■ Future Outlook for CareNet＜2150＞

2. Competitive Advantage

Competing companies of the company include M3 and MedPeer. M3 operates the "m3.com" platform for medical society members, providing pharmaceutical marketing support and utilizing medical data. It has a member count of more than 330,000, representing over 90% of domestic physicians, and holds the top share in the field of pharmaceutical marketing support. MedPeer operates the exclusive community site "MedPeer" for physicians, facilitating information sharing among doctors and providing pharmaceutical marketing support. It has a strength in forming a community of doctors, with over 170,000 members nationwide, and features abundant content such as drug evaluation bulletin boards and case discussions.

The company's advantages include having over 230,000 members, representing approximately 60% of domestic physicians, establishing brand power as a medical education content service for physicians, and deploying a hybrid information provision model that integrates the internet and human based on the trust relationship with physicians.

In the competitive environment of the pharmaceutical DX business, it is predicted that companies such as M3 and MedPeer will continue to be competitors, but it is different from the oligopolistic competitive environment of the medical advertising business. With the rapid decrease in MR, what the pharmaceutical industry seeks is shifting from advertising to sales solutions. Since sales solutions require differentiation from advertising, it is expected that sufficient market share will be obtained by providing speedy and efficient solutions. Furthermore, in the new business environment, the technical aspects such as scale and AI/data management are not the core of competitive advantage, and the company sees that the retention of physicians is the fundamental strength. Therefore, the company considers that it is most important to focus on providing speedy and efficient sales solutions and offering added value that is attractive to top-class specialists from university hospitals.

The performance, major management indicators, and future measures for the three companies including the recent financial period are as follows.

The performance of M3 for the fiscal year ending March 2024 (April 2023 to March 2024) showed a revenue of 238,833 million yen (3.5% increase from the previous period) and an operating profit of 64,381 million yen (10.6% decrease from the previous period). The revenue increased due to the growth of the career solution business, which supports medical field staffing, while the profitability of pharmaceutical marketing support for pharmaceutical companies was soft. The operating profit was affected negatively by the unfavorable clinical trial projects related to the new coronavirus in North America, resulting in impairment losses including goodwill. As a topic, M3 conducted a TOB (tender offer) to Benefit One Inc., a welfare benefits management company, but it was not successful due to a counter TOB by Dai-ichi Life Holdings ＜8750＞ on more favorable terms. For the fiscal year ending in March 2025, it is expected that the revenue will be 268,000 to 273,000 million yen (12.2% to 14.3% increase) and the operating profit will be 67,000 to 70,000 million yen (4.1% to 8.7% increase). To achieve renewed growth in pharmaceutical marketing support, M3 is strengthening the development of new services to improve customer companies' productivity and enhancing proposal-based consulting using the data they own. Among the major management indicators, the total asset turnover ratio decreased to approximately half of that of the fiscal year ending in 2016, reaching 0.5 times (compared to 1.0 times). This level is below that of the company (0.8 times for the fiscal year ending in 2023) and MedPeer (1.2 times for the fiscal year ending in September 2023), indicating a slowdown in growth. It is thought that the pace of increase in revenue is not catching up with the pace of expansion of total assets including goodwill and cash and cash equivalents due to successive M&A activities.

The performance of MedPeer for the fiscal year ending in September 2023 (October 2022 to September 2023) showed a revenue of 14,540 million yen (72.0% increase from the previous period) and an operating profit of 1,119 million yen (5.3% increase from the previous period). The increase in revenue was contributed by MI Force Inc., acquired through M&A, setting a new record. The operating profit did not reach the plan due to the impact of a service mix with high-profit margin web services and low-profit margin of staffing services. For the fiscal year ending in September 2024, it is expected that the revenue will be 14,600 million yen (0.4% increase) and the operating profit will be 1,150 million yen (2.7% increase). The company aims to establish a position as a reliable partner based on the strength of being the platform closest to physicians. It also plans to rebuild its business portfolio through selection and concentration, clearly identify businesses to accelerate investment in, and consider business withdrawal if necessary. Among the major management indicators, the revenue net margin decreased by 5.4 points compared to the previous period. This was due to a significant increase in the top line through M&A, combined with a decrease in profitability due to fluctuations in the business portfolio.

The company's performance for the fiscal year ending December 2023 (January 2023 to December 2023) was sales of 10,235 million yen (an increase of 9.7% compared to the previous year) and operating profit of 2,428 million yen (a decrease of 14.8% compared to the previous year). The main business, the e-promotion market, performed weakly and fell short of the plan, but both the medical DX business and the medical platform business showed growth in sales compared to the previous year. Operating profit decreased due to the increase in sales and administrative expenses caused by new business development investments and reinforcement of personnel, despite the efforts to strengthen the sales system of existing services and reduce administrative expenses. For the fiscal year ending December 2024, the company expects sales of 11,600 million yen (a 13.3% increase) and operating profit of 2,200 million yen (a 9.4% decrease). The company plans to promote improvements in the platform and initiatives such as high-quality content creation to continue the organic growth of existing businesses. Among the main management indicators, ROE is 14.2%, surpassing M3 Inc. (13.8% for the fiscal year ending March 2024) and MedPeer Inc. (7.8% for the fiscal year ending September 2023), indicating the high profitability of the company's business.

When comparing the three companies, the slowdown in the e-promotion market is a common factor. As a result of the COVID-19 pandemic, there has been a polarization between doctors who prefer face-to-face meetings and those who prefer online interactions, making it difficult for pharmaceutical companies to provide information within doctors' working hours. Therefore, pharmaceutical companies need to strengthen online information provision and enhance pull-type information provision for doctors to access when needed. For all three companies, the situation demands the provision of solutions that can adapt to a hybrid sales approach combining digital and face-to-face interactions.

(Author: FISCO Guest Analyst Ryoji Mogi)