Medical Ikkou Group Co.,Ltd.

Revenue from the Dispensing Pharmacy Business is subject to officially set prices under the drug price standards and dispensing fee schedule based on the Health Insurance Act, creating a structure in which it is difficult to pass on rising costs through price increases. If future revisions to the drug price standards and dispensing fee schedule result in lower fee points, this could directly affect the Group's business performance. Because the majority of revenue depends on officially set prices, the essence of this risk lies in the difficulty of maintaining prices through the Company's own efforts.

Operation of the Dispensing Pharmacy Business is subject to numerous legal regulations, including the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices and other therapeutic products, and the Health Insurance Act, requiring the maintenance of multiple licenses and permits such as pharmacy establishment permits (valid for 6 years) and insurance pharmacy designation (valid for 6 years). If a violation of related laws and regulations occurs or if such laws and regulations are amended, this could result in revocation or suspension of licenses and permits, causing serious disruption to business continuity. The Group currently holds and maintains all necessary licenses and permits, but ongoing compliance management is essential.

The Healthcare Business is subject to the Long-Term Care Insurance Act, under which nursing care fees are revised every three years and the overall system is reviewed every five years. If nursing care fees are reduced or if administrative sanctions arise from non-compliance with the "Standards Concerning Personnel, Facilities and Operation of Designated In-Home Service Providers, etc.," this could affect the performance of the Healthcare Business. Maintenance of the business operator designation (valid for 6 years) and registration of senior housing with support services (valid for 5 years) is a precondition for business continuity.

The Group continuously invests funds in the opening of new dispensing pharmacies, the establishment of fee-based nursing homes, and M&A activities, and the balance of interest-bearing debt increased from ¥9,149,383 million (original figure in thousands of yen) in FY2023 (ending February 2023) to ¥10,044,983 thousand in FY2025 (ending February 2025). Although the majority of borrowings are at long-term fixed interest rates, future interest rate trends could raise financial costs and affect business performance. Note that the ratio of interest-bearing debt to total assets has been on a declining trend, from 33.3% in FY2023 (ending February 2023) to 29.3% in FY2025 (ending February 2025).

Under the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices and other therapeutic products, each store is required to assign pharmacists, with the necessary number determined according to the volume of prescriptions handled. The Group has currently been able to secure pharmacists corresponding to the increase in the number of stores, but if it is unable to secure the necessary pharmacists during future store expansion phases, this could restrain new store openings or disrupt the operation of existing stores. The tightening of pharmacist supply and demand is an industry-wide issue, and intensifying competition for recruitment is a concern.

The Group holds large volumes of sensitive personal information related to the medical treatment and nursing care of patients and users through its Dispensing Pharmacy Business and Healthcare Business. Although the Group has established a "Basic Policy on Personal Information Protection" and "Basic Regulations on Personal Information Protection" to prevent leaks, if an information leak were to occur, it could result in a decline in social credibility and liability for damages, potentially affecting business performance. Personal information in the medical and nursing care fields is particularly sensitive, and the impact of a leak tends to be more serious than in other industries.

As the growth rate of the separation of dispensing and prescribing shifts to a more moderate pace, competition to open new dispensing pharmacies is intensifying, and if planned store openings cannot be achieved as scheduled, or if the revenue of new stores falls below plan, this could affect business performance. The number of stores at fiscal year-end over the past three years has been 95 in FY2023 (ending February 2023), 94 in FY2024 (ending February 2024), and 100 in FY2025 (ending February 2025), with the Group actively opening 7 new stores and closing 1 store in FY2025 (ending February 2025). The Group adopts a new store opening policy that emphasizes post-opening profitability, but increasing difficulty in securing locations due to intensifying competition is a challenge.

While the nursing care-related market is expected to continue expanding, subsidy programs and tax incentive measures aimed at promoting the supply of senior housing with support services have led to the entry of diverse companies, including those from other industries, intensifying competition. If intensifying competition leads to a decline in occupancy or utilization rates, or to price competition, this could affect the performance of the Healthcare Business. Utilization rates may also decline, affecting business performance, when residents are hospitalized for health reasons.

If the spread of an infectious disease becomes prolonged, this could affect performance across multiple businesses: a decrease in the number of prescriptions due to reduced hospital visits in the Dispensing Pharmacy Business, reduced usage of home care and day care services in the Healthcare Business, and restrictions on sales activities in the Pharmaceutical Wholesale Business. The Group thoroughly implements countermeasures according to the state of the outbreak, but given the nature of the business, contact with elderly people and patients is unavoidable, making it difficult to completely eliminate infection risk.

As of the end of February 2025, AEON Co., Ltd. is the largest shareholder of the Company, holding 25.06% (1,020,000 shares) of the Company's shares, and has management ties such as an advisor of AEON serving as a corporate auditor of the Company. AEON Co., Ltd. holds an option to subscribe to shares at the time of the Company's capital increases so as not to fall below a 25% shareholding ratio, which could constrain the flexibility of the Company's capital policy. In addition, the Company operates two stores within shopping centers managed by AEON's subsidiaries, paying rent of ¥14,611 thousand in FY2025 (ending February 2025), and there is a risk that changes in the group relationship could affect business operations.