SanBio Company Limited

The development of prescription pharmaceuticals requires substantial R&D investment and long development periods, and there is a risk that development may be extended or discontinued if efficacy and safety cannot be confirmed in clinical trials. Obtaining regulatory approval in each country, including Japan and the United States, is essential, and there is a possibility that products may not be launched on schedule or that launch may be abandoned. Discontinuation of development by a licensee could similarly have a material impact on the Group's business results and financial condition.

While the Group's core technology—allogeneic cell therapy products—is highly novel, there are risks of being overtaken by rapid technological innovation, risks related to manufacturing and stable supply, and risks of unexpected adverse events. In addition, because human cells/tissues and animal-derived raw materials are used, safety risks such as infection by unknown viruses cannot be completely eliminated. If these risks materialize, they could have a material impact on business strategy and business results.

Laws and regulations related to cell therapy products may be revised or reviewed at any time in response to technological innovation, creating risks such as bans on the use of raw materials and delays in or changes to the content of regulatory approvals. Both the United States and Japan are advancing healthcare cost containment measures, and there is a possibility that drug prices and reimbursement prices may be set lower than the product value anticipated by the Company. If legal violations or regulatory non-compliance occur, this could lead to administrative sanctions, business suspension, or loss of credibility.

The Group obtained conditional and time-limited manufacturing and marketing approval for Akuugo® from the Ministry of Health, Labour and Welfare in July 2024, and shipment restrictions were lifted in December 2025; however, the Group must conduct post-marketing clinical trials and other studies to obtain full approval within the seven-year approval period. If unexpected circumstances arise during the regulatory review process, obtaining full approval may not proceed as planned. This could have a material impact on the Group's business results and future business development.

The Group's revenue is highly dependent on upfront payments and development milestone income received upon licensing out, and the timing and amount of such recognition are unstable, being dependent on development progress. There is a possibility that expected revenue may not be recognized due to circumstances beyond the Company's control, such as changes in the management policy of licensee companies or deterioration of their business environment. This tendency is expected to continue prior to product launch, and net income (loss) for the period is expected to remain volatile.

As a research and development-oriented company, the Group requires substantial R&D funding, and operating cash flow has continued to be negative. If the Group breaches financial covenants under term loan agreements or similar arrangements, it may lose the benefit of the term and this could affect its financial condition. If the Group is unable to raise funds when needed, material concerns about business continuity may arise, and the Group is not in a financial position to pay dividends for FY2026 (ending January 2026).

The Group's policy is to flexibly raise funds, primarily through capital increases, to secure R&D funding, and up to 2,113 thousand new shares may be issued upon conversion of the No. 1 Unsecured Convertible Bond-type Bonds with Stock Acquisition Rights issued during the current consolidated fiscal year. In addition, dilution of share value may also occur through the exercise of stock acquisition rights under the stock option plan (equivalent to 267 thousand shares as of the end of January 2026). Similar incentive plans are expected to continue going forward, and the risk of dilution will remain ongoing.

As of the end of January 2026, the Group is a small organization consisting of three directors, three auditors, and 33 employees, and its business activities are heavily dependent on a small number of management personnel and R&D staff, including Chairman and Representative Director Toru Kawanishi and President and Representative Director Keita Mori. If the Group is unable to smoothly secure and develop talented personnel, or if key personnel leave, this could disrupt business activities and have a material impact on business results and financial condition. Expanding the internal management structure in line with business growth remains a challenge.

The Group outsources the conduct of non-clinical and clinical trials, as well as the manufacturing of cell therapy products, to external contractors such as CROs and CMOs, relying on outside parties for important operations beyond its core competencies. If changes in the business environment of external contractors or other circumstances result in the Group being unable to obtain the desired support, this could have a material impact on business results and financial condition. The Group addresses this through contracts and close communication to build cooperative relationships, but the risk cannot be completely eliminated.

There is no guarantee that all patents for which the Group has applied will be granted, and even after patents are granted, there is an ongoing risk that the Company's technology could be superseded by R&D that surpasses it. While no lawsuits alleging infringement of intellectual property rights by third parties have occurred to date, it is difficult for a research and development-oriented company to completely avoid infringement issues, and if disputes arise, they could have a material impact on business results and financial condition. The Group seeks to mitigate this risk by conducting patent searches as it deems necessary.