Alere's cost-saving system attracts capital

Nevada companies have never attracted

much in the way of venture capital. And the

venture capital industry has been in deep

doldrums for the last couple years. Last year

investors put up about a third the amount

of money they did the year before.

Despite all that, Alere Medical Inc.

managed to raise $30 million since its

founding in 1996. That's the most venture

capital money ever raised by a Nevada company,

according to Robb Smith, principal,

Nevada Ventures, one of two venture capital

firms in the state and an investor in Alere.

In that time, Alere has grown quickly.

In 1996, the company was averaging

$10,000 a month in revenue, according to

K. Randall Burt, president of Reno-based

Alere.Two and a half years later, Alere was

making $1 million a month. It went from

serving 200 patients to 7,000 and is on

track to add more than twice that when it

signs up 15,000 patients next year through a

recently-awarded four-year Medicare contract.

"We'll have 25,000 patients next year,"

said Burt.

Alere's patients are culled from the 4.8

million people with heart failure in the

United States, and more specifically the

500,000 individuals at high risk for re-hospitalization.

Alere makes and provides service

for its DayLink Monitor. The monitor is

a device, like a super sophisticated scale,

placed in the home of patients suffering

from heart failure. It's connected to the

patient's home phone line. Every morning

the patient gets on the scale and verbally

responds to three or four questions asked by

the device that cover possible changes in

their medical condition. The whole process

takes about a minute.

Heart failure symptoms, said Burt, are

subtle and early intervention is vital because

patients can significantly deteriorate within

a day. "When the heart starts to fail the

patient starts to retain fluid," he said. "The

key with heart failure is getting an objective

weight."

The data collected by the DayLink

Monitor including the patient's weight

to a quarter of a pound and the answers to

the medical questions are transmitted via

the phone line to Alere's nursing staff, comprising

43 nurses in a Reno facility and

another 7 nurses in a Portland, Maine, call

center under contract with Intellicare.

There nurses track the patients and

monitor them for early warning signs of

heart failure. The patients' doctors can also

review the data remotely and securely via

Alere's Data Exchange Network. Alere also

maintains the database which can be used

to generate reports and research history.

The result, says Alere, is a reduction in a

patients' doctor's office visits. "The cost of

heart failure is so high," said Burt. "About

$10,000 per patient a year in office visits."

Already, PacifiCare Health Systems has

saved $22 million through its patients' use

of the Alere DayLink Monitor, said Burt.

PacifiCare is an insurance provider for

employer groups and Medicare beneficiaries.

The company is also Alere's partner in

the $25 million contract from the Centers

for Medicare & Medicaid Services. That

contract, announced earlier this month, is

called a Disease Management

Demonstration Project. The goal is to

measure the DayLink Monitor's efficacy,

both from a medical and cost point of view.

Today, Alere's customer base consists of

patients in the Medicare Plus Choice program,

which uses HMOs. But that program

is being cut back, said Burt, and his goal is

to foster a second market in billing

Medicare directly.To do that, Alere would

receive a Medicare reimbursement code,

enabling doctors outside HMOs to prescribe

the DayLink Monitor to patients and

Alere to bill the government directly.

The four-year Medicare contract should

help Alere's cause. "This award is to

demonstrate that it works," said Burt.

Like other Nevada technology companies,

Alere moved to Nevada after first

establishing itself somewhere else.

"We moved from San Francisco about

two years ago," said Burt. "We moved here

for the quality of the labor pool, the work

ethic and the cost of doing business."

The company currently employs about

100 people and will likely double its headcount

next year. It may also build another

nurse station here or contract for another

call center with Intellicare.

The company is also looking to partner

with or acquire another provider that monitors

other diseases, such as diabetes which

often occurs with heart failure.

To that end, Alere hopes to raise more

money in the first half of next year. In

February the company closed a $5 million

round financing which included an additional

$5 million line of credit with its

device manufacturer.

Right now the company is working on

gross margins of 35 percent to 40 percent,

but Burt hopes to bump those up to an

even more attractive 60 percent to 65 percent.

And sooner or later Alere will look to a

buyer or the public market, if it can beat the

odds there like it has in the venture capital

market. For now, though, it's business as

usual.

"Our current investors are willing to support

us for six to 12 months," said Burt.

"But at some juncture we'll be looking for

an exit strategy that would bring our shareholders

the greatest value."

Spoken like a company that knows how

to raise venture capital.