TOHO HOLDINGS CO.,LTD.

The Group operates its business under the necessary permits and licenses based on regulations such as the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices, and the Health Insurance Act. Deviations from regulations or amendments to laws and regulations may affect business performance. As countermeasures, the Group has established a code of ethics, set up a Compliance Promotion Department, enhanced its internal whistleblowing system, and made specialized training mandatory.

Prescription drugs, the Group's main products, are listed under the drug price standard, and in addition to the biennial full revision, an interim-year revision has also been introduced since April 2021. Depending on the content of revisions, this may affect sales, delivery prices, wholesale prices, rebates, and sales incentives, potentially impacting profits as well. As countermeasures, the Group is working to secure appropriate profits by expanding its handling of specialty products and complying with distribution improvement guidelines.

In the pharmaceutical wholesale industry, a distinctive transaction practice exists whereby products are delivered to medical institutions and dispensing pharmacies before prices are finalized, with price negotiations conducted afterward. Protracted negotiations or price determinations that differ from initial expectations may affect business performance. The Group sets prices on an item-by-item basis and operates a price-lock system granting approval authority solely to headquarters, striving to sell at appropriate prices.

In the Dispensing Pharmacy Business, the occurrence of a dispensing error carries the risk of causing bodily harm, incurring substantial damages claims, and damaging social credibility. In addition, failure to secure the required number of pharmacists under staffing regulations set by Ministry of Health, Labour and Welfare ordinances may also affect business performance. As countermeasures, the Group has introduced devices to prevent dispensing errors, taken out dispensing accident insurance, established a real-time staffing management system, and implemented new graduate recruitment plans.

In the manufacturing and sale of Generic Drugs and the Contract Manufacturing of Injectable Drugs (CDMO), the occurrence of unexpected side effects or quality and safety issues may result in product recalls, suspension of sales, or suspension of manufacturing, potentially affecting business performance. Subsidiary Kyoso Mirai Pharma Co., Ltd. carries out manufacturing control and quality control in accordance with GMP, GQP, GVP, and GCTP ministerial ordinances, and works to minimize the impact of disasters or disease outbreaks through the formulation of a BCP.

A decline in the profitability of owned fixed assets or a significant drop in market value may necessitate recognition of impairment losses. Similarly, for investment securities without a market price, if net assets per share fall below 50% of the acquisition cost with no prospect of recovery, recognition of a valuation loss may be required. The Group seeks to reduce this risk through profitability assessment at the time of capital investment, deliberation by the Investment Committee, and regular monitoring after investment.

If deterioration in the financial condition or bankruptcy of business partners or customers results in uncollectible amounts exceeding the estimated allowance for doubtful accounts, this may affect business performance. The Group strives to strengthen its credit management system and thoroughly secure receivables through periodic credit risk reviews combining credit information with qualitative information from sales personnel.

As business operations rely on computer systems and networks, large-scale system trouble or system failures caused by unauthorized external access may affect business performance. The Group addresses this through full duplication of core and peripheral systems, outsourcing of monitoring to specialized external vendors, and regular vulnerability assessments.

If a large-scale disaster or pandemic causes the closure of offices, distribution centers, or stores, this may lead to reduced sales and recovery costs, affecting business performance. There is also a risk of a decrease in the number of prescriptions due to reduced hospital visits during infectious disease outbreaks. The Group addresses this through the establishment of the Kyoso Mirai Group Disaster Countermeasures Committee, automation of distribution centers, installation of private power generators, formulation of a BCP, and regular drills.

The Group handles a large amount of sensitive information, including personal information of healthcare professionals and patients, as well as management information. Deficiencies in handling or information leakage caused by cyberattacks or other means may result in a significant loss of social trust and liability for damages. The Group addresses this through the establishment of basic information security regulations, the setting up of an Information Security Committee, compliance with the Act on the Protection of Personal Information, and the establishment of a management system based on its personal information handling regulations.