GHP September 2015

Trends in Healthcare Investments and Exits – First Half 2015 Update Biopharma There are many very large private financings, mostly involving non-VC crossover investors and typically including groups of two or three crossovers per deal. With 24 IPOs in 1H, we see the robust activity showing no sign of slowing down. IPO optionality translates to a high number of early 1H M&A deals (10). Device Round sizes are up, helped by new crossover investor attention. IPOs are set to outpace 2014, with seven in 1H. M&A heated up in Q2 after no activity in Q1, as Medtronic gets back in the game. Dx/Tools Except for two large rounds (Adaptive and Natera), Q2 was a slow quarter. Compared to 2014, M&A activity in 1H dipped, but IPOs appear on pace to match. • The volume of Q2 M&A remained steady with four exits, building on the seven in Q1. This sets the stage to top 2014 M&A transactions (14). • Q1 M&A saw earlier stage assets (3/7 pre-clinical), and Q2 continued that trend with 3/4 pre-clinical or Phase I. IPO optionality is at play, as acquirers look to snap up early-stage companies with compelling technology and large markets prior to an IPO (see Q1 example Flexus). • Deal size in M&A has held relatively steady in comparison to the last two years, with median upfront at $200M and median total deal value at $400M. • We remain firm on our prediction in March 2015 of 45-55 biopharma IPOs for the year. • Eleven of 24 IPOs 1H had participation from crossovers. Of the six IPOs that raised more than $100M, five were backed by top crossovers (lone outlier was Seres). • IPO breakdown: pre-clinical (4); Phase I (6); Phase II (11); Phase III (2); FDA approved (1); over 40 percent IH early stage (pre-clinical + Phase I). This activity mirrors what we saw in 2014. Key Takeaways Biopharma Private Financings M&A IPO Biopharma Exits by Quarter Q1 Q2 Q3 Q4 Total 2013 IPO 3 10 11 8 32 M&A 3 3 4 4 14 2014 IPO 24 12 17 13 66 M&A 3 4 6 1 14 2015 IPO 11 13 24 M&A 7 4 11 Source: CB Insights, press releases and SVB proprietary data *Top 5 financings from Q1 and top 10 from Q2 to focus on most recent trends Pre-Clinical 60% Phase II 27% Phase I 13% Series B 46% Series C+ 47% Series A 7% Biopharma Crossover Activity: Participated in 13/15 Financings Biopharma Clinical Phase Biopharma Round of Financing Top 15* Biopharma Venture-Backed Financings Range $56M - $500M Median $76M For this mid-year update, we analyzed private, venture-backed healthcare activity from January-June 2015. The pullback in global equity markets in late August has impacted this sector, however we believe that the fundamentals of the healthcare venture market continue to be strong. We will be carefully watching to see how IPOs now in the pipeline perform and if investing patterns by crossover investors change. Exit Activity