Cyfuse Biomedical K.K.

In the regenerative and cell therapy field, technological innovation is progressing rapidly, and there is a possibility that the Company's core technology, Bio 3D printing technology (three-dimensional cell stacking technology), may become obsolete in the future. In addition, there is a possibility that safety issues such as side effects that cannot currently be anticipated may become apparent, as well as a risk of difficulty in product supply due to instability in the procurement of raw materials caused by global circumstances. The Company is focusing on the continuous development of advanced technologies to secure technological superiority, in collaboration with partner companies, universities, and public research institutions.

The development of regenerative medicine products, etc. requires a long period of time before commercialization, and development may be delayed due to difficulty in securing the necessary number of cases for clinical trials, circumstances on the part of medical institutions, or requests for additional data from regulatory authorities. Prolongation of the development period could lead to pressure on business performance due to the accumulation of R&D expenses and the need for additional fundraising. The Company carefully formulates its clinical trial plans through prior consultations with the PMDA, and seeks to diversify risk by developing multiple pipelines in parallel.

The social implementation of regenerative medicine products, etc. requires the integration of a wide variety of highly specialized technologies, and unexpected technical issues in establishing manufacturing methods, or difficulty in building and maintaining manufacturing systems, may arise. On the sales side, there is also a risk that the establishment of sales and distribution systems may not proceed as planned due to changes in laws and regulations, changes in the market environment, or delays in reaching agreements with partner companies. The Company is promoting mechanization and automation toward the development of mass cell culture technology and the establishment of commercial production technology in collaboration with partner companies.

The regenerative medicine field is a market that is currently in the process of being formed, and in order to develop as a sustainable industry, it is necessary to develop the market environment through the unified efforts of government agencies, companies, and the industry as a whole, requiring a long period of time and substantial funds to be invested in reducing manufacturing costs, marketing activities, and establishing post-marketing surveillance systems. If infrastructure development and supply chain establishment do not proceed as planned, this could have a material impact on business strategy, financial condition, and business performance. The Company is working to build a supply chain that organically links development, manufacturing, and sales with multiple partner companies.

Laws, regulations and guidelines regarding regenerative medicine products, etc. are subject to continuous review, and there is a possibility that stricter quality control standards may be required, restrictions on the use of raw materials may be imposed, or pharmaceutical approval may not be obtained as anticipated. In addition, amid the global trend toward containing healthcare costs, there is a possibility that insurance reimbursement prices may fall below the Company's expectations, suppressing profitability. The Company is a member of industry associations such as the Forum for Innovative Regenerative Medicine (FIRM) and is working to establish a system that allows it to promptly grasp and respond to regulatory trends.

Although relatively few companies are currently making a full-fledged entry into the regenerative medicine field, the number of companies considering entry may increase in the future, and if a competitor develops and launches a new technology that surpasses the Company's intellectual property rights, there is a risk that this could lead to the dissolution of joint research and development or alliances, or a decrease in future royalty income and other profits. The Company has formed an entry barrier through a combination of foundational patents for which it holds exclusive rights and manufacturing know-how that is difficult to imitate, but the emergence of competing products cannot be completely ruled out.

The Company tends to continue to record operating losses and negative operating cash flow during the upfront investment period, and it is expected that funding needs for working capital, R&D investment, capital expenditures, etc. will increase as business progresses. If there is turmoil in financial markets, deterioration in business performance, or a significant change in business plans, fundraising through equity finance or public subsidies, etc., may not proceed as anticipated. In addition, when equity finance such as capital increases is implemented, there is a possibility that the value per share may be diluted due to an increase in the number of shares issued.

The Company is in a business phase centered on R&D activities, and has recorded a negative retained earnings balance (accumulated deficit) on its balance sheet. If development does not proceed as planned, the timing of recording net income may be delayed, and the timing at which dividends to shareholders become possible may be pushed back later than anticipated. In addition, if future profitability is achieved and the Company is no longer able to receive taxable income deductions due to the accumulated deficit, corporate income tax, etc. will be recorded based on the normal tax rate, which could affect cash flow. For the time being, the Company's policy is to prioritize strengthening internal reserves and securing R&D funds.

There is a possibility that patents currently pending application may ultimately not be registered, or that third parties may independently develop or acquire similar or comparable know-how, resulting in a risk that the Company's technological superiority may relatively decline. The Company employs an intellectual property strategy that combines exclusive rights through patents with confidentiality through know-how, and strives to expand its portfolio through the continuous filing of new and peripheral patents, but the possibility that similar products may emerge after the expiration of key patents cannot be completely ruled out.

The Company maintains a lean organizational structure, and business activities are, to some extent, dependent on the management team and key personnel in each department who possess a high degree of specialized expertise. If personnel acquisition and development do not proceed as planned, or if key officers or employees leave the Company, this could affect business development and business performance. The Company continuously strives to secure and develop personnel with advanced expertise and extensive experience in order to succeed and further develop its proprietary technology.