1018-00001 · Client 1018 · Opinions & Comfort Letters

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CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Attorneys at Law

One Liberty Plaza, 52nd Floor New York, New York 10006

Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com

October 3, 2023

Graystone & Whitmore LLP 30 Rockefeller Plaza New York, New York 10112

Attention: Thomas Reiter, Engagement Partner

Re: Request for Comfort Letter — Secondary Offering of Common Stock of Penterra Pharmaceuticals Corp.

Dear Mr. Reiter:

We refer to the registered selling-stockholder secondary offering (the "Offering") of 6,250,000 shares of common stock, par value $0.001 per share (the "Common Stock"), of Penterra Pharmaceuticals Corp., a Delaware corporation ("PPC" or the "Company"), whose Common Stock is listed on the Nasdaq Global Select Market under the ticker symbol "PNTR." The Offering is being made pursuant to a Prospectus Supplement dated October 2, 2023 (the "Preliminary Prospectus Supplement") to the base prospectus (the "Base Prospectus") forming part of the Company's Registration Statement on Form S-3 (File No. 333-274851) (together with all amendments thereto, the "Registration Statement"), which was declared effective by the Securities and Exchange Commission (the "SEC") on August 22, 2023.

This letter sets forth our request, on behalf of the Company, that Graystone & Whitmore LLP ("Graystone" or "you"), as the Company's independent registered public accounting firm, deliver a comfort letter (the "Comfort Letter") in connection with the Offering, as more particularly described below.

1. Introduction and Purpose

Calderwood & Harkness LLP acts as counsel to Penterra Pharmaceuticals Corp. in connection with the Offering. The underwriters participating in the Offering (collectively, the "Underwriters") are as follows:

• Ridgeline Securities LLC — Lead Left Book-Running Manager

• Broadmark Capital Inc. — Joint Book-Running Manager

• Linden Groves & Co. — Co-Manager

• Harborview Partners LLC — Co-Manager

The Underwriters are represented by Caldwell, Pearce & Strauss LLP, 1251 Avenue of the Americas, 40th Floor, New York, New York 10020, Attention: Margaret Hui, Partner ("Underwriters' Counsel").

The Offering consists of 6,250,000 shares of Common Stock to be sold by certain selling stockholders at a public offering price of $41.60 per share, representing an aggregate offering amount of approximately $260,000,000. The selling stockholders have also granted the Underwriters a 30-day option to purchase up to an additional 937,500 shares of Common Stock to cover over-allotments, if any, on the same terms and conditions. The selling stockholders in the Offering are Dr. Elena Castellano, Dr. Riccardo Castellano, Dr. Marco Castellano, and Castellano Family Holdings LLC (collectively, the "Selling Stockholders"), each of whom is a member of the founding Castellano family. The Company will not receive any proceeds from the sale of the shares of Common Stock by the Selling Stockholders.

We hereby request that Graystone & Whitmore LLP, as the Company's independent registered public accounting firm, deliver the Comfort Letter addressed to the Underwriters and, as applicable, to the Company, in connection with the Offering. The Comfort Letter should be delivered on or prior to the date of execution of the Underwriting Agreement among the Company, the Selling Stockholders, and the Underwriters (the "Underwriting Agreement"), which date is expected to be on or about October 12, 2023. The Comfort Letter should be in form and substance customary for offerings of this type and satisfactory to the Underwriters and Underwriters' Counsel.

We further request that the Comfort Letter be prepared in accordance with the standards and procedures set forth in AU-C Section 920, Letters for Underwriters and Certain Other Requesting Parties (formerly Statement on Auditing Standards ("SAS") No. 72, Letters for Underwriters and Certain Other Requesting Parties, as amended by SAS No. 86), of the American Institute of Certified Public Accountants ("AICPA") Professional Standards, as applicable to letters for underwriters and certain other requesting parties in connection with registered offerings of securities under the Securities Act of 1933, as amended (the "Securities Act").

2. Financial Statements to Be Covered

The Comfort Letter should cover the following audited and unaudited financial statements and financial data of the Company that are included or incorporated by reference in the Preliminary Prospectus Supplement and/or the Registration Statement:

2.1 Audited Financial Statements

The Comfort Letter should address the audited consolidated financial statements of PPC for the fiscal year ended December 31, 2022 (the "FY 2022 Financial Statements"), as included in PPC's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the "2022 10-K"), which has been incorporated by reference into the Registration Statement and the Prospectus Supplement. For reference, the FY 2022 Financial Statements reported the following key financial data:

• FY 2022 Revenue: $387.4 million

• FY 2022 Net Income: $42.1 million

In connection with the FY 2022 Financial Statements, the Comfort Letter should include the following:

(a) A confirmation that Graystone & Whitmore LLP is an independent registered public accounting firm with respect to PPC within the meaning of the Securities Act and the applicable rules and regulations thereunder, including Rule 2-01 of Regulation S-X, and the rules and standards of the Public Company Accounting Oversight Board (the "PCAOB").

(b) A statement that the audit of the FY 2022 Financial Statements was conducted in accordance with the standards of the PCAOB and that the report of Graystone & Whitmore LLP thereon, dated March 1, 2023, included in the 2022 10-K and incorporated by reference into the Registration Statement, remains in effect and has not been withdrawn or modified.

(c) A statement that the FY 2022 Financial Statements, together with the related notes thereto and the report of Graystone & Whitmore LLP thereon, comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the published rules and regulations of the SEC thereunder.

2.2 Unaudited Interim Financial Statements

The Comfort Letter should also address the unaudited condensed consolidated financial statements of PPC for the six months ended June 30, 2023 (the "H1 2023 Interim Financial Statements"), as included in PPC's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 (the "Q2 2023 10-Q"), which has been incorporated by reference into the Registration Statement and the Prospectus Supplement. For reference, the H1 2023 Interim Financial Statements reported the following key financial data:

• H1 2023 Revenue: $312.6 million

• H1 2023 Net Income: $67.8 million

In connection with the H1 2023 Interim Financial Statements, the Comfort Letter should include the following:

(a) A confirmation that a review of the interim financial information of PPC for the six months ended June 30, 2023 was performed by Graystone & Whitmore LLP in accordance with AU-C Section 930, Interim Financial Information, of the AICPA Professional Standards (or the applicable PCAOB interim review standard, as applicable).

(b) A statement (commonly referred to as a "negative assurance" statement) that, based on the review performed, nothing came to the attention of Graystone & Whitmore LLP that caused it to believe that the H1 2023 Interim Financial Statements do not present fairly, in all material respects, the financial position of PPC as of June 30, 2023, and the results of its operations and its cash flows for the six-month period then ended in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"), applied on a basis consistent with the audited consolidated financial statements included in the 2022 10-K.

(c) A statement that the H1 2023 Interim Financial Statements comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the published rules and regulations of the SEC thereunder applicable to interim financial statements.

3. Financial Data and Other Information in the Prospectus Supplement

In addition to the financial statements described in Section 2 above, the Comfort Letter should address certain specified financial data, financial information, and statistical data appearing in the Preliminary Prospectus Supplement (and, to the extent available and requested, in the final Prospectus Supplement), including, but not limited to, the following categories of information:

(a) Selected Financial Data Tables. The selected financial data tables appearing in the Preliminary Prospectus Supplement and/or incorporated by reference from the Company's SEC filings, including data relating to revenue, net income (loss), earnings per share (basic and diluted), total assets, total liabilities, stockholders' equity, and other selected financial items presented for the fiscal year ended December 31, 2022 and the six months ended June 30, 2023, as well as any comparative periods presented.

(b) Capitalization Table. The capitalization table of PPC as of June 30, 2023, presented on an actual basis and on a pro forma/as-adjusted basis giving effect to the Offering. We note that, as of June 30, 2023, the Company had 120,000,000 shares of Common Stock issued and outstanding. On a base offering basis (excluding any exercise of the over-allotment option), the Castellano family's aggregate holdings are expected to be reduced from approximately 40,100,000 shares to approximately 33,850,000 shares. The Comfort Letter should confirm that the financial data and computations underlying the capitalization table have been agreed to or derived from the Company's accounting records and the unaudited condensed consolidated financial statements of PPC as of and for the period ended June 30, 2023, as applicable.

(c) Selling Stockholder Share Ownership Data. Pre-offering and post-offering beneficial ownership percentages for each of the Selling Stockholders, as presented in the "Selling Stockholders" section of the Preliminary Prospectus Supplement (and, to the extent applicable, the final Prospectus Supplement). The Comfort Letter should describe procedures performed to compare such data to Company records, transfer agent records, and/or information provided by the Selling Stockholders.

(d) Financial and Statistical Data in Narrative Sections. Any financial or statistical information derived from the Company's accounting records that is included in the following sections of the Preliminary Prospectus Supplement (or comparable sections of the final Prospectus Supplement): "Summary," "Risk Factors," "Use of Proceeds," "Selling Stockholders," "Capitalization," and "Dilution" (if any). This includes, without limitation, data relating to revenue growth rates, operating margins, research and development expenditure figures, product sales data, cash and cash equivalents balances, and similar financial metrics.

(e) Per Share Data. Per share data referenced in the Preliminary Prospectus Supplement, including the par value of the Common Stock ($0.001 per share), the initial public offering price of $22.00 per share, and the public offering price in the current Offering of $41.60 per share, together with any related computations of net tangible book value per share, dilution per share, or similar metrics.

(f) Market Capitalization Data. Market capitalization data referenced in the Preliminary Prospectus Supplement, including the statement that the Company's approximate market capitalization was $4.8 billion as of September 1, 2023 (based on the closing price of the Common Stock on the Nasdaq Global Select Market on such date and the number of shares of Common Stock outstanding as reported by the Company).

For each category of financial data and statistical information described in clauses (a) through (f) above, we request that Graystone & Whitmore LLP perform procedures to compare such data to the Company's underlying accounting records, the audited consolidated financial statements of PPC for the fiscal year ended December 31, 2022, the unaudited condensed consolidated financial statements of PPC for the six months ended June 30, 2023, publicly available sources (in the case of market data), and/or the minutes of the Board of Directors of PPC, as applicable, and that the Comfort Letter describe the procedures performed and the findings resulting therefrom.

We understand that, with respect to financial data that has been derived from accounting records, the Comfort Letter will contain statements to the effect that the specified data agree with, or have been derived from or computed from, the Company's accounting records. With respect to financial data that is not directly derived from accounting records (such as market capitalization or market price data), the Comfort Letter will describe the limited procedures performed (such as comparison to publicly available third-party sources) and the results of such procedures.

4. Circle-Up Procedures / Agreed-Upon Procedures

In addition to the procedures described in Sections 2 and 3 above, we request that the following specific agreed-upon procedures (commonly referred to as "circle-up" procedures) be performed by Graystone & Whitmore LLP in connection with the preparation and delivery of the Comfort Letter:

4.1 Reading of Minutes

We request that Graystone & Whitmore LLP read the minutes of meetings of the Board of Directors of PPC, and of all committees thereof (including, without limitation, the Audit Committee, the Compensation Committee, and any special committees), for the period from June 30, 2023 through a date not more than five (5) business days prior to the date of the Comfort Letter (such date, the "Cut-Off Date"). In addition, we request that Graystone & Whitmore LLP make appropriate inquiries of officers and directors of the Company regarding matters discussed at any meetings held subsequent to the date of the latest available minutes through the Cut-Off Date, and regarding any actions taken by the Board of Directors or any committee thereof by unanimous written consent during such period. The results of such reading of minutes and inquiries should be described in the Comfort Letter.

4.2 Subsequent Financial Changes

We request that Graystone & Whitmore LLP perform the inquiries and other procedures specified in AU-C Section 920 relating to events subsequent to June 30, 2023, through the Cut-Off Date. Such procedures should include, but not be limited to, inquiries and procedures designed to determine:

(a) Whether there has been any change in the capital stock (including the issuance of any additional shares of Common Stock, preferred stock, or other equity securities, or the granting of any stock options, restricted stock units, or other equity awards), any increase in long-term debt (including any borrowings under credit facilities), or any decrease in stockholders' equity of the Company, in each case as compared to the amounts shown in the Company's unaudited condensed consolidated balance sheet as of June 30, 2023, as included in the Q2 2023 10-Q.

(b) Whether there has been any decrease in net revenues, operating income, or net income of the Company for the period from July 1, 2023 through the Cut-Off Date, as compared to the corresponding period of the prior fiscal year (i.e., July 1, 2022 through the corresponding date in October 2022).

(c) A statement or tabular presentation of the most recent unaudited financial figures available for the Company (which we expect to be through August 31, 2023 or, if available, through the most recent month-end prior to the Cut-Off Date), compared with the corresponding prior-year-period figures, covering at a minimum net revenues, cost of revenues, gross profit, operating expenses, operating income, net income, and earnings per share (basic and diluted). The Comfort Letter should indicate the source of such figures (i.e., management accounts, general ledger, or other internal accounting records) and should note any limitations on the reliability of such figures.

We understand that, consistent with AU-C Section 920, the Comfort Letter will include appropriate language indicating that the procedures performed with respect to the period subsequent to June 30, 2023 do not constitute an audit or review of financial statements and that, accordingly, Graystone & Whitmore LLP does not express any opinion or provide any assurance with respect to the financial statements or financial data for such subsequent period, other than the negative assurance and factual statements contemplated by AU-C Section 920.

4.3 Reading of Subsequent SEC Filings

We request that Graystone & Whitmore LLP read the filings made by the Company with the SEC subsequent to the filing of the 2022 10-K through the Cut-Off Date, including, without limitation:

(a) The Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 (the "Q1 2023 10-Q");

(b) The Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 (the "Q2 2023 10-Q");

(d) Any proxy statement or information statement filed by the Company during such period.

With respect to each such filing, the Comfort Letter should confirm the consistency of the financial data contained therein with the Company's accounting records, to the extent that such financial data falls within the categories of information ordinarily addressed in comfort letters under AU-C Section 920.

5. Cut-Off Date

As referenced throughout this letter, the "Cut-Off Date" for purposes of the procedures to be performed in connection with the Comfort Letter shall be a date not more than five (5) business days prior to the date of delivery of the Comfort Letter. We currently expect that the Comfort Letter will be delivered on or about October 12, 2023, which is the anticipated date of pricing of the Offering and execution of the Underwriting Agreement. Accordingly, the expected Cut-Off Date is on or about October 5, 2023. If the pricing date or the date of execution of the Underwriting Agreement is delayed, we will promptly notify you of any corresponding adjustment to the expected delivery date and Cut-Off Date.

We also note that a separate bring-down comfort letter (as described in Section 8 below) will be requested in a subsequent letter. The bring-down comfort letter is expected to be dated as of the closing date of the Offering, which is currently expected to be October 17, 2023 (the "Closing Date"), and will have an updated cut-off date not more than five (5) business days prior to the Closing Date. We expect to deliver the request for the bring-down comfort letter on or about October 13, 2023.

6. Addressees

The Comfort Letter should be addressed to the following parties:

Addressees:

(a) Ridgeline Securities LLC, as representative of the several underwriters named in the Underwriting Agreement 383 Madison Avenue New York, New York 10017

(b) Broadmark Capital Inc. 200 Park Avenue New York, New York 10166

(d) Harborview Partners LLC 1 Federal Street Boston, Massachusetts 02110

Copies to:

(e) Penterra Pharmaceuticals Corp. 400 Meridian Parkway, Suite 1200 Princeton, New Jersey 08540

Attention: Lisa Hargrove, Chief Financial Officer, and David Orenstein, General Counsel and Corporate Secretary

(f) Calderwood & Harkness LLP One Liberty Plaza, 52nd Floor New York, New York 10006

Attention: Audrey Zhou

(g) Caldwell, Pearce & Strauss LLP 1251 Avenue of the Americas, 40th Floor New York, New York 10020

Attention: Margaret Hui

7. Coordination and Deliverables

In order to ensure that the Comfort Letter can be finalized and delivered in accordance with the anticipated timeline for the Offering, we respectfully request the following:

(a) Draft Comfort Letter. Graystone & Whitmore LLP should provide a complete draft of the Comfort Letter to Calderwood & Harkness LLP and Caldwell, Pearce & Strauss LLP for review and comment as soon as practicable, and in any event no later than October 9, 2023. We would appreciate receiving the draft in both Microsoft Word and PDF format, transmitted via secure email to the attention of Audrey Zhou at Calderwood & Harkness LLP and Margaret Hui at Caldwell, Pearce & Strauss LLP.

(b) Circle-Up Calls. We request that Graystone & Whitmore LLP participate in one or more circle-up conference calls with counsel to the Company, Underwriters' Counsel, and representatives of the Underwriters, as needed, to review and finalize the Comfort Letter prior to its delivery. We anticipate that the initial circle-up call will be scheduled during the week of October 9, 2023, and we will coordinate with your office and the other parties to confirm a mutually convenient time.

(c) Fee Arrangement. We note that PPC has agreed to bear the costs and expenses of the comfort letter engagement, including the fees and disbursements of Graystone & Whitmore LLP in connection with the preparation and delivery of the Comfort Letter and the bring-down comfort letter. We understand that the estimated accounting fees for the comfort letter engagement are approximately $175,000 (exclusive of reasonable out-of-pocket expenses), subject to the terms of the engagement letter between PPC and Graystone & Whitmore LLP. Please direct any invoices or fee-related communications to Lisa Hargrove, Chief Financial Officer, Penterra Pharmaceuticals Corp., at the address set forth in Section 6 above.

(d) Engagement Letter. We understand that Graystone & Whitmore LLP has been separately engaged by PPC for the comfort letter services pursuant to a separate engagement letter between PPC and Graystone & Whitmore LLP (or an amendment or supplement to the existing audit engagement letter). We request that Graystone & Whitmore LLP confirm that such engagement letter (or amendment or supplement) has been duly executed and is in full force and effect, or, if not yet executed, that Graystone & Whitmore LLP promptly arrange for its execution.

8. Bring-Down Comfort Letter

As noted above, the delivery of a bring-down comfort letter will be a condition to the closing of the Offering under the Underwriting Agreement. We anticipate that we will deliver a separate written request for the bring-down comfort letter to Graystone & Whitmore LLP on or about October 13, 2023. The bring-down comfort letter should be dated as of the Closing Date (expected to be October 17, 2023) and should confirm that the statements made in the initial Comfort Letter remain accurate as of the Closing Date, with updated procedures through a cut-off date not more than five (5) business days prior to the Closing Date. The bring-down comfort letter should be in the form customarily delivered in connection with public offerings of equity securities and should be satisfactory in form and substance to the Underwriters and Underwriters' Counsel.

We ask that Graystone & Whitmore LLP plan its work accordingly and ensure that appropriate personnel are available to perform the updated procedures and deliver the bring-down comfort letter on the anticipated Closing Date. If the Closing Date is delayed (for example, in connection with the exercise of the over-allotment option), an additional bring-down comfort letter may be required, and we will provide timely notice of any such request.

9. Confidentiality

This letter and the Comfort Letter (including any drafts thereof) are confidential and are provided solely for the benefit of the parties identified herein. Neither this letter nor the Comfort Letter, nor any portion thereof, should be disclosed, distributed, or made available to any party other than those identified in this letter without the prior written consent of Penterra Pharmaceuticals Corp. and the representative of the Underwriters (Ridgeline Securities LLC). We trust that Graystone & Whitmore LLP will treat all information received in connection with the comfort letter engagement in accordance with its professional obligations of confidentiality and applicable law.

We appreciate Graystone & Whitmore's prompt attention to this matter and your continued cooperation in connection with the Offering. Please do not hesitate to contact me directly with any questions regarding this request or to discuss any aspect of the Comfort Letter. I can be reached at:

Audrey Zhou Senior Associate, Capital Markets Group Calderwood & Harkness LLP Telephone: (212) 558-4217

Email: audrey.zhou@calderwoodharkness.com

In addition, we ask that you coordinate with Thomas Reiter at Graystone & Whitmore LLP (as the engagement partner) and with Lisa Hargrove, Chief Financial Officer of PPC, regarding scheduling, availability of financial data, and access to the Company's accounting records and personnel. Ms. Hargrove can be reached at (609) 555-8800 or lisa.hargrove@penterra.com.

We look forward to working with you on this engagement and to receiving the draft Comfort Letter at your earliest convenience.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Audrey Zhou Senior Associate, Capital Markets Group

cc: (via email)

David Orenstein, General Counsel & Corporate Secretary, Penterra Pharmaceuticals Corp.

Lisa Hargrove, Chief Financial Officer, Penterra Pharmaceuticals Corp.

Jennifer Kwon, Partner, Calderwood & Harkness LLP

Margaret Hui, Partner, Caldwell, Pearce & Strauss LLP

Jonathan Pryce-Hall, Managing Director, Ridgeline Securities LLC

Samuel Okonkwo, Managing Director, Broadmark Capital Inc.

CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Attorneys at Law
One Liberty Plaza, 52nd Floor New York, New York 10006
Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
October 3, 2023
Graystone & Whitmore LLP 30 Rockefeller Plaza New York, New York 10112
Attention: Thomas Reiter, Engagement Partner
Re: Request for Comfort Letter — Secondary Offering of Common Stock of Penterra Pharmaceuticals Corp.
Dear Mr. Reiter:
We refer to the registered selling-stockholder secondary offering (the "Offering") of 6,250,000 shares of common stock, par value $0.001 per share (the "Common Stock"), of Penterra Pharmaceuticals Corp., a Delaware corporation ("PPC" or the "Company"), whose Common Stock is listed on the Nasdaq Global Select Market under the ticker symbol "PNTR." The Offering is being made pursuant to a Prospectus Supplement dated October 2, 2023 (the "Preliminary Prospectus Supplement") to the base prospectus (the "Base Prospectus") forming part of the Company's Registration Statement on Form S-3 (File No. 333-274851) (together with all amendments thereto, the "Registration Statement"), which was declared effective by the Securities and Exchange Commission (the "SEC") on August 22, 2023.
This letter sets forth our request, on behalf of the Company, that Graystone & Whitmore LLP ("Graystone" or "you"), as the Company's independent registered public accounting firm, deliver a comfort letter (the "Comfort Letter") in connection with the Offering, as more particularly described below.
1. Introduction and Purpose
Calderwood & Harkness LLP acts as counsel to Penterra Pharmaceuticals Corp. in connection with the Offering. The underwriters participating in the Offering (collectively, the "Underwriters") are as follows:
•  Ridgeline Securities LLC — Lead Left Book-Running Manager
•  Broadmark Capital Inc. — Joint Book-Running Manager
•  Linden Groves & Co. — Co-Manager
•  Harborview Partners LLC — Co-Manager
The Underwriters are represented by Caldwell, Pearce & Strauss LLP, 1251 Avenue of the Americas, 40th Floor, New York, New York 10020, Attention: Margaret Hui, Partner ("Underwriters' Counsel").
The Offering consists of 6,250,000 shares of Common Stock to be sold by certain selling stockholders at a public offering price of $41.60 per share, representing an aggregate offering amount of approximately $260,000,000. The selling stockholders have also granted the Underwriters a 30-day option to purchase up to an additional 937,500 shares of Common Stock to cover over-allotments, if any, on the same terms and conditions. The selling stockholders in the Offering are Dr. Elena Castellano, Dr. Riccardo Castellano, Dr. Marco Castellano, and Castellano Family Holdings LLC (collectively, the "Selling Stockholders"), each of whom is a member of the founding Castellano family. The Company will not receive any proceeds from the sale of the shares of Common Stock by the Selling Stockholders.
We hereby request that Graystone & Whitmore LLP, as the Company's independent registered public accounting firm, deliver the Comfort Letter addressed to the Underwriters and, as applicable, to the Company, in connection with the Offering. The Comfort Letter should be delivered on or prior to the date of execution of the Underwriting Agreement among the Company, the Selling Stockholders, and the Underwriters (the "Underwriting Agreement"), which date is expected to be on or about October 12, 2023. The Comfort Letter should be in form and substance customary for offerings of this type and satisfactory to the Underwriters and Underwriters' Counsel.
We further request that the Comfort Letter be prepared in accordance with the standards and procedures set forth in AU-C Section 920, Letters for Underwriters and Certain Other Requesting Parties (formerly Statement on Auditing Standards ("SAS") No. 72, Letters for Underwriters and Certain Other Requesting Parties, as amended by SAS No. 86), of the American Institute of Certified Public Accountants ("AICPA") Professional Standards, as applicable to letters for underwriters and certain other requesting parties in connection with registered offerings of securities under the Securities Act of 1933, as amended (the "Securities Act").
2. Financial Statements to Be Covered
The Comfort Letter should cover the following audited and unaudited financial statements and financial data of the Company that are included or incorporated by reference in the Preliminary Prospectus Supplement and/or the Registration Statement:
2.1 Audited Financial Statements
The Comfort Letter should address the audited consolidated financial statements of PPC for the fiscal year ended December 31, 2022 (the "FY 2022 Financial Statements"), as included in PPC's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the "2022 10-K"), which has been incorporated by reference into the Registration Statement and the Prospectus Supplement. For reference, the FY 2022 Financial Statements reported the following key financial data:
•  FY 2022 Revenue: $387.4 million
•  FY 2022 Net Income: $42.1 million
In connection with the FY 2022 Financial Statements, the Comfort Letter should include the following:
(a) A confirmation that Graystone & Whitmore LLP is an independent registered public accounting firm with respect to PPC within the meaning of the Securities Act and the applicable rules and regulations thereunder, including Rule 2-01 of Regulation S-X, and the rules and standards of the Public Company Accounting Oversight Board (the "PCAOB").
(b) A statement that the audit of the FY 2022 Financial Statements was conducted in accordance with the standards of the PCAOB and that the report of Graystone & Whitmore LLP thereon, dated March 1, 2023, included in the 2022 10-K and incorporated by reference into the Registration Statement, remains in effect and has not been withdrawn or modified.
(c) A statement that the FY 2022 Financial Statements, together with the related notes thereto and the report of Graystone & Whitmore LLP thereon, comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the published rules and regulations of the SEC thereunder.
2.2 Unaudited Interim Financial Statements
The Comfort Letter should also address the unaudited condensed consolidated financial statements of PPC for the six months ended June 30, 2023 (the "H1 2023 Interim Financial Statements"), as included in PPC's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 (the "Q2 2023 10-Q"), which has been incorporated by reference into the Registration Statement and the Prospectus Supplement. For reference, the H1 2023 Interim Financial Statements reported the following key financial data:
•  H1 2023 Revenue: $312.6 million
•  H1 2023 Net Income: $67.8 million
In connection with the H1 2023 Interim Financial Statements, the Comfort Letter should include the following:
(a) A confirmation that a review of the interim financial information of PPC for the six months ended June 30, 2023 was performed by Graystone & Whitmore LLP in accordance with AU-C Section 930, Interim Financial Information, of the AICPA Professional Standards (or the applicable PCAOB interim review standard, as applicable).
(b) A statement (commonly referred to as a "negative assurance" statement) that, based on the review performed, nothing came to the attention of Graystone & Whitmore LLP that caused it to believe that the H1 2023 Interim Financial Statements do not present fairly, in all material respects, the financial position of PPC as of June 30, 2023, and the results of its operations and its cash flows for the six-month period then ended in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"), applied on a basis consistent with the audited consolidated financial statements included in the 2022 10-K.
(c) A statement that the H1 2023 Interim Financial Statements comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the published rules and regulations of the SEC thereunder applicable to interim financial statements.
3. Financial Data and Other Information in the Prospectus Supplement
In addition to the financial statements described in Section 2 above, the Comfort Letter should address certain specified financial data, financial information, and statistical data appearing in the Preliminary Prospectus Supplement (and, to the extent available and requested, in the final Prospectus Supplement), including, but not limited to, the following categories of information:
(a) Selected Financial Data Tables. The selected financial data tables appearing in the Preliminary Prospectus Supplement and/or incorporated by reference from the Company's SEC filings, including data relating to revenue, net income (loss), earnings per share (basic and diluted), total assets, total liabilities, stockholders' equity, and other selected financial items presented for the fiscal year ended December 31, 2022 and the six months ended June 30, 2023, as well as any comparative periods presented.
(b) Capitalization Table. The capitalization table of PPC as of June 30, 2023, presented on an actual basis and on a pro forma/as-adjusted basis giving effect to the Offering. We note that, as of June 30, 2023, the Company had 120,000,000 shares of Common Stock issued and outstanding. On a base offering basis (excluding any exercise of the over-allotment option), the Castellano family's aggregate holdings are expected to be reduced from approximately 40,100,000 shares to approximately 33,850,000 shares. The Comfort Letter should confirm that the financial data and computations underlying the capitalization table have been agreed to or derived from the Company's accounting records and the unaudited condensed consolidated financial statements of PPC as of and for the period ended June 30, 2023, as applicable.
(c) Selling Stockholder Share Ownership Data. Pre-offering and post-offering beneficial ownership percentages for each of the Selling Stockholders, as presented in the "Selling Stockholders" section of the Preliminary Prospectus Supplement (and, to the extent applicable, the final Prospectus Supplement). The Comfort Letter should describe procedures performed to compare such data to Company records, transfer agent records, and/or information provided by the Selling Stockholders.
(d) Financial and Statistical Data in Narrative Sections. Any financial or statistical information derived from the Company's accounting records that is included in the following sections of the Preliminary Prospectus Supplement (or comparable sections of the final Prospectus Supplement): "Summary," "Risk Factors," "Use of Proceeds," "Selling Stockholders," "Capitalization," and "Dilution" (if any). This includes, without limitation, data relating to revenue growth rates, operating margins, research and development expenditure figures, product sales data, cash and cash equivalents balances, and similar financial metrics.
(e) Per Share Data. Per share data referenced in the Preliminary Prospectus Supplement, including the par value of the Common Stock ($0.001 per share), the initial public offering price of $22.00 per share, and the public offering price in the current Offering of $41.60 per share, together with any related computations of net tangible book value per share, dilution per share, or similar metrics.
(f) Market Capitalization Data. Market capitalization data referenced in the Preliminary Prospectus Supplement, including the statement that the Company's approximate market capitalization was $4.8 billion as of September 1, 2023 (based on the closing price of the Common Stock on the Nasdaq Global Select Market on such date and the number of shares of Common Stock outstanding as reported by the Company).
For each category of financial data and statistical information described in clauses (a) through (f) above, we request that Graystone & Whitmore LLP perform procedures to compare such data to the Company's underlying accounting records, the audited consolidated financial statements of PPC for the fiscal year ended December 31, 2022, the unaudited condensed consolidated financial statements of PPC for the six months ended June 30, 2023, publicly available sources (in the case of market data), and/or the minutes of the Board of Directors of PPC, as applicable, and that the Comfort Letter describe the procedures performed and the findings resulting therefrom.
We understand that, with respect to financial data that has been derived from accounting records, the Comfort Letter will contain statements to the effect that the specified data agree with, or have been derived from or computed from, the Company's accounting records. With respect to financial data that is not directly derived from accounting records (such as market capitalization or market price data), the Comfort Letter will describe the limited procedures performed (such as comparison to publicly available third-party sources) and the results of such procedures.
4. Circle-Up Procedures / Agreed-Upon Procedures
In addition to the procedures described in Sections 2 and 3 above, we request that the following specific agreed-upon procedures (commonly referred to as "circle-up" procedures) be performed by Graystone & Whitmore LLP in connection with the preparation and delivery of the Comfort Letter:
4.1 Reading of Minutes
We request that Graystone & Whitmore LLP read the minutes of meetings of the Board of Directors of PPC, and of all committees thereof (including, without limitation, the Audit Committee, the Compensation Committee, and any special committees), for the period from June 30, 2023 through a date not more than five (5) business days prior to the date of the Comfort Letter (such date, the "Cut-Off Date"). In addition, we request that Graystone & Whitmore LLP make appropriate inquiries of officers and directors of the Company regarding matters discussed at any meetings held subsequent to the date of the latest available minutes through the Cut-Off Date, and regarding any actions taken by the Board of Directors or any committee thereof by unanimous written consent during such period. The results of such reading of minutes and inquiries should be described in the Comfort Letter.
4.2 Subsequent Financial Changes
We request that Graystone & Whitmore LLP perform the inquiries and other procedures specified in AU-C Section 920 relating to events subsequent to June 30, 2023, through the Cut-Off Date. Such procedures should include, but not be limited to, inquiries and procedures designed to determine:
(a) Whether there has been any change in the capital stock (including the issuance of any additional shares of Common Stock, preferred stock, or other equity securities, or the granting of any stock options, restricted stock units, or other equity awards), any increase in long-term debt (including any borrowings under credit facilities), or any decrease in stockholders' equity of the Company, in each case as compared to the amounts shown in the Company's unaudited condensed consolidated balance sheet as of June 30, 2023, as included in the Q2 2023 10-Q.
(b) Whether there has been any decrease in net revenues, operating income, or net income of the Company for the period from July 1, 2023 through the Cut-Off Date, as compared to the corresponding period of the prior fiscal year (i.e., July 1, 2022 through the corresponding date in October 2022).
(c) A statement or tabular presentation of the most recent unaudited financial figures available for the Company (which we expect to be through August 31, 2023 or, if available, through the most recent month-end prior to the Cut-Off Date), compared with the corresponding prior-year-period figures, covering at a minimum net revenues, cost of revenues, gross profit, operating expenses, operating income, net income, and earnings per share (basic and diluted). The Comfort Letter should indicate the source of such figures (i.e., management accounts, general ledger, or other internal accounting records) and should note any limitations on the reliability of such figures.
We understand that, consistent with AU-C Section 920, the Comfort Letter will include appropriate language indicating that the procedures performed with respect to the period subsequent to June 30, 2023 do not constitute an audit or review of financial statements and that, accordingly, Graystone & Whitmore LLP does not express any opinion or provide any assurance with respect to the financial statements or financial data for such subsequent period, other than the negative assurance and factual statements contemplated by AU-C Section 920.
4.3 Reading of Subsequent SEC Filings
We request that Graystone & Whitmore LLP read the filings made by the Company with the SEC subsequent to the filing of the 2022 10-K through the Cut-Off Date, including, without limitation:
(a) The Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 (the "Q1 2023 10-Q");
(b) The Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 (the "Q2 2023 10-Q");
(c) Any Current Reports on Form 8-K (or Form 8-K/A) filed by the Company during such period; and
(d) Any proxy statement or information statement filed by the Company during such period.
With respect to each such filing, the Comfort Letter should confirm the consistency of the financial data contained therein with the Company's accounting records, to the extent that such financial data falls within the categories of information ordinarily addressed in comfort letters under AU-C Section 920.
5. Cut-Off Date
As referenced throughout this letter, the "Cut-Off Date" for purposes of the procedures to be performed in connection with the Comfort Letter shall be a date not more than five (5) business days prior to the date of delivery of the Comfort Letter. We currently expect that the Comfort Letter will be delivered on or about October 12, 2023, which is the anticipated date of pricing of the Offering and execution of the Underwriting Agreement. Accordingly, the expected Cut-Off Date is on or about October 5, 2023. If the pricing date or the date of execution of the Underwriting Agreement is delayed, we will promptly notify you of any corresponding adjustment to the expected delivery date and Cut-Off Date.
We also note that a separate bring-down comfort letter (as described in Section 8 below) will be requested in a subsequent letter. The bring-down comfort letter is expected to be dated as of the closing date of the Offering, which is currently expected to be October 17, 2023 (the "Closing Date"), and will have an updated cut-off date not more than five (5) business days prior to the Closing Date. We expect to deliver the request for the bring-down comfort letter on or about October 13, 2023.
6. Addressees
The Comfort Letter should be addressed to the following parties:
Addressees:
(a) Ridgeline Securities LLC, as representative of the several underwriters named in the Underwriting Agreement 383 Madison Avenue New York, New York 10017
(b) Broadmark Capital Inc. 200 Park Avenue New York, New York 10166
(c) Linden Groves & Co. 745 Fifth Avenue New York, New York 10151
(d) Harborview Partners LLC 1 Federal Street Boston, Massachusetts 02110
Copies to:
(e) Penterra Pharmaceuticals Corp. 400 Meridian Parkway, Suite 1200 Princeton, New Jersey 08540
Attention: Lisa Hargrove, Chief Financial Officer, and David Orenstein, General Counsel and Corporate Secretary
(f) Calderwood & Harkness LLP One Liberty Plaza, 52nd Floor New York, New York 10006
Attention: Audrey Zhou
(g) Caldwell, Pearce & Strauss LLP 1251 Avenue of the Americas, 40th Floor New York, New York 10020
Attention: Margaret Hui
7. Coordination and Deliverables
In order to ensure that the Comfort Letter can be finalized and delivered in accordance with the anticipated timeline for the Offering, we respectfully request the following:
(a) Draft Comfort Letter. Graystone & Whitmore LLP should provide a complete draft of the Comfort Letter to Calderwood & Harkness LLP and Caldwell, Pearce & Strauss LLP for review and comment as soon as practicable, and in any event no later than October 9, 2023. We would appreciate receiving the draft in both Microsoft Word and PDF format, transmitted via secure email to the attention of Audrey Zhou at Calderwood & Harkness LLP and Margaret Hui at Caldwell, Pearce & Strauss LLP.
(b) Circle-Up Calls. We request that Graystone & Whitmore LLP participate in one or more circle-up conference calls with counsel to the Company, Underwriters' Counsel, and representatives of the Underwriters, as needed, to review and finalize the Comfort Letter prior to its delivery. We anticipate that the initial circle-up call will be scheduled during the week of October 9, 2023, and we will coordinate with your office and the other parties to confirm a mutually convenient time.
(c) Fee Arrangement. We note that PPC has agreed to bear the costs and expenses of the comfort letter engagement, including the fees and disbursements of Graystone & Whitmore LLP in connection with the preparation and delivery of the Comfort Letter and the bring-down comfort letter. We understand that the estimated accounting fees for the comfort letter engagement are approximately $175,000 (exclusive of reasonable out-of-pocket expenses), subject to the terms of the engagement letter between PPC and Graystone & Whitmore LLP. Please direct any invoices or fee-related communications to Lisa Hargrove, Chief Financial Officer, Penterra Pharmaceuticals Corp., at the address set forth in Section 6 above.
(d) Engagement Letter. We understand that Graystone & Whitmore LLP has been separately engaged by PPC for the comfort letter services pursuant to a separate engagement letter between PPC and Graystone & Whitmore LLP (or an amendment or supplement to the existing audit engagement letter). We request that Graystone & Whitmore LLP confirm that such engagement letter (or amendment or supplement) has been duly executed and is in full force and effect, or, if not yet executed, that Graystone & Whitmore LLP promptly arrange for its execution.
8. Bring-Down Comfort Letter
As noted above, the delivery of a bring-down comfort letter will be a condition to the closing of the Offering under the Underwriting Agreement. We anticipate that we will deliver a separate written request for the bring-down comfort letter to Graystone & Whitmore LLP on or about October 13, 2023. The bring-down comfort letter should be dated as of the Closing Date (expected to be October 17, 2023) and should confirm that the statements made in the initial Comfort Letter remain accurate as of the Closing Date, with updated procedures through a cut-off date not more than five (5) business days prior to the Closing Date. The bring-down comfort letter should be in the form customarily delivered in connection with public offerings of equity securities and should be satisfactory in form and substance to the Underwriters and Underwriters' Counsel.
We ask that Graystone & Whitmore LLP plan its work accordingly and ensure that appropriate personnel are available to perform the updated procedures and deliver the bring-down comfort letter on the anticipated Closing Date. If the Closing Date is delayed (for example, in connection with the exercise of the over-allotment option), an additional bring-down comfort letter may be required, and we will provide timely notice of any such request.
9. Confidentiality
This letter and the Comfort Letter (including any drafts thereof) are confidential and are provided solely for the benefit of the parties identified herein. Neither this letter nor the Comfort Letter, nor any portion thereof, should be disclosed, distributed, or made available to any party other than those identified in this letter without the prior written consent of Penterra Pharmaceuticals Corp. and the representative of the Underwriters (Ridgeline Securities LLC). We trust that Graystone & Whitmore LLP will treat all information received in connection with the comfort letter engagement in accordance with its professional obligations of confidentiality and applicable law.
We appreciate Graystone & Whitmore's prompt attention to this matter and your continued cooperation in connection with the Offering. Please do not hesitate to contact me directly with any questions regarding this request or to discuss any aspect of the Comfort Letter. I can be reached at:
Audrey Zhou Senior Associate, Capital Markets Group Calderwood & Harkness LLP Telephone: (212) 558-4217
Email: audrey.zhou@calderwoodharkness.com
In addition, we ask that you coordinate with Thomas Reiter at Graystone & Whitmore LLP (as the engagement partner) and with Lisa Hargrove, Chief Financial Officer of PPC, regarding scheduling, availability of financial data, and access to the Company's accounting records and personnel. Ms. Hargrove can be reached at (609) 555-8800 or lisa.hargrove@penterra.com.
We look forward to working with you on this engagement and to receiving the draft Comfort Letter at your earliest convenience.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Audrey Zhou Senior Associate, Capital Markets Group
cc: (via email)
David Orenstein, General Counsel & Corporate Secretary, Penterra Pharmaceuticals Corp.
Lisa Hargrove, Chief Financial Officer, Penterra Pharmaceuticals Corp.
Jennifer Kwon, Partner, Calderwood & Harkness LLP
Margaret Hui, Partner, Caldwell, Pearce & Strauss LLP
Jonathan Pryce-Hall, Managing Director, Ridgeline Securities LLC
Samuel Okonkwo, Managing Director, Broadmark Capital Inc.

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CALDERWOOD & HARKNESS LLP

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