MEDICAL SYSTEM NETWORK Co., Ltd.
First Quarter of Fiscal Year Ending March 2023

Earnings Report

Prime Market of Tokyo Stock Exchange ; Securities Code: 4350

About contents covered* The contents of this report pertaining future earnings described are based on information

the company has held, and on certain assumptions supervising rational judgement, andare not what the company promises to achieve. There are numerous factors that may
cause actual earnings to differ. Caution is given to the accuracy of information, and we donot take responsibility for loss etc., as a result of misinformed information.

* Furthermore, this report is not prepared for the purposes of investment solicitation.

Readers are responsible for their own judgement in any decision regarding investments.

Please see the following link for our English information.

https://www.msnw.co.jp/eng/

2

FY3/2023 1Q : Topics and Business Overview
 1st Quarter Results
Community pharmacy business exceeded our initial plan, despite a decrease in profit YoY
All three pharmacy support businesses* started strong, exceeding our plan
* Pharmaceuticals Network Business, Manufacture and Market Pharmaceuticals Business, and Digital Shift Business‐ vs. initial plan –・1Q results exceeded our initial plan
 Unit price of prescriptions +1.7% compared to plan Appropriate expense control‐ YoY change –・ Net sales increased due to the contribution both of new community pharmacies and pharmacies acquired
through M&A.
The steady growth in the number of new affiliates of the pharmaceutical network also contributed.
 2022 Dispensing fees for all pharmacies + 0.7% (YoY) 7,812 pharmaceutical network affiliates at the end of June 2022 (+411 compared to theend of the previous fiscal year)
・ Decrease in profits due to the revision of NHI drug prices and dispensing fees, and an increase in labor costs
accompanying the enhancement of our interpersonal services at community pharmacies, etc.
June 30, 2022 Digital shift business: 1,549 installed pharmacies (up 638 from the end of previous FY).
 2,194 order received pharmacies (up 551 from the end of previous FY).



April 2022 NHI drug prices and dispensing fees revision details were announced

As of April 4, 2022 shifted to the "Prime Market" segment of the Tokyo Stock Exchange
3

Table of Contents

Earnings Highlight・・・

5

Business Summary

・・・

11

Core strategies, Earnings Forecast for
FY3/2023

・・・

21

4

1
Earnings
Highlight

5

FY3/2023 1Q : Consolidated results

FY3/2022
1Q (results)

FY3/2023
1Q (plan)

FY3/2023
1Q (results)（Unit: million yen）

Net sales

25,914

26,272

26,299

EBITDA*1

1,359

－

1,061

Profit margin

5.2%

Operating profit

667

Profit margin

2.6%

Ordinary profit

935

Profit margin

3.6%

YoY
ChangeChange (%)

FY3/2023
FY3/2023
1Q Progress rate Full year forecast+ 384+ 1.5%

100.1%(298)(21.9%)

－

4.0%

225

348
1.3%

*2

282

392
1.5%

110,000
6,200
5.6%

(318)

(47.7%)

154.4%

3,500

(543)

(58.1%)

139.0%

3,700

(492)

(84.4%)

168.1%

1,750

3.2%

3.4%

Profit attributable toowners of parent

583

Profit margin

2.3%

Earnings per share
(Yen)

19.37

54

91
0.3%

－

3.02

1.6%

(16.35)

－

－

57.99

*1 EBITDA is the calculated value of “operating profit + depreciation + amortization of goodwill”*2 Includes 263 million yen in subsidy income for countermeasures against COVID-19

6

FY3/2023 Results and forecast of Business Performance
・ In the 1st quarter, both of net sales and operating profit exceeded our initial plan・ From the 2nd quarter onward, operating profit is expected to grow steadily due to an increase in thenumber of network affiliates, a projected increase in the number of prescriptions with seasonal factors,
and the mitigated negative impact of the revision of dispensing fees.
150,000

5000【 Projected in Net Sales and Operating Profit 】■Net sales ■ Operating profit（unit : million yen）

110,000
100,000

4000

3,500

・ Unit price of prescriptions +1.7%
compared to plan
・ Appropriate expense control

3000

53,4602000

50,0001,120

26,29926,272

1000

348

225

0

0

2Q Total

1Q Total
plan
計画

実績
resultsplan
画計画

3Q Totalplan
計画

4Q Totalplan
計画
7

FY3/2023 1Q : Results in each segment part
■Net sales（Unit: million yen）

Net sales

FY3/2022(results)

ChangeChange(%)

25,914

26,299+ 384+ 1.5%*1

24,65725,045+ 387+ 1.6%

*2

1,399

1,444

+ 44

+ 3.2%

(143)

(190)

(47)

Community Pharmacy
Network Segment

Other 3 Segments
Adjustments■Operating profit(Unit: million yen)
Profit margin in brackets

Segment profit
Community Pharmacy*1
Network Segment
Other 3 Segments
Adjustments

FY3/2023(results)*2

FY3/2022(results)

FY3/2023(results)

Change－Change(%)

667

348

(318)

2.6%

1.3%

(1.3pt.)

1,202

1,014

(187)

4.9%

4.1%

(0.8pt.)

(11)

(57)

(45)

－

−

－

(523)

(608)

(84)

－

－

－

(47.7%)(15.6%)－－*1 Community Pharmacy Business, Pharmaceutical Network Business, Manufacture and Market Pharmaceuticals Business, and Digital Shift Business*2 Leasing and Facility related Segment, Meal Catering Segment, and Home Visit Nursing Segment8FY3/2023 1Q : Consolidated balance sheet■End of FY3/2022（Unit: million yen）

■End of FY3/2023 1Q（Unit: million yen）

Assets62,941 Liabilities

49,654

Assets64,964 Liabilities

51,788Current assets

18,701 Current liabilities

20,435Current assets

19,392 Current liabilities

21,146

Cash and deposits

8,201 Short-term loans*1

5,772

Cash and deposits

7,677 Short-term loans*1

6,388

Fixed liabilities

30,642

Fixed assets

45,572 Long-term loans

21,714

13,286

Tangible fixed assets

26,444 Net assets

13,175

12,767 Capital stock

2,128

Intangible fixed
assets12,490 Capital stock

2,128

Goodwill

12,254 Capital surplus

1,182

Goodwill

11,971 Capital surplus

1,182

Investments andother assets

6,848 Retained earnings

10,393

Investments andother assets

6,637 Retained earnings

10,270Treasury stock(326)

Fixed liabilities

29,219Fixed assets

44,239 Long-term loans

22,891

Tangible fixed assets

24,624 Net assets

Intangible fixed
assetsTotal assets

62,941

Total liabilities andnet assets

Equity ratio*2（Equity ratio with taking into account net cash

Treasury stock
64,964

Total liabilities andnet assets

62,941

Total assets

21.1%

Equity ratio

24.2%)（Equity ratio with taking into account net cash

(326)
64,96420.2%*2

23.0%)*1 Includes long-term loans that will be repaid within the year
*2 Own capital / (Total assets – Cash and deposits)

9FY3/2023 1Q : Consolidated cash flows
Cash flows fromoperating activities

Cash flows frominvesting activities

653

EBITDA*
Income taxes paid
Changes in working capital

1,061 million yen(769) million yen
521 million yen

million yen* Calculated by “operating profit + depreciation + amortization of goodwill”(369)

Acquisition of building fixtures, etc.

(328) million yen

Loan amount reduced(561) million yen

million yen

Cash flows fromfinancing activities(807)
million yen

102
Business
Summary

11

Community Pharmacy Business :Trends in number of pharmacies
3 new outlets and 2 outlet closures since the end of previous FY
ポイント〔Medical Mall〕

Hokkaido area

123
outlets〔Medical Mall〕〔Located near medical institutions〕 〔 Nanohana Pharmacy

Sagamihara Hoshigaoka〕
Tohoku area

Chugoku/Shikoku area

24 outlets

21 outlets〔Nanohana Pharmacy Magome Station〕

Kyushu area
Kanto/Koshinetsu area

〔 Nanohana Pharmacy Harima
Himeji Medical Center 〕

63 outlets

98 outlets

Kinki area

Tokai/Hokuriku area

53 outlets

44 outlets(as of June 30, 2022)■Community pharmacy outlet number※trends of the past 10 years

FY3/2014 FY3/2015 FY3/2016 FY3/2017 FY3/2018 FY3/2019 FY3/2020 FY3/2021 FY3/2022
Openings

FY3/2023
1Q

14

10

9

8

8

5

8

7

12

3

(7)

(13)

(8)

(4)

(5)

(14)

(15)

(13)

(6)

(2)

M&A

45

27

7

20

19

30

3

6

3

0

Number of outlets

321

345

353

377

399

420

416

416

425

426

Closings and transferringof businesses

12Community Pharmacy Business :Monthly dispensing fee（YoY)

Dispensing fee of all pharmacies (YoY)
Dispensing fee of existing pharmacies (YoY)

5.6

5.6

4.2
1.2

4.5

6.9
3.9

4.4

1.6
3.4

2nd half total
all pharmacies +2.5%
existing pharmacies +0.7％

(1.8)

4.4

5.3

2.8

0.6

3.2

2.1

1.5

0.5

3.2
1.7

1.6

(0.6)

(0.5)

0.9

(1.7)
1.9

(0.7)

(2.3)

(3.4)
1st half total
all pharmacies +3.7%
existing pharmacies +2.6％

Apr
2021

May

Jun

Jul

Aug

Sep

1Q total
all pharmacies +0.7%
existing pharmacies (0.4％)

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

2022

* Existing pharmacies definition: Pharmacies that have been continuously open since April 1, 2020 for the previous fiscal year and since April 1,
2021 for the current fiscal year

13

Community Pharmacy Business :Monthly prescription volume and unit price of Existing Pharmacies（YoY)
Unit price of prescriptions declined due to the revision of dispensing fees

Unit price (YoY)

2nd half total
Unit price +0.2%
Number of prescription +0.5％

Number of prescriptions (YoY)
12.2

10.7

6.8
5.3

2.9

3.6

2.1

2.1

3.5

2.8

(5.6)

(1.8)

0.7

(2.2)

(3.2)

0.1

(0.6)

(0.2)
0.8

3.7

1.9

(1.5)

0.0
(1.9)

(3.2)

(2.4)

(1.7)

(1.7)

(0.8)

(10.4)

1Q total
Unit price (0.7%)
Number of prescription +0.3％

1st half total
Unit price (3.2%)
Number of prescription +5.9％

Apr
2021

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

2022

14

Community Pharmacy Business : Dispensing fee breakdown■All pharmacies
No. of prescriptions (1,000)
Drug charge perprescription
Unit priceTechnical fee per(yen)prescription
Total
Dispensing fee (million yen)

FY3/2022
1Q

FY3/2023
1Q

ChangeChange
(%)

2,185

2,230

+ 45

+ 2.1%

7,742

7,620

(122)

(1.6%)

2,435

2,421

(13)

(0.5%)

10,177

10,041(135)(1.3%)

22,23822,399+ 160+ 0.7%

2,132

2,138

+5

+ 0.3%

7,730

7,661

(69)

(0.9%)

2,438

2,437

(2)

(0.1%)

10,168

10,097(71)(0.7%)

21,687

21,593(93)(0.4%)■Existing pharmacies
No. of prescriptions (1,000)
Drug charge perprescription
Unit priceTechnical fee per(yen)prescription
Total
Dispensing fee (million yen)

*Dispensing fees are calculated based on the number of prescriptions x unit price of prescriptions

15

Community Pharmacy Business : Dispensing fee revision
Acquisition of dispensing fee is progressing mostly as planned. We are continuing to focus oninterpersonal services

Basic dispensing fee ratio(points)
Pre-revission :Basic fee 1
Basic fee 2
Basic fee 3-b
Special basic fee

42
26
16
9

Post-revission :Basic fee 1
Basic fee 2
Basic fee 3-b
Basic fee 3-cSpecial basic fee

42
26
16
32
7

FY3/2022（End of March 2022）

FY3/2023 1Q(End of June 2022)

FY3/2023 plan（End of March 2023）

Pre-revission Results

Post-revission Results

Target9points
5outlets
1.2%
16points
42points
178outlets 239outlets
41.9%
56.2%
26points
3outlets
0.7%

26points
42points
4outlets
5outlets
0.9%
1.2%
16points
7points
42points
6outlets 32points 170outlets
5outlets
39.9%
1.4% 241outlets 2.8%
56.6%

26points
0.9%

42points
1.2%
7points
2.1% 32points
56.1%

16points
39.7%

Weighted average per prescription Weighted average per prescription Weighted average per prescription
31.4 points
25.8 points
25.6 points

Generic drug dispensing premium ratio (points)
Pre-revission :85% or higher
80% or higher
75% or higher

28
22
15

Post-revission :90% or higher
30
85% or higher
28
80% or higher
21

0point42outlets
15points 9.9%
45outlets
28points
10.6%
248outlets
58.3%
22points
90outlets
21.2%

0point64outlets
15.0% 30points
95outlets
21points
22.3%
72outlets
16.9%
28points
195outlets
45.8%

0point 30points
15.3%
22.1%
21points
22.5%
28points
40.1%

Weighted average per prescription
21.8 points

Community support system premium ratio (points)
Pre-revission :Community support
system premium
38

Post-revission :Additional fee for community
support system 1
39
Additional fee for community
support system 247
Additional fee for community
support system 3
17Additional fee for community
support system 4
39

Weighted average per prescription Weighted average per prescription
22.1 points
21.9 points
39points
39points
49outlets
8.2%
11.5%
(additional(Additionalfee 1)
0pointfee 1)
38points
0point173outlets
0point199outlets
35.3%
226outlets 46.8%
47points
47points
40.6%
39points
148outlets
37.3%
53.2%
39points
1outlet17points 34.8%
0.2% 17points
0.2%(Additional 55outlets(additional 19.0%
12.9%
fee 4)
fee 4)
Weighted average per prescription Weighted average per prescription Weighted average per prescription
19.7 points
25.1 points
25.7 points

16

Pharmaceuticals Network Business : Earnings summary
Network affiliates remained steady, up 411 from the end of the previous FY to 7,812■ Full year

+1,499 for
FY3/2023
target■ 1Q■Network affiliates (actual)■Network affiliates (net increase)（Unit: No. of network affiliates）

7,401（Unit: No. of network affiliates）

7,812+1,455+1,285+1,281

6,116

+871

5,245
3,790

+411
251
FY3/2019

FY3/2020

FY3/2021

FY3/2022

FY3/2023■Ordering volume of pharmaceuticals

FY3/2019

FY3/2020

FY3/2021

FY3/2022

FY3/2023■ FY3/2022 Breakdown of network affiliates (New/Withdrawal)（Unit : billion yen）

1Q

449.2
391.7
336.7
233.7

3Q

4Q

Total

New

405

395

379

463

1,642

Withdrawal

(154)

(62)

(76)

(65)

(357)

■ FY3/2023 Breakdown of network affiliates
123.6

FY3/2019

2Q

FY3/2020

FY3/2021

FY3/2022

1Q

New

525

Withdrawal(114)

FY3/2023

17

Pharmaceuticals Network Business :Network affiliates distribution map (as of June 30, 2022)
ポイント（Unit: No. of network affiliates ）Total

General
MSNW
network
community
affiliates
pharmacies
7,386
426

Total
7,812

7,943 network affiliates
as of July 31, 2022
18

Manufacture and Market Pharmaceuticals Business /Leasing and Facility related Business

As of June 30, 2022

3 billion yen
Net sales
1Q
Sales to network affiliates

Available products (ingredients) :82 products (41 ingredients)

1.8 billion yen(As of July 1, 85 products (42 ingredients))

1.1 billion yen

0.4 billion yen

1,698 affiliates

1,732 affiliates
0.63 billion yen

1,116 affiliates

0.39 billion yen

Mar/2021

Mar/2022

Sales to network affiliates :1,732 affiliates(End of FY 3/2023 target : 2,700 affiliates)

369 affiliates

Mar/2020

Mar/2023

Occupancy rate trends in Wisterias (serviced elderly housing facilities)
100%●98.7%（Wisteria Kiyota）●87.5%（Wisteria N17）●85.2%（Wisteria Otaru Inaho）●76.8%（Wisteria Senri Chuo）●69.0%（Wisteria M1）

90%
80%

All 5 facilities occupancy rate: 81.8%

70%
60%

End of FY 3/2023 target :90% occupancy rate
Jun/2020 Sep/2020 Dec/2020 Mar/2021 Jun/2021 Sep/2021 Dec/2021 Mar/2022 Jun/2022

19

Digital Shift Business : Exceeded 370K user registrations
・ Steady growth in both orders and installations as the needs to strengthen interpersonal
operations grows, coupled with an increase in the number of pharmaceutical network affiliates
・ The Number of registered LINE friends "Tsunagaru Pharmacy" exceeds 370,000■ Number of users registered and number of order
received / installed pharmacies
40
35
30
25

Official LINE Account■ Major additional functions in 1Q• Pharmacy Favorite Registration & QR Code Issuance
Function
3,000
370K users• Enhanced Medication Follow-up
2,194（ Scheduled transmission, message templates ）2,500
Order received
pharmacies• Enhanced Online Medication Guidance（ Reservation function, cash on delivery payment
2,000
supported ）• Refill Prescription Support

20
15
10
5
0

1,500

•
1,549
Installed
1,000 •
pharmacies
•
500

0

Increase in the number of images that can be sent forprescription transmission
Expansion of items displayed in the usage results report
Establishment and announcement of special business hours(for Japanese Golden Week)■ Start of same-day medication delivery service demonstration pilot program
Began a verification experiment of same-day medication delivery service foronline medication guidance using "Tsunagaru Pharmacy" at some of ourNanohana Pharmacy outlets

3Core strategies,
Earnings
Forecast for
FY3/2023【Republish】

21

FY3/2023 : Core strategies

Republish

Core strategies and numerical targets for the current fiscal year
Community
Pharmacy
Business

Community
Pharmacy
Network
Segment

Pharmaceuticals *Network Business
Manufacture and*MarketPharmaceuticals
Business
Digital Shift*

Strengthening interpersonal work and provide quality drug treatment

Acquisition of prescriptions using on-line (LINE, prescription transmission) tools

Development of 15 pharmacies, mainly in medical malls

8,900 affiliates at the end of March 2023 (+1,499 YoY)

Building a system to reach 12,000 affiliates longer termFurther promotion of streamlined distribution

Expansion of services for affiliates

Expand clientele, primarily amongst our pharmaceutical network affiliates→ Target 2,700 at the end of March 2023 (+1,002 YoY）



Expansion of pharmacies with official LINE accounts→ Target Order received 4,400 (+2,757 YoY) / Installed 3,400(+2,489 YoY) at theend of March 2023

Business
Leasing and facility related Segment

Achieve 90% occupancy ; steady operation

Meal Catering Segment, Home Visit
Nursing Segment

Safety-first operation

Steady balance of payments

FinanceSecuring profits through cost control

ESG/Health management

Projects according to SDGs; promote CSR activities* 3 Pharmacy Support Businesses
22Earnings forecast for FY3/2023 :Republish

Consolidated forecasts

Although the number of pharmaceutical network affiliates is expected to grow steadily and the number ofprescriptions filled is expected to increase (Net sales will increase), Income is expected to decrease due to costprecedence from new store openings and dispensing fee revisions, etc.

(Unit: million yen)

FY3/22(results)

FY3/23(forecast)

ChangeChange (%)

Net sales

106,685

110,000

EBITDA

6,708
6.3 %

Operating profit

3,852

3,500

(352)

Profit margin

3.6 %

3.2 %

(0.4 pt)*1+ 3,314+ 3.1 %

6,200

(508)

5.6 %

(0.7 pt.)(7.6 %)

Ordinary profit

4,313

3,700

(613)

Profit margin

4.0 %

3.4 %

(0.6 pt.)

Profit attributable to owners ofparentProfit margin

Earnings per share
(Yen)

*2

2,394

1,750

(644)

2.2 %

1.6 %

(0.6 pt.)

79.35

57.99

(21.36)(9.1 %)(14.2 %)

(26.9 %)－

*1 Includes 421 million yen in subsidy income for COVID-19*2 Includes 272 million yen increase due to one-time factors such as gain on sales of investment securities

23

Earnings forecast for FY3/2023 :Republish

Forecast in each segment■Net sales(Unit: million yen)

FY3/22

FY3/23(results)(forecast)

ChangeChange (%)

106,685

110,000+ 3,314+ 3.1 %

Community Pharmacy
Network Segment*1

101,457

104,701+ 3,244+ 3.2 %

Other 3 Segments*2

5,954

6,172

+ 218

+ 3.7%

Adjustments

(727)

(874)

(147)

－

Net sales■Operating Profit(Unit: million yen)
Profit percentage in brackets

Segment profit

Community Pharmacy
Network Segment*1

Other 3 Segments*2
Adjustments

FY3/22

FY3/23(results)(forecast)

ChangeChange (%)

3,852

3.6 %

3,500

3.2 %

(352)

（0.4 pt.）(9.1 %)

6,117

6.0 %

6,026

5.8 %

(90)

（0.2 pt.）(1.5 %)

28

0.5％

61

1.0 %

+ 32

+ 0.5 pt.

+114.1％(2,293)－(2,588)

－

(294)

－

－

*1 Community Pharmacy Business, Pharmaceutical Network Business, Manufacture and Market Pharmaceuticals Business, Digital Shift Business*2 Leasing and Facility related Segment, Meal Catering Segment, Home Visit Nursing Segment

24New commercial featuring actress
Momoko Fukuchi now on view

QR Code for
New CM YouTube
Click

MEDICAL SYSTEM NETWORK Co., Ltd.
https://www.msnw.co.jp/

MSNW

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