Contract analysis

I. Executive Summary This memorandum supplements our comprehensive Material Adverse Effect ("MAE") analysis memorandum dated August 25, 2024 (the "Initial MAE Memorandum"), which analyzed in detail the clinical data readout from the Marlowe Asset Management-2 Phase II trial (NCT05837291) on August 14, 2024. Since the date of the Initial MAE Memorandum, a significant new development has occurred: on August 22, 2024, t

II. Background and Procedural Posture A. The Transaction On June 10, 2024, Penterra Pharmaceuticals Corp. entered into a Stock Purchase Agreement with Veridian Biosciences, Inc., the individual sellers of Veridian's capital stock identified on Schedule A to the SPA (collectively, the "Sellers"), and David Ng in his capacity as Stockholder Representative, pursuant to which Penterra agreed to acquire one hundred percen

III. The MAE Definition Under the SPA A. Text of the MAE Definition (SPA § 1.1)

Section 1.1 of the SPA defines "Material Adverse Effect" as follows: "Material Adverse Effect" means any event, change, development, occurrence, condition, or effect that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (a) the business, results of operations, financial condition, or assets of the Company, taken as a whole, or (b) the ability of the Selle

IV. Analysis of the FDA Partial Clinical Hold A. Nature and Significance of the Partial Clinical Hold A clinical hold is one of the most consequential regulatory actions available to the FDA short of an outright IND withdrawal or refusal to file. Under 21 C.F.R. § 312.42, the FDA may order a sponsor to delay a proposed clinical investigation or to suspend an ongoing clinical investigation, in whole or in part. A "par

V. Delaware Law Framework: Durational Significance and the MAE Standard A. The Akorn Standard and Its Progeny The leading Delaware precedent on the Material Adverse Effect standard is Akorn, Inc. v. Fresenius Kabi AG, C.A. No. 2018-0300-JTL (Del. Ch. Oct. 1, 2018), aff'd, 198 A.3d 724 (Del. 2018). Akorn is the first—and, as of the date of this memorandum, remains the leading and most thoroughly reasoned—Delaware Cour

VI. Analysis of MAE Carveout Inapplicability to the Clinical Hold A. No Applicable Carveout for Company-Specific FDA Actions The MAE carveouts set forth in SPA § 1.1 are not applicable to the FDA partial clinical hold on VRD-4187. We address each potentially relevant carveout in turn. Carveout (iii) — Changes in Applicable Law. The FDA partial clinical hold on IND 154832 is not a "change in applicable law" within the

VII. Cumulative Effect Analysis A. Aggregation of Events Under the MAE Definition The MAE definition in SPA § 1.1 expressly provides for the consideration of events "individually or in the aggregate." This aggregation language is a standard feature of MAE definitions and has been consistently applied by Delaware courts to permit the buyer to present the totality of adverse developments as a cumulative whole, rather t

1. August 14, 2024 — DMC Interim Analysis. The Data Monitoring Committee for the Marlowe Asset Management-2 trial conducted its pre-planned interim analysis and revealed (a) a 23.4% incidence of Grade 3 or higher CRS in the VRD-4187 treatment arm (vs. 4.1% in the control arm), (b) seven treatment-related deaths in the VRD-4187 arm (3.6%) vs. one in the control arm (0.5%), and (c) a non-statistically-significant ORR o

2. August 22, 2024 — FDA Partial Clinical Hold. The FDA imposed a partial clinical hold on IND 154832, independently confirming the severity of the safety signal identified by the DMC and halting new enrollment in the Marlowe Asset Management-2 trial. The FDA's determination that VRD-4187 presents an "unreasonable and significant risk of illness or injury" to clinical trial subjects constitutes an independent, author

3. August 28, 2024 — Protocol v4.0 Amendment. Veridian submitted Protocol v4.0 to the FDA, incorporating mandatory tocilizumab prophylaxis and a 50% dose reduction (from 1.5 mg/kg to 0.75 mg/kg). While Veridian may characterize this as a proactive remediation measure, the protocol amendment is, in substance, an implicit acknowledgment by Veridian of the severity of the safety problem. A sponsor does not implement man