Capstone Headwaters MEDICAL DEVICE OUTSOURCING Q DRUG-DEVICE COMBINATION MARKET SPOTLIGHT TABLE OF CONTENTS CONTRIBUTORS

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1 Capstone Headwaters MEDICAL DEVICE OUTSOURCING Q TABLE OF CONTENTS Market Spotlight Notable Transactions Select Transactions Firm Track Record CONTRIBUTORS Eric Williams Mark Surowiak Director DRUG-DEVICE COMBINATION MARKET SPOTLIGHT Drug-device combination products include any combination of a drug or biologic with a medical device. Examples of drug-device combination products include prefilled drug delivery systems, drug-eluding stents, wearable injectors, and insulin delivery systems. By 2023, the Drug-Device Combination market value will reach $29.8 billion, increasing at a 13.8% compound annual growth rate from 2018 to 2023, a much faster growth than that of the overall Medical Device industry. 1 These combination devices are complex, requiring sophistication and specialized expertise from outsourced providers especially in areas such as engineering and development, testing, test design, validation, and regulatory compliance. Sterility assurance for sensitive combination products and biologics is challenging and of paramount importance due to more stringent Food & Drug Administration (FDA) requirements and significant ramifications for a device recall, which are driving merger and acquisition (M&A) activity as exemplified by the recently closed transaction detailed below. In August, Capstone Headwaters advised Gibraltar Laboratories on its sale to Sotera Health LLC, a portfolio company of Warburg Pincus and GTCR. Sotera Health is the world s leading, fully integrated protector of global health and operates 63 facilities in 13 countries. The company has over 2,600 employees globally and touches the lives of more than 180 million people around the world each year. Sotera Health serves more than 5,000 customers worldwide, including 75 of the top 100 medical device manufacturers. Gibraltar is a premier provider of outsourced microbiology and analytical chemistry testing, protocol development, and sterility validation solutions serving the Medical Device and Pharmaceutical sectors. The acquisition is a highly strategic fit for Sotera Health, which owns Nelson Labs, a global medical device outsourcing provider focused on lab testing and expert advisory services. Gibraltar represented a highly sought after acquisition target based on its expertise in the fields of sterility, microbiology, molecular biology, and virology and proven ability to assist its clients in validating the safety, efficacy, and regulatory compliance of their products. Both Gibraltar and Nelson Labs share a similar commitment to clients, scientific integrity, and staff development. Additionally, Gibraltar will benefit from Nelson Labs and Sotera Health s international reach and business development resources. 3 September 2018

2 NOTABLE TRANSACTIONS Several notable transactions were announced or completed in the industry through year-to-date Select transactions are outlined below, followed by a more comprehensive list on the following page. Graham Partners acquires Medbio Inc. (July 2018, undisclosed) Graham Partners, a private equity firm focused on investing in middle-market consumer and industrial manufacturing-related companies, has acquired Medbio, a provider of contract manufacturing services for the Medical and Biotech industries. Terms of the deal were not disclosed. Acquires Founded in 2004, Medbio specializes in precision injection molding, injection mold tooling, assembling, packaging, project management, and design support with clients in the US, Europe, and Central America. Medbio currently serves OEMs in the orthopedic, cardiovascular, ophthalmology, neurology, and biotechnology fields. The acquisition expands Graham Partners portfolio into the Healthcare industry and provides Medbio with a reputable partner that can appropriately finance growth opportunities. 2 NN, Inc. acquires Paragon Medical Inc. (April 2018, $375.0 million) Acquires NN, Inc. (Nasdaq:NNBR) under its brand, Precision Engineered Products, has acquired Paragon Medical, a turnkey supplier of cases and trays, surgical instruments, implantable components, and design and development services, for a total transaction value of $375.0 million. The deal provides Precision Engineered Products with complementary capabilities to expand its medical division. Richard Holder, President and CEO of NN, commented in a press release, We are thrilled to welcome the Paragon team to the NN family. Paragon Medical enhances our technical proficiencies, diversifies our product and finished device offerings, and adds key employees that will make impactful contributions throughout the organization. This acquisition continues our strategic focus to expand our Life Sciences portfolio as well as create a balanced business. 3 Westfall Technik, Inc. acquires Elfy s Inc. (February 2018, undisclosed) Acquires Westfall Technik, a private equity backed holding company that engages in the provision of plastics manufacturing solutions, has acquired Elfy s, a provider of front-end solutions for medical devices and components. Founded in 1989, Elfy s 12,000 square foot facility in California produces molded prototypes, tooling designs, computer aided design and manufacturing models, as well as production level parts for its medical clients. Terms of the transaction were not disclosed. Westfall Technik, a portfolio company of Lee Equity Partners and BlackBern Partners, adds Elfy s to their leading plastic manufacturing solutions portfolio. The acquisition provides Westfall Technik s portfolio with comprehensive design-for-manufacturing (DFM) services, providing rapid prototyping and short-term molding to the Medical industry. 4 2

3 SELECT TRANSACTIONS Enterprise EV / LTM Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA 08/06/18 Sil-Pro Trelleborg Sealing Manufactures molded medical components, assemblies, and devices. 07/30/18 Regulatory Professionals Premier Research Provides regulatory expertise and solutions. 07/20/18 Medbio Graham Partners Offers contract manufacturing services for medical and biotech industries. 07/13/18 ReNu Medical Arjo Specializes in reprocessing and sterilizing single use non-invasive medical devices 06/27/18 Sequel Special Products Graphic Controls Offers product development and contract manufacturing services for surgical instruments. 06/21/18 Medelec Resonetics Produces high precision metal tubular profiles for medical use. 06/12/18 Clinical Device Group Factory-CRO Offers medical device consulting and contracting services. 06/11/18 MWC Technologies Zeus Industrial Products Manufactures medical device components. 06/06/18 Advanced Sterilization Fortive Provides medical device sterilization systems. $2, x 14.0x 05/25/18 Precision Medical Röchling Medical Rochester Offers contract packaging services for OEM medical devices. 05/24/18 RS Calibration Trescal Provides laboratory calibration and equipment validation services. 05/21/18 Assets of Heart Sync Graphic Controls Acquisition Manufactures defibrillation electrodes. 05/03/18 Advanced Surgical and Orthopedics MedPlast Offers a broad range of metals manufacturing, frontend design, development, and prototyping services. $ x 11.5x 05/01/18 Hygia Health Stryker Sustainability Provides third party reprocessing services of single-use medical devices. 04/30/18 Assets of Catheter Research Biomerics; ATL Technology Manufactures interventional catheters, tube sets, and other assemblies for medical devices. 04/23/18 Lavezzi Precision MW Industries 04/03/18 Paragon Medical NN 02/22/18 Bridgemedica NN Offers precision machinery components and provides contract medical manufacturing services. A designer and manufacturer of cases and trays, surgical instruments, and implantable components. Designs, researches, develops, and engineers medical devices. $ x 15.6x 02/09/18 Elfy s Lee; Blackburn; Westfall Technik Provides front-end solutions for medical devices and components. 02/08/18 Corpus Medical Confluent Medical Technologies Offers contract manufacturing services for Class III Medical devices. 02/02/18 Dielectrics UFP Technologies Designs medical device components and provides contract manufacturing services. $ x - 01/31/18 Spectrum Plastics Group AEA Investors Manufactures specialty medical plastic products for medical device manufacturers and end-users. 01/02/18 Veracity Medical Solutions Arcamed Provides contract manufacturing of surgical instrumentation and implants. Source: Capital IQ and Capstone Headwaters Research 3

4 FIRM TRACK RECORD has recapitalized with a portfolio company of AUDAX GROUP, INC. has divested assets to has secured financing from 4

5 CITATIONS 1. Market.biz, Global and Regional Drug Device Combination Industry Production, Sales and Consumption Status and Prospects Professional Market Research Report, accessed September 24, Medbio, Medbio Announces Partnership with Graham Partners, accessed September 5, NN, NN, Inc. Completes Acquisition of Paragon Medical, accessed September 5, Westfall Technik, Westfall Technik, Inc. Adds Rapid Prototyping And Short-run Molding Businesses 10 Day Parts, Inc. And Elfy s, Inc, accessed September 5, Disclosure: This report is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and acquisition activity. Information contained in this report should not be construed as a recommendation to sell or buy any security. Any reference to or omission of any reference to any company in this report should not be construed as a recommendation to buy, sell or take any other action with respect to any security of any such company. We are not soliciting any action with respect to any security or company based on this report. The report is published solely for the general information of clients and friends of Capstone Headwaters. It does not take into account the particular investment objectives, financial situation or needs of individual recipients. Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for all investors. This report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that may cause actual results to vary mate- rially. We are under no obligation to update the information contained in this report. Opinions expressed are our present opinions only and are subject to change without notice. Additional information is available upon request. The companies mentioned in this report may be clients of Capstone Headwaters. The decisions to include any company in this report is unrelated in all respects to any service that Capstone Headwaters may provide to such company. This report may not be copied or reproduced in any form, or redistributed without the prior written consent of Capstone Headwaters. The information contained herein should not be construed as legal advice. 5

6 MEDICAL DEVICE OUTSOURCING REPORT CONTRIBUTORS Eric Williams Eric serves as and Head of the Atlantic Region for Capstone Headwaters, based out of Philadelphia. Prior to Capstone, Eric was responsible for managing the Eastern region for Morgan Stanley Smith Barney s Capital Strategies Group and its predecessor, Citi Capital Strategies. Eric has more than 20 years of experience managing strategic sale assignments and leveraged recapitalizations for owners of privately held companies. He is head of Capstone s Health and Medical practice and has successfully completed over 100 transactions in a wide range of industries including medical device, contract manufacturing, pharmaceutical outsourcing, health care services and education and training. In 2016, he received the USA Deal of the Year at the M&A Atlas Awards for his work on the acquisition of Progressus Therapy, LLC and in 2014 was awarded both M&A North American Middle Market Deal of the Year at the M&A Atlas Awards and Cross Border Deal of the Year from the M&A Advisor for his work on the sale of T-DOC Company LLC. Eric has executed complex cross-border transactions with foreign buyers based in London, Germany, Sweden and Switzerland and has structured deals with leading private equity groups and strategic corporate buyers. He graduated cum laude from the University of California and is a Series 7 and 63 Registered Securities Representative as well as a Series 24 Registered Securities Principal. Mark Surowiak Director msurowiak@capstoneheadwaters.com Mark is a Director in the Philadelphia office, supporting the management of the Atlantic Region. Prior to Capstone Headwaters, Mark served over 10 years as a senior investment banking professional in Morgan Stanley Smith Barney s Capital Strategies Group. Over his career, Mark has focused on developing deep credentials and expertise in the sale and recapitalization of privately held businesses. Prior to investment banking, Mark enjoyed a career in the social services field. Mark is a graduate of Illinois State University with a BS in Business Administration. He is a Series 7 and 63 Registered Securities Representative US MIDDLE MARKET INVESTMENTBANKOF THE YEAR BOUTIQUE RESTRUCTURING INVESTMENT BANK OF THE YEAR MIDDLE MARKET INVESTMENTBANKOF THE YEAR TOP 10 MOSTREFERRED INVESTMENTBANKS 6

7 EXTENDED HEALTHCARE TEAM Report Title Q David Baker Rod Rivera Mike Ewing Sophea Chau Director Roger Kahn Eric Ferris Vice President

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