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August 2016
Public Market Trends in Ophthalmology
Andrew Gitkin
Head, West Coast Biotech Investment Banking
Member SIPC an...
3PIPER JAFFRAY
US Markets Had the Worst 10-Day Start in History in 2016
Key Drivers
Uncertainty
with Fed
Weakness
in oil p...
4PIPER JAFFRAY
(15.0%)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
J-16 F-16 M-16 A-16 M-16 J-16 J-16
Brexit and
Geopolitical
Shocks
Eq...
5PIPER JAFFRAY
Positive Signs of Market Upswing Emerging
Net Equity Fund Flows Since 2015
($BN)
Hedge Funds Playing Catch ...
6PIPER JAFFRAY
Financial Profile of Corporate America Remains Robust
S&P 500 Earnings Guidance S&P 500 1-Year Forward P/E
...
7PIPER JAFFRAY
Equity Market Outlook
Bulls
 Resilient U.S. market
 Limited upside in the
U.S. dollar
 Treasury yields a...
8PIPER JAFFRAY
So What Does This Mean For the Healthcare Market in 2016?
S&P Sector Performance - YTD
Source: CapitalIQ as...
9PIPER JAFFRAY
(60%)
(40%)
(20%)
0%
20%
40%
60%
80%
100%
J-14 M-14 S-14 J-15 M-15 S-15 J-16 M-16
Sector Rotation out of Bi...
10PIPER JAFFRAY
(30%)
(20%)
(10%)
0%)
10%)
20%)
30%)
40%)
J-15 A-15 J-15 O-15 J-16 A-16 J-16
Biotech Index Medtech Index
B...
11PIPER JAFFRAY
M&A
IPO
Nov 2015
Key Events and Investor Themes in Ophthalmology
Jan 15 May 15 Sep 15 Jan 16 May 16 Jul 16...
12PIPER JAFFRAY
Historical IPO Activity Has Meaningfully Declined in 2016…
$0.0 $0.0 $0.0 $0.2 $0.2 $0.2 $0.1 $0.3 $0.2 $0...
13PIPER JAFFRAY
(25%)
0%
25%
50%
Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16
2016 IPOs Faced Meaningful Pricing Pressure But...
14PIPER JAFFRAY
Key Success Factors for Going Public in Today’s Market
 Significant levels of crossover and insider
suppo...
15PIPER JAFFRAY
PUBLIC MARKET TRENDS IN OPHTHALMOLOGY
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PUBLIC MARKET TRENDS IN OPHTHALMOLOGY

Presentation by Piper Jaffray at OIS@ASRS 2016.

Participant:
Andrew Gitkin, Head, West Coast Investment Banking - Piper Jaffray

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PUBLIC MARKET TRENDS IN OPHTHALMOLOGY

  1. 1. August 2016 Public Market Trends in Ophthalmology Andrew Gitkin Head, West Coast Biotech Investment Banking Member SIPC and FINRA
  2. 2. 3PIPER JAFFRAY US Markets Had the Worst 10-Day Start in History in 2016 Key Drivers Uncertainty with Fed Weakness in oil prices VRX Aftermath Decline in China (25%) (20%) (15%) (10%) (5%) 0% 1/1 1/8 1/15 1/22 1/29 Dow Jones NASDAQ S&P 500 NBI (5.1%) (5.5%) (7.9%) (21.0%) Source: CapitalIQ as of July 29, 2016
  3. 3. 4PIPER JAFFRAY (15.0%) (10.0%) (5.0%) 0.0% 5.0% 10.0% J-16 F-16 M-16 A-16 M-16 J-16 J-16 Brexit and Geopolitical Shocks Equity Markets Bounce Back Despite Lingering Concerns Source: CapitalIQ as of July 29, 2016 Key Drivers DJI NASDAQ S&P 500 Stability in Commodities Improving Labor Market FOMO Rally Election Uncertainty US Safe Haven Status Significant Currency Fluctuations
  4. 4. 5PIPER JAFFRAY Positive Signs of Market Upswing Emerging Net Equity Fund Flows Since 2015 ($BN) Hedge Funds Playing Catch Up Largest intra- quarter reversal since 1933 $7 ($7) ($24) ($8) ($44) ($46) $0 ($50) ($40) ($30) ($20) ($10) $0 $10 1Q 2015 2Q 3Q 4Q 1Q 2016 2Q 3Q (15%) (10%) (5%) 0% 5% 10% J-16 F-16 M-16 A-16 M-16 J-16 J-16 HFRX S&P500 Source: Dealogic, Capital IQ as of July 29, 2016
  5. 5. 6PIPER JAFFRAY Financial Profile of Corporate America Remains Robust S&P 500 Earnings Guidance S&P 500 1-Year Forward P/E Source: Fidelity, Bloomberg, CapitalIQ as of July 29, 2016 Positive-to-Negative Guidance Ratio 1.0 0.9 0.8 0.7 0.6 0.5 0.4 Ratio (12-Month) Average 2008 2009 2010 2011 2012 2013 2014 2015 2016 Median = 15.2x 0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 2006 2008 2010 2012 2014 2016
  6. 6. 7PIPER JAFFRAY Equity Market Outlook Bulls  Resilient U.S. market  Limited upside in the U.S. dollar  Treasury yields at record lows  Positive economic fundamentals  Historically low global rate environment  Subdued inflation and a dovish Fed Bears  Geopolitical risk (Brexit, Turkey, etc.)  Heightened volatility during elections  Changes in the Fed’s monetary stance  Emerging market stress  Shocks of noneconomic origin Piper Jaffray forecasts a 2,350 S&P 500 year-end price target, ~8% above current levels
  7. 7. 8PIPER JAFFRAY So What Does This Mean For the Healthcare Market in 2016? S&P Sector Performance - YTD Source: CapitalIQ as of July 29, 2016 (-1.1%) 4.5% 5.0% 7.0% 8.2% 8.3% 8.6% 10.8% 20.3% 20.7% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
  8. 8. 9PIPER JAFFRAY (60%) (40%) (20%) 0% 20% 40% 60% 80% 100% J-14 M-14 S-14 J-15 M-15 S-15 J-16 M-16 Sector Rotation out of Biotech in 2016 Source: CapitalIQ as of July 29, 2016 Key Observations Political Headwinds / Pricing Heightened Risk Aversion Healthcare Energy Trade Decoupled 44 Days NBI S&P 500 Medtech Index Energy Index VIX 70 Days VRX News Slowdown 1 Slowdown 2 90+ Days Slowdown 3 Portfolio Rationalization
  9. 9. 10PIPER JAFFRAY (30%) (20%) (10%) 0%) 10%) 20%) 30%) 40%) J-15 A-15 J-15 O-15 J-16 A-16 J-16 Biotech Index Medtech Index Biotech Ophthalmology Medtech Ophthalmology Ophthalmology Traded in Line with the Broader Market 1) Medtech Ophthalmology includes: Clearside, Glaukos, J&J, Presbia, and STAAR 2) Biotech Ophthalmology includes: Aerie, AGTC, Allergan, Bayer, Gensight, Inotek, Nicox, Novartis/Alcon, Ocular, Omeros, Ophthotech, Regeneron, Shire, Valeant • Company-specific events and volatile new IPOs caused medtech ophthalmology to trail the medtech index in 2015 • Biotech ophthalmology traded in line with the biotech index and saw a major reversal in 2016 relative to medtech Source: Capital IQ
  10. 10. 11PIPER JAFFRAY M&A IPO Nov 2015 Key Events and Investor Themes in Ophthalmology Jan 15 May 15 Sep 15 Jan 16 May 16 Jul 16 July 2015 July 2015 Feb 2015 Aug 2015 July 2016Feb 2016 July 2016 June 2015 Jan 2015 Jan 2015 June 2016Feb 2015 Strong Fundamentals • Growing market • Sustained innovation • Strong pricing dynamics • Favorable reimbursement environment IPO Capital Raised M&A Exits $604m $1.4B+ Source: Public filings, Dealogic
  11. 11. 12PIPER JAFFRAY Historical IPO Activity Has Meaningfully Declined in 2016… $0.0 $0.0 $0.0 $0.2 $0.2 $0.2 $0.1 $0.3 $0.2 $0.4 $0.1 $0.2 $0.0 $0.0 $0.0 $0.3 $1.1 $1.4 $0.9 $2.1 $1.3 $1.6 $1.8 $0.9 $2.2 $1.8 $0.8 $0.6 $0.6 $0.9 Capital Raised ($BN) Medtech Biopharma 5 14 16 11 29 17 24 16 12 21 14 10 6 10 4 2 3 2 2 3 3 4 1 1 1 0 5 10 15 20 25 30 35 Q1 2013 Q2 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2015 Q2 Q3 Q4 Q1 2016 Q2 Q3 Medtech IPOs Biopharma IPOs Source: Piper Jaffray
  12. 12. 13PIPER JAFFRAY (25%) 0% 25% 50% Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 2016 IPOs Faced Meaningful Pricing Pressure But Have Performed Well Data as of 07/29/2016 Biopharma IPO Pricing Trends 2016 Biopharma Rolling IPO Performance 42.9% 45.3% 41.5% 42.9% 75.0% 45.2% 41.3% 30.2% 57.1% 25.0% 50.0% 11.9% 13.3% 28.3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2013 2014 2015 Q1 2016 Q2 2016 Q3 2016 Above In Range Below Historical Performances 2014 2015 2016 YTD 47.5% 0.6% 9.5% 50.0% Source: Public filings, Dealogic
  13. 13. 14PIPER JAFFRAY Key Success Factors for Going Public in Today’s Market  Significant levels of crossover and insider support at launch  Valuable lead program with de-risked development plan for multiple products  Targeting attractive markets with long duration assets  Positive data and near term catalysts  Demonstrated investor interest  Experienced management team and Board of Directors  Valuation at current market levels Quarterly Insider Support Trends 60.0% 60.0% 50.0% 57.1% 88.9% 100.0% 0% 50% 100% 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Source: Public filings, Piper Jaffray
  14. 14. 15PIPER JAFFRAY

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