So-net M3 Presentation Material May 2008
The following contains statements that constitute forward-looking statements, plans for the future, management targets, etc. relating to So-net M3, Inc. and/or its group. These are based on current assumptions of future events, and there exist possibilities that such assumptions are objectively incorrect and actual results may differ from those in the statements as a results of various factors. Furthermore, information and data other than those concerning the Company and its subsidiaries/affiliates are quoted from public information, and the Company has not verified and will not warrant its accuracy or dependency. So-net M3, Inc. 1
Company Background History 2000 Sep Founded Oct Launched MR-kun service 2002 Mar Acquired WebMD Japan 2004 Sep Listed on TSE Mothers Business domain Internet-based healthcare businesses Name M3 Medicine Media Metamorphosis 2005 May Alliance with Medi C&C and entry into Korean market Sep Dec Launched QOL-kun service Launched AskDoctors service 2006 Jun Acquired MDLinx and entry into US market 2007 Mar Listed on TSE 1 2
m3.com: Japan s #1 Physician Website Medical News Search engine Directory m3.com Concierge MR-kun QOL-kun Used by 32 companies in Japan (as of Mar. 2008) Literature search Sponsor messages Web-based medical tools Sponsor-free Sponsored 3
Physicians registered in m3.com FY2002.3Q~FY2007.4Q (k) 86 82 72 74 78 90 113 119125 104 97 146 150154159 131 136142 162 +11% 43 47 50 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4
m3.com Logins Increasing FY2002.3Q~FY2007.4Q (1,000 log-ins) 1,610 1,430 2,591 2,272 1,760 1,930 2,999 2,753 3,637 3,440 4,183 3,966 5,043 4,812 4,659 4,678 4,644 +8% 810 530 160200 280 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 5
Expand our core business Domestic M3 s growth Develop new businesses Overseas Develop overseas businesses 6
Japanese Pharma s Huge Marketing Costs Head count Annual costs per person MRs (Pharmaceutical companies) MSs (Pharmaceutical wholesalers) 55,000 20mn = 1.1tn 30,000 10mn = 300bn Total cost of whole industry 1.1-1.4 1.4 tn Source: MIX, Research by So-net M3 7
Physicians Demand for On-Line Detailing Q. What is the ideal ratio of on-line and off-line promotional information ( details ) from pharma companies? A. 100% On-line On-line 100% 80% 20% 100% = 1,300 physicians 5% 16% 60% 40% 13% 50% 50% 43% 20% 40% 80% 60% 9% 12% 100% Off-line 100% Off-line Demand for edetails is quite high for busy physicians as they get the information when it s convenient for them, not for the MR 2% Source: So-net M3 questionnaire to 1,300 physicians 8
edetails Read by Physicians FY2002.3Q~FY2007.4Q (1,000 edetail page views) 10,102 8,541 7,718 7,542 7,289 6,939 +39% 190 310590770890 3,175 2,315 2,627 1,942 1,750 1,540 1,290 3,912 4,695 4,958 5,713 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q (Note)FY2005.2Q: Incl. QOL-kun 9
MR-kun Costs Less than Reps Cost to deliver 1 detail Physician recall rate = Cost per physician-recalled detail Real Average 10,000 ~50% # of details recalled*/ # of details claimed by reps in daily reports Real Average 20,000 87% e Average 285 # of detail recognition*/ # of MR-kun messages opened e Average 320 MR-kun delivery is 1/35 the cost of rep delivery MR-kun detail recall is 1/60 the cost of rep detail recall * IMS recognized detail research, Research by So-net M3 10
MR-kun Increases Sales Like Reps Case study Off-line Reps Non-covered covered MR-kun Non-covered covered 1 (baseline) +8% Sales increase compared with base +9% Sales increase compared with base +16% Sales increase compared with base Combining real reps with MR-kun maximizes detailing impact MR-kun alone has substantial power... Source: Notes: So-net M3 Questionnaire to 16,000 General Practitioners 11
MR-kun Annual Fee Structure MR-kun base fee Detail fee Contents production fee Operation fee 100 per detail M3 creates content that the client s virtual rep delivers to physicians Basic operation, including sending messages to physicians and replying to Initial Phase Top clients 70mn Revised as of Oct. 2005 for new client Previous fee: 60mn ~ 20mn 40mn physicians questions ~ 30mn 100mn 130mn~ 150mn 440mn 300mn~ 530mn 130mn ~Initial Phase 10mn 10mn ~ 60mn ~ 30mn 12
MR-kun s & QOL-kun s Growth Potential in Japan Current Growth Opportunities # of clients using MR-kun & QOL- kun 32 Companies 50~60 Companies +α Appx. 2-3 times X Sales per Client MR-kun Appx.200mn ~500mn increase # of products adopted and # of member MDs Appx. 2-3 times = FY07 average sales of top 10 pharmaceutical clients FY06:230 million yen FY07:310 million yen (33% growth ) Appx. 4-9 times 13
Expand our core business Domestic M3 s growth Develop new businesses Overseas Develop overseas businesses 14
Growing New Business on Our Platform MR-kun X Y QOL m3mt Research Career Z B. Develop new business development on the platform Various types of new business are already incubated. Other 5-10 potential business themes are under consideration. A. Maximize the potential of platform by: Increasing Physician membership Develop new service to activate each member(pv) 15
New Business Development on the Platform FY2008 Sales forecast Assigned staff Above 500mn 200mn ~ 500mn 100mn ~ 200mn Research (Japan) Web-based Physician Surveys 1.5 New Businesses m3mt QOL kun etc. m3.com CAREER E-mail, banner promotion service for pharma companies Promotion service for non-pharmaceutical companies Job information for physicians AskDoctors Consumer service 1.5 3 4 2 New business already 2 billion yen revenue in total Many of the new businesses are run by few staff and quite profitable. Keep nurturing other growing businesses. others Job information for Nurse/Pharmacist 0.5 16
Web-based Physician Surveys Example: 500 physician survey Traditional method Research-kun Paper-based Online survey Required Period Approx.10 weeks Speed: 50 times 1~3 days Cost 10mn ~ 15 mn Cost: 1 /2 ~ 1 /3 5.50 mn Quality Contains mixture of good and poor samples as focus is on quantity Quality: improved Can conduct more targeted research Example: Survey to target MDs of a specific product of a certain company MDs of university hospitals specialized in diabetes etc. 17
m3.com CAREER Physicians Access m3.com CAREER Hospitals Hospitals offering employment Fees for job advertisement For 1 month 100,000 For 3 months 200,000 For 6 months 300,000 Service has been profitable since the 1st month of its launch This page also contributes to gathering physician members Look for job openings m3.com sub-site matches job openings and job seekers Advertise job openings 18
Expansion of AskDoctors <Started PC service> <Expanded to 3 major mobile carriers official site> <Alliance with Yahoo! JAPAN> 05 Dec 06 Apr 06 May 06 Oct 07 Apr AskDoctors Answer Engine More than 1,800 physicians are answering to questions 315/month,and able to ask up to 3 questions a month Response rate, more than 90% More that a million Q&A archives, which user can search 19
Membership of AskDctors FY2005.1Q~FY2007.4Q (Members) 334,000 1,200 11,800 45,300 103,000 78,500 214,000 186,000 158,000 135,000 252,000 294,000 FY2005 FY2006 FY2007 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 20
Expand our core business Domestic M3 s growth Develop new businesses Overseas Develop overseas businesses 21
Development in the US Leverage MDLinx, Inc. 100% owned Subsidiary started Messages (US version of MRkun) Washington D.C. 26 employee 220K medical professionals as member Invested $2mil in FY2007 to launch Messages Started service in Oncology Already received orders from one of the three largest global pharmaceutical firms 22
MDLinx (US):Member Coverage by Specialty Oncology area (% ; 100%=8,000 specialist) 47.7 45.0 Rheumatology (% ; 100%=4,200 specialist ) 29.4 X4.3 23.8 11.0 14.1 11.4 11.5 13.7 14 X1.7 FY2006 FY2007 4Q 1Q 2Q 3Q 4Q (Oct~Dec) FY2006 FY2007 4Q 1Q 2Q 3Q 4Q (Oct~Dec) Succeeded in acquiring half of oncologists in the U.S. Applying the know-how to rheumatology area from march 08 23
Development in Korea Leverage Medi C&C (40% owned Subsidiary, and control the company by having majority of the board) Seoul 9 employee 62K Physicians Started MR-kun from March 2006 24
Consolidated P/L Statement for FY2007 (yen million) FY2006 FY2007 YoY Growth Sales 5,729 7,475 +31% Operating income 2,677 3,597 +34% Ordinary profit 2,779 3,734 +34% Net profit 1,609 1,965 +22% Sales Breakdown by Business Segments Marketing Support 4,776 Research 414 Others 537 5,757 753 964 +21% +82% +79% 25
M3 s Margins have Constantly Grown 60 50 40 30 20 10 0-10 -20-30 -90-86.5 FY2000 (6 months) 9.2 FY2001 Changes in Ordinary Profit Margin 28.7 FY2002 35.1 32.5 FY2003 40.6 38.3 FY2004 Consolidated 46.4 43.9 FY2005 53.2 48.5 FY2006 (unconsolidated) 58.1 50.0 (consolidated) FY2007 26
Consolidated Sales Trend 1,563 2,276 3,854 5,729 7,475 mil FY2003 FY2004 FY2005 FY2006 FY2007 (%) 1.8 19.1 20.4 22.3 80.9 79.6 75.9 9.6 10.6 26.5 28.8 64.0 60.6 Overseas development New business In Japan Core business FY2003 FY2004 FY2005 FY2006 FY2007 27
Annual Results & Forecast for FY2008 Sales ( mn) ( mn) Ordinary Profit & Net Profit 7,475 8,800 Ordinary profit Net Profit 3,734 4,200 107 2,276 1,563 891 480 3,854 5,729 872 256 508 493 279 4462 136 1,694 991 2,779 1,965 1,609 2,400 (Forecast) -93-93 (Forecast) FY FY FY 2000 2001 2002 (6 months) FY 2003 FY FY 2004 2005 Consolidated FY 2006 FY FY 2007 2008 FY FY 2000 2001 (6 months) FY 2002 FY FY 2003 2004 Consolidated FY 2005 FY 2006 FY 2007 FY 2008 28
Creating New Value in Healthcare M3 Medicine Media Metamorphosis Healthcare sector is huge Japanese national spending on medical services is approximately 30tn (approximately 50tn if peripheral businesses are included) Equivalent to 10% of Japanese GDP Sector controlled by only 250,000 people, e.g., physicians, representing only 0.2% of the population M3 aims to create new value in this sector Solve the issues and problems of the medical sector With new and unique business models While focusing on areas were we can add high value (e.g., have high profit) to boost our enterprise value Source: Ministry of Health, Labour and Welfare, the Japan Medical Association, So-net M3 29