PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 280 Park Avenue, 34th Floor New York, New York 10017
MEMORANDUM
Matter No.: 1018-00004
To: Miriam Calloway, Partner, Healthcare & Life Sciences Practice Group
From: Christopher Aiken, Associate, Healthcare & Life Sciences Practice Group
Date: April 24, 2023
Re: Comparative Analysis of Indemnification Structures in Multi-Site Phase III Clinical Trial Agreements — Peer Sponsor Benchmarking for Penterra Pharmaceuticals Corp. / Veridian Health Research Network, Inc. Master Clinical Trial Agreement (Protocol PPC-4871-III / CLARION)
cc: Sean Morrissey, Associate; Rebecca Liang, Esq. (Penterra — Associate General Counsel, Clinical Affairs)
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I. Purpose and Executive Summary
The purpose of this memorandum is to inform the ongoing negotiation of the indemnification provisions in the Master Clinical Trial Agreement ("MCTA") between Penterra Pharmaceuticals Corp. ("Penterra" or "Sponsor") and Veridian Health Research Network, Inc. ("Veridian" or "Site Network") for Protocol PPC-4871-III — the Phase III, randomized, double-blind, placebo-controlled trial of penterafenib in advanced hepatocellular carcinoma, known as the CLARION trial. Specifically, this memorandum benchmarks the indemnification structures used in comparable multi-site Phase III clinical trial agreements executed by peer pharmaceutical sponsors in the oncology and specialty pharmaceutical space against Penterra's proposed indemnification framework.
The MCTA contemplates a significant clinical development program. The total deal value is approximately $80,000,000 across 38 Veridian Network sites located in 14 states, with a projected 42-month enrollment period and 1,200 planned subjects randomized on a 2:1 basis (penterafenib:placebo). Given the scale, complexity, and risk profile of this engagement, the indemnification provisions represent one of the most consequential negotiation workstreams in the MCTA.
Based on our review of indemnification provisions in twelve (12) comparable multi-site Phase III clinical trial agreements executed between 2019 and 2023, we conclude that Penterra's proposed indemnification framework is consistent with or moderately more favorable than prevailing market benchmarks for Phase III oncology trials involving large site networks. Specifically:
• Penterra's proposed per-subject medical care cost cap of $500,000 is at the market median and the most commonly observed cap across the benchmarked agreements.
• Penterra's proposed aggregate medical care cost cap of $15,000,000 is modestly above the market median of $12,500,000 and falls within the most commonly observed range of $10,000,000 to $15,000,000.
• Penterra's proposed uncapped product-defect indemnification is consistent with the predominant market standard (10 of 12 agreements).
• Penterra's proposed reciprocal site indemnity cap of $5,000,000 per site/per occurrence and $20,000,000 aggregate is squarely at the market median for comparable transactions involving large academic site networks.
This memorandum is intended to support the preparation of the first draft MCTA, which is scheduled to be circulated to Veridian's outside counsel, Whitmore, Jansen & Callahan LLP ("WJC"), on or about April 7, 2023, and to provide an analytical foundation for the negotiation sessions expected to follow. The benchmarking data and analysis set forth herein may also be used to substantiate Penterra's negotiating positions if WJC seeks material deviations from the proposed terms on behalf of Veridian.
II. Methodology
A. Data Sources and Scope
This memorandum is based on a detailed review of indemnification provisions from a sample of twelve (12) comparable multi-site Phase III clinical trial agreements — including both master clinical trial agreements ("MCTAs") and master site-network agreements — executed between 2019 and 2023 by peer pharmaceutical sponsors in the oncology, hepatology, and specialty pharmaceutical sectors.
The peer sponsors whose agreements were analyzed include the following entities (all fictional names maintained throughout this memorandum for confidentiality purposes):
• Arivance Therapeutics, Inc.
• Northwell Biosciences Corp.
• Elara Pharma Holdings, LLC
• Torren Oncology, Inc.
• Tralvendo Therapeutics Corp.
• Halloran BioPharmaceuticals, Inc.
• Meridian Life Sciences, LLC
• Caelum Therapeutics Corp.
• Primewell Oncology, Inc.
• Silvanus Pharma Holdings, LLC
• Cascadia Therapeutics, Inc.
• Marlowe Asset Management BioSciences Corp.
These agreements were selected based on the following criteria of comparability to the proposed Penterra/Veridian MCTA:
• Large site networks: Each agreement involved a multi-site institutional network comprising between 15 and 50+ clinical trial sites, comparable to the 38-site Veridian Network.
• Phase III randomized controlled trials: All agreements governed Phase III clinical trials with randomized, controlled designs analogous to the CLARION protocol.
• Deal values in a comparable range: Total deal values across the 12 agreements ranged from approximately $40,000,000 to $120,000,000, with the Penterra/Veridian MCTA at $80,000,000 falling within the middle of this range.
• Comparable investigational product risk profiles: The investigational products in the benchmarked agreements included oral kinase inhibitors, immuno-oncology agents, and targeted therapies for advanced solid tumors — drug classes with risk profiles comparable to penterafenib (an oral multi-kinase inhibitor for advanced hepatocellular carcinoma).
The agreements were accessed through the firm's proprietary precedent database, which includes executed agreements from prior representations by Calderwood & Harkness LLP, as well as publicly available redacted agreements obtained through regulatory disclosures and litigation filings. We acknowledge the inherent limitations of this data set: it does not represent an exhaustive market survey, and the terms of individual agreements may reflect transaction-specific factors (such as the relative bargaining leverage of the parties, the stage of the investigational product's development, or the specific risk profile of the therapeutic intervention) that are not fully captured in this comparative analysis. Nevertheless, we believe the sample is sufficiently representative to provide a reliable benchmark for the purposes of the Penterra/Veridian negotiation.
B. Key Parameters Benchmarked
Across the 12 agreements, we systematically analyzed the following eight indemnification-related parameters:
1. Scope of sponsor indemnification of sites and investigators — including the categories of claims, losses, and liabilities covered, and the classes of indemnified parties (institutions, principal investigators, sub-investigators, study coordinators, and other site personnel).
2. Subject-injury medical care cost provisions — including both per-subject caps and aggregate caps on the sponsor's direct obligation to cover medical care costs arising from study-related injuries, as distinguished from third-party indemnification for litigation claims.
3. Carve-outs and exclusions from sponsor indemnity — including exclusions for site negligence, unauthorized protocol deviations, breach of agreement, and breach of applicable law.
4. Reciprocal site/investigator indemnification of sponsor — including scope, triggering events, and the classes of claims covered by the site's or investigator's indemnity running to the sponsor.
5. Caps on reciprocal site indemnity — including per-site/per-occurrence caps and aggregate caps across all sites in the network.
6. Notice requirements — including the time period for notice of claims and the consequences of failure to provide timely notice.
7. Defense and settlement procedures — including allocation of the right to control the defense of indemnified claims and the procedures governing settlement authority.
8. Insurance requirements supporting indemnification — including minimum per-occurrence and aggregate policy limits for both sponsors and sites, additional insured endorsements, and certificate-of-insurance exchange requirements.
9. Interaction between indemnification and limitation-of-liability provisions — including the carve-out of indemnification obligations from general limitations on liability.
Each of these parameters was analyzed on a provision-by-provision basis across the 12 agreements, and the results are reported in the sections that follow.
III. Sponsor Indemnification of Sites and Investigators — Market Analysis
A. Scope of Sponsor Indemnity Obligations
The scope of the sponsor's indemnification obligation to clinical trial sites and investigators is the foundational provision of any MCTA indemnification structure. Across all twelve (12) agreements reviewed, sponsors provided broad indemnification covering the site institutions, principal investigators, sub-investigators, study coordinators, and other site staff against claims, losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and costs of defense) arising from one or more of the following categories of events:
(i) Subject injury caused by the investigational product when administered in accordance with the clinical trial protocol and applicable regulatory requirements;
(ii) Defects in the investigational product, including defects in manufacturing, formulation, design, packaging, or labeling of the investigational product;
(iii) Sponsor's breach of the agreement or the clinical trial protocol, including failure to provide adequate safety information, failure to report adverse event data, or failure to comply with regulatory obligations; and
(iv) Sponsor's negligence or willful misconduct, including negligent acts or omissions by sponsor personnel, sponsor-designated monitors, and other agents of the sponsor in connection with the conduct of the trial.
This four-part indemnification framework was present, in substance, in all twelve agreements reviewed, though the precise formulations varied in their drafting style. In some agreements, categories (i) and (ii) were merged into a single "product liability" indemnity; in others, category (iii) was subsumed within a broader "breach of obligations" indemnity that also covered regulatory noncompliance. Regardless of drafting approach, the substantive coverage was materially consistent across the sample.
Of particular significance for purposes of the Penterra/Veridian negotiation:
• In ten (10) of twelve (12) agreements, indemnification for product-defect claims (category (ii) above) was uncapped — that is, the sponsor's obligation to indemnify sites and investigators against claims arising from defects in the investigational product was not subject to any monetary ceiling. This reflects a market consensus that the risk of product defects — which are entirely within the sponsor's control — should be borne fully by the sponsor without limitation.
• In the remaining two (2) agreements, product-defect indemnification was subject to high aggregate caps of $50,000,000 and $100,000,000, respectively. Both of these agreements involved sponsors with relatively smaller balance sheets (market capitalizations below $1 billion), where the high caps were negotiated as a concession to the sponsor's concern about uncapped exposure relative to its total assets.
Penterra's proposed approach — providing broad indemnification for subject injury arising from the investigational product and uncapped indemnification for product-defect claims — is fully consistent with the predominant market standard. Given Penterra's financial profile (approximately $4.2 billion market capitalization, $890 million in cash and cash equivalents), there is no financial basis for seeking a cap on product-defect indemnification, and proposing uncapped coverage on this point is likely to facilitate negotiations with Veridian, whose network sites will expect this protection as a baseline.
B. Subject-Injury Medical Care Cost Provisions
It is critical to distinguish between two conceptually distinct components of the sponsor's indemnification framework:
• Third-party claim indemnification: The sponsor's obligation to defend and indemnify sites and investigators against third-party claims (e.g., personal injury lawsuits brought by trial subjects or their estates). This obligation is typically uncapped or subject to very high caps, as discussed in Section III.A above.
• Medical care cost coverage: The sponsor's direct obligation to pay or reimburse the medical care costs incurred by trial subjects who suffer study-related injuries. This obligation runs directly to the subject (or, in practice, to the treating site institution) and is typically subject to per-subject and aggregate monetary caps.
The medical care cost coverage obligation is analytically and contractually distinct from third-party indemnification. It represents the sponsor's commitment to ensure that subjects who are injured as a result of participation in the clinical trial receive appropriate medical care without bearing the financial burden of that care. It is also a practical necessity for trial recruitment, as institutional review boards ("IRBs") and ethics committees typically require evidence of adequate subject-injury coverage as a condition of protocol approval.
Per-Subject Medical Care Cost Caps. Across the twelve agreements reviewed, per-subject medical care cost caps ranged as follows:
• Range: $250,000 to $1,000,000 per subject.
• Median: $500,000 per subject.
• Most common (mode): $500,000 per subject — found in five (5) of twelve (12) agreements.
• Higher caps in the range of $750,000 to $1,000,000 per subject were observed in three (3) agreements involving investigational products with higher-risk profiles, including a cell therapy product and two combination immuno-oncology regimens with known risks of immune-mediated adverse events (including cytokine release syndrome and immune-related hepatotoxicity).
• Lower caps in the range of $250,000 to $350,000 per subject were observed in two (2) agreements involving lower-risk oral agents with established safety profiles in earlier-phase studies, where the Phase III trial was primarily confirmatory in nature.
Aggregate Medical Care Cost Caps. Across the twelve agreements, aggregate medical care cost caps ranged as follows:
• Range: $5,000,000 to $25,000,000 aggregate.
• Median: $12,500,000 aggregate.
• Most common (mode): The $10,000,000 to $15,000,000 range — encompassing eight (8) of twelve (12) agreements.
• Aggregate caps generally scaled with the number of enrolled subjects and the total deal value. Agreements with larger enrolled populations (800+ subjects) and higher deal values ($60M+) tended to cluster at the higher end of the range ($12.5M–$25M), while smaller trials (200–500 subjects) with lower deal values ($40M–$60M) tended to cluster at the lower end ($5M–$10M).
Penterra's proposed per-subject cap of $500,000 and aggregate cap of $15,000,000 fall at or modestly above the market median. The per-subject cap is at the precise median and mode of the benchmarked sample. The aggregate cap of $15,000,000 is approximately 20% above the median of $12,500,000 and falls within the most commonly observed range of $10,000,000 to $15,000,000. These proposed caps are appropriate for a 1,200-subject Phase III oncology trial involving an oral multi-kinase inhibitor with a known but manageable safety profile, and for a total deal value of $80,000,000.
It bears emphasis that these medical care cost caps are separate from and in addition to the uncapped indemnification for product-defect claims discussed in Section III.A above. This is the predominant market approach: the per-subject and aggregate caps apply to the sponsor's direct medical care cost obligation, while the sponsor's indemnification for third-party claims arising from product defects remains uncapped. This dual structure provides meaningful protection to sites and subjects while establishing a defined limit on the sponsor's direct care-cost exposure.
C. Relationship to Sponsor Insurance
The medical care cost caps described above are typically analyzed in conjunction with the sponsor's clinical trial liability insurance coverage. The caps define the sponsor's contractual obligation under the MCTA, while the insurance coverage provides the financial backstop for both the capped medical care cost obligations and the uncapped (or high-capped) third-party indemnification obligations.
Penterra has procured clinical trial liability insurance through Briarcliff Mutual Insurance Company (Policy No. BM-CTL-2023-04182), with the following coverage limits:
• Per-occurrence limit: $25,000,000
• Aggregate limit: $75,000,000
• Subject-injury sublimit: $10,000,000 per occurrence / $50,000,000 aggregate
A detailed analysis of the adequacy and structure of the Briarcliff policy is being prepared separately in the Insurance Requirements Analysis Memorandum, and this memorandum cross-references that analysis. For present purposes, we note the following market observation: per-occurrence insurance limits among the twelve peer agreements ranged from $10,000,000 to $50,000,000, with a median of $25,000,000 — consistent with Penterra's Briarcliff policy limits. Aggregate insurance limits ranged from $25,000,000 to $100,000,000, with a median of $75,000,000 — again consistent with Penterra's policy. The Briarcliff policy thus positions Penterra at the market median on both per-occurrence and aggregate insurance metrics, which should provide a defensible basis for the insurance requirements to be set forth in the MCTA.
IV. Carve-Outs and Exclusions from Sponsor Indemnity — Market Analysis
A. Standard Carve-Outs
No indemnification obligation is absolute, and the appropriate delineation of carve-outs and exclusions from the sponsor's indemnity is essential to achieving a balanced risk allocation. Across all twelve (12) agreements reviewed, the following carve-outs from sponsor indemnification were present without exception:
(i) Negligence or willful misconduct of the site, investigator, or site personnel. Losses, damages, or liabilities to the extent caused by the negligent acts, errors, or omissions, or the willful misconduct, of the site institution, the principal investigator, sub-investigators, study coordinators, or other site personnel are excluded from the sponsor's indemnification obligation.
(ii) Protocol deviations not authorized by the sponsor and not required for immediate subject safety. Losses arising from deviations from the clinical trial protocol that were not authorized in advance by the sponsor and were not necessitated by the need to protect the immediate safety of a trial subject are excluded from the sponsor's indemnity. The scope and nuances of this carve-out are discussed in detail in Section IV.B below.
(iii) Site's or investigator's breach of the agreement or applicable law. Losses arising from the site's or investigator's breach of the MCTA, the site agreement, or applicable federal, state, or local law — including, without limitation, FDA regulations (21 C.F.R. Parts 50, 56, and 312), HIPAA, and state informed-consent statutes — are excluded from the sponsor's indemnification obligation.
The universality of these carve-outs across the twelve-agreement sample reflects a deeply embedded market consensus: the sponsor's indemnification obligation is appropriately limited to losses arising from risks that are within the sponsor's control (product risks, protocol design, sponsor conduct), while losses arising from risks within the site's control (site negligence, unauthorized deviations, site-level legal compliance) should be borne by the site.
Penterra's proposed carve-outs are consistent with this universal market standard. We do not anticipate that Veridian or WJC will object to the inclusion of these carve-outs in principle, though — as discussed below — the precise scope of the protocol deviation carve-out is likely to be a contested negotiation point.
B. Protocol Deviation — Nuances
The carve-out for protocol deviations presents one of the most critical — and frequently negotiated — issues in the indemnification provisions of clinical trial agreements. The core tension is straightforward: sponsors seek broad carve-outs that exclude from their indemnity any loss arising from a deviation from the protocol, while sites and investigators seek to preserve indemnification coverage for deviations that were undertaken in good faith to protect the immediate health and safety of a trial subject.
This tension is particularly acute in the oncology context, where patients with advanced malignancies may experience rapid clinical deterioration that requires the treating investigator to exercise independent clinical judgment — potentially including decisions to deviate from protocol-specified procedures, dosing schedules, or concomitant medication restrictions — in order to address an emergent medical situation.
Across the twelve agreements reviewed, two distinct approaches were observed:
Majority approach (9 of 12 agreements): The carve-out for protocol deviations includes an express exception that preserves sponsor indemnity where the deviation was:
(a) Required for the immediate safety or medical welfare of the trial subject, as determined by the investigator's reasonable clinical judgment; or
(b) Approved in advance by the sponsor, or ratified by the sponsor after the fact in writing.
Under this majority approach, the sponsor's indemnity is not extinguished merely because a protocol deviation occurred; rather, the carve-out applies only to unauthorized deviations that were not medically necessary. This structure incentivizes sites to seek advance authorization for elective deviations while protecting investigators who must act swiftly in emergent clinical situations.
Minority approach (3 of 12 agreements): The protocol deviation carve-out was broader, excluding from sponsor indemnity any deviation from the protocol regardless of medical necessity. Under this approach, the burden is placed entirely on the site to seek advance sponsor approval for any deviation, and the sponsor's indemnity does not extend to any deviation — even one made to protect a subject's life — absent prior written authorization.
We note that the three agreements employing the minority approach all involved non-academic community site networks (as distinguished from the academic medical center networks that predominate in the Veridian Network). Academic medical center sites, where physician-investigators exercise significant clinical autonomy, are particularly insistent on the majority approach, as it aligns with the professional obligations and ethical duties of the treating physician.
Recommendation: We recommend that Penterra adopt the majority approach — carving out unauthorized protocol deviations but expressly preserving sponsor indemnity for deviations made to protect the immediate safety of a trial subject or with the sponsor's written authorization. This recommendation is grounded in three considerations:
First, this approach is consistent with the prevailing market position (9 of 12 agreements), and proposing it will position Penterra's draft as reasonable and market-conforming.
Second, the Veridian Network includes several major academic medical centers — most notably Graystone University Medical Center and Lakemont Medical Center — whose institutional policies and IRB requirements are expected to mandate this protection for their physician-investigators. Omitting the medical necessity exception would likely create a deal-breaking impasse with these lead sites.
Third, from a practical standpoint, the risk to Penterra of preserving indemnity for good-faith medical necessity deviations is modest. Such deviations are relatively rare, are typically well-documented in source records and case report forms, and are subject to review by Penterra's medical monitors. The far greater risk to Penterra lies in the possibility that an aggressive protocol deviation carve-out could deter qualified investigators from participating in the CLARION trial, undermining enrollment timelines and data quality.
We flag this issue as a likely negotiation point with Veridian and WJC. Based on prior experience with WJC in comparable transactions, we anticipate that lead partner Allison Whitmore will seek an even broader medical necessity exception — potentially extending to deviations made in the investigator's "reasonable clinical judgment" without the qualifier of "immediate subject safety." We recommend that Penterra resist this expansion, as it could be read to encompass elective clinical decisions that are not truly emergent, thereby diluting the incentive for sites to adhere to the protocol.
C. Failure to Provide Timely Notice
The consequences of a failure by the indemnified party to provide timely notice of a claim to the indemnifying party represent another significant negotiation issue. Prompt notice serves the legitimate interest of the indemnifying party in being able to investigate claims, preserve evidence, and participate in (or control) the defense of the claim at the earliest possible stage. At the same time, an overly rigid notice requirement can result in the forfeiture of indemnification rights due to technical or inadvertent failures in the notice process.
Across the twelve agreements reviewed, two approaches were observed:
Majority approach (7 of 12 agreements): Failure of the indemnified party to provide timely notice of a claim does not relieve the indemnifying party of its indemnification obligation, except to the extent that the indemnifying party is materially prejudiced by the delay in notice. Under this "material prejudice" standard, the indemnifying party must demonstrate actual harm — such as the inability to investigate the underlying facts, the loss of key evidence, or the inability to participate in early settlement discussions — resulting from the late notice. Absent such a showing, the indemnification obligation survives.
Minority approach (5 of 12 agreements): Failure to provide timely notice within the specified period (typically 15 to 30 calendar days after the indemnified party becomes aware of the claim) operates as a complete bar to indemnification, regardless of whether the indemnifying party suffered any actual prejudice from the delay.
The material prejudice standard is generally regarded as the more commercially reasonable approach, as it preserves the indemnified party's substantive rights while still incentivizing timely notice. It is also the approach most consistent with New York common law, which generally disfavors forfeiture of contractual rights absent clear evidence of prejudice.
Penterra's proposed 30-day notice requirement, coupled with a "material prejudice" standard (rather than an absolute bar), is consistent with the majority position and is recommended as the negotiating position for the MCTA. The 30-day notice period is at the median and mode of the benchmarked sample (notice periods ranged from 15 to 30 days, with 30 days being the most common). We do not recommend shortening the period to 15 days, as this would be at the aggressive end of the market range and may be resisted by Veridian, whose network of 38 sites may require additional time to process and transmit notice through its internal compliance channels.
V. Reciprocal Site/Investigator Indemnification of Sponsor — Market Analysis
A. Scope of Site Indemnity
All twelve (12) agreements reviewed included reciprocal indemnification provisions running from the site network and/or the individual site institutions to the sponsor. Under these provisions, the site network and/or institutions indemnify the sponsor and its directors, officers, employees, and agents against claims, losses, damages, liabilities, and expenses (including reasonable attorneys' fees) arising from one or more of the following categories of events:
(i) Negligence or willful misconduct of site staff. Claims arising from the negligent acts, errors, or omissions, or the willful misconduct, of the site institution, the principal investigator, sub-investigators, study coordinators, research nurses, or other site personnel in connection with the conduct of the clinical trial.
(ii) Unauthorized protocol deviations by site personnel. Claims arising from deviations from the clinical trial protocol by site personnel that were not authorized by the sponsor and were not required for the immediate safety of a trial subject (mirroring the carve-out from sponsor indemnity discussed in Section IV.B above).
(iii) Site's or network's breach of the agreement or applicable law. Claims arising from the site's or network's breach of the MCTA, the site agreement, applicable FDA regulations, HIPAA, state informed-consent requirements, or other applicable law.
This reciprocal indemnification structure mirrors the carve-outs from sponsor indemnity discussed in Section IV.A, creating a symmetrical allocation of fault-based liability: losses arising from risks within the sponsor's control are indemnified by the sponsor, while losses arising from risks within the site's control are indemnified by the site. This symmetry is a core structural feature of the market-standard indemnification framework and is present in all twelve agreements.
It is worth noting that the reciprocal site indemnity is, by its nature, narrower in scope than the sponsor's indemnity. The sponsor's indemnity covers product-related risks — which represent the primary and most significant category of potential liability in a clinical trial — while the site's indemnity covers site-conduct risks, which are typically lower in frequency and severity. This asymmetry in scope is appropriate and reflects the fundamental allocation of risk in the sponsor-site relationship: the sponsor, as the party that designs the protocol, manufactures the investigational product, and bears regulatory responsibility for the trial, assumes the broader indemnification obligation.
B. Caps on Site Indemnity
Unlike sponsor indemnification — which is typically uncapped or subject to high caps for product-defect claims — reciprocal site indemnification is universally subject to monetary caps. This is a function of the structural asymmetry between sponsors and site networks: the sponsor is typically a well-capitalized pharmaceutical company with access to substantial insurance, while the site network is typically a collection of academic medical centers, community hospitals, and research institutions with more limited financial resources.
Across the twelve agreements reviewed, caps on site indemnity were structured as follows:
Per-Site/Per-Occurrence Caps:
• Range: $1,000,000 to $10,000,000 per site, per occurrence.
• Median: $5,000,000.
• Most common (mode): $5,000,000 — found in six (6) of twelve (12) agreements.
• Lower caps ($1M–$3M) were observed in agreements involving smaller community-based site networks with limited insurance coverage and lower total deal values.
• Higher caps ($7.5M–$10M) were observed in agreements involving well-funded academic medical centers with robust institutional insurance programs.
Aggregate Caps (Across All Sites):
• Range: $5,000,000 to $50,000,000 aggregate across all sites in the network.
• Median: $20,000,000.
• Most common (mode): The $15,000,000 to $25,000,000 range — encompassing eight (8) of twelve (12) agreements.
• Aggregate caps tended to scale based on the size of the site network and the total deal value. For large multi-site networks comprising 30 or more sites, aggregate caps of $20,000,000 to $25,000,000 were the most commonly observed.
• The lowest aggregate cap ($5,000,000) was observed in an agreement involving a small 15-site network with a total deal value of approximately $40,000,000.
• The highest aggregate cap ($50,000,000) was observed in an agreement involving a very large 52-site network with a total deal value of approximately $120,000,000.
Penterra's proposed caps — $5,000,000 per site/per occurrence and $20,000,000 aggregate across all Veridian sites — are squarely at the market median for comparable transactions involving large academic site networks. These caps are well within the range that Veridian and its constituent institutions should find reasonable, particularly given the 38-site scope of the Veridian Network and the $80,000,000 total deal value.
We note an important market observation regarding uncapped site indemnity: none of the twelve agreements imposed uncapped indemnification obligations on the site network or its constituent institutions. This is a function of the structural realities discussed above. Veridian is a 501(c)(3) tax-exempt organization, and the individual site institutions within the Veridian Network include both 501(c)(3) academic medical centers and state-funded institutions with sovereign or quasi-sovereign immunity protections. These entities have limited assets relative to a for-profit pharmaceutical sponsor, and their nonprofit status and public mission impose reputational and financial constraints that make uncapped indemnity obligations inappropriate and, in some cases, legally impermissible under the institution's governing documents or state law. Accordingly, we do not recommend that Penterra seek uncapped site indemnity, as such a position would be without market support and would likely be rejected outright by Veridian and its institutional participants.
C. Coordination with Site Insurance
The site indemnity caps discussed above are typically coordinated with minimum insurance requirements imposed on the site network and its constituent institutions. Across the twelve agreements reviewed, site insurance requirements were structured as follows:
• Per-occurrence general and professional liability insurance: Range of $2,000,000 to $10,000,000; median of $5,000,000.
• Aggregate general and professional liability insurance: Range of $5,000,000 to $20,000,000; median of $10,000,000.
Penterra's proposed requirement that Veridian and its participating sites maintain general and professional liability insurance with minimum limits of $5,000,000 per occurrence and $10,000,000 aggregate is consistent with the market median on both metrics. These insurance requirements are reasonable and should not present a burden for the academic medical centers and research institutions within the Veridian Network, which typically maintain insurance programs at or above these levels as a matter of institutional policy.
We recommend that the MCTA include a requirement for the exchange of certificates of insurance within fifteen (15) business days of execution and annually thereafter for the duration of the agreement. This requirement is consistent with the approach observed in ten (10) of twelve (12) agreements reviewed. The remaining two agreements required exchange only at execution, without annual renewal — an approach we consider less protective of Penterra's interests, as it does not provide ongoing confirmation that site insurance remains in force throughout the trial period.
Additionally, we recommend that the MCTA require Veridian to add Penterra as an additional insured under Veridian's general and professional liability policy, to the extent arising from the activities contemplated under the MCTA. This requirement was present in nine (9) of twelve (12) agreements and provides Penterra with a direct right of recovery under the site's insurance program in the event of a claim.
VI. Comparative Summary Table
The following table presents a structured comparison of Penterra's proposed indemnification terms against the market range, median, and most common position across the twelve (12) benchmarked agreements:
As reflected in the table, Penterra's proposed indemnification terms are at or near the market median on every measured parameter. The aggregate medical care cost cap of $15,000,000 is modestly above the median, which positions Penterra as slightly more generous than the typical market position on this point — a feature that may be strategically useful in negotiations with Veridian.
VII. Analysis of Key Negotiation Dynamics
A. Anticipated Veridian Positions
Based on prior representations involving large academic site networks and 501(c)(3) research organizations, and based on our familiarity with the negotiation approach of Whitmore, Jansen & Callahan LLP (lead partner Allison Whitmore), we anticipate that Veridian may seek the following modifications to Penterra's proposed indemnification structure:
1. Uncapped sponsor indemnification for all subject injuries. Veridian is likely to push for the removal of both the $500,000 per-subject medical care cost cap and the $15,000,000 aggregate medical care cost cap, seeking uncapped sponsor indemnification for all study-related subject injuries — not just product-defect claims. This is the most site-favorable position and is consistent with the negotiating posture of academic medical center networks, which bear the burden of providing ongoing medical care to injured subjects and are understandably reluctant to accept the risk that medical care costs could exceed the sponsor's contractual cap.
2. Higher sponsor insurance requirements. Veridian may seek to increase the minimum sponsor insurance requirement to $50,000,000 per occurrence, above the $25,000,000 per-occurrence limit in Penterra's current Briarcliff policy. This demand is often paired with the request for uncapped indemnification, as higher insurance limits provide the financial backstop that makes uncapped indemnification commercially feasible for the sponsor.
3. Narrower carve-outs from sponsor indemnity. Veridian is likely to seek narrower carve-outs from sponsor indemnity, particularly with respect to protocol deviations. As discussed in Section IV.B, we anticipate that WJC will argue for a broader medical necessity exception — potentially extending to any deviation made in the investigator's "reasonable clinical judgment" — and may also seek to limit the scope of the negligence carve-out to "gross negligence" rather than "negligence" simpliciter.
4. Lower site indemnity caps. Veridian may seek to reduce the per-site/per-occurrence cap from $5,000,000 to $2,000,000 or $3,000,000, and to reduce the aggregate cap from $20,000,000 to $10,000,000 or $12,000,000. This is a predictable position for a 501(c)(3) organization concerned about the potential financial impact of indemnification obligations on its tax-exempt mission.
5. Broader definition of "study-related injury." Veridian may seek to expand the definition of "study-related injury" — the triggering event for the sponsor's medical care cost obligation — to encompass injuries arising from study procedures (such as biopsies, imaging procedures, blood draws, and other protocol-mandated interventions) and not just injuries arising directly from the administration of the investigational product itself. This is a material distinction: a broader definition could capture injuries resulting from routine study procedures that are not causally related to the investigational product, thereby increasing the sponsor's potential exposure.
These anticipated positions are consistent with the more site-favorable end of the market spectrum and reflect the institutional priorities and risk tolerances of large academic site networks. While none of these positions is unreasonable on its face, each represents a departure from the market median that would shift risk to Penterra.
B. Recommended Penterra Negotiation Strategy
In light of the benchmarking data and the anticipated Veridian positions, we recommend the following negotiation strategy for Penterra:
1. Maintain the per-subject cap ($500,000) and aggregate cap ($15,000,000) for medical care costs. The benchmarking data demonstrates that these caps are at or above the market median for comparable Phase III oncology trials. In negotiations, Penterra should present the benchmarking analysis to demonstrate that its proposed caps are not only commercially reasonable but are, in fact, moderately more generous than the typical market position (the aggregate cap of $15,000,000 exceeds the market median of $12,500,000 by 20%). If Veridian argues for uncapped medical care cost coverage, Penterra should note that only one (1) of the twelve (12) peer agreements reviewed provided fully uncapped medical care cost coverage, and that agreement involved a materially higher-risk investigational product (a CAR-T cell therapy with a known risk of cytokine release syndrome and neurotoxicity).
2. Maintain uncapped product-defect indemnification as a concession. The uncapped product-defect indemnification is consistent with the market standard (10 of 12 agreements) and represents Penterra's most significant concession on the indemnification structure. In negotiations, Penterra should frame this provision as demonstrating its willingness to bear full responsibility for risks within its control — i.e., defects in the investigational product — while appropriately capping its exposure for medical care costs that may arise from the inherent risks of the investigational product (as distinct from defects). This framing should be persuasive with sophisticated counsel such as WJC.
3. Resist demands for uncapped subject-injury indemnification broadly. As noted above, only one of twelve peer agreements provided fully uncapped medical care cost coverage. Uncapped coverage would expose Penterra to potentially unlimited liability for medical care costs in a 1,200-subject trial, which — while theoretically unlikely to be consumed in full — would create an unquantifiable contingent liability on Penterra's balance sheet that could have implications for financial reporting and disclosure obligations. Penterra should firmly resist this demand while offering the benchmarking data to demonstrate that its proposed caps are at the market standard.
4. Resist the insurance increase to $50,000,000 per occurrence. Penterra's Briarcliff policy provides $25,000,000 per-occurrence coverage, which is at the market median. Increasing the per-occurrence limit to $50,000,000 would impose significant additional premium costs on Penterra, which we understand from preliminary discussions with Briarcliff could amount to approximately $1.2 million to $1.8 million in additional annual premium. This cost should be avoided unless it is necessary to secure a critical concession from Veridian on another term. We refer to the Insurance Requirements Analysis Memorandum for a more detailed analysis of the cost and feasibility of increasing the Briarcliff policy limits.
5. Maintain site indemnity caps at $5,000,000 per site/per occurrence and $20,000,000 aggregate. These caps are at the market median and mode and are appropriate for a site network of Veridian's size and financial profile. However, if Veridian pushes for a reduction and the negotiation requires a concession on this point, Penterra should be prepared to accept a modest downward adjustment — for example, to $4,000,000 per site/per occurrence and $18,000,000 aggregate. Such an adjustment would remain within the market range and could be traded for a concession from Veridian on the medical care cost caps or the definition of "study-related injury."
6. Include the medical necessity exception for protocol deviations. As discussed in Section IV.B, the medical necessity exception is consistent with the majority market position (9 of 12 agreements) and is critical for physician-investigators at Veridian Network academic centers. Proposing this exception in the first draft MCTA will signal Penterra's reasonableness and may preempt a contentious negotiation on this point. However, the exception should be carefully drafted to require that the deviation was necessary for "immediate subject safety" — not merely for "reasonable clinical judgment" — to maintain appropriate limits on the scope of the exception.
C. Asymmetry Considerations
It is important to acknowledge the inherent asymmetry in indemnification structures between a publicly traded pharmaceutical sponsor and a 501(c)(3) nonprofit site network. Penterra is a publicly traded pharmaceutical company with an approximate market capitalization of $4.2 billion and approximately $890 million in cash and cash equivalents. Veridian, by contrast, is a tax-exempt research organization whose financial resources, while significant for a nonprofit, are orders of magnitude smaller than those of a for-profit pharmaceutical sponsor.
This asymmetry is deeply embedded in market practice and is reflected in the structure of indemnification provisions across the twelve agreements reviewed:
• Sponsor indemnity is typically broader in scope, covering product-related risks (the most significant category of potential liability), and is uncapped or subject to high caps for product-defect claims.
• Site indemnity is narrower in scope, limited to fault-based claims arising from site conduct, and is universally subject to lower monetary caps that are calibrated to the site's financial capacity.
This asymmetric structure is not a negotiating weakness for Penterra; rather, it is the industry norm. Penterra's proposed indemnification framework appropriately reflects this norm, providing broad and largely uncapped sponsor indemnity while maintaining reasonable and market-standard caps on site indemnity. Any attempt by Veridian to seek fully symmetric indemnification — i.e., uncapped obligations running in both directions — would be without market support and should be resisted.
Conversely, any attempt by Penterra to impose uncapped or disproportionately high indemnification obligations on Veridian would be inconsistent with market practice and would likely be viewed as overreaching by WJC and the individual site institutions, potentially jeopardizing the commercial relationship.
VIII. Special Considerations for the CLARION Trial
A. Risk Profile of Penterafenib (PPC-4871)
The appropriate level of indemnification coverage should be informed by the specific risk profile of the investigational product. Penterafenib (PPC-4871) is an oral multi-kinase inhibitor being developed for the treatment of advanced hepatocellular carcinoma ("HCC") in patients who have progressed on or are intolerant to first-line systemic therapy. The Phase II data for penterafenib demonstrated a 38% objective response rate ("ORR") — a meaningful efficacy signal that supports advancement to Phase III — but also revealed the safety profile characteristic of the multi-kinase inhibitor class.
Multi-kinase inhibitors are associated with several known class-effect adverse events that inform the indemnification analysis:
• Hepatotoxicity: Elevations in transaminases (ALT, AST) and bilirubin, including the potential for drug-induced liver injury ("DILI"). This risk is particularly relevant in the HCC population, where baseline hepatic function may already be compromised.
• Hypertension: Treatment-emergent hypertension, potentially requiring antihypertensive medication or dose modification.
• Hand-foot skin reaction (palmar-plantar erythrodysesthesia): A common and sometimes treatment-limiting dermatologic adverse event.
• Diarrhea and gastrointestinal toxicity: Occurring with moderate to high frequency in the multi-kinase inhibitor class.
• Fatigue and asthenia: Common treatment-emergent adverse events that may impair quality of life.
• Potential for serious cardiovascular events: Including arterial thromboembolic events and QT prolongation, which are monitored as class-effect risks.
These adverse events, while well-characterized and manageable with appropriate dose modifications and supportive care, can in some cases lead to serious medical complications requiring hospitalization and intensive medical treatment — with correspondingly high medical care costs.
The proposed per-subject medical care cost cap of $500,000 and aggregate cap of $15,000,000 are appropriate for this risk profile. The $500,000 per-subject cap is sufficient to cover the medical care costs associated with the most common serious adverse events (e.g., hospitalization for hepatotoxicity, hypertensive crisis, or thromboembolic events), while the $15,000,000 aggregate cap provides a meaningful cushion above the expected total medical care cost exposure for a 1,200-subject trial with the adverse event profile observed in Phase II.
Importantly, if the Phase III trial reveals unexpected serious toxicities not observed in the Phase II data — which would constitute a potential product defect — the uncapped product-defect indemnification provides an additional and unlimited layer of protection to sites and investigators. This dual structure (capped medical care costs for known risks, uncapped indemnification for product defects) is designed precisely to address the scenario in which the risk profile of the investigational product proves materially different from what was anticipated based on earlier-phase data.
B. Scale of the Trial
The CLARION trial is among the larger multi-site Phase III oncology programs currently in development. With 1,200 planned subjects across 38 sites in 14 states and a total deal value of $80,000,000, the trial represents a significant clinical and financial commitment by both Penterra and Veridian.
The proposed indemnification structure — including the aggregate caps — is scaled appropriately for a trial of this magnitude. The $15,000,000 aggregate medical care cost cap, divided across 1,200 planned subjects, yields a theoretical average of approximately $12,500 per subject if the cap were fully consumed. This analysis illustrates that the aggregate cap is conservative and would be tested only in a scenario of widespread product-related injury affecting a substantial proportion of the enrolled population — a scenario that, while not impossible, is highly unlikely for an oral multi-kinase inhibitor with an established class-effect safety profile.
To put this in further context: if 5% of the 1,200 subjects (i.e., 60 subjects) experienced a serious study-related injury requiring significant medical care, and the average medical care cost per injured subject were $200,000, the total medical care cost would be $12,000,000 — within the $15,000,000 aggregate cap. If 10% of subjects (120 subjects) experienced serious injuries at the same average cost, the total would be $24,000,000 — exceeding the aggregate cap but falling well within the coverage provided by Penterra's Briarcliff insurance policy (which provides $50,000,000 aggregate coverage for subject injury). These scenarios represent extreme adverse event rates that substantially exceed historical benchmarks for the multi-kinase inhibitor class.
C. Governing Law
The MCTA will be governed by New York law, as agreed by the parties during the preliminary term sheet negotiations. Under New York law, contractual indemnification provisions in commercial agreements between sophisticated parties are generally enforceable, including provisions that establish monetary caps on indemnification obligations and provisions that allocate liability between the parties based on fault.
Several principles of New York law are relevant to the drafting of the MCTA indemnification provisions: