Medrx Co.,Ltd.

The Group has continuously recorded operating losses and net losses since its founding, and as operating losses continued in the current consolidated fiscal year, there exists a situation that raises material doubt about the going concern assumption. Although funds for research and development activities for the next consolidated fiscal year have been secured and no material uncertainty is recognized, there is a possibility that if funds cannot be secured at the necessary timing in the future, material concerns regarding business continuity may arise. As a countermeasure, the Company plans to strengthen its financial base by combining business revenue such as milestone income and upfront contract payments with timely and appropriate fundraising through financial activities.

Development of prescription pharmaceuticals requires substantial R&D investment and long periods of time, and it is not uncommon for development to be delayed or discontinued due to failure to confirm useful efficacy in clinical trials, among other reasons. As a result of strict approval reviews under domestic and overseas pharmaceutical regulations, there is a possibility of delays in launch timing or abandonment of launch, and similar risks exist for pipelines that have already been licensed out, which could have a material impact on business results and financial condition. As a countermeasure, the Company strives to construct a portfolio of multiple development pipelines and to expand and diversify its pipeline through alliances and joint development with other pharmaceutical companies, biotech ventures, universities, and others.

The Group's net sales are heavily dependent on upfront contract payments received upon licensing out and milestone income associated with development progress, and the timing of their occurrence is unstable and difficult to predict, depending on licensing negotiations and development progress. Sales from already-launched products are minimal, and if licensing negotiations or development are delayed, or if expected results are not achieved in clinical trials, this could have a material impact on business results and financial condition. This revenue volatility trend is expected to continue until pipelines currently under development are launched and become a stable revenue base.

As an R&D-focused company, the Group requires substantial R&D funding, and operating cash flow has continued to be negative, without sufficiently stable revenue sources. While funds for the near term have been secured through the exercise of the 32nd stock acquisition rights issued via third-party allotment in April 2025, there is a possibility that if funds cannot be secured at the necessary timing in the future, material concerns regarding business continuity may arise. The Company plans to continue flexibly raising funds, primarily through capital increases, but there is no guarantee of certainty regarding such fundraising.

The Company is subject to strict regulation under pharmaceutical-related laws and regulations such as the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices, and operates its business under licenses such as the Type II Pharmaceutical Manufacturing and Marketing License (valid until February 8, 2029). If licenses are revoked due to legal violations or other reasons, this could result in product recalls, suspension of sales, or inability to continue the relevant business, which could have a material impact on business activities. Additionally, significant future changes in various pharmaceutical regulations in different countries could pose similar risks.

Pharmaceuticals may exhibit unexpected side effects from the clinical trial stage through the post-launch period, and although the Company has insurance to address various liability obligations including product liability, there is no guarantee that insurance payouts will cover the full amount of any final damages awarded. Even if a product liability claim is not upheld, the mere fact that such a claim was made could create a negative image, adversely affecting trust in the Group and its products. If such events occur, in addition to a material impact on financial condition and business results, there is concern about serious effects on business development through loss of social trust.

The Group is a small organization with 9 directors and 21 employees (as of the end of December 2025), and business activities are highly dependent on the current management team, department heads, and a small number of R&D personnel. If securing and developing personnel does not proceed smoothly, or if personnel turnover occurs, this could disrupt business activities and have a material impact on business results and financial condition. Additionally, since the Group relies on outsourcing and business alliances for R&D, manufacturing, and sales, if such outsourcing or alliance relationships are terminated for any reason, this could also disrupt business activities.

There is no guarantee that all patents currently pending will be granted, and even after patents are granted, there is a constant possibility that the Company's technology could be superseded by superior R&D that surpasses it. If superior technology is developed that falls outside the scope of the Company's patent rights, this could have a material impact on business results and financial condition. Although no intellectual property infringement lawsuits with third parties have occurred to date, it is difficult for an R&D-focused company to completely avoid intellectual property infringement issues, and the impact could be significant if a dispute were to arise. As a countermeasure, the Company employs intellectual property specialists and conducts ongoing monthly monitoring at board of directors meetings.

The Company continuously issues stock acquisition rights for fundraising purposes, and as of December 31, 2025, against a total of 59,365,100 issued shares, there exist potential shares of an additional 333,000 shares from the exercise of existing stock acquisition rights and 96,800 units (equivalent to 9,680,000 shares) of paid stock options. As the business expands in the future, the Company may flexibly conduct fundraising centered on capital increases, and the increase in the number of issued shares could dilute the value per share. Additionally, the Company plans to continue its stock option program to secure talented personnel, and dilution may also occur through the exercise of stock acquisition rights granted in the future.

In the United States, the Company's most important target market, downward price pressure on originator pharmaceuticals through the MFN (Most Favored Nation) policy and the promotion of generic drug use are advancing, while in Japan, healthcare cost containment policies such as periodic drug price reductions continue. In addition, the pharmaceutical industry is in a state of intense competition among numerous domestic and international companies and research institutions, including major global corporations, and there is no guarantee that the Company can continuously maintain competitive advantage amid rapid technological innovation. These changes in the market environment could have a material impact on the Group's business results and financial condition, and as a countermeasure, the Company strives to incorporate the latest technology and secure competitive advantage through alliances and joint development with other companies and research institutions.