President reports on DrugMax's balance
sheet
William LaGamba, DrugMax
WILLIAM L. LAGAMBA is President and COO of DrugMax, Inc.
TWST: Could we begin with a brief overview of the
history and evolution of DrugMax, Inc.
(Nasdaq:DMAX)?
Mr. LaGamba: Back in 1997 we started the company as a
niche wholesaler called Becan Distributors, and that was
kind of the forbearer to DrugMax. We actually had an analyst
come in and review the business and he determined that we
could really be more successful going out via the Web and
contacting customers, it gave us a greater breadth of
customer base. So in November 1999 we had an IPO and
went public under DrugMax.com, Inc., with a small offering.
The concept was to use a “clicks-and-mortar” business
model to combine our traditional infrastructure and the
Internet to distribute products — resulting in pharmaceutical
products at very great prices. And it’s evolved into what we
are today, a full-line pharmaceutical wholesaler. The Internet
and our e-commerce operations have always been
important components of our business. DrugMax also sells
direct to customers via an inside sales force, outside sales
force, blastfax, and e-mail updates that we call eSpecials.
The Internet gave us the opportunity to reach a large
customer base very fast. DrugMax generated $70 million
last quarter in sales. We have signed up over 9,400
DrugMax members and there are only 25,000 independent
pharmacies in our niche; nearly 38 % of them are members
of our site. In about a year-and-a-half’s time, we were able to capture that many
potential customers. For DrugMax, members give us the opportunity to sell to them.
Members give us their financial history, contact information about who makes the
purchasing decisions, their pharmacy license, and all other pertinent information so that
we can do the appropriate background and credit checks.
TWST: What kind of condition is the balance sheet in? Could it support that kind
of load if need be?
Mr. LaGamba: We turned a profit last quarter and we do not anticipate any negative
changes as we move forward. The type of business that we are, and the best way to
explain it is, once we get to a certain critical mass, then a lot of the efforts fall straight to
the bottom line. We’re now past that critical mass stage, so as we continue to grow it
costs very little for the growth from a true expense form, but the profit then drops to the
bottom line. A real good example is we bought a wholesaler that was a full-line
wholesaler called Valley Drug Company, and they carried 20,000 stock keeping units.
We have almost doubled their capacity and we have added two additional employees to
their staff. So we have doubled the revenues by adding two additional employees.
Needless to say, a lot of that effort then falls to the bottom line. So we’re very confident
about the future.
TWST: As we look ahead to the next year or so, what is a realistic projection as
far as a rate of gain in sales and earnings?
Mr. LaGamba: Our goal, and that is an internal one, is to be at a half-a-billion dollars
within the next two years. And that is what we are striving for. Obviously, to be profitable
with that kind of revenue and to have the appropriate profits match up against that
revenue.
TWST: Are there any specific benchmarks or milestones that you would want us
to keep an eye out for as we judge the progress toward that goal?
Mr. LaGamba: Our goal is to be at a run rate of $300 million by the end of the year. |
