Emerging LifeSciencesM&A and Fundraising Trends May 17, 2019

Charles HamiltonDirector Med Tech Investment Banking

Piper Jaffray & Co., Member SIPC and NYSE

2PIPER JAFFRAY

0

500

1000

1500

2000

2500

3000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Historic Bull Market Continues

S&P 500 Best Performing Quarters Since 2000

S&P

500

# Quarter Return

1 Q3 2009 15.2%

2 Q4 2009 15.0%

3 Q3 2003 14.9%

4 Q1 2019 13.1%

5 Q2 2012 12.0%

61 Months Trough to Peak14% Annualized Return

122 Month Bull Run15% Annualized Return To Date

Q1‘19

Great Recession: Dec ‘07 to June ‘09

*Data through 5/16/2019

3PIPER JAFFRAY

Market Outperformed Despite Weak Earnings Season

*90% of companies reporting

Ea

rnin

gs R

ela

tive

to

Str

ee

t

Co

nse

nsu

s E

stim

ate

s (

%)

Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019*

Above 75% 73% 74% 74% 77% 80% 78% 69% 77%

In-Range 7% 9% 8% 8% 6% 5% 8% 9% 6%

Below 18% 18% 18% 18% 17% 15% 14% 22% 17%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%100%

76%

5%

19%

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500

1,000

1,500

2,000

2,500

3,000

3,500

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

What’s Driving Performance?Accommodative Fed Policy Increased Equity Market Appeal

U.S

. 10

Year

Tre

asur

y R

ate

(%)

Fed Shift to Accommodative Policy

January 2019

S&P

500

Inde

x Va

lue

*Data through 5/16/2019

5PIPER JAFFRAY

–

10

20

30

40

50

60

70

80

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

2001: September 11th Attacks

2002: High-Profile Corporate Bankruptcies

2008: Global Financial Crisis

2010: May Flash Crash

Investors Cautiously Monitoring Volatility (i.e. the Fear Index)

Source: S&P Capital IQ, Fidelity Quarterly

VIX

Perf

orm

ance

2015: China RMB Devaluation

2016: Brexit

2011: U.S. Debt Downgrade

2016: U.S. Election

2018: February Market Correction

2018: December Market Correction

16.3

*Data through 5/16/2019

6PIPER JAFFRAY

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019

Inverted Yield Curve Adds to Investor ConcernsNot Always an Immediate Precursor to Recession

Source: S&P Capital IQ, Fidelity Quarterly

His

toric

al Y

ield

Spr

ead

(10

Year

–3

Mon

th)

Recession

7PIPER JAFFRAY

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19

Healthcare Performing Well; Med Tech Leading The Way

Data as of 5/16/2019

8%

29%

6%

S&P 500

IHI Med Tech IndexBTK Biotechnology Index

8PIPER JAFFRAY

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

EV /

FTM

Rev

enue

1Attractive Valuations for Performing Growth Med Tech

1) Enterprise Value weighted index

High Growth Med Tech valuations are at peak levels

10-year Average:6.4x EV / FTM

Revenue

Low 2.9x – 12/2/2008

Multiples returned to “Pre-Lehman” levels

within 9 months

High Growth Med Tech

Current: 9.6x

Trading Summary1 Year Average (since 5/7/2018): 9.7x3 Year Average (since 5/7//2016): 8.4x5 Year Average (since 5/7/2014): 7.6x10 Year Average (since 5/7/2009): 6.4x

Data as of 5/13/2019

9PIPER JAFFRAY

2019 IPO Activity Remains StrongLife Sciences IPOs > $50M

Number of IPOs

Aggregate Capital Raised ($B)

$3.4

$5.9 $5.3

$2.1 $4.2

$8.0

2013 2014 2015 2016 2017 2018 2019Annualized

36

65

45

2337

63

2013 2014 2015 2016 2017 2018 2019Annualized

Source: S&P Capital IQ, Company filings

48

$6.0

2019 YTD Actual

20

2019 YTD Actual$2.25

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Life Science IPO Overview

Biotech IPO Frequency by Phase1 Medtech IPO Frequency by Revenue (LTM)1

8

1213

2

7

15

19

10

223

4

2

Preclinical Phase I Phase II Phase III Marketed

2017 2018 2019YTD

1 1

3

2

5

2

3

< $20M $20M - $40M $40M+

2017 2018 2019YTD

The Market is Shifting to Earlier Stage Companies

Source: S&P Capital IQ, Company filings1Includes IPOs with gross proceeds greater than $50 million

% IPOs Phase I or Earlier

2017 23%

2018 42%

2019 YTD 45%

% IPOs $20M or Less

2017 0%

2018 30%

2019 YTD 40%

11PIPER JAFFRAY

Med Tech IPO Investors Covet Revenue Growth

Screening Criteria: US Med Tech IPOs with >$20M revenue in year & IPO since 2015Note: NVRO, SWAV, TMDX all exceed 100% Forward year revenue growth; are factored into quadrant 4 medians

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95%

Forw

ard

Rev

enue

Gro

wth

@ P

ricin

g

Gross Margin @ Pricing

Median EV / FTM Revenue @ Pricing

Median Aftermarket Performance

(IPO to Current)

4.5x

+44%

3.1x

+28%

5.2x

+123%

4.1x

+140%Median Gross

Margin: 66%

Median Revenue

Growth: 31%

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53 52 54 56 58 62

27

64

8798

33 28

67

19

0

20

40

60

80

100

120

2013 2014 2015 2016 2017 2018 2019YTD

Med Tech

Biopharma

Life Sciences M&A Remains Active

Includes deals with disclosed transaction values >$20MSource: Pitchbook, Company filings

Med Tech $200 $219 $178 $258 $233 $202 $285Biotech $331 $500 $417 $639 $710 $452 $800

Median Transaction Value ($M):

Num

ber

of T

rans

actio

ns

Biopharma Deal Values Rising

(55 Deals / Year)

(62 Deals / Year)

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MedTech Respiratory Outperforming BioPharma

Data as of 5/13/2019

(4.1%)

38.5%

-35%

-15%

5%

25%

45%

65%

85%

Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19

MedTech Respiratory BioPharma Respiratory

MedTech Respiratory Index: ELMD, FPH, VMD, VAPO, RMD, INGN BioPharma Respiratory Index: KDMN, GLPG, FGEN, TBIO, PTI, VRTX

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Life Sciences Private Financing Trend Remains PositiveLife Sciences and MedTech continue to see increased private financing activity

Life Sciences US VC Activity (2009 – 2018) (1) Med Tech US VC Activity (2009 – 2018) (1)

$7.9 $7.8 $8.8 $8.7 $10.2

$12.3 $15.0

$12.6

$17.0

$23.7

873964

10441096

11661230

1298

1147

1310 1351

0

200

400

600

800

1000

1200

1400

$0

$5

$10

$15

$20

$25

$30

20092010

20112012

20132014

20152016

20172018

Series A & B ($) Total ($) Total Deals

$3.1 $3.2 $3.9 $3.7

$4.0

$4.8 $4.5

$3.6

$4.9

$6.0

455 479

563 572 580608 624

539

610 622

0

100

200

300

400

500

600

700

$0

$1

$2

$3

$4

$5

$6

$7

$8

20092010

20112012

20132014

20152016

20172018

Series A & B ($) Total ($) Total Deals

(1) Source: Pitchbook; includes US deals only

($ in

Billi

ons)

($ in

Billi

ons)

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Areas to Watch in 2019

Distal Lung Access

Interventional Device Therapies

Targeted Immunotherapy

Digital Therapeutics

AI-enabled Diagnostics

Hospital-to-Home