Business Risks

The main business and other risks of the MEDIPAL Group are as follows. Statements regarding the future in the text are the judgments of the MEDIPAL Group as of March 31, 2014.

About risks related to specific legal regulations, etc.

The MEDIPAL Group handles various types of pharmaceuticals and related products. Therefore, the Group conducts sales activities after receiving the necessary authorizations, registrations, designations and licenses from the local governments where business sites are located, pursuant to the Pharmaceutical Affairs Law and other laws.

About medical system reform

In Japan, fiscal reconstruction is an urgent issue, and medical system reforms are being implemented as part of this. Depending on their content, these reforms may affect the business results of the prescription pharmaceutical wholesale business.

About NHI drug price standards

Prescription pharmaceuticals, the products handled by the Prescription Pharmaceutical Wholesale business, are listed in the National Health Insurance (NHI) drug price standards, which stipulate the range of drugs that can be used in insured medical treatment and the billing prices of the drugs used. Therefore, the drug price standards act as a ceiling on selling prices. The prices set by the drug price standards are based on surveys of prevailing market prices and are generally revised every two years. Changes in these prices may affect the business results of the prescription pharmaceutical wholesale business.

About investment cost and unit selling prices

The MEDIPAL Group is expanding its competitive scale and scope. Increased investment costs associated with improvement and expansion of the distribution and information systems to handle this expansion or a larger than expected decrease in unit selling prices may affect business results.

About sales discontinuations, product recalls, etc.

Business results may be affected in the event of a situation such as the discontinuation of sales or recall of products due to factors such as unforeseen side effects or tampering with products sold.

About system trouble

The business operations of the MEDIPAL Group are heavily reliant on computer network systems. Discontinuation of functions due to a natural disaster, accident, intrusion of a computer virus or other occurrences, may result in significant obstacles to sales and product distribution.

About default risk

Business results would be affected in the event that a default occurs due to the bankruptcy or civil rehabilitation, etc. of customers, in regard to the credits associated with ongoing transactions that the MEDIPAL Group conducts with medical institutions.

About merchandise inventory risk

Business results may be affected in the event that merchandise inventory held by the MEDIPAL Group declines in value or becomes unsaleable due to the bankruptcy or civil rehabilitation, etc. of suppliers.

About risks to financial condition and business performance from tie-ups, etc.

The MEDIPAL Group goes through ample and careful deliberation in forming business tie-ups and other partnerships. However, the Group’s financial condition or business performance could be affected if the tie-ups or other partnership is unable to proceed as originally planned as a result of these measures.

About litigation risk

The MEDIPAL Group may be a party to litigation requesting payment of damages in the course of conducting business activities.

About accident and disaster risk

The MEDIPAL Group has established crisis management systems and backup systems to prepare for natural disasters such as earthquakes and typhoons, an outbreak of a new strain of influenza, or other such events. However, if the Group’s business operations are suspended in the event of a large-scale natural disaster, the Group’s business performance could be affected due to decreased sales resulting from lost sales opportunities or an increase in recovery costs or other expenses.

About environmental risk

The MEDIPAL Group conducts environment-conscious business operations while complying with related laws and regulations, and promotes re-use of resources, reduction of carbon dioxide and other such measures. However, further changes in the environment in the future or changes in environmental laws and regulations could affect the Group’s business performance due to increased costs of environmental measures or other factors.

About risk of information leaks

In storage of information assets held by the MEDIPAL Group, including customer information and confidential information, the Group works to maintain a management system to prevent information from leaking to parties outside the Group. However, if such an information leak occurs due to unforeseen circumstances, it could affect the Group’s business performance due to a decrease in public trust or an increase in expenses.

Various risks other than these exist, and the risks described here are not all of the risks of the MEDIPAL Group.