MEDICAL SYSTEM NETWORK Co., Ltd.
Second Quarter of Fiscal Year Ending March 2024

Earnings Report
Standard Market of Tokyo Stock Exchange ; Securities Code: 4350

1

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

FY3/2024 2Q : Topics and Business Overview■ 2nd Quarter Results
Net sales remained strong, and profits at all levels increased
significantly YoY and exceeded the plan by a wide margin.

Figures in parentheses indicate changes from the end of the previous FY* YoY‐ YoY change ‐＜ Community Pharmacy Network Segment ＞● Increase in Net sales and profit(Net sales +5.9%, Operating profit +55.7%)

Community Pharmacy

434 pharmacies（+6）

Prescription Unit price(All pharmacies)

10,033 yen（-28 yen）*

・ The unit price of prescriptions declined on the back of the end of
the transitional measures for additional fees related to community
support system.
→ Existing pharmacies unit price of technical fee -3.1%

No. of prescriptions (All pharmacies)

4,777K （+5.8%）*

No. of prescriptions (Existing pharmacies)

4,642K （+4.0%）*・Due to category 5 migration of COVID-19, infectious disease
outbreaks, prescription transmission benefits through the impact
of DX utilization, and medication follow-ups we saw ;→ No. of prescriptions at existing pharmacies +4.0％

Pharmaceutical Network Business~ Our 3 Pharmacy Support Businesses ~•No. of affiliates

9,374 affiliates （+462）

Manufacture and Market Pharmaceuticals Business‐ vs Forecast ‐•No. of ingredients

47 ingredients（+2）•

No. of products

98 products（+5）● Both of Net sales and profit exceeded the plan.
(Net sales +3.3%, Operating profit +114.1%)•

No. of affiliates

3,894 affiliates（+663）*

・No. of prescriptions filled at existing pharmacies +1.9% vs. plan・No. of Pharmaceutical network affiliates fell short of the plan, butordering volume of pharmaceuticals increased compared to theplan.

Digital Shift Business■ Upwardly revised full-year earnings forecast and increased
dividend forecast＜ Leasing and Facility related Segment ＞•

No. User registrations

842K（+193K）•

No. Installed pharmacies

4,195 pharmacies（+804)

Wisteria•

Occupancy rate of all 5 facilities

82.1%（+1.7%）

3

Table of Contents

Earnings Highlight・・・

5Core strategies, Business Summary

・・・

13

Earnings Forecast for FY3/2024, Revised
dividend forecast

・・・

27

4

1
Earnings
Highlight

5

FY3/2024 2Q : Consolidated Results
FY3/2023
2Q (results)

FY3/2024
2Q (plan)

FY3/2024
2Q (results)（Unit: million yen）

YoY
ChangeProgress rate v.s. forecast

Change (%)

Difference

Differrence (%)

Net sales

53,34054,67056,461+ 3,121+ 5.9%+ 1,791103.3％EBITDA*¹

2,537

2,250

3,247

Profit margin

4.8%

4.1%

5.8%

+ 710

+ 28.0%+ 997

144.3％

1,099

800

1,712

2.1%

1.5%

+ 612

+ 55.7%+ 912

214.1％

3.0%

+ 449

+36.2%+ 942

225.7％+ 359+ 71.5%+ 611

344.5％

Operating profit
Profit margin

Ordinary profit

1,242*²

750

1,692

Profit margin

2.3%

1.4%

3.0%

Profit attributable toowners of parent

502

250

861

0.9%

0.5%

1.5%

16.64

8.28

28.54

Profit margin

Earnings per share（Yen）+ 11.90－+ 20.26－*1 Calculated as "Operating income + Depreciation and amortization + Amortization of goodwill*2 Includes 114 million yen in subsidy income related to online qualification verification

6

FY3/2024 2Q : Results by Segment■ Net sales（Unit: million yen）

FY3/2023
2Q(results)

FY3/2024
2Q(results)

ChangeChange (%)

53,34056,461+ 3,121+ 5.9 %

Community Pharmacy
Network Segment*¹

50,79253,765+ 2,972+ 5.9 %

Leasing and Facility related
Segment
Meal Catering Segment
Home Visit Nursing Segment

2,959

3,032

+ 72

+2.5%

Adjustments

(412)

(336)

+ 75

－

1,099

1,712

+ 612

2.1 %

3.0 %

+ 0.9pt

2,384

2,947*

+ 563

4.7 %

5.5 %

+ 0.8pt

Leasing and Facility related
Segment
Meal Catering Segment
Home Visit Nursing Segment

(108)
－

26

Adjustments(1,175)－Net sales（Unit: million yen）
■ Operating profit Profit margin
in brackets

Segment profit
Community Pharmacy
Network Segment*¹

2*2+ 55.7 %+ 23.6 %

0.9 %

+ 135
－

－

(1,261)
－

(85)
－

－

*1 Community Pharmacy Business, Pharmaceutical Network Business, Manufacture and Market Pharmaceuticals Business, and Digital Shift Business*2 Transferring expenses related to the development of pharmacies from the Leasing and Equipment Related Business to the Community Pharmacy Businessfrom FY3/2024. Transfer of expenses 78 million yen

7FY3/2024 2Q : Consolidated Results Quarterly Changes■Net sales・Operating profit（Quarterly Changes）
Operating profit significantly increased as the No. of prescriptions filled has been strong due to theoutbreak of multiple infectious diseases and strengthened medication follow-ups.
Net sales（Unit: million yen）

Operating profit※※ 2023/3 4Q: Inflation
allowance 202 million yen
including8

FY3/2024 2Q : Comparison to previous FY■ Operating profit■ Net sales(Unit: million yen)

(Unit: million yen)※※

※ From FY3/2024, Development sales expenses is shifted from Leasingand Facility related Segment to Community Pharmacy Business.
Amount of expenses : 78 million yen

9FY3/2024 2Q : Comparison to Forecast■ Operating profit■ Net sales(Unit: million yen)

(Unit: million yen)※※

※Existing Pharmacies: No. of prescriptions +1.9%, unit price +2.0

compared to forecast10FY3/2024 2Q : Consolidated Balance Sheet■End of FY3/2023（Unit: million yen）

■End of FY3/2024 2Q（Unit: million yen）

Assets

66,223 Liabilities

51,735

Assets

66,255 Liabilities

51,057

Current assets

20,265 Current liabilities

21,349Current assets

19,668 Current liabilities

22,158Cash and deposits

8,141 Short-term loans*¹

6,168

Cash and deposits

7,643 Short-term loans*¹

6,041

Fixed liabilities

30,385

Fixed liabilities

28,899Fixed assets

45,958 Long-term loans

20,226

Fixed assets

46,586 Long-term loans

17,843

Tangible fixed assets

27,060 Net assets

14,488

Tangible fixed assets

28,128 Net assets

15,197

Intangible fixed assets

11,807 Share capital

2,128

Intangible fixed assets

11,272 Share capital

2,128

Goodwill

11,183 Capital surplus

1,182

Goodwill

10,622 Capital surplus

1,182

Investments and otherassets7,090 Retained earnings

11,606

Investments and otherassets7,185 Retained earnings

12,284

Treasury shares(326)

Total liabilities andnet assets

66,223

Total assets

Equity ratio

21.8%

Equity ratio（Equity ratio with taking into account net cash*²*1 Includes long-term loans that will be repaid within 1 year
*2 Own capital / (Total assets – Cash and deposits)

24.9%)

Total assets

66,223

66,255

Treasury shares(326)

Total liabilities andnet assets

66,255（Equity ratio with taking into account net cash*²

22.9%
25.9%)

11

FY3/2024 2Q : Consolidated Cash Flows
EBITDA*

3,247 million yen* Calculated by “operating profit + depreciation + amortization of goodwill”

Opening of new pharmacies
Existing pharmacies renovation costs, etc.

Loan amount reduced(710) million yen(291) million yen(2,510) million yen

12

2
Core
strategies
・Business
Summary13

Repubish

FY3/2024: Core Strategies
Focused measures for the current period and Target value■
Community
Pharmacy
Business

Acquisition of prescriptions using on-line tools (LINE, prescription transmission) tools
No. of existing pharmacies prescriptions :+1.9％(YoY)■

Strengthen interpersonal services and provide quality drug treatments■

Development of new 15 pharmacies, mainly in medical malls■

Increased productivity through appropriate cost controls■

10,400 affiliates at the end of March 2024 (+1,488 )■Promote distribution improvement; Our pharmacies Deliver once a day on weekdays, nodeliveries on Saturdays, and reduce urgent deliveries■

Core system renovation and renewal■

Expansion of services for affiliates

Manufacture andMarketPharmaceuticals
Business*■■

Stable supply
No. of transaction pharmacies including network affiliates : 5,000 (+1,263)

Digital ShiftBusiness*■■

No. of installed pharmacies : 5,300 (+1,909), 1 million user registrations (+360K)
Continued enhancements

Leasing and Facility related
Segment■■

Achieved 90% occupancy rate and stable operation in Wisteria
Appropriate cost control and review of labor and advertising costs

Meal Catering Segment, Home
Visit Nursing Segment■

As the impact of Corona fades, returns to normal operations and raises break-even line

Investment and Financial
Strategies■■

IT investment in building area collaboration
Secure profit through cost control while building up capital

Community
Pharmacy
Network
Segment* 3 Pharmacy
SupportBusinesses

Pharmaceuticals
NetworkBusiness*

14

Community Pharmacy Business：
Trends in No. of Pharmacies
8 newoutlets and 2 outlet closures/transfers since end of the previous FY
ポイント②Nanohana Pharmacy
Tenroku Station①Nanohana Pharmacy
Higashijujo

Hokkaido area

123
outlets

Chugoku/Shikoku

①

②

③

Kyushu65
outlets

25
outlets

44
outlets

21
outlets

Kinki

Fixed No. /results in 2Q

Full Year Plan

No. ofopenings

14 / 815

No. ofprospects
connected to
MedicalInstitutions

16 / 12

10

Tohoku area

Tokai/Hokuriku③Sakura Pharmacy Ito

FY3/2024 （As of September 30）

Kanto/Koshinetsu
103
outlets

53
outlets

As of September 30, 2023

■ Community pharmacy outlet no. trends of the past 10 years※

FY3/2026
midtermplan

FY3/2015

FY3/2016

FY3/2017

FY3/2018

FY3/2019

FY3/2020

FY3/2021

FY3/2022

FY3/2023

FY3/2024
2Q

Openings

10

9

8

8

5

8

7

12

8

8

ー

Closing andtransferring

(13)

(8)

(4)

(5)

(14)

(15)

(13)

(6)

(7)

(2)

ー

M&A

27

7

20

19

30

3

6

3

2

0

ー

No. of outlets

345

353

377

399

420

416

416

425

428

434

550

15

Community Pharmacy Business :Monthly Dispensing Fee（YoY)

2nd half total
all pharmacies +2.8%
existing pharmacies +0.4％

1st half total
all pharmacies +5.5%
existing pharmacies +3.7％
1st half total
all pharmacie +1.5%
existing pharmacies +0.1％

2022

2023

• Existing pharmacies definition: Pharmacies that have been continuously open since April 1, 2021 for the previous fiscal year and since April 1,
2022 for the current fiscal year

16

Community Pharmacy Business :Monthly Prescription Volume and Unit Price of Existing Pharmacies（YoY)
・ With the end of the transitional measures for the additional fee related to the community support system,
the unit price of prescriptions declined.
・ Increase in the number of prescriptions due to category 5 migration of COVID-19, epidemic of infectious
diseases, prescription transmission benefits through the impact of DX utilization, and medication follow-ups.

2nd half total
Unit price (1.4%)
No. of prescription +1.8％

1st half total
Unit price (0.3%)
No. of prescription +4.0％

1st half total
Unit price (1.2%)
No. of prescription +1.3％

2022

2023

17

Community Pharmacy Business : Dispensing Fee Breakdown
FY3/2023
2Q■ All pharmacies
No. of prescriptions (1,000)

Unit price(yen)

FY3/2024
2Q

ChangeChange (%)

4,517

4,777

+ 260

+ 5.8%

Drug charge perprescription

7,634

7,687

+ 54

+ 0.7%

Technical fee perprescription

2,427

2,346

▲ 81

▲ 3.3%

10,061

10,033▲ 28▲ 0.3%

45,44847,935+ 2,487+ 5.5%

4,463

4,642

+ 179

+ 4.0%

Drug charge perprescription

7,593

7,635

+ 42

+ 0.5%

Technical fee perprescription

2,431

2,356

▲ 74

▲ 3.1%

10,024

9,991

▲ 33

▲ 0.3%

44,737

46,383+ 1,645+ 3.7%

Total
Dispensing fee (million yen)

■ Existing pharmacies
No. of prescriptions (1,000)

Unit price
(yen)

Total
Dispensing fee (million yen)

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

18

Community Pharmacy Business : Dispensing Fee Revision
・The weighted average number of points decreased from the end of the previous fiscal year due to theend of the transitional measures for the additional allowance related to community
support system. That said, the acquisition of points exceeded our original plan.
・We continue to focus on interpersonal services.

19

Community Pharmacy Business :Implementation of new inventory management system.
Introduced LINCLE, a new inventory management system developed in-house, to all directly
managed pharmacies.
●Effects of Introducing LINCLE・Reduction in the amount of work required to place orders ⇒ Reduced workload at all directly managed
pharmacies through automated ordering, reducing ordering related workload by approximately 60%.
・Reduction of shortages due to fewer forgotten orders ⇒ Reduced product shortages in approx. 70% ofpharmacies【Pharmacy Concerns】
・Losses incurred due to shortages ordisposal of pharmaceuticals
・Time required for ordering andinventory control⇒ Decrease in time spent on interpersonal
tasks【Effects of Introducing LINCLE】
・Appropriate ordering based on drug supply
and demand forecasts
・Reduction of ordering work by automaticordering function⇒ Creation of time for interpersonal tasks【Pharmacy Voice】■ Nanohana Pharmacy Chitose
Although the No.of items and the amount of inventory are large, automatic calculations
are used to determine the appropriate amount to order, leading to time savings.

■ Nanohana Pharmacy Sapporo Tsukisamu
The response to pharmaceutical shipment adjustments can also be transferred from one
pharmacies to another using other pharmacies inventory information.

・Automatic ordering of appropriate inventory significantly reduces labor hours required for physical handlingand contributes to cost control by reducing waste loss.
・October 2023 - Sales to merchants and general pharmacies20

※
3 Pharmacy Support Businesses：

Performance Summary (as of September 30, 2023)
Supporting community pharmacies through 3 businesses : Our core Pharmaceutical Network,
Manufacture and Market Pharmaceuticals, and Digital Shift Initiative■ Progress against numerical targets for this fiscal year
Numerical Targets
for the Current Term

Pharmaceutical Network
Business

10,400 affiliates（+1,488 affiliates）

Progress（As of September 30）
9,374 affiliates+462 affiliates（From the end of the previous FY）
9,417 affiliates（As of October 31）

3,894 transacting pharmacies*+663 pharmacies（YoY）
Manufacture and Market
Pharmaceuticals Business

5,000 transacting pharmacies*（＋1,263 pharmacies）* No. of transacting pharmacies is total
pharmacies that have actually transacted
business since April of each year.

5,300 installed pharmacies（+1,909 pharmacies）

4,195 installed pharmacies+804 pharmacies（From the end of the previous FY）

1 million registered users（+360K users）

842K registered users+193K users（From the end of the previous FY）

Digital Shift Business※ Pharmaceutical Network Division, Pharmaceutical Manufacturing and Sales Division, Digital Shift Division

21

Pharmaceuticals Network Business:
Performance Summary (as of September 30, 2023)
No. of Pharmaceutical network affiliates fell short of the plan, but ordering volume of pharmaceuticalincreased vs plan.
Full year

2Q+1,488 for
FY3/2024
targetIn the 2Q, many pharmacies took a
wait-and-see attitude towardaffiliation as they monitored theprogress of price negotiations, etc.

22

Pharmaceuticals Network Business :Launched an inventory information sharing service.
・Service enables sharing of pharmaceutical inventory information among member pharmacies /merchants for the purpose of flexible distribution of medicines on a regional basis. This initiative waslaunched in September 2023.
・Contributing to reducing the workload of both pharmacies and wholesalers under the uncertainty ofpharmaceutical supply.
■ Advantages of Inventory Information Sharing Service
Pharmacy・Bringt our facilities up to standards eligible for
additional points under the Community Support
System・Reduce the workload for securing inventory
・Searchable by latest delivery data

■ Services① Enter a drug name and search fornearby pharmacies that may have thedrug in stock.

Patient
・Reduced waiting time

August 2023
Patentapplication
completed

Wholesaler
・Decrease in urgent deliveries
・Ease of dealing with uncertainty
of generic drugs supply② Check pharmacy information androutes on a map

876 pharmacies are using the service
in the first month since its launch.
※As of October 31, 2023
③ Contact and receive medical
supplies※ Indicate pharmacies that have purchased the specified drugs within 3 months.
Our company updates delivery data three times a day.

23

Manufacture and Market Pharmaceuticals Business：
98 products / 47 ingredients ( 5 products /2 ingredients were added from the end of the previous FY )・Although some orders have been suspended due to shipment adjustments, no. of new transacting pharmacies increased steadily.
✔ Compared to the same period of the previous year +663
・Shipments have resumed as needed, but shipment adjustments continued for some products.
Expect to fall short of full-yeartarget.
*No. of products adjusted for shipment as of September 30: 10 products / 6 ingredients ( End of March 2023：19 products / 7 ingredients)■ Net sales and No. of transaction
pharmacies■ Breakdown of sales plan for this fiscal year
4.2 billion yen

Release Date

Product name5,000 pharmacies*

2.6 billion yen

3,894
pharmacies

3,231

1.1 billion yen

1.36 billion yen

1,318
pharmacies

Azilsartan OD tablet
10mg/20mg/40mg「Feldsenf」

August 2023

olopatadine hydrochloride tablets
2.5mg/5mg「Feldsenf」

December 2023

3 products / 1 ingredients（plan）

January - March2024

4 products / 2 ingredients（plan）①

1.8 billion yen pharmacies
2,050
pharmacies

June 2023

products /ingredients

12 products /5 ingredients②

April 2022 - March 2023 articles for sale11 products /4 ingredients③

Products released before March 2022

82 products /41 ingredients*No. of transaction pharmacies is total pharmacies that haveactually transacted business since April of each year.

24Digital Shift Business :－840K users registered
Official LINE Account・842K users have registered and 4,195 pharmacies have installed the service.
・We have dissolved the joint venture agreement with Reteigi Co., Ltd. and made Pharmashift awholly owned subsidiary – The Service to continue as before■ No. of users registrations andinstalled pharmacies

842K users■ Effect of new prescription acquisition(Unit:：sheets)

4,195
pharmacies
New by Directional Prescription
Sending Function No. of medical
institutions' requests for prescriptions(for our group pharmacies)■ Dissolution of joint venture agreement
・Announced termination of joint venture agreement with Reteigi on November 7, 2023 (scheduled to expire on November
30, 2023)
・We acquired a 49% stake in Pharmashift from a subsidiary of Reteigi, and made it a wholly owned subsidiary.
・Pharmashift acquired the related business from above subsidiary.
25

Leasing and Facility related Segment
Wisteria Occupancy Rate Trends

All 5 buildings occupied：82.1％(End of FY 3/2024 target：
90% occupancy rate)

・In 2Q, 35 new move-in and 28 move-out of Wisteria locations.
・Reviewed Wisteria's staffing and advertising expenditures.
・Transferring expenses related to the development of pharmacies from the Leasing and Equipment Related
Segment to the Community Pharmacy Business from FY3/2024. Transfer of expenses 78 million yen.
✔ Leasing and Facility related Segment
Net sales
1,687 million yen （YoY +0.8％）
Operating profit
69 million yen （Operating loss for the same period of the previous FY
65 million yen）
26

3
Earnings
Forecast for
FY3/2024
・Interimdividends

27

Upwardly revised earnings forecast for the FY3/2024:
Consolidated Forecast
Considering the strong performance up to the second quarter of the current fiscal year, we have revised up our
FY 3/2024 forecasts significantly.

(Unit: million yen)

FY3/23(Results)

FY3/24(Initial
forecast)

FY3/24(Revised
Forecast)

ChangeChange (%)

Net sales

109,551

112,500

113,800+ 1,300+ 1.2 %EBITDA

6,122

5,600

6,600

+ 1,000

5.6 %

5.0 %

5.8 %

0.8 pt+ 17.9 %Operating profit

3,163

2,600

3,500

+ 900

Profit margin

2.9 %

2.3 %

3.1 %

0.8 ptOrdinary profit

3,355

2,550

3,450

+ 900

Profit margin

3.1 %

2.3 %

3.0 %

0.7 ptProfit attributable to ownersof parent

1,610

1,000

1,650

+ 650

1.5 %

0.9 %

1.4 %

0.5 pt

53.38

33.14

54.67

+ 21.53+ 34.6 %+ 35.3 %+ 65.0 %Profit margin

Earnings per share
(Yen)

－

28

Forecast for the FY3/ 2024:
Revised Segment Performance (YOY)■ Operating profit■ Net sales(Unit: million yen)

(Unit: million yen)※※

※ From FY3/2024, Development sales expenses are shifted from Leasingand Facility related Segment to Community Pharmacy Business.
Amount of expenses :142 million yen

29

Upwardly revised dividend forecast for the FY3/ 2024
■ Revised dividend forecast for the FY ending March 31, 2024 to 12 yen per share(interim dividend: 6 yen, year-end dividend: 6 yen), an increase of 2 yen from the previous
forecast of 10 yen per share (announced on May 9, 2023), on the back of the revised full-year
earnings forecast.
■ Previous forecast【 Shareholder Return Indicators 】■ Revised forecast

Annual dividend per share 10 yen
Dividend payout ratio
30.2％

Annual dividend per share 12 yen
Dividend payout ratio
21.9％【Annual dividend per share】《Reference》
FY3/24 interim dividend
Base date : September 30, 2023
12yen
Payment : December 11, 2023
Dividend per share: 6 yen

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