EZC Pak – Immune Support Supplement
DEAL
EPISODE SUMMARY
đź•“ Air Date: November 3, 2019
Asking For:
$125,000 for 5%
Investor:
Kevin O'Leary
Deal:
$125,000 for 5% + $1 royalty per unit until $450,000 is repaid
PRODUCT SUMMARY
EZC Pak is a physician-formulated immune-support pack containing echinacea, zinc, and vitamin C to strengthen the immune system and combat the overuse of antibiotics.
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Background Story
Dr. Sarath Malepati, a general surgeon from Los Angeles, founded EZC Pak to address the crisis of antibiotic overuse in America. His background involved dealing with complex infections and witnessing the adverse effects of antibiotic resistance, leading to severe cases requiring surgeries and amputations.
Driven by the consumer-driven healthcare system and patient requests for unnecessary antibiotics, he created EZC Pak as a clinically formulated solution to strengthen the immune system. Concerned about the overreliance on antibiotics, Dr. Malepati aimed to provide a natural alternative to combat viruses and promote overall health.
The Product
EZC Pak is a physician-formulated immune-support pack containing echinacea, zinc, and vitamin C (E-Z-C). The product is designed to address the issue of antibiotic overuse by providing a natural solution to strengthen the immune system. The combination of these ingredients is clinically formulated to combat viruses, offering a potential alternative to antibiotics.
The primary ingredients—echinacea, zinc, and vitamin C—are known for their immune-boosting properties. The product comes in a five-day pack, retailing for $15.99 to $19.99. The manufacturing cost allows for an impressive 80% margin. EZC Pak is primarily distributed through chain retail, expanding from 600 to over 9,000 doors in the previous year.
The product has gained traction in the market, with sales reaching $1.2 million in the last 12 months. The gross profit stands at $850,000, while the net profit is -$150,000. The negative net profit is attributed to significant investments in generating sales, including a substantial portion allocated to direct-to-consumer advertising (25%).
How It Went
The company’s position before Shark Tank
EZC Pak has demonstrated commendable growth, expanding from 600 to over 9,000 retail doors in the past year. The product generated $1.2 million in sales in the last 12 months, with a gross profit of $850,000. Despite the negative net profit of -$150,000, the founders have invested significantly in the business, allocating funds to direct-to-consumer advertising to drive sales.
The product’s expansion into chain retail demonstrates its market acceptance, and the impressive 80% margin contributes to the company’s financial health. Dr. Malepati, a full-time entrepreneur for the past three years, has shifted from practicing medicine due to the increasing demand for doctors.
EZC Pak’s focus on natural immune support aligns with the growing consumer interest in holistic health solutions. The founders aim to tackle the critical issue of antibiotic resistance and reduce the unnecessary use of antibiotics by providing an effective and clinically formulated alternative.
The Negotiations:
The pitch faced challenges early on when Lori Greiner expressed discomfort with Dr. Malepati not making direct eye contact with her. Despite this, Lori remained interested in the product. However, her sentiment shifted when Dr. Malepati allegedly ignored her during the discussion. Mark Cuban exited the deal early on, citing a lack of relevance to the consumer’s health history. Lori also dropped out, feeling offended and disrespected. The pitch took an unexpected turn as interpersonal dynamics played a role in the negotiations.
Kevin O’Leary, recognizing the business potential, offered $125,000 for 5% equity and a $1 royalty per unit sold, perpetually. Dr. Malepati sought clarification on the level of effort Kevin would invest in growing the brand. After negotiating, they settled on a $1 royalty per package, closing in 36 months, with Dr. Malepati repaying $450,000 before Kevin reverts to a 5% equity position.
The negotiation highlighted the challenges of personal dynamics in the investment process, with Lori’s discomfort and Dr. Malepati’s perceived lack of engagement affecting the outcome. Ultimately, Dr. Malepati secured a deal with Kevin O’Leary, emphasizing the aligned interests with the royalty structure, ensuring Kevin profits only when the product sells.
