MTS Sells Health Care Company, Buys Three More

Disease management businesses, whose home monitoring devices aim to catch signs of a heart attacks before they occur, are growing as the U.S. population ages. At least a few buyout firms have their finger on the pulse of the industry.

Health care-focused buyout firm MTS Health Investors recently completed a $175 million sale of one such company, Alere Medical Inc., to Boston growth-capital and buyout shop TA Associates. Company management and existing investors, Flagship Ventures and Nevada Ventures, rolled over equity in the transaction.

MTS Health Investors’s return on the deal wasn’t disclosed. The firm acquired Alere Medical in 2005 in a deal that included a $5 million equity investment, according to the firm’s founder and senior managing director Curtis Lane. At the time, Alere Medical’s revenues were about $60 million, and have since “grown nicely,” he said.

Alere Medical’s goal is to help managed-care providers lower their costs through disease management services. The Reno, Nev.-based company provides home monitoring systems that transmit a person’s biometric data to call centers. The data is analyzed for warning signals for various ailments, such as heart failure or diabetic episodes. Alere Medical saves insurers money because people who show early warning signs can be treated before an expensive trip to an emergency room. Every dollar spent on Alere Medical’s services can save a managed care provider as much as five dollars, said Lane.

These services are of particular importance for insurers of people over the age of 65, for whom health care costs four-times more than the under-65 crowd, Lane said. He added that the over-65 population is growing three times faster than the under-65 population.

When MTS Health Investors acquired Alere Medical, the company offered disease management services solely for cardiovascular diseases, such as congestive heart failure. MTS Health Investors helped expand the company’s breadth to also include asthma, chronic obstructive pulmonary disorder and diabetes. Lane said there are more avenues for diversification, but “given how much value we created through that initial expansion, we decided it was a good time to exit.”

Alere Medical covers more than 20 million commercially insured patients and 2 million Medicare insured individuals in 47 states. It has approximately 84,000 active enrollees that it monitors.

Richard Tadler, a managing director at buyer TA Associates said the disease management industry, in its current state, is “under-penetrated.” He noted that there are opportunities for expansion in both the private employer and government markets, as well as in expanded product offerings.

Alere Medical was a portfolio company in MTS Health Partners LP, an $80 million fund raised in 2000. MTS Health Investors is raising a follow-up vehicle for the now-depleted inaugural fund. And at the firm’s current acquisition pace, it needs all the dry powder is can muster.

The sale comes amid a whirlwind of activity for the New York-based firm, which, earlier this month, announced three new acquisitions alongside its strategic investment partner Oaktree Capital Management. MTS Health Investors partners with Oaktree Capital Management on deals larger than $100 million.

One was the $153 million agreement to acquire 49.7 percent of Alliance Imaging Inc. (NYSE:AIQ), a provider of medical imaging services, from Kohlberg Kravis Roberts & Co. The other two joint deals include the formation of a specialty pharmaceutical distributor called Novis Pharmaceuticals, and the add-on of home nursing services provider Synergy Inc. to the jointly owned Senior Home Care Inc. platform.—A.N.