in/out, and financial market fluctuations exceeding expectations may increase interest payments, raise procurement prices, and cause changes in pension assets, retirement benefit obligations, and the valuation of held securities, which could have a material impact on business results and financial condition. The Group addresses this by monitoring financial market trends during the management planning stage, and by implementing forward foreign exchange contracts and reviewing fund-raising methods.