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Job Creation: VC - Backed versus Non VC - Backed

Comments on Professor Lerner’s Paper Calvin R. Stiller, Chairman & CEO Canadian Medical Discoveries Fund Inc. London, Ontario May 4, 2002 C anadian Experience with Venture Capital Sources. Job Creation: VC - Backed versus Non VC - Backed. Job Creation (1995 – 1999). Job Creation

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Job Creation: VC - Backed versus Non VC - Backed

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  1. Comments on Professor Lerner’s PaperCalvin R. Stiller, Chairman & CEOCanadian Medical Discoveries Fund Inc.London, OntarioMay 4, 2002Canadian Experience with Venture Capital Sources

  2. Job Creation: VC - Backed versus Non VC - Backed Job Creation (1995 – 1999) Job Creation (Annual Growth Rate %) Source: BDC Report 2000; Economic Impact of Venture Capital Note: CB100 = top 100 companies (by sales)

  3. Life Sciences Venture Capital Investments in Canada Life sciences VC CMDF net assets Cdn $ Million Source: Macdonald & Associates 1995, 2001, 2002; CMDF Internal

  4. IPO Performance: VC Backed versus Non Source: BDC Report 2000; Economic Impact of Venture Capital

  5. What Are LSVCCs? TraditionalMutual Funds Closed End VC Funds LSVCCs Company Composition Private and public companies Listed public companies Public and private companies No Maximum Restricted to less than 10% May have up to 50%(max. $15M in any one company) Investee Ownership % Other Investment Restrictions None / as per fund mandate Geographic, Company Size (<$50M assets, 500 employees) None Aspire to 100% Aspire to 80%, as 20% must be held for potential redemptions Investment as % of Fund Net Assets 100% Redemption Restrictions Few restrictions Can redeem at any time, but must repay tax credits if prior to 8 years Cannot redeem before expiration

  6. 1 Tax Credits federal and provincial of up to 35% (depending on the province) 2 Private company investment opportunities unavailable to average investor Higher return potential versus traditional investments 3 Advantages of LSVCC Funds 4 Foreign Content retirement savings limit can be increased 5 Diversification beyond pure equities and bonds

  7. Top Investors in Canadian Life Sciences Top Investors in Canadian Life Sciences (1996 – Q2 2001) • Based on Number of Investments: • CMDF/ MDS CC • BioCapital Inc. • CDP Capital-Sofinov • Innovatech du Grand Montréal • BDC Venture Capital Group • Ventures West Management Inc. • Fonds de Solidarité • Working Ventures Canadian Fund • Royal Bank Capital Partners • T2C2 Capital • Based on Total Dollars Invested: • CMDF/ MDS CC • CDP Capital-Sofinov • TD Capital • BioCapital Inc. • Fonds de Solidarité • Innovatech du Grand Montréal • BDC Venture Capital Group • Working Ventures Canadian Fund • Royal Bank Capital Partners • Ventures West Management Inc. Source: Macdonald & Associates

  8. CMDF Portfolio Geographic Distribution Over 40 investments and 90,000 investors across Canada Quebec (9) Acta-Med AEgera Therapeutics CryoCath Technologies Gemin X Biotechnologies Methylgene Nexia Biotechnologies PhageTech T2C2 Ultravision British Columbia (7) AnorMED Micrologix Biotech NeuroMed Phytogen Life Sciences StressGen Biotechnologies Synapse Technologies Xillix Technologies Maritimes (1) MedInnova Partners Prairies (2) Alberta Networc Health Care Saskatchewan Star Biotech Ontario (18) Cytochroma Drug Royalty Ellipsis Biotherapeutics GenSci Regeneration GLYCODesign Hemosol Life Imaging Systems MedTech Partners Microbix Biosystems Morphometrix NPS Allelix Neuroscience Development Queen’s Scientific Breakthrough Fund Systems Xcellence Tm Bioscience UMDI Vaxis Therapeutics XLTEK USA (5) Cubist Pharmaceuticals, Cambridge, MA Genzyme Molecular, Cambridge, MA Neurocrine Biosciences, San Diego, CA NPS Pharmaceuticals, Salt Lake City, UT Variagenics, Cambridge, MA

  9. Hold period, Tax credits LSVCC Capital Raised – Impact of Regulations Cdn $ M Total VC Raised ($ Bn) 1.7 1.6 1.9 2.4 4.2 4.6 Source: Macdonald & Associates

  10. Life Sciences Venture Capital Invested Total Life Sciences VC US$Bn Cdn $Bn Life Sciences VC / Capita US $ Source: Macdonald & Associates, Venture Economics, Statistics Canada, US Census Bureau, Bank of Canada

  11. Life Sciences Venture Capital Invested Total Life Sciences VC US$Bn Cdn $Bn Life Sciences VC / Capita US $ Cdn $ Source: Macdonald & Associates, Venture Economics, Statistics Canada, US Census Bureau

  12. Venture Capital Invested Total VC US$Bn Cdn $Bn VC / Capita US $ Cdn $ Source: Macdonald & Associates, Venture Economics, Statistics Canada, US Census Bureau

  13. Venture Capital Invested Total VC US$Bn Cdn $Bn VC / Capita US $ Source: Macdonald & Associates, Venture Economics, Statistics Canada, US Census Bureau, Bank of Canada

  14. LSVCC Investment in Canada Venture Capital Under Management (1996 – 2001) Cdn $ Billion Source: Macdonald & Associates

  15. Supply Stability LSVCC Capital Raised Cdn $ M Corporate Capital Raised Private Investor Capital Raised Government Capital Raised Cdn $ M Source: Macdonald & Associates

  16. Deal Size Focus: LSVCC versus Other VC All Deal Sizes Deals<$500K Deals $500K - $999K Source: Macdonald & Associates

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