Contract analysis

I. Executive Summary Stonebridge HSW Antitrust Advisors LLP ("Stonebridge HSW") and Calderwood & Harkness LLP ("Calderwood & Harkness," and together with Stonebridge HSW, "outside counsel") have been jointly engaged by Penterra Pharmaceuticals Corp. ("Penterra," "PPC," or the "Company") to assess the antitrust risks associated with Penterra's proposed acquisition of 100% of the outstanding capital stock of Veridian B

1. No Marketed Products at Veridian. Veridian is a clinical-stage biotechnology company with no marketed products and zero revenue. As of the date of this memorandum, Veridian has not obtained marketing approval from the U.S. Food and Drug Administration ("FDA") or any other regulatory authority for any of its product candidates. It does not participate in any commercial product market.

2. Early-Stage Lead Candidate. Veridian's lead product candidate, VRD-4187, a bispecific T-cell engager targeting delta-like ligand 3 ("DLL3") for the treatment of small cell lung cancer ("SCLC"), is currently in Phase II clinical trials. The pivotal Phase II trial, designated Marlowe Asset Management-2 (ClinicalTrials.gov Identifier: NCT05837291), is ongoing, and VRD-4187 is, under the most optimistic assumptions, a

3. Minimal or No Competitive Overlap. There is limited-to-no direct product market overlap between Penterra's marketed portfolio (which consists of twelve products across oncology, immunology, and rare diseases) and Veridian's development-stage pipeline. Penterra does not currently market, and is not currently developing, any bispecific T-cell engager product or any DLL3-targeting therapy. Penterra's internal immuno-

4. Robust Competitive Landscape. The immuno-oncology therapeutic landscape, including the bispecific antibody and T-cell engager space, is highly competitive, with numerous well-funded pharmaceutical and biotechnology companies pursuing competing programs targeting DLL3 and other SCLC-related antigens. The Transaction does not remove a meaningful competitive constraint from any relevant market. Based on this analysis

II. Transaction Overview A. The Parties

1. Penterra Pharmaceuticals Corp. (Buyer). Penterra Pharmaceuticals Corp. is a corporation organized under the laws of the State of Delaware, with its principal executive offices located at 1100 Meridian Boulevard, Suite 400, Princeton, New Jersey 08540. Penterra's common stock is publicly traded on the Nasdaq Global Select Market under the ticker symbol "PPCA." As of the date of this memorandum, Penterra's market ca

2. Veridian Biosciences, Inc. (Target). Veridian Biosciences, Inc. is a corporation organized under the laws of the State of Delaware, with its principal office located at 550 Gateway Drive, Cambridge, Massachusetts 02142. Veridian is a privately held, clinical-stage biotechnology company focused on the discovery and development of novel immuno-oncology therapeutics leveraging its proprietary T-cell engager technolog

III. HSR Act Filing Requirements A. Reportability Analysis Under the HSR Act and the implementing regulations promulgated by the Federal Trade Commission ("FTC"), 16 C.F.R. Parts 801–803, the acquisition of voting securities, assets, or non-corporate interests that satisfies certain statutory thresholds requires pre-closing notification to both the FTC and the Antitrust Division of the U.S. Department of Justice ("DO

IV. Substantive Antitrust Analysis A. Relevant Product Markets The foundation of any substantive antitrust analysis under Section 7 of the Clayton Act is the definition of the relevant product market or markets within which the merging parties participate. A merger violates Section 7 only if it may substantially lessen competition or tend to create a monopoly in a properly defined relevant market. The relevant produc

1. Penterra's Commercial Portfolio. Penterra currently markets a portfolio of twelve products across three therapeutic areas: oncology, immunology, and rare diseases. In the oncology segment specifically, Penterra's marketed products include therapeutics for the treatment of various solid tumors and hematological malignancies. A comprehensive summary of Penterra's marketed oncology product portfolio is set forth in A

2. Veridian's Pipeline. Veridian has no marketed products and generates zero revenue from product sales. Its operations are wholly focused on research and development. Veridian's pipeline consists of the following candidates: Lead Candidate: VRD-4187. VRD-4187 is a bispecific T-cell engager that simultaneously binds DLL3 (expressed on the surface of SCLC tumor cells) and CD3 (expressed on T cells), thereby redirectin

3. Market Definition: Immuno-Oncology and Bispecific T-Cell Engagers. For purposes of this risk assessment, we have considered the relevant product market at multiple levels of specificity, ranging from the broadest to the narrowest plausible definition, to ensure that our analysis is robust under any market definition the reviewing agency might adopt: Broad Relevant Market: Immuno-Oncology Therapeutics. At the broad

1. SCLC Treatment Landscape. SCLC is a highly aggressive form of lung cancer that accounts for approximately 10–15% of all lung cancer diagnoses. It is characterized by rapid growth, early metastasis, and initial responsiveness to chemotherapy followed by nearly universal relapse. SCLC represents a high-unmet-need indication with limited approved treatment options and poor overall survival outcomes. The current stand

2. Bispecific T-Cell Engager Competitive Set. The bispecific antibody and T-cell engager space is one of the most active areas of pharmaceutical research and development globally. Multiple large-cap and mid-cap pharmaceutical companies, as well as well-funded biotechnology firms, are pursuing bispecific antibody and T-cell engager programs across a broad range of oncological and non-oncological indications. The space

3. Concentration Analysis. Under the 2023 Merger Guidelines, the FTC and DOJ assess the structural effects of a merger using, among other tools, the Herfindahl-Hirschman Index ("HHI"). The HHI is calculated by summing the squares of the individual market shares of all participants in the relevant market. Mergers that increase the HHI by more than 100 points in a market with a post-merger HHI above 1,800 are presumed

1. Zero Market Share for Veridian. Veridian has no marketed products and generates zero revenue. In any commercial product market, Veridian's market share is zero. Accordingly, the acquisition of Veridian by Penterra does not combine any existing market shares and does not produce any HHI increase in any commercial product market.

2. No Competing Marketed Products. The Transaction does not combine competing marketed products. Penterra's marketed portfolio does not include any product that competes with a Veridian product, because Veridian has no marketed products. The HHI in any market defined around Penterra's existing products is unchanged by the Transaction.

3. No Reduction in Pipeline Competitors. Even if the analysis is extended to development-stage products (as it might be under an innovation markets theory), the Transaction does not reduce the number of competing pipeline candidates in the DLL3/SCLC space. Penterra has no DLL3-targeting program, so the acquisition of Veridian's VRD-4187 program does not eliminate an independent competitor. The number of independent R

1. Horizontal Overlap. The most common theory of harm in merger enforcement is that the merger combines two direct competitors, resulting in a reduction of competition in a relevant market. This theory requires, at a minimum, that the merging parties offer competing products (or are developing competing products) in the same relevant market. As detailed above, there is no meaningful horizontal overlap between Penterr

2. Potential Competition / Innovation Markets. The FTC and DOJ have, in certain pharmaceutical merger cases, challenged transactions based on a "potential competition" or "innovation markets" theory of harm. Under this theory, even where the merging parties do not currently compete in a commercial product market, the merger may be challenged if it eliminates a potential future competitor — for example, where both par

3. Vertical Concerns. Vertical theories of harm arise where the merging parties stand in a supplier-customer or otherwise vertically related position, and the merger may enable the combined entity to foreclose competitors from necessary inputs (input foreclosure) or to deny competitors access to downstream customers (customer foreclosure). No vertical relationship exists between Penterra and Veridian. Veridian is not

4. Conglomerate / Portfolio Effects. Conglomerate or portfolio effects theories of harm arise where a merger combines complementary (but not directly competing) products in a way that may enable the combined entity to leverage its expanded portfolio to the detriment of competition — for example, through anticompetitive bundling, tying, or the exercise of portfolio-based market power. While the Transaction will expand

V. Second Request Risk Assessment Based on the comprehensive analysis set forth in Section IV above, we assess the risk that the FTC or DOJ will issue a Second Request (a Request for Additional Information and Documentary Material, pursuant to 15 U.S.C. § 18a(e)) in connection with this Transaction as very low. We estimate the probability of a Second Request at less than 5%. The following factors support our assessme

1. No overlapping marketed products. Penterra and Veridian do not compete in any commercial product market. There is no product for which both parties hold meaningful market share.

2. No overlapping pipeline candidates. Penterra has no bispecific T-cell engager, DLL3-targeting therapy, or SCLC treatment in development. There is no pipeline-to-pipeline overlap in any therapeutic area or mechanism of action.

3. Veridian is clinical-stage with zero revenue. The FTC's enforcement priorities in pharmaceutical mergers have historically focused on transactions involving marketed products or late-stage pipeline candidates with identifiable commercial implications. Veridian's lead candidate is in Phase II clinical trials and is years from potential commercialization.

4. Well-established strategic rationale. The Transaction is motivated by Penterra's desire to rebuild its immuno-oncology pipeline following the failure of PPC-0921. Internal strategy documents, board materials, and management presentations uniformly describe the Transaction as pipeline-additive and designed to fill a gap in Penterra's development portfolio. This narrative is consistent with a procompetitive, rather

5. Robust competitive landscape post-transaction. The DLL3/SCLC and bispecific T-cell engager competitive landscape remains highly competitive following the Transaction. Multiple well-funded competitors are pursuing independent development programs in this space. The Transaction does not reduce the number of independent competitors or eliminate a meaningful competitive constraint. In the unlikely event that the FTC o

VI. State Antitrust Considerations In addition to federal antitrust review, pharmaceutical mergers may, in certain circumstances, attract the attention of state attorneys general, who possess independent authority under state antitrust statutes and, in some cases, under parens patriae authority to enforce the federal Clayton Act on behalf of their states' citizens. In recent years, state attorneys general have occasi

VII. International / Foreign Antitrust Filings We have conducted an assessment of the Transaction's filing obligations under the merger control laws of relevant foreign jurisdictions. This analysis considers the revenue profiles, asset locations, and operational footprints of both Penterra and Veridian in each jurisdiction where merger control notification may potentially be triggered. Veridian's operations are conce

VIII. Recommendations and Next Steps Based on the analysis set forth in this memorandum, we recommend the following course of action: A. Filing Strategy We recommend that Penterra and Veridian proceed with the preparation and submission of their respective HSR Notification and Report Forms by the target filing date of April 22, 2024. Both filings should be submitted simultaneously to the FTC and DOJ through the HSR e