## Business Risks 

The main risks that could significantly impact the business results and financial position of the Astellas group are outlined below. 

•  Inherent uncertainties in pharmaceutical R&D 

In general, the probability of discovering a promising com- pound through drug discovery research is not high. Further, it takes a large amount of investments and a great deal of time to successfully launch a new product after discovery of a new compound. However, it may be necessary to discontinue clinical development if the effectiveness of a drug is not proven as initially expected, or if safety issues arise. In addition, pharmaceuticals are subject to legal restrictions in each country, so that authorization from local regulatory authorities is a prerequisite for a product launch in each country. It is difficult to accurately foresee if and when approvals for new products can be obtained. 

The Astellas group’s R&D activities are subject to these inherent risks. 

•  Sales-related risk 

The pharmaceutical industry operates in a highly competitive environment characterized by rapid technological innova- tion. The Astellas group faces fierce competition from drug makers and generics manufacturers based in Japan or overseas. The launch of competitive products by rivals could impact the Astellas group’s business results significantly. 

•  Intellectual property (IP) risk 

The Astellas group’s ethical pharmaceuticals business benefits from the protection of many patents. Although the Astellas group manages intellectual property rights properly and is vigilant against third party violation of such rights, the adverse impact on the Astellas group’s business results of actual IP violations may still be substantial. The Astellas group’s business results are also subject to the outcome of litigation undertaken by the Astellas group to protect patents where infringement has occurred. 

While the Astellas group strives to ensure that its actions do not infringe the IP rights of other parties, there is a risk of litigation in the event of any inadvertent violations. Such 

litigation could also impact the Astellas group’s business results significantly. 

•  Risks relating to product side effects and safety 

Any problems arising due to serious side effects or other safety issues that are caused by the Astellas group’s products could impact the Astellas group’s business results significantly. 

•  Pharmaceutical regulatory risk 

The ethical pharmaceutical business is governed by a wide variety of regulations in each country. In Japan, for exam- ple, the authorities periodically revise the NHI drug prices. Some governments continue to adopt measures aimed at containing medical expenditures. Any trend toward stricter regulations governing the development, manufacture or distribution of pharmaceuticals is a factor that could impact business results. 

•  Environment-related risks 

The Astellas group is careful to observe laws and regulations relating to environmental or health and safety issues and has instituted internal standards that aim to exceed most statutory requirements. Despite such precautions, the costs involved in the unlikely event of a business-related incident causing a serious breach of compliance in this area could impact the Astellas group’s business results significantly. 

•  Foreign exchange rate fluctuations 

The Astellas group’s business results and financial position are subject to the impact of exchange rate fluctuations due to the Astellas group’s extensive international operations. 

In addition to the risks outlined above, the Astellas group is exposed to a wide range of business-related risks, including but not limited to (1) general commercial litigation, (2) delays or suspension of manufacturing activities due to natural disasters or other factors, and (3) partial dependence on licensing or sales agreements relating to pharmaceuticals developed by other companies. 

