MIZUHO MEDY CO.,LTD.

COVID-19 test kits accounted for ¥7,399 million (approximately 65.7%) of the ¥11,260 million in net sales for FY2025 (fiscal year ended December 2025), indicating an extremely high degree of dependence on specific products. There is a risk that demand could fluctuate significantly depending on the spread of infections and changes in the medical/testing system, and the sharp decline from ¥17,581 million in FY2022 (fiscal year ended December 2022) to ¥10,989 million in FY2023 (fiscal year ended December 2023) demonstrates this vulnerability. In recent years, there has been a shift toward CoV/Flu combination test kits (¥5,466 million in FY2025), but the composition of demand between single-target test kits and combination test kits could vary significantly depending on the timing and scale of outbreaks.

Although the company has established a quality control system based on the Pharmaceuticals and Medical Devices Act and related laws and regulations, in the event a serious quality issue were to occur, responses such as product recalls, investigations, and provision of information would be required, potentially leading to decreased net sales and increased costs. Given the nature of in-vitro diagnostic products, quality issues could also directly affect patients, entailing the risk of damage to the company's social credibility.

The company procures a diverse range of raw materials from both domestic and overseas sources, but there is a risk that long-term availability of raw materials could become difficult due to regulatory changes in Japan and abroad, quality issues at raw material manufacturers, or changes in international circumstances or political instability. As countermeasures, the company is strengthening cooperative relationships with suppliers, securing safety stock, and internally manufacturing some critical raw materials; however, if these measures prove insufficient, manufacturing and sale of products could become impossible, potentially having a material impact on business performance.

The company diversifies risk through multiple manufacturing sites in Tosu City, Saga Prefecture and Kurume City, Fukuoka Prefecture, but in the event of a major natural disaster (wind/flood damage, earthquake, fire, etc.) or technical or regulatory problems, product supply could be delayed or suspended due to operational stoppage or disruption. Similar events occurring at the manufacturing facilities or warehouses of suppliers could also be a factor in supply risk.

If the company is unable to secure and develop highly specialized personnel essential for creating new diagnostic technologies and conducting R&D in new fields as planned, R&D activities could be hindered, risking a decline in future product competitiveness. In the in-vitro diagnostics industry, competition to acquire personnel with originality and advanced development skills is intense, and a shortage of such personnel could constrain medium- to long-term business expansion.

The company's products are protected by patents, utility models, and other intellectual property rights, but if a third party infringes upon the company's intellectual property rights, expected earnings could be lost. Conversely, if the company's products unintentionally infringe upon the intellectual property rights of another company, the company could face claims for damages; either scenario could adversely affect business performance.

In-vitro diagnostic products can only be brought to market after undergoing strict review by the relevant regulatory authorities, so if development does not proceed as planned or if the expected performance is not achieved during clinical trials, there is a risk that the development period may need to be extended or discontinued. This could require substantial additional investment or eliminate the prospect of recovering previously invested R&D expenditures, potentially affecting business performance.

In the in-vitro diagnostics industry, the company is constantly in competition with other companies in terms of technology development and performance improvement, and if a competitor brings a new product or performance-improved product to market first, this could adversely affect the company's market share and business performance. The company is working on developing new products and improving performance in anticipation of market needs, but there is a risk that its competitive advantage could be lost due to intensifying technological competition.

In the hospital and clinic sector, medical system reforms and revisions to medical service fee schedules are driving consolidation toward tests more directly aligned with treatment, intensifying price competition; a delayed response could lead to decreased demand for key products and lower selling prices. In the OTC and other sectors as well, the market environment is changing due to reorganization within the pharmacy/drugstore industry and new market entrants, creating a risk of loss of existing market share.

The company holds key licenses such as its In-vitro Diagnostics Manufacturing and Marketing License (valid through March 30, 2030) and Medical Device Manufacturing and Marketing License (valid through April 26, 2026), but failure to comply with amendments or abolition of relevant laws and regulations or the establishment of new legal regulations could result in restrictions on business activities or a decline in social credibility. There is also a risk that increased costs to ensure compliance with laws and regulations could lead to a decline in profit margins.