SUZUKEN CO.,LTD.

The pharmaceutical wholesale business is required under the Pharmaceuticals and Medical Devices Act and related laws to obtain permits, registrations, designations, and licenses from prefectural governors for each sales office nationwide, and the status of these permits poses a risk of affecting business performance. In response, the pharmaceutical affairs departments at each company confirm requirements and handle application procedures when opening new outlets, and continue to provide ongoing education and guidance to employees after opening.

The National Health Insurance drug price standard is revised annually, with prices lowered for most items, and this decline in selling prices directly affects the performance of the pharmaceutical wholesale business. In addition, depending on the content of the government's all-generation social security system reforms, there is a risk of further deterioration in performance. In response, the Group is negotiating shifts to fixed rebates, focusing on high-profit items, and working to curb reductions in allowances through proposals to manufacturers utilizing the "Collabo Portal."

Rebates and sales incentives paid by pharmaceutical manufacturers have the effect of lowering purchase prices and are directly linked to gross profit, but there is a risk that these will be reduced due to changes in manufacturers' sales strategies. In response, the Group is working to build appropriate price structures based on distribution improvement guidelines and to establish new revenue models through the development of new distribution channels and solutions.

Pharmaceutical manufacturers are considering narrowing the number of wholesalers they deal with for purposes such as protecting drug prices, reducing distribution costs, and handling specialty products, and there is a risk that, if excluded from selection, the range of handled items and sales will decline significantly. In response, the Group aims to become a "wholesaler of choice" by improving distribution quality such as temperature management and traceability, strengthening control over product pricing, and advancing supply chain sophistication.

The Group holds a diverse range of fixed assets for business use, and if profitability declines or market value falls significantly such that future cash flows cannot be generated, impairment losses may need to be recognized, posing a risk to performance. In response, the Group evaluates profitability at the time of investment and conducts periodic monitoring after investment, maintaining a system to formulate and implement performance improvement strategies or consider withdrawal if profitability is expected to deteriorate.

If the business environment of customers deteriorates due to foreign exchange fluctuations or price increases caused by soaring electricity, energy, and raw material prices, there is a risk that actual bad debt amounts will exceed initial estimates, affecting business performance and financial condition. In response, the Group has placed credit and receivables management departments at each sales office, utilizes alert functions in coordination with head office management departments, and works to identify and reduce receivables risk early through continuous monitoring in cooperation with group company management departments.

In the pharmaceutical manufacturing business, research and development of new drug candidates requires substantial costs and long periods of time, and there is a possibility that R&D will be abandoned or delayed due to unproven efficacy or unexpected side effects, with various uncertainties also existing after launch. In response, the Group manages its portfolio through alliance activities such as in-licensing and out-licensing of development pipelines and collaboration with other companies, in addition to its own drug discovery.

In the pharmaceutical manufacturing business, if quality concerns arise regarding raw materials or manufacturing processes, or if unexpected side effects or health hazards occur, product recalls, sales suspensions, and regulatory reporting may become necessary, posing a risk to business performance. In response, the Group has strengthened its quality assurance system through internal audits of raw materials and manufacturing processes, and has established a system for prompt evaluation, regulatory reporting, and implementation of safety measures upon collection of side effect information.

The Group's business operations rely heavily on computer systems and networks, and if a large-scale system failure or leakage or misuse of personal information occurs, there is a risk of deteriorating business performance, loss of social trust, damages claims, and administrative sanctions. In response, the Group has established failure response procedures for core systems and operates backup systems, and implements a management framework based on personal information protection regulations, employee education, double-check systems, and measures to prevent unauthorized access.

If sales offices or logistics facilities suffer serious damage from a large-scale natural disaster or accident, stable supply of pharmaceuticals may become difficult, posing a risk to business performance. In response, the Group has established a disaster response headquarters based on BCP procedures, built seismic-isolated distribution centers, installed emergency power generators, operates backup systems, and conducts regular BCP response drills including group companies.