About True Nature Holding, Inc.

True Nature is a development stage company focused on consolidation of the compound pharmacy industry. We believe a national organization can  leverage a broader product line and can benefit from operational efficiencies.

True Nature is a development stage company focused on consolidation of the compound pharmacy industry through opportunistic acquisitions, starting in the Southeast and then across the US. We expect to be able to rapidly scale this business with a combination of acquisitions, organic growth and creation of economies of scale. The concept is that a national organization can more effectively leverage a broader product line and operational efficiencies.

We expect economies of scale from the consolidation of:

  1. Materials procurement;
  2. Compounding activities combined into larger, more efficient and higher quality facilities;
  3. Expanded marketing nationwide with an emphasis on densely populated urban areas where an expanded product line may increase the profitability of each individual branch, when compared to pre-acquisition sales, and;
  4. Consolidated administration and personnel functions.

We intend to target compounders who have a) strong regulatory compliance history, b) a record of profitable operations, c) cash (vs insurance reimbursement) as the source for at least 75% of their revenue, d) operations that represent a geographical “hub” or “spoke” when considered in relation to other compounders, and e) where the combination of operations facilitates cross selling of a growing line of products.

Its principal offices are located at 1355 Peachtree Street, Suite 1150, Atlanta, Georgia 30309, and the company’s telephone number is 404-254-6980.

Description of Pharmaceutical Compounding:
Pharmaceutical compounding (done in compounding pharmacies) is the creation of a particular pharmaceutical product to fit the unique need of a patient. To do this, compounding pharmacists combine or process appropriate ingredients using various tools. This may be done for medically necessary reasons, such as to change the form of the medication from a solid pill to a liquid, to avoid a non-essential ingredient that the patient is allergic to, or to obtain the exact dose(s) needed or deemed best of particular active pharmaceutical ingredient(s). It may also be done for more optional reasons, such as adding flavors to a medication or otherwise altering taste or texture. Compounding is most routine in the case of intravenous/parenteral medication, typically by hospital pharmacists, but is also offered by privately owned compounding pharmacies and certain retail pharmacies for various forms of medication. Whether routine or rare, intravenous or oral, etc., when a given drug product is made or modified to have characteristics that are specifically prescribed for an individual patient, it is known as “traditional” compounding.

One of our key strategies is the use of compounding pharmacies to formulate our proprietary compounded drug formulations and distribute them to physicians and patients. Compounding pharmacies work with physicians to develop customized medications for individually identified patients, and the compounding pharmacy prepares these customized formulations upon receipt of a physician prescription for an individual patient. Examples of compounded formulations include medications with alternative dosage strengths or unique dosage forms, such as topical creams or gels, suspensions or solutions with more tolerable drug delivery vehicles. A physician may also work together with a pharmacist to repurpose or reformulate via the compounding process drugs that have been approved by the U.S. Food & Drug Association (FDA) to meet a patient’s specific medical needs.

The compounding pharmacy business has the potential to provide high margins to the operator, and allow the operator to specialize is certain solutions for specific maladies, so it can target specific markets efficiently. The veterinary profession is particularly interesting as it faces less regulation than human pharmacy, and there is a growing number of pet owners worldwide.

We intend to focus on the acquisition of compounders who have a) a large client base in the veterinary area, b) a strong set of proprietary compounding solutions, versus non-proprietary “over-the-counter” (OTC) medicine sales, and c) where the combination of incremental operations will allow cross selling of a growing line of proprietary compounds into the respective markets of each new market participant acquired.

We expect economies of scale from the consolidation of:

  1. Materials procurement;
  2. Compounding activities combined into larger, more efficient and higher quality facilities;
  3. Expanded marketing nationwide with an emphasis on densely populated urban areas where an expanded product line may increase the profitability of each individual branch, when compared to pre-acquisition sales, and;
  4. Consolidated administration and personnel functions.

We expect to be able to rapidly scale this business with a combination of acquisitions and organic growth. The concept is that a national organization can more effectively leverage broad based marketing of their products, and that the catalog of specialized compounds will grow as acquisitions are completed. Further, we expect to create locations that have better capabilities for certain types of compounding and preparation processes, such as sterile liquid, encapsulated or complex formulation packaging. Those locations are expected to be developed as the acquisitions are increased regionally, to keep delivery and labor costs minimum. An ideal acquisition target will have 50%, or better, of their historical revenue aimed at the veterinary business area, and 50%, or better of their historical revenue will be attributable to their compounding library.

Development and Commercialization Pathway

Our model for the selection and development of proprietary formulations will focus on assessing new development opportunities using a four-step proprietary process, which includes the identification, evaluation, validation, and ultimately commercialization of selected opportunities. Our relationships with inventive physicians and pharmacists provide us with access to numerous formulation candidates and technologies to evaluate and validate. These compounded drug formulations are initially made for individual patients and are developed based on the physician’s and pharmacist’s experience formulating a new therapy to address an unmet need. As a result of our review process, we will focus our commercialization efforts on a select group of promising formulations that we believe may be patentable and that could have broad appeal to patients and physicians.

Identify
Our innovation model, which will serve as our research and development pipeline, will rely on our relationships and partnerships with inventors to identify and secure new development assets. We intend to be strategically attentive to the ideas generated by pharmacists dealing directly with doctors and their patients to address specific and often unmet patient needs in our identification of formulations to develop and commercialize. We believe that going forward, our growing group of collaborative relationships with physicians and pharmacists will bring additional clinically and commercially relevant formulation opportunities to our Company for potential development.

Evaluate
After we have identified potential formulations and technology for development, we subject them to our proprietary evaluation process. We may invest heavily in intellectual property review and analysis at this stage, which includes analyzing each formulation with a focus on understanding the surrounding intellectual property landscape. We will also evaluate any existing supportive clinical data, seeking to identify one or more commercialization pathways to efficiently and profitably make the therapy available to patients and, for superior candidates, ultimately seek to acquire development rights through ownership or licensing of promising formulations.

Validate
Following the identification and evaluation process and our acquisition of development rights, we seek to validate and support potential drug formulations through our review of existing clinical data and documented patient experience and through our support of investigator-initiated studies, which are typically funded by us and conducted by leading physician groups. Any clinical data we obtain may be used to support clinical confidence for physicians prescribing the formulation in compounded form or, if we decide to pursue FDA approval for a particular candidate, to support a development program in connection with the pursuit of such approval. The costs associated with our validation approach may be significantly lower than a traditional FDA approval process because, to the extent we consider and select a commercialization pathway as a compounded formulation, our approach would not require FDA approval for the marketing and sale of the formulation.

Commercialize
Following successful results in the first three steps of our assessment, we will focus on commercialization. As part of the development of potential formulations, we evaluate and select an appropriate commercialization pathway to make these therapies available to patients. We will consider multiple commercialization pathways, including dispensing formulations through compounding pharmacies and other prescription dispensing facilities pursuant to a prescription for an individually identified patient and pursuing FDA approval to market and sell a drug formulation or technology. We are pursuing, and expect to continue to pursue, a compounding commercialization strategy for all proprietary formulations and the other assets that we may acquire, and that we may develop in the future, and we do not presently expect to pursue FDA approval for any of these formulations or other assets. For any non-drug assets we consider, such as drug-delivery vehicles, we may choose to seek partnerships with wholesalers in order to make these technologies available to pharmacies. Depending on the selected commercialization pathway, we would build, or contract with a third party to build, appropriately targeted commercialization teams in order to make the therapies available to physicians and patients.

Summary
According to an industry report published by IBIS World, dated January 2015 there are over 5,500 compounding pharmaceutical groups in the market today, whose total revenue is over $5.6 billion annually, with profits exceeding $1.5 billion. Many of them are small, undercapitalized and without an exit strategy as their principals seek to retire, or face challenges with changes in the regulatory requirements. We do not currently have any acquisitions under contract, though we have identified a number of prospects and expect to be able to close one, or more, acquisitions within six (6) months. We intend to use debt to finance our initial transactions, and we have identified a number of institutional investors who have expressed interest in our approach. We expect to offer units in the Company in a Regulation D offering, to raise the funds necessary to begin the business plan. After the initial acquisition, we intend to merge with an existing, publicly traded company which is listed on the Over the Counter (OTC) Marketplace, and as a result, become a reporting company through an equity exchange transaction. Subsequently, we expect to register the shares of the Company using a Form S-1. If we qualify, we would like to list the shares of the Company on the NASDAQ stock exchange, and create a market for the shares so that we can complete additional funding, pay off the debt we use to complete the initial acquisitions, and invest further in the businesses to achieve a greater size and scale.

Industry Overview

The following information was taken from this report on the Compounding Industry: IBISWorld Industry Report OD5706 Compounding Pharmacies in the US, dated January 2015 by Sarah Turk. A copy of this report is included as an exhibit to this document, and we encourage all prospective investors to read it closely.
Industry Definition: This industry includes stores that make and sell compounded medications that are not commercially available. Compounded medications are prescriptions that are prescribed and written by physicians and prepared by pharmacists for individual patients.

Executive Summary: Despite the Compounding Pharmacies industry experiencing negative media attention from contaminated compounded prescriptions, it has still proved to be a business with a loyal customer base. Compounded medications can assist patients’ compliance with their medication due to offering medication tastes, routes of administration, and medication dosages that were not otherwise commercially available. Moreover, the burgeoning elderly population has stimulated demand for prescriptions, including compounded medications that were customized to address a patient’s needs. From October to September 2012, the Food and Drug Administration (FDA) inspected approximately 150 compounding pharmacies, with 90.0% of facilities inspected having problems. As a result, some industry operators have exited the industry altogether or have contended with costs related to complying with FDA standards. The industry has benefited from pharmaceutical manufacturers having drug shortages, enabling the industry to access raw materials and supply medication orders to patients and hospitals. As group purchasing organizations (GPOs), which secure supplies for healthcare providers, control about 72.0% of purchases made by hospitals, according to the Healthcare Supply Chain Association, drug shortages have occurred. Due to GPOs using their market share as leverage to secure low-cost contracts with pharmaceutical manufacturers, some drug makers did not have the incentive to manufacture and stock essential drugs.

As a result, industry revenue is expected to grow at an annualized rate of 2.4% to $5.6 billion during the five years to 2015, including 7.3% growth in 2015. This growth has been driven by the number of active drug shortages increasing from 328 in 2010 to 361 in 2013, according to the latest data available from the United States Government Accountability Office. Profit is anticipated to rise from 25.7% of industry revenue in 2010 to 26.5% in 2015, due to the prescription shortage and lack of substitutes for industry products enabling the industry to garner higher prices. During the five years to 2020, industry revenue is forecast to grow at an annualized rate of 2.6% to $6.4 billion. As the number of physician visits is expected to rise, more individuals will likely be prescribed medications, which may stimulate demand for compounded pharmaceuticals. Overall, the size of this growth will be contingent on how many patients require medications with alternative dosages and strengths.

Key External Drivers: Number of pets (cats and dogs): In addition to developing drug compounds for humans, compounding pharmacies also create specialized drugs compounded for animals. As the number of pets increases, demand for compounding pharmacies rises, as many pet owners will purchase compounded medications to increase animal compliance with alternative routes of administration.
Regulation: The Food and Drug Administration (FDA) is encouraging large-scale operators to register with the FDA and is increasing federal regulations. As healthcare providers are increasingly purchasing compounded medications from FDA-registered and regulated facilities, many operators will choose to comply with regulations to bolster revenue volumes. Regulation is expected to increase in 2015, which represents a potential threat to the industry.

Per capita disposable income determines consumers’ ability to purchase this industry’s products: While prescription products can be essential for health and therefore less susceptible to changes in consumer discretionary spending, some of the industry’s offerings, such as medicine flavorings, are subject to changes in disposable income. An increase in disposable income will boost demand for compounding pharmacies.

Per capita disposable income is expected to increase in 2015: Number of adults aged 65 and older as the population ages, demand for various pharmaceutical products increases. Adults aged 65 and older are more likely to have chronic illnesses than younger demographics, which stimulates demand for prescriptions. Additionally, elderly individuals may require compounded prescriptions to have personalized dosage forms, flavors, or medications that comply with their allergies. The number of adults aged 65, and over, is expected to increase in 2015, representing a potential growth in demand for the industry.

Current Performance: During the past five years, the Compounding Pharmacies industry has exhibited growth, thanks to an increase in the number of dispensed prescriptions. As the burgeoning elderly population has dealt with a number of chronic illnesses that require medication, demand for compounded pharmaceuticals has risen. For example, patients have used compounded prescriptions to access medications in alternative dosages, routes of administration, ingredients (due to patient allergies) and flavorings than drugs that were commercially available. Moreover, the shortage or termination of prescriptions from drug manufacturers’ product portfolio has stimulated demand for compounded prescriptions. In the five years to 2015, industry revenue is anticipated to increase at an annualized rate of 2.4% to $5.6 billion, including 7.3% growth in 2015, due to a rise in the number of prescription shortages. For example, according to data from the United States Government Accountability Office, the number of active drug shortages has increased from 328 in 2010 to 361 in 2013 (latest data available), which has benefited some compounding pharmacies because they were able to supply drugs to hospitals and patients that may have otherwise come from another source. Profit is expected to increase from 25.7% of industry revenue in 2010 to 26.5% in 2015, due to the prescription shortage enabling operators to mark up industry product prices.

Pharmaceutical awareness: During the past five years, many Americans have purchased pharmaceuticals to treat their health ailments. According to the Pharmaceutical Research and Manufacturers of America (PhRMA), about 3.6 billion prescriptions are dispensed in the United States each year. The US Pharmacopeia Convention estimates that 30.0 million to 40.0 million of those prescriptions are compounded medications.

Over the past five years, numerous trends have increased patient utilization rates of compounded medications. For example, rising healthcare awareness and growth in the number of overall physician visits have bolstered demand for prescriptions. Moreover, as more patients addressed their allergies to certain drugs and their medication preferences, such as medication that have a different dosage strength, route of administration or flavoring than drugs that were commercially available, demand for compounded medications has increased. A relative lack of regulation has had mixed effects on the industry. For instance, pharmaceutical manufacturers contend with high costs from generating brand awareness and complying with FDA regulations, which incites manufacturers to limit their product portfolio.

While many compounding pharmacies opted for regulation to achieve credibility for their compounding process, such as accreditation with the Pharmacy Compounding Accreditation Board to ensure quality and sterility in their compounding facilities, only 163 pharmacies in the United States were accredited in 2013 (latest data available). As a result, costs for complying with regulation are relatively low when compared with Current Performance. During the past five years, the Compounding Pharmacies industry has exhibited growth, thanks to an increase in the number of dispensed prescriptions.

As the burgeoning elderly population has dealt with a number of chronic illnesses that require medication, demand for compounded pharmaceuticals has risen. For example, patients have used compounded prescriptions to access medications in alternative dosages, routes of administration, ingredients (due to patient allergies) and flavorings than drugs that were commercially available. Moreover, the shortage or termination of prescriptions from drug manufacturers’ product portfolio has stimulated demand for compounded prescriptions. In the five years to 2015, industry revenue is anticipated to increase at an annualized rate of 2.4% to $5.6 billion, including 7.3% growth in 2015, due to a rise in the number of prescription shortages. For example, according to data from the United States Government Accountability Office, the number of active drug shortages has increased from 328 in 2010 to 361 in 2013 (latest data available), which has benefited some compounding pharmacies because they were able to supply drugs to hospitals and patients that may have otherwise come from another source. Profit is expected to increase from 25.7% of industry revenue in 2010 to 26.5% in 2015, due to the prescription shortage enabling operators to mark up industry product prices.

Rising healthcare awareness and spending on pharmaceuticals benefited industry: Pharmaceutical awareness continued pharmaceutical manufacturers. This has enabled compounding pharmacies to address drug shortages with few financial barriers. As the number of prescription drug shortages grew, compounding pharmacies were able to help alleviate these shortages by having access to raw materials and downstream markets, such as patients and hospitals. For example, according to the Congressional Research Service’s (CRS) Compounded Drugs report, 62.0% of hospitals outsourced compounded drugs due to drug shortages, to ensure drug stability (69.0%) and to extend drug shelf life (62.0%). However, drug shortages have been particularly prominent among sterile injectable generic drugs, which are difficult to compound safely. Compounding pharmacies have recalled some products, due to not meeting the FDA’s standards.

This trend has further exacerbated the drug shortage. For example, according to data from the CRS, 48.1% of hospitals reported that a shortage of compounded sterile products would have a significant impact on patient care, whereas 16.6% and 11.5% of hospitals reported that it would result in either an inconvenience or a disruption to patient care, respectively.

Growing opportunity: Nevertheless, the burgeoning elderly population has provided a driver for the industry. The number of adults aged 65 and older is expected to grow at an annualized rate of 3.4% during the five years to 2020. More elderly patients have visited their physician, which has stimulated demand for prescriptions. Because the burgeoning elderly population has required more prescriptions to address their numerous chronic illnesses, demand for compounded pharmaceuticals has grown. For example, as the number of stroke patients rose, so did the prevalence of dysphagia, or a patient’s inability to swallow. As a result of this trend, demand for compounded medications with alternative routes of administration increased. Additionally, the industry also provides compounded medications for pets. The number of pet owners is expected to grow at an annualized rate of 2.3% during the five years to 2020. Because of this growth, more pet owners will be required to obtain compounded drugs to increase their pet’s compliance with medications. For example, pet owners may demand compounded drugs to cater to their pets’ individualized needs, such as allergies and complications with the drug’s route of administration.

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True Nature Holding, Inc.
1355 Peachtree Street
Suite 1150
Atlanta, Georgia 30309
Phone: 404.913.1802


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