New Leaf medical device fund outlines investment strategy and portfolio

The New Leaf team is one of the most experienced and proven teams in this sector. The Fund Managers’ combination of proven track record, in-depth knowledge of the medical device and diagnostics fields, a strong current LC. portfolio, and a thought-leading network of LC. advisors, puts New Leaf in a position of leadership within this sector. MEDICAL DEVICES INVESTMENT STRATEGY NLV-III’s investment strategy in medical devices will focus on identifying a limited number of investment opportunities in companies with compelling later stage risk profiles. The Fund will seek to identify investments in companies that are developing innovative and differentiated medical devices, targeting large market opportunities, that offer the potential to meaningfully reduce overall patient treatment costs in high morbidity disease settings through substantial efficacy and safety benefits versus existing standards of care. Investments in this sector will have established regulatory approval pathways and clear regulatory precedents, or are already at the commercial stage at the time of initial investment. The objective will be to identify companies that because of their specific therapeutic area or technology focus, or because the company already has received key regulatory approvals, that they will be less affected by the headwinds that are challenging the sector more broadly. Importantly, these investments will be in therapeutic areas that are known to be of high strategic interest to a number of larger medical device companies, and thus have a high potential of generating M&A interest. The primary risks in these investments will be mostly operational execution, competition, and other market related risks. Similar to the second half of the investment period for NLV-I, the Fund will have a more limited focus on medical device investments in NLV-II] compared to previous funds. The slower projected pace of investment is based on the view that the operating and exit environment for companies in this sector will continue to be challenging due to increased regulatory and reimbursement uncertainty in the U.S. and E.U. These headwinds have resulted in increased development costs and significantly lengthened timelines for most development stage companies. While the Fund Managers expect to see fewer compelling investment opportunities than have been available historically in the medical device sector, they do believe that they will be able to identify and source a number of later stage opportunities that are less affected by these obstacles, and that these will be attractive investment opportunities for NLV-III. One factor that supports this view is that the reduced level of competition for deals resulting from the decline in the number of active venture capital firms mentioned previously is even more pronounced in the medical device sector. Given New Leaf’s historic leadership within this sector, and its clear commitment to remain active during this period of reduced funding, the Fund Managers expect that they will have excellent deal flow. Although the number of deals in this sector is likely to be somewhat lower than in previous funds, with the later stage focus, it is likely that the size of investments in this sector will be larger. Recent medical device investments in the New Leaf portfolio that fit this later stage definition include: Neuronetics (NLV-II, commercial stage), CardioKinetix (NLV-IL, clinical development stage), and Interlace Medical (NLV-I, start-up focused on 510k product, acquired by Hologix, exited at 8.6x). 41 CONTROL NUMBER 257 - CONFIDENTIAL HOUSE_OVERSIGHT_024052