Well-funded startup sets sight on diabetics market

Ron Geraty's team got $100 million to go shopping.

Now all it needs to do is buy wisely, integrate effectively and execute well to meet the expectations of Bertram Capital Management LLC, the San Mateo private equity firm that staked Geraty's Reno-based Sanare LLC.

Sanare's vision: Creation of a single point where diabetes patients can buy supplies and pharmaceuticals and get the education they need. The company thinks it will be the first into the market.

The market is growing rapidly, says Geraty.

In the United States, 25 million people are diabetics, and adults today stand a one-in-three chance of becoming diabetic at some point in their life.

As obesity, poor nutritional habits and sedentary lifestyles become more common, Geraty says the number of diabetics in the United States is expected to grow to more than 50 million by 2050. One in two Americans then will face the likelihood of diabetes.

Another statistic: Only about a third of diabetics follow the treatment plant outlined for them by their physicians.

"People who don't follow their treatment plan have very bad things happen to them," says Geraty, himself a physician.

Bankrolled last fall by Bertram Capital, Sanare is beginning to acquire providers of supplies for diabetics glucose meters, diabetic shoes and the like as one of the cornerstones of its business.

"It's an extremely fragmented industry," says Geraty.

Sanare expects to market the products under a consumer brand that it has yet to roll out.

The company also expects to add a mail-order pharmacy to provide the medicines that diabetics require. And it will add an educational component to teach diabetics to better care for themselves.

Geraty's team thinks that they can get diabetes patients more fully involved in their own care and that, in turn, will help reduce the longterm cost of caring for them.

"Think of us as a behavior change company," Geraty says.

The company's corporate headquarters will be in Reno, where it leased more than 10,700 square feet of office space at 6160 Plumas St. in a deal brokered by Tim Ruffin and Melissa Molyneaux of Colliers International.

Sanare also will be operating its distribution facilities in northern Nevada, Geraty says.

The company expects to employ 40 to 50 people in Reno within the next year, and information technology expertise will be a particular need in the headquarters.

It currently employs several hundred people in operating companies that it has acquired in Detroit, Miami and Arkansas.

Those companies already deliver diabetes-related products and services to about 180,000 beneficiaries of Medicare, Medicaid and commercial health plans across the United States.

Scaling up a health-care company quickly is nothing new to Geraty.

He was chief executive officer for nine years of Alere Medical Inc., a Reno company that was acquired for $175 million in 2007, some 11 years after it was founded.

Unlike Alere, whose nurses provided disease-management services for patients with chronic diseases such as heart failure and asthma, Sanare won't provide disease management.

The companies' names, however, share some common roots. "Alere" is Latin for "to care for," while "Sanare" is Latin for "to cure."

The experience of the group that built Alere helped open doors for the new company, says Ken Drazan, managing director at Bertram Capital. Sanare was funded within less than six months after it filed its articles of organization with the Nevada Secretary of State.

Bertram Capital, which has about $850 million under management, includes care management and healthcare cost-containment among its areas of investment focus.

Sanare, in turn, was drawn to Bertram Capital because of its history of creating fast-growing, innovative companies, Geraty says.

Covington Associates, a Boston firm, served as the financial advisor to Sanare's founders. Weil, Gotschal & Manges LLP of New York City served as Sanare's legal counsel.