Annual review 2016

GLOBAL
HEALTHCARE
Annual Review of the key 2016 demographic and
political drivers and financial activity within the
pharmaceutical, medtech and biotech sectors
Arterial Annual Review of 2016
www.artcapman.com

2
GLOBAL HEALTHCARE
Inside this report
Letter from Arterial ................................................................................................ 3
About Arterial Capital Management ..................................................................... 5
2016 – The Year at A Glance: ................................................................................. 6
Key Drivers of Healthcare....................................................................................... 7
Industry Trends..................................................................................................... 11
Global Macro-Economic Picture ........................................................................... 11
Pharma & MedTech Deals by Value...................................................................... 12
Pharma & MedTech Deals by Number and Size.................................................... 14
Pharma & MedTech Deals by Product Category................................................... 16
Pharma & MedTech Deals by Type of Deal (Trade vs Private Equity)................... 18
Pharma & MedTech Deals by Target Region......................................................... 20
Geographical Focus: UK........................................................................................ 23
Geographical Focus: North America..................................................................... 28
Geographical Focus: Continental Europe ............................................................. 33
Geographical Focus: Rest of the World................................................................ 38
Conclusion ............................................................................................................ 43

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GLOBAL HEALTHCARE
Letter from Arterial
Welcome to Arterial’s Annual Review of Global Healthcare.
2016 has been a strong year for Arterial with significant growth across Central and
Eastern Europe, and emerging interest from the Middle East and Asia. Our primary
growth driver for the past year has been family offices and private banks seeking
opportunities for alpha. In particular from established firms across central Europe,
the Baltics and Russia. Non-UK jurisdictions now account for c. 80% of new investor
flows.
Arterial’s scientific, origination and investee teams have been strengthened with
senior international appointments of Dr Markus Weissbach, formerly of Novartis to
our main board and Dumitru Malic joining from Citigroup to support our origination
team with CEE coverage. Markus is based in Dublin, Dumitru in Budapest. We
continue to recruit strategically and will capitalise upon the current market
uncertainty amongst competitor firms. http://www.artcapman.com/why-work-for-
arterial/
The UK’s Brexit announcement has opened up opportunities for deal flow as some
EU grants for early stage life science businesses are now considered at risk. Solely
with regard to deal origination we consider Brexit a highly positive corporate driver,
insofar as sourcing investee targets is expected to become easier. Whilst the past
year has seen investee due diligence conducted globally, the UK remains an
important source of deal flow, with four of the world’s top ten Universities and the
UK being only second to the San Francisco bay area for life science start-ups.
In terms of investor deal flow, the UK has for some time offered what are known as
tier one visas, whereby non-residents investing typically between £2-10m into a
UK trading business can receive coveted UK residency rights. Interest in such
investment opportunities has increased significantly since Q3 2016. The UK, which
in reality means London for super wealthy Eastern European and Asian investors
remains a highly attractive jurisdiction for many reasons. That is not going to
change in the short term.
The UK IFA market has struggled, with our observation being of an increasingly stark
disconnect between what HNW/UHNW investors both seek and need, and what
they are being offered by an extremely retail, PI focused, automated advisory
sector. The result of which is that such wealthy investors are simply seeking advice
from non UK firms, being a reflection of the inability of the UK IFA’s to service
HNW/UHNW, sophisticated investors. We have witnessed a number of non UK
firms seeking entry into the UK market to capitalise upon this unmet advisory need
both by way of direct entry and acquisition.
International pension trustees have continued their trend of increasing their
exposure to Healthcare, and as the report mentions, overall 2016 has been a
buoyant year with big pharma showing a trending interest in the acquisition of
biotech and medtech businesses.
Arterial experienced
significant organic growth.
Key appointments made from
Merck, Novartis, ICI and Royal
Bank of Scotland. Co-founder
appointed to the Board of
Trustees for the Institute
Cancer Research.
2016 saw third-highest on
record deal value and fourth-
highest numbers…
…with a shift away from
Drugs/Pharma and North
American targets and more
Private Equity action …
…and strong and rising
appetite is set to stay for
small Pharma & MedTech
with innovative products.
Pharma & MedTech should be
seen as a core sector for
investment…

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GLOBAL HEALTHCARE
From an investee perspective, high, though moderately slowing, activity
characterised 2016 across Pharmaceutical and Medical Technology (“Pharma &
MedTech”) deal-making. While the year fell by comparison with a very strong 2015,
which was lifted by a handful of very large US deals, it nonetheless had the third-
highest value of deals and fourth-highest number of deals on record. In a broader
context across all industries, Pharma & MedTech represented just less than a
staggering one in ten of all deals worldwide.
In a longer-term context, growth in transactions in the industry continue to fit a
rising trend, for which the macro drivers of demographic change, shifts in the
prevalence of chronic and communicable disease, technological innovation and
growth in incomes remain intact.
In more detail, 2016 saw a shift away from the bias in recent years towards the
Drugs/Pharma category, with more activity in Instruments and Biomed / Genetics,
and there was moderately less concentration of deal activity in North America.
Private Equity had an active year of involvement in the sector, with its highest total
of deals by value since 2012.
The key reasons for deal-making in the sector are persistent: the aim for market
share leadership in product categories in order to be a preferred vendor and
protect revenue from customer cost-cutting, the need to replenish product
pipelines that are eroding due to patent expiries, to offset competition from generic
drugs, the benefit of scale in R&D, manufacturing, distribution and marketing and
declining R&D productivity. We anticipate that these factors are likely to sustain or
to increase the appetite for new products from smaller Pharma & MedTech
companies in future.
The long-term trends of rising Pharma & MedTech deal numbers and deal value,
plus rising global healthcare spending are leading family offices, private wealth and
pension fund managers to regard the sector as a long-term, core investment
holding, with direct participation offering the potential for extraordinary equity
returns above that from funds.
In summary, Pharma & MedTech continues to be a compelling asset choice, with
amazing opportunities. With a rising middle class, and eagerness across
governmental and the insurance sectors to cut costs, we see no sign of this trend
abating. It is a sector that cannot be ignored.
We hope you enjoy reading this report and should you have any feedback for future
editions or you wish to meet with our team do let us know.
Yours Sincerely,
Arterial Capital Management
...as the deal trends and
relentless organic growth
themes combine to present a
compelling opportunity.
Arterial

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GLOBAL HEALTHCARE
About Arterial Capital Management
Arterial Capital Management is a private equity firm focused exclusively on the global life
science sector. We specialise in providing equity funding for typically early-stage biotech,
medtech and pharmaceutical companies, and capitalising upon the opportunities that
offers. Investor monies are originated from Family Offices, Financial Advisors and Pension
Fund Managers and Trustees.
Our investment policy is to fund well-researched, innovative projects, with proven
management teams, recognised trial data, strong Intellectual Property libraries and a
demonstratable opportunity for significant commercial upside. We target investee firms
with a culture of strong corporate governance, a willingness to build a scalable global
business, a desire to work with and embrace a team effort towards commercial success
and the potential to return 5-25 times our gross investment for investors. The individual
members of the Arterial team reserve the right to invest up to 20% of each project on
the same terms as other investors, and our focus is on a reward for success with a 20%
carried interest on net returns.
Of course, the bedrock of the Arterial business is our world-class team who are
committed to the long-term success of Arterial and our loyal investors.
The Arterial team have, during their careers, operated at the very pinnacle of the life
science, industrial and investment banking sector. Our team has a proven, publicly
verifiable history of leadership and achievement, clearly demonstrated with a track
record which has seen them successfully take over one hundred drugs and medtech
projects to market during their careers. In addition to their outstanding commercial
success, our team’s public work to date includes advising European and US
Governments, and sitting on The Medicines and Healthcare Products Regulatory Agency
(MHRA), Federal Drug Agency (FDA), World Health Organisation (WHO), Wellcome Trust
and the Institute of Cancer Research (ICR) senior or lead teams.
Our professional advisory clients and their supporting investor base are immensely
loyal. Investors typically build a portfolio across multiple projects and fully accept the
risks inherent within life science but also seek to enjoy and benefit from the potentially
immense commercial and social rewards. Our professional advisors are able to access
Arterial’s life science portfolio through investment platforms ranging from the well-
known Enterprise Investment Scheme (EIS) in the United Kingdom through to European
and International investment vehicles and pension funds, all of which are FCA (EU
passported), FACTA and OECD CRS compliant.
If you are reading our annual healthcare report for the first time, then you may wish to
consider the opportunities available for your firm and your clients. Whether you are a
Family Office in Monaco, a Financial Adviser in London, a Pension Trustee in Zurich or a
Law Firm in Moscow or Singapore seeking a Compliant UK investment for a Tier 1
Immigration Visa, speak to us. The Arterial team offer professional advisers innovative,
highly researched deal flow with the real opportunity to advance medical science,
support social well-being and benefit from potentially immense financial upside when
an investee project is successful.

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GLOBAL HEALTHCARE
2016 – The Year at A Glance:
 2016 was a softer, though still by historic standards, very strong year for
Pharma & MedTech deals, with the third-highest deal value on record1
,
and a moderate fall in the number of deals, against a backdrop of a slightly
slowing global economy. This in part reflected a very strong basis for
comparison in 2015. Pharma & MedTech deal activity cooled as a
proportion of that of all sectors combined, and represented 9% of all-
sector deals by value, compared to 11% in 2015 and 14% in 2014.
 North America fell moderately as a proportion of total deal value to 73%
of the global total, reflecting the difficult basis of comparison, with no less
than 80% of global deal value there in 2015, which featured certain very
large deals.
 Drugs & Pharma remained the largest category of deals by value with 59%
of the global total, although significantly less so than in the 2013 to 2015
period, reflecting the absence of several very large deals in 2015, and it
was relatively stable as a proportion of the total number of deals at 37%.
 Private Equity was involved in a significantly higher amount of deal value
in 2016, reversing a sustained lull from 2012 to 2015; it was involved in
14% of total deals by value, though 10% of deals by number.
 UK Pharma & MedTech deals rose significantly in value terms in 2016,
although the number of UK deals fell slightly. Drugs/Pharma was the
leading category of deal target with 81% of the total by deal value and 26%
by deal number, and it slipped back slightly again year-on-year; it tends to
alternate with MedTech categories in popularity.
 Private Equity was involved in more than 1 out of 10 UK Pharma &
MedTech deals in 2016, which was the second-lowest figure in the past 5
years, which reflected a strong basis for comparison in 2015 and which
was an anomaly relative both to its rising trend in the UK over time and to
Private Equity’s relatively high involvement in the UK Pharma & MedTech
market relative to other regions globally.
1
Since Dealogic’s records began in 1995.

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GLOBAL HEALTHCARE
Key Drivers of Healthcare
As a prelude to themes that characterised 2016, we discuss here certain major long-
term drivers of healthcare spending, which played a key role in underpinning
revenue growth for the Pharma & MedTech industry worldwide in 2016, and which
are likely to continue to drive growth in coming years and decades.
Demographic change is one core driver. It comprises a higher global population
(with a global increase of 1.2 billion people, or 16%, expected by 20302
), rising
longevity (in 2030, 16% of the world’s population is expected to be 60 or more years
old, compared with 12% in 20153
) and lifestyle change (towards less active, more
sedentary occupations), coupled with economic growth, a rising proportion of the
middle class, and changing social expectations for healthcare.
One cardinal trend in demographics is the anticipated rise of the elderly as a
proportion of global population. The percentage aged 60 or over overtook the
percentage aged less than 5 circa 2000 and it is forecast to overtake the percentage
aged less than 10 by 2030, the percentage aged less than 15 by 2055 and the
percentage aged less than 20 by 20804
. This is mainly due to a combination of
declining fertility rates, mainly in developing countries, and increasing longevity
worldwide.
Chart 1: Young Children and Older People as a Percentage of Global Population: 1950-
2050
Source: United Nations, World Population Prospects: The 2010 Revision
2
United Nations, World Population Prospects: 2015 Revision, available at
https://esa.un.org/unpd/wpp/
3
United Nations, World Population Prospects: 2015 Revision, available at
https://esa.un.org/unpd/wpp/
4
Ditto.
0
5
10
15
20
1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060
Age <5 Age 65+
Long-term drivers of
healthcare spending are set to
play a key role in Pharma and
Medtech revenue growth.
The world’s population is
expected to rise by 16% by
2030.
Those aged 60 or over are
expected to outnumber those
aged less than 10 by 2030.
%
%
%
%

8
GLOBAL HEALTHCARE
Four important non-communicable diseases are significant drivers of increased
healthcare spending. First, we consider dementia. The causation of most forms of
this disease (of which the most common variant is Alzheimer’s Disease) is unknown
and its diagnosis is not easy (particularly in its early stages), hence estimates of its
prevalence worldwide are subject to relatively higher inaccuracy. It has been
estimated that its prevalence doubles with every five years after the age of 65. In
2015, it has been estimated that 47m people worldwide (or 1% of global
population) had a form of dementia, which is expected nearly to double every 20
years to 75m in 2030 and 132m in 2050, and that its worldwide cost was $818bn in
20155
.
Chart 2: The Growth of Numbers of People with Dementia in High and Middle & Low
income Countries
Source: Alzheimer’s disease International, World Alzheimer Report, 2010
Second, we look at cancer. The World Health Organization (“WHO”) describes
cancer as the second leading cause of death globally, with 9m deaths in 20156
.
Cancer is a broad term for a large group of diseases that affect many parts of the
body and which result in the rapid multiplication of abnormal cells that can then
spread to other body organs in a process known as metastasizing. The WHO
estimates that its worldwide cost was $1.2trn in 2010 and it expects the number of
new cases to increase by around 70% over the next two decades7
.
5
Alzheimer’s Disease International, World Alzheimer Report 2015, available at
https://www.alz.co.uk/research/WorldAlzheimerReport2015.pdf
6
World Health Organization, Cancer Factsheet Updated February 2017, available at
http://www.who.int/mediacentre/factsheets/fs297/en/
7
Ditto
Dementia affects 1% of the
world’s population and it is
expected to double every two
decades.
Cancer is the second-largest
cause of death worldwide,
with cases expected to rise by
~70% over the next 2
decades.
0
20
40
60
80
100
120
1 2 3 4 5
Number of people with dementia (millions)
Low and middle
income Countries
High income Countries
2010 2020 2030 2040 2050

9
GLOBAL HEALTHCARE
Chart 3: The three most common cancers in males and females
Source: Cancer Research UK
Note: Percentages of all Cancer Cases Excluding Non-Melanoma Skin Cancer (C00-C97 excl. C44), UK, 2014
Third, we turn to diabetes. Diabetes mellitus is a chronic disease that arises when
the body is unable to produce sufficient, or any, of the hormone insulin in order to
enable glucose to enter the cells where it is converted into energy. Insufficient or
negligible insulin production leads to high blood glucose concentrations, known as
hyperglycaemia, which gives rise to diabetes. Hyperglycaemia causes painful,
expensive and dangerous complications to ensue that can involve damage to the
eyes, kidneys, legs, feet and heart, which may in turn require amputation. According
to the International Diabetes Federation8
(“IDF”), on a global scale, 387 million
people of 20-79 years of age currently suffer from diabetes, or 8.3% of the
population, and the IDF forecasts that this will rise at a 2.0% Compound Annual
Growth Rate (“CAGR”) to 592 million in 2035. Of the 387 million diabetics globally,
46.3%, or 179 million people, have diabetes but are currently undiagnosed and are
thus progressing toward complications unaware.
Chart 4: Geographical distribution of Current Diabetes Sufferers
Source: International Diabetes Federation
8
International Diabetes Federation. IDF Diabetes Atlas, 6th Edition, Brussels, Belgium:
International Diabetes Federation, 2013. http://www.idf.org/diabetesatlas and 2014
Update at http://www.idf.org/diabetesatlas/update-2014
All
other
cancers
47%
Prostate
26%
Lung
14%
Bowel
13%
Male incidence
180,836 cases
UK 2014
36%
19%6%
10%
10%
13%
6%
Western Pacific
South-East Asia
South and Central
America
North America &
Caribbean
Middle East & North
Africa
Diabetes affects 8% of the
global population.
All other
cancers
47%
Breast
31%
Lung
12%
Bowel
10%
Female Incidence
176,024 cases
UK 2014

10
GLOBAL HEALTHCARE
Fourth and final, we briefly examine cardiovascular disease, which is a broad term
for a range of disorders of the heart and blood vessels, including coronary heart
disease and stroke. This has been identified by the WHO as the top global cause of
death, with 18m such events in 20159
, of which three-quarters occur in low and
middle income countries. Cardiovascular disease is forecast to account for more
than 23m deaths worldwide by 201310
.
Chart 5: Highest Cardiovascular Disease Death Rates
Source: National Health Organization, National Center for Health Statistics and National Heart, Lung and Blood
Institute
Note: Represents a look at the top 10 countries with the highest death rates for heart disease, stroke and high blood
pressure per 100,000 men and women, ages 35 to 74
9
World Health Organization, Noncommunicable Diseases Factsheet Updated January
2015, available at http://www.who.int/mediacentre/factsheets/fs355/en/
10
American Heart Association, Heart Disease, Stroke and Research Statistics At A Glance,
available at http://www.heart.org/idc/groups/ahamah-
public/@wcm/@sop/@smd/documents/downloadable/ucm_480086.pdf
1173
1067
657
524
359
347
347
305
261
235
466
454
312
218
209
205
142
139
137
117
Russian Federation
Ukraine
Romania
Hungary
Cuba
Brazil
Czech Republic
Argentina
Mexico
United States
Women
Men
Cardiovascular disease is the
top global cause of death.

11
GLOBAL HEALTHCARE
Industry Trends
Global Macro-Economic Picture
Amidst steady global economic growth in 2016, worldwide deals
in all sectors fell significantly in total value, though only slightly in
number.
The macro-economic background in 2016 was somewhat steady, which was
balanced by two political shocks in the form of the outcomes of the Referendum on
Membership of the European Union in the UK (to leave) and the Presidential
Election in the US (to elect Mr Donald Trump).
World economic growth (measured by the increase in Gross Domestic Product in
real terms) was 3.111
% (vs. 3.2% in 2015 and 3.4% in 2014), with Developed Market
growth of 1.6% (driven by the US, Germany and the UK) and Emerging Market
growth of 4.1% (driven by China and India). Growth was steady through the year,
and concerns about growth and real estate/financial sector vulnerabilities in China
subsided after impacting markets in 2015.
Global deal activity was strong, though down year-on-year, and it totalled $5,491bn
of announced deal value, which was down by 19% vs. the high base for comparison
in 2015 of $6,782bn, and it represented the fifth highest year on record. Low
interest rates and relatively slow broad economic growth represented still
reasonably favourable conditions for corporate Mergers & Acquisitions (“M&A”)
and equity investment. This is shown in Chart 6 below, which illustrates how this
fall in global deal value was mainly driven by many fewer very large deals of $10bn+.
11
Source: IMF World Economic Outlook Update 16 January 2017
2016 was a year of even
global economic growth and
two political shocks…
…With flattish GDP growth vs
2015…
...And worldwide deals were
down significantly in value
terms, though still at strong
levels.

12
GLOBAL HEALTHCARE
Chart 6: Annual Global Deal Value for All Sectors
Source: Dealogic
Note: Represents all announced deals worldwide for all sectors. It includes those that were not completed for any
reason.
Pharma & MedTech Deals by Value
Pharma and MedTech deal value fell heavily from two
extraordinary peak years in 2014 and 2015, though it remained
at a historically high level. The year was marked by a more even
balance of large and small deals.
For global Pharmaceutical and Medical Technology deals (“Pharma and MedTech”,
defined as those relating to healthcare products, and excluding healthcare services,
insurance or financing companies), 2016 was a year of a return to more normal,
though still strong, levels that totalled $500bn in announced deal value terms. This
represented 9% of all announced deal value in all sectors worldwide, which
sustained a trend of Pharma and MedTech representing an increasing proportion
of total global deals (the average since 1995 is just 6%).
This $500bn of total Pharma and MedTech deal value was by 34% vs the second-
highest all-time figure12
of $761bn in 2015. The $500bn total deal value
represented 1.2x the average annual deal value of the 10 years to the end of 2016.
This is shown in Chart 7 below, which illustrates the very marked step-up in total
deal value in 2014 and 2015, driven by very large deal sizes of $10bn+, which far
outstripped the increases in all-sector $10bn+ deals and total deal activity shown in
Chart 6 above.
12
Since Dealogic’s records begin in 1995
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
20162014201220102008200620042002200019981996
DealValue($m)
Less than 100m 100m to 500m
500m to 1bn 1bn to 10bn
Over 10bn Last-10-Year Mean Deal Value
Mean Deal ValueOver
Past10 Years
+31%
Since
2013
Global Pharma & MedTech
deals totalled $500bn in
2016...
…Which fell by 34% against a
near-record high in 2015.

13
GLOBAL HEALTHCARE
Chart 7: Annual Global Deal Value for Pharmaceutical and Medical Technology
Source: Dealogic
Note: Represents all announced deals for Healthcare Drugs/Pharmaceuticals, Healthcare Instruments, Healthcare
Biomed/Genetics, Healthcare Products and Healthcare Medical/Analytic Systems. It includes those that were not
completed for any reason.
The largest 5 bids in Pharma/MedTech worldwide announced in 2016 are shown in
Table 1 below. Some 60% of deals by value and 16% of deals by number announced
in 2016 have not yet completed for a set of reasons, although only 3% by value and
1% by number have been withdrawn.
Table 1: Largest 5 Bids in 2016 Worldwide for Pharma/MedTech Companies
Announcement
Date
Target
Company Name
Target
Company
Category
Target
Company
Country
Bidder Private
Equity
Entry /
Exit?
Bidder
Country
Deal Value Deal Status
28-Apr-16 St Jude Medical
Inc
Instruments US Abbott
Laboratories
No US $29,440m Completed
13-Jun-16 Fortive Corp Instruments US Existing
Shareholders
22-Aug-16 Medivation Inc
(Bid No 2)
Biomed /
Genetics
US Pfizer Inc No US $14,322m Completed
28-Apr-16 Salix
Pharmaceuticals
Ltd
Drugs /
Pharma.
US Takeda
Pharmaceutical
Co Ltd.
Entry Japan $10,000m Not
Pursued
10-Feb-16 Meda AB Drugs /
Pharma.
Sweden Mylan NV No US $9,929m Completed
Source: Dealogic
Note: Represents the largest 5 announced deals by value worldwide for Healthcare Drugs/Pharmaceuticals, Healthcare Instruments, Healthcare Biomed/Genetics,
Healthcare Products and Healthcare Medical/Analytic Systems. It includes those that were not completed for any reason, but excludes rumours.
0
200,000
400,000
600,000
800,000
1,000,000
20162014201220102008200620042002200019981996
DealValue($m)
Less than 100m 100m to 500m
500m to 1bn 1bn to 10bn
Over 10bn Last 10-Year Mean Deal Value
Mean Deal ValueOver Past10 Years
+48%
Since
2013
The largest deal announced
worldwide in 2016 was
Abbott Labs / St Jude
Medical.

14
GLOBAL HEALTHCARE
Whilst 2016 saw a year of significantly reduced total deal value compared to the
extraordinary levels of 2014 and 2015 in Pharma and MedTech, long-term deal
appetite is well-supported by the key drivers of healthcare spending:
(1) Demographics, including population growth, change in age distribution
and change in the prevalence of chronic and communicable diseases.
(2) Economics, and specifically the resources available to finance the
provision of healthcare, including the value of national economic
production and growth (measured, for example, by Gross Domestic
Product (“GDP”)).
(3) Cost of healthcare goods and services, including the aggregate cost of
research and development (“R&D”) for the corporate and public sectors
and the productivity of that R&D in terms of new therapies and medical
devices that are commercially launched per year.
(4) Other factors, including regulatory, insurance, legal and secular shifts in
healthcare provision. the cost of and change in regulatory requirements
for new products to be approved for commercial sale, the cost of
insurance and legal settlements arising from patient treatment, secular
shifts from volume-based to value-based healthcare provision and shifts
from episodic interventions to continuous health management,
digitisation and connectivity of healthcare.
Pharma & MedTech Deals by Number and Size
Whilst the number of deals in 2016 in Pharma and MedTech fell by
5%, it remained at a high level, and average deal sizes fell
significantly, though remaining above their historic mean level.
In terms of deal numbers, 2,072 individual material deals were announced, which
was the third-highest figure on record13
and was down only modest by 5% vs. the
2,185 in 2014. This represented just above 1.0x the average annual deal count of
the 10 years to the end of 2016. This is shown in Chart 8 below, which also shows
the prolonged but gradual slowdown since 2010 that reversed in 2015, and the long
growth trend in the run-up to the pre-Financial Crisis peak in 2007.
13
Since the start of Dealogic’s records in 1995
Long-term dealflow is
underpinned by 4 key
spending drivers for
healthcare.
In 2016, 2,072 material deals
were announced in Pharma &
MedTech, down 5% vs 2015.

15
GLOBAL HEALTHCARE
Chart 8: Annual Number of Deals for Pharmaceutical and Medical Technology
Source: Dealogic
Note: Represents all announced deals with a deal value assigned for Healthcare Drugs/Pharmaceuticals, Healthcare
Instruments, Healthcare Biomed/Genetics, Healthcare Products and Healthcare Medical/Analytic Systems. It
includes those that were not completed for any reason.
Average announced deal size in 2016 was $383m, which represented a fall of -30%
against 2015’s $543m. This represented 1.1x the average annual deal size of the 10
years to the end of 2016, which represents some normalisation following the
significantly large average deal sizes seen in 2014 and to a lesser degree, in 2015. It
demonstrates that the deal value spikes seen in 2014 and in 2015 were almost all
driven by higher average deal size, rather than the number of deals. This is shown
in Chart 9 below, which clearly demonstrates the extraordinarily large average deal
sizes in 2015, 2014 and 1999.
Chart 9: Annual Average Deal Size in $m for Pharmaceutical and Medical Technology
Source: Dealogic
Note: Represents all announced deals worldwide for Healthcare Drugs/Pharmaceuticals, Healthcare Instruments,
Healthcare Biomed/Genetics, Healthcare Products and Healthcare Medical/Analytic Systems. It includes those that
were not completed for any reason.
0
500
1,000
1,500
2,000
2,500
20162014201220102008200620042002200019981996
No.ofDeals
Total Last 10-Year Mean Deal Count
+9% Since2013
Mean Deal Count
Over Past10 Years
0
200
400
600
800
20162014201220102008200620042002200019981996
AverageDealSize($m)
Mean deal size ($m) Last 10-Year Mean Deal Size
+36%
Since
2013Mean Deal Size
Over Past10 Years
Average deal size fell to
$383m, which was 1.1x the
last-10-year average.

16
GLOBAL HEALTHCARE
Pharma & MedTech Deals by Product Category
Drugs & Pharma was again the dominant category of target
business, though it fell as a proportion of total deal value.
By the value of announced deals, the Drugs/Pharmaceuticals category (for the
company in which shares were acquired) was by far the largest, with $297bn of deal
value announced in 2016, or 59% of the total. The relatively increasing popularity
of this category has been a notable long-term trend, and there has been a recent
spike that started in 2013 and ended in 2015; since 1995, the category has averaged
a rather lower 54% of all Pharma & MedTech deals.
The next most popular targets were Instruments with 21% of 2016 deals (vs.
average since 1995 of 20%), then Biomed / Genetics with 13% (vs. average since
1995 of 10%, reflecting a resurgence in Instruments. This is shown in Chart 10
below, which also depicts the long-term trend of lower share of deal value for
Instruments and Products, and the rise of Drugs/Pharmaceuticals and
Biomed/Genetics.
Chart 10: Category as % of Total Value of Deals in Pharmaceutical and Medical
Technology
0%
20%
40%
60%
80%
100%
20162014201220102008200620042002200019981996
PercentageofTotalDealValue($m)
Drugs/Pharmaceuticals Instruments
Biomed/Genetics Products
Medical/Analytical Systems
Drugs/Pharma is
+35% in deal value
terms since2013
The Drugs/Pharma category
dominated deal value in 2016
with 59% of the total...
...Followed by Instruments
and then by Biomed/
Genetics, the former of which
regained in popularity.

17
GLOBAL HEALTHCARE
Source: Dealogic
Note: Represents all announced deals worldwide for Healthcare Drugs/Pharmaceuticals
14
, Healthcare
Instruments
15
, Healthcare Biomed/Genetics
16
, Healthcare Products
17
and Healthcare Medical/Analytic Systems. It
Six of the largest ten announced deals by value in Pharma & MedTech in 2016 were
in the Drugs/Pharmaceuticals category, although the top three all fell into other
categories: Abbott Labs / St Jude Medical (in Instruments), the separation of
Danaher and spin-off of its industrial businesses (in Instruments), and Pfizer /
Medivation (in Biomed / Genetics).
In terms of the number of deals, whilst the Drugs/Pharmaceuticals category (for the
company in which shares were acquired) was similarly the most popular, it
represented only 764 (or 37%) of announced deals by number (which was slightly
above its average since 1995 of 32%). This reflects the high average deal value in
the Drugs/Pharmaceuticals category, although the trend here has been relatively
flat in the past decade. The next two most popular categories by number of deals
were Instruments with 25% (vs. average since 1995 of 28%) and Biomed/Genetics
with 20% (vs. average since 1995 of 13%). This is shown in Chart 11 below.
14
“Drugs/Pharmaceuticals” comprises manufacturers or wholesalers engaged in medicine
and botanical uncompounded chemicals, including grading, grinding and milling of
uncompounded plants used for medication.
15
“Instruments” comprises manufacturers, rental or wholesalers of all kinds of medical
equipment.
16
“Biomed/Genetics” comprises manufacturers of biotechnology and biopharmaceutical
products, such as bacterial and viral vaccines.
17
“Products” comprises providers of general healthcare products and services - a
combination of equipment, medicines, supplies and services.
6/10 of the top deals in 2016
were in Drugs/Pharma.
Though in number of deals,
Drugs/Pharma was only 37%
in 2016, due to very high deal
sizes.

18
GLOBAL HEALTHCARE
Chart 11: Category as % of Total No. of Deals in Pharmaceutical and Medical Technology
Source: Dealogic
Pharma & MedTech Deals by Type of Deal (Trade vs Private
Equity)
Private Equity was involved in significantly higher deal value in
2016, which hit an all-time high, although the number of PE deals
fell heavily from 2015.
By the value of announced deals, companies owned by Strategic Investors
(essentially corporates, or trade buyers or trade sellers) continued to dominate,
with $428bn of deal value in 2016 (or 86% of the total). This sustained a medium-
term trend towards Strategics and away from Financial Sponsors since the pre-
Financial Crisis low of 75% of deals in 2007; since 1995, the category has averaged
81% of all Pharma & MedTech deals.
Deals involving a Financial Sponsor (virtually always a Private Equity house)
represented $68bn of deal value in 2016 (or 14% of the total), compared to an
average of 10% since 1995. The total value of Sponsor deals rose by 23% year-on-
year to an all-time high18
. These proportions of total deal value are shown in Chart
12 below, which also illustrates the relative rise and fall of Private Equity
18
Since Dealogic’s records begin in 1995
0%
20%
40%
60%
80%
100%
20162014201220102008200620042002200019981996
PercentageofTotalNo.ofDeals
Biomed/Genetics Products
Drugs/Pharma is -3%in deal
count terms since2013
Strategic, or trade, players
dominated deal activity with
86% of the total by value…
..As Private Equity rose
strongly to 14%, reversing a
lull since 2012.

19
GLOBAL HEALTHCARE
participation in Pharma and MedTech deals since the mid-1990s, which peaked in
2007 and again in 2011 and 2012 with over 20% of deal value in those years.
Chart 12: Type of Deal as % of Total Value of Deals in Pharmaceutical and Medical
Technology
Source: Dealogic
In terms of the number of announced deals, the higher average value of Strategic
deals (compared to Private Equity deals) results in Strategic deals representing 90%
of announced deals by number in 2016, which is slightly above its average since
1995 of 84%. Financial Sponsor deals represented just 10% of deals by number in
2016, which continued a declining trend since 2013, and it dipped below its average
of 12% since 1995. This is shown in Chart 13 below, which again illustrates the rise
from 1995 to 2007 and slight fall since then of Private Equity deal-making by the
proportion of deals by number.
0%
20%
40%
60%
80%
100%
20162014201220102008200620042002200019981996
Strategic Sponsor Buyback
Financial Sponsorsare
+83% in deal value
terms since2013
also dominated deal numbers
with 90% of the total, with
Private Equity at just 10%.

20
GLOBAL HEALTHCARE
Chart 13: Type of Deal as % of Total No. of Deals in Pharmaceutical and Medical
Technology
Source: Dealogic
Pharma & MedTech Deals by Target Region
In 2016, North America fell slightly as a proportion of total deal
value to just less than 3/4 of the global total, which was still above
its long-term average.
By the value of announced deals, North America (for the region in which the
investee target is based) continued to be the largest, with $340bn of deal value
announced in 2016, or 73% of the total (it has averaged 61% since 1995). For only
three years in the previous 20 years has it not been the largest region by deal size;
in all three cases where it was surpassed, Europe was the largest region. The next
largest region was Europe with 15% of 2016 deal value (vs. average since 1995 of
31%), then North Asia with 8% (vs. average since 1995 of 2%, reflecting a clear trend
of rising deal value in that region since 2002). This is shown in Chart 14 below,
which illustrates the long-run dominance of North America, occasional spikes for
deal value in Japan, and gradual rise of North Asia.
0%
20%
40%
60%
80%
100%
20162014201220102008200620042002200019981996
-35% in deal count
terms since2013
North America was again the
largest region by deal value,
with a dip in 2016 to 73% of
the total...

21
GLOBAL HEALTHCARE
Chart 14: Target Region as % of Total Deal Value in Pharmaceutical and Medical
Technology
Source: Dealogic
In terms of the number of announced deals, the lower average value of deals
outside North America and Europe results in North America representing only 37%
of announced deals by number in 2016, which is slightly below its average since
1995 of 49%. Europe represented 25% (in-line vs. its average since 1995 of 26%),
and notably North Asia represented 21% (significantly above its average since 1995
of 10%). This is shown in Chart 15 below, which shows the clear trend since 1995
of significantly rising numbers of deals outside Europe and North America, which as
the industry in those other geographies matures, is likely to result in a higher
proportion of global deal value deriving from those regions.
0%
20%
40%
60%
80%
100%
20162014201220102008200620042002200019981996
North America Europe North Asia Japan
India Subcont. Australasia Latin America Middle East
Africa SE Asia Caribbean
North America is
+58% in deal value
terms since2013
Although by deal numbers,
North America represented
only 37%, as North Asia grew
again.

22
GLOBAL HEALTHCARE
Chart 15: Target Region as % of Total Number of Deals in Pharmaceutical and Medical
Technology
Source: Dealogic
Note: Represents all announced deals for Healthcare Drugs/Pharmaceuticals, Healthcare Instruments, Healthcare
Biomed/Genetics, Healthcare Products and Healthcare Medical/Analytic Systems. It includes those that were not
completed for any reason.
0%
20%
40%
60%
80%
100%
20152013201120092007200520032001199919971995
North America Europe North Asia Japan
India Subcont. Australasia Latin America Middle East
Africa SE Asia Caribbean
North America is -2%in deal
count terms since2013

23
GLOBAL HEALTHCARE
Geographical Focus: UK
UK deal activity in Pharma and MedTech rose strongly in value
terms in 2016, although the number of deals fell slightly. Private
Equity activity fell back, due to a very high base for comparison in
2015.
2016 deal activity in the UK Pharma and MedTech sector totalled $12bn of deal
value, which was up by 15% y/y. Chart 16 below shows this, and the extraordinary
spike in 2014 deal activity, which was distorted by the unsuccessful Pfizer /
AstraZeneca deal, the withdrawn AbbVie / Shire deal and the completed disposal of
its Oncology portfolio, R&D activities and AKT inhibitor rights by GlaxoSmithKline to
Novartis. The chart clearly shows the volatile nature of the UK market, which is
heavily distorted by sporadic transactions of very large value.
Chart 16: Pharma & MedTech Deals for UK Target Companies by Deal Value ($m)
Source: Dealogic
Note: Represents all announced deals for a UK target for Healthcare Drugs/Pharmaceuticals, Healthcare
The largest 5 bids in UK Pharma/MedTech announced in 2016 are shown in the
table below. One of the top 5, Creat Group / Bio Products Laboratory Holdings was
a Private Equity exit (and one to a Chinese buyers), and all but one of the largest
five UK deals announced in 2016 were subsequently completed (which contrasts
with the relatively low completion rate of the largest deals by value at global level).
0
100,000
200,000
300,000
20162014201220102008200620042002200019981996
DealValue($m)
Over 10bn 1bn to 10bn
500m to 1bn 100m to 500m
Less than 100m Last-10-Year Mean to 2016
Mean Deal Value
Over Past10 Years
+126%
Since
2013
In the UK, deal value in 2016
rose by 15% against a
somewhat easy comparison
with 2015.
Allergan / Heptares
Therapeutics’ Muscarinic
Receptor Agonists was the
largest announced deal for a
UK target in 2016.

24
GLOBAL HEALTHCARE
Table 2: Largest 5 Bids in 2016 for UK Pharma/MedTech Companies
Announcement
Date
Target Company
Name
Target
Company
Category
Target
Company
Country
Bidder Private
Equity
Entry /
Exit?
Bidder
Country
Deal
Value
Deal Status
06-Apr-16 Heptares
Therapeutics Ltd
(Global rights for
muscarinic
receptor agonists)
Drugs/
Pharma.
UK Allergan plc No US $3,290m Completed
24-Aug-16 AstraZeneca plc
(Small molecule
antibiotics
business)
Drugs/
Pharma.
UK Pfizer Inc No US $1,575m Completed
03-Oct-16 AstraZeneca plc
(Global rights to
MEDI2070)
Drugs/
Pharma.
UK Allergan plc No US $1,520m Pending
19-May-16 Bio Products
Laboratory
Holdings Ltd
Drugs/
Pharma.
UK Creat Group Co Ltd Exit China $1,197m Completed
16-Nov-16 Alliance Medical
Ltd
Medical /
Analytical
Systems
UK Life Healthcare
Group Holdings
Ltd
No South
Africa
$1,013m Completed
Source: Dealogi
Note: Represents the largest 5 announced deals by value for a UK target for Healthcare Drugs/Pharmaceuticals, Healthcare Instruments, Healthcare Biomed/Genetics,
Healthcare Products and Healthcare Medical/Analytic Systems. It includes those that were not completed for any reason.
In terms of deal numbers, 96 individual material deals were announced, which was
the second-highest total on record19
and was down by just 3% vs. the 99 in 2015.
This represented 1.2x the average annual deal count of the 10 years to the end of
2016. This is shown in Chart 17 below, which also shows the relatively flat period
for deals between 2010 and 2013 and the marked rising trend since then.
19
By contrast to the strong rise
in deal value, deal numbers in
the UK in 2016 were down -
3% vs 2015.
GLOBAL HEALTHCARE

25
GLOBAL HEALTHCARE
Chart 17: Pharma & MedTech Deals for UK Target Companies by Deal Count
Source: Dealogic
company in which shares were acquired) was by far the largest, with $10bn of UK
deal value announced in 2016, or 81% of the total. The relatively increasing
popularity of this category has been a notable trend, with a recent rise that started
in 2011 (albeit with a downward blip in 2013); since 1995, the category has
averaged a rather lower 45% of all UK Pharma & MedTech deals. The next most
popular targets were Medical / Analytical Systems with 9% of 2015 UK deals (vs.
average since 1995 of 3%), then Biomed / Genetics with 5% (vs. average since 1995
of 7%, reflecting a volatile trend). This is shown in Chart 18 below, which also
depicts the long-term trend of lower share of deal value for Instruments and
Products, and the rise of Drugs/Pharmaceuticals and Biomed/Genetics.
0
20
40
60
80
100
120
20162014201220102008200620042002200019981996
No.ofDeals
Mean Deal Count
Over Past10 Years
+46% Since2013
As with the global picture,
Drugs/Pharma was the
dominant category in the UK
in 2016 with 81%.

26
GLOBAL HEALTHCARE
Chart 18: Category as % of Total Value of UK Target Company Deals in Pharmaceutical
and Medical Technology
Source: Dealogic
By the value of announced deals, companies owned by Strategic investors
with $11bn of UK target company deal value in 2016 (or 88% of the total). This
reflected a swing to a slightly abnormally high share for Strategic Investors following
a spike in the value of deals by Financial Sponsors in 2015 (which was the second
such spike since 2012); since 1995, the category has averaged 79% of all UK Pharma
& MedTech deals.
represented $1bn of UK target company deal value in 2016 (or 12% of the total),
compared to an average of 18% since 1995 (which reflects the relatively higher
amount of private equity involvement in UK Pharma and MedTech deals compared
to the global averages). This is shown in Chart 19 below, which also illustrates the
relative spikes in Private Equity participation in Pharma and MedTech deals since
the mid-1990s, which have represented 40% or more of total deal value in 2015,
2012, 2004 and 1999. By comparison with the other regions discussed later in this
report, the UK sees this highest average levels of Private Equity participation as a %
of total deal value in Pharma and MedTech.
0%
20%
40%
60%
80%
100%
20162014201220102008200620042002200019981996
Products Biomed/Genetics
Drugs/Pharma is
+1123% in deal value
terms since2013
dominated in the UK in 2016
with 88% of deal value…
…as Private Equity deals fell
back to 12% of the total by
value.

27
GLOBAL HEALTHCARE
Chart 19: Type of Deal as % of Total Value of UK Target Company Deals in
Pharmaceutical and Medical Technology
Source: Dealogic
Note: Represents all announced deals for a UK target in Healthcare Drugs/Pharmaceuticals, Healthcare Instruments,
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
20162014201220102008200620042002200019981996
+19% in deal value
terms since2013

28
GLOBAL HEALTHCARE
Geographical Focus: North America
North America saw a significant fall in 2016 deal activity in value
and a lesser fall in number, driven the non-repeat of very large deals
in 2015 in Drugs/Pharma, though Private Equity activity bounced
back after a recent slowing trend.
2016 deal activity in the North American Pharma and MedTech sector totalled
$341bn of deal value, which whilst down -45% y/y, was still a high level by historic
standards and which reflected a very difficult comparison with a high 2015 base.
The reduction was driven by a steep fall in the value of $10bn-plus bids. Chart 20
below shows the spike in total deal value in 2014 and 2015, and then the return to
still-high, but closer to normal levels in 2016.
Chart 20: Pharma & MedTech Deals for North American Target Companies by Deal Value
($m)
Source: Dealogic
Note: Represents all announced deals for a North American target for Healthcare Drugs/Pharmaceuticals,
Healthcare Instruments, Healthcare Biomed/Genetics, Healthcare Products and Healthcare Medical / Analytic
Systems. It includes those that were not completed for any reason.
The largest 5 bids in North American Pharma/MedTech announced in 2016 are
shown in the table below. Notably, the largest single deal, Pfizer/Allergan was
abandoned, as was the second-largest deal (Teva/Mylan), and the fourth largest
(Mylan/Perrigo) saw the offer expire, leading to a relatively low completion rate
amongst the largest North American deals in 2015.
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
20162014201220102008200620042002200019981996
DealValue($m)
500m to 1bn 100m to 500m
Mean Deal Value
Over Past10 Years
+58%
Since
2013
In 2016, North American
Pharma & MedTech deals
amounted to $341bn, down
45% vs. 2015.
The largest North American
deal was the biggest
worldwide, Pfizer/Allergan.

29
GLOBAL HEALTHCARE
Table 3: Largest 5 Bids in 2016 for North American Pharma/MedTech Companies
Announcement
Date
Target Company
Name
Target
Company
Category
Target
Compan
y
Country
Bidder Private
Equity
Entry /
Exit?
Bidder
Country
Deal Value Deal Status
28-Apr-16 St Jude Medical
Inc
Instruments US Abbott
Laboratories
13-Jun-16 Fortive Corp Instruments US Existing
Shareholders
22-Aug-16 Medivation Inc
(Bid No 2)
Biomed/Gen
etics
US Pfizer Inc No US $14,322m Completed
28-Apr-16 Salix
Pharmaceuticals
Ltd
Drugs /
Pharma.
US Takeda
Pharmaceutical
Co Ltd.
Entry Japan $10,000m Not
Pursued
26-May-16 Stemcentrx Inc Biomed/Gen
etics
US AbbVie Inc No US $9,800m Completed
Source: Dealogic
Note: Represents the largest 5 announced deals by value for a North American target for Healthcare Drugs/Pharmaceuticals, Healthcare Instruments, Healthcare
Biomed/Genetics, Healthcare Products and Healthcare Medical/Analytic Systems. It includes those that were not completed for any reason.
In terms of deal numbers, 769 individual material deals were announced in 2016,
which was down 14% vs. the 889 in 2015. This represented 0.9x the average annual
deal count of the 10 years to the end of 2016. This is shown in Chart 21 below,
which also shows the dip in deals between 2012 and 2014, the spike in 2015, and
then the dip back in 2016.
North American deals by
number were down 14% vs
2015 after a spike in that
year.

30
GLOBAL HEALTHCARE
Chart 21: Pharma & MedTech Deals for North American Target Companies by Deal Count
Source: Dealogic
Healthcare Instruments, Healthcare Biomed/Genetics, Healthcare Products and Healthcare Medical/Analytic
company in which shares were acquired) was by far the largest, with $187bn of
North American deal value announced in 2016, or 55% of the total, which
represents a normalisation; since 1995, the category has averaged 52% of all North
American Pharma & MedTech deals. The next most popular targets were
Instruments with 25% of 2016 North American deals (vs. average since 1995 of
26%), then Biomed / Genetics with 17% (vs. average since 1995 of 13%). This is
shown in Chart 22 below, which also depicts the long-term trend of lower share of
deal value for Instruments and Products, and the rise of Drugs/Pharmaceuticals and
Biomed/Genetics.
0
200
400
600
800
1,000
1,200
20162014201220102008200620042002200019981996
No.ofDeals
Mean Deal Count
Over Past10 Years
-3%
Since
2013
was most popular for North
American deals in 2016, with
55% of total value.

31
GLOBAL HEALTHCARE
Chart 22: Category as % of Total Value of North American Target Company Deals in
Source: Dealogic
with $290bn of North American target company deal value in 2015 (or 85% of the
total). This reflected a bounce-back in the value of deals by Financial Sponsors from
a very low 2015 level; since 1995, the category has averaged 78% of all North
American Pharma & MedTech deals.
represented $51bn of North American target company deal value in 2016 (or 15%
of the total), compared to an average of 10% since 1995. This is shown in Chart 23
below, which also illustrates the relative spikes in Private Equity participation in
Pharma and MedTech deals since the mid-1990s, which have represented 20% or
more of total deal value in 2011, 2010, and 2004.
0%
20%
40%
60%
80%
100%
20162014201220102008200620042002200019981996
Drugs/Pharma is +30%in
deal valueterms since2013
accounted for 85% of North
American deal value in 2016...
…as Private Equity rebounded
to 15% of deal value.

32
GLOBAL HEALTHCARE
Chart 23: Type of Deal as % of Total Value of North American Target Company Deals in
Source: Dealogic
Note: Represents all announced deals for a North American target in Healthcare Drugs/Pharmaceuticals, Healthcare
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
20162014201220102008200620042002200019981996
+92% in deal value
terms since2013

33
GLOBAL HEALTHCARE
Geographical Focus: Continental
Europe
Continental European deal value rose very strongly in 2016 in value
terms, although the number of deals fell, and Private Equity
involvement slipped again, although to around a historically normal
level, despite being up in absolute terms.
2016 deal activity in the Continental European Pharma and MedTech sector totalled
$90bn of deal value, which was up 52% vs. 2015, which reversed a two-year run of
falling deal value. Chart 24 below shows this rebound from a two-year decline.
Chart 24: Pharma & MedTech Deals for Continental European Target Companies by Deal
Value ($m)
Source: Dealogic
Note: Represents all announced deals for a Continental European target for Healthcare Drugs/Pharmaceuticals,
The largest 5 bids in Continental European Pharma/MedTech announced in 2016
are shown in the table below. Notably, only one deal, Svenska Cellulosa / BSN
medical had Private Equity involvement (on both sides), and only three out of the
largest 5 Continental European deals announced in 2016 have so far been
completed.
0
50,000
100,000
150,000
200,000
20162014201220102008200620042002200019981996
DealValue($m)
500m to 1bn 100m to 500m
Mean Deal Value
Over Past10 Years
+12%
Since
2013
Continental European deal
value in 2016 amounted to
$90bn, up 52% vs 2015.
Mylan / Meda was the largest
Continental European deal
announced in 2016.

34
GLOBAL HEALTHCARE
Table 4: Largest 5 Bids in 2016 for Continental European Pharma/MedTech Companies
Announcement
Date
Target
Company Name
Target
Company
Category
Target
Company
Country
Bidder Private
Equity
Entry /
Exit?
Bidder
Country
Deal
Value
Deal Status
10-Feb-16 Meda AB Drugs /
Pharma.
Sweden Mylan NV No US $9,929m Completed
19-Dec-16 BSN medical
GmbH
Instruments Germany Svenska Cellulosa
AB SCA
Exit;
Portfolio
Sweden $2,862m Pending
11-Jan-16 Seres
Therapeutics
Inc (Rights to
Clostridium
Difficile and
Inflammatory
Bowel Disease
Therapies)
Drugs /
Pharma.
Switzerland Nestle SA No Switzerland $1,905m Completed
28-Oct-16 Ganymed
Pharmaceutical
s AG
Drugs /
Pharma.
Germany Astellas Pharma
Inc
No Japan $1,400m Completed
03-Nov-16 Carl Zeiss SMT
AG (24.9%)
Instruments Germany ASML Holding NV No Netherlands $1,110m Pending
Source: Dealogic
Note: Represents the largest 5 announced deals by value for a Continental European target for Healthcare Drugs/Pharmaceuticals, Healthcare Instruments, Healthcare
Biomed/Genetics, Healthcare Products and Healthcare Medical/Analytic Systems. It includes those that were not completed for any reason.
In terms of deal numbers, 417 individual material deals were announced, which
was down 8% vs. the 453 in 2015. This represented 1.0x the average annual deal
count of the 10 years to the end of 2016. This is shown in Chart 25 below, which
also shows the decline in deals between 2011 and 2013 and the marked rising
trend since then.
By deal numbers, Continental
European deals were down
8% vs 2015, though
nonetheless at around the 10-
year average level.

35
GLOBAL HEALTHCARE
Chart 25: Pharma & MedTech Deals for Continental European Target Companies by
Deal Count
Source: Dealogic
Continental European deal value announced in 2016, or 84% of the total. This
category stepped up in 2016 to historically high levels of popularity; since 1995,
the category has averaged a slightly lower 48% of all Continental European
Pharma & MedTech deals. The next most popular targets were Instruments with
8% of 2016 Continental European deals (vs. average since 1995 of 14%), then
Biomed/Genetics with 4% (vs. average since 1995 of 6%). This is shown in Chart
26 below, which also depicts the long-term trend of lower share of deal value for
Instruments and Products, and the rise of Drugs/Pharmaceuticals and
Biomed/Genetics.
0
50
100
150
200
250
300
350
400
450
500
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
No.ofDeals
Mean Deal Count
Over Past10 Years
+14%
Since
2013
represented 84% of total
Continental European deals
by value in 2016, hitting a
historically high level.

36
GLOBAL HEALTHCARE
Chart 26: Category as % of Total Value of Continental European Target Company Deals
in Pharmaceutical and Medical Technology
Source: Dealogic
with $78bn of Continental European target company deal value in 2016 (or 87%
of the total). This reflected strong growth in deals by Strategic Investors rather
than any fall-off in the value of deals by Financial Sponsors; since 1995, the
category has averaged 82% of all Continental European Pharma & MedTech deals.
represented $12bn of Continental European target company deal value in 2016
(or 13% of the total), compared to an average of 14% since 1995. This is shown in
Chart 27 below, which also illustrates the relative spikes in Private Equity
participation in Pharma and MedTech deals since the mid-1990s, which have
represented 20% or more of total deal value in 2012, 2011, 2006, and 2005.
0%
20%
40%
60%
80%
100%
20162014201220102008200620042002200019981996
Drugs/Pharma is +52%in
deal valueterms since2013
were 87% of the 2016 total
value in Continental Europe…
...as Private Equity stayed in-
line with its historical average
at 13% of total value.

37
GLOBAL HEALTHCARE
Chart 27: Type of Deal as % of Total Value of Continental European Target Company
Deals in Pharmaceutical and Medical Technology
Source: Dealogic
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
20162014201220102008200620042002200019981996
Financial Sponsors are
+117% in deal value
terms since2013

38
GLOBAL HEALTHCARE
Geographical Focus: Rest of the World
The Rest of the World (ROW) saw a significant fall in deal value,
though a modest rise in deal numbers in 2016, with Private Equity
shrinking back to a recent-year low of 6% of deal value.
2016 deal activity in the RoW Pharma and MedTech sector (i.e. those countries
outside the UK, North America and Continental Europe) totalled $57bn of deal
value, which was down 26% vs. 2015, and which reversed the striking growth
trend that started in 2012. Chart 28 below shows these trends.
Chart 28: RoW Pharma & MedTech Deals for RoW Target Companies by Deal Value
($m)
Source: Dealogic
Note: Represents all announced deals for a RoW target for Healthcare Drugs/Pharmaceuticals, Healthcare
The largest 5 bids in RoW Pharma/MedTech announced in 2016 are shown in the
table below. None of these had any Private Equity involvement in 2016, and only
two of the largest five RoW deals announced in 2016 have so far been completed.
0
20,000
40,000
60,000
80,000
100,000
20162014201220102008200620042002200019981996
DealValue($m)
500m to 1bn 100m to 500m
Mean Deal Value
Over Past10 Years
+56%
Since
2013
The Rest of the World
dropped in Pharma/MedTech
deal value in 2016 at $57bn,
down 26% vs 2015.
The largest RoW announced
deal was Canon / Toshiba
Medical Systems.

39
GLOBAL HEALTHCARE
Table 5: Largest 5 Bids in 2016 for RoW Pharma/MedTech Companies
Announcement
Date
Target Company
Name
Target
Company
Category
Target
Company
Country
Bidder Private
Equity
Entry /
Exit?
Bidder
Country
Deal
Value
Deal Status
17-Mar-16 Toshiba Medical
Systems Corp
Instru-
ments
Japan Canon Inc None Japan $5,946m Completed
29-Dec-16 Yunnan Baiyao
Group Co Ltd
(58.4764%)
Products China Yunnan Baiyao
Holdings Co Ltd
None China $5,689m Pending
29-Dec-16 Yunnan Baiyao
Holdings Co Ltd
(50%)
Drugs /
Pharma.
China New Huadu
Industrial Group
Co Ltd
None China $3,647m Pending
15-Dec-16 Wako Pure
Chemical
Industries Ltd
(85.12%)
Products Japan Fujifilm Holdings
Corp
None Japan $2,134m Pending
12-Sep-16 LG Life Sciences
Ltd
Biomed/
Genetics
South
Korea
LG Chem Ltd None South
Korea
$1,372m Completed
Source: Dealogic
Note: Represents the largest 5 announced deals by value for a RoW target for Healthcare Drugs/Pharmaceuticals, Healthcare Instruments, Healthcare Biomed/Genetics,
Healthcare Products and Healthcare Medical/Analytic Systems. It includes those that were not completed for any reason.

40
GLOBAL HEALTHCARE
In terms of deal numbers, 786 individual material deals were announced, which
was an all-time high20
and was up 6% vs. the 744 in 2015. This represented 1.1x
the average annual deal count of the 10 years to the end of 2016. This is shown in
Chart 29 below, which also shows the relatively slow-growth period for deals since
2010.
Chart 29: Pharma & MedTech Deals for RoW Target Companies by Deal Count
Source: Dealogic
RoW deal value announced in 2016, or 43% of the total. This category has been
on a declining trend as a proportion of total deal value since 2005; since 1995, the
category has averaged 48% of all RoW Pharma & MedTech deals. The next most
popular targets were Instruments with 22% of 2016 RoW deals (vs. average since
1995 of 12%), then Products with 22% (vs. average since 1995 of 30%). This is
shown in Chart 30 below, which also depicts the volatility of deal values for other
categories of company since 1995.
20
0
100
200
300
400
500
600
700
800
900
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
No.ofDeals
Mean Deal Count
Over Past10 Years
+7%
Since
2013
RoW deals by number hit a
record high in 2016 at 786, up
6% vs 2015.
Once again, Drugs/Pharma
was the top category, though
falling, with 43% of deal value
in the RoW in 2016.

41
GLOBAL HEALTHCARE
Chart 30: Category as % of Total Value of RoW Target Company Deals in
Source: Dealogic
(essentially corporates, or trade buyers or trade sellers) extended their
domination, with $49bn of RoW target company deal value in 2016 (or 87% of the
total). This reflected a return to the elevated levels seen in 2014 and 2013; since
1995, the category has averaged 82% of all RoW Pharma & MedTech deals by
value.
represented $4bn of RoW target company deal value in 2016 (or 6% of the
total),which was the lowest proportion since 2008 and which is compared to an
average of 7% since 1995 . This is shown in Chart 31 below, which also illustrates
the long-term trend of rising Private Equity involvement in RoW Pharma and
MedTech deals, and their low level historically compared to the global averages
0%
20%
40%
60%
80%
100%
20162014201220102008200620042002200019981996
Drugs/Pharma is flatin deal
valueterms since2013
participated in 87% of RoW
deals by value in 2016…
…as Private Equity fell back to
just 6% of deal value in the
RoW in 2016.

42
GLOBAL HEALTHCARE
Chart 31: Type of Deal as % of Total Value of RoW Target Company Deals in
Source: Dealogic
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
20162014201220102008200620042002200019981996
-11% in deal value
terms since2013

43
GLOBAL HEALTHCARE
Conclusion
In conclusion, 2016 was a buoyant, though slowing year worldwide for Pharma &
MedTech deals, with the third highest deal value and fourth highest deal numbers
on record. Strategic, or trade, players acted dominantly in order to secure
Drugs/Pharma category targets.
As global economic growth accelerates in years to come, and the four key drivers
of healthcare spending exert upward pressure on overall spending in the sector,
we anticipate that trends in terms of deal values and numbers are likely to
continue to push upwards.
Some critical drivers of deals are likely to be enduring over the following decade,
accelerating such as loss of revenue for Big Pharma due to patent expiries and
generic competition, both of which are increasing pricing pressure, amidst
declining R&D productivity. We see these factors propelling still-higher appetite in
coming years for fresh, innovative products and Intellectual Property from small
Pharma & MedTech companies.
The combination of the trends above and the strong organic growth drivers
(population growth, change in age distribution and change in the prevalence of
chronic and communicable diseases, rising resources available to finance the
provision of healthcare, relentless increases in the cost of healthcare goods and
services and regulatory pressures) means that Pharma & MedTech presents one
of the most compelling investment areas in the market today for High Net Worth
Investors and their Professional Advisers.
Arterial believe that for Family Offices, Private Wealth and Pension Fund
Managers, these powerful deal and organic growth trends are compelling.
Positions in the growth Pharma & MedTech companies of the future invariably
form a keystone of HNW investor portfolios and cannot be ignored.
We will leave the concluding remark not to Arterial, but to one of the world’s
leading fund managers:
Samuel Isaly, Portfolio Manager, Eaton Vance Worldwide Health Sciences Fund
2016 was a buoyant, though
slowing year...
…and key trends should drive
that higher.
Strong and rising appetite is
set to stay for small Pharma &
MedTech with innovative
products.
Deal trends and relentless
organic growth themes
combine to present a
compelling opportunity…
…which means that Pharma &
MedTech should be keystone
of portfolios.

44
GLOBAL HEALTHCARE
PIONEERING LIFE SCIENCE INVESTMENT
ARTERIAL CAPITAL MANAGEMENT
e: info@artcapman.com
w: www.artcapman.com
Main Office
Suite 15, 1st Floor
Oliaji Trade Centre
Francis Rachel Street
Victoria
Mahe
Seychelles
The views and opinions expressed within this document reflect those of our professional advisors, and are not
necessarily those of Arterial. Professional advisers should ensure that their clients seek independent and suitably
qualified advice before entering into such investment. Investment into biotech and pharmaceuticals is by its very
nature high risk and investors may lose some or all of their money.
Investors and their advisors must be prepared that some investments could fail. Arterial is only
available through professional advisers for HNW, sophisticated investors who genuinely understand
and accept risk. Investors should only invest money they do not need access to, and which they can
afford to lose. No investment may be entered into, neither in part nor in whole, on the basis of this
newsletter. This newsletter is not an offer nor an invitation to subscribe. Arterial does not provide or
imply investment advice.

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