By Hui Cai, VP of Corporate Alliances at WuXi AppTec (@HuiCai2)

As the globalization of healthcare expands, Frank Yu and his team at Ally Bridge Group continue to differentiate themselves in the market with strategic and fruitful investments, and by boosting growth for life science companies on a global scale.

Ally Bridge – a Hong Kong-based global healthcare-focused, multi-stage, multi-strategy investment firm – and its affiliates currently manage over $1 billion in assets in the United States, China and Europe – and that number is quickly growing.

The firm, which invests in innovative, potentially disruptive companies in the global healthcare sector, is well known for fostering strategic cross-border partnerships and market access. Ally Bridge’s unique strategy is led by Yu, the firm’s Founder and CEO, a  former savvy investment banker from Wall Street, who spent his career at Goldman Sachs, Och-Ziff Capital, Credit Suisse in London and Hong Kong and, Moody’s and Thomson Financial in New York. I recently talked with him about the firm’s investment philosophy, and his take on the healthcare revolution.

Hui Cai: First, congrats on your recent investments, TESARO and Sorrento Therapeutics. Maybe we can start from here. Can you tell me more about both?

Frank Yu: Sure. This March we and a few top-tier funds invested in Boston-based TESARO’s $155 million private placement. We think TESARO is an excellent oncology company with a very well balanced pipeline from preclinical to commercial products. Their nausea and vomit drug Rolapitant is approved in the U.S. and is now on the market. They have also been active in developing their business in China, and they have some exciting programs ongoing enabled by WuXi’s R&D platform, including one advanced from DNA to IND filing with the U.S. FDA. All these I care a lot about.

Sorrento Therapeutics is a very innovative company, and we led its $150 million private placement this April. They have a unique and comprehensive portfolio of innovative antibody technologies and cutting-edge immunotherapy programs — in particular, CAR-T and CAR.NK cell therapy programs, as well as ground-breaking cell-penetrating antibody technology that could potentially directly attack previously undruggable intracellular targets. We are delighted to play an important role in accelerating the development of these exciting technologies and products and helping the company to expand its global partnerships and, in particular, with biopharmaceutical companies in China.

Hui Cai: How do these companies fit into your investment strategy?

Frank Yu: We are a global fund, with a global vision and knowhow, a global team, and a global portfolio. We have 40-to-50 portfolio companies around the world, a majority of which are in the U.S., and we are expanding into Europe, and of course, China. We take different investment approaches for each region. In the U.S., we focus on innovative technologies or breakthrough therapies. In China, we are more focused on platforms, for example, our investment in WuXi. Apparently WuXi is not only a Chinese platform, but a truly global enabling platform, with a well-respected global brand and global footprint. We are also continuously cultivating China’s home-grown world-class innovation and product development. Hua Medicine is a good example. It is one of the most innovative biotech companies in Asia, with a first-in-class diabetes drug being developed in China – from preclinical to late-stage clinical trials. With its global development strategy and its clinical trial in the U.S., it is also well positioned to make an impact on patients in the broader international markets.

Hui Cai: Is China always a big part of your investment interest?

Frank Yu: Yes, China’s unmet medical needs are always on our mind. We work very closely with our portfolio companies’ management to figure out what the company can do in China, and how significant the growth prospective is. For example, we invested in Medtech SA, a growth-stage robotic surgery company in southern France which has a product for minimally invasive epilepsy surgery. This little known company has already established a strong presence in the U.S. and had done great in China with six of its surgical robots installed in major hospitals in China. We invested in it partly because we saw this technology would be particularly relevant in China — there are many brain surgeries in China, but China has a shortage of highly experienced neruo-surgeons. The unmet need is huge, so the robotic system will be of great value in meeting China’s needs. Now this technology is the global standard of care for minimally invasive epilepsy surgery. In January 2016, shortly after Ally Bridge’s investment, the company secured a U.S. FDA approval for its spine robot.

That said, China it is not a must-have condition for our investments.  For many of our portfolio companies, we bridge not only between U.S. and China, but also between the U.S. and Europe.  We look for great technologies, teams and products around the world. We help them not only with funding, but also help them capitalize on the value of the technologies to better address the unmet needs of important regional markets.

Hui Cai: I assume every investor likes to find disruptive technologies and hidden gems. What has enabled Ally Bridge to do so?

Frank Yu: I think the key is to understand both the global life science industry and China. For our business, it won’t work if you only know the U.S. and Europe, but not China. It also won’t work if you only understand China, but not the global market. We are in a sweet spot so that we can work with U.S. and European companies, and work with Chinese companies. This is our very unique strength. Another thing is that our people have strong global life science backgrounds, and we also have strong dealmaking and capital market knowhow and experience. What has worked for us is that we have been able to put all the ingredients together to help our portfolio companies.

Hui Cai: Hence the name “Ally” and “Bridge”?

Frank Yu: Yes. We believe we are an ally to big companies, small companies, global companies, and Chinese companies. Also, we function as a bridge.

Hui Cai: How big is your portfolio now?

Frank Yu: Over $1 billion, and it is increasing. The speed is quite fast, so it might reach $2 billion this year.

Hui Cai: This is quite impressive. Do you still remember your first investment?

Frank Yu: As a fund manager, my first investment was Lifetech Scientific, a cardiovascular medical device company based in Shenzhen. This really started my healthcare investment journey, from China to the U.S. At that time, many other institutions were not interested in this company – it was too small. I worked on this for one year and found that it was very special platform. There were three major global companies in the U.S. dominating the space and I thought it would be great to have such a platform for China, so we made an investment, helped figure out its entire strategy, and structured partnerships, including one with Medtronic, which invested in this company in 2013. Our knowledge of this company was actually based on our understanding of the global structural heart devices market, which was nascent in China. Also, our deal-making knowhow helped a lot. So my key take-away from that experience is that if you want to understand the industry, you must understand the global landscape.

Hui Cai: As we close the discussion would you like to share with our readers your view on Chinese life science innovation and how that path will move forward?

Frank Yu: Sure. In my view, first, China has no choice but to accelerate innovation — and start true homegrown innovation. The country has more than 1.3 billion people, and will hit a dead end without innovation. There is no choice; China must do it. Second, the Chinese government, society, and market are very encouraging, in terms of providing capital and other resources, to support homegrown innovation, and I would say the support is truly 360 degrees. Third, very importantly – knowhow. I’m not only talking about science, but also the knowhow to develop and commercialize innovative technologies and products. The latter is so important for us to really be able to address the unmet medical needs in China.

I see the main risk for China’s path forward would be on the regulatory side. After all, we are in a highly regulated industry, and this is especially true for China. Since last year, we have seen a series of CFDA regulatory reform policies coming out. Those significant changes in short term will add to the volatility of the China healthcare market and valuation, but in the long-term will be favorable for advancing truly innovative new therapies and new technologies – and increasing affordability of good medicine. I believe China will have a lot to offer to the global life science industry, and will become an important force in driving innovation to benefit patients worldwide.

Hui Cai: What about the U.S. and Europe?

Frank Yu: The U.S. and Europe markets will continue to be volatile in the near-term.  First, in the U.S., the election year politics is already putting lots of pressure on pricing. The second thing is valuation correction. Third is the pipeline of true breakthroughs. Disruptive innovation continues to be a key driver for our industrybut the question is how fast?  Overall, I think as long as we continue to focus on quality, focus on true breakthroughs, and focus on patients, our industry will be doing just fine in the long run.