MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Miriam Calloway, Partner, Calderwood & Harkness LLP
FROM: Sean Morrissey, Associate, and Christopher Aiken, Associate, Healthcare & Life Sciences Practice Group
DATE: March 27, 2023
RE: Preliminary Issues Memorandum — Key Legal Issues in Negotiation of Master Clinical Trial Agreement Between Penterra Pharmaceuticals Corp. and Veridian Health Research Network, Inc. (Protocol PPC-4871-III / CLARION)
Matter No.: 1018-00004
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I. Executive Summary
Calderwood & Harkness LLP represents Penterra Pharmaceuticals Corp. ("Penterra" or "PPC"), a Delaware corporation publicly traded on the Nasdaq Global Select Market (ticker: PTRA), headquartered at 200 Biopharma Boulevard, Suite 1400, Princeton, New Jersey 08540, in connection with the negotiation and drafting of a Master Clinical Trial Agreement ("MCTA") and associated site-network agreements with Veridian Health Research Network, Inc. ("Veridian" or "VHRN"), a Delaware 501(c)(3) tax-exempt research organization headquartered at 750 Research Parkway, 8th Floor, Philadelphia, Pennsylvania 19104.
The MCTA will govern the conduct of Protocol PPC-4871-III, designated by Penterra as the "CLARION" trial — Clinical Assessment of Response with Longitudinal Investigation in ONcology — at thirty-eight (38) Veridian Network academic medical centers and affiliated research sites located across fourteen (14) states. This represents one of the largest single-network clinical trial arrangements in Penterra's development pipeline and one of the most significant site-network agreements the company has negotiated to date.
The total deal value for the MCTA and related site agreements is approximately Eighty Million Dollars ($80,000,000), encompassing site fees, per-patient payments, investigator grants, network coordination fees, technology integration costs, and operational costs over the trial's projected forty-two (42)-month enrollment period and sixty (60)-month total study duration. The financial magnitude of this arrangement, combined with the regulatory complexity inherent in a multi-site Phase III oncology trial, necessitates careful attention to the legal issues identified in this memorandum.
The investigational product at issue is penterafenib (PPC-4871), an oral multi-kinase inhibitor under development for the treatment of advanced hepatocellular carcinoma ("HCC") in patients who have progressed on or after prior systemic therapy. Penterra filed Investigational New Drug Application No. 157823 ("IND 157823") with the United States Food and Drug Administration ("FDA") in October 2021. The Phase II clinical trial was completed in January 2023, demonstrating an overall response rate ("ORR") of thirty-eight percent (38%) in patients with advanced HCC — results that Penterra's clinical development team considers sufficiently robust to support advancement to a pivotal Phase III registration trial. The CLARION trial has been registered on ClinicalTrials.gov under identifier NCT05928174.
The CLARION trial is designed as a Phase III, randomized, double-blind, placebo-controlled study, with a planned enrollment of one thousand two hundred (1,200) subjects randomized on a 2:1 basis (800 treatment arm, 400 placebo arm). The primary endpoint is overall survival ("OS"), with key secondary endpoints including progression-free survival ("PFS"), objective response rate ("ORR"), and duration of response ("DOR"). The clinical significance of this trial cannot be overstated: a positive outcome could support a New Drug Application ("NDA") submission to the FDA and position penterafenib as a transformative second-line therapy in a disease area with limited treatment options and substantial unmet medical need.
Veridian is represented in this transaction by Whitmore, Jansen & Callahan LLP ("WJC"), located at 1500 Market Street, Suite 3200, Philadelphia, Pennsylvania 19102. The lead partner on the matter for WJC is Allison Whitmore, who is known to our practice group from prior transactions involving academic research networks and who typically advocates strongly for broad academic freedom protections and expansive indemnification provisions.
This memorandum identifies the key legal issues we anticipate will be central to the negotiation of the MCTA and recommends preliminary positions for each issue. The issues addressed herein include, among others, subject-injury indemnification scope and structure, insurance adequacy, data ownership and intellectual property rights, publication rights and academic freedom, payment structure and milestone design, termination and wind-down provisions, regulatory compliance framework, IRB oversight, HIPAA compliance, confidentiality, governing law and dispute resolution, and subcontractor management. For each issue, we have assessed the likely positions of both parties, analyzed applicable legal frameworks, and recommended strategies for the negotiation.
Our target is to circulate the first draft of the MCTA to WJC and Veridian by April 7, 2023, which provides approximately eleven (11) calendar days from the date of this memorandum to finalize internal review and obtain client approval of the draft. We respectfully request your review and comment on the issues and recommended positions set forth herein at your earliest convenience so that we may incorporate your guidance into the initial draft.
II. Background and Transaction Overview
A. Penterra Pharmaceuticals Corp. — Client Profile
Penterra Pharmaceuticals Corp. is a Delaware corporation organized under the Delaware General Corporation Law, with its principal offices located at 200 Biopharma Boulevard, Suite 1400, Princeton, New Jersey 08540. The company is publicly traded on the Nasdaq Global Select Market under the ticker symbol "PTRA" and, as of the first quarter of 2023, has an approximate market capitalization of Four Billion Two Hundred Million Dollars ($4.2 billion).
For fiscal year 2022, Penterra reported total revenues of One Billion Eight Hundred Seventy Million Dollars ($1.87 billion), research and development expenditures of Six Hundred Twelve Million Dollars ($612 million), and cash and cash equivalents as of the first quarter of 2023 of Eight Hundred Ninety Million Dollars ($890 million). The company's financial profile reflects a mid-cap biopharmaceutical company with a substantial and growing clinical development pipeline, adequate cash reserves to fund the CLARION trial, and the financial capacity to support the indemnification and insurance obligations contemplated by the MCTA.
The key members of the Penterra executive and functional leadership team relevant to this matter are as follows:
• Chief Executive Officer: Dr. Anand Raghavan, M.D., Ph.D.
• Chief Medical Officer: Dr. Elaine Whitford, M.D.
• Senior Vice President, Clinical Development: Dr. Marcus Yun, M.D., M.P.H.
• Vice President, Clinical Operations: Jennifer Holt
• Vice President & General Counsel: Nathaniel Briggs, Esq.
• Associate General Counsel, Clinical Affairs: Rebecca Liang, Esq. (day-to-day legal contact for this matter)
• Director, Clinical Contracts: Samantha Novak
Penterra's registered agent in the State of Delaware is Capitol Registered Agents, LLC, 1209 Orange Street, Wilmington, Delaware 19801. We have confirmed that Penterra's certificate of good standing with the Delaware Secretary of State is current as of the date of this memorandum.
Penterra's lead development product — and the subject of the CLARION trial — is penterafenib (PPC-4871), an oral multi-kinase inhibitor targeting multiple receptor tyrosine kinases implicated in the pathogenesis and progression of hepatocellular carcinoma. The IND for penterafenib (IND 157823) was filed with the FDA in October 2021, and Phase II clinical development was completed in January 2023. The Phase II results, which demonstrated a thirty-eight percent (38%) overall response rate in patients with advanced HCC, were considered by Penterra's clinical development team and its FDA regulatory counsel to be sufficiently encouraging to support progression to Phase III registration.
B. Veridian Health Research Network, Inc. — Counterparty Profile
Veridian Health Research Network, Inc. is a Delaware 501(c)(3) tax-exempt research organization headquartered at 750 Research Parkway, 8th Floor, Philadelphia, Pennsylvania 19104. Veridian operates as a coordinating entity for a network of thirty-eight (38) academic medical centers and affiliated research institutions located across fourteen (14) states. The network's collective annual research volume is approximately One Billion Four Hundred Million Dollars ($1.4 billion) in sponsored research, and Veridian employs approximately six thousand two hundred (6,200) individuals across its central operations and network member institutions.
Veridian's Employer Identification Number is 23-4178205. Its tax-exempt status under Section 501(c)(3) of the Internal Revenue Code is relevant to several aspects of the MCTA negotiation, including the structuring of indemnification obligations, the availability of charitable immunity defenses in certain jurisdictions, and the applicability of certain state-law protections for nonprofit entities.
The key members of the Veridian leadership team relevant to this matter are as follows:
• President & CEO: Dr. Franklin Osei, M.D., Ph.D.
• Chief Operating Officer: Diane Prescott
• Senior Vice President, Research Administration: Dr. Lena Marchetti, Ph.D.
• Vice President, Legal & Compliance: Gregory Callahan, Esq.
• Director, Sponsored Research Agreements: Patricia Dunne
We note that Veridian's VP, Legal & Compliance shares a surname with the firm representing Veridian (Whitmore, Jansen & Callahan LLP). We have not confirmed whether there is a familial or other relationship, but this is a point we should bear in mind as negotiations proceed.
C. Key Investigators
The Protocol designates two lead investigators who will serve critical roles in the conduct of the CLARION trial and whose institutional affiliations and academic positions are relevant to the negotiation of publication rights, investigator compensation, and regulatory compliance provisions.
Global Principal Investigator: Dr. Catherine Aldridge, M.D., Ph.D., is a Professor of Oncology at Graystone University Medical Center, located at 1200 University Avenue, Philadelphia, Pennsylvania 19104. Graystone is a Veridian Network member institution and is organized as a Pennsylvania nonprofit corporation. Dr. Aldridge's site (designated Site 001 under the Protocol) will serve as the lead enrollment site and the coordinating center for the trial. Dr. Aldridge is a nationally recognized expert in hepatocellular carcinoma and has served as a principal investigator on more than twenty industry-sponsored clinical trials. We anticipate that Dr. Aldridge's publication record and academic reputation will be significant factors in the negotiation of publication rights provisions.
Co-Principal Investigator: Dr. Howard Matsuoka, M.D., is an Associate Professor of Hepatology & Oncology at Lakemont Medical Center, located at 4400 North Michigan Drive, Chicago, Illinois 60611. Lakemont is also a Veridian Network member institution and is organized as an Illinois nonprofit corporation. Dr. Matsuoka's site (designated Site 002 under the Protocol) will serve as the second-largest enrollment center and will play a significant role in biomarker sub-studies associated with the trial.
Both Dr. Aldridge and Dr. Matsuoka will be required to execute FDA Form 1572 (Statement of Investigator), financial disclosure certifications under 21 C.F.R. Part 54, and individual investigator undertaking agreements as conditions precedent to site activation.
D. Third-Party Service Providers (Referenced in MCTA)
The CLARION trial will involve several third-party service providers whose roles and contractual relationships must be addressed in or cross-referenced by the MCTA. These providers are as follows:
Contract Research Organization: Meridian Contract Research Organization, Inc. ("Meridian CRO"), located at 9200 Corporate Boulevard, Raleigh, North Carolina 27615, will serve as the contract research organization responsible for clinical monitoring, data management, safety reporting, and biostatistical analysis. Meridian CRO's Chief Executive Officer is Thomas Hartwell. Penterra and Meridian CRO entered into a Master Services Agreement dated January 15, 2023 (the "Meridian MSA"), which governs the CRO's services for the CLARION trial. The Meridian MSA is a separate agreement and is not within the scope of the MCTA negotiation; however, certain provisions of the MCTA — particularly those relating to monitoring visits, safety reporting timelines, and data management protocols — must be coordinated with and cross-referenced to the Meridian MSA to avoid operational conflicts or gaps in coverage.
Electronic Data Capture Vendor: Pinnacle Data Solutions, Inc. ("Pinnacle"), located at 6000 Clearwater Drive, San Diego, California 92121, will provide the electronic data capture ("EDC") platform for the CLARION trial. Pinnacle's platform must comply with 21 C.F.R. Part 11 (electronic records and electronic signatures), and the MCTA should address integration requirements and data security standards applicable to the EDC system.
Central Laboratory: Northbridge Bioanalytical Laboratories, Inc. ("Northbridge"), located at 2900 Commerce Way, Baltimore, Maryland 21224, will serve as the central laboratory for the trial, performing specimen analysis, biomarker assessments, and pharmacokinetic sampling as required by the Protocol.
Clinical Trial Liability Insurer: Briarcliff Mutual Insurance Company ("Briarcliff"), located at 55 Constitution Plaza, Hartford, Connecticut 06103, is the underwriter of Penterra's clinical trial liability insurance policy. The relevant policy is Policy No. BM-CTL-2023-04182, with a policy period of April 1, 2023 through March 31, 2024 (renewable annually). The coverage details are discussed more fully in Section III, Issue 2, below. The Penterra contact at Briarcliff is Karen Tremblay, Vice President, Life Sciences Lines.
FDA Regulatory Counsel: Castleton & Hargrove LLP, located at 1100 Connecticut Avenue NW, Suite 900, Washington, D.C. 20036, serves as Penterra's FDA regulatory counsel. The lead attorney on the matter is Dr. Priya Sundaram, Esq. Coordination with Dr. Sundaram will be necessary regarding IND maintenance, safety reporting obligations, and regulatory strategy issues that may impact MCTA provisions.
E. Financial Structure Overview
The total deal value of the MCTA and associated site agreements is approximately Eighty Million Dollars ($80,000,000), comprising the following components:
The per-patient site fee of $52,000 per subject is the single largest component of the deal value, representing approximately seventy-eight percent (78%) of total costs. The structuring of milestone-based per-patient payments is discussed in detail in Section III, Issue 5, below.
The network coordination and administrative fee of $4,200,000, payable quarterly to Veridian's central operations, reflects the value of Veridian's role in coordinating site activation, IRB reliance arrangements, investigator training, and network-level project management. We note that this fee must be supportable under a fair market value analysis for Anti-Kickback Statute compliance purposes (discussed in Section III, Issue 7, below).
F. Projected Timeline
The projected timeline for the CLARION trial is as follows:
The forty-two (42)-month enrollment period is ambitious for a Phase III oncology trial of this size and reflects the enrollment capacity of the thirty-eight (38)-site Veridian Network. The projected first patient in date of August 14, 2023 assumes timely execution of the MCTA, completion of all site activation activities, and receipt of all necessary IRB approvals. Any delays in MCTA negotiation or execution will directly impact the FPI date and, consequently, the overall timeline for NDA submission.
III. Key Legal Issues for Negotiation
Issue 1: Subject-Injury Indemnification Scope and Structure
The subject-injury indemnification provisions represent what we anticipate will be the most heavily negotiated aspect of the MCTA. Indemnification for injuries to human subjects is a fundamental allocation-of-risk mechanism in clinical trial agreements, and the divergent interests of pharmaceutical sponsors and academic research institutions in this area are well documented. This section analyzes the key components of the indemnification framework and recommends positions for Penterra on each.
A. Sponsor Indemnification of Sites and Investigators
The core indemnification obligation flowing from Penterra to the Veridian Network will require Penterra to indemnify, defend, and hold harmless Veridian, each participating site institution, each principal investigator, each sub-investigator, and all site staff (collectively, the "Site Indemnified Parties") against all claims, losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and costs of litigation) arising from or related to:
(a) injury to or death of a trial subject caused by the administration of penterafenib (PPC-4871) when the investigational product has been administered in accordance with the Protocol and applicable regulatory requirements;
(b) any defect in the design, manufacture, labeling, or supply of the investigational product, including but not limited to manufacturing defects, contamination, mislabeling, or failure to meet product specifications;
(c) Penterra's breach of any representation, warranty, covenant, or obligation under the MCTA or the Protocol; and
(d) the negligence, gross negligence, or willful misconduct of Penterra or its employees, agents, or contractors (including Meridian CRO) in connection with the conduct of the trial.
Anticipated Veridian Position. Based on our experience negotiating with academic research networks and with WJC specifically, we anticipate that Veridian and its counsel will demand broad, uncapped indemnification for all subject injuries arising from participation in the CLARION trial, regardless of cause. Large academic site networks and their counsel commonly take the position that the sponsor, as the party that designs the trial, selects the investigational product, and stands to benefit commercially from the results, should bear the full financial risk of subject injury. We expect WJC to argue that any cap on indemnification is inappropriate for a Phase III oncology trial involving a population of patients with advanced cancer and significant comorbidities.
Recommended Penterra Position. We recommend that Penterra propose a structured indemnification framework that includes the following elements:
(i) A per-subject cap of Five Hundred Thousand Dollars ($500,000) for medical care costs (defined as the reasonable and necessary costs of medical treatment directly attributable to a subject injury covered by the sponsor's indemnification obligation);
(ii) An aggregate cap of Fifteen Million Dollars ($15,000,000) across all sites for medical care costs;
(iii) Separate, uncapped indemnification specifically for claims arising from product-defect causes of action (i.e., claims under subsection (b) above); and
(iv) Uncapped indemnification for claims arising from Penterra's gross negligence or willful misconduct.
Rationale. Per-subject and aggregate caps on medical care cost indemnification are consistent with industry practice in multi-site Phase III oncology trials of comparable size and complexity. The uncapped carve-out for product-defect claims provides meaningful protection to sites and investigators against the category of risk most properly borne by the sponsor — namely, the risk that the investigational product itself is defective — while simultaneously limiting Penterra's open-ended exposure for other categories of subject injury that may be caused by or contributed to by site-level factors. We note that the aggregate cap of $15,000,000 is calibrated to the subject-injury sublimit of $10,000,000 per occurrence / $50,000,000 aggregate under the Briarcliff policy, and we recommend that the relationship between these figures be analyzed further in connection with the insurance adequacy analysis discussed in Issue 2 below.
B. Carve-Outs from Sponsor Indemnification
The sponsor's indemnification obligation should not extend to losses, claims, damages, or liabilities arising from or attributable to:
(i) the negligence, gross negligence, or willful misconduct of the site institution, the principal investigator, any sub-investigator, or any member of the site research staff;
(ii) deviation from the Protocol that is not authorized by Penterra in writing and that is not required for the immediate safety of a trial subject; or
(iii) the site institution's or Veridian's breach of any representation, warranty, covenant, or obligation under the MCTA, the individual site agreement, or applicable law, including but not limited to applicable federal and state regulations governing the conduct of clinical trials.
Protocol Deviation Issue. We anticipate that the treatment of protocol deviations will be a significant point of negotiation. The allocation of liability for protocol deviations lies at the intersection of two competing considerations: (1) the sponsor's interest in ensuring that the Protocol is followed precisely to protect data integrity and regulatory compliance, and (2) the site's and investigator's obligation to exercise independent medical judgment in the best interests of the trial subject.
We recommend drawing a clear distinction in the MCTA between two categories of protocol deviations:
Category 1 — Safety-Required Deviations: Deviations from the Protocol that are required for the immediate safety of a trial subject (e.g., dose modifications or treatment discontinuations necessitated by an acute adverse event) should be expressly excluded from the carve-out, meaning that Penterra's indemnification obligation would remain in effect for subject injuries arising in the context of such deviations. The investigator must document the safety rationale for the deviation contemporaneously and must report the deviation to Penterra and Meridian CRO within twenty-four (24) hours.
Category 2 — All Other Deviations: Deviations from the Protocol that are not required for immediate subject safety — including deviations resulting from site error, administrative oversight, or investigator preference — should fall within the carve-out, and the site institution should bear liability for any resulting subject injury, unless Penterra has provided prior written authorization for the deviation.
This distinction is well-grounded in ICH E6(R2) Good Clinical Practice Guidelines, which recognize the investigator's duty to protect the safety, rights, and well-being of trial subjects, while also emphasizing the importance of protocol compliance for data integrity and regulatory purposes.
C. Reciprocal Site/Investigator Indemnification of Sponsor
Reciprocal indemnification obligations running from Veridian and each participating institution to Penterra are an essential component of a balanced risk allocation framework. We recommend that Veridian and each participating institution (severally, not jointly) indemnify, defend, and hold harmless Penterra and its officers, directors, employees, and agents against all claims, losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees) arising from or related to:
(a) the negligence, gross negligence, or willful misconduct of the site institution, its investigators, sub-investigators, or site staff in the conduct of the trial;
(b) unauthorized protocol deviations (i.e., Category 2 deviations as described above); and
(c) Veridian's or the site institution's breach of any representation, warranty, covenant, or obligation under the MCTA, the individual site agreement, or applicable law.
Cap on Site Indemnity. We recommend a cap of Five Million Dollars ($5,000,000) per site per occurrence and Twenty Million Dollars ($20,000,000) in the aggregate across all Veridian sites for the reciprocal indemnification obligation. We note that Veridian's 501(c)(3) tax-exempt status and the nonprofit status of most of its member institutions will likely be cited by WJC as a basis for resisting high reciprocal indemnity caps. Academic medical centers are typically reluctant to accept open-ended indemnification obligations, both because of their fiduciary duties to their institutional missions and because their insurance programs and reserve funds are often structured with lower limits than those maintained by commercial pharmaceutical companies. We should be prepared to negotiate these caps, and a range of $3,000,000 to $5,000,000 per site per occurrence may represent a reasonable negotiation zone.
D. Notice Requirements
Timely notice of claims is essential to the effective operation of the indemnification framework. We recommend the following notice provisions:
(i) The indemnified party must provide written notice to the indemnifying party within thirty (30) calendar days of becoming aware of any claim, action, suit, or proceeding for which indemnification may be sought under the MCTA.
(ii) The notice must include a reasonably detailed description of the claim, the identity of the claimant, the legal theories asserted (if known), and copies of any pleadings, demand letters, or other materials received by the indemnified party.
(iii) Failure to provide timely notice shall not relieve the indemnifying party of its indemnification obligation except to the extent the indemnifying party demonstrates that it has been materially prejudiced by the delay in notification.
(iv) The indemnifying party shall have the right to assume and control the defense of any indemnified claim with counsel of its choosing, provided that such counsel is reasonably acceptable to the indemnified party.
(v) No settlement of any indemnified claim shall be made without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld, conditioned, or delayed. In particular, no settlement shall impose any non-monetary obligation on the indemnified party (including any admission of fault or liability) without the indemnified party's express written consent.
The "material prejudice" standard for late notice is the prevailing approach in negotiated commercial agreements and reflects the modern trend away from strict notice-as-a-condition-precedent provisions, which have been the subject of increasing judicial skepticism. From Penterra's perspective, the material prejudice standard is acceptable because it preserves the indemnifying party's ability to challenge the indemnification obligation in cases where late notice has genuinely impaired its ability to defend or mitigate, while avoiding the harsh results that can arise when a technical notice failure is used to deny indemnification for a meritorious claim.
Issue 2: Insurance Adequacy and Requirements
A. Penterra's Clinical Trial Liability Insurance
Penterra currently maintains clinical trial liability insurance through Briarcliff Mutual Insurance Company under Policy No. BM-CTL-2023-04182. The key terms of the existing coverage are as follows:
Anticipated Veridian Position. Large academic site networks frequently demand per-occurrence clinical trial liability coverage of Fifty Million Dollars ($50,000,000) or higher, reflecting the significant potential liability exposure associated with multi-site, large-enrollment Phase III trials involving seriously ill patient populations. We expect Veridian and WJC to make an initial demand for $50,000,000 per occurrence or, at minimum, to request that the current per-occurrence limit be increased from $25,000,000 to at least $35,000,000 or $40,000,000.
Recommended Penterra Position. Penterra's current coverage of $25,000,000 per occurrence and $75,000,000 aggregate is within the upper range of industry norms for Phase III oncology trials. Market data from recent clinical trial insurance placements indicates that per-occurrence limits in the range of $15,000,000 to $30,000,000 are standard for Phase III trials of this size and therapeutic area. We recommend that Penterra push back firmly on any demand exceeding the current Briarcliff policy limits and present market benchmarking data to support its position. If Veridian insists on higher limits as a condition to closing, we should explore with Briarcliff the cost and availability of an excess layer or umbrella coverage, but only as a last resort and subject to Penterra's cost-benefit analysis.
Analysis of Subject-Injury Sublimit Adequacy. The subject-injury sublimit of $10,000,000 per occurrence and $50,000,000 aggregate must be evaluated in conjunction with the aggregate cap of $15,000,000 proposed for medical care cost indemnification (see Issue 1 above). We note a potential gap: the proposed indemnification aggregate cap of $15,000,000 exceeds the per-occurrence subject-injury sublimit of $10,000,000, which could create a scenario in which a single large subject-injury claim exhausts the per-occurrence sublimit while Penterra's indemnification obligation continues up to the $15,000,000 cap. This gap analysis should be completed in coordination with Briarcliff and reflected in the separate Insurance Requirements Analysis Memorandum (referenced as Attachment 2).
Additional Insured Requirement. Veridian and each participating site institution will expect to be named as additional insureds on the Briarcliff policy. This is a standard requirement in clinical trial agreements, and we anticipate no objection from Penterra. However, naming thirty-eight (38) individual site institutions as additional insureds will require coordination with Briarcliff to issue the appropriate endorsements. We recommend initiating this process with Karen Tremblay at Briarcliff as soon as the MCTA is executed, or earlier if practicable, to avoid delays in site activation.
B. Veridian/Site Insurance Requirements
We recommend that the MCTA require Veridian and each participating site institution to maintain the following minimum insurance coverage throughout the term of the MCTA:
(i) Commercial general liability insurance with limits of not less than Five Million Dollars ($5,000,000) per occurrence and Ten Million Dollars ($10,000,000) in the aggregate;
(ii) Professional liability (errors and omissions) insurance with limits of not less than Five Million Dollars ($5,000,000) per occurrence and Ten Million Dollars ($10,000,000) in the aggregate; and
(iii) Workers' compensation insurance as required by applicable state law at each site location.
We note that certain Veridian member institutions may maintain self-insured retention programs or participate in risk retention groups rather than carrying traditional commercial insurance policies. The MCTA should accommodate these alternative risk management structures provided that they afford comparable financial protection to Penterra.
C. Certificate Exchange Mechanics
Both parties shall exchange certificates of insurance within fifteen (15) business days of execution of the MCTA and annually thereafter on each policy renewal date. Certificates must identify the policy number, coverage limits, deductibles or self-insured retentions, and the policy period, and must include a provision requiring the insurer to provide Penterra with not less than thirty (30) days' prior written notice of cancellation, non-renewal, or material modification of coverage.
Issue 3: Data Ownership and intellectual Property Rights
A. Clinical Trial Data Ownership
The MCTA must clearly establish that Penterra retains exclusive ownership of all clinical trial data generated under Protocol PPC-4871-III. This includes, without limitation, all case report forms, electronic data capture records, source data verifications, laboratory results, biomarker data, pharmacokinetic data, imaging data, subject diaries, and all analyses, reports, and compilations derived from such data (collectively, the "Study Data").
Exclusive sponsor ownership of clinical trial data is a foundational principle in pharmaceutical-sponsored clinical research, and it is particularly critical in this case because Penterra, as the holder of IND 157823, bears ultimate regulatory responsibility for the data generated under the Protocol and will rely on the Study Data to support its anticipated NDA submission. This is a non-negotiable position for Penterra.
Anticipated Veridian Position. Based on our experience with academic research networks, we anticipate that Veridian and WJC will seek some form of co-ownership of, or a perpetual license-back to, the Study Data for academic research purposes. Academic institutions and their investigators place significant value on access to clinical trial data for purposes of post-trial analyses, secondary publications, meta-analyses, and training and educational activities. WJC is likely to argue that the academic investigators who conduct the trial and the institutions that provide the infrastructure and patient populations are entitled to more than a mere contractual right to request access to de-identified data.
Recommended Penterra Position. We recommend a firm position on exclusive sponsor ownership, with a carefully circumscribed license to Veridian and participating investigators permitting use of de-identified Study Data solely for academic research and publication purposes, subject to the following conditions:
(i) The license shall be non-exclusive, non-transferable, and royalty-free;
(ii) Any academic use of de-identified Study Data must comply with the publication rights provisions of the MCTA (see Issue 4 below);
(iii) Penterra shall have the right to review and approve (approval not to be unreasonably withheld) any proposed academic use of de-identified Study Data prior to submission for publication or presentation;
(iv) The license shall not extend to any use of the Study Data for commercial purposes, including but not limited to support of regulatory submissions by any entity other than Penterra; and
(v) The license shall survive termination or expiration of the MCTA solely with respect to de-identified data in the possession of Veridian or its investigators as of the date of termination or expiration.
B. Pre-Existing intellectual Property
Each party shall retain full ownership of its pre-existing intellectual property, including patents, patent applications, trade secrets, know-how, proprietary methodologies, software, and copyrighted works. No transfer of, or license to, any party's pre-existing intellectual property shall occur by operation of the MCTA except as specifically and expressly set forth in the MCTA or in a separate IP side letter executed concurrently therewith.
We note that Penterra's pre-existing intellectual property relevant to this transaction includes, among other things, the penterafenib compound patent portfolio (U.S. and international), the Protocol design and associated proprietary methodologies, the biomarker strategy underlying the CLARION trial, and certain proprietary data analysis tools. Veridian's pre-existing intellectual property may include research methodologies, patient registry databases, institutional protocols, and network coordination platforms. Neither party should be deemed to have granted any license to its background IP except as explicitly stated in writing.
C. Joint Inventions
Given the collaborative nature of clinical research, there is a realistic possibility that inventions may arise during the course of the CLARION trial that are made jointly by Penterra personnel and Veridian investigators. These may include, for example, novel biomarker discoveries, innovative diagnostic methodologies, or improvements to the Protocol or investigational product administration techniques.
We recommend that the treatment of joint inventions be addressed in a separate IP side letter to be negotiated and executed concurrently with the MCTA. The IP side letter should address the following topics at a minimum:
(i) Definition of "Joint Invention" (inventions conceived or reduced to practice jointly by inventors from both parties);
(ii) Ownership allocation (e.g., joint ownership with each party holding an undivided interest, or sponsor-exclusive ownership with a license-back to Veridian);
(iii) Patent prosecution rights (including which party has the first right to file, the obligation to consult with the other party, and the allocation of prosecution costs);
(iv) Licensing and sublicensing rights; and
(v) Commercialization rights and the allocation of any revenue derived from joint inventions.
The IP side letter is likely to be a significant point of negotiation with Veridian and WJC, and we recommend that the side letter be treated as a distinct but concurrent negotiation track so that it does not delay execution of the MCTA itself.
D. Site Record Retention
The MCTA should require all participating sites to retain source documents, including original medical records, laboratory reports, signed informed consent forms, and all other essential documents (as defined in ICH E6(R2)), for a minimum of fifteen (15) years following study completion or as required by applicable federal, state, and institutional regulations, whichever period is longer. This retention period is consistent with FDA regulatory requirements for clinical trial records and with Penterra's internal document retention program. Sites must provide Penterra with reasonable prior written notice before any destruction of records and must permit Penterra to take custody of records that are at risk of destruction.
Issue 4: Investigator Publication Rights and Academic Freedom
We anticipate that publication rights and academic freedom will be a high-priority issue for Veridian and its academic investigators, particularly Dr. Catherine Aldridge (Global Principal Investigator at Graystone University Medical Center) and Dr. Howard Matsuoka (Co-Principal Investigator at Lakemont Medical Center). Both investigators are active academic researchers with substantial publication records, and the ability to publish trial results in peer-reviewed journals is a critical component of their academic careers and institutional obligations. Veridian, as a 501(c)(3) research organization representing thirty-eight academic medical centers, has a strong institutional interest in protecting the academic freedom of its investigators.
Anticipated Veridian/WJC Position. WJC will almost certainly insist on broad, robust academic freedom protections, including (a) the right of investigators to publish trial results without sponsor veto power, (b) a short pre-publication review period (likely no more than 30-45 days), and (c) explicit acknowledgment that the MCTA does not restrict or limit the academic freedom of investigators in any way.
Recommended Penterra Position. We recommend the following compromise framework, which we believe balances Penterra's legitimate interests in protecting confidential information and patentable subject matter with the academic interests of Veridian and its investigators:
(i) Pre-Publication Review Period: Investigators may submit manuscripts, abstracts, presentations, and other publications relating to the CLARION trial to Penterra for review prior to submission to a journal, conference, or other publication venue. The initial review period shall be sixty (60) calendar days from Penterra's receipt of the proposed publication.
(ii) Patent Filing Extension: During the initial 60-day review period, if Penterra identifies patentable subject matter in the proposed publication, Penterra may request an additional delay of up to ninety (90) calendar days to allow for the filing of patent applications. The total maximum pre-publication delay under this provision shall not exceed one hundred fifty (150) days (60 + 90).
(iii) No Veto Power: Penterra shall not have the right to veto, suppress, or permanently prevent any publication. Penterra's review rights shall be limited to: (a) identification and removal of Penterra's confidential information; (b) protection of patentable subject matter through the filing of patent applications during the extension period; and (c) review of the proposed publication for accuracy of data presentation.
(iv) Multi-Center Publication Policy: The MCTA should include a multi-center publication policy establishing a publication committee composed of representatives of Penterra, Veridian, and the lead investigators. The publication committee shall coordinate the timing and content of multi-center publications, including the presentation of pooled data across sites, to ensure consistency, accuracy, and compliance with applicable regulatory requirements (including FDA guidance on dissemination of clinical trial results and ClinicalTrials.gov posting requirements).
(v) Acknowledgment of Sponsorship: All publications arising from the CLARION trial shall include an acknowledgment of Penterra's sponsorship of the trial in a manner consistent with ICMJE (International Committee of Medical Journal Editors) guidelines.
The total maximum pre-publication delay of one hundred fifty (150) days is within the range commonly accepted by academic medical centers and their legal counsel, although we note that some institutions seek to limit the total delay to ninety (90) or one hundred twenty (120) days. We believe that the 150-day framework is defensible given the significant patent portfolio implications of a Phase III registration trial for a potentially first-in-class oral multi-kinase inhibitor.
Issue 5: Payment Structure and Milestone Design
A. Per-Patient Payment Milestones
The per-patient site fee of Fifty-Two Thousand Dollars ($52,000) per subject is the largest component of the total deal value, representing approximately $62,400,000 across the planned enrollment of 1,200 subjects. We recommend a milestone-based payment structure to align payments with site performance, data deliverables, and subject retention. The proposed milestone schedule is as follows:
Rationale. The 25/25/25/25 milestone split is designed to maintain performance incentives throughout the subject's participation in the trial. By deferring fifty percent (50%) of the per-patient payment to milestones occurring at or after Week 24, the structure incentivizes sites to maintain subject retention and data quality through the later stages of the trial, which are critical for the integrity of the primary endpoint (overall survival) and key secondary endpoints (PFS, ORR, DOR).
Anticipated Veridian Position. We anticipate that Veridian will seek a more front-loaded payment structure, with forty to fifty percent (40-50%) of the per-patient payment due at randomization. Academic site networks commonly argue that the highest costs of trial participation — including IRB review, patient screening and enrollment, informed consent, baseline assessments, and investigational product dispensing — are concentrated in the early stages of the trial, and that a front-loaded payment structure more accurately reflects the timing of site expenditures. WJC may also argue that the 25% payment at randomization is insufficient to cover the site's upfront costs, particularly given the complexity and resource intensity of enrolling patients with advanced hepatocellular carcinoma.
Recommended Response. We recommend that Penterra hold firm on the 25/25/25/25 split as the starting position, while acknowledging that some adjustment may be necessary as a negotiation concession. If Penterra needs to make a concession on this point, a 30/25/25/20 or 35/25/25/15 structure may be acceptable, but we would advise against any structure that places more than 35% of the per-patient payment at the randomization milestone.
B. Start-Up Fee Payment
The start-up fee of Seventy-Five Thousand Dollars ($75,000) per site applies to all thirty-eight (38) participating sites, for a total of Two Million Eight Hundred Fifty Thousand Dollars ($2,850,000). We recommend that this fee be paid in two equal installments:
(i) Fifty percent ($37,500) upon site activation (defined as the date on which the site has received all necessary regulatory and IRB approvals, executed the individual site agreement, and been authorized by Penterra to enroll subjects); and
(ii) Fifty percent ($37,500) upon enrollment of the first subject at the site.
This split-payment structure incentivizes timely site activation and enrollment initiation, while providing the site with immediate financial support to cover the costs of regulatory submissions, IRB review, and site preparation.
C. Network Coordination Fee
The network coordination and administrative fee of Four Million Two Hundred Thousand Dollars ($4,200,000) is payable to Veridian's central operations in quarterly installments of Three Hundred Thousand Dollars ($300,000) over fourteen (14) quarters. This fee compensates Veridian for its role in coordinating site activation across the network, managing IRB reliance arrangements, conducting network-level investigator training, providing centralized project management support, and serving as the primary point of contact between Penterra and the individual site institutions.
We note that the network coordination fee must be supportable under a fair market value analysis for purposes of Anti-Kickback Statute compliance (see Issue 7 below). The quarterly payment structure provides a reasonable basis for aligning the fee with the ongoing delivery of coordination services, rather than providing a lump-sum payment that could be more difficult to defend from a fair market value perspective.
D. Annual Site Maintenance Fees
Annual site maintenance fees of Forty Thousand Dollars ($40,000) per site per year are payable to each of the thirty-eight (38) participating sites over an average period of 3.5 years, for a total of Five Million Three Hundred Twenty Thousand Dollars ($5,320,000). These fees cover the ongoing costs of maintaining site readiness, including investigator and staff training, regulatory document maintenance, IRB continuing review submissions, and equipment calibration and maintenance.
Site maintenance fees shall be paid annually in advance on each anniversary of the site activation date. If a site is terminated or deactivated prior to the next anniversary, the pro-rata unused portion of the site maintenance fee for the remaining period shall be refundable to Penterra.
E. Investigator Grants
Investigator grants totaling One Million Five Hundred Thousand Dollars ($1,500,000) are allocated for publication and academic support activities. These grants shall be disbursed upon acceptance of manuscripts for publication in peer-reviewed journals, in accordance with the publication rights provisions of the MCTA (see Issue 4 above). The allocation of investigator grants among individual investigators and across publications shall be determined by the publication committee established under the multi-center publication policy.
We note that investigator grants are reportable under the Physician Payments Sunshine Act / Open Payments program (see Issue 7.C below) and must be supportable under a fair market value analysis.
F. Payment Terms
All invoiced amounts shall be payable within forty-five (45) calendar days from Penterra's receipt of a proper invoice. Invoices shall be submitted by Veridian on behalf of the participating sites in accordance with a standardized invoicing format to be agreed upon by the parties and appended to the MCTA as part of Exhibit B (Budget and Payment Schedule). Late payments shall accrue interest at the rate of one and one-half percent (1.5%) per month, or the maximum rate permitted by applicable law, whichever is less.
Issue 6: Termination and Wind-Down Provisions
The termination and wind-down provisions of the MCTA must address the unique ethical and regulatory considerations arising from the termination of a clinical trial involving human subjects who may be receiving active treatment for a life-threatening disease. The primary objective of the termination framework is to ensure that subject safety is protected throughout any transition period, while providing both parties with clear and predictable rights and obligations upon termination.
Wind-Down Period. We recommend a one hundred twenty (120)-day wind-down period following any termination of the MCTA (whether for cause, convenience, or regulatory action) to allow for the orderly completion of active treatment cycles, safe transition of subjects to alternative care, and completion of all necessary close-out activities at each site. During the wind-down period, the following key principles shall apply:
(i) Subject Safety: Subjects who are receiving active treatment with penterafenib at the time of termination must be permitted to complete their current treatment cycle or be safely transitioned to alternative care under the supervision of the site investigator. No subject shall be abruptly discontinued from treatment unless required by a safety determination or regulatory action.
(ii) Investigational Product Supply: Penterra shall continue to supply penterafenib to sites during the wind-down period to the extent necessary to support the completion of active treatment cycles and the safe transition of subjects.
(iii) Data Collection: Sites shall continue to collect and report data for subjects in the wind-down period in accordance with the Protocol, including all safety data, adverse events, and serious adverse events.
Payment Obligations During Wind-Down. We anticipate that the treatment of payment obligations during the wind-down period will be a significant point of negotiation. Veridian will likely argue that sites should continue to receive full per-patient milestone payments during the wind-down period, on the grounds that the sites are continuing to provide research services and incurring costs associated with subject care. Penterra, on the other hand, has a legitimate interest in limiting its financial exposure during a period in which the trial is being wound down and new subjects are no longer being enrolled.
We recommend the following position: during the wind-down period, Penterra's payment obligations shall be limited to the direct costs of subject transition and safety monitoring, including investigator time, clinical staff time, laboratory assessments, and investigational product supply. Full per-patient milestone payments shall not be payable for milestones that have not been achieved prior to the date of termination. Any per-patient milestone payments that have accrued but have not yet been invoiced as of the date of termination shall remain payable in accordance with the standard payment terms.
Termination for Cause vs. Convenience. The MCTA should include the following termination provisions:
(i) Termination for Material Breach: Either party may terminate the MCTA upon sixty (60) days' prior written notice to the other party if the other party commits a material breach of any representation, warranty, covenant, or obligation under the MCTA and fails to cure such breach within the 60-day notice period.
(ii) Termination for Regulatory Action: Either party may terminate the MCTA immediately upon written notice if: (a) the FDA issues a clinical hold on IND 157823; (b) the Data Safety Monitoring Board ("DSMB") recommends the halt of enrollment or the discontinuation of the trial; or (c) a safety signal arises that, in the reasonable judgment of Penterra's Chief Medical Officer, requires a Protocol amendment that would fundamentally alter the design, objectives, or conduct of the trial.
(iii) Termination for Safety Concerns: Penterra may terminate the MCTA immediately upon written notice if Penterra determines, in its sole discretion, that continuation of the trial poses an unacceptable risk to subject safety.
(iv) Termination for Convenience: Penterra may terminate the MCTA at any time without cause upon one hundred twenty (120) days' prior written notice to Veridian. In the event of termination for convenience, Penterra shall pay all accrued and unpaid site fees, start-up fees, and other amounts due under the MCTA as of the date of termination, plus the direct costs of wind-down activities as described above.
Termination Triggers Specific to Clinical Trials. The MCTA should expressly address the following clinical-trial-specific termination triggers, which are distinct from the standard for-cause and for-convenience termination provisions:
(i) FDA issuance of a clinical hold on IND 157823 pursuant to 21 C.F.R. § 312.42;
(ii) DSMB recommendation to halt enrollment or discontinue the trial, in accordance with the DSMB charter established under the Protocol; and
(iii) Identification of a safety signal requiring a Protocol amendment that, in Penterra's reasonable judgment, fundamentally alters the trial design or objectives.
In the event of any of these triggers, the wind-down period shall commence immediately, and the parties shall cooperate in good faith to implement the wind-down in a manner that prioritizes subject safety and complies with all applicable regulatory requirements.
Issue 7: Regulatory Compliance Framework
The CLARION trial is subject to a comprehensive regulatory framework encompassing FDA regulations, ICH Good Clinical Practice guidelines, HIPAA, and federal fraud and abuse laws. The MCTA must include robust compliance representations, warranties, and covenants from both parties to address each of these regulatory dimensions.
A. Applicable Regulations
The MCTA must require all parties to comply with the following regulations and guidelines throughout the term of the agreement:
(i) 21 C.F.R. Part 11 — Electronic Records; Electronic Signatures. All electronic records generated in connection with the trial, including EDC entries, electronic signatures, and audit trails, must comply with Part 11 requirements.
(ii) 21 C.F.R. Part 50 — Protection of Human Subjects; Informed Consent. Each subject must provide informed consent prior to enrollment, in accordance with Part 50 requirements and applicable state law.
(iii) 21 C.F.R. Part 54 — Financial Disclosure by Clinical Investigators. Each investigator must complete financial disclosure certifications as discussed in Section 7.D below.
(iv) 21 C.F.R. Part 56 — Institutional Review Boards. Each site must obtain and maintain IRB approval for the conduct of the trial, as discussed in Issue 8 below.
(v) 21 C.F.R. Part 312 — Investigational New Drug Application. Penterra, as the holder of IND 157823, must comply with all IND regulations, including safety reporting requirements, annual reporting, and IND amendments.
(vi) ICH E6(R2) Good Clinical Practice Guidelines. The trial must be conducted in accordance with the principles of Good Clinical Practice as set forth in the ICH E6(R2) guidelines, including the requirements for protocol compliance, data integrity, investigator qualifications, and sponsor oversight.