1018-00004 · Penterra Pharmaceuticals Corp · Transaction Documents/MCTA Drafts

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

MEMORANDUM

FROM: Miriam Calloway, Partner, Calderwood & Harkness LLP

TO: Nathaniel Briggs, Esq., Vice President & General Counsel, Penterra Pharmaceuticals Corp. Rebecca Liang, Esq., Associate General Counsel, Clinical Affairs, Penterra Pharmaceuticals Corp. Jennifer Holt, Vice President, Clinical Operations, Penterra Pharmaceuticals Corp.

CC: Joel Strauss, Partner, Calderwood & Harkness LLP Sean Morrissey, Associate, Calderwood & Harkness LLP Christopher Aiken, Associate, Calderwood & Harkness LLP

DATE: May 3, 2023

RE: Negotiation Strategy — Response to Veridian Health Research Network, Inc. Initial Markup of Master Clinical Trial Agreement for Protocol PPC-4871-III (CLARION)

MATTER NO.: 1018-00004

I. Executive Summary

The purpose of this memorandum is to set forth Calderwood & Harkness LLP's recommended negotiation positions in response to the initial markup of the Master Clinical Trial Agreement (the "MCTA") received from Whitmore, Jansen & Callahan LLP ("WJC"), counsel to Veridian Health Research Network, Inc. ("Veridian"), on April 28, 2023. This memorandum is intended to serve as a comprehensive roadmap for Penterra's negotiation team in advance of the circulation of a revised draft MCTA and related materials.

As background, Penterra Pharmaceuticals Corp. ("Penterra" or the "Company") is the sponsor of Protocol PPC-4871-III, known as the CLARION trial — a Phase III, randomized, double-blind, placebo-controlled study of penterafenib (PPC-4871) in advanced hepatocellular carcinoma ("HCC"). Penterra circulated the first draft of the MCTA to WJC on April 7, 2023. Veridian returned its initial markup — containing extensive proposed revisions — on April 28, 2023. The total deal value under the MCTA is approximately $80,000,000 across thirty-eight (38) Veridian Network sites located in fourteen (14) states over the projected sixty (60)-month study duration (consisting of a forty-two (42)-month enrollment period plus an eighteen (18)-month follow-up period).

This memorandum addresses the seven principal categories of contested provisions raised by Veridian's markup: (1) subject-injury indemnification, (2) insurance requirements, (3) payment structure and milestones, (4) publication rights and investigator independence, (5) protocol deviation liability allocation, (6) termination and wind-down, and (7) regulatory compliance representations. For each category, we analyze Veridian's proposed position, assess its market reasonableness, and set forth our recommended negotiation position along with fallback positions where appropriate.

Our overall strategic recommendation is that Penterra should adopt a firm-but-collaborative approach to these negotiations. Specifically, we recommend that Penterra make targeted concessions in the area of academic freedom and publication rights — an area of particular institutional importance to Veridian as a network of academic medical centers — while holding firm on indemnification caps and insurance levels that are market-standard for Phase III multi-site oncology trials and consistent with the Company's existing Briarcliff Mutual Insurance Company coverage. This approach signals good faith while preserving the Company's key financial and legal protections.

As an immediate next step, we recommend that Penterra authorize Calderwood & Harkness to circulate a stand-alone indemnification term sheet to WJC by May 5, 2023, memorializing Penterra's positions on the most contentious issue. This will focus the negotiation and facilitate early resolution of the indemnification provisions, which will in turn unlock the preparation and circulation of a revised Second Draft MCTA incorporating agreed compromise positions, targeted for mid-May 2023.

The balance of this memorandum sets forth our analysis in detail.

II. Background

A. Transaction Overview

Penterra is sponsoring the CLARION trial (ClinicalTrials.gov Identifier NCT05928174; IND 157823), a Phase III, randomized, double-blind, placebo-controlled study evaluating penterafenib (PPC-4871) as a second-line treatment in adult patients with advanced hepatocellular carcinoma who have progressed on or following first-line systemic therapy. Penterafenib is a novel, orally bioavailable kinase inhibitor targeting the FGFR2 and FGFR3 signaling pathways, which play a critical role in the pathogenesis and progression of HCC.

The CLARION trial is designed with a planned enrollment of 1,200 subjects randomized in a 2:1 ratio, with 800 subjects receiving penterafenib and 400 subjects receiving matched placebo plus best supportive care. Subjects will be enrolled across 38 Veridian Network academic medical centers and affiliated research sites located in 14 states. The primary endpoint is overall survival ("OS"). Key secondary endpoints include progression-free survival ("PFS"), objective response rate ("ORR") per RECIST v1.1 criteria, and duration of response ("DOR"). Exploratory endpoints include biomarker analyses (circulating tumor DNA, FGFR pathway mutations), patient-reported outcomes (EORTC QLQ-C30, FACT-Hep), and pharmacokinetic assessments.

The clinical rationale for the CLARION trial is supported by data from the Phase II study (Protocol PPC-4871-II), which was completed in January 2023 and demonstrated a 38% objective response rate in a cohort of 180 evaluable patients with advanced HCC, with a median duration of response of 7.3 months and a manageable safety profile. The most common treatment-emergent adverse events observed in Phase II were hyperphosphatemia (Grade 1–2 in 64% of subjects), diarrhea (Grade 1–2 in 41%), fatigue (Grade 1–2 in 38%), and hand-foot skin reaction (Grade 1–2 in 22%). Grade 3 or higher adverse events occurred in approximately 18% of subjects. These data formed the basis for the FDA's agreement to the Phase III trial design under the Special Protocol Assessment (SPA) framework, which was finalized in March 2023.

The Global Principal Investigator for the CLARION trial is Dr. Catherine Aldridge, M.D., Ph.D., Director of the Hepatobiliary Oncology Program at Graystone University Medical Center. The Co-Principal Investigator is Dr. Howard Matsuoka, M.D., Chief of Medical Oncology at Lakemont Medical Center. Both investigators are internationally recognized experts in HCC and have extensive experience as lead investigators in multi-site clinical trials.

The target date for first patient in ("FPI") is August 14, 2023. This date is driven by commercial timeline considerations, competitive landscape factors (at least two competing FGFR-targeted agents are in Phase II development for HCC), and the Company's NDA filing strategy. Any material delay in FPI could have cascading effects on the overall development timeline and Penterra's competitive position. This target date is the single most important driver of urgency in finalizing the MCTA.

B. Deal Value and Financial Overview

The total deal value under the MCTA is approximately $80,000,000, broken down across the following categories:

For context, Penterra's fiscal year 2022 revenue was $1.87 billion, with research and development expenditure of $612 million. As of the first quarter of 2023, Penterra reported cash and cash equivalents of $890 million. The Company's current market capitalization is approximately $4.2 billion. The CLARION trial represents a significant but manageable financial commitment relative to Penterra's overall R&D portfolio and balance sheet strength.

C. Parties' Counsel

The following law firms and attorneys are engaged in connection with the MCTA negotiations:

Penterra's Outside Counsel: Calderwood & Harkness LLP. The engagement team includes Miriam Calloway (Partner, lead negotiator), Joel Strauss (Partner, strategic advisor), Sean Morrissey (Associate, primary drafter and indemnification specialist), and Christopher Aiken (Associate, insurance and regulatory compliance).

Veridian's Outside Counsel: Whitmore, Jansen & Callahan LLP, located at 1500 Market Street, Suite 3200, Philadelphia, Pennsylvania 19102. The WJC team is led by Allison Whitmore (Partner, named partner) and David Kesselman (Senior Associate). WJC has a well-regarded life sciences practice and has represented Veridian in prior clinical trial agreements, including multi-site oncology trials. Based on our prior interactions with WJC, they are experienced and generally reasonable, but Allison Whitmore in particular is known for aggressive initial positions on indemnification and insurance, with the expectation that there will be meaningful back-and-forth before landing on market terms.

Penterra's FDA Regulatory Counsel: Castleton & Hargrove LLP. The primary contact is Dr. Priya Sundaram, Esq., who manages IND-related regulatory matters, FDA interactions, and safety reporting compliance. We coordinate with Dr. Sundaram's team on all regulatory aspects of the MCTA, including safety reporting procedures, IND maintenance obligations, and protocol deviation frameworks.

D. Timeline Pressures

The negotiation timeline is driven by the following critical-path milestones:

1. MCTA Execution: MCTA signing must occur by late June 2023, which we have identified as June 28, 2023, to permit satisfaction of conditions precedent and site activation activities in time for the August 14, 2023 FPI target.

2. IRB Approvals: Institutional Review Board approvals are required for lead sites prior to site activation. The lead site, Graystone University Medical Center, is subject to the Graystone University Institutional Review Board (IRB registration number IRB00012847). Non-Pennsylvania sites in the Veridian Network are expected to rely on the Veridian Central IRB under a single-IRB model consistent with the 2018 NIH sIRB policy and the revised Common Rule. Both the Graystone IRB and the Veridian Central IRB require an executed MCTA and fully executed individual investigator agreements as conditions for protocol review and approval. Any delay in MCTA execution directly delays IRB submissions and, consequently, site activation and enrollment.

3. CRO Coordination: The Master Services Agreement between Penterra and Meridian Contract Research Organization, Inc. ("Meridian CRO") was executed on January 15, 2023. Meridian CRO's monitoring activities — including site initiation visits, clinical monitoring visits, and data management — are contingent upon finalization of the MCTA and site activation. Meridian CRO has reserved clinical research associate capacity for the CLARION trial beginning in September 2023, and any delay beyond that window may result in resource reallocation and associated costs.

4. Competitive Pressures: As noted above, at least two competing FGFR-targeted agents are in Phase II development for HCC. Timely initiation of the CLARION trial is important to Penterra's competitive positioning and enrollment feasibility, as key opinion leaders and high-enrolling academic sites could be absorbed by competing trials if the CLARION trial is materially delayed.

These timeline pressures underscore the importance of an efficient and focused negotiation strategy. Our approach is designed to resolve the most contentious issues first (through the indemnification term sheet) and to move rapidly toward a comprehensive Second Draft MCTA.

III. Summary of Veridian's Key Markup Positions

This Section provides a detailed summary of the seven principal categories of contested provisions in Veridian's initial markup. Each subsection describes Veridian's proposed position, identifies the departures from Penterra's first draft, and flags the key issues for negotiation. Our recommended responses are set forth in Section IV.

A. Subject-Injury Indemnification

Veridian's markup represents the most significant area of disagreement. Veridian's proposed revisions to the indemnification provisions are aggressive and, in several respects, well outside market norms for multi-site clinical trial agreements. The key elements of Veridian's position are as follows:

First, Veridian demands uncapped indemnification for all subject injuries arising from participation in the CLARION trial, regardless of the cause of the injury. Veridian's markup deletes both the per-subject cap of $500,000 and the aggregate cap of $15,000,000 for reasonable and customary medical costs for the treatment of study-related injuries not otherwise covered by the subject's own health insurance. In effect, Veridian proposes that Penterra serve as a guarantor of all medical costs associated with any injury that occurs during or as a result of trial participation, without any ceiling on financial exposure.

Second, Veridian seeks to eliminate all carve-outs from Penterra's indemnification obligation for injuries caused by investigator negligence, willful misconduct of site personnel, or unauthorized protocol deviations. In Penterra's first draft, the indemnification provision included standard exceptions for injuries attributable to the negligence or willful misconduct of the site, its investigators, or its employees, as well as injuries resulting from the site's failure to comply with the Protocol, the MCTA, or applicable law. Veridian's markup deletes these carve-outs in their entirety, effectively making Penterra the insurer of all trial-related injuries regardless of fault — including injuries caused entirely by site error.

Third, Veridian proposes that failure by Veridian or its sites to provide timely notice of an indemnification claim shall have no effect whatsoever on Penterra's indemnification obligations. Penterra's first draft required written notice of a claim within thirty (30) calendar days and provided that failure to provide timely notice would relieve Penterra of its indemnification obligation for that claim. Veridian's markup deletes the notice requirement entirely, removing any prejudice standard. Under Veridian's proposed language, a site could notify Penterra of a claim months or even years after the triggering event, and Penterra would remain fully obligated to indemnify.

Fourth, Veridian rejects reciprocal site indemnification altogether. Penterra's first draft included a mutual indemnification provision under which each participating site would indemnify Penterra against claims arising from the site's negligence, willful misconduct, or breach of the MCTA. Veridian's markup deletes this provision entirely, arguing in its cover letter that, as a 501(c)(3) tax-exempt research organization, Veridian should not bear indemnity exposure in connection with a commercially sponsored clinical trial. This position is not supported by market practice; we have observed reciprocal indemnification provisions in the vast majority of multi-site clinical trial agreements, including those involving academic medical centers with tax-exempt status.

B. Insurance Requirements

Veridian's markup of the insurance provisions reflects an effort to require Penterra to maintain coverage at levels substantially above both market norms and Penterra's existing policy. The key elements are as follows:

First, Veridian's markup requires Penterra to maintain clinical trial liability insurance of at least $50,000,000 per occurrence and $100,000,000 in the aggregate. This represents a doubling of the per-occurrence limit and a one-third increase over the aggregate limit in Penterra's existing Briarcliff Mutual Insurance Company policy (Policy No. BM-CTL-2023-04182), which provides $25,000,000 per occurrence and $75,000,000 in the aggregate. While Penterra could theoretically obtain increased limits through an endorsement or excess coverage layer, doing so would entail a significant premium increase that is not justified by the risk profile of the CLARION trial.

Second, Veridian demands that Penterra's clinical trial liability policy include an uncapped sublimit for subject-injury claims. Insurance policies inherently contain defined sublimits; it is not possible to obtain an "uncapped" sublimit as a practical matter. Penterra's existing Briarcliff policy includes a subject-injury sublimit of $10,000,000 per occurrence and $50,000,000 in the aggregate.

Third, Veridian objects to Penterra's retained right to change insurers at any time without Veridian's consent. Veridian's markup would require Veridian's prior written consent to any change of insurer, which would give Veridian an effective veto over Penterra's insurance procurement decisions.

C. Payment Structure

Veridian's markup proposes a materially front-loaded payment structure that would shift cash-flow risk to Penterra and reduce the financial incentives for sites to maintain patient retention and data quality throughout the study. The key elements are as follows:

Veridian proposes that per-patient fees be paid according to a 50%/30%/20% milestone structure: 50% of the per-patient fee ($26,000) at randomization, 30% ($15,600) at the Week 12 assessment, and 20% ($10,400) at study completion. This front-loading would mean that the majority of per-patient compensation is earned very early in each subject's participation, well before the most resource-intensive portions of the treatment and follow-up period.

Veridian also seeks quarterly invoicing with Net 30 payment terms, as compared to Penterra's proposed Net 45 terms, which are consistent with the Company's standard vendor payment cycle and internal accounting processes.

Additionally, Veridian requests that start-up fees of $75,000 per site be paid 100% upon site activation, rather than under the 50%/50% split proposed by Penterra (50% upon site activation and 50% upon enrollment of the first patient at each site). Penterra's proposed structure was designed to incentivize timely enrollment initiation and ensure that sites have a financial motivation to move promptly from activation to active enrollment.

D. Publication Rights and Investigator Independence

Veridian's markup on publication rights is consistent with the strong academic freedom protections typically sought by academic medical center networks, but Veridian's position goes further than most in eliminating all sponsor review rights. The key elements are as follows:

First, Veridian insists on unrestricted academic freedom for investigators to publish and present trial results — including interim results, subgroup analyses, and individual site data — without any prior review by Penterra.

Second, Veridian's markup deletes both the sixty (60)-day review period and the ninety (90)-day patent-filing delay proposed by Penterra in the first draft MCTA. Under Penterra's proposed language, investigators would be required to submit manuscripts and abstracts to Penterra at least 60 days prior to submission for publication, during which period Penterra could review for confidential information and patentable subject matter, and could request an additional 90-day delay to permit patent filings. Veridian's markup eliminates these provisions entirely.

Third, Veridian proposes that investigators, not Penterra, shall have sole authority to determine authorship, publication timing, and the selection of journals and scientific meetings at which to present results. While investigator authority over authorship is consistent with ICMJE guidelines and is not objectionable, Veridian's position on timing and venue selection — combined with the elimination of any review period — would leave Penterra with no ability to protect its intellectual property or to ensure consistency of data presentation across sites.

E. Protocol Deviation Liability

Veridian's markup seeks to narrow the circumstances under which a protocol deviation by an investigator or site will trigger a carve-out from Penterra's indemnification obligation. The key elements are as follows:

First, Veridian proposes that the carve-out from sponsor indemnification should apply only to "grossly negligent" protocol deviations, arguing that ordinary negligence in protocol adherence is an inherent part of clinical trial operations and should not shift liability away from the sponsor. Under Veridian's proposed standard, a site that negligently fails to follow the Protocol — for example, by administering an incorrect dose or failing to perform a required safety assessment — would remain fully covered by Penterra's indemnification, unless the deviation rose to the level of gross negligence.

Second, Veridian proposes that "medically necessary" protocol deviations — that is, deviations taken by an investigator in the exercise of clinical judgment because they were required for the immediate safety of a research subject — should be treated identically to protocol-compliant care for all indemnification purposes. Veridian further proposes that no prior or subsequent authorization from Penterra should be required for such deviations. While the concept of protecting investigators who act in the interest of patient safety has merit, Veridian's proposed language contains no notification requirement, no documentation standard, and no mechanism for Penterra to assess whether the deviation was in fact medically necessary or whether it suggests a need for a protocol amendment.

F. Termination and Wind-Down

Veridian's markup proposes more favorable termination and wind-down terms for Veridian and its sites at the expense of Penterra's financial flexibility. The key elements are as follows:

First, Veridian seeks to extend the wind-down period from 120 days (as proposed by Penterra) to 180 days following the effective date of termination. During the wind-down period, sites would be required to transition subjects in active treatment to alternative care providers or to permit subjects to complete their current treatment cycle, and Penterra would remain financially responsible for all associated costs. A 180-day wind-down period would significantly extend Penterra's financial exposure and operational obligations post-termination.

Second, Veridian demands that Penterra continue to pay full per-patient fees at the contracted rate during the wind-down period for all subjects in active treatment, without any proration based on the stage of treatment or the milestones actually achieved at the time of termination. Under this proposal, Penterra would owe the full $52,000 per-patient fee for each subject in active treatment during wind-down, even if the subject had only recently been randomized and had not yet reached any post-randomization milestone.

Third, Veridian seeks an expanded termination-for-convenience right that would allow any individual site within the Veridian Network to withdraw from the CLARION trial without cause upon sixty (60) days' prior written notice. Penterra's first draft required 120 days' notice for individual site withdrawal, and conditioned withdrawal on the orderly transition of subjects in active treatment.

G. Regulatory Compliance

Veridian's markup raises two significant issues in the area of regulatory compliance representations:

First, Veridian objects to Penterra's proposed representation that all investigator payments under the MCTA are at fair market value, consistent with the requirements of the Anti-Kickback Statute (42 U.S.C. § 1320a-7b) and applicable safe harbor regulations. Veridian's position, as expressed in its cover letter, is that Penterra — as the sponsor setting the payment amounts — should bear the sole burden of establishing that payments are at fair market value, and that Veridian should not be required to make a mutual representation on this point. Veridian contends that it has limited ability to independently verify the FMV of sponsor-determined payment amounts.

Second, Veridian's markup reduces the scope of financial disclosure obligations under 21 CFR Part 54, limiting the disclosure requirement to financial interests above $50,000. This is at odds with the regulatory threshold of $25,000 established by 21 CFR § 54.2(b), which defines a "significant financial interest" as including, among other things, any proprietary interest in the tested product or any significant equity interest in the sponsor where the value cannot reasonably be determined by reference to public prices, or any equity interest that exceeds $50,000 in value when combined with payments from the sponsor that exceed $25,000 in a single year. Veridian's proposed $50,000 threshold would create a gap between the MCTA's contractual disclosure requirement and the FDA's regulatory standard, potentially resulting in non-compliant clinical trial financial disclosure submissions.

IV. Recommended Negotiation Positions

This Section sets forth Calderwood & Harkness's recommended negotiation positions for each of the seven contested areas, along with supporting rationale, fallback positions, and strategic considerations.

A. Subject-Injury Indemnification — Hold Firm on Caps; Concede on Product-Defect Uncapped Liability

Subject-injury indemnification is the central contested provision in the MCTA and the area most likely to generate protracted negotiation. Our recommendations are designed to maintain Penterra's core protections while offering reasonable compromises that should be acceptable to a well-counseled counterparty.

1. Per-Subject and Aggregate Caps on Medical Care Costs

Recommendation: Maintain the per-subject cap of $500,000 and the aggregate cap of $15,000,000 for reasonable and customary medical costs for the treatment of study-related injuries that are not covered by the subject's own health insurance or other available coverage. These caps apply only to direct medical care costs and do not limit Penterra's liability for other categories of damages (e.g., wrongful death claims, personal injury tort claims), which would be governed by applicable law and Penterra's insurance coverage.

Justification: These caps are consistent with prevailing market standards in Phase III multi-site oncology clinical trials. Our benchmarking analysis, set forth in the Comparative Indemnification Structures Memorandum circulated to the deal team on April 15, 2023, reviewed 24 multi-site clinical trial agreements executed between 2019 and 2023 involving Phase III oncology trials with enrollment of 500 subjects or more. Of those 24 agreements, 19 (79%) included per-subject caps on medical care costs ranging from $250,000 to $1,000,000, with a median of $500,000. All 24 agreements included aggregate caps, ranging from $5,000,000 to $25,000,000, with a median of $12,500,000. Penterra's proposed caps of $500,000 per subject and $15,000,000 in the aggregate are at or above the market median and represent a significant financial commitment relative to the CLARION trial's total deal value of $80,000,000.

Additionally, from a practical standpoint, the $15,000,000 aggregate cap provides meaningful protection to subjects. Even in a worst-case scenario involving a systemic safety signal affecting a large number of subjects, the aggregate cap would be sufficient to cover medical care costs for at least 30 subjects at the per-subject cap level — a scenario that would almost certainly trigger study termination and broader product liability considerations that would be addressed through Penterra's product liability insurance and tort law frameworks, rather than through the MCTA's contractual indemnification provisions.

Fallback: If Veridian insists on higher caps and this issue threatens to become a deal-breaker, Penterra should consider increasing the per-subject cap to $750,000, but should hold the aggregate cap at $15,000,000. The $750,000 per-subject cap remains within the market range and would increase the per-subject coverage by 50%, a meaningful concession. However, Penterra should not agree to uncapped subject-injury medical care costs under any circumstances, as such a commitment would be uninsurable and would create open-ended financial exposure that is inconsistent with prudent corporate risk management.

2. Product-Defect Claims — Agree to Uncapped Indemnification

Recommendation: Accept uncapped indemnification for third-party claims and subject injuries arising directly from defects in the investigational product (PPC-4871) when the product is administered in accordance with the Protocol and applicable labeling, including the Investigator's Brochure. This means that if a subject is injured by a defect in penterafenib itself — such as a manufacturing defect, contamination, undisclosed adverse reaction profile, or failure of the product to conform to its specifications — and the product was administered in accordance with the Protocol, Penterra's indemnification obligation for such claims would not be subject to the per-subject or aggregate caps described above.

Rationale: Product-defect liability is appropriately the sponsor's responsibility. As the IND holder, the manufacturer, and the entity with exclusive control over the design, formulation, and supply chain of PPC-4871, Penterra is in the best position to prevent and bear the risk of product-defect injuries. This allocation is consistent with Penterra's risk profile and its role as sponsor under 21 CFR Part 312. Moreover, Penterra's Briarcliff Mutual policy provides product liability coverage that is adequate to absorb this risk. Agreeing to uncapped product-defect indemnification is also a meaningful concession that should generate goodwill with Veridian and potentially create space for Veridian to accept Penterra's positions on other indemnification issues, particularly the medical care cost caps.

3. Carve-Outs for Investigator Negligence and Protocol Deviations

Recommendation: Insist on retaining the standard carve-outs from sponsor indemnification for injuries and claims arising from:

(i) the negligence or willful misconduct of the site, the investigator, or any site personnel, including research coordinators, study nurses, and pharmacists;

(ii) unauthorized protocol deviations — that is, deviations from the Protocol that were not directed, authorized, or approved by Penterra and that are not "medically necessary" deviations as defined in the compromise framework proposed in Section IV.E below; and

(iii) the site's material breach of the MCTA, the Protocol, applicable law, or the terms of the subject's informed consent.

These carve-outs are standard in virtually all multi-site clinical trial agreements and are non-negotiable. Without them, Penterra would effectively be guaranteeing against harm caused entirely by site-level errors, misconduct, or non-compliance — a risk that Penterra has no ability to prevent or mitigate, and that is properly borne by the party whose conduct caused the injury. It is essential that Veridian and its investigators understand that the sponsor's indemnification obligation is intended to cover injuries arising from the inherent risks of the investigational product and the clinical trial itself, not from the negligent performance of clinical trial activities by site personnel.

The treatment of medically necessary protocol deviations is addressed separately in Section IV.E below, where we propose a compromise framework that addresses Veridian's legitimate concerns about investigator protection in emergency situations while preserving Penterra's rights.

4. Notice Requirements

Recommendation: Maintain the requirement that Veridian and each participating site provide written notice to Penterra of any indemnification claim within thirty (30) calendar days of the site's or Veridian's first becoming aware of the claim or the circumstances giving rise to the claim. This notice period is standard and reasonable.

However, we recommend a targeted concession on the consequences of late notice. Specifically, Penterra should concede Veridian's position that failure to provide timely notice shall not relieve Penterra of its indemnification obligation except to the extent Penterra is materially prejudiced by such failure. This "material prejudice" qualifier is a well-recognized standard in indemnification and insurance law. It protects Penterra by preserving its right to contest indemnification in cases where late notice materially impaired Penterra's ability to defend the claim, investigate the facts, or mitigate damages. At the same time, it addresses Veridian's legitimate concern that a technical failure to provide notice within exactly 30 days — which could occur due to administrative oversight, delayed identification of a claim, or ambiguity about whether a particular event constitutes a "claim" — should not result in a forfeiture of indemnification protections for an injured subject.

This concession is low-risk for Penterra because the "material prejudice" standard is a high bar. In most cases, a delay of even several weeks in providing notice would not materially prejudice Penterra's ability to defend or investigate a claim, particularly given that Penterra will receive contemporaneous safety data through the clinical trial's adverse event reporting systems. The concession should be well-received by WJC and demonstrates Penterra's good faith.

5. Reciprocal Site Indemnity

Recommendation: Insist on reciprocal indemnification from Veridian and each participating institution for third-party claims (including claims by subjects) arising from:

(i) the negligence or willful misconduct of the site, its investigators, or its employees or agents;

(ii) unauthorized protocol deviations attributable to the site; and

(iii) the site's material breach of the MCTA, the Protocol, applicable law, or the informed consent.

Proposed Caps: $5,000,000 per site per occurrence; $20,000,000 in the aggregate across all Veridian Network sites.

Justification: Reciprocal indemnification is market-standard in multi-site clinical trial agreements and is present in the overwhelming majority of the comparable agreements reviewed in our benchmarking analysis. Veridian's 501(c)(3) tax-exempt status does not preclude contractual indemnification obligations. Tax-exempt organizations routinely enter into contracts containing indemnification provisions, and their tax-exempt status relates to their treatment under the Internal Revenue Code, not to their capacity to assume contractual liability. Veridian maintains general liability and professional liability insurance coverage to absorb indemnification exposure, and we understand from publicly available information that Veridian's insurance program is administered through its captive insurance entity, Veridian Risk Management, Ltd., with excess layers provided by commercial carriers.

The proposed site indemnification caps are deliberately modest relative to the overall deal value. The per-site per-occurrence cap of $5,000,000 is below the minimum coverage levels that Penterra is requiring Veridian and its sites to carry under the MCTA's site insurance provisions (see Section IV.B.5 below). The $20,000,000 aggregate cap across all 38 Veridian sites represents just 25% of the total deal value. These caps provide Penterra with a meaningful remedy for site-caused harm while limiting Veridian's and its sites' contractual exposure to manageable levels.

Fallback: If Veridian resists the $20,000,000 aggregate cap, Penterra should consider reducing the aggregate to $15,000,000 but should not reduce the per-site per-occurrence cap below $5,000,000. Under no circumstances should Penterra agree to eliminate reciprocal site indemnification altogether. The absence of any site indemnity would leave Penterra without a contractual remedy for harm caused by site negligence and would create a severe moral hazard.

6. Proposed Indemnification Term Sheet

Recommendation: We strongly recommend circulating a detailed, stand-alone indemnification term sheet to WJC by May 5, 2023. The term sheet would memorialize all of Penterra's positions on subject-injury indemnification, product-defect indemnification, reciprocal site indemnity, caps, carve-outs, notice requirements, and related procedural provisions (defense and settlement authority, cooperation obligations, etc.).

The purpose of the term sheet is to focus the negotiation on the most contentious set of provisions and to create a framework for early resolution. Indemnification is the issue most likely to delay the overall negotiation, and if the parties can reach agreement (or near-agreement) on indemnification terms before the Second Draft MCTA is circulated, the remainder of the negotiation should proceed more efficiently. The term sheet format also has the advantage of presenting Penterra's positions in a clear, structured way that facilitates line-by-line discussion without the distraction of the full MCTA text.

Sean Morrissey will prepare the initial draft of the term sheet for Miriam Calloway's review and circulation.

B. Insurance Requirements — Negotiate to Existing Briarcliff Policy Limits

1. Per-Occurrence and Aggregate Limits

Recommendation: Reject Veridian's demand for $50,000,000 per occurrence and $100,000,000 in the aggregate. Counter-propose $25,000,000 per occurrence and $75,000,000 in the aggregate — the existing limits under Penterra's Briarcliff Mutual Insurance Company clinical trial liability policy (Policy No. BM-CTL-2023-04182, with a policy period of April 1, 2023 through March 31, 2024, renewable annually).

Justification: The $25,000,000 per-occurrence and $75,000,000 aggregate limits are at or above market standard for Phase III oncology clinical trials. In our benchmarking analysis, the median per-occurrence limit across 24 comparable agreements was $20,000,000, and the median aggregate limit was $50,000,000. Penterra's existing coverage exceeds both medians. Increasing coverage to the levels demanded by Veridian would require either a significant endorsement to the existing Briarcliff policy or the procurement of an excess layer from a specialty carrier. Based on preliminary discussions with Penterra's insurance broker (Harrington & Associates), the estimated incremental annual premium for coverage at Veridian's requested levels would be approximately $1.2 million to $1.8 million — a cost that is not justified by the safety profile of penterafenib as established in Phase II data.

Moreover, the demand for $50,000,000 per-occurrence coverage is particularly disproportionate in the context of the MCTA's proposed per-subject indemnification cap of $500,000. Even at the maximum per-subject cap, a single occurrence affecting 100 subjects — an extraordinarily severe scenario — would generate indemnified medical care costs of $50,000,000, which is precisely the aggregate medical care cap level. The existing $25,000,000 per-occurrence limit, combined with the $75,000,000 aggregate, provides ample coverage for any reasonably foreseeable loss scenario.

2. Subject-Injury Sublimit

Recommendation: Disclose to WJC that the Briarcliff policy includes a subject-injury sublimit of $10,000,000 per occurrence and $50,000,000 in the aggregate. These sublimits are adequate in light of the proposed per-subject cap of $500,000 and aggregate cap of $15,000,000 for medical care costs under the MCTA. The subject-injury sublimit substantially exceeds the MCTA's aggregate indemnification cap, meaning that the insurance coverage is sufficient to fully fund Penterra's contractual indemnification obligations even in a worst-case scenario.

Penterra should not agree to "uncapped" sublimits, as insurance policies inherently operate within defined limits and sublimits. A request for uncapped sublimits reflects either a misunderstanding of insurance mechanics or an aspirational negotiating position that is not achievable in the insurance market.

3. Additional Insured Status

Recommendation: Agree to name Veridian Health Research Network, Inc. and each participating site as additional insureds under the Briarcliff policy, to the extent of Penterra's indemnification obligations under the MCTA. This is consistent with standard industry practice for multi-site clinical trial agreements and should be readily available under the Briarcliff policy.

We recommend that Christopher Aiken prepare a letter to Karen Tremblay, Vice President, Life Sciences Lines, at Briarcliff Mutual, requesting issuance of an additional insured endorsement to Policy No. BM-CTL-2023-04182 naming Veridian and all 38 participating sites (to be identified by schedule). This letter should be sent promptly to ensure that the endorsement is in hand prior to the target MCTA execution date.

4. Change of Insurer

Recommendation: Accept a contractual requirement to provide Veridian with thirty (30) days' prior written notice of any change in Penterra's clinical trial liability insurer during the term of the MCTA. This notice period is reasonable and gives Veridian the opportunity to review the replacement insurer's financial strength and coverage terms. However, Penterra should not grant Veridian consent rights over the selection of a replacement insurer, provided that the replacement coverage meets or exceeds the minimum limits specified in the MCTA (i.e., $25,000,000 per occurrence / $75,000,000 aggregate, or such other limits as may be agreed). Veridian's interest is in ensuring that adequate coverage is maintained, not in controlling Penterra's insurance procurement decisions.

5. Site Insurance

Recommendation: Maintain the requirement that Veridian and each participating site carry general liability and professional liability insurance coverage of at least $5,000,000 per occurrence and $10,000,000 in the aggregate throughout the term of the MCTA. Certificates of insurance evidencing such coverage shall be due within fifteen (15) business days of MCTA execution. These site insurance requirements are standard, and the coverage levels are appropriate for academic medical centers and research institutions of the size and scope represented within the Veridian Network.

The site insurance requirement serves two purposes: first, it ensures that sites have insurance coverage to back their reciprocal indemnification obligations under the MCTA; and second, it provides a layer of protection for Penterra in the event that a site's negligence results in third-party claims that are not covered by the MCTA's indemnification provisions.

C. Payment Structure — Insist on Milestone-Based Per-Patient Payments

1. Per-Patient Fee Milestones

Recommendation: Reject Veridian's proposed front-loaded 50%/30%/20% milestone structure. Counter-propose an even 25%/25%/25%/25% milestone structure tied to meaningful clinical milestones throughout each subject's participation in the trial:

Rationale: Milestone-based payments tied to sequential clinical events are the prevailing standard in Phase III clinical trial agreements for good reason. They incentivize site performance and sustained attention to patient retention throughout the treatment and follow-up periods, rather than concentrating site revenue at the front end. Front-loading per-patient fees to 50% at randomization creates misaligned incentives: sites receive the majority of their compensation before the most resource-intensive portions of the trial (ongoing treatment, safety monitoring, tumor assessments, follow-up visits) have been completed. This structure also creates significant cash-flow risk for Penterra in the event of early patient discontinuation, as a large percentage of per-patient fees would already have been paid for subjects who do not complete the trial.

The even four-tranche distribution is fair to both parties. It provides sites with prompt compensation at randomization ($13,000, which is sufficient to cover initial enrollment and randomization costs), followed by equal installments at meaningful clinical checkpoints that correspond to periods of significant site activity. The structure also provides sites with regular, predictable cash flow rather than concentrating payments at the beginning and end of the study.

The total per-patient site fees across all 1,200 subjects amount to $62,400,000. The distribution of this amount across milestones has significant financial implications for Penterra's cash management and should be controlled carefully.

2. Start-Up Fees

Recommendation: Maintain the 50%/50% split for start-up fees — $37,500 payable upon site activation and $37,500 payable upon enrollment of the first patient at each site. The total start-up fees across 38 sites amount to $2,850,000.

Justification: The split payment structure ensures that sites receive prompt compensation for start-up activities (regulatory submissions, staff training, equipment calibration, pharmacy setup) while maintaining a financial incentive for timely enrollment initiation. In our experience, sites that receive 100% of start-up fees at activation sometimes deprioritize enrollment activities, particularly when competing trials are also in the start-up phase. The second tranche upon first patient enrolled creates a direct financial motivation to move from activation to enrollment as quickly as possible — a consideration of particular importance given the August 14, 2023 FPI target.

Fallback: If Veridian presses hard on this issue and it risks becoming a significant impediment to agreement, Penterra should consider a 60%/40% split ($45,000 at activation / $30,000 upon first patient enrolled). This compromise increases the activation payment by $7,500 per site while maintaining a meaningful incentive for timely enrollment. Penterra should resist agreement to 100% at activation, as this eliminates any financial leverage to encourage prompt enrollment initiation.

3. Payment Terms

Recommendation: Maintain Net 45 days from Penterra's receipt of a proper and complete invoice as the standard payment term for all categories of MCTA payments.

Justification: Net 45 is the standard payment term across Penterra's vendor and sponsor agreements and is aligned with the Company's internal accounting and disbursement cycles. Penterra's accounts payable team processes clinical trial invoices in accordance with established procedures that assume a 45-day processing window. Compressing this to Net 30 would require operational adjustments and could create bottlenecks, particularly during periods of high enrollment when per-patient milestone invoices are being received from multiple sites simultaneously.

Veridian's Net 30 proposal is not unreasonable as a general matter, but it is inconsistent with Penterra's established practices and is not the market norm for sponsor-to-site payments in Phase III trials.

Fallback: If Veridian insists on Net 30 terms and this issue threatens to delay agreement, Penterra should consider agreeing to Net 30 payment terms for start-up fees and annual site maintenance fees only — categories that involve a relatively small number of predictable, scheduled payments — while retaining Net 45 for per-patient milestone payments, which represent the vast majority of the MCTA's deal value and generate the highest volume of invoices.

4. Network Coordination Fee and Site Maintenance

Network Coordination Fee: The quarterly installment structure of $300,000 per quarter over 14 quarters ($4,200,000 total) has not been contested by Veridian in its initial markup. We recommend maintaining this structure as drafted. The network coordination fee compensates Veridian centrally for its administrative oversight, site coordination, central IRB management, and network-wide quality assurance activities. Quarterly invoicing and payment is appropriate for this type of administrative fee.

Annual Site Maintenance Fees: The $40,000 per site per year, paid annually in advance on each site-activation anniversary, is also not a significant area of dispute. We recommend maintaining this provision as drafted. The site maintenance fee covers ongoing infrastructure costs that accrue regardless of enrollment volume, including maintenance of site facilities, retention of trained research staff, and ongoing IRB renewals.

5. Investigator Grants

The investigator grants of $1,500,000 total, disbursed upon acceptance of manuscripts for peer-reviewed publication, should be maintained as drafted. This payment structure ties the grant disbursement to actual deliverables — accepted publications that advance the scientific understanding of penterafenib — and avoids any appearance of payment for referrals or enrollment incentives that could raise concerns under the Anti-Kickback Statute or institutional conflict-of-interest policies. The publication-contingent structure is also consistent with the academic mission of the Veridian Network and should be viewed favorably by Veridian's compliance function.

D. Publication Rights and Investigator Independence — Strategic Concession with Guardrails

Publication rights represent an area where Penterra has the opportunity to make a meaningful strategic concession that addresses one of Veridian's highest institutional priorities — academic freedom and investigator independence — while maintaining the essential protections that Penterra requires for its intellectual property and trade secrets. Our recommendations are designed to strike this balance.

1. Sponsor Review Period

Recommendation: Propose a sixty (60)-day review period during which Penterra may review manuscripts, abstracts, and presentations prior to submission for publication or presentation. During this review period, Penterra's review rights are limited to:

(a) identifying and requesting removal of Penterra's confidential information and trade secrets;

(b) identifying patentable subject matter that may require protection through patent applications; and

For the avoidance of doubt, Penterra's review right does not include the right to suppress or materially alter the scientific conclusions, interpretations, or opinions of the investigators. The review period is an administrative and intellectual property protection mechanism, not an editorial control mechanism. This distinction is critical and should be communicated clearly to WJC and to Veridian's institutional leadership.

A sixty-day review period is widely accepted by academic medical centers, including many of the institutions within the Veridian Network. The Association of American Medical Colleges (AAMC) and the International Committee of Medical Journal Editors (ICMJE) have recognized the legitimacy of limited sponsor review periods of up to 60 days for the purpose of identifying confidential information and patentable subject matter, provided that the sponsor does not have the right to prevent or unduly delay publication.

2. Patent-Filing Delay

Recommendation: Propose an additional ninety (90)-day delay period beyond the 60-day review period if, during the review, Penterra identifies patentable subject matter that warrants the filing of a patent application before the publication would constitute a public disclosure. The total maximum delay from the investigator's submission of a manuscript to Penterra to the earliest date on which the investigator may submit the manuscript for publication would thus be 150 days (60-day review plus 90-day patent-filing delay).

This combined 150-day period is within the range accepted by leading academic medical centers and is consistent with NIH policies and AAMC recommendations. It provides Penterra with sufficient time to evaluate potential patent claims, prepare and file patent applications, and protect its intellectual property rights in the discoveries arising from the CLARION trial. At the same time, the 150-day maximum ensures that publication is not indefinitely delayed and that investigators retain meaningful control over the dissemination of their scientific work.

Penterra should be prepared to provide written notice to the investigator and Veridian within the 60-day review period if it intends to invoke the 90-day patent-filing delay, and should be required to use commercially reasonable efforts to complete patent filings within that 90-day window.

3. Authorship and Academic Freedom

Recommendation: Acknowledge and affirm the investigators' right to authorship consistent with ICMJE guidelines. The MCTA should expressly provide that authorship of publications arising from the CLARION trial shall be determined in accordance with ICMJE criteria, which require that each author have made substantial contributions to the conception or design of the work, or the acquisition, analysis, or interpretation of data; participated in drafting or critically revising the manuscript; approved the final version; and agreed to be accountable for the work.

Penterra should not claim a right to suppress or materially alter the scientific conclusions, interpretations, or opinions expressed by the investigators. However, Penterra should retain the right to include its own scientists and clinical development personnel as co-authors on publications where their contributions meet ICMJE criteria. This is a standard provision in industry-sponsored clinical trial agreements and reflects the legitimate scientific contributions of sponsor personnel to the design, conduct, and analysis of the trial.

4. Multi-Site Publication Coordination

Recommendation: Include a provision requiring that multi-site publications — including any publication reporting the primary endpoint results, any pre-specified secondary endpoint results, or any pooled data from two or more sites — be coordinated through the Global Principal Investigator, Dr. Catherine Aldridge, to ensure data consistency and to avoid premature or inconsistent disclosures that could mislead the scientific community or create confusion about the trial's results. Individual investigators would retain the right to publish site-specific data (e.g., case reports, single-site subgroup analyses) subject to the review period described above, but multi-site publications would be required to go through a coordinated review process led by Dr. Aldridge.

This provision protects both Penterra's interests and the scientific integrity of the CLARION trial. In a multi-site trial of this size, uncoordinated publication of interim or partial results from individual sites could lead to conflicting or misleading interpretations, particularly if different sites have different enrollment characteristics or outcomes. Coordinated publication through the Global PI is consistent with standard practice in large multi-site trials and with the policies of most academic medical centers.

E. Protocol Deviation Liability — Develop Workable Framework for Medically Necessary Deviations

1. Standard for Carve-Out

Recommendation: Reject Veridian's proposal to limit the indemnification carve-out to protocol deviations arising from "gross negligence" only. Maintain that ordinary negligence in protocol adherence is sufficient to trigger the carve-out from Penterra's indemnification obligation.

Rationale: A gross-negligence-only standard would effectively make Penterra financially responsible for negligent site conduct that causes subject injury — a fundamentally inappropriate allocation of risk. The distinction between negligence and gross negligence is a meaningful one in both law and practice. Negligence in protocol adherence could include, for example, failure to perform a required safety assessment, administration of an incorrect dose due to a calculation error, or failure to monitor for a specified adverse event. These are errors that are within the site's control and that the site has the responsibility to prevent through proper training, supervision, and quality control.

If Penterra were to accept a gross-negligence-only standard, sites would face reduced financial accountability for ordinary care failures, which could undermine the quality and safety of trial conduct. Moreover, from an insurance perspective, Penterra's Briarcliff policy anticipates that the MCTA's indemnification provisions will include standard carve-outs for site negligence; accepting a gross-negligence-only standard could affect Penterra's coverage position.

2. Medically Necessary Deviations

Recommendation: Propose a compromise framework for medically necessary protocol deviations that balances the legitimate interests of both parties. Under this framework:

Deviations from the Protocol that are required by an investigator in the exercise of clinical judgment for the immediate safety of a research subject shall be treated as protocol-compliant conduct for purposes of the MCTA's indemnification provisions, provided that the following conditions are satisfied:

(a) The investigator notifies Penterra and Meridian CRO of the deviation within twenty-four (24) hours of the deviation occurring;

(b) The deviation is fully documented in the case report form (CRF), source documents, and the site's deviation log, including the clinical rationale for the deviation and the investigator's assessment of the impact on the subject's safety and the integrity of the trial data; and

(c) Penterra is given the opportunity to assess whether the deviation, or the circumstances giving rise to it, requires or warrants a protocol amendment, a safety communication to other sites, or reporting to the FDA, the relevant IRB, or the Data Safety Monitoring Board.

This framework protects investigators who make good-faith clinical decisions in emergency situations by ensuring that they are covered by Penterra's indemnification for the consequences of medically necessary deviations. At the same time, the notification, documentation, and assessment requirements ensure that Penterra retains visibility into all deviations, can assess whether broader safety or regulatory implications exist, and can take appropriate action (including protocol amendments or safety communications) to protect subjects at other sites.

The 24-hour notification window is consistent with the MCTA's existing serious adverse event ("SAE") reporting timeframe and with Meridian CRO's monitoring procedures. It ensures that information flows promptly without imposing an unreasonable burden on investigators who are simultaneously managing the clinical care of the affected subject.

Fallback: If WJC or Veridian objects to the 24-hour notification window as impractical in certain clinical settings (e.g., weekend or holiday events at sites with limited administrative support), Penterra should consider extending the notification window to forty-eight (48) hours. This remains a prompt timeline and is still consistent with the regulatory expectation of timely deviation reporting. Penterra should not agree to any framework that eliminates the notification requirement entirely, as this would deprive Penterra of information necessary for IND safety reporting, protocol management, and data integrity assessment.

F. Termination and Wind-Down — Maintain 120-Day Wind-Down with Targeted Concessions

1. Wind-Down Period

Recommendation: Maintain the 120-day wind-down period following the effective date of termination for subject safety and transition purposes. Reject Veridian's proposed 180-day wind-down period.

A 120-day wind-down period is sufficient for the orderly transition of subjects in active treatment. In the context of a Phase III oncology trial, treatment cycles for penterafenib are expected to be 28-day cycles, meaning that 120 days provides approximately four full treatment cycles — enough time for subjects to complete a current course of treatment and to be transitioned to alternative care or to standard-of-care therapy with the assistance of the investigator and Penterra's medical affairs team. A 180-day wind-down period would extend this timeframe unnecessarily, imposing approximately two additional months of ongoing costs on Penterra — including per-patient fees, site maintenance fees, monitoring costs, safety reporting obligations, and data management expenses — without a commensurate benefit to subject safety.

Furthermore, a 180-day wind-down period would extend Penterra's ongoing insurance obligations under the MCTA by 60

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
MEMORANDUM
FROM: Miriam Calloway, Partner, Calderwood & Harkness LLP
TO: Nathaniel Briggs, Esq., Vice President & General Counsel, Penterra Pharmaceuticals Corp. Rebecca Liang, Esq., Associate General Counsel, Clinical Affairs, Penterra Pharmaceuticals Corp. Jennifer Holt, Vice President, Clinical Operations, Penterra Pharmaceuticals Corp.
CC: Joel Strauss, Partner, Calderwood & Harkness LLP Sean Morrissey, Associate, Calderwood & Harkness LLP Christopher Aiken, Associate, Calderwood & Harkness LLP
DATE: May 3, 2023
RE: Negotiation Strategy — Response to Veridian Health Research Network, Inc. Initial Markup of Master Clinical Trial Agreement for Protocol PPC-4871-III (CLARION)
MATTER NO.: 1018-00004
I. Executive Summary
The purpose of this memorandum is to set forth Calderwood & Harkness LLP's recommended negotiation positions in response to the initial markup of the Master Clinical Trial Agreement (the "MCTA") received from Whitmore, Jansen & Callahan LLP ("WJC"), counsel to Veridian Health Research Network, Inc. ("Veridian"), on April 28, 2023. This memorandum is intended to serve as a comprehensive roadmap for Penterra's negotiation team in advance of the circulation of a revised draft MCTA and related materials.
As background, Penterra Pharmaceuticals Corp. ("Penterra" or the "Company") is the sponsor of Protocol PPC-4871-III, known as the CLARION trial — a Phase III, randomized, double-blind, placebo-controlled study of penterafenib (PPC-4871) in advanced hepatocellular carcinoma ("HCC"). Penterra circulated the first draft of the MCTA to WJC on April 7, 2023. Veridian returned its initial markup — containing extensive proposed revisions — on April 28, 2023. The total deal value under the MCTA is approximately $80,000,000 across thirty-eight (38) Veridian Network sites located in fourteen (14) states over the projected sixty (60)-month study duration (consisting of a forty-two (42)-month enrollment period plus an eighteen (18)-month follow-up period).
This memorandum addresses the seven principal categories of contested provisions raised by Veridian's markup: (1) subject-injury indemnification, (2) insurance requirements, (3) payment structure and milestones, (4) publication rights and investigator independence, (5) protocol deviation liability allocation, (6) termination and wind-down, and (7) regulatory compliance representations. For each category, we analyze Veridian's proposed position, assess its market reasonableness, and set forth our recommended negotiation position along with fallback positions where appropriate.
Our overall strategic recommendation is that Penterra should adopt a firm-but-collaborative approach to these negotiations. Specifically, we recommend that Penterra make targeted concessions in the area of academic freedom and publication rights — an area of particular institutional importance to Veridian as a network of academic medical centers — while holding firm on indemnification caps and insurance levels that are market-standard for Phase III multi-site oncology trials and consistent with the Company's existing Briarcliff Mutual Insurance Company coverage. This approach signals good faith while preserving the Company's key financial and legal protections.
As an immediate next step, we recommend that Penterra authorize Calderwood & Harkness to circulate a stand-alone indemnification term sheet to WJC by May 5, 2023, memorializing Penterra's positions on the most contentious issue. This will focus the negotiation and facilitate early resolution of the indemnification provisions, which will in turn unlock the preparation and circulation of a revised Second Draft MCTA incorporating agreed compromise positions, targeted for mid-May 2023.
The balance of this memorandum sets forth our analysis in detail.
II. Background
A. Transaction Overview
Penterra is sponsoring the CLARION trial (ClinicalTrials.gov Identifier NCT05928174; IND 157823), a Phase III, randomized, double-blind, placebo-controlled study evaluating penterafenib (PPC-4871) as a second-line treatment in adult patients with advanced hepatocellular carcinoma who have progressed on or following first-line systemic therapy. Penterafenib is a novel, orally bioavailable kinase inhibitor targeting the FGFR2 and FGFR3 signaling pathways, which play a critical role in the pathogenesis and progression of HCC.
The CLARION trial is designed with a planned enrollment of 1,200 subjects randomized in a 2:1 ratio, with 800 subjects receiving penterafenib and 400 subjects receiving matched placebo plus best supportive care. Subjects will be enrolled across 38 Veridian Network academic medical centers and affiliated research sites located in 14 states. The primary endpoint is overall survival ("OS"). Key secondary endpoints include progression-free survival ("PFS"), objective response rate ("ORR") per RECIST v1.1 criteria, and duration of response ("DOR"). Exploratory endpoints include biomarker analyses (circulating tumor DNA, FGFR pathway mutations), patient-reported outcomes (EORTC QLQ-C30, FACT-Hep), and pharmacokinetic assessments.
The clinical rationale for the CLARION trial is supported by data from the Phase II study (Protocol PPC-4871-II), which was completed in January 2023 and demonstrated a 38% objective response rate in a cohort of 180 evaluable patients with advanced HCC, with a median duration of response of 7.3 months and a manageable safety profile. The most common treatment-emergent adverse events observed in Phase II were hyperphosphatemia (Grade 1–2 in 64% of subjects), diarrhea (Grade 1–2 in 41%), fatigue (Grade 1–2 in 38%), and hand-foot skin reaction (Grade 1–2 in 22%). Grade 3 or higher adverse events occurred in approximately 18% of subjects. These data formed the basis for the FDA's agreement to the Phase III trial design under the Special Protocol Assessment (SPA) framework, which was finalized in March 2023.
The Global Principal Investigator for the CLARION trial is Dr. Catherine Aldridge, M.D., Ph.D., Director of the Hepatobiliary Oncology Program at Graystone University Medical Center. The Co-Principal Investigator is Dr. Howard Matsuoka, M.D., Chief of Medical Oncology at Lakemont Medical Center. Both investigators are internationally recognized experts in HCC and have extensive experience as lead investigators in multi-site clinical trials.
The target date for first patient in ("FPI") is August 14, 2023. This date is driven by commercial timeline considerations, competitive landscape factors (at least two competing FGFR-targeted agents are in Phase II development for HCC), and the Company's NDA filing strategy. Any material delay in FPI could have cascading effects on the overall development timeline and Penterra's competitive position. This target date is the single most important driver of urgency in finalizing the MCTA.
B. Deal Value and Financial Overview
The total deal value under the MCTA is approximately $80,000,000, broken down across the following categories:
For context, Penterra's fiscal year 2022 revenue was $1.87 billion, with research and development expenditure of $612 million. As of the first quarter of 2023, Penterra reported cash and cash equivalents of $890 million. The Company's current market capitalization is approximately $4.2 billion. The CLARION trial represents a significant but manageable financial commitment relative to Penterra's overall R&D portfolio and balance sheet strength.
C. Parties' Counsel
The following law firms and attorneys are engaged in connection with the MCTA negotiations:
Penterra's Outside Counsel: Calderwood & Harkness LLP. The engagement team includes Miriam Calloway (Partner, lead negotiator), Joel Strauss (Partner, strategic advisor), Sean Morrissey (Associate, primary drafter and indemnification specialist), and Christopher Aiken (Associate, insurance and regulatory compliance).
Veridian's Outside Counsel: Whitmore, Jansen & Callahan LLP, located at 1500 Market Street, Suite 3200, Philadelphia, Pennsylvania 19102. The WJC team is led by Allison Whitmore (Partner, named partner) and David Kesselman (Senior Associate). WJC has a well-regarded life sciences practice and has represented Veridian in prior clinical trial agreements, including multi-site oncology trials. Based on our prior interactions with WJC, they are experienced and generally reasonable, but Allison Whitmore in particular is known for aggressive initial positions on indemnification and insurance, with the expectation that there will be meaningful back-and-forth before landing on market terms.
Penterra's FDA Regulatory Counsel: Castleton & Hargrove LLP. The primary contact is Dr. Priya Sundaram, Esq., who manages IND-related regulatory matters, FDA interactions, and safety reporting compliance. We coordinate with Dr. Sundaram's team on all regulatory aspects of the MCTA, including safety reporting procedures, IND maintenance obligations, and protocol deviation frameworks.
D. Timeline Pressures
The negotiation timeline is driven by the following critical-path milestones:
1. MCTA Execution: MCTA signing must occur by late June 2023, which we have identified as June 28, 2023, to permit satisfaction of conditions precedent and site activation activities in time for the August 14, 2023 FPI target.
2. IRB Approvals: Institutional Review Board approvals are required for lead sites prior to site activation. The lead site, Graystone University Medical Center, is subject to the Graystone University Institutional Review Board (IRB registration number IRB00012847). Non-Pennsylvania sites in the Veridian Network are expected to rely on the Veridian Central IRB under a single-IRB model consistent with the 2018 NIH sIRB policy and the revised Common Rule. Both the Graystone IRB and the Veridian Central IRB require an executed MCTA and fully executed individual investigator agreements as conditions for protocol review and approval. Any delay in MCTA execution directly delays IRB submissions and, consequently, site activation and enrollment.
3. CRO Coordination: The Master Services Agreement between Penterra and Meridian Contract Research Organization, Inc. ("Meridian CRO") was executed on January 15, 2023. Meridian CRO's monitoring activities — including site initiation visits, clinical monitoring visits, and data management — are contingent upon finalization of the MCTA and site activation. Meridian CRO has reserved clinical research associate capacity for the CLARION trial beginning in September 2023, and any delay beyond that window may result in resource reallocation and associated costs.
4. Competitive Pressures: As noted above, at least two competing FGFR-targeted agents are in Phase II development for HCC. Timely initiation of the CLARION trial is important to Penterra's competitive positioning and enrollment feasibility, as key opinion leaders and high-enrolling academic sites could be absorbed by competing trials if the CLARION trial is materially delayed.
These timeline pressures underscore the importance of an efficient and focused negotiation strategy. Our approach is designed to resolve the most contentious issues first (through the indemnification term sheet) and to move rapidly toward a comprehensive Second Draft MCTA.
III. Summary of Veridian's Key Markup Positions
This Section provides a detailed summary of the seven principal categories of contested provisions in Veridian's initial markup. Each subsection describes Veridian's proposed position, identifies the departures from Penterra's first draft, and flags the key issues for negotiation. Our recommended responses are set forth in Section IV.
A. Subject-Injury Indemnification
Veridian's markup represents the most significant area of disagreement. Veridian's proposed revisions to the indemnification provisions are aggressive and, in several respects, well outside market norms for multi-site clinical trial agreements. The key elements of Veridian's position are as follows:
First, Veridian demands uncapped indemnification for all subject injuries arising from participation in the CLARION trial, regardless of the cause of the injury. Veridian's markup deletes both the per-subject cap of $500,000 and the aggregate cap of $15,000,000 for reasonable and customary medical costs for the treatment of study-related injuries not otherwise covered by the subject's own health insurance. In effect, Veridian proposes that Penterra serve as a guarantor of all medical costs associated with any injury that occurs during or as a result of trial participation, without any ceiling on financial exposure.
Second, Veridian seeks to eliminate all carve-outs from Penterra's indemnification obligation for injuries caused by investigator negligence, willful misconduct of site personnel, or unauthorized protocol deviations. In Penterra's first draft, the indemnification provision included standard exceptions for injuries attributable to the negligence or willful misconduct of the site, its investigators, or its employees, as well as injuries resulting from the site's failure to comply with the Protocol, the MCTA, or applicable law. Veridian's markup deletes these carve-outs in their entirety, effectively making Penterra the insurer of all trial-related injuries regardless of fault — including injuries caused entirely by site error.
Third, Veridian proposes that failure by Veridian or its sites to provide timely notice of an indemnification claim shall have no effect whatsoever on Penterra's indemnification obligations. Penterra's first draft required written notice of a claim within thirty (30) calendar days and provided that failure to provide timely notice would relieve Penterra of its indemnification obligation for that claim. Veridian's markup deletes the notice requirement entirely, removing any prejudice standard. Under Veridian's proposed language, a site could notify Penterra of a claim months or even years after the triggering event, and Penterra would remain fully obligated to indemnify.
Fourth, Veridian rejects reciprocal site indemnification altogether. Penterra's first draft included a mutual indemnification provision under which each participating site would indemnify Penterra against claims arising from the site's negligence, willful misconduct, or breach of the MCTA. Veridian's markup deletes this provision entirely, arguing in its cover letter that, as a 501(c)(3) tax-exempt research organization, Veridian should not bear indemnity exposure in connection with a commercially sponsored clinical trial. This position is not supported by market practice; we have observed reciprocal indemnification provisions in the vast majority of multi-site clinical trial agreements, including those involving academic medical centers with tax-exempt status.
B. Insurance Requirements
Veridian's markup of the insurance provisions reflects an effort to require Penterra to maintain coverage at levels substantially above both market norms and Penterra's existing policy. The key elements are as follows:
First, Veridian's markup requires Penterra to maintain clinical trial liability insurance of at least $50,000,000 per occurrence and $100,000,000 in the aggregate. This represents a doubling of the per-occurrence limit and a one-third increase over the aggregate limit in Penterra's existing Briarcliff Mutual Insurance Company policy (Policy No. BM-CTL-2023-04182), which provides $25,000,000 per occurrence and $75,000,000 in the aggregate. While Penterra could theoretically obtain increased limits through an endorsement or excess coverage layer, doing so would entail a significant premium increase that is not justified by the risk profile of the CLARION trial.
Second, Veridian demands that Penterra's clinical trial liability policy include an uncapped sublimit for subject-injury claims. Insurance policies inherently contain defined sublimits; it is not possible to obtain an "uncapped" sublimit as a practical matter. Penterra's existing Briarcliff policy includes a subject-injury sublimit of $10,000,000 per occurrence and $50,000,000 in the aggregate.
Third, Veridian objects to Penterra's retained right to change insurers at any time without Veridian's consent. Veridian's markup would require Veridian's prior written consent to any change of insurer, which would give Veridian an effective veto over Penterra's insurance procurement decisions.
C. Payment Structure
Veridian's markup proposes a materially front-loaded payment structure that would shift cash-flow risk to Penterra and reduce the financial incentives for sites to maintain patient retention and data quality throughout the study. The key elements are as follows:
Veridian proposes that per-patient fees be paid according to a 50%/30%/20% milestone structure: 50% of the per-patient fee ($26,000) at randomization, 30% ($15,600) at the Week 12 assessment, and 20% ($10,400) at study completion. This front-loading would mean that the majority of per-patient compensation is earned very early in each subject's participation, well before the most resource-intensive portions of the treatment and follow-up period.
Veridian also seeks quarterly invoicing with Net 30 payment terms, as compared to Penterra's proposed Net 45 terms, which are consistent with the Company's standard vendor payment cycle and internal accounting processes.
Additionally, Veridian requests that start-up fees of $75,000 per site be paid 100% upon site activation, rather than under the 50%/50% split proposed by Penterra (50% upon site activation and 50% upon enrollment of the first patient at each site). Penterra's proposed structure was designed to incentivize timely enrollment initiation and ensure that sites have a financial motivation to move promptly from activation to active enrollment.
D. Publication Rights and Investigator Independence
Veridian's markup on publication rights is consistent with the strong academic freedom protections typically sought by academic medical center networks, but Veridian's position goes further than most in eliminating all sponsor review rights. The key elements are as follows:
First, Veridian insists on unrestricted academic freedom for investigators to publish and present trial results — including interim results, subgroup analyses, and individual site data — without any prior review by Penterra.
Second, Veridian's markup deletes both the sixty (60)-day review period and the ninety (90)-day patent-filing delay proposed by Penterra in the first draft MCTA. Under Penterra's proposed language, investigators would be required to submit manuscripts and abstracts to Penterra at least 60 days prior to submission for publication, during which period Penterra could review for confidential information and patentable subject matter, and could request an additional 90-day delay to permit patent filings. Veridian's markup eliminates these provisions entirely.
Third, Veridian proposes that investigators, not Penterra, shall have sole authority to determine authorship, publication timing, and the selection of journals and scientific meetings at which to present results. While investigator authority over authorship is consistent with ICMJE guidelines and is not objectionable, Veridian's position on timing and venue selection — combined with the elimination of any review period — would leave Penterra with no ability to protect its intellectual property or to ensure consistency of data presentation across sites.
E. Protocol Deviation Liability
Veridian's markup seeks to narrow the circumstances under which a protocol deviation by an investigator or site will trigger a carve-out from Penterra's indemnification obligation. The key elements are as follows:
First, Veridian proposes that the carve-out from sponsor indemnification should apply only to "grossly negligent" protocol deviations, arguing that ordinary negligence in protocol adherence is an inherent part of clinical trial operations and should not shift liability away from the sponsor. Under Veridian's proposed standard, a site that negligently fails to follow the Protocol — for example, by administering an incorrect dose or failing to perform a required safety assessment — would remain fully covered by Penterra's indemnification, unless the deviation rose to the level of gross negligence.
Second, Veridian proposes that "medically necessary" protocol deviations — that is, deviations taken by an investigator in the exercise of clinical judgment because they were required for the immediate safety of a research subject — should be treated identically to protocol-compliant care for all indemnification purposes. Veridian further proposes that no prior or subsequent authorization from Penterra should be required for such deviations. While the concept of protecting investigators who act in the interest of patient safety has merit, Veridian's proposed language contains no notification requirement, no documentation standard, and no mechanism for Penterra to assess whether the deviation was in fact medically necessary or whether it suggests a need for a protocol amendment.
F. Termination and Wind-Down
Veridian's markup proposes more favorable termination and wind-down terms for Veridian and its sites at the expense of Penterra's financial flexibility. The key elements are as follows:
First, Veridian seeks to extend the wind-down period from 120 days (as proposed by Penterra) to 180 days following the effective date of termination. During the wind-down period, sites would be required to transition subjects in active treatment to alternative care providers or to permit subjects to complete their current treatment cycle, and Penterra would remain financially responsible for all associated costs. A 180-day wind-down period would significantly extend Penterra's financial exposure and operational obligations post-termination.
Second, Veridian demands that Penterra continue to pay full per-patient fees at the contracted rate during the wind-down period for all subjects in active treatment, without any proration based on the stage of treatment or the milestones actually achieved at the time of termination. Under this proposal, Penterra would owe the full $52,000 per-patient fee for each subject in active treatment during wind-down, even if the subject had only recently been randomized and had not yet reached any post-randomization milestone.
Third, Veridian seeks an expanded termination-for-convenience right that would allow any individual site within the Veridian Network to withdraw from the CLARION trial without cause upon sixty (60) days' prior written notice. Penterra's first draft required 120 days' notice for individual site withdrawal, and conditioned withdrawal on the orderly transition of subjects in active treatment.
G. Regulatory Compliance
Veridian's markup raises two significant issues in the area of regulatory compliance representations:
First, Veridian objects to Penterra's proposed representation that all investigator payments under the MCTA are at fair market value, consistent with the requirements of the Anti-Kickback Statute (42 U.S.C. § 1320a-7b) and applicable safe harbor regulations. Veridian's position, as expressed in its cover letter, is that Penterra — as the sponsor setting the payment amounts — should bear the sole burden of establishing that payments are at fair market value, and that Veridian should not be required to make a mutual representation on this point. Veridian contends that it has limited ability to independently verify the FMV of sponsor-determined payment amounts.
Second, Veridian's markup reduces the scope of financial disclosure obligations under 21 CFR Part 54, limiting the disclosure requirement to financial interests above $50,000. This is at odds with the regulatory threshold of $25,000 established by 21 CFR § 54.2(b), which defines a "significant financial interest" as including, among other things, any proprietary interest in the tested product or any significant equity interest in the sponsor where the value cannot reasonably be determined by reference to public prices, or any equity interest that exceeds $50,000 in value when combined with payments from the sponsor that exceed $25,000 in a single year. Veridian's proposed $50,000 threshold would create a gap between the MCTA's contractual disclosure requirement and the FDA's regulatory standard, potentially resulting in non-compliant clinical trial financial disclosure submissions.
IV. Recommended Negotiation Positions
This Section sets forth Calderwood & Harkness's recommended negotiation positions for each of the seven contested areas, along with supporting rationale, fallback positions, and strategic considerations.
A. Subject-Injury Indemnification — Hold Firm on Caps; Concede on Product-Defect Uncapped Liability
Subject-injury indemnification is the central contested provision in the MCTA and the area most likely to generate protracted negotiation. Our recommendations are designed to maintain Penterra's core protections while offering reasonable compromises that should be acceptable to a well-counseled counterparty.
1. Per-Subject and Aggregate Caps on Medical Care Costs
Recommendation: Maintain the per-subject cap of $500,000 and the aggregate cap of $15,000,000 for reasonable and customary medical costs for the treatment of study-related injuries that are not covered by the subject's own health insurance or other available coverage. These caps apply only to direct medical care costs and do not limit Penterra's liability for other categories of damages (e.g., wrongful death claims, personal injury tort claims), which would be governed by applicable law and Penterra's insurance coverage.
Justification: These caps are consistent with prevailing market standards in Phase III multi-site oncology clinical trials. Our benchmarking analysis, set forth in the Comparative Indemnification Structures Memorandum circulated to the deal team on April 15, 2023, reviewed 24 multi-site clinical trial agreements executed between 2019 and 2023 involving Phase III oncology trials with enrollment of 500 subjects or more. Of those 24 agreements, 19 (79%) included per-subject caps on medical care costs ranging from $250,000 to $1,000,000, with a median of $500,000. All 24 agreements included aggregate caps, ranging from $5,000,000 to $25,000,000, with a median of $12,500,000. Penterra's proposed caps of $500,000 per subject and $15,000,000 in the aggregate are at or above the market median and represent a significant financial commitment relative to the CLARION trial's total deal value of $80,000,000.
Additionally, from a practical standpoint, the $15,000,000 aggregate cap provides meaningful protection to subjects. Even in a worst-case scenario involving a systemic safety signal affecting a large number of subjects, the aggregate cap would be sufficient to cover medical care costs for at least 30 subjects at the per-subject cap level — a scenario that would almost certainly trigger study termination and broader product liability considerations that would be addressed through Penterra's product liability insurance and tort law frameworks, rather than through the MCTA's contractual indemnification provisions.
Fallback: If Veridian insists on higher caps and this issue threatens to become a deal-breaker, Penterra should consider increasing the per-subject cap to $750,000, but should hold the aggregate cap at $15,000,000. The $750,000 per-subject cap remains within the market range and would increase the per-subject coverage by 50%, a meaningful concession. However, Penterra should not agree to uncapped subject-injury medical care costs under any circumstances, as such a commitment would be uninsurable and would create open-ended financial exposure that is inconsistent with prudent corporate risk management.
2. Product-Defect Claims — Agree to Uncapped Indemnification
Recommendation: Accept uncapped indemnification for third-party claims and subject injuries arising directly from defects in the investigational product (PPC-4871) when the product is administered in accordance with the Protocol and applicable labeling, including the Investigator's Brochure. This means that if a subject is injured by a defect in penterafenib itself — such as a manufacturing defect, contamination, undisclosed adverse reaction profile, or failure of the product to conform to its specifications — and the product was administered in accordance with the Protocol, Penterra's indemnification obligation for such claims would not be subject to the per-subject or aggregate caps described above.
Rationale: Product-defect liability is appropriately the sponsor's responsibility. As the IND holder, the manufacturer, and the entity with exclusive control over the design, formulation, and supply chain of PPC-4871, Penterra is in the best position to prevent and bear the risk of product-defect injuries. This allocation is consistent with Penterra's risk profile and its role as sponsor under 21 CFR Part 312. Moreover, Penterra's Briarcliff Mutual policy provides product liability coverage that is adequate to absorb this risk. Agreeing to uncapped product-defect indemnification is also a meaningful concession that should generate goodwill with Veridian and potentially create space for Veridian to accept Penterra's positions on other indemnification issues, particularly the medical care cost caps.
3. Carve-Outs for Investigator Negligence and Protocol Deviations
Recommendation: Insist on retaining the standard carve-outs from sponsor indemnification for injuries and claims arising from:
(i) the negligence or willful misconduct of the site, the investigator, or any site personnel, including research coordinators, study nurses, and pharmacists;
(ii) unauthorized protocol deviations — that is, deviations from the Protocol that were not directed, authorized, or approved by Penterra and that are not "medically necessary" deviations as defined in the compromise framework proposed in Section IV.E below; and
(iii) the site's material breach of the MCTA, the Protocol, applicable law, or the terms of the subject's informed consent.
These carve-outs are standard in virtually all multi-site clinical trial agreements and are non-negotiable. Without them, Penterra would effectively be guaranteeing against harm caused entirely by site-level errors, misconduct, or non-compliance — a risk that Penterra has no ability to prevent or mitigate, and that is properly borne by the party whose conduct caused the injury. It is essential that Veridian and its investigators understand that the sponsor's indemnification obligation is intended to cover injuries arising from the inherent risks of the investigational product and the clinical trial itself, not from the negligent performance of clinical trial activities by site personnel.
The treatment of medically necessary protocol deviations is addressed separately in Section IV.E below, where we propose a compromise framework that addresses Veridian's legitimate concerns about investigator protection in emergency situations while preserving Penterra's rights.
4. Notice Requirements
Recommendation: Maintain the requirement that Veridian and each participating site provide written notice to Penterra of any indemnification claim within thirty (30) calendar days of the site's or Veridian's first becoming aware of the claim or the circumstances giving rise to the claim. This notice period is standard and reasonable.
However, we recommend a targeted concession on the consequences of late notice. Specifically, Penterra should concede Veridian's position that failure to provide timely notice shall not relieve Penterra of its indemnification obligation except to the extent Penterra is materially prejudiced by such failure. This "material prejudice" qualifier is a well-recognized standard in indemnification and insurance law. It protects Penterra by preserving its right to contest indemnification in cases where late notice materially impaired Penterra's ability to defend the claim, investigate the facts, or mitigate damages. At the same time, it addresses Veridian's legitimate concern that a technical failure to provide notice within exactly 30 days — which could occur due to administrative oversight, delayed identification of a claim, or ambiguity about whether a particular event constitutes a "claim" — should not result in a forfeiture of indemnification protections for an injured subject.
This concession is low-risk for Penterra because the "material prejudice" standard is a high bar. In most cases, a delay of even several weeks in providing notice would not materially prejudice Penterra's ability to defend or investigate a claim, particularly given that Penterra will receive contemporaneous safety data through the clinical trial's adverse event reporting systems. The concession should be well-received by WJC and demonstrates Penterra's good faith.
5. Reciprocal Site Indemnity
Recommendation: Insist on reciprocal indemnification from Veridian and each participating institution for third-party claims (including claims by subjects) arising from:
(i) the negligence or willful misconduct of the site, its investigators, or its employees or agents;
(ii) unauthorized protocol deviations attributable to the site; and
(iii) the site's material breach of the MCTA, the Protocol, applicable law, or the informed consent.
Proposed Caps: $5,000,000 per site per occurrence; $20,000,000 in the aggregate across all Veridian Network sites.
Justification: Reciprocal indemnification is market-standard in multi-site clinical trial agreements and is present in the overwhelming majority of the comparable agreements reviewed in our benchmarking analysis. Veridian's 501(c)(3) tax-exempt status does not preclude contractual indemnification obligations. Tax-exempt organizations routinely enter into contracts containing indemnification provisions, and their tax-exempt status relates to their treatment under the Internal Revenue Code, not to their capacity to assume contractual liability. Veridian maintains general liability and professional liability insurance coverage to absorb indemnification exposure, and we understand from publicly available information that Veridian's insurance program is administered through its captive insurance entity, Veridian Risk Management, Ltd., with excess layers provided by commercial carriers.
The proposed site indemnification caps are deliberately modest relative to the overall deal value. The per-site per-occurrence cap of $5,000,000 is below the minimum coverage levels that Penterra is requiring Veridian and its sites to carry under the MCTA's site insurance provisions (see Section IV.B.5 below). The $20,000,000 aggregate cap across all 38 Veridian sites represents just 25% of the total deal value. These caps provide Penterra with a meaningful remedy for site-caused harm while limiting Veridian's and its sites' contractual exposure to manageable levels.
Fallback: If Veridian resists the $20,000,000 aggregate cap, Penterra should consider reducing the aggregate to $15,000,000 but should not reduce the per-site per-occurrence cap below $5,000,000. Under no circumstances should Penterra agree to eliminate reciprocal site indemnification altogether. The absence of any site indemnity would leave Penterra without a contractual remedy for harm caused by site negligence and would create a severe moral hazard.
6. Proposed Indemnification Term Sheet
Recommendation: We strongly recommend circulating a detailed, stand-alone indemnification term sheet to WJC by May 5, 2023. The term sheet would memorialize all of Penterra's positions on subject-injury indemnification, product-defect indemnification, reciprocal site indemnity, caps, carve-outs, notice requirements, and related procedural provisions (defense and settlement authority, cooperation obligations, etc.).
The purpose of the term sheet is to focus the negotiation on the most contentious set of provisions and to create a framework for early resolution. Indemnification is the issue most likely to delay the overall negotiation, and if the parties can reach agreement (or near-agreement) on indemnification terms before the Second Draft MCTA is circulated, the remainder of the negotiation should proceed more efficiently. The term sheet format also has the advantage of presenting Penterra's positions in a clear, structured way that facilitates line-by-line discussion without the distraction of the full MCTA text.
Sean Morrissey will prepare the initial draft of the term sheet for Miriam Calloway's review and circulation.
B. Insurance Requirements — Negotiate to Existing Briarcliff Policy Limits
1. Per-Occurrence and Aggregate Limits
Recommendation: Reject Veridian's demand for $50,000,000 per occurrence and $100,000,000 in the aggregate. Counter-propose $25,000,000 per occurrence and $75,000,000 in the aggregate — the existing limits under Penterra's Briarcliff Mutual Insurance Company clinical trial liability policy (Policy No. BM-CTL-2023-04182, with a policy period of April 1, 2023 through March 31, 2024, renewable annually).
Justification: The $25,000,000 per-occurrence and $75,000,000 aggregate limits are at or above market standard for Phase III oncology clinical trials. In our benchmarking analysis, the median per-occurrence limit across 24 comparable agreements was $20,000,000, and the median aggregate limit was $50,000,000. Penterra's existing coverage exceeds both medians. Increasing coverage to the levels demanded by Veridian would require either a significant endorsement to the existing Briarcliff policy or the procurement of an excess layer from a specialty carrier. Based on preliminary discussions with Penterra's insurance broker (Harrington & Associates), the estimated incremental annual premium for coverage at Veridian's requested levels would be approximately $1.2 million to $1.8 million — a cost that is not justified by the safety profile of penterafenib as established in Phase II data.
Moreover, the demand for $50,000,000 per-occurrence coverage is particularly disproportionate in the context of the MCTA's proposed per-subject indemnification cap of $500,000. Even at the maximum per-subject cap, a single occurrence affecting 100 subjects — an extraordinarily severe scenario — would generate indemnified medical care costs of $50,000,000, which is precisely the aggregate medical care cap level. The existing $25,000,000 per-occurrence limit, combined with the $75,000,000 aggregate, provides ample coverage for any reasonably foreseeable loss scenario.
2. Subject-Injury Sublimit
Recommendation: Disclose to WJC that the Briarcliff policy includes a subject-injury sublimit of $10,000,000 per occurrence and $50,000,000 in the aggregate. These sublimits are adequate in light of the proposed per-subject cap of $500,000 and aggregate cap of $15,000,000 for medical care costs under the MCTA. The subject-injury sublimit substantially exceeds the MCTA's aggregate indemnification cap, meaning that the insurance coverage is sufficient to fully fund Penterra's contractual indemnification obligations even in a worst-case scenario.
Penterra should not agree to "uncapped" sublimits, as insurance policies inherently operate within defined limits and sublimits. A request for uncapped sublimits reflects either a misunderstanding of insurance mechanics or an aspirational negotiating position that is not achievable in the insurance market.
3. Additional Insured Status
Recommendation: Agree to name Veridian Health Research Network, Inc. and each participating site as additional insureds under the Briarcliff policy, to the extent of Penterra's indemnification obligations under the MCTA. This is consistent with standard industry practice for multi-site clinical trial agreements and should be readily available under the Briarcliff policy.
We recommend that Christopher Aiken prepare a letter to Karen Tremblay, Vice President, Life Sciences Lines, at Briarcliff Mutual, requesting issuance of an additional insured endorsement to Policy No. BM-CTL-2023-04182 naming Veridian and all 38 participating sites (to be identified by schedule). This letter should be sent promptly to ensure that the endorsement is in hand prior to the target MCTA execution date.
4. Change of Insurer
Recommendation: Accept a contractual requirement to provide Veridian with thirty (30) days' prior written notice of any change in Penterra's clinical trial liability insurer during the term of the MCTA. This notice period is reasonable and gives Veridian the opportunity to review the replacement insurer's financial strength and coverage terms. However, Penterra should not grant Veridian consent rights over the selection of a replacement insurer, provided that the replacement coverage meets or exceeds the minimum limits specified in the MCTA (i.e., $25,000,000 per occurrence / $75,000,000 aggregate, or such other limits as may be agreed). Veridian's interest is in ensuring that adequate coverage is maintained, not in controlling Penterra's insurance procurement decisions.
5. Site Insurance
Recommendation: Maintain the requirement that Veridian and each participating site carry general liability and professional liability insurance coverage of at least $5,000,000 per occurrence and $10,000,000 in the aggregate throughout the term of the MCTA. Certificates of insurance evidencing such coverage shall be due within fifteen (15) business days of MCTA execution. These site insurance requirements are standard, and the coverage levels are appropriate for academic medical centers and research institutions of the size and scope represented within the Veridian Network.
The site insurance requirement serves two purposes: first, it ensures that sites have insurance coverage to back their reciprocal indemnification obligations under the MCTA; and second, it provides a layer of protection for Penterra in the event that a site's negligence results in third-party claims that are not covered by the MCTA's indemnification provisions.
C. Payment Structure — Insist on Milestone-Based Per-Patient Payments
1. Per-Patient Fee Milestones
Recommendation: Reject Veridian's proposed front-loaded 50%/30%/20% milestone structure. Counter-propose an even 25%/25%/25%/25% milestone structure tied to meaningful clinical milestones throughout each subject's participation in the trial:
Rationale: Milestone-based payments tied to sequential clinical events are the prevailing standard in Phase III clinical trial agreements for good reason. They incentivize site performance and sustained attention to patient retention throughout the treatment and follow-up periods, rather than concentrating site revenue at the front end. Front-loading per-patient fees to 50% at randomization creates misaligned incentives: sites receive the majority of their compensation before the most resource-intensive portions of the trial (ongoing treatment, safety monitoring, tumor assessments, follow-up visits) have been completed. This structure also creates significant cash-flow risk for Penterra in the event of early patient discontinuation, as a large percentage of per-patient fees would already have been paid for subjects who do not complete the trial.
The even four-tranche distribution is fair to both parties. It provides sites with prompt compensation at randomization ($13,000, which is sufficient to cover initial enrollment and randomization costs), followed by equal installments at meaningful clinical checkpoints that correspond to periods of significant site activity. The structure also provides sites with regular, predictable cash flow rather than concentrating payments at the beginning and end of the study.
The total per-patient site fees across all 1,200 subjects amount to $62,400,000. The distribution of this amount across milestones has significant financial implications for Penterra's cash management and should be controlled carefully.
2. Start-Up Fees
Recommendation: Maintain the 50%/50% split for start-up fees — $37,500 payable upon site activation and $37,500 payable upon enrollment of the first patient at each site. The total start-up fees across 38 sites amount to $2,850,000.
Justification: The split payment structure ensures that sites receive prompt compensation for start-up activities (regulatory submissions, staff training, equipment calibration, pharmacy setup) while maintaining a financial incentive for timely enrollment initiation. In our experience, sites that receive 100% of start-up fees at activation sometimes deprioritize enrollment activities, particularly when competing trials are also in the start-up phase. The second tranche upon first patient enrolled creates a direct financial motivation to move from activation to enrollment as quickly as possible — a consideration of particular importance given the August 14, 2023 FPI target.
Fallback: If Veridian presses hard on this issue and it risks becoming a significant impediment to agreement, Penterra should consider a 60%/40% split ($45,000 at activation / $30,000 upon first patient enrolled). This compromise increases the activation payment by $7,500 per site while maintaining a meaningful incentive for timely enrollment. Penterra should resist agreement to 100% at activation, as this eliminates any financial leverage to encourage prompt enrollment initiation.
3. Payment Terms
Recommendation: Maintain Net 45 days from Penterra's receipt of a proper and complete invoice as the standard payment term for all categories of MCTA payments.
Justification: Net 45 is the standard payment term across Penterra's vendor and sponsor agreements and is aligned with the Company's internal accounting and disbursement cycles. Penterra's accounts payable team processes clinical trial invoices in accordance with established procedures that assume a 45-day processing window. Compressing this to Net 30 would require operational adjustments and could create bottlenecks, particularly during periods of high enrollment when per-patient milestone invoices are being received from multiple sites simultaneously.
Veridian's Net 30 proposal is not unreasonable as a general matter, but it is inconsistent with Penterra's established practices and is not the market norm for sponsor-to-site payments in Phase III trials.
Fallback: If Veridian insists on Net 30 terms and this issue threatens to delay agreement, Penterra should consider agreeing to Net 30 payment terms for start-up fees and annual site maintenance fees only — categories that involve a relatively small number of predictable, scheduled payments — while retaining Net 45 for per-patient milestone payments, which represent the vast majority of the MCTA's deal value and generate the highest volume of invoices.
4. Network Coordination Fee and Site Maintenance
Network Coordination Fee: The quarterly installment structure of $300,000 per quarter over 14 quarters ($4,200,000 total) has not been contested by Veridian in its initial markup. We recommend maintaining this structure as drafted. The network coordination fee compensates Veridian centrally for its administrative oversight, site coordination, central IRB management, and network-wide quality assurance activities. Quarterly invoicing and payment is appropriate for this type of administrative fee.
Annual Site Maintenance Fees: The $40,000 per site per year, paid annually in advance on each site-activation anniversary, is also not a significant area of dispute. We recommend maintaining this provision as drafted. The site maintenance fee covers ongoing infrastructure costs that accrue regardless of enrollment volume, including maintenance of site facilities, retention of trained research staff, and ongoing IRB renewals.
5. Investigator Grants
The investigator grants of $1,500,000 total, disbursed upon acceptance of manuscripts for peer-reviewed publication, should be maintained as drafted. This payment structure ties the grant disbursement to actual deliverables — accepted publications that advance the scientific understanding of penterafenib — and avoids any appearance of payment for referrals or enrollment incentives that could raise concerns under the Anti-Kickback Statute or institutional conflict-of-interest policies. The publication-contingent structure is also consistent with the academic mission of the Veridian Network and should be viewed favorably by Veridian's compliance function.
D. Publication Rights and Investigator Independence — Strategic Concession with Guardrails
Publication rights represent an area where Penterra has the opportunity to make a meaningful strategic concession that addresses one of Veridian's highest institutional priorities — academic freedom and investigator independence — while maintaining the essential protections that Penterra requires for its intellectual property and trade secrets. Our recommendations are designed to strike this balance.
1. Sponsor Review Period
Recommendation: Propose a sixty (60)-day review period during which Penterra may review manuscripts, abstracts, and presentations prior to submission for publication or presentation. During this review period, Penterra's review rights are limited to:
(a) identifying and requesting removal of Penterra's confidential information and trade secrets;
(b) identifying patentable subject matter that may require protection through patent applications; and
(c) identifying data inconsistencies or errors that could undermine the scientific integrity of the publication.
For the avoidance of doubt, Penterra's review right does not include the right to suppress or materially alter the scientific conclusions, interpretations, or opinions of the investigators. The review period is an administrative and intellectual property protection mechanism, not an editorial control mechanism. This distinction is critical and should be communicated clearly to WJC and to Veridian's institutional leadership.
A sixty-day review period is widely accepted by academic medical centers, including many of the institutions within the Veridian Network. The Association of American Medical Colleges (AAMC) and the International Committee of Medical Journal Editors (ICMJE) have recognized the legitimacy of limited sponsor review periods of up to 60 days for the purpose of identifying confidential information and patentable subject matter, provided that the sponsor does not have the right to prevent or unduly delay publication.
2. Patent-Filing Delay
Recommendation: Propose an additional ninety (90)-day delay period beyond the 60-day review period if, during the review, Penterra identifies patentable subject matter that warrants the filing of a patent application before the publication would constitute a public disclosure. The total maximum delay from the investigator's submission of a manuscript to Penterra to the earliest date on which the investigator may submit the manuscript for publication would thus be 150 days (60-day review plus 90-day patent-filing delay).
This combined 150-day period is within the range accepted by leading academic medical centers and is consistent with NIH policies and AAMC recommendations. It provides Penterra with sufficient time to evaluate potential patent claims, prepare and file patent applications, and protect its intellectual property rights in the discoveries arising from the CLARION trial. At the same time, the 150-day maximum ensures that publication is not indefinitely delayed and that investigators retain meaningful control over the dissemination of their scientific work.
Penterra should be prepared to provide written notice to the investigator and Veridian within the 60-day review period if it intends to invoke the 90-day patent-filing delay, and should be required to use commercially reasonable efforts to complete patent filings within that 90-day window.
3. Authorship and Academic Freedom
Recommendation: Acknowledge and affirm the investigators' right to authorship consistent with ICMJE guidelines. The MCTA should expressly provide that authorship of publications arising from the CLARION trial shall be determined in accordance with ICMJE criteria, which require that each author have made substantial contributions to the conception or design of the work, or the acquisition, analysis, or interpretation of data; participated in drafting or critically revising the manuscript; approved the final version; and agreed to be accountable for the work.
Penterra should not claim a right to suppress or materially alter the scientific conclusions, interpretations, or opinions expressed by the investigators. However, Penterra should retain the right to include its own scientists and clinical development personnel as co-authors on publications where their contributions meet ICMJE criteria. This is a standard provision in industry-sponsored clinical trial agreements and reflects the legitimate scientific contributions of sponsor personnel to the design, conduct, and analysis of the trial.
4. Multi-Site Publication Coordination
Recommendation: Include a provision requiring that multi-site publications — including any publication reporting the primary endpoint results, any pre-specified secondary endpoint results, or any pooled data from two or more sites — be coordinated through the Global Principal Investigator, Dr. Catherine Aldridge, to ensure data consistency and to avoid premature or inconsistent disclosures that could mislead the scientific community or create confusion about the trial's results. Individual investigators would retain the right to publish site-specific data (e.g., case reports, single-site subgroup analyses) subject to the review period described above, but multi-site publications would be required to go through a coordinated review process led by Dr. Aldridge.
This provision protects both Penterra's interests and the scientific integrity of the CLARION trial. In a multi-site trial of this size, uncoordinated publication of interim or partial results from individual sites could lead to conflicting or misleading interpretations, particularly if different sites have different enrollment characteristics or outcomes. Coordinated publication through the Global PI is consistent with standard practice in large multi-site trials and with the policies of most academic medical centers.
E. Protocol Deviation Liability — Develop Workable Framework for Medically Necessary Deviations
1. Standard for Carve-Out
Recommendation: Reject Veridian's proposal to limit the indemnification carve-out to protocol deviations arising from "gross negligence" only. Maintain that ordinary negligence in protocol adherence is sufficient to trigger the carve-out from Penterra's indemnification obligation.
Rationale: A gross-negligence-only standard would effectively make Penterra financially responsible for negligent site conduct that causes subject injury — a fundamentally inappropriate allocation of risk. The distinction between negligence and gross negligence is a meaningful one in both law and practice. Negligence in protocol adherence could include, for example, failure to perform a required safety assessment, administration of an incorrect dose due to a calculation error, or failure to monitor for a specified adverse event. These are errors that are within the site's control and that the site has the responsibility to prevent through proper training, supervision, and quality control.
If Penterra were to accept a gross-negligence-only standard, sites would face reduced financial accountability for ordinary care failures, which could undermine the quality and safety of trial conduct. Moreover, from an insurance perspective, Penterra's Briarcliff policy anticipates that the MCTA's indemnification provisions will include standard carve-outs for site negligence; accepting a gross-negligence-only standard could affect Penterra's coverage position.
2. Medically Necessary Deviations
Recommendation: Propose a compromise framework for medically necessary protocol deviations that balances the legitimate interests of both parties. Under this framework:
Deviations from the Protocol that are required by an investigator in the exercise of clinical judgment for the immediate safety of a research subject shall be treated as protocol-compliant conduct for purposes of the MCTA's indemnification provisions, provided that the following conditions are satisfied:
(a) The investigator notifies Penterra and Meridian CRO of the deviation within twenty-four (24) hours of the deviation occurring;
(b) The deviation is fully documented in the case report form (CRF), source documents, and the site's deviation log, including the clinical rationale for the deviation and the investigator's assessment of the impact on the subject's safety and the integrity of the trial data; and
(c) Penterra is given the opportunity to assess whether the deviation, or the circumstances giving rise to it, requires or warrants a protocol amendment, a safety communication to other sites, or reporting to the FDA, the relevant IRB, or the Data Safety Monitoring Board.
This framework protects investigators who make good-faith clinical decisions in emergency situations by ensuring that they are covered by Penterra's indemnification for the consequences of medically necessary deviations. At the same time, the notification, documentation, and assessment requirements ensure that Penterra retains visibility into all deviations, can assess whether broader safety or regulatory implications exist, and can take appropriate action (including protocol amendments or safety communications) to protect subjects at other sites.
The 24-hour notification window is consistent with the MCTA's existing serious adverse event ("SAE") reporting timeframe and with Meridian CRO's monitoring procedures. It ensures that information flows promptly without imposing an unreasonable burden on investigators who are simultaneously managing the clinical care of the affected subject.
Fallback: If WJC or Veridian objects to the 24-hour notification window as impractical in certain clinical settings (e.g., weekend or holiday events at sites with limited administrative support), Penterra should consider extending the notification window to forty-eight (48) hours. This remains a prompt timeline and is still consistent with the regulatory expectation of timely deviation reporting. Penterra should not agree to any framework that eliminates the notification requirement entirely, as this would deprive Penterra of information necessary for IND safety reporting, protocol management, and data integrity assessment.
F. Termination and Wind-Down — Maintain 120-Day Wind-Down with Targeted Concessions
1. Wind-Down Period
Recommendation: Maintain the 120-day wind-down period following the effective date of termination for subject safety and transition purposes. Reject Veridian's proposed 180-day wind-down period.
A 120-day wind-down period is sufficient for the orderly transition of subjects in active treatment. In the context of a Phase III oncology trial, treatment cycles for penterafenib are expected to be 28-day cycles, meaning that 120 days provides approximately four full treatment cycles — enough time for subjects to complete a current course of treatment and to be transitioned to alternative care or to standard-of-care therapy with the assistance of the investigator and Penterra's medical affairs team. A 180-day wind-down period would extend this timeframe unnecessarily, imposing approximately two additional months of ongoing costs on Penterra — including per-patient fees, site maintenance fees, monitoring costs, safety reporting obligations, and data management expenses — without a commensurate benefit to subject safety.
Furthermore, a 180-day wind-down period would extend Penterra's ongoing insurance obligations under the MCTA by 60

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

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MATTER NO.: 1018-00004

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