Michael Perry gave a presentation at the MaRS Innovation Summit in Toronto, Canada on October 28, 2010. He discussed trends in pharmaceutical R&D including rising costs of drug development and declining productivity. He noted significant unmet medical needs in areas like oncology, cardiovascular disease, and diabetes. Perry also talked about how venture capital like Bay City Capital is fueling innovation by translating academic research into potential drugs and funding their development through commercialization. However, industry faces challenges like large patent cliffs and risk aversion. Perry proposed strategies like the Pharma Innovation Fund to help bridge gaps in translating discoveries into treatments.

1. MaRS Innovation Summit
Toronto, Canada
October 28, 2010
Michael S. Perry, DVM, PhD, FRCVS
Venture Partner, Bay City Capital, LLC
President and CMO, Poniard Pharmaceuticals

2. 2
Source: Nature Reviews: Drug Discovery, Lessons Learned from the Pharma Industry, December 2009
Overview:
 Trends in Pharmaceutical R&D
 Driving Innovation
 Unmet Medical Needs
 Opportunities for Innovation
 Venture Capital and Private Equity
 Fueling Innovation

3. 3
Source: Nature Reviews: Drug Discovery, Lessons Learned from the Pharma Industry, December 2009
Drug Development Trends
Consider what we knew about human biology/pathophysiology in 1950 vs. 2010
Approvals of NMEs and NBEs by the US FDA between 1950 and 2008

4. 4
 A plot of twelve independent
estimates of the cost of an NME
spanning 48 years.
Source: Nature Reviews: Drug Discovery, Lessons Learned from the Pharma Industry, December 2009
 The same data plotted on a logarithmic
scale. The exponent in the line
equation in part a and the gradient of
the line in part b show :
The cost per NME has grown at an
annual compound rate of 13.35%
since the late 1950s.
Cost of Developing New Drugs

5. 5
A major development if not the major development:
Industry based upon:
innovation, intellectual property, and improvements to health and well being
Very long term decline in R&D productivity, when measured as new molecules per $bn R&D spend
Source: Nature Reviews: Drug Discovery, Lessons Learned from the Pharma Industry, December 2009
Decline in R&D Productivity

6. Significant Near Term Patent Cliff
• Patent exposure remains one of the most significant risks in the pharmaceutical industry
Significant number of patent expirations between 2011 and 2012
16.0
19.8
11.9
19.0
51.2
42.1
20.1
0.0
10.0
20.0
30.0
40.0
50.0
60.0
2007 2008 2009 2010 2011 2012 2013
Large Cap Pharma Revenue Lost to Patent Expirations by Year (1)
$Bn
1. Includes ABT, AZN, BMY, LLY, GSK, JNJ, MRK, NOV, PFE, RHHBY, SNY, SGP and WYE. Revenue lost calculated as last full year of estimated sales prior to scheduled expiration.
Source EvaluatePharma
6

7. 26%
21%
10%
10%
9%
7%
6%
4%
3% 3%
1%0%
PartnershipsbyTherapeutic Area
Oncology
CNS
Multiple TherapyAreas / Other
Infectious Disease / Vaccines
Autoimmune
Endocrinology
Cardiovascular
Respiratory
Hematology
Gastrointestinal
Ophthalmology
Dermatology
69
31
49
38
6
0
10
20
30
40
50
60
70
Preclinical Phase 1 Phase 2 Phase 3 Marketed
NumerofPartnershipDeals
PartnershipsbyStage of Development
Recent Partnerships Trends
Source EvaluatePharma
Multinational Pharma companies are increasing early-stage product licensing
 Therapeutic areas: oncology and CNS have been the most popular areas for licensing
7

8. Healthcare Innovation Unmet Medical Need
8
Deliver to Patient

9.  The World Health Organization estimates that global incidence of cancer will increase by 50%
from 10 million cases in 2000 to 15 million cases by 2020
 The 5-year relative survival rate for all cancers diagnosed from 1996-2003 is 66%*,
up from 50% for the 1975-1977 period …ONLY16% increase in 5-yr survival (‘75 to ’03)
 > 500,000 Americans were expected to die of cancer in 2008 (> 1,500 people per day)
 > 70,000 Canadians were expected to die of cancer in 2008
 Cancer is the second most common cause of death in the United States and Canada
(1 in every 4 deaths, second only to cardiovascular disease)
Unmet Need: Oncology
9
*62% for Canada: 12% up 5 yr survival
Source – Canadian Cancer Society

10. enhanced Dx

12. 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
IDEAL Prove IT HPS 4S LIPID CARE CAPRIE
Risk not addressed
Reduction in MACE
Lipitor Zocor Pravachol
Published Clinical Trial Results
Plavix
70-80% Unaddressed Despite Current Standard of Care
RelativeRiskReductionUnmet Need: Cardiovascular Disease
12

13. Unmet Need: Diabetes
 ~75 million Americans have diabetes or pre-diabetes
 ~9.0 million Canadians have diabetes or pre-diabetes (1 in 4 Canadians)
 80% of Canadians with diabetes die from heart attack or stroke
 Total direct and indirect cost in US: $162 billion (2005)
 Leading cause of heart disease, stroke, blindness and kidney disease
13
0
50
100
150
200
250
300
350
1985 1995 2005 2015 2025
World Health Organization projections
Millions
(persons)
30 M
300 M

14. FUNDING - Private Equity
Venture Capital – meets healthcare…
14

15. Brief Overview of Bay City Capital

16.  Founded in 1997 – Investing ‘exclusively’ in healthcare / life sciences
 $1.6 billion in total capital commitments across seven funds
− $1.45 billion across five general life sciences funds
− $160 million across two sector funds
 History of upper quartile performance
− IRR and COC
 Broad and deep experience building companies
 Lead or co-lead investments
 Over 85 companies funded
Investing in Life Sciences
16

17. OPHTHALMOLOGY
age-related macular degeneration
front of the eye diseases
glaucoma
macular edema
CARDIOVASCULAR
acute MI
atherosclerosis
atrial fibrillation
cholesterol reduction
coronary artery disease
dyslipidemia
endothelial dysfunction
high triglycerides
hypertension
peripheral arterial stenosis
radiocontrast nephropathy
vascular inflammation
RESPIRATORY
asthma
COPD
sleep apnea
NEUROLOGY
acute pain
anxiety
chronic pain
major depressive disorder
migraine
schizophrenia
METABOLIC DISORDERS
diabetes
hepatic encephalopathy
obesity
sleep disorders
GENETIC DISORDERS
cystic fibrosis
hemophilia
muscular dystrophy
urea cycle disorder
ONCOLOGY
acute leukemia
breast cancer
colorectal cancer
melanoma
multiple myeloma
myelodysplastic syndrome
ovarian cancer
prostate cancer
small cell lung cancer
other solid tumors
INFECTIOUS DISEASES
hepatitis C
HIV
influenza
community-acquired pneumonia
Deep Domain Expertise: Therapeutics, Diagnostics, and Devices
PLATFORM TOOLS
assays & kits
clinical trials testing
gene expression modulation
genomic sequencing
healthcare IT
molecular diagnostics
point-of-care diagnostics
systems biology
SURGICAL TOOLS
general surgery
open hysterectomy
17
Indications pursued by Bay City Capital’s portfolio companies

18. Capital commitments of Funds I, II, and III include co-investments by Pritzker family business interests.
Capital commitments of Funds II, III, IV, V, and BV3 include respective side funds.
Capital Commitments
18
Fund
Vintage
Year
Capital
Committed
Bay City Capital Fund V 2007 $ 500M
Bay City Capital Fund IV 2004 351M
Bay City Capital Fund III 2001 252M
Bay City Capital Fund II 1999 201M
Bay City Capital Fund I 1997 148M
$1,452M
GENERAL LIFE SCIENCES FUNDS
Fund
Vintage
Year
Capital
Committed
Birchmere Ventures III 2005 $ 47M
North American
Nutrition & Agribusiness
Fund (NANAF)
1999 111M
$ 158M
SECTOR FUNDS

19. Birks Family
Bronfman Family
Fain Family
Finch Family
Lurie Family
Pritzker Families
Simon Family
Walton Family
High Quality Limited Partners
PROCIFIC LTD
Partners
Employees
Affiliates
Fund IV and Fund V Limited Partners
19
Institutional Investors Endowments / Foundations Family Offices
Strategic Investors Medical Institutions Bay City Capital

20. Broad Spectrum of Investments
Types of Transactions
Create
NewCo
Traditional
Venture
Turn-Around /
Restructuring
PIPEs
20
Sector – By $ Amount Invested Initial Stage – By # of Companies
Drug Discovery
11%
BioPharma
53%
Med Device
13%
Med Dx
6%
Nutrition/Ag
8%
HCIT
5%
Tools/Services
3% Seed
10
Early
36
Mid
22
Late
8
Public
10
Fund
2

21. Bay City Capital audited results as of December 31, 2009. . Fund IV and Fund V have not yet had enough liquidity events to provide meaningful returns data.
The North American Nutrition and Agribusiness Fund (NANAF), a 1999 fund, did not outperform the VC Industry benchmarks
Upper Quartile Performance
21
Bay City Capital funds have outperformed the broad VC benchmarks
0
500
1000
1500
2000
2500
3000
Fund I
(1997 vintage)
Fund II
(1999 vintage)
Fund III
(2001 vintage)
BVIII
(2005 vintage)
basispoints
Net IRR
basis pts above upper quartile
basis pts above average
Venture Capital Benchmark Statistics from Cambridge Associates as of December 31, 2009

22. Innovation
Translational
Research
Development
I II III
GOV’T
PHARMA
GOV’T
PHARMA
VENTURE
PHARMA
PUBLIC MKTS
PHARMA
PUBLIC MKTS
VENTURE
PHARMA
PUBLIC MKTS
 Due to significant
unmet medical
needs, most drugs
that received
approval yielded
substantial profits
to justify the risk of
investment
 Life sciences
innovation
primarily
originated from
basic research
conducted in
university and
government
institutions
 Translating
innovation from
basic research
into drug
candidates was
for the most
part funded by
the venture
capital industry
 As development progressed, risk was reduced and expenses
increased
 A funding shift occurred from venture capital to public
investors and large pharma
PHARMA
PUBLIC MKTS
VENTURE
GOV’T
ACADEMIA
VENTURE
VENTURE
VENTURE
ACADEMIA
Regulatory
Approval
ACADEMIA
22
Marketed
Drugs
VCs served as an engine for translating research into pharma projects
The Old* Healthcare Paradigm
Old* Healthcare Paradigm – prior to financial crisis

23.  US healthcare reform:
uncertainty in pricing
and reimbursement
 Pharma blockbusters
facing patent cliffs
 Still many areas of
unmet medical need
 Aging population
requiring more medical
care
Innovation
Development
I II III
Regulatory
Approval
GOV’T
PHARMA
PHARMA
PUBLIC MKTS
VENTURE
PHARMA
PUBLIC MKTS
PHARMA
PUBLIC MKTS
GOV’T
ACADEMIA
VENTURE
VENTURE
ACADEMIA
VENTURE
23
 More complicated and conservative regulatory environment
 Larger size, complexity, and cost of clinical trials
 Pharma, public investors, VC are increasingly risk averse and
highly selective
 Pharma R&D budget reductions
 Outsourcing is increasing
Translational
Research
VENTURE
GOV’T
ACADEMIA
Marketed
Drugs
“Valley of Death”
Fewer innovative projects are emerging from Pharma companies
The Current State of the Healthcare Industry
 Innovation is
generated by
universities
and
government
 Growing
cache of
innovative
discoveries
 Pharma
research
funding
decreased
 Pharma R&D
staff reductions
 Venture more
selective

24. Innovation
Development
I II III
Regulatory
Approval
GOV’T
PHARMA
PHARMA
PUBLIC MKTS
VENTURE
PHARMA
PUBLIC MKTS
PHARMA
PUBLIC MKTS
GOV’T
ACADEMIA
VENTURE
VENTURE
ACADEMIA
VENTURE
24
Translational
Research
INNOVATION
 The Pharma Innovation Fund will:
1) Unite academia, pharma partners, and
venture funding
2) Transform innovation into commercial
opportunities that are pre-vetted by
the pharma industry
3) Leverage a capital efficient model with
operational and strategic advantages
from offshore operations
Bay City Capital Innovation Strategy
Marketed
Drugs
VENTURE
GOV’T
ACADEMIA
 The Israel Fund will:
1) Leverage government financial
and political commitment
2) Focus on investments in
healthcare companies with
operations in Israel
3) Capitalize on the government’s
$24 million anchor investment
PHARMA INNOVATION FUND ISRAEL INNOVATION FUND
 The China Fund will:
1) Target companies with significant
operations in China
2) Utilize strategic relationships in
China and provide local presence
3) Offer a broader range of liquidity
options
CHINA FUND

25. For more information contact:
Bay City Capital LLC
Attn: Stacey Leanos
750 Battery Street, Ste 400
San Francisco, CA 94111
(415) 835-9394 phone
(415) 837-0303 fax
stacey@baycitycapital.com
www.baycitycapital.com

26. Backup slides

27. 27
Founded by Bay City Capital, Fund II & III
Seed Financing – 1999
Pharmaceuticalcompanywithintegratedsales,marketing,anddevelopmentexpertise
withaportfolioofbrandedcardiovascularpharmaceuticalproducts.

28. 28
Reliant Pharmaceuticals - Overview
 Founded in 1999 as “Bay City Pharmaceuticals”
 Cardiovascular-focused pharmaceutical company
– In-licensed and developed new products
– Developed follow-on products
– Managed lifecycle of those products
 Bay City Capital was instrumental in the creation of Reliant. Initial business
development activities included:
– Drafting the business plan
– Recruiting pharmaceutical executives
– Reviewing 150 potential product candidates
– Negotiating an initial licensing deal with Novartis

29. 29
 Grew from 2 employees to 1,000
 Hired and trained a sales force of 850
 Received FDA approval for 4 drug products
– (InnoPran XL, Axid OS, Omacor, Antara 130 mg)
 Acquired the rights to 3 brands
– (DynaCirc, Rythmol, Omacor)
 Divested 2 products
– (Axid OS, Antara 130 mg)
 Net sales grew from $29 million in 2003 to $337 million in 2006
 Acquired by GlaxoSmithKline in December 2007 for $1.65 billion
– Largest all-cash transaction for a venture-backed company to date
Reliant Pharmaceuticals - Overview

30. Israel – Small Country, Big Player

31. Innovative and Entrepreneurial Workforce
42%
26%
0%
10%
20%
30%
40%
50%
Bachelors degree Graduate degree
Russian Immigrants w/ university degrees
 Within an area roughly the same as the San Francisco Bay Area, Israel has seven major
universities ranked in the top 100 globally in at least one major scientific field
 With135 scientists for every 100,000 workers, the highest proportion in the world, Israel leads the
world in the quality of its work force
 Like the US, Israel benefits from an influx of well-educated immigrants seeking new opportunity
Source: WEF Global Competitiveness Report 2009-2010
5.0 5.5 6.0 6.5
Sweden
Netherlands
Belgium
Denmark
Australia
Canada
Germany
UK
Israel
Switzerland
US
WEF Score
Quality of scientific research institutions
Source: Israeli Central Bureau of Statistics
CONFIDENTIAL 31

32. Pharmaceutical Products Originating in Israel
Indication
2008 Rev
($M)
CompanyInventors
Academic
Institute
Generic NameName
Multiple
Sclerosis
$2,260
Teva /
Sanofi-Aventis
Sela / Arnon /
Teitelbaum
Weizmann
Institute
GlatiramerCopaxone
Multiple
Sclerosis
€1,331Merck SeronoRevel
Weizmann
Institute
Interferon beta-1aRebif
Alzheimer's$815NovartisRosin
Hebrew
University
Rivastigmine
tartrate
Exelon
Cancer
$749/
€565
BMS (ImClone) /
Merck Serono
Sela
Weizmann
Institute
CetuximabErbitux
Cancer$430
J&J /
Shering - Plough
Gabizon
Hebrew
University
Doxorubicin
liposome
Doxil / Caelyx
Source: State of Israel Ministry of Industry, Trade, & Labor Investment Promotion Center – Invest in Israel presentation, www.investinisrael.gov.il
 Innovation in Israel has already led to several major biopharmaceutical products
 Lacking local development options, Israeli scientists have typically out-licensed their inventions to
multinational companies relatively early
CONFIDENTIAL 32

33. A Complete Venture Ecosystem
Innovative,
Entrepreneurial
Culture
Top-tierAcademic
Institutions
Immigration
Scientists
Corporate
Research
Government
initiatives
MatureVC
Community
Industry
Veterans
Accesstoglobal
R&Dnetworks
M&A/IPO
opportunities
Information
Technology
Industry
         
Medical
Device
Industry
         
INNOVATION FINANCING DEVELOPMENT LIQUIDITY
 1977: BIRD established to fund development and commercialization and promote partnering between
Israeli and US companies.
 1993: YOZMA program catalyzed the formation of a domestic venture capital industry, seeding ten
(10) VC funds over 10 years.
 The Israeli medical device industry emerged from the confluence of high-tech and med-tech
innovation centers, and a maturing VC community.
 Israeli medical device companies have produced over $4 Billion in value on about $1 Billion invested
 There is significant liquidity for Israel-based companies: nearly 200 Israeli companies have gone
public on NASDAQ since the 1980s - more than the number from all of Europe combined
BIRD / YOZMA
BIRD / YOZMA
CONFIDENTIAL 33

34. The Next Phase
Innovative,
Entrepreneurial
Culture
Top-tierAcademic
Institutions
Immigration
Scientists
Corporate
Research
Government
initiatives
MatureVC
Community
Industry
Veterans
Accesstoglobal
R&Dnetworks
M&A/IPO
opportunities
Information
Technology
Industry
         
Medical
Device
Industry
         
BioPharma
Industry
         
INNOVATION FINANCING DEVELOPMENT LIQUIDITY
 2010: Israel BioFund Initiative intended to catalyze the biopharmaceutical industry by attracting
additional financing, experienced VCs, and industry veterans with product development expertise
− Dr. A.I. (Ed) Mlavsky, head of BIRD (1979-1992) and founder of Gemini (first VC fund seeded by YOZMA and to
date one of the most successful): one of the Venture Advisors to Bay City Capital Israel Fund I
 Bay City Capital Israel Fund I will be able to mine the value of Israeli life sciences innovation and
generate attractive returns by helping complete the various biopharmaceutical ecosystem,
BIRD / YOZMA
BioFund
BIRD / YOZMA
CONFIDENTIAL 34