Business Risks

Fuji Pharma has identified several major risks that could have a material impact on its financial position and business results and thus influence investors in their decisions regarding the Company. These risks are described below.
Management recognizes that the occurrence of such risks is a possibility and seeks to prevent events that are within the Company's ability to control through sound risk management practices. In addition, the Company does its very best to respond to risk events should they occur.

Statutory Regulations

Fuji Pharma is subject to stringent rules based on the Pharmaceutical Affairs Law and associated laws and regulations and must acquire the licenses and approvals noted below to engage in pharmaceutical-related business activities. The Company emphasizes compliance with associated laws and regulations and miscellaneous provisions pursuant to these licenses and approvals, and at the current time management has no knowledge of any facts that would warrant licenses or approvals now held to be revoked. However, if Fuji Pharma were to violate the law or for any other reason fail to conform to prevailing rules and subsequently have certain licenses or approvals revoked, the Company might be required to recall products that are affected by the loss of license or approval and halt production as well as sale of the affected products. This could have a significant impact on the business activities of the Company.
In addition, the Company is permitted under the Pharmaceutical Affairs Law and related regulations to manufacture and market pharmaceutical products. Future amendments to laws and regulations governing the pharmaceutical industry in Japan could impact the Company's financial position and its business results.

Status of Key Licenses and Approvals
Name of License Jurisdiction Expiry Reasons to Revoke Key
Licenses and Approvals
Remarks
Pharmaceutical manufacturing/ marketing business Toyama Prefecture August 2014
(Renewed every five years)
Licenses and approvals are revoked when corporate actions run contrary to the Pharmaceutical Affairs Law or other legislation related to pharmaceutical business or a company disobeys disciplinary action meted out according to such laws for regulatory violations, and also if the behavior of officers or other high-ranking members of management falls under items subject to disqualification.
(Pharmaceutical Affairs Law, Article 75-1
Toyama Plant
Type 1 pharmaceutical manufacturing/ marketing business licenses Toyama Prefecture August 2014
(Renewed every five years)
Same as above. Toyama Plant
Type 2 pharmaceutical manufacturing/ marketing business licenses Toyama Prefecture August 2014
(Renewed every five years)
Same as above. Toyama Plant
Pharmaceutical wholesale license Toyama Prefecture August 2014
(Renewed every six years)
Same as above. Toyama Sales Office
Tokyo April 2012
(Renewed every six years)
Distribution Center

Pharmaceutical Product R&D

It is possible that the development of pioneer drugs might be delayed, suspended or even abandoned, if R&D activities do not proceed as planned. Such setbacks could impact the Company's business results.

Industry Competition

It is a policy at Fuji Pharma to sell products at reasonable prices, while keeping profitability in mind. However, significant downward pressure on market prices due to competition from numerous rival manufacturers might force the Company to reduce prices on some of its products. Aggressive strategies by pioneer drug manufacturers in Japan to preserve market share might also squeeze the Company's sales. These situations could prevent the Company from achieving its performance targets.

Raw Material Procurement

Fuji Pharma procures raw materials from domestic and international sources. The Company's business results could be affected if skyrocketing raw material costs cause product costs to rise or if difficulties in obtaining the necessary raw materials over an extended period of time, due to such obstacles as domestic or international restrictions on raw materials or quality concerns originating from the makers of such raw materials, hinder the Company's ability to manufacture and market its products.

Side Effects and Product Quality

Among others, unexpected side effects after a product goes to market, the presence of impurities in products made by Fuji Pharma, or restrictions imposed by regulatory authorities, could force the Company to recall products or terminate manufacturing or marketing activities, and impact the Company's business results.

Delayed or Suspended Product Supply

Technical or regulatory problems and man-made or natural disasters such as a fire or earthquake could cause slowdowns or interruptions at facilities where the Company's products are made and warehoused, leading to a disruption in the supply of products. This could impact the Company's business results.

Reliance on Specific Product

Oypalomin, a urinary tract and angiographic agent, is a mainstay product for the Company. Sales of this product accounted for approximately 30% of net sales in the fiscal year ended September 30, 2010. The Company's business results might be affected if for some unexpected reason sales of this product were to stop, or if sales decreased significantly.

Revisions to Official Price List for Medicines in Japan

The National Health Insurance Drug Price List is a list of prices established by the Ministry of Health, Labour and Welfare under provisions of the Health Insurance Law for pharmaceutical products used in medical services, that is, ethical pharmaceuticals, and used in the calculation of medication costs as a drug price standard. The prices on this official price list are not necessarily those paid by medical institutions to drug manufacturers, causing a price discrepancy. To narrow the difference between the purchase price paid by medical institutions to drug manufacturers and the reimbursement price on the official National Health Insurance Drug Price List, which stipulates the amount insurance programs pay to medical institutions for drugs used in providing medical services to patients, the Ministry of Health, Labour and Welfare revises listed prices every two years. Typically, these are downward revisions and they have a corollary effect on the sales prices charged by Fuji Pharma.

Litigation

Makers of pioneering drugs could initiate legal action against Fuji Pharma for infringement of intellectual property rights, including process patents. The Company might also be taken to court over such issues as product liability, harm to the environment, and labor issues. Unfavorable court decisions have the potential to erode the Company's business results.