1. Views from a Venture Capitalist Nancy Harrison

2. Venture Capital Investment in Canadian Companies Excludes Canadian VC investments in foreign companies Source: Macdonald & Associates

3. Venture Capital Investments in Biotech Canadian VCs Support Industry

4. The Markets are Bad – How Bad are They?

5. Where is the Bottom?! Source: Yorkton Securities

6. The Bad News Blair/Clinton comments September 11th Enron Elan Dov Pharma downturn Series of poor data, FDA rejections ImClone

7. Are There Public Market Safe Havens? 7 Stocks Lose $62B in 6 Months 12/31/016/12/02Mkt Cap ChangeMkt Cap % Amgen $59.2B$42.2B-$16.8B-28% Genentech $28.6B$17.4B-$11.2B-39% Immunex $15.8B$12.4B-$3.3B-21% Elan $15.4B$2.6B-$12.8B-83% Serono $14.3B$10.2B-$4.0B-28% Genzyme $12.7B$4.0B-$8.7B-68% Idec $10.5B$5.0B-$5.5B-52% Total $156.4B$94.1B-$62.4B-40% Source: BioCentury June 24,2002

8. What Constitutes a Tier I Company? March 2000: 41 of 81 companies have products Today: 33 of 36 companies have products Source: BioCentury June 17, 2002

9. US Money Raised by Biotech Companies in 2002 YTD $ YTD$ 2001 IPOs$250.6M$400M Follow-ons$592.4M$4B Venture capital$2708.6M$4.2B Other$5537.0M$7.4B Total$9088.6M$16B Source: BioCentury September 9, 2002 Where are the institutional investors?!

10. Canadian Public Market Financings are Dead Source: Yorkton Securities Money Raised in Public Canadian Biotechnology Companies

11. Six Top Public BC Biotech’s – 2 year, 5 year

12. Private Deals Done in BC – not many - Last half 2001 –Protiva - $14.5m First half 2002 –Oncogenex - $3.6m Other deals –follow-ons –Grants - Genome Canada

13. BC Companies are Still Not on the Radar Screen of Foreign Investors

14. What are VC’s Focused on?

15. The New Reality Internal rounds (Series B-2) closing a year after Series B Lack of lead investors Debt financing Lay-offs and downsizing/prioritizing Mergers VC’s supporting their own companies VC’s having a hard time getting excited about the “old” model - Disillusioned Numbers don’t work anymore

16. A Generic Early 90’s Model Round TypeDate Amount Raised (MM) Pre-Money Valuation (MM)IRRMultiple 1SeedJan-90 $ 0.50 $ 2101% 32.53 21stJan-91 $ 3.00 $ 1070% 8.13 32ndJan-92 $ 8.00 $ 3250% 3.30 43rdJan-94 $ 13.50 $ 10032% 1.32 5IPOJan-95 $ 150 Total Private Capital $ 25 Million From Vinod Khosla (KP)

17. A Generic Late 90’s Model Round TypeDate Amount Raised (MM) Pre-Money Valuation (MM)IRRMultiple 1SeedJan-97 $ 5 $ 3579% 18.37 21stJan-98 $ 10 $ 10065% 7.35 32ndJan-99 $ 25 $ 20059% 4.04 43rdJan-00 $ 60 $ 60052% 1.52 5IPOJan-01 $ 1000 Total Private Capital $ 100 Million $200 ?

18. Angiotech Model Go public on TSE (stepping stone/capital) Then go to NASDAQ (liquidity) Luck element - public markets closed

19. Big Corporate Partnership Model Sign a big deal and get credit (Inex) Doesn’t always work that way anymore (StressGen)

20. Top Quartile VC IRR’s above 30 %

21. What are VC’s doing to Get Returns? Focusing on companies with on products, revenues and profits Avoiding concept deals Doing fewer deals – more money per deal Watchful waiting Investing in NRDO’s e.g. Salmedix

22. What are VC’s doing to Get Returns? Investing in Superhero CEO’s –Affinity raised $70m Series B – June 24 Investing at lower valuations (40%) –Especially for Class of 2000 companies Letting companies go under – not throwing good money after bad Investing in relatively cheap publics versus private companies

23. So What Can Companies Do?

24. Creative Financing Alternatives Cut Burn –e.g. Geron Let go 1/3 of work force to refocus on later stage programs – June 2002 “In the current financing climate companies that are well managed make tough calls…early.” Alex Barkas, Chairman Slice and Dice Market –e.g. Angiotech - masters of this Lean and Mean –Angiotech never more than 50 people

25. Creative Financing Alternatives Strategic M&A –e.g. ImmGenics –Don’t wait until out of money Deals to cut burn, increase chances of success –e.g. Active Pass/Neogenesis Buy versus Build –e.g. Active Pass Spinouts –e.g. Inex/Protiva

26. Summary The world has changed – forget the past Lots of money out there –For Right story - at Right Valuation Time is the enemy: Financing and M&A take a long time – don’t get pushed up against the wall Remember what drives investors – returns! – build into pitch Be flexible on model and exit Founders make money when shares are sold, not on company financings.

27. www.ventureswest.com