A View of The Public Ophthalmology Market & Exit Trends at OIS@AAO 2016.
Presenter:
Joe Gilliam, Managing Director, Healthcare Investment Banking - J.P. Morgan Securities
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Public Market Trends and Healthcare Sector Performance
1. a
A View of the Public Markets & Exit Trends
Joe Gilliam, Managing Director
Healthcare Investment Banking
J.P. Morgan
2. 10%
15%
39%
23%
5%
2%
2011 2012 2013 2014 2015 2016
Healthcare
Healthcare sector performance 2016YTD
#1 #2 #1 #1 #2 #5
Sector
performance
Source: FactSet as of 09/23/16
1
Healthcare sector returns have been exceptional…
3. … until the late 2015-2016 pullback…
16.0%
13.8%
13.1%
11.1%
9.6%
8.9%
7.6%
5.4%
2.4%
0.1%
(0.3%)
6.1%
Energy
Telecom
Utilities
Info. Technology
Materials
Industrials
Transportation
Consumer Staples
Consumer Disc.
Healthcare
Financials
S&P 500
25.7%
10.9%
1.9%
3.5%
(6.9%)
(13.0%)
(11.4%)
HMOMedtechS&P HCCROFacilitiesPharmaBiotech
(NBI)
2016YTD healthcare subsector performance2016YTD S&P sector performance
2
Source: FactSet, as of 09/30/16
4. Source: EPFR Global as of 10/04/2016
3
$5
($1)
($13)
($11)
($3)
(20)
0
20
Q3'15 Q4'15 Q1'16 Q2'16 Q3'16
Healthcare fund flows ($bn)
… leading to fund outflows
6. …and a substantial revaluing of biotech IPOs has occurred…
Post-money market cap at IPO ($mm) Proceeds raised ($mm) Valuation step-up at IPO
$81mm
$61mm
$159mm
$92mm
$117mm
$75mm
1.5x
0.8x
2.8x
1.2x
1.8x
1.0x
25th
percentile
75th
percentile
Median
January – August 2015 (n = 24) September 2015 – August 2016 (n = 29)
(39%) (47%)
$210mm $198mm
$557mm
$449mm
$390mm
$293mm
(25%)
Source: Company filings, Dealogic, Pitchbook as of 09/30/2016 for biotech IPOs >$50mm
5
7. 32% 32%
18%
29% 27%
59%
33% 36%
15%
39%
62%
41%
44%
31%
36%
67% 60%
70%
29%
5%
41%
27%
42%
5% 4%
15%
2015 2016 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16
Below
Within
Above
… but after the sustained lull, IPO activity & performance levels have
begun to pick up
Above/Below/Within filing range1
6
Source: Dealogic, Bloomberg and FactSet as of 09/16/16. Excludes deals <$50mm, CLEFS, SPACs. Median Offer/30-day represents offer/current for those IPOs that have not reached 30 days
1 By number of deals. Note: 6 SPAC IPOs have priced in 2016YTD for $2.0bn in total proceeds
Offer/30-day
% above offer
41% 82% 32% 40% 31% 64% 100% 80% 77%
13% 5% 9% 15% 10% 16% 16% 1% 25%
8. Putting the pullback in context for biotech…
Biotech indices (BTK and NBI) vs S&P 500 since 1997
Source: FactSet as of 09/19/2016
Stagnation
The Genomics
revolution
A volatile
market
Biotech needs
to deliver
Gaining
momentum
Innovation
rewarded
A volatile
market
BTK NBI S&P500
7
Feb. trough
(40%) / 209
1978%
9. … and Medtech
10.1x 10.3x
5.0x
12.9x
12.1x
4.6x
14.0x
13.1x
4.3x
FV / EBITDA FV / EBITDA FV / Revenue
Historical (2011-2015 avg) 2015 Avg Current (Last 1-month avg)
Median forward multiplesStock price performance since Aug 2015
Large cap Mid cap Small cap
Source: J.P. Morgan; Dealogic and FactSet as of 08/19/2016
Large-cap medtech index includes JNJ, MDT, ABT, SYK, BDX, BSX, BAX, ISRG, ZMH, EW, SN-GB, BCR, HOLX;
Mid-cap medtech index includes XRAY, TFX, STE, HRC, CMN, GMED, IART, NUVA, MASI, HAE, HYH, CNMD, MMSI;
High-growth medtech index includes PODD, WMGI, NVRO, NXTM, ELGX, SPNC, INGN, MDXG, XENT, GKOS, NVDQ, KTWO, CFMS, TNDM, ENTL, GI
8
10. 2 year performance of ophthalmic sector participants
Relative stock price performance
+8% +118% +25% +15% +14%
Source: FactSet as of 10/06/16
1 Ophth index includes Aerie, Alimera, Avalanche, Clearside, Cooper, Eleven, Glaukos, Inotek, Ocular, Ophthotech, QLT, Santen, Spark, STAAR and ThromboGenics
2 Diversified / Ophth includes Abbott, Allergan, Bayer, Merck, Novartis, Pfizer, Regeneron, Shire and Valeant
3 Return since June 2015 IPO
3
9
1
2
12%
10%
(9%)
2