Japan Lifeline Co., Ltd.

There is a risk that product sales prices will decline due to continuous reductions in insurance reimbursement prices by the government; the June 2024 revision resulted in a negative impact of approximately 2% year-on-year on consolidated net sales in FY2025 (ending March 2025). If the structural contraction of the domestic market due to the declining birthrate and aging population, or a fundamental review of the medical insurance system, occurs, it could bring about a significant change to the business model and business performance. The company is diversifying its revenue base by closely monitoring revision trends, promoting the introduction and development of highly innovative and unique products, and accelerating global market expansion.

There is a risk that the company's market share could decline due to competitors launching new products and the spread of new technologies such as PFA. Four core products (S-ICD, intracardiac defibrillation catheter, Frozen Elephant Trunk, and femoral vein hemostasis device) account for approximately 50% of net sales in FY2026 (ending March 2026), and any impact on these products would directly affect business performance. As countermeasures, the company is strengthening and expanding its product lineup and promoting the rapid introduction and development of highly innovative products.

If defects occur in the medical devices handled by the company, there is a risk of sales suspension, recall measures, or the development of damages litigation. Concerns exist regarding a decline in social credibility and a material impact on business results and financial condition. The company seeks to reduce this risk through compliance with Pharmaceuticals and Medical Devices Act-related regulations and quality control standards, and by establishing a strict quality control system.

Products and other items procured from the top five suppliers account for approximately 40% of consolidated net sales in FY2026 (ending March 2026). If supply is disrupted due to disasters or acquisition of suppliers by competitors, it would become difficult to continue selling the relevant products. In the past, sales contracts have been terminated multiple times due to supplier acquisitions, and the company recognizes that complete avoidance of this risk is difficult. It strives to reduce the risk through longer contract terms, the establishment of change-of-control clauses, and securing alternative suppliers.

If the Class I Marketing Authorization Holder license for medical devices (license number: 13B1X00007, valid until June 30, 2027) is revoked or expires, it would become impossible to continue selling medical devices. In addition, if obtaining regulatory approval for new products becomes difficult or is prolonged, the company would be forced to change its sales strategy, affecting business performance. The company seeks to reduce this risk by thoroughly maintaining a legal compliance system centered on its regulatory affairs and quality assurance departments, and through appropriate communication with regulatory authorities.

If illegal acts such as improper accounting, bribery, violations of the Antimonopoly Act, or insider trading occur, there is a risk of significant fines, criminal penalties, and loss of social credibility, which could have a material impact on business continuity. The company also recognizes that infringement of other companies' intellectual property rights, leading to suspension of product supply, or leakage of technical information could have a severe impact on management. It maintains deterrence through separation of duties, regular internal audits, operation of an internal whistleblowing system, and continuous education and training.

If natural disasters such as earthquakes, typhoons, or floods, or fires, cause severe damage to the facilities and equipment of the company group or its business partners, there is a risk that stable product supply will become difficult, leading to a stagnation of business activities. Prolonged supply chain recovery due to disruption of logistics infrastructure could also affect business results and financial condition. In addition to formulating disaster prevention manuals and BCPs and introducing safety confirmation systems, the company seeks to reduce risk by diversifying suppliers and procurement routes for key products and raw materials, and by maintaining appropriate inventory levels.

Occupational accidents due to overwork and the occurrence of harassment risk harming employees' physical and mental health, as well as leading to decreased productivity, damages claims, and loss of social credibility. The company thoroughly implements 100% participation rates for health checkups and stress checks among all employees and conducts mental health measures through industrial physicians. In addition, it takes measures for early detection and correction through regular harassment training and the operation of consultation desks.

Regarding investment securities and loans to business partners, primarily overseas startups, there are cases where valuation losses or allowances for doubtful accounts must be recorded due to deterioration in the partner's business condition or delays in business plans. Losses have been recorded multiple times in the past, and the company recognizes that complete avoidance of this risk is difficult given the strategic need to secure a future pipeline. It manages this risk through careful screening of new projects by the Investment Committee and regular monitoring of existing projects.

If large-scale system trouble occurs due to cyberattacks or system failures, or if personal information or confidential information is leaked due to unauthorized access, there is a risk of business activity stagnation, decline in social credibility, and litigation risk. A wide range of operations, including sales logistics, production management, and accounting, depend on IT systems, so the scope of impact is broad. The company is strengthening its countermeasures through the continued implementation of targeted phishing email drills, the introduction of the latest security systems, and obtaining the Privacy Mark certification (December 2021).