Q2 2020 Healthcare Investment Banking Update

Healthcare Investment Banking Q2 2020 Update Telehealth Focus

Member FINRA | SIPC

OUR DEDICATED HEALTHCARE TEAM

Deborah F. Aghib, Ph.D. Managing Director, Healthcare daghib@cs-ib.com 305-438-7817

Healthcare Investment Banking

Dr. Aghib leverages 26 years of executive experience, broad scientific knowledge, and significant international expertise to develop long-term, cross-border and inter-industry strategies for business development, licensing, spinoffs, and mergers and acquisitions.

Previous Experience: Chief Business Officer, Stellar Biotechnologies; Vice President of Business Development and Strategy, Neuro-Zone; Chief Business Development and Strategy Officer, Dianax; Founder & Managing Director, DFA Advisors; Consultant, CRG, LP. Board Involvement: Neuro-Zone, CellPly, ImmunGene, OpenWorm Foundation, Open Commons Consortium, SF Art and Film, Stellar Biotechnologies – Strategic Investment, M&A, Audit, and Corporate Governance Committees (Prior).

Ph.D., University of Milan; Ph.D., University of Pavia; B.S./M.S., University of Milan.

Margery Fischbein Managing Director, Healthcare mfischbein@cs-ib.com 305-438-7816

Ms. Fischbein has a long track record of successfully advising clients in the healthcare industry on M&A, licensing transactions, public and private equity, and debt financings, as well as providing strategic advisory services.

Previous Experience: Managing Director and Head of Healthcare Investment Banking, Seaport Global and FBR & Co.; Managing Director and Head of East Coast Biotechnology, JMP Securities; Vice President Business Development, Human Genome Sciences; Vice President Business Development, ImClone Systems; Managing Director Investment Banking, Citigroup and JP Morgan Chase; Senior Vice President, Lehman Brothers.

Board Involvement: Cytodel, EcoHealth Alliance, Inhibrix (Prior).

M.B.A, Harvard Business School; B.A. Harvard University.

Ira Z. Leiderman Managing Director, Healthcare ileiderman@cs-ib.com 305-438-7813

Mr. Leiderman has successfully led numerous transactions, as well as conducted strategic advisory work for companies in the healthcare and life science sectors.

Previous Experience: Founder & Managing Director, Long Trail Advisors, LLC; Co-Head – Healthcare Group, Ladenburg Thalmann & Co. Inc.; Head of Investment Banking, Punk Ziegal & Co.; Member, The Palladin Group; Senior Healthcare Banker, Gerard Klauer Mattison; Co-Founder & Founding CEO, Futuragene Ltd. Board Involvement: Apthera – Executive Chairman, Collplant, MargineSurgical, Camp Ramah.

B.A., CUNY (Brooklyn).

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ABOUT OUR FIRM

Healthcare Investment Banking

¡ Cassel Salpeter & Co. is a boutique investment banking firm focused on providing independent and objective advice to middle-market and emerging growth companies. We can help.

Mergers & Acquisitions

Capital Raising

¡ Financial advisory ¡ Sales to strategic and private equity buyers ¡ Divestitures to strategic and private equity buyers ¡ Buy-side acquisition programs ¡ Leveraged & management buyouts ¡ Going private transactions

James Cassel Chairman

Marcus Wai Vice President

Scott Salpeter President

Other Services

¡ Financial advisory ¡ Equity and debt private placements ¡ Growth capital ¡ PIPEs ¡ Recapitalizations

Philip Cassel Managing Director

Chris Mansueto Vice President

Ira Leiderman Managing Director

Laura Salpeter Vice President

Fairness opinions Solvency opinions Valuations Restructuring, refinancing, and distressed M&A transactions ¡ Debtor and creditor representations ¡ 363 sales & plans of reorganization

¡ ¡ ¡ ¡

Deborah Aghib Managing Director

Julian Astrove Associate

Margery Fischbein Managing Director

Edward Kropf Associate

Joseph Smith Director

Tahz Rashid Analyst

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Healthcare Investment Banking

I

TELEHEALTH MARKET REVIEW

II

M&A & PRIVATE PLACEMENTS REVIEW

III

PUBLIC MARKETS REVIEW

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TELEHEALTH OVERVIEW

Healthcare Investment Banking

Telehealth and telemedicine are broad terms that have been used interchangeably for years. The terms have become synonymous to describe the electronic connection between a healthcare consumer or patient and their healthcare provider.

These terms cover the delivery of healthcare services electronically in real-time or the collection of clinically relevant data transmitted either synchronously (in real-time) or asynchronously (batched and transmitted at a later time) to a healthcare provider. Some of these services can be in the form of a video visit in place of an in-office visit with a healthcare provider, or can be used to collect patient data to be utilized by the healthcare provider to evaluate and possibly diagnose a medical condition.

The electronic transmission of healthcare data has evolved since its infancy in the 1980s. The early days saw the transmission of text data such as medical records and laboratory results. But as electronic bandwidth increased, larger amounts of data with greater fidelity were able to be transmitted. It is now routine to transmit radiographic images and studies to radiologists to be read remotely. The same is true for pathology images which may be transmitted to a pathologist or a group of pathologists to obtain their opinions and diagnosis. These capabilities have also enabled the remote monitoring of some clinical trial subjects to help advance clinical trial studies.

The Covid-19 pandemic has seen an explosive growth of telemedicine. Many physicians closed their offices to all but emergency visits. IQVIA has reported that office visits have decreased by greater than 60%1. However, a great number of patients still needed to be “seen” by their care providers. Frost and Sullivan reports that the number of virtual visits this year has grown by greater than 64% in a year-over-year comparison and is expected to have a five-year compound annual growth of greater than 38%2. In April of this year, one large corporate provider of telehealth solutions reported a spike in the number of video requests of over 200%3. A study from NYU Langone Health, a large New York City based health system, reported a 683% increase in virtual visits for the March 2nd to April 14th period4. In total, it is estimated by Forrester Research that virtual health-care interactions will top 1 billion by year’s end5. Although not a full substitute for a “hands on” physical exam, video assisted visits do offer a feasible substitute for many in-person patient-doctor encounters. As said by Sir William Osler6 over a hundred years ago “Just listen to your patient, he is telling you the diagnosis.”

1.

2.

3.

4.

5.

6.

IQVIA Frost & Sullivan, “Telehealth - A Technology-Based Weapon in the War Against the Coronavirus, 2020”, May 2020 CNBC Health and Science. April 4, 2020 Journal of the American Medical Informatics Association 27(7), 2020 CNBC Health and Science. April 4, 2020 Sir William Osler (1849-1919) was a Canadian physician and is deemed to be the father of internal medicine

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FUTURE TRENDS

Healthcare Investment Banking

The popularity of virtual visits has waned somewhat since its rapid growth several months ago7 due to a somewhat tepid response by patients due to the lack of personal and hands-on interaction with their care provider and some technical challenges faced by patients, particularly the elderly.

Telehealth Weekly Visits as a Percentage of Total FFS Medicare Primary Care Visits in Urban and Rural Counties

One survey of seniors found that only 52% of those polled were comfortable using telehealth8. These technical challenges are rapidly being addressed by a number of companies who are developing easy-to-use solutions for the elderly who may lack manual dexterity in addition to having auditory and vision deficits9. With that said, we believe that telemedicine has found a permanent place in many areas of clinical practice and clinical research.

7.

8.

9.

STAT News June 25, 2020 Fierce Healthcare May 27, 2020 Fierce Healthcare July 27, 2020

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OUR THOUGHTS

Healthcare Investment Banking

Our thoughts are based on several key points. In the face of the pandemic, the Centers for Medicare & Medicaid Services (CMS) of the US Department of Health and Human Services (HHS) had eased and increased reimbursement to physicians for on-line visits10, thus allowing care providers to see more patients per hour with lower overhead. It has been publicly stated that this new reimbursement plan will probably stay in place after the pandemic ends11 12. Private insurers are expected to follow suit.

Blue Cross of Tennessee has already announced that the new reimbursement for telehealth will be permanent13. Cigna and Blue Cross of North Carolina have stated that their pandemic level of reimbursement for telehealth will remain in place through at least the end of the year14. Also, to assist medical practices to adopt and provide expanded telehealth services, the Office of Civil Rights at DHS announced that it was using its “enforcement discretion” and would not impose penalties on those using HIPAA-noncompliant private communications technology15 16. In addition, medical practices have made investments in technology and practice members are now up-to-speed on its use and utility. Furthermore, the “Zoomification” of telephone calls and meetings has made people much more comfortable with using teleconference technology.

Also, the accelerated utilization of telemedicine has carved a growing niche in clinical research. The pandemic has disrupted many clinical trials, so to save these studies, sponsors and investigators have had to find solutions to protect the trials.

Institutional Review Boards are meeting online and rapidly approving study protocols as well as monitoring ongoing studies. The exchange of data between investigators has accelerated along with the urgency in exchanging drug protocols and their clinical experience in treating Covid-19 patients. In addition, many, if not all conferences and international congresses have gone virtual, enabling many more to attend these meetings. Going forward, particularly with the addition of artificial intelligence (AI), online clinical research studies and patient monitoring will only grow in scope and effectiveness17.

10.

11.

12.

13.

14.

15.

16.

17.

Centers for Medicare & Medicaid Services (CMS) Medicare Telemedicine Health Care Provider Fact Sheet March 17, 2020 Centers for Medicare & Medicaid Services (CMS) Press Release August 3, 2020 POTUS Executive Order on Improving Rural Health and Telehealth Access issued August 3, 2020 BCBST News Center, Press Release May 14, 2020 New York Times, Health – Is telemedicine Here to Stay? August 3, 2020 N Engl J Med 2020 382:e82 (June 4, 2020) Centers for Medicare & Medicaid Services (CMS) Medicare Telemedicine Health Care Provider Fact Sheet March 17, 2020 JACC Case Reports 2:9 2020

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OUR THOUGHTS (CONT.)

Healthcare Investment Banking

The current pandemic has seen a rapid adoption of telehealth. We are now seeing the rapid adoption of technology that was only in its infancy a short time ago. The accelerated growth of this new way of delivering patient care will drive technological innovation. Innovation will drive deal activity in both funding and M&A. We anticipate that companies will be on the hunt to acquire competitors and companies with technology, that will enable them to develop and maintain dominant positions in their respective industries. In time, the current health crisis will subside, reimbursement will be secure, and telehealth will become one of routine standards of care.

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SELECTED TELEHEALTH MARKET PERFORMANCE

Healthcare Investment Banking

Relative Trading Performance (Apr 1, 2020 to Aug 21, 2020) 600

Indices CS Telehealth Index S&P 500 NASDAQ Composite Nasdaq HC S&P 500 HC Services S&P 500 HC Tech.

500

_________70.2% _________37.5% - - - - - - - - - 53.7% -_________35.4% ….............1 3.0% - - - - - - - - - 18.3% --

CS Telehealth Index Components

400

Teladoc Health, Inc. _________37.5% Livongo Health, Inc. ….............

404.9% 1Life Healthcare, Inc. _________63.9% Allscripts Healthcare Solutions, - - - Inc. - - - - - - 36.5% -BioTelemetry, Inc. _________14.5% Ontrak, Inc. _________ 363.9% Welltower Inc. ….............4 1.9% MTBC, Inc. _________ 100.2% SHL Telemedicine Ltd. …............. 4.3%

300

200

100 On August 5 Teladoc announced its pending acquisition of Livongo

0 Apr-20

Apr-20

Apr-20

May-20

May-20

Jun-20

Jun-20

Jul-20

Jul-20

Aug-20

Aug-20

So urces o f info rmatio n: S&P Capital IQ.

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SELECTED PRIVATE TELEHEALTH COMPANIES

Healthcare Investment Banking

Selected Private Telehealth Companies Company Name

Parent Co.

Principal Location

98point6 Inc.

Seattle, WA

Website www.98point6.com

AMD Global Telemedicine, Inc.

Chelmsford, MA

www.amdtelemedicine.com

Amwell (1) CentriHealth, Inc.

Boston, MA

www.amwell.com

UnitedHealth Group Incorporated

Nashville, TN

www.centrihealth.com

Citra Health Solutions

Cedar Gate Technologies, LLC

Morrisville, NC

www.citrahealth.com

Critical Signal Technologies, Inc.

Best Buy Co., Inc.

Novi, MI

www.cstltl.com

Doctor on Demand, Inc.

San Francisco, CA

www.doctorondemand.com

Education Networks of America, Inc.

Nashville, TN

www.ena.com

Epic Systems Corporation

Verona, WI

www.epic.com

Kareo, Inc.

Irvine, CA

www.kareo.com

MDLIVE Inc.

Sunrise, FL

welcome.mdlive.com

Ontario Telemedicine Network Inc.

Toronto, ON

www.otn.ca

Physician 360, Inc.

Mckinney, TX

physician360.co

PlushCare, Inc.

San Francisco, CA

www.plushcare.com

ScImage, Inc.

Los Altos, CA

www.scimage.com

Secure Medical, Inc.

Tempe, AZ

www.securemedical.com

SOC Telemed

Reston, VA

www.soctelemed.com

Zipnosis, Inc.

Minneapolis, MN

www.zipnosis.com

(1) Amwel l ha s reportedl y fi l ed for a n IPO.

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Healthcare Investment Banking

I

TELEHEALTH MARKET REVIEW

II

M&A & PRIVATE PLACEMENTS REVIEW

III

PUBLIC MARKETS REVIEW

10

M&A OVERVIEW

Healthcare Investment Banking U.S. Healthcare M&A by Sector Count of M&A Transactions

400

23

350

20

22 23

19

300 250

26

14

20

132

123

200

44

150

31

56

100

52

46

50

0

19

20

121

43

97

43

36

48

47 45

30

20

27 25

Q1

Q2

Q3

127

134

116

118

25

49

40

45

39

37

40

45

52

54

51

54

91

93

137

109

8 61

37

28

64

61

66

66

56

39 39

53

64

58

94

93

17

23

24

32

21

30

34

36

35

39

38

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

2017

2018

Biotechnology

17

131

153

123

27

30

31

16

Pharmaceuticals

Health Care Technology

2019 Health Care Equipment

Health Care Services

2020 Life Sciences Tools and Services

Aggregate M&A Transaction Value ($ in millions)

$60,000

$160,000 $140,000

$50,000

$120,000

$40,000

$100,000

$30,000

$80,000 $60,000

$20,000

$40,000 $10,000

$20,000

$-

$0

Q1

Q2

Biotechnology

Q3 2017 Pharmaceuticals

Q4

Q1

Q2

Health Care Technology

Q3

Q4

2018 Health Care Equipment

Q1

Q2

2019 Health Care Services

Q3

Q4

Q1

Q2 2020

Life Sciences Tools and Services

Total M&A Value

Note: Q1 2018 total transaction value for Health Care Services was $71,655 and Q1 2019 total transaction value for Biotechnology was $116,936.

Sources of information: S&P Capital IQ.

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PRIVATE PLACEMENT OVERVIEW

Healthcare Investment Banking

U.S. Healthcare Private Placements by Sector Count of Private Placement Transactions 1,000 900 800

37 65

700 600

169

39 63

37 56

192

180

500 152

400 300

173

154

43 69

31 61

31 91

40 62

38 77

156

156

137

186

156

157

180

36 71

167

29 70

42 74

161

128

34 68

148

162

181

157

159

183

174

160

190

212

198

192

184

189

166

220

216

215

226

208

223

218

Q3

Q4

Q1

Q2

Q3

Q4

Q1

116

176

158

27 59

126

162 130

150

124

131

129

215

203

195

232

232

238

Q1

Q2

Q3

Q4

Q1

Q2

200 100

36 76

138 201

0

2017

2018

Biotechnology

Pharmaceuticals

Health Care Technology

2019 Health Care Equipment

Health Care Services

Q2 2020

Life Sciences Tools and Services

Aggregate Private Placement Transaction Value ($ in millions)

$18,000

$7,000

$16,000

$6,000

$14,000

$5,000

$12,000

$4,000

$10,000

$8,000

$3,000

$6,000 $2,000

$4,000

$1,000

$2,000

$0

$0

Q1

Q2

Q3

Q4

Q1

2017 Biotechnology

Pharmaceuticals

Q2

Q3

Q4

Q1

2018 Health Care Technology

Health Care Equipment

Q2

Q3

Q4

2019 Health Care Services

Life Sciences Tools and Services

Q1

Q2 2020

Total Private Placement Value

Sources of information: S&P Capital IQ.

12

Healthcare Investment Banking

I

TELEHEALTH MARKET REVIEW

II

M&A & PRIVATE PLACEMENTS REVIEW

III

PUBLIC MARKETS REVIEW

13

SELECTED MARKET INDICES

Healthcare Investment Banking

Relative Trading Performance (Apr 1, 2020 to Aug 21, 2020) 200

Indices CS Telehealth Index S&P 500 NASDAQ Composite Nasdaq HC S&P 500 HC Services S&P 500 HC Tech.

180

160

_________70.2% _________37.5% - - - - - - - - - 53.7% -_________35.4% ….............1 3.0% - - - - - - - - - 18.3% --

140

120

100

80

60

40

20

0 Apr-20

On August 5 Teladoc announced its pending acquisition of Livongo

Apr-20

Apr-20

May-20

May-20

Jun-20

Jun-20

Jul-20

Jul-20

Aug-20

Aug-20

CS Telehealth Index is market capitalizatio n weighted index o f TDOC, LVGO, ONEM , M DRX, B EA T, OTRK, WELL, M TB C, and SHLTN. So urces o f info rmatio n: S&P Capital IQ.

14

EQUITY OFFERINGS OVERVIEW

Healthcare Investment Banking

U.S. Healthcare IPO & Follow-On Equity Offerings by Sector Count of IPOs and Aggregate Equity Raised ($ in millions)

4

$4,500 $4,000

$3,500

3

$2,500

2

$2,000

$ Volume

# of IPOs

$3,000

$1,500

1

$1,000 $500

0

$Q1

Q2

Q3

2017 Health Care Technology

Q4

Q1

Q2

Q3

Q4

Q1

2018 Health Care Equipment

Q2

Q3

Q4

Q1

2019 Life Sciences Tools and Services

Health Care Services

Q2

2020 Total IPO Value

Count of Follow-Ons and Aggregate Equity Raised ($ in millions)

35

$9,000 $8,000

30

$7,000

$6,000

20

$5,000

15

$4,000

$ Volume

# of Follow-Ons

25

$3,000

10

$2,000 5

$1,000

0

$Q1

Q2

Q3

Q4

Q1

2017

Health Care Technology

Q2

Q3

Q4

2018

Health Care Equipment

Q1

Q2

Q3 2019

Health Care Services

Life Sciences Tools and Services

Q4

Q1

Q2 2020

Total Follow-On Value

Sources of information: S&P Capital IQ.

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CONTACT INFORMATION

Healthcare Investment Banking

James S. Cassel

Deborah F. Aghib, Ph.D.

Margery Fischbein

Ira Z. Leiderman

Chairman

Managing Director, Healthcare

Managing Director, Healthcare

Managing Director, Healthcare

jcassel@cs-ib.com

daghib@cs-ib.com

mfischbein@cs-ib.com

ileiderman@cs-ib.com

305-438-7701

305-438-7817

305-438-7816

305-438-7813

801 Brickell Ave. Suite 1900 Miami, Florida 33131 www.casselsalpeter.com

The accuracy or completeness of such information and discussion within this report was prepared by Cassel Salpeter & Co., LLC (“CS”) and is meant to provide general information regarding the subject matter. The information has been obtained from sources that are considered reliable, but CS makes no guarantee or representation of this information. This report reflects information known at the time the report was written and is subject to change.

The discussion reflects the author’s current judgement as of the date of this report and does not necessarily reflect the judgements of CS, and furthermore, are subject to change without notice. CS has no obligation to update, modify, or amend this report, or to otherwise notify a reader thereof, in the event that any matter stated herein, or any opinion, estimate, forecast, or analysis set forth herein, changes or subsequently becomes inaccurate.

This report does not constitute investment advice with respect to the securities of any company discussed herein, is not intended to provide information upon which to base an investment decision, and should not be construed as such. Professional advice should be obtained before taking any action based on any information or discussion contained herein.

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