ASKA Pharmaceutical Holdings Co., Ltd.

Pharmaceutical research and development requires substantial costs and long periods of time, yet the probability of successfully creating new products or new technologies is low. If the efficacy of a product under development cannot be proven, or if safety issues are discovered, the Group may be forced to discontinue development. Depending on the scale of the product under development, this may have a material impact on the Group's business results and financial position.

Pharmaceutical products are approved and sold after undergoing rigorous safety testing and review, but adverse reactions that were not anticipated at the time of launch may be discovered after marketing. In such cases, the Group may be forced to discontinue sales or recall products, which may have a material impact on the Group's business results and financial position.

Prescription pharmaceuticals, which account for the majority of net sales, are subject to various regulations under pharmaceutical administration, and revisions to the drug pricing standards and trends in administrative policies related to the healthcare system and health insurance directly affect business performance. Depending on the content of system reforms, this may have a material impact on the Group's business results and financial position.

The Group has a highly concentrated customer structure, with its largest customer accounting for approximately 80% of net sales. While the Group intends to continue this transaction relationship going forward, should a significant change occur in this business relationship, it may have a material impact on the Group's business results and financial position.

The Group's business is protected by numerous patents, but if a third party infringes upon the Group's intellectual property rights, expected profits may be lost. In addition, if the Group's business activities infringe upon the intellectual property rights of a third party, this may lead to disputes or business discontinuation, which may have a material impact on the Group's business results and financial position.

If a technical or regulatory problem or a disaster causes a suspension of operations at manufacturing or logistics facilities, the supply of pharmaceutical products may be halted or significantly delayed. In addition, changes in the supply-demand conditions of petrochemical products (such as naphtha) or in the international situation may cause tight supply, sharp price increases, or supply chain disruptions for raw materials, which may hinder stable supply due to rising manufacturing costs or procurement delays. The Group is working on diversifying its procurement sources and optimizing inventory management, among other measures.

The Group collaborates with other companies in research, development, and manufacturing through joint research, product in-licensing/out-licensing, and contract manufacturing, among other arrangements. If contract terms are changed or terminated, or if a partner undergoes a business combination, organizational change, change in management policy, or change in shareholders, this may have a material impact on the Group's business results and financial position.

Failures in various information systems or computer viruses, among other factors, may disrupt business operations. In addition, if confidential information, including personal information, is leaked outside the company, this may affect the Group's business results and financial position through damages, administrative sanctions, or loss of social credibility. The Group is promoting cybersecurity measures such as the introduction of EDR, strengthening of networks, and acquisition of DX certification, but risk remains due to the increasing sophistication and cunning of attacks.

In collaborations with overseas subsidiaries and partner companies, including Hatapharm in Vietnam, the Group may be affected by local political instability, sudden changes in economic conditions, changes in legal regulations, and exchange rate fluctuations. In particular, if the business environment changes due to geopolitical risk or policy changes in various countries, this may affect production activities and the supply chain. The Group regularly collects and exchanges risk information with local subsidiaries and partner companies to respond to such risks.

If a large-scale disaster, accident, pandemic, or other event beyond expectations occurs and causes damage to the head office, factories, research laboratories, business offices, or other facilities, or leads to a slowdown or suspension of business activities, this may have a material impact on the Group's business results and financial position. The Group is promoting various measures, including establishing a disaster prevention management system and formulating business continuity plans (BCP), but risk remains with respect to unforeseen events.