CREATE MEDIC CO.,LTD.

The Group operates under administrative regulations such as the Act on Pharmaceuticals and Medical Devices and the medical insurance system. Policy changes aimed at reducing healthcare costs and correcting regional disparities, driven by the declining birthrate and aging population as well as the promotion of digitalization, may affect product demand and pricing. In response, the Group continuously monitors trends in administrative agencies and the medical care system, primarily through departments related to pharmaceutical affairs legislation, and is strengthening its system for rapid response.

In Japan, revisions to the prices of specified insurance medical materials are implemented approximately every two years, and the expansion of joint purchasing is increasing pressure to lower selling prices. In the Chinese market, the expansion of nationwide centralized procurement systems, and in emerging markets, intensifying price competition, could result in a decline in product prices beyond expectations, which may have a material impact on the Group's financial position and business results. The Group is responding through cost reduction via investment in production automation and labor saving, control of selling, general and administrative expenses, and research and development aimed at launching high value-added products.

Because the Group handles medical devices requiring advanced technology, if a medical accident occurs due to an incidental malfunction during use, there is a risk of it developing into a product liability dispute or a voluntary product recall. Although the Group has entered into liability and product liability insurance, if claims are recognized that greatly exceed the insurance coverage, this may have a material impact on the Group's financial position and business results. The Group has established a quality control system through ISO13485 certification and has built a quality monitoring system spanning from the manufacturing stage through to after sales.

If the efficacy of new products cannot be achieved due to changes in treatment methods, or if market share is lost due to the emergence of innovative products from competitors, or if opportunity losses arise from prolonged development periods, this may have a material impact on the Group's financial position and business results. Amid the growing use of AI and digital technology, responding in the field of research and development is also becoming a challenge. The Group has established a new business development department to strengthen its development marketing system, and is working on progress monitoring and profitability evaluation for each development theme.

The Group procures raw materials and purchased goods for medical devices such as catheters from domestic and overseas suppliers, but supply chain disruptions due to geopolitical factors and rising raw material and logistics costs due to surging crude oil prices have occurred. If the supply chain is further affected, this may have a material impact on the Group's financial position and business results. The Group is working to secure stable supply and reduce costs by developing new procurement routes.

The Group manufactures products at domestic factories and production sites in China and Vietnam. If natural disasters, epidemics, legal changes, political instability, or other factors make it difficult to procure raw materials or secure manufacturing personnel, a reduction or suspension of production may occur. The Group is working to minimize the impact should such risks materialize by building a system in which a single production item can be manufactured at multiple sites, and by procuring from multiple suppliers.

The Group conducts some import and export transactions denominated in foreign currencies, including those involving overseas subsidiaries, and prepares consolidated financial statements by translating the financial statements of overseas subsidiaries into yen. Therefore, significant exchange rate fluctuations caused by instability in financial markets or geopolitical risks may have a material impact on revenue, costs, and financial position. The Group denominates some transactions with overseas subsidiaries in yen, and is also proceeding with consideration of appropriate risk hedging in preparation for sudden exchange rate fluctuations and building a system for rapid decision-making.

The Group has business sites in China and Vietnam where it conducts production and sales, and if international disputes, deterioration of economic conditions, changes in laws and regulations, epidemics, natural disasters, or other events occur, this may have a material impact on the Group's financial position and business results. In addition, if transfer pricing tax risks at overseas subsidiaries materialize, there is a risk that additional tax assessments may be imposed. The Group works to regularly confirm the political and economic conditions of the countries and regions in which it operates, and to reduce transfer pricing risk by utilizing advice from outside experts.

The Group holds important information and confidential information, including personal information obtained from customers, in the course of its business activities. If unauthorized access such as computer virus infection or cyberattacks occurs, this could result in business interruption due to system outages or loss of trust from customers and business partners due to leakage of confidential information, which may have a material impact on the Group's financial position and business results. The Group is strengthening information security and implementing countermeasures in anticipation of unforeseen circumstances, working to reduce risk while receiving advice from outside experts as necessary.

The Group engages in capital alliances and business alliances with the aim of enhancing corporate value and strengthening its business foundation, but if the initially expected results are not achieved due to unforeseen circumstances, this may have a material impact on the Group's financial position and business results. When entering into capital alliances and similar arrangements, the Group conducts thorough investigation and analysis of the target company to work to reduce risk.