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  • 1. Minneapolis New York HEALTH CARE EQUITY CAPITAL MARKETS REVIEW Boston Chicago 2008 Q3 Review San Francisco Palo Alto Charlotte Piper Jaffray Equity Capital Markets London October 2008 Shanghai Hong Kong Since 1895. Member SIPC and FINRA
  • 2. BUILDING THE LEADING MIDDLE MARKET INVESTMENT BANK •• Client-focused, independent, publicly held securities firm founded in 1895 Client-focused, independent, publicly held securities firm founded in 1895 •• Leading growth-oriented, middle market investment bank Leading growth-oriented, middle market investment bank •• Full-service capabilities and unparalleled transaction execution Full-service capabilities and unparalleled transaction execution •• Growing presence in global growth markets Growing presence in global growth markets Services for: •• Built on a 100+ year track record of quality service and customer success Built on a 100+ year track record of quality service and customer success Corporate & Institutional Clients Corporate & Institutional Clients •• Investment Banking Investment Banking •• Institutional Equity Sales & Trading Institutional Equity Sales & Trading •• Equity Capital Markets Equity Capital Markets United States Headquarters Minneapolis— United Kingdom •• Convertible Capital Markets (Banking, Research, Sales & London Convertible Capital Markets Minneapolis, MN Trading) London* Piper Jaffray Ltd.** •• PIPEs & RDs (Headquarters) Boston • PIPEs & RDs (Banking, Sales & Boston, MA• (Sale &Trading) China •• Debt Capital Markets Debt Capital Markets San Francisco • Charlotte, NC • • Trading) New York Hong Kong • (Banking, Sales & • •• Equity Research Equity Research • NY• New York,Chicago Shanghai Trading) (Banking, Research & Shanghai •• Asset Management Palo Alto, CA (Banking) Trading) • China Growth Asset Management Menlo Park San Francisco, CA Advisory Ltd.* •• Bridge & Structured Financing Bridge & Structured Financing (Banking & (Banking) Research) Public Finance & Institutional Clients Public Finance & Institutional Clients •• Public Finance Public Finance •• Municipal Sales Municipal Sales •• Municipal Underwriting & Trading Municipal Underwriting & Trading •• Derivative Products Derivative Products •• Loan Syndications Loan Syndications *Securities and products are offered through Piper Jaffray Ltd. which is authorized and regulated by the Financial Services Authority 1
  • 3. THE PIPER JAFFRAY TEAM Equity Capital Markets Chad Abraham Neil Riley Managing Director Principal Head of Equity Capital Markets Greg Klancher Head of Health Care Capital Markets (612) 303-6274 Associate (612) 303-1601 (612) 303-8309 Jonathan Jewett Kevin Lander Michael Bassett Associate Analyst Analyst (612) 303-6365 (612) 303-8432 (612) 303-6865 PIPEs / RDs Convertibles Dave Stadinski Chris Christina Martin Alvarez Iain Franks Managing Director Managing Director Managing Director Principal Head of PIPEs / RDs (612) 303-8521 Head of Convertibles (415) 984-5129 (212) 284-9572 (415) 984-5131 Mark Spiegel Chad Huber Forrest Koenig Daniel Grosslight Principal Associate Vice President Analyst (212) 284-9502 (212) 284-9573 (415) 984-5142 (415) 984-5116 Corporate & Venture Services Tom Wright Jay Hershey Managing Director Managing Director Head of CVS (612) 303-5724 (612) 303-6039 2
  • 4. TABLE OF CONTENTS Section I Broader Markets: A Historical Perspective Section II Key Themes in Q3 2008 Section III IPO Market Update Section IV Follow-on Market Update Section V Convertible Market Update Section VI PIPE and Registered Direct Market Update Section VII Institutional Health Care Fund Movement 3
  • 5. SECTION I Broader Markets: A Historical Perspective
  • 6. BROADER MARKETS: A HISTORICAL PERSPECTIVE Dow Jones Industrial Average (1929 - 1932) Dow Jones Industrial Average (1973 - 1974) The current period of 400 1100 Dow Jones Industrial Average (1929 - 1932) Dow Jones Industrial Average (1972 - 1975) market weakness is Market Decline: 34 Months -89% Market Decline: 23 Months -47% 1000 already similar in 320 depth to previous 900 240 periods; however, it 800 has occurred faster 160 Crash of 1929: 71 Days -49% than any previous 700 downturns since the 80 600 great depression 0 500 Aug '29 Nov '29 May '32 Aug '32 May '30 Aug '30 Nov '30 May '31 Aug '31 Nov '31 Feb '32 Feb '30 Feb '31 Nov '72 Jan '74 Mar '74 May '74 Jul '74 Nov '74 Jan '73 Mar '73 May '73 Jul '73 Nov '73 Sep '74 Jan '75 Sep '73 Dow Jones Industrial Average (2000 - 2002) Dow Jones Industrial Average (2007 - 2008) 12000 15000 Dow Jones Industrial Average (1999 - 2002) Market Decline: 33 Months -40% Market Decline through Oct. 10 Lows: 14000 11000 12 Months -46% 13000 10000 12000 11000 9000 10000 8000 Sep. 15 – Oct. 10: 18 Days -32% 9000 7000 8000 May '02 Aug '02 Nov '02 Nov '99 May '00 Aug '00 Nov '00 May '01 Aug '01 Nov '01 Feb '02 Feb '00 Feb '01 Jan '08 Mar '08 Apr '08 May '08 Jun '08 Jul '08 Aug '08 Oct '08 Oct '07 Nov '07 Feb '08 Sep '08 Sep '07 Dec '07 Source: Yahoo! Finance Data through 10/15/08 5 All market declines calculated using intraday highs and lows
  • 7. BROADER MARKETS: A HISTORICAL PERSPECTIVE Recovery from 1929 - 1932 Bear Market Recovery from 1973 - 1974 Bear Market Markets have 480 30% 1400 12% recovered more 400 Time to Full Recovery: 25 years 25% 1300 11% quickly following 1200 Time to Full Recovery: 10 years 10% recent periods of Dow Jones Industrial Average 320 20% Dow Jones Industrial Average 1100 9% Unemployment Rate Unemployment Rate market weakness 240 15% 1000 8% 900 7% 160 10% 800 6% 700 5% 80 5% 600 4% 0 0% 500 3% 1928 1930 1932 1934 1936 1938 1940 1942 1944 1946 1948 1950 1952 1954 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 Unemployment Rate Dow Jones Industrial Average Unemployment Rate Dow Jones Industrial Average Unemployment has Recovery from 1999 - 2002 Bear Market Recovery from Current Bear Market 15000 10% 15000 10% reached double digits in two of three 14000 Time to Full Recovery: 6.5 years 9% 14000 9% 13000 8% 13000 8% previous downturns Dow Jones Industrial Average Dow Jones Industrial Average 12000 7% 12000 7% Unemployment Rate and appears to pave Unemployment Rate 11000 6% 11000 6% the road to recovery 10000 5% 10000 ? 5% 9000 4% 9000 4% 8000 3% 8000 3% 7000 2% 7000 2% 2000 2001 2002 2003 2004 2005 2006 2007 2007 2008 2009 2010 2011 2012 2013 Unemployment Rate Dow Jones Industrial Average Unemployment Rate Dow Jones Industrial Average Source: Yahoo! Finance and the U.S. Bureau of Labor Statistics Data through 10/15/08 6 All market declines calculated using intraday highs and lows
  • 8. BROADER MARKETS: A HISTORICAL PERSPECTIVE IPO Pricings since 1980 The IPO market is on 600 900 pace to finish the 563 year with fewer than 800 40 offerings, which 500 484 would make it the 442 700 433 429 slowest year in recent 419 history 400 378 379 600 Ru sse ll 2000 # of I P Os 313 500 293 300 271 257 400 233 214 204 196 199 191 200 172 179 300 105 104 97 200 100 88 70 77 77 76 100 29 0 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 # of IPOs Russell 2000 Source: Baseline, Dealogic, Yale School of Management Data excludes BCC/SPACs, closed-end funds and deals <$20mm 7
  • 9. KEY THEMES IN Q3 2008 CBOE Market Volatility Index (VIX) since 1990 The VIX, a measure of expectations for 80 volatility over the Current next 30 days and a 70 Financial Crisis proxy for investor Russian Arthur Andersen/ fear, has spiked to 60 9/11 Financial WorldCom Asian Crisis Terrorist Accounting Scandals unprecedented levels Financial Attack since mid-September 50 Crisis Iraq War First Gulf War 40 30 20 10 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 Source: Yahoo! Finance 8
  • 10. SECTION II Key Themes in Q3 2008
  • 11. KEY THEMES IN Q3 2008 Uncertainty persists US GDP Growth by Quarter Macro-Economic Drivers Annual Percentage Rate Real US GDP Growth 75% 65% as to the length and 6% depth of the 5% 4.7% 4.7% 50% 44% economic slowdown 4% 25% 17% 2.8% – GDP growth has 3% -1% 0% stalled and crude 2% 1.2% 0.9% oil/commodities have 1% -25% -18% 0.0% -28% -28% fallen sharply from 0% -0.2% -0.2% -50% -44% historical highs -1% -0.7% Crude Oil Commodity Home Price Consumer Index Index* Confidence -2% -1.5% % Chg since 1/1/2007 % Chg in Q3 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08F Q4 '08F Q1 '09F Q2 '09F Fed Funds Auction Rate vs. LIBOR S&P 600 Quarterly Earnings Growth Investors seeking 7% 30% security drove the 6% 9/16: Fed-Funds auction rate 21.0% hits 0.06% following the 20% Fed-Funds auction 5% bankruptcy of Lehman Bros. 10.0% rate to near zero in 4% 10% 3.0% Q3 while LIBOR 0.0% 0.0% 3% 0% moved higher (the Current Fed-Funds Target Rate = 2.0% -1.0% 2% normal spread is -10% -9.0% -7.0% 1% -10.0% <0.5%) 0% -20% 12/31/06 3/31/07 6/30/07 9/30/07 12/31/07 3/31/08 6/30/08 9/30/08 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08E Q4 '08E CY '09E Fed-Funds Auction Rate LIBOR Source: Bureau of Economic Analysis, Baseline, Bloomberg U.S. GDP estimates per the Bureau of Economic Analysis S&P 600 estimates per First Call Consensus 10 *Home Price Index reflects Case-Shiller Index through the end of July
  • 12. KEY THEMES IN Q3 2008 Over the last four Russell 2000 Revenue Growth by Sector – Q2 ‘08 Russell 2000 Revenue Growth by Sector – Q1 ‘08 Energy 42.9% Energy 33.4% quarters, the Health Materials 15.1% Materials 14.0% Care sector has seen Industrials 13.4% Technology 10.9% consistent revenue Technology 11.1% Cons. Staples 10.7% growth despite a Health Care 10.6% Health Care 8.6% softening economy Utilities 9.7% Utilities 8.5% Cons. Staples 7.7% Industrials 8.1% Telecom Svcs. 2.3% Telecom Svcs. 3.6% Cons. Discret. -0.5% Cons. Discret. 1.2% Financials -6.1% Financials -10.6% -20% -10% 0% 10% 20% 30% 40% 50% -30% -20% -10% 0% 10% 20% 30% 40% Russell 2000 Revenue Growth by Sector – Q4 ‘07 Russell 2000 Revenue Growth by Sector – Q3 ‘07 Energy 32.1% Telecom Svcs. 25.0% Telecom Svcs. 26.9% Technology 13.0% Technology 13.1% Cons. Staples 11.2% Materials 11.8% Health Care 10.1% Health Care 10.7% Energy 8.8% Utilities 10.4% Industrials 8.5% Industrials 9.3% Materials 6.8% Cons. Staples 9.1% Cons. Discret. 4.2% Cons. Discret. 1.1% Utilities 3.1% Financials -17.6% Financials -0.2% -30% -20% -10% 0% 10% 20% 30% 40% -5% 0% 5% 10% 15% 20% 25% 30% Source: Bloomberg 11
  • 13. KEY THEMES IN Q3 2008 The major market Major Market Index Performance Quarterly Mutual Fund Flows ($ Billions) 130 $100 indices have all $83.0 $80 $75.6 posted negative 120 $60 $47.9 double-digit returns $32.6 Price Indexed to 100 $40 $29.6 $30.0 $26.7 110 YTD $20 $15.2 $3.1 100 $0 -$2.4 CY CY Q3 YTD ($20) 2006 2007 2008 2008 90 Dow Jones 16.3% 6.4% (4.4%) (18.2%) ($40) S&P 500 13.6% 3.5% (8.9%) (20.6%) NASDAQ 9.5% 9.8% (9.2%) (21.5%) -$40.2 Russell 2000 17.0% (2.7%) (1.5%) (11.3%) ($60) 80 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 9/30/06 12/30/06 3/30/07 6/30/07 9/30/07 12/30/07 3/30/08 6/30/08 9/30/08 Health Care funds '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 Dow Jones S&P 500 NASDAQ Russell 2000 saw their third Russell 2000 Health Care Index Performance Health Care Quarterly Mutual Fund Flows ($MM) greatest inflows on 150 $2,000 $1,710 record, only outpaced 140 $1,500 by Q1 2000 and Q2 130 $1,000 120 Price Indexed to 100 2005; likewise, the $683 $449 110 $500 $342 Health Care indices $156 100 dramatically $0 90 CY CY Q3 YTD 2006 2007 2008 2008 -$162 outperformed the 80 Health Care 9.6% 13.3% 8.2% (9.5%) ($500) -$12 Drugs & Pharma 8.4% 20.1% 13.7% (5.4%) Biotech 2.0% (0.9%) 8.2% (10.3%) -$516 broader markets 70 Medical Devices 15.4% 22.7% 8.0% (6.7%) -$696 HC Services 7.7% 6.8% 2.0% (17.7%) ($1,000) 60 -$926 -$901 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 9/30/06 12/30/06 3/30/07 6/30/07 9/30/07 12/30/07 3/30/08 6/30/08 9/30/08 '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 Health Care Drugs & Pharma Biotech Medical Devices HC Services Source: Thomson Baseline, Bloomberg, AMG Data 12
  • 14. KEY THEMES IN Q3 2008 2008 offering volume Annual IPO Offering Activity Annual Follow-on Offering Activity 700 700 is on pace for its Annual Median = 436 600 600 555 lowest levels in more 542 Number of Follow-on Offerings 491 500 500 459 464 477 than 30 years 433 Annual Median = 231 426 436 Number of IPOs 402 391 406 399 391 400 373 371 349 400 412 300 240 300 367 368 361 231 233 303 329 296 345 304 294 316 339 323 215 286 196 198 210 200 200 272 259 221 210 82 75 76 100 153 147 100 130 27 119 139 29 55 53 0 0 2004 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 2004 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 Full Year Activity YTD Full Year Activity YTD Similar to the broader Annual Health Care IPO Offering Activity Annual Health Care Follow-on Offering Activity markets, Health Care 120 120 IPO issuance is at 100 Annual Median = 65 91 Annual Median = 35 100 Number of Follow-on Offerings historically low levels 79 76 82 76 81 80 Number of IPOs 80 67 while follow-on 75 67 65 60 69 60 60 48 49 51 issuance is on pace 44 45 65 44 35 36 39 40 32 40 55 57 for the slowest year 28 48 28 26 38 54 50 34 37 24 16 30 40 20 15 24 20 34 since 1998 19 8 24 30 28 27 28 16 15 13 13 3 0 1 0 2004 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 2004 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 Full Year Activity YTD Full Year Activity YTD Source: Dealogic and Piper Jaffray ECM Excludes BCC/SPACs, closed-end funds, and transaction less than $20mm 13
  • 15. KEY THEMES IN Q3 2008 2008 New Issue Equity New Issue Volume by Product ($ in Millions) Market Highlights $60,000 $50,000 $40,000 2008 Y TD 2007 Y TD % Ch a n ge $37,758 $30,000 $50,886 Capital Capital Capital $28,466 $57,039 $13,504 Raised Raised Raised $26,021 No ($MM) No ($MM) No ($MM) $20,000 $15,816 IPO 29 $26,692 139 $37,903 -79.1% -29.6% $10,000 $20,805 $16,374 $14,727 Follow-on 215 $121,429 323 $79,595 -33.4% 52.6% $11,844 $9,685 $4,952 $935 $0 Total 244 $148,121 462 $117,498 -47.2% 26.1% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 IPO Proceeds Follow-on Proceeds • The mortgage meltdown, credit crunch, inflationary fears, and high energy costs created extremely challenging pricing conditions in Q3. IPO activity all but dried up in the quarter while follow-on activity came primarily on behalf of distressed financials, real estate, and energy companies. • The Visa IPO accounts for $19.7 billion of the $26.7 billion in total IPO capital, or 74% of IPO proceeds thus far in 2008. Capital raised from follow-on offerings on behalf of financials, real estate, and energy companies has accounted for 87% of the total follow-on proceeds thus far in 2008. • Uncertainty driven by recessionary fears has resulted in major swings in volatility in 2008; the CBOE Volatility Index has risen to its highest levels ever and contributed to a slowdown in growth sector equity offering activity. • Energy and commodity prices, stability in the financial/mortgage markets, the upcoming presidential election, and the extent of an imminent recession remain significant themes for the equity market in Q4. Source: Dealogic and Piper Jaffray ECM Excludes BCC/SPACs, closed-end funds, and transaction less than $20mm 14
  • 16. SECTION III IPO Market Update
  • 17. IPO MARKET UPDATE IPO Market Update – Key Takeaways Very difficult Historically Slow Offering Activity conditions have prevailed in the IPO • 6 IPOs priced in Q3 ‘08 raising $1bn; 29 IPOs have priced in ’08 raising $27bn • 29 IPOs priced in the first nine months, the fewest since 2003, when 27 IPOs were priced – 76 IPOs markets in 2008 priced in CY2003 as strong economic performance drove a bull rally in Q4 • In the 2004-2007 time period, there were 52 IPOs per quarter on average with no fewer than 32 Investor Appetite for Growth Stories Limited by Risk Tolerance • Investors have shown a lack of appetite for growth stories as volatility and uncertainty have led to risk aversion; 28 of the 29 companies to go public in 2008 have been profitable or are expected to be profitable before year end • Only 1 non-profitable, long-term growth story has successfully gone public thus far in 2008: MAKO Surgical, which priced at a -33% discount to the mid-point of its filing range and has traded down an additional -28% since going public. • Of note, no pre-revenue companies have successfully completed an IPO in 2008 • 72 IPOs have been withdrawn thus far in 2008 – the highest total since 145 IPOs were withdrawn in the first nine months of 2001 Historical Counter-Cyclicality of Health Care Sector Fails to Boost Activity • Besides MAKO Surgical, the other two Health Care IPOs were for profitable companies and have traded strongly in the aftermarket: IPC The Hospitalist (+61%) and Cardionet (+39%); only 8 of the 29 IPOs to price in 2008 were trading above offer price at the end of the quarter • 24 Health Care IPOs were withdrawn during the first 3 quarters of 2008; 3 of the 24 were acquired and the remaining 21 were withdrawn in order to pursue alternative strategies/financing and cited market conditions as the primary reason for withdrawal Source: Dealogic and Piper Jaffray ECM as of 9/30/08 Excludes BCC/SPACs, closed-end funds, and transaction less than $20mm 16
  • 18. IPO MARKET UPDATE IPO issuance has # of IPOs by Sector 2008YTD # of IPOs by Sector CY2007 Media decreased across all Industrials 7% Technology 17% Technology 34% sectors thus far in 14% REIT 2 2% 70 2008 vs. 2007 5 4 5 Transports Health Care Transports 4% 10% 7% 8 2 Financial 29 Clean Tech 3 14% 12 6% 3 9 Consumer Clean Tech 6 5 10% Industrials 22 4% 5 3% 44 5 Energy/Mining Financial Energy/Mining 10% Health Care Media 17% 18% 21% 2% For issuers who have 2008 IPO Price Performance: File-to-Offer 2008 IPO Price Performance: Return to Current come to market, 20% 60% larger cap IPOs 11% 40% 40% 10% (>$1B) have received 1 20% more favorable 6 0% 1 pricing than the -2% 0% 6 16 29 29 6 6 overall IPO market (10%) -8% 16 -9% (20%) -13% -11% -15% -14% -25% (20%) (40%) < $500MM $500MM- $1B-$5B >$5B Overall < $500MM $500MM- $1B-$5B >$5B Overall $1B $1B Market Cap @ Time of Offering Market Cap @ Time of Offering Source: Dealogic and Piper Jaffray ECM as of 9/30/08 Excludes BCC/SPACs, closed-end funds, and transaction less than $20mm 17
  • 19. IPO MARKET UPDATE 2008 IPO Breakdown by Profitability Recent IPOs by Profitability Pr i c i ng D eal Val M kt Val Offer % Chg % Chg S el l i ng % Chg % Chg/ Oper ati ng Date 8/7/08 Issuer Rackspace Hosting Inc S ecto r Technology ($ M M ) $188 ($ M M ) $1,443 Pr i c e $12.50 Rang e In Range A mt F T O -11% / FTO -11% Shrs % 15% / 1- Day (20%) C ur r ent (22%) Revs √ Di vi d end Pr o fi ts √ 7 8/4/08 China Mass Media Media $49 $162 $6.80 Below -45% -45% (4%) (32%) √ √ 7/29/08 China Distance Education Technology $61 $248 $7.00 Below -30% -30% (6%) (43%) √ √ 7/23/08 GT Solar International Clean Tech $500 $2,349 $16.50 In Range 0% 0% 100% (12%) (34%) √ √ 6 7/1/08 Energy Recovery Inc Clean Tech $137 $407 $8.50 In Range 6% 6% 42% 16% 13% √ √ 6/17/08 RHI Entertainment Inc Media $189 $328 $14.00 Below -11% -18% (4%) 6% √ √ 6/17/08 Britannia Bulk Holdings Transports $125 $405 $15.00 Below -17% -17% (8%) (64%) √ √ √ 6/11/08 Fifth Street Finance Corp Financial $141 $317 $14.12 In Range -6% -6% (14%) (29%) √ √ √ 5 5/28/08 Safe Bulkers Inc Transports $190 $1,036 $19.00 Below -10% -10% 100% (1%) (43%) √ √ √ 5/14/08 American Capital Agency Financial $200 $300 $20.00 In Range -20% 0% (3%) (13%) √ √ √ 5/14/08 Verso Paper Corp 5/8/08 Real Goods Solar Inc Industrials Clean Tech $168 $55 $625 $155 $12.00 $10.00 Below In Range -47% 0% -29% -9% (17%) (12%) (78%) (59%) √ √ √ √ √ 4 5/8/08 Western Gas Partners Energy/Mining $343 $747 $16.50 Below -21% -21% 0% (20%) √ √ √ 5/7/08 Colfax Corp Industrials $388 $742 $18.00 Above 13% 13% 52% 17% (7%) √ √ 4/30/08 Pioneer Southwest Energy 4/24/08 Hatteras Financial Corp Energy/Mining Financial $180 $276 $547 $559 $19.00 $24.00 In Range In Range -37% 20% -5% -4% 3% 3% (13%) (3%) √ √ √ √ √ √ 3 6 4/24/08 Whiting USA Trust I Energy/Mining $234 $263 $20.00 In Range 5% 0% 100% 4% (18%) √ √ √ 5 5 4/22/08 American Water Works Industrials $1,358 $3,440 $21.50 Below -22% -14% 100% (4%) 0% √ √ √ 4/21/08 Intrepid Potash Inc Energy/Mining $1,104 $2,395 $32.00 Above 60% 28% 58% (6%) √ √ 2 3/18/08 Visa Inc Financial $19,650 $42,533 $44.00 Above 11% 11% 28% 40% √ √ 3/18/08 CardioNet Inc Health Care $83 $415 $18.00 Below -47% -22% 33% (2%) 39% √ √ 1 3 3 3 3/11/08 Heritage-Crystal Clean Industrials $25 $120 $11.50 In Range 10% 0% 23% 19% √ √ 2/14/08 MAKO Surgical Corp Health Care $51 $184 $10.00 Below -33% -33% (8%) (28%) √ 1 2 2/13/08 ArcSight Inc Technology $62 $278 $9.00 In Range -10% -10% 13% (2%) (15%) √ √ 1/28/08 ATA Inc (China) Technology $48 $228 $9.50 In Range -10% -10% (8%) (4%) √ √ 1 0 1/28/08 Cascal NV 1/24/08 RiskMetrics Group Inc Industrials Financial $152 $282 $367 $1,012 $12.00 $17.50 Below In Range -52% -3% -33% -3% 31% 29% 0% 36% (13%) 12% √ √ √ √ 0 1/24/08 IPC The Hospitalist Co Health Care $94 $237 $16.00 In Range 11% 0% 37% 28% 61% √ √ 1/17/08 Williams Pipeline Partners Energy/Mining $358 $685 $20.00 In Range 25% 0% 0% (30%) √ √ √ Jan Feb Mar Apr May Jun Jul Aug Sep Mean Median $920 $180 $2,156 $407 -9% -10% -9% -9% 54% 39% 3% (2%) (13%) (13%) Profitable Not Profitable 2007 vs. 2008 IPO Breakdown by Profitability 2007 vs. 2008 Offer/30-Day Performance 2007 2008 2007 2008 20% 15% 40% 15% 3% 9% 10% 5% 0% 0% 0% -5% -3% 60% 97% -10% -11% -15% Profitable Not Profitable Russell 2000 Profitable Not Profitable Source: Dealogic and Piper Jaffray ECM as of 9/30/08 Profitable defined as companies with positive operating income in year of IPO. 18 Excludes BCC/SPACs, closed-end funds, and transaction less than $20mm
  • 20. IPO MARKET UPDATE Q2 and Q3 were the Health Care IPO Activity by Quarter and Subsector first quarters since 12 11 $2,400 2003 in which no 10 $2,000 Health Care IPOs IPO Proceeds ($MM) 8 $1,600 were completed 7 7 # of IPOs 6 6 6 6 $1,200 5 5 5 4 4 44 4 $800 3 3 3 3 22 2 2 2 2 2 2 2 2 $400 11 1 1 1 1 1 1 11 1 0 0 000 000 0 $0 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Biopharmaceuticals Health Care Services Medical Technology Capital Raised Health Care IPOs Completed in 2008 % Chg Deal Market % From % Chg % Chg % Chg Pricing Filing Offer Price Value Value Selling Price Price Price Date Issuer Subsector Range Price FTO ($MM) ($MM) Shareholders 1-Day 30-Day Current 3/18/08 CardioNet Inc Med Tech 22.00 - 24.00 $18.00 -22% $83 $415 33% -2% 11% 39% 2/14/08 MAKO Surgical Corp Med Tech 14.00 - 16.00 $10.00 -33% $51 $184 0% -8% 0% -28% 1/24/08 IPC The Hospitalist Co Inc HC Services 15.00 - 17.00 $16.00 0% $94 $237 37% 28% 30% 61% Mean -18% $76 $279 23% 6% 14% 24% Median -22% $83 $237 33% -2% 11% 39% Source: company filings, Dealogic, and Piper Jaffray ECM Data through 9/30/08 19 Excludes transactions less than $20 million
  • 21. IPO MARKET UPDATE 2008 is on pace to # of Withdrawn & Postponed IPOs by Year 30 see more Health Care 26 25 24 IPOs postponed or 20 withdrawn than any 20 19 17 17 16 year over the last 10 15 13 10 10 8 5 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Filing Withdrawn Amount LTM Date Date Issuer Subsector Filed ($MM) Marketed Acquired Revs ($MM) Profitable Withdrawn/Postponed Comment 4/14/08 9/25/08 Fluidigm Corp Biopharma $80 √ $10 Market conditions 12/31/07 9/9/08 Alma Lasers Ltd Med Tech $86 $82 √ Market conditions 10/23/07 9/8/08 XDx Inc Biopharma $86 $9 Market conditions 8/17/07 9/8/08 Insys Therapeutics Inc Biopharma $86 Pre-Rev Market conditions 3/13/08 8/26/08 Salient Surgical Technologies Med Tech $86 $34 Market conditions 3/20/08 8/1/08 Zogenix Inc Biopharma $86 Pre-Rev Market conditions 1/9/08 6/27/08 Bayhill Therapeutics Inc Biopharma $86 Pre-Rev Market conditions 11/20/07 6/20/08 Broncus Technologies Inc Med Tech $86 Pre-Rev Market conditions 7/27/07 6/18/08 eyeonics Inc Med Tech $70 √ $22 Due to acquisition by Bausch & Lomb Inc 5/11/07 6/9/08 CCS Medical Holdings Inc HC Services $150 √ $507 √ Market Conditions. Initially postponed on 8/15/07 2/13/07 6/4/08 Noninvasive Medical Technologies Med Tech $52 $3 Market conditions 1/23/08 6/3/08 Accuro Healthcare Solutions Inc HC Services $144 √ $68 √ Due to acquisition by MedAssets 9/21/07 5/12/08 Emphasys Medical Inc Med Tech $86 $1 Market conditions 9/21/07 5/9/08 Elixir Pharmaceuticals Inc Biopharma $41 √ Pre-Rev Market conditions. Initially postponed 1/17/08 5/14/07 3/27/08 MonoSol Rx Inc Biopharma $68 √ $3 Market conditions. Initially postponed on 10/17/07 12/31/06 3/21/08 LifeWatch Corp HC Services $68 $51 √ Market conditions 10/13/06 3/19/08 Vision-Ease Lens Corp Med Tech $86 $105 √ Market conditions 10/12/07 2/21/08 Transoma Medical Inc Med Tech $86 √ $37 Market Conditions. Initially postponed on 2/6/08 8/17/07 2/15/08 Concentric Medical Inc Med Tech $63 $14 Market conditions 10/10/07 2/15/08 Critical Homecare Solutions HC Services $69 √ $157 √ Due to acquisition by MBF Healthcare Acq Corp 4/21/06 2/8/08 Light Sciences Oncology Inc Biopharma $125 √ Pre-Rev Market conditions. Initially postponed on 10/12/06 7/25/07 2/6/08 Archemix Corp Biopharma $79 $14 Market conditions 8/14/07 2/1/08 Biolex Therapeutics Inc Biopharma $59 Pre-Rev Market conditions 8/3/07 1/23/08 BG Medicine Inc Med Tech $86 √ $9 Market conditions Source: company filings, Dealogic, and Piper Jaffray ECM 20
  • 22. IPO MARKET UPDATE The overall IPO Total IPO Backlog vs. Health Care IPO Backlog IPO Backlog Aging by Sector backlog has 180 45 Days Since Filing 158 160 stagnated as a result 138 40 0-44 45-89 90-119 120-180 181-360 Total 140 41 Clean Tech 1 4 1 6 Health Care IPO Backlog 33 35 of significant Overall IPO Backlog 120 111 111 115 Consumer 1 1 1 1 4 102 102 105 107 106 99 98 Energy/Mining 2 2 3 7 100 90 94 94 30 volatility in the 27 26 26 Financial 1 3 2 3 4 13 24 30 25 80 23 23 25 He alth Care 2 5 2 3 13 25 markets and 21 21 60 19 Industrials 1 2 1 6 1 11 17 17 20 compressed 40 Media 1 1 2 15 Real Estate 2 1 3 20 valuations among Technology 3 1 6 16 26 0 10 Transportation 1 1 existing public Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Total 12 19 7 19 41 98 '05 '05 '05 '05 '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 companies Overall IPO Backlog Health Care IPO Backlog Health Care IPO Backlog by Subsector (# Deals) Health Care IPO Backlog by LTM Revenue (# Deals) Med Tech New issuance activity >$25MM 24% LTM Revs <$25MM will likely be led by 44% LTM Revs 6 strong revenue 6 24% 11 growth stories 14 5 Services Biopharma 8 20% 56% Pre- Revenue 32% Source: company filings, Dealogic and Piper Jaffray ECM as of 9/30/08 Excludes BCC/SPACs, BDCs, REITs, and closed-end funds 21
  • 23. IPO MARKET UPDATE The Health Care IPO IPO Market Overview backlog stands at 25, Current Health Care IPO Backlog (LTM Revenue > $25 Million) Mo st Curre nt LTM down from a 6-year Filing R e ce nt # of Amt File d Gro ss R e ve nue Date Issue r Ame nd Ame nd Issue r Busine ss De scriptio n ($MM) Marg in ($MM) 07/25/08 Select Medical Corp 08/29/08 1 Operator of specialty acute care hospitals $100 13% $2,105 high of 41 set in Q3 07/27/07 Talecris Biotherapeutics 07/23/08 5 Biopharmaceutical company specializing in the production of plasma-derived protein therapies. $1,000 33% $1,221 09/12/08 Emdeon Corp - - Provides business & tech solutions to financial and healthcare delivery $460 36% $829 of 2007 12/19/07 Prometheus Laboratories 08/14/08 5 Pharma products, pharmacogenetic testing, therapeutic drug monitoring $100 60% $242 06/20/08 AGA Medical Holdings Inc 09/10/08 2 Holding co. for manufacturer of transcatheter occlusion devices. $200 85% $157 03/07/08 Bostwick Laboratories Inc - - Laboratory focused on the diagnosis of cancer $100 62% $103 11/09/07 Xanodyne Pharmaceuticals 06/10/08 4 Therapeutic drugs for oncology, hematology and management $86 84% $72 04/17/08 Epocrates Inc - - Provider of clinical information, IT, and decision support tools $75 65% $66 06/06/08 Acclarent Inc 08/07/08 1 Develops technologies in the ear, nose, and throat. $86 78% $36 05/01/07 Cumberland Pharma 08/12/08 13 Specialty pharmaceutical company focused on acquiring & developing branded prescriptions $94 90% $31 07/02/08 Zonare Medical Systems Inc 09/05/08 2 Develops compact ultrasound systems $86 42% $31 Current Health Care IPO Backlog (LTM Revenue < $25 Million) Mo st Curre nt LTM Filing R e ce nt # of Amt File d Gro ss R e ve nue Date Issue r Ame nd Ame nd Issue r Busine ss De scriptio n ($MM) Marg in ($MM) 01/22/08 Cardiovascular Systems 09/08/08 6 Produces devices for the treatment of cardiovascular disease $86 60% $22 11/09/07 ChemoCentryx Inc 01/14/08 2 Developes orally-administered chemotherapy drugs $58 N/A $19 03/12/08 CyDex Pharmaceuticals 06/18/08 2 Portfolio company focused on the commercialization of drugs $50 85% $12 04/01/08 Biotrove Inc 08/22/08 4 Developing instruments for genomic analysis $75 23% $7 07/25/08 AutoGenomics Inc. 09/18/08 2 Provides automated molecular testing solutions. $86 N/A $3 08/05/08 Dr. Tattoff Inc - - Laser tattoo removal company $8 N/A $1 Current Health Care IPO Backlog (Pre-Revenue) Mo st Curre nt LTM Filing R e ce nt # of Amt File d Gro ss R e ve nue Date Issue r Ame nd Ame nd Issue r Busine ss De scriptio n ($MM) Marg in ($MM) 09/04/08 TherOx Inc - - Developer of devices for cardiac ischemia patients. $100 - - 07/01/08 Alimera Sciences Inc 08/19/08 1 Clinical stage developer of prescription ophthalmic pharmaceuticals. $75 - - 05/09/08 Aldagen Inc 06/18/08 1 Biopharmaceutical company. $81 - - 01/25/08 Phenomix Corp 05/16/08 2 Developing treatments for immune, central nervous system, and metabolic diseases. $86 - - 01/09/08 Omeros Corp 05/08/08 2 Developing orthopedic, rheumatology, urology, and cardiovascular pharmaceuticals $115 - - 11/20/07 Aegerion Pharmaceuticals 01/18/08 2 Specialty pharma company developing products to treat cardiovascular and metabolic disease. $86 - - 09/14/07 TransMedics Inc 12/14/07 2 Medical device company enable transplantation of beating hearts and other functioning organs. $86 - - 08/31/07 Anacor Pharmaceuticals Inc 04/03/08 4 Biopharmaceutical company developing small molecule therapeutics. $58 - - Source: company filings, Dealogic and Piper Jaffray ECM Data through 9/30/08, Shading denotes Piper Jaffray as a manager A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy 22 be accepted prior to the time the registration statement becomes effective.
  • 24. SECTION IV Follow-on Market Update
  • 25. FOLLOW-ON MARKET UPDATE Follow-on Market Update – Key Takeaways The first 9 months of Offering Activity Increased in Q2 Driven by Large-Cap Financials 2008 have been dominated by • Q3 follow-ons accounted for $57bn in capital raised, second only to Q1 2000 in total follow-on proceeds in a quarter struggling financials • The 67 priced transactions was well below the quarterly average of 120 for the ‘04 – ’07 period raising capital in • $105bn of the $121bn (87%) in follow-on capital raised thus far in 2008 has been on behalf of order to shore up Financial, Real Estate and Energy companies their balance sheets Difficult Pricing Conditions and Volatility Have Lead to Selective Offering Activity • Many growth companies without immediate capital needs or significant catalysts to drive stock price appreciation have elected to delay financing; only 53 of the 215 (25%) follow-ons priced so far in ’08 have been on behalf of companies in the growth sectors vs. the average of 40% for the ’04 – ’07 period • Pricing conditions continue to be challenging; the average change from file-to-offer in Q3 was -9.3% vs. the average of -4.4% for the ’04 – ’07 period; on average, sub $2bn market cap growth companies traded down -11.5% in Q3 • Selling shareholder activity has been limited; only 30 transactions have been completed on behalf of selling shareholders in 2008(shareholders selling >50% of the offering), or 14% of the completed offerings – well below the 33% average seen from ’04 – ‘07 Health Care Offering Activity is Limited – However Performance Has Been Strong • Companies with significant announcements/catalysts for stock price appreciation have accounted for the limited deal activity in the Health Care sector; the Health Care sector is one of only two sectors where offerings are trading above offer on average, trading up 11% year-to-date • Pricing performance has been more favorable for Health Care issuers; average price declination file- to-offer was -7.4% in Q3 vs. -9.3% for the broader markets Source: company filings, Dealogic and Piper Jaffray ECM Data through 9/30/08 Excludes transaction less than $20mm and closed end funds 24
  • 26. FOLLOW-ON MARKET UPDATE Distressed financial Follow-on Activity by Quarter 160 $60 companies looking to 148 138 140 140 $50 shore up balance 127 129 122 sheets led to the # of Follow-ons 120 111 113 $40 Proceeds ($B) 101 100 most active quarter of 100 93 $30 83 follow-on issuance, in 80 72 $20 terms of capital 64 60 51 $10 raised, since Q1 of 40 $0 2000 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Follow-ons Completed Follow-on Proceeds ($B) Pricing conditions File / Offer Performance by Quarter Last Trade / Offer Discount by Quarter deteriorated 0% 0% considerably in Q3 (2%) -1% after showing some -2.5% -3.4% -3.1% signs of improvement (4%) -4.1% -2% -4.4% -2.2% in Q2 -2.4% (6%) -5.5% -5.6% -3% -2.6% -2.8% -2.7% -2.6% -6.0% -2.9% -3.2% -3.4% (8%) -4% -8.4% -9.2% -4.3% -9.3% -4.5% (10%) -5% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 Source: company filings, Dealogic and Piper Jaffray ECM Data through 9/30/08 Excludes transaction less than $20mm and closed end funds 25
  • 27. FOLLOW-ON MARKET UPDATE Follow-on offering Follow-on Offering Activity Breakdown activity has 2008 YTD Follow-on Deal Volume by Sector 2007 CY Follow-on Deal Volume by Sector disproportionately been Financial Financial Health Care Health Care 17% 14% 25% on behalf of Financial & 11% Energy companies in Energy & Mining Industrials Industrials 2008 Energy & 7% 18% 9% Mining Real Estate 20% Real Estate 1% 2% REIT 7% Consumer Consumer 6% 3% REIT 17% Clean Tech Clean Tech Transports Transports Technology Technology 3% 5% 7% 18% 5% 5% Issuers have looked to Follow-on Marketing Style Follow-ons Driven by Selling Shareholders* mitigate market risk by 75% 200 40% quickly accessing the 59% 60% 52% 150 30% capital markets via 170 % of Offerings 45% bought/accelerated 170 100 148 20% 30% 140 transactions in 2008 30% 22% 104 19% 18% 50 10% 15% 30 0% 0 0% 2003 2004 2005 2006 2007 2008 YTD 2007 2008 Fully Marketed Bought Accelerated # of Follow-ons w/ Selling Shareholders % of Total FOs Source: company filings, Dealogic and Piper Jaffray ECM through 9/30/08 *Defined as selling shareholder selling 50% or more of the offering Excludes transaction less than $20mm and closed end funds 26
  • 28. FOLLOW-ON MARKET UPDATE Health Care follow-on Health Care Follow-on Activity by Quarter and Sector 25 $5,000 issuance levels are at 20 their lowest levels 20 19 $4,000 Follow-on Proceeds ($MM) 18 18 16 since 2003 # of Follow-ons 15 13 $3,000 11 10 9 9 $2,000 8 8 7 66 6 5 5 5 5 5 4 4 4 4 4 $1,000 3 3 22 2 2 2 2 22 1 1 1 1 0 $0 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Biopharmaceuticals Health Care Services Medical Technology Capital Raised Pricing conditions Health Care File / Offer Performance By Quarter Health Care Last Trade / Offer Discount by Quarter deteriorated in Q3 – 0% 0% however they are still -2% (4%) -3.4% -2.1% -1.9% improved from the -4.5% -4.8% -2.3% -2.7% -2.7% -2.9% -5.2% -5.2% -4% very poor levels seen -6.8% -7.2% -3.9% (8%) -4.3% -4.4% -4.4% -7.5% -6% in Q4 ’07 and Q1 ‘08 -10.8% (12%) -8% (16%) -14.4% -10% -18.7% -10.7% (20%) -12% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 Source: company filings, Dealogic and Piper Jaffray ECM Data through 9/30/08 Excludes transaction less than $20mm and closed end funds 27
  • 29. FOLLOW-ON MARKET UPDATE Recent Growth Sector Small Cap (<$2B) SECs Recent Small Cap (<$2B) Follow-on Pricing Performance Recent small-cap Deal Market Deal % Chg % Chg % Chg (9/23) Hanger Orthopedic -8% Pricing Value Value Value / Price / Amount / Price / follow-ons have seen Date Issuer ($MM) ($MM) Mkt Value FTO FTO Current (8/18) ABIOMED Inc -8% 9/23/08 Hanger Orthopedic $45 $455 10% -8% -8% -3% 8/18/08 ABIOMED Inc $42 $683 6% -8% -8% 2% difficult pricing 8/15/08 VisionChina Media $101 $443 23% -29% -51% -8% (8/15) VisionChina Media -51% -29% 8/6/08 Acorda Therapeutics $131 $1,109 12% -5% -5% -16% 7/31/08 Incyte Corp $109 $870 12% -2% 14% -15% conditions while in 7/31/08 CardioNet Inc $133 $635 21% -11% -5% -6% (8/6) Acorda Therapeutics -5% 7/24/08 EnergySolutions Inc $765 $1,753 44% -15% -15% -47% 7/21/08 Shuffle Master Inc $86 $233 37% -33% -33% 20% (7/31) Incyte Corp -2% 14% registration – 7/17/08 Canadian Solar Inc $119 $1,270 9% -11% -11% -43% 7/15/08 IPC The Hospitalist $74 $300 25% -16% -41% 39% (7/31) CardioNet Inc -11% -5% 6/26/08 Sequenom Inc $98 $889 11% 9% 9% 72% declining 8% on 6/24/08 HealthSouth Corp $151 $1,581 10% -4% -4% 7% (7/24) EnergySolutions Inc -15% 6/24/08 Luminex Corp $80 $803 10% -11% -11% 26% 6/23/08 SuccessFactors Inc $104 $648 16% 5% 23% -8% average 6/19/08 Synthesis Energy Sys. $106 $347 31% 6% 6% -48% (7/21) Shuffle Master Inc -33% 6/17/08 ReneSola Ltd $212 $1,409 15% 0% 0% -49% 6/12/08 Monotype Imaging $68 $340 20% -22% -35% -7% 6/4/08 Solera Holdings Inc $133 $1,816 7% -5% -5% 8% (7/17) Canadian Solar Inc -11% 5/22/08 Natus Medical Inc $90 $519 17% -9% 4% 16% 5/22/08 Allos Therapeutics $70 $435 16% -4% 16% 31% (7/15) IPC The Hospitalist -41% -16% 5/22/08 Polypore International $193 $996 19% 12% 12% -10% - 60% - 40% -20% 0% 20% Mean $139 $835 18% -8% -7% -2% Median $104 $683 16% -8% -5% -6% % Chg Price FTO % Chg Amt FTO Recent Follow-ons (all sectors & market caps) Recent Follow-on Pricing Performance In the broader Pricing Deal Value Market Value Deal Value / % Chg Price / % Chg Amount / % Chg Price / (9/26) Washington Real Estate -4% Date Issuer ($MM) ($MM) Mkt Value FTO FTO Current markets, follow-ons 9/26/08 9/26/08 Washington Real Estate JP Morgan Chase $60 $11,500 $1,905 $169,694 3% 7% -4% -7% -4% -7% 5% 15% (9/26) JP Morgan Chase -7% 9/26/08 National Retail Properties $80 $1,850 4% -3% 66% 4% (9/26) National Retail Properties -3% 66% have primarily been 9/25/08 First Niagara Financial $115 $1,740 7% -14% -14% 17% 9/24/08 Realty Income Corp $78 $2,790 3% -1% -1% -5% -14% (9/25) First Niagara Financial 9/24/08 Stifel Financial Corp $87 $1,224 7% -3% 37% 11% coming on behalf of 9/24/08 James River Coal Co $45 $911 5% -10% -10% -27% (9/24) Realty Income Corp -1% 9/24/08 Corporate Office Prop. $146 $2,039 7% -3% 58% 3% 9/24/08 First Potomac Realty $46 $437 11% -11% -11% 7% distressed financials 9/24/08 Equity One Inc $47 $1,662 3% -2% -2% -5% (9/24) Stifel Financial Corp -3% 37% 9/24/08 Goldman Sachs $5,750 $54,329 11% -2% -2% 4% 9/24/08 Capital One Financial $761 $20,457 4% -9% -9% 4% (9/24) James River Coal Co -10% and REITs 9/24/08 Waste Connections Inc $411 $2,604 16% -12% -4% 6% 9/23/08 Healthcare Realty Trust $205 $1,496 14% -19% -19% 14% 9/23/08 Hanger Orthopedic Group $45 $455 10% -8% -8% -3% (9/24) Corporate Office Prop. -3% 58% 9/19/08 LDK Solar Co Ltd $200 $4,867 4% -5% 21% -28% 9/18/08 Vertex Pharmaceuticals $220 $3,936 6% -4% 3% 30% (9/24) First Potomac Realty -11% 9/18/08 Otter Tail Corp $155 $1,143 14% -25% -32% 2% 9/15/08 Omega Healthcare Investors $98 $1,408 7% -5% -5% 20% (9/24) Equity One Inc -2% 9/11/08 Regency Energy Partners $149 $1,151 13% -11% -11% -13% 9/10/08 Cogdell Spencer Inc $40 $334 12% -3% 14% -13% -20% 0% 20% 40% 60% 80% Mean $964 $13,163 8% -8% 3% 2% % Chg Price FTO % Chg Amt FTO Median $115 $1,740 7% -5% -4% 4% Data as of 9/30/08 Source: Dealogic, Baseline 28 Growth Sectors defined as Clean Tech, Consumer, Health Care, & Technology
  • 30. FOLLOW-ON MARKET UPDATE Biopharmaceuticals/Diagnostics Health Care Follow- Pricing Deal Offer Deal Value Mkt Value Selling % Chg % Chg % Chg Last % Chg / % Chg / % Chg / Date Issuer Type Price ($MM) ($MM) Shrs % Amt FTO Price FTO Trade/Offer 1-Day 30-Day Current ons Completed in 9/18/08 Vertex Pharma Accelerated $25.50 $220 $3,936 3% -4% -4% 9% 2% 30% 8/6/08 Illumina Inc Accelerated $87.50 $352 $6,074 -6% -6% -2% 1% -4% -54% 2008 8/6/08 Acorda Therapeutics Bought $28.50 $131 $1,109 -5% -5% -5% -6% 4% -16% 7/31/08 Incyte Corp Accelerated $9.00 $109 $870 14% -2% -3% 7% 14% -15% 6/25/08 Sequenom Inc Accelerated $15.50 $98 $889 9% 9% -3% -2% 42% 72% 6/24/08 Luminex Corp Marketed $19.91 $80 $803 -11% -11% 0% 4% 8% 26% 5/22/08 Allos Therapeutics Marketed $5.64 $70 $435 16% -4% 0% 7% 16% 31% 5/7/08 La Jolla Pharma Accelerated $1.92 $30 $75 2% 2% 2% -14% 8% -42% 2/28/08 Genoptix Inc Marketed $25.50 $61 $411 100% -58% -16% 0% 1% -1% 28% 2/12/08 Vertex Pharma Accelerated $17.14 $118 $2,380 -6% -6% 0% 12% -10% 94% 2/12/08 Acorda Therapeutics Marketed $21.50 $82 $686 3% -2% -18% 0% 15% -13% 11% 2/6/08 Biodel Inc Marketed $15.50 $59 $376 14% -35% -35% -3% -3% -19% -78% 1/31/08 Rigel Pharma Marketed $27.00 $135 $992 30% 4% -2% -3% -27% -14% 1/23/08 OREXIGEN Therapeutics Marketed $11.00 $81 $388 -21% -21% -4% -1% 3% -2% 1/17/08 Targacept Inc Accelerated $7.07 $31 $173 0% 0% 0% 0% 13% -18% 1/17/08 Seattle Genetics Marketed $9.00 $104 $752 -23% -23% -7% 1% 6% 19% Mean $110 $1,272 39% -6% -9% -2% 2% 3% 5% Median $90 $777 14% -3% -5% -2% 1% 3% 5% Health Care Services Pricing Deal Offer Deal Value Mkt Value Selling % Chg % Chg % Chg Last % Chg / % Chg / % Chg / Date Issuer Type Price ($MM) ($MM) Shrs % Amt FTO Price FTO Trade/Offer 1-Day 30-Day Current 9/23/08 Hanger Orthopedic Bought $18.00 $45 $455 100% -8% -8% -8% -5% -18% -3% 7/15/08 IPC The Hospitalist Marketed $18.50 $74 $300 69% -41% -16% -1% 9% 32% 39% 6/24/08 HealthSouth Corp Bought $17.20 $151 $1,581 -4% -4% -4% -1% 1% 7% 4/11/08 Almost Family Marketed $17.75 $45 $141 -15% -15% -1% 0% 22% 123% Mean $79 $619 84% -17% -11% -4% 1% 9% 41% Median $60 $378 84% -12% -12% -3% 0% 11% 23% Medical Technology Pricing Deal Offer Deal Value Mkt Value Selling % Chg % Chg % Chg Last % Chg / % Chg / % Chg / Date Issuer Type Price ($MM) ($MM) Shrs % Amt FTO Price FTO Trade/Offer 1-Day 30-Day Current 8/18/08 ABIOMED Inc Bought $17.38 $42 $683 -8% -8% -8% 4% 3% 2% 7/31/08 CardioNet Inc Marketed $26.50 $133 $635 100% -5% -11% -4% 8% 15% -6% 5/22/08 Natus Medical Marketed $19.50 $90 $519 4% -9% -1% 8% 5% 16% 4/1/08 Hansen Medical Bought $13.34 $40 $320 10% -9% -9% 9% 32% 1% Mean $76 $539 100% 0% -9% -5% 7% 14% 3% Median $66 $577 100% -1% -9% -6% 8% 10% 1% Source: company filings, Dealogic and Piper Jaffray ECM Data through 9/30/08 Excludes transaction less than $20mm and closed end funds 29
  • 31. SECTION V Convertible Market Update
  • 32. CONVERTIBLE MARKET UPDATE The convertible Convertible Issuance Activity market priced $1.6 Convertible Capital Raised # of Convertible Transactions billion of capital during September, $120 300 bringing the total $100 250 Numbder of Deals Capital Raised ($ bln) $80 200 through Q3 2008 to $21.5 $60 150 278 39 $63.5 billion $40 $89.4 $99.2 100 186 203 $69.3 $63.5 147 50 115 116 $48.8 $20 $40.5 8 5 $1.8 $1.6 0 $0 2003 2004 2005 2006 2007 2008 Sep-07 Sep-08 2003 2004 2005 2006 2007 2008 Sep-07 Sep-08 Completed Deals Annualized Deals Deal activity for Q3 2008 was down 42% versus Q3 2007 as LTM Convertible Issuers by Market Capitalization Q3 Convertible Issuers by Market Capitalization measured by capital raised, and down 33% measured by the 46% 34% 33% number of completed 48% transactions 13% 7% 14% 5% Less than $300mm $300mm - $2B Less than $300mm $300mm - $2B $2B - $10B Greater than $10B $2B - $10B Greater than $10B Source: Company Press Releases, Dealogic and Bloomberg Percentages calculated relative to # of Deals 31
  • 33. CONVERTIBLE MARKET UPDATE Every major industry Convertible Issuance Activity group issued LTM Convertible Transactions by Industry Q3 Convertible Transactions by Industry convertibles in Q3 with a strong 14% 22% showing from the 24% 15% 18% alternative energy 17% 4% 5% and Health Care 18% 5% 10% 8% 5% sectors 7% 14% 14% Consumer & Retail Energy & Power Consumer & Retail Energy & Power Financial Institutions Healthcare Financial Institutions Healthcare Industrial Growth Media & Communications Industrial Growth Media & Communications Real Estate Technology Real Estate Technology 79% of convertible LTM Convertible Issuers by Credit Rating Q3 Convertible Issuers by Credit Rating transactions were not rated by the credit agencies versus 74% 74% 79% during the last 12 months 13% 13% 21% Investment Grade Non-Rated Speculative Investment Grade Non-Rated Speculative Source: Company Press Releases, Dealogic and Bloomberg Percentages calculated relative to # of Deals 32
  • 34. CONVERTIBLE MARKET UPDATE Convertible structuring Convertible Issuance Activity diverged a little from LTM Convertible Security Type Q3 Convertible Security Type the longer term trend – Financials pulled back from issuing 86% convertibles in Q3, as 74% the SEC’s short ban 10% limited investors’ ability 16% to hedge their equity 5% 9% exposure Preferred Mandatory Bond Preferred Mandatory Bond Companies continue to use net share LTM Convertible Enhancement Structures Q3 Convertible Enhancement Structures settlement (NSS) (cash settlement upon 60% 60% 53% 52.4% conversion) - the FASB ruled in favor of 40% 40% changing accounting 31.8% % of Total % of Total guidance on such 22% 20% 20% convertible structures 11% 9% that will be more 5.3% 5.3% dilutive to earnings 0% 0% CoPay NSS Call Spread Turbo CoPay NSS Call Spread Turbo Source: Company Press Releases, Dealogic and Bloomberg Percentages calculated relative to # of Deals 33
  • 35. CONVERTIBLE MARKET UPDATE Convertible bond Convertible Issuance Activity structure was largely Weighted Average Coupon / Premium Convertible Use of Proceeds unchanged during Q3 100% Debt refinancing and 5.0% 45% 80% 72% general corporate 4.5% 40% 68% 4.0% 35% purposes were stated as 3.5% 60% % of Total 30% 51% 3.0% the most prevalent use of 2.5% 25% 40% 20% 40% 2.0% proceeds during Q3 – in 15% 1.5% 10% line with the longer-term 1.0% 18% 0.5% 5% 20% 14% 11% 10% trend 0.0% 0% Oct-07 Dec-07 Jan-08 Mar-08 Apr-08 Jun-08 Jul-08 Sep-08 0% Coupon Premium Debt Share Repo General M&A The majority of Q3’s Refinance LTM Q3 convertible transactions were completed via Rule LTM Convertible Security Registration at Issue Q3 Convertible Security Registration at Issue 144a or as registered offerings 6% The 144A offering process 63% remains the most flexible 14% 52% and efficient process to 42% market for many issuers 23% and appeals to the majority of the buyer base Registered Reg D 144a Registered Reg D 144a Source: Company Press Releases, Dealogic and Bloomberg Percentages calculated relative to # of Deals 34
  • 36. CONVERTIBLE MARKET UPDATE 60% of the convertible Convertible Issuance Activity offerings during Q3 were LTM Convertible Security Marketing Period Q3 Convertible Security Marketing Period completed with just one day of marketing - the convertible market continues to minimize 5% 16% market risk and 60% 53% management distraction 31% 35% via the most utilized on day telephonic road show schedule >1 Day Overnight 1 Day >1 Day Overnight 1 Day Most convertible Q3 Convertible Health Care Transactions transactions completed with a marketing schedule Trade Market Total Effective Non Call Call Call Spread Net Share Stock Stock Repurchase Debt Company Yield Premium Security Date Cap Size Maturity Period Spread Upper Strike Settlement Repurchase % of Deal Refinance longer than one day are completed with other Mylan Labs 9/10/2008 $3,380MM $500MM 3.750% 20% 7 Life NC Sr Note 80.0% NA Salix Pharmaceuticals 8/19/2008 $346MM $60MM 5.500% 20% 5 5 NC Sr Note NA NA capital product offerings China Medical Technologies 8/13/2008 $1,270MM $240MM 4.040% 23% 5 Life NC Sr Note NA NA such as follow-on equity PSS World Medical 7/30/2008 $1,040MM $230MM 3.125% 28% 6 Life NC Sr Note 70.0% 17.5% offerings or debt American Oriental Bioengineering 7/9/2008 $702MM $115MM 5.000% 15% 5 Life NC Sr Note NA NA Number of Deals = 5 $1,347MM $229MM 4.28% 21.00% 6 75.0% 17.5% $1,040MM $230MM 4.04% 20.00% 5 75.0% 17.5% Source: Company Press Releases, Dealogic and Bloomberg Percentages calculated relative to # of Deals 35
  • 37. SECTION VI PIPE and Registered Direct Market Update
  • 38. PIPE AND REGISTERED DIRECT MARKET UPDATE Although so far in 2005 – 2008 YTD PIPE/RD Activity 2008 PIPE and All PIPE/RD Activity by Quarter (a) Registered Direct 225 209 $9 192 issuance is down 200 $8 174 185 173 158 175 $7 from the previous 156 Capital Raised ($B) 150 $6 # of PIPEs/RDs 131 119 year, $12.54 billion 125 115 102 $5 96 88 has still been raised 100 $4 83 71 in 242 transactions 75 $3 50 $2 25 $1 $4.6 $4.2 $6.1 $4.7 $6.0 $5.7 $3.4 $8.1 $5.9 $7.9 $3.6 $5.3 $3.4 $4.0 $5.1 0 $0 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Capital Raised ($B) PIPEs/RDs Completed PIPE/RD Activity Since 1/1/2008 Common Stock Total Amt Convertible Total Amt Sector No. Off (MM) Se ctor No. Off (MM) Clean Tech 17 $483 Clean Tech 7 $214 Consumer 8 $135 Consumer 4 $550 Energy 16 $1,076 Energy 13 $1,232 Financial 25 $2,439 Financial 18 $2,266 Health Care 44 $1,074 Health Care 17 $407 Industrial Growth 29 $794 Industrial Growth 12 $379 Technology 18 $830 Technology 14 $663 Total 157 $6,831 Total 85 $5,711 (a) Source: PlacementTracker.com as of September 30, 2008. Includes all common stock, (b) convertible preferred and convertible debt PIPE/RD transactions greater than $10 million. Percentage indicated is based on number of offerings. 37
  • 39. PIPE AND REGISTERED DIRECT MARKET UPDATE Although so far in 2005 – 2008 YTD PIPE Activity 2008 PIPE issuance is All PIPE Activity by Quarter (a) down from the 200 $8 174 168 167 previous year, $11.21 175 $7 155 151 146 billion has still been 150 $6 134 Capital Raised ($B) 125 $5 raised in 203 104 101 # of PIPEs 108 94 100 $4 transactions 77 76 70 75 57 $3 50 $2 25 $1 $3.8 $3.9 $5.5 $4.2 $5.1 $5.3 $3.1 $6.8 $5.5 $7.1 $2.9 $4.5 $3.2 $3.5 $4.6 0 $0 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Capital Raised ($B) PIPEs Completed 2008 PIPE Activity Since 1/1/2008 Common Stock Total Amt Conve rtible Total Amt Se ctor No. Off (MM) Se ctor No. Off (MM) Clean Tech 12 $359 Clean Tech 7 $214 Consumer 6 $80 Consumer 4 $555 Energy 12 $694 Energy 13 $1,232 Financial 21 $2,267 Financial 18 $2,266 Health Care 25 $599 Health Care 16 $356 Industrial Growth 26 $737 Industrial Growth 12 $379 Technology 17 $804 Technology 14 $663 Total 119 $5,540 Total 84 $5,665 (a) Source: PlacementTracker.com as of September 30, 2008. Includes all common stock, convertible preferred and convertible debt PIPE transactions greater than $10 million. 38 (b) Percentage indicated is based on number of offerings.
  • 40. PIPE AND REGISTERED DIRECT MARKET UPDATE Although so far in 2005 – 2008 YTD RD Activity 2008 RD issuance is All RD Activity by Quarter (a) 40 $2,000 down from the 36 35 $1,750 previous year, $1.34 30 $1,500 billion has still been Capital Raised ($MM) 24 26 25 $1,250 raised in 39 22 22 # of RDs 19 21 20 $1,000 transactions 17 18 18 13 14 15 $750 11 10 8 $500 7 5 $250 $834 $250 $595 $570 $869 $418 $350 $1,303 $342 $806 $724 $752 $241 $579 $523 0 $0 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Capital Raised ($MM) RDs Completed 2008 RD Activity Since 1/1/2008 Common Stock Total Amt Convertible Total Amt Se ctor No. Off (MM) Sector No. Off (MM) Clean Tech 5 $125 Clean Tech 0 — Consumer 2 $54 Consumer 0 — Energy 4 $382 Energy 0 — Financial 4 $172 Financial 0 — Health Care 19 $475 Health Care 1 $52 Industrial Growth 3 $57 Industrial Growth 0 — Technology 1 $26 Technology 0 — Total 38 $1,291 Total 1 $52 (a) Source: PlacementTracker.com as of September 30, 2008. Includes all common stock, convertible preferred and convertible debt RD transactions greater than $10 million. (b) Percentage indicated is based on number of offerings. 39
  • 41. PIPE AND REGISTERED DIRECT MARKET UPDATE Although so far in 2008 YTD Common Stock PIPE/RD Activity (a, b) 2008 common stock % of Traditional PIPEs/RDs with Warrant Coverage PIPE and Registered 75% Direct issuance is 60% down from the 53% 54% 47% 46% previous year, $6.83 45% %of Total billion has still been 30% raised in 157 15% transactions 0% PIPEs RDs No Warrants Warrants Traditional PIPE/RD Transaction Size PIPE/RD Issuer Market Cap as % of Market Cap 17% 30% 21% 18% 9% 18% 36% 22% 21% 8% Less than $50MM $50MM to $100MM 0% to 5% 5% to 10% 10% to 15% $100MM to $200MM $200MM to $400MM 15% to 20% Greater than 20% Greater than $400MM (a) Source: PlacementTracker.com as of September 30, 2008. Includes all agented common stock PIPE/RD transactions greater than $10 million. (b) Percentage indicated is based on number of offerings. 40
  • 42. PIPE AND REGISTERED DIRECT MARKET UPDATE Although so far in 2008 YTD Convertible PIPE/RD Activity (a, b) % of Traditional PIPEs/RDs 2008 convertible PIPE PIPE/RD Structure Breakdown With Warrant Coverage and Registered Direct 100% 100% 100% 100% issuance is down 80% 80% from the previous 58% year, $5.71 billion has 60% 60% 55% % of Total % of Total 42% 45% still been raised in 85 40% 40% transactions 20% 20% 0% 0% 0% 0% PIPEs RDs PIPEs RDs Convertible Notes Convertible Preferred No Warrants Warrants PIPE/RD Transaction Size PIPE/RD Issuer Market Cap as % of Market Cap 15% 23% 67% 8% 13% 5% 5% 31% 18% 15% Less than $50MM $50MM to $100MM 0% to 5% 5% to 10% 10% to 15% $100MM to $200MM $200MM to $400MM 15% to 20% Greater than 20% Greater than $400MM (a) Source: PlacementTracker.com as of September 30, 2008. Includes all agented convertible PIPE/RD transactions greater than $10 million. (b) Percentage indicated is based on number of offerings. 41
  • 43. SECTION VII Institutional Health Care Fund Movement
  • 44. INSTITUTIONAL HEALTH CARE FUND MOVEMENT Equity Movements Among Funds with the Most Health Care Assets Under Management Health Care sector Q2 Change in Equity Assets equity asset Q2 Chg. in Assets Overall Portfolio in HC Assets HC Assets Funds Overall Chg. HC Services movement among Biopharma Med Tech Under % Funds Under Mgmt Devoted Mgmt the top Health Care Institution Name City Style ($MM) to HC ($MM) Fidelity Management & Research Boston Growth -3% -1% -2% -3% $63,461 12% -1% $535,342 funds – as measured Wellington Management Co. Llp Boston Value -3% -2% -11% -5% $50,132 19% -1% $259,118 Capital World Investors Los Angeles Value 2% 25% 6% 3% $40,778 10% 5% $428,547 Alliancebernstein Lp New York Value -1% -2% 1% -1% $32,529 11% -1% $284,828 by equity assets T. Rowe Price Associates, Inc. Baltimore Growth 5% 10% 2% 5% $29,799 13% 3% $225,591 Capital Research Global Investors Los Angeles Growth -3% 0% 2% -2% $24,639 7% 5% $330,851 under management Dodge & Cox, Inc. San Francisco Contrarian 2% 0% -6% 0% $21,578 18% -1% $121,482 Blackrock Advisors, Inc. New York Value 6% 6% -4% 3% $17,028 12% 3% $136,271 TIAA-Cref Asset Management Llc New York Value 0% -3% 0% -1% $16,671 11% 1% $147,717 Columbia Management Advisors, Inc. Boston Value -5% 3% -4% -4% $15,234 10% -5% $146,175 Clearbridge Advisors New York Growth -2% 12% -1% -2% $13,880 20% -3% $69,480 Primecap Management Co. Pasadena Growth 11% - 8% 10% $13,399 25% 4% $54,360 Goldman Sachs Asset Management Tampa Growth 0% -20% 6% -1% $13,142 13% -2% $103,702 Jennison Associates Llc New York Growth -19% 88% -13% -13% $10,392 21% 0% $50,563 Norges Bank Investment Management Oslo Growth 42% 42% 52% 44% $10,207 8% 22% $131,520 Enhanced Investment Technologies Palm Beach Growth -2% -2% 4% 0% $9,621 17% 2% $55,720 UBS Global Asset Management Chicago Value 9% 8% 38% 16% $9,084 15% 16% $62,619 Janus Capital Management Denver Agg. Growth 10% 12% 16% 12% $8,992 12% 5% $76,489 Grantham, Mayo, Van Otterloo Boston Value -1% -24% -6% -3% $8,729 14% 0% $61,427 JPMorgan Asset Management, Inc. New York Value 0% 40% 21% 8% $8,722 10% -1% $89,880 Putnam Investment Management, Inc. Boston Value -2% -19% -2% -4% $8,538 13% -3% $64,543 Brandes Investment Partners San Diego Contrarian 0% -9% -13% -2% $8,468 16% -7% $52,799 MFS Investment Management Boston Value -5% 25% 5% -2% $8,418 9% 4% $91,375 Templeton Global Advisors Nassau Value -1% 1% 6% 0% $8,290 16% -4% $52,796 Capital Guardian Trust Co. Los Angeles Growth -8% 7% 0% -6% $8,245 14% -6% $58,212 UBS Global Asset Management Zürich Growth -5% -14% -8% -6% $8,179 14% -4% $60,028 Franklin Advisers, Inc. San Mateo Growth 3% 1% -1% 2% $7,908 14% 0% $58,410 Oppenheimerfunds, Inc. New York Growth -4% 6% 2% -1% $7,634 8% 1% $95,860 Neuberger Berman New York Growth 0% 4% 3% 2% $7,143 9% -1% $77,180 Lord Abbett & Co. Jersey City Value -3% 7% 3% -1% $7,126 12% -3% $58,809 American Century Investment Mgmt Kansas City Growth -7% -18% -8% -9% $6,802 12% -1% $54,747 Morgan Stanley Investment Mgmt New York Growth -12% -3% 2% -9% $6,761 9% 0% $78,144 Invesco AIM Management Group Houston Growth -5% -10% 10% -2% $6,681 14% -2% $48,595 Van Kampen Asset Management Houston Growth -10% -12% 3% -8% $6,653 12% -1% $55,771 Fil Investments International Ltd. London Growth -13% -3% 19% -3% $6,440 8% -3% $82,383 Median -2% 0% 2% -1% 12% -1% % representative of change in assets between 3/31/08 and 6/30/08 Source: Bigdough, excludes Indexed & Quantitative Investors 43 “-” denotes accounts that have no holdings in the subsector
  • 45. INSTITUTIONAL HEALTH CARE FUND MOVEMENT Top Health Care Buyers and Sellers ($MM) % Change in Current Position Position ($MM) Norges Bank Investment Mgmt 44% $10,207 $3,112 Fairholme Capital Management 313% $1,865 $1,414 T. Rowe Price Associates, Inc. $1,338 5% $29,799 Primecap Management Co. $1,273 10% $13,399 UBS Global Asset Management $1,236 16% $9,084 Capital World Investors $1,226 3% $40,778 Fisher Investments, Inc. $1,118 91% $2,351 APG Investments $1,036 30% $4,484 Janus Capital Management $940 12% $8,992 CM-CIC Asset Management $787 >1000% $787 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 % Change in Current Position Position ($MM) American Century Investment Mgmt -9% $6,802 ($683) BNP Paribas Arbitrage Snc -34% $1,386 ($716) Relational Investors -55% $613 ($740) ($899) AXA Investment Managers Uk -21% $3,464 ($974) Credit Suisse Asset Management -29% $2,435 ($1,076) Marsico Capital Management -20% $4,384 ($1,182) Allianz Global Investors -40% $1,744 ($1,517) Jennison Associates -13% $10,392 ($1,751) Fidelity Management & Research -3% $63,461 ($2,683) Wellington Management Co. -5% $50,132 ($3,000) ($2,500) ($2,000) ($1,500) ($1,000) ($500) $0 % representative of change in assets between 3/31/08 and 6/30/08 Source: Bigdough 44 Excludes Indexed & Quantitative Investors
  • 46. INSTITUTIONAL HEALTH CARE FUND MOVEMENT Top Biopharmaceutical Buyers and Sellers ($MM) % Change in Current Position Position ($MM) Norges Bank Investment Mgmt 42% $7,743 $2,293 Fairholme Capital Management 313% $1,865 $1,414 Fisher Investments, Inc. $1,125 105% $2,193 Primecap Management Co. $984 11% $9,623 APG Investments $970 36% $3,681 T. Rowe Price Associates, Inc. $878 5% $17,241 CM-CIC Asset Management $630 >1000% $630 JPMorgan Asset Management (UK) $596 19% $3,807 Janus Capital Management $591 10% $6,410 Blackrock Advisors, Inc. $567 6% $10,802 $0 $500 $1,000 $1,500 $2,000 $2,500 % Change in Current Position Position ($MM) Fil Investments International -13% $3,980 ($570) Van Kampen Asset Management -10% $5,264 ($584) Credit Suisse Asset Management -27% $1,669 ($624) ($679) Morgan Stanley Investment Mgmt -12% $4,989 ($897) AXA Investment Managers Uk -21% $3,304 ($999) Allianz Global Investors -40% $1,481 ($1,238) Wellington Management Co. -3% $36,389 ($1,274) Fidelity Management & Research -3% $36,408 ($1,308) Marsico Capital Management -24% $4,084 ($1,480) Jennison Associates -19% $6,469 ($1,600) ($1,400) ($1,200) ($1,000) ($800) ($600) ($400) ($200) $0 % representative of change in assets between 3/31/08 and 6/30/08 Source: Bigdough 45 Excludes Indexed & Quantitative Investors
  • 47. INSTITUTIONAL HEALTH CARE FUND MOVEMENT Top Medical Technology Buyers and Sellers ($MM) % Change in Current Position Position ($MM) UBS Global Asset Management 38% $2,437 $677 Norges Bank Investment Mgmt 52% $1,955 $670 Capital World Investors 6% $10,077 $544 Shumway Capital Partners 111% $733 $386 Fil Investments International 19% $2,225 $348 JPMorgan Asset Management, Inc. 21% $1,950 $342 Janus Capital Management $309 16% $2,215 Paulson & Co., Inc. $307 31% $1,281 Primecap Management Co. $272 8% $3,759 Glenview Capital Management $260 31% $1,092 $0 $100 $200 $300 $400 $500 $600 $700 $800 % Change in Current Position Position ($MM) BNP Paribas Arbitrage Snc -69% $101 ($223) Hotchkis & Wiley Capital Management -80% $65 ($257) Friess Associates -26% $786 ($279) ($282) Dodge & Cox, Inc. -6% $4,506 ($349) Loomis, Sayles & Co. Lp -45% $422 ($380) Fidelity Management & Research -2% $18,804 ($448) Jennison Associates -13% $3,042 ($512) Delaware Investment Advisers -65% $281 ($740) Relational Investors -55% $613 ($1,392) Wellington Management Co. -11% $10,721 ($1,600) ($1,400) ($1,200) ($1,000) ($800) ($600) ($400) ($200) $0 % representative of change in assets between 3/31/08 and 6/30/08 Source: Bigdough 46 Excludes Indexed & Quantitative Investors
  • 48. INSTITUTIONAL HEALTH CARE FUND MOVEMENT Top Health Care Service Buyers and Sellers ($MM) % Change in Current Position Position ($MM) Jennison Associates 88% $881 $412 JPMorgan Asset Management, Inc. 40% $1,021 $290 Crédit Agricole Asset Management $288 194% $436 T. Rowe Price Associates, Inc. $254 10% $2,786 Turner Investment Partners, Inc. $170 40% $594 Calamos Advisors $169 68% $419 Norges Bank Investment Mgmt $150 42% $509 Citadel Investment Group $140 162% $227 Capital World Investors $128 25% $645 Chieftain Capital Management, Inc. $120 30% $521 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 % Change in Current Position Position ($MM) Loomis, Sayles & Co. Lp -58% $86 ($117) Credit Suisse Asset Management -40% $215 ($141) Millennium Partners -35% $275 ($145) ($161) Harris Associates Lp -25% $494 ($183) AXA Rosenberg Investment Mgmt -52% $166 ($184) Jana Partners -62% $114 ($185) Glenview Capital Management -35% $349 ($202) Putnam Investment Management, Inc. -19% $881 ($202) American Century Investment Mgmt -18% $946 ($317) Goldman Sachs Asset Management -20% $1,288 ($350) ($300) ($250) ($200) ($150) ($100) ($50) $0 % representative of change in assets between 3/31/08 and 6/30/08 Source: Bigdough 47 Excludes Indexed & Quantitative Investors
  • 49. INSTITUTIONAL HEALTH CARE FUND MOVEMENT Equity Movements Among the Top Sub-$10B Health Care Funds Health Care sector Q2 Change in Equity Assets equity asset Q2 Chg. in Assets Overall Portfolio in HC Assets HC Assets Funds Overall Chg. HC Services movement among Biopharma Med Tech Under % Funds Under Mgmt Devoted Mgmt the top sub-$10 Institution Name City Style ($MM) to HC ($MM) Orbimed Advisors, Inc. New York Sector Specific 5% 0% 5% 5% $3,998 98% 4% $4,088 billion funds – as Sectoral Asset Management Montreal Growth 0% - 1% 0% $3,078 100% 0% $3,078 Westfield Capital Management Boston Agg. Growth 8% 6% -1% 6% $2,813 29% 4% $9,604 Healthcor Management New York Sector Specific 0% -14% 18% 9% $2,364 88% 8% $2,682 measured by equity Sectoral Asset Management (Geneva) Geneva Growth 3% - -19% 3% $2,277 100% 3% $2,277 Bellevue Asset Management Küsnacht Growth -9% 0% -8% -9% $2,150 90% -8% $2,386 assets under Maverick Capital Ltd. Dallas Long/Short 9% - 23% 20% $2,084 21% 16% $9,818 Glenview Capital Management New York Opportunistic 774% -35% 31% 38% $1,966 24% 12% $8,295 management Timessquare Capital Management New York Agg. Growth 38% -8% -7% -3% $1,863 21% 2% $8,870 Walter Scott & Partners Ltd. Edinburgh Growth 3% 6% -3% 1% $1,843 24% 5% $7,817 Frontpoint Partners Llc Greenwich Long/Short -3% -32% 7% -2% $1,711 41% 4% $4,132 Iridian Asset Management Llc Westport Growth 21% 2% -16% 0% $1,535 21% 3% $7,175 Gardner Lewis Asset Management Chadds Ford Agg. Growth 3% 3018% -6% 5% $1,468 21% -2% $7,115 State Of Wisconsin Investment Board Madison Growth -3% 7% 2% -1% $1,419 16% -1% $8,669 Fortress Investment Group New York Opportunistic 71% 0% -52% 0% $1,341 46% 9% $2,900 Edgewood Management New York Growth 19% 51% 3% 20% $1,306 28% 9% $4,694 Comerica Asset Management Detroit Growth -3% -10% -3% -4% $1,235 13% 0% $9,821 Franklin Templeton Investment Mgmt London Value 8% -2% 1% 6% $1,207 15% -3% $8,311 Baker Bros. Advisors Llc New York Sector Specific 2% 0% -10% 1% $1,167 85% 2% $1,381 Sound Shore Management, Inc. Greenwich Value 18% - 0% 8% $1,164 19% -3% $6,089 Valueact Capital Management San Francisco Turnaround -8% -9% 0% -7% $1,149 27% 12% $4,295 Shumway Capital Partners Greenwich Long/Short -8% - 111% 44% $1,148 18% 49% $6,336 Munder Capital Management Birmingham Growth 8% 4% -12% 0% $1,131 12% 0% $9,614 Deerfield Management Co. New York Sector Specific -10% 21% -6% -6% $1,116 93% -6% $1,197 Analytic Investors Los Angeles Growth -49% 10% 12% -7% $1,101 12% 2% $8,929 Trilogy Global Advisors New York Growth 11% 91% 40% 27% $1,095 18% -1% $6,049 Select Equity Group, Inc. New York Growth -18% -12% 18% -1% $1,047 20% 1% $5,177 Carnegie Fond Ab Stockholm Growth 0% -21% 16% 3% $1,026 47% 1% $2,163 Schroder Investment Mgmt New York Growth 66% 19% -9% 28% $1,022 16% -9% $6,298 Metropolitan West Capital Mgmt Newport Beach Contrarian 18% 10% 17% 15% $1,020 12% 10% $8,807 Oppenheimer Capital New York Value -17% 77% 7% -5% $1,017 12% -8% $8,777 Perkins, Wolf, Mcdonnell & Co. Chicago Value -15% 34% -2% 0% $1,009 11% 8% $9,461 The Renaissance Group Cincinnati Growth 29% -8% -1% 11% $999 16% 4% $6,065 Nordea Investment Management Stockholm Growth 16% -4% 12% 15% $998 12% -1% $8,498 Frontier Capital Management Co. Boston Agg. Growth 5% -11% -9% -5% $992 20% -2% $4,850 Median 3% 0% 0% 1% 21% 2% % representative of change in assets between 3/31/08 and 6/30/08 Source: Bigdough, excludes Indexed & Quantitative Investors 48 “-” denotes accounts that have no holdings in the subsector
  • 50. INSTITUTIONAL HEALTH CARE FUND MOVEMENT Top Health Care Buyers and Sellers ($MM) - <$10B Under Management % Change in Current Position Position ($MM) Fairholme Capital Management 313% $1,865 $1,414 Glenview Capital Management 38% $1,966 $541 Elliott Management Corp. $387 679% $444 Shumway Capital Partners $349 44% $1,148 Maverick Capital $342 20% $2,084 Icahn Associates Corp. $322 20% $1,970 Hussman Econometrics Advisors, Inc. $287 67% $714 Visium Asset Management $284 47% $894 Paulson & Co., Inc. $256 25% $1,281 Hilliard Lyons Capital Management $234 Initiation $234 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 % Change in Current Position Position ($MM) H. A. Schupf & Co. -76% $65 ($201) Capital International Sa Switzerland -20% $811 ($203) Bellevue Asset Management Ag -9% $2,150 ($211) ($211) Vinik Asset Management Lp -55% $171 ($263) Duquesne Capital Management -42% $363 ($307) Mcmorgan & Co. -75% $103 ($361) The Robert Wood Johnson Foundation -15% $2,094 ($471) Cantillon Capital Management -40% $709 ($507) Chase Investment Counsel Corp. -36% $894 ($740) Relational Investors -55% $613 ($800) ($700) ($600) ($500) ($400) ($300) ($200) ($100) $0 % representative of change in assets between 3/31/08 and 6/30/08 Source: Bigdough 49 Excludes Indexed & Quantitative Investors
  • 51. INSTITUTIONAL HEALTH CARE FUND MOVEMENT Top Biopharmaceutical Buyers and Sellers ($MM) - <$10B Under Management % Change in Current Position Position ($MM) Fairholme Capital Management 313% $1,865 $1,414 Glenview Capital Management 774% $526 $465 Elliott Management Corp. $384 869% $429 Icahn Associates Corp. $322 20% $1,905 Schroder Investment Management NA $231 66% $583 AGF International Advisors Co. $222 184% $343 Visium Asset Management $201 35% $769 Hussman Econometrics Advisors, Inc. $192 65% $486 Hilliard Lyons Capital Management $192 Initiation $192 Skandia Liv $191 >1000% $206 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 % Change in Current Position Position ($MM) Pictet Asset Management -32% $360 ($167) Bellevue Asset Management Ag -9% $1,726 ($175) Independence Investments -53% $155 ($177) ($178) Mazama Capital Management, Inc. -26% $516 ($178) Analytic Investors -49% $186 ($180) Capital International Sa Switzerland -21% $664 ($221) Mcmorgan & Co. -74% $78 ($361) The Robert Wood Johnson Foundation -15% $2,094 ($476) Cantillon Capital Management -99% $5 ($501) Chase Investment Counsel Corp. -60% $333 ($600) ($500) ($400) ($300) ($200) ($100) $0 % representative of change in assets between 3/31/08 and 6/30/08 Source: Bigdough 50 Excludes Indexed & Quantitative Investors
  • 52. INSTITUTIONAL HEALTH CARE FUND MOVEMENT Top Medical Technology Buyers and Sellers ($MM) - <$10B Under Management % Change in Current Position Position ($MM) Shumway Capital Partners 111% $733 $386 Paulson & Co., Inc. 31% $1,281 $307 Glenview Capital Management 31% $1,092 $260 Maverick Capital 23% $1,283 $237 Healthcor Management Lp 18% $1,408 $213 RR Partners Lp 313% $215 $163 Cadence Capital Management $129 32% $538 Eton Park Capital Management Lp $107 52% $314 Trilogy Global Advisors $97 40% $336 Congress Asset Management Co., Inc. $97 34% $385 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 % Change in Current Position Position ($MM) Jana Partners -90% $11 ($102) Greenlight Capital, Inc. -53% $91 ($103) Highfields Capital Management Lp -51% $101 ($104) ($108) SRM Global -100% $0 ($113) Iridian Asset Management -16% $611 ($119) H. A. Schupf & Co. -77% $36 ($181) Cr Intrinsic Investors -73% $67 ($190) Vinik Asset Management Lp -97% $5 ($198) Duquesne Capital Management -92% $18 ($740) Relational Investors -55% $613 ($800) ($700) ($600) ($500) ($400) ($300) ($200) ($100) $0 % representative of change in assets between 3/31/08 and 6/30/08 Source: Bigdough 51 Excludes Indexed & Quantitative Investors
  • 53. INSTITUTIONAL HEALTH CARE FUND MOVEMENT Top Health Care Service Buyers and Sellers ($MM) - <$10B Under Management % Change in Current Position Position ($MM) Chieftain Capital Management, Inc. 30% $521 $120 Gardner Lewis Asset Management >1000% $105 $102 Larrain Vial Sa Inv. Mgmt $84 891% $93 Oppenheimer Capital $81 77% $186 Trilogy Global Advisors $79 91% $165 Principled Capital Management $77 127% $137 Diamondback Capital Management $74 400% $92 Brookside Capital Investors $62 Initiation $62 Midcap Spdr Trust Services $59 22% $327 Kingdon Capital Management $55 49% $168 $0 $20 $40 $60 $80 $100 $120 $140 % Change in Current Position Position ($MM) Oz Management -36% $104 ($59) Ivory Investment Management Lp -60% $46 ($68) Cadence Capital Management -95% $4 ($70) ($74) Private Capital Management, Inc. -29% $178 ($90) Omega Advisors, Inc. -100% $0 ($97) Roxbury Capital Management -54% $82 ($108) Brown Investment Advisory, Inc. -57% $82 ($112) Alex Brown Investment Management -87% $17 ($184) Jana Partners -62% $114 ($185) Glenview Capital Management -35% $349 ($200) ($180) ($160) ($140) ($120) ($100) ($80) ($60) ($40) ($20) $0 % representative of change in assets between 3/31/08 and 6/30/08 Source: Bigdough 52 Excludes Indexed & Quantitative Investors
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