Rubicon readies for the Golden Age of Pharmacy
We can do everything we’re supposed to - exercise, eat healthy, stay active. But unless we discover the fountain of youth, the truth remains: The older we get, the more we start wearing out.

Baby boomers are beginning to feel that first-hand. In 2005, Canadians in the 40-59 age bracket were averaging 15 prescriptions per capita a year. That number is expected to more than double as boomers approach their retirement years. Allan Chilton calls it the “Golden Age of Pharmacy” – and he’s already getting drugstores prepared.  

Offering more value-added services and building stronger relationships between pharmacists and their patients will be the keys to success. “Consumers are looking for answers, and we need to be a source for those answers,” he asserts.

As the CEO of Rubicon Pharmacies, a group of Pharmasave owners who purchase and franchise drugstores operating under the Pharmasave banner, Allan oversees a major conglomeration. His qualifications are exemplary. Allan has been a pharmacist for more than 37 years, and has co-owned a Pharmasave store in Swift Current, Saskatchewan since 1972. He has also served on Pharmasave’s regional and national boards.

Troubling times
During his tenure on the boards, Allan noticed a disturbing trend: Major consolidators such as Rexall and Shoppers Drugmart were buying independent Pharmasave stores and branding them under their own name. While the Pharmasave board wanted to grow the brand, and had the right to match any bid within 45 days, raising the capital they needed was becoming a challenge.

When a Pharmasave store in Saskatchewan came up for sale in 2004, Allan and a small team that included a handful of Pharmasave owners considered buying it on their own. They ultimately had to decline the opportunity – a major turning point for the group.

“We knew if we couldn’t purchase a store as promising as this one, something was fundamentally wrong,” confides Allan.

Gerald Braaten, a partner with MNP’s Swift Current office, was advising Allan on his Pharmasave store at the time. When Allan mentioned his franchise frustration, Gerald offered to help by introducing Allan and his board to Tamarack Capital Advisors, MNP’s corporate finance subsidiary. Gerald’s foresight helped change the course of Pharmasave’s future.

Tamarack was invited to develop a business plan aimed at growing the Pharmasave brand strategically. The plan recommended a model of shared ownership in Pharmasave stores.

Rubicon Pharmacies, a new acquisition entity, would purchase stores coming up for sale, while the vendors would leave money behind as an investment in Rubicon. Through this arrangement, Rubicon could use the equity to acquire more stores in the future.

“Pharmasave wanted to create a culture that would be attractive to young pharmacists wanting to buy into the program. They also wanted to offer an exit strategy that would build on an established brand, while maintaining a great investment with above-average returns,” explains Gerald.

The Pharmasave board endorsed the plan wholeheartedly, and the limited partnership of Rubicon Pharmacies was formed. The Rubicon team included Allan as CEO, chief integration office Blair Pateman, chief operating officer Robert Gare, along with a number of Saskatchewan-based drugstore owners.

The plan proved a success, enabling Rubicon to purchase 13 stores within a couple of years. The pace of Rubicon’s growth was so great that the group soon had more offers than they had the capital to match.

Recognizing Rubicon’s need to grow more quickly, the Tamarack team revisited the business plan and developed a forecasting model aimed at establishing an effective approach for Rubicon’s financing plan.

“Preparing the forecast analysis helped us gain a clear picture of the costs Rubicon would incur to reach its goals, and it gave potential investors or lenders a better understanding why it made sense to get involved with Rubicon,” explains Charles Addison, a senior vice president and director with Tamarack Capital Advisors.

Based on the model, Tamarack advised Rubicon to pursue a combination of equity and debt financing. The team connected Rubicon with all the right groups, from banks to private equity entities to Tamarack’s own Private Investor Network.

“Tamarack got us into doors we never would have thought of, and we’re a much more astute organization because of it,” says Allan.  

Tamarack also advised Allan’s team on a critical skill in the world of corporate finance: How to win over an investor audience. While Allan jokes he’s become Rubicon’s “chief talking officer,” he’s clearly taken to the role. Rubicon has raised more than $27 million in equity and debt financing under Tamarack’s guidance.

The financing has given Rubicon the capital they need to keep stores under the Pharmasave brand – and promote a smooth transition from one owner to the next. Recently Rubicon expanded its board of directors from four to seven, reflecting its growing operations.

As all of the directors are investors in the company, and many are pharmacists themselves, they have a direct interest in each store’s success. Allan says Rubicon has already had three younger owners join the program.

“They really appreciate having the support of a team and being able to share some of the risks involved. Outgoing owners are also happy because the store stays under the Pharmasave name.”

Charles praises Rubicon’s senior management team for their outstanding contribution to the overall strategy. “They have a wealth of knowledge about their business, which has made our job a lot easier.”

The road ahead
As of January 2008, Rubicon was operating 23 stores, and plans to purchase more. Allan says the experience has been tremendously rewarding.

“We’ve achieved exactly what we wanted, and we’re aiming to have 60 stores within the next couple of years.”

While Rubicon has come a long way in a short time, Allan hasn’t lost sight of what matters most in business and in life: Relationships. Whether it’s a potential investor or a patient looking to fill a prescription, Allan says it’s all about taking the time to get to know someone personally.

The philosophy is one Allan still practices today. When he’s not busy with Rubicon business, Allan can still be found behind the pharmacy counter of the Pharmasave store in Swift Current.

“In the end, it’s all about building relationships. A pharmacist needs to know what’s on his patients’ minds, just like a business advisor.”

To find out more, contact your local MNP advisor.

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