FY4/12 2Q
Results Briefing

December 8, 2011

Results Overview－1－
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Consolidated P/L
Net sales in 1-2Q increased 11.3% YoY and exceeded plan by 1.2%, due to a strong performance by
the dispensing pharmacy business. Ordinary income rose 40.4% YoY and exceeded plan by 21.5%,
reflecting active efforts to promote generic drugs and efficiency gains in store operations in thedispensing pharmacy business, and a move into profit in the drug and cosmetic store business.

(¥ million)

FY4/11 1-2Q
results

FY4/12 1-2Q
plan

Vs plan(%)

YoY change（%）

68,833 6,993 101.2
10,905 1,762 104.9

111.3
119.3

96.9

107.0

4,781 1,364 117.2

139.9

4,871 1,402 121.5

140.4

FY4/12 1-2Q
results

YoYchangeGross profit

61,8409,143

68,00010,400% of net sales

14.8

15.3

5,725

6,320

6,123

9.3

9.3

8.9

3,417

4,080

5.5

6.0

3,469

4,010

% of net sales

5.6

5.9

Net income

1,697

1,970

2,364

667 120.0

139.3

Net income pershare (¥)

115.47123.56148.34 32.87 120.1

128.5

Net sales

SG&A expenses% of net sales

Operating income% of net sales

Ordinary income

15.8

398

6.9

7.1

Figures in the table are rounded down
－2－
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Dispensing Pharmacy Business (Consolidated)
Net sales in the dispensing pharmacy business increased 12.9% YoY and exceeded plan by 1.5%,
reflecting strong same-store sales and contributions from new stores and M&A deals. Margins alsorose on improved efficiency in store operations and an increase in dispensing fees due to active
promotion of generic drugs. As a result, segment income increased 28.3% YoY.

(¥ million)

FY4/11 1-2Q
results

FY4/12 1-2Q
plan

Vs plan(%)

YoY change（%）

61,411 7,002 101.5
8,610 1,668 105.6

112.9
124.0

97.5

114.9

5,587 1,275 110.6

129.6

5,754 1,269 111.3

128.3

FY4/12 1-2Q
results

YoYchangeGross profit

54,4096,942

60,4958,150% of net sales

12.8

13.5

2,630

3,100

3,023

4.8

5.1

4.9

4,312

5,050

7.9

8.3

4,485

5,170

8.2

8.5

404

465

Net sales

SG&A expenses% of net sales

Operating income% of net sales

Segment income% of net sales

Total number of storesat end of period

14.0

393

9.1

9.4

462

－

－

－

Figures in the table are rounded down
Segment income is adjusted ordinary income shown on the quarterly consolidated statements of income
Prescription volume: +7.2% YoY
Average prescription price: +5.8% YoY－3－Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Drug and Cosmetic Store Business (Consolidated)
Although same-store sales in the drug and cosmetic store business declined YoY, net sales weresteady YoY owing to a contribution from new stores opened in FY4/11 and in FY4/12 1-2Q. The
business also moved into profit, reporting segment income of ¥52 million. This reflected active efforts
to close or relocate unprofitable stores, strengthen the merchandise lineup, centered on cosmetics andover-the-counter (OTC) drugs, and review sales promotion approaches.
(¥ million)
FY4/11 1-2Q
results

FY4/12 1-2Q
plan

FY4/12 1-2Q
results

Gross profit

7,315
2,225

7,385
2,290

7,312
2,304

% of net sales

30.4

31.0

31.5

2,386

2,420

2,296

32.6

32.8

31.4

(160)

(130)

7

－

－

0.1

(108)

(100)

52

% of net sales

－

－

0.7

Total number of storesat end of period

51

55

53

Net sales

SG&A expenses% of net sales

Operating income% of net sales

Segment income

YoYchangeVs plan(%)

YoY change
（%）

-3

99.0

100.0

79 100.6

103.6

-90

94.9

96.2

167

－

－

160

－

－

－

－

－

Figures in the table are rounded down
Segment income is adjusted ordinary income shown on the quarterly consolidated statements of income－4－
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Consolidated B/SCompared with end-FY4/11, debt was roughly unchanged but cash on hand and in banks increased,
resulting in net cash of ¥4,918 million.
(¥ million)(¥ million)

End-FY4/11
AssetsCurrent assets
Cash on hand and inbanks

Fixed assets
Investments insecurities

Deferred assets
Total assets

End-FY4/12 2Q
Liabilities

Assets38,032 Current liabilities 37,616
15,437

Short-term debt

5,883

38,871Long-term
liabilities

9,824

2,959

Long-term debt

35 Total net assets
Total liabilities

76,940 and net assets

Interest-bearing debt
Net cash

Current assets
Cash on hand and inbanks

Fixed assets

7,331

Investments insecurities

29,498Deferred assets

76,940Total assets

Liabilities

40,695 Current liabilities 40,371
18,355

Short-term debt

5,965

40,842Long-term
liabilities

10,1302,949

Long-term debt

27 Total net assets
Total liabilities

81,565 and net assets

7,471

31,06481,565

13,214

Interest-bearing debt

13,437（Compared with end-FY4/11）(101.7%)2,222

Net cash

4,918

Figures in the table are rounded down
Bonds as of end-FY4/11 and end-FY4/12 2Q are included in long-term debt
Net cash ＝Cash on hand and in banks －Interest-bearing debt

－5－
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Assets
Capital expenditures during the period totaled ¥2,554 million, reflecting an aggressive store opening
and M&As, however cash on hand and in banks rose ¥2,918 million from end-FY4/11 due to an(¥ million)
increase in cash provided by operating activities.
End-FY4/11
End-FY4/11 2Q
1-2Q

End-FY4/11

End-FY4/12
End-FY4/12 2Q
1-2Q

Cash on hand and in banks

15,196

15,437

18,355

2,918

Notes and accounts receivable

8,532

10,247

9,767

-480

Inventories

7,384

8,375

8,348

-27

Total current assets

37,111

38,032

40,695

2,663

Buildings and structures,
structures net

6,220

6,456

6,597

141

Land

5,011

5,420

5,457

37

Total intangible fixed assets

12,865
12,717

13,451
14,827

13,82916,027378
1,200

Investments in securities

2,842

2,959

2,949

-10

Deferred tax assets

1,159

1,233

1,263

30

Deposits and guarantees

4,537

4,990

5,438

448

9,329
34,912
72,061

10,59238,871
76,94010,98540,842
81,565

393
1,971
4,625

Total property, plant and equipment

Total investments and other assets

Total fixed assets
Total assets

ChangeInflow fromoperating activities

Due to increase
Increasein goodwillingoodwill

新規出店等によるDueto new store
openings, etc.

Figures in the table are rounded down
Capital expenditures (purchases of property, plant and equipment and intangible fixed assets + deposits/guarantees) totaled ¥2,554 million
Change (¥): End-FY4/12 2Q compared with end-FY4/11－6－
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Liabilities and Net Assets
Accounts payable increased ¥2,128 million due to an increase in the number of stores, reflecting newstore openings and expansion through M&A.
(¥ million)

End-FY4/11 2Q

End-FY4/11

End-FY4/12 2Q

Accounts payable

21,036

19,706

21,834

2,128

Short-term debt

6,285

5,883

5,965

82

Total current liabilities

35,49837,61640,371

2,755

Long-term debt (including bonds)

7,036

7,331

7,471

140

Total long-term liabilities

9,332

9,824

10,130306

Total liabilities

44,83047,44150,501

3,060

Common stock

8,682

8,682

8,682

－

Capital surplus

7,872

7,872

7,872

－

Retained earnings

11,007

13,227

14,874

1,647

Total shareholders’ equity

Total net assets

27,55827,23029,77829,49831,42531,064

1,647
1,566

Total liabilities and net assets

72,061

76,94081,565

4,625

ChangeIncrease inpurchasing due torise in number ofstoresProfit growth

Figures in the table are rounded down
Change (¥): End-FY4/12 2Q compared with end-FY4/11－7－
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Consolidated C/F
Operating cash flow increased, mainly reflecting a rise in income before income taxes and minority
interests, and depreciation and amortization (including goodwill). As of end-FY4/12 2Q, cash and cash
equivalents stood at ¥18,293 million, providing further scope for investment.
(¥ million)
FY4/11

FY4/11 1-2Q
(a)

FY4/12 1-2Q
(b)

3,281

4,531

1,250

7,644

Depreciation and amortization

680

815

135

1,560

Amortization of goodwill

440

563

123

973

(463)

95

558

(1,130)(Increase) decrease in other accounts receivable(2,267)

86

2,353

(505)

Net cash provided by operating activities

2,756

7,533

4,777

7,627

Payments for purchases of property, plant andequipment, and intangible fixed assets(637)(1,766)-1,129(1,237)－(1,033)-1,033－

Net cash used in investing activities(1,147)(3,910)-2,763(3,881)

Proceeds from issuance of new shares

4,720

－

-4,7204,720

Net cash provided by (used in) financing activities

2,398

(726)

-3,124463

Net increase in cash and cash equivalents

4,007

2,895

-1,112

4,209

Cash and cash equivalents at end of the period

15,196

18,293

3,097

15,397

Income before income taxes and minority interests(Increase) decrease in inventories

Purchase of shares in affiliated companies

Figures in the table are rounded down(b)-(a)（Reference）－8－
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Business Value Analysis
Earnings are firm, supporting an increase in corporate value.
End-FY4/12 2Q

BPS (¥)

37.7
58.7
22.99
115.471.56
1705.14

38.0
62.8
21.67
148.34
1.65
1946.05

0.3
4.1
-1.32
32.87
0.09
240.91

38.3
64.5
12.18
255.671.68
1,847.46

ROA (%)

2.5

3.0

0.5

5.5

ROE (%)

7.0

7.8

0.8

15.4

4,539
8.56
(0.07)
1,874
40,72642,3316,161
7.27(0.16)
4,918
49,68751,260

1,622
-1.29
-0.09
3,044
8,961
8,929

10,6424.30(0.07)
2,222
48,00049,665

Shareholders’ equity ratio (%)
Market value equity ratio （%）
PER (times)
EPS (¥)PBR (times)

EBITDA (¥ million)
EV/EBITDA (times)
Net Ｄ/Ｅ ratio (times)
Net cash (¥ million)
Shareholder value (¥ million)
Market capitalization (¥ million)

ChangeEnd-FY4/11

End-FY4/11 2Q(Reference)

Figures in the table are rounded down
Shareholder value = EV – net interest-bearing debt
Net D/E ratio = (interest-bearing debt – cash on hand and in banks) / shareholders’ equity
Share prices used to calculate market capitalization: End-FY4/11 2Q ¥2,655 (end-Oct 2010), end-FY4/11 ¥3,115 (end-Apr 2011),
end-FY4/12 2Q ¥3,215 (end-Oct 2011).
Net cash ＝Cash on hand and in banks －Interest-bearing debt

－9－

Copy right 2011 AIN PHARMACIEZ. All rights reserved.

FY4/12 Plan (Consolidated)
We forecast FY4/12 net sales will rise 10.5% YoY due to active store opening and expansion throughM&A. We project ordinary income will increase 15.7% YoY on ongoing efficiency gains in store
operations and cost controls.
(¥ million)
FY4/11
results

FY4/12plan

Gross profit

129,387
20,089143,000
22,650% of net sales

15.5

15.8

11,981

12,980

9.3

9.1

8,107

9,670

6.3

6.8

8,210

9,500

6.3

6.6

Net sales

SG&A expenses% of net sales

Operating income% of net sales

Ordinary income% of net sales

YoY change(%)

Change13,613

110.5

2,561

112.7

999

108.3

1,563

119.3

1,290

115.7

Net income
Net income per share
(¥)

3,916

4,850

934

123.8

255.67304.19

48.52

119.0

Annual dividend (¥)

45.00

50.00

－

－

Figures in the table are rounded down
－ 10 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Operating Outlook
Dispensing pharmacy business
Drug and cosmetic store businessTranscend2000－ 11 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Topics of May through November 2011
Developments in FY4/12 1–2Q
May

30 FY4/11 results announced
Net sales: ¥129,387 million (+3.1% YoY), ordinary income: ¥8,210 million (+29.0% YoY)Jun.

9 FY4/11 results briefing
14 Energy saving project launchedJul.

28 General Meeting of Shareholders – dividend of ¥45 per share approved for FY4/11; follows¥30 for FY4/09 and ¥40 for FY4/10; forecasting ¥50 for FY4/12

Aug.

30 FY4/12 1Q results announced
Net sales: ¥33,940 million (+10.2% YoY), ordinary income: ¥2,273 million (+43.9% YoY)

Oct.

1 Medical Development Co., Ltd. established
28 Long-term senior debt awarded BBB+ rating by JCR
31 Ratio of foreign shareholders reaches 27.78% as of end-2Q, up 2.4ppt YoY

Nov.

30 FY4/12 2Q results announced
株価及び出来高の推移
Changes in AIN PHARMACIEZ’share price and trading volume

4,000

Share price

300,000

Trading volume

250,000

3,500

200,000

Share
price 3,000
(¥)

2,500
2,000
Cumulative
trading volume
Share price(High)

Trading

150,000 volume
100,000
50,000
May
2011
11/5

Jun.
2011
11/6

Jul.
2011
11/7

Aug.
2011
11/8

Sep.
2011
11/9

Oct.
2011
11/10

Nov.
2011
11/11

987,800

1,099,900

454,300

854,900

1,363,700

986,800

645,400¥3,155¥3,300¥3,285¥3,155¥3,575¥3,520¥3,475（May 31）（Jun. 30）

（Jul. 11）

（Aug. 1）

（Sep. 9）（Oct. 13）

（Nov. 16）

May-Nov 2011 share price high: ¥3,575 (Sep. 9), share price low: ¥2,874 (May 27)

0－ 12 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Analysis of 1-2Q Results
Net sales exceeded plan by 1.2%, reflecting new store openings and expansion through M&A in linewith plan, as well as sustained growth in the average prescription price. SG&A expenses were 3.1%
lower than plan owing to overhead cost reductions and more efficient use of personnel in the drug andcosmetic store business. As a result, ordinary income exceeded plan by double digits (21.5%).
■ 1-2Q performance versus plan
FY4/12 1-2Q
plan

FY4/12 1-2Q
results

Vs plan(%)

FY4/12full-year planVs full-yearplan (%)

Net sales

68,00068,833101.2

143,000

48.1

Net sales

Gross profit% of net sales

10,40010,905

15.3

15.8

104.9

22,650

48.1

SG&A expenses% of net sales

6,320

6,123

12,980

9.3

8.9

96.9

Net sales comfortably exceeded plan due to
new store openings and M&As in thedispensing pharmacy business, as well as
growth in the average prescription price atexisting stores.

Operating income% of net sales

4,080

4,781

9,670

6.0

6.9

117.2

Ordinary income% of net sales

4,010

4,871
7.1

121.5

9,500

5.9

Net income% of net sales

1,970

2,364
3.4

120.0

4,850

2.9

Net income pershare (¥)

123.56148.34120.1

304.19(¥ million)

15.8
9.1
6.8
6.6
3.4

47.2
49.4
51.3
48.7
48.8

Analysis

Gross profit
Gross profit improved owing to a decline in
the labor cost ratio due to efficiency
improvements in the dispensing pharmacy
business, and dispensing fees generated
from the generic drug dispensing incentive
scheme.

Operating income
Operating income was sharply higher than
plan due to gross margin improvement andSG&A cost controls (more efficient use of
personnel, sales promotion expenses) in the
drug and cosmetic store business.

Figures in the table are rounded down

Net sales and profit targets were achieved through business expansion (new store openings and M&As),
an increase in dispensing fees due to the promotion of generic drugs, and profit recovery in the drug
and cosmetic store business.
－ 13 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Dispensing Pharmacy Business Performance
1996

1997

1998

2000

2002

2004

2006

2008

2010

Revision ratio on
Dispensing fees

+1.3%

+1.15%

+0.7%

+0.8%

-1.3%

±0%

-0.6%

+0.17%+0.52%

Revision ratio on
Drug prices

-6.8%

-4.4%

-9.7%

-7.0%

-6.3%

-4.2%

-6.7%

-5.2%

(Including special drug price reduction-6.5% measures)

Revision ratio on a drug price basis shows change from previous drug price revision (revision ratio).

140,000

Ratio of non-hospital
dispensing

Dispensing pharmacy
market (¥ trillion)

Total sales in dispensing pharmacy
business (¥ trillion)

16,000Operating income¥123,894 million

120,000

14,000¥111,997 million
Total sales
in dispensing
100,000
pharmacybusiness¥11,009 million
63.1%

10,00080,0008,000¥5,471 million

39.5%

6,000

60,000
Ratio of non-hospital
dispensing
18.1％

4,000
¥1,284 million

Operating income¥(281) million

2,000

20,000Total sales
in dispensing
pharmacy business Dispensing pharmacy market¥296 million
00

No. ofstoresProcess

income(¥ million)

54.1%(¥ million)

40,00012,000 Operating¥2.76 trillion¥1.06 trillion

0¥6.08 trillion¥4.59 trillion

FY4/12
12/4期
plan
（計画）

FY4/9494/4期 FY4/95
95/4期 FY4/96
96/4期 FY4/97
97/4期 FY4/98
0984期 FY4/99
99/4期 FY4/00
00/4期 FY4/01
01/4期 FY4/02
02/4期 FY4/03
03/4期 FY4/04
04/4期 FY4/05
05/4期 FY4/06
06/4期 FY4/07
07/4期 FY4/08
08/4期 FY4/09
09/4期 FY4/10
10/4期 FY4/11
11/4期

2
Dai-ichiPharmacy
opened in
Asahikawa City

13

29
Branded as Ain
Pharmacy

34

39

48

58

Clinical testing
business sold off
Company namechanged to AIN
PHARMACIEZ

75

92

148

Imagawa
Yakuhin (56)

148

193

218

247

356

AIN TOKAI (22) MEDICAL HARTLAND(17)(currently, AIN MEDIO)AIN MEDICALSYSTEMS (18)
Rejoice (16)
Rejoice Pharmacy(14)

Asahi Pharmacy(86)
DAICHIKU (18)

360

397

448

-2,000491

6 M&As(33)
4 M&As(9)
Negotiations
still ongoing

SUNWOOD (5)Ratio of non-hospital dispensing is based on data from the Japan Pharmaceutical Association; dispensing market value is based on data for dispensing cost trends－ 14 －
issued by the Ministry of Health, Labour and Welfare
Store numbers shown in brackets
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Uptake of Generic Drugs
The government is aiming to boost the usage rate on a volume base of generic drugs to over 30% by
March 2013. Generic drug usage volume has increased rapidly since the government sharply
increased premiums for generic drug dispensing systems in April 2010 dispensing fee revisions.
■Generic drug use (volume basis): Ministry of Health, Labour and Welfare data
40.0%

Action program for the promotion of the use of generic drugs (launched Oct. 2007)

30.0%
20.0%

15.4%

16.1%

18.0%

18.9%

FY/3/06

FY3/07

FY3/08

FY3/09

30.0%

22.4%

10.0%
0.0%
Generic drug opt inoffered in prescription
Generic
drug usagerate

FY3/10FY3/11

Generic drug opt out
offered in prescription
Premiums for generic drug dispensing
systems (4 points if 30% of prescriptions
are generics)

FY3/12
Generic drug opt in/opt out
for each prescribed drug

Revision of premiums for generic drug dispensing
systems (6, 13, and 17 points if volumes of
20%, 25%, and 30% are generics, respectively)

Revision of premiums for generic drug
dispensing systems (points as yet undecided forvolumes of 22%, 30% and 35%)

Shift to prescriptions based on
generic names not brand names
Established dedicated genericdrug wholesale subsidiary
WSS in April 2006

Our
response

Established generic drug supply
system with the startup of a new
distribution center and system

Produced DVD to promote
generic drugs to patients

・Produced second DVD to promote generic drugs to patients
・Generic drug promotion project encouraged more patients tochoose generics

We expect the generic drug usage rate to expand further due to (1) upcoming changes in dispensing volume
criteria used to calculate premiums for generic drug dispensing systems depending on prescription volumes in
the April 2012 medical treatment fee revisions, and (2) a shift to prescriptions based on generic names, not－ 15 －
brand names.
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Promoting Generic Drugs
As of end-October 2011, generic drugs accounted for 28.8% of total drug prescription volume at ourpharmacies due to promotion efforts and stepped up training for pharmacists. We expect government policy
to lead to an increase in prescriptions with a generic option and we plan to drive a further shift to generics.
■ Generic drug dispensing volume / ratio of■ Dispensing fees (existing stores)prescriptions with generic drug option

24 24// 4040

100.5
100.5

Premiums
for generic
後発医薬品調剤体制加算
drug dispensing systems

6 / 6/
1313// 1717

155.6
155.6

内服調剤料
Oral
drug dispensing fee

上限89 89
Maximum:

105.5
105.5

一包化加算
Unit-dose
packaging
drug fee
薬歴管理指導料
Drughistory management /上限270
Maximum: 270

109.6

30

100.4

instructionfee
薬剤情報提供料（お薬手帳）
Drug
information provision fee(forpatient medication notebook)
特定薬剤管理指導（ハイリスク薬）
Specificdrugs management /instruction(high-risk drugs)
技術料全体

Total technical fees

30

100.4

113.1

15
15

113.1

199.0

4
－

109.6

4

199.0

102.1
-

102.1

Ratio of prescriptions with generic drug option (%)

調剤基本料
Basic
dispensing fees

Generic drug dispensing
volume (%)

Ratio of prescriptions withgeneric drug option

Generic drug dispensing volume (%)）

点数
PointsOct. 2010

Jan. 2011

Apr. 2011

Jul. 2011

Oct. 2011

Volume base (%)

26.7%

27.6%

28.2%

28.3%

28.8%

20% and less

72

67

65

62

55

20-25%

63

52

50

46

43

25-30%

104

95

85

84

77

30% and more

166

196

212

218

243

Total no. of stores

405

410

412

410

418

Number of stores

Per prescription (¥)

処
方
箋
1
枚
当
た
り
（
円

YoY
前期第2Q
change (%)
比較（増率）

主な項目
Main items

Consolidated basis
Consolidated basis

Around 60% of our prescriptions now offer a generic drug option, with generic drug dispensing
volume steadily approaching the 30% target. We aim to reach this target as soon as possible byincreasing ratios at stores where the level of generic drug dispensing volume is still below 20% of
the total.
－ 16 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Net Sales at WSS
In 1-2Q, ordinary income at WSS rose 43.9% YoY and exceeded plan by 6.2%, however net sales fell
short of plan. We plan to promote wider use of generic drugs within the Group and expand sales toexternal customers by continuing to increase the number of sales items on promotion.
(¥ million)

9,007
1,010

6,415
5,484

3,079

1-2Q 12/3

1,498
408

(Plan)

SG&A expenses

16.1%

8.1%

6.6%

4.9%

5.6%

4.7%

Ordinary income
margin

2.9%

6.1%

7.0%

8.0%

12.6%

11.2%

The ordinary income ratio continues to rise on the back of SG&A cost control and net sales growth.

－ 17 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Developing and Introducing Automated Systems
We work closely with manufacturers in the development of automated equipment to improve safety
and accuracy and develop operating methods during the testing phase.
Automated drug dispensing system

Automated prescription checking system

Automated tablet
picking machine

Automated liquid drug
dispensing machine

New digital patient drug
history

Single-dose packaged drug
check support system＜Robo-pick＞＜Pharma Flex＞＜Pharnes II-MX＞＜Unit-dose packaged drug checksupport robot system＞

Developer

YUYAMA Co., Ltd.

Hitachi-Aloka Medical, Ltd.

SANYO Electric Co., Ltd.

Panasonic Healthcare Co., Ltd

Relationship

Cooperation in development

Cooperation in development

Joint development

Cooperation in development

Test period

Sep 2009–Jun 2010

Dec 2009–Jan 2011

Dec 2010–Oct 2011

Jul 2011–Nov 2011

Start of full-scale
introduction

Jul 2010

Feb 2011

Nov 2011

Nov 2011

Total number of stores withthe systems (as of endFY4/12 2Q)

14

11

60

0

Comment

Expected to save personnel
costs equivalent to a single
pharmacist

Expected to save personnel
Hybrid machine combining a
Introduced from Nov 2011 at thecosts equivalent to half a single receipt computer and digital drug
Amakubo Storepharmacist
history functions－ 18 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Store Network
We opened 24 stores in 1-2Q, exceeding our target. We are making steady progress toward our goal of
50 new stores in FY4/12.
■ Total number of stores・・・・■ Store opening plans
Company nameAIN PHARMACIEZAIN MEDICAL SYSTEMSAIN MEDIODAICHIKU
Asahi Pharmacy

Total

End-FY4/12 2Q

Plan

Plan

31 [5]
76 [2]2
450 [7]

11 [1]
23 [1]2
1
19 [2]

Results

13 [2]
42 [0]41
24 [2]

Number of drug and cosmetic stores shown in brackets

・・

69 properties secured
Total number of stores includes the three stores in the
FC format

・ ・・・・・・・・・・・ ・・・・・・・・ ・ ・・・・・・・・・・・ ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・
・・・・・・
・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ ・ ・ ・・・・・・・・・・・・ ・・・・・ ・・・・・・・・・・・ ・・・・・・・ ・ ・・・・・ ・

FY4/12

Hokkaido 95

・・・・・
・ ・ ・
・
・・・・・・・・・・・・・・・・・・・・
・ ・・・・・・・・・・・・・・・・・・ ・・・・・・・・・

515(Dispensing pharmacy: 462
Drug and cosmetic store: 53)

・・ ・・ ・・・・・・・・
・・・・・
・ ・
・

Tohoku 69

Kanto/Koshinetsu 246

・・

Kinki and other areas 105
End-FY4/12 2Q－ 19 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

・Medical treatment fee revisions (1)The Ministry of Health, Labour and Welfare's Social Security Council has approved the basic policy for
medical treatment fee revisions in April 2012. As part of efforts to promote generic drugs, the Central
Social Insurance Medical Council (CSIMC) is looking at raising the dispensing volume criteria forgeneric drugs used to calculate premiums for generic drug dispensing systems.

■ Premiums for generic drug dispensing systems
The government plans to raise dispensing volume criteria used to calculate premiums for generic drug dispensing
systems. The government is also considering removing natural and traditional medicines, which do not have genericalternatives, from the calculations.
■ Simulation(End-Oct. 2011)

Number ofstores% of total (%)(After revisions)

Number ofstores% of total (%)

Difference

Under 20%
Over 20%
Over 25%
Over 30%
Total

55
43
77
243
418

13.2
10.3
18.4
58.1
100.0

Under 22%
Over 22%
Over 30%
Over 35%
Total

49
78
147
144
418

11.7
18.7
35.2
34.4
100.0

-6
+35
+70
-99
－

Consolidated basis

Actively promoting
wider use of genericdrugs would drive profit
growthNatural and traditional medicines removed from calculations■ Shift to generic names in prescriptions
The government is looking at encouraging a shift from brand names to generic names in prescriptions.
This would make generic drug inventory management easier. We plan to promote wider use of generics and boost
procurement from WSS.

■ Changes to prescription forms
The new prescription forms will replace a single signature approving the use of generics for all drugs in theprescription with an option to select generics for each drug prescribed.
This will result in a wider choice of generics for patients, leading to an increase in generic drug usage.
－ 20 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Medical treatment fee revisions (2)In an effort to reduce waste in home healthcare, where unused prescribed drugs are estimated to costaround ¥40bn, pharmacists will be encouraged to actively participate in home healthcare by offering
drug management and guidance for patients at home. The CSIMC is currently looking at specificrevisions in this area.
■ Home healthcare
To encourage small dispensing pharmacies to move into the home healthcare market, the government is looking
at establishing new criteria for calculating fees for joint guidance provided by doctors and pharmacists and new
evaluation benchmarks for facilities at dispensing pharmacies that provide this care.

■ Our approach to expansion in home healthcare
・We will conduct marketing visits at home healthcare facilities near our stores.
・Working with Group companies, we plan to approach doctors and medical service providers involved in homehealthcare.
・We will also target companies operating elderly care homes in order to actively participate in drug management
and guidance at newly established care homes.

We have stepped up our activities in this area after establishing a home healthcare section in July
2011. We began responding to demand for prescriptions from new facilities in December.

■ Drug history management / instruction fee, and drug information provision fee (patient
medication notebook)
The Great East Japan Earthquake highlighted the benefits of patient medication notebooks. Against this backdrop, thegovernment is considering combining the evaluation of patient medication notebook management with drug history
management / instruction fees in its medical treatment fee system.
We are aiming to encourage wider adoption of patient medication notebooks by stepping up efforts to raiseawareness among patients and enhancing the management of medication history and notebooks.
－ 21 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Developing Medical Malls
As part of efforts to expand the business through new store openings, we have started developing
medical malls with a focus on 122 potential development proposals identified nationwide.
■ Development project business approach■ Hybrid facility development (large-scale dispensing pharmacies near hospitals + medical malls)
We aim to boost sales per store by creating facilities that combine dispensing pharmacies near hospitals withmedical malls. We plan to secure ideal locations for these hybrid facilities by participating in projects to build or
relocate hospitals. Depending on conditions at each location, we will design hybrid facilities and sign up medical
service providers and doctors to work at the medical malls.

■ Medical mall developments
We plan to team up with leading real estate developers to open dispensing pharmacies in buildings in major cities
and near stations. Our aim is create medical malls tailored to the local area by actively attracting medical clinics tothe same building or neighborhood.

■ Sales targets(¥ million)

Sales targets

FY4/12
Number of
Net sales/
projects
year

4

2,000

FY4/13
Number of
Net sales/
projectsyear

24

17,000FY4/14
Number of
Net sales/
projectsyear

22

11,000Of the 122 potential development proposals identified, we have started work on around halfof the medical mall and hospital relocation and rebuilding projects. We plan to open 50 ofthese facilities by FY4/14, generating a projected ¥30bn in annual sales.

－ 22 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Case study (1): Nagamachi Project, Sendai
We are investing in a new medical mall close to Sendai City Hospital, which is being relocated. The mall is due to becompleted and opened in April 2012. Four clinics have already agreed to open sites in the mall and negotiations areunderway with a screening center and other medical service providers about moving into the mall.

New Sendai
City Hospital

Medical mall(Exterior view)■ Overview of medical mall

■ Net sales targets
Number of prescription(Sales(Sales:¥ thousand)¥ thousand)(Number ofprescriptions per day)Sales

1,535,386

1,600,000

1,535,386

600

Sendai City, Miyagi Prefecture

Building

Four floors

Dispensing pharmacy area 1F 396㎡ (120 tsubo*)

500

1,200,000
656,640

800,000

City hospital relocation

600,000

Our dispensing pharmacy (due to open Apr 2012)
Neurosurgical clinic (due to open Sep 2012)

300

2F

Psychosomatic medical clinic (due to open Apr
2012)

30

100
360

560

560
0

Surgical treatment clinic (due to open Jul 2012)

Tenants

400,000
228¥580 million

1F

200
7,200

* One tsubo is equal to approx.
3.305㎡(square meters).

400

1,036,800

1,000,000

0Location

Total investment amount

1,400,000

200,000(Medical service provider) 1F (Our dispensing pharmacy)

Gastrointestinal clinic (due to open Jul 2012)
Rheumatoid arthritis clinic (negotiations ongoing)

3F

Screening center (negotiations ongoing)
Diabetes clinic (negotiations ongoing)
Cardiovascular clinic (negotiations ongoing)

4F

Licensed childcare center (due to open Apr 2012)－ 23 －

Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Case study (2): Shibetsu Project, Hokkaido
We are planning to convert an existing dispensing pharmacy into a medical building. We received a request from Shibetsu
City to create a facility providing medical services not available at the city hospital, thereby helping to create morecomprehensive medical services in cooperation with the hospital. Two medical service providers have already agreed to set
up clinics in the building, which is due to be completed and opened in June 2012.

Shibetsu Municipal
General Hospital(Exterior view)

2F - 3F (Medical service provider)
Medical mall

■ Net sales targets■ Overview of medical mallNumber of prescription(Sales ¥ thousand)

Sales(Number ofprescriptions per day)

1,000,000

779,608

779,608

743,143

800,000

Location

Shibetsu City, Hokkaido

600

Building

Three floors

500

Dispensing
pharmacy area

400
600,000
418,000

300

400,000
158,400

200,000
190

310

310

¥360 million

200

1F

Our dispensing pharmacy (due to open Jun
2012)

100

2F

ENT clinic (due to open Jun 2012)310
0

Tenants

60
0

Total
investment
amount1F 302㎡ (91 tsubo)

Internal medicine clinic (due to open Jun
2012)

3F

Urological clinic (negotiations ongoing)

Psychosomatic medical clinic (negotiations
ongoing)－ 24 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Case study (3): Sapporo Kita Building Project
We are investing in a new clinic zone in the Sapporo Kita Building, due to be completed in 2012. We havebeen involved in the project from the beginning and the first floor has already been earmarked for use as
our dispensing pharmacy.
Medical mall

2F (Medical service provider)(Exterior view)■ Overview of medical mall

■ Net sales targets(Sales ¥ thousand)Number of prescriptions

1,000,000

753,984

800,000

804,250

Sales

837,957(Number ofprescriptions per day)

Location

Sapporo City, Hokkaido

600

Building

Fourteen floors

500

Dispensing
pharmacy area

1F 225㎡（68 tsubo）

400

Total investment
amount¥100 million

837,957

660,000
600,000

300
250

320

350

350

1F

300

400,000

Gastrointestinal clinic (negotiations ongoing)200

200,000

100
32,5600Tenants148

0

Our dispensing pharmacy (due to open Apr 2012)

Cardiovascular clinic (negotiations ongoing)
Diabetes clinic (negotiations ongoing)

2F

Rheumatoid arthritis clinic (negotiations ongoing)
Psychosomatic medical clinic (negotiations
ongoing)
Shared screening clinic (negotiations ongoing)－ 25 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Drug and cosmetic store business
Gross profits increased owing to efforts to boost sales of OTC drugs with high gross margins. In
addition, segment income improved ¥160 million YoY owing to tighter control of store operating
costs, which included more efficient use of personnel and cuts to advertising and sales promotion
expenses.
■ Inventory reductions
Steps to reduce inventories led to a decline in the gross margin to 30.5% in FY4/11, but the margin recovered to31.5% in FY4/12 1-2Q. Inventories returned to healthy levels, leading to a decline in inventory losses.

■ Gross profits increase
Gross profits rose, mainly reflecting steps to boost sales of OTC drugs with high gross margins.
(¥ million)

FY4/11 1-2Q
net sales

FY4/12 1-2Q
net sales

YoY change

YoY change ingross profits

951

1,012

106.4%

113.7%OTC drugs

Figures in the table are rounded down

■ Store operating costs reduced(¥ million)

YoYchangeCost item

Initiative

Personnel costs

Store operating procedures changed to improve efficiency, allowing more
efficient use of personnel-17

Point reward criteria changed, point card production costs reduced-54

Shifted from direct mail to mobile tools for member services-13

Sales promotion costs
Advertising costs

Parallel efforts to generate gross profits and reduce SG&A expenses led to an improvement in
profitability, helping the drugs and cosmetics store business move into profit. We are targeting further
profit growth by opening more ainz & tulpe stores and controlling costs.
－ 26 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

New stores (1)We opened two new stores in 2Q. Both are generating strong sales. The Sannomiya Store was relocatedto the Clefy Sannomiya retail building, which attracts many shoppers from our target demographic. The
Miyanosawa Station Store is connected directly to the station and stocks a wide range of products tailoredto local demand.
■ ainz & tulpe Miyanosawa Station Store■ ainz & tulpe Clefy SANNOMIYA Store(Sapporo City)(Kobe City)Store opened:

Oct. 21, 2011

Store opened:

Oct. 28, 2011

Sales area:

383 ㎡

Sales area:

347 ㎡

Number of product lines:

Approx. 13,000

Number of product lines:

Approx. 13,000

Projected monthly sales:¥19,000 thousand

Projected monthly sales:¥20,000 thousand(¥ thousand)Nov. 2011
plan

Nov. 2011
results

Vs plan(¥ thousand)Nov. 2011
plan

Nov. 2011
results

Vs planNet sales

19,00020,632108.6%Net sales

15,00021,014140.1%

Gross margin

24.5%

28.2%

－

Gross margin

23.0%

30.8%

－
－ 27 －

Copy right 2011 AIN PHARMACIEZ. All rights reserved.

New stores (2)We have already opened two more stores in 3-4Q. Sales at these stores are in line with plan. The Sapporo
Paseo store is located in a retail area that links directly with Sapporo Station. Many neighboring tenants
attract business from our target demographic. The Ario Sapporo Store is located immediately next to the
shopping center’s food and deli counter area and it sells a large number of daily necessities, so we expect it
to attract customers with families.
■ ainz & tulpe Sapporo paseo Store (Sapporo City)■ ainz & tulpe Ario Sapporo Store (Sapporo City)Store opened:

Nov. 12, 2011

Store opened:

Nov. 18, 2011

Sales area:

396 ㎡

Sales area:

710 ㎡

Number of product lines:

Approx. 13,000

Number of product lines:

Approx. 20,000

Projected monthly sales:¥40,000 thousand

Projected monthly sales:¥50,000 thousand(¥ thousand)Nov. 2011
plan

Nov. 2011
results

Vs plan(¥ thousand)Nov. 2011
plan

Nov. 2011
results

Vs planNet sales

40,00045,553113.9%Net sales

25,00040,077160.3%

Gross margin

27.1%

33.0%

－

Gross margin

26.0%

29.4%

－

Business days:19

動画①

Business days:13

動画②－ 28 －

Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Progress with Transcend 2000 (T-2000)
Net sales and ordinary income in FY4/12 1-2Q were both ahead of plan on the back of new store
openings and strong sales at existing stores. We continue to work towards our net sales and ordinary
income targets for FY4/14, the final year of the medium-term plan.
■ T-2000 net sales and ordinary income targets
240,000

Net sales plan (T2000)

Net sales

Ordinary income plan (T2000)

Ordinary income
200,600

200,000

16,000143,000
129,387

125,495

120,000
80,00020,000177,900

160,000
Net sales(¥ million)

24,0009,500

13,580

8,210

6,362

10,7808,000

40,00002010/4
FY4/10Net sales
Ordinary income

Ordinary
income(¥ million)

4,000

0

(¥ million)

12,000Results

125,495
6,362

2011/4
FY4/11
T-2000Results

2012/4
FY4/12
T-2000137,750 129,387 162,100
7,650

8,210

10,000Plan

2013/4
FY4/13

2014/4
FY4/14T-2000T-2000143,000

177,900

200,600

9,500

10,78013,580We are targeting net sales of ¥200bn and ordinary income of ¥13.5bn in FY4/14 by aggressively
opening new stores and diversifying store development, including medical mall development
projects.
－ 29 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

Initiatives to Achieve T-2000 Targets
We are targeting net sales of ¥200 billion and ordinary income of ¥13.5 billion in FY4/14 by opening
new stores, using M&A, and increasing the efficiency of store operations.

■ Initiatives in the dispensing pharmacy business
New store openings exceeded our targets in FY4/12 1-2Q; we plan to actively use
M&A to drive expansion, supplemented by our existing store opening program.
Development of medical malls is progressing smoothly; we aim to open 50 such
facilities by FY4/14.
Increase safety and boost the efficiency of store operations by enhancing
pharmacist training and introducing more automated equipment.
■ Initiatives in the drug and cosmetic store business
Step up openings of highly profitable ainz & tulpe stores in urban markets
Continue to reduce purchasing costs and maintain SG&A expenses at an appropriate
level.

－ 30 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.

For more information about this presentation, please use the contact details below

AIN PHARMACIEZ INC.
Corporate Planning Office
TEL011-783-5681
FAX011-783-0224
http://www.ainj.co.jp/
Transcription, copying or distribution of this material to third parties isforbidden without the permission of Ain Pharmaciez Inc. This material is forpresentation purposes only and is not intended as a solicitation to invest in thecompany's securities. Some or all of the information may be revised orchanged without notice. We caution investors that this material contains
forward-looking statements that may differ to actual performance due tochanges in the operating environment and other factors.

－ 31 －
Copy right 2011 AIN PHARMACIEZ. All rights reserved.