development stage companies as an important source of innovation and new products to supplement R&D pipelines and drive future growth. Strong growth potential is critical for these companies to support their valuation metrics, especially in light of expected patent expirations on their commercial products. In total, over $290 billion of revenue is at risk from patent expirations between now and 2018.29 The large and mid-sized companies are addressing this strategic need to a large extent through increased acquisitions and partnerships with development stage companies that have maturing assets. The Fund Managers expect this dynamic to increase competition between the larger strategic players in the industry as they vie for the most interesting companies with maturing development stage assets. The development stage companies should have strong negotiating leverage in these deal discussions, which should drive premium valuations on acquisitions and attractive terms on partnerships. The increased strategic need for acquisitions and partnerships comes at a time when the large and many of the mid-sized companies in the industry are in a strong financial position to complete high value deals. The top ten pharmaceutical companies have a total of $140 billion in cash on their balance sheets today and have a combined market capitalization of over $1.3 trillion.*°° A relatively new set of well funded potential acquirers and/or partners has emerged over the last decade, as many of the mid-sized biotech companies have seen their commercial businesses thrive, and now have strong revenue and profit growth. Since 2002, the number of public biotech companies with annual profit (EBIT) over $100 million has doubled to 16, and the combined annual profit of these companies has increased 4.5 times to $16.6 billion.2!_ This has significantly increased the number of companies in the industry with the financial wherewithal to complete large cash transactions. At the same time, the industry’