PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
June 7, 2023
MEMORANDUM
TO: Miriam Calloway, Partner, Calderwood & Harkness LLP Rebecca Liang, Esq., Associate General Counsel, Clinical Affairs, Penterra Pharmaceuticals Corp.
FROM: Sean Morrissey, Associate, Calderwood & Harkness LLP Christopher Aiken, Associate, Calderwood & Harkness LLP
RE: Preparation Memorandum for In-Person Negotiation Session — 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. Purpose and Executive Summary
This memorandum has been prepared to brief Miriam Calloway and Rebecca Liang in advance of the in-person negotiation session currently scheduled for Friday, June 9, 2023, at the offices of Whitmore, Jansen & Callahan LLP ("WJC"), located at 1500 Market Street, Suite 3200, Philadelphia, PA 19102. The session is expected to run from 10:00 AM to 4:00 PM (Eastern), with a working lunch, and is intended to serve as the principal forum for resolving all remaining open issues in the Master Clinical Trial Agreement ("MCTA") between Penterra Pharmaceuticals Corp. ("Penterra" or the "Sponsor") and Veridian Health Research Network, Inc. ("Veridian" or the "Network") governing the conduct of the CLARION trial (Protocol PPC-4871-III).
The CLARION trial is a Phase III, randomized, double-blind, placebo-controlled study evaluating the efficacy and safety of penterafenib (PPC-4871) as a second-line treatment in patients with advanced hepatocellular carcinoma ("HCC"). The MCTA contemplates enrollment of approximately 1,200 subjects across 38 Veridian Network-affiliated clinical trial sites located in 14 states, with a total deal value of approximately $80,000,000 over the projected life of the trial.
Negotiation Timeline. The following summarizes the key milestones in the negotiation of the MCTA to date:
Critical Path. The parties' shared target is to execute the MCTA by the end of June 2023. Execution of the MCTA is a closing condition for several dependent workstreams, including the finalization of insurance certificates, the completion of IRB approvals at the two lead sites (Graystone Medical Center and Lakemont University Hospital), and the execution of individual investigator signature pages at all 38 participating sites. Meeting the end-of-June execution target is essential to achieving the target first patient in ("FPI") date of August 14, 2023. Any material delay beyond June 30, 2023 in executing the MCTA will compress the site activation timeline and could jeopardize the FPI target, with downstream consequences for the overall CLARION development timeline and Penterra's regulatory strategy.
Attendees. The following individuals are expected to attend or be available for the June 9 session:
Veridian / WJC:
• Gregory Callahan, Esq. — Vice President, Legal & Compliance, Veridian
• Patricia Dunne — Director, Sponsored Research Agreements, Veridian
• Allison Whitmore — Partner, Whitmore, Jansen & Callahan LLP
• David Kesselman — Associate, Whitmore, Jansen & Callahan LLP
Penterra / Calderwood & Harkness:
• Miriam Calloway — Partner, Calderwood & Harkness LLP (in person)
• Rebecca Liang, Esq. — Associate General Counsel, Clinical Affairs, Penterra (in person)
• Sean Morrissey — Associate, Calderwood & Harkness LLP (in person)
• Christopher Aiken — Associate, Calderwood & Harkness LLP (available by phone for breakout sessions)
This memorandum addresses the five principal open issues remaining after the June 2 second markup, provides detailed talking points for each issue, sets forth recommended positions and authorized fallback positions, identifies authority parameters and escalation protocols, and offers strategic recommendations for the session. Section VIII provides a comprehensive summary of the terms already agreed for reference and confirmation at the session.
II. Overview of Remaining Open Issues
Following a careful review of the Veridian/WJC second markup received on June 2, 2023, we have identified five principal categories of open issues that must be resolved at or promptly following the June 9 negotiation session. The table below provides a high-level summary of each issue, including its current status, the parties' respective last stated positions, and our recommended resolution approach. Detailed analysis of each issue follows in Sections III through VII.
Note Regarding Agreed Indemnification Terms. As referenced above, the subject-injury indemnification structure was substantially agreed following the exchange of the Indemnification Term Sheet on May 5, 2023, and the incorporation of agreed terms into the Second Draft circulated on May 19. Specifically, the parties have agreed to the following framework: (i) Penterra will indemnify Veridian sites and investigators for subject injuries arising from the investigational product (penterafenib/PPC-4871) when administered in accordance with the Protocol; (ii) a per-subject medical care cap of $500,000; (iii) an aggregate indemnification cap of $15,000,000; (iv) uncapped indemnification for product-defect claims; and (v) a reciprocal site indemnity of $5,000,000 per site/per occurrence and $20,000,000 in the aggregate across all Veridian Network sites. We recommend confirming these agreed terms at the outset of the session and moving promptly to the open issues.
The one caveat to the "agreed" status of the indemnification provisions is that the scope of the protocol deviation carve-out from Penterra's indemnification obligations remains an open issue (Issue 2 below). Resolution of Issue 2 is therefore necessary to finalize the indemnification provisions as a whole.
III. Issue 1: Insurance Coverage Requirements
A. Background and Negotiation History
Penterra maintains clinical trial liability insurance through Briarcliff Mutual Insurance Company under Policy No. BM-CTL-2023-04182, with a policy period running from April 1, 2023 through March 31, 2024 (renewable annually). The current policy provides the following coverage:
• General Policy Limits: $25,000,000 per occurrence / $75,000,000 aggregate
• Subject-Injury Sublimit: $10,000,000 per occurrence / $50,000,000 aggregate
• Additional Insured Status: Available for trial sites and site networks upon request
• Policy Territory: United States, its territories, and possessions
• Retroactive Date: January 1, 2020 (covering all active Penterra clinical programs)
The MCTA requires Penterra to maintain clinical trial liability insurance at specified minimum levels throughout the term of the agreement and the applicable tail period. The parties have been unable to agree on the required per-occurrence limit.
Veridian's Initial Position (April 28 Markup). In its initial markup, Veridian requested that Penterra maintain clinical trial liability insurance with minimum limits of $50,000,000 per occurrence and $100,000,000 in the aggregate. Veridian characterized these levels as necessary to protect the interests of the 38 participating sites and their respective patients, given the size and scope of the CLARION trial and the advanced HCC patient population.
Penterra's Position (Second Draft, May 19). Penterra's Second Draft maintained the insurance requirement at $25,000,000 per occurrence / $75,000,000 aggregate, consistent with the existing Briarcliff policy. Penterra noted in its cover letter that these limits are consistent with industry standards for Phase III oncology trials of comparable size and scope, and that the uncapped product-defect indemnification provides additional protection beyond the insurance limits.
Veridian's Second Markup (June 2). In its second markup, Veridian reduced its aggregate demand from $100,000,000 to $75,000,000 (aligning with Penterra's position on aggregate coverage) but maintained its insistence on $50,000,000 per occurrence. As an alternative, Veridian proposed that Penterra either (a) increase the subject-injury sublimit from $10,000,000 to $25,000,000 per occurrence, or (b) obtain an excess/umbrella layer providing at least $25,000,000 in additional per-occurrence coverage above the primary $25,000,000 layer. This alternative proposal was new as of the June 2 markup and has not yet been formally addressed by Penterra.
B. Talking Points
The following talking points should be employed in the session to support Penterra's position on insurance coverage:
1. Industry Benchmarking. The $25,000,000 per-occurrence / $75,000,000 aggregate limits are consistent with prevailing market standards for Phase III oncology trials of comparable size. Christopher Aiken has prepared an Insurance Adequacy Opinion Memorandum (included in the session materials) analyzing insurance coverage levels in eleven recent Phase III clinical trial agreements involving comparable trial designs, enrollment sizes, and therapeutic areas. Of the eleven comparator agreements, nine specified per-occurrence limits at or below $25,000,000. Only two specified limits of $50,000,000 per occurrence, and both of those involved trials with enrollment exceeding 3,000 subjects — more than two-and-a-half times the CLARION trial enrollment. Penterra's existing coverage is therefore fully consistent with market practice.
2. Additional Insured Status. The Briarcliff policy already provides additional insured status for Veridian and each of the 38 participating sites. This additional insured coverage is automatically triggered upon execution of the MCTA and site-level sub-agreements, without the need for separate endorsement requests. Additional insured status affords Veridian and its member sites direct access to the Briarcliff policy and its defense obligations in the event of a covered claim, significantly enhancing the protection available to the Network and its investigators beyond the contractual indemnification provisions.
3. Uncapped Product-Defect Indemnification. Penterra's indemnification obligations under Section 12.1 of the MCTA are uncapped with respect to product-defect claims — that is, claims arising from defects in the manufacture, design, labeling, or formulation of penterafenib (PPC-4871). This uncapped exposure provides Veridian and its sites with protection that extends well beyond the limits of any insurance policy. In practice, the insurance coverage serves as a first layer of protection, with Penterra's balance sheet standing behind the uncapped indemnification obligation for product-defect claims. Given Penterra's market capitalization of approximately $14 billion and its investment-grade credit rating, this commitment is both credible and substantial.
4. Cost and Timeline Implications of a $50M Policy. Obtaining a $50,000,000 per-occurrence policy would require Penterra to either (a) renegotiate the existing Briarcliff policy at a significantly higher premium, or (b) procure a separate excess/umbrella layer. Based on preliminary inquiries made by Penterra's risk management team, the estimated cost of an excess layer providing $25,000,000 in additional per-occurrence coverage is approximately $1.2 million to $1.8 million in annual premium. Beyond the cost, the process of procuring such coverage — including underwriting review, policy negotiation, and issuance — would require an estimated four to six weeks, which would almost certainly delay execution of the MCTA beyond the end-of-June target and jeopardize the August 14 FPI date.
5. Adequacy of Subject-Injury Sublimit. The subject-injury sublimit of $10,000,000 per occurrence / $50,000,000 aggregate is substantial and appropriate in light of the CLARION trial's characteristics. The trial will enroll approximately 1,200 subjects with advanced HCC, a patient population with a median life expectancy of approximately 10 to 14 months. While this underscores the importance of adequate safety protections — and Penterra takes its obligations to trial subjects with utmost seriousness — the reality is that individual subject-injury claims in this population are unlikely to reach the per-occurrence sublimit. The $50,000,000 aggregate sublimit provides ample coverage across the entire trial.
6. Veridian's Alternative Proposal. With respect to Veridian's alternative proposal to increase the subject-injury sublimit or obtain an excess layer, the same cost and timeline concerns apply. Moreover, the subject-injury sublimit is a sublimit within the broader policy — increasing it would not increase the overall per-occurrence limit, but would merely reallocate coverage within the existing $25,000,000 per-occurrence limit. This may actually reduce the coverage available for other types of claims (e.g., property damage, regulatory defense costs) and could be counterproductive.
C. Recommended Position and Fallback
Primary Position. Hold at $25,000,000 per occurrence / $75,000,000 aggregate, consistent with the existing Briarcliff Mutual policy. Argue that these limits are market-standard, are supported by the Insurance Adequacy Opinion Memorandum, and are supplemented by the uncapped product-defect indemnification, which provides protection far exceeding any insurance limit. The additional insured status afforded to Veridian and each participating site provides direct access to the policy and its defense obligations.
Fallback Position (if Veridian insists on additional protections). If Veridian is unwilling to accept the $25,000,000 per-occurrence limit without additional assurances, offer to include the following supplemental provisions in the MCTA:
(a) A covenant requiring Penterra to use commercially reasonable efforts to maintain clinical trial liability insurance at or above $25,000,000 per occurrence / $75,000,000 aggregate throughout the term of the MCTA and for a period of two years following the completion of the CLARION trial (the "tail period"), for an aggregate coverage duration of approximately 60 months;
(b) An obligation requiring Penterra to provide 30 days' advance written notice to Veridian of any material reduction in coverage, including any reduction in per-occurrence or aggregate limits, cancellation or non-renewal of the policy, or any change in the additional insured status of Veridian or participating sites; and
(c) An agreement by Penterra to use good faith efforts to obtain from Briarcliff Mutual a letter confirming its intent to renew the policy at comparable limits for the duration of the CLARION trial, subject to customary underwriting conditions. (Note: This letter would not be a binding commitment by Briarcliff and has limited legal force, but it may provide Veridian with a degree of comfort regarding the continuity of coverage.)
Hard Floor. Under no circumstances should Penterra agree to a $50,000,000 per-occurrence requirement. Agreeing to this level would require Board-level approval (which has not been sought), would impose significant unbudgeted premium costs on the CLARION trial, and cannot be achieved within the timeline necessary to meet the end-of-June MCTA execution target and the August 14 FPI date.
D. Authority Parameters
Miriam Calloway has been authorized by Nathaniel Briggs, Vice President and General Counsel of Penterra, to agree to the $25,000,000 per-occurrence position together with the commercially reasonable efforts maintenance covenant and the notice-of-reduction provision described in the fallback position above. This authority was confirmed in a telephone conference on June 5, 2023.
Any agreement to per-occurrence limits above $25,000,000 — whether in the form of a primary policy requirement or a requirement to procure excess/umbrella coverage — requires escalation to Nathaniel Briggs and Jennifer Holt, Vice President of Clinical Operations, for budgetary review and potential Board-level approval. Given the timeline constraints, such escalation would likely result in a delay that is inconsistent with the parties' shared objective of executing the MCTA by end of June.
IV. Issue 2: Protocol Deviation Liability Allocation
A. Background and Negotiation History
The indemnification provisions of the MCTA (Article 12) contain a standard carve-out excluding Penterra's indemnification obligations for losses arising from protocol deviations that are "not authorized by Penterra or required for subject safety." The scope and application of this carve-out have been the subject of significant disagreement between the parties across all four drafts exchanged to date.
The core tension is between Penterra's interest in maintaining Protocol integrity — which is essential to the statistical validity and regulatory acceptance of the CLARION trial — and Veridian's interest in preserving investigator clinical autonomy and ensuring that investigators who exercise their independent medical judgment in the interest of subject safety are not thereby exposed to unindemnified liability.
Veridian's Position (Both Markups). In both the April 28 initial markup and the June 2 second markup, Veridian has insisted that investigators must retain the discretion to make medically necessary deviations from the Protocol to protect subject safety without losing the benefit of Penterra's indemnification coverage. Veridian's central argument is that requiring investigators to choose between subject safety and indemnification coverage creates an unacceptable conflict of interest and is inconsistent with investigators' ethical obligations under the Declaration of Helsinki, ICH E6(R2) Good Clinical Practice guidelines, and applicable federal regulations (21 C.F.R. § 312.60).
In its June 2 second markup, Veridian broadened the scope of its proposed exception from "deviations required for subject safety" (as proposed in the April 28 markup) to "any deviation that, in the investigator's reasonable medical judgment, is in the best interest of the subject." This expanded formulation is significantly broader than the initial proposal and, in our view, is unacceptable as drafted because it could encompass virtually any clinical decision an investigator might make, effectively rendering the protocol deviation carve-out meaningless.
Penterra's Position (Second Draft, May 19). In the Second Draft, Penterra proposed a narrowly defined exception for emergency deviations required to protect subject life or prevent serious harm, subject to the following procedural requirements:
(i) The deviation must be undertaken in response to an immediate threat to the subject's life or a risk of serious, irreversible harm;
(ii) The investigator must promptly notify Penterra and Meridian CRO (as Penterra's designated clinical research organization) within 24 hours of the deviation;
(iii) The investigator must document the medical rationale for the deviation in the subject's source records contemporaneously or as soon as practicable after the emergency has been addressed.
This formulation was intended to protect the core principle of investigator autonomy in genuine emergencies while maintaining the integrity of the Protocol for all other circumstances.
B. Talking Points
The following talking points should be employed in the session to support Penterra's position and to introduce the tiered framework:
1. Penterra Supports Investigator Autonomy for Genuine Safety Concerns. It is important to begin this discussion by making clear that Penterra fully supports — and indeed requires — investigators to prioritize subject safety above all other considerations. Penterra's commitment to subject safety is not at issue. The question is how to structure the indemnification provisions so that they appropriately protect investigators who exercise good-faith clinical judgment in genuine safety situations, without creating a standard so broad that it undermines the integrity of the Protocol and, ultimately, the CLARION trial itself.
2. The "Reasonable Medical Judgment" Standard Is Overbroad. Veridian's proposed "reasonable medical judgment" standard, as formulated in the June 2 markup, would cover "any deviation that, in the investigator's reasonable medical judgment, is in the best interest of the subject." This standard contains no temporal limitation (it is not limited to emergency or urgent situations), no procedural requirements (it does not require prior approval, notification, or documentation), and no objective criteria for determining what constitutes the subject's "best interest." In practice, this standard could encompass decisions to alter dosing schedules, modify concomitant medication restrictions, skip protocol-required assessments, or deviate from randomization procedures — any of which an investigator might characterize as being in a subject's "best interest" without any meaningful guardrails. If a significant number of such uncontrolled deviations occur across 38 sites and 1,200 subjects, the regulatory consequences could be severe, including the potential for FDA to reject or question the trial data, or to require additional clinical studies.
3. Proposed Tiered Framework. To bridge the gap between the parties, Penterra proposes a tiered framework that categorizes protocol deviations into three tiers based on the urgency and nature of the clinical situation, with corresponding indemnification treatment and procedural requirements for each tier:
Tier 1 — Emergency Deviations. A Tier 1 deviation is a deviation from the Protocol undertaken by the investigator in response to an immediate threat to the subject's life or a risk of serious, irreversible harm (e.g., anaphylaxis, acute organ failure, or other life-threatening adverse events requiring immediate clinical intervention). Tier 1 deviations are fully covered by Penterra's indemnification obligations under Section 12.1 of the MCTA. The investigator must notify Penterra's Medical Monitor and Meridian CRO within 24 hours of the deviation and must document the medical rationale in the subject's source records as soon as practicable.
Tier 2 — Non-Emergency Medically Necessary Deviations. A Tier 2 deviation is a deviation from the Protocol undertaken by the investigator based on a determination that the deviation is medically necessary for the subject's safety or well-being, but the situation does not involve an immediate threat to life or a risk of serious, irreversible harm (e.g., dose modification in response to Grade 2 adverse events that do not meet the Protocol's pre-specified dose-modification criteria, temporary suspension of study drug administration based on clinical findings, or modification of the visit schedule to accommodate the subject's medical condition). Tier 2 deviations are covered by Penterra's indemnification obligations only if the investigator either (a) obtains prior written approval from Penterra's Medical Monitor (or designee) before implementing the deviation, or (b) if prior approval cannot reasonably be obtained given the clinical circumstances, provides notification to Penterra's Medical Monitor and Meridian CRO within 48 hours of the deviation, together with documented medical rationale in the subject's source records.
Tier 3 — All Other Deviations. A Tier 3 deviation is any deviation from the Protocol that does not qualify as a Tier 1 or Tier 2 deviation. Tier 3 deviations fall within the standard protocol deviation carve-out under Section 12.3(c) and are not covered by Penterra's indemnification obligations.
4. The Tiered Framework Protects Both Parties. This framework serves both parties' interests. It protects investigators from the concern that they will lose indemnification coverage by exercising good-faith clinical judgment in genuine safety situations (Tiers 1 and 2). At the same time, it protects the integrity of the CLARION Protocol by requiring procedural safeguards — notification, documentation, and where feasible, prior approval — that enable Penterra and its Medical Monitor to track and assess deviations in real time, identify any patterns of concern, and take corrective action if necessary. The framework also provides a clear, administrable standard that both parties and the 38 participating sites can apply consistently, reducing the potential for disputes.
5. Regulatory and Scientific Imperative. We should emphasize that the integrity of the Protocol is not merely a contractual concern — it is a regulatory requirement. Under 21 C.F.R. § 312.60, investigators are required to conduct clinical trials in accordance with the protocol. Excessive or uncontrolled deviations could compromise the statistical validity of the CLARION trial and could result in questions from the FDA during the BLA review process. The tiered framework is designed to ensure that deviations are appropriately documented and reviewed, which is in the interest of both parties and the subjects.
C. Recommended Position and Fallback
Primary Position. Present and advocate for the tiered framework described above. Draft compromise language implementing this framework is attached as Annex A and should be distributed at the session when this issue is reached on the agenda.
Fallback Position. If Veridian is unwilling to accept the tiered framework and insists on a "reasonable medical judgment" standard, offer to accept the "reasonable medical judgment" standard subject to the following mandatory procedural requirements:
(1) The investigator must create contemporaneous documentation in the subject's source records setting forth the medical rationale for the deviation at the time the deviation is made (or as soon as practicable thereafter in an emergency);
(2) The investigator must provide notification to Penterra's Medical Monitor and Meridian CRO within 48 hours of the deviation, together with a written summary of the medical rationale;
(3) Each such deviation shall be subject to retrospective review by an independent Medical Monitor (to be mutually agreed by the parties, or if they cannot agree, to be selected through the dispute resolution procedures in Article 19) to confirm that the deviation was medically justified under the circumstances. If the independent Medical Monitor confirms that the deviation was medically justified, Penterra's indemnification obligations shall apply to any losses arising from the deviation. If the independent Medical Monitor determines that the deviation was not medically justified, Penterra's indemnification obligations shall not apply, provided that Penterra will cooperate in good faith with Veridian to resolve any resulting liability through commercially reasonable means.
Hard Floor. Under no circumstances should Penterra agree to a blanket "reasonable medical judgment" standard without any notification, documentation, or review requirements. Such a standard would effectively eliminate the protocol deviation carve-out from the indemnification provisions and would deprive Penterra of any ability to assess and manage the risks associated with deviations from the Protocol across 38 sites and 1,200 subjects.
D. Authority Parameters
Miriam Calloway has authority to agree to the fallback position described above. This authority was confirmed in a telephone conference with Nathaniel Briggs on June 5, 2023.
Both the tiered framework (primary position) and the fallback position have been reviewed and approved by Dr. Elaine Whitford, Chief Medical Officer of Penterra, and Dr. Marcus Yun, Senior Vice President of Clinical Development. Their sign-off was obtained via email on June 6, 2023. Dr. Whitford specifically noted that the tiered framework is consistent with the approach Penterra has taken in its clinical trial agreements with other site networks for the CLARION trial and other ongoing Phase III programs.
V. Issue 3: Investigator Independence and Publication Rights
A. Background and Negotiation History
Article 17 of the MCTA governs the rights of Veridian, its member sites, and the site investigators to publish or present the results of the CLARION trial. The publication rights provisions are among the most closely negotiated terms in any clinical trial agreement involving an academic or research-network partner, and the MCTA is no exception. The parties' positions have evolved significantly over the course of the negotiation, and the remaining gap — while narrower than it was — is significant because it implicates Penterra's intellectual property strategy for penterafenib and the broader kinase inhibitor platform.
Penterra's First Draft (April 7). Penterra's initial draft proposed a 90-day sponsor review period for all proposed publications and presentations, during which Penterra would have the right to (a) review the proposed publication for confidential information and request its redaction, and (b) delay publication for up to an additional 180 days if the proposed publication contained patentable subject matter and Penterra needed additional time to prepare and file patent applications. This provision was consistent with Penterra's standard form clinical trial agreement.
Veridian's Initial Markup (April 28). Veridian's initial markup represented a significant departure from Penterra's proposal. Veridian demanded unrestricted publication rights with only a 30-day courtesy review period, with no right to delay publication for patent filings. Veridian cited academic freedom principles and the International Committee of Medical Journal Editors ("ICMJE") guidelines, which require that investigators have full autonomy over publication decisions as a condition of ethical authorship. Veridian also noted that many of its network-affiliated sites are associated with academic medical centers whose institutional policies prohibit investigators from agreeing to sponsor control over publication content or timing.
Penterra's Second Draft (May 19). In the Second Draft, Penterra offered a significant compromise: a reduced 60-day review period (down from 90 days), a reduced maximum patent delay of 90 additional days (down from 180 days), and an explicit provision that the sponsor may require removal of confidential information but may not suppress or require the alteration of scientific findings, conclusions, or interpretations. This compromise was designed to address Veridian's academic freedom concerns while preserving Penterra's ability to protect its intellectual property.
Veridian's Second Markup (June 2). Veridian accepted the 60-day review period as proposed in the Second Draft — an important area of agreement. However, Veridian rejected the 90-day patent delay as excessive and counter-proposed a maximum delay of 45 days for patent filings. Veridian argued that a 45-day delay is sufficient for the preparation and filing of a provisional patent application, and that any delay beyond 45 days would be inconsistent with the ICMJE guidelines and the publication policies of several of Veridian's member institutions.
In addition, Veridian proposed a new provision (not previously addressed in the negotiation) stipulating that multi-center publications reporting the CLARION trial's primary endpoint results should take precedence over single-site publications. Under this proposal, individual sites would be required to defer publication of their site-specific analyses of primary endpoint data until after the initial multi-center publication has been submitted and accepted for publication.
B. Talking Points
1. The 60-Day Review Period Is Agreed. We should note at the outset that the parties are aligned on the 60-day review period. This represents a meaningful compromise by Penterra from its initial 90-day proposal and should be acknowledged as such.
2. 90-Day Patent Delay Is Industry Standard. The 90-day patent delay is consistent with prevailing practice in Phase III sponsor-site agreements. A survey of comparable clinical trial agreements across the pharmaceutical industry indicates that patent delays of 60 to 90 days are standard, with 90 days being the most common period in agreements involving novel chemical entities in competitive therapeutic areas. Penterra's IP counsel at Castleton & Hargrove LLP, Dr. Priya Sundaram, has confirmed in writing that 90 days is the minimum reasonable timeframe for patent prosecution given the complexity of combination intellectual property in the kinase inhibitor space. Penterafenib is a multi-target kinase inhibitor with potential patentable subject matter extending to novel dosing regimens, biomarker-based patient selection criteria, combination therapy approaches, and pharmacokinetic findings that may emerge from the CLARION trial data. Preparing and filing provisional patent applications covering these diverse areas of potential invention requires substantial technical analysis, patent claim drafting, and coordination across Penterra's patent prosecution team and its external counsel.
3. 45-Day Patent Delay Is Insufficient. Veridian's proposed 45-day patent delay is, in our assessment, insufficient for the preparation and filing of provisional patent applications of the complexity anticipated in the kinase inhibitor space. While it is true that a simple provisional application can be prepared in 45 days, the provisional applications that may be required in connection with CLARION trial data are not simple — they may involve complex claim structures covering multiple inventive concepts, require analysis of substantial clinical data sets, and need to be coordinated with ongoing prosecution of Penterra's existing patent portfolio to avoid issues of double patenting or inconsistent claim scope. A 45-day window would create significant risk that patent filings are rushed, incomplete, or poorly coordinated, with potential long-term consequences for Penterra's intellectual property position.
4. Multi-Center Publication Priority Is Reasonable. Penterra is willing to concede on the multi-center publication priority point proposed by Veridian in the June 2 markup. Penterra agrees that the initial reporting of the CLARION trial's primary endpoint results (overall survival) should be via a multi-center publication authored by the Global Principal Investigator, Dr. Catherine Aldridge, and the investigators, with individual site publications of primary endpoint data to follow the multi-center publication. This approach is consistent with best practices in multi-center clinical trial reporting, promotes scientific rigor by ensuring that primary endpoint results are presented in the context of the full trial population, and aligns with the ICMJE guidelines regarding the appropriate reporting of clinical trial results. Conceding this point early in the discussion may generate goodwill and facilitate resolution of the more difficult patent delay issue.
5. ICMJE Compliance. Nothing in Penterra's proposed publication provisions — including the 60-day review period and the 90-day patent delay — is inconsistent with the ICMJE guidelines. The ICMJE guidelines permit sponsors to review manuscripts prior to publication and to delay publication for a reasonable period for patent-related purposes, provided that the sponsor does not have the right to suppress findings or control the content of the publication. Penterra's Second Draft explicitly provides that the sponsor may not suppress or alter scientific findings, which satisfies this ICMJE requirement.
C. Recommended Position and Fallback
Primary Position. Hold at 60-day review + 90-day patent delay. Agree to the multi-center publication priority provision for initial reporting of CLARION primary endpoint results (overall survival). Present this as a package that balances Veridian's academic freedom interests against Penterra's legitimate intellectual property protection needs.
Fallback Position. If Veridian is unwilling to accept a 90-day patent delay, offer the following alternative structure, which has been designed to achieve a practical equivalent of 90 days while accommodating Veridian's stated preference for a shorter delay period:
(a) A baseline patent delay of 60 days from the date of Penterra's receipt of the proposed publication or presentation;
(b) Penterra retains the right to request an additional 30-day extension of the patent delay period upon written certification to Veridian that a patent filing relating to the subject matter of the proposed publication is imminent (i.e., a draft provisional application has been prepared or is in the process of being finalized); and
(c) The additional 30-day extension may be exercised no more than once per proposed publication.
This "60+60+30" structure (60-day review + 60-day patent delay + discretionary 30-day extension) effectively provides up to 90 days of patent delay in practice, but frames the delay as a 60-day baseline with a conditional extension, which may be more palatable to Veridian. Draft compromise language implementing this structure is attached as Annex B.
Hard Floor. Do not accept anything less than a 60-day review period combined with a 60-day patent delay. Any period shorter than 60 days for patent prosecution would expose Penterra to an unacceptable risk of inadequate intellectual property protection and has not been approved by Penterra's IP counsel at Castleton & Hargrove LLP.
D. Authority Parameters
Miriam Calloway has authority to agree to the fallback position (60-day review + 60-day patent delay + discretionary 30-day extension). This authority was confirmed in a telephone conference with Nathaniel Briggs on June 5, 2023.
Any position that results in a patent delay period of less than 60 days (i.e., anything below the 60+60+30 structure) requires escalation to Nathaniel Briggs and Dr. Priya Sundaram at Castleton & Hargrove LLP for review. Given the importance of the kinase inhibitor patent portfolio to Penterra's overall IP strategy, any erosion below the 60-day patent delay floor would need to be assessed in the context of Penterra's broader patent prosecution and portfolio management objectives.
VI. Issue 4: Termination Wind-Down Payment Obligations
A. Background and Negotiation History
Article 20 of the MCTA governs the rights and obligations of the parties upon termination or expiration of the agreement, including the procedures and payment obligations during the wind-down period. The MCTA provides for a 120-day wind-down period following any termination, during which the parties are required to cooperate to ensure the safety of enrolled subjects. Subjects who are in active treatment at the time of the termination notice must be either (a) transitioned to alternative care arrangements, or (b) permitted to complete their current treatment cycle under the Protocol, as determined by the investigator in consultation with Penterra's Medical Monitor.
The payment obligations during the wind-down period are the subject of the most significant remaining financial gap between the parties. The parties' positions are summarized below.
Penterra's Second Draft Position (May 19). Penterra's Second Draft proposed the following wind-down payment structure:
(i) Per-Patient Milestone Fees: Penterra would continue to pay per-patient milestone fees for subjects who were enrolled prior to the date of the termination notice and who continue to participate in the study during the wind-down period. Milestone payments would be made for milestones actually achieved during the wind-down period (i.e., if a subject reaches Week 12 or Week 24 during the wind-down, the corresponding $13,000 milestone payment would be payable). No milestone payments would be payable for milestones not actually reached.
(ii) Site Maintenance Fees: Site maintenance fees ($40,000 per site per year) would be pro-rated through the end of the 120-day wind-down period. Sites that complete all wind-down activities before the end of the 120-day period would receive maintenance fees through the date of completion of their wind-down activities.
(iii) No New Enrollment: No new subjects would be enrolled after the date of the termination notice.
(iv) Start-up Fees: Start-up fees already triggered (50% at site activation, 50% at first patient enrolled) would remain non-refundable. No additional start-up fees would be payable for milestones not yet triggered.
(v) Wind-Down Administrative Costs: No specific provision for wind-down administrative costs beyond the site maintenance fees and per-patient milestone payments.
Veridian's June 2 Markup. Veridian's second markup significantly expanded the wind-down payment obligations, proposing the following:
(i) Full Per-Patient Completion Payments: Penterra would be required to pay the full per-patient completion payment ($52,000 per subject) for all subjects enrolled prior to the termination notice date, regardless of whether those subjects actually complete the study or are transitioned to alternative care during the wind-down period. Veridian's rationale is that the sites have incurred costs and committed resources to support the enrollment and treatment of these subjects, and should not bear the financial risk of a sponsor-initiated termination.
(ii) Six Months of Post-Termination Site Maintenance Fees: Rather than pro-rating site maintenance fees through the end of the 120-day wind-down period, Veridian demands six full months (approximately 180 days) of site maintenance fees following the termination date, calculated at the annual rate of $40,000 per site.
(iii) Non-Refundable Start-Up Fees: Veridian reiterates that all start-up fees that have been triggered are non-refundable — this appears to be an agreed point and does not require further negotiation.
(iv) Wind-Down Administrative Costs: Veridian demands payment of wind-down administrative costs estimated at $150,000 per site, to cover the costs of data reconciliation, source document verification, regulatory filings (IRB notifications, FDA notifications), archiving, and staff redeployment.
The financial gap between the parties' positions is significant. Under Veridian's proposal, a termination at maximum enrollment (1,200 subjects) would trigger the following payment obligations:
Under Veridian's proposal, a termination at maximum enrollment would require Penterra to pay virtually the entire deal value even if the trial is terminated early, which effectively eliminates the economic benefit of the termination right.
B. Talking Points
1. Milestone-Based Payment Structure. The entire payment structure of the MCTA is milestone-based. The per-patient fees are structured as four equal milestone payments of $13,000 each, triggered at randomization, Week 12, Week 24, and study completion. This structure was deliberately chosen to align payment with the delivery of value — Penterra pays for each stage of a subject's participation as it occurs. Paying full completion payments for milestones not achieved contradicts the fundamental logic of the milestone structure and would effectively convert the milestone-based structure into a flat per-subject fee that is payable regardless of actual performance. Penterra is unwilling to agree to such a conversion.
2. Site Maintenance Fees. Site maintenance fees of $40,000 per site per year are intended to cover the ongoing costs of maintaining a site in a state of operational readiness for the trial — staffing, facilities, regulatory compliance, and related overhead. Once the trial is terminated and the wind-down is complete, these costs cease. Pro-rating the maintenance fees through the end of the 120-day wind-down period is appropriate and fully compensates sites for their actual costs during the wind-down. Veridian's demand for six full months of post-termination maintenance fees (approximately $760,000 in total across 38 sites) is not justified by any actual cost that sites will incur after the wind-down is complete, and appears to function as a termination penalty rather than cost reimbursement.
3. Start-Up Fees. The start-up fees ($75,000 per site) are already structured as non-refundable milestone payments — 50% ($37,500) payable at site activation and 50% ($37,500) payable at first patient enrolled. Because these milestones will have been triggered for all activated and enrolling sites prior to any termination, these fees are inherently non-refundable. We do not believe this is a contested point and it should be confirmed quickly.
4. Wind-Down Administrative Costs. Penterra recognizes that sites will incur legitimate administrative costs during the wind-down period, including costs associated with data reconciliation, source document verification, IRB and FDA notifications, archiving, and related activities. Penterra is willing to accommodate reasonable, documented wind-down administrative costs. However, Veridian's estimate of $150,000 per site is excessive and is not supported by any detailed cost breakdown. Across 38 sites, Veridian's proposal would require Penterra to pay $5,700,000 in wind-down administrative costs alone — a figure that exceeds the total site maintenance budget for the entire trial ($5,320,000). Penterra proposes a cap of $50,000 per site for documented wind-down administrative costs. At $50,000 per site across 38 sites, the total wind-down administrative cost would be $1,900,000 — a substantial sum that should more than cover the reasonable costs of an orderly wind-down.
5. Shared Interest in Avoiding Termination. Both parties have a strong shared interest in completing the CLARION trial as designed. Termination provisions are, by their nature, worst-case scenarios that both parties hope will never be triggered. The wind-down payment provisions should be designed to ensure subject safety and fair compensation for sites' actual costs during the wind-down, not to function as punitive termination fees that discourage the sponsor from exercising its termination rights. Overly burdensome termination provisions can actually undermine the sponsor-site relationship by creating an adversarial dynamic around a provision that both parties should hope is never invoked.
C. Recommended Position and Fallback
Primary Position. Per-patient milestone fees payable only for milestones actually achieved during the wind-down period. Site maintenance fees pro-rated through the end of the 120-day wind-down period. Start-up fees confirmed as non-refundable. Wind-down administrative cost cap of $50,000 per site for documented costs.
Fallback Position. If Veridian insists on additional per-patient payments beyond milestones actually achieved, offer the following compromise:
(a) Accelerated Partial Completion Payment: Penterra will pay one additional per-patient milestone payment ($13,000) beyond the last milestone achieved as of the date of the termination notice, for each subject who is enrolled and in active treatment as of the termination notice date. This payment is intended to recognize the site's investment in subjects who are progressing toward their next milestone at the time of termination and would not have reached that milestone but for the termination. This accelerated payment is capped at one additional milestone per subject and does not extend to full completion payments.
(b) Increased Wind-Down Administrative Cost Cap: Increase the wind-down administrative cost cap from $50,000 to $75,000 per site for documented costs.
(c) Site Maintenance: Site maintenance fees remain pro-rated through the end of the 120-day wind-down period. Do not agree to six months of post-termination maintenance.
Draft compromise language implementing the fallback position is attached as Annex C.
Hard Floor. Do not agree to (i) full completion payments for all enrolled subjects regardless of milestone achievement, or (ii) six months of post-termination site maintenance fees. Either concession would fundamentally alter the economics of the MCTA and would require Board-level approval.
Financial Impact of Fallback Position. The financial exposure under the fallback position, assuming a worst-case scenario of termination at maximum enrollment (1,200 subjects), is as follows:
• Accelerated milestone payments: $13,000 × 1,200 subjects = $15,600,000 (maximum)
• Wind-down administrative costs: $75,000 × 38 sites = $2,850,000
• Total incremental exposure: approximately $18,450,000
This represents a significant financial commitment and should not be agreed without appropriate authorization. See Section VI.D below.
D. Authority Parameters
Miriam Calloway has authority for the primary position (milestones achieved only; $50,000/site wind-down cap). This authority was confirmed in the June 5 telephone conference with Nathaniel Briggs.
The fallback position, which carries a maximum incremental financial exposure of approximately $18.5 million, has not yet been approved by Penterra management. Rebecca Liang should confirm fallback authority with Jennifer Holt (VP, Clinical Operations) and Nathaniel Briggs prior to the session. Given the magnitude of the financial exposure, approval from both Jennifer Holt and Nathaniel Briggs is required before the fallback position can be offered at the table.
We recommend that Rebecca Liang schedule a call with Jennifer Holt and Nathaniel Briggs on the morning of June 8 or, at the latest, the morning of June 9 before the session commences, to confirm authorization for the fallback position. If authorization is not obtained prior to the session, the fallback should not be offered, and the team should hold at the primary position and take the termination wind-down issue under advisement for subsequent resolution.
VII. Issue 5: Minor Residual Bracketed Provisions
Three categories of minor residual bracketed provisions remain in the Second Draft and Veridian's June 2 markup. These are expected to be resolved quickly and are scheduled for the final segment of the June 9 session. We summarize each below with our recommended positions.
A. Notice Mechanics (Section 22.1)
The only remaining bracket in Section 22.1 concerns the precise notice addresses for the parties. We recommend confirming the following addresses at the session:
Penterra Pharmaceuticals Corp.:
200 Biopharma Boulevard, Suite 1400 Princeton, NJ 08540
Attention: Nathaniel Briggs, VP & General Counsel
With a copy to: Rebecca Liang, Esq., Associate General Counsel, Clinical Affairs (same address)
With a copy to outside counsel: Calderwood & Harkness LLP 280 Park Avenue, 34th Floor New York, NY 10017
Attention: Miriam Calloway
Veridian Health Research Network, Inc.:
750 Research Parkway, 8th Floor Philadelphia, PA 19104
Attention: Gregory Callahan, Esq., VP, Legal & Compliance
With a copy to: Patricia Dunne, Director, Sponsored Research Agreements (same address)
With a copy to outside counsel: Whitmore, Jansen & Callahan LLP 1500 Market Street, Suite 3200 Philadelphia, PA 19102
Attention: Allison Whitmore
Acceptable Notice Methods. The parties should confirm that the following notice methods are acceptable and effective under the MCTA: (i) personal delivery; (ii) nationally recognized overnight courier service (e.g., Severin Partners LLC, UPS); (iii) United States certified mail, return receipt requested, postage prepaid; and (iv) email, provided that any notice delivered by email must be followed within one business day by a confirmation copy sent via nationally recognized overnight courier service. Notice by email alone (without a confirmation copy by overnight courier) shall not constitute effective notice under the MCTA.
B. Subcontractor Approval Process (Section 8.6)
Veridian's second markup requested the right to approve all subcontractors engaged by Penterra in connection with the CLARION trial. Penterra's position, as set forth in the Second Draft, is as follows:
(i) The subcontractors listed on Exhibit K to the MCTA are pre-approved and require no further consent from Veridian. The current Exhibit K lists the following pre-approved subcontractors:
• Meridian CRO (clinical research organization — trial management, monitoring, and site support)
• Pinnacle Data Solutions, Inc. (electronic data capture and data management)
• Northbridge Bioanalytical Laboratories, Inc. (bioanalytical laboratory services)
(ii) Any additional subcontractors engaged by Penterra for the CLARION trial after execution of the MCTA shall require Veridian's prior written consent, such consent not to be unreasonably withheld, conditioned, or delayed. Veridian shall have 15 business days from receipt of Penterra's written request (including a description of the proposed subcontractor and the scope of services to be performed) to provide its consent or a written statement of its objections. If Veridian fails to respond within the 15-business-day period, consent shall be deemed granted.
We recommend maintaining this position. The pre-approved subcontractor list reflects Penterra's existing vendor relationships for the CLARION trial, and the consent-not-to-be-unreasonably-withheld standard with a deemed-consent mechanism provides Veridian with appropriate oversight without giving it a veto over Penterra's operational decisions. This is a minor issue that we expect Veridian to accept without significant resistance.
C. Force Majeure Clause (Section 21.3)
A minor bracket remains in the force majeure provision regarding whether pandemics and epidemics are expressly included in the enumerated list of force majeure events. Veridian's second markup included the following proposed addition to the force majeure definition: "pandemics, epidemics, or other public health emergencies declared by the World Health Organization or a comparable governmental authority."
Recommendation. Penterra has no reason to resist the express inclusion of pandemics and epidemics in the force majeure definition. The COVID-19 pandemic demonstrated the relevance of pandemic-related disruptions to clinical trial operations, and the express inclusion of pandemics in force majeure provisions has become standard market practice since 2020. We recommend agreeing to Veridian's proposed language.
Duration Cap. We also recommend proposing a duration cap on force majeure suspensions: if a force majeure event continues for more than 180 consecutive days, either party may terminate the MCTA upon 30 days' written notice without liability (other than accrued payment obligations and wind-down obligations for enrolled subjects). This provides a reasonable outer limit on the suspension of performance and prevents the MCTA from being held in indefinite limbo by a prolonged force majeure event.
VIII. Confirmed/Agreed Terms — Summary for Reference
The following terms have been substantially agreed between the parties and are reflected in the Second Draft MCTA (May 19, 2023) as modified by the Indemnification Term Sheet (May 5, 2023). These terms should be confirmed at the outset of the June 9 session. Any adjustments or corrections identified by either party should be addressed promptly before the parties move to the open issues.
Subject-Injury Indemnification (Article 12)
Penterra will indemnify, defend, and hold harmless Veridian, its member sites, and the investigators from and against any and all losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees) arising from injuries to trial subjects caused by the administration of the investigational product (penterafenib/PPC-4871) in accordance with the Protocol. The indemnification is subject to the following parameters:
• Per-Subject Medical Care Cap: $500,000
• Aggregate Cap: $15,000,000
• Product-Defect Claims: Uncapped (no per-subject or aggregate limit for claims arising from defects in the manufacture, design, labeling, or formulation of penterafenib)
• Carve-Outs: Penterra's indemnification obligations do not extend to losses arising from (i) investigator negligence or willful misconduct; (ii) unauthorized protocol deviations (subject to resolution of Issue 2 regarding medically necessary deviations, as discussed in Section IV above); or (iii) site breach of the MCTA
Reciprocal Site Indemnity (Section 12.5)
Each Veridian member site will indemnify, defend, and hold harmless Penterra from and against losses arising from the site's negligent acts, errors, or omissions, or its breach of the MCTA, subject to the following limits:
• Per-Site/Per-Occurrence Limit: $5,000,000
• Aggregate Limit (All Sites): $20,000,000
Notice Period for Indemnification Claims (Section 12.7)
The party seeking indemnification must provide written notice to the indemnifying party within 30 calendar days of becoming aware of a claim or potential claim giving rise to an indemnification obligation. Failure to provide timely notice does not relieve the indemnifying party of its obligations except to the extent the indemnifying party is materially prejudiced by the delay.
Payment Structure (Article 9; Exhibit B)
The MCTA employs a milestone-based payment structure for per-patient fees and a combination of milestone, periodic, and lump-sum payments for other cost categories: