In-House Insights: Investment Diligence for a Healthcare VC

Aug 20, 2021
Edward Tung, legal counsel for Hong Kong-based venture capital firm ORI Capital, discusses the growing importance of ESG, the rise of special purpose acquisition companies (SPACs) and the advantage of having scientific expertise when representing healthcare and biotechnology companies.

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Edward Tung, legal counsel at ORI Capital Edward Tung, legal counsel at ORI Capital/Courtesy photo

Edward Tung is legal counsel, head of compliance and chair of the risk management committee for ORI Capital, a Hong Kong-based venture capital firm launched in 2015 that focuses on investing in innovative healthcare companies globally. ORI Healthcare Fund has a fund size of $200 million, while ORI Healthcare Fund II has a target fund size of $400 million. Prior to joining the firm in 2019, Tung was an associate at the Hong Kong-based international law firm Deacons. We asked him about the growing importance of ESG, the rise of special purpose acquisition companies (SPACs) in the United States and his decision to switch from working in science to working in the law.

This Q&A has been lightly edited for clarity and brevity.

You are one of very few lawyers who has a Ph.D. in microbiology. What made you decide to pursue a career in law? 

I had always wanted to be a scientist. It is why I studied for a Ph.D. at the Faculty of Medicine of the University of Hong Kong. However, I gradually came to realize that a career in science was not the right fit for me. As many of my friends and collaborators at university went on to set up their healthcare or biotechnology companies, they told me that they had difficulty finding the right lawyers in Hong Kong to represent them—lawyers who really understood their business. That’s why I started looking into becoming a lawyer. I felt that being a lawyer would allow me to operate in both the commercial and the scientific worlds. I aspire to be the bridge between inventors and investors.

Why is it so important for healthcare firms to have lawyers that really understand their business? 

It is really important because a lot of our work involves assessing the scientific viability of new treatments, medicines or devices. I work with my colleagues, some who also have doctorate degrees in related fields, in the investment due diligence process to identify investment targets. Although our scientific team is primarily responsible for scientific due diligence, the patent due diligence, which is a crucial part of our legal due diligence, often goes to the fundamentals of the technology. For me, this job entails reading the original scientific papers of new discoveries in relevant areas.

This role requires assessing “binary” scientific risks, meaning that a proposed health intervention could have zero value if it is, in fact, ineffective or potentially a poison rather than a medicine

There are many technical details that your typical transaction lawyer may miss unless they have prior knowledge in this field. For example, milestone payments in healthcare investments are often relevant to a company’s research or clinical trial progress, and it is much easier for someone with the technical knowledge to prepare the documents.

My academic background helps me carry out my responsibilities as the chair of the firm’s risk management committee. This role requires assessing “binary” scientific risks, meaning that a proposed health intervention could have zero value if it is, in fact, ineffective or potentially a poison rather than a medicine.

ESG is becoming a popular issue both in Hong Kong and mainland China. How has ESG affected your work?

It’s a bit embarrassing to say, but we only started reporting our fund’s ESG data to investors in 2020. Even though there are no hard rules in Hong Kong requiring us to do that, we still think it’s a good thing to do and we believe it will be good for our investors to have a better understanding of how good our fund is performing from a social impact perspective.

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