Dear Friends of Vivo,
As we approach the 30th anniversary of Vivo’s founding, we have been reflecting on the remarkable journey that brought us here.
The firm stands on a foundation built through persistence, partnership, and performance. What makes its journey even more remarkable is that it began, in many ways, by accident.
Originally, we set out to build a biotech company, starting a venture called Genelabs, with Frank as CEO and Ed as Chief Scientific Officer. As the company matured, we began exploring expansion into Asia, starting with Taiwan and Singapore. Government officials and investors there expressed a high level of interest in gaining access to best-in-class technology and drugs, hoping that U.S. biotech companies would one day bring their discoveries to Asia and also collaborate with companies there. With encouragement from mainly Taiwan-based investors, we decided to change course and raise an investment fund with the dual goal of investing in biotech in the U.S. and bringing this new industry to Asia.
This was an enticing prospect, and we named our firm BioAsia Investments. We both loved new ideas and the notion that technology could help create breakthrough treatments for disease. But without experience in running an investment fund, our desire to bring groundbreaking, life-saving therapies to patients was matched only by our prudence. In those early days, neither of us took salaries and we worked out of a small office in downtown Palo Alto, unlike the big VCs based along Sandhill Road. Despite all this, our vision and our determination to succeed never wavered. Eventually, we changed our name to Vivo Capital, since both our base of operations and most of our investments were in the U.S.
We knew we were onto something in 1998, when we invested in American Pharmaceutical Partners (APP), which grew into a major producer of injectable drugs for hospitalized patients and was acquired by Fresenius for $4.6B. A year later, we led the first round of investment in Intermune, a biotech startup that developed the first FDA-approved drug for idiopathic pulmonary fibrosis, a lethal lung disease, and was subsequently sold to Roche for $8.3B. These turned out to be just the start. Three decades in, we have backed more than 460 companies employing tens of thousands of people, and helped improve countless lives through the development and distribution of new drugs and medical devices, as well as by supporting providers of health services throughout the world. Our team has now grown to more than 70 professionals, and we are as enthused as ever about what comes next.
Lessons learned
Experience has taught us several important lessons. First, given the long and often unpredictable timelines of drug discovery and development, we always try to keep sufficient reserves for each portfolio company. Second, breakthrough science alone is not enough; backing talented, capable management teams is just as important, sometimes even more so. Above all, it is essential to work with the smartest people we can find, both within Vivo and beyond.
Fortunately, our successes have outnumbered our losses, and this has enabled us to grow and evolve. It is a source of great pride that in its 30 years, Vivo has navigated the ebb and flow of market sentiment towards biotech, significant macro shifts and evolving science, with overall fund performance reflecting the strength and durability of our strategy.
Pivotal moments
Along the way, there have been many pivotal moments in the firm’s evolution, but two decisions stand out as particularly significant.
From the get-go Vivo was active internationally. We had quickly concluded that just as disease knows no borders, nor should healthcare investing. But getting into China didn’t seem realistic at a time when it was still difficult for western companies to do business there. Our efforts in Asia’s largest market started slowly, with a focus on companies making ingredients for drugs licensed to US developers. Only once we had established the viability of operating there did we embark on the more ambitious strategy of backing local start-ups and biotechs.
Shan Fu had been instrumental in initially convincing us of the opportunity in China and, in 2013, we were able to persuade him to come and join us. He also deserves the credit for suggesting our other major strategic change, creating a family of funds under the Vivo umbrella. That decision freed us to invest in companies at different stages of maturity. To support this expanded effort and prepare for future growth, we established an efficient post-investment management team, in addition to teams devoted to legal affairs and compliance, finance and tax and HR.
Challenges faced
Of course, as a management team, we have faced plenty of obstacles along the way, especially as we have grown, geographically, and in size. Most obviously these have involved learning how to foster teamwork and communication across great distances, two cultures and languages. And although targeting companies at varying stages of maturity was the right move from a diversification standpoint, it required our team to become just as adept at evaluating established, profitable businesses as it was at assessing the innovative, pre-revenue companies that had long been our focus.
Wherever this adventure has taken us, we have always tried to adhere to one simple ethos: do well by doing good.
It is not for us to judge whether we have achieved this. That is for you, our loyal investors, disciplined and ambitious management teams and dedicated colleagues who have been with us on this fantastical journey. But we would be nothing without your steadfast support.
In that spirit, we wanted to take this opportunity to reiterate our deep gratitude to all of you who have played, and continue to play, an instrumental role in our growth and evolution.
We are eternally thankful and hope you will continue to be part of this firm’s story for many years to come.
Yours,
Ed Engleman and Frank Kung, Co-Founders