November, 2014 US MedTech Market Overview by Jefferies

1. Medical Device Market Overview
Jefferies LLC / October 2014
12

2. MedTech Equity Market Performance
Top-line growth continues to drive Med Tech share price
Stock Price Performance by Market Capitalization
475%
400%
325%
250%
175%
100%
25%
Financial
Crisis
Recovery
Begins
Jan-08 Feb-09 Apr-10 May-11 Jul-12 Aug-13 Oct-14
S&P 500 Large Cap Med Tech
Mid Cap Med Tech Small Cap Med Tech
High Growth Med Tech
Source: Capital IQ as of October 17, 2014.
Note: Composites are calculated using the average value of constituents.
Jefferies LLC / October 2014
Macro
Concerns
Healthcare
Reform
Valuations of MedTech Companies with Various 2014 Growth
Expectations
Since
01/02/08 2013
2014
YTD
High
Growth
275.3% 78.6% 1.2%
Mid Cap 38.4% 20.1% (1.3)%
S&P 500 28.7% 26.4% 1.7%
Large Cap 18.1% 24.8% (0.8)%
Small Cap 2.3% 31.1% 2.2%
2014E
Sales Growth
>10% 7% – 10% 5% – 7% <5%
EV /
Revenue
EV /
EBITDA
Adjusted
P / E
4.9x
4.1x
2013 2014
2.6x
2013 2014
4.9x
4.1x
2013 2014
3.6x
3.4x
2013 2014
2.5x 2.3x
2013 2014
2.6x 2.6x
2014
15.3x
12.9x
2013 2014
15.1x
12.9x
2013 2014
10.9x
9.7x
2013 2014
11.6x
10.6x
2013 2014
31.2x
25.0x
2013 2014
30.6x
22.5x
2013 2014
26.2x
19.8x
2013 2014
24.8x
19.8x
2013 2014
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3. Recent Med Tech IPO Benchmarking and Performance
($Millions)
Key Takeaways and Implications
 The combination of scale and growth as well as supportive markets has been required in Med Tech to excite investors
─ As noted to the left, few transactions have enjoyed this combination
 Buy-side is less enthusiastic toward early-stage / pre-revenue opportunities
Scale & Profitability IPO Performance and After-Market Performance (2)
Jefferies LLC / October 2014
Highly competitive No competition
Company Revenue Gross Margin
Adj.
Revenue CAGR
2014E - 2016E
Competitive
Landscape
Platform
Company
EBITDA Pricing Date
Prem. / (Disc.) to
Initial Filing
Price(1)
Insider
Participation Reimbursement Filing Size Actual Size
Post-Money
Valuation
Valuation
Step-Up
TEV / 2014E
Revenue
TEV / 2015E
Revenue
Growth Prem.
2015 TEV /
Rev / Growth
Share Price
Performance
since IPO
$5 29% ($12) 199%  09/12/14 (20%) 8.3% O $50 $36 $138 0.9x nm 16.9x 8.5x 173%
23 62% (17) 63% O 07/23/14 (8%) - O 60 55 267 1.6x 12.4x 6.8x 10.7x 38%
158 68% (5) 14% O 05/07/14 (12%) -  150 132 585 1.3x 2.7x 2.4x 16.6x (5%)
7 38% (20) 84% O 04/24/14 (33%) 67.1%  60 55 178 1.0x 3.9x 1.8x 2.1x (33%)
- - (30) na O 04/16/14 (14%) 55.6% O 75 54 279 1.7x na na na 58%
20 40% (42) 59% O 04/15/14 (14%) 48.7%  91 78 253 1.1x 7.5x 4.3x 7.2x 21%
265 54% 26 8%  02/26/14 (25%) - O 100 75 444 1.2x 1.0x 0.9x 11.2x (26%)
70 52% 12 15% O 02/13/14 (6%) -  75 71 326 1.2x 3.0x 2.6x 17.4x 30%
21 22% (37) 48% O 11/13/13 0 -  100 120 385 1.7x 4.7x 2.9x 6.2x (13%)
98 84% 2 19% O 10/08/13 0 20.7%  75 75 376 1.3x 5.4x 4.6x 23.6x 102%
Mean $67 45% ($12) 57% (13%) 20% $84 $75 $323 1.3x 5.1x 4.8x 11.5x 34%
Median $22 46% ($15) 48% (13%) 4% $75 $73 $303 1.3x 4.3x 2.9x 10.7x 25%
Sources: Company filings, press releases, FactSet and Capital IQ as of October 17, 2014.
(1) Offer to midpoint of initial filing range.
(2) Offer to current.
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4. Med Tech M&A Market Overview
M&A volume by dollars has been reasonable due to a few sizeable transactions and transaction valuations have remained “sticky” as buyers
aggressively pursue quality assets
Med Tech M&A Volume
($ in billions)
27 15 20 30 35 32 38 28
All Other
$39.6
$5.2
$2.1
(1)
Philips / Respironics
Olympus / Gyrus
MDT / Kyphon
TFX / Arrow
ReAble / DJO
HOLX /
Cytyc
Warburg /
B&L
Cardinal /
VIASYS
Consortium /
Mölnlycke
Onex /
Carestream
Jefferies LLC / October 2014
Enterprise Value / NTM Revenue
One-month Premium
$6.0
JNJ / Mentor
GE / Vital Signs
Consortium / Convatec
NOVN /
Alcon
$3.2 $6.9
Total Deals
SYK / BSX
STJ / AGA
COV / ev3
Honeywell /
Sperian
NOVN /
Alcon
$9.7 $9.2
Apax / Kinetic Concepts
Dentsply / Astra Tech
$7.2
$10.8
$7.1
$2.6
$10.6 $2.8
$40.6
$2.6
$1.4
$1.5
$4.2
$3.8
$4.1
$1.4
$2.8
$2.2
KKR /
Panasonic
SYK /
MAKO
Valeant /
B&L
Bayer /
Conceptus
$1.2 $1.6
$1.6
$1.0
$2.7
$20.0
$2.3
$8.8
$13.4
$4.5
$1.2
$1.3
$1.9
$4.0
$1.5
$43.7
$6.3
$1.5
$6.3
$1.6
$1.2
$1.5
$2.4
$2.2
$14.2
$4.0
$20.2
$9.7
$57.2
$42.9
JNJ / Synthes
$17.0
$25.4
$87.7
ABT / AMO
Endo /
AMMD
Terumo /
Caridian
BAX /
Gambro
EQT / BSN
Asahi / ZOLL
BSX /
Cameron (2)
C-Rad /
Cyrpa
Danaher /
Nobel Biocare
Cooper /
Sauflon
Medtronic /
Covidien
Zimmer /
Biomet
S&N / ARTC
Carlyle /
Ortho-Clinical
Diagnostics
2007 2008 2009 2010 2011 2012 2013 2014 YTD
Source: Capital IQ as of October 17, 2014.
Notes: Statistics reflect transactions greater than $100 million. Dates reflect transaction announcements. Composites are calculated using the average value of constituents.
(1) Includes transactions less than $1,000 million.
(2) Includes $1,200 million of potential earnout payments.
(3) Excludes 2009.
Mean: 4.1x
Total Deals with Available Metrics 14 7 5 11 7 5 8 9
3.5x
4.6x
2.8x
3.9x
3.0x
4.6x 5.2x
3.0x
2007 2008 2009 2010 2011 2012 2013 2014
YTD
Mean: 40%
Total Deals with Available Metrics
15 7 5 11 7 5 10 7
39%
53%
90%
37%
42%
37%
49%
24%
2007 2008 2009 2010 2011 2012 2013 2014
YTD
(3)
BD /
Carefusion
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5. Pre-FDA approval vs. post-FDA approval: Selling the “dream” has achieved higher valuations and more structure
($Millions)
Jefferies LLC / October 2014
Post-FDA Approval M&A Transactions
Ann.
Date Target Acquiror CE Mark
FDA
Approval
Transaction
Value
LTM
Revenues
TEV / NTM
Revenue
%
Up-front
07/14/14


~200 NA NA 100.0%
06/30/14


375 NA NA 100.0%
05/27/14


~305 55 NA ~75.0%
04/02/14


320 80 NA 100.0%
12/04/13


193 49 NA 100.0%
05/23/13
Targeted Therapies
Business Unit


200 48 3.5 100.0%
10/23/12 

165 NA NA 84.8%
04/05/12


321 68 3.6 100.0%
03/19/12


314 30 10.0 84.1%
11/21/11


413 NA NA 81.8%
11/09/11


313 82 2.8 100.0%
07/27/11


293 NA NA 100.0%
07/07/11


452 65 7.0 100.0%
09/20/10


444 0 NA 43.6%
07/12/10


433 94 3.8 100.0%
06/16/10 

335 54 5.0 100.0%
05/05/10


210 56 3.0 100.0%
12/16/09


785 100 NA 100.0%
11/09/09


489 117 NA 100.0%
10/26/09


200 NA NA 65.5%
09/28/09 

267 100 1.9 100.0%
Mean: $340 $67 4.2x 91.8%
Median: $314 $65 3.5x 100.0%
Med Tech Precedent M&A Transactions
Pre-FDA Approval M&A Transactions
Source: Capital IQ.
(1) $40 million equity investment and has the option to acquire Spinal Modulation for up to $300 million plus certain revenue-based milestones following U.S. commercialization
(2) Includes $150 million potential CVR upon FDA approval. Does not include $1,050 million of potential CVR payments in six years post-approval. Revenue multiples only reflect $150 million in upfront payment.
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