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1
Strategic and funding outlook for growing
healthcare companies

• 2008 Health Care Forecast Conference, University
  of California, Irvine
• February 22, 2008
• George Bickerstaff, Managing Director
• CRT Capital Group LLC

2
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  on information obtained from sources believed to
  be reliable but is neither guaranteed to be
  accurate nor intended to be a complete statement
  or summary of the securities, markets or
  developments referred to in the material.
  Recipients should not use this material as a
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  judgment. Any opinions expressed in this
  material are subject to change without notice and
  CRT is under no obligation to update or keep
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  representative.

3
Agenda

• Situation overview
• Key market drivers
• Growth challenges
• Financing alternatives
• Company implications

4
Situation Overview

• The aging population, higher disposable incomes
  and improved technologies are driving the demand
  for healthcare products and services
• This accelerating demand has resulted in the
  rapid creation of new healthcare companies
  domestically and abroad, particularly in the
  biotechnology and medical device fields
• Many emerging and developing companies lack the
  necessary capital to respond quickly in this
  dynamic marketplace
• The global capital markets, and particularly the
  US capital markets, are providing financial
  support for these companies through a variety of
  funding alternatives

5
Key market drivers

• Aging and older population
• Increased access to healthcare services
• Improved economic standards and ability to pay
• Scientific and medical innovation
• Consumer and patient targeting
• International expansion
• Access to global capital

6
Global pharmaceuticals 700 billion market
5 - 6
CAGR 6.5
Global pharma sales are growing at a rate faster
than the growth rate of world-wide gross domestic
product, driven by the emerging markets.
World-wide gross domestic product estimated at
50.4 trillion for 2007, a 5.7 increase over
2006. Source IMS Health CIA Fact Book
7
Pharmaceutical market geography
The smaller and emerging (Pharmerging) markets
are expected to grow at nearly twice the rate (8
- 13) of the larger countries (lt 5) in 2008.
Source IMS Health
8
Key growth areas

• Specialist driven products ( 15 growth)
• Oncology
• Anti-Diabetes
• Anti-Psychotics
• Respiratory agents
• Biotechnology ( 10 growth)
• Generics ( 15 growth)
• Traditional medicines
• China
• India
• Indonesia

9
Growth challenges

• Generics, price competition and cost containment
• Generics are generally 25 to 75 less expensive
  than branded products
• Products coming off patent, coupled with
  intellectual property challenges
• On average 20 billion of big pharmaceutical
  revenue needs to be replaced every year as old
  products come off patent
• This accelerates in the next few years (e.g.,
  Lipitor)
• Slow down in innovation and timing of regulatory
  approvals
• The number of new chemical entities (NCE)
  launched globally has declined 27 in the past
  five years to an average of 33 per year from 44
  per year during the prior five years
• Increasing costs for product development and
  distribution
• Access to affordable capital

10
Sources of capital for growth companies
300 billion
90 billion
Private Equity
Venture Capital
Company Maturity
Marketplace Evolution
Hedge Funds
1,810 billion
11
Pro and cons of funding sources

• Venture capital and private equity are one source
  of capital
• Often has stringent management and board controls
• Relatively high cost of capital (generally 25 to
  50 IRR target)
• Lacks the public currency for growth
• Hedge funds provide an alternative source
• Generally a lower cost of capital (typically 15
  to 25 IRR target)
• Provide greater liquidity and investor base
• Broader range of financing tools
• Strategic partners
• Provides management resources in addition to
  capital
• Generally offers highest return to sellers
• Often slow in negotiating and closing deals

12
Hedge fund growth

• Hedge fund assets have grown at a 17 CAGR over
  the past 10 years

Source Hedge Fund Research
13
Initial public offering trends

• The initial public offering market (IPO) has
  changed significantly

(1)
Source Securities Data Corporation and Thomson
Financial
14
Small company IPO trends

• The IPO market for small companies is virtually
  closed

(1)
Source Securities Data Corporation and Thomson
Financial IPOs for companies raising less than
50 million
15
Venture backed exits

• Venture backed companies have been forced to look
  for exit alternatives

Venture Backed IPOs Since 1997
Venture Backed MA since 1997
Source VentureOne Note 2007 data is as of
6/30/07
16
Financing considerations

• Cost of capital
• Interest rate
• Equity
• Terms
• Operating flexibility and covenants
• Management and boards
• Measurement hurdles
• Governance
• Other
• Execution risks
• Timing
• Follow-on deals

17
Some financing tools

• Private equity and venture capital
• Public offerings
• Initial and secondary public offerings
• Reverse mergers and special purpose acquisition
  companies (SPACs)
• Private offerings
• Private investments in public entities (PIPE)
• Rule 144a transactions
• Other
• Debt and high yield
• Convertible securities
• Royalty buy-outs
• Licensing and milestones
• Acquisitions/divestitures

18
Financing implications

• Position the company operationally
• Innovation, operational excellence, and talent
• Sustainable advantage better, quicker,
  cheaper
• Ensure good governance and financial controls
• Qualified, independent board of directors
• Accurate, timely and transparent reporting
• Full disclosure
• Hire, retain or develop access to the best talent
• Board of directors and advisors
• Accounting, audit, consulting and legal
• Investment banking and investor relations
• Look for and evaluate all the alternatives

19
Summary

• Healthcare markets should continue to grow ahead
  of GDP
• Demographics
• Access and affordability
• Competitive advantages can be achieved
• Innovation, speed and quality
• Cost of capital
• Capital markets play an important role
• Venture capital and private equity
• Hedge funds and public markets
• Know your alternatives

20
CRT Overview and Healthcare Practice
21
Overview of Capabilities

• CRT Capital Group is a client-focused investment
  bank and securities trading firm that provides
  creative, idea-driven advice and solutions
  delivered by experienced professionals
• Serving the middle market in healthcare by
  providing tailored advice and capital solutions
  to companies and investors

• One of the largest employee-owned investment
  banks in the United States focusing on middle
  market transactions
• Has the experience and the scale to provide
  value-added financial services to the healthcare
  sector
• Operates on the leading edge of the financial
  markets, with the capability to structure and
  trade the latest, most innovative financial
  instruments
• Unparalleled relationships with the hedge fund
  community

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CRTs Dedicated Healthcare Client Team

• Firmwide commitment to the biotech sector with 19
  dedicated senior professionals

Investment Banking Charles Baltic George
Bickerstaff Jim Hesburgh Michiel McCarty Olivier
Saidi Rob Gibson
Research Christopher Young Leah Hartman Sheryl
Skolnick Joy Polefrone
Comprehensive, Research-DrivenCoverage of the
Healthcare Sector
CRT BioMed Stuart Mushlin, M.D. Erik Alexander,
M.D. Jonathan Coblyn, M.D. Wolfram Goessling,
M.D., Ph. D.
Capital Markets Michael Vaughn Ray Rivers John
Ward Evan Collins Jed Stevens
23
Healthcare Investment Banking Team
Representative Transaction Experience

• CRTs healthcare investment banking team has deep
  experience in the sector and is dedicated to
  providing high quality advisory and capital
  raising services to healthcare companies and
  their investors

Vion Pharmaceuticals, Inc. 60,000,000 3 Convert
ible Offering The undersigned acted as Sole
Underwriter
George Bickerstaff
Charles Baltic
Jim Hesburgh

• Managing Director
• Former CFO of Novartis Pharma
• Formerly with Workscape, IMS Healthcare and GE
• Rutgers University, B.S., B.A.

• Managing Director
• Formerly with Wachovia Securities, Cowen
  Company and Dewey Ballantine LLC
• Georgetown University, B.A., J.D.
• University of Pennsylvania, M.B.A.

• Managing Director
• Formerly head of Healthcare Services banking at
  Cowen Company with additional coverage
  responsibilities in Healthcare Information,
  Medical Technology, Biotechnology and
  Pharmaceuticals
• University of Notre Dame, B.A.
• UCLA, M.B.A.

American Oriental Bioengineering,
Inc. 60,000,000 Equity Offering The
undersigned acted as Co-Placement Agent
Cell Therapeutics, Inc. 82,000,000 Convertible
Offering The undersigned acted as Sole Manager
Michiel McCarty

• Managing Director, Head of Investment Banking
  Group
• 28 years of investment banking experience
• Formerly with Gleacher Partners, SG Warburg and
  Dillon Read
• Vanderbilt University, B.A.
• University of Pennsylvania, M.B.A.

Oracle Healthcare Acquisition Corp. 120,000,000
Initial Public Offering The undersigned acted
as Sole Manager
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Healthcare Research Team

• Deep experience in investment and scientific
  research

Leah Hartman
Sheryl Skolnick
Joy Polefrone
Julie Chen

• Joined CRT in 1991
• Formerly with SBCI Swiss Bank Corporation and
  Drexel Burnham Lambert in corporate finance and
  MA
• B.S., in Economics and Finance, Indiana
  University
• J.D., Indiana University School of Law
• M.B.A., University of Chicago

• Joined CRT in 2006
• Formerly with Fulcrum Global Partners and Head of
  Healthcare Research at Robertson Stephens
• Masters in Economics, Washington University
• Ph. D. in Economics, Washington University

• Joined CRT in 2007
• B.S. in Chemistry, James Madison University
• Ph.D. in Chemistry, University of Virginia

• Joined CRT in 2007
• Formerly with Brean Murray Carret Co., New York
  Global Securities, and C.E. Unterberg Towbin.
• B.A. in Mathematics, California State University
• Masters in mathematics, Claremont Graduate School
• M.B.A., Fordham University

Selected CRT Healthcare Research Coverage Universe
Independent Exclusive attention to the company
and the situation, not CRTs relationship with
the issuer
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CRT BioMed LLC Overview

• CRT believes that investment research in
  healthcare often requires experience and
  expertise not generally available in
  institutional securities firms
• CRT BioMed brings the ability to analyze biomed
  and pharmaceutical products with unique insight
  and deep comprehension, including
• Development
• Licensing
• End-use opportunities

• Relationship with CRT BioMed was established to
  broaden the reach of CRTs investment research
  efforts into companies active in biotechnology,
  pharmacology and related areas

Erik Alexander, M.D.
Jonathan Coblyn, M.D.

• Instructor in Medicine, Harvard Medical School
• Associate Physician in Endocrinology and
  Neuroendocrinology, Brigham and Womens Hospital

• Associate Prof. of Medicine, Harvard Medical
  School
• Senior Physician in Rheumatology, Immunology and
  Allergy, Brigham and Womens Hospital

Wolfram Goessling,M.D.,Ph. D.
Stuart Mushlin, M.D.

• Instructor in Medicine, Harvard Medical School
• Fellow in Gastroenterology, Mass. General
  Hospital
• Fellow in Hematology / Oncology, Dana-Farber
  Cancer Institute

• CRT BioMed Team Leader
• Assistant Prof. of Medicine, Harvard Medical
  School
• Senior Physician in Rheumatology and Internal
  Medicine, Brigham and Womens Hospital

26
CRT Contact Information

• George Bickerstaff
• Managing Director
• CRT Capital Group LLC
• 252 Harbor Drive
• Stamford, CT 06830
• Tel [phone]
• Fax [phone]
• gbickerstaff_at_crtllc.com
• www.crtllc.com