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Management policy

Risk Factors

The following types of risks have the potential to affect the TRANS GENIC Group’s financial condition and business performance. The text referring to the future is as of June 2020.

1, In terms of Management

 A, Mergers and Acquisitions
TRANS GENIC considers mergers, acquisitions, and capital or business partnerships as an important part of its strategy to expand the business field. We make detailed investigation of target companies/institutions preliminary, including business contents, financial conditions and business connections, and examine the potential risks sufficiently. However, in cases where an unexpected or unrecognized problem occurs, or desired effect is not achieved by alteration in business environment, it could affect TRANS GENIC’s operating results and financial position by executing measures such as impairment accounting.

 B, Spread of the Novel Coronavirus Infection
Since the beginning of 2020, novel coronavirus infection has been spreading throughout the world rapidly. Not only is health of people around the world under thread, but the economy has been affected seriously with extensively restricted economic activities. Under such circumstances, TRANS GENIC make every effort to maintain business activities while taking measures to prevent the spread of coronavirus infection, such as allowing teleworking (telecommuting), placing the highest priority on protecting the health and safety of our employees and customers, and remains fully operational at most business facilities.
  However, some business operations in CRO business are concerned to be affected: there is no prospect of reassuming the import of some laboratory animals for non-clinical testing service, and subject recruitment for clinical trial is suspended. Moreover, since teleworking is just started, it might be difficult to conduct corporate activity as in a conventional manner.
 There is no knowing when the spread of novel coronavirus infection will come to the end as of this moment. If such circumstances are prolonged, TRANS GENIC’s operating results and financial condition could be affected by the seriously-restricted operational activities and economic stagnation, including the increase in bankruptcies and severe slump in consumption.

2, In terms of Each Business Divisions

 A, The Trend of Pharmaceutical Industry
 The revenue of CRO business is highly dependent on the sales of contract non-clinical /clinical test service received from pharmaceutical companies, and order-receiving situation is relatively stable at the moment. However, business environment of domestic pharmaceutical companies is getting severe because of drug price revision and the popularization of generic drugs, and furthermore, R&D expenses have been restrained recently. Although TRANS GENIC pay attention to this industry trend, if it changes drastically, our operating results and financial condition might be affected seriously.

 B, Technical Innovations
 In biotechnological industry, technologies have been evolving rapidly, and TRANS GENIC makes continuous effort to develop the technologies in our field of specialization. However, in the event that the market environment is changed by technological innovation, and our technical advantage over our competitors is reduced, TRANS GENIC’s operating results and financial position could be affected significantly.

 C, Relationship with Public Research Institutes and Universities
 In CRO business, TRANS GENIC Group promotes and implements collaborative research with public research institutes and universities, such as Kumamoto University, in order to introduce and transfer new technologies. However, the relationship with them may be affected by legal amendment or organizational change. In the event that the direction of the collaborative research or rights are compelled to be changed by such changes in circumstances, the business strategy and performance of TRANS GENIC Group could be affected.

 D, Patents and other Intellectual Property Rights
TRANS GENIC is developing its business while constantly taking care not to infringe on the intellectual property of other companies, such as commissioning the patent survey to the patent firm. However, it must be recognized that in reality it is difficult to completely eliminate the risk of getting involved in litigation. If TRANS GENIC becomes a party involved in lawsuits due to the infringement of unrecognized intellectual property rights, not only litigation costs but also possible compensatory payment costs could have an influence on TRANS GENIC’s performance and its business strategy.

 E, Legal Regulations
a, Laboratory animals
Regarding the laboratory animals-related service in CRO business, a regulation concerning the use of laboratory animals is considered to be introduced in Europe and the United States from the perspective of animal protection. TRANS GENIC received the accreditation from AAALAC (The Association for Assessment and Accreditation of Laboratory Animal Care International), and makes an effort to handle laboratory animals appropriately. However, these regulations might be introduced in Japan as well. In such cases, it is impossible to deny the possibility that the market of laboratory animals could shrink, and the performance of TRANS GENIC Group might be affected considerably.

b, Recombinant DNA Technology
 TRANS GENIC complies with laws and regulations that stipulate the operation method and the equipment for gene transfection, such as "Guidelines for Industrialization of Recombinant DNA Technology" and "Act on the Conservation and Sustainable Use of Biological Diversity through Regulations on the Use of Living Modified Organisms". The business contents and performance of TRANS GENIC Group might be affected in the event that such laws and regulations are tightened.

 6, Fluctuation of Exchange Rate
In TGBS business, TGM Co., LTD. and GALAX Corporation obtain most of their products from overseas. In order to reduce the impact on the fluctuation of currency exchange rates on performance, TRANS GENIC undertakes risk-aversion measures, primarily using foreign exchange forwards. However, currency exchange fluctuations, depending on their degree, still could have a possibility to affect TRANS GENIC Group’s business performance.

Management policy

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To Our Shareholders

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Business-Related and Other Risks
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