TAKARA BIO INC.

The biotechnology industry is strongly affected by technological innovation and new entrants, so there is no guarantee that research and development activities will proceed as planned, and the gene therapy field in particular requires a long period of time. If development is delayed or the expected effects are not achieved, the Group may not be able to secure the planned revenue. The Group aims to maintain its competitive advantage by continuing extensive research and development activities.

The majority of reagents, the Group's core products, are manufactured at its Chinese subsidiary (Takara Bio (Dalian) Engineering Co., Ltd.). Changes in that company's earnings trends, changes in tariff policies in various countries, or a suspension of business activities could have a material impact on the Group's business strategy and business performance. Significant changes in economic conditions or political systems in North America, Europe, China, and elsewhere, as well as international tax issues such as transfer pricing taxation, are additional risk factors. As a countermeasure, the Group is developing a globally multipolar manufacturing and R&D structure that balances improved efficiency with risk reduction.

Unlike pharmaceuticals and medical devices, research reagents, instruments, and contract services do not require permits or approvals, resulting in low entry barriers and the presence of numerous competitors both domestically and internationally. In the gene therapy field as well, many biotech ventures and pharmaceutical companies in Europe and the United States have entered the market, and if other companies gain a lead with similar products or technologies, this could affect product development and business performance. The Group addresses this through exclusivity and differentiation via intellectual property rights, and by maintaining price competitiveness through cost reduction and strengthening its manufacturing structure.

In the biotechnology industry, securing excellent personnel with specialized knowledge and skills is essential to maintaining competitiveness. If personnel cannot be secured as planned, or if such personnel leave the company, this could affect business strategy and business performance. As countermeasures, the Group is working on promoting diversity, enhancing educational programs, implementing a wage system that reflects performance, promoting work-life balance, and developing a safe and comfortable work environment.

The Group holds tangible fixed assets, goodwill arising from corporate acquisitions, technology assets, and other intangible fixed assets. If production facilities become idle or operating rates decline due to sudden changes in the business environment, or if an acquired business's performance falls below the initial plan, impairment losses may occur, affecting business performance. As countermeasures, the Group conducts follow-up on acquired businesses aimed at realizing synergies after acquisition, and performs regular monitoring of the macroeconomic environment.

Expenses and revenues arising from foreign currency-denominated transactions, as well as foreign currency-denominated receivables and payables, are exposed to foreign exchange fluctuation risk. Fluctuations in exchange rates may also affect business performance when translating the revenues, expenses, assets, and other items of overseas consolidated subsidiaries into yen. The Group conducts hedging transactions such as forward exchange contracts to mitigate foreign exchange fluctuation risk.

Research and development activities are subject to regulations such as the Act on Prevention of Radiation Hazards and the Cartagena Act, and the manufacture, sale, and trade of reagents require compliance with the Poisonous and Deleterious Substances Control Act, the Quarantine Act, and other laws. If regulations are tightened or new regulations are introduced in the future, or if licenses or approvals under the Pharmaceuticals and Medical Devices Act are not obtained for in-vitro diagnostic products or gene therapy drugs under development, this could affect business strategy. The Group maintains a policy of compliance with relevant laws and regulations while proceeding with efforts to obtain licenses and approvals.

As a research and development-oriented company, it is difficult to completely avoid the occurrence of patent infringement issues, and the Group may be subject to claims for damages, injunctions, or royalty payments. In addition, if business partners or licensors become involved in disputes, this could result in the suspension of sales of the relevant products or involvement in litigation, potentially requiring significant time and expense to resolve. The Group conducts appropriate investigations regarding intellectual property rights and addresses this risk by enhancing internal controls and strengthening compliance.

If confidential information or personal information held by the Group is leaked, this could affect business performance due to a decline in competitiveness and social trust, among other factors. If problems arise in research and development, manufacturing, information systems, or other areas due to cyberattacks, this could also affect business performance. In addition to implementing various protective measures, the Group seeks to mitigate damage through cyber insurance coverage.

There are transactions with Takara Holdings Inc. (which holds 60.93% of voting rights), including real estate leasing (transaction amount of ¥13 million in FY2025 (ended March 2025)), trademark licensing (¥6 million), and computer-related business outsourcing and equipment leasing (¥333 million). If continuation of these transactions becomes difficult, this could temporarily affect business performance due to costs of securing alternatives or business suspension. In addition, changes in Takara Holdings Inc.'s group company management policy could affect business strategy and business performance. The Company conducts its own independent business operations, and prior approval of board resolution matters is not required.