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CONTRACTION IN HEALTHCARE VENTURE CAPITAL INDUSTRY & CAPITAL MARKET DYNAMICS MORE BROADLY CREATE OPPORTUNITY IN DEVELOPMENT STAGE AND EARLY COMMERCIAL STAGE COMPANIES

For the last several decades the healthcare venture capital industry has been the predominant source of early and growth stage funding for smaller, technology focused companies while they pursue product development, regulatory approval, and early commercialization. Over the last several years, there has been a significant contraction in the size of the healthcare venture capital industry in terms of amount of capital available to fund new companies, and the number of active firms investing in new companies. This contraction creates significant opportunity for those funds that remain active, as fewer firms and less capital is translating into less competition for deals. The Fund Managers have benefited from the reduced level of competition during the new investment period for NLV-II, and they believe these conditions will remain in place for at least part of the new investment period of NLV-III. It is too soon to know for sure, but it is likely the industry may have already reached the bottom of this cycle of contraction and could see a re-set that begins to shift the industry to more normalized conditions due to the recent stronger IPO and M&A markets.

[Chart Left: Life Sciences Venture Fundraising]
Life Sciences Venture Fundraising - Dollars Raised ($B) **
(Bar chart data: 2007: $7.8, 2008: $7.8, 2009: $2.8, 2010: $2.9, 2011: $3.0, 2012: $2.5)
Venture Capital Fundraising Allocated to Life Sciences

[Chart Right: Investments into Biopharma and Medical Devices]
Life Sciences Venture Financings - $ Invested ($B) and Count
(Chart data showing investment amounts ranging from $4.8B to $5.7B for Biopharmaceuticals and deal counts ranging from 404 to 541 between 2004-2012)
Biopharmaceuticals Therapeutic Medical Devices Deal Count

Source: Venture investments data from VentureSource (U.S. only). Includes therapeutic medical devices only.
** "Life Sciences Venture Fundraising data from Dow Jones; Fenwick & West Analysis in 2012 Trends in Terms of Life Science Venture Financings

The market for IPOs was strong during 2013 and the first quarter of 2014 for companies with compelling stories based on differentiated technology, targeting important unmet medical needs, large market opportunities, and experienced management teams. Although the number of IPOs in the healthcare technology sector increased significantly, most of that activity was driven by offerings for biopharmaceuticals companies. The significant increase in IPO activity was driven by a number of factors, but one that had an important impact is the Jumpstart Our Business Startups Act (JOBS Act). This legislation was signed into law in the U.S. in April, 2012 and it changed the regulations governing how certain private companies can interact with investors in advance of an IPO. Under the new regulations, emerging growth companies can file their IPO draft registration statement privately with the SEC, and continue to meet with interested investors over several weeks or months to explain clearly their company strategy and technology in "testing the waters" meetings. The Fund Managers believe these new regulations are especially helpful to private biopharmaceutical companies, as they allow interested

29 CONTROL NUMBER 257 - CONFIDENTIAL HOUSE_OVERSIGHT_024040