Vivo Capital's longtime strategy of enabling health care companies to tap into cross-border opportunities between the U.S. and China has clearly paid off. In the last 20 years since its 1996 inception, it has amassed more than $1.8 billion under management – raising two recent funds.
Last summer, it closed an early stage innovative health care fund, known as Vivo Panda, at more than $100 million; the firm is also currently investing from its $750 million eighth fund that closed last year into public and private health care companies in the U.S. and greater China.
The Palo Alto, Calif., firm's latest investment is to help lead an acquisition of Angiotech Pharmaceuticals alongside other China-focused investors. ZQ Capital, a China-based investment and advisory firm, is co-leading the deal with Vivo with participation from GSO Capital Partners LP, China Orient Asset Management International Holding Limited and Fung Shing Investments Ltd. The transaction amount remains undisclosed, with the deal slated to close next quarter.
Vancouver-based Angiotech had sought to recreate itself by housing its operational subsidiaries under a Braintree, Mass.-based entity known as Surgical Specialties Corp. after the sale of its interventional oncology business in 2013 for $362 million to Argon Medical Devices Inc. in Plano, Texas.
CHINA MARKET EXPANSION
Angiotech, via Surgical Specialties, sells surgical sutures and other tissue closure devices, as well as ophthalmic microsurgical knives. It claims to have one of the largest portfolios available of blades and sutures; the company's products include the Quill Knotless Tissue-Closure Device, which enables suturing without the tying of knots by surgeons.
The company has extensive global efforts including commercial operations in China – as well as Latin America, Europe and other regions. That's not common among smaller, revenue-generating med techs, but it's precisely what attracted Vivo Capital to the investment.
"The combination of a stable U.S./EU business and a strong growth opportunity in China was a great fit for our unique position in the market," Vivo Capital Managing Partner Chen Yu told Medical Device Daily. "With a team on the ground in both the U.S. and China, we felt uniquely positioned to be able to maximize growth opportunities in both markets."
Angiotech has an annual growth rate of more than 20 percent in China and other parts of Asia, Yu said. The company develops and manufactures branded, private label, and original equipment manufacturer (OEM) surgical instruments.
"We liked the company because it was of meaningful scale, reasonable growth in developed markets, and an unusually strong China growth story. Unlike most U.S. companies which are only now beginning to think about a China strategy," he added.
PARTNERING IN THE PORTFOLIO
The new syndicate seeks to help Angiotech expand its product offerings by leveraging its existing multi-channel strategy – while driving strong geographic growth in China and other parts of Asia. Vivo intends to use its existing connections to top regional executives to help drive growth; it also expects to potentially partner Angiotech with some of its existing portfolio companies.
Vivo has an extensive med-tech portfolio including novel suture delivery and tissue closure device player Sentreheart Inc. The Redwood City, Calif.-based company recently raised $35 million in September, from a syndicate including Vivo, to complete a pivotal trial for its catheter-based, non-implant left atrial appendage closure Lariat device as an adjunctive treatment to ablation in patients with persistent or long-standing persistent atrial fibrillation.
Other surgically focused med-tech companies in Vivo Capital's portfolio include the Palo Alto, Calif.-based Airxpanders Inc. ABN, which has a patient-controlled breast tissue expander for use in reconstructive surgeries, and Minerva Surgical Inc., a Redwood City, Calif.-based start up that offers an endometrial ablation system to treat heavy menstrual bleeding.
VIVO STRATEGY SPELLED OUT
Vivo's main investment approach is to buy into later-stage, development biopharmaceutical and medical device companies in the U.S. – as well as revenue-stage health care companies in greater China. It also starts health care companies from scratch and invests in public companies.
The keys to success with its approach are typically forging cross-border partnerships, acquiring new products and expanding the markets for existing products.
"We believe that med tech in the U.S. remains a fairly challenging space," Vivo's Yu said. "The opportunity to capitalize on geographic expansion in China is a theme we believe will extend well beyond Angiotech into other businesses. As such, we see this as an important future theme for our fund moving forward."