Role of a VC in Helping Commercialize Early

Role of a VC in Helping Commercialize Early Stage Innovation November 19 th 2007 Presented by: Richard J. Meadows Managing Partner CTI Life Sciences Fund CTI LIFE SCIENCES FUND

Canada – Biotech A pipeline which seems to be stalled Number of companies financed • After a sharp increase in the 90 s, the number of early stage financings is decreasing • In spite of the number Total amount invested (Can$M) Total Early Stage Late Stage CTI LIFE SCIENCES FUND of early stage financings, there is no increase in the number of late stage financings – The pipeline is still too young… – … or it is not progressing Source: Thompson Financial

U. S. – Biotech The pipeline is progressing • The number of early Number of companies financed stage companies financed remains constant • The pipeline is Total amount invested (US$M) progressing • The growth in the total amount invested is partly explained by the progress of the pipeline Total Early Stage CTI LIFE SCIENCES FUND Source: Thompson Financial

Canada – Biotech The size of the rounds is much smaller Compared to the US, in 2002 -06 : than in the US • Canadian GDP is 9% Average size of the rounds (‘ 000 Can$) Early Stage • US Canada • • Late Stage The number of early stage rounds is 55%, whereas the number of late stage is only 15% The size of early stage rounds is 60 % and the late stage 33 % Total amount invested: 10% (33% ES, 5% LS) Number of companies Canada vs US ES X 1. 6 LS 33% 14% CTI LIFE SCIENCES FUND

Foreign (US) investors play an important role in building exit value in Canadian deals CTI LIFE SCIENCES FUND Source: Giles Durufle, CVCA

Problems with Canadian VC’s CTI LIFE SCIENCES FUND Source: Giles Durufle for CVCA

Value Creation vs. Value Capture The Real Curves $ Value Capture Value Building Curve Value Recognition Curve Discovery Cost of Development Grants $ 100 k Preclinical $5 -25 m Phase I $10 -20 m Phase III $20 -50 m Seed Series A Series B Series C 1 M 5 – 10 M 10 – 20 M 20 -30 M CTI LIFE SCIENCES FUND $100 m+ Mezz/Publ 30 M+ Source: D. Ho BDC Health Ventures

Investment Strategy Picking the "right" Value Inflection Points Size of round: $25 -50 M Pre-Money $50 -100 M+ Post-Money: $75 -150 M Bump Up: ≈ 3 -5 x Size of round: $1 -5 M Pre-Money $5 -10 M Post-Money: $6 -15 M Size of round: $5 -15 M Pre-Money $10 -20 M Post-Money: $15 -35 M Bump Up: ≈ 2 -3 x CTI LIFE SCIENCES FUND

Best Practices: The Blueprint CTI LIFE SCIENCES FUND Source: Giles Durufle, CVCA

What can we do? • Ensure adequate financing. • Bring in high quality investors. • Fine tune/re-do the development plan. • Finance to achievable milestones and be prepared to re-adjust. • Bring in ad hoc support to help management create value. CTI LIFE SCIENCES FUND

Private Market Valuations on the Rise Sources: n=79 Life Science Co. in the Bay Areas Who Raised Money in 2006: Fenwick&West LLP CTI LIFE SCIENCES FUND

The Changing Investment Paradigm 1995/1998 $15 -30 mm 3 -5 years IPO $150 MM 2 -4 2005 Capital Invested $40 -80 mm Average length 5 - 8 years Exit Form M&A > IPO Average IPO price $200 MM Number of syndicate members 5 -7 Source : JSB Partners CTI LIFE SCIENCES FUND

Raison D'être of CTI Life Sciences Fund "Where broad Operational and VC experience come together to create and realize shareholder value in Canadian Life Sciences Companies with pre-clinical and clinical drugs and enabling technologies”. CTI LIFE SCIENCES FUND

CTI Life Sciences Fund Overview Emphasis on Quebec & Canadian life sciences companies with pre-clinical, clinical drugs and enabling technologies. • An investment team that combines Operational and VC experience. • A unique pro-active exit strategy Through active post investment management. v Leveraging relationships with top advisors and US VC investors to position companies for successful exits. v M&A’s vs. I. P. O’s. v • First Close: CAD $71 million, June 20 2006. • Target size: CAD $100 million, Achieved March 1 2007 CTI LIFE SCIENCES FUND

Value Creation happens once the Investment Decision has been made. CTI LIFE SCIENCES FUND

CTI Life Sciences Fund – People Jean-François Leprince -Managing Partner Accomplished leader with 30 years of multifunctional, multigeographical experience in the pharmaceutical industry Richard Meadows-Managing Partner VC experience in two multi-billion dollar private equity funds along with 15+ years Business Development experience in the pharmaceutical industry Ken Pastor General Partner’s Representative 20 years experience in the financial market Shermaine Tilley – Principal 20 years experience in the biotech industry, including investment management, consulting, tech transfer and strong academic experience CTI LIFE SCIENCES FUND