Corporate Governance

• Linical has established a Code of Conduct and provides education on and promotes this code so that Directors and employees can carry out their activities in compliance with the law, the Articles of Incorporation and internal regulations.
• Our Chief Compliance Officer (CCO) and Executive Officer promotes and oversees compliance within the organization. In addition, the Compliance Committee is responsible for working on compliance-related governance and risk management, as well as for addressing important issues, and shall report to the Management Committee and the Board of Directors.
• In addition to the Board of Directors, members of Linical’s Audit and Supervisory Committee participate in important internal meetings to develop the compliance system and confirm the state of its operation.
• Linical has established an Internal Audit Department as an organization under the direct control of the Representative Director, and this department works with the Audit and Supervisory Committee to monitor the state of compliance with the law and various regulations, and reports to the Board of Directors.
• Linical has established a whistleblower hotline based on the Ethics Reporting Policy and related procedures to prevent and detect promptly misconduct resulting from violation of the law or other wrong-doing, and strives to ensure public trust. When a report is made, Linical provides thorough protection so that the reporter is not treated disadvantageously due to making the report.
• In accordance with the Code of Conduct and related procedures, Linical does not respond to unfair or unwarranted demands from anti-social forces, organizations or groups, takes a resolute approach and cuts off all relationships.
• Linical has established a Nomination Committee and a Remuneration Committee, the majority of whose members are independent Outside Directors, to improve transparency and objectivity related to the nomination of candidates for Director and the determination of the remuneration of Directors and Executive Officers.

Linical records information related to the execution of duties by Directors in documents such as minutes and circulated requests for approval and stores them appropriately in accordance with the law and internal policies. Directors are able to view these documents at all times.

• The Company has established a Risk Management Committee to anticipate risks that may affect corporate activities, strive to prevent problems from occurring and deal appropriately with any that do occur. The CXOs who make up the Committee identify and evaluate risks across overseas Group companies for each of their assigned duties, and consider workarounds and countermeasures. The Risk Management Committee confirms these measures, evaluates and monitors critical risks, and reports to the Management Committee and the Board of Directors.
• The Company has established a Sustainability Committee, which discusses basic policies and initiatives on sustainability. The Committee formulates priority measures on key issues (materialities), rolls them out internally, monitors their progress, and promotes sustainability initiatives throughout the Company. In addition, the Committee reports their progress to the Management Committee and the Board of Directors.
• In the event that a serious risk materializes, we will set up a task force headed by the Representative Director to take measures to minimize damage in accordance with the crisis response policy. 

• Linical has clarified the administrative authority of Directors and Executive Officers and the submission standards for meeting bodies through internal regulations to realize more efficient and appropriate decision-making.
• In principle, Linical holds a meeting of the Board of Directors once a month, and also holds special meetings of the Board of Directors from time to time as required. In addition, Linical holds meetings of the Management Committee at least once a month to accelerate decision-making by fully considering matters to be submitted to the Board of Directors in advance and making advance decisions on matters to be reported to the Board of Directors.

• The Company and its Group companies share the Code of Business Conduct and the Ethics and Compliance Program as compliance-related basic policies, and strive to raise awareness of ethics and compliance among officers and employees through ongoing education and awareness-raising activities.
• Linical and its group companies establish risk management systems in accordance with the Risk Management Policy and related procedures.
• Linical and its group companies establish risk management systems in accordance with regulations related to risk management.
• Linical clarifies the objectives to be achieved by the company and its group companies in management plans, and evaluates and manages the state of business execution.
• Based on the internal regulations, Linical receives reports on the operating results and financial data of group companies as well as other important information regularly to grasp their situations.
• Our CXOs are delegated some authority by the President and Representative Executive Director and have cross-sectional jurisdiction over their area of responsibility, including the Group companies, to ensure the appropriateness of business operations.

Linical’s Board of Directors may, in consultation with the Audit and Supervisory Committee, appoint an employee to assist the Audit and Supervisory Committee if the committee requests an employee to assist with its duties. In addition, if that employee has received instructions from the Audit and Supervisory Committee in relation to their duties, Linical ensures the effectiveness of those instructions.

The appointed employee is independent from the Directors (excluding directors who are members of the Audit and Supervisory Committee) with regard to the duties designated by the Audit and Supervisory Committee to assist it, and executes those duties under the instructions of the Audit and Supervisory Committee.

• Linical’s Directors report immediately to the Audit and Supervisory Committee if they discover any fact that may cause substantial harm to the company or a subsidiary.
• Linical’s Directors and employees report on business regularly and as requested by the Audit and Supervisory Committee.
• Linical’s Directors and employees report important internal communications to the Audit and Supervisory Committee regularly and as required.
• Linical protects people who report to the Audit and Supervisory Committee so that they are not treated disadvantageously for reason of making such reports.

If a member of the Audit and Supervisory Committee requests the advance payment, etc., of expenses required for the execution of their duties, Linical processes such expenses or debts promptly.

• Members of the company’s Audit and Supervisory Committee may attend important meetings such as meetings of the Management Committee or the Board of Directors, view important documents related to the execution of business such as circulated requests for approval, and request explanations from Directors and employees in order to grasp important decision-making processes and the state of execution of business. Directors and employees may not block these requests.
• Linical’s Audit and Supervisory Committee ensures the effectiveness of audits through its independence and authority based on the “Audit and Supervisory Committee Regulations” and the “Audit and Supervisory Committee Standards,” and works closely with Internal Audit Department to enhance the effectiveness of audits by the Audit and Supervisory Committee.

The Group provides services under contract to companies engaged in drug development. If sales to a specific client account for too large a percentage of total sales, the Group’s business results could be affected by a decline in the utilization rate of clinical research associates (CRAs) or other factors if that customer cancels or terminates a project that is currently outsourced to the Group. We have dealt mainly with major pharmaceutical companies in Japan that have many promising products under development, and as a result of the quality of our work being recognized by our clients, the percentage of sales to certain domestic pharmaceutical companies became relatively high. However, this situation has improved as we expanded our overseas business and increased the number of our clients.
To address these risks, we will continue to expand our customer base by developing new customers and capturing demand from biotech companies in Japan and overseas by expanding our global business and our drug discovery support business and other business activities.

If the number of contracts decreases or contract prices decline due to the expansion of Japanese operations of global CROs in Europe and the U.S. or the intensification of price competition caused by the low-cost strategies of other CROs, the Group’s business results may be affected.
To address these risks, we at the Group will focus on highly novel drugs being developed by  pharmaceutical and biotech companies in Japan and overseas and challenging disease areas, and will differentiate ourselves from our competitors by offering global one-stop contract services in a prompt and high-quality manner through the recruitment and training of capable talent.

Global competition in drug development is becoming increasingly heated, and global development has become a fundamental strategy for pharmaceutical companies in order to obtain regulatory approval quickly in key market countries and maximize profits. If the globalization of the clinical trial environment and the shift to overseas occur at a speed much faster than anticipated by the Group, and the scale and number of clinical trials conducted in Japan rapidly decline, the Group’s business results may be affected.
To address these risks, the Group has offices in the U.S., Europe, and Asia, in addition to Japan. In countries where we do not have our own offices, we establish cooperative systems with other CROs in the short term and consider insourcing through the establishment of our own offices. We are also working to increase the ratio of overseas sales by enhancing our ability to deal with global clinical trials through the expansion of our global contracting system and by improving the ability of our overseas subsidiaries to win orders.

Changes in the drug development strategies of pharmaceutical companies, which are the Group’s major clients, (such as major revisions of priority areas and development products, promotion of joint development and licensing agreements with other companies, and consideration of insourcing and review of outsourcing policies in conjunction with these changes) may result in a decrease in the number of projects outsourced to the Group. In addition, as the difficulty of new drug development increases and competition intensifies, there is a growing need to speed up the development process by streamlining it and curbing costs. If development efficiency improves faster than expected through the utilization of real-world data and progress in DX, the size of clinical trials outsourced to the Group may shrink, which may in turn affect the Group’s business results.

To address these risks, the Group is expanding its customer base by developing new customers, including pharmaceutical and biotech companies worldwide, and is also expanding partnering on a global scale for functions the Group does not own, such as those required for decentralized clinical trials (DCT). We will respond to diversifying needs for clinical trial efficiency by considering insourcing depending on the needs and market trends.

In the event of a serious violation of related laws and regulations in the execution of work contracted by the Group, the Group may be liable for damages to the pharmaceutical company that contracted the work, or the Group may lose the trust of pharmaceutical companies other than the contractor, which may result in a lawsuit or a decrease in the number of contracts. In such cases, the Group’s business results may be affected.
To address these risks, we strive to ensure the quality of our operations by regularly reviewing the business procedures, establishing risk-based quality control processes, and providing ongoing case study training for our employees.

As the digitization of information progresses in drug development, the Group strengthens IT security as needed. However, in the event of a failure of our IT-based services or an information leakage due to a cyberattack or other event that we had not anticipated, there is a risk that business operations of the Group and of our clients and clinical trial sites may be severely affected.
To address these risks, we are further strengthening information security by obtaining guidance and advice from outside experts as follows:
<Basic Approach and Governance Structure>
As a company responsible for drug development, the Group is deeply aware of the importance of information security, and has established the “Basic Policy for Information Security” and is working to maintain information security throughout the Group, including overseas subsidiaries.
Our Chief Information Officer (CIO) is responsible for group-wide risk management and strategy formulation and execution related to IT, and reports directly to the President and Representative Executive Director. The Chief Information Security Officer (CISO), who reports to the Chief Information Officer (CIO), is responsible for information security, and has established and is operating a group-wide structure to promote the information security management system (ISMS). As for the supervisory function, the Board of Directors is ultimately responsible for supervision as part of overall management governance, and the status of information security, in particular, is regularly reported through the Risk Management Committee as a critical risk.
<Measures>
Based on the above basic approach and governance structure, we regularly identify and analyze information security risks through our ISMS, and we also develop and perform information security procedures and organizational, personnel, physical, and technical security measures in consideration of the requirements of our clients and other stakeholders, as well as laws and regulations, thereby reducing risks. We also have procedures in place for prompt recovery, reporting, and response in the event of a disaster or incident. To familiarize employees with these procedures and to raise the level of each employee’s ability to deal with information security risks, including cyberattacks, we regularly conduct various training sessions for all employees. In the fiscal year ended March 31, 2024, we obtained ISO/IEC 27001 certification, an international certification system, through NSF-ISR, an independent third-party organization, for our ISMS, which applies to the entire Group.
We will continue our efforts to maintain and enhance information security through continuous operation of ISMS and evaluation of its effectiveness.

In the event of leakage or unauthorized use of personal information in clinical trials contracted or conducted by the Group, the Group may be liable for damages to the pharmaceutical company that contracted the work, or the Group may lose the trust of pharmaceutical companies other than the contractor, which may result in a lawsuit or a decrease in the number of contracts. In such cases, the Group’s business results may be affected.
To address these risks, in addition to operating our information security management system (ISMS) that conforms to ISO/IEC 27001, we have established procedures for the protection of personal information in accordance with the Personal Information Protection Law and other relevant laws and regulations in various countries, and regularly conduct training for all employees on the protection of personal information as well as sessions for management and group company-specific training by rank to reduce the risks.