Healthcare Report 2017

Trends in Healthcare
Investments and Exits 2017

Strong Fundraising and Innovation Fuels
Healthcare Momentum
Written by:
Jonathan Norris Paul Schuber Caitlin Tolman Visit svb.com
Managing Director Senior Associate Senior Associate Follow @SVB_Financial
Silicon Valley Bank SVB Analytics Silicon Valley Bank Engage #SVBHealthcare
Table of Contents
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
Trends in Healthcare Investments and Exits 2017 2

2016 Key Highlights
After an exceptionally strong 2015, we saw a decline in investment in 2016,
but fundraising remains at historically robust levels.
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. AbbVies $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.

Healthcare Investments and Fundraising:
Series A Activity Booms

Biopharma Keeps Pace with Overall
Venture Investing
Biopharma and Device Investment as a Percentage of All U.S. Venture Investing
Total VC Capital Invested ($B) Biopharma as % of Total US VC $
Venture investments in companies
Device as % of Total US VC $
$90 18%
from 2014-2016 nearly doubled
compared with 2011-2013.
$80 16%
Percentage of U.S. Venture Investing

Total VC Capital Invested in Billions
Biopharma investments have scaled

$70 14% similarly. During 2014-2016, strong
IPO and M&A big exit activity has
$60 12%
spurred healthy returns, additional
$50 10% fundraising and an invigorated
investment pace.
$40 8%
Device companies maintained
$30 6% consistent overall exit activity, but it
took longer to reach M&A exits, and
$20 4%
there were fewer IPOs. As a result,
$10 2% many investors shifted dollars to
biopharma.
$0 0%
2009 2010 2011 2012 2013 2014 2015 2016*
Total VC
26.4 31.0 44.2 40.5 44.5 68.7 78.9 74.0
Dollars ($B)
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%
*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. Trends in Healthcare Investments and Exits 2017 5
Biopharma Investing Off Record High and
Device Declines
U.S. Biopharma and Device Investment Dollars and Deals
Pharma & Biotech ($B) Pharma & Biotech (# of Deals) Biopharma investments declined
$12 700
612 15 percent from 2015 but marked a
548 562 600
$10
475
496
$9.8 393 20 percent increase compared with
459 500
$8 2014. While Series A investments
BIOPHARMA
402 $6.8 $8.3

400 were up, later-stage dollars were
$6 $4.7 $4.8
$4.5
$3.9 $4.1 300 down.
$4
200
$2
The number of biopharma deals slid
100
to the lowest level in four years. We
$0 0 anticipate similar deal and dollar
2009 2010 2011 2012 2013 2014 2015 2016* activity in 2017.
HC Devices & Supplies ($B) HC Devices & Supplies (# of Deals)

Device investments grew annually
$6 700 since 2012, but in 2016 the amount
583
600 598 614 invested was projected to decline
$5 548 600
486 $4.3
$4.5 25 percent, down $1.4 billion.
$5.3
449 $3.9 $3.8
383 500 That marks a four-year low, and
$4
$3.5 $3.9
400
the number of deals was at a
$2.9
$3 six-year low.
DEVICE
300
$2
200
For 2017, we forecast device
investment dropping to $3.5 billion.
$1 100 However, the recently enacted 21st
$0 0 Century Cures Act could provide
2009 2010 2011 2012 2013 2014 2015 2016* additional capital and faster
approvals, spurring increased
investment.
*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. Trends in Healthcare Investments and Exits 2017 6
Steady Fundraising Continues as Investments
Come Off Record 2015
U.S. Healthcare Capital Invested and VC Dollars Raised
$16
Spurred by biopharma investments,
overall healthcare venture investing
$14 continued strong, though below the
record year of 2015.
$12.2B
$12 Fundraising was robust as investors
who saw large returns in recent years
$10
raised new funds.
($ Billions)
More than $20 billion in venture

$8 funds have been raised since 2013,
$7.2B which will continue to propel
investment.
$6
Looking ahead the next two years,
we expect investments into
$4
companies to level off at $10.5$11
billion annually through a
$2 combination of venture, corporate
and other investors.
$0
2009 2010 2011 2012 2013 2014 2015 2016
HC $ Invested in Companies HC VC $ Fundraised Gap in Funding
Source: PitchBook, NVCA and SVB proprietary data. Trends in Healthcare Investments and Exits 2017 7
Series A Takes Off in 2016
U.S. Company Formation: Deals and Investments in Series A
# of Deals 2013 2014 2015 2016 Biopharma Series A investments

137
BIOPHARMA 87 were up dramatically, spurred by
60 75
newly raised venture funds and
early-stage exits.
Total Series A ($M) $746 $701 $1,843 $2,127 Oncology led indications, and
CVC Deals % / # 38% / 10 35% / 18 26% / 23 22% / 25 orphan/rare disease placed second.
Oncology Oncology Oncology Oncology
Top 3 Indications Platform
Drug Delivery
Neuro
Anti-Infective
Anti-Infective
Neuro
Orphan/Rare Disease
Neuro
Series A also grew significantly for
device, but corporate investments in
61 early-stage companies dropped off.
42
# of Deals
DEVICE
38
31 We expect corporate investment to
return in 2017 and see increased
engagement by Chinese corporate
investors.
Total Series A ($M) $96 $268 $155 $235
CVC Deals % / # 24% / 4 16% / 5 14% / 5 6% / 3 Dx/Tools saw meaningful early-stage
Imaging Cardiovascular Neuro Neuro momentum in 2016.
Top 3 Indications Cardiovascular Neuro Cardiovascular Respiratory
Neuro Vascular Access Ophthalmology Cardiovascular, Orthopedic
Dx outpaced tools, with 59 percent of
63 the Series A deal flow and 60
# of Deals
39 34 percent of total investment. At $125

29
DX/TOOLS million, Grail was the largest
venture-backed Dx/Tools Series A
deal we have seen.
Total Series A ($M) $108 $137 $252 $503
CVC Deals % / # 20% / 3 18% / 3 13% / 4 19% / 10
Source: PitchBook and SVB proprietary data. Trends in Healthcare Investments and Exits 2017 8
Venture and Corporate Investment in Biopharma
Continues Strong
Most Active New Investors in Biopharma 20152016*
# of Deals
26
20
19
14
13
12
11
10
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 20152016.
Oncology Leads Biopharma Investments;
Orphan/Rare Disease Sees New Interest
Most Active New Investments in Biopharma by Indication 20152016*
Oncology 63 10 3
Platform 21 3 1
Neuro 17 7
Orphan/Rare Disease 16 3 4
Anti-Infective 15 2
Auto-Immune 9 2
Metabolic 8 1
Early Stage Late Stage Undesignated
Ophthalmology 4 1
Gastrointestinal 4 1
Trends: Oncology, Orphan/Rare Cardiovascular
Cardiovascular 5
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 years 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.
*Most Active New Investors in biopharma defined as Top 44 venture and corporate investors based
on new investments in 20152016.
Massachusetts and Northern California
See Majority of Activity
Most Active New Investments in Biopharma by Geography 20152016*
Top 5 U.S. Biopharma Top 5 OUS Biopharma

WA
8 deals $192M Canada
8 deals $417M
MA
United
54 deals $2,127M Kingdom
Northern NY 11 deals $379M
CA 9 deals $316M
43 deals $1,648M
Sweden
3 deals $96M
Southern
CA Switzerland
20 deals $631M 5 deals $117M
China
5 deals $285M
*Most Active New Investors in biopharma defined as Top 44 venture and corporate investors based
on new investments in 20152016.
Diverse Investors Focus on Device
Most Active New Investors in Device 20152016*
# 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.
*Most Active New Investors in medical device defined as Top 36 investors based on new
New Category of Non-Invasive Monitoring
Receives Substantial Investment
Most Active New Investments in Device by Indication 20152016*
Cardiovascular 7 6 2
Surgical 2 6 2
Vascular Access 7 2 1
Neuro 8 2
Non-Invasive
Non-Invasive
Monitoring 5 3 2
Uro/Gyn 4 3 1
Orthopedic 2 1 5
Ophthalmology 3 2 2 Early Stage Late Stage Undesignated
Metabolic 3 3
Trends:
Drug Delivery 3 1 1 Non-Invasive Monitoring,
Cardiovascular, Neuro Aesthetics/Derm
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
Most Active New Investments in Device by Geography 20152016*
Top 5 U.S. Device Top 5 OUS Device

WA
7 deals $138M Israel
5 deals $55M
MA
11 deals $255M France
3 deals $21M
Northern
CA
Switzerland
28 deals $663M
6 deals $180M
Southern
CA Ireland
TX Italy
Tech-focused VCs Dive into Dx/Tools
Most Active New Investors in Dx/Tools 20152016*
# 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).
*Most Active New Investors in Dx/Tools defined as Top 31 investors based on new investments in
20152016.
Northern CA Continues to be Most Active
Region for Dx/Tools
Most Active New Investments in Dx/Tools by Geography 201516*
Top 5 U.S. Dx/Tools Top 5 OUS Dx/Tools

WA
Canada
2 deals $24M
4 deals $42M
MA
United
7 deals $106M Kingdom
1 deal $2M
Northern UT
CA
2 deals $61M France
19 deals $1,193M
3 deals $35M
Southern
CA
7 deals $345M Israel
1 deal $13M
Italy
2 deals $6M
*Most Active New Investors in Dx/Tools defined as Top 31 investors based on new investments in
20152016.
Deal Sizes for Biopharma Soar
Median Deal Size for Most Active New Investors 20132016*
Biopharma
40 $36.0 Biopharma deal sizes have more than
$30.0
Median Deal Size
doubled since 2013. Our analysis

30 $23.0
indicates three major reasons:
20 $15.3
($M)
Increased fund size investors

10
are putting more dollars to work
0 per company
2013 2014 2015 2016
Series A lasting longer many of
Device $18.0 the Series A deals we see are
Median Deal Size ($M)
20 $17.1 $16.3
$15.2 large tranched rounds that
15 provide 3-4 years worth of
financing. This allows company
10
management to focus on growing
5 the business instead of constantly
fundraising
0
2013 2014 2015 2016 Bigger syndicates larger
syndicates mean larger round
Dx/Tools
Median Deal Size ($M)
20 sizes and also provide financial

$14.2 security. A company can sustain
15 $10.0 $12.4 $12.0
itself for long periods of time with
10 inside rounds if there is a down
financial market
5
0
2013 2014 2015 2016
*Most Active New Investors in biopharma (60), medical device (36) and Dx/Tools (31) defined as top
investors based on new investments in 20152016.
Top 15 Crossover Investors:
Investments Decline as
Crossovers Focus on IPOs

Crossover Investments in Biopharma
Decline Rapidly
Top 15 Crossover Investors in Biopharma 20132016*
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013 2014 Total
2015 2015 2015 2015 2016 2016 2016 2016
PRIVATE
14 74 30 42 68 23 13 13 11 10 298
INVESTMENTS
Top Biopharma Crossover Investors 2016
11 *Top 15 Crossover Investors:

Adage Capital Management,
Cormorant Asset Management,
6 Deerfield Management, EcoR1
Capital, Fidelity Investments,
Foresite Capital Management,
6 Jennison Associates, Partner Fund
Management, Perceptive
4 Advisors, RA Capital Management,
Redmile Group, Rock Springs
Capital, Sabby Capital, Wellington
4 Management and Woodford
Investment Management
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 based on new investments in 20152016.

Top 15 Crossovers Drive Biopharma IPO Activity
IPOs with Top 15 Crossover Investors vs. Other Venture-Backed Investors
70 For two years in a row, the top 15

crossover investors drove more IPOs
58 than all other venture investors.
60
These crossover investors seek a
foothold in private venture-backed
50 companies interested in an IPO and
typically are major participants in
the resulting IPO.
40
As the overall biopharma IPO market
# of IPOs
32 has slowed in recent years, the

crossover share of IPOs has grown.
30
23 Top 15 Nearly 60 percent of biopharma IPOs
Crossovers* had a top 15 crossover investor (16
20 of 28) in 2016.
19 16
However, crossover-backed IPOs
8 12 declined significantly (from 11 to 5)
10
2 Other Investors** in the second half of 2016. We
believe crossovers will resume their
0 IPO push in early 2017.
2013 2014 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.
Source: PitchBook, press releases and SVB proprietary data. Trends in Healthcare Investments and Exits 2017 20
Healthcare Big Exit M&A and IPOs:
Robust M&A Activity
Continues as IPOs Slow

Potential Distributions* Dip from Record High,
But Up Cycle Continues
Potential Distributions from VC-backed IPOs and Big Exit M&A 20122016
Pre-Money IPO Value Potential distributions nearly tripled

between 2012 and 2015. However, as
24 Big Exit Milestones to be Earned
we predicted, such growth is not
22 Big Exit Upfront Payments sustainable. The slower IPO market
20 led to lower distributions in 2016,
though they still outpaced 2013.
18 $11.6
Total Value ($ Billions)
16 In 2016, the value of big exit M&A

$12.1
$4.4 upfront payments (see brown
14
columns) outpaced pre-money IPO
12 values for the first time since 2012.
$2.0 $3.1
10 $8.8 The Stemcentrx acquisition
8 $1.0 accounted for about half of the
$2.1 April 2016: upfront M&A proceeds.
6 $0.8 Stemcentrx
$1.8 $10.1 In 2017, we expect potential
$9.2 acquired by
4 $8.0
$5.4 AbbVie for distributions to closely match 2016.
2 $4.3
$5.8 billion
0
2012 2013 2014 2015 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 calculated as 75% of upfront payments, 25% of milestones, and 75% of pre-
money IPO value.
Biopharma Big Exits and IPOs Slow Down
VC-backed Biopharma Exits 20122016
We predicted IPOs would decline to

about 7-8 per quarter, and 2016
2016 28 17
ended with 28. We saw a steep
decline in Q4.
We were surprised to see M&A

2015 42 22 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.
2014 66 14
Orphan/rare disease exits increased
to match oncology, with 7 exits each
(M&A and IPOs). Exit activity also
increased for aesthetics/
2013 34 12 dermatology, rare (non-genetic)
and metabolic indications.
Neuro, cardiovascular and anti-

2012 10 15 infective saw the largest declines in
exits in 2016.
0 20 40 60 80 100
IPO M&A
Acquirers Flock to Early-Stage
Biopharma Companies
VC-backed Biopharma Big Exit M&A by Stage 20122016
25 Early-stage big exits continued to
Pre-Clinical Phase I Phase II Phase III Commercial dominate in 2016, with more than
half occurring in pre-clinical and
phase I. These indications included
orphan/rare disease, neuro,
20 oncology, aesthetics/dermatology
and auto-immune.
Aesthetics/dermatology tied with
1 oncology for the most M&A activity
15
9 in 2016 (3 deals). Neuro and
orphan/rare disease had two deals
# of Big Exits
1 each.
6
1
6 Early-stage M&A activity is expected
3 to continue in 2017. If corporate tax
10 4 repatriation should occur, we think
4 that would free up cash and lead to
1
2 increased activity above 2015 levels.
3 3
8
5 4
7
4
5
2
2
1 1
0
2012 2013 2014 2015 2016
*Stage defined as last completed clinical trial in most advanced asset.

Biopharma Big Exit Deal Values Are Stable,
Despite IPO Decline
VC-backed Biopharma Big Exit M&A Deal Structure 20082016
In 2016, the median upfront deal
24 value for biopharma big exits was
# of Structured Deals # of All-In Deals
stable and substantial.
22
20 The acquirers were a mix of big
18 pharma and large biotech
10 companies. Allergan, at the top of
16
the list, acquired four companies.
# of Big Exits
14 2 7
12 5 A possible new trend in 2017:
10 3 Avalanche, which went public in
2014, became an acquirer in 2016.
8
6 13 12 In 2016, we saw four disclosed big
9 9 10
4 exits valued at more than $1 billion
2 (including milestones). In order of
total deal size: Stemcentrx, Afferent,
0 Nimbus and Ganymed.
2012 2013 2014 2015 2016
Median Because of the IPO slowdown,

125 213 225 200 200 acquirers felt less pressure to act, so
Upfront ($M)
Median time to exit increased.
375 452 413 570 535
Total Deal ($M)
Median
Years to Exit
5.1 5.6 4.0 4.2 6.0
Oncology, Neuro Lead Biopharma Big Exits;
Orphan/Rare Disease Gains Early-Exit Traction
VC-backed Biopharma Big Exit M&A by Indication 20122016
Number of Median Years
Pre-Clinical Phase I Phase II Phase III Commercial
Exits 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 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.
*Stage defined as last completed clinical trial in most advanced asset.

Anti-Infective and Cardiovascular See
Largest Upfront Multiples
VC-backed Biopharma Big Exit M&A by Indication 20122016
Median Median Total
Number of Median Medium Median
Upfront Multiple Deal Multiple
Exits Invested ($M) Upfront ($M) Total Deal ($M)
On VC $ 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 20122016 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
VC-Backed Biopharma IPOs by *Stage 20122016
70
5
60 6
50
26
# of IPOs
40 6
30 2
8 17 2
7
20 20
13 6
9
10 8
6
8 9 9
3 1 1 5
0
2012 2013 2014 2015 2016
Pre-Clinical Phase I Phase II Phase III Commercial
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.
*Stage defined as current clinical trial in most advanced asset.

Dollars and Values Decline as IPOs Wane
VC-backed Biopharma IPOs by Pre-Money Valuation and Dollars Raised 20122016
250 The number of large IPOs declined

significantly in 2016: Intellia, which
focuses on orphan/rare diseases,
$202
200 $199 was the only $100 million-plus IPO.
Median Amount ($ Millions)
$182 In 2015, nearly one of three IPOs

raised $100 million-plus.
$141 $156
150 Median pre-money valuations
dropped to $156 million, compared
with nearly $200 million in 2015.
100 Still, 2016 was higher than 2014.
$71 $70 We think a key reason crossover
$61 $62 investors retreated from the IPO
50 $53 market in the second half is that
pre-money valuations plummeted
in Q2 and Q3 2016.
0
2012 2013 2014 2015 2016 On a positive note, Q4 2016 saw two
solid venture-backed IPOs:
# of IPOs Raised CRISPR Therapeutics and Ra
1 8 12 13 1 Pharmaceuticals. Each company
Over $100M
% of IPOs Raised raised $90 million-plus with healthy
10 24 18 32 4 pre-money values and appear to be
Over $100M
holding their values post-IPO.
Acquisitions of Newly Public Companies Soar,
Generating Significant Returns
VC-backed IPOs Acquired within 2.5 Years from IPO/Reverse Merger 20132016
IPO Pre- Acq. Price Acq. Price
Total Deal
Company IPO money Acquisition ($M) ($M) in Acquirer Sector Indication Stage*
Size ($M)
Value ($M) Upfront Milestones
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
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 $19 billion on
these companies.
*Stage defined as current clinical trial in most advanced asset. **RM defined as reverse merger.
Biopharma Landscape Oncology Exits
VC-backed Biopharma Big Exit M&A and IPO in Oncology 20132016
9,800
1,400
M&A* Pre-Clinical
4,000 M&A* Phase I
M&A* Phase II
1,200
1,250 M&A* Commercial
IPO**
1,000
Total Value ($ Millions)
800
600
400
200
0
Jan. '13 Aug. '13 Mar. '14 Sep. '14 Apr. '15 Oct. '15 May. '16 Nov. '16
2016: Undisclosed deal
*Stage for M&A defined as last completed trial in most advanced asset. **IPO value is pre-money IPO value.
Biopharma Landscape Neurology Exits
VC-backed Biopharma Big Exit M&A and IPO in Neurology 20132016
1,000
M&A* Pre-Clinical
M&A* Phase I
900 M&A* Phase II
M&A* Commercial
800 IPO**
700
600
500
400
300
200
100
-
Aug. '13 Mar. '14 Sep. '14 Apr. '15 Oct. '15 May. '16 Nov. '16
2016: Undisclosed partnership payout
*Stage for M&A defined as last completed trial in most advanced asset. **IPO value is pre-money IPO value.
Device Big Exit M&A Charges On
as IPOs Disappear
VC-backed Device Exits 20122016
In 2016, device big exit M&A activity
declined from the highs of 2014 and
2016 3 13 2015, but beat 2013. Surprisingly,
2016 M&A exits declined each
quarter, ending with a single deal
in Q4.
2015 11 19
Orthopedic (4 deals) and
ophthalmology (3 deals) led
indications in 2016. This marks a
change: since 2012, orthopedic
2014 10 18 ranked #4 and ophthalmology #5
in big exits.
Surprisingly, Medtronic, the leading

acquirer in earlier years, made no
2013 2 12
VC-backed acquisitions in 2016.
Device IPOs reappeared in late 2016.

Two 510k product companies
2012 1 14 (Tactile and iRhythm) were FDA-
approved, and had a revenue ramp at
$50 million-plus at IPO. PMA
pathway company Obalon held an
0 5 10 15 20 25 30 35
IPO immediately after FDA approval,
IPO M&A without any significant
commercialization.
Device Acquirers Continue to Focus on
Later-Stage Companies
VC-backed Device Big Exit M&A by Stage 20122016*
20 Acquirers continue to focus on
buying companies with products that
18
are FDA-approved and
16 commercialized. This puts critical
regulatory and commercialization
14 10 risk squarely on the venture
community, increasing investment
# of Big Exits
12
time and capital required.
10 8
15 7 All 7 U.S. commercial M&A deals
8 8 were 510k products. This reflects the
5 investor mindset of the early 2000s,
6
which focused on products with
4 3 7 8 easier FDA-approval paths, instead
4
2 2 of PMAs, which had unpredictable
2 3
4 FDA outcomes.
3 1
1 2 1 1 2 3
1 1
0 That said, PMA companies are being
2012 2013 2014 2015 2016 acquired, typically before FDA
approval is secured. In 2016, the
3 CE Mark Only and 2 Non-Approved
Represents # of IPOs Represents Big Exits
exits were likely PMA pathway
Non-Approved CE Mark Only U.S. Commercial companies.
*Stage defined as current stage in most advance product.

Device M&A Time to Exit Increases in 2016
VC-backed Device Big Exit M&A Deal Structure 20122016
# of Structured Deals # of All-In Deals

20 Median upfront deal values
stabilized in 2016 at $120 million,
18 but we saw a significant number of
milestones to be earned.
16
14 The time to exit rose in 2016, with

9
12 4 exits taking 10 years or more from
# of Big Exits
12 close of Series A. Just 2 deals had

4
10 7 time to exit under 6 years.
8 8 We see 510k companies reaching

approval and commercialization
6
more quickly compared with 5 years
4 9 9 ago. That should lead to quicker
7 7 time to exit in the next few years.
2 4
0
2012 2013 2014 2015 2016
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
Cardiovascular, Ophthalmology and Neuro
Achieve Exits at Earlier Stage*
VC-backed Device Big Exit M&A by Indication 20122016
Number Median Years

Non-approved CE Mark Only U.S. Commercial
of Exits to Exit
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
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.
*Stage defined as current stage in most advance product.

Cardiovascular and Vascular Lead in Milestone
Upside for Investors
VC-backed Device Big Exit M&A by Indication 20122016
Median Median Total
Number of Median Median Median
Upfront Multiple Deal Multiple
Exits Invested ($M) Upfront ($M) Total Deal ($M)
On VC $ 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
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.
Device Landscape Cardiovascular Exits
VC-backed Device Big Exit M&A and IPO in Cardiovascular 20132016
800
M&A* Non-Approved
M&A* CE Mark Only
700 M&A* U.S. Commercial
IPO**
600
500
400
300
200
100
-
Feb. '13 Aug. '13 Mar. '14 Sep. '14 Apr. '15 Nov. '15 May. '16 Dec. '16
2016: Undisclosed deal

One cardio development stage
*Stage for M&A defined as current stage in most advance product. **IPO value is pre-money IPO value.
Device Landscape Vascular Exits
VC-backed Device Big Exit M&A and IPO in Vascular 20132016
900
M&A* Non-Approved
M&A* CE Mark Only
800 M&A* U.S. Commercial
IPO**
700
600
500
400
300
200
100
-
Jul. '12 Feb. '13 Aug. '13 Mar. '14 Sep. '14 Apr. '15 Nov. '15 May. '16 Dec. '16
*Stage for M&A defined as current stage in most advance product. **IPO value is pre-money IPO value.
Dx/Tools Faces Exit Slowdown
VC-backed Dx/Tools Exits 20122016
Among the trends we are seeing: new

tools to enable drug development
2016 4 and high-end sequencing, and
substantial progress in move from
invasive diagnostics to simple blood
screens and liquid biopsies.
2015 5 8 Tech-focused investment in

bioinformatics is on the rise.
Investors expect these companies to
develop technologies faster and
2014 7 10 become more capital efficient. Still,
M&A continued to lag in 2016.
2015*
There were no Dx/Tools IPOs in

2016, in the wake of poor after-
2013 4 3 market performance. All five 2015
Dx/Tools IPOs are trading below
their IPO price. Two have seen their
share prices fall by half.
2012 6
0 5 10 15 20
IPO M&A
Tools Sector Grabs Majority of Big Exits
VC-backed Dx/Tools Big Exit M&A by Stage 20122016
10 For the first time since 2012, Tools

exits outpaced Dx in 2016.
9 Over the last two years, tools exits
earned stellar multiples on capital.
8 4
The average upfront multiples
exceeded 14x (median 7x), and had
7
shorter exit times.
6 4
# of Big Exits
With burgeoning interest from tech-

5 focused VCs, Tools are advancing
quickly and we expect exits
4 (particularly for NGS and drug
discovery) to increase in 2017.
3 6 6
1 3 While Dx exits declined in 2016, we
2 4 see a significant number of
companies ramping revenue towards
1 2
$30-$50 million. We think that level
4 7 5 1
should attract acquirer interest.
0
2012 2013 2014 2015 2016
Some early-stage Dx companies,
Represents # of IPOs Represents Big Exits using advancements in assay
development and bioinformatics,
Dx Tools may morph into drug development
companies.
Dx/Tools Sees Stable Deal Values
But Time to Exit Rises
VC-backed Dx/Tools Big Exit M&A Deal Structure 20122016
# of Structured Deals # of All-In Deals Upfront M&A values remained stable,

while total deal value went up. Time
10
to exit more than doubled from 2015.
9 2
We have seen several advancements
8
in Dx/Tools that will allow for faster,
7 cheaper technology development,
which could help continued
# of Big Exits
6 engagement and collaboration with

5 6 biopharma. We hope that these
advancements will spur exit activity
4 8 and reduce time to exit.
3 6 2
Valuable assets have commanded a
2 2 premium (Assurex and ACD),
1 2 2 however we think acquirers are
1 being selective, waiting to get
0 specific assets at the right price. Part
2012 2013 2014 2015 2016 of the slowdown could be a timing
issue as the acquirers were busy
Median completing and digesting big
Upfront ($M)
127 350 133 164 175
mergers in 2016.
Median
Total Deal ($M)
127 450 239 164 225
Median
Years to Exit
5.6 8.2 6.0 3.6 7.7
2017 Outlook: Healthcare Trends Continue
Positive Cycle
In last years 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.

Glossary
Big Exit Regulatory
Big Exits are defined as private, venture-backed merger and acquisition Non-approved
transactions in which the upfront payment is $75 million or more for Non-approved refers to a device company that has no regulatory approval
biopharma deals and $50 million or more for device and Dx/Tools deals. for its product.
CE Mark Only
Initial Public Offering This refers to a device company that has a CE Mark approval but has not
IPO is defined as a venture-backed company raising IPO proceeds more received FDA approval. CE Mark is a European Union designation that is
than $25 million. less difficult to obtain than FDA approval, and the approval process
typically has a faster timeline.
Deal Descriptions U.S. Commercial
Structured Deal Commercial refers to a device company that has an FDA-approved
This is a pay-for-performance system that pays some of the consideration product, and typically is in commercial stage.
up front, but sets milestones in development that must be achieved Series A
before the full value of the transaction will be realized. Series A companies are defined as U.S. companies raising their first
All-in Deal round greater than $2 million in equity or backed by institutional or
All consideration for the deal is paid when the deal closes. corporate venture capital.
Big Exit Upfront Payments Corporate Investor

The upfront payment refers to payments in a structured deal that are Corporate investor is defined as both venture and parent company
made at the close of the deal; it does not include milestones. investment into venture-backed companies
Big Exit Milestones to be Earned Indication Definitions

The milestones to be earned refer to payments in a structured deal that Neurology
are made after the predetermined goals are met. CNS, pain, and psychology comprise neurology.
Total Deal Value Non-Invasive Monitoring
The total deal value of a structured deal includes both the upfront Defined as medical data collection through sensors and other technology.
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.

About the Authors
As a Managing Director, Norris oversees business development efforts for banking and lending opportunities as well as spearheading
strategic relationships with many healthcare venture capital firms. He also helps SVB Capital through sourcing and advising on limited
partnership allocations.
In addition, he speaks at major investor and industry conferences and authors widely-cited analyses
of healthcare venture capital trends. Norris has more than 16 years of banking experience
Jonathan Norris
Managing Director
working with healthcare companies and venture capital firms. Norris earned a bachelors degree in business administration from the
Silicon Valley Bank University of California, Riverside, and a juris doctorate from Santa Clara University.
jnorris@svb.com
As a Senior Associate with SVB Analytics, Schuber leads strategic advisory and valuation engagements, specializing in the life sciences.
Prior to SVB Analytics, Schuber facilitated clinical trials on behalf of pharmaceutical sponsors and pre-clinical trials to advance medical
school research, which included writing and implementing IRB and IACUC protocols. Schubers healthcare experience also includes
working as an emergency medical technician and an electrocardiogram technician. He has a background in technology as well, working
in many roles, including chief technology officer of an e-commerce company.
Paul Schuber
Schuber earned a masters degree in the business of bioscience from Keck Graduate Institute of Applied Life Sciences while also studying
Senior Associate
SVB Analytics at Claremont McKenna College at the Robert Day School of Economics and Finance. Schuber earned a bachelors degree in biology,
pschuber@svb.com emphasis in physiology and minor in chemistry, from California State University, Long Beach.
Caitlin is a Senior Associate with SVBs Life Science and Healthcare team. A five-year veteran of the team, she provides market
research and targeted analysis of historic and current investment trends within the life science and healthcare venture capital
industry. Caitlin works to strengthen and deepen relationships to build the SVB network and offer meaningful connections for
both VC firms and SVB clients. Her passion for innovation is evident in the work she does every day to identify emerging industry
and market trends.
Caitlin Tolman After graduating with honors from the University of Massachusetts, Amherst, Caitlin joined Silicon Valley Bank as a client service
Senior Associate
Silicon Valley Bank advisor in 2007. She then held a role in SVBs Global Sales and Solutions group and helped to drive various product and service
ctolman@svb.com solutions, particularly in cash management and payments.

About Silicon Valley Bank About SVB Analytics
For more than 30 years, Silicon Valley Bank has helped SVB Analytics, a non-bank affiliate of Silicon Valley Bank, serves the
innovative companies and their investors move bold ideas strategic business needs of entrepreneurs, corporates and investors
forward, fast. SVB provides targeted financial services and in the global innovation economy. For more than a decade, SVB
expertise through its offices in innovation centers around the Analytics has helped global business leaders make informed
world. With commercial, international and private banking decisions by providing market intelligence, research, and consulting
services, SVB helps address the unique needs of innovators. services. Powered by proprietary data, SVB Analytics has a unique
view into the technology and life science sectors.
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
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2017 SVB Financial Group. All rights reserved. SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, MAKE NEXT HAPPEN NOW and the chevron device are
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Healthcare Report 2017

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Healthcare Report 2017

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Trends in Healthcare

Investments and Exits 2017

2016 Key Highlights 3

Healthcare Investments and Fundraising 4

Top 15 Crossover Investors 18

Healthcare Big Exit M&A and IPOs 21

About the Authors 45

Trends in Healthcare Investments and Exits 2017 2

Trends in Healthcare Investments and Exits 2017 3

Trends in Healthcare Investments and Exits 2017 4

Percentage of U.S. Venture Investing

Biopharma investments have scaled

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%

402 $6.8 $8.3

HC Devices & Supplies ($B) HC Devices & Supplies (# of Deals)

More than $20 billion in venture

HC $ Invested in Companies HC VC $ Fundraised Gap in Funding

# of Deals 2013 2014 2015 2016 Biopharma Series A investments

39 34 percent of total investment. At $125

Top 5 U.S. Biopharma Top 5 OUS Biopharma

Ophthalmology 3 2 2 Early Stage Late Stage Undesignated

Top 5 U.S. Device Top 5 OUS Device

Top 5 U.S. Dx/Tools Top 5 OUS Dx/Tools

doubled since 2013. Our analysis

Increased fund size investors

20 sizes and also provide financial

Trends in Healthcare Investments and Exits 2017 18

Top Biopharma Crossover Investors 2016

11 *Top 15 Crossover Investors:

*Top 15 Crossover Investors based on new investments in 20152016.

70 For two years in a row, the top 15

32 has slowed in recent years, the

Trends in Healthcare Investments and Exits 2017 21

Pre-Money IPO Value Potential distributions nearly tripled

16 In 2016, the value of big exit M&A

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%

We predicted IPOs would decline to

We were surprised to see M&A

Neuro, cardiovascular and anti-

*Stage defined as last completed clinical trial in most advanced asset.

Median Because of the IPO slowdown,

*Stage defined as last completed clinical trial in most advanced asset.

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

*Stage defined as current clinical trial in most advanced asset.

250 The number of large IPOs declined

$182 In 2015, nearly one of three IPOs

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

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

2016: Undisclosed deal

2016: Undisclosed partnership payout