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July 5, 2016

Dear Partners,
Performance of Bioterp Partners Fund is set forth below:

BTP Performance Since Inception

BTP 2016 YTD Performance









BTP’s Market Outlook
The 2nd quarter of 2016 continued to be a challenging environment to invest in small cap biopharma
companies for numerous reasons specific to both the general market and the healthcare sector. With
respect to the general market, headwinds such as overextended valuations, political (both domestic and
international) risk, and monetary policy continued to plague risk assets. Considering the events on tap
for the 2nd half of 2016, we do not see these headwinds relaxing. Thus, we maintain a neutral outlook on
With respect to the healthcare sector, fund outflows, lack of significant earnings growth by large caps,
and drug pricing discussions continue to plague the sector. Despite these headwinds, we continue to see
investment opportunities in small cap biotechs, however, selectivity is required in order to avoid
becoming correlated with the sector in an unfavorable investment environment. Instead, we strive to
own a limited number of companies in BTP that we have conviction on the risk/reward ratio.

Fund Strategy
BTP’s core positions consist solely of small cap biopharma companies whose asset’s net present value
(NPV), we believe, are being mispriced by the market. The mispricing of the company’s asset’s NPV, in
conjunction with the proper investment/trade “set-up”, can result in a skewed risk/reward ratio. Only
when our research enables a conviction on the risk/reward ratio will BTP accumulate in size.
Notably, the companies we have identified with skewed risk/reward ratios tend to have a number of key
characteristics. These characteristics include (but are not limited to):

Multiple late-stage or commercial value-driving assets.
Multiple catalysts within the next 12 months potentially facilitating the repricing of the
company’s stock.
Lack of understanding by the market of a key part of the investment thesis. (Of note: lack of
understanding ≠ misunderstanding).

Selected Position Review
Aratana Therapeutics – PETX
Aratana Therapeutics is an example of company that possessed multiple late-stage/commercial assets
that were guided for multiple value-driving catalysts in the near-term when we initiated the position.
Notably, our research indicated there was a lack of understanding by the market of the FDA’s Center for
Veterinary Medicine (CVM) regulatory process, which was critical in coming to our conclusion that the
risk/reward ratio was skewed.
BTP continued to add to our long position in Aratana in the 2nd quarter of 2016. Despite Aratana
executing on multiple key value driving events in the 1st half 2016, we believe the market is still
undervaluing the NPV of Aratana’s pipeline. Importantly, additional near term value-driving events such
as Nocita and AT-014’s potential approval are expected in the 2nd half of 2016. In addition, Aratana is
expected to eventually file for EU approval and enter into ex-US commercialization agreements for
Entyce and Nocita. We believe these events, in conjunction with Aratana demonstrating the commercial
value of their pipeline throughout the commercialization process, should facilitate further repricing of
Aratana’s stock.
Company X
BTP also continued to accumulate stock in our second core position – Company X. Company X is the
riskiest position we own in size due to the binary nature of the initial catalysts. The size of our position in
Company X is justified by, what we believe is, significant upside if the initial value-driving events in the
2nd half of 2016 are positive. We believe there is a lack of understanding by the market of the business
model of Company X and their pipeline. Considering this, and the investment “set-up”, we believe
Company X has a skewed risk/reward ratio. We believe this skewed ratio further justifies owning
Company X in size despite the binary nature of the initial value-driving events.
Company Y
BTP has begun accumulating a non-core position in Company Y ahead of phase III data for Company Y’s
lead pipeline asset. Despite Company Y having many blemishes such as a balance sheet overhang, we
believe without these negative characteristics, the current investment “set-up” would not be possible.
Importantly, we hypothesize the market is missing key information critical to understanding the
regulatory and commercial dynamics of Company Y’s lead asset. Therefore, we believe the market’s lack
of understanding of these dynamics is facilitating further discounting of Company Y’s stock price. It is
important to note that this hypothesis can only be confirmed/denied once more information becomes
available in the 2nd half of 2016. If our hypothesis is correct, we believe the market will reprice the stock.

Zachary Fink – Co-Founder and Portfolio Manager

This letter does not constitute a recommendation, an offer to sell or a solicitation of an offer to purchase any security or
investment product.