Contract analysis

I. Executive Summary The second quarter of 2023 represents a critical transitional period in the IRS's transfer pricing examination of Penterra Pharmaceuticals Corp. ("PPC" or the "Company"). During this quarter, the IRS examination team has substantially completed its factual development phase and is now moving toward the formulation of proposed adjustments. This shift in posture was made evident during the mid-exam

II. Examination Status and Activity During Q2 2023 A. IDR Activity The IRS's factual development through Information Document Requests continued at a significant pace during Q2 2023. As of the close of the quarter, the IRS had issued a total of 47 IDRs since the examination commenced in June 2022. Of these, C&H has responded to approximately 38 IDRs, with the remaining requests in various stages of response preparati

III. Defense Workstreams — Status Update A. Economic Analyses (Whitmore Valuation Group LLC) All core economic reports prepared by WVG were delivered on schedule during Q4 2022 and remain current as of the date of this report. The following is a summary of the status of each deliverable: CUT Analysis (Legacy IP Royalty Rate). Delivered in November 2022. WVG identified 14 comparable pharmaceutical license agreements t

IV. Anticipated Q3 2023 Developments and Upcoming Milestones The following milestones and developments are anticipated during Q3 2023: August 15, 2023 — Meeting with IRS Economist Dr. Alan Washburne. C&H has secured a meeting with Dr. Washburne to discuss his economic methodology, comparable selection criteria, and discount rate assumptions. Leonard Cross and Garrett Simmons will attend on behalf of C&H. Dr. Helena V

V. Privilege and Document Management All document production to the IRS in connection with the examination is coordinated through C&H. A comprehensive privilege log is maintained and updated with each IDR response to ensure that privileged and work-product-protected materials are not inadvertently produced to the IRS. The privilege log identifies each withheld or redacted document by date, author, recipient, subject

VI. Financial Reporting / Budget Update A. Fees Billed Through Q2 2023 Calderwood & Harkness LLP. Fees billed by C&H through June 30, 2023 are trending toward approximately $3.0M–$3.5M of the $4.5M–$7.0M total estimated range for C&H's fees through resolution of the examination. The pace of billing during Q2 2023 was driven primarily by the intensive IDR response period (including the preparation and production of re

VII. SEC Disclosure and Financial Reporting Considerations PPC's FIN 48 (ASC 740-10) reserve for uncertain tax positions related to the Irish IP structure currently stands at $62.4M. This reserve was established at a pre-settlement level based on PPC's assessment of the probability and magnitude of potential adjustments in connection with the IRS examination. C&H provided its analysis supporting the FIN 48 reserve to

VIII. Recommended Next Steps Based on the foregoing analysis and the current posture of the examination, C&H recommends the following actions for Q3 2023:

1. Complete Remaining IDR Responses. Continue preparation and timely submission of responses to all outstanding IDRs through IDR No. 47. Particular attention should be given to ensuring that the final IDR responses are complete, accurate, and consistent with the factual record established in prior responses.

2. Attend August 15, 2023 Meeting with IRS Economist Dr. Washburne. Leonard Cross, Garrett Simmons, and Dr. Helena Vasquez (Whitmore) will participate. C&H will prepare detailed talking points highlighting the strength of WVG's comparable selection methodology, the rigor of the 9.8% WACC, and the arm's-length nature of PPC's intercompany pricing. This meeting represents a critical opportunity to understand and begin

3. Prepare Whitmore for Rapid-Turnaround Rebuttal. Ensure that WVG is positioned to initiate rebuttal work on an expedited basis immediately upon the issuance of the NOPA. The rebuttal should address each component of the IRS economist's analysis, including comparable selection, discount rate methodology, RAB calculations, and cost-sharing ratio adjustments.

4. Prepare Correlative Adjustment Memorandum. Prepare the correlative adjustment research memorandum under Treas. Reg. § 1.482-1(g) in anticipation of potential overlap between the IRS's proposed CSA cost-sharing adjustments and royalty rate adjustments. This memorandum should develop the legal and economic arguments supporting a reduction in the aggregate adjustment to avoid double-counting.

5. Develop NOPA Response Contingency Plan. Begin outlining the framework for a formal Protest to IRS Appeals, including identification of the key factual, economic, and legal arguments to be advanced. Develop preliminary settlement parameters based on a range of potential NOPA amounts and PPC's assessment of the relative strength of its positions on each adjustment.

6. Schedule Call Regarding Disclosure and Covenant Implications. Schedule a call with Deborah Staines and Rajesh Iyer to discuss the implications of a large NOPA for SEC disclosure requirements, FIN 48 reserve levels, and the Hargrove National Bank credit facility covenants. This call should be scheduled for late Q3 2023, in advance of the anticipated NOPA issuance.

7. Continue Irish-Side Coordination. Continue coordination with Thornbury & Keogh on Irish-side developments, including monitoring for any Irish Revenue inquiries related to PBI's operations or Knowledge Development box claims. Ensure that T&K is prepared to provide supplemental substance documentation if needed in connection with the NOPA response.

8. Schedule Q3 Status Call. Schedule the next quarterly status call with PPC management for early October 2023, at which time C&H will provide an update on the NOPA status, the results of the August 15 meeting with Dr. Washburne, and the Q3 budget status.

IX. Closing and Contact Information C&H will issue its next quarterly status report covering Q3 2023 in early October 2023. Given the anticipated issuance of the NOPA during Q3, the next report is expected to include a detailed analysis of the proposed adjustments and C&H's recommended response strategy. In the interim, all inquiries regarding this matter should be directed to: Leonard Cross, Responsible Partner Cald