Capital Markets: Healthcare Trends & Future Outlook Kuwait Healthcare Reform 2009 Presented by Julie B. Decker Managing Director, Lynxcom Partners Operating Partner, Director of Healthcare Practice, FocalPoint Partners

2 Introduction: Julie Decker  FocalPoint Partners – Operating Partner & Director Healthcare Practice Largest independently-owned investment bank in Southern California, founded in 2002, with offices in Los Angeles and New York Run by seasoned veterans, with backgrounds in:  Distressed markets  Turnaround management  Private equity  Investment banking  LynxCom Partners – Managing Director Healthcare consulting firm based in San Diego providing M&A advisory, global sales development, marketing organizations, financial turnaround with expertise in:  Alternate site and home health  Biotechnology and life sciences  Pharmacy, nursing and DME  Law  Public accounting  Strategy consulting  Senior lending  Payer relations, reimbursement and regulatory affairs  Business development and operations  Healthcare information services

3 Agenda  Current economic situation What happened? Capital Markets Government response  Healthcare outlook Current trends Spending and Government initiatives Continued investor interest M&A activity  Future outlook of healthcare investments Financing and M&A activity Expected future capital allocation

Market Changes Credit Crunch Decrease in new loans New loans are more expensive Decreased valuations Money stops circulating, economy slows Uncertainty Investors are more risk averse (>$10 MM EBITDA, risk-free) Huge losses in paper wealth Slowdown in consumer spending Downward pricing pressure Economic Crisis Increase in bankruptcy and restructuring/distressed opportunity Slowdown in M&A and financings Stock markets at new lows What will happen next? 4

Capital Markets Bank failures and consolidations 5 Dow Jones Industrial Average JP Morgan Chase acquires Bear Stearns for $270 MM Lehman files for bankruptcy Merrill Lynch sold to Bank of America for $50.3 Bn JP Morgan Chase acquires assets of Washington Mutual US Treasury takes 36% ownership of Citigroup FreddieMac and FannieMae failures

6 Government Stabilization Initiatives  1 st major action: Troubled Asset Relief Program (TARP) Authorized by legislation passed October 3, 2008 $700 billion, approximately 50% has been spent Provide financial support to failing banks  2 nd major action: Stimulus Package (American Recovery and Reinvestment Act) Signed into law February 17, 2009 Provides additional $789 billion in funding for tax relief, healthcare, education, housing and infrastructure

7 Why Healthcare Remains Healthy: Aging Population Aging population utilizes more healthcare services

8 Why Healthcare Remains Healthy: New Technologies Advances in Technology Remote Monitoring: telemedicine, Bluetooth diagnostics for laboratory Sensors and automation Data EMR/PHR Centralized Reporting

9 Why Healthcare Remains Healthy: Drug Development  Drug spend forecasted to reach $453 billion by 2018  New advances in drug therapy 475 drugs in Phase III clinical trials 800 drugs in Phase II clinical trials Cancer treatment is the largest area of drug development  Targeted, long-term therapies  Genetically based information  Tumor biomarkers

10 Why Healthcare Remains Healthy: Growing Healthcare Spend  Healthcare is a large part of the US economy National health expenditures totaled $2.3 trillion in 2007 Single largest segment of the GDP at 16% Expenditures on hospital care reached $700 billion in 2007

11 Why Healthcare Remains Healthy: Government Commitment American Recovery and Reinvestment Act (Stimulus Bill): New Administration’s Renewed Focus on Healthcare Reform New administration’s proposed budget  In addition to the Stimulus Bill, the 2009 budget includes $664 billion in Medicare and Medicaid  In 2010 the new administration plans to increase Medicaid and Medicare and establish a Uninsured Healthcare Reserve Fund increasing the total budget by 114%

12 Solid Investor Interest in Healthcare  Highly fragmented sector Disconnects Shift toward inclusive model: Anthem, PrecisionRx and Aenta SPEC.Rx  Investors want to secure part of a growing market By 2018 national health spending is expected to reach $4.4 trillion, 20.3% of total US GDP Prescription drug spend projected to reach $453 billion by 2018  Healthcare is unavoidable and sustainable

Healthcare Transaction Overview  Healthcare was the second most active M&A sector in total M&A transactions $223.1 billion invested 3% of volume accounted for 74% of healthcare M&A dollars More than 90% invested in healthcare technology

14 Recent Healthcare Transactions  Biotechnology Roche acquisition of Genentech for $47 billion  Pharma Teva acquisition of Barr Pharmaceuticals for $8.9 billion Merck has will acquire Schering Plough for $41 billion Pfizer will acquire Wyeth for $68 billion  Medical Devices Novartis acquisition of Alcon for $38 billion  eHealth MedAssets acquisition of Accuro Healthcare Solutions for $450 million

Investment Focus Trends First Opinion, Isabel – automated diagnosis EMR/PHR – Allscripts, Microsoft, Google, McKesson eHealth Companies Sensors & wireless - disposable temperature sensors, continuous glucose monitoring, RFID/bluetooth communication Robotics – InTouch Health, hospital rounds, E-ICU monitoring Technology-driven Healthcare Focus on controlling costs by managing chronic diseases Redefining what disease management means Healthways, Alere, Focused Health Solutions Disease Management New drug development focused on cancer, CHF, diabetes More interest in generics Continued Focus on Pharmaceuticals and Biotech Social networking and patient support sites Medical information Consumer-Driven Health

Outlook Although credit has dried up almost everywhere else, drugs companies, with their cash reserves and healthy revenues, can still call on the banks. - The Economist Although credit has dried up almost everywhere else, drugs companies, with their cash reserves and healthy revenues, can still call on the banks. - The Economist