Spin-Offs at the Cleveland Clinic

1. Spin-Offs at the Cleveland Clinic November 17, 2006 Christopher M. Coburn Executive Director, Cleveland Clinic Innovations www.clevelandclinic.org/innovations

2. “ “…every time I see a resurrection here – and there are many – and I realize that each resuscitation owes its life to a little dingy dirty laboratory in Cleveland – our laboratory at that. We assembled it – we ran it – we paid for it and now many times every day it is all paid back – paid back in the invisible coin of infinite satisfaction.” George Crile, Sr., in a 1917 letter home from the front lines during World War I.

3. Innovation (inventions per year)

4. Commercialization Model • Build from can-do clinical culture and group practice foundation • Innovation key to every aspect of CCF future • Directed – more corporate than academic • Leverage CCF’s place in WW market • Assume region will remain sub-critical for next 5-10 years (e.g. HR)

5. Highlights • Active advisors (IAB and Commercialization Council) • Entrepreneurs in residence • Validation fund • Translational research cores • Targeted IP development • Pre-clinical animal studies tied to clinical requirements • Broad clinical trial capability (e.g. C5) • 15k sq. ft. accelerator + abutting development • Seed investment and operating support for spin-offs • Close relationship with key VCs • 20+FTE BD team

6. Why Spin-offs? • Create “Innovation Environment” • Retain and recruit staff • Build local good will • Economic development • Expand funding sources • Increase financial upside • Bayh-Dole Act

7. Spin-Off Model • Hands on – staff are employees • Participate in raising Series A (and beyond) • Recruit Management • Provide on-campus incubator • Often hold majority stake in company post-Series A (CCF holds for staff) – 100% at launch • Provide “packaged newco” – IP, fund-raising, research base, admin services

8. Spin-off Activity

9. Spin-Off Process Business Case Development Spin-off Formation & Development Portfolio Management & Governance • Ohio BioGel • Quantum Dots • Education Concept • Ridgeway • Semantic Database • Sharepoint (CRS) • Go Beyond Learning • Ophthalmology NewCo • CSF Therapeutics • Merlot OrthopediX • RegenRX • VitalStream • Tolera Therapeutics • Zin Medical • ReVasc • CBL • CleveX • IntElect • Peritec • PrognostiX • VioQuest • OrthoMEMS Technology Assessment Patent Landscape Market Research Competitive Analysis Fundability (Grants, Investors) Executive Summary Term negotiation Execution of Legal Docs Compliance Management Recruitment COI Management Plan Supermajority Financial Analysis Capital Raise Fair Market Value Compliance Financial Analysis Supermajority rights Maintain Board Position Reporting to CCF Sr. Mngt

10. Cleveland Clinic Spin-Off Highlights • CBL - First Biotech IPO in more than a decade in Ohio • Four Companies in Series B: • 2 have Term Sheets • 1 under due diligence for possible acquisition by 2 multi-billion $ cos. • Three Companies in Series A • Will close $4M Series A in next 10 days • Executed investment contract • Joint development agreement in place • Total employment nearly 200

15. Company Background • Cleveland Clinic awarded $7.6M State of Ohio grant to form Brain Neuromodulation Center in 2004 • IntElect Medical founded by Ali Rezai, M.D. and incorporated in April 2005 • Executed license with the Clinic for 33 U.S. patents and applications, based on six years of research • Closed $3M Series A financing in September 2005 and hired initial staff • Licensed 3 U.S. patents for Traumatic Brain Injury indication from Cornell Weill Medical College in March 2006

16. Managing expectations Recruiting talent to NEO Appropriate governance Preserving organizational boundaries while leveraging institution Increased COI management needs Building local investor base Space close to institution Institution reluctant, high risk investor Monetization delay vs. licensing Challenges