Blog of Intellectual Capital

SALE OF PORTAERO, INC.

Gerbsman Partners (www.gerbsmanpartners.com) has been retained by Portaero, Inc. to solicit interest for the acquisition of all, or substantially all, Portaero, Inc.’s (“Portaero”) assets.

Headquartered in Cupertino, California, Portaero is a leader in developing devices for the treatment of homogeneous emphysema.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to the Portaero’s Assets has been supplied by Portaero. It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Portaero’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the Portaero Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Portaero and Gerbsman Partners. Without limiting the generality of the foregoing, Portaero and Gerbsman Partners and their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the Portaero Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

Portaero, Inc. Company Profile

Founded in 2007, Portaero is a private, California-based, clinical stage medical device company. Over the past 6 years, Portaero has raised approximately $20mm in equity and debt from the leading venture capital firms Versant, Aberdare, and Novartis Ventures.

Portaero is a leader in developing innovative, therapeutic devices to treat advanced, homogeneous emphysema. It is the only therapy currently in patients whose primary indication for the FDA pivotal trial will be homogeneous emphysema.

Portaero’s therapy targets patients whose lungs are hyperinflated due to emphysematous destruction and dynamic airway collapse. The Portaero Access Tube System creates a transthoracic pneumostoma which is subsequently managed by the patient with the Portaero Daily Disposable Tube.  When patent, the pneumostoma reduces the amount of trapped gas and the pressure in the diffusely destroyed lung, thus restoring the productivity of the native airways, improving overall lung function, and increasing patient quality of life.  Early experience also suggests pneumostoma patients experience a lower rate of exacerbations.  Exacerbations make these patients among the most expensive in the health care system.

Portaero believes its assets are attractive for a number of reasons:

·     Portaero is the only device in development which has generated data in homogeneous patients that warrants inclusion of those patients in a US PMA trial.

·     6+ years of clinical experience supports the safety and the efficacy of the therapy.

·     Current patients continue to manage their pneumostomas from 1+ years to 6.5 years.

·     Portaero Intellectual Property, comprising 25 issued US patents, 15 pending US patent applications, 10 issued international patents and 10 international pending patent applications, is the earliest and most comprehensive portfolio for    transthoracic bypass. Some of Portaero patents also apply to using the Portaero port for improving drug delivery to the lung.

·     The Portaero Access Tube System is placed by a thoracic surgeon via a mini-thoracotomy.  The 45 minute procedure requires no special skills and has been completed under both local and general anesthesia.

·     The Portaero Daily Disposable Tube has successfully been managed by a wide variety of patients.

·     The Portaero Reopening Device is designed to be used by an Interventional Bronchoscopist or surgeon.  It should be a simple, safe, outpatient procedure that can be quickly done at the end of the bronch list.

·     The Portaero therapy is very accessible to health care capabilities worldwide.

·     The Portaero system fits well with the direction of reimbursement systems that prefer to pay for desired outcomes.  The bulk of the economics is in the disposable which is only used if the patient is receiving benefit.

·     A leading clinician experienced with Portaero and other emphysema therapies believes Portaero patients have a lower exacerbation rate than untreated patients.

·     The Portaero therapy is reversible.  No patient has been worse off for having tried the Portaero treatment.

·     Preliminary BODE data suggest the potential to increase life expectancy with the Portaero therapy.

·     In the long term, the patents allow for development of a percutaneous procedure for interventionalists.

Impact of Technology on the Market

Patients with homogeneous emphysema represent a large, growing market with an unmet clinical need. Accessing Portaero’s intellectual property is critical for any successful endeavor into this very attractive market. Portaero’s therapy is complimentary to other therapies addressing heterogeneous disease (e.g., valves, coils, steam, glue) and could be sold by the same sales force.

Intellectual Property Summary

Portaero has a comprehensive intellectual property portfolio consisting of 35 issued patents: 25 are issued for the US and 10 are issued for International.  Portaero has 25 pending applications: 15 pending for the U.S. and 10 pending for International.  Description of the portfolio can be found in the Appendix B.  The portfolio represents a broad array of strategic variables including:

Methods and devices used by patient to maintain and protect the pneumostoma
Methods and devices for pneumostomy procedures for creating a pneumostoma
Methods and devices for assessment, maintenance, and treatment of a pneumostoma
Portaero’s Assets

Portaero has developed a portfolio of assets critical to the treatment of emphysema via a pneumostoma. These assets fall into a variety of categories, including:

·     Patents and Patent Applications
·     Patient Data Set for Treating Homogeneous Emphysema from 2 different non-randomized clinical studies
·     Design and manufacturing documentation for surgical and patient care products
The assets of Portaero will be sold in whole or in part (collectively, the “Portaero Assets”). The sale of these assets is being conducted with the cooperation of Portaero. Portaero will be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership. Notwithstanding the foregoing, Portaero should not be contacted directly without the prior consent of Gerbsman Partners.

Portaero, Inc. Board of Directors

·       Sami Hamade: Aberdare Ventures – San Francisco, CA

·       Ross Jaffe:  Versant Ventures – Menlo Park, CA

·       Dave Plough: Portaero President & CEO – Cupertino, CA

·       Steve Weinstein: Novartis Ventures – Cambridge, MA

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a Confidential Disclosure Agreement (attached hereto as Appendix A) to have access to key members of management and intellectual capital teams and the due diligence “war room” documentation (“Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has had an opportunity to inspect and examine the Portaero, Inc. assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Portaero, Inc. assets. Each sealed bid must be submitted so that it is received by Gerbsman Partners no later than Tuesday, July 16, 2013 at 3:00pm Pacific Daylight Time (the “Bid Deadline”) at Portaero, Inc.’s office, located at 21631 Stevens Creek Blvd., Cupertino, CA 95014.  Please also email steve@gerbsmanpartners.com with any bid.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase.  All bids must be accompanied by a refundable deposit in the amount of $100,000 (payable to Portaero, Inc.).  The deposit should be wired to Portaero, Inc.’s attorneys (information will be provided).  The winning bidder will be notified within 3 business days of the Bid Deadline. The deposit will be held in trust by Portaero’s counsel.  Unsuccessful bidders will have their deposit returned to them within 3 business days of notification that they are an unsuccessful bidder.

Portaero, Inc. reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.

Portaero Inc. will require the successful bidder to close within a 7 day period. Any or all of the assets of Portaero, Inc. will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Portaero, Inc. assets shall be the sole responsibility of the successful bidder and shall be paid to Portaero, Inc. at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman

Gerbsman Partners

steve@gerbsmanpartners.com

Kenneth Hardesty

Gerbsman Partners

ken@gerbsmanpartners.com