Contract analysis

I. Executive Summary On April 28, 2023, Whitmore, Jansen & Callahan LLP ("WJC"), outside counsel to Veridian Health Research Network, Inc. ("Veridian"), returned their initial markup of the Master Clinical Trial Agreement ("MCTA") that Calderwood & Harkness circulated on behalf of Penterra Pharmaceuticals Corp. ("Penterra" or the "Sponsor") on April 7, 2023. The marked-up draft was transmitted via WJC's secure file-s

1. Uncapped Subject-Injury Indemnification. Veridian has deleted both the per-subject and aggregate caps on Penterra's indemnification obligations for study-related injuries, broadened the definition of compensable injuries, shifted the burden of proof regarding causation to Penterra, and narrowed the carve-outs for site negligence and misconduct. If accepted, these changes would expose Penterra to potentially unlimi

2. Increased Insurance Requirements ($50M Per Occurrence). Veridian has proposed doubling Penterra's per-occurrence insurance coverage from $25,000,000 to $50,000,000 and increasing aggregate limits from $75,000,000 to $150,000,000, while simultaneously reducing Veridian's own required coverage. These revisions would require Penterra either to renegotiate its existing policy with Briarcliff Mutual Insurance Company o

3. Front-Loaded Payment Structure. Veridian has proposed restructuring the per-patient payment schedule from the milestone-based approach (25%/25%/25%/25%) in our draft to a front-loaded model concentrating 50% of per-patient payments at randomization. Veridian has also proposed a new "site readiness" fee, an increased network coordination fee, and accelerated payment terms, collectively increasing total deal value a

4. Materially Expanded Investigator Publication Rights. Veridian has shortened Penterra's publication review period from 60 days to 30 days, deleted the 90-day patent-filing delay provision entirely, and inserted an "academic freedom" clause that would significantly restrict Penterra's ability to protect its intellectual property and commercial interests in connection with investigator publications. In addition to th

II. Background A. The CLARION Trial Penterra is sponsoring the CLARION trial (ClinicalTrials.gov Identifier NCT05928174; IND No. 157823), a Phase III, randomized, double-blind, placebo-controlled, multicenter study evaluating the efficacy and safety of penterafenib (PPC-4871) versus placebo in adult patients with advanced hepatocellular carcinoma who have progressed on or are intolerant to at least one prior line of

III. Category 1: Subject-Injury Indemnification — Demand for Uncapped Obligations The most significant and commercially consequential revisions in Veridian's markup relate to the subject-injury indemnification provisions set forth in Article 11 of the MCTA. Taken together, Veridian's proposed changes would (a) eliminate all caps on Penterra's indemnification obligations, (b) dramatically expand the scope of indemnifi

Section 11.5 of our draft required Veridian and each participating institution to provide reciprocal indemnification to Penterra for claims, losses, and liabilities arising from: (a) The negligence or willful misconduct of the participating institution, the investigator, or any site personnel; (b) Any unauthorized deviation from the Protocol not required for immediate subject safety; and (c) Any breach by the partici

Section 11.7 of our draft established notice requirements for indemnification claims, requiring the indemnified party to provide written notice to the indemnifying party within 30 calendar days of becoming aware of a claim, potential claim, or circumstances reasonably likely to give rise to a claim. Our draft further provided that failure to provide timely notice "shall not relieve the indemnifying party of its oblig

1. Maintain per-subject and aggregate caps. Penterra should firmly maintain the per-subject medical care cost cap of $500,000 and the aggregate cap of $15,000,000 as set forth in the first draft. These caps apply only to medical care costs; our draft already provides uncapped indemnification for claims based on product defect, which should provide adequate comfort to Veridian on the most serious category of potential

2. Reject the burden-of-proof shift. The requirement that Penterra affirmatively disprove causation by clear and convincing evidence is fundamentally inconsistent with standard clinical trial risk allocation and should be firmly resisted. The standard formulation — under which a study-related injury is one "directly caused by the administration of the investigational product in accordance with the Protocol" — appropr

3. Retain the ordinary negligence standard for carve-outs. The deletion of the ordinary negligence standard and substitution of a gross negligence threshold effectively eliminates the carve-out for routine investigator errors. Given that multi-kinase inhibitor dose management requires careful monitoring and that investigator errors in this context can have serious consequences, Penterra should not accept responsibili

4. Resist reduction of reciprocal site indemnity caps. Penterra should maintain the $5,000,000 per-site/per-occurrence and $20,000,000 aggregate caps for reciprocal site indemnity. The proposed reduction to $2,000,000/$8,000,000 is inadequate given the scale of the agreement and the number of participating sites.

5. Retain the 30-day notice period and material-prejudice qualifier. The 30-day notice period is standard and provides adequate time for sites to identify and report claims. The material-prejudice qualifier is a widely accepted commercial contracting provision that should be retained.

6. Indemnification Term Sheet. Given the complexity and significance of the indemnification issues, we recommend preparing a detailed indemnification-focused term sheet for circulation to WJC as a standalone document, separate from the comprehensive Second Draft markup. This approach will enable the parties to focus the negotiation on the indemnification terms and potentially reach agreement on this issue before the

IV. Category 2: Insurance Requirements — $50M Per-Occurrence Demand The insurance provisions in Article 12 of the MCTA have been significantly revised in Veridian's markup, with changes affecting the minimum limits for Penterra's clinical trial liability insurance, the required sublimits for subject-injury coverage, the type of policy required, the site insurance requirements, and the administrative procedures for ce

Section 12.1 of our draft required Penterra to maintain clinical trial liability insurance with minimum limits of $25,000,000 per occurrence and $75,000,000 in the aggregate throughout the term of the MCTA and for a period of three years following study completion. These limits are consistent with Penterra's existing clinical trial liability insurance policy through Briarcliff Mutual Insurance Company (Policy No. BM-

Section 12.2 of our draft required Veridian and each participating institution to maintain general liability and professional liability insurance with minimum limits of $5,000,000 per occurrence and $10,000,000 in the aggregate. This requirement was designed to ensure that each site in the Veridian network carries adequate insurance to cover its own liabilities under the MCTA, including claims arising from site negli

1. Maintain the $25M/$75M position. Penterra should maintain its position that $25,000,000 per occurrence / $75,000,000 aggregate coverage is adequate and consistent with prevailing market standards. We should be prepared to provide WJC with supporting market data, including references to published industry benchmarking reports.

2. Maintain the $10M/$50M subject-injury sublimit. The existing sublimit in the Briarcliff policy is adequate given the per-subject medical care cost cap of $500,000 and the aggregate cap of $15,000,000 proposed in our draft. If the indemnification caps are maintained (as we recommend), the sublimit provides adequate coverage for Penterra's indemnification obligations.

3. Resist the occurrence-based coverage requirement. Claims-made coverage is the prevailing standard in the pharmaceutical industry, and converting to occurrence-based coverage would impose significant costs and disruption. We should explain this market reality to WJC and offer to provide evidence of the claims-made policy's adequacy, including the retroactive date and tail coverage provisions.

4. Resist the reduction in site insurance requirements. Penterra should maintain its requirement that Veridian and each participating institution carry at least $5,000,000 per occurrence / $10,000,000 aggregate in general liability and professional liability insurance. Veridian's 501(c)(3) status and claimed limitations in insurance access do not justify coverage levels below what is appropriate for an organization c

5. Maintain the 15-business-day certificate exchange deadline. The shortened 10-business-day deadline may present logistical challenges and should be resisted.

6. Maintain the 30-day cancellation notice period. The 60-day notice period is impractical given that insurance carriers typically provide only 30 days' notice to the insured. We should offer to pass through to Veridian any cancellation or non-renewal notice received from the carrier promptly upon receipt, which is a more practical approach.

V. Category 3: Payment Structure — Front-Loaded Payment Demand Veridian's markup proposes significant changes to the payment structure set forth in Article 8 of the MCTA, including a restructuring of the per-patient payment schedule, modifications to start-up fees, the addition of a new "site readiness" fee, an increase in the network coordination fee, and changes to payment terms and late-payment provisions. Taken t

Section 8.2 of our draft established a milestone-based per-patient payment structure designed to align payments with site performance and incentivize both enrollment and subject retention throughout the study. Under our structure, each enrolled subject would generate a total payment of $52,000, payable in four equal installments of $13,000 each, triggered by the following milestones: Veridian's markup restructures th

Section 8.1 of our draft provided start-up fees of $75,000 per site, payable in two equal tranches: $37,500 upon site activation (defined as the date on which the site has received IRB approval, executed the site-specific addendum, completed all required training, and been cleared by Penterra to enroll subjects) and $37,500 upon enrollment of the first subject at that site. The two-tranche structure was designed to t

Section 8.3 of our draft provided for a network coordination fee of $4,200,000, payable in quarterly installments of $300,000 over 14 quarters. This fee compensates Veridian for its network-level administrative, operational, and management services, including site selection, network-wide training coordination, enrollment tracking, quality management, and regulatory coordination. Veridian's markup increases the quarte

Section 8.5 of our draft specified payment terms of Net 45 days from receipt by Penterra of a proper invoice from Veridian, with invoices to be submitted monthly and to include supporting documentation as specified in the MCTA. Our draft did not include a late-payment interest provision, consistent with Penterra's standard contracting practice. Veridian's markup shortens the payment terms to Net 30 days and adds a ne

1. Maintain the 25%/25%/25%/25% milestone-based structure. The equal milestone-based payment schedule aligns payments with site performance, incentivizes both enrollment and retention, and distributes cash-flow obligations evenly across the study timeline. This structure is widely used in Phase III clinical trial agreements and provides appropriate risk allocation between sponsor and site network. If Veridian presses

2. Maintain the two-tranche start-up fee. The $37,500/$37,500 structure appropriately ties a portion of the start-up fee to site performance (enrollment of first subject). However, if other terms are favorable and this issue is a significant priority for Veridian, Penterra could accept payment of the full $75,000 at site activation as a concession. This should be treated as a negotiating chip to be deployed in exchan

3. Reject the site readiness fee. The proposed $25,000 per-site readiness fee is non-standard and duplicative of the start-up fee, which already covers pre-activation preparation costs. Penterra should reject this fee entirely.

4. Maintain the $300,000 quarterly network coordination fee. The 25% increase proposed by Veridian is not justified absent a corresponding expansion in the scope of network coordination services. If Veridian can identify specific additional services not contemplated by Exhibit E, those could be evaluated and priced separately, but a blanket 25% increase without corresponding scope expansion is not appropriate.

5. Maintain Net 45 payment terms. Net 45 is standard in pharmaceutical industry agreements and is consistent with Penterra's accounts payable cycle. As a potential compromise, Penterra could offer Net 40 payment terms. On the late-payment interest provision, Penterra could accept interest at a rate of the lesser of 1% per month or the maximum rate permitted by applicable law, which would provide Veridian with a reaso

VI. Category 4: Publication Rights — Expanded Investigator Academic Freedom The publication provisions in Article 14 of the MCTA have been significantly revised in Veridian's markup, reflecting Veridian's strong institutional interest in preserving investigator academic freedom and its historical position as an advocate for open publication of clinical trial results. While Penterra shares the commitment to responsibl

Section 14.1 of our draft granted investigators the right to publish, present, or otherwise disseminate trial results, subject to the following conditions: (a) The investigator shall submit a complete copy of any proposed publication or presentation to Penterra at least 60 days before the planned submission or presentation date; (b) Penterra shall have 60 days from receipt of the proposed publication or presentation

Section 14.3 provides that "all multi-center publications arising from the Study shall be coordinated through the Global Principal Investigator, Dr. Catherine Aldridge, M.D., Ph.D., who shall have primary responsibility for ensuring the scientific integrity, completeness, and accuracy of multi-center publications." This provision further states that "the Sponsor may not publish trial results independently without inv

Section 14.4 provides that "any ghostwriting or medical writing support pro