This section describes material risks identified by the Kyowa Kirin Group as of December 31, 2025. The Group defines risks as factors that could have an uncertain impact on business targets, including both threats and opportunities.
However, the Group may face other unforeseen risks caused by changes in internal and external conditions. In addition, the domestic and overseas pharmaceutical industry faces a number of other risks to its business activities. These include, but are not limited to, risks related to intellectual property rights, risks related to product side-effects, risks related to legal disputes, risks related to competition and patent expiry, risks related to fluctuations in fuel costs, risks related to fluctuations in exchange rates and financial markets, and country risk, which could all have a negative impact on the Group’s business performance and financial position.
Details of risks and expected main impacts
The Group operates important information systems and networks related to research and development, manufacturing, sales, etc., at multiple locations globally. These include highly sensitive data such as patient information, research and development data, manufacturing know-how, and contract and management information. In recent years, cyberattacks such as ransomware and targeted attacks have become more advanced and sophisticated, and the life science sector has become a high-priority target for these attacks. Insufficient security measures (access control, encryption, vulnerability management, monitoring, backup, etc.) can result in system stoppages, failures, and information leaks, potentially making it impossible to continue business operations. This may result in violations of laws and regulations, fines, lawsuits, significant economic losses, a decline in public trust, and loss of competitiveness, impacting the Company. Differences in regional security standards and response policies, the absence of unified governance, and limitations in insurance coverage may also contribute to the escalation of damage.
Key mitigation measures
All the regions are currently monitored by full-time staff to provide support. In North America, EMEA, and Japan, we have implemented ransomware protection technology, and in addition to ongoing internal vulnerability management, we conduct an external penetration test once a year. In addition, each region is monitored by managed security service providers (MSSPs), asset discovery and management using asset management tools, third-party risk management (TPRM) assessments, annual global and regional cyber exercises, and anti-phishing training. Going forward, we plan to respond rapidly through integrated MSSP services and single-tenant operations, establish a global security operations model, standardize TPRM, and enhance operations technology (OT) security in the manufacturing divisions. We will also implement an ERM program to monitor risks in all regions.
Details of risks and expected main impacts
The Group manufactures and supplies products and investigational drugs in a variety of modalities, including biopharmaceutical drugs, both domestically and internationally. Manufacturing and quality-related problems, raw material procurement uncertainty, sudden fluctuations in demand, problems with contractors, natural disasters, geopolitical risks, and system failures may have a serious impact on supply. Insufficient supply or restricted shipments, especially of important products, may make it difficult to continue treatment for patients, resulting in a loss of public trust, decreased orders, reduced revenue, penalties, lawsuits, and other economic losses. Furthermore, the inability to respond to new modalities and devices, concentration of production bases in one location, aging facilities, and a lack of strategic consistency in capital investment may also undermine supply stability over the medium to long term.
Key mitigation measures
Our mitigation measures include: Maintenance of appropriate inventories, development and expansion of our in-house production system (the HB7 building at Takasaki Plant and Sanford Plant), establishment of a dual sourcing system for important products, and reinforcement of CDMO management. In addition, we will strive to quickly identify the impact of disasters, secure stable supplies of raw materials and supplies, improve supplier management, improve management processes that respond to deviation and change, and promote the development and use of new technologies. Going forward, we will plan to identify risks throughout the supply chain and develop response scenarios, establish a supply system based on a long-term strategy, strengthen monitoring for early identification of manufacturing and quality risks, and reform operations through the use of DX. We will monitor the number of incidents, the number of serious findings during inspections, and the degree of plan achievement.
Details of risks and expected main impacts
The Group relies on a number of business partners for key business processes, including procurement of raw materials, contract manufacturing, distribution, etc. Risks such as human rights and environmental issues (forced labor, child labor, greenhouse gas emissions, etc.), bribery and corrupt practices, information security breaches, and regulatory violations caused by these business partners are more likely to become apparent if management systems are inadequate. In particular, if the department in charge or the monitoring process is unclear, due diligence (DD) may not be conducted, contracts and audits may not be in place, and transactions may continue without proper evaluation and response to high-risk partners. If an incident occurs, it may be difficult to continue business, fines and penalties may be levied, public trust may be lost, financial losses may be incurred, and a huge amount of human and material resources may have to be allocated to the incident response.
Key mitigation measures
Our mitigation measures include activities such as interviewing and studying themes in relation to DD and human rights DD in each region as we have been doing. In addition, we are currently stipulating the management outline by formulating the basic policy and rule for business partners across the entire Group, selecting partners involved in a stable supply as priority DD targets, and confirming the current status of the management system in each region so as to stipulate the global operation process. In addition, by joining the Pharmaceutical Supply Chain Initiative (PSCI), we are improving our organization based on the DD status of other companies and industry trends. Going forward, we will develop DD target selection criteria and priority risk assessment criteria, implement selfassessment questionnaire (SAQ), prepare risk assessment guidelines and response guidance, ensure thorough monitoring of high-risk partners, and design and implement an audit system that can also manage external disclosure. We will also improve the comprehensiveness of monitoring at the time of contracting and post-contracting, plan to globally unify management of supplier information, and monitor the completion rate of assessments and implementation rate of risk reduction measures for priority partners.
Details of risks and expected main impacts
The portfolio of our development products and products from R&D to launch forms the foundation of the Company’s sustainable growth. Although we have established investment policies by disease area (value creation and offer on our own and value maximization through strategic partnering with other companies), there is a risk that the equilibrium of future revenue and profits may be disrupted due to increased investment in late-stage development products, uneven distribution in the initial pipeline, difficulties in partnering negotiations, and other factors. Insufficient discussion from short-, medium-, and long-term perspectives and a lack of consistency with financial perspectives may lead to erroneous investment decisions and development stagnation, resulting in a decline in stock prices, deterioration of medium- to long-term profitability, and lost opportunities.
Key mitigation measures
Currently, we regularly conduct portfolio analysis (revenue and profit forecasts, sensitivity analysis, scenario-based growth forecasts, and swing factor analysis, which is an analysis of factors of significant influence) at the Global Executive Committee Meeting and other meetings to share the current and future scenarios at the CxO level. Going forward, we will establish a quarterly product portfolio management meeting to ensure consensus on strategic direction based on scenario analysis, including financial perspectives. The Company will also promptly reflect what was discussed in development operations, and monitor prior measures to respond to worst-case scenarios related to swing factors.
Details of risks and expected main impacts
In order to achieve sustainable growth and competitive advantage in the rapidly changing environment of the pharmaceutical industry, it is essential for the Group to secure a highly specialized, diverse, and agile organization and human resources. However, if there is a delay in efforts to correctly identify and systematically address any gap between necessary capabilities and the current situation, creation of innovation may stagnate and competitiveness may decline. In addition, if our corporate culture (KABEGOE Culture) is not sufficiently cultivated, it may be difficult to recruit and retain talented individuals, leading to lower engagement and productivity, which may hinder the execution of global strategy and the achievement of the vision. Specifically, factors such as the absence of a consistent global and local human resources strategy, unclear role definitions and expectations for People Leaders (executives and managers), and insufficient competitiveness in Total Reward (remuneration policy) and career opportunities may cause a long-term talent outflow. In addition, there is another noticeable impact of human resource development becoming ad hoc, hindering the establishment of a robust pipeline of strategic talent.
Key mitigation measures
The Company has started to strengthen its human resource management structure to correct these capability gaps. Within human resources divisions, the Company has established Virtual Global Sub-functions and developed a crossfunctional and cross-regional structure to drive strategic initiatives. Our efforts also include introducing a Global Succession Planning framework to clarify next-generation leadership candidates in each function and their respective development policies. Furthermore, in the R&D area, we have defined a value-creating human resource image and introduced human resource development measures. In terms of corporate culture, we are continuously disseminating KABEGOE Principles within the Company to achieve Vision 2030, and building a structure for talent management across countries and divisions through the development of the Global HR Operation Model and other initiatives. Going forward, we will focus on clarifying the expected roles of People Leaders, implementing training measures to support the fulfilment of those roles, clarifying the Total Reward Policy and redesigning the remuneration system, and strengthening the certification program. In addition, to support the operating model transformation, we will revamp its internal awards system, expand cross-divisional value creation activities, and develop a corporate culture in which each and every employee can experience change.
Details of risks and expected main impacts
Rising healthcare costs, pressure to suppress drug prices, and the emphasis on health technology assessment (HTA) have led to stricter insurance reimbursement and price setting of pharmaceutical products. There is a risk that access to products may be delayed or limited due to development strategies that do not adequately reflect the needs of patients, payers (insurers), and authorities, or due to insufficient processes to validate economic value. What we need is a mechanism to incorporate market access and economic value strategies from the early stages of development. Specifically, this should include a study design that meets European HTA standards, a system and human resources capable of managing cost-effectiveness evaluations, and the ability to flexibly respond to differences in pricing rules and negotiation cultures in different countries. If these are lacking, post-launch price and access conditions will be unfavorable, and profitability and growth potential will be significantly reduced.
Key mitigation measures
The Company incorporates access and value maximization strategies into the product strategy documents and target product profiles (TPPs) from the early stages of development, and checks consistency of strategies at the Research and Development Committee. We share knowledge gained from prior development products and similar areas through cross-functional review by disease area teams, promote the Phase III study design that meets European HTA standards, and revise the price setting system to accommodate cost-effectiveness assessments. Furthermore, we systematically respond to the joint clinical assessment (JCA) in Europe for our major products, working to strengthen our negotiating position in the U.S. and European markets. At the same time, we develop systems and human resources that enable our continuous response to cost-effectiveness evaluations in Japan, while aiming to standardize value-maximizing measures that fit each country’s circumstances in cooperation with government liaison departments, health economics, Pharmacy Benefit Management (PBMs), payer response departments, and others.
Details of risks and expected main impacts
If there is a delay in implementing the product life cycle strategy regarding long-term listed products, which are the core of the Japan business, we may find it difficult to improve our portfolio, with a high-cost structure persisting. Furthermore, if the in-house development of new products and their introduction in Japan do not proceed as planned, our competitiveness in the Japan market may decline, which could affect the earnings of the entire Group. In addition, if the plan to launch new drugs is delayed, profits may fall far short of the target. For this reason, we urgently need a shift to a sustainable growth model.
Key mitigation measures
In order to execute the product life cycle strategy, the Company shares information with its partners and CDMOs from an early stage to improve transparency and speed up decision-making in succession activities. With regard to transfer agreements, we strengthen inter-organizational collaboration by conducting legal due diligence and scrutinizing relevant agreements, so as to support smooth project execution. In preparation for the launch of new drugs, we have established a JP Pre-launch Team for the Japan market and formed a cross-functional task force supporting the Team, in order to strengthen collaboration among functions and promote smooth launch preparations. Going forward, we will further strengthen the project management function, organize due diligence information in advance, clarify the support structure by task forces, and improve the accuracy of monitoring milestone progress. Furthermore, we will continue discussions at the management level to shift to a sustainable growth model that can respond to changes in the healthcare system and market environment.
Details of risks and expected main impacts
In 2021, the Group created Digital Vision 2030 to promote DX. Although various efforts have been made in each department and region, there is still room for further enhancement from the perspective of overall optimization. With the current situation going on, we may not be able to see full realization of our efforts to create the originally expected company-wide effects of Operational Transformation (productivity improvement, rapid decision making, pipeline acceleration, etc.) as well as efforts to create Life-changing value.
Key mitigation measures
In April 2025, we established a position of Chief Digital Transformation Officer (CDXO) and newly established Operational and Digital Transformation (ODX) to promote DX on a company-wide basis, so as to accelerate operational reforms centered on DX. In addition, we are strengthening and developing human resources with expertise in DX, AI, etc. and transformational leaders, as well as improving the governance structure for IT and digital investments. We will continue to maximize company-wide DX effects by setting investment priorities in line with company strategies and periodically reviewing strategic themes.
Details of risks and expected main impacts
In 2024, the Company acquired Orchard Therapeutics, which owns a hematopoietic stem cell gene therapy platform, and has thereby designated as the core of “Vision 2030 and Beyond: Our Growth Story” the following: the development of promising therapies utilizing this platform; and the research and development of new therapies enabled by the integration of this platform with the Company’s long-cultivated drug discovery technologies. However, if the formulation of post-merger business strategies and the establishment of an organizational governance system do not proceed as planned, the expected group synergies may not be fully realized. In addition, in the Gene & Cell Therapy area, inadequate response to changes in the business environment and regulatory changes in each country could stagnate growth through sales promotion of already launched products and the creation of innovative products, which could affect the achievement of “Vision 2030 and Beyond: Our Growth Story.”
Key mitigation measures
The Company is leveraging Orchard Therapeutics’s hematopoietic stem cell gene therapy platform to expand OTL-200 (product name in Europe: Libmeldy, in the U.S.: Lenmeldy) in the region and to promote the development of OTL-203, OTL-201 and other products. This will strengthen the business foundation in the Gene & Cell Therapy area and stabilize earnings. In addition, we will set up a governance meeting to jointly formulate R&D strategies, make investment decisions, etc. with Orchard Therapeutics, and establish a system that enables prompt and appropriate decision-making in response to issues specific to the Gene & Cell Therapy area and changes in the business environment. In addition, we will develop an R&D system that makes the most of the characteristics and capabilities of all Group business sites, and promote the development of specialized human resources.
Details of risks and expected main impacts
Policy changes by the U.S. administration (tariffs, drug price regulations, etc.) have a direct impact on the Group. If the MFN Drug Pricing policy is passed into law, price reductions and strategy changes will be inevitable in the United States, which will then affect drug price setting in other countries, too. Introduction of high tariffs on pharmaceutical products would severely damage the manufacturing strategy targeted at the United States, and price pass-through would entail political risk.
Key mitigation measures
In preparation for tariff impacts, the Company has established the U.S. Tariff Task Force to strengthen cross-functional coordination among Production and SCM, Finance, Legal, Government Affairs, Market Access, RA, etc., and is also planning to restructure its supply system, including relocation of manufacturing bases. In addition, we are strengthening our policy engagement through activities in the United States and Japan, while the subsidiary in the U.S. has joined PhRMA, to increase our political influence. We will continue to monitor developments in the U.S. Congress and seek to reduce political risk by securing supply capacity and restructuring contracts.
