Silicon Valley Bank "Venture Healthcare Industy Update" presented at OIS@AAO 2014

1. Venture Healthcare – Industry Update
OIS 2014
October 16, 2014

2. SVB - OIS 2014 2
ê Manage West Coast Healthcare Relationships
for SVB across the SVB Platform, including
ê Fund of Funds (Investment as LP)
ê Direct Equity (Co-Investments and Rights to Invest)
ê Commercial Bank (Venture/Mezzanine Debt, Asset-based Debt,
New Fundings)
ê Equity Financing Strategy for Early Stage and Venture-Backed
Companies
ê Industry Thought Leadership
Jon Norris: Managing Director, SVB Capital
Jonathan Norris
Managing Director,
Healthcare
Silicon Valley Bank
Mobile 650.575.1377
jnorris@svb.com
Twitter: @jonnysvb
ê Recent Publications
ê Trends in Healthcare Investments and Exits (2014)
ê Strong Momentum in Healthcare (2013)
ê First Mover Advantage (2012)
ê Continued Rebound (2012)
ê Trends in M&A (2011)
ê Bringing Home the Bacon (2010)

3. 3
Healthcare as a Percentage of Total Venture Investment into Companies
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Total
VC
$
$99
$38
$21
$19
$22
$23
$27
$31
$30
$20
$23
$28
$27
$30
BioPharma
4%
9%
15%
19%
19%
16%
17%
17%
15%
19%
17%
17%
16%
15%
Device
2%
5%
9%
8%
8%
10%
11%
12%
11%
13%
10%
10%
9%
7%
0%
5%
10%
15%
20%
$-
$10
$20
$30
$40
$50
20002001200220032004200520062007200820092010201120122013
Billions
Total VC $ BioPharma Device
Source:
PricewaterhouseCoopers,
Silicon
Valley
Bank
$99
SVB - OIS 2014

4. 4
Device Investment Into Venture Companies Over Time
The Real Story is Consistency
Year Device $ Invested Dollars as % of Total VC
2007 $3.7 Billion 12%
2008 $3.6 Billion 11%
2009 $2.6 Billion 13%
2010 $2.5 Billion 10%
2011 $2.9 Billion 10%
2012 $2.6 Billion 9%
2013 $2.1 Billion 7%
2014 (Proj) $2.5 Billion 6%
SVB - OIS 2014

5. 5
Year
refers
to
Vintage
Year
of
Fund.
Source:
PricewaterhouseCoopers,
Thompson
Reuters,
Silicon
Valley
Bank
proprietary
data
US HC Funding: Dollars Invested v Dollars Fundraised; Stable Capital
In 2010, the capital deployed was >3x of capital fundraised
In 2013, the capital deployed was 1.7x of capital fundraised
0%
100%
200%
300%
400%
$0
$2
$4
$6
$8
$10
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Billions
Gap in Funding HC $ Fundraised HC $ Invested % Overfunded
SVB - OIS 2014

6. 0
20
40
60
80
100
0
20
40
60
80
100
SVB OIS 2014 6
US Company Creation/Series A:
Corporate Investors Plug the Gap in BioPharma; Device Down
BioPharma Medical Device
*Includes
Series
A
companies
raising
at
least
$2,000,000
in
equity
SVB
Proprietary
Data
for
Series
A
Dollars
and
Number
of
Companies
using
VentureSource
**2013
data
sourced
from
Pitchbook
#ofDeals
#ofDeals
Corporate Venture as part of Series A syndicate
Venture-backed Series A
Corporate Venture as part of Series A syndicate
Venture-backed Series A
Total$Invested(M)
Total$Invested(M)
9% 16% 15% 22% 20% 14% 12% 30% 35% 8% 5% 8% 7% 5% 6% 4% 0% 10%
% of US Deals with a Corporate % of US Deals with a Corporate
Total Dollars InvestedTotal Dollars Invested

7. 7
New $ Investors: BioPharma 2012-2013: 5 of Top 15 are Corporate
(Corporate)
Includes
Series
A
companies
raising
at
least
$2
Million
in
equity.
Sources:
CB
Insights,
PitchBook,
VentureSource,
and
SVB
proprietary
data.
0
2
4
6
8
10
12
#ofDeals
85%
15%
SVB - OIS 2014

8. 8
New $ BioPharma Investments by Top Investors: Indication and Stage
2012-2013
*Target
GeneraWng
PlaXorm
Sources:
CB
Insights,
PitchBook,
VentureSource,
and
SVB
proprietary
data.
*Target Generating Platform
87%
13%
0
5
10
15
20
25
30
#ofDeals
SVB - OIS 2014

9. 9
New $ Corporate BioPharma Investments 2012-2013
Data
contains
Series
A
companies
invested
into
by
12
most
acWve
investors,
with
at
least
3
investments
greater
than
$2
Million
in
equity.
Sources:
CB
Insights,
PitchBook,
VentureSource,
and
SVB
proprietary
data.
0
1
2
3
4
5
6
7
8
#ofDeals
90%
10%
SVB - OIS 2014

10. 10
New $ BioPharma Investments: Corporates with 2+ Deals
Top Corporate Investors: BioPharma 2012-2013
Sources:
CB
Insights,
PitchBook,
VentureSource,
and
SVB
proprietary
data.
0
5
10
15
20
25
30
35
Pre-Clinical Phase I Phase II Phase III
SVB - OIS 2014

11. 11
Device Top New $ Investors: 2012-2013
Only One Corporate Venture in Top 10
(Corporate)
Includes
Series
A
companies
raising
at
least
$2
Million
in
equity.
Sources:
CB
Insights,
PitchBook,
VentureSource,
and
SVB
proprietary
data.
0
1
2
3
4
5
6
7
8
#ofDeals
56%
44%
SVB - OIS 2014

12. 12
Device Top Investors:
New Money Investment by Indication and Stage 2012-2013
Top Device Indications
Data
contains
Series
A
companies
invested
into
by
10
most
acWve
investors
with
investments
greater
than
$2
Million
in
equity.
Sources:
CB
Insights,
PitchBook,
VentureSource,
and
SVB
proprietary
data.
0
1
2
3
4
5
6
7
#ofDeals
56%
44%
SVB - OIS 2014

13. 13
BioPharma and Device Big Exits M&A and IPOs 2005-2013
Biotech
Device
0
5
10
15
20
25
30
35
2005 2006 2007 2008 2009 2010 2011 2012 2013
#ofBigExits
Biotech Big Exits
BioPharma
Device Exits
Device
2005
2006
2007
2008
2009
2010
2011
2012
2013
BioPharma:
Big
Exits
12
8
13
9
13
13
18
18
13
BioPharma:
VC-­‐Backed
IPOs
25
20
17
1
3
9
4
12
33
Device:
Big
Exits
7
12
11
8
9
15
17
17
14
Device:
VC-­‐Backed
IPOs
7
9
4
1
0
3
3
1
4
Device
IPOs
Biotech
IPOs
Big
Exits:
2005-­‐Present.
Private
Biotech
M&A
Up-­‐Front
>$75M,
Med
Device
M&A
Up
Front>$50M.
“Up-­‐Front”:
Up-­‐Front
defined
as
payments
in
a
structured
deal
not
including
milestones.
“Up-­‐Front
w/
Milestones”:
defined
as
payments
in
a
structured
deal
including
milestones.
“All-­‐In”:
Deals
where
the
total
value
is
paid
at
the
close
of
the
transacWon.
IPOs
include
Venture
Capital-­‐backed
IPOs
only.
Sources:
Investment
Bank
Reports,
VentureSource,
Press
Releases,
and
discussions
with
Life
Science
professionals.
SVB - OIS 2014

14. 14
Big
Exits:
2005-­‐Present.
Private
Biotech
M&A
Up
Front
>$75M,
Med
Device/Services
M&A
Up
Front>$50M.
“Up-­‐Front”:
Up-­‐
Front
defined
as
payments
in
a
structured
deal
not
including
milestones.
“Up-­‐Front
w/
Milestones”:
Up-­‐Front
defined
as
payments
in
a
structured
deal
including
milestones.
“All-­‐In”:
Deals
where
the
total
value
is
paid
at
the
close
of
the
transacWon.
Sources:
Investment
Bank
Reports,
Venture
Source,
Press
Releases
&
discussions
with
Life
Science
Venture-Backed Big Exits by Year 2005-2013
What is Happening in 2014?
Sneak Peak at 2014 Device: As of 08/13, Device Big Exits have EXCEEDED yearly 2013
numbers, with HIGHER Up Front ($238M) and All In ($261M) Values
BioPharma Medical Device
0
100
200
300
400
500
600
0
2
4
6
8
10
12
14
16
18
20
All In
Structured Deals
Ave. Deal: Structured
Ave. Deal: All In
Total Deal Value
#ofDeals
DealSize($M)
#ofDeals
DealSize($M)
0
100
200
300
400
500
600
0
2
4
6
8
10
12
14
16
18
20
All In
Structured Deals
Total Deal Value
Ave. Deal: All In

15. 15
BioPharma and Device:
Potential Distributions from Big Exit M&A and IPOs*
*Discounts applied: 75% on Up-Front M&A; 25% on M&A Milestones; 75% on IPO Pre Money
Big
Exits:
2005-­‐Present.
Private
Biotech
M&A
Up-­‐Front
>$75M,
Med
Device
M&A
Up
Front>$50M.
“Up-­‐Front”:
Up-­‐Front
defined
as
payments
in
a
structured
deal
not
including
milestones.
“Up-­‐Front
w/
Milestones”:
defined
as
payments
in
a
structured
deal
including
milestones.
“All-­‐In”:
Deals
where
the
total
value
is
paid
at
the
close
of
the
transacWon.
IPOs
include
Venture
Capital-­‐backed
IPOs
only.
Sources:
Investment
Bank
Reports,
VentureSource,
Press
Releases,
and
discussions
with
Life
Science
professionals.
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010 2011 2012 2013
TotalValue($Billion)
SVB - OIS 2014
Pre-Money Valuation Pre-IPO
Big Exit Milestones to be Earned
Big Exit Up-Front Payments

16. 16
Device: Big Exit M&A by Stage and Year (2009-2013)
Consistent Deal Values Across Stage in Device
0
2
4
6
8
10
12
14
16
18
2009 2010 2011 2012 2013
#ofBigExits
Non-Approved
CE Mark
U.S. Commercial
Private,
venture-­‐backed
Big
Exits
from
2009-­‐2013
over
$50M
Up-­‐Front.
Sources:
Press
Releases,
CB
Insights,
and
SVB
proprietary
data.
$325
/
$695
$411
/
$489
$296
/
$315
$200
/
$345
$804
/
$1,350
$150
/
$228
$78
/
$78
$123
/
$248
$208
/
$214
$137
/
$195
$100
/
$250
$129
/
$233
$220
/
$340
$147
/
$227
$191
/
$210
*Avg.
Upfront
/
Total
Deal
Value
($
M)
SVB - OIS 2014

17. 17
Top Indication Analysis (2009-2013): Device M&A >$50M
No Wonder Ophthalmology Gaining Early Stage Investment!
SVB
Proprietary
Data:
Private
Venture
Backed
Big
Exits
Average
MulWple
calculated
at
85%
of
value
divided
by
venture
equity
2009-­‐2013
#
of
Exits
Average
$
In
Average
Years
to
Exit
Average
Up-­‐Front
MulPple
Average
Total
Deal
MulPple
Average
Total
Deal
Value
($M)
Cardiovascular
12
68
6.5
3.8
7.0
416
Vascular
12
57
7.9
4.4
6.3
322
Imaging/DiagnosPcs
12
50
8.9
4.0
4.9
193
Surgical
9
50
8.1
3.0
3.6
211
Tools
7
36
5.3
5.2
7.3
207
Orthopedics
5
35
7.2
5.7
6.9
142
AesthePcs
3
5
3.0
56.9
56.9
242
Ophthalmology
3
76
6.0
5.0
8.7
515
Other
3
26
4.0
3.6
4.0
116
Respiratory
3
95
11.7
1.8
2.7
281
ENT
2
89
7.5
3.7
3.8
440
Metabolic
1
66
8.0
0.6
0.6
50
Uro/Gyn
1
28
4.0
3.8
3.8
125
OVERALL
AVERAGE
53
7.2
6.2
7.8
270

18. 18
Big
Exits:
2005-­‐Present.
Private
Biotech
M&A
Up
Front
>$75M,
“Up-­‐Front”:
Up-­‐Front
defined
as
payments
in
a
structured
deal
not
including
milestones
Big Exit Deals by Year and Stage 2005-2013: BioPharma
Are Acquirers Moving to Later Stage M&A Deals?
0
1
2
3
4
5
6
7
8
9
10
2005
2007
2009
2011
2013
2005
2007
2009
2011
2013
2005
2007
2009
2011
2013
2005
2007
2009
2011
2013
2005
2007
2009
2011
2013
Pre-Clinical Phase I Phase II Phase III Commercial
#ofBigExits
Pre-Clinical
Phase I
Phase II
Phase III
Commercial
2013
2013
2013
2013
2013
SVB - OIS 2014

19. 0
2
4
6
8
10
12
14
16
18
20
2009 2010 2011 2012 2013
#ofBigExits
Commercial
Phase III
Phase II
Phase I
Pre-Clinical
BioPharma: Big Exit M&A and IPOs by Stage and Year (;09-’13)
Early Stage M&A Candidates Spurn M&A for Hot IPO Valuations
Bar
graph
signals
Private
Biotech
M&A
Up-­‐Front
>$75M.
Circle
indicates
one
Venture
Capital-­‐backed
IPO.
Sources:
Investment
Bank
Reports,
Press
Releases,
and
discussions
with
Life
Science
professionals.
Represents 1 IPO
Represents 1 Big Exit
19SVB - OIS 2014

20. 20
Indication Analysis (2009-2013): BioPharma Big Exit M&A
SVB
Proprietary
Data:
Private
Venture
Backed
Big
Exits
2009-­‐2013
Number
of
Exits
Average
$
In
Average
Years
to
Exit
from
Series
A
Avg.
Up-­‐Front
MulPple
on
VC$
Invested
Structured
Deals?
Average
Total
Deal
Value
Oncology
19
88.8
7.5
9.0
18/19
$678M
Respiratory
9
66.2
5.0
2.9
8/9
$377M
CNS
8
57.2
4.3
3.4
7/8
$471M
Target
GeneraPng
Pla^orm
7
57.6
8.4
5.1
1/7
$261M
Cardiovascular
7
116.7
6.1
4.8
5/7
$473M
AnP-­‐InfecPves
5
60.8
4.2
4.7
3/5
$398M
Metabolic
3
55.9
5.3
13.3
3/3
$706M
Ophthalmology
3
86.7
5.9
1.5
3/3
$560M
Uro/Gyn
3
64.4
3.4
2.8
2/3
$358M
SVB - OIS 2014

21. 21
VC Backed BioPharma IPOs by Year (Thru 9/14)
What A Ride This Year!!!!
0
10
20
30
40
50
60
2011 2012 2013 2014
#ofIPOs
# of IPOs by year
0
10
20
30
40
50
60
2011 2012 2013 2014
#ofIPOs
Pre-Clinical Phase I Phase II
Phase III Commercial Pre-Approval
Stage by year
SVB - OIS 2014Source:
Venture
Source,
CB
Insights,
CapIQ,
SVB
Proprietary
data

22. 22
VC-Backed BioPharma IPOs by Indication (2011- Sep. 2014)
31% of IPOs were Pre Clinical of Phase I
0
5
10
15
20
25
Oncology
Anti-Infectives
CNS
Ophthalmology
Cardiovascular
Orphan
GI
Hematology
Anti-Inflammatory
Auto-Immune
AnimalHealth
Dermatology
DrugDelivery
Hepatic
ENT
Metabolic
Women'sHealth
Musculoskeletal
Respiratory
Technology
#ofIPOs
Pre-Clinical Phase I Phase II Phase III Commercial Pre-Approval
8%
Phase
I, 23%
Phase
II, 32%
Phase
III
27%
8% 2%
SVB - OIS 2014Source:
Venture
Source,
CB
Insights,
CapIQ,
SVB
Proprietary
data

23. 23
VC-Backed BioPharma IPOs Avg. Pre-Money Values and $ Raised (‘11-’14)
Dramatic Drop in IPO Value and Dollars so far in 2014
0
50
100
150
200
250
300
350
400
2011 2012 2013 2014
Average$(Millions)
Estimated pre-money IPO Amount Raised
SVB - OIS 2014Source:
Venture
Source,
CB
Insights,
CapIQ,
SVB
Proprietary
data

24. 24
VC Backed BioPharma IPOs: Pre-Money and $ Raised By Quarter (‘12- Q3 ’14)
Dramatic Drop Since Apex in Q3’13
Pre-Money Valuations $ Raised at IPO
0
100
200
300
400
500
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014
Average$(Millions)
Estimated pre-money Year Average
0
50
100
150
200
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014
Average$(Millions)
IPO Amount Raised Year Average
SVB - OIS 2014Source:
Venture
Source,
CB
Insights,
CapIQ,
SVB
Proprietary
data

25. VC-Backed IPO: Avg Pre-Money Valuation by Stage (Thru Sep. ‘14)
Ophthalmology: IPO Jump in ‘14 at Slightly Lower than Avg. Pre $
Number:
3
2
1
0
0
Avg
302
81
102
Pre-­‐Clinical
168
Phase
I
Phase
II
102
Phase
III
369
81
Commercial
Number:
11
3
0
2
3
Avg
293
217
323
230
Pre-­‐Clinical
632
Phase
I
341
Phase
II
137
142
Phase
III
217
323
273
Commercial
2013
Number:
9
6
8
5
3
Avg
169
75
163
145
124
Pre-­‐Clinical
135
359
157
Phase
I
201
126
95
104
Phase
II
41
65
131
104
106
Phase
III
202
200
Commercial
202
159
2014
2012
Top 5 BioPharma Indications
SVB - OIS 2014Source:
Venture
Source,
CB
Insights,
CapIQ,
SVB
Proprietary
data

26. Thank you!!!
26