these diseases further from what has historically been a death sentence into a chronic, treatable

these diseases further from what has historically been a death sentence into a chronic, treatable condition. As this happens, huge markets will be created for entirely new biopharmaceutical products. While cancer is the leading disease area, this pace of dramatic scientific and technological progress is extending into several other areas of medicine and will likely accelerate. Many of the initial examples of targeted or personalized therapies in non-cancer indications have been in rare or so called "orphan" diseases following discovery of the underlying genetic abnormalities. This period of rapid technology advancement establishes a cycle of innovation in the market that creates great opportunity for highly focused, small, companies. Information Convergence: The rate of innovation in information convergence has already accelerated relative to the historical rate of innovation in healthcare information technology (“HCIT”) due to several underlying factors. First, as mentioned, the HITECH Act provided billions in direct incentives to encourage healthcare providers to adopt information technology, beginning with electronic medical record (“EMR”) systems. This led to a significant increase in spending on EMRs which benefitted large established EMR vendors, but it also benefitted new smaller players in the EMR market. Importantly, the broad upgrade of information technology and deployment of EMRs across the healthcare provider market has established a technology infrastructure in the market that benefits an entirely new generation of companies that are developing technologies that layer onto existing EMRs and address the next levels of IT adoption. This next level of information technology adoption is dictated by the HITECH Act through a series of “meaningful use” incentive initiatives. Another key factor that has led to an acceleration in innovation in information convergence is that most of the highest value innovation in this sector is arising from integrating technologies that have been discovered, developed, validated, and implemented in completely different sectors (e.g., cloud storage, mobile computing, wireless communications, web-delivered software, diagnostics and sensors). These product development efforts draw heavily from existing technologies and allow small companies focused on addressing discrete problems and opportunities within the healthcare market to develop and launch products with minimal technology discovery. The bulk of the effort in these activities is in rapidly creating high value products by combining well-understood and available technologies, and getting them into the hands of customers to evaluate their performance in real world use conditions. This early customer experience allows companies to generate revenues early in their life, but also provides valuable user feedback which can be used to continuously improve product design elements. The benefit of this type of product development effort in the information convergence sector is that it reduces risk, lowers capital requirements, and results in more predictable timelines. Considering the size of the opportunity and the large number of discrete problems and inefficiencies that must be addressed, the Fund Managers expect the next decade will be a period of robust innovation and company creation. Smaller companies are likely to thrive during this period as they are better able to quickly move from opportunity to product launch. 28 CONTROL NUMBER 257 - CONFIDENTIAL HOUSE_OVERSIGHT_024039