BML, INC.

The Clinical Laboratory Testing Services business is subject to regulation under the Act on Clinical Laboratory Technicians, etc., which governs the establishment, facilities, and management organization of sanitary testing laboratories. Future legal amendments or tightening of regulations could lead to restrictions on operations or increased costs. The Group closely monitors developments in relevant laws and regulations and maintains a system capable of responding when amendments occur.

Most items in clinical laboratory testing have insurance fee points set as the basis for medical treatment fees, and it is customary for the Ministry of Health, Labour and Welfare to revise these every two years. If the medical fee schedule is changed as part of measures to curb national medical expenditures, this could directly affect outsourcing prices and worsen business and financial results. The Group continuously monitors the impact on outsourcing prices, but faces a structural risk in which profitability could be significantly affected depending on the content of revisions.

Precision control is extremely important in the Clinical Laboratory Testing Services business, and the Group has established a rigorous precision control system through operation of survey programs as a US CAP-accredited facility and acquisition of ISO15189 certification. However, if testing accuracy is compromised due to unforeseen circumstances, this could result in claims for damages, potentially affecting business and financial results. Although a highly sophisticated quality control system is maintained, complete elimination of this risk remains difficult.

The Group is making investments toward establishing a medical IT infrastructure business, including the development and sale of electronic medical records. If the Group's strategy fails to respond to changes in the environment surrounding electronic medical records and the investments do not yield the expected returns, this could affect business and financial results. The competitive environment in the medical IT market and the pace of technological innovation increase the uncertainty of investment recovery.

The Group holds large volumes of patient personal information and testing data, and has established a security system through ISO27001 and Privacy Mark certification. However, if personal information is leaked or data is tampered with or lost due to cyberattacks, this could lead to loss of corporate credibility, social sanctions, and suspension of test outsourcing and reporting operations, potentially having a material impact on business and financial results. Because the Group handles highly sensitive medical data, the impact of an information security incident could be particularly severe.

There is a risk that laboratories may become unable to conduct testing due to natural disasters such as earthquakes, storms and floods, tsunamis, or heavy snow. The Company is strengthening flood and earthquake countermeasures at its core laboratory, the General Research Institute (Soken) in Kawagoe City, Saitama Prefecture, and is building a system in which each main laboratory works together with Soken to continue testing at Soken even during disasters. However, until this system is fully established, there remains a risk that business continuity could become difficult in the event of a large-scale disaster.

If suppliers raise prices for testing equipment, reagents, containers, and other procurement items, the Group may be unable to sufficiently pass these increases on to outsourcing prices, potentially reducing profitability. In particular, rising crude oil prices driven by heightened geopolitical risk in the Middle East are increasing procurement costs for resin products and various materials, as well as transportation costs for specimen collection and delivery due to higher gasoline prices. Although the Group is implementing measures such as streamlining collection routes, if the situation in the Middle East becomes prolonged or worsens and cost increases exceed expectations, this could affect business and financial results.