Few investors can say they’ve moved from the clinic to the boardroom to the trading floor, but Chen Yu has done exactly that. He left medical school to build a tech startup that went public and was acquired, then returned to biotech by joining Vivo Capital, where he helped grow the fund from $60 million to $5 billion. After nearly two decades, he struck out on his own to launch TCGX, a crossover fund designed to invest in both public and private biotech companies.

The hybrid model was unconventional when Chen launched it, and many investors were unsure how to categorize his approach. Yet over the past five years, TCGX has demonstrated why breaking away from fixed mandates matters. By shifting capital between late-stage private companies and small-cap public biotechs, Chen and his team avoid the cycle-driven inefficiencies that plague traditional funds. Along the way, he’s also rethought how leadership and decision-making work inside a firm, building a culture that prizes dissent, data, and transparency at every level.

In this episode, Chen shares how he persuaded LPs to embrace the model, why he believes drug discovery still faces decades-long challenges despite the hype around AI, and how care delivery may be transformed far sooner by tools like ChatGPT. He also discusses the economics of drug pricing, the structural creativity behind deals at TCGX, and what it takes to find value in a biotech market where fundamentals remain strong but sentiment has lagged.

Episode Highlights:

[02:16] Chen reflects on his background and growing Vivo Capital from $60 million to $5 billion before launching TCGX.

[03:37] Chen explains why fixed-mandate funds create inefficiencies in biotech investing. [05:03] Discussion on shifting risk-reward between public and private biotech markets. [06:27] Chen describes the fundraising challenges of pitching a hybrid strategy to LPs.

[07:19] How TCGX has validated the model and why the market is moving in their direction.

[08:17] Trade-offs between GP compensation in open-end funds and better alignment in closed- end funds.

[11:34] Chen shares his leadership approach and decision-making culture at TCGX.

[12:30] Why every team member votes publicly on deals and how it boosts diligence.

[13:37] The firm’s 83% hit rate in biotech trials and how dissent improves accuracy.

[17:08] Advice for junior analysts: admitting when you’re wrong is the fastest way to be right again.

[18:11] Chen voices skepticism about AI’s near-term impact on drug discovery.

[21:19] Study results showing ChatGPT outperforming physicians in diagnostics.

[23:12] Why AI may reduce care delivery costs and shift more spending toward drugs.

[26:03] Chen argues drug prices may be too low given the value they provide.

[30:14] Outlook on biotech valuations, fundamentals, and the role of interest rates.

[33:15] Examples of creative deal structures, including royalties and cash sweep mechanisms.

[36:52] How biotech leadership differs from other sectors and the role of scientific founders. [39:18] Leveraging public-private synergies and data transparency for competitive advantage. [41:25] Lessons learned from recent IPOs and why focusing on fundamentals matters.

Resources & Links Related to this Episode

• Chen Yu, Managing Partner of TCGX
• Chen Yu - LinkedIn