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Silicon Valley Bank

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Silicon Valley Bank "Venture Healthcare Industy Update" presented at OIS@AAO 2014

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Silicon Valley Bank

  1. 1. Venture Healthcare – Industry Update OIS 2014 October 16, 2014
  2. 2. SVB - OIS 2014 2 ê Manage West Coast Healthcare Relationships for SVB across the SVB Platform, including ê  Fund of Funds (Investment as LP) ê  Direct Equity (Co-Investments and Rights to Invest) ê  Commercial Bank (Venture/Mezzanine Debt, Asset-based Debt, New Fundings) ê  Equity Financing Strategy for Early Stage and Venture-Backed Companies ê  Industry Thought Leadership Jon Norris: Managing Director, SVB Capital Jonathan Norris Managing Director, Healthcare Silicon Valley Bank Mobile 650.575.1377 jnorris@svb.com Twitter: @jonnysvb ê Recent Publications ê  Trends in Healthcare Investments and Exits (2014) ê  Strong Momentum in Healthcare (2013) ê  First Mover Advantage (2012) ê  Continued Rebound (2012) ê  Trends in M&A (2011) ê  Bringing Home the Bacon (2010)
  3. 3. 3 Healthcare as a Percentage of Total Venture Investment into Companies 2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   Total  VC  $   $99   $38   $21   $19   $22   $23   $27   $31   $30   $20   $23   $28   $27   $30   BioPharma   4%   9%   15%   19%   19%   16%   17%   17%   15%   19%   17%   17%   16%   15%   Device   2%   5%   9%   8%   8%   10%   11%   12%   11%   13%   10%   10%   9%   7%   0% 5% 10% 15% 20% $- $10 $20 $30 $40 $50 20002001200220032004200520062007200820092010201120122013 Billions Total VC $ BioPharma Device Source:  PricewaterhouseCoopers,  Silicon  Valley  Bank   $99 SVB - OIS 2014
  4. 4. 4 Device Investment Into Venture Companies Over Time The Real Story is Consistency Year Device $ Invested Dollars as % of Total VC 2007 $3.7 Billion 12% 2008 $3.6 Billion 11% 2009 $2.6 Billion 13% 2010 $2.5 Billion 10% 2011 $2.9 Billion 10% 2012 $2.6 Billion 9% 2013 $2.1 Billion 7% 2014 (Proj) $2.5 Billion 6% SVB - OIS 2014
  5. 5. 5 Year  refers  to  Vintage  Year  of  Fund.         Source:  PricewaterhouseCoopers,  Thompson  Reuters,  Silicon  Valley  Bank  proprietary  data   US HC Funding: Dollars Invested v Dollars Fundraised; Stable Capital In 2010, the capital deployed was >3x of capital fundraised In 2013, the capital deployed was 1.7x of capital fundraised 0% 100% 200% 300% 400% $0 $2 $4 $6 $8 $10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Billions Gap in Funding HC $ Fundraised HC $ Invested % Overfunded SVB - OIS 2014
  6. 6. 0 20 40 60 80 100 0 20 40 60 80 100 SVB OIS 2014 6 US Company Creation/Series A: Corporate Investors Plug the Gap in BioPharma; Device Down BioPharma Medical Device *Includes  Series  A  companies  raising  at  least  $2,000,000  in  equity     SVB  Proprietary  Data  for  Series  A  Dollars  and  Number  of  Companies  using  VentureSource   **2013  data  sourced  from  Pitchbook   #ofDeals #ofDeals Corporate Venture as part of Series A syndicate Venture-backed Series A Corporate Venture as part of Series A syndicate Venture-backed Series A Total$Invested(M) Total$Invested(M) 9% 16% 15% 22% 20% 14% 12% 30% 35% 8% 5% 8% 7% 5% 6% 4% 0% 10% % of US Deals with a Corporate % of US Deals with a Corporate Total Dollars InvestedTotal Dollars Invested
  7. 7. 7 New $ Investors: BioPharma 2012-2013: 5 of Top 15 are Corporate (Corporate) Includes  Series  A  companies  raising  at  least  $2  Million  in  equity.   Sources:  CB  Insights,  PitchBook,  VentureSource,  and  SVB  proprietary  data.   0 2 4 6 8 10 12 #ofDeals 85% 15% SVB - OIS 2014
  8. 8. 8 New $ BioPharma Investments by Top Investors: Indication and Stage 2012-2013 *Target  GeneraWng  PlaXorm   Sources:  CB  Insights,  PitchBook,  VentureSource,  and  SVB  proprietary  data.   *Target Generating Platform 87% 13% 0 5 10 15 20 25 30 #ofDeals SVB - OIS 2014
  9. 9. 9 New $ Corporate BioPharma Investments 2012-2013 Data  contains  Series  A  companies  invested  into  by  12  most  acWve  investors,  with  at  least  3  investments  greater  than  $2  Million  in  equity.     Sources:  CB  Insights,  PitchBook,  VentureSource,  and  SVB  proprietary  data.   0 1 2 3 4 5 6 7 8 #ofDeals 90% 10% SVB - OIS 2014
  10. 10. 10 New $ BioPharma Investments: Corporates with 2+ Deals Top Corporate Investors: BioPharma 2012-2013   Sources:  CB  Insights,  PitchBook,  VentureSource,  and  SVB  proprietary  data.   0 5 10 15 20 25 30 35 Pre-Clinical Phase I Phase II Phase III SVB - OIS 2014
  11. 11. 11 Device Top New $ Investors: 2012-2013 Only One Corporate Venture in Top 10 (Corporate) Includes  Series  A  companies  raising  at  least  $2  Million  in  equity.   Sources:  CB  Insights,  PitchBook,  VentureSource,  and  SVB  proprietary  data.   0 1 2 3 4 5 6 7 8 #ofDeals 56% 44% SVB - OIS 2014
  12. 12. 12 Device Top Investors: New Money Investment by Indication and Stage 2012-2013 Top Device Indications Data  contains  Series  A  companies  invested  into  by  10  most  acWve  investors  with  investments  greater  than  $2  Million  in  equity.     Sources:  CB  Insights,  PitchBook,  VentureSource,  and  SVB  proprietary  data.   0 1 2 3 4 5 6 7 #ofDeals 56% 44% SVB - OIS 2014
  13. 13. 13 BioPharma and Device Big Exits M&A and IPOs 2005-2013 Biotech Device 0 5 10 15 20 25 30 35 2005 2006 2007 2008 2009 2010 2011 2012 2013 #ofBigExits Biotech Big Exits BioPharma Device Exits Device 2005   2006   2007   2008   2009   2010   2011   2012   2013   BioPharma:  Big  Exits   12   8   13   9   13   13   18   18   13   BioPharma:  VC-­‐Backed  IPOs   25   20   17   1   3   9   4   12   33   Device:  Big  Exits   7   12   11   8   9   15   17   17   14   Device:  VC-­‐Backed  IPOs   7   9   4   1   0   3   3   1   4   Device IPOs Biotech IPOs Big  Exits:  2005-­‐Present.  Private  Biotech  M&A  Up-­‐Front  >$75M,  Med  Device  M&A  Up  Front>$50M.  “Up-­‐Front”:  Up-­‐Front  defined  as   payments  in  a  structured  deal  not  including  milestones.  “Up-­‐Front  w/  Milestones”:  defined  as  payments  in  a  structured  deal  including   milestones.  “All-­‐In”:  Deals  where  the  total  value  is  paid  at  the  close  of  the  transacWon.  IPOs  include  Venture  Capital-­‐backed  IPOs  only.   Sources:  Investment  Bank  Reports,  VentureSource,  Press  Releases,  and  discussions  with  Life  Science  professionals.   SVB - OIS 2014
  14. 14. 14 Big  Exits:  2005-­‐Present.  Private  Biotech  M&A  Up  Front  >$75M,  Med  Device/Services  M&A  Up  Front>$50M.  “Up-­‐Front”:  Up-­‐ Front  defined  as  payments  in  a  structured  deal  not  including  milestones.  “Up-­‐Front  w/  Milestones”:  Up-­‐Front  defined  as   payments  in  a  structured  deal  including  milestones.  “All-­‐In”:  Deals  where  the  total  value  is  paid  at  the  close  of  the   transacWon.  Sources:  Investment  Bank  Reports,  Venture  Source,  Press  Releases  &    discussions  with  Life  Science   Venture-Backed Big Exits by Year 2005-2013 What is Happening in 2014? Sneak Peak at 2014 Device: As of 08/13, Device Big Exits have EXCEEDED yearly 2013 numbers, with HIGHER Up Front ($238M) and All In ($261M) Values BioPharma Medical Device 0 100 200 300 400 500 600 0 2 4 6 8 10 12 14 16 18 20 All In Structured Deals Ave. Deal: Structured Ave. Deal: All In Total Deal Value #ofDeals DealSize($M) #ofDeals DealSize($M) 0 100 200 300 400 500 600 0 2 4 6 8 10 12 14 16 18 20 All In Structured Deals Total Deal Value Ave. Deal: All In
  15. 15. 15 BioPharma and Device: Potential Distributions from Big Exit M&A and IPOs* *Discounts applied: 75% on Up-Front M&A; 25% on M&A Milestones; 75% on IPO Pre Money Big  Exits:  2005-­‐Present.  Private  Biotech  M&A  Up-­‐Front  >$75M,  Med  Device  M&A  Up  Front>$50M.  “Up-­‐Front”:  Up-­‐Front  defined  as   payments  in  a  structured  deal  not  including  milestones.  “Up-­‐Front  w/  Milestones”:  defined  as  payments  in  a  structured  deal  including   milestones.  “All-­‐In”:  Deals  where  the  total  value  is  paid  at  the  close  of  the  transacWon.  IPOs  include  Venture  Capital-­‐backed  IPOs  only.   Sources:  Investment  Bank  Reports,  VentureSource,  Press  Releases,  and  discussions  with  Life  Science  professionals.   0 2 4 6 8 10 12 2005 2006 2007 2008 2009 2010 2011 2012 2013 TotalValue($Billion) SVB - OIS 2014 Pre-Money Valuation Pre-IPO Big Exit Milestones to be Earned Big Exit Up-Front Payments
  16. 16. 16 Device: Big Exit M&A by Stage and Year (2009-2013) Consistent Deal Values Across Stage in Device 0 2 4 6 8 10 12 14 16 18 2009 2010 2011 2012 2013 #ofBigExits Non-Approved CE Mark U.S. Commercial Private,  venture-­‐backed  Big  Exits  from  2009-­‐2013  over  $50M  Up-­‐Front.     Sources:  Press  Releases,  CB  Insights,  and  SVB  proprietary  data.   $325  /  $695   $411  /  $489   $296  /  $315   $200  /  $345           $804  /  $1,350   $150  /  $228   $78  /  $78   $123  /  $248   $208  /  $214   $137  /  $195   $100  /  $250   $129  /  $233   $220  /  $340   $147  /  $227   $191  /  $210   *Avg.  Upfront  /  Total  Deal  Value  ($  M)   SVB - OIS 2014
  17. 17. 17 Top Indication Analysis (2009-2013): Device M&A >$50M No Wonder Ophthalmology Gaining Early Stage Investment! SVB  Proprietary  Data:  Private    Venture  Backed  Big  Exits   Average  MulWple  calculated  at  85%  of  value  divided  by  venture  equity   2009-­‐2013   #  of  Exits   Average  $  In   Average  Years  to   Exit   Average  Up-­‐Front   MulPple   Average  Total  Deal   MulPple   Average  Total  Deal   Value  ($M)   Cardiovascular   12   68   6.5   3.8   7.0   416   Vascular   12   57   7.9   4.4   6.3   322   Imaging/DiagnosPcs   12   50   8.9   4.0   4.9   193   Surgical   9   50   8.1   3.0   3.6   211   Tools   7   36   5.3   5.2   7.3   207   Orthopedics   5   35   7.2   5.7   6.9   142   AesthePcs   3   5   3.0   56.9   56.9   242   Ophthalmology   3   76   6.0   5.0   8.7   515   Other   3   26   4.0   3.6   4.0   116   Respiratory   3   95   11.7   1.8   2.7   281   ENT   2   89   7.5   3.7   3.8   440   Metabolic   1   66   8.0   0.6   0.6   50   Uro/Gyn   1   28   4.0   3.8   3.8   125   OVERALL  AVERAGE       53   7.2   6.2   7.8   270  
  18. 18. 18 Big  Exits:  2005-­‐Present.  Private  Biotech  M&A  Up  Front  >$75M,  “Up-­‐Front”:  Up-­‐Front  defined  as  payments  in  a  structured   deal  not  including  milestones   Big Exit Deals by Year and Stage 2005-2013: BioPharma Are Acquirers Moving to Later Stage M&A Deals? 0 1 2 3 4 5 6 7 8 9 10 2005 2007 2009 2011 2013 2005 2007 2009 2011 2013 2005 2007 2009 2011 2013 2005 2007 2009 2011 2013 2005 2007 2009 2011 2013 Pre-Clinical Phase I Phase II Phase III Commercial #ofBigExits Pre-Clinical Phase I Phase II Phase III Commercial 2013 2013 2013 2013 2013 SVB - OIS 2014
  19. 19. 0 2 4 6 8 10 12 14 16 18 20 2009 2010 2011 2012 2013 #ofBigExits Commercial Phase III Phase II Phase I Pre-Clinical BioPharma: Big Exit M&A and IPOs by Stage and Year (;09-’13) Early Stage M&A Candidates Spurn M&A for Hot IPO Valuations Bar  graph  signals  Private  Biotech  M&A  Up-­‐Front  >$75M.  Circle  indicates  one  Venture  Capital-­‐backed  IPO.     Sources:  Investment  Bank  Reports,  Press  Releases,  and  discussions  with  Life  Science  professionals.   Represents 1 IPO Represents 1 Big Exit 19SVB - OIS 2014
  20. 20. 20 Indication Analysis (2009-2013): BioPharma Big Exit M&A SVB  Proprietary  Data:  Private    Venture  Backed  Big  Exits   2009-­‐2013   Number  of  Exits   Average  $  In   Average  Years     to  Exit  from  Series   A   Avg.       Up-­‐Front  MulPple   on  VC$  Invested   Structured  Deals?   Average     Total  Deal  Value   Oncology   19   88.8   7.5   9.0   18/19   $678M   Respiratory   9   66.2   5.0   2.9   8/9   $377M   CNS   8   57.2   4.3   3.4   7/8   $471M   Target  GeneraPng  Pla^orm   7   57.6   8.4   5.1   1/7   $261M   Cardiovascular   7   116.7   6.1   4.8   5/7   $473M   AnP-­‐InfecPves   5   60.8   4.2   4.7   3/5   $398M   Metabolic   3   55.9   5.3   13.3   3/3   $706M   Ophthalmology   3   86.7   5.9   1.5   3/3   $560M   Uro/Gyn   3   64.4   3.4   2.8   2/3   $358M   SVB - OIS 2014
  21. 21. 21 VC Backed BioPharma IPOs by Year (Thru 9/14) What A Ride This Year!!!! 0 10 20 30 40 50 60 2011 2012 2013 2014 #ofIPOs # of IPOs by year 0 10 20 30 40 50 60 2011 2012 2013 2014 #ofIPOs Pre-Clinical Phase I Phase II Phase III Commercial Pre-Approval Stage by year SVB - OIS 2014Source:  Venture  Source,  CB  Insights,  CapIQ,  SVB  Proprietary  data  
  22. 22. 22 VC-Backed BioPharma IPOs by Indication (2011- Sep. 2014) 31% of IPOs were Pre Clinical of Phase I 0 5 10 15 20 25 Oncology Anti-Infectives CNS Ophthalmology Cardiovascular Orphan GI Hematology Anti-Inflammatory Auto-Immune AnimalHealth Dermatology DrugDelivery Hepatic ENT Metabolic Women'sHealth Musculoskeletal Respiratory Technology #ofIPOs Pre-Clinical Phase I Phase II Phase III Commercial Pre-Approval 8% Phase I, 23% Phase II, 32% Phase III 27% 8% 2% SVB - OIS 2014Source:  Venture  Source,  CB  Insights,  CapIQ,  SVB  Proprietary  data  
  23. 23. 23 VC-Backed BioPharma IPOs Avg. Pre-Money Values and $ Raised (‘11-’14) Dramatic Drop in IPO Value and Dollars so far in 2014 0 50 100 150 200 250 300 350 400 2011 2012 2013 2014 Average$(Millions) Estimated pre-money IPO Amount Raised SVB - OIS 2014Source:  Venture  Source,  CB  Insights,  CapIQ,  SVB  Proprietary  data  
  24. 24. 24 VC Backed BioPharma IPOs: Pre-Money and $ Raised By Quarter (‘12- Q3 ’14) Dramatic Drop Since Apex in Q3’13 Pre-Money Valuations $ Raised at IPO 0 100 200 300 400 500 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 Average$(Millions) Estimated pre-money Year Average 0 50 100 150 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 Average$(Millions) IPO Amount Raised Year Average SVB - OIS 2014Source:  Venture  Source,  CB  Insights,  CapIQ,  SVB  Proprietary  data  
  25. 25. VC-Backed IPO: Avg Pre-Money Valuation by Stage (Thru Sep. ‘14) Ophthalmology: IPO Jump in ‘14 at Slightly Lower than Avg. Pre $ Number:   3   2   1   0   0   Avg   302   81   102           Pre-­‐Clinical   168   Phase  I   Phase  II   102   Phase  III   369   81   Commercial   Number:   11   3   0   2   3   Avg   293   217       323   230   Pre-­‐Clinical   632   Phase  I   341   Phase  II   137   142   Phase  III   217   323   273   Commercial   2013 Number:   9   6   8   5   3   Avg   169   75   163   145   124   Pre-­‐Clinical   135   359   157   Phase  I   201   126   95   104   Phase  II   41   65   131   104   106   Phase  III   202   200   Commercial   202   159   2014 2012 Top 5 BioPharma Indications SVB - OIS 2014Source:  Venture  Source,  CB  Insights,  CapIQ,  SVB  Proprietary  data  
  26. 26. Thank you!!! 26

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