The State of the Massachusetts Life Science Industry - The Year in Review - June 2, 2011 MALSI | MA Life Sciences Innovation Day

Copyright © 2011 All Rights Reserved MA Life Science Venture Investments Investment by Sector (2008 – present) (millions of dollars) $ Source: PWC Moneytree; Thomson Reuters medical device biotechnology

Copyright © 2011 All Rights Reserved MA Life Science Venture Investments Stage of Investment (Q – present) (percent of total) $357 mm $345 mm $199 mm $240 mm $223 mm Start Up Early Stage Late Stage Source: PWC Moneytree; Thomson Reuters No. of financings

Copyright © 2011 All Rights Reserved MA Life Science Venture Investments Early-Stage Investments (Q – present) $210 mm $290 mm $169 mm $178 mm $128 mm No. of financings Medical device Biotechnology Source: PWC Moneytree, Thomson Reuters Note:Includes early-stage and seed/start-up catregories

Copyright © 2011 All Rights Reserved MA Life Science Venture Investments Select Series A Biopharma Investments DateCompanyAmount RaisedDescription Jan-11 Civitas Therapeutics $20 mm Parkinson’s lead Based on A.I.R. pulmonary delivery technology of Alkermes Nov-10 VeraStem $16 mm Cancer stem cell focused May-10 Tesaro $20 mm Acquires and develops oncology therapeutics Former MGI Pharma management team Apr-10 Catabasis Pharmaceuticals $40 mm Type II diabetes focused Technology from Joslin Diabetes Center Jul-10 Euthymics $24 mm acquisition of DOV Pharma CNS candidate

Copyright © 2011 All Rights Reserved Capital Market Perspectives US Venture Investments - Biotechnology Oncology CNS Anti-infective Other $3.8 billion Note: Data for the twelve months ended March 31, 2011 Source: PWC Moneytree; Thomson Reuters; Johnston Blakely research Investment by indication (TME ) (percent of total transactions)

Copyright © 2011 All Rights Reserved Number of issues % life science issues 23.5% 14.9%9.7%8.8% All Industries Life Science Issues Capital Market Perspectives Annual IPO Activity: 2000 – % Source: IPOMonitor, Hoover’s IPO Central, Johnston Blakely & Co % % % % 6.3% 12.4%

Copyright © 2011 All Rights Reserved Capital Market Perspectives Biopharma IPO Activity 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Preclinical Phase I Phase II Phase III NDA filed 37.7% 92.0% Preclinical Phase II Phase III NDA filed Percent of total IPOs Source: SEC filings Note:Includes biopharmaceutical and related issues only. Lead compound in clinical development % of total life science IPOs 76.8%56.8% 100.0% 2007 Phase I Phase II Phase III NDA filed/approved 48.4% % 2009/10 Phase II Phase III 73.3% 11 NDA filed/approved

Copyright © 2011 All Rights Reserved Life Science IPO Performance Aggregate Performance (2000 to 2010) Percent of Aggregate Value $2,547 Note:Represents value of one common share in 245 life science IPOs from 2000 through Dec 31, Stock transactions involving mergers of equals or reverse mergers calculated using current share prices. Cumulative value of one share/IPO $2.727 (6.6%)

Copyright © 2011 All Rights Reserved 2010 Biotechnology IPOs IPO Pricing vs. Expected Range IPO price per share Note: % change from expected range calculated using the midpoint of the expected range. Source: SEC filings % PPS priced below expected PPS 25.0%50.0%37.5%7.1%44.4%31.3%33.3%36.7%69.2%70.6%7.7%61.5% Expected price per share Realized price per share Indicates Massachusetts Company Current PPS vs IPO PPS

Copyright © 2011 All Rights Reserved Number of announced transactions Source: Johnston Blakely & Co. research Merger & Acquisition Activity Life Science Sector (Q – Q4 2010)

Copyright © 2011 All Rights Reserved Pre/non clinical %: 51.0%44.0%39.0%32.0%25.9%25.7%27.2% Percent of total R&D expenditures Pharma R&D Expenditures (by function) Pre/non clinical Ph I – III clinicals Post-approval studies Regulatory/other Source: PhRMA, Note: Pre/non-clinical category includes process development, QC and formulation related expenditures. 32.5%31.9%27.3%27.0% $29.2 B$32.4 B$36.1 B$37.0 B$38.7 B$42.0 B$43.8 B$46.2 B $49.6 B$47.2 B

Pharmaceutical Innovation Relative New Therapeutic Contributions (1997 – 2009) Percent of annual new drug approval Bio/Specialty Pharma: Large Pharma: 66.7% 33.3% 74.4% 25.6% 40.8% 59.2% 42.5% 57.5% 51.2% 48.8% 57.9% 42.1% 39.4% 60.6% 48.4% 51.6% 70.7% 29.3% 84.4% 15.6% Source: PhRMA, BIO, FDA Large PharmaBio/specialty pharma 13 Copyright © 2011 All Rights Reserved % 20.0% 76.7% 23.3% 60.0% 40.0%

Copyright © 2011 All Rights Reserved 14 Productivity in the pharmaceutical industry continues to worsen. Royalty stacking negatively impacts already reduced profit margins. Promise of the genomics revolution to date unfulfilled. The dependence of the pharmaceutical industry on biotechnology has never been more acute. R&D Productivity Current M&A Influences Pipeline pressures significantly influencing M&A activity. Patent expirations weigh heavily on top and bottom lines.

Copyright © 2011 All Rights Reserved The Financing Divide Traditional Investment Model INDIND NDANDA Discovery DevelopmentPhase IPhase IIPhase IIIApproval Pre clinical CandidateClinical DevelopmentMarketed Product Go publicVenture funding traditional investment model Follow on offerings Private Institutional InvestorsPublic Markets

Copyright © 2011 All Rights Reserved The Financing Divide Shifting Investment Dynamics INDIND NDANDA Discovery DevelopmentPhase IPhase IIPhase IIIApproval Pre clinical CandidateClinical DevelopmentMarket Go publicVenture funding traditional investment model Go public Venture funding current investment model Follow on offerings Private Institutional InvestorsPublic Markets Private Institutional Investors The Financial Abyss ?

Copyright © 2011 All Rights Reserved ++ The Life Sciences in Massachusetts Centers of Academic Excellence Storied Medical Institutions Access to Investment Capital Massachusetts Life Science Industry All of the Ingredients are Here

Copyright © 2011 All Rights Reserved Benjamin Conway The State of the Massachusetts Life Science Industry - The Year in Review - MALSI | MA Life Sciences Innovation Day