2796.T

Overall Financial Results

• Total consolidated revenue: 50.556 billion yen, +8.5% YoY; operating profit: 603 million yen, +530.7% YoY, a substantial recovery from prior period results. All profit lines increased YoY, but missed plan due to one-time costs from the acquisition of Sanko Medical.
• A net loss of 125 million yen attributable to parent shareholders was recorded, driven by higher effective tax rate from non-deductible acquisition costs and subsidiary losses under non-consolidated tax filing.
• Management confirmed that the targeted V-shaped recovery from the 4Q 2024 period (after the store count crossed 300) is complete, with operating profit returning to pre-dip levels.

Dispensing Fee Revision Response

• The company's My Number Insurance Card utilization rate reached 78.5% as of February 2026, exceeding the 70% threshold for the highest medical DX add-on fee.
• New family pharmacist consent agreements are on track to meet the full year target of 167,000 total agreements by end of May 2026, with 13,000 new patients expected this fiscal year.
• Full year technical fee gains are now projected at 474 million yen YoY, 35 million yen below the original plan, driven by lower-than-expected prescription volume offset partially by higher than planned gains from regional support and generic drug add-on fees.

Medium-Term Growth Strategy (Pharmacy Business)

• 1. Strengthen family pharmacist functions: Established dedicated task forces with KPIs for specialized training frequency, best practice case sharing, customer satisfaction (CS) and employee satisfaction (ES) initiatives. Rolled out a detailed cleaning and organization manual to all stores, and is rebuilding service training and redefining the company's unique MCS (medical clerical support) role to improve patient service.
• 2. Patient-centric pharmacy operation:
  • Standardized OTC product assortments across stores; compliance with the new 3-pattern standard increased from 20% to 71.4% of stores by February 2026, and average OTC sales per store are already up 4.6% from the start of the fiscal year.
  • The company's original dementia cafe-based health event program hit its initial KPI, so the store target was raised from 50 to over 100 stores, with 87 stores already hosting events as of 3Q.
  • The company secured a 5.0% share of all registered OTC emergency contraception sales locations in Japan ahead of the regulatory change, with consistent demand across all regions, and plans to expand the number of participating locations.
  • As of February 2026, the company has 78 certified health support pharmacies, 88 certified regional collaboration pharmacies, and 4 certified specialized medical institution collaboration pharmacies, and continues to pursue new certifications.
• 3. Increase prescription volume:
  • The number of contracted nearby medical institutions increased by 2,940 (+10.9% YoY) as of 3Q, on track to grow total prescription volume.
  • Post-dispensing follow-up programs using the company's original "Pocket Pharmacy" electronic medication notebook have strong patient demand (85% of approached patients opt-in), and the company is developing digital tools to overcome capacity limits from traditional phone-based follow-up.
  • Expanded digital tools including official LINE integration, and plans to develop AI tools to improve store operational efficiency.
• Home and facility care: Full year 2026 planned home care revenue of 4.521 billion yen is on track to be achieved, with 3Q revenue up 3.6% YoY to 1.138 billion yen. M&A has expanded the company's service coverage area.

Recent M&A

• The company acquired all shares of Sanko Medical, a generic drug wholesaler with 16 dispensing pharmacies operating in Saitama, Tokyo, and Chiba prefectures, in February 2026. The acquisition will build a stable generic drug supply system for the group, and the company plans to improve the new acquisition's profitability to match group levels via efficient operations and flexible staff allocation.

• Management maintained the full-year operating profit plan while noting that technical fee gains are on track to come in 35 million yen below the original 509 million yen target, due to lower-than-expected prescription volume.
• The target for the number of stores hosting the company's "Cafe Nyaramarize" health event was raised from 50 to over 100 stores after hitting the initial KPI early.
• The company reaffirmed its medium-term target of reaching 700 billion yen in total revenue and 16 billion yen in operating profit by the final year of the current medium-term plan, and is on track to execute the six defined growth strategies to hit these goals.
• Full year 2026 home care targets of 690 contracted facilities, 585,000 prescriptions, and 4.521 billion yen in revenue are maintained, with management expecting these targets to be achieved.

1. 調剤薬局事業 (Dispensing Pharmacy Business): 43.004 billion yen in revenue, +12.3% year-over-year (YoY), contributed 85% of total consolidated revenue. YoY operating profit increased 671 million yen, driven by M&A store growth. Revenue was 734 million yen above plan, as higher average prescription price offset lower-than-planned prescription volume. Operating profit was 37 million yen below plan, with the plan deviation gap narrowed from the 2Q cumulative result. 2. 物販事業 (Product Sales Business): 6.009 billion yen in revenue, -9.3% YoY, contributed 11.9% of total consolidated revenue. Revenue was 57 million yen above plan. The segment is split into two sub-segments: drug store sales missed plan due to lower-than-expected sales of epidemic-related products, while convenience store sales outperformed plan on higher average customer spending. Operating profit was 82 million yen below plan due to lower-than-expected sales of high-margin seasonal winter products. 3. その他事業 (Other Business): 100 million yen YoY operating profit decline: 58 million yen from new product development amortization at the healthcare IT solution subsidiary Muteus, 35 million yen from reduced home visit volume due to nursing staff shortages at the home care business. 4. 医学資料保管・管理セグメント (Medical Document Storage & Management Segment): Operating profit was 53 million yen above plan driven by unbudgeted film disposal income gains. 5. 医療モール事業 (Medical Mall Business): Operating profit was 42 million yen above plan due to delayed large-scale investments that reduced depreciation expense. An unallocated 62 million yen in M&A-related costs dragged down total consolidated operating profit relative to plan.

• Lower-than-expected prescription volume due to longer prescription terms (reducing visit frequency) and lower prevalence of epidemic diseases (pediatrics/ENT) has negatively impacted revenue relative to plan, and this trend may continue into future quarters.
• The dispensing fee revision's new concentration rules that lower base fees for pharmacies with high concentration of prescriptions from single medical institutions will require additional strategic changes to avoid negative margin impacts.
• The new fee structure that rewards performance-based metrics for family pharmacist and regional support add-ons has resulted in a net negative impact for the company compared to the prior structure, and regaining the lost revenue may be challenging.
• Traditional phone-based post-dispensing patient follow-up has inherent capacity limits that could prevent the company from hitting its patient engagement KPIs, if digital tool development does not scale as expected.
• Under the new dispensing fee revision, personal at-home care requirements have become more stringent, creating added implementation cost and complexity for the company's planned expansion in this segment.

Q: What is your view of the recent dispensing fee revision, described as very strict by other firms, and what is your strategy moving forward? / A: Management views the fee increases to address wage and price inflation positively, as this supports employee motivation. However, they are surprised by the new concentration ratio calculation rules that lower base fees for high-concentration pharmacy locations, which will lead to fee reductions for affected locations. The impact on Pharmarise is limited, as the company does not operate many high-concentration gate or medical mall pharmacies. The change to a performance-based assessment model for generics, regional support, and family pharmacist fees represents a net negative reduction for the company, and recovering this lost revenue is the key strategic priority. Growing total prescription volume is the most important priority, which will also help bring concentration ratios below the 85% threshold to avoid penalties. The company also plans to increase the share of stores eligible for the new higher regional support add-on fee, currently at 50% of locations. The dedicated regional healthcare department will be expanded to grow personal at-home care, which now has stricter, expanded requirements under the new rules. Ensuring all staff fully understand the increasingly complex fee calculation requirements to avoid missed fee claims is also a critical priority.

Q: What are your volume targets and hiring plans for the personal at-home care segment? / A: (Answer not fully provided in the transcript, but management confirmed they are strengthening the dedicated department and restructuring initiatives to expand the segment in response to the revised requirements.)

Q: What specific measures do you plan to take to reduce your prescription concentration ratio at high-risk locations? / A: (Answer not fully provided in the transcript, but management noted that growing prescription volume from additional nearby medical institutions is the core approach to lower concentration.)