PHR platform investment cycle now complete; Disease Solutions up +81.2%, with profitability to be driven by the twin pillars of disease-area platforms and the payer-facing business

Summary

For 1H FY12/2026, revenue was JPY 376M (+30.7%), led by the Disease Solutions business at JPY 244M (+81.2%). On the call, management indicated that the large-scale PHR platform investment of the past two to three years — including My Number Portal connectivity and lab-value data ingestion — has now run its course, with the business moving into a commercialization phase. The operating loss of ▲JPY 256M reflects organizational expansion costs, primarily hiring and training, with a lead time of six months to one year before these investments bear fruit.

Key Points (Results Highlights and Growth Actions)

• Management Strategy and Market View
  • Three revenue pillars: B2B (pharma, insurers, etc.), B2M (medical institutions), and B2B2C (municipalities, health insurance associations). B2B currently accounts for the majority.
  • The company will not charge patients directly, a strategic judgment that patient-pay models do not fit the Japanese environment.
  • Of the roughly 130 members of the PHR Service Industry Association, most operate in health and fitness. Welby specializes in the treatment domain and has recently expanded into the high-risk, non-consulting (preventive) segment.
  • The tailwind for healthcare DX comes less from reimbursement than from staffing shortages at the point of care. Reimbursement points are revised on a two-year cycle and subsidies effectively flow through the year after next, implying a lead time more than twice that of other industries.
• Recent Business Progress and Drivers
  • The large-scale PHR platform investment has run its course. My Number Portal integration, lab-value data ingestion and similar features have reached the commercialization stage.
  • The wider operating loss stems mainly from organizational expansion costs including hiring and training, some of which are one-off in nature.
  • Gross profit margin held at 68%. Municipality- and payer-facing work carries a lower margin than solution provision, so the margin fluctuates with mix.
  • Recurring (stock) revenue was JPY 231M (61%) and one-off (flow) revenue JPY 145M (39%). Growth in flow revenue is a leading indicator of recurring revenue conversion from next fiscal year onward.
• Key Strategic Initiatives and Inflection Points
  • Shift from drug-by-drug bespoke PSP development to disease-area platforms. Consolidating multiple apps within the same cancer type also lowers development and maintenance costs.
  • PHR now offered across 44 diseases. My Karte for central nervous system and rare diseases is slated for launch next year, with autoimmune diseases the following year.
  • A patient-facing medical education platform launches this fiscal year, partnering with pharma companies to streamline the delivery of disease information as well as drug efficacy and side-effect information to patients.
  • In the payer-facing alliance with Wemex, deemed health checkups were incorporated into outsourced checkup services, marking the first step of health-checkup DX (announced in June).

Outlook and Strategy

• Full-year guidance is revenue of JPY 1,466M and an operating loss of ▲JPY 30M. 1H typically accounts for 20–40% of full-year revenue, leaving the year 2H-weighted; guidance was left unchanged.
• Profitability is targeted via two businesses: (1) disease-area PHR platforms (B2B) and (2) payer-facing PHR utilization and severity prevention (B2B2C).
• Near-term earnings leverage in B2B is tied to the number of drugs pharma clients deploy. Past profitable periods coincided with high drug counts, and the company is considering enhanced disclosure of drug counts.
• The municipality business follows a dominant-share strategy, combining municipalities, medical associations and providers at the city/ward and secondary medical area level, ultimately feeding into a data monetization business.
• Management explicitly flagged a six-month to one-year lead time for headcount additions and promotional spending to bear fruit, with large municipal projects taking even longer.
• The company continues to explore strengthening net assets and cash, and is pursuing share price improvement measures to encourage exercise of outstanding stock acquisition rights and convertible bonds with warrants.

Positive Factors

• Disease Solutions surged to JPY 244M (+81.2%), confirming platform-type solutions as the growth driver.
• Recurring revenue rose to JPY 231M (+11%), extending growth versus 2Q 2024, while the increase in flow revenue of JPY 145M should build next year's recurring base.
• My Karte contracted medical institutions reached 7,270 (11.3% of internal medicine practices), with roughly 34,000 registered primary care facilities.
• Oncology contracts stood at 68 institutions (14.7% of the 464 designated cancer care hubs and similar facilities). The US-led shift toward DX in anticancer drug side-effect management is now spreading to Japan.
• Apps across 44 diseases are linked via a single ID and common database. Comprehensive data integration with device makers and testing laboratories is the source of competitive advantage.
• With policy shifting toward proactive preventive medicine, severity prevention along the metabolic domino and healthcare cost optimization are becoming targets for public funding.

Concerns and Risks

• The operating loss widened to ▲JPY 256M from ▲JPY 249M a year earlier. Payback on organizational expansion costs is lagging.
• My Karte revenue declined to JPY 132M (▲13.7%), reflecting the ongoing revenue shift toward platform-type offerings.
• Financial headroom is limited, with cash of JPY 435M and net assets of JPY 108M. Progress on equity financing depends on share price formation.
• Cash outflows continue, with operating CF of ▲JPY 178M and investing CF of ▲JPY 87M.
• Seasonality is heavily 4Q-weighted given the concentration of foreign pharma fiscal year-ends, making 2H order fulfillment key to hitting full-year guidance.
• Web-based electronic medical records have been slow to penetrate providers, with paper logbooks and paper charts still accounting for the majority — a constraint on adoption speed.

Performance Highlights

For 1H FY12/2026, revenue was JPY 376M (+30.7%) and gross profit JPY 255M (+27.8%, 68% margin). The operating loss was ▲JPY 256M, recurring loss ▲JPY 257M, and net loss attributable to owners of the parent ▲JPY 223M. Platform investment totaled JPY 98M (+19.5%), sustaining growth investment while maintaining an upward trend in revenue and gross profit.

Segment Results

• My Karte contracted medical institutions (end-June 2026): 7,270 (11.3% of internal medicine practices)
• App downloads: 1.5M (over 1.52M including Welby and MeDaCa combined)
• Registered primary care facilities: approx. 34,000
• Registered primary care facility penetration: cardiology 61.5% / diabetology 74.0% / internal medicine 57.0%
• Oncology contracted institutions (end-June 2026): 68 (14.7% of the 464 target institutions; 2026 target of 100)
• Recurring revenue: JPY 231M (+11% YoY)
• Flow revenue: JPY 145M
• Gross profit margin: 68% (69.7% a year earlier)

Q&A List

• Q: How will you change disclosure around your growth strategy and KPIs going forward?
  A: The broad strategy is unchanged. Current revenue is by no means large in scale, but that reflects the nature of the PHR business itself — the industry is still in its start-up phase. All players remain small at this stage, and our growth scenario rests on two elements. The first is the B2B business with pharma companies, delivered in conjunction with pharmaceuticals; we have run this same model since our IPO. The point is not simply that we cover a large number of 44 diseases, but that bundling them together allows us to add leverage, which is why the count keeps rising. For near-term profitability, an increase in the number of drugs deployed by pharma companies is the fastest-acting lever and the most established part of our model. Since listing we have swung between profit and loss, and the profitable periods have been characterized by a high number of drugs in the B2B business. To ensure this is not temporary, we are working disease by disease to increase the drug count. Going forward we would like to disclose, as far as possible, how many drugs have been added and where the total now stands. That said, the limitation of this first model is that the number of drugs and pharma companies will not grow indefinitely, so it will eventually plateau. In that sense, the second pillar — the payer-facing business — offers a much larger market and TAM. The bulk of Japan's healthcare spending goes to lifestyle-related diseases and cancer, and if digital investment is made there as part of cost containment, we intend to capture it. These two growth drivers should meaningfully accelerate earnings over the short term and the three-to-five year horizon. We would like to disclose drug counts, actual figures and the revenue structure going forward. As shown in the scale indicated in our medium-to-long-term portfolio strategy, profitability will be achieved through the pharma-facing B2B and payer-facing businesses. There will be a range of views on why we are not profitable again this year, but our initial guidance called for a loss, and we would ask investors to understand this as a period in which, including upfront investment, we are not chasing profitability. If the supporting rationale is hard to follow, we will strengthen our IR efforts.
• Q: Even with environmental tailwinds, the pace of business expansion does not seem to be accelerating. What is your view?
  A: First, there is a broader question of why healthcare DX — PHR and also online consultations, not just at our company — has not grown as much as expected, and we must be careful not to fall into that trap ourselves. There is an expectations gap: progress is harder to achieve in the short term than shareholders and others hope. We did not say we would turn profitable this year, though naturally profitability would be preferable. Reaching breakeven requires building up patient numbers, and that takes time. The tailwinds are reimbursement points being assigned and subsidies being granted, but reimbursement is on a two-year cycle, and it then takes another year, so roughly three to four years before the tailwind actually reaches the clinical front line. As for subsidies, even next year's programs are basically decided by around June of the preceding year, meaning funds do not flow until the year after next. We are often criticized that other businesses would move faster, and having run non-healthcare businesses myself, my sense is that the lead time here is more than twice as long. That said, some companies do grow within these constraints, so our task is to compress that timeline ourselves. As for tailwinds, policy matters, but the bigger factor is that physician shortages at the point of care keep worsening while patient numbers rise, to the point that operations cannot function without digital tools. Reimbursement has not in fact driven fundamental change; the labor shortage is the far more significant factor. We expect considerable progress here, but the difficulty of healthcare is that a favorable environment does not translate into an abrupt surge next year. Effects come through on roughly a three-year cycle, and we see ourselves as taking the steps to realize that — though we recognize some will criticize this as too slow.