Trends in Healthcare Investments and Exits 2016

Trends in Healthcare
Investments and Exits 2016
Investor Confidence and Innovation Drive
Healthcare Venture to New Heights
Written by
Jonathan Norris
Managing Director
Silicon Valley Bank
M 650.575.1377
jnorris@svb.com
@jonnysvb
Paul Schuber
Valuations Associate
SVB Analytics
Caitlin Tolman
Senior Associate
Silicon Valley Bank

2
Table of Contents
3 Overview
4 Healthcare Venture Fundraising and Investment: A Year of RecordHighs
16 Crossover Activity Peaks in Q3, Slows in Q4
19 Healthcare Venture Exits: M&A Climate Improves as IPOs Slow
34 2016 Outlook
35 Glossary
36 Authors

3
2015: Another Banner Year for Healthcare
At the start of 2015, it was hard to imagine that we would have another year as successful as
2014. And yet, by most measures, 2015 came very close.
• Led by a blockbuster M&A deal at the end of the year, potential returns to investors in 2015 rocketed to a new
high. By SVB estimates, three years of strong performance has generated more than $55 billion in potential value
back to investors.
• With record investments in biopharma, 2015 saw more capital invested in healthcare VC-backed companies
than in any other year.
• Non-traditional “crossover investors” increased activity, participating in large mezzanine rounds to take advantage
of the biopharma IPO market.
• While IPOs dipped versus 2014, the public markets continued to be receptive to healthcare companies. Also,
many companies going public in the past two years had very successful public follow-on fundings.
• Biopharma M&A activity increased, culminating in AstraZeneca’s $4 billion payment to Acerta in
December 2015.
• Higher returns, greater investor confidence and faster investment cycles led some funds to raise again within two
years of their previous fund.
• Such a speedy fundraising cycle means venture healthcare has fresh capital to support existing investments and
create new ones, and create a critical cash cushion as IPOs decline and crossover investors pull back.
Despite the slowdown in Q4, the healthcare industry is poised for a strong 2016, though activity
likely will not match 2015.

4
Healthcare Venture Fundraising and
Investment: A Year of Record Highs

5
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
$55
$60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 3Q'15
$BillionsU.S. Healthcare Venture Investment Hits 15-Year High
Healthcare as Percentage of Total Venture Investment
Venture investments in healthcare were projected to reach $9.4 billion in 2015, the highest level since 2000.
Biopharma venture investments reached a record $7 billion, and device remained steady at $2.4 billion.
Total VC Dollars
($B)
$105 $41 $22 $20 $23 $23 $28 $32 $30 $20 $23 $30 $28 $30 $51 $59
Biopharma 4% 9% 15% 19% 19% 17% 18% 19% 17% 19% 17% 16% 15% 15% 12% 12%
Device 2% 5% 8% 8% 8% 9% 10% 11% 12% 13% 11% 10% 9% 7% 5% 4%
$105
Total VC$ % Biopharma % Device
*Projected total for 2015
Source: PricewaterhouseCoopers, Thomson Reutersand SVB proprietary data
Thomson Reuters data includes life science anddx/tools inbiopharma and device categories.
2015*

6
Strong Biopharma M&A and IPO Market Drive
Investment and Fundraising
U.S. Healthcare: Venture Dollars Invested and Raised Fundraising and investment each grew
by 10 percent in the past year.
SVB analysis found crossover investors
deployed more than $1.2 billion in
venture-backed pre-IPO rounds, as
these investors rushed to get a foot in
the door ahead of the IPOs. However,
after peaking in Q3, crossover
investment activity significantly declined
in Q4.
While not included in this fundraising
data, corporate venture investment
continued to add critical capital to
venture-backed life science companies.
The strong levels of 2015 fundraising
should provide ample capital to support
new companies over the next few years,
which will prove critical as IPOs slow
and crossover activity decreases.
Declining capital flow ratio in the past
five years is a positive development,
indicating that fundraising is keeping a
closer pace with investments.
Capital Flow
Ratio
127% 353% 211% 182% 169% 140% 139%
*Projected total for 2015
Source: PricewaterhouseCoopers, Thomson Reutersand SVB proprietary data
$9.4B
$6.8B
0
1
2
3
4
5
6
7
8
9
10
2009 2010 2011 2012 2013 2014 2015 Proj
$Billions
HC VC $ Invested into Companies HC VC $ Fundraised Gap in Funding
2015*

7
46 45 45
17
0
40
80
120
#ofDeals
Biopharma Series A Investment Dollars Surge while
Device and Dx/Tools Struggle
Source: VentureSource,PitchBook, CB Insightsand SVB proprietary data
Biopharma Series A investment
amounts skyrocketed,fueled by
considerably larger deal sizes: 36
percent of deals raised at least
$20 million.
Quick paths to exit drew crossover
investors into Biopharma Series A.
Corporate venture also remained
active, participating in more than a
quarter of all Series A deals.
Declining investor interestin device
led to a drop in new company
formations, and the majority of
Series A rounds were less than
$5 million.
Dx/tools faced challenges due to
commercial reimbursement issues,
regulatory uncertainty and difficulty
protecting IP.
76
59
81
97
0
40
80
120
2012 2013 2014 2015
#ofDeals
Total Series A ($M) $776 $1,102 $823 $1,871
CVC Deals % / # 22% / 17 29% / 17 27% / 22 29% / 28
BIOPHARMA
35 34 39
22
0
40
80
120
#ofDeals
Total Series A ($M) $212 $215 $327 $96
CVC Deals % / # 9% / 3 18% / 6 15% / 6 32% / 7
DEVICE
Total Series A ($M) $331 $257 $354 $165
CVC Deals % / # 4% / 2 11% / 5 9% / 4 24% / 4
DX/TOOLS
U.S. Company Formation: Deals and Investments in Series A

8
Venture Capital and Corporate Venture
Accelerate Investing Pace
*Most active defined astop 60 investorsbased on new investments
Source: CB Insights, press releases, PitchBookand SVB proprietary data
Of the top venture capital investors,
three (OrbiMed, Sofinnova, Venrock)
joined crossover syndicate partners
in at least 50 percent of their 2015
new deals.
Top biopharma investor OrbiMed
Advisors raised a $950M fund in
late 2015 and is likely to remain
very active.
WuXi Venture Fund separated from
its corporate parent and in Q4 raised
a traditional venture fund.
GlaxoSmithKline appears on the
CVC list twice: For its corporate
venture arm (SR One) and for its
early-stage parent company
investments, many of which are with
Avalon Ventures.
Top VC Biopharma
INVESTOR DEALS TOTAL $
OrbiMed Advisors 30 $1,300M
Novo 20 $736M
NEA 19 $713M
Versant Ventures 16 $376M
Sofinnova Ventures 15 $742M
Fidelity Biosciences 12 $586M
Venrock 11 $705M
ARCH Venture
Partners
11 $630M
MPM Capital 10 $236M
Atlas Venture 10 $143M
Top CVC Biopharma
JJDC 18 $235M
Novartis Venture
Funds
13 $321M
SR One 11 $305M
Pfizer Venture
Investments
9 $221M
Celgene 8 $260M
WuXi Venture Fund 8 $204M
Roche Venture Fund 7 $198M
Lilly Ventures 7 $106M
Partners HealthCare
Innovation
7 $104M
GlaxoSmithKline 6 $92M
Most Active* New VC Investors in Biopharma 2014-15:
Venture Capital and Corporate Venture Capital

9
Oncology Leads New Biopharma Investments
Oncology
72 deals
$2,492M
Platform
31 deals
$871M
Anti-Infectives
28 deals
$610M
CNS
25 deals
$743M
Rare/Orphan
20 deals
$664M
Metabolic
13 deals
$354M
Auto-Immune
8 deals
$211M
Respiratory
7 deals
$248M
Ophthalmology
8 deals
$303M
GI
5 deals
$125M
Cardio
5 deals
$111M
Most Active* New VC Investments in Biopharma by Indication 2014-15
Oncology raised nearly 3X the dollar amounts of the next most active indication.
Anti-infectives jumped from #9 to #3 in total deals in one year, while rare/orphan and metabolic deals doubled. CNS,
ophthalmology and oncology posted the largest average deal sizes.

10
New Biopharma Hubs Emerge Outside the U.S.
Most Active* New VC Investments in Biopharma by Geography 2014-15
Northern
CA
48 deals $1,763M
Southern
CA
26 deals $592M
Canada
8 deals $218M
Top 5 U.S. Biopharma Top 5 OUS Biopharma
United
Kingdom
11 deals 410M
France
7 deals $98M
China
6 deals $48M
Switzerland
7 deals $175M
MA
46 deals $1,588M
TX
10 deals $376M
PA
7 deals $261M

11
Top Device Investors Ramp Up New Investment Activity
Top VC Device
NEA 8 $136M
Life Sciences
Partners
7 $200M
Windham Venture
Partners
7 $183M
OrbiMed Advisors 6 $240M
Lightstone Ventures 6 $117M
Novo 5 $136M
Venrock 4 $150M
Ally Bridge Group 4 $148M
5AM Ventures 4 $124M
BioStar Ventures 4 $54M
Top CVC Device
Boston Scientific 7 $75M
Cleveland Clinic
Innovations
5 $4M
JJDC 4 $60M
Xandex Investments 3 $3M
GE Ventures 2 $66M
Most Active* New VC Investors in Device 2014-15:
Venture Capital and Corporate Venture Capital
New entries to the top investors list
included Windham Venture Partners
(later-stage focused), Life Sciences
Partners (mostly OUS), 5AM (focus on
drug/device combinations) and Ally
Bridge Group (Hong Kong-based).
On the corporate side, JJDC and
Boston Scientific increased their
investing appetite for device
companies.

12
Cardiovascular continues to be the most active. Orthopedics and vascular surpassed neuro and ophthalmology
in the #2 and #3 spots.
Drug delivery devices made the list for the first time, and this indication likely will continue to gain traction.
Cardiovascular, Orthopedics
Lead New Device Investments
Most Active* New VC Investments in Device by Indication 2014-15
Cardiovascular
20 deals
$368M
Orthopedics
12 deals
$159M
Dermatology
6 deals
$107M
Drug
delivery
6 deals
$60M
Vascular
10 deals
$185M
Surgical
9 deals
$225M
Ophthalmology
7 deals
$198M
Uro/Gyn
4 deals
$123M
Neuro
5 deals
$9M
ENT
4 deals
$90M

13
Device Gains International Attention
Most Active* New VC Investments in Device by Geography 2014-15
Top 5 U.S. Device Top 5 OUS Device
Northern
CA
32 deals $629M
Southern
CA
7 deals $207M
MN
10 deals $194M
OH
4 deals $22M
MA
9 deals $142M
United
Kingdom
3 deals $46M
Ireland
4 deals $28M
Switzerland
6 deals $110M
Austria
1 deal $13M
China
1 deal $15M

14
Top CVC Dx/Tools
WuXi Venture Fund 5 $193M
Novartis Venture
Funds
3 $113M
Qiagen 3 $50M
GE Ventures 2 $62M
Celgene 2 $50M
JJDC 2 $35M
Siemens Venture
Capital
2 $23M
Mayo Medical
Ventures
2 $10M
Dx/Tools Captures Interest of Larger VCs
Top VC Dx/Tools
OrbiMed Advisors 5 $155M
Khosla Ventures 5 $61M
ARCH Venture
Partners
4 $115M
Morningside Group 3 $16M
Serra Ventures 3 $9M
Baird Capital 2 $68M
Canaan Partners 2 $45M
Life Sciences
Partners
2 $35M
Novo 2 $33M
HealthQuest Capital 2 $24M
Most Active* New VC Investors in Dx/tools 25:
Venture Capital and Corporate Venture Capital 2014-15
A number of larger venture capital
investors who are more active in other
sectors made some bets in dx/tools.
China-based investors WuXi Venture
Fund and Morningside Group
increased investments in dx/tools,
joining the top investor list.
Potential acquirers, including big
pharma and biotech, also increased
their appetite.

15
Canada
3 deals $39M
United
Kingdom
4 deals $40M
Northern CA Continues as Most Active
Region for Dx/Tools
Top 5 U.S. Dx/Tools Top 5 OUS Dx/Tools
Most Active* New Investments in Device by Geography 2014-15
Northern
CA
15 deals $559M
Southern
CA
7 deals $112M
TX
2 deals $21M
MO
2 deals $42M
MA
9 deals $196M
Germany
4 deals $36M
Israel
4 deals $35M

16
Crossover Activity Peaks in Q3, Slows in Q4
CROSSOVER INVESTOR 2013 2014 Q1’15 Q2’15 Q3'15 Q4'15 2013-15
RA Capital 4 12 7 5 9 4 41
Rock Springs Capital 1 8 5 5 7 3 29
Deerfield Management 5 11 1 5 3 3 28
Foresite Capital 4 5 3 4 4 2 22
Fidelity Investments 0 2 3 4 11 1 21
Cormorant 0 0 0 5 8 4 17
Jennison Associates 1 3 3 3 7 0 17
Perceptive Advisors 1 6 1 4 2 3 17
EcoR1 Capital 1 4 2 3 5 1 16
Redmile Group 2 7 0 2 3 2 16
Casdin Capital 4 2 0 5 2 1 14
Wellington Management 0 5 2 5 1 1 14
Adage Capital Management 1 6 2 0 2 0 11
Woodford Investment 0 4 0 3 4 0 11
Sabby Capital 0 6 1 1 1 0 9
Total Deals 24 81 30 54 69 25 283
Top Crossover Investors by Deals 2013-15 SVB analysis shows that the top 15
crossover investors poured more than
$1.2 billion into private venture-
backed healthcare companies in
2015.
Crossover activity peaked in Q3 at 69
deals. Each of the top 10 biopharma
deals in Q3 raised more than $75M,
and eight of the 10 deals included at
least one crossover investor.
However, the pace of investment by
crossovers slowed abruptly in Q4.
Looking ahead, we expect these
investors to continue to cautiously
invest, but grow more focused on
moving their private portfolio
companies into the public markets.

17
Biopharma Gets Lion’s Share of Crossover Deals
Top Crossover Investors by Sector 2013-15
Top Biopharma Crossover Investors
INVESTOR DEALS
RA Capital 35
Rock Springs Capital 26
Deerfield Management 22
Fidelity Investments 19
Foresite Capital 18
Cormorant 16
EcoR1 Capital 16
Jennison Associates 16
Perceptive Advisors 16
Redmile Group 14
Top Device Crossover Investors
INVESTOR DEALS
Deerfield Management 6
RA Capital 4
Foresite Capital 3
Redmile & 9 others 1
Top Dx/Tools Crossover Investors
INVESTOR DEALS
Casdin Capital 6
RA Capital 2
Rock Springs Capital 2
Woodford Investment 2
Foresite & 6 others 1

18
SeriesB
30 deals
SeriesC
25 deals
SeriesD
12 deals
Series A
9 deals
SeriesE+
5 deals
Series E+
9 deals
Series B
7 deals
SeriesC
5 deals
SeriesD
2 deals
SeriesA
1 deal
Top Crossover Investors Flock to Series B Mezzanine
Rounds and Series A Deals Double
Distribution of Round for Crossover Investments 2013-15
2013 Distribution
Biopharma Device Dx/Tools
62.5% 20.8% 16.7%
2014 Distribution
88.9% 7.4% 3.7%
2015 Distribution
89.9% 4.5% 5.6%
2013
SeriesB
79 deals
SeriesD
22 deals
SeriesC
37 deals
Series A
25 deals
SeriesE+
15 deals
2014 2015
Series A Series B Series C Series D Series E+

19
Healthcare Venture Exits:
M&A Climate Improves as IPOs Slow

20
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
22.0
24.0
2009 2010 2011 2012 2013 2014 2015
TotalValue($Billions)
2015 Sets Record for Healthcare Investment Returns
Pre-Money
IPO Value ($B)
$0.1 $1.8 $1.2 $2.1 $8.8 $12.1 $11.6
Big Exit
Upfront
Payments ($B)
$4.5 $4.1 $6.6 $4.3 $5.4 $8.0 $9.9
Big Exit
Milestones to
be Earned ($B)
$0.9 $1.1 $1.0 $1.8 $0.8 $1.0 $2.2
Pre-Money IPO ValueBig Exit Milestones to be EarnedBig Exit Upfront Payments
Source: Investment bankresearch, VentureSource pressreleases, CB Insights, and discussions with life science
professionals
Potential Distributions* from VC-Backed IPOs
and Big Exit M&A 2009-15
In 2015, returns reached a record
$23.6 billion, driven in part by
AstraZeneca's $4 billion payment to
Acerta in December.
In the last three years, potential
distributions to investors reached
more than $55 billion — a key reason
behind the large increase in venture
fundraising.
While IPOs dipped in 2015, IPO pre-
money values soared; Biopharma
pre-money values grew40 percent
over 2014.
*Potential distributions are
calculated assuming 75 percent
venture ownership for upfront
payments. IPOs are based on the
pre-money valuation assuming 75
percent venture ownership. M&A
milestone payments are
discounted to 25 percent.

21
Biopharma M&A Grows as IPO Market Slows
Q1 Q2 Q3 Q4 Total
2013
IPO 3 10 11 8 32
M&A 3 3 4 3 13
2014
IPO 24 12 17 13 66
M&A 3 4 6 1 14
2015
IPO 11 13 9 10 43
M&A 7 4 6 4 21
VC-backed Biopharma Exits by Quarter 2013-15 M&A activity increased in 2015, as
leading acquirers sought target
companies before they went public.
IPOs slowed as a result, but still
exceeded 2013 totals.

22
Early-Stage Companies Dominate Biopharma IPOs
VC-backed Biopharma IPOs by Stage 2012-15 For the second year in a row, 40
percent of biopharma IPOs in 2015
were pre-clinical or phase Istage.
Early-stage focus crossed multiple
indications, with oncology, anti-
infectives, cardiovascular,CNS and
metabolic each obtaining at least two
pre-clinical or phase IIPOs.
Even in 4Q, with heavy discounts in
some cases in order to get out, five of
nine IPOs were pre-clinical or phase I.
Stage 2012 2013 2014 2015 Total
Pre-Clinical 1 1 9 9 20
Phase I 0 8 20 9 37
Phase II 3 12 26 18 59
Phase III 6 8 6 6 26
Development Animal 0 2 0 0 2
Commercial 0 1 5 1 7
Total 10 32 66 43

23
$61
$72
$62
$50
$70
$106
$63
$202
$174
$141
$95
$166
$266
$220
$-
$50
$100
$150
$200
$250
$300
2012 2013 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
MedianValue($Millions)
2015 saw a sharp uptick in biopharma
pre-money values, driving the 2015
median to nearly $200 million. Q4
posted a surprisingly high median of
$220 million.
Despite the overall decline in IPOs in
2015, the number of $100 million
biopharma IPOs increased
compared to 2014.
Healthy invested capital multiples in
Q4 — highest in the current IPO
window — indicate that only the
strongest IPOs went to market, as the
overall IPO market stalled.
Strong Crossover Activity Leads to
Improved Biopharma IPO Metrics
# of IPOs
Raising over
$100M
1 8 12 2 4 6 1
% of IPOs
Raising over
$100M
10% 25% 18% 18% 31% 67% 10%
Invested Capital
Multiple*
1.95x 2.00x 2.01x 2.03x 2.25x 2.46x 2.48x
*Invested Capital Multipleisthe pre-money IPO valuationdivided by privatecapital raised.
VC-backed Biopharma IPOs 2012-15:
Median Pre-Money and Dollars Raised
0
IPO $ Raised IPO Median Pre-Money

24
0
5
10
15
20
25
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
#ofBigExits
Biopharma M&A Activity
Reaches Highest Level in a Decade
# of Structured Deals # of All-In Deals
Median
Upfront ($M)
$230 $410 $346 $200 $200 $148 $208 $125 $200 $225 $200
Median Total
Deal ($M) $230 $435 $346 $285 $403 $325 $407 $375 $440 $413 $580
Median
Years to Exit 4.9 4.9 6.5 4.8 5.0 4.1 5.8 5.1 6.2 4.0 4.2
VC-backed Biopharma Big Exit M&A Deal Structure 2005-15 Venture-backed M&A deals reached
their highest level since we started
tracking the data in 2005.
In 2015, upfront deal value was flat,
but the median total deal value
reached a decade-high $580 million.
The time to exit dropped dramatically
in the past two years, underscoring
acquirers' appetite for innovative
technologies and helping investors'
internal rate of return.
2015 saw a higher percentage of all-in
deals, underscoring the optionality
and leverage held by VC-backed
biopharma companies.

25
Biopharma M&A Activity Continues Early-Stage Shift
VC-backed Biopharma Big Exit M&A by Stage 2009-15
Pre-Clinical Phase I Phase II Phase III Commercial
0
2
4
6
8
10
12
14
16
18
20
2009 2010 2011 2012 2013 2014 2015
Since 2013, there has been a major
shift among M&A deals to companies
at the pre-clinical or phase Istage.
IPOs continued strong for most of
2015, which led acquirers to snap up
earlier-stage companies rather than
risk losing them to the public markets.

26
0
1
2
3
4
5
2013 2014 2015
#ofBigExits
Oncology
CNS Becomes Biopharma Exit Leader while Early-Stage
Interest Grows in Anti-Infectives and Cardio
0
1
2
3
4
5
2013 2014 2015
CNS
0
1
2
3
4
5
2013 2014 2015
Anti-Infectives
0
1
2
3
4
5
2013 2014 2015
Cardiovascular
0
1
2
3
4
5
2013 2014 2015
Ophthalmology
VC-backed Biopharma IPO and Big Exit M&A by Indication 2013-15
Pre-Clinical Phase I Phase II Phase III Commercial
Represents # of IPOs Represents Big Exits
1
6
4
4
6
1
1
2
2
4
1
3
6
1
1
4
4
2
1
1
2
2
1
1
1
1
1
2
2
1
2
1
2 2
1
1
1
1
#ofBigExits

27
Device Exits Hold Steady
Q1 Q2 Q3 Q4 Total
2013
IPO 0 0 0 2 2
M&A 2 2 6 2 12
2014
IPO 1 5 1 3 10
M&A 2 9 5 2 18
2015
IPO 3 4 3 1 11
M&A 0 4 9 4 17
VC-backed Device Exits by Quarter 2013-15 Overall exit activity closely matched
a very strong 2014, with Q3 2015
posting the greatestactivity.
With a decline in Series A,
company formation closely matched
exit activity.
This smaller pool of companies
matched with the smaller number of
investors should lead to more
attractive valuationsfor investors
and increase the chances of a
successful exit.

28
Device Big Exit M&A Sees Earlier-Stage Activity
Non-Approved CE Mark U.S. Commercial
0
2
4
6
8
10
12
14
16
18
20
2009 2010 2011 2012 2013 2014 2015
#ofBigExits
1
1
2 1 2 1
2
7
1
2
8
VC-backed Device Big Exit M&A by Stage 2009-15 2015 saw a significant pickup in early-
stage activity, with five non-approved
stage exits compared to one in each
of the previous two years.
For the first time since 2009, non-
approved and CE Mark outpaced
FDA-approved U.S. commercial
acquisitions.

29
0
2
4
6
8
10
12
14
16
18
20
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
#ofExits
Early-Stage Deals Propel Median Values
VC-backed Device Big Exit M&A Deal Structure 2005-15 Median total deal value grewnearly
20 percent over 2014,helped mostly
by early-stage deals.
The five non-approved deal values
averaged $294 million upfront and
$478 million all-in. That also helped
drop the time to exit to a four-year low.
Six of the 17 M&A deals in 2015 were
by Medtronic, which post-merger
continues to be a major acquirer.
Median
Upfront ($M)
$66 $132 $89 $150 $323 $160 $130 $95 $127 $180 $150
Median Total
Deal ($M) $101 $150 $121 $250 $405 $200 $155 $195 $175 $185 $219
Median
Years to Exit 5.8 7.3 7.5 7.5 4.9 7.0 6.0 7.0 6.6 6.9 5.5

30
0
1
2
3
4
5
6
7
8
9
10
11
#ofCompanies
Cardiovascular Leads in Early-Stage Exits
VC-backed Device IPO and Big Exit M&A
by Indication 2014-15
1
2
Cardiovascular, surgical and vascular
grabbed the majority of exits, with
cardiovascular leading non-approved
exits.
Neuro-based companies sawtraction
in the IPO market, as well as earlier-
stage M&A.
Non-Approved CE Mark U.S. Commercial
1
3
2 1
1
1
1 1 2 2

31
Dx/Tools Faces Stiff Challenges
Q1 Q2 Q3 Q4 Total
2013
IPO 1 0 1 1 3
M&A 1 1 1 0 3
2014
IPO 2 2 3 0 7
M&A 2 3 0 5 10
2015
IPO 1 2 1 1 5
M&A 3 0 2 0 5
VC-backed Dx/Tools Exits by Quarter 2013-15 M&A and IPOs declined in 2015 as
the sector continued to face
challenges, including regulatory
issues, slow reimbursement and poor
IPO performance.

32
0
1
2
3
4
5
6
7
8
9
10
2009 2010 2011 2012 2013 2014 2015
#ofCompanies
Dx and Tools Hit M&A Slump
Dx Tools
1
1
3 5
2
5
VC-Backed Dx and Tools IPOs and Big Exit M&A Dx and tools M&A declined 50
percent. But exhibiting some
resiliency, three of five IPOs raised
more than $100 million, although
prices have fallen at least 50 percent
post-IPO.
Dx challenges include the need for
additional fundraising to get clinical
data for reimbursement.This cut into
the investor multiple.
Tools companies remained attractive
to investors looking to make a bet on
or partner with companies involved in
NGS. Lab miniaturization and
automation may also find investor
interest.

33
0
2
4
6
8
10
12
2008 2009 2010 2011 2012 2013 2014 2015
#ofExits
Dx/Tools Sees Positive Deal Value Jump
VC-backed Dx/Tools Big Exit M&A Deal Structure The median upfront deal value jumped
43 percent over 2014.
Dx/tools companies formed in the last
few years have learned to become
more capital efficient and figure out a
way to exit. This led to a significant
decline in time to exit.
Median
Upfront ($M)
$73 $275 $223 $159 $127 $350 $133 $190
Median Total
Deal ($M)
$73 $275 $415 $159 $127 $450 $239 $200
Median
Years to Exit
2.7 9.9 2.0 12.6 5.6 8.2 6.0 3.5

34
2016 Outlook: 2015 Will Be a Hard Act to Follow
As 2015 closed, we saw some decline in exit activity and investor interest that indicate things are slowing.
Here are our predictions for 2016:
• Investment levels are poised to decline as crossover investors pull back from involvement in large mezzanine
biopharma rounds and traditional investors slow their investment pace.
• Fundraising, too, will fall off as most investors in this “up-cycle” have already raised new funds.
• Series A investments in biopharma will drop slightly, but device may see an uptick to take advantage of the healthy
ratio of Series A companies to exits. Dx/tools likely will stabilize after a challenging 2015.
• The biopharma IPO window should remain open, but there will be fewer IPOs, about seven to eight per quarter in
2016. As a result, M&A will continue on pace as acquirers seek biopharma companies to replenish their pipeline,
and high-fliers from the IPO boom now become acquirers.
• Device IPO activity will decline. But as the pool of private device companies shrinks and acquirers look to innovate,
M&A activity will likely remain stable. We believe this will lead to increased deal values and returns to investors.
We anticipate continued acquisition flurries, similar to Q3 2015, as acquirers are pressured to innovate.
• Dx/tools IPO activity will be difficult given ongoing challenges. M&A should pick up, and will include a mix of
commercial stage companies without enough revenue to be IPO candidates and emerging tool companies that are
able to leverage NGS, lab miniaturization and automation innovations.

35
Glossary
Big Exit
Big Exits are defined as private, venture-backed merger and
acquisition transactions in which the upfront payment is $75 million or
more for biopharma deals and $50 million or more for device and
dx/tools deals.
Initial Public Offering
IPO defined as venture-backed company raising IPO proceeds more
than $25 million.
Deal Descriptions:
• Structured Deal
This is a pay-for-performance system that pays some of the
consideration upfront, but sets milestones in development that must
be achieved before the full value of the transaction will be realized.
• All-in Deal
All consideration for the deal is paid when deal closes.
• Big Exit Upfront Payments
The upfront payment refers to payments in a structured deal that are
made at the close of the deal; it does not include milestones.
• Big Exit Milestonesto be Earned
The milestones to be earned refer to payments in a structured deal
that are made after the pre-determined goals are met.
• Total Deal Value
The total deal value of a structured deal includes both the upfront
payment and the milestones to be earned.
Regulatory Definitions:
• Non-approved
Non-approved refers to a device company that has no regulatory
approval for its product.
• CE Mark
CE Mark refers to a device company that has a CE Mark-only
product. CE Mark is a European Union designation that is less
difficult to obtain than FDA approval, and the approval process
typically has a faster timeline.
• U.S. Commercial
Commercial refers to a device company that has an FDA-
approved product, and typically is in commercial stage.
• SeriesA
Series A companies are defined as U.S. companies raising their
first round greater than $2 million in equity or backed by
institutional or corporate venture capital.

36
Paul Schuber
Paul Schuber is an associate with SVB Analytics leading valuation engagements
and specializing in the life sciences. Prior to SVB Analytics, Schuber facilitated
clinical trials on behalf of pharmaceutical sponsors and pre-clinical trials to
advance medical school research, which included writing and implementing IRB
and IACUC protocols. Schuber’s healthcare experience also consists of working
as an emergency medical technician and an electrocardiogram technician. He has
a background in technology as well, working in many roles, including chief
technology officer of an e-commerce company.
Schuber earned a master’s degree in the business of bioscience from Keck
Graduate Institute of Applied Life Sciences while also studying at Claremont
McKenna College at the Robert Day School of Economics and Finance.
Authors
Jonathan Norris
Jonathan Norris is a managing director for SVB's Healthcare practice. Norris
oversees business development efforts for banking and lending opportunities as
well as spearheading strategic relationships with many healthcare venture capital
firms. He also helps SVB Capital through sourcing and advising on limited
partnership allocations.
In addition, he speaks at major investor and industry conferences and authors
widely cited analyses of healthcare venture capital trends. Norris has more than
sixteen years of banking experience working with healthcare companies and
venture capital firms. Norris earned a bachelor's degree in business
administration from the University of California, Riverside and a juris doctorate
from Santa Clara University.
Managing Director,
Silicon Valley Bank
jnorris@svb.com
Valuations Associate,
SVB Analytics
pschuber@svb.com

37
About Silicon Valley Bank
For more than 30 years, Silicon Valley Bank (SVB) has helped innovative companies and their investors
move bold ideas forward, fast. SVB provides targeted financial services and expertise through its offices in
innovation centers around the world. With commercial, international and private banking services, SVB
helps address the unique needs of innovators. Forbes named SVB one of America’s best banks (2015)
and one of America’s best-managed companies (2014). Learn more at svb.com.
This material, including w ithout limitation to the statistical information herein, is provided for informational purposes only. The material is based in part on information
from third-party sources that w e believe to be reliable, but w hich have not been independently verified by us and for this reason w e do not represent that the
information is accurate or complete. The information should not be view ed as tax, investment, legal or other advice nor is it to be relied on in making an investment or
other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be
construed as a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction.
©2016 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC and Federal Reserve System. SVB>, SVB Financial Group, and Silicon
Valley Bank are registered trademarks.

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