SeeThru Equity + Marcum Conference: RXMD 1X1 – 5
Post# of 1525
Posted On: 06/02/2016 9:54:14 AM
SeeThru Equity + Marcum Conference: RXMD 1X1 – 5/31/16, 3pm + 6/1/16 11am
CARNYC and INSTATRADER met with Shital Mars and Armen Karapetyan. Alan Weisberg was not present for CARNYC but was for INSTATRADER. They were all pleased to meet one of their shareholders face to face and were extremely cordial and transparent throughout.
The following are questions and answers during CARNYC's 37 minutes with mgmt, much of it word for word. A good portion of it dives a little deeper into their business model.
The time literally flew by, and I tried to get in as much as possible. Some of this will be familiar to you, but hopefully there’s a little something for everyone, and hopefully many of your questions were touched upon.
Opinions may differ, but I am more confident today about RXMD than I was yesterday, and I was pretty confident yesterday.
Warning, this is a little long.
Question:
Shareholders are well aware of your expansion plans, the robotic dispending system, and the intention to obtain additional licenses. Once these initial steps are completed, how will RXMD break into these new markets (e.g. via a sales force, cold calls, etc.)?
Shital
We don’t want to build facilities in these new markets. To start, it’s going to be a marketing team that we’re going to develop. We have a lot of connections in New York, so getting the NY license was key, but we also have connections with people in Georgia, and marketing teams in Texas, so we can capitalize in these states right away.
In places where we don’t have connections, such as Utah for example, it will be a little more challenging, but as we build the brand it will become easier to penetrate these markets.
Armen
Once you build a sales force in the northeast, for example, then that sales force network goes beyond NY/NJ, and extends into PA, CT, and NH because it’s a small world. Members of your sales force will know someone that can market in other places and now you’re tapped into the entire northeast corridor.
Question:
What’s a day in the life of a sales person look like? Where is their primary focus?
Shital
It is a lot of knocking on doctor’s office doors, but ideally these teams already have some healthcare connections and would go to those doctors and clinics where they have relationships and, first and foremost, educate. RXMD is not a simple pharmacy, we’re not just looking for scripts, we are trying to promote our business model, which includes what kinds of compounds we make, how we ship, that all of our products re FDA approved and readily available, which means we don’t have issues that other compounding pharmacies have, and who are just trying to get scripts.
So the force would go to doctor’s offices and coordinate their patient’s care with them, find out what scripts are coming in, monitor what is going out, and streamline the process. Eventually, doctors are sending you to other doctors and it grows from there.
Armen
And we are winning these relationships because of the services we provide. There’s unlimited access to the compounding pharmacist, both for the doctors and their staff, as well as the patients.
Question:
Are the elderly your primary demographic for the compounding business?
Shital
The compounding business is not restricted to senior care. We have diabetic practices, osteopathic practices; we can prescribe anything from pain medication to erectile dysfunction. We have lots of patients in the 30s/40s with lower lumbar pain, or need something for their knee, or for their neck. So there’s a lot of activity in the younger, active demographic.
Question:
How have you been able to increase your market share in South Florida? Is it through similar relationships with doctors, community outreach as described in your presentation, or something else?
Shital
Honestly, it’s a lot because of our risk management services. Walgreens won’t manage risk, CVS won’t manage risk. They don’t care about you. So when we come to a doctor’s office for a service visit and that doctor is struggling with a risk management contract, and saying my patients are all over the place, I can’t follow up with them, I don’t have any time, we are that sign of relief, and within six months, they’re seeing improvements. Within 12 months, the doctors are now eligible for bonuses. That’s what really drives a lot of the growth, that’s why patients are switching to RXMD. Doctors are telling their patients to go to PharmCo. so that the doctors can watch what their patients are doing.
Armen
When you talk about managed care, you’re talking about most people over the age of 65; they’re on Medicare. What happens is, you’re a physician, you have a couple options. You can have a regular contract with a Humana or an AARP, which pays you $15 or $20 per patient, per month. Or, you can choose instead to share the risk with the insurer, which pays you $120 per patient, per month. And you have the opportunity to make even more if you keep that patient healthy and out of the hospital. It’s outcome based.
Shital
For example, let’s say you have a patient who just got discharged from the hospital with a blood pressure issue. Now you’re managing him for the next three to six months. If he takes his medication, he’s going to be fine. He’s not going back to the hospital. If he takes his medications some days, forgets to take it other days, he’s not going to get better, and he’s going to end up back at the hospital with the same issue. The insurance company then goes to the doctor and says that’s coming out of your $120. So it behooves the doctors to make sure that the patient takes his medication, gets better and doesn’t require additional care.
Armen
The whole health care system is based on the rating today, and preventive care. So if you keep your patients healthy, and keep them within in the network, then you’re successfully managing the risk. In addition, when you prescribe medication, you need to make sure that the medicine you prescribe isn’t the most expensive when cheaper medications are available. A lot of doctors have no idea which medications are more expensive. They don’t stay current. RXMD advises them on which formulations they should stick to, which will provide good patient outcomes, and which drugs are the cheapest. This is what health insurance companies want.
So instead of letting the doctor sort this out, we tell him to see his patients, prescribe therapies and do his job. We take the rest off his shoulders. We will manage the compliance. We’ll make sure the patient isn’t taking duplicate medications, isn’t getting prescriptions from multiple doctors, and will explain to the doctor what medications their patients are being prescribed after being discharged from hospital visits. We will also make sure that medications are delivered on time, and that insurers know all of this is happening.
Question:
In doing so, the doctor is clearly incentivized to send his patients to you as it represents an opportunity for a better financial outcome, more bonuses from insurance providers and a better rating, correct?
Armen
All of his patients.
Shital
And that’s the two-fold benefit of this system. We don’t provide a service fee for this, and it only amounts to a tiny bit of revenue for us, but doctors send us their patients, and then insurance companies see that we’re managing patient risk and reducing cost across the whole spectrum. So then insurance companies start telling their network of doctors to send their patients to RXMD too.
Question:
This was basically covered in your presentation, but you hope to have the robotic dispensary system built out by September, and that system will allow you fill 3x the number of scripts you’re currently filling?
Shital
Yes to both. We’ve been expecting Miami Fire Dept. permits for a few weeks now; they’re kind of dragging their feet.
Question:
Any reason why?
Shital
We don’t know and have no control over it, but we hope that it happens soon. Once we have it, we think the build out will take around 6 weeks.
Armen
We are really looking forward to it, as the build out allows us to get the robot operating, and it gives us the additional space necessary to build more long term care business.
Shital
We have a lot of demand today. In fact, we have to turn away a lot of business at the moment b/c we don’t have the square footage. But long term care facilities are waiting for us, and when the build out is complete, we’ll start reaping the benefits of not only greater revenues, but also fewer mistakes and significant cost savings.
Armen
Again, it’s a small world. Assisted living facilities talk to one another. One nurse might work at a number of these facilities and doctors go to many facilities. When a doctor sees how an RXMD assisted living facility is running vs. another facility, he tells them to leave their current pharmacy and take their business to PharmCo. And it’s a no-brainer for them b/c it makes their job easier.
Question:
Can you tell shareholders more about your upcoming closed door pharmacy?
Armen
We have two licenses: retail and closed door. We haven’t been able to use the closed door license yet. While we are getting very good prices on drugs b/c of the volume we do, the closed door license will get us even better pricing. That’s the benefit.
Shital
So the closed door facility will literally be attached to our retail pharmacy, but separate so that customers have no access. The closed door facility will serve the long term care business and allow us to take advantage of the lower pricing.
Armen
We can also do our rehabilitation facility business under the closed door, which is currently being handled by our retail pharmacy, and once again get the better pricing on drugs. So anything that does not require a patient consulting with a pharmacist can be shifted to closed door.
Question:
What percentage of your business do you anticipate being via the closed door pharmacy?
Shital
It’s hard to say, but long term care represents about 6% of our revenues today, and with this shift it will probably end up being 20-30% of our revenue stream.
Armen
We might serve about 1000 beds, so I think 20-30% is accurate. The beauty of the long term care business is that it is recurring, and we might deliver 50, 100, or more scripts in one delivery to one facility, so there’s efficiency from the fewer deliveries.
Question:
How’s the MTM business progressing?
Shital
So MTM is medication therapy management. This is where we get “cases,” and what doctors are asking us to do is to look at patient’s compliance, look at medications that have been prescribed and any redundancies, duplication, or gaps in treatment. And then report back to the doctor and improve patient compliance. Doctors will often send us cases that aren’t even our patients. And while the revenue for this service is tiny, what happens is that as we fulfill these cases, PharmCo. receives better ratings, better performance scores, and better bonuses from the insurance carrier because of the cost savings we’re creating.
Armen
Another benefit is that we get more scripts because when we get an MTM case, a lot of them will have patients who are getting scripts filled at multiple pharmacies at the same time. What we do is consolidate all of those prescriptions at CVS, Walgreens, etc. with us. So we contact the patient, perform the MTM, and consolidate the prescriptions in one place.
Question:
There was a mention of trying to obtain licenses in all 50 states this year. Is that still on track?
Shital
Not really. We gave only filed for the five licenses so far. And this is by design. We could technically submit all of the applications, but it’s just not beneficial yet. We want to do this in tranches and go to the right states.
What we’ve done in tandem is that we’ve been talking with a pharmacy that is already licenses in all 50 states. So assuming we don’t get a particular license, we have access to that state.
Question:
So you enter into a contract that allows you to utilize the license of another pharmacy?
Shital
Yes, it’s called a Center Fill contract. How it works is you give the pharmacy the prescription, they fill it, and revenues are shared.
Armen
So the idea here is that we might deploy a sales force in a state where we don’t yet have a license, and they go to the local pharmacy and tell them what kinds of prescriptions will be coming their way. The Rx comes first to us, it gets transferred to the local pharmacy, they fill it, they ship it, and we pay them a fee for that service. The billing stays with us, and revenues are apportioned per our arrangement with the local pharmacy.
Question:
You covered the FDA regs that have made compounding less lucrative in this morning’s presentation. How much does this concern you as it represents one of you largest sources of revenue?
Armen
We’re paranoid about everything.
Shital
We are concerned generally as reimbursements will always continue to fall. So, we have to be proactive and always be on the lookout for the next thing. Four years ago “specialty” was giving you 30-40% margins, now it gives you 6%. Things are always changing, and we’re always looking ahead.
Question:
I think we already know the answer to this one, but for the avoidance of doubt, do you anticipate entering into any agreements that will have a dilutive impact on the outstanding shares?
Armen
<Laughing> No.
Shital
No more 3(a)(10)’s, no more aged debt, no more anything. We want long term investors who get the business, who aren’t going to dump their shares the first chance they get, and who want to be in the business of building a business.
We aren’t trying to keep the lights on. We can afford to be picky.
Armen
We are very careful now, and can afford to be. We are looking for a deal that doesn’t hurt the shareholder.
Question:
How much will the build out cost?
Armen
$100-120k.
Question:
For 2000 square feet? And you can pay for this using operating capital?
Shital
Yes. We don’t need to raise money for the build out. Again, as soon as we can install the robot, even if it doesn’t improve the revenue side right away, we’re going to see cost savings immediately.
Question:
Ok, best for last. On the M&A discussion during the presentation, we knew that you were in conversations, but we didn’t know that there are now three identified targets. You said you are looking for $2M from private investors. That seems like an unusually small amount. What’s the $2M for?
Shital
Yes, it seems like a random number, but the reason why is that the businesses we are talking to aren’t huge players. What they have is the licenses. We are looking to do a complete buy-out, which would transfer the licenses to us.
Armen
These are operating businesses. They’re small, but because we know these businesses and how to operate them, we can capitalize on our network immediately with these kinds of businesses. This is why we’re going after them.
It’s the licenses, the contracts they already have established with insurance carriers, and the ability to bill for Medicare.
Shital
For us to open up a shop and build it out organically would take too much time. Our network ties us in with more doctors and insurance providers than some of these small businesses, so we just need their infrastructure. After an acquisition, it’s plug and play. No add’l overhead, no premium for the database, etc.
Armen
Also, in some states there is a moratorium on new licenses, and this is a way to get around that.
We don’t want to take the risk of taking over a business where existing relationships might not want to work with us. We already have the relationships and sources of business; we just need the license and provider contracts.
Question:
We have about a minute left. What additional services do you anticipate adding as you move forward?
Shital
Eventually we want to get the accreditations. With the decrease in revenues in non-sterile compounding, we know that to stay successful in compounding we need the sterile compounding accreditation. As mentioned in the presentation, it costs around $100k, so it’s not an immediate priority, but it’s something we’re looking to do sometime in the future to maintain the longevity of the compounding department.
I don’t know what this industry will look like in two years. It’s dynamic and changes rapidly. We were specializing in “specialty” three years ago and the trends clearly changed. So we know the trends will change again.
Armen
You’ve got to keep you finger on the pulse and be very active. But we have an advantage as a lean, productive operation. We can switch gears quickly; much more quickly than other companies.
Shital
Exactly. And it’s worth noting that our MTM and risk management business happened organically as we in our daily operations began to notice a gap, so we filled that gap. We believe that we will be able to do it again when required.
Question:
Audited financials is a focus for some. Is it safe to say that with EisnerAmper on board that this is more of a back-burner priority at this point?
Shital
Yes. We believe we can add greater shareholder value by executing on our objectives rather than spending hundreds of thousands of dollars to report the same numbers that we’re already providing.
Armen
In addition, it’s much harder to do an acquisition when you’re a fully reporting company because we would have to audit our acquisitions as well. So we think doing acquisitions now is the easier, faster, less expensive way to go about things.
It’s gonna happen. We’re gonna trade on the NASDAQ as well. We actually could trade on NASDAQ right now, but we are holding back in order to grow our business first.
Question:
Ok we are out of time. To prospective investors or existing investors who might want to add to their portfolio, what would you tell them that I haven’t touched on today?
Armen
Some of our biggest accomplishments to date.
First, we hired EisnerAmper to review our financials. That adds tremendous transparency. EisnerAmper doesn’t do business with OTC companies. It’s because of Shital that they agreed to review RXMD’s financials.
Shital
They knew us from when we were audited by Malofermin (sp). EisnerAmper acquired them, and put them under their umbrella. We reached out to them because we had worked together so closely before. They know how we do our books, they know how I stay up all night looking for pennies, and they felt comfortable working with us as a third party reviewer because they knew that we aren’t trying to mess around.
Armen
And secondly, we turned a profit, which is enormous. And we believe that this is just the beginning. For those investors that invest in RXMD at 4, 5, 6 cents, we feel that they’re getting in at the beginning of our story.
We are very focused. Focused on keeping our costs low, increasing our revenues and earnings, and increasing shareholder value.
THE FOLLOWING IS INFO FROM INSTATRADER MEETING 6/1 AT MARCUM...
Q: How does PHARMCO sit in in Florida market, and regional market today?
A: We consistantly rank in the TOP TIER of every measured metric in the florida market. TOP 10% consistantly, and the fastest growing company in the health services industry in florida. We service 200 patients a day.
Q: How does the revenue break down by category?
A: 37% General 32% Compounds (fastest growing) 25% Specialty 6% long term care (next primary focus)
Q: Is the company on track for 21K prescriptions a month as guided?
A: Absolutely, and we are almost there now. We just did 18.5K prescriptions in a month, and we are just one nursing home or clinic away from being at 21K today... We have our salespeople knocking on doctors office doors everyday to begin new relationships. This industry in all about RELATIONSHIPS, and we have a large and growing network to pull from. Right now we are literally turning away new business as the permit process with the local fire department is taking longer than anticipated for the buildout of the extra space and robot dispenser.
Q: When do you anticipate the robot and buildout completion?
A: Permits can be approved any day now - we do not control that process, and 6 weeks from then we expect completion.
Q: You mentioned we are seeking $2M in private funding for 1 or 2 acquisitions. What do you expect to get for $2M?
A: We are looking at smaller companies with owners looking to sell because they are retiring, or had enough. One company in particular has licenses in all 50 states. We are interested in those licenses as well as the relationships and contracts they have. That is what we are buying.
Q: Anything cooking on that front?
A: Yes, we have targeted 3 companies so far, and are deep in talks with 2. Already have price agreed upon, just working out terms etc.
Q: What about the funding? $2M is alot of money for a .05 cent company. We are talking 50-60M shares. How would that work?
A: First, we dont need all the money right away. We have surplus operating capital, and would only take funds as needed. We are obviously going to stay away from dilutive toxic deals. We have MANY terms sheets presented to us, and expect several more today. We are very picky on who we work with, and what the terms are. The $2M could be spread out over a year.. say $500K a quarter, and the shares would be restricted for 1 year minimum. Similar to the MIDAM deal.
Q: Where are these targets you have identified?
A: All in MIAMI DADE and BROWARD counties in Florida.
Q: If you find an out of state company will you be looking to expand a location there?
A: We are not interested in that expense. If we ACQUIRE a company out of state we would simply take over their lease or building. remember its about the relationship with the doctors. The prescriptions can be mailed anywhere, or even setup with a local pharmacy in their state for pickup where we would receive a fee.
Q: What makes you think knocking on random doctors doors is a business plan?
A: Well one thing people do not know is that doctors take a prescription drug class early on in med school and never really see it again. They literally need to be trained on the meds and procedures as the rules change. Many are not willing to provide this to the doctors, we are.
Q: So once this robot dispenser is in, whats the next step?
A: We will be able to service all the business we are now turning away, and be able to handle much more with less error and more efficiency.
Q: You mentioned the close door facility in the presentation, is that a big driver of future business?
A: We can get meds for much cheaper with a closed door facility, and it will increase margins tremendously. Much of our business now is NOT walk in traffic.
Q: Will you ever turn into a CVS or WALGREENS with groceries in your store?
A: That is absolutely NOT OUR MODEL.. that is why we are different. They make their money on the groceries, not the prescriptions. We focus on prescriptions and patient care - RELATIONSHIPS - and that is why we are growing as we have been.
Q: Will we ever get out of the DAMN OTC?
A: We have a 2-3 year M&A strategy. We feel after it is initially completed, we will make the move to NASDAQ. We can trade NASDAQ now, but the cost of compliance, and timing is just not right at this time.
THE FOLLOWING ARE A SMALL LIST OF THE COMPANIES I SAW AT THE PRESENTATION - THERE WERE MANY MORE...
UBS
MERRILL
AKEMI CAPITAL
VECTOR CAPITAL
OCCIDENTAL CAPITAL
INVEST WISELY
CARNYC and INSTATRADER met with Shital Mars and Armen Karapetyan. Alan Weisberg was not present for CARNYC but was for INSTATRADER. They were all pleased to meet one of their shareholders face to face and were extremely cordial and transparent throughout.
The following are questions and answers during CARNYC's 37 minutes with mgmt, much of it word for word. A good portion of it dives a little deeper into their business model.
The time literally flew by, and I tried to get in as much as possible. Some of this will be familiar to you, but hopefully there’s a little something for everyone, and hopefully many of your questions were touched upon.
Opinions may differ, but I am more confident today about RXMD than I was yesterday, and I was pretty confident yesterday.
Warning, this is a little long.
Question:
Shareholders are well aware of your expansion plans, the robotic dispending system, and the intention to obtain additional licenses. Once these initial steps are completed, how will RXMD break into these new markets (e.g. via a sales force, cold calls, etc.)?
Shital
We don’t want to build facilities in these new markets. To start, it’s going to be a marketing team that we’re going to develop. We have a lot of connections in New York, so getting the NY license was key, but we also have connections with people in Georgia, and marketing teams in Texas, so we can capitalize in these states right away.
In places where we don’t have connections, such as Utah for example, it will be a little more challenging, but as we build the brand it will become easier to penetrate these markets.
Armen
Once you build a sales force in the northeast, for example, then that sales force network goes beyond NY/NJ, and extends into PA, CT, and NH because it’s a small world. Members of your sales force will know someone that can market in other places and now you’re tapped into the entire northeast corridor.
Question:
What’s a day in the life of a sales person look like? Where is their primary focus?
Shital
It is a lot of knocking on doctor’s office doors, but ideally these teams already have some healthcare connections and would go to those doctors and clinics where they have relationships and, first and foremost, educate. RXMD is not a simple pharmacy, we’re not just looking for scripts, we are trying to promote our business model, which includes what kinds of compounds we make, how we ship, that all of our products re FDA approved and readily available, which means we don’t have issues that other compounding pharmacies have, and who are just trying to get scripts.
So the force would go to doctor’s offices and coordinate their patient’s care with them, find out what scripts are coming in, monitor what is going out, and streamline the process. Eventually, doctors are sending you to other doctors and it grows from there.
Armen
And we are winning these relationships because of the services we provide. There’s unlimited access to the compounding pharmacist, both for the doctors and their staff, as well as the patients.
Question:
Are the elderly your primary demographic for the compounding business?
Shital
The compounding business is not restricted to senior care. We have diabetic practices, osteopathic practices; we can prescribe anything from pain medication to erectile dysfunction. We have lots of patients in the 30s/40s with lower lumbar pain, or need something for their knee, or for their neck. So there’s a lot of activity in the younger, active demographic.
Question:
How have you been able to increase your market share in South Florida? Is it through similar relationships with doctors, community outreach as described in your presentation, or something else?
Shital
Honestly, it’s a lot because of our risk management services. Walgreens won’t manage risk, CVS won’t manage risk. They don’t care about you. So when we come to a doctor’s office for a service visit and that doctor is struggling with a risk management contract, and saying my patients are all over the place, I can’t follow up with them, I don’t have any time, we are that sign of relief, and within six months, they’re seeing improvements. Within 12 months, the doctors are now eligible for bonuses. That’s what really drives a lot of the growth, that’s why patients are switching to RXMD. Doctors are telling their patients to go to PharmCo. so that the doctors can watch what their patients are doing.
Armen
When you talk about managed care, you’re talking about most people over the age of 65; they’re on Medicare. What happens is, you’re a physician, you have a couple options. You can have a regular contract with a Humana or an AARP, which pays you $15 or $20 per patient, per month. Or, you can choose instead to share the risk with the insurer, which pays you $120 per patient, per month. And you have the opportunity to make even more if you keep that patient healthy and out of the hospital. It’s outcome based.
Shital
For example, let’s say you have a patient who just got discharged from the hospital with a blood pressure issue. Now you’re managing him for the next three to six months. If he takes his medication, he’s going to be fine. He’s not going back to the hospital. If he takes his medications some days, forgets to take it other days, he’s not going to get better, and he’s going to end up back at the hospital with the same issue. The insurance company then goes to the doctor and says that’s coming out of your $120. So it behooves the doctors to make sure that the patient takes his medication, gets better and doesn’t require additional care.
Armen
The whole health care system is based on the rating today, and preventive care. So if you keep your patients healthy, and keep them within in the network, then you’re successfully managing the risk. In addition, when you prescribe medication, you need to make sure that the medicine you prescribe isn’t the most expensive when cheaper medications are available. A lot of doctors have no idea which medications are more expensive. They don’t stay current. RXMD advises them on which formulations they should stick to, which will provide good patient outcomes, and which drugs are the cheapest. This is what health insurance companies want.
So instead of letting the doctor sort this out, we tell him to see his patients, prescribe therapies and do his job. We take the rest off his shoulders. We will manage the compliance. We’ll make sure the patient isn’t taking duplicate medications, isn’t getting prescriptions from multiple doctors, and will explain to the doctor what medications their patients are being prescribed after being discharged from hospital visits. We will also make sure that medications are delivered on time, and that insurers know all of this is happening.
Question:
In doing so, the doctor is clearly incentivized to send his patients to you as it represents an opportunity for a better financial outcome, more bonuses from insurance providers and a better rating, correct?
Armen
All of his patients.
Shital
And that’s the two-fold benefit of this system. We don’t provide a service fee for this, and it only amounts to a tiny bit of revenue for us, but doctors send us their patients, and then insurance companies see that we’re managing patient risk and reducing cost across the whole spectrum. So then insurance companies start telling their network of doctors to send their patients to RXMD too.
Question:
This was basically covered in your presentation, but you hope to have the robotic dispensary system built out by September, and that system will allow you fill 3x the number of scripts you’re currently filling?
Shital
Yes to both. We’ve been expecting Miami Fire Dept. permits for a few weeks now; they’re kind of dragging their feet.
Question:
Any reason why?
Shital
We don’t know and have no control over it, but we hope that it happens soon. Once we have it, we think the build out will take around 6 weeks.
Armen
We are really looking forward to it, as the build out allows us to get the robot operating, and it gives us the additional space necessary to build more long term care business.
Shital
We have a lot of demand today. In fact, we have to turn away a lot of business at the moment b/c we don’t have the square footage. But long term care facilities are waiting for us, and when the build out is complete, we’ll start reaping the benefits of not only greater revenues, but also fewer mistakes and significant cost savings.
Armen
Again, it’s a small world. Assisted living facilities talk to one another. One nurse might work at a number of these facilities and doctors go to many facilities. When a doctor sees how an RXMD assisted living facility is running vs. another facility, he tells them to leave their current pharmacy and take their business to PharmCo. And it’s a no-brainer for them b/c it makes their job easier.
Question:
Can you tell shareholders more about your upcoming closed door pharmacy?
Armen
We have two licenses: retail and closed door. We haven’t been able to use the closed door license yet. While we are getting very good prices on drugs b/c of the volume we do, the closed door license will get us even better pricing. That’s the benefit.
Shital
So the closed door facility will literally be attached to our retail pharmacy, but separate so that customers have no access. The closed door facility will serve the long term care business and allow us to take advantage of the lower pricing.
Armen
We can also do our rehabilitation facility business under the closed door, which is currently being handled by our retail pharmacy, and once again get the better pricing on drugs. So anything that does not require a patient consulting with a pharmacist can be shifted to closed door.
Question:
What percentage of your business do you anticipate being via the closed door pharmacy?
Shital
It’s hard to say, but long term care represents about 6% of our revenues today, and with this shift it will probably end up being 20-30% of our revenue stream.
Armen
We might serve about 1000 beds, so I think 20-30% is accurate. The beauty of the long term care business is that it is recurring, and we might deliver 50, 100, or more scripts in one delivery to one facility, so there’s efficiency from the fewer deliveries.
Question:
How’s the MTM business progressing?
Shital
So MTM is medication therapy management. This is where we get “cases,” and what doctors are asking us to do is to look at patient’s compliance, look at medications that have been prescribed and any redundancies, duplication, or gaps in treatment. And then report back to the doctor and improve patient compliance. Doctors will often send us cases that aren’t even our patients. And while the revenue for this service is tiny, what happens is that as we fulfill these cases, PharmCo. receives better ratings, better performance scores, and better bonuses from the insurance carrier because of the cost savings we’re creating.
Armen
Another benefit is that we get more scripts because when we get an MTM case, a lot of them will have patients who are getting scripts filled at multiple pharmacies at the same time. What we do is consolidate all of those prescriptions at CVS, Walgreens, etc. with us. So we contact the patient, perform the MTM, and consolidate the prescriptions in one place.
Question:
There was a mention of trying to obtain licenses in all 50 states this year. Is that still on track?
Shital
Not really. We gave only filed for the five licenses so far. And this is by design. We could technically submit all of the applications, but it’s just not beneficial yet. We want to do this in tranches and go to the right states.
What we’ve done in tandem is that we’ve been talking with a pharmacy that is already licenses in all 50 states. So assuming we don’t get a particular license, we have access to that state.
Question:
So you enter into a contract that allows you to utilize the license of another pharmacy?
Shital
Yes, it’s called a Center Fill contract. How it works is you give the pharmacy the prescription, they fill it, and revenues are shared.
Armen
So the idea here is that we might deploy a sales force in a state where we don’t yet have a license, and they go to the local pharmacy and tell them what kinds of prescriptions will be coming their way. The Rx comes first to us, it gets transferred to the local pharmacy, they fill it, they ship it, and we pay them a fee for that service. The billing stays with us, and revenues are apportioned per our arrangement with the local pharmacy.
Question:
You covered the FDA regs that have made compounding less lucrative in this morning’s presentation. How much does this concern you as it represents one of you largest sources of revenue?
Armen
We’re paranoid about everything.
Shital
We are concerned generally as reimbursements will always continue to fall. So, we have to be proactive and always be on the lookout for the next thing. Four years ago “specialty” was giving you 30-40% margins, now it gives you 6%. Things are always changing, and we’re always looking ahead.
Question:
I think we already know the answer to this one, but for the avoidance of doubt, do you anticipate entering into any agreements that will have a dilutive impact on the outstanding shares?
Armen
<Laughing> No.
Shital
No more 3(a)(10)’s, no more aged debt, no more anything. We want long term investors who get the business, who aren’t going to dump their shares the first chance they get, and who want to be in the business of building a business.
We aren’t trying to keep the lights on. We can afford to be picky.
Armen
We are very careful now, and can afford to be. We are looking for a deal that doesn’t hurt the shareholder.
Question:
How much will the build out cost?
Armen
$100-120k.
Question:
For 2000 square feet? And you can pay for this using operating capital?
Shital
Yes. We don’t need to raise money for the build out. Again, as soon as we can install the robot, even if it doesn’t improve the revenue side right away, we’re going to see cost savings immediately.
Question:
Ok, best for last. On the M&A discussion during the presentation, we knew that you were in conversations, but we didn’t know that there are now three identified targets. You said you are looking for $2M from private investors. That seems like an unusually small amount. What’s the $2M for?
Shital
Yes, it seems like a random number, but the reason why is that the businesses we are talking to aren’t huge players. What they have is the licenses. We are looking to do a complete buy-out, which would transfer the licenses to us.
Armen
These are operating businesses. They’re small, but because we know these businesses and how to operate them, we can capitalize on our network immediately with these kinds of businesses. This is why we’re going after them.
It’s the licenses, the contracts they already have established with insurance carriers, and the ability to bill for Medicare.
Shital
For us to open up a shop and build it out organically would take too much time. Our network ties us in with more doctors and insurance providers than some of these small businesses, so we just need their infrastructure. After an acquisition, it’s plug and play. No add’l overhead, no premium for the database, etc.
Armen
Also, in some states there is a moratorium on new licenses, and this is a way to get around that.
We don’t want to take the risk of taking over a business where existing relationships might not want to work with us. We already have the relationships and sources of business; we just need the license and provider contracts.
Question:
We have about a minute left. What additional services do you anticipate adding as you move forward?
Shital
Eventually we want to get the accreditations. With the decrease in revenues in non-sterile compounding, we know that to stay successful in compounding we need the sterile compounding accreditation. As mentioned in the presentation, it costs around $100k, so it’s not an immediate priority, but it’s something we’re looking to do sometime in the future to maintain the longevity of the compounding department.
I don’t know what this industry will look like in two years. It’s dynamic and changes rapidly. We were specializing in “specialty” three years ago and the trends clearly changed. So we know the trends will change again.
Armen
You’ve got to keep you finger on the pulse and be very active. But we have an advantage as a lean, productive operation. We can switch gears quickly; much more quickly than other companies.
Shital
Exactly. And it’s worth noting that our MTM and risk management business happened organically as we in our daily operations began to notice a gap, so we filled that gap. We believe that we will be able to do it again when required.
Question:
Audited financials is a focus for some. Is it safe to say that with EisnerAmper on board that this is more of a back-burner priority at this point?
Shital
Yes. We believe we can add greater shareholder value by executing on our objectives rather than spending hundreds of thousands of dollars to report the same numbers that we’re already providing.
Armen
In addition, it’s much harder to do an acquisition when you’re a fully reporting company because we would have to audit our acquisitions as well. So we think doing acquisitions now is the easier, faster, less expensive way to go about things.
It’s gonna happen. We’re gonna trade on the NASDAQ as well. We actually could trade on NASDAQ right now, but we are holding back in order to grow our business first.
Question:
Ok we are out of time. To prospective investors or existing investors who might want to add to their portfolio, what would you tell them that I haven’t touched on today?
Armen
Some of our biggest accomplishments to date.
First, we hired EisnerAmper to review our financials. That adds tremendous transparency. EisnerAmper doesn’t do business with OTC companies. It’s because of Shital that they agreed to review RXMD’s financials.
Shital
They knew us from when we were audited by Malofermin (sp). EisnerAmper acquired them, and put them under their umbrella. We reached out to them because we had worked together so closely before. They know how we do our books, they know how I stay up all night looking for pennies, and they felt comfortable working with us as a third party reviewer because they knew that we aren’t trying to mess around.
Armen
And secondly, we turned a profit, which is enormous. And we believe that this is just the beginning. For those investors that invest in RXMD at 4, 5, 6 cents, we feel that they’re getting in at the beginning of our story.
We are very focused. Focused on keeping our costs low, increasing our revenues and earnings, and increasing shareholder value.
THE FOLLOWING IS INFO FROM INSTATRADER MEETING 6/1 AT MARCUM...
Q: How does PHARMCO sit in in Florida market, and regional market today?
A: We consistantly rank in the TOP TIER of every measured metric in the florida market. TOP 10% consistantly, and the fastest growing company in the health services industry in florida. We service 200 patients a day.
Q: How does the revenue break down by category?
A: 37% General 32% Compounds (fastest growing) 25% Specialty 6% long term care (next primary focus)
Q: Is the company on track for 21K prescriptions a month as guided?
A: Absolutely, and we are almost there now. We just did 18.5K prescriptions in a month, and we are just one nursing home or clinic away from being at 21K today... We have our salespeople knocking on doctors office doors everyday to begin new relationships. This industry in all about RELATIONSHIPS, and we have a large and growing network to pull from. Right now we are literally turning away new business as the permit process with the local fire department is taking longer than anticipated for the buildout of the extra space and robot dispenser.
Q: When do you anticipate the robot and buildout completion?
A: Permits can be approved any day now - we do not control that process, and 6 weeks from then we expect completion.
Q: You mentioned we are seeking $2M in private funding for 1 or 2 acquisitions. What do you expect to get for $2M?
A: We are looking at smaller companies with owners looking to sell because they are retiring, or had enough. One company in particular has licenses in all 50 states. We are interested in those licenses as well as the relationships and contracts they have. That is what we are buying.
Q: Anything cooking on that front?
A: Yes, we have targeted 3 companies so far, and are deep in talks with 2. Already have price agreed upon, just working out terms etc.
Q: What about the funding? $2M is alot of money for a .05 cent company. We are talking 50-60M shares. How would that work?
A: First, we dont need all the money right away. We have surplus operating capital, and would only take funds as needed. We are obviously going to stay away from dilutive toxic deals. We have MANY terms sheets presented to us, and expect several more today. We are very picky on who we work with, and what the terms are. The $2M could be spread out over a year.. say $500K a quarter, and the shares would be restricted for 1 year minimum. Similar to the MIDAM deal.
Q: Where are these targets you have identified?
A: All in MIAMI DADE and BROWARD counties in Florida.
Q: If you find an out of state company will you be looking to expand a location there?
A: We are not interested in that expense. If we ACQUIRE a company out of state we would simply take over their lease or building. remember its about the relationship with the doctors. The prescriptions can be mailed anywhere, or even setup with a local pharmacy in their state for pickup where we would receive a fee.
Q: What makes you think knocking on random doctors doors is a business plan?
A: Well one thing people do not know is that doctors take a prescription drug class early on in med school and never really see it again. They literally need to be trained on the meds and procedures as the rules change. Many are not willing to provide this to the doctors, we are.
Q: So once this robot dispenser is in, whats the next step?
A: We will be able to service all the business we are now turning away, and be able to handle much more with less error and more efficiency.
Q: You mentioned the close door facility in the presentation, is that a big driver of future business?
A: We can get meds for much cheaper with a closed door facility, and it will increase margins tremendously. Much of our business now is NOT walk in traffic.
Q: Will you ever turn into a CVS or WALGREENS with groceries in your store?
A: That is absolutely NOT OUR MODEL.. that is why we are different. They make their money on the groceries, not the prescriptions. We focus on prescriptions and patient care - RELATIONSHIPS - and that is why we are growing as we have been.
Q: Will we ever get out of the DAMN OTC?
A: We have a 2-3 year M&A strategy. We feel after it is initially completed, we will make the move to NASDAQ. We can trade NASDAQ now, but the cost of compliance, and timing is just not right at this time.
THE FOLLOWING ARE A SMALL LIST OF THE COMPANIES I SAW AT THE PRESENTATION - THERE WERE MANY MORE...
UBS
MERRILL
AKEMI CAPITAL
VECTOR CAPITAL
OCCIDENTAL CAPITAL
INVEST WISELY
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