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HEALTH CARE EQUITY CAPITAL MARKETS REVIEW2008 Q3 Review
Piper Jaffray Equity Capital Markets
October 2008
Minneapolis
New York
Boston
Chicago
San Francisco
Palo Alto
Charlotte
London
Shanghai
Hong Kong
Since 1895. Member SIPC and FINRA
1
BUILDING THE LEADING MIDDLE MARKET INVESTMENT BANK
*Securities and products are offered through Piper Jaffray Ltd. which is authorized and regulated by the Financial Services Authority
• Client-focused, independent, publicly held securities firm founded in 1895
• Leading growth-oriented, middle market investment bank
• Full-service capabilities and unparalleled transaction execution
• Growing presence in global growth markets
• Built on a 100+ year track record of quality service and customer success
• Client-focused, independent, publicly held securities firm founded in 1895
• Leading growth-oriented, middle market investment bank
• Full-service capabilities and unparalleled transaction execution
• Growing presence in global growth markets
• Built on a 100+ year track record of quality service and customer success
Minneapolis— Headquarters(Banking, Research, Sales &
Trading)
Menlo Park(Banking &
Research)
Chicago(Banking)
New York(Banking, Research & Trading)
LondonPiper Jaffray Ltd.**(Banking, Sales & Trading)San Francisco
(Banking, Sales & Trading) Shanghai
China Growth Advisory Ltd.*(Banking)
Boston(Sale &Trading)
Public Finance & Institutional ClientsPublic Finance & Institutional Clients
Corporate & Institutional ClientsCorporate & Institutional Clients
• Public Finance
• Municipal Sales
• Municipal Underwriting & Trading
• Derivative Products
• Loan Syndications
• Public Finance
• Municipal Sales
• Municipal Underwriting & Trading
• Derivative Products
• Loan Syndications
• Investment Banking
• Institutional Equity Sales & Trading
• Equity Capital Markets
• Convertible Capital Markets
• PIPEs & RDs
• Debt Capital Markets
• Equity Research
• Asset Management
• Bridge & Structured Financing
• Investment Banking
• Institutional Equity Sales & Trading
• Equity Capital Markets
• Convertible Capital Markets
• PIPEs & RDs
• Debt Capital Markets
• Equity Research
• Asset Management
• Bridge & Structured Financing
•
• ••
•
•••
•
United KingdomLondon*
ChinaHong KongShanghai
United StatesMinneapolis, MN (Headquarters)Boston, MACharlotte, NCNew York, NYPalo Alto, CASan Francisco, CA
Services for:
•
2
THE PIPER JAFFRAY TEAM
Chad AbrahamManaging Director
Head of Equity Capital Markets(612) 303-6274
Equity Capital Markets
Neil RileyPrincipal
Head of Health Care Capital Markets(612) 303-1601
Jonathan JewettAssociate
(612) 303-6365
Michael BassettAnalyst
(612) 303-6865
Chad HuberAssociate
(212) 284-9573
Dave StadinskiManaging Director
Head of PIPEs / RDs(212) 284-9572
Chris ChristinaManaging Director
(612) 303-8521
Kevin LanderAnalyst
(612) 303-8432
Greg KlancherAssociate
(612) 303-8309
Forrest KoenigVice President(415) 984-5142
Martin AlvarezManaging Director
Head of Convertibles(415) 984-5131
Iain FranksPrincipal
(415) 984-5129
PIPEs / RDs
Daniel GrosslightAnalyst
(415) 984-5116
Convertibles
Mark SpiegelPrincipal
(212) 284-9502
Tom WrightManaging Director
Head of CVS(612) 303-6039
Jay HersheyManaging Director
(612) 303-5724
Corporate & Venture Services
3
TABLE OF CONTENTS
Section I Broader Markets: A Historical Perspective
Section II Key Themes in Q3 2008
Section III IPO Market Update
Section IV Follow-on Market Update
Section V Convertible Market Update
Section VI PIPE and Registered Direct Market Update
Section VII Institutional Health Care Fund Movement
SECTION IBroader Markets: A Historical Perspective
5
8000
9000
10000
11000
12000
13000
14000
15000
Sep
'07
Oct
'07
Nov
'07
Dec
'07
Jan
'08
Feb
'08
Mar
'08
Apr
'08
May
'08
Jun
'08
Jul '
08
Aug
'08
Sep
'08
Oct
'08
The current period of
market weakness is
already similar in
depth to previous
periods; however, it
has occurred faster
than any previous
downturns since the
great depression
Source: Yahoo! FinanceData through 10/15/08All market declines calculated using intraday highs and lows
Dow Jones Industrial Average (2007 - 2008)
BROADER MARKETS: A HISTORICAL PERSPECTIVE
Dow Jones Industrial Average (1929 - 1932)
0
80
160
240
320
400
Aug
'29
Nov
'29
Feb
'30
May
'30
Aug
'30
Nov
'30
Feb
'31
May
'31
Aug
'31
Nov
'31
Feb
'32
May
'32
Aug
'32
Dow Jones Industrial Average (1972 - 1975)
500
600
700
800
900
1000
1100
Nov
'72
Jan
'73
Mar
'73
May
'73
Jul '
73
Sep
'73
Nov
'73
Jan
'74
Mar
'74
May
'74
Jul '
74
Sep
'74
Nov
'74
Jan
'75
Dow Jones Industrial Average (1999 - 2002)
7000
8000
9000
10000
11000
12000
Nov
'99
Feb
'00
May
'00
Aug
'00
Nov
'00
Feb
'01
May
'01
Aug
'01
Nov
'01
Feb
'02
May
'02
Aug
'02
Nov
'02
Dow Jones Industrial Average (2000 - 2002)
Dow Jones Industrial Average (1973 - 1974)Dow Jones Industrial Average (1929 - 1932)
Market Decline: 23 Months -47%Market Decline: 34 Months -89%
Market Decline: 33 Months -40% Market Decline through Oct. 10 Lows: 12 Months -46%
Crash of 1929: 71 Days -49%
Sep. 15 – Oct. 10: 18 Days -32%
6
BROADER MARKETS: A HISTORICAL PERSPECTIVE
7000
8000
9000
10000
11000
12000
13000
14000
15000
2007
2008
2009
2010
2011
2012
2013
Dow
Jone
s In
dust
rial
Ave
rage
2%
3%
4%
5%
6%
7%
8%
9%
10%
Une
mpl
oym
ent R
ate
Unemployment Rate Dow Jones Industrial Average
0
80
160
240
320
400
480
1928
1930
1932
1934
1936
1938
1940
1942
1944
1946
1948
1950
1952
1954
Dow
Jone
s In
dust
rial
Ave
rage
0%
5%
10%
15%
20%
25%
30%
Une
mpl
oym
ent R
ate
Unemployment Rate Dow Jones Industrial Average
500
600
700
800
900
1000
1100
1200
1300
1400
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
Dow
Jone
s In
dust
rial
Ave
rage
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
Une
mpl
oym
ent R
ate
Unemployment Rate Dow Jones Industrial Average
7000
8000
9000
10000
11000
12000
13000
14000
15000
2000
2001
2002
2003
2004
2005
2006
2007
Dow
Jone
s In
dust
rial
Ave
rage
2%
3%
4%
5%
6%
7%
8%
9%
10%
Une
mpl
oym
ent R
ate
Unemployment Rate Dow Jones Industrial Average
Markets have
recovered more
quickly following
recent periods of
market weakness
Unemployment has
reached double digits
in two of three
previous downturns
and appears to pave
the road to recovery
Source: Yahoo! Finance and the U.S. Bureau of Labor StatisticsData through 10/15/08All market declines calculated using intraday highs and lows
Recovery from Current Bear MarketRecovery from 1999 - 2002 Bear Market
Recovery from 1973 - 1974 Bear MarketRecovery from 1929 - 1932 Bear Market
Time to Full Recovery: 25 yearsTime to Full Recovery: 10 years
Time to Full Recovery: 6.5 years
?
7
70
191
77
442
172 179
378
271
204
293
433
313
379
563
419
257
484
429
8877 76
233
196 199214
29
97
105 104
0
100
200
300
400
500
600
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
# o
f IP
Os
0
100
200
300
400
500
600
700
800
900
Ru
sse
ll 2
00
0
# of IPOs Russell 2000
IPO Pricings since 1980
Source: Baseline, Dealogic, Yale School of ManagementData excludes BCC/SPACs, closed-end funds and deals <$20mm
The IPO market is on
pace to finish the
year with fewer than
40 offerings, which
would make it the
slowest year in recent
history
BROADER MARKETS: A HISTORICAL PERSPECTIVE
8
0
10
20
30
40
50
60
70
80
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
The VIX, a measure
of expectations for
volatility over the
next 30 days and a
proxy for investor
fear, has spiked to
unprecedented levels
since mid-September
KEY THEMES IN Q3 2008
CBOE Market Volatility Index (VIX) since 1990
Source: Yahoo! Finance
First Gulf War
Iraq War
Arthur Andersen/ WorldCom
Accounting Scandals9/11
Terrorist Attack
Asian Financial
Crisis
Russian Financial
Crisis
Current Financial Crisis
SECTION IIKey Themes in Q3 2008
10
Annual Percentage Rate Real US GDP Growth
1.2%
-0.7%
-1.5%
-0.2%
2.8%
0.9%
-0.2%
4.7%4.7%
0.0%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08F Q4 '08F Q1 '09F Q2 '09F
-10.0% -9.0%-7.0%
10.0%
21.0%
-1.0%
0.0%3.0%
0.0%
-20%
-10%
0%
10%
20%
30%
Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08E Q4 '08E CY '09E
KEY THEMES IN Q3 2008
0%
1%
2%
3%
4%
5%
6%
7%
12/31/06 3/31/07 6/30/07 9/30/07 12/31/07 3/31/08 6/30/08 9/30/08
Fed-Funds Auction Rate LIBOR
65%
44%
-18%
-28% -28%
17%
-44%
-1%
-50%
-25%
0%
25%
50%
75%
Crude Oil Commodity Index
Home Price Index*
ConsumerConfidence
% Chg since 1/1/2007 % Chg in Q3
Uncertainty persists
as to the length and
depth of the
economic slowdown
– GDP growth has
stalled and crude
oil/commodities have
fallen sharply from
historical highs
Investors seeking
security drove the
Fed-Funds auction
rate to near zero in
Q3 while LIBOR
moved higher (the
normal spread is
<0.5%)
S&P 600 Quarterly Earnings GrowthFed Funds Auction Rate vs. LIBOR
Source: Bureau of Economic Analysis, Baseline, BloombergU.S. GDP estimates per the Bureau of Economic AnalysisS&P 600 estimates per First Call Consensus*Home Price Index reflects Case-Shiller Index through the end of July
US GDP Growth by Quarter Macro-Economic Drivers
Current Fed-Funds Target Rate = 2.0%
9/16: Fed-Funds auction rate hits 0.06% following the bankruptcy of Lehman Bros.
11
-10.6%
1.2%
3.6%
8.1%
8.5%
8.6%
10.7%
10.9%
14.0%
33.4%
-30% -20% -10% 0% 10% 20% 30% 40%
Financials
Cons. Discret.
Telecom Svcs.
Industrials
Utilities
Health Care
Cons. Staples
Technology
Materials
Energy
Over the last four
quarters, the Health
Care sector has seen
consistent revenue
growth despite a
softening economy
Russell 2000 Revenue Growth by Sector – Q2 ‘08 Russell 2000 Revenue Growth by Sector – Q1 ‘08
Source: Bloomberg
-0.5%
2.3%
7.7%
9.7%
10.6%
11.1%
13.4%
15.1%
42.9%
-6.1%
-20% -10% 0% 10% 20% 30% 40% 50%
Financials
Cons. Discret.
Telecom Svcs.
Cons. Staples
Utilities
Health Care
Technology
Industrials
Materials
Energy
3.1%
4.2%
6.8%
8.5%
8.8%
10.1%
11.2%
13.0%
25.0%
-0.2%
-5% 0% 5% 10% 15% 20% 25% 30%
Financials
Utilities
Cons. Discret.
Materials
Industrials
Energy
Health Care
Cons. Staples
Technology
Telecom Svcs.
Russell 2000 Revenue Growth by Sector – Q4 ‘07 Russell 2000 Revenue Growth by Sector – Q3 ‘07
1.1%
9.1%
9.3%
10.4%
10.7%
11.8%
13.1%
26.9%
32.1%
-17.6%
-30% -20% -10% 0% 10% 20% 30% 40%
Financials
Cons. Discret.
Cons. Staples
Industrials
Utilities
Health Care
Materials
Technology
Telecom Svcs.
Energy
KEY THEMES IN Q3 2008
12
$26.7
$47.9
$32.6
-$40.2
$3.1
-$2.4
$83.0
$29.6
$15.2
$30.0
$75.6
($60)
($40)
($20)
$0
$20
$40
$60
$80
$100
Q1 '06
Q2 '06
Q3 '06
Q4 '06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
80
90
100
110
120
130
9/30/06 12/30/06 3/30/07 6/30/07 9/30/07 12/30/07 3/30/08 6/30/08 9/30/08
Pri
ce In
dexe
d to
100
Dow Jones S&P 500 NASDAQ Russell 2000
Major Market Index Performance Quarterly Mutual Fund Flows ($ Billions)
60
70
80
90
100
110
120
130
140
150
9/30/06 12/30/06 3/30/07 6/30/07 9/30/07 12/30/07 3/30/08 6/30/08 9/30/08
Pri
ce In
dexe
d to
100
Health Care Drugs & Pharma Biotech Medical Devices HC Services
-$516
$156
$449
-$901
$1,710
-$12-$162
-$696
$342
-$926
$683
($1,000)
($500)
$0
$500
$1,000
$1,500
$2,000
Q1 '06
Q2 '06
Q3 '06
Q4 '06
Q1'07
Q2'07
Q3'07
Q4 '07
Q1'08
Q2'08
Q3'08
Russell 2000 Health Care Index Performance Health Care Quarterly Mutual Fund Flows ($MM)
CY2006
CY2007
Q32008
YTD2008
Dow Jones 16.3% 6.4% (4.4%) (18.2%)S&P 500 13.6% 3.5% (8.9%) (20.6%)NASDAQ 9.5% 9.8% (9.2%) (21.5%)Russell 2000 17.0% (2.7%) (1.5%) (11.3%)
The major market
indices have all
posted negative
double-digit returns
YTD
Health Care funds
saw their third
greatest inflows on
record, only outpaced
by Q1 2000 and Q2
2005; likewise, the
Health Care indices
dramatically
outperformed the
broader markets
Source: Thomson Baseline, Bloomberg, AMG Data
KEY THEMES IN Q3 2008
CY2006
CY2007
Q32008
YTD2008
Health Care 9.6% 13.3% 8.2% (9.5%)Drugs & Pharma 8.4% 20.1% 13.7% (5.4%)Biotech 2.0% (0.9%) 8.2% (10.3%)Medical Devices 15.4% 22.7% 8.0% (6.7%)HC Services 7.7% 6.8% 2.0% (17.7%)
13
76
28
82
65
7681
6051
24
67
45 44
67
3948
3440
282730
37 5055 57
54
65
28
0
20
40
60
80
100
120
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Num
ber
of F
ollo
w-o
n O
fferi
ngs
Full Year Activity YTD
240
402349
231
433
373
82 75 76
233
2929
210198196
139119147153
275355
329303
210221
286
130
0
100
200
300
400
500
600
700
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Num
ber
of IP
Os
Full Year Activity YTD
391
491
555
406 399426
391 371
459
542
464 477436
215215
272
367 368 361296
345
259304 294
412
316 339 323
0
100
200
300
400
500
600
700
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Num
ber
of F
ollo
w-o
n O
fferi
ngs
Full Year Activity YTD
35
79
48
91
168
49
32 3644
3315
28 26
16
69
34
1519
75
13 131
38
24 2430
0
20
40
60
80
100
120
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Num
ber
of IP
Os
Full Year Activity YTD
2008 offering volume
is on pace for its
lowest levels in more
than 30 years
Similar to the broader
markets, Health Care
IPO issuance is at
historically low levels
while follow-on
issuance is on pace
for the slowest year
since 1998
Annual Median = 231
Annual Median = 35
Annual IPO Offering Activity Annual Follow-on Offering Activity
Annual Health Care IPO Offering Activity Annual Health Care Follow-on Offering Activity
Annual Median = 436
Annual Median = 65
Source: Dealogic and Piper Jaffray ECMExcludes BCC/SPACs, closed-end funds, and transaction less than $20mm
KEY THEMES IN Q3 2008
14
$9,685
$16,374$11,844
$14,727$20,805
$4,952
$26,021
$37,758
$15,816
$28,466$13,504
$50,886 $57,039
$935
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08
IPO Proceeds Follow-on Proceeds
2008 New Issue
Market Highlights
Equity New Issue Volume by Product ($ in Millions)
• The mortgage meltdown, credit crunch, inflationary fears, and high energy costs created extremely challenging pricing conditions in Q3. IPO activity all but dried up in the quarter while follow-on activity came primarily on behalf of distressed financials, real estate, and energy companies.
• The Visa IPO accounts for $19.7 billion of the $26.7 billion in total IPO capital, or 74% of IPO proceeds thus far in 2008. Capital raised from follow-on offerings on behalf of financials, real estate, and energy companies has accounted for 87% of the total follow-on proceeds thus far in 2008.
• Uncertainty driven by recessionary fears has resulted in major swings in volatility in 2008; the CBOE Volatility Index has risen to its highest levels ever and contributed to a slowdown in growth sector equity offering activity.
• Energy and commodity prices, stability in the financial/mortgage markets, the upcoming presidential election, and the extent of an imminent recession remain significant themes for the equity market in Q4.
2008 YTD 2007 YTD % Change
No
CapitalRaised($MM) No
CapitalRaised($MM) No
CapitalRaised($MM)
IPO 29 $26,692 139 $37,903 -79.1% -29.6%Follow-on 215 $121,429 323 $79,595 -33.4% 52.6%
Total 244 $148,121 462 $117,498 -47.2% 26.1%
KEY THEMES IN Q3 2008
Source: Dealogic and Piper Jaffray ECMExcludes BCC/SPACs, closed-end funds, and transaction less than $20mm
SECTION IIIIPO Market Update
16
IPO MARKET UPDATE
Very difficult
conditions have
prevailed in the IPO
markets in 2008
Historically Slow Offering Activity
• 6 IPOs priced in Q3 ‘08 raising $1bn; 29 IPOs have priced in ’08 raising $27bn
• 29 IPOs priced in the first nine months, the fewest since 2003, when 27 IPOs were priced – 76 IPOs priced in CY2003 as strong economic performance drove a bull rally in Q4
• In the 2004-2007 time period, there were 52 IPOs per quarter on average with no fewer than 32
Investor Appetite for Growth Stories Limited by Risk Tolerance
• Investors have shown a lack of appetite for growth stories as volatility and uncertainty have led to risk aversion; 28 of the 29 companies to go public in 2008 have been profitable or are expected to be profitable before year end
• Only 1 non-profitable, long-term growth story has successfully gone public thus far in 2008: MAKO Surgical, which priced at a -33% discount to the mid-point of its filing range and has traded down an additional -28% since going public.
• Of note, no pre-revenue companies have successfully completed an IPO in 2008
• 72 IPOs have been withdrawn thus far in 2008 – the highest total since 145 IPOs were withdrawn in the first nine months of 2001
Historical Counter-Cyclicality of Health Care Sector Fails to Boost Activity
• Besides MAKO Surgical, the other two Health Care IPOs were for profitable companies and have traded strongly in the aftermarket: IPC The Hospitalist (+61%) and Cardionet (+39%); only 8 of the 29 IPOs to price in 2008 were trading above offer price at the end of the quarter
• 24 Health Care IPOs were withdrawn during the first 3 quarters of 2008; 3 of the 24 were acquired and the remaining 21 were withdrawn in order to pursue alternative strategies/financing and cited market conditions as the primary reason for withdrawal
Source: Dealogic and Piper Jaffray ECM as of 9/30/08Excludes BCC/SPACs, closed-end funds, and transaction less than $20mm
IPO Market Update – Key Takeaways
17
Clean Tech6%
Consumer4%Industrials
3%
Financial14%
REIT2%
Technology34%
Health Care21%
Energy/Mining10%Media
2%
Transports4%
Industrials17%
Media7%
Clean Tech10%
Energy/Mining18%
Financial17%
Health Care10%
Transports7%
Technology14%
Market Cap @ Time of Offering
-14%
-8%
-2%
11%
-9%
(20%)
(10%)
0%
10%
20%
< $500MM $500MM-$1B
$1B-$5B >$5B Overall
Market Cap @ Time of Offering
-15% -13%
40%
-25%
-11%
(40%)
(20%)
0%
20%
40%
60%
< $500MM $500MM-$1B
$1B-$5B >$5B Overall
23
5
5
5
4
3
2
1
29 16
70
6
12
22
# of IPOs by Sector 2008YTD
2008 IPO Price Performance: File-to-Offer 2008 IPO Price Performance: Return to Current
# of IPOs by Sector CY2007
6
6
16
6 6
1
29
8
44
5
5
9
29
IPO issuance has
decreased across all
sectors thus far in
2008 vs. 2007
For issuers who have
come to market,
larger cap IPOs
(>$1B) have received
more favorable
pricing than the
overall IPO market
Source: Dealogic and Piper Jaffray ECM as of 9/30/08Excludes BCC/SPACs, closed-end funds, and transaction less than $20mm
IPO MARKET UPDATE
18
IPO MARKET UPDATE
15%
0%
9%
-3%
0%
-11%-15%
-10%
-5%
0%
5%
10%
15%
20%
Profitable Not Profitable Russell 2000
5
3
5
6
3 3
2
01
1
0
1
2
3
4
5
6
7
Jan Feb Mar Apr May Jun Jul Aug Sep
Profitable Not Profitable
40%
60% 97%
3%
Profitable Not Profitable
2007 2008 2007 2008
2008 IPO Breakdown by Profitability
2007 vs. 2008 IPO Breakdown by Profitability 2007 vs. 2008 Offer/30-Day Performance
Recent IPOs by Profitability
Source: Dealogic and Piper Jaffray ECM as of 9/30/08Profitable defined as companies with positive operating income in year of IPO.Excludes BCC/SPACs, closed-end funds, and transaction less than $20mm
Pr ic ing Date Issuer Sector
Deal Val ($MM )
Mkt Val ($MM)
Offer Pr ice Rang e
% C hgAmt FTO
% C hg / FTO
Sel l i ng Shrs %
% C hg / 1- Day
% Chg /C ur rent Revs Di vidend
Operati ngProfi ts
8/7/08 Rackspace Hosting Inc Technology $188 $1,443 $12.50 In Range -11% -11% 15% (20%) (22%) √ √
8/4/08 China Mass Media Media $49 $162 $6.80 Below -45% -45% (4%) (32%) √ √
7/29/08 China Distance Education Technology $61 $248 $7.00 Below -30% -30% (6%) (43%) √ √
7/23/08 GT Solar International Clean Tech $500 $2,349 $16.50 In Range 0% 0% 100% (12%) (34%) √ √
7/1/08 Energy Recovery Inc Clean Tech $137 $407 $8.50 In Range 6% 6% 42% 16% 13% √ √
6/17/08 RHI Entertainment Inc Media $189 $328 $14.00 Below -11% -18% (4%) 6% √ √
6/17/08 Britannia Bulk Holdings Transports $125 $405 $15.00 Below -17% -17% (8%) (64%) √ √ √
6/11/08 Fifth Street Finance Corp Financial $141 $317 $14.12 In Range -6% -6% (14%) (29%) √ √ √
5/28/08 Safe Bulkers Inc Transports $190 $1,036 $19.00 Below -10% -10% 100% (1%) (43%) √ √ √
5/14/08 American Capital Agency Financial $200 $300 $20.00 In Range -20% 0% (3%) (13%) √ √ √
5/14/08 Verso Paper Corp Industrials $168 $625 $12.00 Below -47% -29% (17%) (78%) √ √ √
5/8/08 Real Goods Solar Inc Clean Tech $55 $155 $10.00 In Range 0% -9% (12%) (59%) √ √
5/8/08 Western Gas Partners Energy/Mining $343 $747 $16.50 Below -21% -21% 0% (20%) √ √ √
5/7/08 Colfax Corp Industrials $388 $742 $18.00 Above 13% 13% 52% 17% (7%) √ √
4/30/08 Pioneer Southwest Energy Energy/Mining $180 $547 $19.00 In Range -37% -5% 3% (13%) √ √ √
4/24/08 Hatteras Financial Corp Financial $276 $559 $24.00 In Range 20% -4% 3% (3%) √ √ √
4/24/08 Whiting USA Trust I Energy/Mining $234 $263 $20.00 In Range 5% 0% 100% 4% (18%) √ √ √
4/22/08 American Water Works Industrials $1,358 $3,440 $21.50 Below -22% -14% 100% (4%) 0% √ √ √
4/21/08 Intrepid Potash Inc Energy/Mining $1,104 $2,395 $32.00 Above 60% 28% 58% (6%) √ √
3/18/08 Visa Inc Financial $19,650 $42,533 $44.00 Above 11% 11% 28% 40% √ √
3/18/08 CardioNet Inc Health Care $83 $415 $18.00 Below -47% -22% 33% (2%) 39% √ √
3/11/08 Heritage-Crystal Clean Industrials $25 $120 $11.50 In Range 10% 0% 23% 19% √ √
2/14/08 MAKO Surgical Corp Health Care $51 $184 $10.00 Below -33% -33% (8%) (28%) √
2/13/08 ArcSight Inc Technology $62 $278 $9.00 In Range -10% -10% 13% (2%) (15%) √ √
1/28/08 ATA Inc (China) Technology $48 $228 $9.50 In Range -10% -10% (8%) (4%) √ √
1/28/08 Cascal NV Industrials $152 $367 $12.00 Below -52% -33% 31% 0% (13%) √ √
1/24/08 RiskMetrics Group Inc Financial $282 $1,012 $17.50 In Range -3% -3% 29% 36% 12% √ √
1/24/08 IPC The Hospitalist Co Health Care $94 $237 $16.00 In Range 11% 0% 37% 28% 61% √ √
1/17/08 Williams Pipeline Partners Energy/Mining $358 $685 $20.00 In Range 25% 0% 0% (30%) √ √ √
Mean $920 $2,156 -9% -9% 54% 3% (13%)
Median $180 $407 -10% -9% 39% (2%) (13%)
19
5
2
6
3
6
5
2
7 7
11
2
6
0 0 0
1
2
1
2 2
1
0
1 1 1 1
4
1
0 0
1
3 3 3
1
5
2
4 4
2
1
4
2
0 00
2
4
6
8
10
12
Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08
# of
IP
Os
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
IPO
Pro
ceed
s ($
MM
)
Biopharmaceuticals Health Care Services Medical Technology Capital Raised
Q2 and Q3 were the
first quarters since
2003 in which no
Health Care IPOs
were completed
Health Care IPO Activity by Quarter and Subsector
Source: company filings, Dealogic, and Piper Jaffray ECMData through 9/30/08Excludes transactions less than $20 million
Health Care IPOs Completed in 2008
PricingDate Issuer Subsector
FilingRange
OfferPrice
% ChgPriceFTO
DealValue($MM)
MarketValue($MM)
% FromSelling
Shareholders
% ChgPrice1-Day
% ChgPrice
30-Day
% ChgPrice
Current3/18/08 CardioNet Inc Med Tech 22.00 - 24.00 $18.00 -22% $83 $415 33% -2% 11% 39%2/14/08 MAKO Surgical Corp Med Tech 14.00 - 16.00 $10.00 -33% $51 $184 0% -8% 0% -28%1/24/08 IPC The Hospitalist Co Inc HC Services 15.00 - 17.00 $16.00 0% $94 $237 37% 28% 30% 61%
Mean -18% $76 $279 23% 6% 14% 24%Median -22% $83 $237 33% -2% 11% 39%
IPO MARKET UPDATE
20
2008 is on pace to
see more Health Care
IPOs postponed or
withdrawn than any
year over the last 1017
20
26
16
108
17
13
19
24
0
5
10
15
20
25
30
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
FilingDate
WithdrawnDate Issuer Subsector
AmountFiled ($MM) Marketed Acquired
LTMRevs ($MM) Profitable Withdrawn/Postponed Comment
4/14/08 9/25/08 Fluidigm Corp Biopharma $80 √ $10 Market conditions12/31/07 9/9/08 Alma Lasers Ltd Med Tech $86 $82 √ Market conditions10/23/07 9/8/08 XDx Inc Biopharma $86 $9 Market conditions8/17/07 9/8/08 Insys Therapeutics Inc Biopharma $86 Pre-Rev Market conditions3/13/08 8/26/08 Salient Surgical Technologies Med Tech $86 $34 Market conditions3/20/08 8/1/08 Zogenix Inc Biopharma $86 Pre-Rev Market conditions1/9/08 6/27/08 Bayhill Therapeutics Inc Biopharma $86 Pre-Rev Market conditions
11/20/07 6/20/08 Broncus Technologies Inc Med Tech $86 Pre-Rev Market conditions7/27/07 6/18/08 eyeonics Inc Med Tech $70 √ $22 Due to acquisition by Bausch & Lomb Inc5/11/07 6/9/08 CCS Medical Holdings Inc HC Services $150 √ $507 √ Market Conditions. Initially postponed on 8/15/072/13/07 6/4/08 Noninvasive Medical Technologies Med Tech $52 $3 Market conditions1/23/08 6/3/08 Accuro Healthcare Solutions Inc HC Services $144 √ $68 √ Due to acquisition by MedAssets9/21/07 5/12/08 Emphasys Medical Inc Med Tech $86 $1 Market conditions9/21/07 5/9/08 Elixir Pharmaceuticals Inc Biopharma $41 √ Pre-Rev Market conditions. Initially postponed 1/17/085/14/07 3/27/08 MonoSol Rx Inc Biopharma $68 √ $3 Market conditions. Initially postponed on 10/17/07
12/31/06 3/21/08 LifeWatch Corp HC Services $68 $51 √ Market conditions10/13/06 3/19/08 Vision-Ease Lens Corp Med Tech $86 $105 √ Market conditions10/12/07 2/21/08 Transoma Medical Inc Med Tech $86 √ $37 Market Conditions. Initially postponed on 2/6/088/17/07 2/15/08 Concentric Medical Inc Med Tech $63 $14 Market conditions
10/10/07 2/15/08 Critical Homecare Solutions HC Services $69 √ $157 √ Due to acquisition by MBF Healthcare Acq Corp 4/21/06 2/8/08 Light Sciences Oncology Inc Biopharma $125 √ Pre-Rev Market conditions. Initially postponed on 10/12/067/25/07 2/6/08 Archemix Corp Biopharma $79 $14 Market conditions8/14/07 2/1/08 Biolex Therapeutics Inc Biopharma $59 Pre-Rev Market conditions8/3/07 1/23/08 BG Medicine Inc Med Tech $86 √ $9 Market conditions
Source: company filings, Dealogic, and Piper Jaffray ECM
IPO MARKET UPDATE
# of Withdrawn & Postponed IPOs by Year
21
The overall IPO
backlog has
stagnated as a result
of significant
volatility in the
markets and
compressed
valuations among
existing public
companies
New issuance activity
will likely be led by
strong revenue
growth stories
Total IPO Backlog vs. Health Care IPO Backlog
102111
10290 94
111
138
99105 107
158
115106
94 98
2321
1917 17
24
33
21
27 26
2326 2530
41
0
20
40
60
80
100
120
140
160
180
Q1 '05
Q2 '05
Q3 '05
Q4 '05
Q1 '06
Q2 '06
Q3 '06
Q4 '06
Q1 '07
Q2 '07
Q3 '07
Q4'07
Q1'08
Q2'08
Q3'08
Ove
rall
IPO
Bac
klog
10
15
20
25
30
35
40
45
Hea
lth C
are
IPO
Bac
klog
Overall IPO Backlog Health Care IPO Backlog
<$25MM LTM Revs
24%
Pre-Revenue
32%
>$25MM LTM Revs
44%
116
8
IPO Backlog Aging by Sector
Health Care IPO Backlog by LTM Revenue (# Deals)
Med Tech24%
Services20%
Biopharma56%
14
6
5
Health Care IPO Backlog by Subsector (# Deals)
Days Since Filing
0-44 45-89 90-119 120-180 181-360 TotalClean Tech 1 4 1 6Consumer 1 1 1 1 4Energy/Mining 2 2 3 7Financial 1 3 2 3 4 13He alth Care 2 5 2 3 13 25Industrials 1 2 1 6 1 11Media 1 1 2Real Estate 2 1 3Technology 3 1 6 16 26Transportation 1 1Total 12 19 7 19 41 98
Source: company filings, Dealogic and Piper Jaffray ECM as of 9/30/08Excludes BCC/SPACs, BDCs, REITs, and closed-end funds
IPO MARKET UPDATE
22
FilingDate Issue r
MostRe ce nt Ame nd
# of Ame nd Issue r Busine ss De scription
Curre nt Amt File d
($MM)Gross
Margin
LTM Re ve nue
($MM)07/25/08 Select Medical Corp 08/29/08 1 Operator of specialty acute care hospitals $100 13% $2,10507/27/07 Talecris Biotherapeutics 07/23/08 5 Biopharmaceutical company specializing in the production of plasma-derived protein therapies. $1,000 33% $1,22109/12/08 Emdeon Corp - - Provides business & tech solutions to financial and healthcare delivery $460 36% $82912/19/07 Prometheus Laboratories 08/14/08 5 Pharma products, pharmacogenetic testing, therapeutic drug monitoring $100 60% $24206/20/08 AGA Medical Holdings Inc 09/10/08 2 Holding co. for manufacturer of transcatheter occlusion devices. $200 85% $15703/07/08 Bostwick Laboratories Inc - - Laboratory focused on the diagnosis of cancer $100 62% $10311/09/07 Xanodyne Pharmaceuticals 06/10/08 4 Therapeutic drugs for oncology, hematology and management $86 84% $7204/17/08 Epocrates Inc - - Provider of clinical information, IT, and decision support tools $75 65% $6606/06/08 Acclarent Inc 08/07/08 1 Develops technologies in the ear, nose, and throat. $86 78% $3605/01/07 Cumberland Pharma 08/12/08 13 Specialty pharmaceutical company focused on acquiring & developing branded prescriptions $94 90% $3107/02/08 Zonare Medical Systems Inc 09/05/08 2 Develops compact ultrasound systems $86 42% $31
FilingDate Issue r
MostRe ce nt Ame nd
# of Ame nd Issue r Busine ss De scription
Curre nt Amt File d
($MM)Gross
Margin
LTM Re ve nue
($MM)01/22/08 Cardiovascular Systems 09/08/08 6 Produces devices for the treatment of cardiovascular disease $86 60% $2211/09/07 ChemoCentryx Inc 01/14/08 2 Developes orally-administered chemotherapy drugs $58 N/A $1903/12/08 CyDex Pharmaceuticals 06/18/08 2 Portfolio company focused on the commercialization of drugs $50 85% $1204/01/08 Biotrove Inc 08/22/08 4 Developing instruments for genomic analysis $75 23% $707/25/08 AutoGenomics Inc. 09/18/08 2 Provides automated molecular testing solutions. $86 N/A $308/05/08 Dr. Tattoff Inc - - Laser tattoo removal company $8 N/A $1
FilingDate Issue r
MostRe ce nt Ame nd
# of Ame nd Issue r Busine ss De scription
Curre nt Amt File d
($MM)Gross
Margin
LTM Re ve nue
($MM)09/04/08 TherOx Inc - - Developer of devices for cardiac ischemia patients. $100 - -07/01/08 Alimera Sciences Inc 08/19/08 1 Clinical stage developer of prescription ophthalmic pharmaceuticals. $75 - -05/09/08 Aldagen Inc 06/18/08 1 Biopharmaceutical company. $81 - -01/25/08 Phenomix Corp 05/16/08 2 Developing treatments for immune, central nervous system, and metabolic diseases. $86 - -01/09/08 Omeros Corp 05/08/08 2 Developing orthopedic, rheumatology, urology, and cardiovascular pharmaceuticals $115 - -11/20/07 Aegerion Pharmaceuticals 01/18/08 2 Specialty pharma company developing products to treat cardiovascular and metabolic disease. $86 - -09/14/07 TransMedics Inc 12/14/07 2 Medical device company enable transplantation of beating hearts and other functioning organs. $86 - -08/31/07 Anacor Pharmaceuticals Inc 04/03/08 4 Biopharmaceutical company developing small molecule therapeutics. $58 - -
IPO Market OverviewCurrent Health Care IPO Backlog (LTM Revenue > $25 Million)
The Health Care IPO
backlog stands at 25,
down from a 6-year
high of 41 set in Q3
of 2007
Current Health Care IPO Backlog (LTM Revenue < $25 Million)
Current Health Care IPO Backlog (Pre-Revenue)
IPO MARKET UPDATE
Source: company filings, Dealogic and Piper Jaffray ECMData through 9/30/08, Shading denotes Piper Jaffray as a managerA registration statement relating to these securities has been filed with the Securities and ExchangeCommission but has not yet become effective. These securities may not be sold nor may offers to buybe accepted prior to the time the registration statement becomes effective.
SECTION IVFollow-on Market Update
24
The first 9 months of
2008 have been
dominated by
struggling financials
raising capital in
order to shore up
their balance sheets
Offering Activity Increased in Q2 Driven by Large-Cap Financials
• Q3 follow-ons accounted for $57bn in capital raised, second only to Q1 2000 in total follow-on proceeds in a quarter
• The 67 priced transactions was well below the quarterly average of 120 for the ‘04 – ’07 period
• $105bn of the $121bn (87%) in follow-on capital raised thus far in 2008 has been on behalf of Financial, Real Estate and Energy companies
Difficult Pricing Conditions and Volatility Have Lead to Selective Offering Activity
• Many growth companies without immediate capital needs or significant catalysts to drive stock price appreciation have elected to delay financing; only 53 of the 215 (25%) follow-ons priced so far in ’08 have been on behalf of companies in the growth sectors vs. the average of 40% for the ’04 – ’07 period
• Pricing conditions continue to be challenging; the average change from file-to-offer in Q3 was -9.3% vs. the average of -4.4% for the ’04 – ’07 period; on average, sub $2bn market cap growth companies traded down -11.5% in Q3
• Selling shareholder activity has been limited; only 30 transactions have been completed on behalf of selling shareholders in 2008(shareholders selling >50% of the offering), or 14% of the completed offerings – well below the 33% average seen from ’04 – ‘07
Health Care Offering Activity is Limited – However Performance Has Been Strong
• Companies with significant announcements/catalysts for stock price appreciation have accounted for the limited deal activity in the Health Care sector; the Health Care sector is one of only two sectors where offerings are trading above offer on average, trading up 11% year-to-date
• Pricing performance has been more favorable for Health Care issuers; average price declination file-to-offer was -7.4% in Q3 vs. -9.3% for the broader markets
Follow-on Market Update – Key Takeaways
FOLLOW-ON MARKET UPDATE
Source: company filings, Dealogic and Piper Jaffray ECMData through 9/30/08Excludes transaction less than $20mm and closed end funds
25
FOLLOW-ON MARKET UPDATE
10193
122
148
127 129
83
138
111
140
72
113
51
100
64
40
60
80
100
120
140
160
Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08
# o
f Fol
low
-ons
$0
$10
$20
$30
$40
$50
$60
Pro
ceed
s ($
B)
Follow-ons Completed Follow-on Proceeds ($B)
Follow-on Activity by Quarter
File / Offer Performance by Quarter Last Trade / Offer Discount by Quarter
-8.4%
-5.6%
-9.3%
-3.1%-3.4%
-4.4%
-2.5%
-6.0%
-4.1%
-5.5%
-9.2%(10%)
(8%)
(6%)
(4%)
(2%)
0%
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
-2.6%-2.4%
-2.2%
-2.8%-2.7% -2.6%
-3.4%
-4.3%
-3.2%-2.9%
-4.5%-5%
-4%
-3%
-2%
-1%
0%
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Distressed financial
companies looking to
shore up balance
sheets led to the
most active quarter of
follow-on issuance, in
terms of capital
raised, since Q1 of
2000
Pricing conditions
deteriorated
considerably in Q3
after showing some
signs of improvement
in Q2
Source: company filings, Dealogic and Piper Jaffray ECMData through 9/30/08Excludes transaction less than $20mm and closed end funds
26
FOLLOW-ON MARKET UPDATE
Follow-on offering
activity has
disproportionately been
on behalf of Financial &
Energy companies in
2008
Issuers have looked to
mitigate market risk by
quickly accessing the
capital markets via
bought/accelerated
transactions in 2008
Follow-on Offering Activity Breakdown
Source: company filings, Dealogic and Piper Jaffray ECM through 9/30/08*Defined as selling shareholder selling 50% or more of the offeringExcludes transaction less than $20mm and closed end funds
Health Care
11%
Industrials
7%
Clean Tech
5%
Consumer
3%
Energy &
Mining
20%
Financial
25%
REIT
17%
Real Estate
2%
Technology
5%
Transports
5%
Transports
7%
Technology
18%
Real Estate
1%
REIT
7%
Financial
17%
Energy &
Mining
18%
Consumer6%
Clean Tech
3%
Industrials9%
Health Care
14%
148
170
170
104
30
140
0
50
100
150
200
2003 2004 2005 2006 2007 2008 YTD0%
10%
20%
30%
40%
# of Follow-ons w/ Selling Shareholders % of Total FOs
30%
59%
18%22%
19%
52%
0%
15%
30%
45%
60%
75%
2007 2008
% o
f O
ffer
ings
Fully Marketed Bought Accelerated
2007 CY Follow-on Deal Volume by Sector2008 YTD Follow-on Deal Volume by Sector
Follow-on Marketing Style Follow-ons Driven by Selling Shareholders*
27
FOLLOW-ON MARKET UPDATE
-4.3% -4.4%
-2.3%-2.7%
-3.9%
-2.7% -2.9%
-10.7%
-2.1% -1.9%
-4.4%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
-14.4%
-5.2%
-7.5%
-5.2%-6.8%
-3.4%-4.5%
-10.8%
-7.2%
-4.8%
-18.7%(20%)
(16%)
(12%)
(8%)
(4%)
0%
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Health Care follow-on
issuance levels are at
their lowest levels
since 2003
Pricing conditions
deteriorated in Q3 –
however they are still
improved from the
very poor levels seen
in Q4 ’07 and Q1 ‘08
Health Care Follow-on Activity by Quarter and Sector
Health Care File / Offer Performance By Quarter Health Care Last Trade / Offer Discount by Quarter
Source: company filings, Dealogic and Piper Jaffray ECMData through 9/30/08Excludes transaction less than $20mm and closed end funds
18
4
1816
19
9
5
1311
20
67
8
34
2
8
2
56
1
4
9
5
2 221
64
2 2
4
1 1
5
32
0
5
10
15
20
25
Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08
# of
Fol
low
-ons
$0
$1,000
$2,000
$3,000
$4,000
$5,000
Follo
w-o
n P
roce
eds
($M
M)
Biopharmaceuticals Health Care Services Medical Technology Capital Raised
28
FOLLOW-ON MARKET UPDATE
Pricing Date Issuer
Deal Value ($MM)
Market Value ($MM)
DealValue /
Mkt Value
% Chg Price / FTO
% Chg Amount /
FTO
% Chg Price / Current
9/23/08 Hanger Orthopedic $45 $455 10% -8% -8% -3%8/18/08 ABIOMED Inc $42 $683 6% -8% -8% 2%8/15/08 VisionChina Media $101 $443 23% -29% -51% -8%8/6/08 Acorda Therapeutics $131 $1,109 12% -5% -5% -16%
7/31/08 Incyte Corp $109 $870 12% -2% 14% -15%7/31/08 CardioNet Inc $133 $635 21% -11% -5% -6%7/24/08 EnergySolutions Inc $765 $1,753 44% -15% -15% -47%7/21/08 Shuffle Master Inc $86 $233 37% -33% -33% 20%7/17/08 Canadian Solar Inc $119 $1,270 9% -11% -11% -43%7/15/08 IPC The Hospitalist $74 $300 25% -16% -41% 39%6/26/08 Sequenom Inc $98 $889 11% 9% 9% 72%6/24/08 HealthSouth Corp $151 $1,581 10% -4% -4% 7%6/24/08 Luminex Corp $80 $803 10% -11% -11% 26%6/23/08 SuccessFactors Inc $104 $648 16% 5% 23% -8%6/19/08 Synthesis Energy Sys. $106 $347 31% 6% 6% -48%6/17/08 ReneSola Ltd $212 $1,409 15% 0% 0% -49%6/12/08 Monotype Imaging $68 $340 20% -22% -35% -7%6/4/08 Solera Holdings Inc $133 $1,816 7% -5% -5% 8%
5/22/08 Natus Medical Inc $90 $519 17% -9% 4% 16%5/22/08 Allos Therapeutics $70 $435 16% -4% 16% 31%5/22/08 Polypore International $193 $996 19% 12% 12% -10%
Mean $139 $835 18% -8% -7% -2%Median $104 $683 16% -8% -5% -6%
Pricing Date Issuer
Deal Value ($MM)
Market Value ($MM)
DealValue /
Mkt Value
% Chg Price / FTO
% Chg Amount /
FTO
% Chg Price / Current
9/26/08 Washington Real Estate $60 $1,905 3% -4% -4% 5%9/26/08 JP Morgan Chase $11,500 $169,694 7% -7% -7% 15%9/26/08 National Retail Properties $80 $1,850 4% -3% 66% 4%9/25/08 First Niagara Financial $115 $1,740 7% -14% -14% 17%9/24/08 Realty Income Corp $78 $2,790 3% -1% -1% -5%9/24/08 Stifel Financial Corp $87 $1,224 7% -3% 37% 11%9/24/08 James River Coal Co $45 $911 5% -10% -10% -27%9/24/08 Corporate Office Prop. $146 $2,039 7% -3% 58% 3%9/24/08 First Potomac Realty $46 $437 11% -11% -11% 7%9/24/08 Equity One Inc $47 $1,662 3% -2% -2% -5%9/24/08 Goldman Sachs $5,750 $54,329 11% -2% -2% 4%9/24/08 Capital One Financial $761 $20,457 4% -9% -9% 4%9/24/08 Waste Connections Inc $411 $2,604 16% -12% -4% 6%9/23/08 Healthcare Realty Trust $205 $1,496 14% -19% -19% 14%9/23/08 Hanger Orthopedic Group $45 $455 10% -8% -8% -3%9/19/08 LDK Solar Co Ltd $200 $4,867 4% -5% 21% -28%9/18/08 Vertex Pharmaceuticals $220 $3,936 6% -4% 3% 30%9/18/08 Otter Tail Corp $155 $1,143 14% -25% -32% 2%9/15/08 Omega Healthcare Investors $98 $1,408 7% -5% -5% 20%9/11/08 Regency Energy Partners $149 $1,151 13% -11% -11% -13%9/10/08 Cogdell Spencer Inc $40 $334 12% -3% 14% -13%
Mean $964 $13,163 8% -8% 3% 2%Median $115 $1,740 7% -5% -4% 4%
Recent Growth Sector Small Cap (<$2B) SECs
Recent Follow-on Pricing PerformanceRecent Follow-ons (all sectors & market caps)
Recent Small Cap (<$2B) Follow-on Pricing Performance Recent small-cap
follow-ons have seen
difficult pricing
conditions while in
registration –
declining 8% on
average
In the broader
markets, follow-ons
have primarily been
coming on behalf of
distressed financials
and REITs
Data as of 9/30/08Source: Dealogic, BaselineGrowth Sectors defined as Clean Tech, Consumer, Health Care, & Technology
-2%
-11%
-3%
-10%
-3%
-1%
-14%
-3%
-7%
-4%
-2%
-11%
58%
-10%
37%
-1%
-14%
66%
-7%
-4%
-20% 0% 20% 40% 60% 80%
(9/24) Equity One Inc
(9/24) First Potomac Realty
(9/24) Corporate Office Prop.
(9/24) James River Coal Co
(9/24) Stifel Financial Corp
(9/24) Realty Income Corp
(9/25) First Niagara Financial
(9/26) National Retail Properties
(9/26) JP Morgan Chase
(9/26) Washington Real Estate
% Chg Price FTO % Chg Amt FTO
-16%
-11%
-33%
-15%
-11%
-2%
-5%
-29%
-8%
-8%
-41%
-11%
-33%
-15%
-5%
14%
-5%
-51%
-8%
-60% -40% -20% 0% 20%
(7/15) IPC The Hospitalist
(7/17) Canadian Solar Inc
(7/21) Shuffle Master Inc
(7/24) EnergySolutions Inc
(7/31) CardioNet Inc
(7/31) Incyte Corp
(8/6) Acorda Therapeutics
(8/15) VisionChina Media
(8/18) ABIOMED Inc
(9/23) Hanger Orthopedic
% Chg Price FTO % Chg Amt FTO
29
PricingDate Issuer
DealType
OfferPrice
Deal Value($MM)
Mkt Value($MM)
SellingShrs %
% ChgAmt FTO
% ChgPrice FTO
% Chg LastTrade/Offer
% Chg /1-Day
% Chg /30-Day
% Chg /Current
9/18/08 Vertex Pharma Accelerated $25.50 $220 $3,936 3% -4% -4% 9% 2% 30%8/6/08 Illumina Inc Accelerated $87.50 $352 $6,074 -6% -6% -2% 1% -4% -54%8/6/08 Acorda Therapeutics Bought $28.50 $131 $1,109 -5% -5% -5% -6% 4% -16%
7/31/08 Incyte Corp Accelerated $9.00 $109 $870 14% -2% -3% 7% 14% -15%6/25/08 Sequenom Inc Accelerated $15.50 $98 $889 9% 9% -3% -2% 42% 72%6/24/08 Luminex Corp Marketed $19.91 $80 $803 -11% -11% 0% 4% 8% 26%5/22/08 Allos Therapeutics Marketed $5.64 $70 $435 16% -4% 0% 7% 16% 31%5/7/08 La Jolla Pharma Accelerated $1.92 $30 $75 2% 2% 2% -14% 8% -42%
2/28/08 Genoptix Inc Marketed $25.50 $61 $411 100% -58% -16% 0% 1% -1% 28%2/12/08 Vertex Pharma Accelerated $17.14 $118 $2,380 -6% -6% 0% 12% -10% 94%2/12/08 Acorda Therapeutics Marketed $21.50 $82 $686 3% -2% -18% 0% 15% -13% 11%2/6/08 Biodel Inc Marketed $15.50 $59 $376 14% -35% -35% -3% -3% -19% -78%
1/31/08 Rigel Pharma Marketed $27.00 $135 $992 30% 4% -2% -3% -27% -14%1/23/08 OREXIGEN Therapeutics Marketed $11.00 $81 $388 -21% -21% -4% -1% 3% -2%1/17/08 Targacept Inc Accelerated $7.07 $31 $173 0% 0% 0% 0% 13% -18%1/17/08 Seattle Genetics Marketed $9.00 $104 $752 -23% -23% -7% 1% 6% 19%
Mean $110 $1,272 39% -6% -9% -2% 2% 3% 5%Median $90 $777 14% -3% -5% -2% 1% 3% 5%
PricingDate Issuer
DealType
OfferPrice
Deal Value($MM)
Mkt Value($MM)
SellingShrs %
% ChgAmt FTO
% ChgPrice FTO
% Chg LastTrade/Offer
% Chg /1-Day
% Chg /30-Day
% Chg /Current
9/23/08 Hanger Orthopedic Bought $18.00 $45 $455 100% -8% -8% -8% -5% -18% -3%7/15/08 IPC The Hospitalist Marketed $18.50 $74 $300 69% -41% -16% -1% 9% 32% 39%6/24/08 HealthSouth Corp Bought $17.20 $151 $1,581 -4% -4% -4% -1% 1% 7%4/11/08 Almost Family Marketed $17.75 $45 $141 -15% -15% -1% 0% 22% 123%
Mean $79 $619 84% -17% -11% -4% 1% 9% 41%Median $60 $378 84% -12% -12% -3% 0% 11% 23%
PricingDate Issuer
DealType
OfferPrice
Deal Value($MM)
Mkt Value($MM)
SellingShrs %
% ChgAmt FTO
% ChgPrice FTO
% Chg LastTrade/Offer
% Chg /1-Day
% Chg /30-Day
% Chg /Current
8/18/08 ABIOMED Inc Bought $17.38 $42 $683 -8% -8% -8% 4% 3% 2%7/31/08 CardioNet Inc Marketed $26.50 $133 $635 100% -5% -11% -4% 8% 15% -6%5/22/08 Natus Medical Marketed $19.50 $90 $519 4% -9% -1% 8% 5% 16%4/1/08 Hansen Medical Bought $13.34 $40 $320 10% -9% -9% 9% 32% 1%
Mean $76 $539 100% 0% -9% -5% 7% 14% 3%Median $66 $577 100% -1% -9% -6% 8% 10% 1%
Health Care Follow-
ons Completed in
2008
Medical Technology
Biopharmaceuticals/Diagnostics
Health Care Services
FOLLOW-ON MARKET UPDATE
Source: company filings, Dealogic and Piper Jaffray ECMData through 9/30/08Excludes transaction less than $20mm and closed end funds
SECTION VConvertible Market Update
31
The convertible
market priced $1.6
billion of capital
during September,
bringing the total
through Q3 2008 to
$63.5 billion
Deal activity for Q3
2008 was down 42%
versus Q3 2007 as
measured by capital
raised, and down
33% measured by the
number of completed
transactions
Convertible Capital Raised
Convertible Issuance Activity
46% 34%
7%13%
Less than $300mm $300mm - $2B
$2B - $10B Greater than $10B
33% 48%
14%5%
Less than $300mm $300mm - $2B
$2B - $10B Greater than $10B
Q3 Convertible Issuers by Market Capitalization
CONVERTIBLE MARKET UPDATE
$89.4
$48.8$40.5
$69.3
$99.2
$63.5
$21.5
$1.8 $1.6$0
$20
$40
$60
$80
$100
$120
2003 2004 2005 2006 2007 2008 Sep-07 Sep-08
Cap
ital
Rai
sed
($ b
ln)
Completed Deals Annualized Deals
# of Convertible Transactions
LTM Convertible Issuers by Market Capitalization
116
203147
115
186
278
58
39
0
50
100
150
200
250
300
2003 2004 2005 2006 2007 2008 Sep-07 Sep-08
Nu
mbd
er o
f D
eals
Source: Company Press Releases, Dealogic and BloombergPercentages calculated relative to # of Deals
32
Every major industry
group issued
convertibles in Q3
with a strong
showing from the
alternative energy
and Health Care
sectors
79% of convertible
transactions were not
rated by the credit
agencies versus 74%
during the last 12
months
LTM Convertible Transactions by Industry
Convertible Issuance Activity
Q3 Convertible Issuers by Credit Rating
CONVERTIBLE MARKET UPDATE
5%
17%
14%
5%
18%22%
14%
5%
Consumer & Retail Energy & PowerFinancial Institutions HealthcareIndustrial Growth Media & CommunicationsReal Estate Technology
13%
74%
13%
Investment Grade Non-Rated Speculative
Q3 Convertible Transactions by Industry
LTM Convertible Issuers by Credit Rating
18%
24%
10% 8%
15%
14%
7%
4%
Consumer & Retail Energy & PowerFinancial Institutions HealthcareIndustrial Growth Media & CommunicationsReal Estate Technology
79%
21%
Investment Grade Non-Rated Speculative
Source: Company Press Releases, Dealogic and BloombergPercentages calculated relative to # of Deals
33
Convertible structuring
diverged a little from
the longer term trend –
Financials pulled back
from issuing
convertibles in Q3, as
the SEC’s short ban
limited investors’ ability
to hedge their equity
exposure
Companies continue to
use net share
settlement (NSS) (cash
settlement upon
conversion) - the FASB
ruled in favor of
changing accounting
guidance on such
convertible structures
that will be more
dilutive to earnings
LTM Convertible Security Type
Convertible Issuance Activity
Q3 Convertible Enhancement Structures
CONVERTIBLE MARKET UPDATE
16%
10%
74%
Preferred Mandatory Bond
86%
5%9%
Preferred Mandatory Bond
9%
22%
11%
53%
0%
20%
40%
60%
CoPay NSS Call Spread Turbo
% o
f To
tal
Q3 Convertible Security Type
LTM Convertible Enhancement Structures
5.3%
31.8%
52.4%
5.3%
0%
20%
40%
60%
CoPay NSS Call Spread Turbo
% o
f Tot
al
Source: Company Press Releases, Dealogic and BloombergPercentages calculated relative to # of Deals
34
Convertible bond
structure was largely
unchanged during Q3
Debt refinancing and
general corporate
purposes were stated as
the most prevalent use of
proceeds during Q3 – in
line with the longer-term
trend
The majority of Q3’s
convertible transactions
were completed via Rule
144a or as registered
offerings
The 144A offering process
remains the most flexible
and efficient process to
market for many issuers
and appeals to the
majority of the buyer base
Weighted Average Coupon / Premium
Convertible Issuance Activity
Q3 Convertible Security Registration at Issue
CONVERTIBLE MARKET UPDATE
52%
42%
6%
Registered Reg D 144a
23%
63%14%
Registered Reg D 144a
51%
72%
10%
40%
18%
68%
14%11%
0%
20%
40%
60%
80%
100%
DebtRefinance
Share Repo General M&A
% o
f Tot
al
LTM Q3
Convertible Use of Proceeds
LTM Convertible Security Registration at Issue
0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%
Oct-07 Dec-07 Jan-08 Mar-08 Apr-08 Jun-08 Jul-08 Sep-08
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Coupon Premium
Source: Company Press Releases, Dealogic and BloombergPercentages calculated relative to # of Deals
35
60% of the convertible
offerings during Q3 were
completed with just one
day of marketing - the
convertible market
continues to minimize
market risk and
management distraction
via the most utilized on
day telephonic road show
schedule
Most convertible
transactions completed
with a marketing schedule
longer than one day are
completed with other
capital product offerings
such as follow-on equity
offerings or debt
LTM Convertible Security Marketing Period
Convertible Issuance Activity
CONVERTIBLE MARKET UPDATE
31%
16%
53%
>1 Day Overnight 1 Day
35%
60%
5%
>1 Day Overnight 1 Day
Q3 Convertible Security Marketing Period
Q3 Convertible Health Care Transactions
CompanyTradeDate
MarketCap
TotalSize
Yield Premium EffectiveMaturity
Non CallPeriod
Security Call
Spread Call SpreadUpper Strike
Net ShareSettlement
StockRepurchase
Stock Repurchase% of Deal
DebtRefinance
Mylan Labs 9/10/2008 $3,380MM $500MM 3.750% 20% 7 Life NC Sr Note 80.0% NA
Salix Pharmaceuticals 8/19/2008 $346MM $60MM 5.500% 20% 5 5 NC Sr Note NA NA
China Medical Technologies 8/13/2008 $1,270MM $240MM 4.040% 23% 5 Life NC Sr Note NA NA
PSS World Medical 7/30/2008 $1,040MM $230MM 3.125% 28% 6 Life NC Sr Note 70.0% 17.5%
American Oriental Bioengineering 7/9/2008 $702MM $115MM 5.000% 15% 5 Life NC Sr Note NA NA
Number of Deals = 5 $1,347MM $229MM 4.28% 21.00% 6 75.0% 17.5%$1,040MM $230MM 4.04% 20.00% 5 75.0% 17.5%
Source: Company Press Releases, Dealogic and BloombergPercentages calculated relative to # of Deals
SECTION VIPIPE and Registered Direct Market Update
37
PIPE AND REGISTERED DIRECT MARKET UPDATE
$4.2 $6.1 $4.7 $5.7 $3.4 $7.9 $3.6 $5.3 $4.0 $5.1$3.4$8.1 $5.9$6.0$4.6
7183
119
96
115131
174
156
173185
102
209
158
192
88
0
25
50
75
100
125
150
175
200
225
Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08
# of
PIP
Es/R
Ds
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
Cap
ital
Rai
sed
($B
)
Capital Raised ($B) PIPEs/RDs Completed
All PIPE/RD Activity by Quarter (a)
2005 – 2008 YTD PIPE/RD Activity
(a) Source: PlacementTracker.com as of September 30, 2008. Includes all common stock, convertible preferred and convertible debt PIPE/RD transactions greater than $10 million.
(b) Percentage indicated is based on number of offerings.
Common StockSector No.
Total AmtOff (MM)
Clean Tech 17 $483Consumer 8 $135Energy 16 $1,076Financial 25 $2,439Health Care 44 $1,074Industrial Growth 29 $794Technology 18 $830Total 157 $6,831
ConvertibleSector No.
Total AmtOff (MM)
Clean Tech 7 $214Consumer 4 $550Energy 13 $1,232Financial 18 $2,266Health Care 17 $407Industrial Growth 12 $379Technology 14 $663Total 85 $5,711
PIPE/RD Activity Since 1/1/2008
Although so far in
2008 PIPE and
Registered Direct
issuance is down
from the previous
year, $12.54 billion
has still been raised
in 242 transactions
38
$3.8 $3.9 $5.5 $4.2 $5.1 $5.3 $3.1 $5.5 $7.1 $2.9 $4.5 $3.2 $3.5 $4.6$6.8
76
57
7077
101
167
146
174
94
168
151
134
155
108 104
0
25
50
75
100
125
150
175
200
Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08
# of
PIP
Es
$0
$1
$2
$3
$4
$5
$6
$7
$8
Cap
ital
Rai
sed
($B
)
Capital Raised ($B) PIPEs Completed
All PIPE Activity by Quarter (a)
Common StockSector No.
Total AmtOff (MM)
Clean Tech 12 $359Consumer 6 $80Energy 12 $694Financial 21 $2,267Health Care 25 $599Industrial Growth 26 $737Technology 17 $804Total 119 $5,540
PIPE AND REGISTERED DIRECT MARKET UPDATE
2005 – 2008 YTD PIPE Activity
(a) Source: PlacementTracker.com as of September 30, 2008. Includes all common stock, convertible preferred and convertible debt PIPE transactions greater than $10 million.
(b) Percentage indicated is based on number of offerings.
ConvertibleSector No.
Total AmtOff (MM)
Clean Tech 7 $214Consumer 4 $555Energy 13 $1,232Financial 18 $2,266Health Care 16 $356Industrial Growth 12 $379Technology 14 $663Total 84 $5,665
2008 PIPE Activity Since 1/1/2008
Although so far in
2008 PIPE issuance is
down from the
previous year, $11.21
billion has still been
raised in 203
transactions
39
PIPE AND REGISTERED DIRECT MARKET UPDATE
$250 $595 $570 $869 $418 $350 $342 $724 $752 $241 $579 $523$806$834 $1,303
1418
21
18
7
26
13
36
8
17
222219
24
11
0
5
10
15
20
25
30
35
40
Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08
# of
RD
s
$0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
$2,000
Cap
ital
Rai
sed
($M
M)
Capital Raised ($MM) RDs Completed
Common StockSector No.
Total AmtOff (MM)
Clean Tech 5 $125Consumer 2 $54Energy 4 $382Financial 4 $172Health Care 19 $475Industrial Growth 3 $57Technology 1 $26Total 38 $1,291
Although so far in
2008 RD issuance is
down from the
previous year, $1.34
billion has still been
raised in 39
transactions
All RD Activity by Quarter (a)
2008 RD Activity Since 1/1/2008
2005 – 2008 YTD RD Activity
(a) Source: PlacementTracker.com as of September 30, 2008. Includes all common stock, convertible preferred and convertible debt RD transactions greater than $10 million.
(b) Percentage indicated is based on number of offerings.
ConvertibleSector No.
Total AmtOff (MM)
Clean Tech 0 —Consumer 0 —Energy 0 —Financial 0 —Health Care 1 $52Industrial Growth 0 —Technology 0 —Total 1 $52
40
Although so far in
2008 common stock
PIPE and Registered
Direct issuance is
down from the
previous year, $6.83
billion has still been
raised in 157
transactions
2008 YTD Common Stock PIPE/RD Activity (a, b)
18%
21%
8%
17%
36%
0% to 5% 5% to 10% 10% to 15%
15% to 20% Greater than 20%
Traditional PIPE/RD Transaction Size as % of Market Cap
22%
9%
30%
18%
21%
Less than $50MM $50MM to $100MM$100MM to $200MM $200MM to $400MMGreater than $400MM
PIPE/RD Issuer Market Cap
PIPE AND REGISTERED DIRECT MARKET UPDATE
(a) Source: PlacementTracker.com as of September 30, 2008. Includes all agented common stock PIPE/RD transactions greater than $10 million.
(b) Percentage indicated is based on number of offerings.
% of Traditional PIPEs/RDswith Warrant Coverage
53%
47%
54%
46%
0%
15%
30%
45%
60%
75%
PIPEs RDs
% o
f Tot
al
No Warrants Warrants
41
Although so far in
2008 convertible PIPE
and Registered Direct
issuance is down
from the previous
year, $5.71 billion has
still been raised in 85
transactions
PIPE/RD Structure Breakdown
58%
42%
0%0%
20%
40%
60%
80%
100%
PIPEs RDs
% o
f Tot
al
Convertible Notes Convertible Preferred
2008 YTD Convertible PIPE/RD Activity (a, b)
5%5%
15%
8%67%
0% to 5% 5% to 10% 10% to 15%
15% to 20% Greater than 20%
31%
15% 23%
13%
18%
Less than $50MM $50MM to $100MM$100MM to $200MM $200MM to $400MMGreater than $400MM
PIPE/RD Issuer Market Cap
PIPE AND REGISTERED DIRECT MARKET UPDATE
(a) Source: PlacementTracker.com as of September 30, 2008. Includes all agentedconvertible PIPE/RD transactions greater than $10 million.
(b) Percentage indicated is based on number of offerings.
% of Traditional PIPEs/RDsWith Warrant Coverage
45%
0%
55%
0%
20%
40%
60%
80%
100%
PIPEs RDs
% o
f Tot
al
No Warrants Warrants
PIPE/RD Transaction Size as % of Market Cap
100% 100%
SECTION VIIInstitutional Health Care Fund Movement
43
Health Care sector
equity asset
movement among
the top Health Care
funds – as measured
by equity assets
under management
% representative of change in assets between 3/31/08 and 6/30/08Source: Bigdough, excludes Indexed & Quantitative Investors“-” denotes accounts that have no holdings in the subsector
Equity Movements Among Funds with the Most Health Care Assets Under Management
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Q2 Change in Equity Assets
Institution Name City Style Bio
phar
ma
HC
Ser
vice
s
Med
Tec
h
Ove
rall
Chg
.in
HC
Ass
ets HC Assets
UnderMgmt($MM)
% FundsDevoted
to HC Ove
rall
Port
folio
Q2
Chg
. in
Ass
ets
FundsUnderMgmt($MM)
Fidelity Management & Research Boston Growth -3% -1% -2% -3% $63,461 12% -1% $535,342Wellington Management Co. Llp Boston Value -3% -2% -11% -5% $50,132 19% -1% $259,118Capital World Investors Los Angeles Value 2% 25% 6% 3% $40,778 10% 5% $428,547Alliancebernstein Lp New York Value -1% -2% 1% -1% $32,529 11% -1% $284,828T. Rowe Price Associates, Inc. Baltimore Growth 5% 10% 2% 5% $29,799 13% 3% $225,591Capital Research Global Investors Los Angeles Growth -3% 0% 2% -2% $24,639 7% 5% $330,851Dodge & Cox, Inc. San Francisco Contrarian 2% 0% -6% 0% $21,578 18% -1% $121,482Blackrock Advisors, Inc. New York Value 6% 6% -4% 3% $17,028 12% 3% $136,271TIAA-Cref Asset Management Llc New York Value 0% -3% 0% -1% $16,671 11% 1% $147,717Columbia Management Advisors, Inc. Boston Value -5% 3% -4% -4% $15,234 10% -5% $146,175Clearbridge Advisors New York Growth -2% 12% -1% -2% $13,880 20% -3% $69,480Primecap Management Co. Pasadena Growth 11% - 8% 10% $13,399 25% 4% $54,360Goldman Sachs Asset Management Tampa Growth 0% -20% 6% -1% $13,142 13% -2% $103,702Jennison Associates Llc New York Growth -19% 88% -13% -13% $10,392 21% 0% $50,563Norges Bank Investment Management Oslo Growth 42% 42% 52% 44% $10,207 8% 22% $131,520Enhanced Investment Technologies Palm Beach Growth -2% -2% 4% 0% $9,621 17% 2% $55,720UBS Global Asset Management Chicago Value 9% 8% 38% 16% $9,084 15% 16% $62,619Janus Capital Management Denver Agg. Growth 10% 12% 16% 12% $8,992 12% 5% $76,489Grantham, Mayo, Van Otterloo Boston Value -1% -24% -6% -3% $8,729 14% 0% $61,427JPMorgan Asset Management, Inc. New York Value 0% 40% 21% 8% $8,722 10% -1% $89,880Putnam Investment Management, Inc. Boston Value -2% -19% -2% -4% $8,538 13% -3% $64,543Brandes Investment Partners San Diego Contrarian 0% -9% -13% -2% $8,468 16% -7% $52,799MFS Investment Management Boston Value -5% 25% 5% -2% $8,418 9% 4% $91,375Templeton Global Advisors Nassau Value -1% 1% 6% 0% $8,290 16% -4% $52,796Capital Guardian Trust Co. Los Angeles Growth -8% 7% 0% -6% $8,245 14% -6% $58,212UBS Global Asset Management Zürich Growth -5% -14% -8% -6% $8,179 14% -4% $60,028Franklin Advisers, Inc. San Mateo Growth 3% 1% -1% 2% $7,908 14% 0% $58,410Oppenheimerfunds, Inc. New York Growth -4% 6% 2% -1% $7,634 8% 1% $95,860Neuberger Berman New York Growth 0% 4% 3% 2% $7,143 9% -1% $77,180Lord Abbett & Co. Jersey City Value -3% 7% 3% -1% $7,126 12% -3% $58,809American Century Investment Mgmt Kansas City Growth -7% -18% -8% -9% $6,802 12% -1% $54,747Morgan Stanley Investment Mgmt New York Growth -12% -3% 2% -9% $6,761 9% 0% $78,144Invesco AIM Management Group Houston Growth -5% -10% 10% -2% $6,681 14% -2% $48,595Van Kampen Asset Management Houston Growth -10% -12% 3% -8% $6,653 12% -1% $55,771Fil Investments International Ltd. London Growth -13% -3% 19% -3% $6,440 8% -3% $82,383
Median -2% 0% 2% -1% 12% -1%
44
% Change in CurrentPosition Position ($MM)
Norges Bank Investment Mgmt 44% $10,207
Fairholme Capital Management 313% $1,865
T. Rowe Price Associates, Inc. 5% $29,799
Primecap Management Co. 10% $13,399
UBS Global Asset Management 16% $9,084
Capital World Investors 3% $40,778
Fisher Investments, Inc. 91% $2,351
APG Investments 30% $4,484
Janus Capital Management 12% $8,992
CM-CIC Asset Management >1000% $787$787
$940
$1,036
$1,118
$1,226
$1,236
$1,273
$1,338
$1,414
$3,112
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500
Top Health Care Buyers and Sellers ($MM)
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
% Change in CurrentPosition Position ($MM)
American Century Investment Mgmt -9% $6,802
BNP Paribas Arbitrage Snc -34% $1,386
Relational Investors -55% $613
AXA Investment Managers Uk -21% $3,464
Credit Suisse Asset Management -29% $2,435
Marsico Capital Management -20% $4,384
Allianz Global Investors -40% $1,744
Jennison Associates -13% $10,392
Fidelity Management & Research -3% $63,461
Wellington Management Co. -5% $50,132($2,683)
($1,751)
($1,517)
($1,182)
($1,076)
($974)
($899)
($740)
($716)
($683)
($3,000) ($2,500) ($2,000) ($1,500) ($1,000) ($500) $0
% representative of change in assets between 3/31/08 and 6/30/08Source: BigdoughExcludes Indexed & Quantitative Investors
45
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
% Change in CurrentPosition Position ($MM)
Norges Bank Investment Mgmt 42% $7,743
Fairholme Capital Management 313% $1,865
Fisher Investments, Inc. 105% $2,193
Primecap Management Co. 11% $9,623
APG Investments 36% $3,681
T. Rowe Price Associates, Inc. 5% $17,241
CM-CIC Asset Management >1000% $630
JPMorgan Asset Management (UK) 19% $3,807
Janus Capital Management 10% $6,410
Blackrock Advisors, Inc. 6% $10,802$567
$591
$596
$630
$878
$970
$984
$1,125
$1,414
$2,293
$0 $500 $1,000 $1,500 $2,000 $2,500
Top Biopharmaceutical Buyers and Sellers ($MM)
% representative of change in assets between 3/31/08 and 6/30/08Source: BigdoughExcludes Indexed & Quantitative Investors
% Change in CurrentPosition Position ($MM)
Fil Investments International -13% $3,980
Van Kampen Asset Management -10% $5,264
Credit Suisse Asset Management -27% $1,669
Morgan Stanley Investment Mgmt -12% $4,989
AXA Investment Managers Uk -21% $3,304
Allianz Global Investors -40% $1,481
Wellington Management Co. -3% $36,389
Fidelity Management & Research -3% $36,408
Marsico Capital Management -24% $4,084
Jennison Associates -19% $6,469($1,480)
($1,308)
($1,274)
($1,238)
($999)
($897)
($679)
($624)
($584)
($570)
($1,600) ($1,400) ($1,200) ($1,000) ($800) ($600) ($400) ($200) $0
46
% Change in CurrentPosition Position ($MM)
UBS Global Asset Management 38% $2,437
Norges Bank Investment Mgmt 52% $1,955
Capital World Investors 6% $10,077
Shumway Capital Partners 111% $733
Fil Investments International 19% $2,225
JPMorgan Asset Management, Inc. 21% $1,950
Janus Capital Management 16% $2,215
Paulson & Co., Inc. 31% $1,281
Primecap Management Co. 8% $3,759
Glenview Capital Management 31% $1,092$260
$272
$307
$309
$342
$348
$386
$544
$670
$677
$0 $100 $200 $300 $400 $500 $600 $700 $800
Top Medical Technology Buyers and Sellers ($MM)
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
% representative of change in assets between 3/31/08 and 6/30/08Source: BigdoughExcludes Indexed & Quantitative Investors
% Change in CurrentPosition Position ($MM)
BNP Paribas Arbitrage Snc -69% $101
Hotchkis & Wiley Capital Management -80% $65
Friess Associates -26% $786
Dodge & Cox, Inc. -6% $4,506
Loomis, Sayles & Co. Lp -45% $422
Fidelity Management & Research -2% $18,804
Jennison Associates -13% $3,042
Delaware Investment Advisers -65% $281
Relational Investors -55% $613
Wellington Management Co. -11% $10,721($1,392)
($740)
($512)
($448)
($380)
($349)
($282)
($279)
($257)
($223)
($1,600) ($1,400) ($1,200) ($1,000) ($800) ($600) ($400) ($200) $0
47
Top Health Care Service Buyers and Sellers ($MM)
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
% Change in CurrentPosition Position ($MM)
Loomis, Sayles & Co. Lp -58% $86
Credit Suisse Asset Management -40% $215
Millennium Partners -35% $275
Harris Associates Lp -25% $494
AXA Rosenberg Investment Mgmt -52% $166
Jana Partners -62% $114
Glenview Capital Management -35% $349
Putnam Investment Management, Inc. -19% $881
American Century Investment Mgmt -18% $946
Goldman Sachs Asset Management -20% $1,288($317)
($202)
($202)
($185)
($184)
($183)
($161)
($145)
($141)
($117)
($350) ($300) ($250) ($200) ($150) ($100) ($50) $0
% representative of change in assets between 3/31/08 and 6/30/08Source: BigdoughExcludes Indexed & Quantitative Investors
% Change in CurrentPosition Position ($MM)
Jennison Associates 88% $881
JPMorgan Asset Management, Inc. 40% $1,021
Crédit Agricole Asset Management 194% $436
T. Rowe Price Associates, Inc. 10% $2,786
Turner Investment Partners, Inc. 40% $594
Calamos Advisors 68% $419
Norges Bank Investment Mgmt 42% $509
Citadel Investment Group 162% $227
Capital World Investors 25% $645
Chieftain Capital Management, Inc. 30% $521$120
$128
$140
$150
$169
$170
$254
$288
$290
$412
$0 $50 $100 $150 $200 $250 $300 $350 $400 $450
48
Health Care sector
equity asset
movement among
the top sub-$10
billion funds – as
measured by equity
assets under
management
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Equity Movements Among the Top Sub-$10B Health Care FundsQ2 Change in Equity Assets
Institution Name City Style Bio
phar
ma
HC
Ser
vice
s
Med
Tec
h
Ove
rall
Chg
.in
HC
Ass
ets HC Assets
UnderMgmt($MM)
% FundsDevoted
to HC Ove
rall
Port
folio
Q2
Chg
. in
Ass
ets
FundsUnderMgmt($MM)
Orbimed Advisors, Inc. New York Sector Specific 5% 0% 5% 5% $3,998 98% 4% $4,088Sectoral Asset Management Montreal Growth 0% - 1% 0% $3,078 100% 0% $3,078Westfield Capital Management Boston Agg. Growth 8% 6% -1% 6% $2,813 29% 4% $9,604Healthcor Management New York Sector Specific 0% -14% 18% 9% $2,364 88% 8% $2,682Sectoral Asset Management (Geneva) Geneva Growth 3% - -19% 3% $2,277 100% 3% $2,277Bellevue Asset Management Küsnacht Growth -9% 0% -8% -9% $2,150 90% -8% $2,386Maverick Capital Ltd. Dallas Long/Short 9% - 23% 20% $2,084 21% 16% $9,818Glenview Capital Management New York Opportunistic 774% -35% 31% 38% $1,966 24% 12% $8,295Timessquare Capital Management New York Agg. Growth 38% -8% -7% -3% $1,863 21% 2% $8,870Walter Scott & Partners Ltd. Edinburgh Growth 3% 6% -3% 1% $1,843 24% 5% $7,817Frontpoint Partners Llc Greenwich Long/Short -3% -32% 7% -2% $1,711 41% 4% $4,132Iridian Asset Management Llc Westport Growth 21% 2% -16% 0% $1,535 21% 3% $7,175Gardner Lewis Asset Management Chadds Ford Agg. Growth 3% 3018% -6% 5% $1,468 21% -2% $7,115State Of Wisconsin Investment Board Madison Growth -3% 7% 2% -1% $1,419 16% -1% $8,669Fortress Investment Group New York Opportunistic 71% 0% -52% 0% $1,341 46% 9% $2,900Edgewood Management New York Growth 19% 51% 3% 20% $1,306 28% 9% $4,694Comerica Asset Management Detroit Growth -3% -10% -3% -4% $1,235 13% 0% $9,821Franklin Templeton Investment Mgmt London Value 8% -2% 1% 6% $1,207 15% -3% $8,311Baker Bros. Advisors Llc New York Sector Specific 2% 0% -10% 1% $1,167 85% 2% $1,381Sound Shore Management, Inc. Greenwich Value 18% - 0% 8% $1,164 19% -3% $6,089Valueact Capital Management San Francisco Turnaround -8% -9% 0% -7% $1,149 27% 12% $4,295Shumway Capital Partners Greenwich Long/Short -8% - 111% 44% $1,148 18% 49% $6,336Munder Capital Management Birmingham Growth 8% 4% -12% 0% $1,131 12% 0% $9,614Deerfield Management Co. New York Sector Specific -10% 21% -6% -6% $1,116 93% -6% $1,197Analytic Investors Los Angeles Growth -49% 10% 12% -7% $1,101 12% 2% $8,929Trilogy Global Advisors New York Growth 11% 91% 40% 27% $1,095 18% -1% $6,049Select Equity Group, Inc. New York Growth -18% -12% 18% -1% $1,047 20% 1% $5,177Carnegie Fond Ab Stockholm Growth 0% -21% 16% 3% $1,026 47% 1% $2,163Schroder Investment Mgmt New York Growth 66% 19% -9% 28% $1,022 16% -9% $6,298Metropolitan West Capital Mgmt Newport Beach Contrarian 18% 10% 17% 15% $1,020 12% 10% $8,807Oppenheimer Capital New York Value -17% 77% 7% -5% $1,017 12% -8% $8,777Perkins, Wolf, Mcdonnell & Co. Chicago Value -15% 34% -2% 0% $1,009 11% 8% $9,461The Renaissance Group Cincinnati Growth 29% -8% -1% 11% $999 16% 4% $6,065Nordea Investment Management Stockholm Growth 16% -4% 12% 15% $998 12% -1% $8,498Frontier Capital Management Co. Boston Agg. Growth 5% -11% -9% -5% $992 20% -2% $4,850
Median 3% 0% 0% 1% 21% 2%
% representative of change in assets between 3/31/08 and 6/30/08Source: Bigdough, excludes Indexed & Quantitative Investors“-” denotes accounts that have no holdings in the subsector
49
Top Health Care Buyers and Sellers ($MM) - <$10B Under Management
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
% Change in CurrentPosition Position ($MM)
Fairholme Capital Management 313% $1,865
Glenview Capital Management 38% $1,966
Elliott Management Corp. 679% $444
Shumway Capital Partners 44% $1,148
Maverick Capital 20% $2,084
Icahn Associates Corp. 20% $1,970
Hussman Econometrics Advisors, Inc. 67% $714
Visium Asset Management 47% $894
Paulson & Co., Inc. 25% $1,281
Hilliard Lyons Capital Management Initiation $234$234
$256
$284
$287
$322
$342
$349
$387
$541
$1,414
$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600
% representative of change in assets between 3/31/08 and 6/30/08Source: BigdoughExcludes Indexed & Quantitative Investors
% Change in CurrentPosition Position ($MM)
H. A. Schupf & Co. -76% $65
Capital International Sa Switzerland -20% $811
Bellevue Asset Management Ag -9% $2,150
Vinik Asset Management Lp -55% $171
Duquesne Capital Management -42% $363
Mcmorgan & Co. -75% $103
The Robert Wood Johnson Foundation -15% $2,094
Cantillon Capital Management -40% $709
Chase Investment Counsel Corp. -36% $894
Relational Investors -55% $613($740)
($507)
($471)
($361)
($307)
($263)
($211)
($211)
($203)
($201)
($800) ($700) ($600) ($500) ($400) ($300) ($200) ($100) $0
50
% Change in CurrentPosition Position ($MM)
Fairholme Capital Management 313% $1,865
Glenview Capital Management 774% $526
Elliott Management Corp. 869% $429
Icahn Associates Corp. 20% $1,905
Schroder Investment Management NA 66% $583
AGF International Advisors Co. 184% $343
Visium Asset Management 35% $769
Hussman Econometrics Advisors, Inc. 65% $486
Hilliard Lyons Capital Management Initiation $192
Skandia Liv >1000% $206$191
$192
$192
$201
$222
$231
$322
$384
$465
$1,414
$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600
Top Biopharmaceutical Buyers and Sellers ($MM) - <$10B Under Management
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
% representative of change in assets between 3/31/08 and 6/30/08Source: BigdoughExcludes Indexed & Quantitative Investors
% Change in CurrentPosition Position ($MM)
Pictet Asset Management -32% $360
Bellevue Asset Management Ag -9% $1,726
Independence Investments -53% $155
Mazama Capital Management, Inc. -26% $516
Analytic Investors -49% $186
Capital International Sa Switzerland -21% $664
Mcmorgan & Co. -74% $78
The Robert Wood Johnson Foundation -15% $2,094
Cantillon Capital Management -99% $5
Chase Investment Counsel Corp. -60% $333($501)
($476)
($361)
($221)
($180)
($178)
($178)
($177)
($175)
($167)
($600) ($500) ($400) ($300) ($200) ($100) $0
51
% Change in CurrentPosition Position ($MM)
Shumway Capital Partners 111% $733
Paulson & Co., Inc. 31% $1,281
Glenview Capital Management 31% $1,092
Maverick Capital 23% $1,283
Healthcor Management Lp 18% $1,408
RR Partners Lp 313% $215
Cadence Capital Management 32% $538
Eton Park Capital Management Lp 52% $314
Trilogy Global Advisors 40% $336
Congress Asset Management Co., Inc. 34% $385$97
$97
$107
$129
$163
$213
$237
$260
$307
$386
$0 $50 $100 $150 $200 $250 $300 $350 $400 $450
Top Medical Technology Buyers and Sellers ($MM) - <$10B Under Management
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
% representative of change in assets between 3/31/08 and 6/30/08Source: BigdoughExcludes Indexed & Quantitative Investors
% Change in CurrentPosition Position ($MM)
Jana Partners -90% $11
Greenlight Capital, Inc. -53% $91
Highfields Capital Management Lp -51% $101
SRM Global -100% $0
Iridian Asset Management -16% $611
H. A. Schupf & Co. -77% $36
Cr Intrinsic Investors -73% $67
Vinik Asset Management Lp -97% $5
Duquesne Capital Management -92% $18
Relational Investors -55% $613($740)
($198)
($190)
($181)
($119)
($113)
($108)
($104)
($103)
($102)
($800) ($700) ($600) ($500) ($400) ($300) ($200) ($100) $0
52
Top Health Care Service Buyers and Sellers ($MM) - <$10B Under Management
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
% Change in CurrentPosition Position ($MM)
Oz Management -36% $104
Ivory Investment Management Lp -60% $46
Cadence Capital Management -95% $4
Private Capital Management, Inc. -29% $178
Omega Advisors, Inc. -100% $0
Roxbury Capital Management -54% $82
Brown Investment Advisory, Inc. -57% $82
Alex Brown Investment Management -87% $17
Jana Partners -62% $114
Glenview Capital Management -35% $349($185)
($184)
($112)
($108)
($97)
($90)
($74)
($70)
($68)
($59)
($200) ($180) ($160) ($140) ($120) ($100) ($80) ($60) ($40) ($20) $0
% representative of change in assets between 3/31/08 and 6/30/08Source: BigdoughExcludes Indexed & Quantitative Investors
% Change in CurrentPosition Position ($MM)
Chieftain Capital Management, Inc. 30% $521
Gardner Lewis Asset Management >1000% $105
Larrain Vial Sa Inv. Mgmt 891% $93
Oppenheimer Capital 77% $186
Trilogy Global Advisors 91% $165
Principled Capital Management 127% $137
Diamondback Capital Management 400% $92
Brookside Capital Investors Initiation $62
Midcap Spdr Trust Services 22% $327
Kingdon Capital Management 49% $168$55
$59
$62
$74
$77
$79
$81
$84
$102
$120
$0 $20 $40 $60 $80 $100 $120 $140
Minneapolis800 Nicollet Mall
Suite 800Minneapolis, MN 55402
(612) 303-6000
LondonOne South Place
London EC2M 2RB011 44 20 3142-8700
San Francisco345 California Street
Suite 2400San Francisco, CA 94104
(415) 277-1500
New YorkThe Chrysler Center
405 Lexington AvenueNew York, NY 10174
(212) 284-9300
Disclaimer:
Information contained in this material is based on data obtained from sources we deem to be reliable; however, it is not guaranteed as to accuracy and does not purport to be complete. Nothing contained in this material is intended to be a recommendation of a specific security or company nor is any of the information contained herein intended to constitute an analysis of any company or security reasonably sufficient to form the basis for any investment decision. Nothing contained in this material constitutes an offer to buy or sell or the solicitation of an offer to buy or sell any security. Officers or employees of affiliates of Piper Jaffray & Co., or members of their families, may have a beneficial interest in the securities of a specific company mentioned in this publication and may purchase or sell such securities in the open market or otherwise.