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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 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)
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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
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
# of
Dea
ls
SVB - OIS 2014
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
# 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
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
# 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
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>$50M. “Up-‐Front”: Up-‐Front defined as payments in a structured deal not including milestones. “Up-‐Front w/ Milestones”: defined as payments in a structured deal including milestones. “All-‐In”: Deals where the total value is paid at the close of the transacWon. IPOs include Venture Capital-‐backed IPOs only. Sources: Investment Bank Reports, VentureSource, Press Releases, and discussions with Life Science professionals.
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010 2011 2012 2013
Tota
l Val
ue ($
Bill
ion)
SVB - OIS 2014
Pre-Money Valuation Pre-IPO Big Exit Milestones to be Earned Big Exit Up-Front Payments
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
# 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
10
15
20
25 O
ncol
ogy
Ant
i-Inf
ectiv
es
CN
S
Oph
thal
mol
ogy
Car
diov
ascu
lar
Orp
han GI
Hem
atol
ogy
Ant
i-Inf
lam
mat
ory
Aut
o-Im
mun
e A
nim
al H
ealth
D
erm
atol
ogy
Dru
g D
eliv
ery
Hep
atic
E
NT
Met
abol
ic
Wom
en's
Hea
lth
Mus
culo
skel
etal
R
espi
rato
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%
SVB - OIS 2014 Source: Venture Source, CB Insights, CapIQ, SVB Proprietary data
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
SVB - OIS 2014 Source: Venture Source, CB Insights, CapIQ, SVB Proprietary data
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
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
SVB - OIS 2014 Source: Venture Source, CB Insights, CapIQ, SVB Proprietary data
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 2014 Source: Venture Source, CB Insights, CapIQ, SVB Proprietary data
Thank you!!!
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