Silicon Valley Bank

Venture Healthcare – Industry Update OIS 2014 October 16, 2014

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 [email protected] 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

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

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Bill

ions

Total VC $ BioPharma Device

Source: PricewaterhouseCoopers, Silicon Valley Bank

$99

SVB - OIS 2014

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 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

Bill

ions

Gap in Funding HC $ Fundraised HC $ Invested % Overfunded

SVB - OIS 2014

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

# of

Dea

ls

# of

Dea

ls

Corporate Venture as part of Series A syndicate Venture-backed Series A

Corporate Venture as part of Series A syndicate Venture-backed Series A

Tota

l $ In

vest

ed (M

)

Tota

l $ In

vest

ed (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 Invested Total Dollars Invested

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

# of

Dea

ls 85%

15%

SVB - OIS 2014

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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

# of

Dea

ls

SVB - OIS 2014

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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

# of

Dea

ls

90%

10%

SVB - OIS 2014

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

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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

# of

Dea

ls

56% 44%

SVB - OIS 2014

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

# of

Dea

ls

56%

44%

SVB - OIS 2014

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

# of

Big

Exi

ts

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

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 professionals. MulWples are calculated based on all-‐in and up-‐front amounts and do not include milestones

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

# of

Dea

ls

Dea

l Siz

e ($

M)

# of

Dea

ls

Dea

l Siz

e ($

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

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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

Tota

l Val

ue ($

Bill

ion)

SVB - OIS 2014

Pre-Money Valuation Pre-IPO Big Exit Milestones to be Earned Big Exit Up-Front Payments

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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

# of

Big

Exi

ts

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

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 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 20

05

2007

20

09

2011

20

13

2005

20

07

2009

20

11

2013

20

05

2007

20

09

2011

20

13

2005

20

07

2009

20

11

2013

20

05

2007

20

09

2011

20

13

Pre-Clinical Phase I Phase II Phase III Commercial

# of

Big

Exi

ts

Pre-Clinical Phase I Phase II Phase III Commercial

2013

2013

2013

2013

2013

SVB - OIS 2014

0 2 4 6 8

10 12 14 16 18 20

2009 2010 2011 2012 2013

# of

Big

Exi

ts

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

19 SVB - OIS 2014

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

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

# of

IPO

s

# of IPOs by year

0

10

20

30

40

50

60

2011 2012 2013 2014

# of

IPO

s

Pre-Clinical Phase I Phase II Phase III Commercial Pre-Approval

Stage by year

SVB - OIS 2014 Source: Venture Source, CB Insights, CapIQ, SVB Proprietary data

22

VC-Backed BioPharma IPOs by Indication (2011- Sep. 2014) 31% of IPOs were Pre Clinical of Phase I

0

5

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20

25 O

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ogy

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Orp

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Ant

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Aut

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Hea

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skel

etal

R

espi

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ry

Tech

nolo

gy #

of IP

Os

Pre-Clinical Phase I Phase II Phase III Commercial Pre-Approval

8%

Phase I, 23%

Phase II, 32%

Phase III

27%

8% 2%


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

Aver

age

$ (M

illio

ns)

Estimated pre-money IPO Amount Raised


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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

Aver

age

$ (M

illio

ns)

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

Aver

age

$ (M

illio

ns)

IPO Amount Raised Year Average


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


Thank you!!!

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Silicon Valley Bank

Healthcare

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