Trends in Healthcare Investments and Exits 2015

Venture healthcare investments and returns skyrocket
The overall boom in healthcare propelled fundraising,
investing and exits in 2014 to the highest level in several
years, eclipsing our bullish outlook from a year ago. The
number of IPOs more than doubled over 2013, and hit a
10-year high. Robust returns have accelerated the cycle;
limited partners are enthusiastic and fundraising increased
56 percent in a single year, the most tangible sign in a decade
that confidence in healthcare innovation is extremely high.
While we predict the strong fundraising will help fuel the
investment cycle for another few years, IPO activity in 2015
likely will dip slightly. Other trends we examine in this
report include the new role of non-VC investors in helping
healthcare companies generate successful IPOs, the growing
focus on early-stage biopharma companies and the emerging
promise of medical device and diagnostic/tools companies.
Written by
Jonathan Norris
Managing Director
Silicon Valley Bank
M 650 575 1377
jnorris@svb.com
@jonnysvb
Kristina Peralta
Senior Associate
Silicon Valley Bank
T 415 764 3152
kperalta@svb.com
Trends in
healthcare
investments
and exits
2015

TRENDS IN HEALTHCARE INVESTMENTS AND EXITS 2015 2

5 Key findings and forecasts
6 Surging venture fundraising and investment drive healthcare innovation
6 Healthcare drops slightly as percentage of total venture investment
7 Healthcare venture fundraising and investment exceed expectations
8 Why the 2014 boom took us by surprise
9 Analysis: What is driving investors
9 Active biopharma investors focus on early rounds and quick exits
11 Smaller investors and angels see opportunities in device
12 Dx/tools companies find support from biopharma seeking drug development tools
13 Non-VC investors flock to companies preparing forIPOs
14 White-hot IPO market and big exit M&A lead to impressive returns
14 “First Movers” reap biggest rewards
16 Strong biopharma exits propel faster investment cycle
16 Big exit M&A activity rebounds in all sectors
18 Analysis: What is driving IPOs and big exit M&A
18 Early-stage biopharma activity leads exits parade
20 Device company exits rebound with solid results
21 Later-stage dx/tools companies attract large investor interest
22 Focus on big exit M&A: What is driving value creation
22 Capital efficiency is key to positive returns
23 Biopharma: Large equity round doesn’t guarantee top returns
24 Device: Sustainability requires capital efficiency
25 Conclusion
Silicon Valley Bank (SVB) produces this annual report to guide our clients in decision-making and to contribute valuable insight into the top trends in the healthcare
venture industry. We analyzed proprietary data and forecasts to determine trends at both ends of the pipeline: on the capital side through venture investment into
companies and venture fundraising and on the liquidity side through IPO activity and big exits.
Table of contents

2014 Key findings
‣‣ Healthcare venture fundraising surged 56 percent over 2013, reaching its highest level
since 2008 and signaling that confidence in the industry is very high.
‣‣ Healthcare venture investment also grew significantly, reaching $8.6 billion in 2014,
a 30 percent increase over 2013.
‣‣ Non-VC investors flocked to companies ready for an IPO, providing “top-up financing”
and supporting these companies in very successful IPOs.
‣‣ Led by early-stage biopharma, potential distributions from VC-backed IPOs and big exit
M&A rose 60 percent in one year, topping $20 billion and marking a 10-year high.
‣‣ The speed to exit for biopharma IPOs and big exit M&A quickly accelerated.
‣‣ Device saw big exit M&A increase after a two-year decline, and IPO activity heated up.
‣‣ Large biopharma showed new interest in late-stage dx/tools, targeting investments to
develop better drug discovery tools and companion diagnostics.
‣‣ SVB analysis of factors leading to healthy exit multiples found capital efficiency was key.
Key forecasts for 2015
‣‣ The second consecutive year of exceptional IPO and big exit M&A activity produced
impressive returns, and spurred a faster fundraising-investment-exit cycle. We expect
strong fundraising and investment to continue.
‣‣ With plenty of new capital to invest, company creation should equal or surpass 2014.
‣‣ The successful strategy of non-VC investors coming in late with “top-up” financing that
leads to a quick exit will continue through 2015, and drive up potential distributions.
‣‣ The option of companies to go public, particularly in biopharma, will decline but that
will drive up M&A activity. We can expect another year of stellar potential distributions,
though not at 2014 levels.
‣‣ The opening IPO window for device, combined with the potential for big device
companies to acquire early-stage companies at a discount, should make for a strong 2015.
‣‣ Dx/tools are expected to see good returns but challenges remain. Tech/big data giants
are starting to invest in dx/tools — and many may have significant acquisition strategies
in the sector.

Healthcare drops slightly as percentage of total
venture investment
Healthcare venture investment in biopharma, device, and dx/tools companies accounted for 18 percent of all venture capital
dollars invested in 2014, compared to 22 percent a year earlier (Exhibit 1). The dip resulted from the exponential growth in
venture investment overall, not from a decline of interest in the sector. In fact, healthcare venture investment rose 30 percent
to $8.6 billion, the highest level in seven years.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total VC Dollars ($B) $99 $38 $21 $19 $22 $23 $27 $31 $30 $20 $23 $28 $27 $30 $48
% Biopharma 4% 9% 15% 19% 19% 16% 17% 17% 15% 19% 17% 17% 16% 15% 12%
% Device 2% 5% 9% 8% 8% 10% 11% 12% 11% 13% 10% 10% 9% 7% 5%
Source: PricewaterhouseCoopers and SVB proprietary data
% Device% BiopharmaTotal VC $
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
$Billions
2005
2004
2003
2002
2001
2000
2006
2007
2008
2009
2010
2011
2012
2014
2013
$99
Exhibit 1: Healthcare as Percentage of Total Venture Investment
Source: PricewaterhouseCoopers and SVB proprietary data
% Device% BiopharmaTotal VC $
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
$Billions
2005
2004
2003
2002
2001
2000
2006
2007
2008
2009
2010
2011
2012
2014
2013
$99
Exhibit 1: Healthcare as Percentage of Total Venture Investment
Surging venture fundraising
and investment drive
healthcare innovation
Healthcare venture activity is benefitting from
the overall hot venture industry.

HC $ InvestedHC $ Fundraised % Capital Flow RatioGap in Funding
Source: PricewaterhouseCoopers, Thompson Reuters and SVB proprietary data
$Billions
$10
$9
$8
$7
$6
$5
$4
$3
$2
$1
$0
2005
2006
2007
2008
2009
2010
2011
2012
2014
500%
400%
300%
200%
100%
0%
2013
Exhibit 2: U.S. Healthcare: Venture Dollars
Invested and Raised
Healthcare venture
fundraising and investment
exceed expectations
Healthcare venture fundraising surged 56 percent over 2013,
reaching its highest level since 2008. This result represents
extremely strong confidence in the industry. The total raised
surpassed $6 billion, considerably higher than we had
predicted in last year’s report.
Healthcare investment into companies also grew significantly,
reaching $8.6 billion in 2014. Biopharma companies had the
major share of that total, at $6 billon – the highest level since
SVB started tracking the data in 2005.
Capital flow ratio returns to healthy levels
In 2014, dollars invested in healthcare rose 30 percent.
The amount fundraised was up 56 percent. This hefty activity
produced a capital flow ratio of 1.4x (capital invested in companies
versus capital fundraised), the healthiest ratio in several years.
SVB believes that a favorable capital flow ratio is between 1.3x and
1.6x, represented by the dotted lines in Exhibit 2.
Series A: Corporate investors support biopharma
company creation
In 2014, corporate investors continued to play an active role
in biopharma company formation with Series A investments.
Biopharma Series A deals increased 35 percent over 2013
(Exhibit 3). Device and dx/tools Series A deals showed little
change.

Why the 2014 boom took us
by surprise
For the past few years, we predicted slightly declining
investments in healthcare companies. This was based on
the previously stagnant venture fundraising market — we
felt that increased investment from non-VC investors and
corporate venture arms could not keep up with the pace of
company creation, and at some point overall investment
would fall. That did not happen. Instead, the IPO and M&A
exit markets have produced fantastic returns, and spurred
renewed investment, particularly from non-VC investors. We
examine this trend later in the report.
We expect increases in fundraising and investment levels
will lead to a very active 2015, with a note of caution,
however. When the window closes, and non-VC investors
pull back, the industry could be left with a crowded private
market and a lack of investors.
80
60
40
20
0
1500
1000
500
0
1500
1000
500
0
#ofDeals
BIOPHARMA
CVC %
Corporate VC in Syndicate Total $ Invested (M)
DX/TOOLS
CVC %
80
60
40
20
0
#ofDeals
VC Only
Source: VentureSource, PitchBook, CB Insights and SVB proprietary data
1500
1000
500
0
80
60
40
20
0
#ofDeals
$Millions$Millions$Millions
DEVICE
CVC %
Exhibit 3: U.S. Company Formation: Deals and Investment in Series A

Early (Seed-Series B): 88% Late (Series C+): 12% (Corporate)
*Most active defined as top 14 investors based on new investments
Source: CB Insights and SVB proprietary data
Trends Polaris, J&J Dev’t SR One, Alta, Astellas, Pfizer, Third Rock
OrbiM
ed
24
20
16
12
8
4
0
AtlasNovo
A/S
NEA
Sofinnova
V.
M
S
Ventures
Novartis
Versant
Polaris
FidelityJ&JDev’t
Arch
M
PM
SR
One
#ofDeals
Exhibit 4: Most Active* New VC Investments in
Biopharma (2013-2014)
Early (Seed-Series B): 88% Late (Series C+): 12%
Trends J&J Dev’t, Wuxi MedImmune/AZ, Roche, Sanofi, Shire
M
S
Ventures
14
12
10
8
6
4
2
0
SR
One
Novartis
J&JDev’t
Celgene
Baxter
Am
gen
Pfizer
Astellas
W
uxi
#ofDeals
Exhibit 5: Most Active* New Corporate VC
Investments in Biopharma (2013-2014)
Active biopharma investors
focus on early rounds and
quick exits
Successful biopharma big exit M&A and IPOs are leading to
a stronger fundraising environment, hence there is more
capital to invest. The renewed confidence in healthcare is
accelerating the fundraising-investment-exit cycle. With
capital available, venture firms invest in new companies and
double down on existing deals in mezzanine rounds led by
non-VC investors, with the hope of a quick M&A exit or IPO.
Dollars typically reserved for existing company support can
instead be used for new investments because those companies
have taken advantage of the strong market to exit faster than
anticipated. When the active investment cycle ends with a
hot exit environment, investors are in a good position to raise
another fund, and the cycle starts again.
The top five most active investors in biopharma invested in
50 percent more companies in 2013-2014 than they did in the
prior two-year period (Exhibit 4).
Among the active new corporate investors is China-based
Wuxi, which focused almost exclusively on early-stage U.S.
biopharma investments in 2013-2014 (Exhibit 5).
Rebounding investor confidence is speeding up the
fundraising-exit cycle and freeing up more capital to invest.
Analysis:
What is driving investors

**Target Generating Platform
Trends Uro/Gyn, Anti-Infectives, Auto-Immune
Metabolic, Cardiovascular, Dermatology
Oncology
50
45
40
35
30
25
20
15
10
5
0
TGP**
CNSAuto-Im
m
uneRare
DiseasesOphthalm
ology
M
etabolic
Uro/GynAnti-Infectives
#ofDeals
Exhibit 6: Most Active* New VC Investments
in Biopharma by Indication (2013-2014)
*Most active defined as top 61 investors based on new investments (duplicate
investments removed)
**Top five OUS investments: UK: 10, Switzerland: 7, France: 6, Germany: 6 and Israel: 5
OUS**
55
50
45
40
35
30
25
20
15
10
5
0
M
A
Northern
CA
Southern
CA
W
A
TX
PA
NC
M
D
#ofCompanies
Biopharma by Company Location (2013-2014)
Most biopharma indications showed increased investment
activity (Exhibit 6); however auto-immune significantly
outpaced other indications when measured year over year.
Most of the auto-immune deals were outside the U.S. (OUS),
and the majority had corporate venture support.
For the first time, we examined new investment activity based
on company location. New biopharma investments were
led by the Boston/Cambridge area, Northern California and
Southern California (Exhibit 7). There also was substantial
new-deal activity
outside the U.S.
The UK had the
largest amount
of international
activity, ranking it
fourth among all
regions. We think
the international
investment focus indicates a strategy to tap the offshore
profits held by big biopharma. Venture firms are domiciling
new investments abroad to leverage offshore funds held by
companies for partnerships, investment and M&A.
New VC investments in
auto-immune significantly
outpaced other indications
when measured year
over year.

Northern
CA
35
30
25
20
15
10
5
0
Southern
CA
OUS
M
N
W
A
M
A
#ofCompanies
Device by Company Location (2013-2014)
Trends Cardiovascular, Neuro, ENT Uro/Gyn
Cardiovascular
14
12
10
8
6
4
2
0
NeuroOphthalm
ology
Surgical
Orthopedics
Aesthetics
ENT
Vascular
Device by Indication (2013-2014)
#ofDeals Early (Seed-Series B): 64% Late (Series C+): 36%
Trends Sofinnova P., Sightline, Kearny, BioStar, Emergent, Lightstone
Versant, Hatteras, Delphi
(Corporate)
NEA
10
9
8
7
6
5
4
3
2
1
0
BioStarEm
ergentOrbiM
edNovo
A/S
Lightstone
etal
Sofinnova
P.
L.S.Angels
Sightline
J&JDev't
Kearny
Boston
Longitude
#ofDeals
Device (2013-2014)
Smaller investors and angels
see opportunities in device
The number of active device investors has significantly
declined in the last five years, and the types of investors have
changed in the past two years. While some investors were
able to close new funds, others were not. Still others decided
to focus on biopharma or digital health. New Enterprise
Associates (NEA) continues to lead device investing in new
companies, but smaller groups, including BioStar, Emergent
and angel groups such as Life Science Angels (L.S. Angels),
are helping to shore up investor interest (Exhibit 8).
Looking at indications, investments in cardiovascular and
neuro have tripled and interest in ENT has picked up (Exhibit 9).
California companies saw the most new biopharma
investments, followed by companies located outside the U.S.
(OUS) (Exhibit 10).

Early (Seed-Series B): 68% Late (Series C+): 32% (Corporate)
OrbiM
ed
7
6
5
4
3
2
1
0
L.S.Angels
QiagenGE
Ventures
Seventure
Arch
Celgene
SV
Life
Sciences
Novartis
Pfizer
#ofDeals
Dx/Tools (2013-2014)
*Most active defined as top 61 investors based on new investments (duplicate
investments removed)
**Top two OUS investments are Germany: 5 and Israel: 3
OUS**
16
14
12
10
8
6
4
2
0
Northern
CA
M
A
Southern
CA
W
A
PA
NY
#ofCompanies
Dx/Tools by Company Location (2013-2014)
Dx/tools companies
find support from
biopharma seeking drug
development tools
There is growing corporate interest in dx/tools companies.
Half of the most active investors in dx/tools are corporate.
Specifically, large biopharma companies are making
investments in firms that develop companion diagnostics to
monitor clinical trials and advance new technologies for drug
discovery (Exhibit 11).
The focus in this sector leans to commercial-stage companies.
In fact, more than half of 2014 Series A dx/tools deals
were already generating revenues. As in the medical device
industry, dx/tools startups must run lean and make more
progress with less capital.
Dx/tools companies in Northern California and those outside
the U.S. saw the highest number of investments. The most
active countries outside the U.S. (OUS) were Germany with
five deals and Israel with three deals (Exhibit 12).

Non-VC investors flock to
companies preparing for IPOs
Crossover investors’ strategy to gain footholds in
pre-IPO companies swells IPO wave.
In the past two years, we have seen the emergence of
non-VC investors, particularly hedge funds, providing
“top-up” financing to IPO-ready companies prior to
entering the public markets (Exhibit 13).
These non-VC investors (many of whom are referred to
as crossovers, based on their ability to invest both in
the public and private markets) are focused primarily
on biopharma and have benefitted from, and helped
propel, the wave of IPOs in this sector. Their strategy is
to get a foothold in the company prior to going public by
providing later-stage financing, typically at a discount
to the IPO. Companies view these investors as helpful
because they tend to be less sensitive to higher company
valuations than traditional venture investors, and they
provide a sign of confidence to the public markets ahead
of the IPO.
Non-VC investors see exceptional exit rates
The strategy has been extremely successful for the most
active investors. The top 15 investors are responsible for
57 unique new lead investments in 2013-2014. Of those
investments, 25 have achieved an exit as of February
2015: 21 IPOs and 4 M&A transactions. A 44 percent exit
rate within two years from an initial investment is truly
exceptional.
Companies that received investments from this group
had more successful IPOs: Median pre-money valuations
were 52 percent higher ($211 million vs. $139 million)
and dollars raised at IPO were 48 percent higher ($96
million vs. $65 million) than their peers during the
2013-2014 IPO window.
In addition, six months post-IPO, these companies had a
median value 20 percent higher than the IPO price, and
the average value was more than 70 percent higher.
With this in mind, companies considering pre-IPO
financing are actively seeking out these non-VC
investors.
Based on the current success of non-VC investors, it is
likely that biopharma companies ready for an IPO will
continue to benefit. We think this activity also will start
to spread to device and dx/tools, though the focus in
those sectors likely will be on later-stage, commercial
companies. We expect top non-VC investors to continue
to dominate mezzanine fundings.
Biopharma Device Dx/Tools
44% of these investments have gone public or been acquired during these two years
*Most active defined as top 15 non-VC healthcare investors based on new investments
Ra
Capital
Deerfield
12
10
8
6
4
2
0
Rock
Springs
Adage
CapitalM
gm
t
Redm
ile
GroupW
ellington
M
gm
t
Perceptive
AdvisorsHealthcare
Royalty
Sabby
Capital
Brookside
Capital
TopSpin
Partners
Jennison
Associates
SatterInvestm
entM
gm
t
Pharm
Standard
Intl
SectoralAssetM
gm
t
#ofDeals
Exhibit 13: Most Active* New Non-VC Investors (2013-2014)

Big Exit M&A VC-Backed IPOs
Source: Investment bank reports, VentureSource, PitchBook, press releases and
discussions with life science professionals
90
80
70
60
50
40
30
20
10
0
#ofBigExits
2005
2006
2007
2008
2009
2010
2011
2012
2014
2013
Exhibit 14: VC-Backed IPOs and Big Exit M&A
(2005-2014)
“First Movers”
reap biggest rewards
The number of IPOs at least doubled in each sector and
rebounding big exit M&A soared 59 percent (Exhibit 14).
This environment led to record high potential distributions
in 2014, topping $20 billion (Exhibit 15). This is the largest
return on investment measured since SVB began tracking the
information a decade ago.
Potential distributions in 2014 outpaced 2013, the previous
record year, by nearly 40 percent and were more than double
any year between 2005 and 2012.
The growth in potential distributions was driven largely by
biopharma, which accounted for 70 percent of healthcare IPOs
in 2014. The upfront portion of big exits also produced the
highest amount since we began tracking the data in 2005.
There is a lesson here: In our First Mover Advantage report
published in 2012, we predicted that it was a great time to
be investing in healthcare, despite lackluster investment
numbers, because exit activity was trending up. Investors
who got in then are reaping the rewards of an aggressive IPO
market and a swell of M&A activity. Fueling the cycle, limited
partners are reinvesting the capital distributions into new
healthcare funds.
White-hot IPO market
and big exit M&A lead to
impressive returns
Potential distributions from VC-backed IPOs and big exit
M&A top $20 billion, highest returns in a decade.
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Big Exit
M&A
19 20 24 17 22 28 35 36 27 43
VC-Backed
IPOs
32 29 21 2 3 12 7 11 37 83

Source: Investment bank reports, VentureSource, press releases, CB Insights and discussions with life science professionals
22
20
18
16
14
12
10
8
6
4
2
0
TotalValue($Billions)
2005
2006
2008
2010
2011
2012
2013
2014
2009
2007
Big Exit Milestones to be EarnedBig Exit Upfront Payments Pre-Money IPO Value
Exhibit 15: Potential Distributions* From VC-Backed IPOs and Big Exit M&A
*Definition of Potential Distributions
To determine potential distributions, we calculated big exit upfront payments assuming 75 percent of venture ownership at the
time of sale and discounted all milestone payments to 25 percent. For IPOs, we calculated the last private valuation before raising
money in the public market (pre-money IPO value) and based potential returns on 75 percent venture ownership.

Source: CB Insights, press releases and SVB proprietary data
$250
$200
$150
$100
$50
$0
MedianValue($Millions)
2012
2014
2013
Biopharma Pre-Money Device Pre-Money Dx/Tools Pre-Money
Biopharma IPO $ Raised Device IPO $ Raised Dx/Tools IPO $ Raised
$61
$202
$226
$174
$98
$72
$188
$141
$86
$70
$62
$52
$132
$64
Exhibit 17: VC-Backed IPOs: Median Pre-Money
and Dollars Raised (2012-2014)
Strong biopharma exits propel
faster investment cycle
The number of IPOs for each sector — biopharma, device
and dx/tools — was at least double that of 2013 (Exhibit
16). In early-stage biopharma, companies have the option
to spurn M&A deals and instead raise significant cash in
the public market to fund the next stage of clinical trials
or commercialization ramp. Acquirers had to pay more to
secure attractive assets of early- and late-stage biopharma
companies or risk watching the company go to the public
markets. Device IPOs increased five times over 2013, though
unlike biopharma, the activity was focused on later-stage
companies. A bouyant IPO market led to superb value creation
and helped investors provide substantial returns back to
limited partners — making it easier to raise their next funds.
Despite the very active IPO market, the median pre-money
valuations and dollars raised at IPO decreased for all three
sectors in 2014 (Exhibit 17). One possible explanation: With
more companies completing IPOs in 2014, the quality of
companies varied compared to earlier years.
Big exit M&A activity
rebounds in all sectors
As the number of VC-backed IPOs doubled in 2014, big exit
M&A also did very well, with a 59 percent increase in the
number of deals. Every sector saw an increase in big exit M&A
activity in 2014 (Exhibit 18).
Source: CB Insights, press releases, and SVB proprietary data
Exhibit 16: VC-Backed IPOs by Stage
Year 2012 2013 2014 Total
Pre-Clinical 1 1 9 11
Phase I 0 8 20 28
Phase II 3 12 26 41
Phase III 6 8 6 20
Dev’t Stage - Animal 0 2 0 2
Commercial 0 1 5 6
Total 10 32 66
Year 2012 2013 2014 Total
Non-Approved 0 0 0 0
CE Mark 0 0 2 2
Commercial 1 2 8 11
Total 1 2 10
Year 2012 2013 2014 Total
Pre-Approved 0 0 1 1
Commercial 0 3 6 9
Total 0 3 7
BIOPHARMA
DEVICE
DX/TOOLS
3.2x
2.1x
5.0x
2.3x

Source: Investment bank reports, press releases and discussions with life science professionals
Number of Structured Deals Average Total Deal Value ($M) Average Upfront ($M)
16
18
12
8
4
0
600
800
400
200
0
#ofBigExits
BIOPHARMA
$Millions
Median Upfront ($M)
Median Total Deal ($M) 413
600
800
400
200
0
#ofBigExits
16
18
12
8
4
0
DEVICE
$Millions
Median Upfront ($M)
Median Total Deal ($M) 185
600
800
400
200
0
16
18
12
8
4
0
DX/TOOLS
$Millions
#ofBigExits
Median Upfront ($M)
Median Total Deal ($M)
Exhibit 18: VC-Backed Big Exit M&A

Pre-clinical Phase I Phase II Phase III Commercial
Source: Investment bank reports, press releases, CB Insights and discussions with
life science professionals
2009
18
16
14
12
10
8
6
4
2
0
2010 2011 2012 2013 2014
1 4
2
2
1
3
2
1
3
6
1
8
12
8
3
9
20
26
6
5
IPOs Big Exits
#ofBigExits
Exhibit 19: VC-Backed Biopharma IPOs and
Big Exit M&A by Stage
Early-stage biopharma
activity leads exits parade
The biopharma IPO boom had some interesting twists. While
many people speculated that some of these companies may
have been “long in the tooth,” later-stage venture deals, in
fact the median time to exit for 2014 biopharma IPOs was
less than six years. And 44 percent of these IPOs were in
pre-clinical or Phase I trials for their most advanced asset,
despite the clinical risk and expected long timeline to
commercialization (Exhibit 19).
With big exit M&A deals, the median time to exit was a speedy
4.3 years from the close of Series A — the quickest we have
seen. M&A activity, like IPOs, trended up for early-stage
companies in 2014, with 56 percent of big exit M&A in pre-
clinical or Phase I companies.
Strong investor confidence in healthcare is leading to
quick exits.
Analysis: What is driving IPOs
and big exit M&A
6
5
4
3
2
1
0
#ofBigExits
4
3
2
1
0
#ofBigExits
Exhibit 20: VC-Backed Biopharma IPOs and Big Exit M&A by Top Indication
2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014
2011 2012 2013 2014 2011 2012 2013 2014
1
1
1
2
1
1
6
4
4
5
1
1
1 1
2
2
1
2 1
2
1
1
2
1
3
6
Oncology CNS
Anti-Infectives Respiratory Cardiovascular
1
2
Source: Investment bank reports, press releases, CB Insights and discussions with life science professionals
IPOs Big Exits

Source: Investment bank reports, press releases and discussions with life
science professionals
Oncology
4
3
2
1
0
Anti-Infectives
CNS
Auto-Im
m
une
Derm
atologyRare/Orphan
M
etabolic
Respiratory
Ophthalm
ology
#ofBigExits
Exhibit 21: 2014 VC-Backed Biopharma
Big Exit M&A by Indication
Looking at indications, oncology continued to chug along as the
main focus of interest. CNS showed substantial activity (both
big exit M&A and IPO) after an oddly quiet 2013. Activity in
anti-infectives has picked up over the last few years, especially
in the IPO market (Exhibits 20-22).
The swell in early-stage biopharma IPO activity is keeping
the current IPO window open. Most of these companies have
multiple products in their pipelines, and they are at an early
stage, increasing the likelihood of advancing from pre-clinical
to human trials or from a Phase I safety trial into a dosing
trial. We see greater potential for positive news outweighing
negative reports and diverse pipelines. As a result, we predict
improving public investor confidence with each new IPO.
Exhibit 22: Top 3 Biopharma IPO Indications by Stage (2011-2014)
Oncology CNS Anti-Infectives
All Biopharma IPOs
Phase I
42%
Phase II
19%
Phase III
16% Pre-clinical
23%
Phase I
23%
Phase II
54%
Phase III
15%
Pre-
clinical
8%
Phase I
18%
Phase II
46%
Phase III
27%
Pre-
clinical
9%
Phase I
24%
Phase II
37%
Phase III
20%
Pre-
clinical
10%
Commercial 7%
Pre-Approval 2%
Source: Investment bank reports, press releases, CB Insights and discussions with life science professionals
Oncology CNS Anti-Infectives
# of IPOs 26 13 11
Median Pre-Money ($M) $163 $110 $110
Median IPO $ Raised ($M) $74 $45 $62

Source: Press releases, CB Insights and SVB proprietary data
Non-Approved CE Mark U.S. Commercial IPOs Big Exits
5
4
3
2
1
0
1
1 1 1 1
1
VascularCardiovascular
Surgical
Anti-Infectives
Uro/Gyn
Aesthetics
Orthopedics
Neuro
RespiratoryOpthalm
ology
1
#ofCompanies
Exhibit 24: 2014 VC-Backed Device IPOs and
Big Exit M&A by Indication
Non-Approved CE Mark U.S. Commercial
IPOs Big Exits
2009
18
16
14
12
10
8
6
4
2
0
2010 2011 2012 2013 2014
1
1
2 1 2 2
8
#ofBigExits
Exhibit 23: VC-Backed Device IPOs and
Device company exits
rebound with solid results
Despite being out of the proverbial spotlight, device
companies are performing well based on the number of exits,
capital invested and companies created, as well as on the
multiple of capital invested (a topic which is discussed later
in this report) (Exhibits 23 and 24).
Device had a strong 2014, rebounding after a two-year decline
in exits. There were 18 big exit M&A transactions, achieving a
10-year high.
While many people want to compare device directly
with the biopharma sector, it is important to understand
perspective. Consider that biopharma investors have
deployed substantially more into companies since 2005,
$47.5 billion compared
to device at $27.5
billion. Biopharma
also has created more
companies, 684 Series
A companies versus
463 for device. Bearing
those differences in mind, device big exits compare favorably,
producing 78 deals since 2009 versus 85 for biopharma.
Thus, with about half as much capital invested, device big
exit results are solid.
Device had a strong 2014,
rebounding after a two-
year decline in exits.

Non-Approved U.S. Commercial
IPOs Big Exits
2009
12
10
8
6
4
2
0
2010 2011 2012 2013 2014
2 3 1
6
#ofBigExits
Exhibit 25: VC-Backed Dx/Tools IPOs and
Big Exit M&A
Device environment grows more competitive
While we are generally bullish on overall device M&A exit
activity — and it should equal or surpass 2014 activity — the
merger of two large acquirers (Medtronic and Covidien) could
slow activity. The two companies pre-merger were responsible
for a combined six of the 18 deals in 2014. Will post-merger
integration shift focus away from acquisitions or will the
newly created giant shore up sector competencies and seek
out complementary opportunities?
Even without a clear answer, the trend lines point to a strongly
competitive exit environment in device. With less capital and
a smaller number of deals, the sector has a focused group of
high-quality companies competing for investment dollars.
Only the very top companies with the best innovation stories
are getting funded. We think acquirers’ current focus on
geographical growth in emerging markets can only go so far in
satisfying investors’ demands for revenue growth. They must
find innovative technologies, and this current crop of venture-
backed device companies fits the bill.
We also believe there is a great opportunity for one or more
big device players to fill their innovation gap by acquiring
earlier-stage companies at an M&A discount. These are
companies that are pending or post-FDA approval, but have
not yet raised a commercialization round. These companies
likely would be available at a reduced price, with a structure
similar to biopharma M&A. Once one acquirer makes a move,
it is likely that the others will follow, which would build on
improving M&A trends.
Later-stage dx/tools
companies attract large
investor interest
Dx/tools big exit M&A and IPO activity increased substantially
in 2014, with 10 M&A deals and seven IPOs — both represent
10-year highs since SVB has been tracking the data (Exhibit
25). This sector remains focused almost exclusively on later-
stage companies. The acquirers in 2014 were quite diverse,
including big pharma (3), big device (1), tools/testing (5) and
an MDX Company (1).
In dx/tools, tech/big data giants (Google, Qualcomm, Amazon,
Intel, among others) are starting to sniff around, and many
appear to have significant
strategies in the sector that
could include acquisition.
Next-generation DNA
sequencing technologies
are helping to open
the doors to adjacent
industries, including big
data and diagnostics.
Synthetic biology is also being helped by next-generation
sequencing advances. There are a number of companies
with potentially “game-changing” technologies that are just
starting to commercialize.
Dx/tools companies face regulatory uncertainty
However, some challenges remain, especially in the dx/tools
sector. They include identifying the FDA’s role in regulation
and getting commercial reimbursement. To that point, strong
and clear (or at least consistently enforced) FDA standards
could bring clarity to the industry and provide confidence in
marketed products, which in turn would allow payers to move
more aggressively to accept payment for these tests.
We believe that dx/tools is positioned for continued solid
returns in 2015 based on a number of strong, revenue-stage
private companies. The potential issue is the headwinds of poor
post-IPO performance last year as well as the lack of enterprise
value consideration as a part of M&A. Thus, it could be tough
for some of these companies to access the public markets or
find a buyer. Instead, private companies could be poised for
consolidation in the sector, yielding companies that have
multiple tests developed for a specific indication. “Owning an
indication” could help to establish these companies as market
leaders, generating the enterprise value that has been lacking
so far and creating attractive M&A and IPO candidates.
Dx/tools big exit M&A
and IPO activity increased
substantially in 2014,
with 10 M&A deals and
seven IPOs

How SVB calculates exit multiples
Wecalculatedexitmultiplesinaconservativemanner,
dividingbigexitvaluebytheamountofventuredollarsinvested.
Bigexitvalueiscalculatedbymultiplyingtheupfrontpayment
by85percent,thenmultiplyinganymilestonestobeearnedby
25percent.
Capital efficiency is key
to positive returns
For this year’s report, we analyzed big exit M&A activity
over the past six years to identify exit multiple trends. What
factors drive investor returns in biopharma and device? Stage?
Indication? Capital intensity? We examined the data and
classified quartiles based on exit multiple for biopharma and
device. There was not enough dx/tools activity to conduct a
meaningful multi-year analysis.
Biopharma companies in the top quartile had impressive exit
multiples of more than 8x, and device companies were only
slightly behind with multiples of more than 7x (Exhibit 26).
In 2014, 10 deals had exit multiples exceeding 10x the
amount of capital invested, and three had multiples above
20x. These substantial multiples underscore the large
rebound in healthcare and the significant returns available.
For example, if a single investor owned at least 25 percent in
each of these big exits since 2009, that investor would have
seen at least 30 deals each return $100 million or more.
Focus on big exit M&A:
What is driving value creation
Soaring exit multiples tell healthcare rebound story.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Top Quartile 2nd Quartile 3rd Quartile Bottom Quartile
Source: CB Insights, VentureSource, PitchBook, press releases and
SVB proprietary data
Exhibit 26: Biopharma Big Exit M&A Multiples by
Quartile and Stage (2009-2014)
Exit Multiple
Median Capital
Invested
Total Exits
Exits with
$50M-$100M
Invested
Exits with
$100M+ Invested
Top Quartile
(8.1x+)
$16M 22 3/22 0/22
2nd Quartile
(3.67 -8.0x)
$42M 22 5/22 4/22
3rd Quartile
(2.76-3.66x)
$73M 20 13/20 5/20
Bottom Quartile
(0-2.75x)
$106M 21 7/21 12/21
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Biopharma: Large equity
round doesn’t guarantee
top returns
Given that many Series A equity rounds biopharma we see
typically are more than $20 million, we were surprised by
the low median dollars ($16 million) raised for top quartile
biopharma companies. The lesson for investors is that a big
equity round does not necessarily translate to top returns.
Unless a company is building directly to access the public
markets, capital investment needs to be very measured to
get top quartile multiples. On that point, since 2009 only
two M&A deals with more than $70 million invested returned
multiples greater than 4.5x.
Thus, companies should look to leverage non-dilutive funding
when possible. Many companies started since 2009 have
diverse asset pipelines, and partnerships with big biopharma
can help by providing non-dilutive funding and validation
of the technology. In addition, we have seen an upswing
in patient advocacy groups that are providing non-dilutive
grants to help defray clinical costs in specific trials. This also
provides clinical development opportunities for companies
without adding to equity capital.
Biopharma: Oncology companies post
highest exit multiples
Predictably, pre-clinical exits produced healthy exit
multiples, with 45 percent of those deals reaching the top
quartile. In comparison, 41 percent of commercial-stage exits
were in the bottom quartile.
By indication, oncology company exits showed excellent
overall returns, with 35 percent of exits reaching the top
quartile, and 57 percent making the top half (Exhibit 27).
Quartile and Top Indication (2009-2014)
TOP QUARTILE
Top Indications # of Exits % of Top Quartile Exits
Oncology 8/22 36.4%
Anti-Infectives 3/22 13.6%
Metabolic 3/22 13.6%
3RD QUARTILE
Top Indications # of Exits % of 3rd Quartile Exits
CNS 4/20 20.0%
Oncology 3/20 15.0%
Respiratory 3/20 15.0%
2ND QUARTILE
Top Indications # of Exits % of 2nd Quartile Exits
Oncology 5/22 22.7%
CNS 3/22 13.6%
BOTTOM QUARTILE
Top Indications # of Exits % of Bottom Quartile Exits
Oncology 7/21 33.3%

Device: Sustainability requires
capital efficiency
The device companies in the top quartile had a median of $15
million invested. Only two device deals in the last six years
showed better than a 3.5x multiple when dollars invested
exceeded $50 million. Like biopharma, this indicates capital
efficiency is the key to positive returns (Exhibit 28).
But that means a tough road for device companies, as most
device companies are single product and do not have the
ability to find non-dilutive partnership capital. In addition,
the vast majority of deals require raising a commercialization
round. Almost all of the bottom device quartile deals had
$50 million or more invested. However, plenty of good deals
are happening. There were 39 device deals since 2009 that
delivered 3.5x or greater exit multiples.
By indication, aesthetics companies had the best performance
in device, as all four exits were top quartile (Exhibit 29).
Vascular exits also have performed well, with more than half
reaching the top two quartiles.
Exhibit 29: Device Big Exit M&A Multiples by
Quartile and Top Indication (2009-2014)
TOP QUARTILE
Top Indications # of Exits % of Top Quartile Exits
Vascular 4/19 21.0%
Aesthetics 4/19 21.0%
Cardiovascular 4/19 21.0%
3RD QUARTILE
Top Indications # of Exits % of 3rd Quartile Exits
Surgical 4/19 21.0%
Vascular 4/19 21.0%
2ND QUARTILE
Top Indications # of Exits % of 2nd Quartile Exits
Vascular 5/20 25.0%
Surgical 4/20 20.0%
BOTTOM QUARTILE
Top Indications # of Exits % of Bottom Quartile Exits
Imaging 4/20 20.0%
Orthopedics 3/20 15.0%
Vascular 3/20 15.0%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Non-Approved CE Mark U.S. Commercial
Exhibit 28: Device Big Exit M&A Multiples by
Exit Multiple
Median Capital
Invested
Total Exits
Exits with
$50M-$100M
Invested
Exits with
$100M+ Invested
Top Quartile
(7.1x+)
$15M 19 2/19 0/19
2nd Quartile
(3.51 -7.0x)
$33M 20 3/20 2/20
3rd Quartile
(2.1-3.5x)
$67M 19 8/19 3/19
Bottom Quartile
(0-2.0x)
$73M 20 15/20 4/20

In 2014, we saw fantastic returns in venture healthcare that
we have not seen in years. What we thought was a white-
hot market in 2013 turned out to be only a precursor to an
exceptionally active 2014, with IPOs and big exit M&A lifting
biopharma, device and dx/tools.
For 2015, we predict the healthy investment and fundraising
pace to continue. With plenty of new capital to invest,
company creation should equal or surpass 2014. Corporate
venture activity will continue to support biopharma and dx/
tools, but will lag in device. While big exit M&A will increase
across the board, IPOs likely will dip slightly, except for
device. Buoyed by their success, non-VC investors will stay
active in pre-IPO companies.
Overall, 2015 is set to be another remarkable year for the
healthcare industry, driven by strong investor confidence
in exit opportunities for the next few years.
2015 is shaping up to be
another great year for healthcare

Glossary
Big Exit
Big Exits are defined as private, venture-backed merger and acquisition transactions in which the upfront payment is $75
million or more for biopharma deals and $50 million or more for device and dx/tools deals.
Initial Public Offering
IPO defined as venture-backed company raising minimum IPO proceeds of $25 million.
Deal Descriptions:
—— Structured Deal
This is a pay-for-performance system that pays some of the consideration upfront, but sets milestones in development that
must be achieved before the full value of the transaction will be realized.
—— Big Exit Upfront Payments
The upfront payment refers to payments in a structured deal that are made at the close of the deal; it does not include
milestones.
—— Big Exit Milestones to be Earned
The milestones to be earned refer to payments in a structured deal that are made after the pre-determined goals are met.
—— Total Deal Value
The total deal value of a structured deal includes both the upfront payment and the milestones to be earned.
Regulatory Definitions:
—— Non-approved
Non-approved refers to a company that has no regulatory approval for its product.
—— CE Mark
CE Mark refers to a company that has a CE Mark-only product. CE Mark is a European Union designation that is less
difficult to obtain than FDA approval, and the approval process typically has a faster time line.
—— Commercial
Commercial refers to a company that has an FDA-approved product, and typically is in commercial stage.
Series A
Series A companies are defined as U.S. companies raising at least $2 million in equity in a round.

About Silicon Valley Bank
Silicon Valley Bank is the premier bank for technology, life science, cleantech,
venture capital, private equity and premium wine businesses. SVB provides
industry knowledge and connections, financing, treasury management, corporate
investment and international banking services to its clients worldwide through 28
U.S. offices and seven international operations. (Nasdaq: SIVB)
www.svb.com
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 has
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.
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SVB Financial Group, and Silicon Valley Bank are registered trademarks. B-15-14017 Rev. 04-22-15

Trends in Healthcare Investments and Exits 2015

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