Welcome to the
Annual General
Meeting of
Shareholders
June 23, 2006
Forward Looking Statements
Certain oral statements made by management of DrugMax, Inc. from time to time, including those contained in this presentation and
the oral presentation that accompanies it, that are not historical facts are “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Because such statements involve risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking statements. Forward-looking statements, are statements regarding the intent,
belief or current expectations, estimates or projections of DrugMax, its directors or its officers about DrugMax and the industry in
which it operates, and include among other items, statements regarding (a) DrugMax’s strategies regarding growth and business
expansion, including its strategy of building an integrated specialty drug distribution platform with multiple sales channels, opening
new Worksite locations and acquiring third-party pharmacies, (b) its financing plans, (c) trends affecting its financial condition or
results of operations; and (d) its ability to continue to control costs and to meet its liquidity and other financing needs. Although
DrugMax believes that its expectations are based on reasonable assumptions, it can give no assurance that the anticipated results will
occur. When used in this report, the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar
expressions are generally intended to identify forward-looking statements.
Important factors that could cause the actual results to differ materially from those in the forward-looking statements include, among
other items, (i) management’s ability to implement its growth and business strategies, (ii) management’s ability to locate and acquire
suitable acquisition candidates; (iii) management’s ability to negotiate and open new Worksite pharmacies, (iv) management’s ability to
manage the company’s growth, (v) changes in the regulatory and general economic environment related to the health care and
pharmaceutical industries, including possible changes in reimbursement for healthcare products and in manufacturers’ pricing or
distribution policies; (vi) conditions in the capital markets, including the interest rate environment and the availability of capital; (vii)
changes in the competitive marketplace that could affect DrugMax’s revenue and/or cost bases, such as increased competition, lack of
qualified marketing, management or other personnel, and increased labor and inventory costs; and (viii) changes regarding the
availability and pricing of the products which DrugMax distributes, as well as the loss of one or more key suppliers for which
alternative sources may not be available. Further information relating to factors that could cause actual results to differ from those
anticipated is included under the heading Risk Factors in DrugMax’s Form 10-K for the year ended December 31, 2005 filed with the
U.S. Securities and Exchange Commission. DrugMax disclaims any intention or obligation to update or revise forward-looking
statements, whether as a result of new information, future events or otherwise.
DrugMax Today
First integrated specialty pharmaceutical distribution
model:
Targeted location strategy
Specialty product focus
Outpatient pharmacies at point of care:
In or near medical centers
For chronically ill, high value patients with acute prescription
medications
Servicing physicians and clinics for in-office treatment
Nationally recognized brand: Familymeds
78 corporate locations
7 licensed/franchised locations
Presence in 14 states
DrugMax Today & Familymeds Tomorrow
Vision
Build the largest network of on-site & clinic pharmacies in
the U.S. under the Familymeds brand
Value
Focused specialty pharmacy services for chronic/acute
patients and their physician providers
Depth of Experience
Years of
Previous Experience /
Name
Title
Experience
Affiliations
Ed Mercadante
Pharmacist
Chairman and Chief Executive Officer
25
Familymeds, Arrow Corporation, APP, Rite Aid,
GNC, Medibank, ProHealth
Jim Bologa, CPA
Chief Operating Officer
25
Ernst & Young
Jim Beaumariage
Pharmacist
SVP, Pharmacy Operations,
22
Familymeds, CVS, CVS/People’s Drug
Allison Kiene
Pharmacist - Lawyer
VP, General Counsel and Secretary
17
Familymeds, The Stop & Shop Supermarket
Company, Stop & Shop Pharmacy
Rees Pinney
SVP, Employer Sponsored Pharmacy,
16
Familymeds, Healthright, O'Neal & Prelle
Gregg Montgomery
Pharmacist
SVP, Procurement,
25
Familymeds, Rite-Aid, Farmco Ventures,
NeighborCare
Familymeds, Inc.
Familymeds, Inc.
Valley Drug Co.
Jim Searson, CPA
Chief Financial Officer
20
Daticon, TranSwitch, Katerra, PWC
Chronically Ill
Patients With
Acute Needs
Large Employee
and
Retiree Population
Physicians, Clinics
and Other
Specialty Providers
FamilyMeds Clinic
and
Arrow Apothecary
Pharmacies
Worksite
Employer
Sponsored
Pharmacies
Valley
Medical Supply
Hospital Clinics
and
Medical Campuses
(83 locations)
Fortune 500
Companies with
Large Single Site
Population of
Employees
(2 locations)
Small to Mid-size
Medical and
Healthcare
Provider Locations
Oral & Specialty Pharmaceuticals
HomeCare & Medical Care Specialty Products
Target
Customer
Product
Focus
Targeted
Location
Strategy
Unique Business Model
Focus: Location Strategy
Increased focus from health insurers and employers to
reduce healthcare costs
Growing consumer preference toward point of care
prescription service
To provide a low-cost solution with a focus on convenience, DrugMax
employs a unique location strategy which targets:
Large employer campuses
Hospital clinics and medical campuses
Medical & healthcare provider locations
Focus: Specialty Pharmaceuticals
Specialty Pharmaceuticals
Include:
Biopharmaceuticals
Blood Derived Products
Complex Molecules
Select oral, injectable and
infused medications
Specialty Pharmaceuticals
Require:
Tailored patient education for
safe & cost-effective use
Patient specific dosing
Patient monitoring with acute
needs
Administration via injection,
infusion, inhalation or oral
Usually requires special handling
Drug category driven by advances in drug research &
technology since 2000
Target and treat specific chronic or genetic conditions
Estimated $20-$25B market opportunity
Competitive Pharmacy Metrics
Source: NACDS industry profile 2005
Mass Market
Supermarkets
Our Pharmacies
Independents
Chain
Average Rx Price for
Overall Industry
Overall Selling
Space/Unit (sq. ft.)
Average Sales/
Pharmacy
% of Pharmacy Sales
Average Generic
Utilization
9,062
$4.3 Million
68%
52%
3,087
$2.2 Million
95%
48%
43,814
$2.7 Million
13%
N/A
1,800
$2.9 Million
95%
57%
$54.60
$59.87
Core Business by Therapeutic Category
Percentage of RX Revenue
Patient Demographics by Age Group
Percentage of RX Utilization
Market Dynamics
Medicare Modernization Act - Medicare Part D
Expansion of prescription drug benefit for seniors
Highly variable reimbursement structure for pharmacies
Generics will play a more important role in the future
Fluctuating supply and demand
Prescriptions growth outpacing supply of community pharmacists
Prescriptions +41%: 3.2 B in 2003 to 4.5 B in 2010
Community pharmacists +9.2%
Requirements for disease management services called Medication
Therapeutic Management under new Med D Program
Leveraging Our Platform Strength
Our Expertise
Specialty & complex treatments
Higher transaction value
Infectious disease
Diabetes
Pain & Oncology
Respiratory
Psychological & mental health
Our Relationships
43 pharmacies at point of care
Inside medical office
buildings/campuses
4,000 doctors on medical
campuses within or near our sites
Valley Medical Supply
Natural outlet for medical
specialty distribution
Our Patients
> 400,000 chronic and acute
patients
Active patient and clinical
programs:
Greater medication compliance
Medical therapeutic
management (MTM)
Greater specialty drug
pull-through
Our Pharmacies
80 pharmacies in key medical
locations
>3.6M prescriptions
Estimated market opportunity:
$1.3B in pharmacy & medical
supply sales in our existing
locations
Strategic Initiatives
Build our per unit sales volume
Organic sales growth by location
Deeper product assortment with higher transactional value
Specialty pharmacy and Institutional Rx products & Services
Focus on integrated growth
Direct sales of products and services to doctors
Pro forma estimate $15 million in 2006
Add more Worksite PharmaciesSM
Growing demand by employers to control drug benefit expenditures
Improve employee convenience
Increase automation and technological capabilities
Kiosks connecting patients to pharmacies
Electronic Rx transmission connecting DrugMax to physicians
Grow our network of pharmacies
Fragmented market = > 1,000 location opportunities
2005 Scorecard
Divested “non core” lower margin legacy wholesale
distribution business (December 2005)
Integrated DrugMax distribution facility with pharmacy
operations (December 2005)
Completed refinancing and recapitalization to improve our
financial position (October 2005)
2006 Objectives
Top-line organic growth
Up-sell pharmaceuticals to physicians in current pharmacy locations and
through Valley Medical Supply (VMS)
Super-charge sales referrals from physicians in specialty Rx and through
institutional sectors like assisted living & group homes for Rx sales
Add new pharmacies
Near leading medical institutions and hospitals and large employer
sponsored locations
Expand gross margin to the 20.5% level seen in 2004
Through “Familymeds Formulary” emphasizing Generic Utilization
Through Product strategy geared toward high value patients with chronic
diseases
Through using 5 day a week Wholesaler Base Supply Chain Management
Improve financial performance through
operational integration & leveraged growth:
Focus on Profitability
Increase Gross Margin
Bundle products
Pharmaceuticals with home care products yield higher gross margins of
30+%
Utilization of generic drugs yields higher gross margins of
approximately 50% (2006-2007 will see dramatic shift towards
generics)
Compounded and infusion medications yield higher gross margins of
50+%
Expense Control
Maintain SG&A model of current pharmacy footprint and operation
help control expense
Average size is 1800 sq. ft. with low occupancy expenses
Location/proximity strategy
Being close to physicians drives down operating/marketing expenses
2006 Monthly Sales Trend
$16.2M
$17.4M
$22.5M
$18.4M
$19.0M
April & May 2006 sales of $37.4M grew 10.0% YoY and
11.6% over Jan & Feb 2006 sales.
(4 weeks)
(4 weeks)
(4 weeks)
(4 weeks)
(5 weeks)
~ 4.1M/wk
~ 4.4M/wk
~ 4.5M/wk
~ 4.6M/wk
~ 4.8M/wk
Q1 2006 Financial Highlights
Revenues of $56M, a sequential increase of 6.9%
Gross margin of 19.5%, compared to 18.3% in Q4 2005
Operating loss of $2.9M, an improvement of 36%
compared to loss of $4.5M in Q4 2005
Net loss per share of $.06, compared to net loss of $.47 in
Q4 2005
Nasdaq: DMAX (FMRX)
Shares Outstanding: approximately 66 million
Market Capitalization: $47 million
Fiscal Year End: Saturday closest to December 31
We operate on a 4-4-5 week retail quarterly calendar
As of June 15, 2006
Key Takeaways
Unique locations + specialty products model
Forward focus on core pharmacy operations
Leverage through integrated platform strength
Favorable competitive metrics and market dynamics
Improving financial condition
Positioned to achieve substantial organic revenue growth
in 2006
Expect to be EBITDA positive in 2H 2006
FAMILYMEDS, INC.
NASDAQ: FMRX
(DrugMax, Inc. Nasdaq: DMAX)
312 Farmington Avenue
Farmington, CT 06032-1968
Tel: 860-676-1222
www.drugmax.com
www.familymeds.com
Pharmacy Services for Specialty Care