Report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Medical Net, Inc.
Report on the medium-term shareholder value outlook

Moving on to a next-growth stage, with the aim of
becoming No. 1 in the platform business of extending
healthy life expectancy, starting with oral care

FY5/2025 targets:¥10 billion in revenues and 10% operating profit margin
Issued on November 16, 2020

Copyright © Medical Net, Inc. All rights reserved.

Report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Contents
I.

Medium-term outlook for shareholder value................................................................................. 1
Mission: Use the internet to improve the quality of life and health of people and make them smile ......... 1
Long-term outlook in shareholder value ....................................................................................................... 6

II.

Corporate summary and characteristics of business ...................................................................... 7
Corporate summary ....................................................................................................................................... 7
Corporate philosophy .................................................................................................................................... 8
Japan’s No. 1 in the dental care platform business ....................................................................................... 9Grow beyond an upfront investment phase, and pursue long-term growth and profitability ................... 10
Summary of major existing businesses and keys to raising shareholder value ........................................... 11III.
Growth drivers of shareholder value ........................................................................................... 21
Vision, and target expansion of the three types of capability ..................................................................... 21
Three key points in realizing the vision ....................................................................................................... 22
Particular measures to emphasize for expansion in new and existing domains ......................................... 24
Medical Net’s vision (One forecast)............................................................................................................. 27
IV.
Shareholder value creation structure .......................................................................................... 30
Shareholder return policy ............................................................................................................................ 31
Appendix (reference data)..................................................................................................................... 32
Disclaimer ............................................................................................................................................. 35

Copyright © Medical Net, Inc. All rights reserved.

Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

I. Medium-term outlook for shareholder value
Mission: Use the internet to improve the quality of life andhealth of people and make them smile
Medical Net, Inc. was founded in 2000, and the Medical Net Group that has been established around it has asits mission “use of the internet to improve the quality of life and health of people and make them smile”
and the objective of realizing a vision “to provide innovative services to the public and medical facility
operators to become the top company in Japan in the dental care platform business and the specializeddomain platform business.” By providing services that enable people to select better medical treatment byacting on their own initiative, and for institutions and companies to enjoy sustainable growth by providing thetreatment desired by the people, the Medical Net Group aims at developing its business and to support
health and well-being of people at any or all stages of their entire life.

Three types of capability1 that enable realization of the Company’s mission
and objective (vision)
In order to achieve its mission and objective (vision), the Medical Net Group has expanded its unique platformthat can connect people with medical facility operators and related companies. By being designed for use by
the dental industry and other beauty care, health, lifestyle domains in Japan, the platform is contributing toraising the social values of domains by 1) making dental care and other specialized domains to be better
understood and known; 2) reducing the information gap between patients and clinics; and 3) revitalizing thedental care industry. The Group has thus established itself as the No. 1 position in the dental care platformbusiness. Medical Net has emphasized three types of capability in promoting its business. They are I)
Capability to explore underdeveloped online domains; II) Capability to pursue specialization; and III)Capability to expand newly industrialized domains.
▉

Three types of capability that propelled Medical Net to becoming the No. 1 oral care platformer
Social values that the Medical Net Group helps create

Three types of capability

I

Capability to explore
underdeveloped online
domains

II

III

¨

Industrialize the internet marketing ofprivate practice dental clinics¨

Capability to pursue
specialization¨

Expand the information sites on oral
health, for greater use by dental clinics
and people¨

Capability to expand
the industrialized
domains¨

Assist operations of dental clinics andrelated companies in their function as
an information media hub¨

Creation of platforms for both thedental care information and the dental
clinic information, and offering
appropriate pricing for For eachcustomer attributeª1. Make dental care and otherdomains to be better known andunderstood
2. Plug thee information gap
between patients and hospitals
3. Revitalize the dental industryªFacilitate patients’ choice of better
dental clinics and expand the dental
care industry. Contribute to enhancing
sustainability.

Towards the No. 1 position in the dental care platform business in Japan
Enhancement of long-term shareholder value

Unique development of untapped businesses; advanced information power for differentiation; revenue growth fromperipheral domains
Sustainable growth with little competition; added value; expansion in business scope and scale to increase revenue
opportunities and improve business stability

With Capability I, Medical Net explores underdeveloped domains in the broad field of supporting people’s
health and growth by the use of the internet, realizing unique business operations with little competition.
With Capability II, Medical Net earns trust of the customer segment consisting of men and women who have1

Capability here refers to a company’s organizational capability and strength, which becomes a driver of its growth. When a company
demonstrates superiority of its internal organizational strength, this can be one of its sources to raise long-term shareholder value.

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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

professional, advanced knowledge of health and medical treatment and thereby adds more value to thebusiness conducted. With Capability III, the Company explores adjacent domains of the industrialized businessand pursues growth in revenue, scale, and scope of business.

At present: No. 1 in the dental care platform business while making upfront
investment for expansion of business domains
During the growth made since its foundation, the Medical Net Group used Capability I and II and establishedthe media platform business of developing portal sites, which are mainly for its own media, so as to provide
specialized information on dental care to the public. Since 2006 the Group has used Capability III in expanding
management support business for dental clinics and the medical BtoB business that connects dental care
professionals with dental-related companies. As a result, the Medical Net Group has established itself in theNo. 1 position in the dental care platform business in Japan by doing business with about 3,000 dental clinics
and 60 dental-related companies and by having 10,000 clinics participating in the free membership system of
its portal sites as well as 40,000 dental care-related people in the dental media as its members (all this as of
May 31, 2020).
The media platform business generated ¥800 million in revenues and ¥530 million in segment profit in
FY5/2020 (fiscal year ended May 2020), securing high profitability. By contrast, the medical institution
management support business and the medical BtoB business are still in the investment stage, striving toachieve long-term expansion.
▉

The Medical Net Group’s business activities in FY5/2020
BusinesssegmentMedia
platform
business

Management
supportbusiness for
medicalinstitutions

Medical BtoB
business

Consolidated

Revenues (top)Segment profit (bottom)(¥ million)

804.2
535.8

2,058.1
8.1

Business activities
Business

Development and operation of 61 sites specialized in the dental,
beauty care and esthetic, and other domains, such as the Implant Net

Customers

Approx. 1,000 clinics, mostly dental clinics.
10,000 clinics, almost all using free membership benefits

Business

To dental clinics, 1) Provision of SEO service and ad agency service; 2)
website production; 3) sale of other companies’ web products andother ad media; 4) support for startup and management; 5) sale ofdental equipment, materials, and medicines by a consolidated
subsidiary, Okamura; 6) operation of a dental clinic by a consolidated
subsidiary in Thailand

Customers

Approx. 3,000 clinics, mostly dental clinics.

Operation of a BtoB portal site that connects dental professionals anddental-related companies. Approx. 30,000 dental professionals are
Business
51.7
members. Provides research on dental-related companies, manages-21.5
conventions, and gives advertising solutions.
Customers 60 customers, mostly of dental-related companies
Total revenues ¥2,917 million; total segment profit ¥522 million
Head office expenses, etc. ¥419 million; operating profit ¥106 million

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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

The number of members, including those who received any service of the Medical Net Group for free, isshown in the graph below, starting from FY5/2014, when Medical Net was listed. Currently, the Group’s
membership exceeds 40,000. Paid members who contribute to revenues, however, are only 1,000 in the
media platform business and 3,000 in the management support business for medical institutions, leaving
significant room to grow in terms of paid memberships.
▉

Overwhelming number of members

35,52329,42730,548

15/5期
FY5/15

16/5期
FY5/1638,29341,06932,352

20,292

7,849

上場時
IPO

14/5期
FY5/14

17/5期
FY5/17

18/5期
FY5/18

19/5期
FY5/19

20/5期
FY5/20Record-high revenues of ¥2,917 million in FY5/2020
The Medical Net Group posted a record-high revenue of ¥2.9 billion – up 30.5% y-o-y – in FY5/2020 partly due
to acquisition of a dental equipment sales company Okamura Co., Ltd. Profitability, however, is a challengewith a 39.6% decline in operating profit to ¥0.1 billion, mainly due to two factors: a negative impact from
Google’s algorithm change, which caused a decline in attracting customer on the portal sites, and upfront
investment in the business that is related to general maintenance of health and specific preventive care andproclivity treatment2 for domain expansion.

Moving on to the next growth stage, with the aim of becoming No. 1 in theplatform business of “extending healthy life expectancy,” starting from oral
care
The Medical Net Group intends to expand to encompass more domains and evolve into a next growth stage.
In so evolving, the Group will have the aim of rising from the “No. 1 in the dental care platform business” tobecoming “No. 1 in the platform business of extending healthy life expectancy, starting from oral care.” The
Group will also strive to improve the profitability of the medical institution management support business andthe medical BtoB business and aim to achieve ¥10 billion in revenues and 10% operating margin in FY5/2025.
To this end, the Group plans to realize three measures: 1) enhancement of the No. 1 position in the dental
care platform business; 2) development of a platform business in new domains; and 3) expansion in Southeast
Asia through an overseas IPO of the dental care subsidiary.
The first measure includes expanding its own customer-collecting method, which does not depend on
Google’s algorithm, solicit 40,000 dental care-related free members to acquire paid membership, and growrevenue per member. The second measure specifically refers to developing a platform business for a new
domain of preventive care and proclivity treatment. This business will be centered around a DNA testing2“Proclivity treatment” means to find abnormality or a status of light symptoms at an earlier stage and to prevent becoming sick. This is an

important concept in extending healthy life expectancy.

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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

service to check the status of a person’s health, in order to promote overall health starting from oral care. The
third measure, expansion in Southeast Asia, has already begun with entry into Thailand in the dental carebusiness.
▉

What was achieved by FY5/2020 and is to be achieved by FY5/2025, and segment details

What was achieved by FY5/2020
No. 1 in the dental care platform business

What is to be achieved by FY5/2025
No. 1 in the platform business ofextending healthy life expectancy,
starting from oral care

Record-high revenue ¥2,917 million
But a decline in profitability, mainly due to the negative
impact of Google’s algorithm changes and upfront
investment

Operating profit ¥106 million, down 39.6% y-o-yOperating margin 3.6%¨

Revenue ¥10,000 million
1) Enhance the No. 1 position in the dental care platform
market2) Develop platform business in new domains
3) Expand in Southeast Asia

Operating margin ¥10%

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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Background and purpose of the vision
Dental care is expected to dramatically shift from treating cavities to preventive dental care and from a focus
on teeth to a broader focus on preventive care of the entire body. That is why the Medical Net Group aims tobecome No. 1 in the platform business of extending healthy life expectancy, starting from oral care. Researchadvances in the past 20 years have been made on the relationship of dental care and oral health with healthy
life expectancy, and the Japan Dental Association and the Ministry of Health, Labour and Welfare havereleased statistically meaningful research results showing that care of oral functions helped reduce risks ofillness and, in time of illness, the duration of hospital stays, detection rate of causative bacterium, and thelength of time for taking medicine, as well as helping improve QOL (see reference materials at the end of thereport). Responding to such advances, the Japanese Government in its “Basic Policy on Economic and Fiscal
Management and Reform 2019” advocated an enhanced dental and oral health policy, including provision of
appropriate information to people and life-long dental checkups, and creation of a framework to provide
dental health services. Those moves and the significance of the Medical Net Group’s new aim are summarized
below.
▉

Moves to promote dental and oral health, and the background and purpose of the vision for FY5/2025(Source) Prepared from “The current evidence of dental care and oral health for achieving healthy longevity in an aging society 2015” by the Japan
Digital Association; “Basic Policy on Economic and Fiscal Management and Reform 2019” by the Japanese Government; and “The recent
trend on dental oral health; February 7, 2020” by the Ministry of Health, Welfare and Labour

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5Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Long-term outlook in shareholder value
COVID-19 impact: short-term negative but longer-term positive
The novel coronavirus infection (COVID-19) had a short-term negative impact on the Medical Net Group via adecline in users of its esthetic sites, resulting from widespread compliance with the government’s “stayhome” self-restraint request. These sites, however, represent less than 3.5% of the media platform businessrevenues and 2.3% of profit. Moves to restrain non-essential, non-urgent dental care are also likely to depress
use of services offered by the Medical Net Group in the short term. In the longer term, however, demand is
expected to increase, as better understanding of the value of having a good oral environment results in
reducing risk of infection and its spread. Good oral hygiene with less bacteria also helps prevent aspiration
pneumonia3 and viral diseases. Moreover, the Medical Net Group may potentially expand sales of various
kinds of equipment for prevention of a nosocomial virus infection. As an example, the Medical Net Groupdecided to expand sale of “overall antibacterial coating” for dental clinics in cooperation with anothercompany in March 2020. Judging from the above factors, COVID-19 is expected to end up having a net
positive impact to the Group’s shareholder value from the long-term perspective (up to FY5/2025 as foreseenat this time).
▉

COVID-19 impacts on the Medical Net Group’s business
Negative impacts

Short-term, use of the Medical Net Group’s service has

Positive impacts(1)with a decline in users of its esthetic sites, which,

An increase in demand as a good oral environment
leads to reduce risk of virus infection.

declined due to the government’s self-restraint request,(2)

however, represent less than 3.5% of the media platform

Sale of various preventive equipment against
nosocomial infection of virus to dental clinics

business revenues and 2.3% of its profit.

Long-term impact to shareholder value is expected to be neutral.
Based on the Medical Net Group’s vision for FY5/2025 and other factors, its long-term overviews of sales areshown below in the figure.
▉Long-term overviews of sales[millions of yen]

12,00010,000
8,000
6,000
4,000
2,000
0
2021.52022.52023.52024.52025.5

3
Aspiration pneumonia is caused by the entry of bacteria in the mouth into the lungs. The elderly or bedridden patients of neural and otherdiseases who have poor oral hygiene may have more bacteria developed in the mouth. These people also tend to have weaker cough reflex andthe resultant weaker dysphagia. Artificial respirators are needed for treatment of aspiration pneumonia but these devices may be short in supply
due to the COVID-19 pandemic. If the COVID-19 risks may remain, dental care needs to prevent aspiration pneumonia are expected to increase.

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Integrated report on the medium-term shareholder value outlook

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II. Corporate summary and characteristics ofbusiness
Corporate summary▉

Corporate data▉

History
Year

2000

Month
Apr.
Sep.

Japan Internet Media Center was established and began a portal site operation business and a website production
business.
A portal site, “Implant Net”, was launched.

2001

June

Japan Medical Net Communications, Inc. was established.

2006

Oct.

Services of web marketing and medical institution management support began.

2010

Dec.

Listed in the TSE Mothers Market.

2011

Aug.

A subsidiary, GuideDent Co., Ltd., was established in Shibuya-ku, Tokyo.

2012

Nov.

Blanc Networks, Inc became a consolidated subsidiary, engaged in the medical BtoB business.

2016

Dec.

A corporate name change to Medical Net, Inc.

MayEntered into a business alliance with Dental Tribune International (Germany).

Sep.

Success Sound Co., Ltd. (present Medical Net Thailand Co., Ltd.) became a consolidated subsidiary and began
operating a dental clinic in Bangkok.

JuneEntered into a capital and business alliance with MiRTeL Co., Ltd.

2017

2018

Nov.
Mar.

2019
2020

May
Feb.

Okamura Co., Ltd. became a consolidated subsidiary, engaged in wholesale business inf dental equipment, materials,
and medicines.
Began provision of the “Shikigaku Training - Dental Clinic Edition,” jointly with Shikigaku Co., Ltd.
Entered into a capital and business alliance with Biolux Research Holdings, Inc., which manufactures and sells Ortho
Pulse®, that shortens the orthodontic treatment period and improves the efficiency of treatment.
Absorbed and merged Blanc Networks, Inc.

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Integrated report on the medium-term shareholder value outlook

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Corporate philosophy
The corporate philosophy, which is a backbone of the direction taken by management, is stated below indetail.

Vision, mission, values, and their significance to shareholders▉

Medical Net Group’s mission, objective (vision), and values

Mission (social raison d’être): Use of the internet to improve the quality of life and health of people
and make them smile
From the time it was founded in 2001, the Medical Net Group has made numerous innovations and has taken
on numerous challenges in the combined medical care and IT-and-internet field, with the aim of creating newvalue and contributing to society. Particularly in the dental care field, the Group has strived to resolve
challenges related to all kinds of demand in dental care, in addition to providing services that use the internet,
with the ultimate aim of helping realize a better dental care environment. The Group is now moving beyond
dental care and is promoting the broad supply of useful information, related not only to dental care but also
medical and beauty care, lifestyle, and child-raising support.

Objective (vision): “Provide innovative services to people and medical facility operators, and become
the top company in Japan and abroad in the dental care platform business and the specialized-domain
platform business”
Looking 5 or 10 years ahead, the Medical Net Group is committed to continuously providing innovative
services to the general population and medical operators, and to strive to raise added value of its services.

Values (organizational values): No change, no progress; Passion; Speed; Teamwork; and Respect
The Medical Net Group’s values comprise of the above five concepts, including “No change, no progress”,
which is meant to express an acceptance of a challenge like the quest for the Holy Grail. Passion refers toaspiration, initiative, responsibility, and mindfulness, while Speed puts emphasis on consciousness, ideas,
judgment, words, and actions. Teamwork incorporates concepts of cooperation, competition, synergy, andaltruism. Respect also describes appreciation, thoughtfulness, and sincerity. These concepts or values are
adopted in pursuit of growing business opportunities and enhancing efficiency.
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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Japan’s No. 1 in the dental care platform businessIn 2000 the Medical Net Group was created with awareness of the information gap between hospitals andpatients and a wish to fill in that gap by using IT. The original target was general healthcare but the focus wasthen shifted to dental care, in view of the prospect for strong needs of prospective patients who wish toproactively look for a dentist (the Company’s 1st stage).
In the dental field, dental implants and orthodontic care require special skills of dentists and such treatment is
not covered by health insurance in Japan, making prospective patients eager to find an outstanding clinic.
Online advertising therefore has high cost-benefit performance in this sector. Given the proliferation of online
ads, Medical Net created a domain-focused platform business, with the the private practice sector selected as
the targets. Medical Net subsequently became No. 1 in the dental care platform business in Japan and was
successfully listed in the Tokyo Stock Exchange Mothers Market in 2010 (2nd stage).
Having this infrastructure, Medical Net is now expanding in Japan and overseas, with the aim to become a top
company in the global dental care platform business (3rd stage).
▉

Medical Net’s business development

Expansion of business domains from the 2nd stage onward is summarized below.
▉

Actions taken after the IPO to become the No. 1 in the dental care platform business and expand
domains

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Medical Net, Inc. [3645]

Grow beyond an upfront investment phase, and pursue longterm growth and profitability
The above actions have resulted in steady revenue growth but profitability has been on a downtrend due toupfront investment. While maintaining revenue growth, Medical Net now aims at growing out of the upfront
investment phase and, further, reverse the downtrend in profitability by FY5/2025.

▉ Operating results from the IPO to FY5/2020
New businesses entry

More business diversification

Business scale expansion

The key is to grow out of an upfront investment period.

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10Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Summary of major existing businesses and keys to raising
shareholder value
Highly-profitable media platform business enables Medical Net to make upfront investment
in other businesses
Medical Net’s consolidated and by-segment revenue and profit are presented below. The media platformbusiness generates over 60% of total profit, while the medical institution management support business andthe medical BtoB business are still making a loss due to upfront investment.
▉

Consolidated and by-segment revenue and profit [Thousand yen]Media platform business: Profit pillar with 1,000 dental clinics as customers
FY5/2020 ¥804 million in revenue; ¥535 million in profit; and 66% profit margin
Strong advertising effects are the reason for high profitability to be maintained
Since its foundation in 2000, the Medical Net Group has been operating online media centered around dental
car, with its main profit source in advertising fees from clinics registered as paid members. This business
represents about 30% of consolidated revenue with a segment profit margin of about 66% in FY5/2020. In
order to increase information volume that facilitates finding a desirable clinic, Medical Net also provides a
free online service that introduces more clinics with a brief text for each. Among 68,226 dental clinics in Japanas of July 31, 2020, Medical Net captured about 10,000 clinics in its free membership program and about
1,000 clinics in its paid membership program as of May 31, 2020. Medical Net generates revenue of around¥0.8-0.9 million from each paid member. The biggest contributing sites to revenue are the Implant Net,
Orthodontist Net, and Esthetic Dentist Net – the major three fields of private dental practices. Three key
factors of revenue growth are 1) an increase in free membership, 2) solicitation of upgrades from freemembership to paid membership, and 3) revenue growth per member.

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11Integrated report on the medium-term shareholder value outlook▉

Medical Net, Inc. [3645]

Major portal sites in the dental care platform business

Site name
Implant Net
Orthodontist Net
Esthetic Dentist Net
Dentist Net
Ask Dentist
Dental job site, Denty
Life with dentures

Service content
Japan’s first comprehensive site specialized in implant treatment
Comprehensive site specialized in orthodontist treatment; provision of various contents by area and conditions
Comprehensive site specialized in esthetic dental treatment, i.e., whitening and ceramic treatment
One of Japan’s largest dental information sites that enables search of over 60,000 dentists across Japan
Dental Q&A site where dental technicians answer to dental-related questions from users
Job site specialized for employment opportunities of dental technicians, dental hygienists, assistants andreceptionists
Information site on dentures for the elderly

Three major private practice fields
Implant Net

Orthodontist Net

https://www.implant.ac/https://www.kyousei-shika.net/

Esthetic Dentist Net

https://www.shinbi-shika.net/

Approx. 10,000 clinics as members(1,000 clinics in paid membership; 9,000 clinics in free membership)(Reference: total number of dentists in Japan: 68,226 as of July 31, 2020）

While Medical Net also operates a beauty care site, a medical information site, and other sites related tohealth and beauty, the dental care-related sites represent over 80% of segment revenues and over 90% ofsegment profit.

Achieved the No. 1 position by narrowing domains to coverage of private practices
Domains of the Medical Net Group’s platforms are private practices not covered by health insurance in Japanand the private treatment tends to be expensive. Each clinic therefore has a strong desire to acquire
customers by conveying its differentiating features, such as a unique treatment policy and skills to prospective
patients. The patients also have strong desire to obtain information about private practices and clinics. The
Medical Net Group has been thoroughly satisfying needs of both sides.
Online advertising that complies with the medical advertising regulations and is appropriate to theincrease in use of internet advertising
While medical regulations have been tightened4 according to the guidelines issued by the Minister of Health,Labour and Welfare, online advertising tends to be less strictly regulated than advertising in other media.
Online advertising also has greater affinity with practices not covered by the national health system, as they
are highly profitable and have a high incentive to advertise. Diffusion and greater use of the internet have also
boosted demand for online advertising.

4

Source: “Guideline on advertisement of medical or dental practices and hospitals or clinics (Medical advertisement guideline)”, Ministry of

Health, Labour and Welfare, https://www.mhlw.go.jp/file/06-Seisakujouhou-10800000-Iseikyoku/0000209841.pdf (only in Japanese)

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Medical Net, Inc. [3645]

Current operating performance
Partly due to the impact of Google’s algorithm changes, revenue of the media platform business has been
on a downtrend since FY5/2019. However, the measures against the algorithm began to show some positive
impacts and the number of reservations and the number of page views hit record-highs in May 2020. The
Medical Net Group continues to be committed in implementing measures. It also plans to reverse the trend
by enhancing collection of captive members, accomplishing this by deploying a variety of its own sites, that
depend less on Google search. Specifically, as a company that contributes to promotion of health in acomprehensive manner, it plans to expand an overall site that promotes “health, medical treatment, beauty
care, and dental care” with a main focus on oral care and to enhance its customer collection capability.
▉

Media platform business: Quarterly revenue, profit, and profit margin

Improve own capability
to collect customers
Enhance sites that
promote health of theoral environment and thewhole body

Toward becoming No. 1 in the platform business of extending healthy life expectancy, starting fromoral care
In order to lessen the impact of Google search’s algorithm changes and to collect more customers by using agreater variety of keywords for searching, it is important to increase the quality and volume of information on
promotion of health. Medical Net believes that such action will enable the company to advance to being No. 1
in the platform business of extending healthy life expectancy, starting from oral care. The PET Testing Net has
already been launched as a site that contributes to the Company’s advance. According to the Company’s own
research, the PET Testing Net appears to be the top site of its kind in the number of searches. Such successful
experience encouraged the Medical Net Group to launch a new information site, named “for healthcare,” topromote health over a broad range, including dental and oral health, in February 2020.

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Medical Net, Inc. [3645]

Sites that provide information on promoting a broad range of health improvement
PET Testing Net

No. 1 portal site in PET testing, which is getting
noticed as an early detection method of cancer
https://www.pet-net.jp/

for healthcare

Site to provide information on factors affecting
health, and hints and ways to solve problems, forpeople to have a healthy life
https://forhealthcare.jp/

Operation of sites that promote health
To help become No. 1 in the platform business of extending healthy life expectancy,
starting from oral care

Management support business for medical institutions: returning into profit
making, with 3,000 dental clinics as customers
FY5/2020 ¥2,058 million in revenue; ¥8 million in segment profit; and 0.4% profit margin
Business outline
This business segment is engaged in the following six operations. As this segment has been making upfront
investment so as to play a role in reinforcing the media platform business, this segment has a low profit
margin. Medical Net is now aiming to turn the segment into a source of profit in the current year bygenerating synergies with Okamura Co., Ltd. – one of top dental item dealers in the Kanto Region, whichbecame a subsidiary in December 2018.
▉

Six services of the management support business of medical institutions

(1)
(2)
(3)
(4)

Provision of monthly-fixed-rate or performance-based- fee SEO service and ad agency service of listing ads
Website production and maintenance (dental clinics and esthetic salons as major customers)
Sales agency (sale of other companies’ web products and other ad media to customers of the Medical Net Group
Support for startup and management (support to find an office site and install devices when opening a dental clinic;
support to operate a dental clinic
Sale of dental equipment (sales of dental equipment, materials, and medicines by a consolidated subsidiary (Okamura)
Operation of a dental clinic (by consolidated subsidiary Medical Net Thailand in Bangkok)

(5)
(6)

High growth potential in the management support business
The medical institution management support business has only about 3,000 dental clinics as customers as ofFebruary 29, 2020, but this market is large with 68,226 target clinics across Japan as of July 2020, and with
about 2,000 new clinics being opened each year. As there is a strong demand for supporting a startup of aclinic, which requires about ¥30-70 million in capital for a dentist, this business has high growth potential.
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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Moreover, there is no major competitor in the business and Medical Net is expected to be able to raise its
market share in this domain. It also expects high potential growth in assisting in a startup of a clinic bystrengthening management support in tandem with a shift from the teeth cavities treatment to preventive
dental care, and from dental care to overall preventive care.

Digital transformation capability
Medical Net’s differentiating point in the medical institution support business is its strength in digital work
such as website production and online marketing. The Company has helped rationalize the management ofdental clinics by accepting their order placement of equipment by digital means instead of a telephone
request, and by raising transparency of processing such orders. The Medical Net Group plans to continue
using its digital transformation capability not only in website production and online marketing but also indiverse management support services, including startup support and real estate management, so as tobecome a comprehensive consultant in dental clinic operation. Moreover, the support system will beenhanced by use of AI as stated below.
▉

Online contact support system with a built-in AI function

Online contact support system with a builtin AI function on the website of dental clinics will beavailable from January 2018
Information of about 5,000 dental clinics and knowledge
from over 20,000 inquiries since 2000 will be loaded.
Nikkei Sangyo Newspaper, November 22, 2017

Nikkei Newspaper 2017/11/22

Solving dental clinics’ organizational challenges
In a business alliance with Shikigaku Co., Ltd., the Medical Net Group began providing customers with the“Shikigaku Training - Dental Clinic Edition” in FY5/2019. By combining Shikigaku’s organizational consulting
know-how and the Medical Net Group’s strength in the network of dental professionals, highly-practicalconsulting services can be provided. This service facilitates solving dental clinics’ organizational management
issues and creates an environment that enables dentists to maximally demonstrate their advanced medical
skills. The services are also intended be utilized as a foothold to solve certain challenges of the dental
industry, such as retention and development of staff.
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Medical Net, Inc. [3645]

From management support to organizational management support

A much talked-aboutorganization management
consulting firm. Its basetheory is unique, being
focused on the structure ofconsciousness.

Have an outstanding
record of supporting
over 3,000 medical
institutions nationwide.

Expanded overseas for provision of management support services: A dental clinic business in Thailand
Medical Net Thailand Co., Ltd., a consolidated subsidiary, operates a dental clinic in Bangkok, mainly targetingthe 100,000 Japanese living in Bangkok, one of the cities with the highest number of Japanese residents
outside of Japan. There is thus a strong need for a dental clinic for Japanese in Bangkok, and prospective
patients can be expected from other Southeast Asian countries. This company plans to open another dental
clinic, this one for well-to-do people in Thailand, launch a dental care platform business, and ultimately getlisted in the stock market. Over the long term, the Medical Net Group aspires to expand from Thailand toother Southeast Asian countries and ultimately to Africa, and to realize its mission “Use of the internet to
improve the quality of life and health of people worldwide and make them smile.” Medical Net also intends tobe engaged in exports of Japanese dental equipment in the future.
▉

Transborder management support service

Prompt delivery technology for dental equipment
Okamura, a consolidated subsidiary and a dental dealer, is engaged in sales of dental equipment, mainly in
the Tama Area of suburban Tokyo. Okamura intends to differentiate itself by digitalizing paper-based
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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

transaction information, using its digital transformation capability. The company’s dental SKUs amount to as
much as 200,000. The company can differentiate itself if items are consistently and promptly delivered andtransaction data are digitized.
Using the Medical Net Group’s total capability, Okamura plans to raise its market share, which is currently
about 10% in its sales region, to 40-50% in the next 5-10 years. The Medical Net Group’s aim is to achieve
revenue of over ¥10 billion at least in the roughly ¥400 billion market of dental dealers, including the primaryand secondary wholesalers, within the next 10 years. Expansion of private brands and sales areas is also in theplan.
Okamura is currently experiencing favorable sales of price-competitive private brand products, various
disinfectants and preventive equipment that prevent nosocomial infection of virus.
▉

A consolidated subsidiary that becomes a driver in the medical institution management support
busines

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Medical Net, Inc. [3645]

Current operating performance
Thanks to the acquisition of Okamura and to synergies, this business more than doubled quarterly revenues
and became profit-making on a quarterly basis. The current target is to make profit on a full-year basis.
▉

Medical institution management support business: Quarterly revenue, profit, and profit margin

The key is to growout of an upfront
investment period.

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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Medical BtoB business: 60 dental care-related companies are customers
FY5/2020 ¥51 million in revenue; ¥21 million in segment loss
Media management that connects dentists with dental-related manufacturers
The Medical Net Group operates a BtoB portal site that connects dental clinic dentists with dental
professionals and related companies, in particular dental drug and equipment manufacturers. Using themembership of the site as a base, Medical Net provides services, such as to do research on dental-relatedcompanies, receive orders for operating a convention, and to give advertising advice.

Operations of the two major media, covering both domestic and global markets
This business segment provides two media – Dentwave.com and Dental Tribune Japan edition. Dentwave.com
is an information portal site of Japanese dental clinics with approximately 32,160 dental professionals as as of
May 2020. While Dental Tribune is the world’s largest publication of its kind, specializing in a range of
information supply service in the dental field, and reaches over 650,000 dentists worldwide, Dental Tribune
Japan edition has been published since 2017 with a print run of 20,000 copies as of May 2020. The Medical
BtoB business has three major revenue sources: ad revenue from drug and equipment makers seeking to sell
to dental professionals; research service for members, such as conducting surveys; and convention planning
service. Medical Net plans to strengthen site information, which should mean to put stronger efforts inpromoting overall health. This is expected to contribute to advancing the Group to become No. 1 in theplatform business of extending healthy life expectancy, starting from oral care.
▉

Operations of the two major media, covering both domestic and global markets
Dental Tribune

Dentwave.com

As of May 2020
Paper media: 20,000 copies

As of May 2020
32,160 members

Operation of sites that promote health
To help become No. 1 in the platform business of extending healthy life expectancy, starting from oral
care

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19Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Advantage in the dental care ad industry
This business segment is currently making a loss, which, however, is regarded as tolerable, as it represents
upfront investment for capturing more business partners. Challenges going forward are to gain morecredibility by raising the precision of articles, while digitalizing more paper-based dental clinic ads; and toacquire more research projects, which will be a promising profit source with a high unit price and an 80%
gross margin.

Current operating performance
Having these media has been effective in raising the credibility and profile of Medical Net. While this businesssegment alone remains in a upfront investment phase, it allows the Group to release relevant information,
make its activities better known to more dental professionals, and at the same time assist marketing of abroader range of companies. This will ultimately contribute to Medical Net becoming a No. 1 in the platformbusiness of extending healthy life expectancy, starting from oral care. The Group seeks to make profit growthby utilizing its media with over 32,000 dental professionals and 5,000 dental clinics as readers and by
supporting marketing of diverse dental drug and equipment manufacturers, targeting dental-relatedcompanies. The segment business has been operated by Medical Net from February 2020, when it absorbed
and merged a consolidated subsidiary Blanc Networks, Inc – the previous operator of the business.
▉

Medical BtoB business: Quarterly revenue, profit, and profit margin

Expect to turn into profit making by becoming a No. 1
in the platform businessof extending healthy life expectancy, starting from oral care

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Integrated report on the medium-term shareholder value outlook

III.

Medical Net, Inc. [3645]

Growth drivers of shareholder value

Vision, and target expansion of the three types of capability
The Medical Net Group will expand target domains of its three types of capability in order to promote thefollowing three measures up to FY5/2025: 1) enhancement of the No. 1 position in the dental care platformbusiness; 2) development of a platform business of new domains; and 3) expansion in Southeast Asia startingwith an overseas IPO of the Thai subsidiary, as summarized below. The Group target is to industrialize a“platform business for preventive care and proclivity treatment” as a new domain and to promote theoperation of dental clinics in Southeast Asia, and expand the domain. These measures are expected to enablebusiness expansion to reach a broader range of dental clinics, compared to the previous focus on private
practice dental clinics. It will thus be a pursuit of evolutionary revenue growth, based on Medical Net’s
membership of over 40,000 dental professionals, including those having free membership, apart from thepast growth.
▉Target expansion of the three types of capability and the three measures
Three types of capability

Ongoing targets

Potential growth targets

Capability to explore

To industrialize online marketing of“Platform business for preventive care

underdeveloped onlineI.

private practice dental clinics

and proclivity treatment”

domains
To strengthen information sites

Capability to pursue
II.



specialty

available to both dental clinics andTo expand information sites concerning

people concerning oral healthpromotion of healthy life, that starts
from oral care

To connect dental clinics withdental related companies,

Capability to expand theⅢ.

industrialized domains

centered around information



media, and support the companies

Operation of dental clinics in Southeast
Asia

by providing advertising solutions
Mainly private practitioners,
Revenue sources in termsof customers and regions

among dental clinics
Dental-related companies

Dental clinics ex. private practitioners


Japan

General medical institutions and relatedcompanies
Southeast Asia

No. 1 in the platform business of extending healthy life expectancy, starting from oral care
1) Enhancement of the No. 1 position in the dental care platform business; 2) development ofa platform business of a new domain; and 3) expansion in Southeast Asia with an overseas
IPO of the dental care business
Revenues of ¥10,000 million; operating margin of 10%

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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Three key points in realizing the vision(1) Source to maintain competitiveness: Dental clinics’ characteristics thatcreate an entry barrier to others
The Medical Net Group’s major customers are dental clinics, which are mostly run by a dentist as both a sole
proprietor and the person with authority, unlike hospitals which have a dedicated person with authority in an
executive office or a medical office. These dentists spend most of their time in clinic to treat patients and theycan engage in business talks only before or after the treatment time or during a lunch break. It means that
opportunities to do walk-in sales to these dentists are greatly restricted. Most dental clinic operators are also
among the high-income Japanese and tend to reject numerous walk-in sales approaches.
The Medical Net Group, however, is able to reach dental clinics that are typically hard to approach for sales,
thanks to its high profile and strong track record in the dental industry. Medical Net currently puts emphasison thorough follow-up to existing customers. This entry barrier is expected to work favorably for Medical Net
to expand a domain in a new business in the future, by making it difficult for its peers to imitate businessdevelopment mainly based on dental clinic customers.

(2) Source to maintain competitiveness: Digital transformation capability
specialized in dentistry
As the Medical Net Group has been engaged in business expansion in online domains since its foundation, it isstrong in website creation and online marketing, having expert knowledge in dental clinics’ operations andtrade practices. Medical Net has also directly accumulated information of and know-how in digitaltransformation capability specialized in dentistry. Such strengths cannot be easily imitated even by major IT
companies or IT companies with strength in general medical care.
Medical Net further believes that the above two sources to maintain competitiveness are difficult to beimitated even over the long term. The company will continue to aim at remaining as the only company that
establishes platforms, connecting people with dental clinics and related companies.
▉

The Medical Net Group’s strength: An overwhelming No. 1 position in the dental domain

Continue to maintain the accumulated sources of competence
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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645](3) External environment: Changes in the dental industry
As mentioned in section I: Medium-term outlook for shareholder value, the dental industry is anticipated toexperience a shift from an emphasis on cavities treatment to emphasis on preventive dental care. The
Japanese Government’s “Basic Policy on Economic and Fiscal Management and Reform,” which has been
compiled since the launch of the Abe administration in 2013, stated for the first time that there is a role fordental checkups among disease prevention measures in 2017 and this view was stated in greater detail in2019 as shown below. Full progress of such changes over the next five years will be the most important factor
in the close at hand external environment, while Medical Net strives to realize its vision.
▉

Changes in the dental industry as a backbone to Medical Net’s growth scenario

Excerpt5 from the Basic Policy on Economic and Fiscal Management
and Reform 2019
“As oral health leads to overall health, while improving the reliability of evidence, the government will
enhance dental and oral health, including provision of appropriate information to people, life-time dental
checkups, oral health management by dentists and dental hygienists, which can help countermeasuresagainst frailty, and cooperation with medical and dental hospitals in oral function management for
inpatients. In addition to those measures, the government will establish a framework to provide dental
health and medical services, including cooperation with institutions of long-term care and welfare services
for persons with disabilities.”

Capture such significant changes of the times andaim at becoming No. 1 in the platform business of extending healthy life
expectancy, starting from oral care

5

Excerpt from page 58, https://www5.cao.go.jp/keizai-shimon/kaigi/cabinet/2019/2019_basicpolicies_ja.pdf

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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Particular measures to emphasize for expansion in new andexisting domains
New domain: Platform for preventive care and proclivity analysis
Use of saliva in DNA and micro RNA testing for early detection of diseases and proclivity
The Medical Net Group operates the portal sites to broadly enhance health in the media platform business.
With the aim of becoming “No. 1 in the healthy life expectancy platform business, starting from oral care,”
Medical Net aims to launch within the next five years a platform business for preventive care and proclivity,with DNA testing using saliva and digital sensors. Collaboration with MiRTeL Co., Ltd., a venture thatoriginated at Hiroshima University that entered into a capital alliance with Medical Net in 2015, is a key forthis business. MiRTeL conducts telomere testing to determine the proclivity state, using its unique technology
to measure the length of “G-tail” at the end of telomere of chromosome. The company has already launcheda test to determine the proclivity status and the early detecting methods of diseases, using telomere andmicro RNAs, which are contained in blood. MiRTeL is now targeting to establish a framework that allows
dentists to do testing with telomere and micro RNAs, which are contained in saliva, and are thus easy toobtain as a biopsy sample. The Medical Net Group and MiRTeL have been jointly planning and developing in
the dental area a testing business that use saliva and oral mucous of clinical samples, with an objective ofearly detection of proclivity and disease. Sales are planned to be handled exclusively by Medical Net. While
the schedule has not been determined, Medical Net aims at commercializing the business by FY3/2025.
▉

MiRTeL: Outline and significance of alliance with the Medical Net Group

Corporate profile
Corporate name: MiRTeL Co., Ltd.
Founded: September 2012
President and Representative Director: Eiji Tahara
Capital: ¥367.5 million (as of July 2020)
Major services and outlook
Operation of a test to detect diseases early only from a blood sample and a test to determine the proclivity
state
Telomere test
MiR test®
 Test to determine the proclivity state, using its  Test, which is designed for early discovery of
unique technology to measure the length of
diseases, to detect disease-specific factors“G-tail” at the end of telomere of
released from each organ (micro RNAs, etc.)
chromosome.
 It only requires to take a blood sample,
 Test to determine proclivity status, such as
resulting in a lower burden on the patient thansusceptibility to diseases caused by aging, theother existing tests.
state of health or developing disease.
 Potential diseases that cannot be confirmed by
 The telomere test enables a doctor to monitor
imaging can be detected.
the genetic fatigue rates and give a person
 Early detection of cancer or Alzheimer typeadvice for maintaining a healthy condition anddementia.
aiming for a long healthy life through Especially effective in detecting breast cancer
appropriate precautions and corrective
and pancreatic caner
measures.
 Even in patients with a high risk of disease, it ispossible to prevent development of diseases
by enhancing immunity and improving diet,etc.

The Medical Net Group and MiRTeL jointly planned and developed in the dental domain tests that
use the saliva and oral mucous of a clinical sample with an objective of early detection of proclivity
and disease. Medical Net is to be engaged only in sales.

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24Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

For reference, intention of investment in MiRTeL by major venture funds and companies is listed below. This
demonstrates how highly those investors have evaluated MiRTeL.
▉

Major venture funds and companies that have invested in MiRTeL and their intention of investment
Invested companies

The University of Tokyo Edge
Capital (UTEC) Co., Ltd./The
University of Tokyo Edge CapitalPartners Co., Ltd.
Hiroshima Venture Capital Co.,Ltd.
NTT Docomo Ventures, Inc.

Beyond Next Ventures Inc.

KYOCERA Corporation

Intention of investment

To realize a society in which thanks to medical innovation people
are less prone to disease and in which a contribution can be madeto lengthening a healthy life and reducing medical expenditures１
The fund is committed to revitalizing local economies and creating
jobs, and realizing “regional revitalization”.２
NTT Docomo and MiRTeL started to jointly study health innovation
for promoting a longer healthy life. Docomo’s knowledge in the ICT
area and MiRTeL’s knowledge in the proclivity area will be used increating a new healthy long life business.３
Beyond Next Ventures has been paying attention to MiRTeL, which
has accumulated a wealth of data and testing know-how in highlysensitive, highly-specific telomere testing and MiR testing and haveentered into alliances with many companies４.
Identifying the healthcare market as a new business field, Kyocera
started an initiative concerning proclivity testing.5

1: https://www.ut-ec.co.jp/admin/wp-content/uploads/2019/01/jp_utec_150dpi.pdf
2: http://www.h-vc.co.jp/news/140/
3: https://www.nttdocomo-v.com/release/株式会社ミルテルへの投資について/
4: https://prtimes.jp/main/html/rd/p/000000036.000017460.html
5: https://www.kyocera.co.jp/tech/new/tkaz.html

Development of technology to use breath odor sensor for disease risk testing
The Medical Net Group and Okayama University have jointly (50:50 equity ratio) conducted research on
testing technology that identifies causal relationships between breath odor and specific diseases. Results arein the patent application stage Medical Net intends to continue such research and to potentiallycommercialize a digital sensor (to be attached to a tooth) for early detection of disease. Well-known causes ofbreath odor are diverse, including tooth decay, periodontitis, decline in saliva production, and change in oral
bacteria flora. However, the currently-available sensor technology cannot identify a cause of odor generationand odor treatment is mostly limited to cleaning of the entire oral cavity, far from removing the underlying
cause of the problem. The technology jointly developed with Okayama University is to detect a local odor, andidentify a local odor-generating area.
Including such technology, the Medical Net Group intends to launch a platform that comprehensively
supports preventive care and proclivity related medical technology. The platform would use testing
technology of oral areas in addition to dental preventive care and proclivity medical services.
Conventional work of dentists is limited to the dental domain, including implant and orthodontic work, evenin case of private practices. However, if dental clinics become able to test saliva, those who mainly provide
privately-paid insurance treatment can have additional work of a new domain. Demand for DNA testing has
been rising and various kinds of testing kits are on sale but testing by medical institutions, such as dental
clinics, can be differentiated in terms of reliability of testing. As testing of saliva is cheaper than testing ofblood, this type of DNA testing can be expected to become more popular. Therefore, the DNA testing using asaliva sensor has significant potential growth. At the same time, dental offices can broaden the scope ofoperations and differentiation among dental clinics may occur. Such trend also signifies a greater role to beplayed by dental clinics in supporting people’s health – from only oral care to healthcare of the entire body.

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Medical Net, Inc. [3645]

Alliance with iRidge toward provision of the industry’s first online dental examination service, using anoral camera
Medical Net has entered into a business alliance with iRidge, Inc. iRidge supports corporate O2O (Online-toOffline) and OMO (Online Merges with Offline) activities by use of smartphones, and plans to jointly develop
online medical examination service by use of an oral camera for dental clinics, with Medical Net. According to
the Japan Dental Association’s research committee, more and more Japanese are aware of the relationshipbetween dental trouble and a disease. The study has also found that people tend to be reluctant to takeorthodontic treatment, for example, due to appearance of dental corrective devices, pain, and burden ofvisits to a clinic, in addition to expenses. In case of an online medical examination by use of an oral camera, anoral camera is provided to a patient by a dentist and a video chat via a smartphone is used for real-time
examination. This can be the industry’s first such service. In the future, a service of not-real-time consultation
by a dentist is also planned. In this service, the dentist gives a general reply or advice on the need for dental
examination and the health status of a patient. This can be effective in reducing frequency of a clinic visit andpreventing expansion of an infectious disease.
▉

About iRidge, Inc.

In keeping with the corporate mission of “Tech Tomorrow – Usetechnology to create a convenient life, rather than functions,” iRidge,
Inc. has a core business in supporting O2O (Online-to-Offline) andOMO (Online Merges with Offline) of companies by use ofsmartphones and is engaged in a broad domain, including fintech, realestate tech, and VUI (Voice User Interface). In addition to theindustry’s top-class achievement in application design anddevelopment for O2O/OMO support, iRidge has strength in application
marketing measures. Through the FANSHIP, a loyal customer nurturing
platform that is attuned to the degree of interest of each user andhelps foster blue-chip customers, the company is engaged in supporting promotion of purchasing andimprovement in customer experience.

New domain: Dental supply delivery platform business
The Medical Net Group will launch a cloud-based delivery platform business dealing in dental supplies.
Specifically, Okamura, a subsidiary, will digitize analog transactions between dental dealers and dental clinics.
This will be a business of digital transformation, which is beneficial to both dental dealers and dental clinics byimproving efficiency in transactions. As already stated, Okamura’s data of 200,000 SKUs of equipment andmaterials used in dental treatment will be digitized and become open externally, so as to broadly raise
efficiency in transactions between dealers and clinics. Potential growth can be substantial if the Medical Net
Group can acquire a certain share in this market of about ¥200 billion and achieve a margin of around 5%.

Measure to grow a particular existing business domain: Dental business inThailandJapan’s dental treatment market has been flat, as shown below. The business environment is tough and themarket is crowded with 68,000 dental clinics. In fact, the number of dental clinics exceeds the number ofconvenience stores.
In order for the Medical Net Group to achieve further growth in this market, it is important to support the
BtoB domain from the aspects of both consumption and conventional business operations as this market iswhere services and products are provided to dentists. Potential keys for revenue growth include sale ofconsumable supplies to dentists, launch of a platform that supports wholesalers of a few hundreds ofthousands SKUs in dental devices, equipment, drugs, and technical materials, and overseas expansion.

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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

It should also be important to increase the number of BtoB partners from 60 at present. Entry into overseas
markets, based on the advanced dental treatment technology in Japan, is also of importance in expanding
domains.

Medical Net’s vision (One forecast)
The Medical Net Group is combining the existing business with new domains and expanding into real channels
in addition to information domains. It also strives to create a platform to extend healthy life expectancy,
starting from oral care to the entire body. This vision is summarized in the following table.

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Integrated report on the medium-term shareholder value outlook▉

Medical Net, Inc. [3645]

Vision to be realized by FY5/2

Becoming No. 1 in the healthy life expectancy platformbusiness, starting from oral careThree types ofcapability

I. Capability to
exploreunderdeveloped
online domains“From the oral area to health of the whole body”
Comprehensive support of the health revolution, mainly through dental clinics¨¨¨
II. Capability to
pursue specialty

III. Capability to
expand theindustrialized
domains

New domain:
Delivery platformbusiness fordental treatment

 Plan to sell a wide range of dental equipment
and therapeutic medicines to 60,000 dental
clinics, as a way to promote a longer healthy
life, starting from oral care
 Creation of a value chain platform, connectedwith dental clinics, while prospering together
with sales dealers Use of Medical Net’s information platform forthe promotion of services of the company andrelated companies

New domain:
Business in thedomain ofpreventive careand proclivity

MiRTeL’s DNA testing Use of saliva for DNA testing to visualize adisease risk
Intraoral sensor
 Use of a breath odor sensor to enable toidentify an odor generating area and presenceof a disease

Enhance themedia platformbusiness

PET Testing Net
 Collaborate with the dental preventive,
proclivity domain business so as to increase
PET testing cases

Matching thetheme “From only
oral care to
healthcare of theentire body”,
enhance thecapability tocollect customersof dental clinics
and the healthcare industry

for health care
 Enhance the “for health care” – a media
platform of information to promote a broad
range of health, launched in February 2020.
Enhance support in customer collection ofdental clinics and make the platform better
known so as to capture more customers of
medical institutions

Enhance themedical institution
management
support business

Enhanced support to dental clinics and relatedcompanies
 Support management of the industry thatbroadly relates to promotion of a longer
healthy life; and support differentiation andcollection of customers
Enhancement of in-house dealers Use digital transformation power Raise shares and expand areas in delivery of
products for dentists
 Strengthen competitiveness by more broadly
handling PB products

Medical BtoB
business:
Capture demand
for ads by¨ companies under
the theme “Fromonly oral care to
healthcare of theentire body”

 Sending more information on “From only oral
care to healthcare of the entire body” via twomedia Enhance the advertising power to 32,000
dental professionals and increase ads from
related companies

Enhance themedical institution
management
support business

Dental clinic management business in Thailand
 Established marketing strategy that satisfies
regulations in Thailand Aim to expand from Thailand to other
Southeast Asian countries and Africa
 Target the wealthy locals and resident
Japanese
 Use of marketing know-how in clinic
operation
 Expand into Southeast Asia based on the
success in Thailand Expand globally the latest know-how related
to a move “from only oral care to healthcareof the entire body” in Japan¨¨As a pioneer in diverse
dentalcare related
businesses, Medical Net will
participate in new domain
activities to promote a healthrevolution centered arounddental clinics, for
improvement of people’s
health and life

¨

¨

¨

Change the conventional
work of dentists, initiate ahealth and medical
revolution, and enhancehappiness of people, dentists,and dental related companies¨¨

Introduce Japan’s latest
know-how and the capability
to support the health andmedical revolution globally

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Medical Net, Inc. [3645]

When the above vision is realized, business is expected to increase even in areas that are not related to dental
care, while transactions and the geographic range of business should also expand.
▉

Greatly expanding transactions and business arena

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Integrated report on the medium-term shareholder value outlook

IV.

Medical Net, Inc. [3645]

Shareholder value creation structure

Medical Net’s shareholder value creation structure is summarized in the following chart. Shareholder value isincreased by revenue growth, improved capital efficiency, and lower business risks. The viewpoint of the GCC
Management™6 is incorporated in the chart. This concept emphasizes Growth (in revenue), Connection(improvement in connection between people and businesses, that leads to improve return on invested
capital), and Confidence (enhanced credibility, leading to lower business risks).
▉

6

Shareholder value structure

Concept developed by J-Phoenix Research. The concept of corporate value is systematically designed in easy language. See details in a report,“Analytical Framework of the GCC Management™ (URL: https://www.j-phoenix.com/gcc_how-to-create_mid-term-plan/ for reference”

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Integrated report on the medium-term shareholder value outlook

Medical Net, Inc. [3645]

Shareholder return policy
Medical Net recognizes a return to shareholders as an important managerial target. The company’s basic
policy is to make appropriate dividend payment according to its operating performance, while securing
internal reserves and giving comprehensive consideration to operating performance, financial condition, andfuture business plans.
The Company intends to efficiently use internal reserves as capital for investment for business expansion andto raise its corporate value. The Company’s Articles of Incorporation states that an interim dividend can bemade as stipulated in Article 454, Paragraph 5 of the Companies Act.
The Company has also implemented a shareholder special benefit program in order to respond toshareholders’ support and to raise medium- to long-term investment attractiveness of its shares. Givenconsideration to opinions expressed by shareholders, the benefit program was revised on May 31, 2020 andwill be further revised on May 31, 2021 so as to enhance shareholders’ satisfaction.


Before revision
Number of shares heldRecord date

Benefit

100 shares or more

May 31QUO card worth 500 yen

After revision■ Revision as of May 31, 2020
Number of shares held

Shareholding periodLess than one year

One year or more

100 shares or more

QUO card worth 500 yen

QUO card worth 500 yen

600 shares or more

QUO card worth 500 yen

QUO card worth 1,000 yen

Notes: A shareholding period of one year or more: This refers to shareholders, who are listed on the shareholders’ list of therecord dates (May 31 and November 30) under the same shareholder number for holding one unit (100 shares) or more for thethird consecutive time at least.

■ Revision as of May 31, 2021
Shareholding period
Number of shares held

One year or more but less thanThree years or more

three years
100 shares or more

QUO card worth 1,000 yen

QUO card worth 1,000 yen

600 shares or more

QUO card worth 1,500 yen

QUO card worth 1,500 yen

1,000 shares or more

QUO card worth 1,500 yen

QUO card worth 2,000 yen

Notes: A shareholding period of one year or more: This refers to shareholders, who are listed on the shareholders’ list of therecord dates (May 31 and November 30) under the same shareholder number for holding one unit (100 shares) or more for thethird consecutive time at least.
A shareholding period of three years or more: This refers to shareholders, who are listed on the shareholders’ list of the record
dates (May 31 and November 30) under the same shareholder number for holding one unit (100 shares) or more for the seventh
consecutive time at least.

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Appendix (reference data)“The current evidence of dental care and oral health for achieving healthy longevity in an
aging society; 2015”
On March 13, 2015, the Japan Dental Association published “The current evidence of dental care and oral
health for achieving healthy longevity in an aging society; 2015”. This report of 288 pages of comprehensively
analyzed documents, which had been released in a number of countries since the beginning of the 21st
century, on how dental care and oral health contribute to achieving healthy longevity in society. The key
points are summarized below.
https://www.jda.or.jp/dentist/program/pdf/world_concgress_2015_evidence_en.pdf▉

The current evidence of dental care and oral health for achieving healthy longevity in an aging society
Analysis theme

Specific theme

Summary of conclusion
By use of PubMed* (the same applies to all themes hereafter), articles that analyzed
the relationship between having 10 or more teeth and mortality in Japan, China andEurope in 2001-2014 were reviewed. Targets of a certain age were categorized bynumber of teeth and difference in their hazard ratio was analyzed. The reviewed
studies indicate that retaining a larger number of teeth indeed results in an
extension of life expectancy, with hazard ratios (HRs) of 1.1-2.7.
・
Several reports showed a link between number of teeth and cardiovascular disease(CVD).
・
Fifteen articles that analyzed the relationship between subjective masticatory
functions and life span in Japan, China and Europe in 2005-2014 were reviewed. All thereports showed that the higher the subjective masticatory function, the relatively
longer the life-span.
・Eight articles that analyzed the relationship between teeth decay/periodontal disease
and life span in Europe and the U.S. in 2009-2014 were reviewed. The relationshipbetween life span and oral disease (dental caries or periodontal disease) was
examined, but sufficient evidence was not obtained to conclude a clear relation. On
the other hand, it was found that persons with regular oral care habits lived a longtime. For example, the risk of death was significantly lower in those persons having
adequate oral care habits (brushing teeth at least twice a day, visiting a dentist atleast once a year, cleaning dentures).
・
185 articles in 2000-2014 were reviewed. The articles showed that dentists could
contribute to the improvement of diabetes by working in cooperation, as diabetes
affects diseases of the oral cavity, and in particular, it is closely associated withperiodontal diseases.
・
There is a possibility that performing oral health care may lead to early detection ofdiabetes or provide an opportunity to edify patients in the pre-diabetic stage.
・

Tooth number andlife span

Oral health and life
span

Mastication and life
span

Oral disease (dental
caries or
periodontal
disease), oral careand life span

Oral care,periodontal disease
and prevention ofdiabetes
Oral care,periodontal disease
and respiratory
diseases including
pneumonia
Effects on lifestylerelated diseases,
non-communicablediseases・

Articles published in January 2010 – January 2014 were reviewed. Some articles
pointed out that respiratory diseases including pneumonia are associated with oral
care and periodontal disease. However, further studies are needed concerning the roleand importance of dental profession in the prevention of respiratory disease.

・

Articles published in January 2014 – March 2014 were reviewed. Oral adverse events
that occur in association with cancer treatment interfere with smooth cancer
treatment, and sometimes affect patient life prognosis. It was confirmed thatappropriate oral hygiene management prior to initiation of cancer treatment is usefulin reducing the risk of occurrence and severity of oral adverse events.
Mostly articles published in April 2003 – April 2014 were reviewed. The results
showed that although many reports acknowledge the association between
periodontal disease and cardiovascular disease, currently the causal relationship isstill unclear.
In the future, new studies are required to assess associations between oral healthconditions and cardiovascular disease using indicators other than periodontitis, and toinvestigate prevention of cardiovascular disease or its recurrence through treatmentof periodontal disease.
Articles that were available for verification as of July 2014 were reviewed. There is no
doubt that metabolic syndrome and oral health, mainly periodontal disease, areassociated with each other in some way or other. However, sufficient evidence is stilllacking with regard to the direction or causality of their association. Therefore, inorder to elucidate the association between metabolic syndrome and oral health, it isnecessary to continue to accumulate many studies.

Role of oral care incancer treatment
・
Oral health andcardiovasculardiseases・・
Metabolic syndrome* PubMed is a free search engine accessing primarily the MEDLINE database of references and abstracts on life sciences andbiomedical topics. The United States National Library of Medicine (NLM) at the National Institutes of Health maintains the
database as part of the Entrez system of information retrieval.

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Integrated report on the medium-term shareholder value outlook

Analysis theme

Specific theme
Oral health andcerebrovasculardiseaseOral health anddementia
Association
between oral
health and main
illnesses
underlying
conditions thatnecessitate longterm care

Oral health andfalls and fractures

Periodontal
disease andrheumatoid
arthritis
Oral health andconditions thatnecessitate longterm care

Exercise

Oral health,physical fitness
and ADL among
the elderly

Nutrition

Dental/oral healthand nutrition

QOL (Quality ofLife)

Oral health and
QOL

Medical Net, Inc. [3645]

Summary of conclusion
Papers and their references published in April 2003 – April 2014 werereviewed. The results showed that the association between periodontal
disease and cerebrovascular disease is stronger in those with increased
tooth loss, as well as in cases where periodontal tissues were destroyed.
However, the direct causal relationship between the two has not beenclarified, and future research is needed, including more follow-up studies,and intervention studies are needed.
・ In April – May 2014, the papers that studied association between oral healthand future onset of dementia or cognitive decline were searched. The review
examined original papers of longitudinal or intervention studies from Japanand abroad to determine whether oral health is associated with future onset
of dementia and cognitive decline. The results found that, in most of thestudies, significant associations were reported between oral health andfuture onset of dementia and cognitive decline.
・ In April – May 2014, the papers were examined to find whether poor oral
health led to an increased risk of future incidence of falls and fractures.
Many of those studies had demonstrated that loss of occlusal support and
not using dentures after tooth loss were risk factors for future falls.
Moreover, it was also revealed that having periodontal disease or a low
number of teeth increased the risk of future hip fractures.
・ Articles published by June 1, 2014 were reviewed.
・ The results of intervention studies, case-control studies, cross-sectional
studies and basic studies showed that periodontal disease was associatedwith rheumatoid arthritis, and that the prevention and periodontal
treatment could improve symptoms of rheumatoid arthritis. However, as
the effects have only been observed in some symptoms, further examination
will be necessary.
・ Favorable oral health conditions, including use of dentures, wereassociated with a lower future occurrence of conditions that necessitate
long-term care. There is a possibility that the incidence of conditions
requiring long-term care could be decreased by further spreading health careinterventions aimed at maintaining oral health of the older individuals.
・ The papers published in Japanese or English in January 1, 1995 – April 1,2014 were reviewed.
・ Elderly persons oral conditions and functional fitness are associated with
their balance function, lower extremity muscle strength and upper extremity
muscle strength, which were indicated to be related to occlusion andmasticatory performance, and deterioration in occlusal condition was
indicated to have a detrimental effect on balance function and lower
extremity muscle strength over time.
・ Since the association between oral health status and ADL is thought to beindirect as a result of being mediated by nutritional status and physicalfitness, maintenance of oral health status and rehabilitation of oral function
were considered to ultimately lead to prevention of decreases in ADL
through these mediators.
・ English papers published in August 2001 - April 2014 were reviewed.
・ Tooth loss was associated with dietary intake of predominantly vegetables
and fruit and a decrease in nutrient intake of mainly vitamins withantioxidative effect.
・ A literature search using PubMed and the Igaku Chuo Zasshi website
database (ICHUSHI) were conducted on May 18, 2014.
・ A significant association was identified between oral health and healthrelated QOL, and a possible contribution of maintenance/improvement ofgood oral health to the enhancement of QOL was suggested.
・

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Material submitted to the Central Social Insurance Medical Council: Effects oforal function caretaking
On November 22, 2013, in the Central Social Insurance Medical Council, an advisory body of the Minister of
Health, Labour and Welfare that discusses various aspects of the Japanese health insurance program, andrevision of medical fees, etc., the caretaking results of the oral function were studied by the Dentistry and
Oral-Maxillofacial Surgery Department of the Chiba University Hospital for a period of 9 years and 10 months(January 2004 to October 2013) and findings were presented as the “Effects of oral function caretaking”(https://www.mhlw.go.jp/file/05-Shingikai-12404000-Hokenkyoku-Iryouka/0000030114.pdf in Japanese only)
The results were summarized in the following tables. Oral function caretaking reduced the length of hospital
stays by 1.1-53.2% for eight types of targets. Oral function caretaking also reduced oral malignancy patients’hospital stay for radio chemotherapy by 10.5% and their treatment period by 18.7%. Moreover, oral function
caretaking also reduced the detection rate of pathogens by 10-54%.
▉

Effects of oral function caretaking to reduce the length of hospital stay
Results
Those not taken careThose taken care
TargetNumber ofsamples

Days in thehospital (A)

Number ofsamples

Days in thehospital (B)

271

102.4

210

77.9

23.9%

52
63
64
60
20

42.0
38.6
135.3
108.0
124.8

108
110
55
103
40

29.0
29.0
84.3
96.0
114.2

31.0%
24.9%
37.7%
11.1%
8.5%

20

122.9

28

57.5

53.2%

18

60.7

31

43.2

28.8%

Dentistry and OralMaxillofacial Surgery
Gynecology Surgery
Cardiovascular Surgery
Pediatrics
Overall
Leukemia
Hematology
MalignantLymphoma
Plasmacytoma▉

Decline ofdays in thehospital
1-(B)/(A)Oral malignancy patients: Effects of oral function caretaking to reduce the length of hospital
stay for radio chemotherapy
TargetDecline of daysin the hospital
1-(B)/(A)Number ofsamples

Days in thehospital (A)

Number ofsamples

Days in thehospital (B)

33

84.0

54

75.2

10.5%

33

31.5

54

25.6

18.7%

Length of hospital
stay
Treatment period▉

Results
Those taken careThose not taken care

Oral malignancy patients: Effects of oral function caretaking to reduce the detection rates ofpathogensThose not taken care
Number of
Detection rate
samplesResults
Those taken care
Number of
Detection rate
samples

Decline indetection rate
% points

Oral swab

132

58%

92

41%

17

Coughedup sputum

146

56%

108

36%

10

Oral swab

23

65%

30

30%

35

Coughedup sputum

30

70%

30

16%

54

Sample bodies fromwhich pathogens weredetected
Postsurgery

Radiochemotherapy

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Disclaimer
This material includes forward-looking matters such as forecasts, prospects, targets, and plans related to
Medical Net, Inc. (hereinafter referred to as “Medical Net”). These are based on the predictions made at thetime based on information obtained by Medical Net at the time of preparation of this document. Certain
preconditions and assumptions are adopted in this document, including subjective projections and thosewhich are not judgments of Medical Net’s executives.
Also, various risks and uncertainties may prove to be inaccurate in the future or may not be realized in the
future. Therefore, the actual results, business results, financial condition, etc. of the Medical Net Group may
differ from its forecasts, outlooks, targets and plans. For this reason, the Medical Net Group has no obligationor policy to update such information to the latest information from time to time regarding the forecasts,
prospects, targets, plans, etc. posted in this document.
The information contained in this document is for informational purposes only and is not intended for
application, investment solicitation, or sales recommendation in any securities, financial products, ortransactions. At the same time, the accuracy, completeness, fairness, and certainty of the content are notguaranteed. Therefore, Medical Net is not responsible for any damage caused as a result of using thisdocument. The copyright of this document and all other rights related to this document belong to Medical
Net.

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