2014 Venture Capital Executive Compensation Survey

LIFE SCIENCES SECTOR TREND REPORT We are pleased to present the 2014 VC Executive Compensation Survey Trend Report for Life Sciences Companies. The 2014 VC Executive Compensation Survey was sponsored by the following Venture Firms: Accel Partners

Delphi Ventures

Kleiner Perkins Caufield & Byers

Sequoia Capital

Andreessen Horowitz

Draper Fisher Jurvetson

Lightspeed Venture Partners

Shasta Ventures

August Capital

Emergence Capital Partners

Mayfield Fund

Sigma Partners

Azure Capital Partners

Fontinalis Partners

Menlo Ventures

Stripes Group LLC

Balderton Capital

Foundation Capital

Morado Ventures

Third Rock Ventures

Battery Ventures

Foundry Group

Morgenthaler Ventures

Thomvest Ventures

Bay Partners

Greylock Partners

New Enterprise Associates

Trident Capital

Bessemer Venture Partners

Highland Capital Partners

Norwest Venture Partners

Trinity Ventures

Braemar Energy Ventures

Hummer Winblad

Notion Capital

True Ventures

Canaan Partners

OpenView Venture Partners

US Venture Partners

Carmel Ventures

Ignition Partners Index Ventures

Opus Capital Partners

VantagePoint Capital Partners

Charles River Ventures

InterWest Partners

Polaris Partners

Venrock

Costanoa Venture Capital

Jafco Ventures

Redpoint Ventures

Versant Ventures

Crosslink Capital

Khosla Ventures

Scale Venture Partners

Through the efforts of sponsoring venture firms and Advanced-HR, Inc., survey data was collected from 177 private, venture backed life sciences companies between mid-August 2014 and mid-September 2014. Survey participation in 2014 increased +14.9% from the 154 companies in the 2013 life sciences sector survey. This trend report was a collaborative undertaking between Advanced-HR, Inc. and PwC. It is intended to provide an overview of company metrics, company practices and changes in executive compensation from 2013 to 2014. We wish to thank those whose efforts went into producing the 2014 VC Executive Compensation Survey Trend Report by providing data analysis, trend evaluation, and assessment of company practices.

This report utilizes data from Advanced-HR’s Option Impact system. The information contained in this report may not be distributed, either in part or in whole, to any company or person not involved with efforts undertaken through the 2014 sponsoring venture firms or their participating portfolio companies. All data contained in this report is subject to copyright and may not be distributed to unauthorized users without written consent from Advanced-HR, Inc. or PwC.

2014 Venture Capital Executive Compensation Survey LIFE SCIENCES SECTOR TREND REPORT

Survey Demographics The survey of executive compensation in private, venture backed life sciences companies recorded data in effect at the time of reporting between mid-August 2014 and mid-September 2014. The survey was completed by 177 companies that submitted company metrics and compensation information for 888 executives globally, a decrease of -2.1% in surveyed executives compared with 2013. The 2014 report provides compensation data for executives based on their founding status with categorization included for company, industry, region, stage, capital raised, funding round, revenue and number of employees. In addition, companies provided information about their total employee ownership as a percentage of the fully diluted shares.

Regions The 2014 regional breakdown for the United States shifted only slightly as a percentage of the survey population compared to 2013. The table below shows the regional distribution for the 2014 survey and the graph shows a comparative distribution between 2014 and 2013.

2014 Region Breakdown Count

% Total

SF Bay Area

63

35.6%

North East

46

26.0%

So. California

25

14.1%

Central/Midwest

12

6.8%

South East

8

4.5%

Mid-Atlantic

7

4.0%

South West

5

2.8%

Pacific NW

2

1.1%

Mountain

2

1.1%

No Calif. (Not SF Bay Area)

1

0.6%

6

3.4%

United States

Outside the US

The map below shows the states comprising each geographic US area in the 2014 survey.

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2014 Venture Capital Executive Compensation Survey LIFE SCIENCES SECTOR TREND REPORT

Industries The distribution of companies by industry shifted slightly in 2014 as compared to 2013 when looking at industry as a percentage of the survey population. The table below shows industry distribution for the 2014 survey and the graph shows a comparative distribution between 2014 and 2013. The largest change was a decrease of -8.2 % in the Medical Device and Diagnostic companies with the corresponding increase of +8.7% in the Healthcare Information Technology companies.

2014 Industry Breakdown

Med. Device & Diagnostic

Count 66

% Total 37.3%

Biotech & Pharmaceutical

60

33.9%

Healthcare Services

21

11.9%

Healthcare Info Tech

28

15.8%

Other Life Science

2

1.1%

Stage of Development The distribution of companies by stage of development for the 2014 survey shifted slightly from 2013. The table below shows developmental distribution for the 2014 survey and the graph shows a comparative distribution between 2014 and 2013.

2014 Stage of Development Breakdown

Early/Product Definition Product Development Clinical Trials Product in Beta Shipping Product Profitable

Count 19 25 59 5 52 17

% Total 10.7% 14.1% 33.3% 2.8% 29.4% 9.6%

In 2014 there was a large shift in the amount of data coming from the Early/Product Definition stage due to 19 companies versus five companies in 2013.

Funding The survey distribution of companies by Funding Round in 2014 showed an overall increase of funding to earlier stage companies. In 2014 there was an increase of +55% in data submitted by “Seed Funding Only” through “Post Series B” companies when compared to the 2013 survey population. The 2014 distribution of companies by Cumulative Capital Raised also shifted to show a general decrease in amount raised by surveyed companies. There was an average increase of +53% in companies raising capital of >$0 - $10M and >$10M - $25M with a corresponding drop in the companies with capital raised of between >$75M - $100M and >$100M.

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2014 Venture Capital Executive Compensation Survey LIFE SCIENCES SECTOR TREND REPORT

The tables below show funding round and capital raised distribution for the 2014 survey and graphs on the following page show comparative distribution between 2014 and 2013. 2014 Funding Round Seed Funding Only Post Series A Post Series B Post Series C Post Series D 5+ Rounds of Funding Growth Capital Only

2014 Capital Raised ($M)

Count

% Total

10 47 41 27 23 21 8

5.6% 26.6% 23.2% 15.3% 13.0% 11.9% 4.5%

>$0-$10M >$10M-$25M >$25M-$50M >$50M-$75M >$75M-$100M >$100M

Count

% Total

27 36 41 37 16 20

15.3% 20.3% 23.2% 20.9% 9.0% 11.3%

Revenue and Employees

Survey distribution for revenue in 2014 saw an increase of 25% in Pre-Revenue companies. Similarly, the distribution for headcount groupings shifted with an increase of 93% in companies with < 10 employees. The tables below show revenue and headcount distribution for the 2014 survey and graphs show comparative distribution between 2014 and 2013. 2014 Revenue

2014 Headcount Count

% Total

Count

% Total

Pre-Revenue

85

48.0%

$0-$10M

50

28.2%

10-25

49

27.7%

>$10M-$25M

18

10.2%

26-50

38

21.5%

>$25M-$50M

14

7.9%

51-100

29

16.4%

>$50M-$100M

5

2.8%

101-200

15

8.5%

>$100M

5

2.8%

>200

15

8.5%

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2014 Venture Capital Executive Compensation Survey LIFE SCIENCES SECTOR TREND REPORT

Employee Ownership The table below shows 2014 median (50th percentile) ownership as a percentage of company fully diluted shares by founder, investor and employee groups for five developmental cuts of survey data.

#Cos

Median # Employees

% Cos w/ Founding CEO's or No CEO

Median % Founder

Median % Investor

Median % Employee*

29

11

43%

1.3%

78.5%

14.3%

OWNERSHIP

All Technology Industries Both Founding and Non-Founding CEOs Pre-Revenue Companies Post Series A Post Series B

24

14.5

10%

5.1%

78.7%

15.4%

Post Series c, D, 5+ Rounds

22

24.5

18%

1.9%

82.0%

15.9%

Shipping Product

52

70.5

33%

5.3%

76.3%

16.3%

Profitable

17

220

19%

7.9%

72.0%

20.6%

Companies with Revenue

* Employee ownership includes unissued options

In 2014, total employee ownership as a % of company fully diluted shares was comparable to 2013 as shown on the graph “Employee Ownership by Stage” in all but Profitable companies. In the Profitable stage, companies reported an increase of +3.4% of the Fully Diluted Shares in employee ownership. However, as shown in the second graph, “Founding CEOs on Staff by Stage”, there was a -19% decrease in founding CEOs for the Profitable companies. As such, the increase in total employee ownership would be expected as a result of the increase in non-founding CEOs. The only other grouping showing a change in the founder status from 2013 was a decrease of -11% in the Post Series B Companies. However, a corresponding increase in the employee ownership as a % of the fully diluted shares is not evident.

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2014 Venture Capital Executive Compensation Survey LIFE SCIENCES SECTOR TREND REPORT

Compensation Trends Survey Population A subset of the more common survey positions was reviewed for changes in the 2014 survey population as compared to the 2013 survey population. The 2014 survey data was comprised of 85% non-founders, representing a decrease of -2% in the total non-founder population compared to the 2013 survey data. The table below shows the total count and percent of non-founding positions for the 2014 survey and the graph shows a comparative distribution between 2014 and 2013.

2014 Select Non-Founder Jobs as a Percent of Total Count Total % Count Non-Founder Chief Executive Officer 163 67% Chief Operations Officer 39 82% VP Operations 33 88% Chief Med Officer/Med Director 55 96% VP Clinical/Regulatory 56 93% Chief Scientific Officer 28 61% VP Research 61 90% Chief Financial Officer 68 97% VP Finance 22 95% Chief Marketing Officer 11 73% VP Marketing 30 100% Chief Revenue Officer 9 100% VP Sales 55 96%

In 2014, the population of non-founder positions was fairly comparable to 2013 with the noted exception of a decrease of -27% in the Chief Marketing Officer position and an increase of +14% in the Chief Medical Officer/Medical Director position.

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2014 Venture Capital Executive Compensation Survey LIFE SCIENCES SECTOR TREND REPORT

Cash Compensation Non-Founders When comparing 2014 to 2013 data for the subset of most common non-founding executives, both overall base salary and overall total target pay (defined as base salary + target incentive pay) were relatively unchanged. The table below shows median (50th percentile) cash compensation for select non-founder positions in the 2014 survey and the graph shows comparative data between 2014 and 2013. All currency was converted to USD for analysis purposes. Select Non-Founder Jobs 2014 Median Cash Compensation

Chief Executive Officer Chief Operations Officer VP Operations Chief Med Officer/Med Dir VP Clinical/Regulatory Chief Scientific Officer VP Research Chief Financial Officer VP Finance Chief Marketing Officer VP Marketing Chief Revenue Officer VP Sales

Base Salary $350,000 $256,950 $205,000 $300,000 $243,794 $277,875 $240,000 $250,000 $197,600 $250,000 $215,500 $275,000 $215,000

Total Target Pay $455,000 $319,938 $244,000 $354,234 $275,313 $343,918 $275,000 $302,000 $249,200 $309,375 $251,500 $410,160 $290,500

Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation.

The aggregate non-founding CEO median (50th percentile) for cash compensation in 2014 showed no change in base salary and a decrease of -0.3% in total target pay compared to 2013 data. A detailed analysis of 2014 cash compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2014 and 2013. Analysis showed the largest change occurred in the Profitable category where there was a decrease of 13% in total target pay.

Non-Founder CEO 2014 Median Cash Compensation By Stage of Development # CEOs

Base Salary

110

$350,000

Total Target Pay $455,000

Pre-Revenue: All Companies

49

$350,000

$442,000

Post Series A, No Revenue

13

$340,000

$439,400

Post Series B, No Revenue

18

$353,240

$437,500

61

$350,950

$464,197

Shipping Product

34

$334,411

$420,340

Profitable

13

$350,000

$500,500

Total Companies in Analysis

Revenue: All Companies

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2014 Venture Capital Executive Compensation Survey LIFE SCIENCES SECTOR TREND REPORT

Founders When comparing 2014 to 2013 data for the subset of the most common founding executives, overall cash compensation increased by an average of +11% with a wide variance by position. This may be attributed to different companies comprising the data set in the 2014 survey as compared to the 2013 survey. The table below shows median (50th percentile) cash compensation for select founder positions in the 2014 survey and the graph shows comparative data between 2014 and 2013. All currency was converted to USD for analysis purposes.

Select Founder Jobs 2014 Median Cash Compensation

Chief Executive Officer Chief Operations Officer Chief Med Officer/Med Director Chief Scientific Officer VP Research

Base Salary $250,000 $255,000 $275,000 $286,000 $190,000

Total Target Pay $300,000 $375,000 $305,000 $345,560 $205,000

Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation.

The aggregate founding CEO median (50th percentile) for cash compensation in 2014 showed a decrease of -20.1% change in base salary and a decrease of -19.6% in total target pay compared to 2013 data. A detailed analysis of 2014 cash compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2014 and 2013. Analysis showed the largest change in cash compensation occurred in Pre-Revenue, Post Series A companies with an increase of +4.2% in base salary and +35.8% in total target pay. Although there was a large reduction in cash compensation for the Pre-Revenue, Post Series B companies, there were only 2 companies in the data set. For companies in the Shipping Product stage, there was a decrease of -16.7% in the base salary and a decrease of -8.8% in total target pay. Profitable companies showed an increase of +4.9% in base salary and an increase of +27.7% in total target pay.

Founder CEO 2014 Median Cash Compensation By Stage of Development

$250,000

Total Target Pay $300,000

Pre-Revenue: All Companies

26

$250,000

$250,000

Post Series A, No Revenue

10

$312,500

$407,500

2

$280,000

$382,500

Total Companies in Analysis

Post Series B, No Revenue Revenue: All Companies Shipping Product Profitable

# CEOs

Base Salary

53

27

$250,000

$317,000

17

$250,000

$300,000

3

$343,583

$560,000

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2014 Venture Capital Executive Compensation Survey LIFE SCIENCES SECTOR TREND REPORT

Equity Compensation Non-Founders Equity compensation for non-founding executives remained relatively consistent and a much smaller variance is typically seen from year to year. When looking at the entire population of executives instead of data by stage of development, data is neutralized and blended equity benchmarks are a reflection of overall survey demographics. The table below shows median (50th percentile) equity compensation as a percentage of fully diluted shares for select non-founder positions in the 2014 survey and the graph shows comparative data between 2014 and 2013. Select Non-Founder Jobs 2014 Median Equity Compensation (% of Fully Diluted Shares) Total Equity Held Chief Executive Officer 4.91% Chief Operations Officer 1.24% VP Operations 0.55% Chief Medical Officer 0.96% VP Clinical 0.60% Chief Scientific Officer 1.29% VP Research 0.69% Chief Financial Officer 0.81% VP Finance 0.36% Chief Marketing Officer 0.91% VP Marketing 0.64% Chief Revenue Officer 1.30% VP Sales 0.71%

Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation.

The aggregate non-founding CEO median (50th percentile) for total equity compensation in 2014 showed an increase of +6.5% (representing +0.30% of fully diluted shares) compared to 2013 data. A detailed analysis of 2014 equity compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2014 and 2013. Analysis showed an increase in all development grouping with the exception of the Pre-Revenue Post A companies with a decrease of -6% (representing -0.27% of fully diluted shares) Profitable companies showed an increase of +7.3 in the amount of equity held (representing +0.34% of fully diluted shares). Non-Founder CEO 2014 Median Equity Compensation By Stage of Development (% Fully Diluted Shares) # CEOs Total Companies in Analysis

110

Total Equity Held 4.91%

Pre-Revenue: All Companies

49

5.00%

Post Series A, No Revenue

13

4.23%

Post Series B, No Revenue

18

5.49%

61

4.90%

Shipping Product

34

4.82%

Profitable

13

4.97%

Revenue: All Companies

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2014 Venture Capital Executive Compensation Survey LIFE SCIENCES SECTOR TREND REPORT

Founders Equity held by select founder positions showed an increase from 2014 to 2013 with increased of percent total equity held increases for all positions reviewed in this report. The table below shows median (50th percentile) equity compensation as a percentage of fully diluted shares for select founder positions in the 2014 survey and the graph shows comparative data between 2014 and 2013.

Select Founder Jobs 2014 Median Equity Compensation (% of Fully Diluted Shares) Total Equity Held Chief Executive Officer 10.56% Chief Operations Officer 6.22% Chief Med Officer/Med Director 10.92% Chief Scientific Officer 4.10% VP Research 2.53%

Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation.

The aggregate founding CEO median (50th percentile) for total equity compensation in 2014 showed an increase of +71.2% (representing +4.39% of fully diluted shares) compared to 2013 data. A detailed analysis of 2014 equity compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2014 and 2013. With an overall increase in equity as a % of the fully diluted shares, Founding CEOs were generally more successful in maintaining their equity positions in 2014 compared to 2013. Analysis showed the largest increased occurred in companies that were Shipping Product Companies with +67.4% in the amount of equity held (representing +3.5% of fully diluted shares). Profitable companies showed a decrease of -44% in the amount of equity held (representing -9.7% of fully diluted shares). Founder CEO 2014 Median Equity Compensation By Stage of Development (% Fully Diluted Shares)

53

Total Equity Held 10.56%

Pre-Revenue: All Companies

26

12.77%

Post Series A, No Revenue

10

6.01%

Post Series B, No Revenue

2

10.90%

# CEOs Total Companies in Analysis

27

8.76%

Shipping Product

17

8.76%

Profitable

3

12.41%

Revenue: All Companies

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2014 Venture Capital Executive Compensation Survey LIFE SCIENCES SECTOR TREND REPORT

Performance Stock Performance stock represents the shares or options granted or promised that will be either earned or vested in the future based upon either company or individual performance. It is a subset of the total shares and options held by the executive.

The use of performance stock continues its minimal occurrence as a form of incentive compensation for the Life Sciences sector. In 2014, performance stock was utilized by roughly 6% of the companies surveyed, which is a significant reduction from the 8% of companies who reported using performance stock in 2013. The 50th percentile of performance stock as shown below is approximately equivalent to 15% - 25% of the total equity held by the executive level. Performance Stock Held

Companies Using Performance Stock

(% of Fully Diluted Shares)

% Jobs with Performance Stock

25th Percentile

50th Percentile

75th Percentile

CEO

4.9%

0.29%

1.00%

1.61%

C Level

4.1%

0.09%

0.34%

0.43%

VP Level

5.9%

0.03%

0.11%

0.18%

Level

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