Ally Bridge, the healthcare investment group that whisked Shanghai-based Wuxi Pharmatech from under the noses of established global private equity firms in 2015, is “reaching an inflection point”, according to founder Frank Yu.
Established five years ago Ally Bridge has matured into a larger healthcare growth capital and buyout firm via its Flagship fund, while remaining active in developmental-stage life science investments in the US and Europe through a separate Innovation fund. Yu says the firm aligns itself with management, particularly in its buyout deals, and notes that it moved to focus on the take private of China focused pharmaceutical company Shandong Luoxin [HKG:8058] after walking away from an unsolicited USD 570m proposed consortium bid for SciClone Pharmaceuticals [NASDAQ:SCLN] which had received a cool response from the target’s board. In the SciClone case, ABG took a 1.4% stake worth USD 6.2m through on-market purchases between July and October 2015. ABG Management Limited entered into the consortium GL Capital Management GP Limited, which is involved alongside Ally Bridge in the Luoxin take private, Jade Park Investments Limited and Bank of China Group Investment Limited triggering a 13D.
“For an investment firm with USD 1.5bn in assets under management (AUM) we have not done much fund raising. But our story is much clearer now, says Yu, a former MD at Goldman Sachs and Och-Ziff. “We have different products to offer investors, we have significant AUM, and we have truly global capabilities with bases in Hong Kong, the US, and Switzerland, the home of great life sciences companies such as Roche, and Novartis.”
Yu’s hint towards formal fund raising comes as the specialist life sciences firm prepares for the IPOs of Wuxi Biologics in Hong Kong this year and the remainder of the Shanghai-based research and development services company’s assets on a Chinese mainland stock exchange.
Books for Wuxi Biologics open today (25 May), which is aiming to raise up to USD 511m pre-greenshoe. As reported, this will be followed by the IPO of Wuxi Apptech. The combined enterprise value of the two companies post listing is expected to be more than USD 12bn as reported by our sister equity capital markets service. According to the Wuxi Biologics IPO prospectus 11% of its offering will be secondary shares.
The listings will aid Ally Bridge’s potential fund raising plans as well as providing a catalyst for the firm’s AUM, which has doubled from around USD 700m in early 2015.
The specialist life sciences firm initially focused on making smaller venture and growth capital investments of up to around USD 30m and gained recognition by becoming a rare example of an Asia-based cross border life sciences specialist via multiple investments in US, Europe and China-based life science companies.
“We have lost our mystique,” acknowledges Yu, who heads the business with partners including Li Bin, a former Merck & Co. scientist and previously head of Morgan Stanley’s Greater China healthcare research. “But this means we have lots more investment opportunities to choose from now. Whereas in the past we have had to turn down lots of very poor quality assets,” he says, “people, from China, to the US and Europe, now bring us quality”.
Europe strategic investments
Aside from buyouts Ally Bridge said in February that it had made strategic investments in two Europe-based life sciences companies, Galenica Group [VTX:GALN], now known as Vifor Pharma [VTX:VIFN] and Nabriva Therapeutics AG [NASDAQ:NBRV], ahead of respective corporate restructurings and sector consolidation deals.
Ally Bridge said at the time that these investments along with its existing position in Adaptimmune [NASDAQ:ADAP] of the UK, constitute ABG’s core European life sciences portfolio, and are all representative of ABG’s focus on leading European companies with strong aspirations and capabilities in the US. Adaptimmune’s stock is up nearly 50% year-to-date.
In another European situation in late 2015, Ally Bridge invested EUR 13.6m in Medtech, a Montpellier, France-based surgical robotics portfolio company, via a convertible bond and warrant issue. The fund doubled its money when it received EUR 25.7m, when the company was sold to global orthopaedics giant Zimmer Biomet for around EUR 119.7m seven months later.
“We did not expect such a quick turnaround,” admits Yu, adding that Medtech had not even had time to use the money Ally Bridge had invested. “We had been considering a US listing for the business primarily to raise its profile but Zimmer Biomet saw the traction Medtech’s products were having in all the best hospitals in the US and Europe and made an attractive offer,” says Yu.
The Medtech investment was brought to Ally Bridge by mid-market financial services firm Stifel Financial Corp via “a mutual friend”. Yu says this landed the firm another useful long term partner in Bertin Nahum, Medtech’s founder.
Another significant short term return came from Ally Bridge’s USD 20m investment in Tesaro [NASDAQ:TSRO], a Boston-based bio-pharma, as part of a USD 155m share placement in 1Q16. The firm sold its position for at least USD 44m in late June of that year after the company’s stock doubled on positive results from an ovarian cancer drug study. Tesaro, which now has an USD 8bn market value, is considered a likely takeover target for a pharma giant.
Yu said in a recent 2016 interview with China Money News more broadly that the group has generated returns of well above 25%.
By Ed Vinales in Hong Kong, with additional reporting by George Shen and analytics by Derek Li
Five facts you need to know about Ally Bridge
- Hong Kong-based Ally Bridge was founded in 2012 by Frank Yu and now has USD 1.5bn AUM
- The life sciences specialist also has a hedge fund product, the Ally Bridge LB healthcare fund.
- Although Yu won’t confirm it Temasek, a Singapore sovereign wealth fund, is understood to be an Ally Bridge LP
- Yu’s business associate Li Bin was formerly head of Morgan Stanley’s Greater China healthcare research where he built a relationship with GL Capital, Ally Bridge’s partner in the SciClone take private attempt and the Shandong Luoxin deal.
- Ally Bridge in early 2017 said it had made ‘strategic’ investments in two Europe-based life sciences companies, ahead of respective corporate restructurings and sector consolidation deals
Wuxi take private and relisting timeline
05 Mar 2015 – Wuxi Chairman and co founder Ge Li considers take-private proposal following negative market reaction to 4Q14 and FY14 results
14 Mar 2015 – Wuxi begins talks with Ally Bridge about take private
20 Apr 2015– Temasek becomes involved in talks to part finance take private
30 Apr 2015 – Press release states Chairman and Ally Bridge have made USD 46 per ADS (USD 3.3bn) take private proposal
May 2015 – Ally Bridge holds debt financing talks with Shanghai Pudong Development Bank and Ping An Bank
Jun/Jul 2015 – Nine potential third party buyers contacted by Credit Suisse on behalf of special committee. Bank says no rival bids expected.
11 Aug 2015 – BofA Merrill Lynch, financial advisor to buyer group, provides special committee with the final version of the USD 1.1bn debt commitment letter and term sheet.
14 Aug 2015 – Definitive deal agreement signed between Wuxi and the Ally Bridge led buyer group
25 Nov 2015 – Wuxi shareholders vote (75% turnout with 97.49% voting “for”) to approve deal at EGM
10 Dec 2015 – Deal completed
04 Jan 2017 – Wuxi Biologics files for Hong Kong IPO
27 Mar 2017 – WuXi AppTec (aka Wuxi Pharmatech) mandates Huatai United Securities for Chinese mainland IPO