1. White Pine Medical, Inc. Confidential 4th Annual Translational Medicine Symposium FEBRUARY 11 & 12, 2014 Dan Lemaitre Dan@whitepinemedical.com Dan@whitepinemedical.com

2. White Pine Medical, Inc. Confidential Agenda Medical Device Retrospect and Prognosis The Demise of Traditional Venture Capital What is An Innovator to Do? Medical Device Retrospect and Prognosis The Demise of Traditional Venture Capital What is An Innovator to Do?

3. White Pine Medical, Inc. Confidential Executive Summary Medical device industry revenue growth will remain tepid Emerging market focus will siphon R&D spending required to fund new products Traditional venture capital market is dead, hurt by prolonged development and approval cycles Innovator options: Run lean, particularly early-on Strategics, although fraught with peril Private company platforms that have scale/cash flow Medical device industry revenue growth will remain tepid Emerging market focus will siphon R&D spending required to fund new products Traditional venture capital market is dead, hurt by prolonged development and approval cycles Innovator options: Run lean, particularly early-on Strategics, although fraught with peril Private company platforms that have scale/cash flow

4. White Pine Medical, Inc. Confidential A Brief History of, and the Outlook for, the Medical Device Industry

5. White Pine Medical, Inc. Confidential “Cost Plus” Reimbursement Prior to 1983 Industry revenue growth ~20%

6. White Pine Medical, Inc. Confidential Diagnostic Related Group slows industry growth to ~10% Prospective Payment System Launched in 1983

7. White Pine Medical, Inc. Confidential “Failed” Clinton Reform Led to “Managed Care” Industry growth slowed to ~3% in part because….

8. White Pine Medical, Inc. Confidential …David Kessler effectively “shutdown” the FDA by demanding randomized prospective clinical trials for PMA devices FDA Raised the Regulatory Hurdle Bar

9. White Pine Medical, Inc. Confidential Cardiac Resynchronization Therapy (CRT) and Drug Eluting Stents (DES) lift industry growth to ~15% Industry Growth Peaked in 2003-2005

10. White Pine Medical, Inc. Confidential Industry growth now in the 2-4% vicinity Recalls, Safety Concerns Stymie Growth

11. White Pine Medical, Inc. Confidential Traditional source of medical device innovation is Bedside to Bench which is now being disrupted by hefty scrutiny i.e. The Sunshine Act Disintermediation of Physicians & Vendors

12. White Pine Medical, Inc. Confidential Accountable Care Organizations will likely result in more “conservative” care under the guise of “patient safety” Evidence Based (i.e. Cookbook Medicine)…

13. White Pine Medical, Inc. Confidential Surgeons, historically incentived to do more, will be motivated to do “better” with less …Where Less is More

14. White Pine Medical, Inc. Confidential Physicians Staff Models Further Align Interests

15. White Pine Medical, Inc. Confidential Companies Shifting Focus to Emerging Markets

16. White Pine Medical, Inc. Confidential Which Is Apt to Be Profitless Prosperity

17. White Pine Medical, Inc. Confidential Medical Device Industry Summary Industry growth will continue to be lethargic due to: More conservative, evidence-based care Alignment of physician and payers interests Disintermediation of physician/vendor relationships Emerging market focus will syphon R&D spending Developed markets will further atrophy given lack of new products, pricing will worsen Industry will eventually need to return to “new product roots” Hence, a superb time to be developing new products Industry growth will continue to be lethargic due to: More conservative, evidence-based care Alignment of physician and payers interests Disintermediation of physician/vendor relationships Emerging market focus will syphon R&D spending Developed markets will further atrophy given lack of new products, pricing will worsen Industry will eventually need to return to “new product roots” Hence, a superb time to be developing new products

18. White Pine Medical, Inc. Confidential Developing Products in a Brave New World

19. White Pine Medical, Inc. Confidential Traditional Venture Model is Broken Historically, highest returns went to Series A investors: Logical given higher risk profile of early stage Series B investors provided “tasteful” step-up Exit in 3-5 years with ~$50MM in total invested Regulatory cycles lengthening, requiring higher levels of funding and multiple rounds Inability to capture higher investment in pricing, hence returns have dwindled Historically, highest returns went to Series A investors: Logical given higher risk profile of early stage Series B investors provided “tasteful” step-up Exit in 3-5 years with ~$50MM in total invested Regulatory cycles lengthening, requiring higher levels of funding and multiple rounds Inability to capture higher investment in pricing, hence returns have dwindled

20. White Pine Medical, Inc. Confidential Requisite FDA Bashing Slide

21. White Pine Medical, Inc. Confidential PMA Development Times > Than VC Fund Cycle

22. White Pine Medical, Inc. Confidential

23. White Pine Medical, Inc. Confidential Returns Improving Mostly Due to Technology

24. White Pine Medical, Inc. Confidential Now in a “Vulture Capital” Climate Where…

25. White Pine Medical, Inc. Confidential …Liquidity Preferences Dictate Returns Last money in typically get a 2x return before earlier investors participate in an exit

26. White Pine Medical, Inc. Confidential As Such, Even the “Angels” are Late Stage

27. White Pine Medical, Inc. Confidential So What Is An Innovator To Do? It’s not enough to know which way the wind is blowing, you need to know what difference it makes

28. White Pine Medical, Inc. Confidential Option 1: Run Lean By Outsourcing

29. White Pine Medical, Inc. Confidential Option 2: Partner With Strategics

30. White Pine Medical, Inc. Confidential Strategics Not The Best “Early” Investors Strategics don’t have ability to call “audibles” Often don’t participate in follow-on rounds Orphan deals created by senior executive turnover Exit complicated if rights have been granted

31. White Pine Medical, Inc. Confidential Option 3: Private Company with Scale/Cash Flow

32. White Pine Medical, Inc. Confidential In sum… Medical device industry revenue growth will remain tepid Emerging market focus will siphon R&D spending required to fund new products Traditional Venture Capital market is dead, hurt by prolonged development and approval cycles Innovator options: Run lean, particularly early-on Strategics, although fraught with peril Private Company platforms that have scale/cash flow Medical device industry revenue growth will remain tepid Emerging market focus will siphon R&D spending required to fund new products Traditional Venture Capital market is dead, hurt by prolonged development and approval cycles Innovator options: Run lean, particularly early-on Strategics, although fraught with peril Private Company platforms that have scale/cash flow

33. White Pine Medical, Inc. Confidential Thank You Dan@whitepinemedical.com

34. White Pine Medical, Inc. Confidential Appendix

35. White Pine Medical, Inc. Confidential Medical Device Revenue Growth Source: JP Morgan

36. White Pine Medical, Inc. Confidential 36 Revenue Growth Drives Valuations