Company Overview
2. Business content
Miyahara Holdings (7129) has set its business mission as "challenging the issues of a declining birthrate and aging society and making the local community bright and lively." With this in mind, the company is expanding into business areas with high social needs, from pharmaceuticals to nursing and childcare, and is working to build a "comprehensive regional care system*", making the business itself connected to SDGs.
*The comprehensive regional care system is a policy that the government has set forth to establish a care system tailored to each region in preparation for a super-aging society. The Ministry of Health, Labour and Welfare is working to build a comprehensive support and service system for the elderly so that they can continue living their lives in their familiar communities as long as possible, offering medical care and nursing care services.
The company presents its business segments in 3 categories: pharmaceutical, nursing, and childcare, and others (food business). In the sales composition ratio for the March 2024 period, the pharmaceutical business accounted for 41.0% of the overall revenue, followed by the childcare business at 40.3%, the nursing business at 14.6%, and others at 4.1%. Looking at the trend over the past 5 periods, the composition ratio of the childcare business has risen to the level of the pharmaceutical business due to two M&As. As for the operating profit margin, it has been relatively stable, except for the nursing business. The nursing business has been deteriorating since the spread of the new coronavirus infection (hereinafter referred to as the Covid-19 pandemic) and has posted losses for 2 consecutive years since the March 2023 period. On the other hand, the pharmaceutical and childcare businesses have remained stable. It is considered that 70% to 90% of the main 3 businesses are covered by social insurance premiums and public expenses from local governments, making it less likely for price competition to occur and resulting in stable profitability.
(1) Pharmaceutical Business
Under the brand names "Nissho Pharmacy" and "Miyahersa Pharmacy", the company operates dispensing pharmacies in the Tokyo metropolitan area. As of the end of March 2024, there are 42 stores (38 in Tokyo, 3 in Kanagawa, and 1 in Saitama), and 27 of them are dispensing pharmacies in front of large general hospitals. In addition, the company has opened 9 stores in medical mall type and 6 stores in face-to-face type in urban areas where demand is expected. It also focuses on home medical care, and offers HIT (home infusion therapy) dispensing service, a highly technical service that supports pain relief care for cancer patients, for example, and provides total support for the health of local residents as a "clinic pharmacy". HIT refers to home medical care management through infusion therapy, which involves injecting nutrient solutions or medications into patients through intravenous drip or nasal tube technique. The infusion solution needs to be prepared in a sterile dispensing room within the pharmacy. As the number of patients receiving home medical care increases due to the progress of an aging society, the demand for HIT dispensing services is expected to expand. Since 2005, some of the company's stores have been equipped with a sterile dispensing room so that they can prepare infusion solutions in-house, in response to the needs of severely ill patients who receive home medical care.
The characteristics of the pharmaceutical business are that they have many dispensing pharmacies in front of large hospitals such as university hospitals, and their average dispensing sales per store are approximately JPY 221 million per year (as of March 2024), which is about 1.7 times the industry average of JPY 126 million (actual results for fiscal year 2022). Also, the number of pharmacists per store is higher than average, about 4 people (including non-full-time employees), compared to the industry average of 2-3 people, due to the large number of dispensing pharmacies. Since highly skilled pharmacy management skills are required, such as dealing with the side effects of anticancer drugs and handling medical products for rare diseases, pharmacy knowledge level is generally high. In addition, the company's strength lies in providing polite customer service with high customer satisfaction based on educational training that reflects the company's mission. Since stores are concentrated in the Tokyo metropolitan area, particularly in Tokyo, they are also popular among students, and there is no problem in employing pharmacists, including part-timers.
As a business model, it mainly relies on the Pharmaceutical Affairs Law to receive dispensing fees for compounding pharmaceuticals based on prescriptions from patients and insurance agencies, accounting for 99% of the pharmaceutical industry's revenue. Dispensing fees are composed of dispensing fees for drugs and technical fees for dispensing, as well as pharmaceutical management fees. Technical fees for dispensing are added based on the "Dispensing Fee Points Table" established by the Ministry of Health, Labor and Welfare for pharmacists' dispensing work, while pharmaceutical management fees are added for pharmacists' medication guidance and drug data management. Previously, the Ministry of Health, Labor and Welfare has conducted a review of these fees every two years, but for drug fees, they have been reviewed annually since the 2021 fiscal year.
Drug fees refer to the price of the medicine itself, and the price of medicines is determined by the government based on the drug price standard, which fluctuates for each prescription depending on the content of the medicine and the prescription period. Pharmaceuticals are purchased from pharmaceutical wholesalers, and the purchase price is determined through negotiations with the wholesalers, with the difference between the drug price and the purchase price (drug price differential profit) becoming the gross profit. Technical fees for dispensing include not only basic dispensing fees (concentration rate at specific medical institutions), but also regional support system additional fees (business accomplishments for home-based patients, pharmacy opening hours, etc.) and dispensing system additional fees for generic drugs (rate of use of generic drugs), with standards and points for each calculation item being determined. The same applies to pharmaceutical management fees, which are also added points according to various calculation standards, such as medication history management and guidance fees (presence or absence of medication notebook, online medication guidance system, etc.), primary care pharmacist guidance fees (accomplishments as a primary care pharmacist), and home-based patient visit drug management guidance fees. Dispensing pharmacies promote efforts for these calculation items to increase the dispensing fees, including technical fees for dispensing, including pharmaceutical management fees.
This technical fee for dispensing is a variable part depending on the efforts of each pharmacy in response to the Ministry of Health, Labor, and Welfare's policies and is also directly related to profit. As national medical expenses increase year by year, drug price revisions and dispensing fee revisions aim to suppress and rationalize national medical expenses, and there is a trend for the profits of dispensing pharmacies to worsen due to the lowering of drug prices and the decrease of technical fees for dispensing in the revision year. The company is working to quickly respond to the revision contents, raise the additional points, and stabilize revenue through the development of new stores.
(Written by FISCO guest analyst, Jo Sato)