May 2019
Vol 6 | Issue 222

Q&A with Milton Cohen of Safe Rx

President & Chief Executive Officer

Principle Series:

Safe Rx’s initial patented and award-winning product, a locking prescription vial (LPV), is sold to pharmacy retailers, health systems and treatment centers through all major pharmacy wholesalers in the US and Canada, as both a resale SKU and in dispensing kits. Locking prescription vials (LPVs) cut off the number one source for teen drug abuse in the US, and are expected to generate a significant impact on the opioid epidemic; over a ten – year – period, locking prescription vials (LPVs) are expected to prevent approximately 7 million teens from initiating drug abuse, while returning over $92 billion to the national economy, generating an over 2,000% ROI to the system. The Company has made progress towards major tipping points for universal adoption of locking prescription vial (LPV) pharmacy dispensing in both its commercial and government affairs strategies, with reimbursement discussions underway in Canada and active legislation mandating locking prescription vial (LPV) dispensing for controlled substances in several US states. The Company expects to capture a large share of the locking prescription vial (LPV) market, with ten issued patents and an 8x manufacturing cost advantage. Safe Rx has raised over $3.5 million to-date in three oversubscribed financing rounds, and is currently seeking investors for a small top-off financing and a $5 million equity round planned for late 2019.

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How is Safe Rx impacting the opioid epidemic?

Our locking prescription vials, or "LPVs" for short, cut off the number one source for teen drug abuse in the country.

Pilfering, sneaking a few pills at a time in secret, from family medicine cabinets is both the number one source for teen drug abuse in the United States, and an index source of the opioid epidemic. Our locking prescription vials (LPVs) have been proven to cut off pilfering as a source, and given their impact, are supported by leading experts from Johns Hopkins, Yale, Vanderbilt University Medicine & other institutions as a key solution to the epidemic.

By eliminating pilfering as a source of initiation and abuse, locking prescription vial (LPV) dispensing of opioids is estimated to return over $92 billion to the healthcare system and economy, while preventing approximately 7 million teens from initiating abuse over a ten-year-period.

As a result of the reduced initiation of abuse on the front end, and the accompanying savings in treatment costs on the back end, locking prescription vial (LPV) dispensing generates a 740% return on investment in the first year of implementation to the healthcare system and an over 2,000% return on investment overall.

How big is the market and what are your competitive advantages?

The market for locking prescription vials (LPVs) is over a billion units annually in the U.S. alone, representing an over $1.25 billion domestic revenue opportunity for us as a Company. While we compete in the safe storage product category with our retail SKU product line, our LPVs are the only products on the market that were designed specifically for the point of dispensing. None of the other products in the safe storage category could compete with us on the two primary competitive factors in the market - cost, and impact to pharmacy workflow and fill-time. We have an over 8x manufacturing cost advantage versus our next closest competitor from the safe storage category, and 10 issued patents on the lowest cost locking cap & closure mechanism. Separately, our impact on direct fill time is all of approximately 8 seconds for a trained pharmacist or tech on average.

How much capital are you raising? Who is your ideal investor?

This is a great question and part of the reason we were selected for Arthur’s program and Family Office Insights. So far, we’ve raised over $3.5 million in three successive oversubscribed rounds since 2016, with participation from pharmacy sector executives, colleagues of mine from the Young Presidents Organization and selected HNW and smaller family office investors. Right now, we’re just raising a small top-off to our last round. We originally targeted $500,000 for the round, but have pledged that we’d do as much as $1 - $1.25 million to accommodate some larger investors and existing investors that want to invest more. But we’re also seeking to develop relationships with mission-aligned family offices for an institutional equity round later this year or in first quarter 2020. As a mission-focused company, we’re taking the time to find the partner with the best fit, as opposed to focusing on valuation and terms, and have a strong rationale for partnering with families as opposed to VCs. Unlike VC firms, family offices match our long-term corporate strategy. Once we’ve grown our locking prescription vial (LPV) business to scale, we expect to license our intellectual property into other product categories where for public health reasons, packaging requires more security than the current child resistant packaging standards, with examples in household goods, drugs & supplements, cannabis, liquid nicotine and others. As a result, over time we expect the business to assume a royalty cash flow profile, and if we can preserve our LLC pass-through structure, we can distribute proceeds without double taxation. Family offices, unlike VCs, typically have passive losses elsewhere in the portfolio that can be used to offset those distributions.

Milton Cohen of Safe Rx

Mr. Cohen is a seasoned operator and prior private equity executive with experience in specialty manufacturing and business & healthcare services. Prior to joining Safe Rx as its CEO in 2016, Mr. Cohen executed a leveraged buildup as Chairman and CEO of Expert NJS, which he grew from a small regional platform through two add-on acquisitions into a national competitor. In his prior two roles as a lower middle market principal investor, Mr. Cohen led direct equity investing for a mid-Atlantic merchant bank and a multifamily office, after completing a successful turnaround in the specialty chemicals sector. Mr. Cohen started his career as an investment banker at JP Morgan Chase, and holds a BA in Economics from Vassar College and an MBA from the Goizueta Business School at Emory University, which he attended under full scholarship as a Robert Woodruff Fellow. Mr. Cohen was elected to the Young Presidents Organization in 2011.