PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
MEMORANDUM
April 29, 2023
FROM: Sean Morrissey, Associate, Calderwood & Harkness LLP
TO: Miriam Calloway, Partner, Calderwood & Harkness LLP Rebecca Liang, Esq., Associate General Counsel, Clinical Affairs, Penterra Pharmaceuticals Corp.
CC: Christopher Aiken, Associate, Calderwood & Harkness LLP Joel Strauss, Partner, Calderwood & Harkness LLP
RE: Review and Analysis of Veridian Health Research Network, Inc. / Whitmore, Jansen & Callahan LLP Initial Markup of Master Clinical Trial Agreement for Protocol PPC-4871-III (CLARION)
Matter No.: 1018-00004
This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the named recipients and is not to be distributed, disclosed, or otherwise disseminated without the express authorization of Calderwood & Harkness LLP. This memorandum reflects preliminary legal analysis and recommendations; it does not constitute final legal advice and is subject to revision upon further factual development and strategic discussion.
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I. Executive Summary
On April 28, 2023, Whitmore, Jansen & Callahan LLP ("WJC"), outside counsel to Veridian Health Research Network, Inc. ("Veridian"), returned their initial markup of the Master Clinical Trial Agreement ("MCTA") that Calderwood & Harkness circulated on behalf of Penterra Pharmaceuticals Corp. ("Penterra" or the "Sponsor") on April 7, 2023. The marked-up draft was transmitted via WJC's secure file-sharing platform and is attached hereto as Attachment 1. This memorandum summarizes and analyzes the most significant revisions proposed by Veridian and provides preliminary recommendations for Penterra's response.
The MCTA governs Penterra's engagement of Veridian's 38-site network across 14 states for the Phase III CLARION trial (Protocol PPC-4871-III) evaluating penterafenib (PPC-4871), a novel multi-kinase inhibitor, in patients with advanced hepatocellular carcinoma ("HCC"). The total deal value under the MCTA is approximately $80,000,000 over the projected 60-month study duration, consisting of a 42-month enrollment period followed by an 18-month follow-up period. Given the scale of this engagement and the complexity of the regulatory environment governing Phase III oncology trials, the terms of the MCTA are of considerable commercial and legal significance to Penterra.
Veridian's markup contains substantive revisions across virtually all sections of the MCTA. While many of the approximately 180 individual tracked changes reflect editorial or conforming adjustments that do not raise significant concerns, four categories of changes are of particular significance and require strategic discussion before we prepare Penterra's response:
1. Uncapped Subject-Injury Indemnification. Veridian has deleted both the per-subject and aggregate caps on Penterra's indemnification obligations for study-related injuries, broadened the definition of compensable injuries, shifted the burden of proof regarding causation to Penterra, and narrowed the carve-outs for site negligence and misconduct. If accepted, these changes would expose Penterra to potentially unlimited liability across the 1,200-subject trial.
2. Increased Insurance Requirements ($50M Per Occurrence). Veridian has proposed doubling Penterra's per-occurrence insurance coverage from $25,000,000 to $50,000,000 and increasing aggregate limits from $75,000,000 to $150,000,000, while simultaneously reducing Veridian's own required coverage. These revisions would require Penterra either to renegotiate its existing policy with Briarcliff Mutual Insurance Company or to procure excess or umbrella coverage at significant additional premium cost.
3. Front-Loaded Payment Structure. Veridian has proposed restructuring the per-patient payment schedule from the milestone-based approach (25%/25%/25%/25%) in our draft to a front-loaded model concentrating 50% of per-patient payments at randomization. Veridian has also proposed a new "site readiness" fee, an increased network coordination fee, and accelerated payment terms, collectively increasing total deal value above the approved $80,000,000 program budget.
4. Materially Expanded Investigator Publication Rights. Veridian has shortened Penterra's publication review period from 60 days to 30 days, deleted the 90-day patent-filing delay provision entirely, and inserted an "academic freedom" clause that would significantly restrict Penterra's ability to protect its intellectual property and commercial interests in connection with investigator publications.
In addition to these four priority categories, Veridian's markup includes significant revisions to the data ownership provisions, confidentiality carve-outs, termination and wind-down mechanics, regulatory compliance representations, dispute resolution procedures, and subcontractor provisions. Each of these is addressed in the body of this memorandum.
This memorandum analyzes each category of changes, assesses the risk to Penterra, benchmarks the proposed terms against prevailing market practice for comparable multi-site Phase III oncology trial agreements, and provides preliminary recommendations for Penterra's response. We recommend scheduling an internal strategy call with the full deal team early in the week of May 1 to discuss these issues and align on negotiating positions before preparation of the Second Draft.
II. Background
A. The CLARION Trial
Penterra is sponsoring the CLARION trial (ClinicalTrials.gov Identifier NCT05928174; IND No. 157823), a Phase III, randomized, double-blind, placebo-controlled, multicenter study evaluating the efficacy and safety of penterafenib (PPC-4871) versus placebo in adult patients with advanced hepatocellular carcinoma who have progressed on or are intolerant to at least one prior line of systemic therapy. The study protocol (Protocol PPC-4871-III, Version 3.0, dated February 14, 2023) calls for the enrollment of approximately 1,200 subjects in a 2:1 randomization ratio (800 subjects receiving penterafenib; 400 subjects receiving matched placebo), with the primary endpoint of overall survival and key secondary endpoints including progression-free survival, objective response rate per RECIST v1.1, and patient-reported outcomes. The projected study duration is 60 months, comprising a 42-month enrollment period and an 18-month follow-up period following enrollment of the last subject.
Penterafenib is an orally bioavailable multi-kinase inhibitor targeting the VEGFR-2, FGFR, and MET signaling pathways. As with other agents in this class, the known toxicity profile includes hypertension, hand-foot skin reaction, diarrhea, hepatotoxicity, and, at higher incidence than single-pathway inhibitors, proteinuria and thromboembolic events. The safety profile is relevant to the indemnification and insurance discussions addressed in this memorandum, as the patient population (advanced HCC, many with underlying hepatic impairment) is inherently high-risk.
B. The MCTA and Negotiation Timeline
The MCTA was drafted by Calderwood & Harkness in consultation with Penterra's Clinical Operations team (led by Nathaniel Briggs, Senior Vice President, Clinical Development, and Jennifer Holt, Vice President, Clinical Operations) and the Penterra Legal Affairs department (Rebecca Liang, Associate General Counsel, Clinical Affairs). The first draft of the MCTA was circulated to WJC on April 7, 2023, via secure email from Sean Morrissey to David Kesselman, Esq. (Associate, WJC), with a copy to Allison Whitmore, Esq. (Partner, WJC). Our circulated draft reflected Penterra's positions on all key commercial and legal terms, including the following principal economic and risk-allocation provisions:
• Per-Patient Payments: $52,000 per subject, paid in four equal installments of $13,000 each at (i) randomization, (ii) Week 12 assessment, (iii) Week 24 assessment, and (iv) study completion/final visit.
• Start-Up Fees: $75,000 per site, payable in two tranches — $37,500 upon site activation and $37,500 upon enrollment of the first subject at that site.
• Network Coordination Fee: $4,200,000 total, payable in quarterly installments of $300,000 over 14 quarters.
• Subject-Injury Indemnification: Penterra indemnification for study-related injuries caused by the investigational product when administered in accordance with the Protocol, subject to a per-subject medical care cost cap of $500,000 and an aggregate cap of $15,000,000, with uncapped indemnification for claims based on product defect.
• Insurance: Clinical trial liability insurance of not less than $25,000,000 per occurrence and $75,000,000 in the aggregate, consistent with Penterra's existing policy through Briarcliff Mutual Insurance Company (Policy No. BM-CTL-2023-04182, policy period April 1, 2023 through March 31, 2024).
• Publication Review: 60-day review period for confidential information and patentable subject matter, with Penterra's right to request an additional 90-day delay for patent filings (150 days total maximum delay).
• Data Ownership: Exclusive Penterra ownership of all clinical trial data generated under the MCTA.
• Governing Law: New York; three-step dispute resolution (negotiation, mediation, binding arbitration in New York).
C. Veridian Health Research Network, Inc.
Veridian is a Delaware-incorporated 501(c)(3) tax-exempt research organization (EIN 23-4178205), headquartered at 750 Research Parkway, 8th Floor, Philadelphia, PA 19104. Veridian operates a network of 38 clinical research sites across 14 states, primarily affiliated with academic medical centers and community teaching hospitals. The organization is led by Dr. Franklin Osei, M.D., M.P.H. (President & CEO), with Gregory Callahan, Esq. (Vice President, Legal & Compliance) serving as the primary legal contact and Patricia Dunne (Director, Sponsored Research Agreements) handling day-to-day contract administration.
Lead sites for the CLARION trial include Graystone University Medical Center (Site 001, Philadelphia, PA), where Dr. Catherine Aldridge, M.D., Ph.D. will serve as the Global Principal Investigator, and Lakemont Medical Center (Site 002, Chicago, IL), where Dr. Howard Matsuoka, M.D. will serve as Co-Principal Investigator. Dr. Aldridge is a nationally recognized authority in hepatocellular carcinoma and is a co-author of the current NCCN guidelines for HCC management. Her involvement as Global PI is a significant asset for the CLARION trial, and the publication rights provisions must be evaluated in that context.
Veridian's outside counsel, WJC, is a Philadelphia-based firm with a well-regarded life sciences practice. The WJC team on this matter is led by Allison Whitmore, a senior partner who has represented Veridian in multiple prior sponsor agreements, and David Kesselman, an associate. Based on our prior dealings with WJC on the Penterra/Graystone investigator-initiated study agreement in 2021, we anticipate a professional but firm negotiating posture.
D. Scope of Veridian's Markup
WJC returned a marked-up draft of the MCTA containing approximately 180 individual tracked changes. This memorandum addresses the most commercially and legally significant of those changes, organized into four priority categories (Sections III through VI below) and a section addressing additional significant changes (Section VII). A complete catalogue of all 180 tracked changes, organized by section and classified by significance level (High / Medium / Low), is provided in Attachment 3.
III. Category 1: Subject-Injury Indemnification — Demand for Uncapped Obligations
The most significant and commercially consequential revisions in Veridian's markup relate to the subject-injury indemnification provisions set forth in Article 11 of the MCTA. Taken together, Veridian's proposed changes would (a) eliminate all caps on Penterra's indemnification obligations, (b) dramatically expand the scope of indemnifiable losses, (c) shift the burden of proof regarding causation from the claimant to Penterra, (d) narrow the available carve-outs from indemnification, (e) reduce the reciprocal site indemnity, and (f) weaken the notice requirements that protect Penterra's ability to manage and defend claims. Each of these changes is addressed below.
A. Summary of Veridian's Proposed Changes
Veridian has deleted in their entirety Sections 11.2(b) and 11.2(c) of our draft, which established a per-subject medical care cost cap of $500,000 and an aggregate cap of $15,000,000, respectively, for study-related injury medical costs. In place of these provisions, Veridian has inserted new language providing that Penterra shall provide "full and complete indemnification, without cap, ceiling, or monetary limitation of any kind, for all costs, damages, losses, and liabilities arising from or related to study-related injuries." The defined term "study-related injury" has been substantially expanded, as discussed below.
Under Veridian's markup, the scope of indemnifiable losses is materially broadened beyond medical care costs to include all of the following categories of damages:
• All medical care costs, including but not limited to hospitalization, specialist consultations, surgical procedures, rehabilitation, and long-term care arising from the study-related injury;
• Lost wages, loss of earning capacity, and impairment of future economic productivity of the injured subject;
• Pain and suffering, emotional distress, loss of consortium, and other non-economic damages;
• Consequential and incidental damages, including but not limited to the costs of alternative medical treatments, travel and lodging for medical care, and any other foreseeable damages arising from the study-related injury.
Our draft limited Penterra's indemnification obligation to "reasonable and documented medical care costs directly resulting from a study-related injury caused by the administration of the investigational product in accordance with the Protocol." The distinction between these two formulations is significant. Veridian's markup would expose Penterra to liability not only for direct medical costs but also for pain and suffering, consequential damages, and lost wages — categories of damages that are typically addressed through the tort system rather than through contractual indemnification in clinical trial agreements.
Critically, Veridian has also revised the definition of "study-related injury" in Section 1.47 of the MCTA. Our draft defined "study-related injury" as "any physical injury or illness directly caused by the administration of the investigational product to a study subject in accordance with the Protocol, as determined by the Sponsor's medical monitor in consultation with the Principal Investigator." Veridian's markup replaces this with a substantially broader definition:
"Study-Related Injury" means any adverse event, injury, illness, or medical condition occurring during the Study Period or within twelve (12) months following the subject's last dose of investigational product, unless the Sponsor affirmatively demonstrates, by clear and convincing evidence, that such adverse event, injury, illness, or medical condition is wholly unrelated to (a) the investigational product, (b) any study procedure, (c) any activity undertaken pursuant to or in connection with the Protocol, or (d) the subject's participation in the Study.
This revised definition operates a fundamental shift in the risk-allocation framework. Under our draft, Penterra's indemnification obligation was triggered only by injuries "directly caused by the administration of the investigational product." Under Veridian's formulation, any adverse event occurring during the study period or within a 12-month post-dosing window is presumptively a study-related injury, and the burden falls on Penterra to affirmatively disprove causation by "clear and convincing evidence" — a heightened evidentiary standard typically reserved for fraud and punitive damages claims. In a patient population with advanced hepatocellular carcinoma, where patients routinely experience disease progression, intercurrent illnesses, and complications of prior therapies, the practical effect of this definition would be to render virtually every adverse event during the study an indemnifiable study-related injury.
Moreover, Veridian's markup expands the indemnification obligation beyond injuries caused by the investigational product itself to encompass injuries arising from "any activity undertaken pursuant to or in connection with the Protocol." This language would capture injuries arising from routine study procedures (blood draws, imaging studies, biopsies), site visits, and even injuries sustained by subjects traveling to study visits. The phrase "in connection with the Protocol" is sufficiently broad to capture a nearly limitless range of events, and the deletion of the qualifier "directly caused by" in our draft removes any meaningful causation requirement.
B. Veridian's Changes to Carve-Outs
Our draft established three carve-outs from Penterra's indemnification obligations, set forth in Section 11.3, under which Penterra would have no obligation to indemnify Veridian or any participating institution for losses to the extent arising from:
(i) The negligence or willful misconduct of the participating institution, the investigator, or any site personnel acting within the scope of their duties under the MCTA;
(ii) Any deviation from the Protocol that was not authorized in writing by Penterra and was not undertaken for the immediate safety of the subject as reasonably determined by the investigator at the time of the deviation; and
(iii) Any breach by the participating institution or the investigator of the MCTA, the Protocol, applicable law, or any institutional policy governing the conduct of clinical research.
Veridian's markup makes several significant changes to these carve-outs. First, Veridian has revised carve-out (i) to limit the negligence exclusion to "gross negligence or willful misconduct" only, deleting the reference to ordinary negligence. The practical effect of this change is substantial. Under the ordinary negligence standard in our draft, if an investigator failed to follow standard-of-care monitoring procedures and a subject was injured as a result, that injury would be carved out of Penterra's indemnification obligation. Under Veridian's "gross negligence" standard, such a failure would need to rise to the level of reckless disregard or conscious indifference to a known risk before the carve-out would apply. Given the inherent complexity of multi-kinase inhibitor dose management and the potential for investigator errors in monitoring liver function in HCC patients, the deletion of the ordinary negligence standard significantly increases Penterra's exposure.
Second, Veridian has expanded the protocol-deviation exception in carve-out (ii) by inserting language providing that "protocol deviations undertaken in the investigator's reasonable medical judgment for subject safety shall not constitute a basis for withholding indemnification from the Sponsor, regardless of whether such deviation was pre-authorized by the Sponsor." Our draft already contained a limited exception for deviations undertaken for immediate subject safety, but Veridian's formulation is broader in two respects: it replaces "immediate safety" with the more subjective standard of "reasonable medical judgment," and it eliminates the requirement that the deviation be for "immediate" (as opposed to general) safety concerns. Under this language, an investigator who unilaterally modified the dosing schedule, added concomitant medications not permitted by the Protocol, or enrolled a subject who did not meet eligibility criteria could claim that the deviation was based on "reasonable medical judgment" and thereby preserve the site's claim for indemnification against Penterra.
Third, Veridian has deleted carve-out (iii) in its entirety — the carve-out for site breach of applicable law — and replaced it with a significantly narrower provision stating that Penterra's indemnification obligation shall not extend to losses arising from "a material and knowing violation of applicable law by the participating institution or investigator that directly causes the claimed loss." The substitution of "material and knowing violation" for "breach" introduces both a materiality qualifier and a scienter requirement that did not exist in our draft. Under this formulation, a site's failure to comply with FDA Good Clinical Practice regulations, HIPAA requirements, or state research subject protection laws would not trigger the carve-out unless Penterra could demonstrate that the violation was both "material" and "knowing" — a difficult evidentiary burden that would effectively insulate sites from responsibility for regulatory non-compliance.
C. Reciprocal Site Indemnity
Section 11.5 of our draft required Veridian and each participating institution to provide reciprocal indemnification to Penterra for claims, losses, and liabilities arising from:
(a) The negligence or willful misconduct of the participating institution, the investigator, or any site personnel;
(b) Any unauthorized deviation from the Protocol not required for immediate subject safety; and
(c) Any breach by the participating institution or the investigator of the MCTA, the Protocol, or applicable law.
This reciprocal indemnity was subject to a cap of $5,000,000 per site per occurrence and $20,000,000 in the aggregate across all participating sites. The caps were calibrated to reflect the relative scale of the overall agreement and the institutional insurance capacity of the Veridian network.
Veridian's markup makes three material changes to the reciprocal indemnity provision. First, Veridian has reduced the per-site/per-occurrence cap from $5,000,000 to $2,000,000 and the aggregate cap across all sites from $20,000,000 to $8,000,000. The proposed $8,000,000 aggregate cap represents only 10% of the total deal value and would provide inadequate protection to Penterra in a scenario involving serious regulatory non-compliance or investigator misconduct at multiple sites.
Second, Veridian has deleted trigger (b) — the protocol-deviation trigger — in its entirety, eliminating any reciprocal indemnity obligation for unauthorized protocol deviations. This deletion, read together with Veridian's expansion of the protocol-deviation exception in the sponsor indemnity (discussed in Section III.B above), creates an asymmetric framework in which protocol deviations always fall within Penterra's indemnity obligation and never trigger the site's reciprocal indemnity.
Third, Veridian has limited the remaining triggers for reciprocal indemnity to "gross negligence, willful misconduct, or knowing material breach of this Agreement," mirroring the heightened standard applied to the sponsor indemnity carve-outs. The combined effect of these changes is to create a regime in which the sites' reciprocal indemnity obligation is triggered only in extreme cases of deliberate misconduct, while Penterra's obligation is triggered by any adverse event the site cannot affirmatively disprove.
D. Notice Requirements
Section 11.7 of our draft established notice requirements for indemnification claims, requiring the indemnified party to provide written notice to the indemnifying party within 30 calendar days of becoming aware of a claim, potential claim, or circumstances reasonably likely to give rise to a claim. Our draft further provided that failure to provide timely notice "shall not relieve the indemnifying party of its obligations under this Article 11, except to the extent that the indemnifying party is materially prejudiced by such failure." This "material prejudice" qualifier is a standard commercial contracting provision that balances the indemnifying party's interest in prompt notice (to enable timely investigation and defense) against the indemnified party's interest in not losing coverage due to an inadvertent or short delay in notification.
Veridian's markup makes two changes to the notice provision. First, Veridian extends the notice period from 30 calendar days to 60 calendar days. While a 60-day notice period is not per se unreasonable, it doubles the time during which Penterra may remain unaware of a pending claim and unable to take steps to investigate, preserve evidence, or engage defense counsel.
Second, and more significantly, Veridian has deleted the "except to the extent materially prejudiced" qualifier entirely. Under Veridian's formulation, Penterra's indemnification obligation would be absolute regardless of the timing of notice, even if the site's delay in providing notice resulted in the destruction of evidence, expiration of statutes of limitation, or other material prejudice to Penterra's ability to defend against the underlying claim. The deletion of the material-prejudice qualifier is unusual and inconsistent with prevailing commercial practice in clinical trial agreements. It appears designed to eliminate any incentive for sites to provide prompt notice, which is contrary to both Penterra's interests and sound claims-management practice.
E. Analysis and Recommendations
The indemnification provisions represent the single most significant area of disagreement in Veridian's markup and will likely be the most heavily negotiated aspect of the MCTA. The following analysis and recommendations are preliminary and should be discussed with the full deal team, including Rebecca Liang and Nathaniel Briggs, before being finalized.
Risk Assessment. Accepting uncapped indemnification across a 1,200-subject trial at 38 sites would expose Penterra to potentially unlimited liability. The risk is compounded by several factors specific to the CLARION trial. First, the patient population — adults with advanced HCC who have progressed on prior systemic therapy — has a high baseline morbidity and mortality rate, meaning that a significant number of subjects will experience serious adverse events and deaths during the study that may or may not be related to the investigational product. Second, the known toxicity profile of multi-kinase inhibitors (including hepatotoxicity, which is of particular concern in a population with underlying liver disease) creates a substantial probability that adverse events will occur that are at least plausibly related to penterafenib. Third, the shifted burden of proof — requiring Penterra to disprove causation by clear and convincing evidence — would make it extremely difficult for Penterra to resist indemnification claims, particularly in cases where the causal relationship between the investigational product and the adverse event is ambiguous. Fourth, the expanded definition of "study-related injury" to include injuries arising from "any activity undertaken pursuant to or in connection with the Protocol" extends Penterra's liability well beyond the investigational product itself.
Market Benchmarking. Based on our experience with comparable multi-site Phase III oncology trial agreements, the prevailing market practice is for sponsors to provide capped indemnification for medical care costs arising from study-related injuries, with uncapped indemnification limited to claims based on product defect (manufacturing defect, design defect, or failure to warn). Per-subject medical care cost caps in the range of $250,000 to $750,000 are typical, with aggregate caps ranging from $10,000,000 to $25,000,000 depending on trial size. Penterra's proposed per-subject cap of $500,000 and aggregate cap of $15,000,000 fall well within the market range. The burden-of-proof shift proposed by Veridian (requiring the sponsor to disprove causation) is highly unusual and has not appeared in any of the comparable agreements we have reviewed.
Recommendations. We make the following recommendations regarding Penterra's response to Veridian's indemnification changes:
1. Maintain per-subject and aggregate caps. Penterra should firmly maintain the per-subject medical care cost cap of $500,000 and the aggregate cap of $15,000,000 as set forth in the first draft. These caps apply only to medical care costs; our draft already provides uncapped indemnification for claims based on product defect, which should provide adequate comfort to Veridian on the most serious category of potential claims.
2. Reject the burden-of-proof shift. The requirement that Penterra affirmatively disprove causation by clear and convincing evidence is fundamentally inconsistent with standard clinical trial risk allocation and should be firmly resisted. The standard formulation — under which a study-related injury is one "directly caused by the administration of the investigational product in accordance with the Protocol" — appropriately places the burden on the claimant to establish causation. We should be prepared to discuss the medical monitor determination process as an alternative mechanism for resolving causation disputes.
3. Retain the ordinary negligence standard for carve-outs. The deletion of the ordinary negligence standard and substitution of a gross negligence threshold effectively eliminates the carve-out for routine investigator errors. Given that multi-kinase inhibitor dose management requires careful monitoring and that investigator errors in this context can have serious consequences, Penterra should not accept responsibility for injuries resulting from ordinary negligence by site personnel.
4. Resist reduction of reciprocal site indemnity caps. Penterra should maintain the $5,000,000 per-site/per-occurrence and $20,000,000 aggregate caps for reciprocal site indemnity. The proposed reduction to $2,000,000/$8,000,000 is inadequate given the scale of the agreement and the number of participating sites.
5. Retain the 30-day notice period and material-prejudice qualifier. The 30-day notice period is standard and provides adequate time for sites to identify and report claims. The material-prejudice qualifier is a widely accepted commercial contracting provision that should be retained.
6. Indemnification Term Sheet. Given the complexity and significance of the indemnification issues, we recommend preparing a detailed indemnification-focused term sheet for circulation to WJC as a standalone document, separate from the comprehensive Second Draft markup. This approach will enable the parties to focus the negotiation on the indemnification terms and potentially reach agreement on this issue before the full Second Draft is exchanged. We would target circulation of the term sheet by May 5, 2023.
IV. Category 2: Insurance Requirements — $50M Per-Occurrence Demand
The insurance provisions in Article 12 of the MCTA have been significantly revised in Veridian's markup, with changes affecting the minimum limits for Penterra's clinical trial liability insurance, the required sublimits for subject-injury coverage, the type of policy required, the site insurance requirements, and the administrative procedures for certificate exchange and cancellation notice. These changes, while less dramatic than the indemnification revisions, carry significant cost implications and require careful analysis.
A. Summary of Veridian's Proposed Changes
Section 12.1 of our draft required Penterra to maintain clinical trial liability insurance with minimum limits of $25,000,000 per occurrence and $75,000,000 in the aggregate throughout the term of the MCTA and for a period of three years following study completion. These limits are consistent with Penterra's existing clinical trial liability insurance policy through Briarcliff Mutual Insurance Company (Policy No. BM-CTL-2023-04182, policy period April 1, 2023 through March 31, 2024), which provides the following coverage:
• General clinical trial liability: $25,000,000 per occurrence / $75,000,000 aggregate
• Subject-injury sublimit: $10,000,000 per occurrence / $50,000,000 aggregate
• Products liability: $25,000,000 per occurrence / $50,000,000 aggregate
• Policy type: Claims-made, with retroactive date of January 1, 2019
• Named insured: Penterra Pharmaceuticals Corp. and subsidiaries
• Deductible: $250,000 per occurrence (self-insured retention)
Veridian's markup revises Section 12.1 to require the following enhanced coverage:
• General clinical trial liability: $50,000,000 per occurrence / $150,000,000 aggregate (double the existing limits)
• Subject-injury sublimit: not less than $25,000,000 per occurrence (our current Briarcliff policy has a subject-injury sublimit of $10,000,000 per occurrence / $50,000,000 aggregate)
• Policy type: "Occurrence-based" rather than "claims-made" (a significant change that would require Penterra to procure a different type of policy or convert its existing claims-made policy)
• Tail coverage: At least five (5) years following study completion (our draft specified three years)
The demand for $50,000,000 per-occurrence coverage represents a doubling of Penterra's current policy limits and would require either renegotiation of the existing Briarcliff policy or procurement of excess or umbrella coverage from a separate carrier. Based on preliminary discussions with Penterra's insurance broker (Hartwell & Associates, contact: Michael Corrigan), we understand that the cost of increasing per-occurrence limits from $25,000,000 to $50,000,000 would result in an estimated annual premium increase of approximately $1.8 million to $2.4 million, depending on the structure of the additional coverage. Over the five-year study duration, this would represent an additional $9 million to $12 million in insurance costs — a significant unbudgeted expense.
The demand for occurrence-based rather than claims-made coverage is particularly significant. Penterra's existing Briarcliff policy is written on a claims-made basis, which is the prevailing form of clinical trial liability insurance in the pharmaceutical industry. Occurrence-based policies are generally more expensive and less readily available in the life sciences insurance market. Converting to an occurrence-based policy would require Penterra either to negotiate a policy conversion with Briarcliff (which may not be available) or to procure an entirely new policy from a different carrier, potentially disrupting Penterra's existing insurance program. The five-year tail coverage requirement (versus our proposed three-year tail) would further increase costs.
The increased subject-injury sublimit from $10,000,000 to $25,000,000 per occurrence is also notable. Veridian may be seeking a sublimit that aligns with the expanded scope of indemnifiable losses discussed in Section III above — if Penterra were to accept uncapped indemnification for subject injuries, a higher insurance sublimit would provide some financial backstop for those obligations. However, as discussed in Section III.E, we recommend resisting the uncapped indemnification demand, which should mitigate the need for an enhanced subject-injury sublimit.
B. Veridian's Changes to Site Insurance Obligations
Section 12.2 of our draft required Veridian and each participating institution to maintain general liability and professional liability insurance with minimum limits of $5,000,000 per occurrence and $10,000,000 in the aggregate. This requirement was designed to ensure that each site in the Veridian network carries adequate insurance to cover its own liabilities under the MCTA, including claims arising from site negligence, investigator errors, and unauthorized protocol deviations.
Veridian's markup reduces the site insurance requirements to $2,000,000 per occurrence and $5,000,000 in the aggregate. In the margin notes accompanying this revision, WJC states that "Veridian, as a 501(c)(3) tax-exempt research organization, has more limited access to insurance markets than commercial pharmaceutical sponsors" and that the reduced limits "reflect the coverage actually available to Veridian's member institutions at commercially reasonable premiums."
We have reviewed publicly available financial data on Veridian. Veridian's most recent Form 990 (for fiscal year ended June 30, 2022) reports total revenue of approximately $1.4 billion, of which approximately $1.1 billion was derived from sponsored research agreements with pharmaceutical and biotechnology companies. An organization of this scale, with this level of sponsored research activity, should be expected to maintain insurance coverage commensurate with its exposure. The $2,000,000/$5,000,000 limits proposed by Veridian are inadequate for an organization conducting more than $1 billion in annual research, and the 501(c)(3) status does not materially limit Veridian's ability to obtain appropriate coverage. Numerous academic medical centers and research organizations of comparable size maintain insurance limits of $5,000,000 or more per occurrence.
C. Additional Insured and Certificate Requirements
Veridian has accepted the requirement in Section 12.3 of our draft that Veridian and each participating institution be named as additional insureds on Penterra's clinical trial liability insurance policy. This is a standard provision and its acceptance is not noteworthy.
However, Veridian's markup makes two changes to the administrative insurance provisions. First, Section 12.4(b), which requires Penterra to provide written notice to Veridian of any cancellation, non-renewal, or material reduction in coverage, has been revised to require 60 days' prior written notice (our draft specified 30 days). While 60-day notice provisions are not uncommon in commercial agreements, the extended notice period may be difficult to satisfy in practice, as insurance carriers typically provide 30 days' notice to the insured of cancellation or non-renewal. Committing to 60-day notice to Veridian would require Penterra to provide notice before Penterra itself receives notice from its carrier — an impractical result.
Second, Veridian has shortened the deadline for exchange of certificates of insurance from 15 business days to 10 business days following execution of the MCTA. While this change is relatively minor, the shortened timeline may present logistical challenges, particularly if Penterra needs to negotiate policy endorsements to add Veridian as an additional insured.
D. Analysis and Recommendations
Risk Assessment. The insurance provisions present a combination of cost concerns (increased premiums for enhanced coverage) and structural concerns (the demand for occurrence-based coverage and extended tail periods). While adequate insurance is important for both parties, the proposed limits significantly exceed market norms and would impose substantial unbudgeted costs on Penterra.
Market Benchmarking. Based on our review of comparable Phase III oncology trial agreements, the prevailing market standard for sponsor clinical trial liability insurance is $25,000,000 per occurrence / $75,000,000 aggregate, with a subject-injury sublimit in the range of $5,000,000 to $15,000,000 per occurrence. Claims-made coverage is the prevailing form, with tail periods of two to three years post-study completion. Penterra's existing coverage falls squarely within these norms. We are not aware of any comparable agreement in which a site network has required $50,000,000 per-occurrence coverage, though we note that such demands have occasionally appeared in agreements with very large academic medical centers for high-risk trials.
Recommendations. We make the following recommendations:
1. Maintain the $25M/$75M position. Penterra should maintain its position that $25,000,000 per occurrence / $75,000,000 aggregate coverage is adequate and consistent with prevailing market standards. We should be prepared to provide WJC with supporting market data, including references to published industry benchmarking reports.
2. Maintain the $10M/$50M subject-injury sublimit. The existing sublimit in the Briarcliff policy is adequate given the per-subject medical care cost cap of $500,000 and the aggregate cap of $15,000,000 proposed in our draft. If the indemnification caps are maintained (as we recommend), the sublimit provides adequate coverage for Penterra's indemnification obligations.
3. Resist the occurrence-based coverage requirement. Claims-made coverage is the prevailing standard in the pharmaceutical industry, and converting to occurrence-based coverage would impose significant costs and disruption. We should explain this market reality to WJC and offer to provide evidence of the claims-made policy's adequacy, including the retroactive date and tail coverage provisions.
4. Resist the reduction in site insurance requirements. Penterra should maintain its requirement that Veridian and each participating institution carry at least $5,000,000 per occurrence / $10,000,000 aggregate in general liability and professional liability insurance. Veridian's 501(c)(3) status and claimed limitations in insurance access do not justify coverage levels below what is appropriate for an organization conducting $1.4 billion in annual research.
5. Maintain the 15-business-day certificate exchange deadline. The shortened 10-business-day deadline may present logistical challenges and should be resisted.
6. Maintain the 30-day cancellation notice period. The 60-day notice period is impractical given that insurance carriers typically provide only 30 days' notice to the insured. We should offer to pass through to Veridian any cancellation or non-renewal notice received from the carrier promptly upon receipt, which is a more practical approach.
V. Category 3: Payment Structure — Front-Loaded Payment Demand
Veridian's markup proposes significant changes to the payment structure set forth in Article 8 of the MCTA, including a restructuring of the per-patient payment schedule, modifications to start-up fees, the addition of a new "site readiness" fee, an increase in the network coordination fee, and changes to payment terms and late-payment provisions. Taken together, these changes would increase total deal value above the approved $80,000,000 program budget and shift a disproportionate share of the financial risk from Veridian to Penterra.
A. Summary of Veridian's Proposed Changes to Per-Patient Payments
Section 8.2 of our draft established a milestone-based per-patient payment structure designed to align payments with site performance and incentivize both enrollment and subject retention throughout the study. Under our structure, each enrolled subject would generate a total payment of $52,000, payable in four equal installments of $13,000 each, triggered by the following milestones:
Veridian's markup restructures these payments to a front-loaded model, with 50% of the per-patient amount payable at randomization:
While the total per-subject amount remains unchanged at $52,000, the front-loaded structure fundamentally alters the cash-flow profile of the agreement. Under Penterra's proposed milestone-based structure, per-patient payments would be distributed relatively evenly over the study timeline, with each milestone payment contingent on the subject reaching the applicable assessment point. Under Veridian's front-loaded structure, 75% of the per-patient amount ($39,000) would be payable by the Week 12 assessment, and only 25% ($13,000) would remain contingent on the subject completing the remainder of the study through the final visit.
In the margin notes accompanying this revision, WJC explains that "front-loading is necessary to cover the substantial site staffing, infrastructure, and operational costs incurred during early patient enrollment, when the intensity of clinical activity is highest." While we acknowledge that sites do incur significant costs during the early stages of subject enrollment — including screening, baseline assessments, randomization procedures, and initial treatment administration — the degree of front-loading proposed by Veridian is disproportionate and creates several concerns for Penterra.
First, the front-loaded structure reduces the financial incentive for sites to retain subjects through the later assessment points and through study completion. Subject retention is critical in a Phase III oncology trial, particularly one with an 18-month follow-up period, and milestone-based payments that are distributed evenly across the study timeline provide a meaningful financial incentive for sites to maintain active subject management throughout the study duration.
Second, the front-loaded structure concentrates approximately $31.2 million in per-patient payments (based on planned enrollment of 1,200 subjects, with $26,000 payable at randomization) during the enrollment period. If enrollment proceeds more rapidly than projected, this could create significant cash-flow pressure on Penterra's $80 million program budget, potentially requiring acceleration of program funding or reallocation of resources from other pipeline activities.
Third, in the event of early study termination — whether due to safety concerns, futility, or regulatory action — the front-loaded structure would result in Penterra having paid a disproportionate share of per-patient fees for subjects who may not have completed the study, with limited practical ability to recover the excess payments.
B. Start-Up Fee Changes
Section 8.1 of our draft provided start-up fees of $75,000 per site, payable in two equal tranches: $37,500 upon site activation (defined as the date on which the site has received IRB approval, executed the site-specific addendum, completed all required training, and been cleared by Penterra to enroll subjects) and $37,500 upon enrollment of the first subject at that site. The two-tranche structure was designed to tie a portion of the start-up fee to actual site performance — specifically, to the site's ability to successfully enroll its first subject, which is a meaningful indicator of site operational readiness and recruitment capability.
Veridian's markup revises Section 8.1 to require payment of 100% of the $75,000 start-up fee upon site activation, eliminating the enrollment-linked second installment entirely. While the total start-up fee per site remains unchanged, the elimination of the enrollment-linked tranche removes the performance incentive and shifts the risk of site underperformance to Penterra. Under Veridian's structure, a site that achieves activation but fails to enroll any subjects would receive the full $75,000 start-up fee with no enrollment-contingent component.
Additionally, Veridian's markup introduces a new provision in Section 8.1(c) creating a "site readiness" fee of $25,000 per site, payable 60 days before the anticipated date of site activation. This fee is described in the margin notes as intended to cover "pre-activation infrastructure, personnel onboarding, and regulatory preparation costs." The site readiness fee would add $950,000 to the total cost of the agreement (38 sites × $25,000 = $950,000). This fee is non-standard in our experience and appears duplicative of the start-up fee, which is itself intended to cover the costs of site preparation and activation.
C. Network Coordination Fee
Section 8.3 of our draft provided for a network coordination fee of $4,200,000, payable in quarterly installments of $300,000 over 14 quarters. This fee compensates Veridian for its network-level administrative, operational, and management services, including site selection, network-wide training coordination, enrollment tracking, quality management, and regulatory coordination.
Veridian's markup increases the quarterly network coordination fee from $300,000 to $375,000. Over 14 quarters, this would increase the total network coordination fee from $4,200,000 to $5,250,000 — an increase of $1,050,000, or 25%. In the margin notes, WJC states that the increase reflects "the expanded scope of Veridian's network coordination responsibilities, including the implementation of a centralized recruitment support program and enhanced quality oversight infrastructure." No specific detail on these expanded responsibilities is provided in the markup, and the original scope of Veridian's network coordination services as set forth in Exhibit E to the MCTA has not been modified.
D. Payment Terms
Section 8.5 of our draft specified payment terms of Net 45 days from receipt by Penterra of a proper invoice from Veridian, with invoices to be submitted monthly and to include supporting documentation as specified in the MCTA. Our draft did not include a late-payment interest provision, consistent with Penterra's standard contracting practice.
Veridian's markup shortens the payment terms to Net 30 days and adds a new Section 8.5(b) providing for late-payment interest of 1.5% per month (equivalent to 18% per annum) on any undisputed amounts not paid within the Net 30 period. The 18% annual interest rate is significantly above prevailing commercial rates and, depending on the jurisdiction, may exceed the maximum rate permitted by applicable usury laws.
E. Analysis and Recommendations
Budget Impact. The cumulative effect of Veridian's proposed payment changes would increase the total deal value above the approved $80,000,000 program budget. Specifically:
The remaining approximately $10.5 million of the $80 million program budget is allocated to site-level pass-through costs, regulatory fees, central laboratory services, and other operational expenses not addressed in the payment provisions discussed here. The $2 million increase in contractual payments would need to be absorbed either through reductions in other budget categories or through an increase in the overall program budget, which would require approval from Penterra's Finance and Clinical Development leadership.
Recommendations. We make the following recommendations:
1. Maintain the 25%/25%/25%/25% milestone-based structure. The equal milestone-based payment schedule aligns payments with site performance, incentivizes both enrollment and retention, and distributes cash-flow obligations evenly across the study timeline. This structure is widely used in Phase III clinical trial agreements and provides appropriate risk allocation between sponsor and site network. If Veridian presses strongly on this point, we could consider a modest front-loading as a compromise — for example, 30%/25%/25%/20% — but the preferred position should remain 25%/25%/25%/25%.
2. Maintain the two-tranche start-up fee. The $37,500/$37,500 structure appropriately ties a portion of the start-up fee to site performance (enrollment of first subject). However, if other terms are favorable and this issue is a significant priority for Veridian, Penterra could accept payment of the full $75,000 at site activation as a concession. This should be treated as a negotiating chip to be deployed in exchange for concessions on higher-priority issues.
3. Reject the site readiness fee. The proposed $25,000 per-site readiness fee is non-standard and duplicative of the start-up fee, which already covers pre-activation preparation costs. Penterra should reject this fee entirely.
4. Maintain the $300,000 quarterly network coordination fee. The 25% increase proposed by Veridian is not justified absent a corresponding expansion in the scope of network coordination services. If Veridian can identify specific additional services not contemplated by Exhibit E, those could be evaluated and priced separately, but a blanket 25% increase without corresponding scope expansion is not appropriate.
5. Maintain Net 45 payment terms. Net 45 is standard in pharmaceutical industry agreements and is consistent with Penterra's accounts payable cycle. As a potential compromise, Penterra could offer Net 40 payment terms. On the late-payment interest provision, Penterra could accept interest at a rate of the lesser of 1% per month or the maximum rate permitted by applicable law, which would provide Veridian with a reasonable remedy for late payment while avoiding the risk of a usurious interest rate.
VI. Category 4: Publication Rights — Expanded Investigator Academic Freedom
The publication provisions in Article 14 of the MCTA have been significantly revised in Veridian's markup, reflecting Veridian's strong institutional interest in preserving investigator academic freedom and its historical position as an advocate for open publication of clinical trial results. While Penterra shares the commitment to responsible publication of trial results, the proposed changes raise significant concerns regarding Penterra's ability to protect its intellectual property, manage the timing and content of public disclosures regarding penterafenib, and maintain appropriate control over the narrative surrounding the CLARION trial data.
A. Summary of Veridian's Proposed Changes
Section 14.1 of our draft granted investigators the right to publish, present, or otherwise disseminate trial results, subject to the following conditions:
(a) The investigator shall submit a complete copy of any proposed publication or presentation to Penterra at least 60 days before the planned submission or presentation date;
(b) Penterra shall have 60 days from receipt of the proposed publication or presentation to review the submission for (i) confidential information belonging to Penterra and (ii) patentable subject matter;
(c) Upon Penterra's request, the investigator shall delay submission or presentation for up to an additional 90 days to enable Penterra to file patent applications protecting any patentable inventions identified during the review period (150 days total maximum delay from initial submission to Penterra);
(d) The investigator shall remove any confidential information specifically identified by Penterra during the review period; and
(e) Penterra shall have the right to request reasonable modifications to the proposed publication to correct factual inaccuracies or to protect Penterra's legitimate commercial interests, provided that Penterra may not suppress publication of scientifically valid data.
Veridian's markup makes five significant changes to these provisions.
First, Veridian reduces Penterra's initial review period from 60 days to 30 days (Section 14.1(b)). A 30-day review period is insufficient for meaningful review of a publication arising from a Phase III trial with complex efficacy and safety data. In practice, the review process requires coordination among multiple internal stakeholders (medical affairs, regulatory affairs, legal, intellectual property, and commercial teams), as well as potential consultation with outside patent counsel. A 60-day review period is standard in the pharmaceutical industry for Phase III trial publications and is necessary to enable thorough review.
Second, Veridian deletes Penterra's right to request the additional 90-day patent-filing delay entirely (Section 14.1(c)). This deletion is of significant concern for Penterra's intellectual property strategy. The 90-day patent-filing delay is a standard provision in pharmaceutical clinical trial agreements and is essential to protect patentable inventions arising from the trial, including potential new uses, formulations, or biomarker-based patient selection strategies identified through analysis of CLARION data. Without this provision, Penterra would be forced either to file preliminary patent applications within the 30-day review period (an impracticably short timeframe for complex patent filings) or to risk losing patent rights through premature public disclosure.
We note that Penterra's patent counsel, Castleton & Hargrove LLP (Dr. Priya Sundaram, Ph.D., J.D., lead partner on the penterafenib patent portfolio), should be consulted regarding the significance of the patent-filing delay provision. The penterafenib patent portfolio currently includes 14 issued U.S. patents and 23 pending applications covering the compound, pharmaceutical compositions, methods of treatment, combination therapies, and biomarker-based patient selection. The CLARION trial data may give rise to additional patentable inventions, particularly if subgroup analyses reveal differential efficacy based on molecular markers or if the safety data suggest novel dosing or monitoring approaches.
Third, Veridian inserts a new Section 14.1(f), described as an "academic freedom" provision, which states:
"The Sponsor acknowledges and agrees that the investigator's academic freedom to publish and present the results of clinical research is of paramount importance and shall not be abridged by this Agreement. The Sponsor may not censor, suppress, unduly delay, or modify the scientific conclusions, analyses, or interpretations contained in any publication or presentation. The Sponsor's review rights under this Section 14.1 are limited to the identification of specifically identified trade secret or patent-sensitive information, and the Sponsor shall not exercise its review rights for the purpose of influencing the scientific content or conclusions of any publication."
This provision is problematic in several respects. While the principle of academic freedom is important and Penterra has no interest in suppressing valid scientific data, the breadth of this provision goes well beyond protecting academic freedom. Specifically, the prohibition on modifying "scientific conclusions, analyses, or interpretations" could prevent Penterra from requesting corrections to publications that contain inaccurate characterizations of the data, methodologically flawed analyses, or conclusions that are not supported by the underlying results. The statement that "the Sponsor shall not exercise its review rights for the purpose of influencing the scientific content or conclusions" could be interpreted to prohibit Penterra from even suggesting scientific revisions, regardless of their merit. This would effectively transform Penterra's publication review right from a substantive review into a purely mechanical exercise of identifying specifically enumerated categories of confidential information.
Fourth, Veridian's markup adds a new Section 14.2 permitting investigators to present preliminary findings at scientific conferences with only 15 days' advance notice to Penterra, with no right of delay or review. Preliminary conference presentations — including poster presentations, oral abstracts, and late-breaking presentations — can have significant market impact and can affect Penterra's stock price, competitive positioning, and regulatory strategy. A 15-day notice period with no right of delay or review is inadequate to enable Penterra to assess the potential commercial and regulatory implications of a preliminary presentation.
Fifth, Section 14.1(e) of our draft, which granted Penterra the right to request reasonable modifications to correct factual inaccuracies and protect legitimate commercial interests, has been deleted entirely and replaced by the "academic freedom" provision discussed above.
B. Multi-Site Publication Coordination
Veridian has added two new provisions addressing multi-site publication coordination and authorship.
Section 14.3 provides that "all multi-center publications arising from the Study shall be coordinated through the Global Principal Investigator, Dr. Catherine Aldridge, M.D., Ph.D., who shall have primary responsibility for ensuring the scientific integrity, completeness, and accuracy of multi-center publications." This provision further states that "the Sponsor may not publish trial results independently without investigator co-authorship" and that "the order of authorship for multi-center publications shall be determined by the Global Principal Investigator in accordance with the International Committee of Medical Journal Editors (ICMJE) criteria."
Section 14.4 provides that "any ghostwriting or medical writing support pro