Galen's Growth-Equity Approach Pays Off Through National Rehab and Aperio Exits

Aperio Technologies, Inc. 
Medical Devices & Technology

 Update: Friday, 26 October 2012
By Brian Gormley

Galen Partners, which infuses small but growing health-care businesses with expansion capital, has recently sold its stake in medical-product supplier National Rehab Equipment Inc. to an undisclosed buyer, the firm told VentureWire.

Galen, formed in 1990, typically provides the first institutional capital to companies whose growth can outpace that of their market, said Managing Partner Zubeen Shroff. After investing, the firm works with management and existing shareholders to put the company on a path to achieve that expansion. The firm's approach has also paid off recently through the sale of digital-pathology company Aperio Technologies Inc., which has just merged with Leica Biosystems.

The Stamford, Conn., firm invested in National Rehab in 2007. A family-founded business, National Rehab was looking to expand from a local player to a regional and national one, Mr. Shroff said. The company, which has offices in Moon Township, Pa., supplies medical products directly to consumers. These include supplies used in wound care and to manage conditions such as incontinence and urological problems.

While the competition was growing at about 5% a year, National Rehab grew at a rate that was several-fold faster, largely because of its focus on customer service, which is paramount in this direct-to-consumer business, according to Mr. Shroff. He said he couldn't discuss specifics about the sale of Galen's stake, such as the amount it invested, the sale price, and the buyer, but said the firm is pleased with the outcome. A National Rehab representative wasn't available for comment.

Aperio, which says it has advanced the technology that enables glass slides to be digitized and securely shared, was smaller than National Rehab when Galen made its original investment, in 2005, Mr. Shroff said. Aperio, which had sales in the low single-digit millions at the time, applied its technology to the pharmaceutical research-and-development market.

After raising capital from Galen and Advanced Technology Ventures that year, it expanded into the hospital market, where digital pathology could enable easier sharing of information among pathologists. Mr. Shroff declined to discuss the amount invested in the company, but VentureWire records show that Aperio raised a $17 million Series B financing in 2005 co-led by Galen and ATV.

Aperio, based in Vista, Calif., had excellent intellectual property and a well-developed system for the drug-research market, Mr. Shroff said. But for clinical care, it needed simpler interfaces and features and benefits that were more appropriate for a hospital setting. The company did marketing studies to find out what clinical customers found to be most important, changed configurations for its devices and made the interface more clinically friendly, according to Mr. Shroff.

Aperio established itself in this market by selling to large hospitals in the U.S. and Europe, he said. Aperio, whose product line includes scanners, image-management software, and image-analysis tools and services, has grown significantly from where it was in 2005, according to Mr. Shroff, but he didn't give specifics. Terms of the company's sale weren't disclosed.

Other Aperio backers included HLM Venture Partners, which led a $20 million Series C round in 2008 that also included new investor Acadia Woods Partners and BlackRock Alternative Advisors, according to VentureWire records.

Aperio's biggest challenge was establishing the market for its services, Mr. Shroff said.

"Today, everybody knows that digital pathology is important," he said. "It wasn't as obvious in 2005."

Write to Brian Gormley at