Contract analysis

I. Purpose and Background This memorandum summarizes the preliminary valuation analyses of Caliston BioSciences, Inc. ("Caliston" or the "Target") presented by Thorngate Partners LLC ("Thorngate") to the Special Committee (the "Committee") of the Board of Directors of Penterra Pharmaceuticals Corp. ("Penterra" or the "Company") (NYSE: PPHR) at the Special Committee meeting held on August 3, 2023. Thorngate was engage

II. Transaction Overview A. Proposed Transaction Structure Penterra proposes to acquire 100% of the outstanding equity of Caliston BioSciences, Inc. via a one-step merger pursuant to which a newly formed, wholly owned subsidiary of Penterra would merge with and into Caliston, with Caliston surviving as a wholly owned subsidiary of Penterra. The transaction would be structured as a reverse triangular merger under Dela

I. Proposed Consideration As indicated by Dr. Hale's initial proposal communicated to the Board on May 28, 2023, the proposed aggregate equity value for the acquisition of 100% of Caliston's outstanding equity is in the vicinity of $925 million. As of the date of Thorngate's presentation, definitive terms had not been agreed, and the $925 million figure represents the starting point advanced by management rather than

III. Summary of Valuation Methodologies Employed At the August 3, 2023 meeting, Thorngate presented the results of four principal valuation methodologies applied to Caliston in its preliminary analyses: 1. discounted Cash Flow ("DCF") Analysis — CLT-4019 Only. A risk-adjusted discounted cash flow analysis of projected cash flows attributable solely to CLT-4019, Caliston's lead Phase 2b clinical-stage asset. 2. discou

3. Comparable Transactions Analysis. An analysis of selected precedent merger and acquisition transactions involving clinical-stage oncology biopharmaceutical companies, with relevant multiples and benchmarks applied to Caliston's profile.

4. Premiums Paid Analysis. An analysis of premiums paid in acquisitions of private biotechnology companies relative to their most recent private financing round valuations, applied to Caliston's Series C post-money valuation. Each of these methodologies is summarized in detail in Sections IV through VII below, including the key assumptions, inputs, and resulting valuation ranges presented by Thorngate. In preparing i

IV. Discounted Cash Flow Analysis — CLT-4019 Only A. Methodology Description Thorngate performed a risk-adjusted discounted cash flow analysis focused solely on projected cash flows attributable to CLT-4019, Caliston's lead clinical-stage compound. This analysis is intended to capture the fundamental value of Caliston's most advanced and de-risked asset in isolation, providing the Committee with a baseline valuation

V. Discounted Cash Flow Analysis — Full Pipeline A. Methodology Description In addition to the CLT-4019-only DCF, Thorngate performed a risk-adjusted net present value ("rNPV") analysis of Caliston's full pipeline, encompassing CLT-4019, CLT-5227, and CLT-6034. The rNPV methodology is a standard valuation approach for multi-asset biopharmaceutical companies, in which each development-stage asset is modeled separately

VI. Comparable Transactions Analysis A. Methodology Description As a complement to the DCF analyses, Thorngate performed a comparable transactions analysis by examining selected precedent merger and acquisition transactions involving clinical-stage oncology biopharmaceutical companies. The purpose of this analysis is to provide market-based benchmarks for the valuation of Caliston by reference to the prices paid in a

VII. Premiums Paid Analysis A. Methodology Description Thorngate's fourth valuation methodology is a premiums paid analysis, which examines the premiums paid in acquisitions of private biotechnology companies relative to the target company's most recent private financing round valuation. This approach is particularly relevant in the context of the proposed Caliston acquisition because Caliston is a privately held com

VIII. Summary of Valuation Ranges The following table consolidates the implied enterprise value ranges for Caliston derived from each of Thorngate's four preliminary valuation methodologies: The reference range across all four methodologies spans approximately $780 million to $1,180 million, with the central tendency of the analyses falling in the $900 million to $1,025 million range. The preliminary consideration un

IX. Discussion of Contingent Value Rights (CVRs) At the August 3 meeting, Thorngate addressed the potential inclusion of a contingent value right ("CVR") as a component of the transaction consideration. The CVR has been discussed in preliminary terms between Penterra management and Caliston representatives as a mechanism to bridge the valuation gap between buyer and seller expectations and to allocate the binary regu

X. Preliminary Observations and Next Steps A. Thorngate's Preliminary Observations Based on the preliminary valuation analyses presented on August 3, 2023, Thorngate offered the following preliminary observations for the Committee's consideration:

1. Reasonableness of Starting Point. The proposed $925 million equity value (excluding CVRs) falls within all four valuation ranges derived by Thorngate, supporting its reasonableness as a starting point for negotiations. However, Thorngate emphasized that the $925 million figure is the price advanced by Dr. Hale and Penterra management, not a negotiated price, and that the Committee retains significant scope to nego

2. Incremental Pipeline Value. The full-pipeline DCF analysis suggests that CLT-5227 and CLT-6034 contribute meaningful incremental value in the range of $90 million to $160 million above the CLT-4019-only valuation. However, this incremental value is highly speculative given the preclinical status of both compounds and the substantial clinical, regulatory, and commercial risks that must be overcome before either com

3. CLT-4019 Phase 2b Data as Key Value Driver. Thorngate identified the Phase 2b topline data readout for CLT-4019, expected in Q4 2023, as the single most significant value driver across all valuation scenarios. Positive topline data would be expected to significantly de-risk the CLT-4019 program and could shift the valuation range meaningfully upward, while negative or inconclusive data could have the opposite effe

4. CVR as Valuation Bridge. Thorngate noted that the CVR structure, if properly designed, could serve as an effective tool for bridging the valuation gap between the buyer and seller and for allocating regulatory risk in a manner that aligns the interests of the parties. However, the terms and probability-weighted present value of the CVR require further analysis before the Committee can evaluate the total considerat

1. Market Check. Thorngate to conduct a market check to identify potential alternative acquisition targets or strategic alternatives for Penterra. The scope and parameters of the market check were discussed at the August 3 meeting and formalized by the Committee at its August 22, 2023 meeting. Thorngate will report the results of the market check to the Committee at a subsequent meeting.

2. Refined Valuation Analyses. Thorngate to refine its preliminary valuation analyses following receipt of additional due diligence materials from the Caliston data room, updated Caliston financial projections (if available), and any additional clinical data or regulatory developments pertaining to CLT-4019 or the preclinical pipeline.

3. CVR Analysis. Thorngate to further analyze the proposed CVR structure, including the present value of the CVR payment under various probability-weighted scenarios, the appropriate milestone conditions and Milestone Date, and the impact of the CVR on the total transaction consideration and its allocation among Caliston stockholders.

4. Fairness Opinion. Thorngate to prepare final valuation analyses and deliver a formal fairness opinion to the Special Committee once definitive transaction terms have been agreed. The fairness opinion will address whether, in Thorngate's professional judgment, the consideration to be paid by Penterra in the proposed transaction is fair, from a financial point of view, to Penterra and its unaffiliated stockholders.

5. Legal and Regulatory Due Diligence. Calderwood & Harkness LLP to continue its due diligence review in parallel with Thorngate's financial analyses, including review of Caliston's intellectual property portfolio, material contracts, regulatory history, pending and threatened litigation, and other legal and regulatory risk factors relevant to valuation. Calderwood & Harkness will coordinate with Thorngate on the int

XI. Limitations and Disclaimers The following limitations and disclaimers apply to the analyses summarized in this memorandum:

1. The analyses summarized herein are preliminary and subject to revision. Thorngate has not rendered any opinion, formal or informal, on the fairness of any transaction at this time. The preliminary analyses are intended solely to inform the Special Committee's evaluation of the proposed transaction and to establish a framework for the Committee's negotiating posture.

2. Thorngate's analyses are based on information available as of August 3, 2023, and are subject to change as additional data room materials are reviewed, clinical developments occur (including, without limitation, the Phase 2b topline data readout for CLT-4019 expected in Q4 2023), and market conditions evolve. Thorngate has not independently verified the accuracy or completeness of the information provided by Calis

3. This memorandum is prepared by Calderwood & Harkness LLP for the sole use of the Special Committee of the Board of Directors of Penterra Pharmaceuticals Corp. in connection with Project Coriander. This memorandum is protected by the attorney-client privilege and the work product doctrine and should not be disclosed to any third party without the prior written consent of the Special Committee and Calderwood & Harkn

4. This memorandum should not be shared with Dr. Marcus Hale, Angela Whitmore, Raymond Tusk, or any other person outside the information barrier established pursuant to the Independence Protocol & Information Barrier Policy dated June 2, 2023. Any unauthorized disclosure of this memorandum could waive the protections of the attorney-client privilege and work product doctrine and could compromise the integrity of the

5. Nothing in this memorandum constitutes legal advice regarding the legal obligations of the Special Committee, the Board of Directors, or any individual director. Legal advice regarding the Committee's fiduciary duties and the legal requirements applicable to related-party transactions will be provided by Calderwood & Harkness LLP in separate memoranda and communications.

XII. Attachments (Referenced but Not Appended) The following attachments are referenced in this memorandum but are not appended hereto. All attachments are maintained in the Project Coriander secure workspace and are available for review by the Special Committee upon request. Attachment A: Thorngate Partners LLC Presentation Slides (August 3, 2023). The complete slide deck presented by Gregory Ashford at the August 3