Contract analysis

I. Executive Summary This memorandum evaluates whether the payment structure and investigator compensation contemplated under the proposed Master Clinical Trial Agreement ("MCTA") between Penterra Pharmaceuticals Corp. ("Penterra" or the "Sponsor") and Veridian Health Research Network, Inc. ("Veridian" or "VHRN") for the Phase III CLARION trial (Protocol PPC-4871-III) comply with the federal Anti-Kickback Statute ("A

1. Obtain and maintain an independent fair market value opinion from a qualified healthcare valuation firm for per-patient site fees and investigator grants, and retain such opinion in the matter files;

2. Ensure that the written MCTA agreements specify, with particularity, the services to be rendered by Veridian and each participating site in exchange for each category of payment;

3. Include robust AKS compliance representations and covenants in the MCTA and in individual investigator agreements;

4. Implement monitoring protocols to confirm ongoing compliance throughout the 42-month enrollment period and the full 60-month study term; and

5. Conduct a state-by-state analysis of anti-kickback and fee-splitting statutes in all 14 states where Veridian sites are located. The balance of this memorandum sets forth the factual background, the applicable legal framework, a component-by-component analysis of the MCTA payment structure, a detailed safe harbor analysis, identification of additional risk factors and mitigation strategies, and specific recommenda

1. Penterra Pharmaceuticals Corp. Penterra Pharmaceuticals Corp. ("Penterra" or the "Sponsor") is a corporation organized under the laws of the State of Delaware and publicly traded on the Nasdaq Stock Market under the ticker symbol PTRA. Penterra is headquartered at 200 Biopharma Boulevard, Suite 1400, Princeton, New Jersey 08540. The company is a specialty pharmaceutical company focused on the development and comme

2. Veridian Health Research Network, Inc. Veridian Health Research Network, Inc. ("Veridian" or "VHRN") is a corporation organized under the laws of the State of Delaware and is recognized by the Internal Revenue Service as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code, Employer Identification Number 23-4178205. Veridian is headquartered at 750 Research Parkway, 8th Floor, Philadelphi

3. Key Investigators The Global Principal Investigator for the CLARION trial is Dr. Catherine Aldridge, M.D., Ph.D., Professor of Oncology at Graystone University Medical Center, one of the 38 Veridian Network sites. Dr. Aldridge is a recognized expert in hepatocellular carcinoma and has served as principal investigator on more than 20 industry-sponsored clinical trials in liver cancers over the past 15 years. She is

1. Investigational Product The investigational product is penterafenib (designated PPC-4871), an oral multi-kinase inhibitor under development by Penterra for the treatment of advanced hepatocellular carcinoma in the second-line setting, following failure of or intolerance to prior systemic therapy. Penterafenib targets multiple receptor tyrosine kinases implicated in HCC pathogenesis and has demonstrated promising e

2. Trial Design The CLARION trial (Protocol PPC-4871-III) is a Phase III, randomized, double-blind, placebo-controlled, multi-center clinical trial designed to evaluate the efficacy and safety of penterafenib versus placebo in patients with advanced HCC who have progressed on or after at least one prior line of systemic therapy. The trial is being conducted under IND Number 157823 and is registered with ClinicalTrial

3. Endpoints. The primary endpoint is overall survival ("OS"), defined as the time from randomization to death from any cause. Key secondary endpoints include progression-free survival ("PFS"), objective response rate ("ORR") per RECIST v1.1, and duration of response ("DOR"). Safety and tolerability endpoints, patient-reported outcomes, and exploratory biomarker analyses are also included in the protocol.

4. Trial Infrastructure The trial's contract research organization ("CRO") is Meridian Contract Research Organization, Inc., engaged under a Master Services Agreement dated January 15, 2023. The electronic data capture ("EDC") vendor is Pinnacle Data Solutions, Inc., which provides the clinical data management platform. Central laboratory services are provided by Northbridge Bioanalytical Laboratories, Inc. These ent

III. Legal Framework: The Anti-Kickback Statute A. Statutory Text — 42 U.S.C. § 1320a-7b(b) The federal Anti-Kickback Statute, codified at 42 U.S.C. § 1320a-7b(b), is the principal federal statute governing the legality of remuneration exchanged between parties in connection with the referral of patients or the generation of business payable by federal health care programs, including Medicare and Medicaid.

1. Prohibition on Soliciting or Receiving Remuneration Subsection (b)(1) of the AKS provides that whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment ma

2. Prohibition on Offering or Paying Remuneration Subsection (b)(2) of the AKS provides a parallel prohibition on the offering or payment side, making it a felony for any person to knowingly and willfully offer or pay any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, to any person to induce such person to refer an individual to a person for th

3. Breadth of "Remuneration" The term "remuneration" as used in the AKS is defined expansively and encompasses any payment whatsoever, whether made directly or indirectly, overtly or covertly, in cash or in kind. Courts have interpreted this term to include not only cash payments but also gifts, in-kind transfers of value, below-market loans, free goods and services, and any other transfer of value. See, e.g., United

4. Scienter Requirement The AKS requires proof that the defendant acted "knowingly and willfully." However, the Patient Protection and Affordable Care Act of 2010 ("ACA") amended the AKS to provide that "a person need not have actual knowledge of [the AKS] or specific intent to commit a violation of [the AKS]." 42 U.S.C. § 1320a-7b(h). This amendment lowered the scienter threshold and expanded the range of conduct th

5. Application to Clinical Trials Payments from pharmaceutical sponsors to clinical investigators and site institutions in connection with clinical trials may implicate the AKS when the investigators and institutions are in a position to prescribe, recommend, order, or arrange for items or services payable by federal health care programs. In the context of the CLARION trial, this nexus is present because: (a) The inv

6. Penalties. Violation of the AKS carries severe consequences, including: (a) Criminal Penalties: A conviction under the AKS is classified as a felony offense, punishable by a fine of up to $100,000 per violation, imprisonment for up to 10 years, or both; (b) Civil Monetary Penalties: The OIG may impose civil monetary penalties under 42 U.S.C. § 1320a-7a of up to $100,000 per violation, plus treble damages (three ti

1. OIG Compliance Program Guidance for Pharmaceutical Manufacturers (2003) In April 2003, the OIG published its Compliance Program Guidance for Pharmaceutical Manufacturers, 68 Fed. Reg. 23,731 (May 5, 2003). This guidance identifies a range of industry practices that may implicate the AKS, including clinical research payments to investigators. The guidance advises pharmaceutical manufacturers to ensure that payments

2. OIG Special Advisory Bulletin on Payments to Referring Physicians (2013) In June 2013, the OIG issued a Special Advisory Bulletin addressing payments to referring physicians, including compensation arrangements incident to clinical trials. The Bulletin emphasizes the "one purpose" test and reiterates that arrangements with referring physicians are subject to heightened scrutiny when the physician is in a position

3. OIG Guidance on Grants and Research Funding The OIG has addressed research grants and funding arrangements in various advisory opinions and guidance documents. The core principles applicable to clinical trial payments are: (a) Research payments must reflect fair market value for legitimate, necessary services rendered in connection with the research; (b) Payments must not be tied, directly or indirectly, to the vo

4. The "One Purpose" Test Courts have consistently held that a payment violates the AKS if one purpose of the remuneration is to induce referrals, even if there are other legitimate purposes for the payment. See United States v. Greber, 760 F.2d 68 (3d Cir. 1985); United States v. Kats, 871 F.2d 105 (9th Cir. 1989); United States v. McClatchey, 217 F.3d 823 (10th Cir. 2000). Under this standard, it is not a defense t

1. Personal Services and Management Contracts Safe Harbor — 42 C.F.R. § 1001.952(d) The personal services and management contracts safe harbor is the principal safe harbor applicable to clinical trial site and investigator payments. This safe harbor protects remuneration paid under an arrangement for the provision of services if all of the following requirements are met: (a) The arrangement is set out in a written ag

2. Employee Safe Harbor — 42 C.F.R. § 1001.952(i) The employee safe harbor protects remuneration paid by an employer to an employee (who has a bona fide employment relationship with the employer) for employment in the provision of covered items or services. This safe harbor is not applicable to the MCTA arrangement because the investigators and site personnel who will conduct the CLARION trial are employees of the Ve

3. Space Rental Safe Harbor — 42 C.F.R. § 1001.952(b) The space rental safe harbor protects payments for the use of office space or equipment if certain requirements are met, including that the lease is set out in writing, covers all premises used, specifies the schedule of use, has a term of at least one year, provides for aggregate rental charges set in advance and consistent with FMV, and is not determined based o

4. Limitations of Safe Harbor Protection It is important to emphasize that compliance with a regulatory safe harbor does not confer absolute immunity from prosecution or investigation. Rather, compliance with a safe harbor provides a strong affirmative defense and, as a practical matter, makes it highly unlikely that the OIG or the Department of Justice would pursue an enforcement action. Conversely, failure to compl

IV. AKS Analysis of Each Payment Component This Section analyzes each of the seven principal payment components of the proposed MCTA individually, identifying the AKS risk factors specific to each component and providing recommendations to mitigate those risks. A. Per-Patient Site Fees ($52,000/Subject; $62,400,000 Total)

1. Description. Per-patient site fees represent the largest single component of the MCTA, constituting approximately 78% of the total deal value. These fees compensate the 38 Veridian Network site institutions for all clinical activities associated with each enrolled subject, including but not limited to: screening and eligibility assessment, informed consent, randomization procedures, study drug dispensation and adm

2. Payment Structure The per-patient fee of $52,000 per subject is structured as four equal milestone-based installments of $13,000 each, payable upon the achievement of the following protocol-defined milestones: (a) subject randomization, (b) completion of the Week 12 assessment, (c) completion of the Week 24 assessment, and (d) study completion/final visit. This payment structure aligns each installment with the de

3. AKS Risk Analysis Per-patient fee arrangements are widely used in industry-sponsored clinical trials and have been recognized by the OIG as a legitimate mechanism for compensating sites for clinical trial services. However, per-patient fees are not free from AKS risk, and the following factors must be considered: Fair Market Value. The threshold AKS question for per-patient site fees is whether the per-patient amo

4. Recommendation. Penterra should commission an independent FMV assessment from a qualified healthcare valuation firm (such as Kraft Renwick CPAs LLP Healthcare Advisory, Navigant, or a comparable firm not affiliated with either Penterra or Veridian) to confirm that the per-patient site fee of $52,000 per subject is consistent with fair market value for the scope and complexity of Phase III oncology trial services d

1. Description. Start-up fees of $75,000 per site are intended to compensate each of the 38 Veridian Network sites for the activities and costs associated with preparing the site for trial participation. These activities include, but are not limited to: regulatory document preparation and submission, Institutional Review Board ("IRB") or Ethics Committee submissions and review, site feasibility assessments, staff ide

2. Payment Structure The start-up fee is payable in two equal installments of $37,500 each: the first installment upon site activation (defined as the completion of all regulatory requirements and the site initiation visit), and the second installment upon enrollment of the first patient at the site.

3. AKS Risk Analysis Start-up fees are a standard and well-recognized component of clinical trial budgets. The OIG has not identified start-up fees as a particular area of concern, provided that such fees reflect the actual costs of start-up activities and are not used as a mechanism to funnel excess payments to sites or investigators. The split payment structure — with 50% payable upon site activation and 50% upon f

4. Recommendation. Penterra should document the specific start-up activities and associated costs at each site to support the FMV determination for the $75,000 per-site fee. This documentation should be maintained in the trial master file and should include, where available, site-specific budgets reflecting the estimated time and effort of site personnel, IRB submission costs, equipment calibration costs, and EDC int

1. Description. Annual site maintenance fees of $40,000 per site per year compensate each of the 38 Veridian Network sites for the ongoing costs of maintaining clinical trial readiness and regulatory compliance throughout the study period. These costs include ongoing regulatory maintenance (e.g., IRB continuing review submissions, protocol deviation reporting, IND safety report distribution and acknowledgment), staff

2. Payment Structure Annual site maintenance fees are paid annually in advance on each site-activation anniversary. The fees are uniform across all 38 sites, with no differentiation based on enrollment volume, patient accrual rates, or other performance metrics. Based on the projected average site participation period of 3.5 years (reflecting staggered site activation and enrollment periods), the total per-site maint

3. AKS Risk Analysis Annual site maintenance fees for ongoing infrastructure and regulatory readiness are recognized as legitimate components of clinical trial budgets. The AKS risk associated with maintenance fees arises only if such fees are disproportionate to the actual costs of site maintenance or if they function as disguised payments for referrals or prescribing activity. The $40,000 per-site per-year fee, app

4. Recommendation. Penterra should document the categories of maintenance services covered by the $40,000 annual fee and, where practicable, obtain supporting cost documentation from Veridian. The independent FMV opinion should address the maintenance fee as part of the comprehensive valuation. D. Investigator Grants ($1,500,000 Total)

1. Description. The MCTA allocates a total of $1,500,000 for investigator grants designated for publication support and academic activities by investigators participating in the CLARION trial. These grants are intended to support the preparation, submission, and publication of manuscripts reporting the results of the trial in peer-reviewed scientific journals. The primary recipients of investigator grants are expecte

2. Payment Structure Investigator grants are disbursed upon the acceptance of manuscripts for publication in peer-reviewed journals. The grants are not disbursed upon enrollment milestones, prescribing activity, or any other metric tied to the volume or value of referrals or business generated for Penterra. The publication-contingent disbursement mechanism ties payments to the delivery of a specific academic delivera

3. AKS Risk Analysis Investigator grants constitute an area of heightened OIG scrutiny under the AKS. The OIG has repeatedly cautioned that grants, honoraria, and other payments to physician investigators may function as indirect payments for referrals or prescribing activity, particularly when the physician is in a position to prescribe the sponsor's commercially available products. The following considerations are

4. Recommendation. Each investigator grant award should be documented with a separate written agreement between Penterra and the individual investigator that specifies the academic deliverables (i.e., the specific manuscripts or publications to be prepared), the amount of the grant, and the conditions for disbursement. The agreement should include an express representation that the grant reflects fair market value fo

1. Description. The MCTA provides for a network coordination and administrative fee of $4,200,000 payable to Veridian's central office. This fee compensates Veridian's central organization for the administrative oversight, site coordination, network governance, quality assurance, and centralized regulatory support that Veridian provides across its 38-site network in connection with the CLARION trial. Specific service

2. Payment Structure The network coordination fee is payable in quarterly installments of $300,000 over 14 quarters, commencing upon execution of the MCTA. The quarterly payment structure provides a predictable, fixed stream of compensation that is independent of enrollment volume or site-level performance metrics.

3. AKS Risk Analysis Administrative fees payable to research networks are common in multi-site clinical trial agreements and have been recognized as serving legitimate administrative purposes. The AKS risk associated with the network coordination fee arises primarily from the possibility that the fee could function as a referral fee — that is, compensation to Veridian for directing its member sites to participate in

4. Recommendation. Penterra should require Veridian to maintain contemporaneous time and effort records supporting the coordination fee, including documentation of the specific services performed by Veridian's central office staff in connection with the CLARION trial and the allocation of staff time to those services. The MCTA should include a representation by Veridian that the coordination fee reflects fair market

1. Description. The MCTA includes a technology integration cost of $1,230,000, representing the fixed cost of integrating Veridian site systems with the Pinnacle Data Solutions, Inc. EDC platform used for the CLARION trial. This is a one-time technology infrastructure cost associated with the configuration, testing, and deployment of the EDC system across the 38 Veridian Network sites.

2. AKS Risk Analysis Technology infrastructure payments that are not linked to patient referrals, prescribing activity, or the generation of business payable by federal health care programs present minimal AKS risk. The EDC integration cost is a pass-through technology cost that compensates Veridian for a legitimate and identifiable infrastructure expenditure necessary for trial conduct. The payment is fixed, does no

3. Recommendation. Standard documentation of the technology integration services and associated costs is sufficient. No additional AKS-specific measures are recommended for this component beyond inclusion in the MCTA's general compliance representations. G. Contingency/Change Order Reserve ($2,500,000)

1. Description. The MCTA sets aside a contingency and change order reserve of $2,500,000 to cover unanticipated costs that may arise during the course of the 60-month study period. Such costs may include protocol amendments requiring additional study visits or procedures, regulatory changes necessitating additional compliance activities, unanticipated safety monitoring requirements, and other changes in scope that ar

2. Payment Structure Disbursement from the contingency reserve is subject to the execution of a written change order approved by authorized representatives of both Penterra and Veridian. The change order process requires documented justification for the additional expenditure, specification of the additional services to be performed, and agreement on the amount of additional compensation. No funds may be disbursed fr

3. AKS Risk Analysis Contingency reserves are a standard feature of clinical trial budgets and serve a legitimate operational purpose. The AKS risk associated with the contingency reserve is low because disbursement requires documented justification and mutual agreement, and the amounts disbursed must reflect fair market value for additional services at the time of disbursement. The change order process provides a bu

4. Recommendation. Each change order should be evaluated individually for AKS compliance at the time of execution. The additional services should be specified in writing, the additional compensation should be assessed for FMV consistency, and the change order should be documented in the trial master file. The MCTA should include a provision requiring that all change orders comply with the AKS and applicable safe harb

V. Safe Harbor Analysis: Personal Services and Management Contracts A. Element-by-Element Analysis Under 42 C.F.R. § 1001.952(d) This Section evaluates the MCTA payment structure against each of the six elements of the personal services and management contracts safe harbor. Satisfaction of all six elements provides protection from AKS liability for the compensatory arrangements described in the MCTA.

1. Written Agreement Signed by the Parties The MCTA will be a comprehensive written agreement between Penterra and Veridian, negotiated at arms-length between the parties and executed by authorized representatives of each organization. The MCTA will be supplemented by individual site joinder agreements for each of the 38 participating Veridian Network institutions, pursuant to which each site agrees to the terms and

2. Agreement Specifies All Services to Be Provided The MCTA will define the scope of clinical trial services in detail, encompassing all protocol-specified procedures, subject enrollment and treatment administration activities, data collection and management, safety reporting (including reporting of serious adverse events within 24 hours), regulatory document maintenance, and other clinical trial obligations. The MCT