Trends in Healthcare Investments and Exits 2017

Trends in Healthcare
Investments and Exits 2017
Strong Fundraising and Innovation Fuels
Healthcare Momentum
Paul Schuber
Senior Associate
SVB Analytics
Written by:
Jonathan Norris
Managing Director
Silicon Valley Bank
Caitlin Tolman
Senior Associate
Silicon Valley Bank
Visit svb.com
Follow @SVB_Financial
Engage #SVBHealthcare

Table of Contents
Trends in Healthcare Investments and Exits 2017 2
2016 Key Highlights 3
Healthcare Investments and Fundraising 4
Top 15 Crossover Investors 18
Healthcare Big Exit M&A and IPOs 21
2017 Outlook 43
Glossary 44
About the Authors 45

2016 Key Highlights
• Series A investments set records in all sectors. Recently closed funds have eagerly invested in early-stage
technologies.
• Biopharma has kept up with the accelerated pace of overall venture investing between 2013 and 2016.
However, crossover investors reduced private investments to focus on taking their portfolio companies
public.
• The most active device and Dx/Tools investors grew more diverse - corporate venture, angel groups,
incubators and accelerators and private equity - all seeking to fill the void left by traditional healthcare
venture. Tech-focused VCs became very active in Dx/Tools.
• Potential distributions declined in 2016 but exceeded 2013 totals. AbbVie’s $9.4 billion acquisition of
Stemcentryx dominated the 2016 total.
• Biopharma IPOs, as predicted, declined more than 30 percent from 2015. M&A activity dipped slightly and
focused on early-stage deals.
• IPOs for device companies reappeared in late 2016. Big exit M&A activity remained consistent, and
surprisingly orthopedics and ophthalmology were the top indications.
• Dx/Tools companies continued to struggle to get to exit and had no IPO activity. Technology advancements
in bioinformatics have led to large investment bets, setting the stage for M&A in the coming years.
After an exceptionally strong 2015, we saw a decline in investment in 2016,
but fundraising remains at historically robust levels.

Healthcare Investments and Fundraising:
Series A Activity Booms

Total VC
Dollars ($B)
26.4 31.0 44.2 40.5 44.5 68.7 78.9 74.0
Biopharma 17.0% 12.4% 9.3% 11.6% 10.7% 9.9% 12.5% 11.3%
Device 11.0% 11.3% 8.8% 9.3% 9.7% 6.6% 6.8% 5.3%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2009 2010 2011 2012 2013 2014 2015 2016*
TotalVCCapitalInvestedinBillions
Total VC Capital Invested ($B) Biopharma as % of Total US VC $
Device as % of Total US VC $
Venture investments in companies
from 2014-2016 nearly doubled
compared with 2011-2013.
Biopharma investments have scaled
similarly. During 2014-2016, strong
IPO and M&A big exit activity has
spurred healthy returns, additional
fundraising and an invigorated
investment pace.
Device companies maintained
consistent overall exit activity, but it
took longer to reach M&A exits, and
there were fewer IPOs. As a result,
many investors shifted dollars to
biopharma.
Biopharma Keeps Pace with Overall
Venture Investing
5
Biopharma and Device Investment as a Percentage of All U.S. Venture Investing
*Full data for 2016 was not available therefore total VC capital invested in 2016 was extrapolated based on
9/30/16 data and SVB proprietary data.
Source: PitchBook, NVCA and SVB proprietary data. The PitchBook data does not contain a separate Dx/Tools
category. Most Dx/Tools deals appear to be contained within the biopharma and device categories.
PercentageofU.S.VentureInvesting
Trends in Healthcare Investments and Exits 2017

$4.5
$3.9 $4.1
$4.7 $4.8
$6.8
$9.8
$8.3402
475 459
496
548 562
612
393
0
100
200
300
400
500
600
700
$0
$2
$4
$6
$8
$10
$12
2009 2010 2011 2012 2013 2014 2015 2016*
Pharma & Biotech ($B) Pharma & Biotech (# of Deals)
$2.9
$3.5
$3.9 $3.8
$4.3
$4.5
$5.3
449
486
548
600 598 614 583
383
0
100
200
300
400
500
600
700
$0
$1
$2
$3
$4
$5
$6
2009 2010 2011 2012 2013 2014 2015 2016*
HC Devices & Supplies ($B) HC Devices & Supplies (# of Deals)
BIOPHARMADEVICE
$3.9
Biopharma Investing Off Record High and
Device Declines
Biopharma investments declined
15 percent from 2015 but marked a
20 percent increase compared with
2014. While Series A investments
were up, later-stage dollars were
down.
The number of biopharma deals slid
to the lowest level in four years. We
anticipate similar deal and dollar
activity in 2017.
Device investments grew annually
since 2012, but in 2016 the amount
invested was projected to decline
25 percent, down $1.4 billion.
That marks a four-year low, and
the number of deals was at a
six-year low.
For 2017, we forecast device
investment dropping to $3.5 billion.
However, the recently enacted 21st
Century Cures Act could provide
additional capital and faster
approvals, spurring increased
investment.
U.S. Biopharma and Device Investment Dollars and Deals
*Full data for 2016 was not available therefore total VC capital invested in 2016 was extrapolated based on
9/30/16 data and SVB proprietary data.
Source: PitchBook, NVCA and SVB proprietary data. The PitchBook data does not contain a separate Dx/Tools
category. Most Dx/Tools deals appear to be contained within the biopharma and device categories.

$0
$2
$4
$6
$8
$10
$12
$14
$16
2009 2010 2011 2012 2013 2014 2015 2016
($Billions)
HC $ Invested in Companies HC VC $ Fundraised Gap in Funding
$7.2B
$12.2B
Steady Fundraising Continues as Investments
Come Off Record 2015
Spurred by biopharma investments,
overall healthcare venture investing
continued strong, though below the
record year of 2015.
Fundraising was robust as investors
who saw large returns in recent years
raised new funds.
More than $20 billion in venture
funds have been raised since 2013,
which will continue to propel
investment.
Looking ahead the next two years,
we expect investments into
companies to level off at $10.5–$11
billion annually through a
combination of venture, corporate
and other investors.
U.S. Healthcare Capital Invested and VC Dollars Raised
Source: PitchBook, NVCA and SVB proprietary data.

38 42
31
61
#ofDeals
39 34 29
63
#ofDeals
Total Series A ($M) $746 $701 $1,843 $2,127
CVC Deals % / # 38% / 10 35% / 18 26% / 23 22% / 25
Top 3 Indications
Oncology
Platform
Drug Delivery
Oncology
Neuro
Anti-Infective
Oncology
Anti-Infective
Neuro
Oncology
Orphan/Rare Disease
Neuro
BIOPHARMA
DEVICE
Total Series A ($M) $96 $268 $155 $235
CVC Deals % / # 24% / 4 16% / 5 14% / 5 6% / 3
Top 3 Indications
Imaging
Cardiovascular
Neuro
Cardiovascular
Neuro
Vascular Access
Neuro
Cardiovascular
Ophthalmology
Neuro
Respiratory
Cardiovascular, Orthopedic
DX/TOOLS
Total Series A ($M) $108 $137 $252 $503
CVC Deals % / # 20% / 3 18% / 3 13% / 4 19% / 10
Series A Takes Off in 2016
Biopharma Series A investments
were up dramatically, spurred by
newly raised venture funds and
early-stage exits.
Oncology led indications, and
orphan/rare disease placed second.
Series A also grew significantly for
device, but corporate investments in
early-stage companies dropped off.
We expect corporate investment to
return in 2017 and see increased
engagement by Chinese corporate
investors.
Dx/Tools saw meaningful early-stage
momentum in 2016.
Dx outpaced tools, with 59 percent of
the Series A deal flow and 60
percent of total investment. At $125
million, Grail was the largest
venture-backed Dx/Tools Series A
deal we have seen.
U.S. Company Formation: Deals and Investments in Series A
60 75 87
137
2013 2014 2015 2016#ofDeals
Source: PitchBook and SVB proprietary data.

8
9
10
11
12
13
14
19
20
26
Venture and Corporate Investment in Biopharma
Continues Strong
Most Active New Investors in Biopharma 2015–2016*
Seven of the top 20 investors are corporate. This underscores the continued support and influence of corporate venture in the
biopharma ecosystem. Each of the top venture investors has raised a new fund in the last two years. It is likely that this list will not
change substantially in 2017 as these top investors are quickly deploying new capital.
After dominating biopharma investing in 2015, crossover activity scaled down significantly in 2016. We discuss crossover investment
in biopharma later in this report.
*Most Active New Investors in biopharma defined as Top 44 venture and corporate investors based on new
investments in 2015–2016.
# of Deals

5
4
4
8
9
15
16
17
21
63
1
1
1
2
3
7
3
10
2
4
1
3
Cardiovascular
Gastrointestinal
Ophthalmology
Metabolic
Auto-Immune
Anti-Infective
Orphan/Rare Disease
Neuro
Platform
Oncology
Early Stage Late Stage Undesignated
Oncology, Orphan/Rare CardiovascularTrends:
Oncology Leads Biopharma Investments;
Orphan/Rare Disease Sees New Interest
Most Active New Investments in Biopharma by Indication 2015–2016*
*Most Active New Investors in biopharma defined as Top 44 venture and corporate investors based
on new investments in 2015–2016.
Early-stage investment (series A and B) across all indications in biopharma represented more than 80 percent of deals in the last two
years. This has been driven by a recent increase in early stage exits.
Orphan/rare disease investments continue to rise in 2016, up from #5 in last year’s paper. This interest was driven in part due to time
and cost reduction for gaining FDA approval. In addition, there is typically extended market exclusivity and better commercial
economics. Aesthetics/dermatology was not in the top 10 for investments, but tied with oncology for the top M&A indication in 2016.

Massachusetts and Northern California
See Majority of Activity
Top 5 U.S. Biopharma Top 5 OUS Biopharma
Most Active New Investments in Biopharma by Geography 2015–2016*
*Most Active New Investors in biopharma defined as Top 44 venture and corporate investors based
on new investments in 2015–2016.
China
5 deals $285M
United
Kingdom
11 deals $379M
Switzerland
5 deals $117M
Canada
8 deals $417M
Sweden
3 deals $96M
Northern
CA
43 deals $1,648M
Southern
CA
20 deals $631M
MA
54 deals $2,127M
NY
9 deals $316M
WA
8 deals $192M

3
4
5
6
7
9
Diverse Investors Focus on Device
Most Active New Investors in Device 2015–2016*
*Most Active New Investors in medical device defined as Top 36 investors based on new
# of Deals
The very diverse list of investors includes venture, corporate, PE, crossovers, angel groups and accelerators. Traditional venture
investors have scaled back their investing in this sector.
Corporate investors include Boston Scientific, Medtronic, GSK (through Action Potential), OSF and Johnson & Johnson.
Investors outside the U.S. include LSP, GIMV, and Triventures.

3
3
3
2
4
5
8
7
2
7
1
3
2
1
3
3
2
2
6
6
1
2
5
1
2
1
2
2
Drug Delivery
Metabolic
Ophthalmology
Orthopedic
Uro/Gyn
Non-Invasive…
Neuro
Vascular Access
Surgical
Cardiovascular
Early Stage Late Stage Undesignated
New Category of Non-Invasive Monitoring
Receives Substantial Investment
Most Active New Investments in Device by Indication 2015–2016*
Non-Invasive Monitoring,
Cardiovascular, Neuro Aesthetics/Derm
Trends:
Non-Invasive
Monitoring
For the first time, we are reporting investments in non-invasive monitoring. This category is defined as medical data collection
through sensors and other technology. We saw significant investment in this category.
In ranking by deals, orthopedic fell from #2 in 2015 to #7 in 2016, despite continued exit activity in this indication.
Neuro investment activity grew year-over-year, and drug delivery continued to draw investor dollars.

Device Deals Get Boost on West Coast
Top 5 U.S. Device Top 5 OUS Device
Most Active New Investments in Device by Geography 2015–2016*
Northern
CA
28 deals $663M
Southern
CA
9 deals $318M
WA
7 deals $138M
TX
7 deals $40M
MA
11 deals $255M
Israel
5 deals $55M
France
3 deals $21M
Switzerland
6 deals $180M
Ireland
3 deals $47M
Italy
3 deals $8M

2
3
4
5
8
Tech-focused VCs Dive into Dx/Tools
Most Active New Investors in Dx/Tools 2015–2016*
*Most Active New Investors in Dx/Tools defined as Top 31 investors based on new investments in
2015–2016.
# of Deals
We observed that a number of tech-focused venture investors are pursuing technology advancements that can be leveraged to improve
healthcare. Dx/Tools, for example, uses big data and is in a prime position to take advantage of improved tools for bioinformatics.
Tech-focused firms like Data Collective, Felicis and AME Cloud Ventures have emerged as very active new Dx/Tools investors. Other
active investors included angel groups (Keiretsu Forum and Golden Seeds), corporate venture (Google Ventures, LabCorp, GE and
Illumina) and OUS firms (DeCheng, Invitalia).

Northern CA Continues to be Most Active
Region for Dx/Tools
Top 5 U.S. Dx/Tools Top 5 OUS Dx/Tools
Northern
CA
19 deals $1,193M
Southern
CA
7 deals $345M
UT
2 deals $61M
Most Active New Investments in Dx/Tools by Geography 2015–16*
*Most Active New Investors in Dx/Tools defined as Top 31 investors based on new investments in
2015–2016.
United
Kingdom
1 deal $2M
MA
7 deals $106M
WA
2 deals $24M
Canada
4 deals $42M
France
3 deals $35M
Israel
1 deal $13M
Italy
2 deals $6M

Biopharma deal sizes have more than
doubled since 2013. Our analysis
indicates three major reasons:
• Increased fund size – investors
are putting more dollars to work
per company
• Series A lasting longer – many of
the Series A deals we see are
large tranched rounds that
provide 3-4 years worth of
financing. This allows company
management to focus on growing
the business instead of constantly
fundraising
• Bigger syndicates – larger
syndicates mean larger round
sizes and also provide financial
security. A company can sustain
itself for long periods of time with
inside rounds if there is a down
financial market
Deal Sizes for Biopharma Soar
Dx/Tools
Device
Biopharma
$15.3
$23.0
$30.0
$36.0
0
10
20
30
40
2013 2014 2015 2016
MedianDealSize
($M)
$15.2
$17.1 $16.3
$18.0
0
5
10
15
20
2013 2014 2015 2016
MedianDealSize($M)
$10.0
$12.4
$14.2
$12.0
0
5
10
15
20
2013 2014 2015 2016
MedianDealSize($M)
*Most Active New Investors in biopharma (60), medical device (36) and Dx/Tools (31) defined as top
investors based on new investments in 2015–2016.
Median Deal Size for Most Active New Investors 2013–2016*

Top 15 Crossover Investors:
Investments Decline as
Crossovers Focus on IPOs

4
4
6
6
11
Top Biopharma Crossover Investors 2016
2013 2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
PRIVATE
INVESTMENTS
14 74 30 42 68 23 13 13 11 10 298
*Top 15 Crossover Investors:
Adage Capital Management,
Cormorant Asset Management,
Deerfield Management, EcoR1
Capital, Fidelity Investments,
Foresite Capital Management,
Jennison Associates, Partner Fund
Management, Perceptive
Advisors, RA Capital Management,
Redmile Group, Rock Springs
Capital, Sabby Capital, Wellington
Management and Woodford
Investment Management
Crossover Investments in Biopharma
Decline Rapidly
Crossover deals in private venture-backed companies dropped more than 70 percent in 2016 as the IPO market slowed. Crossover
investors shifted focus from new investments to managing IPO expectations for still-private companies in their portfolios. A number
of those companies went public in 2016, but there remains a backlog of more than 80 companies.
A big question for private portfolio companies seeking additional private rounds: Will crossover investors provide equity support?
We expect to start learning the answers in Q2-Q3 2017.
Top 15 Crossover Investors in Biopharma 2013–2016*
*Top 15 Crossover Investors based on new investments in 2015–2016.

*Top 15 Crossover Investors: Adage Capital Management, Cormorant Asset Management, Deerfield Management, EcoR1 Capital,
Fidelity Investments, Foresite Capital Management, Jennison Associates, Partner Fund Management, Perceptive Advisors, RA
Capital Management, Redmile Group, Rock Springs Capital, Sabby Capital, Wellington Management and Woodford Investment
Management
**Other Investors defined as venture-backed IPOs that do not include a Top 15 crossover in private investor syndicate.
Top 15 Crossovers Drive Biopharma IPO Activity
For two years in a row, the top 15
crossover investors drove more IPOs
than all other venture investors.
These crossover investors seek a
foothold in private venture-backed
companies interested in an IPO and
typically are major participants in
the resulting IPO.
As the overall biopharma IPO market
has slowed in recent years, the
crossover share of IPOs has grown.
Nearly 60 percent of biopharma IPOs
had a top 15 crossover investor (16
of 28) in 2016.
However, crossover-backed IPOs
declined significantly (from 11 to 5)
in the second half of 2016. We
believe crossovers will resume their
IPO push in early 2017.
2
8
23
16
32
58
19
12
0
10
20
30
40
50
60
70
2013 2014 2015 2016
#ofIPOs
Top 15
Crossovers*
Other Investors**
Source: PitchBook, press releases and SVB proprietary data.
IPOs with Top 15 Crossover Investors vs. Other Venture-Backed Investors

Healthcare Big Exit M&A and IPOs:
Robust M&A Activity
Continues as IPOs Slow

$4.3
$5.4
$8.0
$10.1 $9.2
$1.8
$0.8
$1.0
$2.0 $3.1
$2.1
$8.8
$12.1
$11.6
$4.4
0
2
4
6
8
10
12
14
16
18
20
22
24
2012 2013 2014 2015 2016
TotalValue($Billions)
April 2016:
Stemcentrx
acquired by
AbbVie for
$5.8 billion
Potential Distributions* Dip from Record High,
But Up Cycle Continues
Potential distributions nearly tripled
between 2012 and 2015. However, as
we predicted, such growth is not
sustainable. The slower IPO market
led to lower distributions in 2016,
though they still outpaced 2013.
In 2016, the value of big exit M&A
upfront payments (see brown
columns) outpaced pre-money IPO
values for the first time since 2012.
The Stemcentrx acquisition
accounted for about half of the
upfront M&A proceeds.
In 2017, we expect potential
distributions to closely match 2016.
Biopharma 64.4% 79.9% 69.0% 69.2% 79.2%
Device 26.6% 12.2% 21.2% 22.2% 17.1%
Dx/Tools 9.0% 7.9% 9.8% 8.5% 3.7%
Potential Distributions from VC-backed IPOs and Big Exit M&A 2012–2016
*Potential distributions calculated as 75% of upfront payments, 25% of milestones, and 75% of pre-
money IPO value.
Pre-Money IPO Value
Big Exit Milestones to be Earned
Big Exit Upfront Payments

Biopharma Big Exits and IPOs Slow Down
We predicted IPOs would decline to
about 7-8 per quarter, and 2016
ended with 28. We saw a steep
decline in Q4.
We were surprised to see M&A
activity decline, with a 2016 total of
17 deals. Still, that's coming off an
exceptionally strong 2015 (22 deals),
and 2016 activity marked the second
highest level since 2012.
Orphan/rare disease exits increased
to match oncology, with 7 exits each
(M&A and IPOs). Exit activity also
increased for aesthetics/
dermatology, rare (non-genetic)
and metabolic indications.
Neuro, cardiovascular and anti-
infective saw the largest declines in
exits in 2016.
VC-backed Biopharma Exits 2012–2016
10
34
66
42
28
15
12
14
22
17
0 20 40 60 80 100
2012
2013
2014
2015
2016
IPO M&A

Acquirers Flock to Early-Stage
Biopharma Companies
Early-stage big exits continued to
dominate in 2016, with more than
half occurring in pre-clinical and
phase I. These indications included
orphan/rare disease, neuro,
oncology, aesthetics/dermatology
and auto-immune.
Aesthetics/dermatology tied with
oncology for the most M&A activity
in 2016 (3 deals). Neuro and
orphan/rare disease had two deals
each.
Early-stage M&A activity is expected
to continue in 2017. If corporate tax
repatriation should occur, we think
that would free up cash and lead to
increased activity above 2015 levels.
1 1
5
7
2
4
2
3
4
8
3
4
4
9
6
1
2
1
6
3
1
1
0
5
10
15
20
25
2012 2013 2014 2015 2016
#ofBigExits
Pre-Clinical Phase I Phase II Phase III Commercial
VC-backed Biopharma Big Exit M&A by Stage 2012–2016
*Stage defined as last completed clinical trial in most advanced asset.

Biopharma Big Exit Deal Values Are Stable,
Despite IPO Decline
In 2016, the median upfront deal
value for biopharma big exits was
stable and substantial.
The acquirers were a mix of big
pharma and large biotech
companies. Allergan, at the top of
the list, acquired four companies.
A possible new trend in 2017:
Avalanche, which went public in
2014, became an acquirer in 2016.
In 2016, we saw four disclosed big
exits valued at more than $1 billion
(including milestones). In order of
total deal size: Stemcentrx, Afferent,
Nimbus and Ganymed.
Because of the IPO slowdown,
acquirers felt less pressure to act, so
time to exit increased.
Median
Upfront ($M)
125 213 225 200 200
Median
Total Deal ($M)
375 452 413 570 535
Median
Years to Exit
5.1 5.6 4.0 4.2 6.0
13
9 9
12
10
2
3
5
10
7
0
2
4
6
8
10
12
14
16
18
20
22
24
2012 2013 2014 2015 2016
#ofBigExits
# of Structured Deals # of All-In Deals
VC-backed Biopharma Big Exit M&A Deal Structure 2008–2016

Number of
Exits
Median Years
to Exit
Oncology 18 4.3 8 4 4 0 2
Neuro 13 4.2 4 1 5 1 2
Respiratory 7 4.9 0 1 4 1 1
Aesthetics/Derm 6 6.1 0 2 2 0 2
Cardiovascular 6 5.7 1 2 1 0 2
Auto-Immune 5 3.7 2 2 1 0 0
Anti-Infective 5 5.6 1 3 1 0 0
Orphan/Rare Disease 4 1.4 1 1 2 0 0
Ophthalmology 3 4.1 0 0 2 1 0
Oncology, Neuro Lead Biopharma Big Exits;
Orphan/Rare Disease Gains Early-Exit Traction
VC-backed Biopharma Big Exit M&A by Indication 2012–2016
*Stage defined as last completed clinical trial in most advanced asset.
Oncology saw the highest number of big exits since 2012, and 12 of 18 were early stage (pre-clinical or phase I).
Orphan/rare disease has attracted significant venture investment in recent years, and now we are seeing remarkably quick exits: 1.5
years from Series A equity raise. Six of 9 indications (highlighted above) have a median time to exit of 5 years or less.

Anti-Infective and Cardiovascular See
Largest Upfront Multiples
VC-backed Biopharma Big Exit M&A by Indication 2012–2016
Number of
Exits
Median
Invested ($M)
Medium
Upfront ($M)
Median
Upfront Multiple
On VC $
Median
Total Deal ($M)
Median Total
Deal Multiple
On VC $
Oncology 18 $33 $238 6.7x $668 15.2x
Neuro 13 $50 $185 3.1x $550 6.8x
Respiratory 7 $36 $135 3.2x $430 5.4x
Aesthetics/Derm 6 $32 $237 4.1x $310 10.6x
Cardiovascular 6 $38 $250 8.3x $1,125 25.5x
Auto-Immune 5 $27 $225 3.5x $325 10.2x
Anti-Infective 5 $40 $325 9.4x $464 9.4x
Orphan/Rare Disease 4 $43 $128 2.9x $252 6.6
Ophthalmology 3 $42 $160 1.9x $300 6.8x
The median equity round size in 2016 was substantially larger than the median total invested for exits during the 2012–2016 period.
This leads to a concern that the recent large round sizes may negatively affect future exit multiples.
Cardiovascular and oncology saw the largest milestone upside.

Early-Stage Biopharma Companies
Continue March to IPO
1 1
9 9
5
8
20
9
8
3
13
26
17
6
6
8
6
6
7
2
5
2
0
10
20
30
40
50
60
70
2012 2013 2014 2015 2016
#ofIPOs
VC-Backed Biopharma IPOs by *Stage 2012–2016
*Stage defined as current clinical trial in most advanced asset.
For a third year, early-stage (pre-clinical and phase I) biopharma IPOs continued strong, accounting for 46 percent of all 2016
biopharma IPOs. However, there was a significant decline from the first half of 2016 (10 of 18) compared with the second half (3 of 10).
The early-stage trend has been fueled by crossover investors putting up large pre-IPO venture rounds. In fact, venture-backed
biopharma companies with a top 15 crossover investor accounted for more than 70 percent of early-stage biopharma IPOs in
2015-2016.

Dollars and Values Decline as IPOs Wane
# of IPOs Raised
Over $100M
1 8 12 13 1
% of IPOs Raised
Over $100M
10 24 18 32 4
$202
$182
$141
$199
$156
$61
$71
$62
$70
$53
0
50
100
150
200
250
2012 2013 2014 2015 2016
MedianAmount($Millions)
The number of large IPOs declined
significantly in 2016: Intellia, which
focuses on orphan/rare diseases,
was the only $100 million-plus IPO.
In 2015, nearly one of three IPOs
raised $100 million-plus.
Median pre-money valuations
dropped to $156 million, compared
with nearly $200 million in 2015.
Still, 2016 was higher than 2014.
We think a key reason crossover
investors retreated from the IPO
market in the second half is that
pre-money valuations plummeted
in Q2 and Q3 2016.
On a positive note, Q4 2016 saw two
solid venture-backed IPOs:
CRISPR Therapeutics and Ra
Pharmaceuticals. Each company
raised $90 million-plus with healthy
pre-money values and appear to be
holding their values post-IPO.
VC-backed Biopharma IPOs by Pre-Money Valuation and Dollars Raised 2012–2016

Company IPO
IPO Pre-
money
Value ($M)
Acquisition
Acq. Price
($M)
Upfront
Acq. Price
($M) in
Milestones
Total Deal
Size ($M)
Acquirer Sector Indication Stage*
May. ‘15 RM** Sep-16 $695 $1,000 $1,695 Biopharma NASH Phase III
Sep. ‘14 $69 Sep-16 $639 $0 $639 Biopharma Auto-Immune Phase II
Jun. ‘14 $230 Nov-15 $2,700 $0 $2,700 Biopharma Cardiovascular Phase III
Feb. ‘14 $186 Mar-15 $3,500 $0 $3,500 Biopharma CNS Phase III
Sep. ‘13 $315 Jan-15 $1,000 $0 $1,000 Dx/Tools Dx Commercial
Jun. ‘13 $596 Nov-14 $680 $160 $840 Biopharma Orphan/Rare Phase III
May. ‘13 $55 Sep-14 $315 $95 $410 Biopharma Oncology Phase III
May. ‘13 $182 Jul-15 $7,200 $0 $7,200 Biopharma Auto-Immune Phase III
Jul. ‘12 $94 Oct-14 $675 $147 $822 Biopharma Anti-Infective Commercial
Total $18,806
Acquisitions of Newly Public Companies Soar,
Generating Significant Returns
VC-backed IPOs Acquired within 2.5 Years from IPO/Reverse Merger 2013–2016
*Stage defined as current clinical trial in most advanced asset. **RM defined as reverse merger.
The hot IPO market of the previous few years enabled many promising healthcare startups to go public. Over time, with ensuing data
releases, larger companies snapped them up at significant valuations. Between 2013 and 2016, acquirers spent nearly $19 billion on
these companies.

Biopharma Landscape – Oncology Exits
0
200
400
600
800
1,000
1,200
1,400
Jan. '13 Aug. '13 Mar. '14 Sep. '14 Apr. '15 Oct. '15 May. '16 Nov. '16
TotalValue($Millions)
9,800
1,250
4,000
M&A* Pre-Clinical
M&A* Phase I
M&A* Phase II
M&A* Commercial
IPO**
2016: Undisclosed deal
VC-backed Biopharma Big Exit M&A and IPO in Oncology 2013–2016
*Stage for M&A defined as last completed trial in most advanced asset. **IPO value is pre-money IPO value.

-
100
200
300
400
500
600
700
800
900
1,000
Aug. '13 Mar. '14 Sep. '14 Apr. '15 Oct. '15 May. '16 Nov. '16
TotalValue($Millions)Biopharma Landscape – Neurology Exits
VC-backed Biopharma Big Exit M&A and IPO in Neurology 2013–2016
*Stage for M&A defined as last completed trial in most advanced asset. **IPO value is pre-money IPO value.
2016: Undisclosed partnership payout
M&A* Pre-Clinical
M&A* Phase I
M&A* Phase II
M&A* Commercial
IPO**

Device Big Exit M&A Charges On
as IPOs Disappear
VC-backed Device Exits 2012–2016
In 2016, device big exit M&A activity
declined from the highs of 2014 and
2015, but beat 2013. Surprisingly,
2016 M&A exits declined each
quarter, ending with a single deal
in Q4.
Orthopedic (4 deals) and
ophthalmology (3 deals) led
indications in 2016. This marks a
change: since 2012, orthopedic
ranked #4 and ophthalmology #5
in big exits.
Surprisingly, Medtronic, the leading
acquirer in earlier years, made no
VC-backed acquisitions in 2016.
Device IPOs reappeared in late 2016.
Two 510k product companies
(Tactile and iRhythm) were FDA-
approved, and had a revenue ramp at
$50 million-plus at IPO. PMA
pathway company Obalon held an
IPO immediately after FDA approval,
without any significant
commercialization.
1
2
10
11
3
14
12
18
19
13
0 5 10 15 20 25 30 35
2012
2013
2014
2015
2016
IPO M&A

3
1 1
4
2
3
3
1
5
4
8
8
15
10
7
0
2
4
6
8
10
12
14
16
18
20
2012 2013 2014 2015 2016
#ofBigExitsDevice Acquirers Continue to Focus on
Later-Stage Companies
Non-Approved CE Mark Only U.S. Commercial
Represents # of IPOs Represents Big Exits
Acquirers continue to focus on
buying companies with products that
are FDA-approved and
commercialized. This puts critical
regulatory and commercialization
risk squarely on the venture
community, increasing investment
time and capital required.
All 7 U.S. commercial M&A deals
were 510k products. This reflects the
investor mindset of the early 2000s,
which focused on products with
easier FDA-approval paths, instead
of PMAs, which had unpredictable
FDA outcomes.
That said, PMA companies are being
acquired, typically before FDA
approval is secured. In 2016, the
3 CE Mark Only and 2 Non-Approved
exits were likely PMA pathway
companies.
1 2
7
1
2
8
1
2
3
VC-backed Device Big Exit M&A by Stage 2012–2016*
*Stage defined as current stage in most advance product.

Device M&A Time to Exit Increases in 2016
Median upfront deal values
stabilized in 2016 at $120 million,
but we saw a significant number of
milestones to be earned.
The time to exit rose in 2016, with
4 exits taking 10 years or more from
close of Series A. Just 2 deals had
time to exit under 6 years.
We see 510k companies reaching
approval and commercialization
more quickly compared with 5 years
ago. That should lead to quicker
time to exit in the next few years.
Median
Upfront ($M)
95 127 180 125 120
Median
Total Deal ($M)
195 175 185 141 300
Median
Years to Exit
7.0 6.6 6.9 7.0 8.1
7
4
9
7
9
7
8
9
12
4
0
2
4
6
8
10
12
14
16
18
20
2012 2013 2014 2015 2016
#ofBigExits
VC-backed Device Big Exit M&A Deal Structure 2012–2016

Cardiovascular, Ophthalmology and Neuro
Achieve Exits at Earlier Stage*
VC-backed Device Big Exit M&A by Indication 2012–2016
*Stage defined as current stage in most advance product.
Earlier stage (non-approved and CE Mark only) are focused in cardiovascular, ophthalmology and neuro.
Commercial-stage products have dominated device exits. Acquirers appear to have limited bandwidth or P&L ability to take on non-
approved stories, other than in huge growth markets where they have been forced to buy early based on acquirer competition.
Cardiovascular is a good example of this.
Number
of Exits
Median Years
to Exit
Non-approved CE Mark Only U.S. Commercial
Cardiovascular 19 6.8 5 4 10
Surgical 13 7.0 1 2 10
Vascular 12 5.8 1 3 8
Orthopedic 8 8.9 0 0 8
Ophthalmology 7 8.2 2 3 2
Neuro 4 5.6 1 3 0
Imaging 3 12.8 0 0 3
Aesthetics/Derm 2 5.6 0 0 2

Cardiovascular and Vascular Lead in Milestone
Upside for Investors
VC-backed Device Big Exit M&A by Indication 2012–2016
Cardiovascular and vascular companies typically are acquired before U.S. commercialization, resulting in more milestone earnouts
and a larger gap between upfront and total deal values.
Orthopedic exits typically are ready-made tuck-in acquisitions. The acquirers seek to scale with existing sales staff so the new revenue
accrues directly to the bottom line. For this reason, we have seen acquirers target venture-backed orthopedic companies with proven
sales ramps which requires more equity investment and reduced multiples for investors.
Number of
Exits
Median
Invested ($M)
Median
Upfront ($M)
Median
Upfront Multiple
On VC $
Median
Total Deal ($M)
Median Total
Deal Multiple
On VC $
Cardiovascular 19 $40 $124 2.6x $250 5.8x
Surgical 13 $34 $110 3.4x $170 3.8x
Vascular 12 $31 $138 4.4x $238 7.4x
Orthopedic 8 $49 $125 2.1x $133 2.3x
Ophthalmology 7 $62 $240 2.7x $400 4.8x
Neuro 4 $56 $188 3.0x $210 3.3x
Imaging 3 $83 $102 1.2x $102 1.2x
Aesthetics/Derm 2 $21 $325 13.7x $325 13.7x

-
100
200
300
400
500
600
700
800
Feb. '13 Aug. '13 Mar. '14 Sep. '14 Apr. '15 Nov. '15 May. '16 Dec. '16
TotalValue($Millions)Device Landscape – Cardiovascular Exits
2016: Undisclosed deal
One cardio development stage
M&A* Non-Approved
M&A* CE Mark Only
M&A* U.S. Commercial
IPO**
VC-backed Device Big Exit M&A and IPO in Cardiovascular 2013–2016
*Stage for M&A defined as current stage in most advance product. **IPO value is pre-money IPO value.

-
100
200
300
400
500
600
700
800
900
Jul. '12 Feb. '13 Aug. '13 Mar. '14 Sep. '14 Apr. '15 Nov. '15 May. '16 Dec. '16
TotalValue($Millions)Device Landscape – Vascular Exits
VC-backed Device Big Exit M&A and IPO in Vascular 2013–2016
M&A* Non-Approved
M&A* CE Mark Only
M&A* U.S. Commercial
IPO**
*Stage for M&A defined as current stage in most advance product. **IPO value is pre-money IPO value.

Dx/Tools Faces Exit Slowdown
2015*
Among the trends we are seeing: new
tools to enable drug development
and high-end sequencing, and
substantial progress in move from
invasive diagnostics to simple blood
screens and liquid biopsies.
Tech-focused investment in
bioinformatics is on the rise.
Investors expect these companies to
develop technologies faster and
become more capital efficient. Still,
M&A continued to lag in 2016.
There were no Dx/Tools IPOs in
2016, in the wake of poor after-
market performance. All five 2015
Dx/Tools IPOs are trading below
their IPO price. Two have seen their
share prices fall by half.
VC-backed Dx/Tools Exits 2012–2016
4
7
5
6
3
10
8
4
0 5 10 15 20
2012
2013
2014
2015
2016
IPO M&A

Dx Tools
Represents # of IPOs Represents Big Exits
Tools Sector Grabs Majority of Big Exits
6
2
6
4
1
1
4
4
3
0
1
2
3
4
5
6
7
8
9
10
2012 2013 2014 2015 2016
#ofBigExits
4 7 5
VC-backed Dx/Tools Big Exit M&A by Stage 2012–2016
For the first time since 2012, Tools
exits outpaced Dx in 2016.
Over the last two years, tools exits
earned stellar multiples on capital.
The average upfront multiples
exceeded 14x (median 7x), and had
shorter exit times.
With burgeoning interest from tech-
focused VCs, Tools are advancing
quickly and we expect exits
(particularly for NGS and drug
discovery) to increase in 2017.
While Dx exits declined in 2016, we
see a significant number of
companies ramping revenue towards
$30-$50 million. We think that level
should attract acquirer interest.
Some early-stage Dx companies,
using advancements in assay
development and bioinformatics,
may morph into drug development
companies.

Dx/Tools Sees Stable Deal Values
But Time to Exit Rises
Upfront M&A values remained stable,
while total deal value went up. Time
to exit more than doubled from 2015.
We have seen several advancements
in Dx/Tools that will allow for faster,
cheaper technology development,
which could help continued
engagement and collaboration with
biopharma. We hope that these
advancements will spur exit activity
and reduce time to exit.
Valuable assets have commanded a
premium (Assurex and ACD),
however we think acquirers are
being selective, waiting to get
specific assets at the right price. Part
of the slowdown could be a timing
issue as the acquirers were busy
completing and digesting big
mergers in 2016.
Median
Upfront ($M)
127 350 133 164 175
Median
Total Deal ($M)
127 450 239 164 225
Median
Years to Exit
5.6 8.2 6.0 3.6 7.7
1
8
2 2
6
2
2
6
2
0
1
2
3
4
5
6
7
8
9
10
2012 2013 2014 2015 2016
#ofBigExits
VC-backed Dx/Tools Big Exit M&A Deal Structure 2012–2016

In last year’s report, we predicted 2015 would be a hard act to follow. And we were right.
Here are our projections for 2017:
• Healthcare investments will closely match 2016 levels, and biopharma will continue as the strongest
sector.
• Fundraising will come close to 2016 amounts, though may decline slightly. The current quick pace of
investing may lead firms that raised in 2014 or early 2015 to return to the market in 2017, bolstering
fundraising.
• After a remarkably strong 2016, Series A investments in biopharma may drop as funds turn their attention
to supporting Series B and later stage companies that are unable to go public. Device and Dx/Tools likely
will be stable.
• The biopharma IPO window will remain open in 2017, anticipating between 28 and 32 IPOs (compared
with 28 in 2016). Crossovers will continue to actively push their companies public. At least half of the
biopharma M&A big exits will be for early-stage companies, with the total number expected to reach
between 18 and 22.
• After a very slow 2016 (three IPOs), device IPOs will at least double. M&A activity likely will remain
stable (13 in 2016), driven by a flurry of early-stage acquisitions.
• Dx/Tools big exit M&A activity will rise in 2017 and may reach double digits (four in 2016). We anticipate
at least one major acquisition of $1 billion-plus in total deal value.
2017 Outlook: Healthcare Trends Continue
Positive Cycle

Glossary
Big Exit
Big Exits are defined as private, venture-backed merger and acquisition
transactions in which the upfront payment is $75 million or more for
biopharma deals and $50 million or more for device and Dx/Tools deals.
Initial Public Offering
IPO is defined as a venture-backed company raising IPO proceeds more
than $25 million.
Deal Descriptions
Structured Deal
This is a pay-for-performance system that pays some of the consideration
up front, but sets milestones in development that must be achieved
before the full value of the transaction will be realized.
All-in Deal
All consideration for the deal is paid when the deal closes.
Big Exit Upfront Payments
The upfront payment refers to payments in a structured deal that are
made at the close of the deal; it does not include milestones.
Big Exit Milestones to be Earned
The milestones to be earned refer to payments in a structured deal that
are made after the predetermined goals are met.
Total Deal Value
The total deal value of a structured deal includes both the upfront
payment and the milestones to be earned.
Time to Exit
Company time to exit, measured from the close of its first institutional
round of financing.
Regulatory
Non-approved
Non-approved refers to a device company that has no regulatory approval
for its product.
CE Mark Only
This refers to a device company that has a CE Mark approval but has not
received FDA approval. CE Mark is a European Union designation that is
less difficult to obtain than FDA approval, and the approval process
typically has a faster timeline.
U.S. Commercial
Commercial refers to a device company that has an FDA-approved
product, and typically is in commercial stage.
Series A
Series A companies are defined as U.S. companies raising their first
round greater than $2 million in equity or backed by institutional or
corporate venture capital.
Corporate Investor
Corporate investor is defined as both venture and parent company
investment into venture-backed companies
Indication Definitions
Neurology
CNS, pain, and psychology comprise neurology.
Non-Invasive Monitoring
Defined as medical data collection through sensors and other technology.

About the Authors
AsaManagingDirector,Norrisoverseesbusinessdevelopmenteffortsforbankingandlendingopportunitiesaswellasspearheading
strategicrelationshipswithmanyhealthcareventurecapitalfirms.HealsohelpsSVBCapitalthroughsourcingandadvisingonlimited
partnershipallocations.
Inaddition,hespeaksatmajorinvestorandindustryconferencesandauthorswidely-citedanalyses
ofhealthcareventurecapitaltrends.Norrishasmorethan16yearsofbankingexperience
workingwithhealthcarecompaniesandventurecapitalfirms.Norrisearnedabachelor’sdegreeinbusinessadministrationfromthe
UniversityofCalifornia,Riverside,andajurisdoctoratefromSantaClaraUniversity.
Jonathan Norris
Managing Director
Silicon Valley Bank
jnorris@svb.com
AsaSeniorAssociatewithSVBAnalytics,Schuberleadsstrategicadvisoryandvaluationengagements,specializinginthelifesciences.
PriortoSVBAnalytics,Schuberfacilitatedclinicaltrialsonbehalfofpharmaceuticalsponsorsandpre-clinicaltrialstoadvancemedical
schoolresearch,whichincludedwritingandimplementingIRBandIACUCprotocols.Schuber’shealthcareexperiencealsoincludes
workingasanemergencymedicaltechnicianandanelectrocardiogramtechnician.Hehasabackgroundintechnologyaswell,working
inmanyroles,includingchieftechnologyofficerofane-commercecompany.
Schuberearnedamaster’sdegreeinthebusinessofbiosciencefromKeckGraduateInstituteofAppliedLifeScienceswhilealsostudying
atClaremontMcKennaCollegeattheRobertDaySchoolofEconomicsandFinance.Schuberearnedabachelor’sdegreeinbiology,
emphasisinphysiologyandminorinchemistry,fromCaliforniaStateUniversity,LongBeach.
PaulSchuber
Senior Associate
SVB Analytics
pschuber@svb.com
CaitlinisaSeniorAssociatewithSVB’sLifeScienceandHealthcareteam.Afive-yearveteranoftheteam,sheprovidesmarket
researchandtargetedanalysisofhistoricandcurrentinvestmenttrendswithinthelifescienceandhealthcareventurecapital
industry.CaitlinworkstostrengthenanddeepenrelationshipstobuildtheSVBnetworkandoffermeaningfulconnectionsfor
bothVCfirmsandSVBclients.Herpassionforinnovationisevidentintheworkshedoeseverydaytoidentifyemergingindustry
andmarkettrends.
AftergraduatingwithhonorsfromtheUniversityofMassachusetts,Amherst,CaitlinjoinedSiliconValleyBankasaclientservice
advisorin2007.ShethenheldaroleinSVB’sGlobalSalesandSolutionsgroupandhelpedtodrivevariousproductandservice
solutions,particularlyincashmanagementandpayments.
CaitlinTolman
Senior Associate
Silicon Valley Bank
ctolman@svb.com

About Silicon Valley Bank
For more than 30 years, Silicon Valley Bank has helped
innovative companies and their investors move bold ideas
forward, fast. SVB provides targeted financial services and
expertise through its offices in innovation centers around the
world. With commercial, international and private banking
services, SVB helps address the unique needs of innovators.
This material, including without limitation to the statistical information herein, is provided for informational purposes only. The material is based in part on
information from third-party sources that we believe to be reliable, but which have not been independently verified by us and for this reason we do not represent
that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an
investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material
should be construed as a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction.
SVB Analytics is a member of SVB Financial Group and a non-bank affiliate of Silicon Valley Bank. Products and services offered by SVB Analytics are not FDIC
insured and are not deposits or other obligations of Silicon Valley Bank. SVB Analytics does not provide investment, tax, or legal advice. Please consult your
investment, tax, or legal advisors for such guidance.
©2017 SVB Financial Group. All rights reserved. SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, MAKE NEXT HAPPEN NOW and the chevron device are
trademarks of SVB Financial Group, used under license. Silicon Valley Bank is a member of the FDIC and the Federal Reserve System. Silicon Valley Bank is the
California bank subsidiary of SVB Financial Group (Nasdaq: SIVB). CompID-Jan2017-172
About SVB Analytics
SVB Analytics, a non-bank affiliate of Silicon Valley Bank, serves the
strategic business needs of entrepreneurs, corporates and investors
in the global innovation economy. For more than a decade, SVB
Analytics has helped global business leaders make informed
decisions by providing market intelligence, research, and consulting
services. Powered by proprietary data, SVB Analytics has a unique
view into the technology and life science sectors.

Trends in Healthcare Investments and Exits 2017

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (7)

Similar to Trends in Healthcare Investments and Exits 2017

Similar to Trends in Healthcare Investments and Exits 2017 (20)

More from Silicon Valley Bank

More from Silicon Valley Bank (12)

Trends in Healthcare Investments and Exits 2017