From Idea to Market – A Successful U.S. Model Ivar Sorensen, Managing Partner, The M&A Group, LLC

In Collaboration with Venturi Group, LLC

Idea to Market Model

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Need Market

Technology Strategy

Critical Experiment

Market Driven Need

Focus on clinical (market) need areas, not tools (technology, software, etc.)

• Focus on the “what”, not the “how”

• Understand the size of the opportunity

– Large opportunity = venture backing

– Smaller opportunity = “angels”, grants, economic development, FFFs

• Structure effort and focus after these steps, not before

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Assess Prospective Solutions

• Product specification– Identify candidate technologies

• Intellectual property office

• Literature

– Patent

– Scientific/medical

• “Triage”: Evaluate and test– Does it solve the need!

– Now, after all the above:

• Start to decide on technology

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Technology Requirements

• Decision points– Technologies must meet market need areas (“markets in search of

technologies”)

• Strategic IP protection availability

• Established proof of capability

• Development to Proof of Concept (POC) cost target established

• Multiple technology avenues– Confirm the options available

– Do they “fit”?

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The Critical Experiment

• Most important final step: “The Critical Experiment” – Challenge new paradigm

– Confirm algorithm

• Achieve the predicted outcome(s)?

• Function appropriately in application?

– Verify technology

• Perform to specification?

• Yields a manufacturable and reliable product?

• Licenses in place or not needed?

• It is not “nibbling” at the edges!– Truly test while you can change direction if needed

– ~25% rule

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An Example - EnteroMedics

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A Venturi Group Portfolio Company

Market Driven Need Assessment

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Source: World Health Organization

• Over 1.4 billion adults are estimated to be overweight, one-third of whom are obese

• So many at risk, yet the market is underserved– Societal burden growing exponentially

– It is estimated that obesity could affect 42% of Americans by 2030

• Treatment spectrum limited with significant gaps– Diet, exercise and current and new drugs continue to have safety and

compliance issues

– Current surgical options are physical interventions, risky and not lifestyle friendly

– Nothing in-between for patients

The Problem: Current Treatment Paradigm

• Serious safety concerns

• Less effective for morbid obesity

– Limited weight loss

– Unsustained effect

• Adverse side-effects

• Duration of use restrictions

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Pharmaceuticals Bariatric Surgery

• “Barbaric”

• Bypass & sleeve surgery irreversible and risky

• Adjustable gastric bands have long-term follow-up burdens (e.g. vomiting, quarterly adjustments) result in major lifestyle changes including side effects, dietary restrictions and food intolerances

Less Invasive More Invasive

Literature Study – Role of Vagus Nerve

• Vagus nerve controls:– Sensation of hunger

– Expansion, fullness and emptying of stomach

– Digestive enzyme secretion

• Severing the vagus nerve (vagotomy) causes:– Reduced appetite

– Delayed stomach emptying

– Prevention of weight gain

• The effects of vagotomy are not sustainable– The body accommodates for, or

“works around”, the permanent interruption

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80% of vagus nerve fibers

send messages to the brain

20% of vagus nerve fibers send instructions from

the brain

Critical Experiment

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EnteroMedics

• VBLOC® Therapy, a revolutionary solution that fills the significant treatment gap for obesity

• ReCharge Study: – Demonstrated:

• Clinically meaningful and statistically significant EWL of 25-28% (~10% TBL)

• Excellent individual weight loss response

– High patient acceptance — 93% at 12 months

– Met primary safety endpoint (3.1% SAE rate); Positive CV safety signals

– High benefit-low risk profile

• Moving forward with Premarket Approval Application– Submission planned for Q2 2013

– Panel — 4Q13/1Q14

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ReCharge Study Results – Weight Loss PPG

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11 m

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12 Month Data Point –Treatment Group~26% Excess Weight Loss~10% Total Body Weight Loss

12 Month Data Point –Sham Control Group

EnteroMedics - Company Information

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Key Balance Sheet Data (March 31, 2013) Diluted Shares Outstanding (March 31, 2013)

Cash & Cash Equivalents $29.6 M Common Shares $55.6 M

Debt $10.0 M Warrants $25.6 M

Total Invested Capital $203.0 M Options $7.6 M

Total $88.8 M

EnteroMedics, Inc. Company Highlights

NASDQ: ETRM Founded: December 2002

Headquarters: Saint Paul, Minnesota Employees: ~ 30

The Venturi Group

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Idea Source

The Venturi Principals

The Facility

The Funding Partners

The Venturi Group

16M&A Group, LLC 3565 IDS Center 80 South Eighth Street Minneapolis, MN 55402 USAm-a-group.com Member FINRA and SIPC

Ivar Sorensen:p 612.375.1190ivar@m-a-group.com

Address:3565 IDS Center80 South Eighth StreetMinneapolis, Minnesota 55402www.m-a-group.com

Contact Information