Trends in Healthcare Investments and Exits 2018

Trends in Healthcare
Investments and
Exits 2018
Investments and Fundraising Reach All-Time
Highs, Focus Grows on Early-Stage M&A
ANNUAL REPORT 2018
Follow @SVB_Financial Engage #SVBHealthcare

2
Table of Contents
2017 Key Highlights 3
Healthcare Investments and Fundraising 5
Healthcare Big Exit M&A and IPOs 21
2018 Outlook 31
Glossary 32
About the Authors 33
Trends in Healthcare Investments and Exits 2018

Healthcare Investments and Fundraising Set Records in 2017
2017 Key Highlights: Investments
3
• U.S. healthcare venture fundraising set a record, reaching $9.1B – a 26 percent increase over 2016 – and
surpassing the 2015 record of $7.5B.
• Investments into venture-backed biopharma, medical device and diagnostics and tools (Dx/Tools)
companies are also expected to break a record in 2017, increasing 31 percent over 2016 to reach $15.5B.
• Spikes in Q1 and Q4 biopharma Series A deals propelled the sector to another record year, posting $2.8B
in investments.
• Biopharma investment centered on oncology and platform companies. Platform companies piqued
investor interest, as their technologies showed promise for multiple exits across different indications.
• Non-invasive monitoring, especially in cardiovascular, uro/gyn and neuro, took off in medical device
Series A investments.
• Neuro investment surged in 2017, with significant interest from niche investors and incubators.
• Artificial intelligence spurred tech investor interest in Dx/Tools, leading to record investment.
• Liquid biopsy investment exploded, punctuated by $1.8B in investments into Guardant Health, GRAIL and
Human Longevity.

Biopharma and Device M&As Focused on Early-Stage Companies
2017 Key Highlights: Exits
4
• Biopharma saw a wave of IPOs, beating 2016’s total, while big exit M&A activity slowed. IPOs had a
significant upswing in pre-money valuations.
• Oncology deals led M&A activity and dominated IPOs, accounting for 36 percent of all exits in 2017.
• Biopharma M&A continued to focus on early-stage companies, while IPOs shifted to later stage.
• Crossover investors scaled back their biopharma investments from 2015 but continue to drive their
existing portfolio companies to IPO.
• Device M&A activity continued at a steady pace, with a focus on minimally invasive devices and next-
gen visualization/imaging companies.
• PMA/De Novo 510(k) Device M&As have shown better returns and time to exit than iterative 510(k)
exits; 2015 – 2017 returns now beat biopharma M&A upfront values and multiples.
• Dx/Tools had no M&A exits in 2017 and only one IPO. Substantial private investment, however,
permits these companies to continue their development.

5
Healthcare Investments and Fundraising:
Healthcare Sectors Set Record
Highs in 2017

6
Healthcare Fundraising Reaches New Heights
U.S. Healthcare Venture Fundraising*, 2009 – 2017
$5.2B
$1.8B
$3.7B $3.6B
$3.9B
$6.1B
$7.5B
$7.2B
$9.1B
2009 2010 2011 2012 2013 2014 2015 2016 2017
*SVB estimates the dollars allocated to healthcare by all U.S. venture funds.
Source: PitchBook and SVB proprietary data
Healthcare venture funding hit a
new high in 2017. The increase
started in 2014 when fundraising
jumped 50% over the previous
year. This has led to a large pool of
capital available to invest in
venture-backed companies.
Venture healthcare investors have
recently focused on biopharma
and Dx/Tools. As Dx/Tools
companies integrate
computational methods such as
artificial intelligence, we see tech
investors, many new to healthcare,
starting to invest in these deals.
Over the past few years,
traditional VCs scaled back
medical device investments. This
trend reversed in 2017.
Looking ahead, we anticipate
fundraising will continue to be
strong, but will decline to the $6B-
7B range in 2018.
HC VC $ Fundraised
($ BILLIONS)

7
Healthcare Investments Are Projected to Reach a
Record of $15.5B in 2017, a 31% Increase over 2016
U.S. Biopharma and Device Investments and Deals, 2010 – 2017
*SVB estimated numbers for 2017.
Note: PitchBook data does not contain a separate Dx/Tools category. Most Dx/Tools deals
appear to be contained within the biopharma, device and services categories.
Source: PitchBook, NVCA.
$4.4B $4.4B
$4.8B $5.2B
$7.1B
$10.4B
$8.2B
$10.5B476 469
498
559
595
641
546
548
0
100
200
300
400
500
600
700
$0
$2
$4
$6
$8
$10
$12
2010 2011 2012 2013 2014 2015 2016 2017*
Pharma & Biotech ($B) Pharma & Biotech (# of Deals)
$3.1B
$3.9B $3.7B
$4.0B
$4.7B
$4.2B
$3.6B
$5.0B
474
544
577 578 603 584
499
507
0
100
200
300
400
500
600
700
$0
$1
$2
$3
$4
$5
$6
2010 2011 2012 2013 2014 2015 2016 2017*
HC Devices & Supplies ($B) HC Devices & Supplies (# of Deals)
Biopharma investment is projected
to hit a record in 2017, while the
number of deals remained stable.
As a result, average deal size rose.
In particular, we saw a large
increase in mega-rounds in Q4
2017. Cullinan Oncology, Arcus
Biosciences and Allakos each
raised over $100M.
Device funding and deal levels were
steady, although funding may be
lower than shown because some
Dx/Tools deals are counted in the
device category. The device sector’s
active M&A market and uncrowded
investment space make it attractive
for investors. As a result, we are
seeing traditional venture investors
return to this sector.
BIOPHARMADEVICES

5
13
16
17
36
9
12
16
19
38
Anti-Infective
Orphan/Rare Disease
Neuro
Platform
Oncology
2016 2017
Oncology
Platform
Neuro
Orphan/
Rare
Anti-
Infective
2016 2017
# of Investments 125 144
Total Series A Funding ($M) $2,334 $2,787
Corporate Investments (%) 26% 29%
8
Biopharma Series A Spikes in Q1 & Q4 Set A Record
U.S. Series A* Biopharma Investments, 2016 – 2017
A
B
C
$784M
$540M
$743M
$267M
$1,711M
Investors making big bets on new technologies led biopharma Series A activity to record levels in 2017.
[A]: Corporate investors often joined these early-stage syndicates, but they were least active in orphan/rare and neuro companies (20%
and 22%).
[B] Oncology deals and dollars at least double the next closest indication.
[C]: The 2017 median deal was $9M, but Q1 and Q4 median deals had values twice that size.
*Series A investments include all U.S.-based first-round institutional or corporate venture investment,
and all first-round investments equal to or greater than $2M regardless of investor.
Source: PitchBook and SVB proprietary data.
2016 Median Series A Funding by Quarter ($M)
2017 Median Series A Funding by Quarter ($M)
75th
Quartile
25th
Quartile
$10.0M $6.3M $7.4M $7.5M
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
Q1 2016 Q2 2016 Q3 2016 Q4 2016
$18.4M
$6.0M
$5.7M
$19.5M
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
Q1 2017 Q2 2017 Q3 2017 Q4 2017

9
Investors Seek Early-Stage Biopharma Deals
Most Active Biopharma Investors*, 2016 – 2017
As venture fundraising hit highs,
healthcare-focused VCs continued
their torrid pace of investing in
biopharma.
Median deal size in 2016 –2017
was $31M, slightly down from
2015 –2016’s median of $33M.
Corporate investors are active,
making mostly early-stage bets.
Those investing in the largest
Series A deals include GSK’s SR
One, Pfizer, Celgene and GV.
Alexandria led biopharma deals,
though investments averaged
under $2M per deal**.
*Most Active Biopharma Investors calculated as new (first-time) investments into companies in 2016 – 2017.
**AREE, Inc. Earnings Press Release 9/30/17
Source: PitchBook, press releases and SVB proprietary data.
# OF DEALS
8
9
10
11
12
13
14
15
16
17
18
19
22
23
26
Corporate Investors

8
9
15
16
27
70
3
5
1
3
3
6
3
4
4
6
5
10
Anti-Infective
Auto-Immune
Orphan/Rare Disease
Neuro
Platform
Oncology
Early Stage Late Stage Undesignated
10
Oncology, Platform Draw New Investor Activity
Most Active Biopharma Investors* by Indication, 2016 – 2017
*Most Active Biopharma Investors by Indication defined as Top 42 venture and corporate investors calculated
as new (first-time) investments into companies in 2016 – 2017.
Early Stage is defined as Series A & B; Late Stage defined as Series C and later.
We saw sustained investment in oncology, resulting from big wins by early-stage oncology investors. The number of oncology
exits is double that of any other indication over the last five years.
Investors see multiple-exit potential for platform technologies by leveraging their potential use in different clinical indications.
Orphan/rare’s decrease in deal volume could be due to waning crossover investor interest.
Oncology
Platform
Auto-
Immune
Orphan/
Rare Disease
Anti-
Infective
Neuro
$3,410M
$1,421M
$664M
$734M
$541M
$649M
# DEALS | $ MILLIONS
Logos represent any $25M+
financing raised in that
time period/indication.

11
Massachusetts and Northern CA See Majority of
Activity
New Biopharma Investments* by Geography, 2016 – 2017
*New biopharma investments defined as Top 42 venture and corporate investors calculated as new
(first-time) investments into companies in 2016 – 2017.
China
3 deals $179M
United
Kingdom
8 deals $257M
Israel
4 deals $78M
Canada
4 deals $353M
Germany
6 deals $142M
Northern
CA
51 deals $2,118M
Southern
CA
22 deals $692M
MA
72 deals $2,310M
NY
11 deals $306M
WA
7 deals $249M
Top 5 U.S. Biopharma Top 5 OUS Biopharma

7
5
5
6
4
1
3
7
7
11
Ophthalmology
Cardiovascular
Neuro
Orthopedic
Non-Invasive
Monitoring
2016 2017
$97M
$63M
$72M
$50M
$27M
Non-Invasive
Monitoring
Orthopedic
Neuro
Cardiovascular
Ophthalmology
2016 2017
Total Series A Funding ($M) $248 $342
Median Round Size ($M) $3.3 $3.9
Non-Invasive Monitoring Drives Device Series A
U.S. Series A* Device Investments, 2016 – 2017
12
A
B
Cardiovascular
Uro/Gyn Neuro
[A]: Deal activity in 2017 matched 2016, but Series A funding increased nearly 40%. Corporate venture increased by two-thirds.
[B]: Non-invasive monitoring, orthopedic and neuro companies made up 68% of all Series A funding over the past two years.
[C]: Non-invasive monitoring deals focused almost exclusively on cardiovascular in 2016 but shifted in 2017, with 64% of deals
in other indications. Chart C details 2017 non-invasive monitoring deals by underlying indication.
Respiratory Ambulatory Metabolic Ophthalmology
Series A Investments includes all U.S. based first-round investments from institutional or corporate
venture investment, and all first-round investments equal to or greater than $2M regardless of investor.
C

3
4
5
7
8
13
Traditional VCs Increase Device Investments
Most Active Device Investors*, 2016 – 2017
*Most Active Device Investors calculated as new (first-time) investments into companies in 2016 – 2017.
Traditional venture investor activity in device rebounded in 2017. Nine firms had at least four deals in 2016 –2017,
compared to only three firms in 2015–2016.
In contrast to biopharma investors’ focus on early-stage deals, device investments by corporate investors were primarily in
later-stage companies.
Corporate Investors
# OF DEALS
KCK Group

Incubators and niche corporate venture arms generated significant new interest in neuro, leading to a 2017 investment surge.
Non-invasive monitoring companies continue to spark investor interest at smaller deal sizes. These companies have smaller
development costs and less stringent regulatory requirements.
We anticipate that drug delivery investment will continue to increase, as therapeutic treatments move outside the hospital.
1
4
2
5
4
5
7
9
5
3
0
3
1
3
1
4
5
3
1
1
1
5
1
6
ENT
Drug Delivery
Metabolic
Vascular Access
Non-Invasive Monitoring
Orthopedic
Neuro
Cardiovascular
Surgical
Early Stage Late Stage Undesignated
14
Niche Investors Generate Major Interest in Neuro
Most Active Device Investors by Indication*, 2016 – 2017
*Most Active Device Investors defined as Top 35 venture and corporate investors calculated as new (first-time)
investments into companies in 2016 – 2017.
Early Stage is defined as Series A & B; Late Stage defined as Series C and later.
Surgical, Neuro and Non-
Invasive Monitoring Vascular Access
Trends:
$163M
$451M
$276M
$97M
$117M
$167M
$197M
$235M
$192M
financing raised in that
time period/subsector.
Surgical
DrugDelivery
Metabolic
Non-Invasive
Monitoring
ENT
Orthopedic
Cardiovascular
VascularAccess
Neuro

California Dominates Device Deals
New Device Investments* by Geography, 2016 – 2017
15
*New Device Investments defined as Top 35 venture and corporate investors based on new
investments in 2016–2017.
Northern
CA
25 deals $709M
Southern
CA
6 deals $275M
MN
7 deals $241M
PA
5 deals $181M
MA
10 deals $278M
Israel
6 deals $63M
France
3 deals $39M
Switzerland
2 deals $74M
Ireland
3 deals $55M
Italy
2 deals $7M
Top 5 U.S. Device Top 5 OUS Device

2016 2017
Total Series A Funding ($M) $516 $500
Median Round Size ($M) $5.3 $4.7
16
Investors Make Smaller Series A Bets in Dx/Tools
U.S Series A* Dx/Tools Investments, 2016 – 2017
9
20
26
9
24
40
Dx Analytics
Dx Test
R&D Tool
2016 2017
$529M
$347M
$140M
B
[A]: While Series A deals increased, total funding declined, indicating that investors are making smaller Dx/Tools bets.
[B]: R&D Tools companies are generating major investor interest. This is likely due to a lack of regulatory and reimbursement
hurdles facing other Dx/Tools subsectors.
[C]: While many Series A financings are R&D Tools, the majority of >$10M deals are AI-based bets in the Dx Tests and Dx
Analytics subsectors.
C
*Series A Investments includes all U.S. based first-round investments from institutional or corporate
venture investment, and all first-round investments equal to or greater than $2M regardless on investor.
A Artificial Intelligence
Synthetic
Biology
Point-of-Care
Dx Tests
Traditional
R&D Tools
Logos represent
all >$10M Series A
financings.
s
s

3
4
5
6
9
17
Tech-Focused Investors Emerge as Dx/Tools Leaders
Most Active Dx/Tools Investors*, 2016 – 2017
*Most Active Dx/Tools Investors calculated as new (first-time) investments into companies in 2016 – 2017.
Tech-focused investors, including AME Cloud Ventures, Data Collective and Khosla Ventures, increased their participation in
Dx/Tools investments.
We anticipate that tech-focused investors will continue to apply their software expertise in Dx Analytics deals that leverage AI.
While tech corporate venture participation has increased, these investors focus on a small set of deals most compatible with
their own technologies.
# OF DEALS
Corporate Investors

16
19
42
Dx Analytics
Dx Test
R&D Tool
18
Investors Focus on R&D Tools and Dx Tests
Most Active Dx/Tools Investors* by Subsector, 2016 – 2017
*Most Active Dx/Tools Investors defined as Top 24 venture and corporate investors calculated as new (first-
time) investments into companies in 2016 – 2017.
$981M
$2,021M
$749M
Overall, Dx/Tools fundraising increased 40%, reaching $2.8B in 2017. Investments in GRAIL and Guardant Health accounted for
$1.6B, nearly 60% of the total.
R&D Tools fundraising increased by 50% in 2017, led by four $25M+ financings in Series A companies.
Two 1H deals accounted for the majority of Dx Tests’ 2017 investment total of $1.8B. Still, the subsector showed a median round
size of $15M, higher than R&D Tools and Dx Analytics.
In stark contrast to R&D Tools, active investors avoided funding Series A Dx Analytics companies. Instead, these investors
focused on later-stage companies that had more clinical validation.
financing raised in that time
period/subsector.
s
s

$608M
$179M
$1,853M
$537M
$0.0M
$400.0M
$800.0M
$1,200.0M
$1,600.0M
$2,000.0M
1H 2016 2H 2016 1H 2017 2H 2017
19
Seed/Series A Series B Series C/Later
Oncology Liquid Biopsy Investments Surge in 2017
Investments in Liquid Biopsy and NGS, 2016 – 2017
NGS Fundraising Triples in 2017
TOTAL FINANCING ($M)
Includes All Dx/Tools Liquid Biopsy and NGS Investments in 2016 – 2017.
2017
$2,094M
2016
$581M
$200M
($500M)
$360M
($540M)
$1,212M
($1,312M)
$322M
($569M)
RAISED IN 2017
(TOTAL RAISED)
10 Other Companies
17
10
12
14
B
Seed/Series A Series B Series C/Later
Round Size Pre-Money Valuation
$310M
$48M
$9M$13M $19M
$58M
A
Explosion in NGS Valuations
MEDIAN ROUND SIZE AND PRE-MONEY VALUATIONS (2016 – 2017)
C
[A]: 85% of liquid biopsy funding
went to Guardant Health, GRAIL
and Human Longevity.
[B]: Investments into NGS deals
increased by 3x in 2017, with
activity concentrated in 1H.
[C]: Late-stage NGS deals saw
huge pre-money valuations.
For a deeper look at this trend,
read SVB’s Tech Advancements in
Dx/Tools Draw Powerful New
Players

Northern CA Remains Most Active Region for
Dx/Tools
Most Active Dx/Tools Investments* by Geography 2016 – 2017
20
Northern
CA
30 deals $2,575M
Southern
CA
9 deals $362M
UT
2 deals $79M
*Most Active Dx/Tools Investments defined as Top 24 venture and corporate investors calculated as new (first-
time) investments into companies in 2016 – 2017.
MA
10 deals $461M
WA
2 deals $44M
Canada
1 deals $3M
France
2 deals $3M
China
1 deal $30M
Italy
2 deals $6M
Top 5 U.S. Dx/Tools Top 5 OUS Dx/Tools

21
Healthcare Big Exit M&A and IPOs:
Biopharma and Device M&A Activity
Are Focused on Early Stage

$0M
$5,000M
$10,000M
$15,000M
$20,000M
$25,000M
$30,000M
2013 2014 2015 2016 2017
M&A Upfront M&A Milestones TBE* Pre-Money IPO
22
Biopharma IPOs Rise as M&A Activity Slows
VC-backed Biopharma Exits, 2013 – 2017
Exit Values by Year
$ MILLIONS
B
A
C
34
66
42
28
31
12
14
22
20
14
2013
2014
2015
2016
2017
IPO M&A
Top Exits by Indication
2013–2017
*Milestones TBE defined as M&A payments that have not yet been earned.
$17.7B
$21.3B
$26.9B $26.5B
$18.7B
Biopharma saw a wave of IPOs, while M&A slowed. Record
high pre-money IPO valuations helped drive activity.
[A]: 2017 biopharma IPOs flourished while M&As declined.
M&A activity was within the bounds of the past five year
cycle, but below 2015 – 2016 highs.
[B]: Overall exit values were down, but biopharma pre-money
IPO values skyrocketed. Median pre-money IPO value was a
record for this cycle.
[C]: 62% of IPOs and 56% of M&As in 2013 – 2017 were
clustered in five indications. Oncology led with four M&A
deals in 2017, followed by orphan/rare (3), auto-immune (2)
and platform (2).
20
10 7 5 4
48
24 25
15 12
Oncology Neuro Orphan / Rare Anti-Infectives Ophthalmology
M&A IPO

23
Biopharma M&A Continues to Focus on Early Stage
VC-backed Biopharma Big Exits by Stage*, 2013 – 2017
*Stage defined as last completed clinical trial in most advanced asset.
Median Upfront($M) 213 225 200 200 171
Median Total Deal($M) 457 413 570 600 461
Median Years to Exit 5.6 4.0 4.2 5.9 3.5
The attractive IPO market in 2017
meant fewer M&A deals. Large private
venture rounds raised in the past few
years made it difficult for companies to
accept early-exit offers while also
maintaining robust multiples.
[A]: Half of biopharma big exit M&As
were early stage (pre-clinical and phase
I). For 2017, 36% of the big exits were
pre-clinical, compared to 25% for the
2013 – 2017 cycle.
Buying early-stage companies allows
big biopharma companies to replenish
their pipelines. The five pre-clinical big
exits in 2017 were acquired by large
players Gilead, Merck, Celgene, Astellas
and Bristol-Myers Squibb.
[B]: The median time to exit hit a record
of 3.5 years from close of Series A. Six
deals exited within three years,
generating a 4.2x median upfront
multiple on private capital invested
(median deal value $250M). These
deals provided tremendous returns to
investors in a very short time.
1
5
7
2
5
2
3
4
8 2
4
4
9
9
5
2
1 1
3
1
1
1
2013 2014 2015 2016 2017
$7.0B
$8.0B
$16.6B $21.2B
$8.9B
A # of Big Exits
Phase III
Phase II
Phase I
Pre-Clinical
Commercial
B

5
8
6
7
2
2016
46%
Early Stage**
9
9
17
6
2015
44%
Early Stage**
9
20
26
6
5
2014
44%
Early Stage**
1
8
13
8
2
2013
32%
Early Stage**
1
5
17
7
1
2017
19%
Early Stage**
24
Biopharma IPOs Shift to Later-Stage Companies
VC-backed Biopharma IPOs by Stage*, 2013 – 2017
*Stage defined as current clinical trial in most advanced asset.
**Early Stage defined as most advanced asset in Pre-Clinical and/or Phase I trials.
2013 2014 2015 2016 2017
Oncology IPOs 11 12 8 5 12
Orphan/Rare IPOs 3 3 5 7 7
% of total biopharma IPOs 41% 19% 31% 43% 63%
A surge in Q4 lifted the total number of IPOs to 31, meeting our projection of 28 to 32 for the year. Oncology and orphan/rare
accounted for 63% of the biopharma IPOs.
[A]: Many biopharma IPOs in this five-year cycle were early stage (pre-clinical and phase I). We saw a dramatic shift in 2017
from early-stage to phase II and III companies going public. This signals a public market focus on actionable clinical data, and
less on the promise of early-stage technologies.
[B]: More than half of biopharma IPOs in 2017 involved oncology and orphan/rare companies – compared to just 32% between
2013 and 2016. Oncology IPOs more than doubled over the 2016 total.
B
Phase IIIPhase IIPhase IPre-Clinical Commercial
A

IPO Pre-Money Value
$ MILLIONS
25
Biopharma Pre-Money IPO Valuations Hit Stratosphere
VC-backed IPOs by Pre-Money Valuation and Dollars Raised, 2013 – 2017
*Pre-money IPO valuation divided by venture capital invested.
**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, Sectoral Asset Management, Viking Global Investors, Wellington Management, Woodford Investment Management
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
2013 2014 2015 2016 2017
$206M
$141M
$193M
$140M
$295M
2013 2014 2015 2016 2017
IPOs Raised Over $100M 8 12 13 1 12
% of IPOs Raised Over $100M 24% 18% 31% 4% 39%
$0
$15
$30
$45
$60
$75
$90
$105
$120
$135
$150
$71M
$62M
$71M
$52M
$81M
C
[A]: Biopharma pre-money IPO valuations hit a record $295M in 2017, nearly 50% higher than the previous record.
[B]: IPOs also had a median invested capital multiple* of 2.8x, resulting in up-round IPOs for many of these companies.
[C]: Crossover investors led the strong IPO class: the top 15 healthcare crossover investors** participated in 10 of 12 of 2017’s
$100M+ IPOs. We anticipate that IPOs will remain a viable financing option for crossover investments that have solid initial
clinical data.
A IPO Proceeds
$ MILLIONS
B
75th
Quartile
25th
Quartile
IPO Median Pre-Money IPO Median Dollars Raised
2013 2014 2015 2016 2017

$0M
$1,000M
$2,000M
$3,000M
$4,000M
$5,000M
$6,000M
$7,000M
$8,000M
2013 2014 2015 2016 2017
M&A Upfront M&A Milestones TBE* Pre-Money IPO
26
Device M&A Activity is Stable
VC-backed Device Big Exits, 2013 – 2017
Exit Values by Year
$ MILLIONS
B
A
C Top Exits by Indication
2013 – 2017
*Milestones TBE defined as M&A payments that have not yet been earned.
$2.8B
$6.4B
$7.6B
$4.9B $4.9B
There were nine acquisitions in 2H 2017, each led by a different
acquirer.
[A]: Device IPO and M&A activity matched 2016, but each of the
last two years saw fewer deals than 2014 and 2015. M&A activity
far outpaced IPO activity for 2013 –2017.
[B]: M&A in 2017 outperformed the 2013 – 2017 cycle. NeoTract’s
$1.1B deal ($725M upfront) drove this value.
[C]: Between 2013 – 2017, 76% of M&As and 45% of IPOs were
clustered in five indications. Cardiovascular (3), drug delivery (2)
and vascular (2) were the only indications that had multiple M&A
big exits in 2017.
2
10
11
3
3
12
18
19
13
14
2013
2014
2015
2016
2017
IPO M&A
19
12 11
8 8
1
4 4
3 1
Cardiovascular Vascular Surgical Ophthalmology Orthopedics
M&A IPO

Median Upfront($M) 127 180 125 120 113
Median Total Deal($M) 175 185 141 380 275
Median Years to Exit 6.6 6.9 7.0 8.1 7.7
U.S. Commercial
CE Mark Only
Non-approved
1 1
4
2
3
3
1
5
4
3
8
15
10
7
8
2013 2014 2015 2016 2017
27
Device Shows Earlier Exits and Higher Valuations
VC-backed Device by Stage*, 2013 – 2017
*Stage defined as last completed clinical trial in most advanced asset.
[A]: Large companies (e.g. J&J, Boston
Scientific) drove M&A deals in 2017,
although longtime acquirer Medtronic
remained absent. Large acquirers
targeted innovative technologies,
including those focused on minimally
invasive solutions (5) and advanced
imaging/visualization platforms (3).
Since 2014, 37% of device M&A deals
were CE Mark only or non-approved.
These deals had a 4.5x median upfront
multiple in 2017 – twice that of FDA-
approved companies.
[B]: Device deal structures shifted
during this cycle. 2016 and 2017 deals
had a larger proportion of milestones to
be earned (60%) vs. 2013 to 2015
(19%).
The device median time to exit from
Series A declined in 2017 but still the
time exceed the five year trend. If the
number of non-FDA approved deals
continues to rise, we anticipate time to
exit to decrease.
$2.3B
$4.3B
$3.7B
$4.4B
$4.6B
A # of Big Exits
B

28
PMA/De Novo 510(k) Upfront Multiple and Value
Exceed Biopharma Levels
VC-backed Device M&A by Pathway, 2015 – 2017
Since 2015, PMA/De Novo acquisitions generated larger upfront multiples and quicker times to exit than iterative 510(k) exits.
PMA/De Novo upfront values and multiples both now exceed those of biopharma’s. We anticipate healthcare-focused investors
to place bigger bets in innovative, early-stage device companies.
Prior to acquisition, iterative 510(k) pathway companies often require both FDA clearance and funding for commercializing and
ramping revenue. These obstacles increase required capital and lengthen time to exit. In contrast, nearly all innovative PMA/De
Novo acquisitions occur before approval by the FDA.
2015 – 2017 Stage at Exit
Median
Invested
($M)
Median
Upfront
($M)
Median
Upfront
Multiple
Median
Total Deal
($M)
Median
Total Deal
Multiple
Median
Time to
Exit
(Years)
510(k)M&As
25 Exits $50 $100 2.3x $110 3.4x 9.0
PMA/DeNovo
510(k)M&As
21 Exits
$51 $225 4.3x $325 6.7x 5.5
BiopharmaM&As
56 Exits $37 $200 4.2x $557 11.7x 4.3
1
2
8 11
23
28
28
1
≥ Phase IDevelopment StageCE Mark OnlyFDA-Approved < Phase I

MeanYearstoIPO 10.9 6.5 9.4 N/A N/A 4.1
Mean Years
to Big Exit
9.1 8.4 7.8 6.4 2.6 4.7
0 to 1X 1 to 2X 2 to 4X 4 to 7X 7 to 10X >10.1X
IPO M&A
2013 2014 2015 2016 2017
29
No 2017 Dx/Tools Exits, but Opportunities Lie Ahead
VC-backed Dx/Tools Exits, 2013 – 2017
Exit Values by Year
$ BILLIONS
B
A
C IPO/Exit Multiples*
2013 – 2017
$1.0B
$2.8B
$1.4B
$1.5B
No
Exits
[A]: Despite heavy investment in the Dx/Tools sector, exits
proved elusive in 2017, with only a single IPO.
[B]: Companies in the R&D Tools space largely dominated big
exits, accounting for 62% of M&A activity in 2013-2017.
[C]: Large-multiple big exits (>7x) in 2013-2017 typically had
short exit times and small amounts of invested capital (median
investment of $10M). IPOs had lower multiples and longer
times to exit, and most post-IPO companies underperformed.
We anticipate big exits in the next few years, with tech giants
making more investments and emerging as potential acquirers.
*IPO multiple calculated as estimated pre-money valuation divided by private invested capital. Exit multiple
calculated as upfront deal value divided by private invested capital.
4
7
5
1
3
10
8
5
2013
2014
2015
2016
2017
IPO M&A
MedianUpfront($M) 350 133 164 225 N/A
Median Total Deal ($M) 450 239 164 325 N/A
Median Years to Exit 8.2 6.0 3.6 8.5 N/A
R&D Tools
Dx Analytics
Dx Tests
6
9
2
2
1
7
5 4
5
2

30
Despite a Pullback, Crossovers Remain Active
Top 15 Crossover* Activity and Exits, 2013 – 2017
*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, Sectoral Asset Management, Viking Global Investors, Wellington
Management, Woodford Investment Management
**Average months to exit from last crossover round of financing
[A]: Crossover private investment peaked in 2015, and returned to normal activity in 2016 – 2017.
Favorable market conditions drove quicker exits in 2013-2014 and 2017. Record time to exit in 2017 could drive strong
crossover private investment in 2018.
[B]: With the highest exit rate, orphan/rare bets have paid off for crossover investors. However, there are limited future exits
unless crossovers reinvest in this indication. There were only two new orphan/rare private crossover investments in 2017.
Fifty-one private companies in these indications make up a strong pipeline for future IPOs. Oncology had the most exits in 2017
and the largest pipeline, suggesting a major role in 2018 IPOs.
26
7
16
9 7
23
17 2
6
3
7
31
64
25
35
3
7
5
4
4
4
4
4
6
5
Top 15 Crossover Private InvestmentsA Most Active Biopharma Indications
and Exits
B
2013 2014 2015 2016 2017
TotalInvestments 14 42 74 39 47
IPO / M&A 9 / 2 20 / 5 40 / 6 6 / 1 8 / 0
Months/Exit** 7.4 6.6 9.0 9.8 3.3
Dx/Tools
Medical Device
Biopharma
Oncology Platform Orphan/Rare Neuro Ophthalmology
ExitPercent 53% 29% 89% 60% 70%
IPO / M&A 23 / 3 7 / 0 14 / 2 7 / 2 6 / 1
Months/Exit** 8.2 9.0 9.1 4.0 8.2
Still Active
Total Exits

2018 Outlook
31
• Annual healthcare venture fundraising will decline to $6B - 7B, as a number of larger firms closed new funds in 2017.
• Biopharma investors will likely slow their deal pace.
• Biopharma M&A deals will reach 20-plus big exits based on available acquirer cash and the need to replenish pipelines.
• A market driven by a steady pipeline of crossover investor-backed oncology companies should again achieve 28 to 32
IPOs. There were 31 IPOs in 2017.
• Due to a steady M&A market and quick exits in PMA/De Novo 510(k) companies, investments in medical device will
increase. Traditional venture investors will lead this upswing.
• Early stage device M&A will continue. Neuro and drug delivery companies may join cardiovascular companies to spur the
next flurry of early-stage device acquisitions.
• Dx/Tools investments in 2018 will dramatically decline, down 25 percent from 2017, although the number of deals is
expected to stay steady.
• We anticipate more investments in the Dx Analytics subsector as companies develop AI-assisted technologies.
Increasingly, these companies will receive backing by tech-focused investors. We will also see R&D Tools companies spin
off Dx Test and Dx Analytics companies, as their research technologies develop into clinically relevant approaches.
• Liquid biopsy investments will slow, as current companies will look to validate their technologies.
• Despite no Dx/Tools M&A activity in 2017, we anticipate a few exits in R&D tools companies. Tech giants may make move
from investing to acquiring promising Dx Analytics companies.

32
Glossary
Big Exits
Big Exits 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 a venture-backed company raising IPO proceeds of $25
million or more.
Deal Descriptions
Structured 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 before it is
realized.
All-in Deal defined as an acquisition where the full deal value is paid on
deal close.
Upfront Payments defined as initial proceeds from an acquisition paid
upon the close of a structured deal; it does 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.
Corporate Investor
Corporate investor defined as both venture and parent company
investment into venture-backed companies
Regulatory
Non-approved defined as a device company that has no regulatory 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.
U.S. Commercial defined as a device company that has received FDA
approval of its product and usually is in commercial stage.
Series A
Series 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.
Indication Definitions
Neurology( (Neuro) defined as CNS, pain and psychology companies.
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.

Trends in Healthcare Investments and Exits 2018 33
About the Authors
AsaManagingDirector,JonathanNorrisspearheadsstrategicrelationshipswithmanyhealthcareventurecapitalfirmsandalsooversees
businessdevelopmenteffortsforbankingandlendingopportunities.Inaddition,hehelpsSVBCapitalthroughsourcingandadvisingon
limitedpartnershipallocationsanddirectinvestments.
Norrisspeaksatmajorinvestorandindustryconferencesandauthorswidelycitedanalysesofhealthcareventurecapitaltrends.Hehas
morethan17yearsofbankingexperienceworkingwithhealthcarecompaniesandventurecapitalfirms.Norrisearnedabachelor’s
degreeinbusinessadministrationfromtheUniversityofCalifornia,Riverside,andajurisdoctoratefromSantaClaraUniversity.
Jonathan Norris
Managing Director
Silicon Valley Bank
jnorris@svb.com
CaitlinTolmanisaSeniorAssociatewithSVB’sLifeScienceandHealthcareteam.Afive-yearveteranoftheteam,sheprovides
marketresearchandtargetedanalysesofhistoricandcurrentinvestmenttrendswithinthelifescienceandhealthcareventure
capitalindustry.TolmanworkstostrengthenanddeepenrelationshipstobuildtheSVBnetworkandoffermeaningful
connectionsforbothVCfirmsandSVBclients.Herpassionforinnovationisevidentintheworkshedoeseverydaytoidentify
emergingindustryandmarkettrends.
AftergraduatingwithhonorsfromtheUniversityofMassachusetts,Amherst,TolmanjoinedSVBasaclientserviceadvisorin
2007.ShethenheldaroleinSVB’sGlobalSalesandSolutionsgroupandhelpedtodrivevariousproductandservicesolutions,
particularlyincashmanagementandpayments.
Caitlin Tolman
Senior Associate
Silicon Valley Bank
ctolman@svb.com
ThomasJoyceisaLifeScienceSeniorAssociatebasedinBoston,whereheperformsstrategicadvisoryserviceswithafocuson
Dx/Toolsmergersandacquisitions.
JoycewaspreviouslyaSeniorAssociateinSVB’scommercialbank,focusedonfinancialanalysis,portfoliomanagement,business
developmentandunderwritingofcomplexcredittransactionsforlifescienceandhealthcarecompanies.PriortoSVB,Joycewas
responsiblefororiginatingandanalyzingprivateequitytransactionsforKamylonCapital,aprincipalinvestmentfirm.Joyceearned
abachelor’sdegreeinfinancewithaminorineconomicsfromSuffolkUniversity’shonorsprogram,graduatingsummacumlaude
andasamemberoftheBetaGammaSigmaHonorsSociety.
Thomas Joyce
Senior Associate
SVB Securities
tjoyce@svb.com
As a Healthcare Investments Consultant, Ritish Patnaik helped developed SVB’s Dx/Tools classification system, which
led to SVB’s Tech Advancements in Dx/Tools Draw Powerful New Players Report. In addition, he helped analyze the final
data set, create graphs and put together takeaways for the investment trends presented in this report.
Patnaik is pursuing a Ph.D. in Bioengineering at Stanford University, where he is creating a multi-omic liver cancer test
via magnetically tagged liquid biopsy. Patnaik earned a bachelor’s degree in Biomedical Engineering at Columbia
University.
Ritish Patnaik
Healthcare Consultant
rp2616@stanford.edu

This material, including without limitation to the statistical information herein, is provided for informational purposes only. The material is based in part on
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About Silicon Valley Bank
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investors move bold ideas forward, fast. SVB provides targeted financial services and expertise
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