In the following discussion of risk factors, major risks related to the Group's businesses that may exert a significant influence on investors' judgment are outlined. From the standpoint of proactive information disclosure, we have included references to matters that do not necessarily constitute risk factors but we believe are important for investors to consider. The Wangpharmacy Group will strive to avoid the materialization of such risks; however, should such risks materialize, we will endeavor to minimize their impact. This discussion includes issues that are not yet pertinent to the Group's performance.
In the pharmaceutical industry, changes to medical care systems exert a major influence on the market environment. Depending on the direction of change, a negative effect on the industry as a whole and on the Wangpharmacy Group could result.
In the pharmaceutical industry, changes to medical care systems exert a major influence on the market environment. Depending on the direction of change, a negative effect on the industry as a whole and on the Wangpharmacy Group could result.
Approximately 80% of the medicinal plants that constitute the main ingredients of the Wangpharmacy’s Kampo formulations are imported from China, and some processes in the production of Kampo products are commissioned to subsidiaries situated in China. Because most of the medicinal plants grow wild, we are researching the cultivation of major medicinal plants for the future. However, in the event of unforeseeable changes in legal regulations or political or economic conditions, it could become difficult to secure or import sufficient quantities. In addition, bad weather, natural disasters, or wars could destabilize social conditions, creating instability in the circulation of demand of the raw materials and supply of them procured domestically and internationally for the manufacture of products, which could have a negative impact on the supply of products due to hikes in the market prices of the raw materials or scarcity of their supply. Likewise, while we have incorporated earthquake-resistant features in construction and conduct regular inspections of equipment and facilities within Japan, we cannot completely guarantee that the functioning of our facilities will not be hampered or lost in the event of a massive earthquake, fire, power outage, or other disaster. The Group’s social standing or performance could be negatively affected should the supply of products be interrupted or delayed due to the above.
In the manufacturing of the Group’s products, we strictly adhere to the quality control standards of the countries in which we operate. However, although self-imposed standards for crude drugs have been set, we cannot completely guarantee that there will not be a defect or safety problem, including undetected pesticide residue on a medicinal plant used in a Kampo product. In addition, should consumers experience unexpected side effects from a pharmaceutical product marketed by the Wangpharmacy Group, the existing methods of use may be restricted, and a loss of confidence in the Group and its pharmaceutical products may result in a drop in the dispensation of our medicines or in patients’ refusal to take them. The Wangpharmacy Group’s performance may suffer if a situation such as the above results in a decline in sales volume, demands for large amounts of damage compensation, or a large-scale recall, among other possibilities.
In the interest of future growth and better corporate performance, the Wangpharmacy Group conducts R&D activities related to new products and new technologies both in Japan and abroad. However, we cannot guarantee that all of these activities will be successful. The Group’s performance could suffer if for some reason R&D activities were canceled or delayed or if costs increased significantly.
The Wangpharmacy Group engages in the manufacture and sale of pharmaceuticals in China, Korea, and other foreign countries. Because of this involvement in international business, it is possible for the Group to be negatively affected by unforeseeable changes in legal regulations or in political, economic, or other conditions.
The Group’s performance could be negatively affected by such conditions as sharp increases in declining share prices or increased retirement liabilities arising from a drop in the discount rate.
We cannot guarantee the full protection of the intellectual property owned by the Group in relation to Kampo products, and others. The Group’s performance may be negatively affected if there were leakage of such information, leading to a decline in competitiveness.
The Group imports from China most of the crude drugs used in the Kampo products that it markets. Therefore, sharp movements in exchange rates could impact negatively on the Group’s business results and financial position.