Contract analysis

Section 1 — Overview of the Penterra Pharmaceuticals Corp. Global Corporate Structure The following is a narrative overview of PPC's global corporate structure as it existed during the Examination Period. This overview covers the entities that are directly relevant to the transfer pricing issues identified by the examination team in IDR No. 1 and in preliminary correspondence. A diagram of the ownership structure is

Section 2 — Ownership Structure Diagram The global corporate ownership structure of PPC and its relevant subsidiaries during the Examination Period is depicted in the ownership structure diagram enclosed as Enclosure 1 to this response. The diagram illustrates the following ownership chain, which reflects the corporate structure in place during each of the four tax years at issue (2017, 2018, 2019, and 2020): Penterr

Section 3 — Functional Organizational Charts In addition to the ownership structure diagram (Enclosure 1), PPC has prepared and enclosed functional organizational charts for PPC (U.S. operations), PBI (Dublin operations), and PMI (Cork manufacturing operations). These charts are described below. 3.1 PPC U.S. Functional Organizational Chart (Enclosure 2) The PPC U.S. functional organizational chart is enclosed as Encl

Section 4 — Key Intercompany Relationships and Agreements (Summary) For the convenience of the examination team, PPC provides below a brief summary of the principal intercompany arrangements among the entities described in this response that are relevant to the transfer pricing issues under examination. PPC notes that this summary is provided for informational context only; copies of the underlying agreements are not

1. Cost-Sharing Arrangement ("CSA"): PPC and PBI are parties to a qualified cost-sharing arrangement, effective July 1, 2012, governed by the provisions of Treasury Regulation § 1.482-7. Under the CSA, PBI co-funds qualified research and development costs incurred by the PPC group in proportion to its reasonably anticipated benefits from the exploitation of the intangible property developed under the CSA. In exchange

2. Legacy IP License Agreement: PPC (as licensor) and PBI (as licensee) are parties to an intercompany license agreement for the exploitation of certain pharmaceutical compounds that were developed and commercialized prior to the formation of the CSA on July 1, 2012, and which are not included within the scope of the CSA (the "Legacy Compounds"). Under the Legacy IP License Agreement, PBI pays PPC a royalty of 4.5% o

3. Contract Manufacturing Agreement: PBI (as principal) and PMI (as contract manufacturer) are parties to an intercompany contract manufacturing agreement under which PMI manufactures biologic pharmaceutical products for PBI on a fully loaded cost-plus basis. PMI is compensated at a markup of 8% over its total costs incurred in performing manufacturing services. The cost-plus markup was established based on a benchma

Section 5 — Additional Entities and Contextual Information PPC notes that its global corporate structure includes a number of additional domestic and foreign subsidiaries beyond the four entities described in detail in Sections 1 through 4 of this response. These additional entities are shown on the global corporate ownership structure diagram (Enclosure 1) for completeness. However, these additional entities are not

Section 6 — List of Enclosures The following enclosures are attached to and incorporated by reference into this response: Enclosure 1: Global Corporate Ownership Structure Diagram — depicting the ownership chain from PPC (Delaware) → PHL (Luxembourg) → PBI (Ireland) → PMI (Ireland), reflecting the corporate structure as in effect during each of the tax years 2017, 2018, 2019, and 2020. Enclosure 2: PPC U.S. Functiona

Section 7 — Privilege and Rights Reservation This response is made without prejudice to PPC's right to supplement, clarify, correct, or amend any of the information or documents provided herein or enclosed herewith, whether in response to subsequent IDRs or otherwise, as additional information becomes available or as PPC deems appropriate. PPC reserves all rights, objections, and defenses available to it under applic