MEDICAL SYSTEM NETWORK Co., Ltd.
Fiscal Year Ending March 2022

Earnings Report andSixth Medium-Term
Management Plan
Prim 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

FY3/2022 : Topics and Business Overview
 April 2021 drug price revision details were announced
 Profits at all levels achieved record highs Although the prescription unit price of community pharmacies fell, the number of prescriptions recovered toa certain extent and as a result, sales and profits increased.
As of March 31, 2022 : 7,401 pharmaceutical network member affiliates +1,285 YoY
Unit price of prescriptions at existing pharmacies (1.5%) YoY
Number of prescriptions at existing pharmacies +3.2% YoY

As of the end of March 2021, PharmaShift LINE official- account registered users exceeded 310K and 911
pharmacies have adopted the service (We received a total of 1,643 orders for initiating the service)Meal Catering Segment became profitable for FY3/2022

In July 2021, the merger of our consolidated subsidiary Himawari Nursing Station Co., Ltd resulted insome tax relief for FY3/2022

As of April 4, 2022 officially shifted to the "Prime Market" segment of the Tokyo Stock Exchange as part ofthe overall market restructuring

3

Table of Contents

Earnings Highlight・・・

5

Business Summary and Core Strategies

・・・

12

Medium-term Management Plan

・・・

24

Core strategies, Earnings Forecast
for FY3/2023 and Dividends

・・・

39

Reference Materials

・・・

46

4

1
Earnings
Highlight

5

FY3/2022 : Consolidated results
FY3/2021(result)

FY3/2022 *1(revised forecast)

Change（Unit: million yen）

Net sales
EBITDA*2

Profit margin

Operating profit
Profit margin

Progress rate*1

Year-on-year

FY3/2022(result)

Change (%)

Difference

Differrence (%)

104,257

106,500

106,685+ 2,427+ 2.3%+ 185

100.2%

6,426

6,800

6,708

+ 282

+ 4.4%

(91)

98.7%

6.2%

6.4%

6.3%

3,429

3,800

3,852

+ 422

+ 12.3%+ 52

101.4%

3.3%

3.6%

3.6%

+ 833

+ 24.0%+ 113

102.7%+ 195+ 8.9%+ 94

104.1%+ 6.84－*3

Ordinary profit
Profit margin

Profit attributable toowners of parent
Profit margin

Earnings per share
(Yen)

3,479

4,200

4,313

3.3%

3.9%

4.0%

*4

2,198

2,300

2,394

2.1%

2.2%

2.2%

72.51

76.23

79.35

+ 3.12－*1 Announced revision of consolidated earnings forecast on February 4, 2022
*2 EBITDA is the calculated value of “operating profit + depreciation + amortization of goodwill”*3 Includes 421 million yen in subsidy income for countermeasures against COVID-19*4 Includes gain on sales of investment securities and tax effect of absorption-type merger of Himawari Nursing Station Co., Ltd totaling 272 million yen

6FY3/2022: Results in each segment - Part 1
 Summary of Business Results by Segment
Segment

Community
Pharmacy
Network Segment

Earnings summary

Pharmaceutical
Network Business• Acquisition of new affiliates remained steady→ Exceeded the target of 7,300 affiliates, reaching 7,401 by the end of March 2022 +1,285 YoY

Community
Pharmacy Business• Impact of COVID-19→ NHI price revision and decrease in long-term prescriptions. Unit price of prescriptions atexisting stores: (1.5%) YoY→ Number of prescriptions filled recovered to a certain degree. Number of prescriptions filled
at existing pharmacies : +3.2% YoY

Manufacture andMarketPharmaceuticals
Business• Number of ingredients/products handled: 68 products of 34 ingredients (end of March 2021) → 82
products of 41 ingredients (end of March 2022)• Number of locations carrying the products : 1,116 (end of March 2021) → 1,698 (end of March 2022)

Digital ShiftBusiness• Official LINE account "Tsunagaru(Connected) Pharmacy”→ We have installed 911 pharmacies (end of March 2022)→ Number of registered users exceeded 310,000 (end of March 2022)

Leasing and Facility related Segment• Real estate rental income remained steady, while construction business saw an increase in orders
received• Serviced elderly-care housing saw sluggish occupancy growth due to the impact of COVID-19

Meal Catering Segment• Gross profit improved due to changes in suppliers→ Operating profit: 1 million yen (vs operating loss of 21 million yen in the previous FY )Home Visit Nursing Segment• Increase in sales and reduction in operating loss
→ Operating loss: 12 million yen (vs operating loss of 31 million yen in the previous FY)
7

FY3/2022 : Results in each segment part 2■Net sales（Unit: million yen）

Net sales

FY3/2022(revised *1
forecast)

FY3/2021(result)

Progress rate*1

Year-on-year

FY3/2022(result)

ChangeChange(%)

Difference

Difference(%)

104,257

106,500

106,685+2,427+ 2.3%+ 185

100.2%

99,214

101,119

101,457+2,243+ 2.3%+ 337

100.3%

Other 3 Segments

5,644

6,087

5,954

+309

+ 5.5%

(132)

97.8%

Adjustments

(601)

(707)

(727)

(126)

－

(20)

－

Community Pharmacy
Network Segment*2*3■Operating profit(Unit: million yen)
Profit margin in brackets

Segment profit
Community Pharmacy
Network Segment*2*3

Other 3 Segments
Adjustments

FY3/2022(revised *1
forecast)

FY3/2021(result)

Progress rate*1

Year-on-year

FY3/2022(result)

ChangeChange(%)

3,429

3,800

3,852

+ 422

3.3%

3.6%

3.6%

+ 0.3pt

5,703

6,070

6,117

+ 413

5.7%

6.0%

6.0%

+ 0.3pt

(20)

67

28

+ 49

－

1.1%

0.5%

－

(2,253)(2,338)(2,293)

(40)

－

－

－

－

+ 12.3%+ 7.3%－－

Difference+52+ 0.0pt+46+ 0.0pt

(38)
－
+44

Difference(%)

101.4%
100.8%－－－*1 Announced revision of consolidated earnings forecast on February 4, 2022
*2 Pharmaceutical Network Business, Community Pharmacy Business, Manufacture and Market Pharmaceuticals Business, Digital Shift Business*3 Leasing and Facility related Segment, Meal Catering Segment, Home Visit Nursing Segment8FY3/2022 : Comparison to previous FY■ Net sales(Unit: million yen)

■ Operating profit

98,00099,000100,000
101,000
102,000
103,000
104,000
105,000
106,000
107,000
108,000
109,000
110,000

FY3/2021
results
2021/3期
Pharmaceutical
医薬品ネットワーク
network

2,000
2,100
2,200
2,300
2,400
2,500
2,600
2,700
2,800
2,900
3,000
3,100
3,200
3,300
3,400
3,500
3,600
3,700
3,800
3,900
4,000
4,100
4,200

FY3/2021
results
2021/3期

104,257

3,429

Pharmaceutical
医薬品ネットワーク
network+ 380

Community Pharmacy
地域薬局(Unit: million yen)

+ 527

Community Pharmacy
地域薬局

(46)

Manufacture andMarket医薬品製造販売
Pharmaceuticals

+30

+ 385

Leasing andFacility
賃貸設備
related+7

Meal Catering
給⾷

(151)

Meal Catering
給⾷

+22

Home
visit
訪問看護
Nursing+ 75

Home visit
訪問看護
Nursing

+ 19

その他
Other

(1,079)

Other
その他

(136)

+ 2,087

Manufacture and医薬品製造販売
MarketPharmaceuticals
Leasing and賃貸設備
Facility
related2022/3期
FY3/2022
results+ 731

106,685

FY3/2022
results
2022/3期

3,852

9

FY3/2022 : Consolidated balance sheet■End of FY3/2021（Unit: million yen）

■End of FY3/2022（Unit: million yen）

Assets64,448 Liabilities

53,260Assets62,941 Liabilities

49,654Current assets

19,313 Current liabilities

25,418Current assets

18,701 Current liabilities

20,435

Cash and deposits

10,118 Short-term loans*1

9,961

Cash and deposits

8,201 Short-term loans*1

5,772

Fixed liabilities

27,841

Fixed liabilities

29,219Fixed assets

45,134 Long-term loans

21,556

Fixed assets

44,239 Long-term loans

22,891

Tangible fixed assets

24,634 Net assets

11,187

Tangible fixed assets

24,624 Net assets

13,286

Intangible fixed
assets

13,572 Capital stock

2,128

Intangible fixed
assets12,767 Capital stock

2,128

Goodwill

13,145 Capital surplus

1,182

Goodwill

12,254 Capital surplus

1,182

Investments andother assets

6,926 Retained earnings

8,305

Investments andother assets

6,848 Retained earnings

10,393

Treasury stock(344)

Treasury stock(326)

Total assets

64,448

Total liabilities andnet assets

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

62,941

Total liabilities andnet assets

64,448

Total assets

17.3%

Equity ratio

20.5%)（Equity ratio with taking into account net cash

62,94121.1%*2

24.2%)*1 Includes long-term loans that will be repaid within the year
*2 Own capital / (Total assets – Cash and deposits)10FY3/2022 : Consolidated cash flows
Cash flows fromoperating activities

4,010

million yen

EBITDA*
Income taxes paid
Changes in working capital

6,708 million yen(2,866) million yen(220) million yen* Calculated by “operating profit + depreciation + amortization of goodwill”

Cash flows frominvesting activities

Cash flows fromfinancing activities(2,511)

Acquisition of buildings, etc.

(2,095) million yen(3,415)

Loan amount reduced(2,869) million yen

million yen

million yen■Cash ﬂow trends （Unit: million yen）
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash flows from operating activities +Cash flows from investing activities

4,010(3,415)(2,511)11

2Business
Summary

12

Pharmaceuticals Network Business: Earnings summary
Network affiliates remained steady, up 1,285 from the end of the previous FY to 7,401■Network affiliates (actual) （Unit: No. of network affiliates）

7,401■Network aﬃliates (New/Withdrawal/Net increase)（Unit: No. of network affiliates）

New

6,116

+1,405

5,245
2,509

FY3/2018

3,790

+848

FY3/2020

FY3/2021（Unit: one hundred million yen）

3,917

4,492

FY3/2019

FY3/2020

FY3/2021

FY3/2022+1,503

FY3/2018

FY3/2019

FY3/2020+1,285

(632)

(357)

FY3/2021

FY3/2022■FY3/2022 Breakdown of network affiliates
2Q+1,642

+871

(182)

1Q

1,691

Net increase+1,455

(124)

3,367
2,337

+1,637(109)

FY3/2022■Ordering volume of pharmaceuticals

FY3/2018+1,281+739

FY3/2019

Net
increase
Withdrawal

3Q(New/Withdrawal)

4Q

Total

New

405

395

379

463

1,642

Withdrawal

(154)

(62)

(76)

(65)

(357)

(as of March 31, 2022)

13

Pharmaceuticals Network Business :Network affiliates distribution map (as of March 31, 2022)
ポイント（Unit: No. of network affiliates ）Total

General
MSNW
network
community
pharmacies
affiliates
6,976
425

Total
7,401

7,605 network affiliates
as of April 30, 2022
14

Community Pharmacy Business :Trends in number of pharmacies
15 new outlets (3 from acquisition) and 6 outlet closures/transfers since the end
ポイント FYof previous
Hokkaido area
124
outlets

Chugoku/Shikoku area
Tohoku area

21 outlets

24 outlets

Kyushu area
Kanto/Koshinetsu area

63 outlets

96 outlets

Kinki area

Tokai/Hokuriku area

53 outlets

44 outlets(as of March 31, 2022)※■Community pharmacy outlet number trends of the past 10 years

Openings
Closings and transferring ofbusinesses
M&A
Number of outlets

FY3/2013

FY3/2014

FY3/2015

FY3/2016

FY3/2017

FY3/2018

FY3/2019

FY3/2020

FY3/2021

FY3/2022

21

14

10

9

8

8

5

8

7

12

(8)

(7)

(13)

(8)

(4)

(5)

(14)

(15)

(13)

(6)

33

45

27

7

20

19

30

3

6

3

269

321

345

353

377

399

420

416

416

425

15

Community Pharmacy Business :Monthly dispensing fee（YoY)

6.9
5.6

5.6

5.3

4.4

4.2
2.5

1.6

(0.2)

5.2 1.2

(0.7)
1.5

(3.0)
(5.5)

(7.7)
(1.6)

(4.4)

(3.6)

0.5

(5.1)

3.2
1.7

5.3

1.6

2.1
1.5

0.6

1st half total
all pharmacies +3.7%
existing pharmacies +2.6％

(5.1)

(6.3)

1st half total
all pharmacies (2.4%)
existing pharmacies (3.4％)

2.8

(1.8)

(0.6) (0.5)

(5.0)

(3.7)

(8.5)

4.4

(2.0)

(1.2)

(3.9)

1.6
3.4

(0.9)
1.0

4.5

3.9

(3.4)
2nd half total
all pharmacies +2.5%
existing pharmacies +0.7％

2nd half total
all pharmacies (1.1%)
existing pharmacies (1.5％)

Dispensing fee of all pharmacies (YoY)
Dispensing fee of existing pharmacies (YoY)
2020

2021

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar• Existing pharmacies definition: Pharmacies that have been continuously open since April 1, 2019 for the previous fiscal year and since April 1,2020 for the current fiscal year

16

Community Pharmacy Business :Monthly prescription volume and unit price of Existing pharmacies（YoY)-

Unit price of prescriptions had declined due to a decrease in long-termprescriptions, but recovered to almost the same level as the previous year
The number of prescriptions has recovered to some extent
Prescription unit price
18.2
12.2
9.2

(10.4)
(5.6)

(1.8)

8.0

(2.2)

Unit price (YoY)（FY3/2021）

3.0

5.4

5.6

0.8

0.7

(0.2)

8.1

(1.5)

8.4

0.0

10.5
5.8

2.8
(1.9)

1.9

(0.4)

Unit price (YoY)（FY3/2022）

Number of prescriptions

12.2

10.7
5.3

2.9

3.6

6.8

2.1

2.1

(3.2)

(16.8)(18.4)

(6.3)

(7.0)
(11.1)

Apr

May

Jun

Jul

(3.2)
(2.4)

(4.3)

(9.0)

Number of prescriptions (YoY)（FY3/2021）

5.7

3.5

(12.3)(9.6)(12.8)(10.2)

Dec

Jan

Feb

Number of prescriptions (YoY)（FY3/2022）

Aug

Sep

Oct

Nov

Mar

17

Community Pharmacy Business : Dispensing fee breakdown■All pharmacies

FY3/2021

No. of prescriptions (1000)
Drug charge perprescription
Unit priceTechnical fee per(yen)prescription
Total
Dispensing fee (million yen)

FY3/2022

ChangeChange
(%)

8,289

8,746

+ 457

+5.5%

8,279

7,984

(295)

(3.6%)

2,376

2,426

+50

+2.1%

10,65588,32010,41091,056(245)+2,736(2.3%)
+3.1%

8,158

8,416

+258

+3.2%

8,269

8,057

(212)

(2.6%)■Existing pharmacies
No. of prescriptions (1000)
Drug charge perprescription
Technical fee perprescription
Total

2,377

2,430

+54

+2.3%

10,646

10,488(158)(1.5%)

Dispensing fee (million yen)

86,852

88,267+1,415+1.6%

Unit price(yen)*Dispensing fees are calculated based on the number of prescriptions x unit price of prescriptions

18

Community Pharmacy Business : Dispensing fee revision
Achieved full-year targets, we continue to focus on interpersonal operations

Basic dispensing fee

Basic fee 1
Basic fee 2
Basic fee 3-b
Special basic fee

42
26
16
9

Generic drug dispensing
premium

85% or higher
80% or higher
75% or higher

28
22
15

FY3/2021（End of March 2022）

FY3/2022 plan（End of March 2023）

FY3/2022 result(End of March 2022)

FY3/2023 plan（End of March 2023）

Results

TargetResults

Target9points
3outlets
0.7%
16points
188outlets 42points
216outlets
45.7%
52.6%
26points
4outlets
1.0%

9points
5outlets
1.2%

9points
1.4%
16points
42.2%

42points
55.5%

26points
0.9%

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

Basic fee 1
Basic fee 2
Basic fee 3-b
Basic fee 3-cSpecial basic fee

42
26
16
32
7

Weighted average per prescription Weighted average per prescription Weighted average per prescription
30.7 points
31.2 points
31.4 points
0points
0points
Generic drug dispensing
0points
15points 42outlets
48outlets
11.6%
premium
15points
45outlets
9.9%
15points
39outlets 11.7%
10.6%
10.2%
28points
9.5%
28points
28points
220outlets
248outlets
22points
53.1%
53.5%
22points
22points
90outlets
58.3%
104outlets
90% or higher
30
25.1%
21.2%
25.3%
85% or higher
28
80% or higher
21
Weighted average per prescription Weighted average per prescription Weighted average per prescription
21.4 points
21.4 points
21.8 points

Community support
system premiumCommunity support
system premium

Basic dispensing fee

42points
1.2%
7points
2.1%

26points
0.9%

32points
56.1%

16points
39.7%

Weighted average per prescription
25.6 points
0points
15.3% 30points
22.1%
21points
22.5% 28points
40.1%
Weighted average per prescription
21.9 points

Community support
system premium
38points
0points 188outlets
223outlets
45.7%
54.3%

0points
53.3%

38points
46.7%

38points
0points 199outlets
226outlets
46.8%
53.2%

38
Weighted average per prescription Weighted average per prescription Weighted average per prescription
19.1 points
19.6 points
19.7 points

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 4390points
35.3%
39points
8.4%

47points
37.3%
17points
19.0%

Weighted average per prescription
25.7 points

19Community Pharmacy Business :Becoming a Community Pharmacy of Choice by Enhancing the Family Care Function■ Enhancement of in-house education system
・ New education system (CP Step) is in full swing

Community Collaboration Pharmacy
Acquisition of 42 Pharmacies

Restructured the education system to support the promotion of interpersonal
work
・ Training pharmacists to be active in clinical practice through the Nanohana
Academy *Increased acquisition of certified pharmacists and specialist pharmacists
accredited by various academic societies* Participatory lectures designed to foster pharmacists who demonstrate a high level of expertise and play arole in team medicine

Medication follow-up
Number of units to be tested more than
300,000 units / year
Family Pharmacist Supervision Fee
Calculated performance more than
100,000 pieces / year

To improve the quality of pharmacy care and support the health of Local residents■ Efforts related to COVID-19
・Our 23 pharmacies are offering Free antigen testing in cooperation with local governments→ Testing in an isolated space or in the patient's own car. Subsequent cooperation with
Medeical institutions and care in the instance of a positive test result
・Medical antigen test kits available at 189 pharmacies
・ At 119 pharmacies, we have placed therapeutic drugs and able to deliver rapid
treatment
・Utilizing our broad network to maintain the operation of pharmacies and replacestaff in the instance of a staff member being found positive*Number of pharmacies as of March 31, 2022

〔 Pharmacies offering free antigen testing 〕

20

Manufacture and Market Pharmaceuticals Business :New generic drugs of 14 products (7 ingredients)

・ Full-year Net sales exceed 1.8 billion yen
・ Expanded lineup of in-house products and products sold in partnership・ Thorough quality control and strengthening cooperation with contract manufacturers for stable supply■Net sales and number of products sold■Upcoming releases of 3 products (1 ingredients)

Net sales
1.8billion yen
41 ingredients
34 ingredients 82 products
68 products
23 ingredients
17 ingredients 51 products

Available products (ingredients) : 82 products (41 ingredients)
Sales to network affiliates

34 products

Mar/2019■ As of March 31, 2022
: 1,698 affiliates■ End of FY 3/2023 target
Mar/2020

Mar/2021

Mar/2022

Net sales: 3 billion yen

Sales to network affiliates: 2,700

21

Digital Shift Business : Exceeded 310K user registrations
・Launched "Tsunagaru Pharmacy" 310,000 users registered as users in 1 year, the No.1 official
LINE account for Pharmacies
・Orders received exceeded 1,643 pharmacies and 911 pharmacies installed, with further
acceleration to come■ Various functions corresponding to the revision■ Number of users registered and number of order
35.0 received / installed pharmacies
30.0

25.0

20.0

15.0

Official LINE Accountof dispensing fees

2,500

︓Electronic medication organizer

310K users
Medication follow-up

︓Chat function

Online Medication Guidance

︓Video Calls

Refill prescription

︓To-Do Management Function

1,500

Infection control measures

︓Prescription transmission

911
Installed
pharmacies
1,000

All in one LINE

1,643 2,000
Order received
pharmacies■ Two New Companies Join Digital Pharmacy Consortium
973 Pharmacies in 9 Companies promote DX in the Pharmacy Industry

10.0
500

Sano Pharmacy, Haiyaku, Pal honest, Forall, MEDIX, Yakuju, PHARMACY,
OHGA Pharmacy, our company

5.0

0.0

Centralized management of medication status0■ Promote the introduction of the service to affiliatesof the pharmaceutical network
Strengthening collaboration from April 2022
Promptly penetrate our pharmaceutical network as a standard service
22Leasing and Facility related Business:
Building a community where medical care and nursing are one“Wisteria” SeriesServiced residence for the elderly + community pharmacies, clinics, care offices, nurseries■Trends in Wisteria Occupancy Rate
●97.3%（Wisteria Kiyota）●90.6%（Wisteria N17）●88.9%（Wisteria Otaru Inaho）●78.1%（Wisteria Senri Chuo）●69.8%（Wisteria M1）

100%

90%

80%

70%

60%
Mar/2020

Jun/2020

Sep/2020

Dec/2020

Mar/2021

Jun/2021

Sep/2021

Dec/2021■Wisteria Initiatives under the COVID-19

Mar/2022

Infection control measures

・Installation of thermometers, acrylic
plates, and hand sanitizers
・Individual consultations and viewings
limited to one group at a time

Proactive use of media

・ Broadcasting of TV commercials
・ “Branding" is the theme of the print ads
・ Renewal of brochureprint advertisement

Broadcasting of TV commercials

Increasing the number of tenants by providing asafe living environment and sales promotion23

3
Medium-termManagement
Plan

24

Fifth Medium-Term Management Plan Review■■

Maintained profitability despite a significant drop in planned assumptions due to the impact of
COVID-19.
The number of network affiliates greatly exceeded the target and grew to more than 10% of thepharmacy market share.
Fourth MediumTerm Management
Plan【results】

Fifth MediumTerm Management
Plan【initial plan】

FY3/2018

FY3/2022

Fifth Medium-Term Management Plan
【Changes in actual results during the subject period】
FY3/2019

FY3/2020

FY3/2021

FY3/2022

Evaluation

Pharmaceutical
network affiliates

2,509

5,000

3,790

5,245

6,116

7,401

Consolidated net
sales(million yen)

93,900120,000

98,232

105,241

104,257

106,685

Ordinary profit(million yen)

3,200

5,000

1,501

1,560

3,479

4,313

Ordinary profit margin

3.5%

4.1%

1.5%

1.5%

3.3%

4.0%

Consolidated
EBITDA(million yen)

5,700

7,500

4,200

4,645

6,426

6,708

Capital adequacy
ratio

16.9%

30.0％

15.6%

14.2%

17.3%

21.1%

×

399

—

420

416

416

425

—

Community pharmacy
outlets×○25

Business DomainDeveloping Community Pharmacy Business and Pharmaceutical Network Business as mainstay businesses
Supporting community pharmacies through three businesses: Pharmaceutical Network at the core, Manufactureand Market Pharmaceutical, and Digital Shift

Community Pharmacy Network
Business Segment
3 Pharmacy Support Business
Manufactureand Market
Pharmaceuticals
Business
Manufacture and saleof generic drugs

Pharmaceutical
Manufacturer

Generic Drug
Manufacturer

Pharmaceuticals
Network Business

Digital ShiftBusiness

Pharmacy management
support 7,401 affiliates
nationwide

Support for conversion toa family pharmacy“Tsunagaru Pharmacy”

Pharmaceutical
Wholesaler

Generic Drug
Wholesaler

Community
Pharmacy
Business

Medical institution（hospitals,clinics andpharmacies ）Nationwide expansion of“Nanohana pharmacies”
425 outlets

Local residents
Patients
Leasing andFacility Related
Business
Serviced senior
housing “Wisteria”* As of March 31, 2022

Home Visit
Nursing
Business

Meal
Catering
Business

Nursing Care and LifestyleSupport Services
26

Positioning of the Sixth Medium-Term Management Plan
 Transitioning out of Stage I (which was aimed at acquiring scale), to the Next stage
StageⅠ 〜 Fifth Medium-Term Management Plan Period"market acquisition and scale expansion" of pharmacies and network
3rd Medium-Term
Management Plan

4th Medium-Term
Management Plan

5th Medium-Term
Management Plan

7,401
network affiliates
over 10% market
share
98,232

93,9773,790

75,548106,685

2,509

54,827MISSION / GROUPPHILOSOPHY

StageⅡ
New 6th Medium-Term
Management Plan

Create a quality medical
infrastructure serving as “thetown’s beacon of light” tosustain lives and contribute tohealthy living

StageⅡ︓New 6th MediumTerm Management Plan〜
Based on the platform

Restructuring of
expansion strategy

×

1,200

1,033

Expansion of growth areas

Net sales

Network affiliates

Evolving into a new
growth model

27

New Growth Model through Stage Transition
NetworkAffiliates

Community
Pharmacy

The dots gradually become lines as the twofounding businesses expand their locations

7,401

Expansion of growth areas
Based on the platform Acquire

multilayered growth areas

network affiliates
over 10% market share・Manufacture and Market
Pharmaceuticals Business・Digital Shift Business・Pharmaceuticals
Network Business

Become a surface (platform)
within a certain market
Community Pharmacies as
the foundation platform

The platform aims to function as a new pharmacy
infrastructure, with group pharmacies at its core andaffiliates as wellEnsure sustainability of local healthcare anddistribution markets by providing quality healthcare,goods, and services through infrastructure andstreamlining distribution

・Community
Pharmacy BusinessRestructuring of expansion strategy
Further expand the platform base・550 community pharmacies in 4 years(M&A, Newly opened）
・12,000 network affiliates over 20% market share28

Community pharmacy vision as the core of the platform■■

In the first half of the mid-term management plan, establish how individual pharmacies should play arole in the community-based integrated care systems
Ultimately, we aim to be a hub that supports local healthcare and community
Sixth Medium-Term Management Plan Period
First 2 years FY3/2023〜FY3/2024
Establish a vision of pharmacies in
the community-based integrated care systems■VisionChanging our story from "near a clinic or hospital" to "family
function" then to "community cooperation”
Changing the focal point from "object" to "person”✓ Centralized and continuous management of medication information✓ Home healthcare support, 24-hour support✓ Collaboration with internal and external multi-professionals supporting
medical care, nursing care, food, and daily life

→Active investment in human resources, facilities, etc.
Temporary cost increase
Nanohana Pharmacy

Food & Life・Registered Dietitian・Resident facility staff

Medical institution
・Doctor・Dentist
・Nurse・PT,OT,ST・Pharmacist Local residents and patients・StaffCare institution
・Nurse・Care worker
・PT,OT・Helper
・Care manager
・Home-visit bathing care
・Registered dietitian Community
cooperation
In-house collaboration

Second 2 years FY3/2025〜FY3/2026
Becoming a community core/hub pharmacy■VisionTransitioning from "in-house optimization" to "area optimization”✓ Area sharing of knowledge, human resources, pharmaceuticals, etc.
✓ Maximize and jointly utilize local resources✓ Expansion of network of hub locations→ Perform the values and functions required by the community
and receive increase profitability
Area network
Nanohana
Pharmacy

Area network
Community
pharmacies

Affiliates

Medicalinstitution

Nursing home

Affiliates
Nanohana Pharmacy
Knowledge Sharing

Local residents and patients

Human Resource
Exchange
Sharing of medicines

29Transformation of Earnings Structure Expanding growth areas by leveraging platform strengths, aiming to change profit structure Increase in sales by ¥20,000 million in the Community Pharmacy Business, and ¥15,000 million in the
Pharmacy Support Businesses *before consolidation and elimination
 Profits from the 3 Platform Businesses* set to grow significantly, driving earnings* Pharmaceuticals Network Business, Manufacture and Market Pharmaceuticals Business, and Digital Shift Business

Consolidated net sales

Consolidated Operating Profit¥140,000 million¥106,685
million3 Pharmacy Support
Businesses Drive Profits¥6,500 million（4.6% profit margin）¥3,852 million（3.6% profit margin）■3 Pharmacy Support
Businesses■ Community Pharmacy
Business■ Nursing, care and nutrition■Consolidation andelimination

FY3/2022

FY3/2026

FY3/2022

FY3/2026
30

Financial Impact
 Reduce debt and increase equity capital by increasing operating cash flow andsteadily accumulating profits
Four-year
total

Reference︓FY3/2022 Consolidated balance sheet

Summary(million yen)

Cash flows
fromoperatingactivities
Cash flowsfrominvestingactivities

20,000▲18,000

Increase in operating income
and EBITDA
Development and M&A withemphasis on investment
efficiency

Free cash
flows

2,000

(Cash flows from operating
activities) + (Cash flows frominvesting activities)

Cash flowsfromfinancing
activities▲2,000

Reduce debt and improvefinancial soundness

Assets(Unit: billion yen)

62.9 Liabilities

49.6

Cash and deposits

8.2

29.5

Tangible fixed assets

24.6

Intangible fixed assets

12.7 Net assets

13.2

12.2

2.1

Goodwill

Total assets

62.9

Favorable sub liabilities

Capital stock

Total liabilities andnet assets

Equity ratio

62.9

21.1%

Target for the final year of
the Medium-Term Management Plan: 30%

31

Priority Measures by BusinessBusiness Segment

Program Outline

Focused Policy

Community Pharmacy
Business

Practice of “the town’s
beacon of light” to support
the local community andexpand the area

・Improving store operation efficiency to expand interpersonal operations
・Providing medical care that supports the Community-based integrated
care systems
・Strengthen store development capabilities Plan︓ 25 new stores per year

Pharmaceuticals
Network Business

12,000 network affiliates×（distribution improvement＋ service expansion）

・Expansion of scale Plan︓FY3/2026 12,000 affiliates＝20％ market share
・Promote distribution improvement and establish supply chain management
・Contribution to regional medical care by building an area network

Manufacture and Market
Pharmaceuticals
Business

Stable supply of safe andsecure pharmaceuticals to
the network

・Creating a system to ensure quality and safety
・Establishment of a system to ensure a stable supply
・Expand product lineup and sales channels Plan︓Sales 10 billion in
FY3/2026

Digital Shift Business

Establishment of pharmacy
business infrastructure andexpanding to multiple business
lines

・Gaining market share Plan︓20,000 stores in FY3/2026
・High value-added services, such as collaborative functions with medical
and nursing care institutions
・Launch of new revenue-generating businesses

Nursing Care, Meal
Catering and Nursing
Business*

Deepen cooperation between
medical and nursing care・Nursing︓ Expand opportunities for collaboration with pharmacies anddevelop a base of operations
・Nursing Care︓ Development of Wisteria Home Visit Services
・Nutrition︓ Expand business scale and revenues＊ Home Visit Nursing Business, Leasing and Facility Related Business, Meal Catering Business32

Business Plans –Community Pharmacy Business＜Program Outline＞

Practice of “the town’s beacon of light” to support the local community and expand the area

＜Focused Policy＞■Improving store operation efficiency to expand interpersonal operations■Providing medical care that supports the community-based integrated care systems■Strengthen store development capabilities Plan︓ 25 new stores per year
・Pursuing the functions that society requires pharmacies and pharmacists to fulfill（A member of the Community-based integrated care systems）
・Expand opportunities for collaboration with nursing, nursing care, and nutrition services within and outside the group
・Strengthen development of new outlets to expand network of bases with enhanced functions
・Improve operational efficiency and the invest in store development in order to offset the negative impact to some extent due to revision in NHI
compensation, and maintain profit

The goal of “the town’s beacon of light”(1) ”No. 1 quality care in the region”

・Fostering a medical mindset
・Strengthening of pharmacotherapy practice
capacity・Strengthening communication skills(2) Facilities that deliver safety and security

・Active implementation of medical safety systems
・Use of advanced business tools(3) Regional cooperation and response to social issues
・Efforts to Address Local Medical Issues
・Prevention and Preventive Measures
・Emergency response to disasters, infectious diseases, etc.

Medical Cooperation
Drug-Medical Cooperation
Aiming to be a " the town’s beacon of light "that supports people's daily lives
Providing services toNanohana Pharmacy
425 outlets
As of March 31, 2022
Knowledge Sharing

Affiliates

Human Resource
Exchange
Sharing of medicines

Restructuring of expansion strategy
25 new stores per year

Medicalinstitutions

support the community-based
integrated care systems
Local residents and patients
Coordination with
Nursing, Nursing
Care, and Nutrition
Services
Regional Cooperation
Home Cooperation

Nursinghome

33

Business Plans –Pharmaceuticals Network Business＜Program Outline＞
12,000 network affiliates ×（distribution improvement ＋ service expansion）＜Focused Policy＞■ Expansion of scale Plan︓FY3/2026 12,000 affiliates ＝ 20％ market share■ Promote distribution improvement and establish supply chain management■ Contribution to regional medical care by building an area network• Strengthen partnerships with pharmaceutical wholesalers and expand the number of affiliates• Healthy distribution market, Negotiation of single unit price to promote efficiency (already achieved) , Implement distribution reforms
such as efficient delivery• Work across the merchant platform to create discipline and impact in the industry

Businessmodel

・Providing management support services for community pharmacies
・Creating an environment in which affiliates can focus on interpersonal operations by improving operational
efficiency
・Implement distribution improvements and form a sustainable pharmacy market

Pharmaceuticalwholesaler

Pharmaceuticalmanufacturer

Pharmaceuticalwholesaler

Pharmaceuticalwholesaler【 Management support for community pharmacies 】
・Negotiation of unit price of single item
・Dead stock consumption
・Inventory management system proposal
MEDICAL SYSTEM NETWORK

MarginNetwork affiliates（Pharmacies,etc）
7,401 affiliates

Local residents and patients

As of March 31,2022【 Improve distribution in the pharmaceutical market 】
・Encourages affiliates to manage inventory properly Plan︓
and Contributing to wholesalers' delivery efficiency and FY3/2026 12,000 affiliates ＝ 20％ market sharecost reduction

34

Business Plans –Manufacture and Market Pharmaceuticals Business＜Program Outline＞Stable supply of safe and secure pharmaceuticals to the network＜Focused Policy＞■Creating a system to ensure quality and safety■Establishment of a system to ensure a stable supply■Expand product lineup and sales channels Plan︓Sales ¥10,000 million in FY3/2026
・Reinforcement of organization and personnel to ensure quality and safety
・Addressable Market in FY3/2026 forecasted at ¥33,000 million, Sales plan achieved at 30% utilization rate
Generic drug use
Of which, theby network
markets covered byaffiliates
Feldsenf PharmaBusiness
model(Unit: million yen)

Sales

FY3/2022 Results

67,00015,6001,800

FY3/2026 Targets

103,500

33,00010,000・Generic drug manufacturer

・Manufacturing is outsourced to a specialized manufacturer, No capital investment

・Accurate demand monitoring for lean production

・Growth prospects as platform expands

Daito PharmaceuticalCo., Ltd.

80％
outsourcing

20％

Manufacture and Market
Pharmaceuticals company
Feldsenf Pharma Co., Ltd.

sales

Specialized
wholesalerof generic drugs

sales

Local residents and patients

Pharmacies andmedical institutions

Generic drug
Manufacturer( Contract manufacturer )manufacture

Plan︓Sales ¥10,000 million in FY3/2026
35

Business Plans –Digital Shift Business＜Program Outline＞
Establishment of pharmacy business infrastructure and expanding to multiple business lines＜Focused Policy＞■Gaining market share Plan︓20,000 outlets in FY3/2026■High value-added services, such as collaborative functions with medical and nursing care institutions■Launch of new revenue-generating businesses• Achievement of 310K users in the first year of service• Expand introduction to network affiliates and build adominant platform• New businesses such as digital signage and e-commerce
are also in operation and generating revenue

Businessmodel

Number of LINE official account users registrations

つながる薬局
Tsunagaru
Pharmacy

31 user
310K

薬局A
Pharmacy
A

5.1

薬局B
Pharmacy
B・Support for conversion to a family pharmacy
・Supporting communication between patients and pharmacies
through official LINE accounts
・Realizing the digital transformation (DX) of the pharmacy
industry

3.9

薬局C
Pharmacy
C

1.4

薬局D
Pharmacy
D

1.2

薬局E
PharmacyE

0.8

RePharmacy Co., Ltd.*

51％
Providing a patient-centeredpharmaceutical platform

49％(As of March 31, 2022)*Subsidiary of DIGITAL HOLDINGS, Inc.

QR Code forFriend Registration
Medicalinstitutions

High value-added

PharmaShift Co., Ltd. (operation of multidisciplinary
collaboration function)

Pharmacies
Nursing home

20,000 outlets in FY3/2026
Local residents and patients36

Value of Business Offering –SDGs Management
 Resolving social issues through business activities to realize our philosophy
 Set short-, medium-, and long-range time goals to resolve issues
Social Issue✓

Pharmacies and pharmacists are necessary and society requires sufficient medical resources while eliminating
regional disparities
Sustainable market formation through rationalization of pharmaceutical distribution and appropriate profit sharing

✓

Input

Activities

Human resource

OutputShort-term Outcomes（Services provided）
1-3 years

Business
activities

Medium-term Outcomes~5 years

Sixth Medium-Term
Management Plan Period

Knowledge
Nanohana Pharmacy

Provide pharmacy services inline with community issues

Establishment of thecommunity-based integrated
care systems for each region

Expansion of thequality/quantity of patientdriven connection mechanisms(pharmaceutical platform
development)

Digital linkage to medical,
nursing, and administrative
domains(digital shift in healthcare)

Proper inventory control at
network affiliated pharmacies
nationwide

Ensure proper inventory
across the supply chain

Providing safe and economical
pharmaceutical products

Planned pharmaceuticalmanufacturing based onmarket forecasts

Nursing and care
Dietary nutrition
Network
infrastructure

DigitalLong-Term Outcomes~10 years

PharmaShift
Tsunagaru Pharmacy

Pharmaceutical Network

Feldsenf Pharma

Creation of a medical
infrastructure ofhomogeneous andhigh quality pharmacies(nationwide)

Reducing healthcare costs
Sustainable pharmaceuticals
Distribution market formation

37

Management Numerical Targets
Fifth Medium-Term
Management Plan Results

Sixth Medium-Term
Management Plan Targets

FY3/2022

FY3/2026

106,685

140,000

Consolidated operating profit(million yen)*

3,852

6,500

Operating profit margin

3.6 %

4.6 %

Consolidated EBITDA (million yen)

6,708

10,000

Pharmaceutical Network affiliates

7,401

12,000425

550

21.1 %

30.0 %

Consolidated net sales (million yen)Community pharmacy outlets
Capital adequacy ratio* Increase of over 3 billion yen in the 3 Pharmacy Support Businesses (Pharmaceuticals Network
Business, Manufacture and Market Pharmaceuticals Business, and Digital Shift Business)38

4Core strategies,
Earnings Forecast
for FY3/2023
and Dividends

39

FY3/2023: Core strategies
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
40Earnings forecast for FY3/2023: 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)

Net sales

106,685

110,000

EBITDA

6,708
6.3 %

Operating profit
Profit margin

ChangeChange (%)+ 3,314+ 3.1 %

6,200

(508)

5.6 %

(0.7 pt)(7.6 %)

3,852

3,500

(352)

3.6 %

3.2 %

(0.4pt)*1

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

41

Earnings forecast for FY3/2023: 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 Segment42FY3/2023: Earnings forecast (comparison to previous term)■ Net sales

主な前提(Unit: million yen)

■ Operating profit

95,00096,00097,00098,00099,000100,000
101,000
102,000
103,000
104,000
105,000
106,000
107,000
108,000
109,000
110,000
111,000
112,000
113,000
114,000
115,000

FY3/2022
2022/3期results
実績

106,685

Pharmaceutical
医薬品ネット…
network

FY3/2022
results
2022/3期実績+ 425

Community Pharmacy
地域薬局+ 2,129

Manufactureand
医薬品製造販売
MarketPharmaceuticals
Leasing andFacility
賃貸設備
related3,852

Pharmaceutical
医薬品ネットワーク
network+ 711

Community Pharmacy
地域薬局(Unit: million yen)

1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500
2,600
2,700
2,800
2,900
3,000
3,100
3,200
3,300
3,400
3,500
3,600
3,700
3,800
3,900
4,000
4,100
4,200
4,300

+ 1,105
+ 181

(657)

Manufactureand
医薬品製造販売
MarketPharmaceuticals
Leasing and賃貸設備
Facility
related+68+0

Meal Catering
給⾷

+ 12

Meal Catering
給⾷+20Home visit
訪問看護
Nursing

+ 23

Home
visit
訪問看護
Nursing

+ 12

その他
Other

(220 )Other
その他
FY3/2023
2023/3期results
予想(compared to previous
year)

(846)

FY3/2023
results
2023/3期
予想

110,000
FY3/2022
results

FY3/2023
forecast

Number of prescriptions atexisting pharmacies

+3.2%

＋2.0%

Prescription unit price atexisting pharmacies(1.5%)(2.1%)*

3,500* Impact of medical fee revisions (see page.44) increasing
cost by new stores openings, and increasing labor cost
due to strengthen interpersonal operations* “Existing pharmacies” refer to pharmacies that continue to be in business on or after April 1, 2021

43

2022 medical fee revision : Effects on results■ Main initiatives- Obtaining an additional regional support system fee by strengthening the family care function and home
medical care
- Acquire generic dispensing premiums through promotion of generic drugs- Pharmacy management fee, additional fee for strengthening cooperation“Existing pharmacies”
FY3/2022 results

FY3/2023 plan

(Points per prescription)(Points per prescription)[Drug price revision]――(277M yen)

[Dispensing fee revision]――+ 74 M yen

Main revisions

FY3/2023 impacts

1. Basic dispensing fee

31.2 points

25.7 points(430M yen)

2. Generic dispensing
premiums

21.9 points

22.3 points+8M yen

3. Community support
premiums

20.1 points

26.9 points+553M yen(▲56M yen)

4. Other

Total

―

―

(202M yen)

* Numbers listed are after implementation of main initiatives

44

FY3/2023︓Prospective dividends
・Dividend prospects for the fiscal year ending March 31, 2022 is an interim dividend of 5 yen and a year-end
dividend of 7 yen (ordinary dividend of 6 yen and a commemorative dividend of 1 yen for the 20th anniversaryof the Company's listing), bringing the annual dividend to 12 yen per share.
・For the fiscal year ending March 31, 2023, we plan to pay interim and year-end dividends of 6 yen per shareeach, for an annual dividend of 12 yen per share.

【Shareholder Return Indicators 】■FY3/2023（forecast）■FY3/2022（prospects）
Annual dividend per share
Dividend payout ratio

Annual dividend per share
Dividend payout ratio

12yen
15.1%

12yen
20.7%

【 Annual dividend per share trend 】
Year-end

interimYear-end

5

5

5

7

6
12yen

5

5

5

5

6

Interim
FY03/19

FY03/20

FY03/21

FY03/22

FY03/23(prospects)(forecast)45

5Reference
Materials

46

ESG Initiatives
As a company that supports the health of Local residents, we contribute to thedevelopment of a sustainable society through ESG initiatives

E=Environment（ Environmental Initiatives ）S＝Society（ Contribution to society andlocal communities ）G＝Governance（ Efforts to improvegovernance ）・Ensuring compliance・Establishing a risk management
system・ Financial structure improvement【 Approaches to environmental
risk management 】
・Reduction of pharmaceutical waste
・Reduction of environmental impact
・ Proper disposal of industrial waste,
etc

Contributing to society through sports

Enhancement of corporate
governanceSupport for the promotion and educationof organ transplantation medicine

Introduction of LED lighting【 Environmental conservation efforts 】
・ Energy conservation measures forbuildings, etc.

Employment of people withdisabilities to support initiatives in
Chinese Medicine development

Accountability to Stakeholders

Our Web site for CSR and Sustainability reports （https://www.msnw.co.jp/csr/)
47

New commercial featuring actress
Momoko Fukuchi now on view

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

MSNW

Search[Contact us]
Corporate Strategy Department
E-mail︓ info@msnw.co.jp

48