Financing Trends – October 2014

2

Early-stage healthcare deals and dollars both fell slightly versus the previous month, while funding was down 26% versus the same month a year prior.

3

$248

$144

$269

$118 $169 $177

$316

$199 $190 $188 $140

$117

$445

$313

$242 $210

$149

$242 $220

$190

$244

$181 $145

$378 $330

43

50 47

45 47

44

58

45

52

57

50 53

64

54

48

64

54

44

48

43 46 46

38

51 48

Healthcare Early-Stage Monthly Financing: Investment Deals and

Dollars October 2012 - October 2014

Investment Dollars ($M) Deals

Eastern US healthcare companies garnered the bulk of early-stage deals, accounting for 47% in October, with healthcare hub Massachusetts leading the way.

4

US Early-Stage Healthcare Investment by Region As % of Deals

47%

21%

15%

18%

October 2014

45%

18%

20%

16%

October 2013

44%

25%

13%

19%

October 2012

Early-stage tech funding share to Silicon Valley healthcare companies jumped drastically in October 2014 versus the same month a year prior, behind Image Biosciences’ $26.5M Series A.

5

US Early-Stage Healthcare Investment by Region As % of Funding

63%

6%

7%

25%

October 2014

70%

7%

16%

8%

October 2013

43%

4%

39%

13%

October 2012

October set a new two-year high for median deal size at $5.03M. This was the second straight month of growth as September’s median total was 80% higher than the previous month’s.

6

3.00

1.12

2.00

1.50 1.68 1.99

1.71

2.40 2.01 2.04

1.34

2.00

4.71

3.76

1.92 1.69

1.39

2.18

3.10

2.63 3.00

2.00 2.00

3.61

5.03

6.19

3.79

6.56

3.38

4.12

4.67

5.75

5.24

4.12 3.99 3.70

2.71

8.39

6.96 7.13

4.38

2.97

6.04 5.79

4.88

5.42

4.30 4.38

8.22

7.18

Early Stage Healthcare Deal Size Trend $M, October 2012 - October 2014

Median of Deal Size Mean of Deal Size

Angel deal sizes in healthcare have remained relatively range bound since June.

7

2.65

1.00

0.75 0.86

1.90

1.22 1.30 1.46

2.00

1.17

0.43

2.02

1.06

2.64

0.80 0.64

1.32

0.70

2.50 2.32

1.39 1.55

1.69 1.54 1.50

3.03

1.56

0.89 1.02

2.29

1.83 1.95

2.92

1.98

2.49

0.87

2.98

1.47

2.43

1.49

1.98

1.59 1.52

2.55

3.23

3.48

1.90 2.10

3.95

2.46

Angel Round Healthcare Deal Size Trend $M, October 2012 - October 2014

Median of Deal Size Mean of Deal Size

Both median and average healthcare seed rounds reached two-year highs in October, behind UK-based Magnus Life Science’s $25M financing. No other seed deals in healthcare in October were greater than $10M.

8

1.26

0.37

0.99 0.92

0.52 0.65 0.75

0.59 0.44

1.03

0.73 0.59

0.87 1.03

1.15

0.68

0.25 0.35

1.00 1.10

0.53

0.94

0.43

1.32 1.50

1.25

0.65

1.41

0.97 0.77

1.14

0.88

0.59

1.51

0.91

1.40

0.78 1.01

1.63

1.30

0.93

0.47

0.78

1.62 1.45

1.20 1.37

0.72

1.25

4.31

Seed Round Healthcare Deal Size Trend $M, October 2012 - October 2014

Median of Deal Size Mean of Deal Size

After an average Series A peak in December 2013 due to Juno Therapeutics’ $120M financing, average healthcare rounds are down 25% YoY in October, and 7% on a median basis.

9

6.80 6.10

7.00

3.50

4.58 3.74

5.13

3.00

4.50

3.00 3.04 3.09

6.49

9.00

8.00

3.82 3.00

4.00

5.50

3.40 4.30

6.00 6.00 6.53

6.02

11.44

8.71

10.73

5.62

7.74 8.40

10.64

6.53 5.84 5.63

6.81

4.16

11.76 11.32

16.45

7.56

6.00

10.38

7.87 7.20

8.07

9.02 9.16

11.31

8.92

Series A Round Healthcare Deal Size Trend $M, October 2012 - October 2014

Median of Deal Size Mean of Deal Size

Medical devices accounted for just 15% of all early-stage healthcare deals in October 2014, its lowest share of the past two years. The contribution of other life science categories (disease diagnosis, drug manufacturing, etc.) accounted for 31% of all early-stage healthcare deals, a two-year high, highlighting the diversity of companies being funded within the healthcare space.

10

42% 40% 43%

33%

23%

39% 40% 31% 31% 30%

38%

28% 34%

26%

38% 38% 35%

23% 21%

47%

22%

39% 39%

27%

15%

19% 20%

36%

16%

26%

20%

40%

13% 15%

30% 18%

28% 17% 30%

15%

25% 26%

30% 38%

28%

33%

28% 29% 45%

31%

12% 6%

6%

22% 15%

9%

2%

16% 21%

18%

12% 11% 17% 9%

10%

9% 6%

14%

21%

2%

11%

9% 8%

10%

13%

7%

0%

2%

9%

6% 0%

0%

4%

4%

2%

4% 6% 5% 4%

0%

2% 6%

2%

8%

2%

2%

0% 5%

0%

6%

7%

14%

2% 11%

4% 11%

2%

13% 8%

5% 14%

2% 6%

7% 17% 3% 6% 16%

4%

7%

11%

11% 5%

8%

4%

14% 20%

11% 9%

26% 20% 17%

22% 21% 16% 14%

25% 20%

24% 21% 23% 22% 16%

8% 14%

22% 13% 13% 10%

31%

Healthcare Investments by Industry As % of Deals, October 2012 - October 2014

Medical Devices & Equipment Biotechnology Drug Development Pharmaceuticals / Drugs Medical Facilities & Services Others

After September saw Adaptimmune raise $104M and push biotech to a 73% funding share, October fell back down to 38% as biotech and medical devices accounted for over 50% of early-stage healthcare dollars for the 4th straight month.

11

21% 15%

34%

21% 21% 19%

30%

13%

30%

21% 19% 27%

16% 16% 11%

20% 22% 23% 15%

20%

10%

29% 29%

8% 14%

12%

5%

52%

5% 7% 13%

54%

5%

7%

41%

6%

26%

23%

47%

72% 55% 59%

49%

45%

48%

23%

43% 36%

73%

38% 9%

8%

10%

49%

25%

39%

5%

31%

36%

16%

63% 14%

16%

13%

6% 13% 5%

6% 23%

2%

26%

8%

10%

14%

11%

7%

0%

2%

10%

7%

0%

0%

8%

2% 0%

0%

4%

12%

6%

0% 3% 2%

0%

3%

3%

2%

0% 5%

0%

5%

21%

13%

0%

6%

0%

22%

1%

9%

14% 6%

2%

1% 2%

2%

4% 0% 2%

2%

13%

13%

8%

7% 3%

1%

4%

29%

58%

1% 9%

40%

7% 10%

33%

10% 16%

9%

28% 32%

16% 8% 10% 11%

20%

2%

15%

30%

13% 18%

4%

28%

Healthcare Investments by Industry As % of Dollars, October 2012 - October 2014

Medical Devices & Equipment Biotechnology Drug Development Pharmaceuticals / Drugs Medical Facilities & Services Others

Series A rounds accounted for 69% of all early-stage healthcare investments in October, higher than any month in the past two years. Angel investment share fell for the third straight month, and was down from 16% in October 2013.

12

19% 24% 21% 22% 21%

14%

26% 33%

17% 23% 20%

13% 16% 17% 15% 19%

35% 27%

21% 12%

17%

35%

21% 14% 13%

33%

40%

28% 22%

40%

41%

29% 9%

27% 19%

42%

40%

20%

31%

54% 36%

28%

20%

23% 33%

28%

33%

42%

25% 19%

49%

36%

51% 56%

38% 45% 45%

58% 56% 58%

38% 47%

64%

52%

31%

45% 37%

52% 56% 56% 54%

33% 37%

61% 69%

Early Stage Healthcare Investments by Stage As % of Deals, October 2012 - October 2014

Angel Seed Series A

Four early-stage companies raised rounds of $20M+ in October including Imago Biosciences who raised a $26.5M led by Clarus Ventures. Also of note, four of the top ten deals were in international companies including Magnus Life Science, Highland Therapeutics, Levicept, and Forendo Pharma.

13

Rank Company Industry Amount ($M)

1 Imago BioSciences Biotechnology 26.5

2 Magnus Life Science Medical Devices & Equipment 25.0

2 Highland Therapeutics Drug Delivery 25.0

4 Raze Therapeutics Drug Discovery 24.0

5 Quartet Medicine Biotechnology 17.0

6 Levicept Biotechnology 16.1

7 Forendo Pharma Drug Development 15.2

8 Paragon Bioservices Medical Facilities & Services 13.0

8 Zynerba Pharmaceuticals Drug Development 13.0

10 Unum Therapeutics Biotechnology 12.0

Largest Angel-Series A Healthcare Deals, October 2014

Few VCs made multiple early-stage healthcare investments in October, but Novartis Venture Funds and Atlas Venture both were the most active, with 3+ investments each.

14

Rank Investor

1 Novartis Venture Funds

1 Atlas Venture

2 Wellington Partners

2 Dolby Family Ventures

2 MS Ventures

Most Active Early-Stage Healthcare VCs, October 2014

15

We encourage you to review the methodology and definitions employed by us to better understand the numbers presented in this report. If you have any questions about our definitions or methodological principles, we encourage you to reach out to us directly.

What is included? • Early-Stage (Angel – Series A) Equity financings into emerging

companies. • Fundings of only private companies. Public companies of any kind

on any exchange (including Pink Sheets) are excluded from our numbers even if they received investment by a venture firm(s)

• Only include the investment made in the month for tranched investments. If a company does a second closing of its Series A round for $5M and previously had closed $2M in a prior quarter, only the $5M is reflected in our results.

• Round #s reflect what has closed –not what is intended. If a company indicates the closing of $5M out of a desired raise of $15M, our numbers reflect only the amount which has closed.

• Only verifiable fundings are included. Fundings are verified via (1) various federal & state regulatory filings (2) direct confirmation with firm or investor or (3) press release.

• Funding close date matters. Fundings are provided based on funding close date and not on announcement date.

What is not? • No contingent funding. If a company receives a commitment for $20M subject to

hitting certain milestones but first gets $8M, only the $8M is included in our data. • No business development/R&D arrangements whether transferable into equity

now, later or never. If a company signs a $300M R&D partnership with a larger corporation, this is not equity financing nor is it from venture capital firms. As a result, it is not included.

• Buyouts, Consolidations and Recapitalizations. All three of these of transaction types are commonly employed by private equity firms and are tracked by CB Insights. However, they are excluded for the purposes of this report. Private equity investments into companies which may have received venture capital investment prior are also not included.

• Private placements. These investments also known as PIPEs (Private Investment in Public Equities) even if made by a venture capital firm(s) are not included.

• Debt/loans of any kind. Venture debt or any kind of debt/loan issued to emerging, startup companies even if included as an additional part of an equity financing is not included. If a company receives $3M with $2M from venture investors and $1M in debt, only the $2M is included in these statistics.

• Government funding. Grants, loans, equity financings by the federal government, state agencies or public -private partnerships.

16

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