Linkages between the Public & Private Markets

1. Linkages between the Public & Private Markets Georgiana Fung Small Cap Strategist, MLPF&S 212-449-9189 · georgiana_fung@ml.com May 2007 Merrill Lynch does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on slide 33. 1

2. Outline • Background • Public Market Structure • Relationship to Private Equity • Private Equity Outlook • Investments • Exits

3. BACKGROUND

4. For Every Large Cap, there are 10 Smaller Cap Names Source: Merrill Lynch Small Cap Research

5. The Linkages between the Public and Private Equity Markets Source: Merrill Lynch Small Cap Research

6. Similarities of Smaller Cap Stocks and Private Equity • Characteristics of Smaller Cap stocks & Private Equity vs. Large Cap stocks • Less transparent • Less recognized • Less liquid • Faster growth

7. Information Flow Reduces as Company Size Decreases Source: Merrill Lynch Small Cap Research, IBES

8. Managers of Less Liquid Assets are More Likely to Provide Value Added Source: Merrill Lynch Small Cap Research, Lipper

9. Smaller and Less Liquid Assets have Outperformed the S&P 500 Source: Merrill Lynch Small Cap Research, Venture Economics

10. PRIVATE EQUITY OUTLOOK

11. Private Equity Outlook • Investments • Capital markets supportive of buyouts • Opportunities in smaller cap public equities • Exits • IPOs expected to be healthy • M&A to remain a key driver

12. INVESTMENTS Capital markets supportive of buyouts

13. Fund Raising Has Gone from Strength to Strength Source: Merrill Lynch Small Cap Research, Venture Economics

14. Investors are Suspect over High Expectations among the Mega-50 Source: Merrill Lynch Small Cap Research, I/B/E/S

15. Anything but Large Source: Merrill Lynch Small Cap Research, Lipper, ML High Yield Strategy, Venture Economics (*) Bond issuance and PE data is Quarterly as of Q4/06.

16. Capital Markets to Facilitate Deal Making Source: Merrill Lynch Small Cap Research, Merrill Lynch High Yield Strategy

17. LBOs of Smaller Public Companies on the Rise Source: Merrill Lynch Small Cap Research, Securities Data Corp.

18. Relative Values are Not Extreme Source: Merrill Lynch Small Cap Research

19. Cost of Being Public Weighs on Smaller Companies Source: Merrill Lynch Small Cap Research

20. More Opportunities in Small Cap Stocks Source: Merrill Lynch Small Cap Research

21. EXITS IPOs likely to be healthy; M&A to remain the driver

22. IPOs Expected to be Healthy • Risk taking to curtail appetites for IPOs in the near-term • However, healthy markets, a lower cost of capital and rising issuance go hand in hand

23. Over 400 Companies were Sold by VCs in Each of the Past 3 Years, a Solid Figure Source: Merrill Lynch Small Cap Research, VentureOne

24. Risk Appetites Unwinding and will Continue Source: Merrill Lynch Small Cap Research, VentureOne

25. An Improving IPO Backdrop can Fuel a Spate of Additional Fund Raising Source: Merrill Lynch Small Cap Research

26. M&A a Key Driver • Hunt for growth by larger firms through acquisition • Especially true in Healthcare

27. Healthcare Increasingly becoming a more Meaningful Part of the Consolidation Wave Source: Merrill Lynch Small Cap Research, Securities Data Corp.

28. Expectations for Large Pharma Continue to Grind Down Source: Merrill Lynch Small Cap Research, I/B/E/S

29. Micro Cap Healthcare Offers Higher Growth * Private Equity/Micro Cap Proxy Source: Merrill Lynch Small Cap Research, I/B/E/S

30. Smaller Biotech/Drug Sell Below Long-term Average Valuations Source: Merrill Lynch Small Cap Research

31. Large Cap Healthcare Companies are Hunting for Growth

32. Final Remarks PUBLIC PRIVATE Source: Merrill Lynch Small Cap Research

33. Disclaimers