WDB coco CO., LTD.

In FY2026 (ending March 2026), the Safety Information Management Service accounted for 66.6% of net sales, indicating an extremely high degree of dependence on a specific service. If differentiation from competitors does not proceed as expected or competition intensifies, this could have a material impact on the Company's financial position and operating results. The Company is working to reduce this dependence by expanding Document Support Service and Post-Marketing Surveillance Support Service.

The combined sales of the top three customers (Chugai Pharmaceutical, GlaxoSmithKline, and Eli Lilly Japan) accounted for 42.7% of total sales (¥2,057,058 thousand), indicating a high degree of dependence on specific customers. If these pharmaceutical companies undergo mergers, integrations, or changes in management policy, the risk of reduced or lost business with the Company could materialize. Although the Company has adopted a policy of diversifying its customer base, the current concentration risk remains high.

If mergers and integrations among pharmaceutical companies progress, there is a risk that CRO providers will be selected more selectively, leading to reduced or terminated business with the Company. In addition, changes in the management policies of pharmaceutical companies may alter their criteria for selecting CRO providers. The Company is highly dependent on the business environment of the pharmaceutical industry, and overall industry trends directly affect the Company's financial position and operating results.

The CRO business is subject to regulation under the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices, the Clinical Research Act, GCP, GPSP, GVP, and other pharmaceutical-related laws and regulations. Tightening of regulations or changes in administrative policy may require changes to the organizational structure of existing outsourced operations. Delayed response to such changes could result in the risk of discontinuation of outsourcing contracts or the need for unplanned additional funds for personnel recruitment and capital investment. While the Company formulates its business plans based on current laws and regulations, ongoing responses to changes in the regulatory environment are required.

Continued business expansion requires securing, developing, and retaining excellent personnel. If the Company is unable to secure or develop the desired personnel in a timely manner, or if personnel turnover increases, this could hinder stable business operations and business expansion. There is also a risk that recruitment costs may deviate from the plan, which could affect the Company's financial position and operating results. Competition in the labor market for highly specialized personnel supporting pharmaceutical development is intense, requiring continuous investment in recruitment and training.

In the course of operations outsourced by pharmaceutical companies, the Company handles highly confidential safety information and other sensitive data. If an information leak were to occur, this could lead to claims for damages from the outsourcing pharmaceutical companies and a decline in the Company's business reputation. Although the Company has established information management regulations and conducts internal training for all employees, the risk that the management system may not function effectively cannot be eliminated. Since a loss of trust directly leads to customer attrition, the impact on business continuity is significant.

The parent company, WDB Holdings Co., Ltd., holds 67.7% of voting rights (as of March 31, 2026), placing it in a position to influence the Company's management decisions through the appointment and dismissal of directors, among other means. The parent company's interests may not align with those of the Company's other shareholders, and changes in the parent company's management policy or deterioration in its financial condition could affect the Company's financial position and operating results. While the Company has established a Related Party Transaction Review Committee to ensure independence, the risk associated with a controlling shareholder is structurally inherent.

As the CRO business operates in a growth market with relatively low barriers to entry, competition may intensify due to new entrants, and oligopolization may progress through M&A and capital alliances. Competitors' sales strategies, pricing, and service offerings affect the market, and if the Company is unable to achieve effective differentiation, its planned business development may become difficult. While the Company intends to continue providing services tailored to customer needs, responding to changes in the competitive environment remains a challenge.

While the order backlog and renewal sales are trending upward, if contract non-renewals increase due to a decline in the market competitiveness of the Company's services or changes in the outsourcing selection policies of the global headquarters of major pharmaceutical companies, the order backlog and renewal sales could decrease, affecting the Company's financial position and operating results. Given the high concentration of sales in the Safety Information Management Service, the expiration of major contracts would have a particularly significant impact on performance. The Company is working to improve customer retention by enhancing convenience through platform implementation.

Haruhiko Taniguchi, the President and Representative Director, plays an important role across the Company's overall business activities, including determining management policy and business strategy. If it becomes difficult for him to carry out his duties, this could affect the Company's financial position and operating results. While the Company is working to reduce excessive dependence through strengthening its management structure and developing personnel, the current degree of dependence remains high. Developing a management structure, including successor training, remains an ongoing challenge.