Chugai's corporate performance is subject to major impact from a range of possible future events. Below, we list what we consider the principal sources of risk to the development of our business. We recognize the possibility of these risk events actually occurring, and have prepared policies to forestall such risks and take appropriate measures when they do occur.
New Product Development
With the goal of becoming a top Japanese pharmaceutical manufacturer capable of continuously delivering innovative new drugs, Chugai aggressively pursues R&D in Japan and overseas. Our development pipeline is well stocked, especially in the fields of oncology, bone and joint diseases, and renal diseases. However, bringing all of them smoothly through to the market from the R&D stages may not be possible, and we expect to have to abandon development in some cases.
When such a situation occurs, there is a possibility of major impact on our business performance and financial position, depending on the product under development.
Changes in Product Environments
In recent years, there have been rapid technological advancements in the pharmaceutical industry, and the Company faces fierce competition from pharmaceutical companies in Japan and overseas. The Company's business performance and financial status may be significantly affected by changes in product environments caused by the sale of competing products and genetic products and also by changes in contracts concluded by the Company for the marketing agreement or the licensing of technologies.
Medical products are approved in Japan by the Ministry of Health, Labour and Welfare after stringent screening. However, advances in science and technology and years of careful post-marketing monitoring of pharmaceutical product use mean that side effects are discovered in a good number of drugs. In cases where unexpected side effects occur after marketing, there is a risk of significant impact on our business performance and financial position.
Reform of Japan's Medical System
Japan's medical insurance system is being reformed against a backdrop of rapid demographic change, with a falling birthrate and increasing numbers of aged citizens. As part of this process, measures are being taken to curb medical expenses. Revisions have been made to the system of reimbursement of medical fees, and debate is continuing in such areas as drug price reform. The Company's business performance could be significantly affected by future developments in medical system reform, including drug price reform.
Intellectual Property (IP) Rights
The Company recognizes that it applies intellectual property rights in pursuing its business activities, and takes care to distinguish its own proprietary intellectual property rights and licensing arrangements recognized under law. However, the possibility remains of our infringing on third-party intellectual property rights without being aware of the fact. Major disputes related to intellectual property rights relating to our business could have major impact on our business performance.
Strategic Alliance with Roche
In line with its strategic alliance with Roche, we are the only pharmaceutical partner of Roche in the Japanese market and have introduced many products and projects from Roche. In the event that our strategic alliance with Roche is changed for some reason, such circumstances could have a major impact on the Company's operating results and financial position.
Foreign Exchange-Rate Fluctuations
The Company's business activities include export and import transactions as well as royalties and other operating income denominated in foreign currencies. The Company hedges against exchange risk and similar risk through forward foreign exchange contracts and other means, but it is impossible to completely eliminate such risk, and there is a possibility of non-negligible adverse effects on the Company's business results and financial position from such risk.