Trends in Healthcare Investments and Exits 2019 · 2019-08-19 · of FDA-approved drugs originated...

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Trends in Healthcare Investments and Exits 2019 IPO Boom Fuels Investment and Fundraising MID-YEAR REPORT 2019 Follow @SVB_Financial Engage #SVBHealthcare

Transcript of Trends in Healthcare Investments and Exits 2019 · 2019-08-19 · of FDA-approved drugs originated...

Trends in Healthcare Investments and Exits 2019IPO Boom Fuels Investment and Fundraising

MID-YEAR REPORT 2019

Follow @SVB_Financial Engage #SVBHealthcare

Trends in Healthcare Investments and Exits Mid-Year 2019 2

Table of Contents

Mid-Year 2019 Highlights 3

Healthcare Investments and Fundraising 5

Healthcare M&As and IPOs 24

Second Half of 2019 Outlook 35

Glossary 36

About the Authors 37

Trends in Healthcare Investments and Exits Mid-Year 2019 3

Mid-Year 2019 Highlights: Investments

• US healthcare venture fundraising is set for another strong year, but due to the number of big firms that closed new funds in 2018, it will likely fall short of the record $9.6B set last year. At the same time, recent IPO success in all sectors produced strong potential returns and likely an accelerated fundraising pace.

• Venture investment for full-year 2019 likely will land slightly below 2018’s record haul, but it is on pace to rank a close second.

• Oncology did not lead biopharma Series A investments for the first time, as platform has now risen to the top. Highlighted by recent pre-clinical and phase I IPO and M&A activity, this trend signals investor and acquirer interest in very early-stage technologies that are applicable across multiple indications.

• Biopharma corporate investors re-engaged with early-stage Series A deals, and we see corporate-only equity rounds emerge alongside collaborations and options to buy.

• Despite concerns that CFIUS would silence China investment in US biopharma in 2019, the percentage of dollars invested by syndicates with China-based investors equaled 2018’s pace.

• Device investment is on pace to surpass 2018, as device companies closed larger, later stage deals led by crossover and private equity firms.

• Dx/Tools Series A investment increased but overall investment is likely to decline in comparison to 2018. Dx Analytics companies leveraging artificial intelligence/machine learning (AI/ML) spurred deal flow in 1H 2019.

*We include US and European data for venture investment totals and Series A.

US and Europe* Post Strong Investments and High Deal Values

Trends in Healthcare Investments and Exits Mid-Year 2019 4

Mid-Year 2019 Highlights: Exits

• 1H 2019 saw 30 IPOs across all sectors, with 13 biopharma IPOs in May and June alone.

• While Venture-Capital (VC) backed biopharma exits typically occur at an early stage, these venture-funded assets have a track record of translating into clinically impactful therapies. Forty-two percent of FDA-approved drugs originated from VC-backed companies in the past decade.

• Six of the biopharma IPOs in 2019 were valued at $1B+ as of late June. Two private biopharma M&A deals had also reached $1B+ in total deal value.

• Impressive device IPOs and a spectacular M&A deal (Johnson & Johnson's $5.8B acquisition of Auris) drove total device exit value to surpass the full-year record only halfway through 2019.

• Four of five device IPOs were outperforming their IPO price at the end of June, with two cardiovascular-focused IPOs up more than 140%.

• Dx/Tools companies produced more value through IPOs than M&A deals in 1H 2019, buoyed by strong public offerings from Personalis and Adaptive Biotechnologies.

• Eight of 10 Dx/Tools IPOs since 2015 have generated significant market cap, with four companies valued at $1B+ as of late June.

Biopharma Leads IPO Flurry

Trends in Healthcare Investments and Exits Mid-Year 2019 5

Healthcare Investments and Fundraising:Strong Capital Flow Continues

Trends in Healthcare Investments and Exits Mid-Year 2019 6

$B Exits Drive Strong Healthcare FundraisingUS Healthcare Venture Fundraising*, 2009–1H 2019

*SVB calculates only the dollars allocated to healthcare by venture funds investing primarily in the US. Dates of financing rounds subject to change based on add-on investments. 2019 numbers through 06/14/19.Source: PitchBook and SVB proprietary data.

$ Invested by Round Size 2017–1H 2019

[A] Fundraising remains strong in 2019, including a $B+ healthcare fund (Vivo Capital). Still, we believe that total fundraising will fall just short of the record set in 2018. Large fundraises by veteran healthcare funds (Third Rock Ventures, Flagship Pioneering, HealthQuestCapital, 5AM Ventures, Santé Ventures, Arboretum Ventures, and Atlas Venture) reflect the healthy investment appetite across healthcare sectors, as $B exits have been seen in all three sectors. Numerous dual-focused venture firms (tech and healthcare) raised as well, but there has been less overall fundraising by these investors in 1H 2019.

[B] Biopharma Series A and mezzanine pre-IPO deal sizes continue to grow as these companies eye the attractive IPO market. We saw larger crossover and commercialization rounds in the device sector, led in part by a string of successful IPOs over the past two years. There was slightly more angel/seed round activity (deals under $5M) in 1H 2019 versus 2018, likely the result of increased seed investing programs by traditional venture funds.

$5.2B

$1.8B

$3.7B $3.6B $3.9B

$6.1B

$7.5B $7.2B

$9.1B $9.6B

$5.8B

$0B

$5B

$10B

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H 2019

0%

50%

100%

2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2

>$50M $25-$50M $10-$25M $5-$10M Under $5M

A

B

Healthcare VC $ Fundraised

0

100

200

300

$0B

$3B

$6B

$9B

2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2

Biopharma Dx/Tools Medical Device Total Deals

Trends in Healthcare Investments and Exits Mid-Year 2019 7

Device $s Up, Biopharma and Dx/Tools Below Record PaceBiopharma, Device and Dx/Tools Investments and Deals, 2017–1H 2019, US & Europe

Sectors ($M) US Europe Total US Europe Total US Europe Total

Biopharma $6,342 $1,841 $8,183 $15,035 $2,738 $17,773 $6,410 $1,324 $7,734

Dx/Tools $4,367 $363 $4,730 $5,075 $440 $5,515 $1,784 $375 $2,164

Medical Device $2,533 $497 $3,030 $3,585 $511 $4,094 $2,038 $224 $2,262

Total $13,242 $2,701 $15,944 $23,695 $3,690 $27,384 $10,237 $1,923 $12,160

Financing data includes private financings by venture-backed companies in US and Europe. Dates of financing rounds subject to change based on add-on investments. 2019 numbers through 06/14/19.Source: PitchBook and SVB proprietary data.

2017 2018

VC Dollars and Deals by Quarter (US and Europe)

2018 healthcare venture investment swelled to a record $27.4B, aided by >$1B raised by three huge deals in the last two weeksof December (Rakuten, Relay and 23andMe).2019 looks to be the second-largest investment year ever, currently trailing 2018 pace by 10%. Device is set to eclipse 2018 numbers, as successful IPOs have spurred increased early stage investing and crossover interest in large pre-IPO mezzanine rounds. Biopharma is slightly down, but an open IPO window has led to lofty valuations and continued large Series A and B rounds. Dx/Tools investment is down, as exits lag behind the other two sectors.

1H 2019

Trends in Healthcare Investments and Exits Mid-Year 2019 8

Investment in Early-Stage Platforms Eclipse Oncology All Series A* Biopharma Investments, 2017–1H 2019, US and Europe

Series A Deals

*Series A Investments includes all first-round investments from institutional or corporate venture investment in the US and Europe, and all first-round investments equal to or greater than $2M, regardless of investor. Dates of financing rounds subject to change based on add-on investments. 2019 financing data through 06/14/19.Source: PitchBook and SVB proprietary data.

Top 10 Largest Series A Deals

A

C

US Deals 2017 2018 1H 2019Number of Investments 133 149 62Total Series A Funding ($M) $2,639 $4,587 $1,871Corporate Investments (%) 29% 17% 27%Median Round Size ($M) $10 $12 $10

[A] Biopharma Series A numbers show a slight reduction in 1H 2019. Early-stage corporate and corporate venture investment staged a comeback, led by Big Pharma and public biotech companies.[B] Platform companies unseated oncology in early-stage investment dollars, marking the first time since 2013 that oncology hasn't led Series A. Highlighted by steady early-stage biopharma IPOs and M&As, investors continue to fund pre-clinical technologies, regardless of indication. Anti-infective investment has all but disappeared, likely due to difficult commercialization and suboptimal exits. [C] Top 15 Crossover Investors participated in four of the top ten deals, suggesting that their next financing will be an IPO.

Europe Deals 2017 2018 1H 2019Number of Investments 70 42 22Total Series A Funding ($M) $867 $686 $469Corporate Investments (%) 32% 24% 32%Median Round Size ($M) $8 $13 $9

17

21

17

29

54

10

16

27

35

48

1

7

13

20

21

Anti-Infective

Orphan/Rare Disease

Neurology

Platform

Oncology

2017 2018 1H 2019$1,029 $1,473 $483

$531 $1,145 $659

$273 $615 $259

$573 $650 $371

$309 $114 $3

Series A by Indication — US and EuropeDeal Counts (Dollars $M Invested)

B

34

20

18

17

16

14

13

12

11

Trends in Healthcare Investments and Exits Mid-Year 2019 9

Venture Firms Lead Series A; Crossovers Fund Series BMost Active New Investors* in Biopharma, 2018–1H 2019

*Most Active New Investors calculated as new (first-time) investments into US and Europe companies in 2018–1H 2019. 2019 financing data through 06/14/19. Dates of financing rounds subject to change based on add-on investments. Alexandria investments typically average $2M per deal, AREE, Inc. Earnings 9/30/18.Source: PitchBook and SVB proprietary data.

NUMBER OF DEALS

Corporate Investor

For the last six years, crossover investors have been active in large biopharma rounds as a precursor to an IPO. This remains consistent in 1H 2019, as Top 15 Crossover Investors RA Capital, Perceptive Advisors, Redmile, Deerfield, EcoR1, Cormorant, Fidelity and Foresite all make the list of most active investors. This group funded 21 unique private biopharma companies in the first half of 2019. This activity shows that crossovers continue to trust their IPO playbook – closing a large private financing, then an up-round IPO in quick succession.

Traditional venture investors led the majority of biopharma Series A deals. Venture investors with 5+ new Series A deals since 2018 include ARCH Venture Partners, F-Prime, OrbiMed, Versant Ventures, 5AM Ventures, BioInnovation Capital, Longitude Capital, MPM Capital, New Enterprise Associates, Sofinnova Partners and Third Rock Ventures.

China-based investors continue to be active. 6 Dimensions typically joins syndicates early, participating in eight Series A deals since 2018. NFLS-Pivotal (backed by a Hong Kong family office) jumped onto the list, with mostly later stage (Series B or later) deals.

202438

333

Total Biopharma

5

20

26

42

57

31

36

55

73

118

27

35

28

47

97

Anti-Infective

Orphan/Rare Disease

Neurology

Platform

Oncology

2017 2018 1H 2019

Trends in Healthcare Investments and Exits Mid-Year 2019 10

Corporate Deals Pick Up; China-Based Activity StableAll Biopharma Deals by Indication, 2017–1H 2019, US and Europe

Financing data includes private financings by venture-backed companies in the US and Europe through 06/14/19. Dates of financing rounds subject to change based on add-on investments. Source: PitchBook and SVB proprietary data.

NUMBER OF DEALS | $ MILLIONS

$5,514$2,513

Top 15 Crossover Investors backed 41% of the deals raising $80M+, signaling continued interest in pre-IPO rounds. We also saw large corporate-only equity rounds as part of broader collaborations (BioNTech with Sanofi and Pfizer, Tizona with AbbVie and Kyn with Celgene). Orphan/rare investment rebounded and pulled ahead of 2017’s and 2018's investment pace, punctuated by two corporate equity investments with options to buy (Caelum with Alexion, Vivet with Pfizer). However, in a surprise, Top 15 Crossover Investor interest scaled back in 1H 2019, investing in only three deals.Chinese or China-backed investment continued in 2019, in spite of CFIUS concerns. In 1H 2019, these investors participated in syndicates that funded 23% of US biopharma investment, about the same level of activity by this group in 2018.

$2,647

$4,186$1,127

$1,673

$1,409$497

$809

$1,668$1,118

$922

$1,080$641

$206

$17,773

$8,183

$7,734

1H 2019 Deals $125M–$200M

1H 2019 Deals $80M–$100M

1H 2019 Deals $100M–$125M

1H 2019 Deals over $200M

Trends in Healthcare Investments and Exits Mid-Year 2019 11

Platform Deals Drive Highest Values and Find Exits Highest-Valued Private Biopharma Companies, 2018–1H 2019

*Only includes post-money values reported by PitchBook for US and Europe companies. Dates of financing rounds subject to change based on add-on investments. 2019 financing and market cap data through 06/14/19.Source: PitchBook and SVB proprietary data.

Neurology

7/25/18$133M Round$913M Post

3/27/19$50M Round$450M Post

8/13/18$143M Round$729M Post

Orphan/Rare

5/21/19$121M Round$731M Post

Anti-Infective

1/28/19$100M Round$1,100M Post

Aesthetics/Dermatology

Platform Companies

5/4/18$125M Round$7,125M Post

3/1/18$101M Round$951M Post

3/23/18$82M Round$401M Post

3/6/19$135M Round$675M Post

6/25/18$101M Round$576M Post

2/15/18$250M Round$480M Post

7/20/18$230M Round$650M Post

1/15/19$50M Round$500M Post

3/5/18$100M Round$400M Post

Oncology

This list shows the highest-valued private companies over the last two years, all with post-money valuations of $400M+*.

Platform (9) and oncology (6) deals make up 15 of 20 financings.

The eight 2019 financings joining this list raised $115M on a pre-money of $530M, a step-up of 2.6x from the previous round, yielding a post-money of $623M (all medians). Four of these eight deals had Top 15 Crossover Investors as new investors in their syndicate, potentially setting up the companies for a near-term IPO.

The exit atmosphere continues to be strong, and deals tend to exit quickly after big rounds. Nine companies on this list have exited, with eight IPOs and one acquired on the eve of a public offering (Peloton). Seven of the nine have a current market cap/deal value of $1B+.

12/20/18 $350M Round$834M Post

4/19/18$412M Round$687M Post

2/20/19$150M Round$500M Post

9/28/18$80M Round$415M Post

4/22/2019$142M Round$568M Post

5/8/2019$108M Round$623M Post

Green box: Company subsequently went public. Purple box: Company subsequently was acquired.

Trends in Healthcare Investments and Exits Mid-Year 2019 12

Massachusetts and California Lead US InvestmentBiopharma Investments by Geography, 1H 2019, US and Europe

Series A Investments includes all private, first-round investments from institutional or corporate venture investment, and all first-round investments equal to or greater than $2M, regardless of investor. Dates of financing rounds subject to change based on add-on investments. 2019 financing data through 06/14/19. Financing data includes private financings by venture-backed companies in the US and Europe.Source: PitchBook and SVB proprietary data.

Top Biopharma Regions for All Investments and Series A

United States Europe

Northern CA31 Deals $1,761M7 Series A $317M

Southern CA19 Deals $608M6 Series A $107M

PA13 Deals $317M3 Series A $133M

MA38 Deals $1,831M14 Series A $753M

France7 Deals $89M6 Series A $74M

Switzerland7 Deals $542M5 Series A $242M

UK11 Deals $150M9 Series A $124M

NY10 Deals $527M6 Series A $249M

7

4

10

9

4

8

10

4

6

8

9

5

14

9

3

5

3

3

12

5

10

Vascular

Non-Invasive Monitoring

Surgical

Neurology

Imaging

Cardiovascular

Orthopedic

2017 2018 1H 2019

Trends in Healthcare Investments and Exits Mid-Year 2019 13

Series A Device $ Are Stable in US and Down in Europe All Series A* Device Investments, 2017–1H 2019, US and Europe

[A] Device Series A investment slowed in 1H 2019, with deals and dollars on pace to land between 2017 and 2018 full-year totals. On the plus side, we saw more corporate investment in 1H 2019, with Intel notably investing in two imaging startups (ELoupes and Proprio).[B] Imaging and orthopedic saw increased deal activity in 1H 2019, with both indications already exceeding 2018 numbers. Imaging funding can be categorized in two different buckets – surgical visualization/support (seven deals) and image processing/analysis (five deals). [C] Three of the top 10 largest Series A deals are linked to cancer treatment (Vergent, Elucida and Onconano). Corporate participation in the largest Series A deals included Johnson & Johnson and Xandex (Hyalex) and Merck (Biolinq).

US Deals 2017 2018 1H 2019Number of Investments 57 78 38Total Series A Funding ($M) $438 $679 $297Corporate Investments (%) 19% 8% 18%Median Round Size ($M) $4 $7 $4

*Series A includes first-time investments from institutional or corporate venture investment in the US and Europe, and includes any first-round investments equal to or greater than $2M, regardless of investor. Financing data through 06/14/19. Dates of financing rounds subject to change based on add-on investments. Source: PitchBook and SVB proprietary data.

Series A Deals

Top 10 Largest Series A Deals

A

C

Europe 2017 2018 1H 2019Number of Investments 25 20 13Total Series A Funding ($M) $192 $257 $63Corporate Investments (%) 8% 0% 0%Median Round Size ($M) $4 $6 $5

$41 $62 $7

$57 $50 $34

$71 $112 $7

$78 $56 $14

$29 $41 $134

$42 $172 $30

$41 $92 $60

Series A by Indication – US and EuropeDeal Counts (Dollars $M Invested)

B

7

5

4

3

Trends in Healthcare Investments and Exits Mid-Year 2019 14

Venture and Angel Groups Dominate Device ListMost Active New Investors* in Device, 2018–1H 2019

*Most Active New Investors calculated as new (first-time) investments into US and Europe companies in 2018–1H 2019. 2019 financing data through 06/14/19. Dates of financing rounds subject to change based on add-on investments. Source: PitchBook and SVB analysis.

NUMBER OF DEALS

Corporate Investor

Device investors continue to be diverse. PE, asset managers and other nontraditional investors lead big, later-stage deals. However, these investors don't make this list because of their small device portfolios. One-off corporate interest in larger deals have also continued. 1H 2019 examples include Beta Bionics (Dexcom, Novo Nordisk), Cala Health (Novartis), HistoSonics (Varian Medical Systems) and Trice Medical (Smith & Nephew).

Crossover investor Deerfield and venture investors USVP, Life Science Partners, RTW Investments and Khosla Ventures joined this year's active list, as well as smaller funds Medical Technology Venture Partners and Heuristic Capital. Other groups new to this list include Accelerator/VC SOSV, corporate players Boston Scientific and DSM, individual investor-driven managed fund Portfolia and angel group Alliance of Angels.

147244

175Total Medical Device

13

19

16

10

10

21

18

12

10

15

25

27

29

33

6

10

17

20

20

19

26

Non-Invasive Monitoring

Imaging

Vascular

Surgical

Neurology

Orthopedic

Cardiovascular

2017 2018 1H 2019

Trends in Healthcare Investments and Exits Mid-Year 2019 15

Big Deals Dominate Vascular, Orthopedic and ImagingAll Device Investments, 2017–1H 2019

Dates of financing rounds subject to change based on add-on investments. Financing data includes private financings by venture-backed companies in the US and Europe through 06/14/19.Source: PitchBook and SVB proprietary data.

Device deals and dollars invested are set to exceed 2018 numbers. Orthopedic, non-invasive monitoring, vascular access and imaging indications experienced increased deals and dollars at mid-year, while surgical and neuro activity declined. The 10 $50M+ deals in 1H 2019 are on pace to eclipse 2018’s year-end total of 15, as private equity and crossover investors stay active in funding big rounds.

Three of the four top non-invasive monitoring financings were based on glucose monitoring, both portable (Beta Bionics, Biolinq) and hospital-based (OptiScan). The largest orthopedic deals were split between robotic/surgical aids (Think Surgical, OrthoSensor) and implants (Barricaid, Active Implants).

1H 2019 Deals over $100M

1H 2019 Deals $50M–$100M

$414$651

$313$237

$337$358

$353$505

$173$504

$505$136

$317$236$286

$119$360

$255$102

$197$186

$3,030$4,097

$2,262

NUMBER OF DEALS | $ MILLIONS

Trends in Healthcare Investments and Exits Mid-Year 2019 16

Neuro and Imaging Lead Most Valuable Private DealsHighest-Valued Private Device Companies, 2018–1H 2019

*Only includes post-money values reported by PitchBook for US and Europe companies. Dates of financing rounds subject to change based on add-on investments. 2019 financing and market cap data through 06/14/19.Source: PitchBook and SVB proprietary data.

This list shows the highest-valued private companies since 2018, all with post-money valuations of $150M or more*.

We saw three exits from this list in 2019, with M&As for Auris and Myoscience and an IPO for Avedro.

Later-stage, highly valued rounds increased substantially over the last two years as Top 15 Crossover Investors (Deerfield, Fidelity, Wellington, Perceptive, Cormorant) diversified from biopharma. We also saw other late-stage crossover/PE groups (Viking, KKR, ArrowMark, Eventide) invest, as well as family office and sovereign wealth groups (NFLS-Pivotal, Richard King Mellon and MubadalaInvestment Company).

Traditional venture funds Endeavor Vision, Life Science Partners, Lightstone, Gilde, Ally Bridge, Longitude and SV Health also led large, later-stage rounds.

Neurology

7/3/2018$5M Round$155M Post

Cardiovascular

7/10/18$31M Round$166M Post

Gastrointestinal

11/28/18$220M Round$2,160M Post

Surgical

3/28/18$55M Round$165M Post

8/28/18$132M Round$607M Post

Renal

2/21/18$118M Round$398M Post

Uro/Gyn

3/9/18$75M Round$450M Post

Vascular

Ophthalmology

5/10/19$39M Round$509M Post

3/7/18$45M Round$235M Post

7/25/18$13M Round$388M Post

12/6/18$68M Round$168M Post

5/31/18$20M Round$160M Post

5/2/18$25M Round$150M Post

12/20/18$20M Round$150M Post

9/27/18$250M Round$1,250M Post

Imaging

Metabolic

1/9/19$63M Round$213M Post

Non-Invasive Monitoring

4/26/19$65M Round$315M Post

Respiratory

Green box: Company subsequently went public. Purple box: Company subsequently was acquired.

Top Medical Device Regions for All Investments and Series A

United States Europe

Trends in Healthcare Investments and Exits Mid-Year 2019 17

Northern California Dominates Device DealsDevice Investments by Geography, 1H 2019, US and Europe

Northern CA31 Deals $687M9 Series A $70M

WA11 Deals $119M4 Series A $15M

MN10 Deals $156M3 Series A $20M

Southern CA10 Deals $55M3 Series A $19M

Series A Investments includes all private, first-round investments from institutional or corporate venture investment, and all first-round investments equal to or greater than $2M, regardless of investor. Dates of financing rounds subject to change based on add-on investments. 2019 financing data through 06/14/19.Financing data includes private financings by venture-backed companies in the US and Europe.Source: PitchBook and SVB proprietary data.

France4 Deals $51M3 Series A $14M

Germany3 Deals $14M2 Series A $9M

MA17 Deals $339M4 Series A $31M

UK6 Deals $66M2 Series A $11M

20

21

57

18

29

39

18

14

20

Dx Test

Dx Analytics

R&D Tools

2017 2018 1H 2019

$221$180$137

$122$259$550

$105$273$361

Trends in Healthcare Investments and Exits Mid-Year 2019 18

Dx/Tools Investment Stable as Corporates Up ActivityAll Series A* Dx/Tools Investments, 2017–1H 2019, US and Europe

*Series A includes first-time investments from institutional or corporate venture investment in the US and Europe, and includes any first-round investments equal to or greater than $2M, regardless of investor. Financing data through 06/14/19. Dates of financing rounds subject to change based on add-on investments. Source: PitchBook and SVB proprietary data.

US Deals 2017 2018 1H 2019Number of Investments 65 68 36Total Series A Funding ($M) $836 $625 $365Corporate Investments (%) 22% 17% 36%Median Round Size ($M) $6 $6 $5

Series A Deals

Top 10 Largest Series A Deals

A

C

[A] US Dx/Tools Series A is on pace to equal 2018 activity after a significant drop-off from 2017 to 2018, while Europe projects to double deals and dollars. Corporate activity grew, led by Big Pharma/public Dx companies (6), hospital systems/practice groups (4) and public tech firms (3). [B] Dx Test investment picked up in 1H 2019, led by a $110M deal in Thrive Earlier Detection (cancer liquid biopsy) and a $31M deal in Sherlock Biosciences (CRISPR-based infectious disease diagnostics). [C] Continuing a trend, four of the top Series A deals (BilliontoOne, BostonGene, Exscientia, Onera) leverage AI/ML and/or data analytics.

Europe 2017 2018 1H 2019Number of Investments 33 18 16Total Series A Funding ($M) $211 $87 $82Corporate Investments (%) 0% 28% 19%Median Round Size($M) $3 $4 $4

Series A by Indication – US and EuropeDeal Counts (Dollars $M Invested)

B

10

8

7

6

4

Trends in Healthcare Investments and Exits Mid-Year 2019 19

Tech Investors Pull Back from New Dx/Tools DealsMost Active New Investors* in Dx/Tools, 2018–1H 2019

*Most Active New Investors calculated as new (first-time) investments into US and Europe companies in 2018–1H 2019. 2019 financing data through 06/14/19. Dates of financing rounds subject to change based on add-on investments. Alexandria investments typically average $2M per deal, AREE, Inc. Earnings 9/30/18.Source: PitchBook and SVB proprietary data.

NUMBER OF DEALS

Corporate Investors

While tech investors have dominated Dx/Tools over the past few years, we observed a slow-down in their funding of new Dx/Tools deals in 1H 2019 and a number of these firms have dropped off this list. Instead, these firms have turned their attention to investing into new AI-enabled biopharma companies with their own drug development pipelines, or morphing drug discovery service companies into pursuing internally generated assets. One reason for this transition is that biopharma value is often realized in development stage assets while Dx/Tools companies typically need to show significant commercial ramp prior to M&A/IPO.

New entrants to the most active Dx/Tools list include traditional healthcare investor F-Prime (Embark, LunaPBC, Nebula Genomics, Owkin) and crossover Casdin Capital (Genome Medical, Celsius, Prominex, Thrive Earlier Detection).

171231

119Total Dx/Tools

37

44

38

72

55

104

40

41

90

Dx Analytics

Dx Test

R&D Tools

2017 2018 1H 2019

Trends in Healthcare Investments and Exits Mid-Year 2019 20

Dx Analytics Investment Jumps Up in 1H 2019All Dx/Tools Investments by Subsector, 2017–1H 2019, US and Europe

Dates of financing rounds subject to change based on add-on investments. Financing data includes private financings by venture-backed companies in the US and Europe through 06/14/19.Source: PitchBook and SVB proprietary data.

$2,488$1,278

While investment in Dx/Tools was down in 1H 2019, we continued to see crossover, PE and corporate investors leading later-stage deals.R&D Tools investments have slipped significantly. Only three $50M+ deals (Inscripta, GreenLight and PathAI) have been financed in 1H 2019, versus 14 $50M+ deals in 2018. However, the two successful IPOs in this subsector may spur an uptick in 2H 2019.Dx Analytics deals spiked in 1H 2019 and are poised to continue a three-year upward trend. The largest financings were in later-stage companies aggregating and analyzing genomic or physiological data (Tempus, Verana, Sophia Genetics, DNAnexus).

1H 2019 Deals over $75M–$100M

1H 2019 Deals over $50M–$75M

$656

$1,157$2,102

$555

$1,870$1,350

$953

$5,514$4,730

$2,164

1H 2019 Deals over $100MNUMBER OF DEALS | $ MILLIONS

Trends in Healthcare Investments and Exits Mid-Year 2019 21

Four Private Dx/Tools Companies Hit $B ValuationsDx/Tools Post-Money by Indication, 2018–1H 2019

.

*Only includes post-money values reported by PitchBook for US and Europe companies. Dates of financing rounds subject to change based on add-on investments. 2019 financing and market cap data through 06/14/19.Source: PitchBook and SVB proprietary data.

This list shows the highest-valued private companies over the last two years, all with post-money valuations of $200M or more*.

R&D Tools (10 of the 15 companies listed) dominate this list of private financings. Grail is the only Dx Test company to make the list.

Only Twist has exited this group, with an IPO in 2018. It trades at twice its last private valuation as of 1H 2019. Other sectors have fared better over the last year and a half, as biopharma exited (by IPO or M&A) nine of its top 20 privately valued deals and device exited three of its 17.

Most of these Dx/Tools deals are now commercial stage and ramping revenue, a key metric needed for big exit values in this sector. We believe that a number of these exciting technologies will set up the sector for multiple $B+ exits in 2H 2019.

Dx Tests

Dx Analytics

R&D Tools

8/29/18$110M Round$2,000M Post

2/14/2018$240M Round$1,500M Post

5/30/19$200M Round$3,100 Post

3/23/18$80M Round

$1,030M Post

9/21/18$83M Round$600M Post

4/10/19$80M Round$230M Post

Green box: Company subsequently went public.

1/4/2019$64M Round$494M Post

5/11/2018$300M Round$3,200M Post

4/2/18$125M Round$474M Post

1/7/19$35M Round

$1,280M Post

4/26/18$125M Round$1,000M Post

4/10/19$131M Round$251M Post

4/17/19$60M Round$375M Post

9/25/18$58M Round$308M Post

6/19/18$36M Round$200M Post

8/23/18$6M Round$210M Post

5/3/18$20M Round$210M Post

6/28/18$95M Round$797M Post

Top Dx/Tools Regions for All Investments and Series A

United States Europe

Trends in Healthcare Investments and Exits Mid-Year 2019 22

NorCal, Boston and the UK Lead Dx/Tools FundingDx/Tools Investments by Geography, 1H 2019, US and Europe

Northern CA23 Deals $485M9 Series A $56M

Southern CA7 Deals $64M2 Series A $12M

MA15 Deals $519M7 Series A $214M

UK11 Deals $169M5 Series A $36M

TX5 Deals $84M2 Series A $10M

PA8 Deals $73M5 Series A $21M

Series A Investments includes all private, first-round investments from institutional or corporate venture investment, and all first-round investments equal to or greater than $2M, regardless of investor. Dates of financing rounds subject to change based on add-on investments. 2019 financing data through 06/14/19. Financing data includes private financings by venture-backed companies in the US and Europe.Source: PitchBook and SVB proprietary data.

France5 Deals $53M3 Series A $11M

Belgium3 Deals $27M2 Series A $9M

0

50

100

150

200

$0B

$1B

$2B

$3B

2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2

Invested Capital Total Deals

Trends in Healthcare Investments and Exits Mid-Year 2019 23

Digital Health Funding Takes OffDigital Health Investments and Deals, 2017–1H 2019, US and Europe

2017 2018 1H 2019

Sectors ($M) US Europe Total US Europe Total US Europe Total

Digital Health* $3,494 $602 $4,096 $7,180 $673 $7,853 $4,542 $716 $5,258

VC Dollars and Deals by Quarter (US and Europe)

Notes: *(<10%) of digital health companies overlap with traditional biopharma, device, and Dx/Tools financings. Financing data includes private financings by venture-backed companies in the US and Europe. Dates of financing rounds subject to change based on add-on investments. 2019 numbers through 06/14/19. Source: PitchBook and SVB analysis.

For the first time in this report, we review the digital health landscape. Digital health is defined as solutions that use technology to improve patient health outcomes and/or reduce the cost of healthcare. Notwithstanding some double-counting of AI/ML-enabled traditional healthcare companies elsewhere in this presentation, financings within the industry during 2018 almost doubled 2017’s numbers due to a staggering 14 $100M+ deals led by Oscar, OneMedical, and Devoted Health. 1H 2019 investments have already eclipsed 2017’s full year and is currently on track to be >$10B. That is partly due to a $500M round by Clover Health.

Trends in Healthcare Investments and Exits Mid-Year 2019 24

Healthcare M&As and IPOs:Record IPO Values and Big M&A Deals Lead Exits

$0B

$25B

$50B

2014 2015 2016 2017 2018 1H 2019

M&A Upfront M&A Milestones IPO Market Cap

66

42

28

31

54

23

14

22

20

14

14

5

2014

2015

2016

2017

2018

1H2019

IPO M&A

Trends in Healthcare Investments and Exits Mid-Year 2019 25

Highly Valued IPOs Dominate Biopharma ExitsVC-Backed Biopharma Big Exits and IPOs, 2014–1H 2019

M&A defined as private, venture-backed M&A with upfront payments of at least $75M. IPO defined as private, venture-backed IPO raising at least $25M in proceeds.Market cap at IPO used to estimate value of public companies.Source: PitchBook, press releases and SVB proprietary data.

Exit Values by Year Top Exits by Indication2014–1H 2019

[A] May and June saw 13 biopharma IPOs that drove a continued robust IPO environment. Most companies seeking to exit pursued a public listing, as IPO pre-money market valuations exceeded up-front M&A deal value. In contrast to this trend, Peloton drove a $B+ up-front private M&A exit on the eve of its planned IPO.

[B] In a similar manner to 2018, IPO market caps accounted for 70% of overall exit value. 2019’s total exit value is on pace to be the second-highest year ever.

[C] Oncology had the most exits (M&A and IPO) since 2014, followed closely by orphan/rare, neuro and platform. 2018 saw five anti-infective IPOs, but none so far in 1H 2019. The likely reason for this slowdown is that these companies struggled post IPO. At 1H 2019 the median price change for 2018 anti-infective IPOs was -47%.

Number of Exits by Year

$26.3B$30.3B $28.1B

$21.7B

$49.3B

28

68

45

64

62

31 30 2717

23

12 126

3

Oncology Orphan/Rare Disease Neurology Platform Anti-Infective

IPO M&A

A

B C

80

48

$18.9B

57

2

5 4

3

4

8 26

3

4

10

9

5

3

2

111 1

2014 2015 2016 2017 2018 1H 2019

Trends in Healthcare Investments and Exits Mid-Year 2019 26

Early-Stage, Quick-to-Exit Deals Yield Attractive M&AVC-Backed Biopharma Big Exit M&A by Stage*, 2014–1H 2019

M&A defined as private, venture-backed M&A with upfront payments of at least $75M. Upfront multiple is M&A payment received at deal close divided by venture investment. *Stage defined as last completed clinical trial in most advanced asset.Source: PitchBook, press releases and SVB proprietary data.

Crossover-led rounds at attractive valuations typically led to value creating IPOs in 1H 2019 instead of private M&A, as pre-money IPO valuation exceeded the median upfront M&A deal value. As a result, there were 4x the number of IPOs than private M&A deals in biopharma.

M&A continued to focus on earlier-stage deals, with three phase I and two phase II companies. Three of the four private M&A (IFM Tre, Myonexus and Therachon) were bought within 2.3 years from the close of Series A, continuing a trend of lightning-fast exits in biopharma. These deals saw a median up-front multiple of 8.5x invested equity. The biggest up-front deal, Peloton Therapeutics, closed a $150M mezzanine round at a $500M post-money valuation in February 2019 and was acquired just three months later, right before an IPO, for $1B+ up-front.

Phase IIIPhase IIPhase IPre-Clinical

Commercial

Number of Big Exits

$8.0B

$16.6B $21.2B

$8.9B $14.8B

Median Upfront ($M) $225 $200 $200 $171 $153 $310

Median Total Deal ($M) $413 $570 $600 $461 $528 $810

Median Years to Exit 4.0 4.2 5.9 3.5 3.1 2.3

$5.2B

1

1

$62 $71

$53

$85

$100

$89

$0M

$50M

$100M

$150M

2014 2015 2016 2017 2018 1H 2019

IPO Pre-Money Value

Trends in Healthcare Investments and Exits Mid-Year 2019 27

Valuations Continue Climb in Hot IPO MarketVC-Backed Biopharma IPOs by Pre-Money Value and Dollars Raised, 2014–1H 2019

Source: PitchBook, press releases and SVB proprietary data.

IPO defined as private, venture-backed IPO raising at least $25M in proceeds.Stage for IPO deals defined as most advanced current clinical trial. Early stage defined as pre-clinical and phase I.*Step-up calculated as pre-money IPO valuation divided by last round post-money valuation. Private valuations sourced through PitchBook.

IPO Proceeds

75thQuartile

25thQuartile

IPO Median Dollars Raised

The hot IPO market continued in 1H 2019 with a record median pre-money valuation of $339M. However, median dollars raised dippedfrom $100M to $89M. Early stage dominated deals (13/23). Multiple large, highly valued IPOs hit the market in 1H 2019 with six of these companies now at $1B+ market cap (BridgeBio, Gossamer Bio, Turning Point Therapeutics, Alector, CStone and Cortexyme). Top 15 Crossover Investors drove 65% of IPOs. These investors funded mezzanine deals in seven of the top 10 2019 IPOs by market cap. Pre-clinical or phase I companies continue to dominate oncology public offerings and also make-up half of the platform deals. Neuro IPOs increased to five, with two early-stage (Prevail and Alector), a phase II (Karuna) and two phase III (Trevi and Cortexyme).

$135

$193

$140

$294

$325 $339

$0M

$200M

$400M

$600M

2014 2015 2016 2017 2018 1H 2019

IPO Median Pre-Money

Indication Number of Deals % Early Stage Median $ Last Private Round Median Step-Up at IPO*

Oncology 9 89% $94M 1.03x

Platform 4 50% $151M 1.06x

Neurology 5 40% $80M 1.13x

1H 2019 IPOs By Top Indications

Trends in Healthcare Investments and Exits Mid-Year 2019 28

$B Biopharma Deals Pick Up Speed in 2019$B+ VC-Backed Biopharma M&A and IPO Market Cap Values, 2013–1H 2019

$B+ Public Deals by IPO Vintage: 53 Companies

$B+ M&A Deals by Year: 22 Private/13 Public

$B+ deal defined as a venture-backed company since 2013 that achieved an M&A with $1B+ total deal value, or is a public company (IPO since 2013) valued at $1B+ as of 06/28/19 or was acquired for at least $1B. **Acquisition announced but not closed.Source: PitchBook, press releases and SVB proprietary data.

Billion-dollar-plus deals continued in biopharma, especially in the public market, and appear to be speeding up. Six Class of 2019 IPOs are currently trading at more than a $B market cap as of 1H 2019, one behind the full-year IPO Classes of 2018 and 2017, and equaling the Classes of 2015 and 2016. Billion-dollar M&A activity in 1H 2019 keeps pace with 2018, as four companies were acquired for $B+ total deal value, with two private deals and two public companies, Clementia (IPO Class of 2017) and Spark (IPO Class of 2015).

As of 1H 2019, the IPO Class of 2018 had three deals drop from the $B+ list, while IPO Class of 2016 added three (Audentes, Ra Pharma and Novanta).

2014 2015 2016 2017 2018

Private M&A Public M&A

1H 20192013

20172014 2015 2016 20182013 1H 2019

**

0%

20%

40%

60%

80%

0

20

40

60

80

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Not Venture-Backed Venture-BackedUS Orginator & Venture-Backed Europe Orginator & Venture-Backed

Trends in Healthcare Investments and Exits Mid-Year 2019 29

42% of Approved Drugs Originated as VC-Backed DealsFDA-Approved US Drugs (New Chemical Entity [NCE] & Biologics), 2009–2018% of Venture-Backed FDA Approved Drugs

Notes: *A thank you to HBM for providing the underlying data on drugs, originators and estimated peak sales.A drug’s originator is the company that discovered the drug or undertook the first clinical development effort. Venture-backed status is defined as a company that received venture investment, per PitchBook.Source: PitchBook, HBM and SVB analysis.

Num

ber o

f Com

pani

es

Backing StatusUS

Originator*Europe

Originator*Peak

Sales ($M) Orphan/RareFirst

in ClassOncology

Drugs

VC-Backed 111 16 $159,655 60 56 38

Non VC-Backed 82 92 $149,480 67 55 48

% VC-Backed 58% 15% 52% 47% 50% 44%

The late 2000s saw huge cuts in Big Pharma R&D budgets and an increase in both corporate investment and collaborations with venture-backed biopharma companies. Nine-year data shows that this strategy has paid off. Of the new drugs approved in the US, 42% originated from VC investments. For assets originated specifically in the US, that number swells to almost 60% . Venture-backed FDA-approved drugs since 2009 account for almost $160B in projected peak sales, 52% of the total.Venture-backed companies also produced 50% of first-in-class drugs and initiated about half of the approved oncology and orphan/rare drugs since 2009. Exits in biopharma typically come early (phase II and earlier) so development is continued by the acquirer. This trend shows that a significant number of theseventure-backed assets get approval and into patients.

10

11

3

3

8

5

18

19

13

14

19

10

2014

2015

2016

2017

2018

1H 2019

IPO M&A

$0B

$5B

$10B

2014 2015 2016 2017 2018 1H 2019

M&A Upfront M&A Milestones IPO Market Cap

Trends in Healthcare Investments and Exits Mid-Year 2019 30

Device Exits Pick Up SteamVC-Backed Device Big Exits and IPOs, 2014–1H 2019

M&A defined as private, venture-backed M&A with upfront payments of at least $50M. IPO defined as private, venture-backed IPO raising at least $25M in proceeds.Market cap at IPO used to estimate value of public companies.Source: PitchBook, press releases and SVB proprietary data.

$7.1B$8.4B

$5.1B $5.1B

$7.4B

27

17

16

30

15

Year # of IPOs Median Pre-Money

Median Raised

2019 5 $233M $91M

2018 8 $217M $86M

2017 3 $59M $26M

2016 3 $164M $75M

2015 11 $156M $77M

2014 10 $189M $70M

A Number of Exits by Year [A] 1H 2019 saw nine M&As and five IPOs, continuing 2018’s strong exit environment.

[B] Led by Johnson & Johnson's $5.8B acquisition of Auris, device's total exit value already set a full-year record of $9.4B. Consistent 1H 2019 M&A and IPOs, in addition to this big deal, forecast 2019 as a strong year for exits.

[C] Robust IPO deal size and pre-money valuations continued in 1H 2019. Four of the five device IPOs in 2019 are outperforming their IPO price, with cardiovascular-focused IPOs of Shockwave and Silk Road trading up 235% and 140%, respectively. However, the 2018 IPO class has shown mixed results, especially in neuro. Implantables-based IPOs have performed well (up 250% and 150% post-IPO) while non-invasive neuro companies have struggled (down 30% and 80%). 28

$9.4B

Exit Values by Year Device IPO Activity B C

1

42

32 2

1

5

43

2 2

15

10

78

15

6

2014 2015 2016 2017 2018 1H 2019

Median Upfront ($M) $180 $125 $120 $113 $190 $115

Median Total Deal ($M) $185 $141 $380 $275 $225 $220

Median Years to Exit 6.9 7.0 8.1 7.7 8.1 8.3

US CommercialCE Mark OnlyNon-approved

Trends in Healthcare Investments and Exits Mid-Year 2019 31

Spotlight Turns to Robotics with Record Auris Deal VC-Backed Device Big Exit M&A by Stage*, 2014–1H 2019

M&A defined as private, venture-backed M&A with upfront payments of at least $50M. *Stage defined as US Commercial (FDA-approved), CE Mark Only (no FDA approval) and Non-approved (development stage).Source: PitchBook, press releases and SVB proprietary data.

Johnson & Johnson’s acquisition of surgical robotics company Auris ($3.4B up-front, $5.8B total) took center stage in 1H 2019. The upfront was 4x bigger than any other VC-backed device M&A we have seen. This provided huge returns to the Series A and B venture investors, as the $35M Series B post-money valuation was just $45M. Series A venture investors were Highland Capital Partners and Kleiner Perkins, while Series B venture investors were Lux Capital and Mithril Capital.

1H 2019 upfront deal value declined, and time to exit extended slightly. However total deal value was similar to 2018. Cardiovascular, orthopedic and surgical each had two M&A deals.

Stryker acquired two companies in 1H 2019 and a total of three since 2018, highlighting an aggressive venture-backed M&A strategy. Medtronic and Abbott emerged from a VC-backed acquisition hiatus, each acquiring a device company in 1H 2019. Boston Scientific continued its torrid M&A pace, buying its tenth venture-backed device company since 2017. Other acquirers buying multiple venture-backed device companies since 2017 include Johnson & Johnson, LivaNova, Merit and Smith & Nephew.

Number of Big Exits

$4.3B

$3.7B

$4.4B$4.7B

$4.8B

$7.7B

2015–1H 2019 Stage at ExitMedian

Invested ($M)

Median Upfront

($M)

MedianUpfrontMultiple

Median Total Deal

($M)

Median Total Deal Multiple

Median Time to

Exit (Years)

510(k) M&As39 Exits $46 $110 3.4x $140 4.7x 8.9

De Novo 510(k) M&As4 Exits

$46 $360 4.6x $435 6.1x 8.8

PMA M&As31 Exits $51 $200 3.4X $315 5.8x 6.7

Trends in Healthcare Investments and Exits Mid-Year 2019 32

510(k) Deals Now Show Faster Exits, More MilestonesVC-Backed Device M&A by Pathway, 2015–1H 2019

1

4

36

2

Development StageCE Mark OnlyFDA-Approved

5

1214

Exit analysis by pathway has shown that 510(k) exits typically require both FDA clearances and revenue ramp before an acquisition and that premarket approval (PMA) deals were usually acquired prior to FDA approval. This trend continued in 1H 2019. Five of the six 510(k) exits were FDA-cleared, commercial stage at acquisition, while three of the four PMA deals were bought before FDA approval.

510(k) exit metrics improved over the last 18 months versus 2015–2017. Upfront deal values were similar, but with less capital invested (median of $41M versus $50M) and quicker time to exit (median of 7.3 years versus 9.0 years). 510(k) exits in prior years had no milestones but that has changed. The median milestone for a 510(k) exit in 1H 2019 was $100M, and five of six 510(k) deals had milestones earn-outs.

M&A defined as private, venture-backed M&A with upfront payments of at least $50M.510(k) is an FDA classification that provides clearance to market typically without clinical trials. De Novo 510(k) is a classification that provides approval to market but typically requires clinical trials. PMA is a classification that provides approval to market but typically requires pivotal clinical trials to collect safety and effectiveness data. Source: PitchBook, press releases and SVB proprietary data.

7

5

1

2

2

10

8

5

10

4

2014

2015

2016

2017

2018

1H 2019

IPO M&A

Number of Exits by Year

$0B

$3B

$5B

2014 2015 2016 2017 2018 1H 2019

M&A Upfront M&A Milestones IPO Market Cap

Trends in Healthcare Investments and Exits Mid-Year 2019 33

Big Dx/Tools IPOs Balance Weak M&A LandscapeVC-Backed Dx/Tools Big Exits and IPOs, 2014–2018

M&A defined as private, venture-backed M&A with upfront payments of at least $50M. IPO defined as private, venture-backed IPO raising at least $25M in proceeds.Market cap at IPO used to estimate value of public companies. *Market Cap and Stock prices as of 06/28/19.Source: PitchBook, press releases and SVB proprietary data.

$3.9B$3.4B

$1.5B

$0.3B

$4.0B

6

17

A

Company IPO Price/Date Price 6/28/19

Price +/-

Market Cap*6/28/19

GuardantHealth $19 10/4/18 $86 352% $7,910M

TwistBioscience $14 10/31/18 $29 107% $942M

Personalis $17 6/20/19 $27 59% $808M

AdaptiveBiotechnologies $39 6/27/19 $48 23% $5,720M

12

13

$3.2B

[A] Dx/Tools M&A activity decreased in 1H 2019 with only four deals (three of them R&D Tools). Deal values also decreased. Two recent IPOs (Personalis and Adaptive Biotechnologies) performed very well in the after-market.

[B] Total deal value was dominated by IPOs, with only $530M in total deal value from M&A. We continue to wait for a $B+ M&A. There are four private Dx/Tools companies currently valued at $B+.

[C] IPO has been the way to create value in Dx/Tools. Since 2015, there have been 10 Dx/Tools IPOs, with eight of these companies trading up. The median market cap of this group was $890M with four deals valued at $B+ as of 1H 2019.

Exit Values by Year Dx/Tool IPO Activity 2018–1H 2019 B C

Trends in Healthcare Investments and Exits Mid-Year 2019 34

Dx/Tools M&A Activity, Dollars Trail Other SectorsVC-Backed Dx/Tools Big Exit M&A, 2014–1H 2019

Median Upfront ($M) $133 $164 $225 N/A $126 $68Median Total Deal ($M) $239 $164 $325 N/A $161 $83Median Years to Exit 6.0 3.6 8.5 N/A 9.1 6.7

$0B

$1B

$2B

$3B

2014 2015 2016 2017 2018 1H 2019

R&D ToolsDx AnalyticsDx Tests

$2.8B

$1.4B $1.5B

NoExits

$2.3B

M&A defined as private, venture-backed M&A with upfront payments of at least $50M. Source: PitchBook, press releases and SVB proprietary data.

Number of Big Exits

$0.5B

Deal values decreased as acquirers played small ball by either adding technological horsepower to their current capabilities (Just Biotherapeutics by Evotec, Singular Bio by Invitae) or expanding an existing market (Invisible Sentinel by bioMérieux, Labcyte by Beckman Coulter). Both Just and Singular were quick, cash-efficient R&D Tools exits with Just exiting 3.7 years fromSeries A on $29M raised capital and Singular exiting 5.2 years from Series A on $29M raised capital.

Trends in Healthcare Investments and Exits Mid-Year 2019 35

2H 2019 Outlook

• While 1H 2019 was very strong, market uncertainty may lead to a 2H slowdown for US fundraising, resulting in slightly lower full-year totals compared to 2018.

• Biopharma investments will also decline from the 2018 record but remain robust overall, as strong 1H 2019 IPO activity should continue to spur large pre-IPO financings. We expect the biopharma IPO pipeline to remain strong, but it likely won’t reach the activity and record valuations of full-year 2018.

• The strong performance of device IPOs should spur continued later-stage venture investment, which may lead to device investment surpassing 2018 totals.

• A group of later-stage, VC-backed device companies show promise for IPO activity to grow in 2H 2019. We expect healthy M&A activity to continue.

• Dx/Tools Series A deals for Dx Analytics companies likely will climb in 2H 2019, and R&D Tools investment could surge after successful IPOs by Adaptive Biotechnologies and Personalis.

• In the last year, the public market has been a successful way for Dx/Tools companies to capture value. Accordingly, we anticipate more $B+ IPOs than private M&A for 2H 2019. We also believe tech companies will start to acquire Dx/Tools companies in the AI/ML big data space.

• 1H 2019 investments in digital health have already eclipsed full-year 2017 investments and are on track to reach >$10B for the full-year 2019.

Trends in Healthcare Investments and Exits Mid-Year 2019 36

GlossaryBig ExitsBig Exits defined as a private, venture-backed merger and acquisition 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 OfferingIPO defined as a venture-backed company raising IPO proceeds of $25 million or more.

Deal DescriptionsStructured Deal defined as a pay-for-performance acquisition where some of the deal value is paid upfront when the deal closes, but also contains additional value based on milestones that must be achieved.

All-In Deal defined as an acquisition where the full deal value is paid upon deal close.

Upfront Payments defined as initial proceeds from an acquisition paid upon the close of a structured deal; they do not include milestones.

Milestones to be Earned defined as proceeds from an acquisition that are paid once predetermined milestones are met.

Total Deal Value defined as the full value of the acquisition, including any milestones to be earned.

Time to Exit defined as the time from the close of a company’s first institutional round of financing to the exit.

Step-Up defined as the valuation change from the last round post-money value to the next round pre-money value.

Corporate InvestorCorporate Investor defined as both corporate venture and parent company investment into venture-backed companies.

Series ASeries A defined as all first-round institutional or corporate venture investment, and all first-round investments equal to or greater than $2M, regardless of investor.

Device Regulatory DefinitionsNon-approved defined as a device product that has no regulatory clearance or approval for its product.

CE Mark Only defined as a device company that has CE Mark approval but has not received FDA approval. CE Mark is a European Union designation that is typically less difficult to obtain than FDA approval, and the approval process often has a faster timeline.

510(k) defined as an FDA classification that provides clearance to market typically without clinical trials.

De Novo 510(k) defined as an FDA classification that provides approval to market but typically requires clinical trials.

PMA defined as an FDA classification that provides approval to market but typically requires pivotal clinical trials to collect safety and effectiveness data.

US Commercial defined as a device company that has received FDA approval or clearance of its product and usually is in commercial stage.

Indication DefinitionsNeurology (neuro) defined as CNS, pain and psychology companies, as well as neuro implant technologies.

Non-Invasive Monitoring defined as medical data collection through sensors and other technology.

Dx Tests defined as proprietary Yes/No diagnostic tests.

Dx Analytics defined as actionable data analytics to help determine/direct treatment.

R&D Tools defined as research equipment/services for biopharma and academia.

Top 15 Crossover InvestorTop 15 Crossover Investor defined as a public-minded investor who strategically invests in private companies. The top 15 list includes: Casdin Capital, Cormorant Asset Management, Deerfield Management, EcoR1 Capital, Fidelity Investments, Foresite Capital Management, Perceptive Advisors, RA Capital Management, RedmileGroup, Rock Springs Capital, Softbank, T. Rowe Price, Viking Global Investors, Wellington Management and Woodford Investment Management.

Jonathan NorrisManaging DirectorSilicon Valley [email protected]@jonnysvb

Ritish PatnaikHealthcare [email protected]

Dhruv K. Vig, Ph.D.Senior AssociateSilicon Valley [email protected]

Trends in Healthcare Investments and Exits Mid-Year 2019 37

About the Authors

As a Managing Director, Jonathan Norris spearheads strategic relationships with many healthcare VC firms. In addition, he helps SVB Capital through sourcing and advising on limited partnership allocations and direct investments.

Jonathan speaks at major investor and industry conferences and authors widely cited analyses of healthcare VC trends. He has 18+ years of banking experience working with healthcare companies and VC firms. Jonathan earned a B.S. in business administration from the University of California, Riverside, and a J.D. from Santa Clara University.

As a Healthcare Consultant, Ritish Patnaik developed SVB’s deep dives of the Dx/Tools, synthetic biology and oncology biopharma subsectors. He also helped put together takeaways for investment and exit trends presented in this report.

Ritish is pursuing a Ph.D. in bioengineering at Stanford University where he is using bioinformatics and magnetics to create a liver cancer liquid biopsy test. He is a co-founder of Luso Labs, a startup that brings affordable cervical cancer screening worldwide. Ritish has a B.S. in biomedical engineering from Columbia University and an M.S. in management science and engineering from Stanford.

Dhruv K. Vig is a Life Science & Healthcare Senior Associate based in San Francisco.

Before joining SVB, Dhruv co-founded a digital health company and worked with entrepreneurs at SRI (formerly Stanford Research Institute) International helping them launch their ventures. He holds a Ph.D. from the University of Arizona and completed a postdoctoral fellowship at Johns Hopkins University in computational biophysics.

Disclaimers

This material including, without limitation, to the statistical information herein, is provided for informational purposes only. The material is based inpart 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, noris it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making anyinvestment decision. Nothing relating to the material should be construed as a solicitation, offer or recommendation to acquire or dispose of anyinvestment or to engage in any other transaction.

Silicon Valley Bank is registered in England and Wales at Alphabeta, 14-18 Finsbury Square, London EC2A 1BR, UK under No. FC029579. Silicon ValleyBank is authorised and regulated by the California Department of Business Oversight and the United States Federal Reserve Bank; authorised by thePrudential Regulation Authority with number 577295; and subject to regulation by the Financial Conduct Authority and limited regulation by thePrudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request.

Silicon Valley Bank, a public corporation with limited liability (Aktiengesellschaft) under the laws of the U.S. federal state of California, withregistered office in Santa Clara, California, U.S.A. is registered with the California Secretary of State under No. C1175907, Chief Executive Officer(Vorstand): Gregory W. Becker, Chairman of the Board of Directors (Aufsichtsratsvorsitzender): Roger F Dunbar.

Silicon Valley Bank Germany Branch is a branch of Silicon Valley Bank. Silicon Valley Bank Germany Branch with registered office in Frankfurt amMain is registered with the local court of Frankfurt am Main under No. HRB 112038, Branch Directors (Geschäftsleiter): Oscar C. Jazdowski, John K.Peck. Competent Supervisory Authority: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), Graurheindorfer Straße 108, 53117 Bonn, Germany.

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Trends in Healthcare Investments and Exits Mid-Year 2019 38

See complete disclaimers on previous page.©2019 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).

About Silicon Valley BankFor more than 35 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.

Trends in Healthcare Investments and Exits Mid-Year 2019 39

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