Basic Approach to and System for Promoting Compliance
KAKEN believes that compliance-based business activities are fundamental to earning the trust of society and promoting the healthy development of a company. KAKEN promotes compliance-based management in accordance with this belief.
In order to achieve compliance-based management, KAKEN has appointed a compliance officer and has designated the Compliance Group of the Legal Affairs & Intellectual Property Department as the unit responsible for instilling a compliance-based mindset in executives and employees.
Activities to Promote Compliance
Based on our corporate philosophy and business philosophy, we have established the KAKEN Charter of Corporate Behavior and Code of Conduct. The charter and code comprise guidelines to be followed by all executives and employees, and express KAKEN’s basic position on compliance. They serve as the basis for making decisions and taking actions in the performance of duties by executives and employees toward the achievement of our corporate philosophy and business philosophy. To help executives and employees of the KAKEN Group engage in compliance-based business activities, we have prepared panels displaying the corporate philosophy, business philosophy and the KAKEN Charter of Corporate Behavior, as well as a Compliance Check Card and Compliance Guidebook. In addition, KAKEN provides level-based compliance education and, through the Company intranet, distributes messages from the compliance officer and related information from the Compliance Group of the Legal Affairs & Intellectual Property Department as appropriate to raise compliance awareness.
Ethical Considerations in Animal Testing
In developing pharmaceuticals and agrochemicals, animal testing is indispensable for verifying the safety and effectiveness of drugs. The Company has formulated internal regulations that fully reflect the intent of “the Act on the Welfare and Management of Animals,” “the Standards relating to the Care and Keeping and Reducing Pain of Laboratory Animals,” and “the Basic Policies for the Conduct of Animal Experiments in Research Institutions under the Jurisdiction of the Ministry of Health, Labour, and Welfare, ”and gives full consideration to the 3Rs: the utilization of alternatives to animal testing (replacement), the reduction of the number of animals used (reduction), and the mitigation of pain (refinement). In conducting animal tests, the Company complies with relevant laws and regulations and internal regulations, gives due consideration to animal welfare, and carries out examinations by the Animal Testing Committee to ensure that the tests are appropriately carried out from a scientific point of view. Self-inspections and self-assessments on the status of animal testing are carried out every year to verify the appropriateness of the tests. In addition, the Company's initiatives for animal testing have been assessed by an external party as being appropriately carried out in accordance with the policies of the Ministry of Health, Labour and Welfare. In January 2022, KAKEN received the Accreditation of Animal Experimentation Facilities from the Japan Pharmaceutical Information Center for the fourth time.
Basic Approach to and System for Promoting Risk Management
KAKEN engages in risk management initiatives with the aim of appropriately managing risks that could hinder the realization of the corporate philosophy and the achievement of the business plan, fulfilling its social responsibility, and contributing to sustainable corporate value improvement.
Overview of the Risk Management System
- Regulations and other systems for managing the risk of losses
- Regulations and other systems for managing the risk of losses at subsidiaries
- For risks the KAKEN Group is exposed to, the Company has established a system for identifying and managing such risks under which a risk management officer is appointed and the Corporate Planning & Coordination Department is designated as the responsible department.
- The Company classifies risks and manages them by designating the responsible departments, respectively.
- The Board of Directors makes management decisions on the handling of material risks from the perspective of the KAKEN Group's management, and such risks are managed by the responsible departments.
- The Internal Audit Department audits the status of risk management at the KAKEN Group and reports the results to the president, the Board of Directors and the Audit & Supervisory Board.
The Company has formulated Regulations for Risk Management and carries out risk management activities such as identifying risks, taking countermeasures and providing education for each division and department. At the same time, the Risk Management Committee has been set up, chaired by the risk management officer appointed by the Board of Directors.
In such ways, the Company has established a system to manage risks on a Companywide basis. Important matters deliberated at Risk Management Committee meetings are submitted for approval or reported to the Board of Directors.
Major risks recognized by management as those that materially affect the financial position, business performance and cash flows are as shown below. The forward-looking statements contained herein reflect the judgment of the KAKEN Group as of March 31, 2022.
1. Risks related to legal regulations and administrative developments such as policies to curtail public healthcare expenditures
The pharmaceutical business in Japan is subject to various regulations under the pharmaceutical regulatory system. In addition, various medical system reforms are underway as part of policies to curtail public healthcare expenditures, such as revisions of the drug price standards and measures to promote the use of generic drugs. Revisions of related laws and regulations and developments in the administrative policies related to the medical system and health insurance could materially affect the KAKEN Group's business performance and financial condition.
Considerable financial investment and development periods of more than 10 years are required for the research and development of drugs; however, the probability of these efforts coming to fruition as a new product or technology is not high. The Company carefully develops new drugs while taking the efficacy and safety of each drug into full consideration, but development could be halted before completion if the expected efficacy cannot be proven or a safety issue is identified. Such cases could materially affect the KAKEN Group's business performance and financial condition.
Pharmaceutical products are approved and marketed only after sufficient safety tests and thorough review; however, only a limited number of patients are administered experimental drugs during clinical trials undertaken in the development stage. In order to supplement these clinical trials, post-marketing surveillance is conducted after products are launched. If unexpected adverse drug reactions are identified in post-marketing surveillance, the Company may be compelled to recall the product or discontinue its sales. Such cases could materially affect the KAKEN Group's business performance and financial condition.
The pharmaceutical industry is very competitive. Competition with competing products that have similar efficacy and effect and with generic products launched after patents expire may result in declines in sales of our products, which could materially affect the KAKEN Group's business performance and financial condition.
The KAKEN Group manages its intellectual property properly and takes precautions against infringement by third parties. If a third party infringes the Group's intellectual property rights, the Group may file a lawsuit against the third party to protect such rights. The outcome of such litigation could materially affect the KAKEN Group's business performance and financial condition. The Group also pays close attention to ensure that its projects do not infringe the intellectual property rights of any third party. However, if such an infringement occurs, it may result in a dispute and subsequent compensation for damages and cancellation of the project, which could materially affect the KAKEN Group's business performance and financial condition.
As a company conducting business both in Japan and overseas, KAKEN is at risk of litigation instituted for adverse drug reactions of its pharmaceutical products and issues concerning product liability, labor, the environment and fair trade. Such litigation could materially affect the Group's business performance and financial condition.
Delay or interruption of product supply due to problems with the Company's manufacturing facilities or its suppliers, or delays in the procurement of raw materials, or product recalls due to quality problems could materially affect the Group's business performance and financial condition.
The Group uses various information systems; therefore, our business operations may be hampered by system failures, computer viruses and cyber-attacks, and other factors. If confidential information including personal information in our possession is leaked to any third party, the Group would face compensation for damages, administrative action, and loss of public trust. These events could materially affect the Group's business performance and financial condition.
The occurrence of natural disasters such as earthquakes and typhoons, accidents such as fires, or pandemics could cause extensive damage to the KAKEN Group's offices and business partners. The resulting disruption to business activities or considerable expense required to repair damaged facilities could materially affect the Group's business performance and financial condition.
Despite the efforts of the KAKEN Group, impacts of the COVID-19 pandemic that are more serious or persistent than the Company expects could materially affect the Group's business performance and financial condition. In addition, even after the COVID-19 pandemic is contained, the pandemic may continue to have an impact for an extended period of time.