Business Risks

The following are risk factors that relate to our group’s business fields and could have a significant impact on investor judgment.

(1)Healthcare administration

With business operations closely related to the healthcare system, our group pays keen attention to information on healthcare system reforms by the Ministry of Health, Labour and Welfare and other information released by other administrative organizations.

Future changes of the environment surrounding healthcare and resulting overhauling of the nation’s healthcare system could have an adverse effect on our group’s business performance and fiscal status.

(2)Market prices

Medical institutions, which are the users of our group products, are facing an increasingly tough business environment due to a decline in official medical service remunerations and health insurance payouts under the government’s policy to reduce healthcare spending.

This has intensified price competition, and applied a downward pressure on our products’ market prices.

(3)Material procurement costs

Medical devices produced by our group use plastic, which is a petroleum product, as the main ingredient. Conditions in oil-producing nations could destabilize the cost of purchasing raw materials.

A sudden surge in material procurement cost could deal an adverse effect on our group’s business performance and fiscal status.

(4)Foreign exchange rates

Our group has overseas subsidiaries, which prepare their financial statements in their respective countries’ currencies.

The figures are converted into Japanese yen when we prepare consolidated financial statements. The fluctuations of exchange rate for applicable countries’ currencies could have an adverse effect on our group’s business performance and fiscal status.

(5)Offshore production

Our group produces medical devices at our overseas bases in Singapore, Indonesia, China, Philippines and South Korea.

Any unexpected changes in laws / regulations or political upheaval in these countries could deal an adverse impact on our group’s business performance and fiscal status.

(6)Quality

Medical devices and pharmaceutical products supplied by our group are produced or procured in line with the GMP standards defined by the Ministry of Health, Labor and Welfare as well as the international ISO standards to ensure quality.

However, if any product becomes unfit for use for unexpected situations, the need for a recall or other actions could cause a substantial loss.

Such a development could have an adverse effect on our group’s business performance and fiscal status.

(7)Serious legal risk

Our group’s line of business includes manufacturing and marketing.

Some of our business activities are associated with various legal risks, including infringing on other’s intellectual property rights, having our intellectual property rights infringed on, having product liability and being under the control of the Antimonopoly Act.

As part of legal risk management to avert and reduce these risks, our Compliance Committee is making an organizational effort. Yet, a lawsuit seeking a substantial amount of damages could deal an adverse effect on our group’s business performance and fiscal status.

(8)Miscellaneous

In addition to the abovementioned economic risks, country risks and legal risks, a major event such as an act of terrorism, war or extraordinary natural phenomenon could have an adverse effect on our group’s business performance and fiscal status.