How to Expedite Examination of a Patent Application · patent examination process and show that you ... application and related forms must be complete. ... Fees Accelerated Examination

By David Hoffmeister, Partner, and AndrewEllis, Associate (Palo Alto)

On September 23, 2013, the U.S. Food & DrugAdministration (FDA) released its finalguidance concerning mobile medicalapplications,1 which had been highlyanticipated since the FDA first released itsproposed guidance in July 2011. In its finalguidance, the FDA sets its focus on thosemobile medical apps that qualify as medical

devices and carry the highest risk to patientsafety, leaving the remainder of mobilemedical apps still within FDA jurisdiction, butoutside the purview of active FDA regulation.

IntroductionThe landscape of mobile medical apps hasburgeoned in recent years, with currentlyavailable apps numbering between 30,000 and40,000.2 Although the FDA only released itsproposed guidance in July 2011, it has had the

By Doug Portnow, Associate, and Darby Chan,Associate (Palo Alto)

Does this sound familiar? Your company isdeveloping an innovative medical product andyou have several patent applications filed withthe United States Patent and Trademark Office(USPTO). The patent applications have beensitting in the queue for many months, or evenyears, waiting for examination. You’re also inthe process of fundraising or forming analliance with a corporate strategic partner.Wouldn’t it be great if you could speed up thepatent examination process and show that youhave granted patents? The good news is thatthere are several USPTO programs that mayhelp you procure a patent more quickly.

Track One

Under the newly enacted America Invents Act,the Track One Prioritized Examination programis now being offered. Track One allows apatent applicant to get final disposition inabout 12 months. The program is similar to thenormal patent prosecution process, exceptthat a complete application must be filed withall documents submitted at the time of filingand a fee is paid to bump the application tothe front of the examination queue. Theprioritized examination fee recently wasreduced and now is $4,000 for large entitiesand $2,000 for small entities. At the time theTrack One patent application is filed, any otherfees (e.g., excess page fees) also must bepaid, and the application and all related forms

must be complete. Additionally, theapplication can have no more than fourindependent claims and a total of thirtyclaims. Applicants then can expect to see afirst Office Action in a few months. Responsesto Office Actions must be filed promptly withinthe three-month shortened statutory period,and no extensions of time are permitted.Otherwise, the application will be removedfrom the Track One program and placed backinto the regular examination docket. Finaldisposition is approximately in 12 months,which means that an applicant either will havean allowance or his or her case will be onFinal Rejection in about a year.

Track One permits patent applicants to getclaims allowed quickly as long as they have

The Life Sciences ReportFA L L 2 0 1 3

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In This Issue

How to Expedite Examination of a PatentApplication ........................................Page 1-3

The FDA Releases Final Guidance forMobile Medical Applications....Page 1, 4-5

Creating Value in the Medtech IndustryUsing a Gender Lens........................Page 6-7

Life Sciences Venture Financings for WSGR Clients ..............................Page 7-8

Recent Life Sciences Highlights .........................................Page 9-10

Life Sciences Events....................Page 11-12

The FDA Releases Final Guidance forMobile Medical Applications

How to Expedite Examination of a Patent Application

1 The original PDF of the final guidance can be found at http://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/UCM263366.pdf. In addition, the FDA has set up a mobile medical apps website athttp://www.fda.gov/MedicalDevices/ProductsandMedicalProcedures/ConnectedHealth/MobileMedicalApplications/default.htm

2 http://mhealthwatch.com/mobile-health-care-apps-growing-fast-in-number-20052/; http://www.kaiserhealthnews.org/stories/2012/june/27/fda-medical-app-market.aspx


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reasonable expectations for the claims theyare pursuing and the applicant is familiar withthe prior art and has filed appropriatelydrafted claims that take that prior art intoaccount. The program also may be used withcontinuation applications or, one time only,with a Request for Continued Examination(RCE). The total number of applications thatmay be filed under Track One is limited to10,000 per year. As of July 2013,approximately 5,000 Track One applicationshave been filed in fiscal year 2013.

Accelerated Examination

Accelerated Examination is another programthat allows faster examination. It is verysimilar to Track One, and also has the goal offinal disposition in about twelve months.Unlike Track One, which requires entry into theprogram at the time the patent application oran RCE is filed, a patent application can beplaced into Accelerated Examination at almostany time with the filing of a low-cost petition.At the time this petition is filed, theapplication and related forms must be complete.

While the additional fees required forAccelerated Examination are minimal, theprogram requires much more work anddiligence upfront than normal examination oreven Track One. A significant difference is arequirement that the patent applicant conducthis or her own patentability search, characterize

the closest prior art, and explain why theclaimed invention is distinguished from thatprior art in an Accelerated ExaminationSupport Document (AESD). An interview withthe Patent Examiner also must be performedbefore a first Office Action is mailed out.Under Accelerated Examination, Office Actionshave a much shorter period for reply—onemonth with no extensions of time versus threemonths with up to three months of extensionsfor normal prosecution. Not responding to theOffice Action will result in the patentapplication being considered abandoned.Moreover, any claim amendments andadditions will require an update of the AESD.

Since patent applicants are requiredproactively to make statements on the recordabout the prior art and the claimed invention,many practitioners do not like to useAccelerated Examination. Making suchstatements could present problems down theroad, especially during litigation. Thus, TrackOne usually is preferable since it has fewerrequirements and does not require any pre-examination search.

Petitions to Make Special

Patent applications also may be advanced forexamination by submitting a Petition to MakeSpecial. The cost of such a petition is low tonone, but applications only qualify for suchadvancement if they fall within certainsituational categories.

A number of such categories relate to the lifesciences. Applications for inventions relatingto the safety of research in the field ofrecombinant DNA can be made special.Applications also can qualify if the inventioncontributes to the diagnosis, treatment, orprevention of HIV/AIDS or cancer. Smallbiotechnology companies can make anapplication special if they show that theapplication is a significant corporate asset andthat development of the technology would besignificantly impaired if examination weredelayed.

The health and age of applicants also can because for advancement. The applicant mustshow evidence that he or she might not beavailable to assist in the prosecution of theapplication if it were to run its normal course(usually two to five years from filing) due tohis or her state of health. Advancement alsomay be granted if an applicant demonstratesthat he or she is 65 years of age or older. Inboth these cases, no petition fee is required.

Other categories include the prospectivedomestic manufacture of the patented product,infringement of the prospective patent, andinventions related to energy, superconductivity,counterterrorism, or protecting or conservingthe environment.

Patent Prosecution Highway

In some cases, patent applications filed inmultiple international jurisdictions can takeadvantage of the Patent Prosecution Highway(PPH). If a patent applicant receives afavorable ruling from an Office of First Filingindicating that at least one claim in his or herapplication is patentable, the PPH allows thatapplicant to request fast-track examination ofthe corresponding claims in an applicationfiled in an Office of Second Filing. There is no


Patent applications alsomay be advanced forexamination by submittinga Petition to Make Special . . . applications onlyqualify for suchadvancement if they fallwithin certain situationalcategories.

Accelerated Examination is another program thatallows faster examination.Under AcceleratedExamination, Office Actionshave a much shorterperiod for reply . . .

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fee for making this request, and the PPHspeeds up the examination of patentapplications filed in participating countries byallowing examiners to rely on search andexamination results from another country. A patent application fast-tracked under thisprogram may be examined in two or threemonths after the request is granted. Currently, about 15 countries participate in the PPH program.

A pilot program also has expanded the PPHeligibility for national- and regional-phasepatent applications filed under the PatentCooperation Treaty (PCT) using positivepatentability results obtained during theinternational PCT phase. Thus, a favorable PCTWritten Opinion or International PreliminaryReport on Patentability from a participating

office allows the applicant to request that acorresponding national-phase entry or nationalapplication filed at the USPTO be placed in thefast-track examination queue. Participatingoffices include the USPTO, the Japan PatentOffice, the European Patent Office, the KoreanIntellectual Property Office, and the Austrian,Russian, and Spanish Patent Offices.

Summary

A number of programs are available that allowexpedited examination and allowance of apatent application under certaincircumstances. Each program has its ownspecial requirements, and it is important forapplicants to review the requirementscarefully, make sure that they qualify, andcomply with the rules. These accelerated

programs, especially Track One, have beenwell received by patent practitioners and canbe great tools for expedited procurement ofgranted patents. The table below summarizessome of the key features of the individualprograms.

Program Additional Fees Key AdditionalRequirements

Key Benefits Key Drawbacks

Track One (PrioritizedExamination)

- Prioritized ExaminationFee: $4,000 (Large Entity),$2,000 (Small Entity),$1,000 (Micro-Entity)

- Filing of Track OneRequest & CompleteApplication at Time ofFiling Patent Application

- Placement of PatentApplication at Front ofExamination Queue

- Disposition Within 12Months

- High Additional USPTOFees

AcceleratedExamination

- Petition Fee to RequestAccelerated Examination:$130

- Complete Application atTime of Filing Petition toRequest AcceleratedExamination

- Examination of PatentApplication upon PetitionGrant

- Disposition Within 12Months

- Higher Upfront Legal Costs

- Greater DiligenceRequired

- May Need to CharacterizePrior Art

Special Case - Petition Fee to MakeSpecial: $130 (or none ifrelated to health or age)

- Patent Application MustFall Within SpecialSituational Category

- Advancement ofApplication Out of Turn

- Not Available in ManyCases

Patent ProsecutionHighway (PPH)

- No Fee - Filing of CorrespondingApplication in ForeignPatent Office

- Favorable Ruling inForeign Patent Office

- Faster Examination withUse of Foreign PatentOffice Search andExamination Results

- Corresponding ApplicationMust Be Filed in ForeignPatent Office Before U.S.

Key Features of Expedited Patent Prosecution Programs

Darby Chan(650) [email protected]

Doug Portnow(650) [email protected]

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authority to regulate mobile medical apps fordecades. Section 201(h) of the Food, Drug &Cosmetic Act (FDCA) defines a medical deviceas “an instrument, apparatus, implement,machine, contrivance, implant, in vitroreagent, or other similar or related article,including any component, part, or accessory . . .intended for use in the diagnosis of disease orother conditions, or in the cure, mitigation,treatment, or prevention of disease, in man orother animals.”3 Under this definition, somemobile medical applications have already beenregulated as medical devices or accessories tomedical devices; however, there has beenconsiderable uncertainty as to whether the“intended use” of many other medical appswould qualify them for regulation as devices.While the new guidance does not clearlyanswer every conceivable question, it doescarve out those apps that will not be regulatedby the FDA, which many commentators hopeand expect to stimulate further developmentand investment due to reduced uncertainty.

Mobile Medical Apps Under Active FDARegulation

The final FDA guidance focuses on thosemobile medical apps that meet the statutorydefinition of “device” under the FDCA and (1)are intended to be used as an accessory to aregulated medical device, or (2) transform amobile platform into a regulated medicaldevice. This wording is identical to that of thedraft guidance, but the final guidance is farmore detailed, providing numerous usefulexamples and explanations of the FDA’sprocess for mobile medical app regulation.

The FDA divides mobile medical apps that itintends to actively regulate into threecategories:

1. Mobile apps that are an extension of oneor more medical devices by connecting tosuch device(s) for purposes of controllingthe device(s) or displaying, storing,analyzing, or transmitting patient-specific

medical device data. Examples within thiscategory include apps that displaymedical device data (e.g., an app thatenables remote display of bedsidemonitors), apps that control medicaldevices (e.g., an app that inflates anddeflates a blood pressure cuff), and appsthat display medical data in its originalformat.

2. Mobile apps that transform the mobileplatform into a regulated medical deviceby using attachments, display screens, orsensors or by including functionalitiessimilar to those of currently regulatedmedical devices. Examples include an appthat allows attachment to an ECGmachine or an app that connects to aglucose monitor.

3. Mobile apps that become a regulatedmedical device (software) by performingpatient-specific analysis and providingpatient-specific diagnosis, or treatmentrecommendations. Examples include appsthat perform sophisticated analysis or

interpret data (electronically collected ormanually entered) from another medicaldevice, such as image processing orradiation treatment planning software.

Mobile Medical Apps Under FDA“Enforcement Discretion”

The FDA lists six categories of low-riskdevices to which it intends to apply“enforcement discretion”; in other words, theFDA has jurisdiction to regulate, but does notintend to actively regulate the followingcategories:

1. Mobile apps that provide or facilitatesupplemental clinical care, by coaching orprompting, to help patients manage theirhealth in their daily environment.Examples include an app that coachesobese patients on weight-loss strategies.

2. Mobile apps that provide patients withsimple tools to organize and track theirhealth information. Examples include anapp that provides a means of loggingdaily blood pressure measurements.

3. Mobile apps that provide easy access toinformation related to patients’ healthconditions or treatments (beyondproviding an electronic “copy” of amedical reference). Examples include alookup tool for drug interactions.

4. Mobile apps that are specificallymarketed to help patients document,show, or communicate to providerspotential medical conditions. Examplesinclude an app that allows securevideoconferencing between patients andproviders.

5. Mobile apps that perform simplecalculations routinely used in clinicalpractice. Examples include an app thatmeasure Body Mass Index (BMI).


The FDA Releases Final Guidance for Mobile Medical Applications

3 http://www.fda.gov/RegulatoryInformation/Legislation/FederalFoodDrugandCosmeticActFDCAct/FDCActChaptersIandIIShortTitleandDefinitions/ucm086297.htm

The final FDA guidancefocuses on those mobilemedical apps that meet thestatutory definition of“device” under the FDCAand (1) are intended to beused as an accessory to aregulated medical device,or (2) transform a mobileplatform into a regulatedmedical device.


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The FDA Releases Final Guidance for Mobile Medical Applications

6. Mobile apps that enable individuals tointeract with PHR systems or EHRsystems. Examples include an app thatallows patients to download electronichealth record data.

Mobile Medical Apps Not Under FDARegulation

Finally, the FDA delineates five categories ofmobile medical apps that it will not regulateand fall outside the definition of medicaldevice under the statute:

1. Mobile apps that are intended to provideaccess to electronic “copies” (e.g., e-books, audio books) of medical textbooksor other reference materials with generictext search capabilities. Examples includeapps for medical dictionaries andelectronic copies of medical textbooks.

2. Mobile apps that are intended forhealthcare providers to use aseducational tools for medical training orto reinforce training previously received.Examples include apps for medicalflashcards and surgical training videos.

3. Mobile apps that are intended for generalpatient education and facilitate patientaccess to commonly used referenceinformation. Examples include patienthelp guides and CPR training resources.

4. Mobile apps that automate general officeoperations in a healthcare setting and arenot intended for use in the diagnosis ofdisease or other conditions, or in thecure, mitigation, treatment, or preventionof disease. Examples include apps thatenable insurance claim data collectionand those that generate reminders formedical appointments.

5. Mobile apps that are generic aids orgeneral purpose products. These apps arenot considered devices because they arenot intended for use in the diagnosis of

disease or other conditions, or in thecure, mitigation, treatment, or preventionof disease. Examples include apps thatprovide turn-by-turn directions to medicalfacilities and those that enable patient-provider communication via email.

Implications for Digital HealthEntrepreneurs

Industry observers and participants alike havecriticized the notice-and-comment systemutilized by administrative agencies such as theFDA for its inability to keep up with rapidlychanging technology. The FDA’s final guidanceon mobile medical apps applies a thoughtfulrisk-based balance that protects patient safetythrough regulation of the highest-risk apps,while innovation is cultivated by eliminatingregulatory uncertainty with respect tocategories of medical apps that pose little tono patient risk. Although the deregulatorynature of this guidance encourages thedevelopment of new and unforeseentechnology, that same open-endedness alsoleaves some remaining uncertainties.

For example, clinical decision support system(CDSS) software, which aids physicians intranslating patient data into diagnosis andtreatment decisions, can be interpreted tooverlap with the third category of regulatedmobile medical applications, which is definedby the FDA as apps that “perform[] patient-specific analysis and provid[e] patient-specificdiagnosis, or treatment recommendation.” In arecent guidance-related announcement,Jeffrey Shuren, Director of the FDA Center forDevices and Radiological Health, specificallystated that regulatory guidance pertaining toCDSS software would be released in January2014, which means mobile medical apps thatstraddle the line between a medical deviceand CDSS software will have to wait for moreregulatory clarity.

One area in which the FDA produced absoluteclarity is in its exemption of certain entitiesfrom regulation. For example, platform makers

(i.e., mobile device manufacturers) andsoftware distributors (i.e., app stores) are notregulated entities, and their mobile platforms(e.g., iPhones) are not medical devices, underthe final guidance. In addition, unlike in theproposed guidance, the FDA will not regulatecalculators such as Apgar scores and the NIHStroke Scale.

In summary, the final guidance should have afavorable effect on digital healthentrepreneurs, allowing innovation withreduced uncertainty, while the FDA focuses itslimited resources on those apps that pose thegreatest threat to patient safety.


David Hoffmeister(650) [email protected]

Andrew Ellis(650) [email protected]

The FDA’s final guidanceon mobile medical appsapplies a thoughtful risk-based balance thatprotects patient safetythrough regulation of thehighest-risk apps . . .

6

By Nancy M. Lynch, M.D., Founder andPrincipal, Advisorthopædics Incorporated

In July, the FDA’s Center for Devices andRadiological Health (CDRH) launched anambitious and important initiative focused onimproving women’s access to and outcomesfrom treatments using medical devices. Thisfollows the publication of its 2011 draftguidance on the subject. The Health of WomenProgram commenced with an impressive two-day public workshop and included participantsfrom all stakeholder groups.

To say the least, the discussion was eyeopening and sobering. Let me share threespecific points:

• Women are less frequently asked toparticipate in clinical trials than men.Furthermore, when asked, women opt outof participation in those same trials athigher rates than men. As such, trialresults (among other things) may notaccurately reflect treatment effects orsafety issues in women. That’s left up tothe real world to discover after theproduct is on the market.

• Although women undergo far more kneereplacements than men, women whootherwise qualify for a knee replacementare not being offered that procedure atthree times the rate of men who aren’tbeing offered the same surgery! In otherwords, for an equivalent disease burden,women are underserved relative to theirmale counterparts. To be clear, thispattern is not unique to the orthopedicindustry.

• As if being underserved weren’t enough,a woman’s outcome after a kneereplacement is not as good as a man’s.Don’t get me wrong—women get betterfrom knee replacements. They definitelydo. However, on average, women startwith a worse preoperative level of

function and never achieve the functionaloutcome men do.

So, in sum, women are understudied andunderserved. And when they are finallystudied and served, they underrespond.

See what I mean about the discussion beingeye opening and sobering?

While absorbing this information, I couldn’thelp but think of Joy Anderson’s incrediblymind-bending MedtechWomen Fireside Chatsubject, “A Gender Lens in Investing,” andponder the MedtechVision 2013 topic, “Valuein Healthcare.” Both relate directly to the FDAworkshop. The differences and disparitiesmentioned above represent a multitude ofunmet needs. (Hint: “unmet needs” is code for“opportunities.”) By using the optics of agender lens, the medtech industry can focuson innovation that creates value in the healthcaresystem where it is currently not visible.

Unfortunately, in the present reformenvironment, our industry is allowing value tobe defined for us. In my opinion, “value” inhealthcare has become synonymous with“cost containment.” Sure, improving health ismentioned in passing, but the core of health(insurance) reform is about squeezing cost outof the system. To me, value is present only ifan individual’s outcome is optimized and thecollective health of a population improves as aresult. (I’m a physician and that’s my bias. ButI’m also influenced by Clay Christensen’steachings on innovation and concerned thatefforts aimed solely at cost containment aresimply “efficiency innovations” in disguise.)

Fortunately, opportunities exist to create thisoptimization-type of value in our industry bykeenly and agnostically recognizingdifferences in the following:

• Sex-specific incidence and prevalence ofdisease

• Sex-specific expression of disease

• Sex-specific progression of disease

• Sex- and gender-specific experience ofdisease

• Sex- and gender-specific response totreatment

It’s when these sex- and gender-specificvariations are identified, acknowledged, andunderstood that smart, patient-centricapproaches (involving the use of algorithms,diagnostics, services, and therapeutics) can bedeveloped and implemented to improve thehealth of people, not just of women.

Fundamentally, the FDA’s program is thefoundation upon which personalized medicinewill be built. We have leaps and bounds to gobefore we get there, and it starts not withindividual differences but with patternrecognition within and between groups. (Asthe saying goes, even though you’re one in amillion, there are eight more of you in NewYork.) Every part of the healthcare ecosystemsimply must participate in the process forpersonalized medicine to be realized in ourtime. As it relates to gender, stakeholders canemploy a lot of complementary strategies.Specifically,

• For those studying the basic science ofdisease, it’s time to highlight thetranslational relevance of your findings ongeno- and phenotypical sex differences.

• For those designing new products andservices, it’s time to innovate taking intoaccount the probability that men andwomen will respond differently.

• For those running clinical trials, it’s timeto focus on how to explore and report onsex and gender differences in what youare studying.

Creating Value in the Medtech Industry Using a Gender Lens1

1 Please note that this article originally appeared on the MedtechWomen website (www.medtechwomen.org). Continued on page 7...

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Creating Value in the Medtech Industry Using a Gender Lens

• For those regulating trials, it’s time toencourage gender stratification andsubgroup analyses in a manner thatcatalyzes progress.

• For those teaching the next generation,it’s time to incorporate intentional andfrequent didactic instruction on sex andgender differences throughout the carecycle.

• For those providing care, it’s time toobserve the differences, communicatethem to your patients, and incorporatethem into your algorithms of care.

• For those receiving care (or advocating onbehalf of someone receiving care), it’s

time to start asking your physicians,“What differences do you see in howwomen respond to this treatmentcompared to men?”

The FDA is committed to an ongoing,interactive, multidisciplinary dialogue on thisserious and complex topic. You can contributeby broadening your awareness of these issues(Gendered Innovations is an intriguing place tostart), putting a gender lens in front of yourgaze to see the opportunities, and theninterjecting this subject as a recurring themein your personal and professionalconversations. Create a ripple effect byfrequently engaging others. That’s the sourceof change. And who better to bring about thatchange than the 51 percent?

Nancy M. Lynch, M.D., founderand principal ofAdvisorthopædics, has morethan 25 years of experience inthe clinical and business

elements of orthopedics. She is a board-certified orthopedic surgeon and a Fellow ofthe American Academy of OrthopaedicSurgeons. Nancy’s firm, AdvisorthopædicsIncorporated, which is focused exclusively oninnovation in orthopedics, providesconsultation services to a range of entitiesdeveloping products for musculoskeletal care.http://www.advisortho.com.


By Scott Murano, Partner (Palo Alto)

The table below includes data from lifesciences transactions in which Wilson SonsiniGoodrich & Rosati clients participated in thesecond half of 2012 and the first half of2013. Specifically, the table compares—by

industry segment—the number of closings,the total amount raised, and the averageamount raised per closing across the secondhalf of 2012 and the first half of 2013.

The data generally demonstrates that venturefinancing activity declined during the first half

of 2013 compared to the second half of 2012.Specifically, the total number of closingscompleted across all industry segments duringthe first half of 2013 decreased byapproximately 24.8 percent compared to thesecond half of 2012, from 101 closings to 76closings. More significantly, the total amount

Life Sciences Venture Financings for WSGR Clients

Life SciencesIndustry Segment

2H 2012Number ofClosings

2H 2012Total AmountRaised ($M)

2H 2012 AverageAmount

Raised ($M)

1H 2013 Number ofClosings

1H 2013Total AmountRaised ($M)

1H 2013 AverageAmount

Raised ($M)

Biopharmaceuticals 13 83.89 6.45 12 65.31 5.44

Diagnostics 6 19.98 3.33 3 3.18 1.06

Genomics 5 26.04 5.21 2 1.1 0.55

Healthcare Services 3 7.93 2.64 4 37.37 9.34

Medical Devices & Equipment 66 343.76 5.21 46 205.45 4.47

Medical Information Systems 6 11.04 1.84 9 23.36 2.6

Other 2 1.85 0.93 0 N/A N/A

Total 101 494.49 76 335.77


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Life Sciences Venture Financings for WSGR Clients

of money raised across all industry segmentsduring the first half of 2013 decreased bymore than 32.1 percent compared to thesecond half of 2012, from $494.49 million to$335.77 million.

The two industry segments with the largestnumber of closings—medical devices andequipment and biopharmaceuticals—bothexperienced a decline in number of closingsduring the first half of 2013 compared to thesecond half of 2012. Specifically, the largestindustry segment, medical devices andequipment, declined 30.3 percent, from 66closings in the second half of 2012 to 46closings in the first half of 2013; and thesecond-largest industry segment,biopharmaceuticals, declined 7.7 percent, from13 closings to 12 closings. Similarly, in termsof total amounts raised, the two industrysegments with the largest total amountsraised—medical devices and equipment andbiopharmaceuticals—both experienced adecline in amounts raised during the first halfof 2013 compared to the second half of 2012.Specifically, the largest industry segment,medical devices and equipment, declined 40.2percent, from $343.76 million raised in thesecond half of 2012 to $204.45 million raisedin the first half of 2013; and the second-largest industry segment, biopharmaceuticals,declined 22.1 percent, from $83.89 millionraised in the second half of 2012 to $65.31million raised during in the first half of 2013.Bucking the downward trend on bothmeasures were healthcare services andmedical information systems. The totalnumber of closings in healthcare servicesincreased 33.3% from three closings in thesecond half of 2012 to four closings in the firsthalf of 2013; and the total number of closingsin medical information systems increased 50%

from six closings in the second half of 2012 tonine closings in the first half of 2013.Similarly, the total amount raised in healthcareservices increased 371.2% from $7.93 millionin the second half of 2012 to $37.37 million inthe first half of 2013; and the total amountraised in medical information systemsincreased 111.6% from $11.04 million in thesecond half of 2012 to $23.36 million in thefirst half of 2013.

In addition, our data suggests that Series Afinancing activity is up compared to Series Band later-stage equity financings and bridgefinancings. Specifically, the number of SeriesA closings as a percentage of all closingsduring the first half of 2013 compared to thesecond half of 2012 increased from 28.7percent to 30.3 percent, whereas the numberof Series B closings during the same periodsremained constant at 15.8 percent, the numberof Series C and later closings decreased from15.8 percent to 14.5 percent, and the numberof bridge financings decreased from 35.6percent to 34.2 percent. Moreover, the datademonstrates that the average pre-moneyvaluations for Series A and Series B closingsincreased, while the average pre-moneyvaluations for Series C and later closingsdecreased. Specifically, the average pre-money valuation for Series A financingsincreased 17.3 percent, from $7.17 millionduring the second half of 2012 to $8.41 millionduring the first half of 2013; Series Bfinancings increased 5.2 percent, from $17.4million to $18.3 million; and Series Cfinancings decreased by 46.8 percent, from$136.4 million to $72.6 million.

Other data taken from transactions in whichall Wilson Sonsini Goodrich & Rosati clientsparticipated in the second half of 2012 and the

first half of 2013 suggests a continued shift ininvestment money away from life sciences toother industries. In the second half of 2012,life sciences was the second-most attractiveindustry for investment among our clients,representing 19.2 percent of total fundsraised, and was edged out of the number onespot by the software industry, whichrepresented 24.9 percent of total funds raised.In the first half of 2013, life sciences retainedthe number two spot at 18.6 percent of totalfunds raised, with software gaining moreground on life sciences as the top industry forinvestment at 29.5 percent.

Overall, the data confirms that access toventure capital for life sciences companiescontinued to decline during the first half of2013 compared to the second half of 2012.The upshot may be the uptick in Series Aclosings and improved Series A pre-moneyvaluations, both suggesting that demand forthose deals is on the rise. Moreover, whilethe traditional industry segment giants—medical devices and equipment andbiopharmaceuticals—continued to decline interms of closings and total amounts raisedduring the first half of 2013 compared to thesecond half of 2012, lesser-known andhistorically less-popular industry segments ofhealthcare services and medical informationsystems are experiencing double-digit growth,both in terms of closings and total amountsraised, suggesting that there is a growingappetite for investments focused on servicesand software-based healthcare innovations.


Scott Murano(650) [email protected]

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Practice Fusion Raises $70 Million inSeries D FundingOn September 24, 2013, Practice Fusion, thelargest and fastest-growing healthcareplatform in the U.S., announced that it hadcompleted a $70 million Series D financinground. This investment will allow PracticeFusion to expand its offerings to patients andaccelerate the company’s continued leadershipin the electronic medical record market, aswell as fund new clinical data research anddevelopment. WSGR advised Practice Fusion in the financing. To learn more, please see the company’s press release athttp://www.practicefusion.com/pages/pr/pf-announces-series-d-funding.html.

Pacific Biosciences of California Signs$75 Million Deal with Roche DiagnosticsOn September 25, 2013, Pacific Biosciences ofCalifornia announced that it has entered intoan agreement with Roche Diagnostics todevelop diagnostic products, includingsequencing systems and consumables. PacificBiosciences will develop and manufacturecertain products intended for clinical use,which it will sell exclusively to Roche, whichhas obtained worldwide rights to exclusivelydistribute these products in the field of humanin vitro diagnostics. WSGR advised PacificBiosciences in the transaction. For moredetails, please see Pacific Bioscience’s pressrelease at http://www.globenewswire.com/news-release/2013/09/25/575764/10049796/en/Pacific-Biosciences-Announces-Agreement-With-Roche-Diagnostics-to-Develop-and-Supply-DNA-Sequencing-Based-Products-for-Clinical-Diagnostics.html.

Transcept Pharmaceuticals and ShinNippon Biomedical Laboratories SignGlobal Licensing AgreementOn September 25, 2013, TranceptPharmaceuticals and Shin Nippon BiomedicalLaboratories (SNBL) announced in a joint pressrelease that the companies have entered intoan exclusive worldwide licensing agreementfor a novel, rapidly absorbed treatment foracute migraines that incorporatesdihydroergotamine as the active drug. WSGR

represented Shin Nippon BiomedicalLaboratories in this transaction. For moreinformation, please see the companies’ jointpress release at http://www.prnewswire.com/news-releases/transcept-and-shin-nippon-biomedical-laboratories-announce-global-licensing-agreement-for-advanced-acute-migraine-treatment-225245472.html.

SafeStitch Medical Completes Mergerwith TransEnterix On September 4, 2013, development-stagemedical device companies SafeStitch Medicaland TransEnterix announced that they haveclosed SafeStitch’s acquisition of TransEnterix.Headquartered in North Carolina’s ResearchTriangle, the combined company is expected tobe renamed TransEnterix and is dedicated tobringing flexible minimally invasive surgicaltechnologies to market, including SurgiBot, anovel patient-side surgical robotic system.WSGR represented TransEnterix in thetransaction. For more information, please seehttp://www.transenterix.com/news/2013/09/safestitch-medical-completes-merger-with-transenterix/.

Otsuka Pharmaceutical to Acquire AstexPharmaceuticalsOn September 5, 2013, Otsuka Pharmaceuticaland Astex Pharmaceuticals announced thattheir respective boards of directorsunanimously approved a transaction underwhich Otsuka will acquire all of theoutstanding shares of Astex for $8.50 pershare in cash, representing a 48 percentpremium to the average closing stock price forthe prior 30-day period. The purchase pricerepresents a fully diluted equity value ofapproximately $886 million. The transaction isexpected to allow the companies to combineAstex’s fragment-based drug discoverytechnology with Otsuka’s own R&S strengthsin areas such as central nervous systemdiseases and strengthen Otsuka’s oncologyofferings. WSGR is representing Astex in theacquisition. More details are available athttps://www.otsuka.co.jp/en/company/release/2013/0905_01.html.

Rani Therapeutics Secures Series BFundingOn August 28, 2013, Rani Therapeutics, acompany that has developed a novel approachfor the oral delivery of large drug molecules,announced it has closed its Series B round offunding, led by Google Ventures. InCubeVentures and VentureHealth also joined theround. The funding will support the furtherdevelopment of Rani Therapeutics’ novelapproach for the oral delivery of large drugmolecules including peptides, proteins,antibodies, RNAi therapies, and selectvaccines. WSGR represented RaniTherapeutics in the financing. Furtherinformation is available athttp://www.cnbc.com/id/100994267.

Johnson & Johnson CompletesAcquisition of Aragon PharmaceuticalsOn August 19, 2013, Johnson & Johnsonannounced that it has successfully completedits acquisition of Aragon Pharmaceuticals, aprivately held pharmaceutical discovery anddevelopment company focused on drugs totreat hormonally driven cancers. Developmentof compounds from Aragon’s androgenreceptor antagonist program will be managedby Janssen Research & Development. WSGRadvised Aragon Pharmaceuticals in thetransaction. For additional details, please seehttp://www.investor.jnj.com/releasedetail.cfm?ReleaseID=786092.

Actelion Enters Agreement to AcquireCeptaris TherapeuticsOn July 31, 2013, Actelion US HoldingsCompany and privately held CeptarisTherapeutics announced they have enteredinto an agreement for Actelion to acquireCeptaris. Under the terms of the agreement,Actelion paid Ceptaris $25 million uponsigning and will pay $225 million to Ceptarisshareholders upon the close of thetransaction. The merger is contingent uponcertain closing conditions, including FDA ofCeptaris’ product Valchlor, a topicalformulation of mechlorethamine for thetreatment of early-stage mycosis fungoides.WSGR represented Ceptaris in the

Recent Life Sciences Highlights

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Recent Life Sciences Highlights

transaction. To learn more, please refer tohttp://cws.huginonline.com/A/131801/PR/201307/1719734_5.html.

Sequenta Completes $20 Million Series CFinancingOn July 3, 2013, Sequenta, a biotechnologycompany dedicated to improving patient carein diseases mediated by immune cells throughthe discovery and development of novelclinical diagnostics, announced the completionof a $20 million Series C financing. The roundwas led by Foresite Capital Management, withparticipation from all inside investors,including MDV and Index Ventures. Sequentawill use the proceeds for commercial scale-upand clinical validation of the ClonoSIGHT test. WSGR advised the company in thefinancing. Further details may be found athttp://sequentainc.com/sequenta-completes-20-million-series-c-financing/.

Avanir Pharmaceuticals and OptiNoseAnnounce Development andCommercialization AgreementOn July 2, 2013, Avanir Pharmaceuticals anddrug delivery company OptiNose ASannounced they have entered into an exclusiveNorth American license agreement for thedevelopment and commercialization ofOptiNose’s novel intranasal delivery systemcontaining low-dose sumatriptan powder totreat acute migraine. OptiNose received anupfront cash payment of $20 million and iseligible to receive certain shared developmentcosts and up to an additional $90 millionlinked to the achievement of future clinical,regulatory, and commercial milestones. WSGR represented Avanir in the matter.Additional information is available athttp://ir.avanir.com/phoenix.zhtml?c=61699&p=irol-newsArticle&ID=1834946&highlight.

NuMedii Receives $3.5 Million in SeriesA FinancingOn June 26, 2013, NuMedii, a company thatdiscovers and de-risks effective new drugs bytranslating its predictive Big Data technologyinto therapies with a higher probability oftherapeutic success, announced that it hasreceived $3.5 million in a Series A funding ledby Claremont Creek Ventures and LightspeedVenture Partners, with participation by LifeScience Angels and others. NuMedii raisedthis initial funding to further develop itsproprietary technology and prepare its firstthree internal drug development programs forclinical testing. Wilson Sonsini Goodrich &Rosati advised the company in the financing.For more information, visit http://numedii.com/numedii-announces-series-a/.

NanoString Technologies Prices InitialPublic OfferingOn June 25, 2013, NanoString Technologies, aprovider of life science tools for translationalresearch and molecular diagnostic products,announced the pricing of its initial publicoffering of 5.4 million shares of common stockat a price to the public of $10.00 per share.The bookrunning managers of the offeringwere J.P. Morgan and Morgan Stanley, andthe co-managers were Leerink Swann andRobert W. Baird & Co. NanoStringTechnologies common stock trades on theNASDAQ Global Market under the symbol“NSTG.” WSGR represented NanoString inconnection with the offering. Further detailscan be found at http://www.nanostring.com/company/corp_press_release?id=87.

U.S. Supreme Court Adopts Firm’sArguments in Myriad DecisionOn June 13, 2013, the United States SupremeCourt issued its long-awaited decision in

Association for Molecular Pathology v. MyriadGenetics, concluding that isolated fragmentsof genomic DNA are naturally occurring andthus are not patent eligible, whilecomplementary DNA (cDNA) is not a productof nature and thus is patent eligible. Thearguments adopted by the court mirror thoseput forth in an amicus brief previously filed byWSGR on behalf of Dr. Eric Lander, of theworld’s leading genomics researchers, in thecase. At the oral argument, three of thejustices referred repeatedly to WSGR’s brief in questioning Myriad’s counsel. Please see the U.S. Supreme Court’s decision athttp://www.wsgr.com/PDFs/myriad-0613.pdffor more information.

St. Jude Medical Signs Equity Investmentand Option to Purchase Agreement withSpinal ModulationOn June 7, 2013, St. Jude Medical, a globaldevice company, and privately held SpinalModulation announced that they have enteredinto a series of agreements under which St.Jude Medical made a $40 million equityinvestment in Spinal Modulation, which hasdeveloped an innovative neuromodulationtherapy that provides a new pain managementoption for patients with chronic pain. Theagreement provides St. Jude Medical with anexclusive option to distribute the AxiumNeurostimulator System, developed andmanufactured by Spinal Modulation, ininternational markets where it is approved forsale. WSGR advised Spinal Modulation in thetransaction. To learn more, please visithttp://investors.sjm.com/phoenix.zhtml?c=73836&p=irol-newsArticle&ID=1828124&highlight.

11

Life Sciences Events: Wilson Sonsini Goodrich & RosatiHosts 21st Annual Medical Device Conference

WSGR Receives Top Rankings from Dow Jones Venture Source, LMG Life Sciences, and BioPharm Insight

Wilson Sonsini Goodrich & Rosati recently received third-party recognition from Dow Jones VentureSource, LMG Life Sciences, and BioPharmInsight for its achievements on behalf of clients.

Dow Jones VentureSource’s legal rankings for issuer-side venture financing deals in the first half of 2013 placed Wilson Sonsini Goodrich & Rosatiahead of all other firms by the total number of rounds of equity financing raised on behalf of clients. The firm is credited as legal advisor in 98rounds of financing, while its nearest competitor advised on 64 rounds of equity financing. Of particular interest to The Life Sciences Report, DowJones VentureSource ranked WSGR No. 1 nationally for issuer-side deals in the healthcare and medical devices and equipment industries.

Further, a number of the firm’s life-sciences-related practices received recognition in the 2013 edition of LMG Life Sciences, a guide published bythe UK-based Euromoney Legal Media Group. Wilson Sonsini Goodrich & Rosati was “highly recommended” in the areas of patent prosecution,patent strategies and management, and licensing collaboration, and “recommended” in the corporate category. The rankings were based on areview of nearly 1,000 interviews and surveys completed by individuals active in the life sciences industry.

In addition, the firm ranked highly on several biotechnology and pharmaceutical league tables published by BioPharm Insight based on the volumeand value of its licensing agreements in both the second quarter of 2013 and the preceding 12 months. Select rankings include the following:

On June 19, 2013, the firm hosted its 21stAnnual Medical Device Conference, at which avariety of industry experts addressed topics ofcritical importance to medical device companies.More than 650 executives, entrepreneurs,investors, and in-house counsel from medicaldevice companies attended the event, whichtook place in San Francisco, California.

In a series of panels, industry CEOs, venturecapitalists and other investors, industrystrategists, investment bankers, and marketanalysts addressed such topics as fundingstrategies, med-tech investment models, theSunshine Act and physician payments,crowdfunding, patent strategies, digital health,university licensing, and recent regulatorydevelopments.

The event’s lunch session featured aninterview with representatives from The

Fogarty Institute for Innovation, aneducational, nonprofit organization thatpromotes medical innovation by providingsupport to entrepreneurial innovators workingon promising new medical therapies. Thediscussion, which was moderated by DavidCassak, VP of content and managing directorof medical devices for Elsevier BusinessIntelligence, included institute founder anddirector Thomas Fogarty, M.D.; president andCEO Ann Fyfe; and director Frederick St Goar,M.D. They discussed the state of innovation inmedical devices today and how programs likeThe Fogarty Institute offer a novel approach toa challenging environment.

In addition, the conference included the firstannual MedTech Idol Competition, throughwhich four medical device start-ups wereselected to present pitches to a panel ofinvestor judges. The judges evaluated the

presenters and the audience members votedfor the winner. This year, LIM Innovations, adeveloper of prosthetic socket technology,took first place, earning them a presenting slotat an upcoming IN3 Medical Deviceconference and a profile in an upcoming issueof Elsevier’s monthly magazine, START-UP: TheReview of Emerging Medical Ventures. Thecompetition was produced by RCT Ventures,an investment program of ResearchCorporation Technologies that is focused onearly-stage biomedical companies.

Please visit http://www.wsgr.com/news/medicaldevice/agenda.htm to view the 2013Medical Device Conference agenda, whichincludes links to videos of the variouspresentations.

• Ranked No. 2 by global volume and No. 4 by global valueof biotech and pharma licensing agreements in Q2 2013

• Ranked No. 4 by global volume and No. 7 by global valueof biotech and pharma licensing agreements in the 12months preceding Q2 2013

• Ranked No. 5 by volume and No. 7 by value of biotech andpharma licensing agreements in North America in the 12months preceding Q2 2013

• Ranked No. 2 by volume and No. 4 by value of biotech andpharma licensing agreements in the Asia-Pacific region inthe 12 months preceding Q2 2013

• Ranked No. 6 by volume and No. 6 by value of biotech andpharma licensing agreements in Europe in the 12 monthspreceding Q2 2013

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© 2013 Wilson Sonsini Goodrich & Rosati, Professional Corporation. All rights reserved.

THIS PUBLICATION IS PROVIDED FOR YOUR INFORMATION ONLY AND IS NOT INTENDED TO CONSTITUTE PROFESSIONAL ADVICE AS TO ANY PARTICULAR SITUATION.

Upcoming Life Sciences Events

Casey McGlynn (650) [email protected]

Elton Satusky(650) [email protected]

Scott Murano(650) [email protected]

Casey McGlynn, a leader of the firm’s life sciences practice, has editorial oversight of The Life Sciences Reportand was assisted by Elton Satusky and Scott Murano. They would like to take this opportunity to thank all ofthe contributors to the report, which is published on a semi-annual basis.

Phoenix 2013: The MedicalDevice and DiagnosticConference for CEOsOctober 10–13, 2013The Ritz-Carlton, Dove MountainMarana, Arizonawww.wsgr.com/news/phoenix

Phoenix 2013 will serve as the20th annual conference for chiefscientific officers and seniorleadership of medical device anddiagnostic companies. The eventwill provide an opportunity for top-level executives from largehealthcare and small venture-backed companies to discussfinancing, strategic alliances, andother industry issues.

Wilson Sonsini Goodrich &Rosati’s Biotech Board ofDirectors ReceptionJanuary 15, 2014Clift HotelSan Francisco, California

The Biotech Board of DirectorsReception is an exclusivenetworking event geared towardexecutives and directors of biotechcompanies.

rEVOLUTION SymposiumMay 7–9, 2014Mandarin OrientalBoston, Massachusettswww.wsgr.com/news/revolution

The rEVOLUTION Symposium willdiscuss the most importantstrategic challenges facingpharmaceutical and biotech chiefscientific officers. The event willexamine the organization andmanagement of R&D to uncovernew disruptive discovery anddevelopment models and assessthe continued impact of pricing,reimbursement, regulation, andglobalization on our industry.

Wilson Sonsini Goodrich &Rosati’s Medical DeviceConferenceJune 11–12, 2014The InterContinental HotelSan Francisco, California

Wilson Sonsini Goodrich &Rosati’s 22nd Annual MedicalDevice Conference, aimed atprofessionals in the medical deviceindustry, will feature a series ofpanels and discussions addressingthe critical business issues facingthe sector today.