Overview of Medium-Term Business Plan

(1)

Overview of Medium

-

Term Business Plan

(2)

16

Make competitive products

9 Further increase added value of Operamaster

9 Modify product designs to enhance added value

9 Establish manufacturing facilities to ensure safe products and stable supplies

9 Enhance efficiency through automation of new kit factory

Development theme for

next-generation core products

9 Develop products that ensure “hospital safety,” “Minimally invasive,” “efficient hospital management,” and “at-home care and prevention” based on concept of “products that contribute to the medical front lines.”

　

Tireless challenge aimed at dramatic progress

Achieve continued earnings growth

9 Reinforce Operamaster Strategy and kit product sales

9 Prepare and launch new products

9 Strengthen promotion of joint development with hospitals 9 Emphasize in-house manufacturing of parts/materials 9 Design factories based on long-term perspectives

Fiscal 2012 Fiscal 2013 Fiscal 2014 Fiscal 2015

External conditions ·Increase in medical remuneration: +0.004% ·Configuration of DCP hospitals ·Amendments to Medical Care Act and

Pharmaceutical Affairs Act

·Revision in medical remuneration ·Increase in consumption tax rate 5→8% ·Increase in consumption tax rate 8→10% Market conditions Our responses

· IC Tracer ·ME equipment management ·Kit materials

·Drug management system

·Kit materials

Factory ·Completion of _buildings ·Gradual commissioning _{of new factory} Concentration of surgical procedures (clarification of hospitals for acute patients)

Low-price competition from other companies

Increasing shift from outpatient procedures to Minimally invasive procedures

Establish new products sales support team

1,000-kit strategy

Reinforce follow-up for contracted hospitals (promote surgery management system)

Develop products jointly with hospitals

Market Environment

Reinforce in-house systems

9 Further strengthen internal control system and compliance to earn the trust of stakeholders

(3)

Develop new products - Medical treatment devices - Minimally invasive products

Launch of Operamaster

Contracted hospitals account for 50,000 surgeries annually in total

- Endeavor to verify effectiveness - Get up and running; build track record

- Introduce system of coordinators - Announce academic society results - Step up sales to large hospitals

- Surgery management system

- Announce specific details of hospital performances - Rejuvenate activities of salespeople - Strengthen support for contracted hospitals

Fiscal 2004 Fiscal 2006 Fiscal 2012

Hospital Master

Medium-term business plan

Continue advancing Operamaster while

incorporating feedback from hospitals!

Hogy Medical’s Responses and Future Strategies

17

Expand Operamaster - ME management system - Drug management system

Surgery visualization; reduced tasks for nurses

Formulation and verification of earnings plans

Increased contribution to improved

hospital management

Increased contribution to medical safety

Conversion to kit form Picking list preparation 　

Tagging of medical treatment materials prevents them from being left inside the patients body

DPS allows accurate preparation/procurement of materials and saves labor

Allocate staff according to experience-based data Can forecast cash flows at surgery planning stage

Operation procedure manual From Operamaster to Hospital Master [Operamaster concept] From improvement of Surgery rooms to improvement of entire hospital management Highly accurate payment receipt

Can prevent mistake in Can prevent mistake in medical accounting medical accounting

Data incorporating next round of Data incorporating next round of medical treatment price revisions medical treatment price revisions

Monitoring of materials (incoming, outgoing, balance)

Pharmaceuticals

ME equipment management Examination room

(4)

New Kit Plant

Make competitive products

Capital expenditure concepts

18

■ Make high-value-added products

■ Use automation to enhance efficiency and reduce

costs for future

■ Address expansion of production volume through

increase in production lines

■ Maintain high operating efficiency through segmented

expansion of facilities

■ Deploy production management system to reduce

need for indirect labor

■ Emphasize in-house manufacturing of parts/materials

Improve productivity to reduce costs

(5)

99.0% 100.0% 101.0% 102.0% 103.0% 104.0% 105.0% 106.0% 107.0% FY2009 Result FY2010 Result FY2011 Result FY2012 Plan FY2013 Plan FY2014 Plan FY2015 Plan 101.1% 99.9% 101.8% 103.1% 104.4% 106.0% 106.0% 90.0% 95.0% 100.0% 105.0% 110.0% FY2009

Result FY2010Result FY2011Result FY2012Plan FY2013Plan FY2014Plan FY2015Plan

106.3% 107.9% 90.1% 103.2% 106.8% 108.9% 102.6%

Medium-Term Business Plan: Income Statements

_{Net Sales Growth Rate}

_{Operating Income Growth Rate}

19

3,870

3,130

3,000

3,135

Total depreciation and amortization 382.74yen 373.19yen 342.95yen 320.60yen EPS

(minus treasury shares)

6,020

5,870

5,395

5,043

Net income

9,620

9,540

38,550

9,380

9,300

36,380

8,620

8,540

34,330

8,060

8,000

32,870

Operating

income

Ordinary

income

Net sales

Fiscal 2015 Plans Fiscal 2014 Plans Fiscal 2013 Plans Fiscal 2012 Plans

(Unit: million yen, rounded down)

(6)

Medium

-

Term Business Plan

(7)

21

Sales by Major Products

_{Kit sales figures increase and decrease}

_{SG&A Expenses Plan}

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 FY2009

Result FY2010Result FY2011Result FY2012Plan FY2013Plan FY2014Plan FY2015Plan

13,808 14,380 15,232 16,530 18,000 19,550 21,050 10,841 10,767 10,569 10,370 10,100 9,930 9,800 2,570 2,500 2,450 2,380 1,650

New products Sales of subsidiary Other products Mekkin

bag Non-woven fabric Kit

0 50,000 100,000 150,000 200,000 FY2009

Result FY2010Result FY2011Result FY2012Plan FY2013Plan FY2014Plan FY2015Plan 0 2,000 4,000 6,000 8,000 10,000 12,000 FY2012 Plan FY2013 Plan FY2014 Plan FY2015 Plan 1,259 1,360 1,390 1,430 3,650 3,675 3,775 3,882 880 1,000 1,000 1,000 618 900 1,000 1,000 2,283 2,385 2,515 2,588

Others Testing and research Depreciation Personnel Selling costs

（百万円）

(8)

22 2,000 3,000 4,000 5,000 FY2012

Plan FY2013Plan FY2014Plan FY2015Plan

3,135

3,000

3,130

3,870

Depreciation expenses

Capital Expenditure Plan

Fiscal 2012 Fiscal 2013 Fiscal 2014 Fiscal 2015

Equipment Capital expenditure

2,000

8,330

8,830

5,230

Depreciation

_3,135

_3,000

_3,130

_3,870

Factory CPU: ¥1.5 billion Buildings: ¥6.9 billion Incorporation of non-woven combinations: ¥5.6 billion Incorporation of

kit products: 6.7 billion

Materials

inventory

Packaging

Additional equipment for kit products

Kit product process

Non-woven

combination process

（Unit: million yen, rounded down）

(9)

New Product Concepts

23

New products for drug departments

Improve business efficiency for medical practitioners

　 The role of hospital pharmacists will become more and more important as medical treatment becomes more advanced, thus raising the need for greater efficiency and labor savings in conventional procedures.

Develop a system that automates drug

selection, return, and inventory management

ME equipment management

Product that enables real-time monitoring of

usage status of ME equipment in hospitals

9 Is the purchased equipment being used effectively?

9 I don’t know where the ME equipment is kept in the spacious surgery room, and I can’t tell whether or not it is in use. 9 Maintenance is not being performed regularly