1018-00004 · Penterra Pharmaceuticals Corp · Analysis & Strategy

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MEMORANDUM

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

TO: Miriam Calloway, Partner, Calderwood & Harkness LLP

FROM: Sean Morrissey, Associate; Christopher Aiken, Associate

DATE: March 31, 2023

RE: Choice-of-Law Analysis — New York Governing Law for Master Clinical Trial Agreement Between Penterra Pharmaceuticals Corp. and Veridian Health Research Network, Inc. (Protocol PPC-4871-III / CLARION)

MATTER NO.: 1018-00004

I. Executive Summary

You asked us to analyze the implications of designating New York law as the governing law for the proposed Master Clinical Trial Agreement (the "MCTA") between Penterra Pharmaceuticals Corp. ("Penterra"), a Delaware corporation headquartered at 200 Biopharma Boulevard, Suite 1400, Princeton, New Jersey 08540, and Veridian Health Research Network, Inc. ("Veridian"), a Delaware Section 501(c)(3) tax-exempt corporation headquartered at 750 Research Parkway, 8th Floor, Philadelphia, Pennsylvania 19104. The MCTA will govern a Phase III multi-center clinical trial (Protocol PPC-4871-III, known as the "CLARION" trial) evaluating penterafenib (PPC-4871), a multi-kinase inhibitor, in the treatment of advanced hepatocellular carcinoma. The trial is planned across 38 Veridian Network sites located in 14 states, with a total deal value of approximately $80,000,000 over a projected 60-month study duration.

Based on our analysis, we conclude that New York law is generally favorable for the enforceability of the MCTA's key commercial provisions, including indemnification (both sponsor-to-site subject-injury indemnification and reciprocal site-to-sponsor indemnification), limitation-of-liability provisions and caps, the three-step dispute resolution framework (escalation, mediation, and binding arbitration under AAA rules), the 10-year confidentiality term, data ownership and intellectual property provisions, and publication rights restrictions. New York General Obligations Law § 5-1401 provides a strong statutory basis for enforcing the parties' choice of New York law in a contract of this magnitude, and New York courts have consistently respected the freedom of commercially sophisticated parties to allocate risk, define remedies, and structure dispute resolution mechanisms.

However, certain state-specific regulatory and healthcare laws applicable at site locations may apply notwithstanding the New York choice-of-law clause. These include, among others, state human-subjects research protection statutes, state anti-kickback and fraud-and-abuse laws, state insurance regulatory requirements, state privacy laws that are more protective than HIPAA, and state employment laws governing site personnel. Federal regulatory requirements — including the Federal Food, Drug, and Cosmetic Act; 21 C.F.R. Parts 11, 50, 54, 56, and 312; ICH E6(R2) Good Clinical Practice guidelines; and the Health Insurance Portability and Accountability Act — apply irrespective of the contractual governing law designation and override any conflicting contractual provisions. These mandatory law regimes cannot be displaced by the parties' choice-of-law provision, and the MCTA must be drafted to acknowledge and accommodate these overlapping regulatory frameworks.

We recommend proceeding with New York as the governing law, subject to the inclusion of specific carve-out language acknowledging the mandatory application of local regulatory and healthcare compliance laws at each site jurisdiction. Detailed drafting recommendations are set forth in Section XI of this memorandum, and a summary enforceability table is provided in Appendix A.

II. Background and Transaction Overview

A. The Parties

Penterra Pharmaceuticals Corp. Penterra is a Delaware corporation organized under the Delaware General Corporation Law and publicly traded on the Nasdaq Global Select Market under the ticker symbol "PTRA." As of the first quarter of 2023, Penterra's market capitalization is approximately $4.2 billion. In fiscal year 2022, Penterra reported total revenue of $1.87 billion, research and development expenditure of $612 million, and cash and cash equivalents of approximately $890 million. Penterra's principal executive offices are located at 200 Biopharma Boulevard, Suite 1400, Princeton, New Jersey 08540. Penterra's registered agent in Delaware is Capitol Registered Agents, LLC, located at 1209 Orange Street, Wilmington, Delaware 19801.

Penterra's chief executive officer is Dr. Anand Raghavan, M.D., Ph.D. The company's Vice President and General Counsel is Nathaniel Briggs, Esq. Its Associate General Counsel for Clinical Affairs is Rebecca Liang, Esq. Ms. Liang serves as the primary legal contact for the CLARION trial and will be Penterra's designee for purposes of contract administration and legal notices under the MCTA. Calderwood & Harkness LLP represents Penterra in connection with the negotiation and drafting of the MCTA. Our offices are located at 280 Park Avenue, 34th Floor, New York, New York 10017.

Veridian Health Research Network, Inc. Veridian is a Delaware 501(c)(3) tax-exempt research organization that operates a network of 38 academic medical centers and affiliated research institutions located across 14 states. Veridian's annual research volume is approximately $1.4 billion, and the organization employs approximately 6,200 individuals. Veridian's employer identification number is 23-4178205. Its principal offices are located at 750 Research Parkway, 8th Floor, Philadelphia, Pennsylvania 19104.

Veridian's President and Chief Executive Officer is Dr. Franklin Osei, M.D., Ph.D. Its Vice President of Legal & Compliance is Gregory Callahan, Esq. Veridian is represented by outside counsel at Whitmore, Jansen & Callahan LLP, located at 1500 Market Street, Suite 3200, Philadelphia, Pennsylvania 19102. The lead partner on the Veridian engagement is Allison Whitmore, Esq. We anticipate that Ms. Whitmore will serve as the primary counterparty counsel during MCTA negotiations.

Lead Participating Site. The lead participating site in the CLARION trial is Graystone University Medical Center, located at 1200 University Avenue, Philadelphia, Pennsylvania 19104. Graystone is organized as a Pennsylvania nonprofit corporation and is one of the largest academic medical centers in the Veridian Network. The Principal Investigator for the CLARION trial at Graystone is Dr. Catherine Aldridge, M.D., Ph.D., who holds the Eleanora Whitfield Endowed Chair in Hepatology at the Graystone University School of Medicine.

Key Secondary Site. Among the secondary sites, Lakemont Medical Center, located at 4400 North Michigan Drive, Chicago, Illinois 60611, has been designated as a key enrollment center. Lakemont is organized as an Illinois nonprofit corporation. The Co-Principal Investigator at Lakemont is Dr. Howard Matsuoka, M.D., who serves as Director of the Division of Gastrointestinal Oncology at Lakemont.

B. The MCTA and Trial Parameters

The MCTA is designed to serve as the umbrella agreement governing the relationship between Penterra, as sponsor, and Veridian, as the network coordinating organization, with Individual Site Agreements (in the form of joinder agreements referencing the MCTA's master terms) to be executed by each of the 38 participating sites. The MCTA establishes the framework for conduct of Protocol PPC-4871-III, entitled "CLARION: A Phase III, Randomized, Double-Blind, Placebo-Controlled Study Evaluating the Efficacy and Safety of Penterafenib (PPC-4871) in Subjects with Advanced Hepatocellular Carcinoma."

The key trial parameters are as follows:

• Study Drug: Penterafenib (PPC-4871), a novel multi-kinase inhibitor targeting vascular endothelial growth factor receptors (VEGFR-1, -2, -3), platelet-derived growth factor receptors (PDGFR-α, -β), and fibroblast growth factor receptors (FGFR-1, -2, -3, -4).

• Phase: Phase III

• Design: Randomized, double-blind, placebo-controlled

• Indication: Advanced hepatocellular carcinoma (HCC) in subjects who have progressed on or are intolerant to first-line systemic therapy

• Planned Enrollment: 1,200 subjects, randomized in a 2:1 ratio (800 treatment arm : 400 placebo arm)

• Enrollment Period: 42 months, with a target first patient in (FPI) date of August 14, 2023

• Projected Study Duration: 60 months from FPI to final study report

• IND Number: IND 157823, filed with the United States Food and Drug Administration

• ClinicalTrials.gov Identifier: NCT05928174

The total deal value of the MCTA is approximately $80,000,000 over the projected study duration, comprising the following components:

The key contractual provisions under analysis in this memorandum include: (i) indemnification, including subject-injury indemnification by Penterra and reciprocal indemnification by Veridian and sites; (ii) insurance requirements for both sponsor and sites; (iii) limitation-of-liability provisions and monetary caps; (iv) the dispute resolution framework, comprising escalation to designated representatives, mediation under AAA Commercial Mediation Rules, and binding arbitration; (v) confidentiality obligations, with a 10-year term from date of disclosure; (vi) data ownership; (vii) publication rights, including a 60-day review period and an additional 90-day patent-filing delay; and (viii) termination provisions, including a 120-day wind-down period.

C. Multi-State Dimension

The multi-state character of the CLARION trial introduces a significant layer of complexity to the choice-of-law analysis. The trial will be conducted at 38 Veridian Network sites across at least 14 states. Based on the sites identified to date, these states include at a minimum:

• Pennsylvania — Graystone University Medical Center (Philadelphia)

• Illinois — Lakemont Medical Center (Chicago)

• Massachusetts — Haverford Regional Medical Center (Boston)

• Colorado — Cedar Falls University Hospital (Denver)

• Georgia — Weston Memorial Health System (Atlanta)

Additional states will be confirmed upon finalization of Schedule 1 to the MCTA, which will set forth the complete list of participating sites and principal investigators. We understand from discussions with Ms. Liang that sites in New York, New Jersey, California, Texas, Florida, Ohio, North Carolina, Maryland, and Michigan are under consideration, though activation of specific sites remains subject to feasibility assessments and IRB approvals.

Each participating site is a separate legal entity — typically organized as a nonprofit corporation or an affiliated entity of a nonprofit academic medical center — operating under the laws of the state in which it is incorporated and conducts business. This multi-entity, multi-state structure means that although the MCTA will be governed by New York law as between Penterra and Veridian, the day-to-day conduct of the trial at each site will be subject to a patchwork of federal and state regulatory requirements, institutional policies, and local legal standards.

With respect to institutional review and ethical oversight, the trial will utilize a hybrid IRB model. The Graystone University Institutional Review Board (IRB00012847) will serve as the reviewing IRB for all Pennsylvania-based sites. The Veridian Central IRB, which functions as a central institutional review board for Veridian's multi-site studies pursuant to the 2017 Common Rule amendments (45 C.F.R. § 46.114), will serve as the single IRB of record for all non-Pennsylvania sites. This dual-IRB structure reflects Graystone's institutional requirement to maintain local IRB oversight for trials conducted at its own facilities.

III. Enforceability of New York Choice-of-Law Clause

A. New York General Obligations Law § 5-1401

The principal statutory authority supporting the parties' selection of New York governing law is New York General Obligations Law § 5-1401. This provision, enacted in 1984 and subsequently amended, was designed to promote New York as a center of commercial activity by enabling parties to choose New York law to govern their agreements without the need to demonstrate that the contract bears a "reasonable relationship" to the State of New York. The statute provides, in relevant part:

"The parties to any contract, agreement or undertaking, contingent or otherwise, in consideration of, or relating to any obligation arising out of a transaction covering in the aggregate not less than two hundred fifty thousand dollars . . . may agree that the law of this state shall govern their rights and duties in whole or in part, whether or not such contract, agreement or undertaking bears a reasonable relation to this state."

The operative threshold is that the contract must involve a transaction "covering in the aggregate not less than two hundred fifty thousand dollars." The MCTA's total deal value of approximately $80,000,000 substantially exceeds this threshold by a factor of more than 300. There is no colorable argument that the MCTA falls below the statutory minimum.

Moreover, although § 5-1401 does not require any nexus to New York, an additional New York connection exists by virtue of Calderwood & Harkness LLP's offices at 280 Park Avenue, 34th Floor, New York, New York 10017. Calderwood & Harkness serves as Penterra's transactional counsel for the MCTA and will administer certain aspects of the contract from its New York office. While this nexus is not legally necessary under § 5-1401, it provides supplementary support for the reasonableness of the New York governing law selection, which may be relevant if the choice-of-law provision is ever challenged in a court outside New York that applies a "reasonable relationship" test rather than deferring to New York's statutory framework.

It is important to understand the scope of § 5-1401. The statute permits parties to select New York law for their contractual obligations — that is, the rights, duties, and remedies arising under the four corners of the agreement itself. Section 5-1401 does not, however, override mandatory regulatory requirements or public-policy mandates of other jurisdictions that have a legitimate interest in the subject matter of the contract. As the New York Court of Appeals has recognized, the statute facilitates party autonomy with respect to purely contractual matters; it does not serve as a mechanism for parties to exempt themselves from the application of non-waivable legal requirements imposed by jurisdictions with a materially greater interest in specific regulatory questions. We address these limitations in detail in Section III.C below.

Conclusion. The New York choice-of-law clause should be enforceable under § 5-1401 with respect to the commercial and contractual terms of the MCTA, including indemnification obligations, limitation-of-liability provisions, arbitration and dispute resolution, confidentiality, data ownership, publication rights, termination, and payment terms.

B. New York General Obligations Law § 5-1402

Section 5-1402 of the New York General Obligations Law is a companion provision to § 5-1401. It provides that parties to contracts meeting the $250,000 threshold who agree that New York law governs their agreement may also consent to the jurisdiction of the courts of the State of New York. Specifically, § 5-1402 bars a party who has agreed to a New York choice-of-law clause in a qualifying contract from contesting personal jurisdiction or venue in New York courts, or from seeking to dismiss on the basis of forum non conveniens, when a lawsuit is brought against it in a New York court.

This provision is directly relevant to the MCTA because the proposed dispute resolution clause reserves the jurisdiction of state and federal courts located in New York County, New York for purposes of seeking injunctive relief, including temporary restraining orders and preliminary or permanent injunctions. In such circumstances, § 5-1402 would preclude Veridian from challenging the New York court's exercise of jurisdiction or arguing that the case should be heard in another forum.

The interaction between § 5-1402 and the MCTA's AAA arbitration provision warrants brief analysis. The dispute resolution framework contemplates that the vast majority of disputes will be resolved through the three-step escalation process culminating in binding arbitration. The New York court jurisdiction carved out for injunctive relief is intended to be a narrow exception — available primarily in circumstances requiring immediate equitable relief, such as enforcement of confidentiality obligations, prevention of unauthorized data disclosure, or preservation of the status quo pending arbitration. Under § 5-1402, Veridian's consent to New York court jurisdiction for these limited purposes would be enforceable. Importantly, § 5-1402 does not conflict with the arbitration provision because the two operate in parallel: arbitration addresses claims on the merits, while the injunctive relief carve-out addresses interim equitable relief that, by its nature, may require the imprimatur of a court. New York courts routinely honor this type of concurrent jurisdiction framework.

C. Limitations on Choice-of-Law Effectiveness

Notwithstanding the broad enforceability of New York choice-of-law provisions under § 5-1401, there are important limitations that bear directly on the MCTA. The central principle is that New York courts — and the courts of other states that may be called upon to enforce the MCTA — will not apply a contractual choice-of-law provision to override the mandatory public policy of a jurisdiction with a materially greater interest in the subject matter at issue. This principle is codified in the Restatement (Second) of Conflict of Laws § 187(2), which provides that a chosen state's law will not be applied if:

(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice; or

(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

While subsection (a) is unlikely to present a problem here (given the MCTA's satisfaction of § 5-1401's statutory requirements and the additional New York nexus through Calderwood & Harkness), subsection (b) warrants careful consideration. In the clinical trial context, several categories of law may constitute "fundamental policy" that a site-state court would apply notwithstanding the New York choice-of-law clause:

1. State Healthcare and Research-Subject Protection Statutes. States in which clinical trial sites are located have a compelling interest in protecting the health and safety of research subjects enrolled at those sites. State statutes governing the conduct of human-subjects research, informed consent requirements, and research-subject injury compensation may be deemed mandatory law that cannot be overridden by a contractual choice-of-law provision.

2. State Anti-Kickback and Fraud-and-Abuse Laws. Many states have enacted their own anti-kickback statutes and fraud-and-abuse laws that supplement the federal Anti-Kickback Statute. These laws typically apply to healthcare transactions occurring within the state's borders and are expressions of fundamental state policy regarding the integrity of healthcare delivery.

3. State Insurance Regulatory Requirements. Insurance is regulated primarily at the state level. Requirements regarding clinical trial insurance, proof of financial responsibility, or research-subject injury coverage imposed by the state in which a site operates would apply as a matter of state regulatory law, regardless of the MCTA's governing law clause.

4. State Employment Laws Governing Site Personnel. Research coordinators, study nurses, and other clinical trial staff at each site are employees of the site institution and are subject to the employment laws of the state where they work. Wage-and-hour requirements, anti-discrimination protections, and other employment mandates are mandatory law that the New York governing law clause cannot displace.

5. State Consumer Protection Laws Applicable to Research Subjects. Certain states, most notably Massachusetts (Chapter 93A), have broadly interpreted consumer protection statutes that may reach clinical trial conduct involving residents of those states.

In addition to these state-law considerations, the MCTA is subject to a comprehensive federal regulatory regime that operates independently of the parties' choice of governing law. The conduct of the CLARION trial must comply with, among other requirements:

• 21 C.F.R. Part 11 (electronic records and electronic signatures)

• 21 C.F.R. Part 50 (protection of human subjects, informed consent)

• 21 C.F.R. Part 54 (financial disclosure by clinical investigators)

• 21 C.F.R. Part 56 (institutional review boards)

• 21 C.F.R. Part 312 (investigational new drug applications)

• ICH E6(R2) Good Clinical Practice guidelines (integrated into FDA regulations by reference)

• HIPAA Privacy Rule (45 C.F.R. Parts 160, 164)

• Common Rule (45 C.F.R. Part 46) (applicable to federally funded or supported research)

These federal requirements apply irrespective of the MCTA's governing law clause and override any contractual provisions that are inconsistent with them. The New York choice-of-law provision should be understood as governing the contractual relationship between the parties — their respective rights, obligations, remedies, and the interpretation of the agreement's terms — while leaving intact the full overlay of federal and state regulatory requirements that govern the substantive conduct of clinical research.

IV. Enforceability of Indemnification Provisions Under New York Law

A. General Enforceability Framework

New York courts have long recognized and enforced contractual indemnification provisions between sophisticated commercial parties, including broad indemnification for third-party claims. The freedom of contract is a cornerstone of New York commercial law, and courts are generally reluctant to interfere with indemnification allocations that represent the informed, bargained-for exchange of commercially sophisticated entities. This well-established framework provides a strong foundation for the enforceability of the MCTA's indemnification structure.

The MCTA contemplates two parallel indemnification streams:

Sponsor Indemnification (Penterra → Veridian/Sites/Investigators). Under the proposed sponsor indemnification provision, Penterra will indemnify, defend, and hold harmless Veridian, each participating site, and each site's investigators and staff from and against losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or related to:

(a) Injury to a research subject caused by PPC-4871 when administered in accordance with the Protocol and investigator's brochure;

(b) Any defect in the design, manufacture, labeling, packaging, storage, or supply of PPC-4871 or matching placebo;

(d) Penterra's negligence or willful misconduct in the performance of its obligations under the MCTA.

Reciprocal Site/Investigator Indemnification (Veridian/Sites → Penterra). Under the proposed reciprocal indemnification provision, Veridian and each participating site will indemnify, defend, and hold harmless Penterra from and against losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or related to:

(a) The negligence or willful misconduct of site staff in the conduct of the trial;

(b) Unauthorized deviations from the Protocol not approved by Penterra or the FDA; and

As a threshold matter, we have confirmed that the principal New York anti-indemnity statutes do not apply to clinical trial agreements of this nature. New York General Obligations Law § 5-322.1, which renders void and unenforceable certain indemnification clauses in construction contracts, is limited by its terms to agreements "in connection with . . . the construction, alteration, repair or maintenance of a building, structure, appurtenance and appliance . . . or with respect to real property." The MCTA does not involve construction or maintenance of real property, and § 5-322.1 is therefore inapplicable. Similarly, New York General Obligations Law § 5-321, which addresses indemnification clauses in leases of real property, is facially inapplicable to a clinical trial agreement. Neither statute presents an obstacle to enforcement of the MCTA's indemnification provisions.

B. Indemnification Caps and Limitations

The MCTA includes several monetary caps on indemnification obligations, which we analyze in turn.

Per-Subject Medical Care Cap and Aggregate Cap. Penterra's sponsor indemnification for study-related subject injury includes a per-subject medical care cap of $500,000 and an aggregate cap of $15,000,000 for study-related injury medical costs across all subjects and all sites. Under New York law, contractual caps on indemnification obligations are enforceable between commercially sophisticated parties, provided they are the product of arm's-length negotiation. New York courts afford broad latitude to sophisticated commercial entities to define the scope and limits of their indemnification obligations. The per-subject cap of $500,000 and the aggregate cap of $15,000,000 are within the range of caps we have observed in clinical trial agreements of comparable scale, though they are on the lower end given the enrollment of 1,200 subjects in a population with advanced hepatocellular carcinoma and the potential toxicity profile of a multi-kinase inhibitor. We address potential public-policy concerns related to these caps in Section V below.

Uncapped Product-Defect Indemnification. The MCTA does not cap Penterra's indemnification obligations for claims arising from product defects in PPC-4871 or matching placebo. Under New York law, open-ended indemnification provisions are enforceable between sophisticated commercial parties. The absence of a cap on product-defect indemnification is consistent with industry practice, which generally reflects the understanding that the sponsor is best positioned to control the quality and safety of the investigational product and should bear the corresponding risk.

Reciprocal Site Indemnity Caps. The reciprocal indemnification provided by Veridian and each site is subject to a cap of $5,000,000 per site per occurrence and $20,000,000 in the aggregate across all Veridian sites. These caps reflect the economic reality that individual sites — many of which are nonprofit academic medical centers — have limited financial capacity to absorb indemnification obligations. Under New York law, such caps are enforceable as a reasonable allocation of risk between the parties. We note that the per-site, per-occurrence cap of $5,000,000 aligns with the minimum general liability and professional liability insurance coverage required of each site under the MCTA ($5,000,000 per occurrence), ensuring that insured amounts are available to fund indemnification claims up to the cap.

30-Day Notice Requirement. The MCTA requires that any party seeking indemnification provide written notice to the indemnifying party within 30 calendar days of becoming aware of a claim, threatened claim, or circumstances reasonably likely to give rise to a claim. Under the proposed language, failure to provide timely notice does not relieve the indemnifying party of its indemnification obligation except to the extent the indemnifying party is materially prejudiced by the delay. This "material prejudice" standard is well supported under New York law. New York's Insurance Law § 3420, as amended effective January 17, 2009, adopted a prejudice requirement for late-notice disclaimers by liability insurers, and New York courts have applied analogous prejudice-based analyses in the context of contractual notice provisions. The inclusion of the material-prejudice qualifier protects the indemnified party from losing its indemnification rights due to a technical notice failure while preserving the indemnifying party's right to demonstrate actual harm from delayed notice.

C. Indemnification for One's Own Negligence

Under New York law, a party seeking indemnification for its own negligence must establish that the indemnification agreement expressly and unambiguously contemplates such coverage. Courts apply this requirement rigorously, and ambiguous indemnification clauses are construed against the party seeking indemnification for its own negligent acts. This principle, while often articulated in the context of personal injury litigation, applies broadly to contractual indemnification.

The MCTA's indemnification structure is designed to ensure that each party bears responsibility for its own conduct. Specifically, the sponsor indemnification of sites expressly covers subject injury caused by PPC-4871 when administered in accordance with the Protocol, and the reciprocal site indemnification of the sponsor expressly covers the negligence or willful misconduct of site staff and unauthorized protocol deviations. These carve-outs are consistent with New York's requirement for clear and unambiguous allocation of indemnification responsibility. The structure ensures that Penterra does not indemnify sites for injuries caused by investigator negligence, and sites do not indemnify Penterra for injuries caused by product defects or Penterra's own misconduct.

Recommendation. We recommend that the drafting team ensure that the language of each indemnification provision is explicit and unambiguous with respect to the scope of coverage and the applicable carve-outs. Any ambiguity in the allocation of responsibility between the parties could be exploited in litigation or arbitration to argue that the provision does not cover (or improperly covers) a party's own negligence. We recommend using parallel structure and cross-referencing between the sponsor indemnification and reciprocal indemnification provisions to make the allocation as clear as possible.

D. Potential Conflicts with State-Specific Indemnification Laws

While New York law is generally permissive with respect to contractual indemnification between sophisticated parties, the laws of certain states in which Veridian sites are located may impose limitations that could complicate enforcement of the MCTA's indemnification provisions at the site level. Several specific concerns merit attention:

Illinois. Illinois law restricts indemnification in certain healthcare contexts. The Illinois Joint Tortfeasor Contribution Act (740 ILCS 100/0.01 et seq.) and related precedent may affect the enforceability of broad indemnification provisions in agreements involving healthcare providers. Although these restrictions are most directly applicable to medical malpractice claims, a court applying Illinois public policy could potentially scrutinize indemnification provisions in a clinical trial agreement involving an Illinois site like Lakemont Medical Center.

Colorado. Colorado generally permits contractual indemnification between sophisticated parties but has specific statutory provisions and public-policy doctrines that may limit the enforceability of certain indemnification terms in healthcare or research contexts, particularly where research-subject protection is concerned.

Other States. Depending on the final roster of 14 site states, additional state-specific indemnification limitations may be relevant. A comprehensive survey of each state's indemnification law should be conducted once the site list is finalized.

Recommendation. To address these potential state-law conflicts, we recommend including a savings clause in the MCTA's indemnification provisions. The savings clause should provide that if any indemnification provision is held to be unenforceable under the law of any jurisdiction, it shall be modified to the minimum extent necessary to render it enforceable in that jurisdiction, and all remaining indemnification provisions shall continue in full force and effect. This approach preserves the maximum enforceability of the indemnification framework while acknowledging the practical reality that certain state laws may require accommodation.

V. Enforceability of Limitation-of-Liability Provisions Under New York Law

A. General Principles

New York courts consistently enforce limitation-of-liability clauses in commercial agreements between sophisticated parties. The principle of freedom of contract is given particular weight in the context of agreements between entities with substantial bargaining power, access to legal counsel, and the ability to negotiate terms at arm's length. Courts will enforce a limitation-of-liability clause where the provision was freely negotiated, the parties are commercially sophisticated, and the clause does not violate public policy or constitute unconscionable conduct.

In the MCTA context, the aggregate site indemnity cap of $20,000,000 across all Veridian sites functions as a form of limitation of liability for Veridian and its member institutions. This cap limits the total exposure of the Veridian network for reciprocal indemnification claims by Penterra, regardless of the number of sites involved or the number of claims asserted. Under New York law, this type of aggregate cap is enforceable, particularly where both parties are large, well-resourced organizations that negotiated the terms with the assistance of experienced legal counsel.

To the extent the MCTA includes an exclusion of consequential, incidental, or punitive damages — a common provision in clinical trial agreements — New York law generally enforces such exclusions between commercial parties. New York courts have upheld consequential-damage exclusions in commercial contracts even where the excluded damages are substantial, reasoning that sophisticated parties are entitled to allocate risk as they see fit. However, we note that certain categories of damages — such as subject-injury medical costs — may not be appropriately characterized as "consequential" damages in the clinical trial context. The drafting team should carefully define the categories of damages subject to the exclusion to avoid unintended gaps in coverage.

B. Unconscionability and Public-Policy Limitations

Although New York courts generally enforce limitation-of-liability clauses between sophisticated parties, they retain the authority to decline enforcement if a clause is unconscionable or contrary to public policy. This authority is exercised sparingly in commercial disputes but cannot be disregarded, particularly in the clinical trial context where public-policy considerations relating to the protection of human research subjects are implicated.

In analyzing unconscionability, New York courts consider both procedural unconscionability (relating to the circumstances of contract formation, such as unequal bargaining power, lack of meaningful choice, or surprise) and substantive unconscionability (relating to the one-sidedness or unreasonableness of the challenged provision). Given that Penterra has a market capitalization of approximately $4.2 billion and Veridian oversees approximately $1.4 billion in annual research volume, and given that both parties are represented by experienced legal counsel, a procedural unconscionability challenge is unlikely to succeed.

The more relevant inquiry concerns substantive unconscionability and public policy. The per-subject medical care cap of $500,000 and the aggregate cap of $15,000,000 for study-related injury medical costs should be assessed in light of the following factors:

• The CLARION trial plans to enroll 1,200 subjects with advanced hepatocellular carcinoma, a condition associated with significant morbidity and mortality.

• PPC-4871 is a multi-kinase inhibitor, a class of drugs associated with a range of potential adverse events, including hepatotoxicity, cardiovascular events, dermatologic reactions, and gastrointestinal toxicities.

• The aggregate cap of $15,000,000, divided across a potential 1,200 subjects, yields a theoretical per-subject average of only $12,500 — well below the per-subject cap of $500,000 but suggesting that the aggregate cap could be exhausted if a significant number of subjects experience serious study-related injuries requiring extensive medical care.

• It is conceivable, although unlikely, that a court could view the aggregate cap as inadequate to protect research subjects in a trial of this size and therapeutic area.

We believe, on balance, that the caps as proposed are enforceable under New York law. New York courts afford significant deference to the risk allocations agreed upon by sophisticated commercial parties, and the per-subject cap of $500,000 is within the range of commercially reasonable limits for clinical trial subject-injury indemnification. However, the adequacy of the $15,000,000 aggregate cap relative to the enrollment size and the disease population warrants further discussion with the client.

Recommendation. To reduce any risk of an unconscionability challenge, we recommend that the MCTA include recitals or preamble language documenting that the monetary caps were negotiated at arm's length between Penterra (with a market capitalization of approximately $4.2 billion) and Veridian (with annual research volume of approximately $1.4 billion), each with the benefit of sophisticated legal counsel, and that the caps reflect the parties' considered judgment regarding appropriate risk allocation in light of the trial's scope, the therapeutic area, and the investigational product's known and anticipated safety profile. This documentation of the negotiation context would serve as evidence against any future unconscionability challenge.

VI. Enforceability of Arbitration Agreement Under New York Law

A. Federal Arbitration Act Preemption

The MCTA's dispute resolution clause establishes a three-step escalation process for the resolution of disputes between the parties:

Step 1 — Designated Representative Negotiation. Upon the occurrence of a dispute, the parties will designate senior representatives to attempt to resolve the dispute through good-faith negotiations for a period of 30 days from written notice of the dispute.

Step 2 — Mediation. If the dispute is not resolved through negotiation within the 30-day period, either party may initiate mediation under the American Arbitration Association ("AAA") Commercial Mediation Rules. The mediation shall be conducted in New York, New York, and shall continue for a period not to exceed 60 days from the date of the initial mediation session.

Step 3 — Binding Arbitration. If the dispute is not resolved through mediation within the 60-day period, either party may initiate binding arbitration. The arbitration shall be conducted in New York, New York under the AAA Commercial Arbitration Rules then in effect, before a panel of three arbitrators selected in accordance with those Rules. The arbitrators' award shall be final and binding, and judgment upon the award may be entered in any court of competent jurisdiction.

The Federal Arbitration Act (the "FAA"), 9 U.S.C. §§ 1–16, governs the enforceability of the MCTA's arbitration provision. The FAA applies to contracts involving interstate commerce, and the MCTA clearly satisfies this requirement: it governs a multi-state clinical trial involving a Delaware-incorporated, New Jersey-headquartered pharmaceutical company and a Delaware-incorporated, Pennsylvania-headquartered research network operating sites across 14 states. The interstate character of the transaction is manifest.

Under the FAA, arbitration agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Supreme Court has consistently held that the FAA establishes a strong federal policy favoring arbitration, and courts must compel arbitration when the parties have agreed to arbitrate, absent grounds that exist at law or in equity for the revocation of any contract (such as fraud, duress, or unconscionability). The FAA preempts state laws that single out arbitration agreements for disfavored treatment or that impose requirements on arbitration agreements that are not applicable to contracts generally.

In addition to the FAA, New York's own arbitration statute, codified in CPLR Article 75, provides a supportive framework for the enforcement of arbitration agreements. CPLR § 7501 provides that a "written agreement to submit any controversy thereafter arising or any existing controversy to arbitration is enforceable without regard to the justiciable character of the controversy." The dual federal and state statutory frameworks reinforce the enforceability of the MCTA's arbitration provision.

B. Scope of Arbitrability

While the MCTA's arbitration clause is broadly drafted to cover "any dispute, claim, or controversy arising out of or relating to this Agreement or the breach, termination, or validity thereof," the scope of arbitrability has important practical limitations.

Research Subjects. Research subjects enrolled in the CLARION trial are not parties to the MCTA and are not signatories to the arbitration provision. Accordingly, research subjects cannot be compelled to arbitrate any claims they may bring against Penterra, Veridian, or individual sites or investigators. Subject-injury claims asserted directly by research subjects (or their legal representatives) would be brought in the courts of the jurisdiction where the subject is located, under applicable tort, contract, or statutory law. The arbitration clause governs only disputes between Penterra and Veridian (and, through the Individual Site Agreements, between Penterra and each participating site).

Regulatory Enforcement Actions. Enforcement actions by the FDA, state attorneys general, state health departments, or other regulatory bodies are not arbitrable. Regulatory agencies are not parties to the MCTA and cannot be required to submit enforcement proceedings to arbitration. Any FDA enforcement action — including clinical holds, warning letters, consent decrees, or debarment proceedings — would proceed through the applicable administrative or judicial channels.

Inter-Party Disputes. The arbitration clause is enforceable as to disputes between the parties to the MCTA, including disputes regarding payment obligations, performance of trial-related services, compliance with the Protocol, interpretation of contractual provisions, breach of representations and warranties, and claims for indemnification between the parties.

Recommendation. We recommend that the arbitration clause be drafted to clearly delineate its scope. The clause should specify that it covers disputes between the parties to the MCTA (and, as applicable, parties to the Individual Site Agreements) arising out of or relating to the MCTA. The clause should include an express acknowledgment that it does not purport to bind third parties, including research subjects, regulatory authorities, and other non-signatories. This clarification will reduce the risk of challenge and provide transparency regarding the intended scope of the arbitration agreement.

C. Venue for Injunctive Relief

The MCTA reserves the jurisdiction of state and federal courts located in New York County, New York for the purpose of seeking injunctive relief, including temporary restraining orders and preliminary or permanent injunctions. This type of carve-out is common in commercial arbitration agreements and is routinely enforced by New York courts. The FAA does not prohibit parties from agreeing to seek interim or provisional judicial relief in aid of arbitration, and New York law expressly recognizes the availability of provisional remedies in connection with arbitrable disputes. See CPLR § 7502(c) (authorizing courts to entertain applications for provisional remedies in connection with an arbitrable controversy).

One practical issue warrants attention. If injunctive relief is sought in connection with conduct occurring at a specific trial site located outside New York — for example, to enjoin an alleged unauthorized data disclosure by personnel at Lakemont Medical Center in Chicago, Illinois — a New York court's injunction may face practical enforcement challenges. Although the injunction would be legally valid and binding on the parties (who have consented to New York jurisdiction under § 5-1402), enforcement against a non-party or enforcement of conduct occurring in another state may require registration or domestication of the New York order in the site's home jurisdiction. Additionally, in an emergency situation, the time required to obtain relief from a New York court may be impractical when the conduct necessitating the injunction is occurring at a remote site.

Recommendation. We recommend that the MCTA's injunctive relief carve-out be drafted to permit filing in either (a) state or federal courts located in New York County, New York, or (b) state or federal courts in the jurisdiction where the affected site is located, at the election of the party seeking relief. This permissive alternative venue approach would preserve New York as the default forum while allowing a party to seek emergency relief in the jurisdiction most proximate to the site-specific conduct at issue. Both parties would benefit from this flexibility, as either might need to seek injunctive relief regarding site-level conduct in a jurisdiction where a court can act quickly and with direct enforcement authority.

VII. Confidentiality Provisions Under New York Law

A. Enforceability of 10-Year Confidentiality Term

The MCTA includes confidentiality provisions requiring each party to maintain the confidentiality of the other party's Confidential Information for a period of 10 years from the date of disclosure. "Confidential Information" as defined in the MCTA encompasses Protocol-related information, investigational product specifications (including the formulation, manufacturing process, and analytical methods for PPC-4871 and matching placebo), study data (including individual subject data, aggregate data, interim analyses, and final study results), financial terms (including per-patient fees, site budgets, and the total deal value), and any other information designated as confidential by the disclosing party.

New York courts enforce reasonable confidentiality provisions in commercial agreements. The 10-year confidentiality term is within the range of terms customary for pharmaceutical and clinical trial agreements, which typically range from 7 to 15 years, reflecting the extended timelines associated with drug development, regulatory review, and post-marketing surveillance. A 10-year term from the date of disclosure is unlikely to be challenged as unreasonably long, particularly given the sensitive nature of the information involved and the competitive implications of premature disclosure of clinical trial data and investigational product specifications.

The confidentiality provision includes standard exceptions for information that: (i) is or becomes publicly available through no fault of the receiving party; (ii) was already known to the receiving party at the time of disclosure, as documented by written records; (iii) is independently developed by the receiving party without reference to the disclosing party's Confidential Information; or (iv) is received from a third party not under an obligation of confidentiality to the disclosing party. In addition, the provision identifies certain permitted disclosures, including disclosures to: IRBs and ethics committees in connection with Protocol review and approval; federal, state, and local regulatory authorities as required by applicable law; legal counsel of the receiving party who are subject to an obligation of confidentiality; and auditors, consultants, and contractors engaged by the receiving party in connection with the trial who have executed written confidentiality agreements. These permitted disclosures are consistent with the operational necessities of a multi-center clinical trial and do not undermine the enforceability of the confidentiality provision.

B. Interaction with Regulatory Disclosure Obligations

The confidentiality provision must be analyzed in light of several mandatory disclosure obligations that apply regardless of the parties' contractual confidentiality terms:

FDA Regulatory Disclosures. Clinical trial data generated under IND 157823 may be subject to mandatory disclosure to the FDA under 21 C.F.R. Part 312, including safety reports (21 C.F.R. § 312.32), annual reports (21 C.F.R. § 312.33), and the eventual submission of data in support of a New Drug Application or Biologics License Application. The FDA may also request or require disclosure of trial data in connection with advisory committee proceedings, which may involve public disclosure of previously confidential data.

ClinicalTrials.gov Posting Requirements. Under the Food and Drug Administration Amendments Act of 2007 (FDAAA) and implementing regulations at 42 C.F.R. Part 11, certain clinical trial results information must be posted on ClinicalTrials.gov within specified time frames. The CLARION trial, which has already been registered (NCT05928174), will be subject to results reporting requirements upon completion or termination of the study.

Securities Disclosure Obligations. As a publicly traded company on the Nasdaq Global Select Market, Penterra is subject to securities disclosure obligations under the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission. Material clinical trial results — particularly top-line results from a Phase III study with potential implications for the company's product pipeline — may need to be disclosed through SEC filings (Form 8-K, Form 10-Q, or Form 10-K) or press releases. Regulation FD prohibits selective disclosure of material nonpublic information.

New York law would not prevent enforcement of the MCTA's confidentiality provision where it does not conflict with these federal regulatory mandates. The confidentiality provision and the regulatory disclosure requirements operate in complementary fashion: the provision protects against voluntary, unauthorized disclosure while recognizing that legally mandated disclosures are outside its scope.

Recommendation. We recommend that the confidentiality provision contain a clear and explicit carve-out for legally required disclosures, drafted to provide that the receiving party may disclose Confidential Information to the extent required by applicable law, rule, regulation, court order, or government directive, provided that the receiving party (to the extent legally permissible) gives the disclosing party prompt written notice of such requirement and cooperates with the disclosing party's reasonable efforts to obtain a protective order or other appropriate limitation on the scope of disclosure. This formulation balances the parties' interest in maintaining confidentiality with the practical reality that both parties operate in heavily regulated environments with mandatory disclosure obligations.

VIII. Data Ownership and intellectual Property Under New York Law

A. Data Ownership

The MCTA provides that Penterra retains exclusive ownership of all clinical trial data generated in connection with the CLARION trial, including but not limited to individual subject data, case report forms, aggregate data, statistical analyses, interim analyses, final study results, and any data compilations or databases derived therefrom. New York law enforces contractual data ownership provisions between commercial parties, and there is no New York statutory or common-law obstacle to the enforceability of this provision. The parties' agreement regarding data ownership, freely negotiated between sophisticated entities, will be respected by New York courts as a valid allocation of rights.

Under the MCTA, Veridian and each participating site are required to retain source documents — including medical records, laboratory reports, imaging studies, and signed informed consent forms — for a minimum of 15 years following the completion or termination of the study, or such longer period as may be required by applicable law or regulation. This retention obligation is consistent with FDA requirements (21 C.F.R. § 312.62(c)) and ICH E6(R2) guidelines and is enforceable under New York law.

A potential area of tension arises from the policies of academic institutions that are members of the Veridian Network. Many academic medical centers and affiliated universities maintain institutional policies asserting ownership or co-ownership of research data generated by their faculty members and employees. These policies are typically rooted in the institution's employment relationship with the investigator and the institution's provision of resources, facilities, and infrastructure for the conduct of research. Where an institutional policy conflicts with the MCTA's data ownership provision, the contractual provision should govern as between the contracting parties — i.e., as between Penterra and Veridian (and, through the Individual Site Agreement, as between Penterra and the site institution). However, the institutional policy may create practical friction if site-level personnel or administrators resist full cooperation with data transfer requests or assert competing claims to data generated at the site.

Recommendation. To mitigate this risk, we recommend that each Individual Site Agreement (the joinder agreement through which each site accedes to the MCTA) contain an express acknowledgment by the site institution that Penterra is the exclusive owner of all clinical trial data, and that the site institution waives any claim of ownership or co-ownership to such data. This acknowledgment should be signed by an authorized representative of the site institution with the authority to bind the institution with respect to its intellectual property and data policies. If a particular site institution refuses to execute this acknowledgment, the matter should be escalated to Veridian for resolution at the network level before the site is activated for enrollment.

B. Intellectual Property — IP Side Letter

The MCTA provides that each party retains exclusive ownership of its pre-existing intellectual property ("Background IP"), and that any inventions, discoveries, or improvements made jointly by Penterra and Veridian personnel in connection with the CLARION trial ("Joint Inventions") will be governed by a separate IP Side Letter to be executed concurrently with the MCTA. The IP Side Letter will address ownership allocation, prosecution and maintenance of patent applications, licensing rights, and commercialization terms for Joint Inventions.

New York law governs the IP ownership provisions set forth in the MCTA and the IP Side Letter. We note, however, that patent law is exclusively federal — the patentability, validity, and enforceability of patents are governed by Title 35 of the United States Code and adjudicated by the federal courts. The New York governing law clause applies to the contractual allocation of rights and obligations with respect to intellectual property (e.g., assignment obligations, prosecution responsibilities, licensing terms) but does not and cannot displace federal patent law.

Publication Rights. The MCTA grants investigators the right to publish the results of the CLARION trial, subject to Penterra's 60-day review period for removal of Confidential Information and assessment of patentable subject matter, with up to an additional 90-day delay to enable Penterra to file patent applications on any patentable inventions identified during the review. These publication restrictions are standard in industry-sponsored clinical trial agreements and are enforceable under New York law as a contractual restriction freely agreed upon between commercial parties.

However, publication restrictions in industry-sponsored clinical trials have been the subject of considerable academic and regulatory scrutiny. Academic medical centers and their faculty may view contractual limitations on publication as an infringement of academic freedom. The International Committee of Medical Journal Editors (ICMJE) requires, as a condition of publication in ICMJE-member journals, that investigators have the right to publish results regardless of sponsor approval, and that sponsors may not delay publication for the purpose of suppressing unfavorable results. The MCTA's publication review mechanism, which permits delay only for the limited purposes of confidentiality review and patent filing, is consistent with ICMJE requirements and should not create conflict with academic freedom principles. Nonetheless, we recommend that the MCTA clearly state that Penterra may not withhold consent to publication (or require modifications to a manuscript) for the purpose of suppressing unfavorable results, and that the 60-day review and 90-day patent delay are the exclusive limitations on investigators' publication rights.

IX. Insurance Provisions and Multi-State Regulatory Considerations

A. Penterra's Insurance Obligations

Under the MCTA, Penterra is required to maintain clinical trial liability insurance throughout the duration of the CLARION trial, with the following coverage terms:

• Carrier: Briarcliff Mutual Insurance Company (a Connecticut-domiciled mutual insurance company)

• Policy Number: BM-CTL-2023-04182

• Per-Occurrence Limit: $25,000,000

• Aggregate Limit: $75,000,000

• Subject-Injury Sublimit: $10,000,000 per occurrence / $50,000,000 aggregate

• Policy Period: April 1, 2023 through March 31, 2024 (renewable annually)

• Additional Insureds: Veridian and each participating site to be named as additional insureds

The insurance policy itself is a separate contract between Penterra and Briarcliff Mutual Insurance Company, governed by its own terms and by the insurance regulatory law of the state(s) in which it is issued and delivered. Briarcliff is domiciled in Connecticut, and the policy is subject to Connecticut insurance regulations. The New York choice-of-law clause in the MCTA does not control the governing law of the insurance policy, which is an independent agreement between different parties.

It is important to distinguish between the MCTA's contractual requirement that Penterra maintain certain insurance coverage (which is governed by New York law and enforceable under the MCTA) and the insurance policy itself (which is governed by Connecticut insurance law and the terms of the policy). If a coverage dispute arises under the Briarcliff policy, that dispute would be resolved under the law governing the insurance contract, not under the New York law governing the MCTA. However, if Penterra fails to maintain the required insurance coverage and thereby breaches its obligation under the MCTA, Veridian's remedies for such breach would be determined under New York law as the governing law of the MCTA.

B. Veridian/Site Insurance Requirements

The MCTA requires Veridian and each participating site to maintain general liability insurance and professional liability insurance with minimum coverage of $5,000,000 per occurrence and $10,000,000 in the aggregate. Each site institution is organized under the law of its respective state, and the insurance policies maintained by each site are issued and regulated in those states. The MCTA's New York governing law does not alter the regulatory framework applicable to each site's insurance progr

MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Miriam Calloway, Partner, Calderwood & Harkness LLP
FROM: Sean Morrissey, Associate; Christopher Aiken, Associate
DATE: March 31, 2023
RE: Choice-of-Law Analysis — New York Governing Law for Master Clinical Trial Agreement Between Penterra Pharmaceuticals Corp. and Veridian Health Research Network, Inc. (Protocol PPC-4871-III / CLARION)
MATTER NO.: 1018-00004
I. Executive Summary
You asked us to analyze the implications of designating New York law as the governing law for the proposed Master Clinical Trial Agreement (the "MCTA") between Penterra Pharmaceuticals Corp. ("Penterra"), a Delaware corporation headquartered at 200 Biopharma Boulevard, Suite 1400, Princeton, New Jersey 08540, and Veridian Health Research Network, Inc. ("Veridian"), a Delaware Section 501(c)(3) tax-exempt corporation headquartered at 750 Research Parkway, 8th Floor, Philadelphia, Pennsylvania 19104. The MCTA will govern a Phase III multi-center clinical trial (Protocol PPC-4871-III, known as the "CLARION" trial) evaluating penterafenib (PPC-4871), a multi-kinase inhibitor, in the treatment of advanced hepatocellular carcinoma. The trial is planned across 38 Veridian Network sites located in 14 states, with a total deal value of approximately $80,000,000 over a projected 60-month study duration.
Based on our analysis, we conclude that New York law is generally favorable for the enforceability of the MCTA's key commercial provisions, including indemnification (both sponsor-to-site subject-injury indemnification and reciprocal site-to-sponsor indemnification), limitation-of-liability provisions and caps, the three-step dispute resolution framework (escalation, mediation, and binding arbitration under AAA rules), the 10-year confidentiality term, data ownership and intellectual property provisions, and publication rights restrictions. New York General Obligations Law § 5-1401 provides a strong statutory basis for enforcing the parties' choice of New York law in a contract of this magnitude, and New York courts have consistently respected the freedom of commercially sophisticated parties to allocate risk, define remedies, and structure dispute resolution mechanisms.
However, certain state-specific regulatory and healthcare laws applicable at site locations may apply notwithstanding the New York choice-of-law clause. These include, among others, state human-subjects research protection statutes, state anti-kickback and fraud-and-abuse laws, state insurance regulatory requirements, state privacy laws that are more protective than HIPAA, and state employment laws governing site personnel. Federal regulatory requirements — including the Federal Food, Drug, and Cosmetic Act; 21 C.F.R. Parts 11, 50, 54, 56, and 312; ICH E6(R2) Good Clinical Practice guidelines; and the Health Insurance Portability and Accountability Act — apply irrespective of the contractual governing law designation and override any conflicting contractual provisions. These mandatory law regimes cannot be displaced by the parties' choice-of-law provision, and the MCTA must be drafted to acknowledge and accommodate these overlapping regulatory frameworks.
We recommend proceeding with New York as the governing law, subject to the inclusion of specific carve-out language acknowledging the mandatory application of local regulatory and healthcare compliance laws at each site jurisdiction. Detailed drafting recommendations are set forth in Section XI of this memorandum, and a summary enforceability table is provided in Appendix A.
II. Background and Transaction Overview
A. The Parties
Penterra Pharmaceuticals Corp. Penterra is a Delaware corporation organized under the Delaware General Corporation Law and publicly traded on the Nasdaq Global Select Market under the ticker symbol "PTRA." As of the first quarter of 2023, Penterra's market capitalization is approximately $4.2 billion. In fiscal year 2022, Penterra reported total revenue of $1.87 billion, research and development expenditure of $612 million, and cash and cash equivalents of approximately $890 million. Penterra's principal executive offices are located at 200 Biopharma Boulevard, Suite 1400, Princeton, New Jersey 08540. Penterra's registered agent in Delaware is Capitol Registered Agents, LLC, located at 1209 Orange Street, Wilmington, Delaware 19801.
Penterra's chief executive officer is Dr. Anand Raghavan, M.D., Ph.D. The company's Vice President and General Counsel is Nathaniel Briggs, Esq. Its Associate General Counsel for Clinical Affairs is Rebecca Liang, Esq. Ms. Liang serves as the primary legal contact for the CLARION trial and will be Penterra's designee for purposes of contract administration and legal notices under the MCTA. Calderwood & Harkness LLP represents Penterra in connection with the negotiation and drafting of the MCTA. Our offices are located at 280 Park Avenue, 34th Floor, New York, New York 10017.
Veridian Health Research Network, Inc. Veridian is a Delaware 501(c)(3) tax-exempt research organization that operates a network of 38 academic medical centers and affiliated research institutions located across 14 states. Veridian's annual research volume is approximately $1.4 billion, and the organization employs approximately 6,200 individuals. Veridian's employer identification number is 23-4178205. Its principal offices are located at 750 Research Parkway, 8th Floor, Philadelphia, Pennsylvania 19104.
Veridian's President and Chief Executive Officer is Dr. Franklin Osei, M.D., Ph.D. Its Vice President of Legal & Compliance is Gregory Callahan, Esq. Veridian is represented by outside counsel at Whitmore, Jansen & Callahan LLP, located at 1500 Market Street, Suite 3200, Philadelphia, Pennsylvania 19102. The lead partner on the Veridian engagement is Allison Whitmore, Esq. We anticipate that Ms. Whitmore will serve as the primary counterparty counsel during MCTA negotiations.
Lead Participating Site. The lead participating site in the CLARION trial is Graystone University Medical Center, located at 1200 University Avenue, Philadelphia, Pennsylvania 19104. Graystone is organized as a Pennsylvania nonprofit corporation and is one of the largest academic medical centers in the Veridian Network. The Principal Investigator for the CLARION trial at Graystone is Dr. Catherine Aldridge, M.D., Ph.D., who holds the Eleanora Whitfield Endowed Chair in Hepatology at the Graystone University School of Medicine.
Key Secondary Site. Among the secondary sites, Lakemont Medical Center, located at 4400 North Michigan Drive, Chicago, Illinois 60611, has been designated as a key enrollment center. Lakemont is organized as an Illinois nonprofit corporation. The Co-Principal Investigator at Lakemont is Dr. Howard Matsuoka, M.D., who serves as Director of the Division of Gastrointestinal Oncology at Lakemont.
B. The MCTA and Trial Parameters
The MCTA is designed to serve as the umbrella agreement governing the relationship between Penterra, as sponsor, and Veridian, as the network coordinating organization, with Individual Site Agreements (in the form of joinder agreements referencing the MCTA's master terms) to be executed by each of the 38 participating sites. The MCTA establishes the framework for conduct of Protocol PPC-4871-III, entitled "CLARION: A Phase III, Randomized, Double-Blind, Placebo-Controlled Study Evaluating the Efficacy and Safety of Penterafenib (PPC-4871) in Subjects with Advanced Hepatocellular Carcinoma."
The key trial parameters are as follows:
• Study Drug: Penterafenib (PPC-4871), a novel multi-kinase inhibitor targeting vascular endothelial growth factor receptors (VEGFR-1, -2, -3), platelet-derived growth factor receptors (PDGFR-α, -β), and fibroblast growth factor receptors (FGFR-1, -2, -3, -4).
• Phase: Phase III
• Design: Randomized, double-blind, placebo-controlled
• Indication: Advanced hepatocellular carcinoma (HCC) in subjects who have progressed on or are intolerant to first-line systemic therapy
• Planned Enrollment: 1,200 subjects, randomized in a 2:1 ratio (800 treatment arm : 400 placebo arm)
• Enrollment Period: 42 months, with a target first patient in (FPI) date of August 14, 2023
• Projected Study Duration: 60 months from FPI to final study report
• IND Number: IND 157823, filed with the United States Food and Drug Administration
• ClinicalTrials.gov Identifier: NCT05928174
The total deal value of the MCTA is approximately $80,000,000 over the projected study duration, comprising the following components:
The key contractual provisions under analysis in this memorandum include: (i) indemnification, including subject-injury indemnification by Penterra and reciprocal indemnification by Veridian and sites; (ii) insurance requirements for both sponsor and sites; (iii) limitation-of-liability provisions and monetary caps; (iv) the dispute resolution framework, comprising escalation to designated representatives, mediation under AAA Commercial Mediation Rules, and binding arbitration; (v) confidentiality obligations, with a 10-year term from date of disclosure; (vi) data ownership; (vii) publication rights, including a 60-day review period and an additional 90-day patent-filing delay; and (viii) termination provisions, including a 120-day wind-down period.
C. Multi-State Dimension
The multi-state character of the CLARION trial introduces a significant layer of complexity to the choice-of-law analysis. The trial will be conducted at 38 Veridian Network sites across at least 14 states. Based on the sites identified to date, these states include at a minimum:
• Pennsylvania — Graystone University Medical Center (Philadelphia)
• Illinois — Lakemont Medical Center (Chicago)
• Massachusetts — Haverford Regional Medical Center (Boston)
• Colorado — Cedar Falls University Hospital (Denver)
• Georgia — Weston Memorial Health System (Atlanta)
Additional states will be confirmed upon finalization of Schedule 1 to the MCTA, which will set forth the complete list of participating sites and principal investigators. We understand from discussions with Ms. Liang that sites in New York, New Jersey, California, Texas, Florida, Ohio, North Carolina, Maryland, and Michigan are under consideration, though activation of specific sites remains subject to feasibility assessments and IRB approvals.
Each participating site is a separate legal entity — typically organized as a nonprofit corporation or an affiliated entity of a nonprofit academic medical center — operating under the laws of the state in which it is incorporated and conducts business. This multi-entity, multi-state structure means that although the MCTA will be governed by New York law as between Penterra and Veridian, the day-to-day conduct of the trial at each site will be subject to a patchwork of federal and state regulatory requirements, institutional policies, and local legal standards.
With respect to institutional review and ethical oversight, the trial will utilize a hybrid IRB model. The Graystone University Institutional Review Board (IRB00012847) will serve as the reviewing IRB for all Pennsylvania-based sites. The Veridian Central IRB, which functions as a central institutional review board for Veridian's multi-site studies pursuant to the 2017 Common Rule amendments (45 C.F.R. § 46.114), will serve as the single IRB of record for all non-Pennsylvania sites. This dual-IRB structure reflects Graystone's institutional requirement to maintain local IRB oversight for trials conducted at its own facilities.
III. Enforceability of New York Choice-of-Law Clause
A. New York General Obligations Law § 5-1401
The principal statutory authority supporting the parties' selection of New York governing law is New York General Obligations Law § 5-1401. This provision, enacted in 1984 and subsequently amended, was designed to promote New York as a center of commercial activity by enabling parties to choose New York law to govern their agreements without the need to demonstrate that the contract bears a "reasonable relationship" to the State of New York. The statute provides, in relevant part:
"The parties to any contract, agreement or undertaking, contingent or otherwise, in consideration of, or relating to any obligation arising out of a transaction covering in the aggregate not less than two hundred fifty thousand dollars . . . may agree that the law of this state shall govern their rights and duties in whole or in part, whether or not such contract, agreement or undertaking bears a reasonable relation to this state."
The operative threshold is that the contract must involve a transaction "covering in the aggregate not less than two hundred fifty thousand dollars." The MCTA's total deal value of approximately $80,000,000 substantially exceeds this threshold by a factor of more than 300. There is no colorable argument that the MCTA falls below the statutory minimum.
Moreover, although § 5-1401 does not require any nexus to New York, an additional New York connection exists by virtue of Calderwood & Harkness LLP's offices at 280 Park Avenue, 34th Floor, New York, New York 10017. Calderwood & Harkness serves as Penterra's transactional counsel for the MCTA and will administer certain aspects of the contract from its New York office. While this nexus is not legally necessary under § 5-1401, it provides supplementary support for the reasonableness of the New York governing law selection, which may be relevant if the choice-of-law provision is ever challenged in a court outside New York that applies a "reasonable relationship" test rather than deferring to New York's statutory framework.
It is important to understand the scope of § 5-1401. The statute permits parties to select New York law for their contractual obligations — that is, the rights, duties, and remedies arising under the four corners of the agreement itself. Section 5-1401 does not, however, override mandatory regulatory requirements or public-policy mandates of other jurisdictions that have a legitimate interest in the subject matter of the contract. As the New York Court of Appeals has recognized, the statute facilitates party autonomy with respect to purely contractual matters; it does not serve as a mechanism for parties to exempt themselves from the application of non-waivable legal requirements imposed by jurisdictions with a materially greater interest in specific regulatory questions. We address these limitations in detail in Section III.C below.
Conclusion. The New York choice-of-law clause should be enforceable under § 5-1401 with respect to the commercial and contractual terms of the MCTA, including indemnification obligations, limitation-of-liability provisions, arbitration and dispute resolution, confidentiality, data ownership, publication rights, termination, and payment terms.
B. New York General Obligations Law § 5-1402
Section 5-1402 of the New York General Obligations Law is a companion provision to § 5-1401. It provides that parties to contracts meeting the $250,000 threshold who agree that New York law governs their agreement may also consent to the jurisdiction of the courts of the State of New York. Specifically, § 5-1402 bars a party who has agreed to a New York choice-of-law clause in a qualifying contract from contesting personal jurisdiction or venue in New York courts, or from seeking to dismiss on the basis of forum non conveniens, when a lawsuit is brought against it in a New York court.
This provision is directly relevant to the MCTA because the proposed dispute resolution clause reserves the jurisdiction of state and federal courts located in New York County, New York for purposes of seeking injunctive relief, including temporary restraining orders and preliminary or permanent injunctions. In such circumstances, § 5-1402 would preclude Veridian from challenging the New York court's exercise of jurisdiction or arguing that the case should be heard in another forum.
The interaction between § 5-1402 and the MCTA's AAA arbitration provision warrants brief analysis. The dispute resolution framework contemplates that the vast majority of disputes will be resolved through the three-step escalation process culminating in binding arbitration. The New York court jurisdiction carved out for injunctive relief is intended to be a narrow exception — available primarily in circumstances requiring immediate equitable relief, such as enforcement of confidentiality obligations, prevention of unauthorized data disclosure, or preservation of the status quo pending arbitration. Under § 5-1402, Veridian's consent to New York court jurisdiction for these limited purposes would be enforceable. Importantly, § 5-1402 does not conflict with the arbitration provision because the two operate in parallel: arbitration addresses claims on the merits, while the injunctive relief carve-out addresses interim equitable relief that, by its nature, may require the imprimatur of a court. New York courts routinely honor this type of concurrent jurisdiction framework.
C. Limitations on Choice-of-Law Effectiveness
Notwithstanding the broad enforceability of New York choice-of-law provisions under § 5-1401, there are important limitations that bear directly on the MCTA. The central principle is that New York courts — and the courts of other states that may be called upon to enforce the MCTA — will not apply a contractual choice-of-law provision to override the mandatory public policy of a jurisdiction with a materially greater interest in the subject matter at issue. This principle is codified in the Restatement (Second) of Conflict of Laws § 187(2), which provides that a chosen state's law will not be applied if:
(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice; or
(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.
While subsection (a) is unlikely to present a problem here (given the MCTA's satisfaction of § 5-1401's statutory requirements and the additional New York nexus through Calderwood & Harkness), subsection (b) warrants careful consideration. In the clinical trial context, several categories of law may constitute "fundamental policy" that a site-state court would apply notwithstanding the New York choice-of-law clause:
1. State Healthcare and Research-Subject Protection Statutes. States in which clinical trial sites are located have a compelling interest in protecting the health and safety of research subjects enrolled at those sites. State statutes governing the conduct of human-subjects research, informed consent requirements, and research-subject injury compensation may be deemed mandatory law that cannot be overridden by a contractual choice-of-law provision.
2. State Anti-Kickback and Fraud-and-Abuse Laws. Many states have enacted their own anti-kickback statutes and fraud-and-abuse laws that supplement the federal Anti-Kickback Statute. These laws typically apply to healthcare transactions occurring within the state's borders and are expressions of fundamental state policy regarding the integrity of healthcare delivery.
3. State Insurance Regulatory Requirements. Insurance is regulated primarily at the state level. Requirements regarding clinical trial insurance, proof of financial responsibility, or research-subject injury coverage imposed by the state in which a site operates would apply as a matter of state regulatory law, regardless of the MCTA's governing law clause.
4. State Employment Laws Governing Site Personnel. Research coordinators, study nurses, and other clinical trial staff at each site are employees of the site institution and are subject to the employment laws of the state where they work. Wage-and-hour requirements, anti-discrimination protections, and other employment mandates are mandatory law that the New York governing law clause cannot displace.
5. State Consumer Protection Laws Applicable to Research Subjects. Certain states, most notably Massachusetts (Chapter 93A), have broadly interpreted consumer protection statutes that may reach clinical trial conduct involving residents of those states.
In addition to these state-law considerations, the MCTA is subject to a comprehensive federal regulatory regime that operates independently of the parties' choice of governing law. The conduct of the CLARION trial must comply with, among other requirements:
• 21 C.F.R. Part 11 (electronic records and electronic signatures)
• 21 C.F.R. Part 50 (protection of human subjects, informed consent)
• 21 C.F.R. Part 54 (financial disclosure by clinical investigators)
• 21 C.F.R. Part 56 (institutional review boards)
• 21 C.F.R. Part 312 (investigational new drug applications)
• ICH E6(R2) Good Clinical Practice guidelines (integrated into FDA regulations by reference)
• HIPAA Privacy Rule (45 C.F.R. Parts 160, 164)
• Common Rule (45 C.F.R. Part 46) (applicable to federally funded or supported research)
These federal requirements apply irrespective of the MCTA's governing law clause and override any contractual provisions that are inconsistent with them. The New York choice-of-law provision should be understood as governing the contractual relationship between the parties — their respective rights, obligations, remedies, and the interpretation of the agreement's terms — while leaving intact the full overlay of federal and state regulatory requirements that govern the substantive conduct of clinical research.
IV. Enforceability of Indemnification Provisions Under New York Law
A. General Enforceability Framework
New York courts have long recognized and enforced contractual indemnification provisions between sophisticated commercial parties, including broad indemnification for third-party claims. The freedom of contract is a cornerstone of New York commercial law, and courts are generally reluctant to interfere with indemnification allocations that represent the informed, bargained-for exchange of commercially sophisticated entities. This well-established framework provides a strong foundation for the enforceability of the MCTA's indemnification structure.
The MCTA contemplates two parallel indemnification streams:
Sponsor Indemnification (Penterra → Veridian/Sites/Investigators). Under the proposed sponsor indemnification provision, Penterra will indemnify, defend, and hold harmless Veridian, each participating site, and each site's investigators and staff from and against losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or related to:
(a) Injury to a research subject caused by PPC-4871 when administered in accordance with the Protocol and investigator's brochure;
(b) Any defect in the design, manufacture, labeling, packaging, storage, or supply of PPC-4871 or matching placebo;
(c) Penterra's breach of the MCTA or the Protocol; and
(d) Penterra's negligence or willful misconduct in the performance of its obligations under the MCTA.
Reciprocal Site/Investigator Indemnification (Veridian/Sites → Penterra). Under the proposed reciprocal indemnification provision, Veridian and each participating site will indemnify, defend, and hold harmless Penterra from and against losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or related to:
(a) The negligence or willful misconduct of site staff in the conduct of the trial;
(b) Unauthorized deviations from the Protocol not approved by Penterra or the FDA; and
(c) Veridian's or the site's breach of the MCTA or applicable law.
As a threshold matter, we have confirmed that the principal New York anti-indemnity statutes do not apply to clinical trial agreements of this nature. New York General Obligations Law § 5-322.1, which renders void and unenforceable certain indemnification clauses in construction contracts, is limited by its terms to agreements "in connection with . . . the construction, alteration, repair or maintenance of a building, structure, appurtenance and appliance . . . or with respect to real property." The MCTA does not involve construction or maintenance of real property, and § 5-322.1 is therefore inapplicable. Similarly, New York General Obligations Law § 5-321, which addresses indemnification clauses in leases of real property, is facially inapplicable to a clinical trial agreement. Neither statute presents an obstacle to enforcement of the MCTA's indemnification provisions.
B. Indemnification Caps and Limitations
The MCTA includes several monetary caps on indemnification obligations, which we analyze in turn.
Per-Subject Medical Care Cap and Aggregate Cap. Penterra's sponsor indemnification for study-related subject injury includes a per-subject medical care cap of $500,000 and an aggregate cap of $15,000,000 for study-related injury medical costs across all subjects and all sites. Under New York law, contractual caps on indemnification obligations are enforceable between commercially sophisticated parties, provided they are the product of arm's-length negotiation. New York courts afford broad latitude to sophisticated commercial entities to define the scope and limits of their indemnification obligations. The per-subject cap of $500,000 and the aggregate cap of $15,000,000 are within the range of caps we have observed in clinical trial agreements of comparable scale, though they are on the lower end given the enrollment of 1,200 subjects in a population with advanced hepatocellular carcinoma and the potential toxicity profile of a multi-kinase inhibitor. We address potential public-policy concerns related to these caps in Section V below.
Uncapped Product-Defect Indemnification. The MCTA does not cap Penterra's indemnification obligations for claims arising from product defects in PPC-4871 or matching placebo. Under New York law, open-ended indemnification provisions are enforceable between sophisticated commercial parties. The absence of a cap on product-defect indemnification is consistent with industry practice, which generally reflects the understanding that the sponsor is best positioned to control the quality and safety of the investigational product and should bear the corresponding risk.
Reciprocal Site Indemnity Caps. The reciprocal indemnification provided by Veridian and each site is subject to a cap of $5,000,000 per site per occurrence and $20,000,000 in the aggregate across all Veridian sites. These caps reflect the economic reality that individual sites — many of which are nonprofit academic medical centers — have limited financial capacity to absorb indemnification obligations. Under New York law, such caps are enforceable as a reasonable allocation of risk between the parties. We note that the per-site, per-occurrence cap of $5,000,000 aligns with the minimum general liability and professional liability insurance coverage required of each site under the MCTA ($5,000,000 per occurrence), ensuring that insured amounts are available to fund indemnification claims up to the cap.
30-Day Notice Requirement. The MCTA requires that any party seeking indemnification provide written notice to the indemnifying party within 30 calendar days of becoming aware of a claim, threatened claim, or circumstances reasonably likely to give rise to a claim. Under the proposed language, failure to provide timely notice does not relieve the indemnifying party of its indemnification obligation except to the extent the indemnifying party is materially prejudiced by the delay. This "material prejudice" standard is well supported under New York law. New York's Insurance Law § 3420, as amended effective January 17, 2009, adopted a prejudice requirement for late-notice disclaimers by liability insurers, and New York courts have applied analogous prejudice-based analyses in the context of contractual notice provisions. The inclusion of the material-prejudice qualifier protects the indemnified party from losing its indemnification rights due to a technical notice failure while preserving the indemnifying party's right to demonstrate actual harm from delayed notice.
C. Indemnification for One's Own Negligence
Under New York law, a party seeking indemnification for its own negligence must establish that the indemnification agreement expressly and unambiguously contemplates such coverage. Courts apply this requirement rigorously, and ambiguous indemnification clauses are construed against the party seeking indemnification for its own negligent acts. This principle, while often articulated in the context of personal injury litigation, applies broadly to contractual indemnification.
The MCTA's indemnification structure is designed to ensure that each party bears responsibility for its own conduct. Specifically, the sponsor indemnification of sites expressly covers subject injury caused by PPC-4871 when administered in accordance with the Protocol, and the reciprocal site indemnification of the sponsor expressly covers the negligence or willful misconduct of site staff and unauthorized protocol deviations. These carve-outs are consistent with New York's requirement for clear and unambiguous allocation of indemnification responsibility. The structure ensures that Penterra does not indemnify sites for injuries caused by investigator negligence, and sites do not indemnify Penterra for injuries caused by product defects or Penterra's own misconduct.
Recommendation. We recommend that the drafting team ensure that the language of each indemnification provision is explicit and unambiguous with respect to the scope of coverage and the applicable carve-outs. Any ambiguity in the allocation of responsibility between the parties could be exploited in litigation or arbitration to argue that the provision does not cover (or improperly covers) a party's own negligence. We recommend using parallel structure and cross-referencing between the sponsor indemnification and reciprocal indemnification provisions to make the allocation as clear as possible.
D. Potential Conflicts with State-Specific Indemnification Laws
While New York law is generally permissive with respect to contractual indemnification between sophisticated parties, the laws of certain states in which Veridian sites are located may impose limitations that could complicate enforcement of the MCTA's indemnification provisions at the site level. Several specific concerns merit attention:
Illinois. Illinois law restricts indemnification in certain healthcare contexts. The Illinois Joint Tortfeasor Contribution Act (740 ILCS 100/0.01 et seq.) and related precedent may affect the enforceability of broad indemnification provisions in agreements involving healthcare providers. Although these restrictions are most directly applicable to medical malpractice claims, a court applying Illinois public policy could potentially scrutinize indemnification provisions in a clinical trial agreement involving an Illinois site like Lakemont Medical Center.
Colorado. Colorado generally permits contractual indemnification between sophisticated parties but has specific statutory provisions and public-policy doctrines that may limit the enforceability of certain indemnification terms in healthcare or research contexts, particularly where research-subject protection is concerned.
Other States. Depending on the final roster of 14 site states, additional state-specific indemnification limitations may be relevant. A comprehensive survey of each state's indemnification law should be conducted once the site list is finalized.
Recommendation. To address these potential state-law conflicts, we recommend including a savings clause in the MCTA's indemnification provisions. The savings clause should provide that if any indemnification provision is held to be unenforceable under the law of any jurisdiction, it shall be modified to the minimum extent necessary to render it enforceable in that jurisdiction, and all remaining indemnification provisions shall continue in full force and effect. This approach preserves the maximum enforceability of the indemnification framework while acknowledging the practical reality that certain state laws may require accommodation.
V. Enforceability of Limitation-of-Liability Provisions Under New York Law
A. General Principles
New York courts consistently enforce limitation-of-liability clauses in commercial agreements between sophisticated parties. The principle of freedom of contract is given particular weight in the context of agreements between entities with substantial bargaining power, access to legal counsel, and the ability to negotiate terms at arm's length. Courts will enforce a limitation-of-liability clause where the provision was freely negotiated, the parties are commercially sophisticated, and the clause does not violate public policy or constitute unconscionable conduct.
In the MCTA context, the aggregate site indemnity cap of $20,000,000 across all Veridian sites functions as a form of limitation of liability for Veridian and its member institutions. This cap limits the total exposure of the Veridian network for reciprocal indemnification claims by Penterra, regardless of the number of sites involved or the number of claims asserted. Under New York law, this type of aggregate cap is enforceable, particularly where both parties are large, well-resourced organizations that negotiated the terms with the assistance of experienced legal counsel.
To the extent the MCTA includes an exclusion of consequential, incidental, or punitive damages — a common provision in clinical trial agreements — New York law generally enforces such exclusions between commercial parties. New York courts have upheld consequential-damage exclusions in commercial contracts even where the excluded damages are substantial, reasoning that sophisticated parties are entitled to allocate risk as they see fit. However, we note that certain categories of damages — such as subject-injury medical costs — may not be appropriately characterized as "consequential" damages in the clinical trial context. The drafting team should carefully define the categories of damages subject to the exclusion to avoid unintended gaps in coverage.
B. Unconscionability and Public-Policy Limitations
Although New York courts generally enforce limitation-of-liability clauses between sophisticated parties, they retain the authority to decline enforcement if a clause is unconscionable or contrary to public policy. This authority is exercised sparingly in commercial disputes but cannot be disregarded, particularly in the clinical trial context where public-policy considerations relating to the protection of human research subjects are implicated.
In analyzing unconscionability, New York courts consider both procedural unconscionability (relating to the circumstances of contract formation, such as unequal bargaining power, lack of meaningful choice, or surprise) and substantive unconscionability (relating to the one-sidedness or unreasonableness of the challenged provision). Given that Penterra has a market capitalization of approximately $4.2 billion and Veridian oversees approximately $1.4 billion in annual research volume, and given that both parties are represented by experienced legal counsel, a procedural unconscionability challenge is unlikely to succeed.
The more relevant inquiry concerns substantive unconscionability and public policy. The per-subject medical care cap of $500,000 and the aggregate cap of $15,000,000 for study-related injury medical costs should be assessed in light of the following factors:
• The CLARION trial plans to enroll 1,200 subjects with advanced hepatocellular carcinoma, a condition associated with significant morbidity and mortality.
• PPC-4871 is a multi-kinase inhibitor, a class of drugs associated with a range of potential adverse events, including hepatotoxicity, cardiovascular events, dermatologic reactions, and gastrointestinal toxicities.
• The aggregate cap of $15,000,000, divided across a potential 1,200 subjects, yields a theoretical per-subject average of only $12,500 — well below the per-subject cap of $500,000 but suggesting that the aggregate cap could be exhausted if a significant number of subjects experience serious study-related injuries requiring extensive medical care.
• It is conceivable, although unlikely, that a court could view the aggregate cap as inadequate to protect research subjects in a trial of this size and therapeutic area.
We believe, on balance, that the caps as proposed are enforceable under New York law. New York courts afford significant deference to the risk allocations agreed upon by sophisticated commercial parties, and the per-subject cap of $500,000 is within the range of commercially reasonable limits for clinical trial subject-injury indemnification. However, the adequacy of the $15,000,000 aggregate cap relative to the enrollment size and the disease population warrants further discussion with the client.
Recommendation. To reduce any risk of an unconscionability challenge, we recommend that the MCTA include recitals or preamble language documenting that the monetary caps were negotiated at arm's length between Penterra (with a market capitalization of approximately $4.2 billion) and Veridian (with annual research volume of approximately $1.4 billion), each with the benefit of sophisticated legal counsel, and that the caps reflect the parties' considered judgment regarding appropriate risk allocation in light of the trial's scope, the therapeutic area, and the investigational product's known and anticipated safety profile. This documentation of the negotiation context would serve as evidence against any future unconscionability challenge.
VI. Enforceability of Arbitration Agreement Under New York Law
A. Federal Arbitration Act Preemption
The MCTA's dispute resolution clause establishes a three-step escalation process for the resolution of disputes between the parties:
Step 1 — Designated Representative Negotiation. Upon the occurrence of a dispute, the parties will designate senior representatives to attempt to resolve the dispute through good-faith negotiations for a period of 30 days from written notice of the dispute.
Step 2 — Mediation. If the dispute is not resolved through negotiation within the 30-day period, either party may initiate mediation under the American Arbitration Association ("AAA") Commercial Mediation Rules. The mediation shall be conducted in New York, New York, and shall continue for a period not to exceed 60 days from the date of the initial mediation session.
Step 3 — Binding Arbitration. If the dispute is not resolved through mediation within the 60-day period, either party may initiate binding arbitration. The arbitration shall be conducted in New York, New York under the AAA Commercial Arbitration Rules then in effect, before a panel of three arbitrators selected in accordance with those Rules. The arbitrators' award shall be final and binding, and judgment upon the award may be entered in any court of competent jurisdiction.
The Federal Arbitration Act (the "FAA"), 9 U.S.C. §§ 1–16, governs the enforceability of the MCTA's arbitration provision. The FAA applies to contracts involving interstate commerce, and the MCTA clearly satisfies this requirement: it governs a multi-state clinical trial involving a Delaware-incorporated, New Jersey-headquartered pharmaceutical company and a Delaware-incorporated, Pennsylvania-headquartered research network operating sites across 14 states. The interstate character of the transaction is manifest.
Under the FAA, arbitration agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Supreme Court has consistently held that the FAA establishes a strong federal policy favoring arbitration, and courts must compel arbitration when the parties have agreed to arbitrate, absent grounds that exist at law or in equity for the revocation of any contract (such as fraud, duress, or unconscionability). The FAA preempts state laws that single out arbitration agreements for disfavored treatment or that impose requirements on arbitration agreements that are not applicable to contracts generally.
In addition to the FAA, New York's own arbitration statute, codified in CPLR Article 75, provides a supportive framework for the enforcement of arbitration agreements. CPLR § 7501 provides that a "written agreement to submit any controversy thereafter arising or any existing controversy to arbitration is enforceable without regard to the justiciable character of the controversy." The dual federal and state statutory frameworks reinforce the enforceability of the MCTA's arbitration provision.
B. Scope of Arbitrability
While the MCTA's arbitration clause is broadly drafted to cover "any dispute, claim, or controversy arising out of or relating to this Agreement or the breach, termination, or validity thereof," the scope of arbitrability has important practical limitations.
Research Subjects. Research subjects enrolled in the CLARION trial are not parties to the MCTA and are not signatories to the arbitration provision. Accordingly, research subjects cannot be compelled to arbitrate any claims they may bring against Penterra, Veridian, or individual sites or investigators. Subject-injury claims asserted directly by research subjects (or their legal representatives) would be brought in the courts of the jurisdiction where the subject is located, under applicable tort, contract, or statutory law. The arbitration clause governs only disputes between Penterra and Veridian (and, through the Individual Site Agreements, between Penterra and each participating site).
Regulatory Enforcement Actions. Enforcement actions by the FDA, state attorneys general, state health departments, or other regulatory bodies are not arbitrable. Regulatory agencies are not parties to the MCTA and cannot be required to submit enforcement proceedings to arbitration. Any FDA enforcement action — including clinical holds, warning letters, consent decrees, or debarment proceedings — would proceed through the applicable administrative or judicial channels.
Inter-Party Disputes. The arbitration clause is enforceable as to disputes between the parties to the MCTA, including disputes regarding payment obligations, performance of trial-related services, compliance with the Protocol, interpretation of contractual provisions, breach of representations and warranties, and claims for indemnification between the parties.
Recommendation. We recommend that the arbitration clause be drafted to clearly delineate its scope. The clause should specify that it covers disputes between the parties to the MCTA (and, as applicable, parties to the Individual Site Agreements) arising out of or relating to the MCTA. The clause should include an express acknowledgment that it does not purport to bind third parties, including research subjects, regulatory authorities, and other non-signatories. This clarification will reduce the risk of challenge and provide transparency regarding the intended scope of the arbitration agreement.
C. Venue for Injunctive Relief
The MCTA reserves the jurisdiction of state and federal courts located in New York County, New York for the purpose of seeking injunctive relief, including temporary restraining orders and preliminary or permanent injunctions. This type of carve-out is common in commercial arbitration agreements and is routinely enforced by New York courts. The FAA does not prohibit parties from agreeing to seek interim or provisional judicial relief in aid of arbitration, and New York law expressly recognizes the availability of provisional remedies in connection with arbitrable disputes. See CPLR § 7502(c) (authorizing courts to entertain applications for provisional remedies in connection with an arbitrable controversy).
One practical issue warrants attention. If injunctive relief is sought in connection with conduct occurring at a specific trial site located outside New York — for example, to enjoin an alleged unauthorized data disclosure by personnel at Lakemont Medical Center in Chicago, Illinois — a New York court's injunction may face practical enforcement challenges. Although the injunction would be legally valid and binding on the parties (who have consented to New York jurisdiction under § 5-1402), enforcement against a non-party or enforcement of conduct occurring in another state may require registration or domestication of the New York order in the site's home jurisdiction. Additionally, in an emergency situation, the time required to obtain relief from a New York court may be impractical when the conduct necessitating the injunction is occurring at a remote site.
Recommendation. We recommend that the MCTA's injunctive relief carve-out be drafted to permit filing in either (a) state or federal courts located in New York County, New York, or (b) state or federal courts in the jurisdiction where the affected site is located, at the election of the party seeking relief. This permissive alternative venue approach would preserve New York as the default forum while allowing a party to seek emergency relief in the jurisdiction most proximate to the site-specific conduct at issue. Both parties would benefit from this flexibility, as either might need to seek injunctive relief regarding site-level conduct in a jurisdiction where a court can act quickly and with direct enforcement authority.
VII. Confidentiality Provisions Under New York Law
A. Enforceability of 10-Year Confidentiality Term
The MCTA includes confidentiality provisions requiring each party to maintain the confidentiality of the other party's Confidential Information for a period of 10 years from the date of disclosure. "Confidential Information" as defined in the MCTA encompasses Protocol-related information, investigational product specifications (including the formulation, manufacturing process, and analytical methods for PPC-4871 and matching placebo), study data (including individual subject data, aggregate data, interim analyses, and final study results), financial terms (including per-patient fees, site budgets, and the total deal value), and any other information designated as confidential by the disclosing party.
New York courts enforce reasonable confidentiality provisions in commercial agreements. The 10-year confidentiality term is within the range of terms customary for pharmaceutical and clinical trial agreements, which typically range from 7 to 15 years, reflecting the extended timelines associated with drug development, regulatory review, and post-marketing surveillance. A 10-year term from the date of disclosure is unlikely to be challenged as unreasonably long, particularly given the sensitive nature of the information involved and the competitive implications of premature disclosure of clinical trial data and investigational product specifications.
The confidentiality provision includes standard exceptions for information that: (i) is or becomes publicly available through no fault of the receiving party; (ii) was already known to the receiving party at the time of disclosure, as documented by written records; (iii) is independently developed by the receiving party without reference to the disclosing party's Confidential Information; or (iv) is received from a third party not under an obligation of confidentiality to the disclosing party. In addition, the provision identifies certain permitted disclosures, including disclosures to: IRBs and ethics committees in connection with Protocol review and approval; federal, state, and local regulatory authorities as required by applicable law; legal counsel of the receiving party who are subject to an obligation of confidentiality; and auditors, consultants, and contractors engaged by the receiving party in connection with the trial who have executed written confidentiality agreements. These permitted disclosures are consistent with the operational necessities of a multi-center clinical trial and do not undermine the enforceability of the confidentiality provision.
B. Interaction with Regulatory Disclosure Obligations
The confidentiality provision must be analyzed in light of several mandatory disclosure obligations that apply regardless of the parties' contractual confidentiality terms:
FDA Regulatory Disclosures. Clinical trial data generated under IND 157823 may be subject to mandatory disclosure to the FDA under 21 C.F.R. Part 312, including safety reports (21 C.F.R. § 312.32), annual reports (21 C.F.R. § 312.33), and the eventual submission of data in support of a New Drug Application or Biologics License Application. The FDA may also request or require disclosure of trial data in connection with advisory committee proceedings, which may involve public disclosure of previously confidential data.
ClinicalTrials.gov Posting Requirements. Under the Food and Drug Administration Amendments Act of 2007 (FDAAA) and implementing regulations at 42 C.F.R. Part 11, certain clinical trial results information must be posted on ClinicalTrials.gov within specified time frames. The CLARION trial, which has already been registered (NCT05928174), will be subject to results reporting requirements upon completion or termination of the study.
Securities Disclosure Obligations. As a publicly traded company on the Nasdaq Global Select Market, Penterra is subject to securities disclosure obligations under the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission. Material clinical trial results — particularly top-line results from a Phase III study with potential implications for the company's product pipeline — may need to be disclosed through SEC filings (Form 8-K, Form 10-Q, or Form 10-K) or press releases. Regulation FD prohibits selective disclosure of material nonpublic information.
New York law would not prevent enforcement of the MCTA's confidentiality provision where it does not conflict with these federal regulatory mandates. The confidentiality provision and the regulatory disclosure requirements operate in complementary fashion: the provision protects against voluntary, unauthorized disclosure while recognizing that legally mandated disclosures are outside its scope.
Recommendation. We recommend that the confidentiality provision contain a clear and explicit carve-out for legally required disclosures, drafted to provide that the receiving party may disclose Confidential Information to the extent required by applicable law, rule, regulation, court order, or government directive, provided that the receiving party (to the extent legally permissible) gives the disclosing party prompt written notice of such requirement and cooperates with the disclosing party's reasonable efforts to obtain a protective order or other appropriate limitation on the scope of disclosure. This formulation balances the parties' interest in maintaining confidentiality with the practical reality that both parties operate in heavily regulated environments with mandatory disclosure obligations.
VIII. Data Ownership and intellectual Property Under New York Law
A. Data Ownership
The MCTA provides that Penterra retains exclusive ownership of all clinical trial data generated in connection with the CLARION trial, including but not limited to individual subject data, case report forms, aggregate data, statistical analyses, interim analyses, final study results, and any data compilations or databases derived therefrom. New York law enforces contractual data ownership provisions between commercial parties, and there is no New York statutory or common-law obstacle to the enforceability of this provision. The parties' agreement regarding data ownership, freely negotiated between sophisticated entities, will be respected by New York courts as a valid allocation of rights.
Under the MCTA, Veridian and each participating site are required to retain source documents — including medical records, laboratory reports, imaging studies, and signed informed consent forms — for a minimum of 15 years following the completion or termination of the study, or such longer period as may be required by applicable law or regulation. This retention obligation is consistent with FDA requirements (21 C.F.R. § 312.62(c)) and ICH E6(R2) guidelines and is enforceable under New York law.
A potential area of tension arises from the policies of academic institutions that are members of the Veridian Network. Many academic medical centers and affiliated universities maintain institutional policies asserting ownership or co-ownership of research data generated by their faculty members and employees. These policies are typically rooted in the institution's employment relationship with the investigator and the institution's provision of resources, facilities, and infrastructure for the conduct of research. Where an institutional policy conflicts with the MCTA's data ownership provision, the contractual provision should govern as between the contracting parties — i.e., as between Penterra and Veridian (and, through the Individual Site Agreement, as between Penterra and the site institution). However, the institutional policy may create practical friction if site-level personnel or administrators resist full cooperation with data transfer requests or assert competing claims to data generated at the site.
Recommendation. To mitigate this risk, we recommend that each Individual Site Agreement (the joinder agreement through which each site accedes to the MCTA) contain an express acknowledgment by the site institution that Penterra is the exclusive owner of all clinical trial data, and that the site institution waives any claim of ownership or co-ownership to such data. This acknowledgment should be signed by an authorized representative of the site institution with the authority to bind the institution with respect to its intellectual property and data policies. If a particular site institution refuses to execute this acknowledgment, the matter should be escalated to Veridian for resolution at the network level before the site is activated for enrollment.
B. Intellectual Property — IP Side Letter
The MCTA provides that each party retains exclusive ownership of its pre-existing intellectual property ("Background IP"), and that any inventions, discoveries, or improvements made jointly by Penterra and Veridian personnel in connection with the CLARION trial ("Joint Inventions") will be governed by a separate IP Side Letter to be executed concurrently with the MCTA. The IP Side Letter will address ownership allocation, prosecution and maintenance of patent applications, licensing rights, and commercialization terms for Joint Inventions.
New York law governs the IP ownership provisions set forth in the MCTA and the IP Side Letter. We note, however, that patent law is exclusively federal — the patentability, validity, and enforceability of patents are governed by Title 35 of the United States Code and adjudicated by the federal courts. The New York governing law clause applies to the contractual allocation of rights and obligations with respect to intellectual property (e.g., assignment obligations, prosecution responsibilities, licensing terms) but does not and cannot displace federal patent law.
Publication Rights. The MCTA grants investigators the right to publish the results of the CLARION trial, subject to Penterra's 60-day review period for removal of Confidential Information and assessment of patentable subject matter, with up to an additional 90-day delay to enable Penterra to file patent applications on any patentable inventions identified during the review. These publication restrictions are standard in industry-sponsored clinical trial agreements and are enforceable under New York law as a contractual restriction freely agreed upon between commercial parties.
However, publication restrictions in industry-sponsored clinical trials have been the subject of considerable academic and regulatory scrutiny. Academic medical centers and their faculty may view contractual limitations on publication as an infringement of academic freedom. The International Committee of Medical Journal Editors (ICMJE) requires, as a condition of publication in ICMJE-member journals, that investigators have the right to publish results regardless of sponsor approval, and that sponsors may not delay publication for the purpose of suppressing unfavorable results. The MCTA's publication review mechanism, which permits delay only for the limited purposes of confidentiality review and patent filing, is consistent with ICMJE requirements and should not create conflict with academic freedom principles. Nonetheless, we recommend that the MCTA clearly state that Penterra may not withhold consent to publication (or require modifications to a manuscript) for the purpose of suppressing unfavorable results, and that the 60-day review and 90-day patent delay are the exclusive limitations on investigators' publication rights.
IX. Insurance Provisions and Multi-State Regulatory Considerations
A. Penterra's Insurance Obligations
Under the MCTA, Penterra is required to maintain clinical trial liability insurance throughout the duration of the CLARION trial, with the following coverage terms:
• Carrier: Briarcliff Mutual Insurance Company (a Connecticut-domiciled mutual insurance company)
• Policy Number: BM-CTL-2023-04182
• Per-Occurrence Limit: $25,000,000
• Aggregate Limit: $75,000,000
• Subject-Injury Sublimit: $10,000,000 per occurrence / $50,000,000 aggregate
• Policy Period: April 1, 2023 through March 31, 2024 (renewable annually)
• Additional Insureds: Veridian and each participating site to be named as additional insureds
The insurance policy itself is a separate contract between Penterra and Briarcliff Mutual Insurance Company, governed by its own terms and by the insurance regulatory law of the state(s) in which it is issued and delivered. Briarcliff is domiciled in Connecticut, and the policy is subject to Connecticut insurance regulations. The New York choice-of-law clause in the MCTA does not control the governing law of the insurance policy, which is an independent agreement between different parties.
It is important to distinguish between the MCTA's contractual requirement that Penterra maintain certain insurance coverage (which is governed by New York law and enforceable under the MCTA) and the insurance policy itself (which is governed by Connecticut insurance law and the terms of the policy). If a coverage dispute arises under the Briarcliff policy, that dispute would be resolved under the law governing the insurance contract, not under the New York law governing the MCTA. However, if Penterra fails to maintain the required insurance coverage and thereby breaches its obligation under the MCTA, Veridian's remedies for such breach would be determined under New York law as the governing law of the MCTA.
B. Veridian/Site Insurance Requirements
The MCTA requires Veridian and each participating site to maintain general liability insurance and professional liability insurance with minimum coverage of $5,000,000 per occurrence and $10,000,000 in the aggregate. Each site institution is organized under the law of its respective state, and the insurance policies maintained by each site are issued and regulated in those states. The MCTA's New York governing law does not alter the regulatory framework applicable to each site's insurance progr

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