THE BROOKLINE BRIEF Healthcare Equity Capital Markets Update March 2, 2021 Healthcare Equity Capital Markets Update March 2, 2021 Equity Market / New Issue Market Tailwinds Equity Market / New Issue Market Headwinds › February 2021 delivered one of the strongest months of IPO activity (as measured by › Although the follow-on segment of the broader new issue market enjoyed sustained aggregate monthly deal count) on record, welcoming 17 new entrants to the now-21 momentum over the past 4 weeks, competition for capital within the life sciences, med. member IPO Class of 2021. Currently, February 2021’s 17 life sciences, med. tech, and tech, and diagnostics subsectors continued to intensify, with the median file-to-offer diagnostics IPOs ranks as the #1 most active February on record – more than doubling discount paradoxically ticking down to -14.1% amidst a record-setting first 8 weeks of the prior all-time monthly IPO volume record for the month of February the year – the 3rd-worst median file-to-offer discount on a quarterly basis since Q1 2019 (2019; 8 IPOs) and recording the #2 most active month of IPO volume for any single and the worst quarterly median discount (on a file-to-offer basis) since Q1 2020. month dating back to January 2016 (surpassed only by October 2020’s 18 IPO all-time Although buy-side appetite for follow-on offerings appears resilient, some observers have monthly record). In addition, February 2021’s 17 IPOs raised more in cumulative cautioned that sustained levels of elevated new issue activity may continue to shift pricing aggregate gross proceeds ($2.63bn) than the total amounts raised in February 2019, power toward investors as a growing number of companies seeking equity capital 2018, 2017, and 2016 combined ($1.54bn). Given the tendency for market observers to compete for a finite pool of dedicated investment funding. view the IPO market as a “leading indicator” for the broader life sciences, med. tech, and diagnostics subsectors, many remain optimistic that the continued strength and resilience › While post-IPO performances continued to reward IPO investors – as evidenced by the of the IPO market in 2021 YTD may portend continued outperformance for the sector +36.1% median offer-to-1-day return for the overall IPO Class of 2021 YTD – IPO over the near- to mid-term. pricing dynamics during 2021 YTD have marginally deteriorated, with 3 of 2021’s 21 IPOs (14%) pricing below the lower bound of the initial pricing range (compared to 0% › Follow-on offering activity for life sciences, med. tech, and diagnostics-focused companies and 14% in 2020 and 2019, respectively). Even as the life sciences, med. tech, and also remained robust during the prior month, building upon January’s strong start to the diagnostics IPO market remains on pace to dramatically surpass the current all-time IPO new year and bringing year-to-date total follow-on volume to 152 completed offerings. records set during 2020, some have warned that the uptick in below-range IPO pricings Following a record-breaking first 2 months of the year, 2021 remains on pace to witness could indicate an increased willingness on the part of IPO investors to push back on over 900 deals and over $105bn in aggregate gross proceeds raised (assuming straight- consistently growing preliminary IPO valuations and private-to-public valuation step-ups. line continuations of January and February 2021 volume trends) – setting the stage for a potentially transformative year for pre-revenue and development-stage companies › Following the departure of Commissioner Stephen Hahn on Jan. 20, the incoming Biden seeking to raise growth capital throughout the broader healthcare industry vertical. Administration failed to nominate a permanent FDA Commissioner during its first full month in office, leaving the Agency under the leadership of Acting Commissioner and › Following a unanimous 22-0 Advisory Committee panel vote this past Friday, the FDA FDA veteran, Janet Woodcock – a noted advocate of “collaborative” development granted Emergency Use Authorization for Johnson & Johnson’s lead nCoV-SARS-2 protocols generally viewed as favorable to the development-stage biopharma community. vaccine candidate, JNJ-78436735, this past weekend. Barring any unforeseen clinical While some expect a permanent appointment to be made in the coming weeks, others complications, many expect the addition of JNJ’s vaccine – the first EUA-granted vaccine worry that a lack of visibility into the longer-term leadership at the FDA could introduce to leverage the more “tried and true” viral vector approach – to dramatically accelerate new headwinds throughout the biopharma subsector as investors hedge against the already steadily improving US vaccination campaign, potentially leading to better-than- possibility of longer-term uncertainty the top of the FDA’s leadership. expected clinical outcomes and ahead-of-schedule economic “re-openings” across the country. Sources: FactSet, Bloomberg, The Wall Street Journal, Financial Times. Market data as of 4:30 PM on Jan. 29, 2021. Healthcare Equity Capital Markets Update March 2, 2021 Major US Indices ETF Performance – Monthly Performance Montage (2020 to 2021) Yr Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Full Yr / YTD 2021 -2.0% 3.2% -- -- -- -- -- -- -- -- -- -- 1.2% Dow Jones iShares Dow Jones ETF (DIA) 2020 -0.9% -9.9% -13.9% 10.9% 4.6% 1.4% 2.5% 7.5% -2.4% -4.5% 11.9% 3.1% 43.5% 2021 -1.0% 2.8% -- -- -- -- -- -- -- -- -- -- S&P 500 1.7% SPDR S&P 500 ETF (SPY) 2020 0.0% -7.9% -13.0% 12.7% 4.8% 1.3% 5.9% 7.0% -4.1% -2.5% 10.9% 3.3% 16.2% NASDAQ 2021 0.9% 1.2% -- -- -- -- -- -- -- -- -- -- 2.1% Fidelity NASDAQ Comp (ONEQ) 2020 1.8% -6.1% -10.6% 15.9% 6.8% 5.9% 6.6% 10.2% -5.6% -2.3% 11.8% 5.8% 43.5% Russell 2000 2021 4.8% 6.2% -- -- -- -- -- -- -- -- -- -- 11.3% iShares Russell 2000 ETF (IWM) 2020 -3.1% -8.8% -21.8% 13.8% 6.6% 3.1% 2.9% 5.5% -3.6% 2.2% 18.2% 8.3% 43.5% Major US Index ETFs – Performance Since January 1, 2021 (1) DOW S&P 500 NASDAQ RUSSELL +1.20% +1.73% +2.08% +11.35% Major US Index ETF Constituents – Largest Movers Since January 1, 2021 (1) D Company Ticker % Chg. S Company Ticker % Chg. O Intel INTC-US 22.0% & Discovery DISCA-US 76.2% Goldman Sachs Group GS-US 21.1% ViacomCBS VIAC-US 73.1% W P Walgreens WBA-US 20.2% Marathon Oil MRO-US 66.4% Caterpillar CAT-US 18.6% Occidental Petroleum OXY-US 53.7% Chevron CVX-US 18.4% L Brands LB-US 47.0% Merck US MRK-US (11.2%) Verisk Analytics VRSK-US (21.1%) Procter & Gamble PG-US (11.2%) Viatris VTRS-US (20.8%) Coca-Cola KO-US (10.7%) Paycom Software PAYC-US (17.2%) Walmart WMT-US (9.9%) Equifax EFX-US (16.1%) Apple AAPL-US (8.6%) Leidos LDOS-US (15.9%) N Company Ticker % Chg. R Company Ticker % Chg. A The9 NCTY-US 823.4% U Cassava Sciences SAVA-US 612.3% Cassava Sciences SAVA-US 612.3% GameStop GME-US 440.0% S S CPS Technologies CPSH-US 611.9% Pandion Therapeutics PAND-US 305.4% D Ocugen OCGN-US 498.4% S AMC Entertainment AMC-US 277.8% A Naked Brand Group NAKD-US 441.7% E Evolus EOLS-US 260.4% Q Immunovant IMVT-US (65.8%) L Immunovant IMVT-US (65.8%) Lumos Pharma LUMO-US (61.9%) L GTT Communications GTT-US (47.3%) Otonomy OTIC-US (54.9%) Concert Pharmaceuticals CNCE-US (47.1%) Oncorus, Inc. ONCR-US (51.1%) Amicus Therapeutics FOLD-US (46.8%) Codiak BioSciences, Inc. CDAK-US (49.8%) IMARA IMRA-US (42.9%) Source: FactSet, Bloomberg. Market data as of 4:00 PM on Feb. 26, 2021. (1): Note: Index and individual stock performance (% chg.) indexed to each security’s respective closing price on Dec. 31, 2020. Healthcare Equity Capital Markets Update March 2, 2021 Healthcare ETF Performance – Monthly Performance Montage (2020 to 2021) Yr Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Full Yr / YTD Health Care Select Sector 2021 1.4% -2.1% -- -- -- -- -- -- -- -- -- -- -0.7% SPDR Fund (XLV) 2020 -2.7% -6.6% -4.4% 12.6% 3.3% -2.9% 5.5% 2.6% -2.6% -3.6% 7.9% 3.4% 11.4% iShares NASDAQ 2021 6.0% -2.3% -- -- -- -- -- -- -- -- -- -- 3.6% Biotechnology ETF (IBB) 2020 -5.6% 0.1% -5.4% 15.1% 8.7% 1.4% -1.7% 0.9% -0.1% -3.5% 11.0% 4.5% 25.7% Invesco S&P SmallCap 2021 6.2% 2.8% -- -- -- -- -- -- -- -- -- -- 9.2% Health Care ETF (PSCH) 2020 0.1% -7.0% -14.0% 12.4% 3.6% 0.6% 5.2% 4.6% -0.9% 1.2% 15.3% 10.2% 31.5% iShares U.S. Medical 2021 1.9% -1.2% -- -- -- -- -- -- -- -- -- -- 0.6% Devices ETF (IHI) 2020 0.1% -8.7% -6.7% 14.2% 4.3% -1.4% 10.7% 3.7% -1.4% -0.5% 5.0% 4.5% 23.8% Major US Healthcare Index ETFs – Performance Since January 1, 2021 (1) XLV IBB PSCH IHI (0.73%) +3.59% +9.21% +0.64% Major US Healthcare Index ETF Constituents – Largest Movers Since January 1, 2021 (1) X Company Ticker % Chg. I Company Ticker % Chg. L Eli Lilly & Co LLY-US 21.4% B Evolus EOLS-US 260.4% Illumina ILMN-US 18.8% Gritstone Oncology GRTS-US 244.4% V B LabCorp LH-US 17.9% Amyris AMRS-US 123.5% Biogen BIIB-US 11.4% Lexicon Pharmaceuticals LXRX-US 110.2% Waters WAT-US 10.7% Prothena PRTA-US 85.8% Viatris VTRS-US (20.8%) Sarepta Therapeutics SRPT-US (48.9%) DaVita DVA-US (13.0%) Amicus Therapeutics FOLD-US (46.8%) PerkinElmer PKI-US (12.1%) Editas Medicine EDIT-US (37.4%) Cerner CERN-US (11.9%) Y-mAbs Therapeutics YMAB-US (29.0%) Merck US MRK-US (11.2%) bluebird bio BLUE-US (28.1%) P Company Ticker % Chg.