Contract analysis

1. Executive Summary This Matter Status Report covers activity during the first quarter of 2023 (January 1 through March 31, 2023) in connection with the ongoing Internal Revenue Service Large Business & International Division ("LB&I") examination of Penterra Pharmaceuticals Corp.'s ("PPC" or the "Company") transfer pricing methodology for tax years 2017 through 2020. The examination was formally opened on May 16, 20

2. Examination Background and Scope 2.1 The Taxpayer Penterra Pharmaceuticals Corp. (EIN 22-3741856; Nasdaq ticker PPCA) is a publicly traded specialty pharmaceutical and biotechnology company headquartered at 2200 Independence Boulevard, Princeton Junction, New Jersey 08550. For fiscal year 2020, PPC reported consolidated global revenue of approximately $6.82 billion and consolidated pre-tax income of approximately

3. Q1 2023 Activity Summary 3.1 Information Document Requests (IDRs) 3.1.1 IDRs Issued During Q1 2023. During the first quarter of 2023, the IRS examination team issued IDRs No. 22 through approximately No. 28. These requests continued the IRS's systematic gathering of information concerning PPC's transfer pricing arrangements, PBI's operations and substance, and supporting economic data. As of March 31, 2023, a cumu

4. Anticipated NOPA Timeline and Next Steps 4.1 Projected Timeline Based on the current pace of the examination, the volume and complexity of outstanding IDRs, and the recent engagement of the IRS economist, C&H estimates the following timeline for the next major phase of the examination: • Information Gathering Completion: Mid- to late-Q3 2023 (approximately August–September 2023). The IRS is expected to issue addit

1. Continued IDR Response Activity. C&H will continue to prepare and file responses to outstanding and newly issued IDRs, with a target of completing the IDR response phase by approximately September 2023.

2. Mid-Examination Conference Request. C&H plans to submit a written request to the IRS exam team (Supervisory Revenue Agent Meskill and Lead Revenue Agent Dunleavy) for a mid-examination conference. The purpose of this conference would be to discuss the status of the examination, narrow the remaining issues under consideration, and understand the IRS's preliminary areas of concern. C&H is targeting May 2023 for this

3. Meeting with IRS Economist. As discussed in Section 3.3 above, C&H recommends requesting a meeting or telephone conference with Dr. Washburne to understand his analytical approach and to present PPC's economic analyses proactively.

4. Whitmore Rebuttal Preparation. C&H will continue to coordinate with Whitmore Valuation Group in anticipation of rebuttal work that will be necessary once the IRS economist's analysis is received or a NOPA is issued. Whitmore is maintaining readiness to prepare a comprehensive rebuttal report on an expedited timeline.

5. IRS Office of Chief Counsel. C&H anticipates the possible engagement of attorneys from the IRS Office of Chief Counsel as the examination approaches the NOPA stage. Based on available information, the assigned counsel may include Franklin Rosario (Attorney-Advisor) and Donna Hirabayashi (Senior Counsel). C&H will monitor for any indication of Chief Counsel involvement and will coordinate with the assigned attorney

5. Statute of Limitations Status C&H is carefully tracking the assessment statute of limitations under IRC § 6501 for each of the four tax years under examination. The current status is as follows: *Filing dates reflect extensions of time to file; actual filing dates to be confirmed against IRS records. TY 2017. The original three-year assessment period for TY 2017 would have expired on April 15, 2021 (three years fr

6. Budget and Fee Status 6.1 Calderwood & Harkness Fees Pursuant to the engagement letter dated June 2, 2022, C&H estimated that total legal fees for the engagement — encompassing the examination defense phase (IDR responses, NOPA response), the Protest and Appeals phases, and potential post-Appeals resolution — would fall in the range of $4.5 million to $7.0 million. This range was based on assumptions regarding the

7. FIN 48 / ASC 740-10 Reserve 7.1 Current Reserve PPC maintains a reserve for uncertain tax positions under Financial Accounting Standards Board Interpretation No. 48 ("FIN 48"), codified as ASC 740-10 (Accounting for Uncertainty in Income Taxes), in the amount of $62.4 million related to the Irish IP structure, including the CSA, the PCT, and the legacy IP royalty arrangements. This reserve reflects PPC's assessmen

8. Hargrove Credit Facility Considerations PPC's revolving credit facility of $1.5 billion with Hargrove National Bank, N.A. (100 Federal Street, Boston, Massachusetts 02110; Christine Bellucci, Senior Vice President, Relationship Manager) contains covenants relating to tax indemnities and material tax events. Specifically, certain provisions of the credit agreement require PPC to provide notice to the administrative

9. SEC Disclosure Considerations 9.1 Ongoing Disclosure Obligations PPC's ongoing obligations under the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission require disclosure of material contingent liabilities, including pending or threatened tax controversies, in PPC's periodic filings on Forms 10-K and 10-Q. The applicable accounting standards (ASC 450, Contingenc

10. Key Products Under Examination The following is a brief summary of key product revenue data relevant to the transfer pricing issues under examination. This data provides context for the CSA cost-sharing ratios, the legacy IP royalty base, and the overall magnitude of the intercompany transactions at issue. 10.1 Veritaxol (Oncology) Veritaxol is PPC's oncology blockbuster product, approved for the treatment of mul

11. Engagement Team and Contact Information The following professionals are assigned to the PPC engagement: Calderwood & Harkness LLP Leonard Cross — Responsible Partner, Tax Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, Pennsylvania 19103 Admitted: New York, New Jersey, District of Columbia Experience: 28 years specializing in transfer pricing controversy, IRS examination defense, and intern

12. Action Items and Recommended Next Steps for Q2 2023 Based on the developments during Q1 2023 and the current status of the examination, C&H recommends the following action items for Q2 2023:

1. Continue IDR Responses. Continue preparing and filing responses to outstanding and anticipated IDRs, with a target of completing the IDR response phase by approximately September 2023. Maintain rigorous tracking of all IDRs, response deadlines, and privilege assertions through the master IDR tracker and privilege log.

2. Request Mid-Examination Conference. Submit a written request to the IRS examination team (Supervisory Revenue Agent Meskill and Lead Revenue Agent Dunleavy) for a mid-examination conference to discuss the status of the examination, narrow the remaining issues under consideration, and understand the IRS's preliminary areas of concern. Target date for the request: May 2023.

3. Engage with IRS Economist. Prepare for and participate in a meeting or telephone conference with IRS economist Dr. Alan Washburne to understand his analytical approach and methodology, and to present PPC's economic analyses proactively. C&H and Whitmore Valuation Group should jointly prepare presentation materials for this engagement.

4. Whitmore Rebuttal Preparation. Continue coordination with Whitmore Valuation Group on preparation for potential rebuttal work. Ensure that Whitmore's team maintains readiness to prepare a comprehensive rebuttal report on an expedited timeline following receipt of the IRS economist's analysis or the issuance of a NOPA.

5. Irish Tax Coordination. Continue coordination with Thornbury & Keogh on Irish tax aspects of the defense, including monitoring for any Irish Revenue activity, updating PBI substance documentation as needed, and ensuring alignment between the U.S. and Irish positions.

6. Crestfield Data Requests. Follow up with Crestfield & Associates LLP on any outstanding data requests for IDR responses. Ensure that Crestfield's workpapers and contemporaneous documentation remain accessible and organized for efficient retrieval.

7. Statute of Limitations Monitoring. Continue monitoring statute of limitations dates for all four tax years. Prepare Form 872 extension requests as needed, particularly for TY 2019, where the original statutory period may be approaching expiration.

8. Quarterly Status Call. Schedule a quarterly status call with PPC management (Whitfield, Staines, and Iyer) to discuss developments, strategy, and any decisions requiring client input. C&H recommends scheduling this call for the first or second week of July 2023, following the conclusion of Q2.

9. SEC and Credit Facility Monitoring. Continue monitoring SEC disclosure requirements and Hargrove credit facility covenant implications. Advise PPC promptly of any development that triggers a reporting obligation or disclosure update.

13. Conclusion The IRS examination of PPC's transfer pricing for TY 2017–2020 remains in the information-gathering phase as of the end of Q1 2023. No formal proposed adjustments have been issued, and the examination is proceeding in an orderly fashion through the IDR process. PPC's transfer pricing positions — the CSA cost-sharing ratios, the legacy IP royalty rate of 4.5%, and the PCT payment of $312 million — are w