Familymeds Group, Inc.
NASDAQ: FMRX
Ed Mercadante, R.Ph.
Chairman and Chief Executive Officer
860.676.1222 x112
mercadante@familymeds.com
Forward Looking Statements
Certain oral statements made by management of Familymeds Group, 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 Familymeds, its directors or its officers about Familymeds and the industry in which it operates, and include
among other items, statements regarding (a) Familymeds’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 Familymeds 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 Familymeds’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 Familymeds 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 Familymeds’s Form 10-K for the year ended
December 31, 2005 filed with the U.S. Securities and Exchange Commission. Familymeds disclaims any intention or
obligation to update or revise forward-looking statements, whether as a result of new information, future events
or otherwise.
Chronically Ill
Patients With
Acute Needs
Large Employee
and
Retiree Population
Physicians, Clinics
and Other
Specialty Providers
FamilyMeds Clinic
and
Arrow Apothecary
Pharmacies
Employer
Sponsored
Worksite
Pharmacies
Medical Supply
Hospital Clinics
and
Medical Campuses
83 locations
14 States
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
Integrated Specialty Pharmacy Delivery & Strategy
Why a Targeted Location Strategy?
Our increased focus to health insurers and employers to reduce
healthcare costs and improve outcomes
Reliable Refill program anticipates patient prescription refill needs.
We are connected via e-prescribing to reduce errors and improve patient
services.
Growing consumer preference toward point-of-care prescription
service together with physician services
Our pharmacists and teams collaborate with MDs and hospitals to
optimize Rx care and follow up.
Low cost solution emphasizes convenience and better patient care
Through our pharmacy technology platform we have automated and
work flow optimized pharmacies to reduce costs and improve quality .
Superior business economics for point-of-care and employer-based
pharmacies. Our Worksite PharmaciesSM :
Eliminate costly administration.
Improve employee experience.
Reduce costs via direct pharma contracts and higher generic dispensing.
National Leader in Pharmacies at “Point of Care”
A Sample of our Hospital/Medical Office Building Affiliated Pharmacies:
Worksite PharmacySM Benefits
Key Benefits to Employers
Cost savings on Rx
Enhanced benefits
Improved health
Target Company Profile
2,000+ employees at single location
History of innovative health and wellness programs
Existence of other on-site providers
Paths to Market
Relationships with HR/Benefits consultants
Partnerships with providers of on-site medical care
Direct communications to employers
Contiguous geography
Vertical industries
Comparative Worksite PharmacySM Economics after 1 Year
Q2 2005 Q1 2006 Q2 2006
Rx Dispensed: 17,175 20,940 21,457
Year-to-Year Growth: 24.9%
Quarter-to-Quarter Growth: 2.5%
Rx Revenue: $649K $796K $893K
Year-to-Year Growth = 37.5%
Quarter-to-Quarter Growth = 12.2%
Front Store Revenue:$207K $235K $247K
Year-to-Year Growth = 18.8%
Quarter-to-Quarter Growth = 4.9%
Patient Demographics by Age Group
Percentage of RX Utilization
Majority of
patients with
chronic/acute
needs
Core Business by Therapeutic Category
Percentage of RX Revenue
Generic Utilization by Payer Type
Average Annualized Unit Economics
Annual Revenue / Unit $3 Million
Gross margin / Unit $ 630K
Gross Margin % 20.3%
OpEx / Unit $ 490K
OpEx % 15.8%
EBITDA / Unit $ 140K
EBITDA % 4.5%
Note: 94% of Revenue is Rx Prescription
Amounts in 000’s, except percentages
Approx. Avg. Oral Rx Price / Rx $ 63.50
Approx. Avg. Specialty Rx Price / Rx $ 180.00
Approx. Avg. Sales / Sq. Ft. $1,660/Ft
Comp organic revenue Growth 9% - 10%
Real Estate Profile Average and Advantage
Average Size of Site
Apothecary 2,423 sf.
Medical Office Building 1,161 sf.
Consolidated 1,802 sf.
Base Lease Occupancy
Apothecary $17.68 per sf.
M.O.B. $22.71 per sf.
Total Gross Occupancy Costs
Apothecary 2.64% of Revenue
M.O.B. 2.18% of Revenue
Approximate Cost to Open New Pharmacy = $350k/Pharmacy
CapEx = $100k
Inventory = $150k
Working Capital = $100k
Cost to Acquire our Type of Pharmacy = $500k - $700k
More than 1,000 Sites for Possible Acquisition
More than 4,000 Sites for Possible New Pharmacy Expansion
2006 Sales Objectives
Top-line organic growth
Up-sell pharmaceuticals to physicians in current pharmacy
locations and through Medical Supply Business
Super-charge sales referrals from physicians in specialty Rx
and through institutional sectors for Rx sales
Increasing comparative same location sales
Pharmacy-focused growth
Point-of-sale: Near leading medical institutions and hospitals
Worksite Pharmacies: Large employer-sponsored locations
Improve financial performance, operational integration and
growth through:
2006 Monthly Sales Trend
$16.2M
$17.4M
$22.5M
$18.4M
$19.0M
2Q06 comparative same store sales increased 9.5% YOY
January
(4 weeks)
February
(4 weeks)
April
(4 weeks)
May
(4 weeks)
March
(5 weeks)
June
(5 weeks)
$23.3M
Core Pharmacy Revenue
Technology Driven: E-prescribing
Familymeds is a founding
member of Surescripts, the
e-prescribing network.
Familymeds is currently a
100% fully connected chain.
E-prescribing simplifies
prescription writing and the refill
authorization process.
E-prescribing increases medical
disbursement accuracy.
Repeat Pharmacy Revenue
Technology Driven: Pharmacy Services
Voice Outreach “Silverlink” Telephony
Auto Refill
Reliable Refill
Incremental Pharmacy Revenue
Technology Driven: Kiosks
Incremental Non-Rx Revenue
Technology Driven: E-commerce
Technology Driven Patient Services
Improves Revenue; Reduces Overall Costs
Kiosk
E-prescribing
E-commerce
Pharmacy Services
Patient
Focus on Profitability
Increase Gross Margin to 20% Target
Bundle products: pharmaceuticals bundled with home care products
Yield higher gross margins of 30%+
Familymeds Formulary emphasizes generic drugs utilization
Yield higher gross margins of approximately 50%
Dramatic market shift towards generics 2006 to 2007
Chronic/acute patients: compounded and infusion medications
Yield higher gross margins of 50%+
Expense Control
Improve SG&A model while maintaining optimal sales structure
Low cost pharmacy model
Average pharmacy size is 1800 sq. ft. with low occupancy expenses
Location/proximity strategy
Close proximity to physicians drives down operating/marketing expenses
Recent Scorecard
2005
Divested “non core” lower margin legacy wholesale distribution business
Integrated DrugMax distribution facility with pharmacy operations
Completed refinancing and recapitalization to improve financial position
2006
Strong organic sales growth momentum and improving gross margin
trend
1H06 net revenues up 12% sequentially over 2H05
19.5% gross margin for 1H06
Operating expense controls to result in 10% expense reduction in 2H06
Substantially improved balance sheet and capital structure
Reduced total debt by $13 million through early retirement of $23 million in
outstanding debt
2 pharmacies opened + 1 planned; strong locations expansion pipeline
Trailing 12 Months to June 30, 2006
Second Quarter 2006 Highlights
Organic patient growth of 5,000 patients Q1 to Q2 2006
Over 410,000 patients now served
Revenue of $60.7, a sequential increase of 8.4%
20% of revenue from Medicare D, up from 15% in 1Q06
$4.2 million of revenue from direct-to-provider medical supply
operations, up from $0.8 million in 1Q06
Gross margin of 19.6%, compared to 19.5% in 1Q06
EPS of $0.12 inclusive of $13.1 million gain on debt
extinguishment
YOY operating loss reduction to $(4.1) million from $(3.5)
million
Nasdaq: FMRX
One-for-ten reverse stock split August 16*
Shares outstanding 6.6 mm
Share price (August 17, 2006) $ 6.34
Market capitalization $ 42.1 mm
Fiscal Year End: Saturday closest to December 31
4-4-5 week retail quarterly calendar
* Ticker change to FMRXD through September 13, 2006
Depth of Experience
Years of
Previous Experience / Affiliations
Name
Title
Exp.
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
Gregg Montgomery
Pharmacist
SVP, Procurement,
25
Familymeds, Rite-Aid, Farmco Ventures,
NeighborCare
Familymeds, Inc.
Valley Medical Supply
Jim Searson, CPA
Chief Financial Officer
20
Daticon, TranSwitch, Katerra, PWC
Allison Kiene
Pharmacist - Lawyer
VP, General Counsel and Secretary
17
Familymeds, The Stop & Shop Super-
market Company, Stop & Shop
Pharmacy
Leveraging Our Unique Platform Strength
Our Expertise
Specialty & complex treatments
Higher transaction value
Infectious disease
Diabetes
Pain & Oncology
Respiratory
Psychological & mental health
Our Relationships
44 pharmacies at point of care
Inside medical office
buildings/campuses
4,000 doctors on medical
campuses within or near our sites
Medical Supply to MDs
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
83 pharmacies in key medical
locations
>3.6M prescriptions
Estimated market opportunity:
$1.3B in pharmacy & medical
supply sales in our existing
locations
Key Investment Takeaways
Unique locations + specialty products model
Platform strength:
Pharmacies + Patients + Relationships + Expertise
Focused specialty pharmacy services for chronic/acute
patients and their physician providers
Favorable competitive metrics and market dynamics
Substantial organic revenue growth in 2006
Reduced operating cost structure
Improving financial condition and capital structure
Outlook: Modestly EBITDA positive in 3Q06; increasing
positive cash flow in 4Q06
Familymeds Group, Inc.
NASDAQ: FMRX
312 Farmington Avenue, Farmington CT 06032
ph: (860) 676-1222; fax: (860) 679-9337
www.familymedsgroup.com