Contract analysis

I. Executive Summary This memorandum analyzes the adequacy of Penterra Pharmaceuticals Corp.'s ("Penterra" or the "Sponsor") existing clinical trial liability insurance, underwritten by Briarcliff Mutual Insurance Company ("Briarcliff"), against the initial demand made by Veridian Health Research Network, Inc. ("Veridian") for no less than $50,000,000 in per-occurrence coverage as a condition of the Master Clinical T

II. Background A. The CLARION Trial Penterra Pharmaceuticals Corp. is a Delaware corporation headquartered at 200 Biopharma Boulevard, Suite 1400, Princeton, New Jersey 08540. Penterra's shares are listed on the Nasdaq Global Select Market under the ticker symbol "PTRA." As of the most recent publicly available financial data (Q1 2023), Penterra reported approximately $890 million in cash and cash equivalents, fiscal

1. Trial Scale. The CLARION trial's enrollment of approximately 1,200 subjects, which Veridian characterized as creating substantial aggregate exposure for subject-injury claims.

2. Oncology Indication. The advanced HCC indication, involving patients with significant baseline morbidity and co-morbidities, which Veridian asserted heightened the risk and potential severity of adverse events, including fatal outcomes.

3. Multi-Site Network Structure. The involvement of 38 sites across 14 states, which Veridian argued exposed multiple institutions to potential liability from a single occurrence (e.g., a product-batch contamination event or a systemic safety signal affecting subjects across multiple sites simultaneously). As discussed in detail below, while Veridian's concerns regarding trial risk are understandable as a matter of p

III. Analysis of Current Briarcliff Policy Coverage A. Policy Structure and Key Terms The Briarcliff policy (Policy No. BM-CTL-2023-04182) is a specialty clinical trial liability and subject-injury insurance policy issued under Briarcliff's Life Sciences Lines division. The policy is designed specifically for pharmaceutical and biotechnology companies sponsoring clinical trials and provides coverage for liability ari

IV. Industry Benchmarking — Per-Occurrence and Aggregate Limits A. Peer Sponsor Comparison To assess whether Veridian's $50,000,000 per-occurrence demand is commercially reasonable, we conducted a benchmarking analysis of clinical trial insurance requirements in comparable multi-site Phase III oncology agreements. Our analysis draws on the following sources: • Publicly available disclosure in FDA-mandated informed co

1. Veridian's $50,000,000 per-occurrence demand exceeds the upper range of industry standard requirements. Across the data set we reviewed, per-occurrence limits for Phase III oncology trials ranged from $10,000,000 to $25,000,000, with the majority of agreements falling in the $15,000,000 to $25,000,000 range. No comparable agreement in our data set required a per-occurrence limit of $50,000,000 or above.

2. Most large academic medical center networks accept $15,000,000 to $25,000,000 per-occurrence limits in practice. While initial insurance demands from academic sites and site networks often exceed these levels (as Veridian's demand does here), these demands are routinely negotiated downward to the $15,000,000 to $25,000,000 range. Our experience indicates that Veridian's $50,000,000 demand is consistent with an ope

3. Penterra's $25,000,000 per-occurrence limit is at the upper end of the market range. Penterra's existing coverage places it at or above the coverage levels maintained by peer pharmaceutical sponsors of comparable trials, including several large-cap and mid-cap pharmaceutical companies with Phase III oncology programs of similar scale.

4. Aggregate limits of $75,000,000 are at the upper end of market norms. Penterra's aggregate limit is well within (and at the high end of) the typical range, providing additional confidence in the adequacy of the current coverage structure.

5. Some large sponsors carry higher per-occurrence limits, but context matters. A small number of large pharmaceutical companies maintain per-occurrence limits of $50,000,000 or above, but these are typically global programs with sites in jurisdictions outside the United States where regulatory requirements may mandate higher coverage levels (e.g., certain European Union member states require sponsor insurance at pre

V. Interplay with MCTA Indemnification Provisions The insurance requirements under the MCTA do not operate in isolation; they function as part of a comprehensive risk allocation framework that includes mutual indemnification obligations, liability caps, and carve-outs. A proper assessment of insurance adequacy requires analysis of this interplay. A. Sponsor Indemnification of Sites and Investigators Under the propose

VI. Veridian's Site-Side Insurance Requirements A. Required Coverage Levels The MCTA requires each Veridian participating site to maintain general liability and professional liability insurance coverage throughout the duration of the CLARION trial. The minimum coverage levels required under the MCTA are as follows: These coverage requirements apply to all 38 Veridian participating sites and are consistent with indust

1. Initial Exchange. Within 15 business days of MCTA execution, each party shall provide to the other party certificates of insurance evidencing the required coverage levels and any additional insured endorsements.

2. Annual Exchange. Thereafter, updated certificates shall be exchanged annually during the trial period, within 30 days of each policy renewal date.

3. Notice of Material Change. Each party shall provide prompt written notice (no less than 30 days prior, where practicable) of any material change in coverage, including cancellation, non-renewal, or reduction in limits. To facilitate the initial certificate exchange, Calderwood & Harkness will prepare a letter to Karen Tremblay at Briarcliff Mutual requesting the issuance of an additional insured endorsement naming

VII. Recommendation A. Recommended Negotiation Position on Per-Occurrence Limit We recommend that Penterra maintain its negotiating position at $25,000,000 per occurrence / $75,000,000 aggregate clinical trial liability insurance coverage. This recommendation is supported by the following rationale:

1. Consistency with Industry Benchmarks. As detailed in Section IV above, $25,000,000 per occurrence is at the upper end of the market range for Phase III oncology trials conducted across multi-site academic research networks. Penterra's current coverage meets or exceeds the coverage maintained by peer sponsors in comparable programs.

2. Adequacy in Light of MCTA Indemnification Structure. The MCTA's indemnification provisions — including the $500,000 per-subject and $15,000,000 aggregate medical care caps, the carve-outs for site negligence and breach, and the reciprocal site indemnification — operate in conjunction with the Briarcliff policy to provide comprehensive risk allocation. The insurance need not cover the full theoretical maximum expos

3. Veridian's $50,000,000 Demand Is Above Market. Our benchmarking analysis demonstrates that Veridian's demand is materially above the upper end of the observed range for comparable agreements. No agreement in our data set required a per-occurrence limit of $50,000,000 or above for a U.S.-only Phase III oncology trial.

4. Disproportionate Cost of Increased Limits. Increasing the per-occurrence limit from $25,000,000 to $50,000,000 would impose significant additional premium costs — potentially $200,000 to $500,000 per year or more — without commensurate risk reduction. The incremental protection afforded by doubling the per-occurrence limit is modest given the low probability of a single-occurrence loss exceeding $25,000,000 and th

1. Present Industry Benchmarking Data. In the next negotiation session with Allison Whitmore and the WJC team, we recommend presenting the industry benchmarking data (summarized in Section IV above and detailed in Appendix B) to demonstrate that $25,000,000 per occurrence is at or above market for comparable Phase III oncology trials. Presenting this data in a clear, tabular format — showing the range of per-occurren

2. Emphasize the Additional Insured Endorsement. Highlight that Veridian and all 38 participating sites will be named as additional insureds on the Briarcliff policy, providing them with direct coverage rights under a $25,000,000 per-occurrence / $75,000,000 aggregate policy. This is a significant benefit that should be underscored in negotiations.

3. Highlight the Comprehensive Indemnification Structure. Emphasize that the MCTA's indemnification provisions — particularly the uncapped product-defect indemnification — provide substantial protection that supplements (and in some categories exceeds) the insurance coverage. Veridian and its sites are protected not only by the insurance but also by Penterra's direct contractual indemnification obligations, backed by

4. Offer Written Commitment to Maintain Coverage. Offer to include in the MCTA a covenant by Penterra to maintain clinical trial liability coverage at the specified levels throughout the duration of the CLARION trial, through projected study completion in August 2028, with annual renewal. This addresses any concern that Penterra might reduce or cancel coverage during the trial.

5. Demonstrate Penterra's Financial Strength. Note Penterra's significant financial resources — $890 million in cash and equivalents, $1.87 billion in FY2022 revenue, and a $4.2 billion market capitalization — as demonstrating Penterra's capacity to satisfy its indemnification obligations beyond the insurance limits. This financial backing provides an additional layer of security for Veridian and its sites that is no

6. Fallback Position (If Needed). If Veridian proves unwilling to accept the $25,000,000 per-occurrence limit after reviewing the benchmarking data and indemnification structure, we recommend exploring whether a modest increase — for example, to $30,000,000 per occurrence — could be achieved through an excess policy endorsement at reasonable cost. This fallback should be reserved as a final concession in negotiations

1. Confirm Additional Insured Endorsement Availability. Contact Karen Tremblay at Briarcliff Mutual to confirm that Policy No. BM-CTL-2023-04182 permits the addition of Veridian Health Research Network, Inc. and all 38 participating site institutions as additional insureds. Request formal issuance of the additional insured endorsement. Responsible: Sean Morrissey. Target completion: April 25, 2023.

2. Obtain Preliminary Quotes for Increased Limits. Request from Briarcliff Mutual a preliminary quote for increasing per-occurrence limits to $30,000,000, $40,000,000, and $50,000,000 (either through primary limit increases or excess layer endorsements), for internal planning purposes only. This information will be used to assess the cost and feasibility of a fallback negotiation position and should not be disclosed

3. Prepare Letter to Briarcliff Requesting Additional Insured Endorsement. Draft and send a formal letter to Karen Tremblay at Briarcliff, referencing Policy No. BM-CTL-2023-04182, requesting the issuance of an additional insured endorsement naming Veridian and all 38 participating sites. The letter should include a list of all site institutions to be added, which we will obtain from Penterra's clinical team. Respons

4. Incorporate Insurance Analysis into Negotiation Strategy Memorandum. Include the key insurance adequacy analysis points from this memorandum in the comprehensive Negotiation Strategy Memorandum being prepared by Miriam Calloway for the Penterra legal and clinical teams. The recipients of the Negotiation Strategy Memorandum include Nathaniel Briggs (General Counsel, Penterra), Rebecca Liang (Associate General Couns

5. Coordinate Certificate Exchange Timeline. Coordinate with Samantha Novak, Director of Clinical Contracts at Penterra, on the certificate exchange timeline and tracking procedures across all 38 Veridian sites. Recommend implementation of a centralized certificate tracking system, and establish a process for obtaining certificates from each Veridian site within 15 business days of MCTA execution. Responsible: Sean M

VIII. Appendices (Referenced) Appendix A — Briarcliff Policy Summary The following is a summary of the key terms and conditions of Penterra Pharmaceuticals Corp.'s clinical trial liability insurance policy issued by Briarcliff Mutual Insurance Company. This summary is provided for reference purposes in connection with this memorandum and does not constitute a comprehensive recitation of all policy terms, conditions,