Urohealth Gets a Big Shot in the Arm From Investors

Urohealth Systems Inc. has received a financial injection to help propel its rapid growth.

Last month, investors led by former Drexel Burnham executive Leon Black and an affiliate of Chase Manhattan Bank bought a 25% stake in the Costa Mesa-based maker and marketer of urological products, according to Urohealth’s financial filings.

The investors, including Black’s New York-based Apollo Investment Fund III LP, Chase Venture Capital Associates, also of New York, and some private individuals, poured $50 million into the company, according to Urohealth.

Apollo and Chase each invested $22.8 million. In exchange, each received 41,364 shares of common stock; warrants to purchase another 113,750 shares; and $22.3 million worth of debentures convertible into 2 million shares. Each will also name a director for Urohealth’s board. Urohealth shares closed Wednesday at $4.38.

Urohealth, which has purchased eight companies in the last year, needed refinancing, says James Osbon, a board member and executive of the company’s largest division, which is based in Augusta, Ga. “Any time you’re growing fast, you need more investment in inventories, your receivables expand and more financing is in order,” Osbon says.

The Augusta division, which makes products to treat male impotence, among other items, is the successor to an independent company, Osbon Medical Systems Limited, which Urohealth bought last December.

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Barbara Marsh covers health care for The Times. She can be reached at (714) 966-7762 and at barbara.marsh@latimes.com