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MaRS Best Practices Series

Special Valuation Series Nov. 12th, 2010

MaRS Best Practices Special Valuation Series

Friday Nov 12th @ Noon

Raymond King, Senior Manager Toronto Stock Exchange

Wayne Schnarr, Analyst, Equicom Toronto Stock Exchange

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A Capital Opportunity for Life Science Companies Listing on Toronto Stock Exchange and TSX Venture Exchange

Raymond D. King, MBA Senior Manager, Global Diversified Industrials

Listings Business Development

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Who is TMX Group?

Toronto Stock Exchange and TSX Venture Exchange

Life Science Sector

Going Public

Outline

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7th largest exchange group By domestic market cap1

1st in North America

2ndglobally

By number of issuers1

TMX Group - Global Leader in Equities

6th largest exchange group By equity capital raised2

1Issuers on TSX and TSXV (WFE, June 2010) 2(WFE and Capital IQ, Dec 2009)

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North American Equity Stock Market Continuum

OTC - Pink Sheets

OTCBB

NASDAQ

NYSE

• Minimal/No listing standards

• Senior listing standards

• Disclosure rules • Junior listing

standards

CNSX

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2,177 companies 20 graduates in First Half 2010 20 graduates in 2009 45 graduates in 2008

1,488 companies

TSX Venture Exchange

•  Access to capital for earlier stage companies or smaller financings

•  Total market cap of $38 Billion & average market cap of $17.4MM

•  Cost effective stepping stone for international companies looking to list on a quality North American market

•  Exchange mandate to mentor management of newly public companies

•  Streamlined graduation to TSX when senior market requirements are met

•  103 year history

Toronto Stock Exchange

•  Senior market for well established businesses and management teams with experience in public markets

•  Total market cap of $1.8 Trillion & average market cap of $1.2B

•  30% of TSX issuers >$500M are interlisted on a US exchange

•  Access to larger, more international institutional investors and greater analyst coverage

•  Globally visible specialized indices

•  157 year history

Unique Equity Market Structure

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TMX Group Serves Companies at all Stages of Growth

Market Capitalization Toronto Stock Exchange and TSX Venture Exchange

Unique feeder system

471 graduates + 85 M&A*

*From January 1, 2000 – June 30, 2010

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Toronto Stock Exchange issuer base: 1,488 issuers, ~$1.8 trillion market cap TSX Venture Exchange issuer base (excludes NEX): 2,177 issuers, ~$37.7 billion market cap

As at June 30, 2010

514 Issuers

498 Issuers

476 Issuers

2016 Issuers 142

19 Issuers

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International Investment Community Trades on Toronto Stock Exchange

25 International Brokers including: Barclays Capital Citigroup CSFB Deutsche Bank Goldman Sachs HSBC JP Morgan Macquarie Capital Markets Merrill Lynch Morgan Stanley Raymond James Thomas Weisel State Street UBS

80 Canadian Brokers including: BMO Nesbitt Burns Canaccord Genuity CIBC World Markets GMP Securities RBC DS Scotia Capital Markets TD Securities National Bank Financial

~35% of daily trading originates from International brokers

Volume CAGR 14%

Transactions CAGR 37%

Toronto Stock Exchange Volume and Transactions (2004-2009)

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Who is TMX Group?

Toronto Stock Exchange and TSX Venture Exchange

Life Science Sector

Going Public

Outline

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TMX Group’s Equity Exchanges Support a Diverse Issuer Base

Number of Issuers by Sector

Includes issuers on Toronto Stock Exchange and TSX Venture Exchange (100% = 3665)

As at June 30 2010

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Why Companies Consider TSX and TSX Venture Exchange

Unique Public Market for small to mid cap companies

•  Access to Capital

•  Liquidity

•  Visibility

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Access to Capital: 2009 was a record year for financing on TMX Group Equity Exchanges

*NOTE: TSX Venture Exchange commenced operations on November 29 1999

Toronto Stock Exchange and TSX Venture Exchange Total Financings (C$Billions) 1999 – 2010 August

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TSX and TSX Venture Exchange have shown consistent growth in liquidity

Billions of Shares

Toronto Stock Exchange Volume of Shares Traded

Billions of Shares

TSX Venture Exchange Volume of Shares Traded

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TMX Group Listing can Provide Analyst Visibility

872 TSX Companies get Analyst Coverage

Source: Capital IQ, December 31 2009

4 Average Number of Analysts Covering

TSX Cos.

259 TSXV Companies get

Analyst Coverage

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Who is TMX Group?

Toronto Stock Exchange and TSX Venture Exchange

Life Science Sector

Going Public

Outline

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Life Sciences Companies By The Numbers

136 Life Sciences Cos.

$11B Market Cap

$367M Raised Through 84

Financings

4B Shares Traded

Through 2.4Million Transactions

Average Number of Analysts Covering Life Sciences Cos:3

7 New Life Sciences

Listings

YTD Dec 31 2009 Analyst Coverage Source: Capital IQ

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Who is TMX Group?

Toronto Stock Exchange and TSX Venture Exchange

Life Science Sector

Going Public

Outline

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Benefits of Going Public

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Methods for Going Public on Toronto Stock Exchange or TSX Venture Exchange

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•  IPO market window closed

•  Listing certainty needed – removes underwriting risk

•  Financing amount below a minimum IPO floor

•  Lower up-front costs

•  A private placement can be escrowed until reverse merger completed

When to Pursue an IPO vs. a CPC™ Transaction

CPC™ IPO

•  Demand for primary distribution

•  Scale and liquidity criteria met

•  Limited transaction timeline constraints

•  Sufficient capital to fund up-front costs

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Capital Pool Company™ (CPC) Program has a Strong Track Record

Since inception in 1987: • Over 2095 CPCs have been created • 80% have completed their QT – over 1660 companies

• 332 Graduates now trade on TSX • 96 of the grads were CPCs

As at June 30 2010

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CPC Acquires Business (QT)

Public Financing and CPC Trades

Seed 24 Months Maximum

Capital Pool Company: Process

Aftermarket and Growth

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Seed Financing •  seed financing of the company by 3-5 Founders/Directors

CPC IPO •  a prospectus offering to create a corporate vehicle with public

distribution

Qualifying Transaction (QT) •  a target business is identified, disclosed and acquired

Aftermarket and Growth •  company trades and executes its business plan

Capital Pool Company: Milestones

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CPC Acquires Business (QT)

Public Financing and CPC Trades Seed

24 Months Maximum

Qualifying Transaction

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Considerations for a Qualifying Transaction:

•  Significant growth opportunity & reason to be public

•  Strong & coachable management

•  Capital needs: $5+ Million

•  Close to or at commercialization

•  Meets minimum listing and audit requirements

•  Stock options and acquisition currency

•  Strong market appetite

•  12 to 18 month cash requirements (can be financed)

Selecting a QT Candidate

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Consider this…

Success Factors:

•  Lots of cash on closing

•  Market interest and understanding

•  Deliver in short term post closing

•  Reasonable valuation – not always maximum valuation

Potential Pitfalls:

•  Listing requirements shortfalls

•  Insufficient cash/working capital on closing

•  Valuation versus escrow regime (TSXV Policy 5.4)

•  PIFs - timing and impact on circular

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CPC Acquires Business (QT)

Public Financing and CPC Trades Seed

24 Months Maximum

Aftermarket and Growth

Aftermarket and Growth

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Consider this…

Success Factors:

•  Press release clarity / quality

•  Broker management and support

•  Timely disclosure against published milestones (good and bad)

Potential Pitfalls:

•  Orphan status

•  Mistrust of management’s willingness to communicate

•  Market fluctuations

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Listing Requirements – Life Sciences

TSX Venture Exchange Toronto Stock Exchange

Tier 1 Tier 2

Net Tangible Assets, Revenue or Financing

$5 million NTA OR $5 million revenue

$750,000 NTA OR $500,000 revenue OR $2 million arm’s length financing

Adequate Working Capital Adequate for 18 months plus $200,000 unallocated funds

Adequate for 12 months plus $100,000 unallocated funds

Funds to cover all R&D and capital expenditures for 2 years

Cash in Treasury Minimum $12 million raised via prospectus offering

History History of operations or validation of business Minimum 2 year history of R&D activities

Distribution • Public float of 1 million shares • 250 board lot shareholders • 20% of issued and outstanding

shares in hands of public shareholders

• Public float of 500,000 shares • 200 board lot shareholders • 20% of issued and outstanding

shares in hands of public shareholders

• 1 million free trading public shares

• $4 million held by public • 300 public board lot

shareholders

Sponsorship Generally required

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Disclaimer

This document is for information purposes only and is not an invitation to purchase securities listed on Toronto Stock Exchange and/or TSX Venture Exchange or Natural Gas Exchange. TMX Group Inc. and its affiliates do not endorse or recommend any securities referenced in this document. Please seek professional advice to evaluate specific securities. While the information herein is collected and compiled with care, neither TMX Group Inc. nor any of its affiliated companies represents, warrants or guarantees the accuracy or the completeness of the information. You agree not to rely on the information contained herein for any trading, business or financial purpose. This information is provided with the express condition, to which by making use thereof you expressly consent, that no liability shall be incurred by TMX Group Inc. and/or any of its affiliates as a result of any errors or inaccuracies herein or any use or reliance upon this information. © 2010 TMX Group Inc.

Diversified Industrials Raymond King 416 947-4675 raymond.king@tsx.com