“Managing a Startup in Turbulent Times” Satellite Broadcast Presented by Fred A. Middleton General Partner Sanderling Ventures June 6, 2001

 Sanderling Ventures - An Introduction  The Biomedical Sector - An Overview  Startups in Turbulent Times - Important Issues

Sanderling Ventures - Overview  Founded: 1979  Strategy: Seed and Early Stage Biomedical Investing  Main Office: Sand Hill Road, Menlo Park, CA  Total Funds Raised Sanderling I thru V: $468 Million  Companies Funded: 50  IPOs Completed: 16  Geography: 75% of deals in Western U.S.  Employees: 14 with 3 Ph.D.s on staff Sanderling Overview

Biomedical Investing – An Overview Biotechnology Devices Healthcare Services & Delivery Markets Served Intellectual Property Margins Capital Requirements Time Horizon Sanderling Overview BigHigh HugeShort Medium ModestLow HighLong

Others Biotechnology & Therapeutics Medical Devices & Instrumentation Healthcare Delivery & Information Services Biomedical Technologies and Markets Sanderling Overview Sanderling V Investment Strategy Biotech and Therapeutics Medical Devices and Instrumentation Healthcare Delivery 50% 35% 15% Composition of Deal Flows

Actual Funds Flow ($ Billion) $- $10 $20 $30 $40 $50 $ InternetIT OnlyAll Biomedical Private Equity Funds Flowing to the Medical Sector Have Lagged that for IT Note: IT Sector defined as Telecommunications, Semiconductors, Comp. Hardware & Software Source: NVCA/Venture Economics Biomedical Sector Overview

Biomedical As A % Of Total VC Disbursements 0% 5% 10% 15% 20% 25% 30% Historical Average (22 years) = 17% Source: NVCA/Venture Economics Note: 1999 and 2000 represented 7% and 5% respectively The Percent of VC Dollars Flowing Into Biomedical is Below its Historic Average Biomedical Sector Overview

Source: US Food and Drug Administration Number of Products More Biotechnology Products Approvals Biomedical Sector Overview

Capital Raised Through Biotechnology IPO’S ( ) Jan-Jun 94 Jul-Dec 94 Jan-Jun 95 Jul-Dec 95 Jan-Jun 96 Jul-Dec 96 Jan-Jun 97 Jul-Dec 97 Jan-Jun 98 Jul-Dec 98 Jan-Jun 99 Jul-Dec 99 Jan-Jun 00 Jul-Dec 00 $- $20 $40 $60 $80 $100 $120 Avg. Amount Raised ($ MM ) Year 2000 Brings a Window of Opportunities for IPOs Source: BioCentury, BioWorld Financial Watch Biomedical Sector Overview

Progress Recognized : The Growth of Public Bio-Tech Companies Valued at Over $1Billion Source: Sanderling Analysis Biomedical Sector Overview

Company Valuation ($ Millions) Market Valuations Relative to Stage of Clinical Development Source: Sanderling Analysis Building Successful Startups

Average Valuations of Biomedical IPO Candidates IPO Market Cycle Average IPO Valuations 1990 – 1994 $105 million 2000 – Today $300 million Source: Sanderling Analysis Building Successful Startups

Startups in Turbulent Times – Important Issues Managing Startups in Turbulent Times Five Questions to Ask of Your Company: 1. How has my business environment changed? 2. Is my long term strategy still valid? 3. What is the current funding outlook? 4. Is my company’s current burn-rate sustainable? 5. What changes in operating tactics are appropriate?