ATTORNEY WORK PRODUCT — PRIVILEGED AND CONFIDENTIAL DRAFT Matter No.: 1018-00007
COMMONWEALTH OF MASSACHUSETTS
SUPERIOR COURT BUSINESS LITIGATION SESSION SUFFOLK COUNTY
AFFIDAVIT OF STEVEN KAPOOR IN SUPPORT OF PLAINTIFF PENTERRA PHARMACEUTICALS CORP.'S MOTION FOR SUMMARY JUDGMENT
I, Steven Kapoor, being duly sworn, depose and state as follows. I have personal knowledge of the facts set forth in this affidavit, and I am competent to testify to each of them. If called as a witness, I could and would testify to these facts. I submit this affidavit in support of Plaintiff Penterra Pharmaceuticals Corp.'s Motion for Summary Judgment, and the statements contained herein are made based on my direct involvement in the events described, my review of relevant business records maintained in the ordinary course of Penterra's business, and my personal recollection of communications with representatives of Defendant Vantage Medical Distribution, LLC.
Paragraph 1 — Identity and Position
1. My name is Steven Kapoor. I am an adult over the age of eighteen, and I reside in Mercer County, New Jersey. I am currently employed as Vice President, Commercial Operations, of Penterra Pharmaceuticals Corp. ("Penterra" or the "Company"), a Delaware corporation publicly traded on the Nasdaq Stock Market under the ticker symbol "PTRA," with its principal offices located at 400 Carnegie Center Drive, Suite 600, Princeton, New Jersey 08540. I have held this position since March 2015. In my role as Vice President, Commercial Operations, my responsibilities encompass the oversight and strategic direction of Penterra's commercial distribution strategy, the management of all distributor relationships across the Company's therapeutic portfolio, and the supervision of the Company's product supply chain for all therapeutic areas in which Penterra operates, including, without limitation, oncology, immunology, and rare disease. I report directly to Penterra's Chief Executive Officer, Dr. Marcus Lindholm, and I work in close coordination with other senior members of Penterra's leadership team in performing my duties.
Paragraph 2 — Scope of Responsibilities
2. In my capacity as Vice President, Commercial Operations, I am directly responsible for managing Penterra's relationships with its network of regional exclusive distributors and national specialty pharmacy partners throughout the United States. My role involves direct supervisory involvement in the negotiation, drafting, execution, and ongoing administration of distribution agreements between Penterra and its distribution partners. This includes, specifically and directly, the Exclusive Distribution Agreement at issue in this litigation between Penterra and Defendant Vantage Medical Distribution, LLC ("Vantage"). In the performance of my duties, I report to Dr. Marcus Lindholm, Chief Executive Officer, and I work closely and regularly with Jennifer Chao, Esq., Penterra's General Counsel, on legal matters pertaining to distribution arrangements, and with Rachel Mendez, Director of Distribution & Logistics, on operational matters related to supply chain management, order fulfillment, and distribution performance analytics. I am familiar with the business records, correspondence, and internal reports that Penterra maintains in the ordinary course of its business relating to its distribution operations, including those pertaining to Vantage.
Paragraph 3 — Familiarity with the Exclusive Distribution Agreement
3. I personally participated in the negotiation and execution of the Exclusive Distribution Agreement dated July 1, 2017, between Penterra, as "Supplier," and Vantage Medical Distribution, LLC, as "Distributor" (the "EDA" or the "Agreement"). The EDA governs the distribution of two of Penterra's commercially marketed pharmaceutical products: (a) Oncalaris® (pegvisomant-axel), available in 20 mg and 40 mg vials for injection, an oncology product indicated for the treatment of certain advanced solid tumors; and (b) Renuvesta® (cilosporin-beta), available in 5 mg capsules, an immunosuppressive agent indicated for the prevention of organ transplant rejection. The EDA has an initial term of five (5) years, commencing on July 1, 2017 and continuing through June 30, 2022, with two successive one-year automatic renewal options, each subject to either party's delivery of one hundred eighty (180) days' prior written notice of non-renewal in accordance with the notice provisions of the Agreement. I am personally familiar with the terms and provisions of the EDA, including its exhibits and schedules, and I have reviewed the EDA in its entirety on multiple occasions, both during the negotiation process and during the course of Penterra's ongoing administration of the distribution relationship with Vantage. In particular, I am personally familiar with the terms and provisions of Exhibit A to the EDA, which defines the geographic territory within which Vantage was granted exclusive distribution rights.
Paragraph 4 — The Territory as Defined in Exhibit A
4. Section 2.1 of the EDA grants Vantage "the exclusive right to distribute the Products within the Territory, as defined in Exhibit A." Exhibit A to the EDA defines the "Territory" as follows: "The states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont (collectively, the 'New England States')." I attest that during the negotiation of the EDA, the parties specifically discussed and agreed that the Territory within which Vantage would hold exclusive distribution rights would be limited to those six New England states and no others. The geographic scope of the Territory was a central and material term of the parties' negotiations. Penterra's distribution strategy at the time of the EDA's execution involved the use of multiple regional distributors across different geographic markets in the United States, and it was important to Penterra that the Territory granted to Vantage be precisely defined and limited to the six New England states so as to preserve Penterra's flexibility to engage other distribution partners in adjacent markets, including the tri-state area of New York, New Jersey, and Pennsylvania. At no point during the negotiation of the EDA, whether in person, by telephone, or through written correspondence or draft exchanges, did Penterra agree, propose, or consent to include the states of New York, New Jersey, or Pennsylvania within the Territory as defined in Exhibit A. The final, executed version of Exhibit A to the EDA reflects precisely and completely the geographic scope that both parties understood and intended.
Paragraph 5 — Section 2.3 Limitation on Out-of-Territory Sales
5. Section 2.3 of the EDA provides, in relevant part, as follows:
"Distributor shall not actively solicit orders for, or deliver, the Products outside the Territory without Supplier's prior written consent."
I understood this provision, at the time of the EDA's execution and at all times thereafter, to mean that Vantage was contractually prohibited from distributing, selling, or delivering any Penterra products — including Oncalaris® and Renuvesta® — to any customer located outside the six New England states constituting the Territory, unless and until Penterra provided Vantage with express, advance, written consent authorizing such out-of-territory sales. This understanding was shared among Penterra's commercial and legal teams. The requirement of "prior written consent" under Section 2.3 was a deliberate and important safeguard, designed to ensure that Penterra retained control over its broader distribution network and could make informed, strategic decisions about when and whether to extend a distributor's geographic reach. No such written consent was ever provided by me to Vantage or to any representative of Vantage at any time. Furthermore, to the best of my knowledge, no other officer, employee, or authorized representative of Penterra ever provided Vantage with written consent to distribute Products outside the Territory as defined in Exhibit A.
Paragraph 6 — Section 13.1 Amendment Requirement
6. Section 13.1 of the EDA provides as follows:
"No amendment, modification, or waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by both parties."
I understood this provision, and continue to understand this provision, to require that any change to any term of the EDA — including, without limitation, any change to the definition of the Territory set forth in Exhibit A — would be effective only if memorialized in a formal written amendment or modification instrument and duly signed by authorized representatives of both Penterra and Vantage. This anti-oral-modification clause was a standard provision in Penterra's distribution agreements and reflected Penterra's longstanding corporate policy requiring that all material contractual modifications be documented in writing and approved through appropriate internal channels. I attest that no signed written amendment to Exhibit A of the EDA was ever executed by the parties. No signed written amendment modifying, expanding, or otherwise altering the definition of the Territory was ever negotiated, drafted, circulated for signature, or signed at any time during the term of the EDA.
Paragraph 7 — Section 14.8 Integration Clause
7. Section 14.8 of the EDA provides, in relevant part, that the Agreement, including all Exhibits attached thereto, constitutes the entire agreement between the parties with respect to the subject matter thereof and supersedes all prior negotiations, representations, or agreements relating thereto, whether written or oral. I attest that this integration clause reflected the parties' mutual understanding, as discussed and agreed upon during the negotiation of the EDA, that the written terms of the EDA as executed on July 1, 2017, together with its Exhibits, would constitute the complete and exclusive statement of the parties' agreement regarding the distribution of the Products. It was the shared intention of the parties that no prior oral discussions, preliminary proposals, or informal communications would have any contractual force or effect, and that the written EDA would govern the entirety of the distribution relationship between Penterra and Vantage.
Paragraph 8 — The January 12, 2018 Email
8. On January 12, 2018, I sent an email message from my Penterra business email address (skapoor@penterra.com) to Donald R. Farnham, Managing Member and Chief Executive Officer of Vantage, at his Vantage business email address (dfarnham@vantagemd.com). The text of the email stated as follows:
"Don — good catching up yesterday. We're definitely open to exploring expansion into NY/NJ/PA once your New England footprint is fully ramped. Let's circle back mid-year and see where things stand."
A true and correct copy of this January 12, 2018 email, as retrieved from Penterra's email archives in the ordinary course of document preservation and production in this litigation, is attached to this affidavit as Exhibit 1. I attest that this email was sent by me following an informal telephone conversation with Mr. Farnham on January 11, 2018. During that telephone conversation, Mr. Farnham and I discussed Vantage's progress in establishing distribution operations in the New England Territory during the first six months of the EDA's term. In the course of that conversation, Mr. Farnham raised the possibility of expanding Vantage's distribution territory at some point in the future to include states in the mid-Atlantic region, specifically New York, New Jersey, and Pennsylvania. I responded during the call that Penterra would be willing to discuss the idea at a later time, once Vantage had demonstrated a fully established operational presence in New England. The January 12, 2018 email was a brief, informal follow-up to that telephone conversation.
Paragraph 9 — Meaning and Intent of the January 12, 2018 Email
9. I attest that the January 12, 2018 email was intended by me to express Penterra's general willingness to consider and discuss the possibility of territorial expansion at some future date. Any such expansion was, in my mind and in the mind of the Penterra commercial team, contingent upon Vantage's successful development of its New England operations and upon the parties' reaching a mutually acceptable agreement on terms for any expanded territory through formal negotiation and a written amendment to the EDA. The January 12, 2018 email was not intended to, and did not, constitute "prior written consent" under Section 2.3 of the EDA for Vantage to distribute Products outside the six New England states that comprised the Territory under Exhibit A. The email was not intended to, and did not, constitute an amendment, modification, or waiver of Exhibit A or any other provision of the EDA under Section 13.1. The language I used in the email was deliberately forward-looking and conditional. The phrase "open to exploring" signified a willingness to engage in future discussions, not a present grant of authorization. The phrase "once your New England footprint is fully ramped" expressly conditioned any consideration of expansion on the occurrence of a future event — namely, the full development of Vantage's distribution capabilities within the existing Territory. The phrase "Let's circle back mid-year and see where things stand" indicated my intention to revisit the topic at a later date and to assess circumstances at that time, further underscoring that no decision had been made and no consent had been granted. At no point in the email did I state or imply that Vantage was authorized to begin distributing Products in New York, New Jersey, or Pennsylvania, nor did I state or imply that the Territory defined in Exhibit A had been expanded. No formal written amendment to Exhibit A was ever negotiated, drafted, circulated, or signed following this email, either at mid-year 2018 or at any subsequent time.
Paragraph 10 — No Follow-Up Agreement on Expansion
10. I attest that no follow-up meeting, telephone conference, or negotiation session regarding the proposed tri-state expansion occurred at or around "mid-year" 2018, as contemplated in my January 12, 2018 email, or at any subsequent time prior to the discovery of Vantage's unauthorized out-of-territory distribution activities described below. I do not recall Mr. Farnham or any other representative of Vantage initiating a request for a mid-year meeting to discuss territorial expansion, and I did not initiate such a meeting. While I had occasional general business conversations with Mr. Farnham during 2018, 2019, and 2020 regarding Vantage's performance metrics, order volumes, market conditions, and other routine operational matters, at no point during any of those conversations did I communicate to Mr. Farnham — orally or in writing — that Penterra had authorized, consented to, or approved Vantage distributing Penterra Products in New York, New Jersey, or Pennsylvania. To the best of my knowledge, no other Penterra executive, officer, employee, or authorized agent provided Vantage with any such authorization, consent, or approval at any time, whether orally or in writing. The subject of tri-state expansion was not, to my recollection, raised again in any substantive manner until Penterra learned of Vantage's unauthorized sales activities in early 2021.
Paragraph 11 — Vantage's Performance in the Territory
11. I am familiar with Vantage's purchase history under the EDA. Section 5.2 of the EDA required Vantage to maintain a minimum annual purchase commitment of Nine Million Five Hundred Thousand Dollars ($9,500,000) of Oncalaris® per year, calculated at wholesale acquisition cost ("WAC"), as a condition of maintaining its exclusive distribution rights within the Territory. Based on my review of Penterra's internal sales records, which are maintained in the ordinary course of business by the Distribution & Logistics team under the direction of Rachel Mendez, Vantage's actual purchases of Oncalaris® from Penterra were as follows:
• Fiscal Year 2018 (July 1, 2017 — June 30, 2018): $11.2 million (at WAC)
• Fiscal Year 2019 (July 1, 2018 — June 30, 2019): $14.8 million (at WAC)
• Fiscal Year 2020 (July 1, 2019 — June 30, 2020): $18.3 million (at WAC)
• Fiscal Year 2021 (July 1, 2020 — March 31, 2021, reflecting nine months of data available as of the relevant period): $16.1 million (at WAC)
I attest that these purchase figures reflect the total volume of Oncalaris® purchased by Vantage from Penterra during the referenced periods and include Products distributed by Vantage within the authorized New England Territory as well as Products that Vantage shipped, without authorization, to customers located in New York, New Jersey, and Pennsylvania beginning on or about September 14, 2020. The commingling of authorized and unauthorized sales within Vantage's aggregate purchase volumes underscores the significance of the unauthorized tri-state distribution, as a material portion of the increased purchase volume in Fiscal Year 2021 is attributable to Products that Vantage distributed outside the Territory in violation of Section 2.3 of the EDA.
Paragraph 12 — Discovery of Unauthorized Tri-State Sales
12. In early 2021, specifically in or around late January 2021, Penterra became aware that Vantage had begun distributing Oncalaris® to hospitals, oncology clinics, and other healthcare facilities located in the states of New York, New Jersey, and Pennsylvania. Based on information subsequently obtained, these unauthorized out-of-territory sales commenced on or about September 14, 2020. I became aware of these sales through two channels. First, Rachel Mendez, Penterra's Director of Distribution & Logistics, brought to my attention internal distribution reports reflecting anomalous shipping patterns and product delivery destinations for Oncalaris® units ordered by Vantage. Second, Penterra's customer service and commercial operations team received direct inquiries from hospitals and oncology clinics in the tri-state area — accounts that had not previously been serviced through Vantage's distribution channel — regarding the source and terms of Oncalaris® supply they were receiving from Vantage. Based on my review of Vantage's sales records produced during the course of discovery in this litigation, Vantage's revenues derived from the distribution of Oncalaris® to customers in New York, New Jersey, and Pennsylvania during the period from approximately September 2020 through March 2021 were approximately Six Million Four Hundred Thousand Dollars ($6,400,000). I attest that Vantage's tri-state distribution of Penterra Products was undertaken entirely without Penterra's knowledge, authorization, or consent. Penterra did not learn of these activities until approximately five months after they commenced, and at no point prior to Penterra's discovery of these activities had Vantage sought or obtained Penterra's approval to distribute Products outside the Territory.
Paragraph 13 — Penterra's Response and the Meridian Term Sheet
13. On February 15, 2021, following an internal assessment of the Company's distribution coverage needs in the mid-Atlantic region, Penterra executed a non-binding term sheet with Meridian National Distributors, Inc. ("Meridian"), a New York corporation with offices located at 520 Seventh Avenue, 12th Floor, New York, New York 10018. The term sheet contemplated a distribution arrangement pursuant to which Meridian would serve as Penterra's authorized distributor for Oncalaris® in the states of New York, New Jersey, Pennsylvania, and Maryland. Penterra pursued this arrangement because the states of New York, New Jersey, and Pennsylvania were not part of Vantage's exclusive Territory under Exhibit A to the EDA, and Penterra had identified a significant and growing need for dedicated, authorized distribution coverage for Oncalaris® in those markets. However, negotiations with Meridian stalled and the term sheet was not consummated into a definitive distribution agreement when Vantage, through its counsel, asserted that it held exclusive distribution rights over the tri-state area, a claim that Penterra disputes in its entirety and that is at the heart of this litigation. Vantage's assertion of purported exclusive rights to the tri-state territory directly interfered with Penterra's ability to formalize its relationship with Meridian and to establish authorized distribution channels in those markets. On March 8, 2021, Jennifer Chao, Esq., Penterra's General Counsel, sent a cease-and-desist letter via overnight courier and email to Donald R. Farnham at Vantage's principal office in Waltham, Massachusetts, demanding that Vantage immediately cease and desist from distributing Oncalaris® or any other Penterra product to customers located outside the six New England states constituting the Territory as defined in Exhibit A to the EDA. A true and correct copy of that cease-and-desist letter has been produced in discovery and is included in the summary judgment record.
Paragraph 14 — Kapoor's Deposition Testimony
14. I was deposed on November 2, 2021, in this action, at the offices of Calderwood & Harkness LLP, in Boston, Massachusetts. My testimony at deposition was consistent in all material respects with the statements set forth in this affidavit. At my deposition, I was questioned at length regarding the January 12, 2018 email, and I testified that the email expressed a general willingness on Penterra's part to explore the possibility of future territorial expansion through further negotiation, but that the email did not grant Vantage consent to distribute Products outside the Territory and did not constitute an amendment to the Territory as defined in Exhibit A. I further testified that no formal amendment to the EDA was ever executed to expand the Territory, and that no written consent to out-of-territory distribution was ever provided to Vantage by me or, to my knowledge, by any other Penterra representative.
Paragraph 15 — Conclusion
15. In summary, and to state clearly and unequivocally: At no time did I, or any other authorized representative of Penterra Pharmaceuticals Corp. to my knowledge, grant Vantage Medical Distribution, LLC written consent to distribute Penterra Products outside the Territory as defined in Exhibit A to the Exclusive Distribution Agreement — that is, outside the six New England states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. At no time was Exhibit A, or any other provision of the EDA, formally amended in a written instrument signed by both parties to expand the Territory to include the states of New York, New Jersey, or Pennsylvania, as would be required under Section 13.1 of the EDA for any such amendment to be effective. The January 12, 2018 email that I sent to Donald R. Farnham was a preliminary, forward-looking, and informal expression of interest in the possibility of future negotiations regarding territorial expansion. It was not a grant of consent, it was not an authorization to distribute Products outside the Territory, and it was not a contractual amendment to the EDA or to Exhibit A. Vantage's distribution of Oncalaris® in New York, New Jersey, and Pennsylvania, which commenced on or about September 14, 2020, was undertaken without Penterra's knowledge, consent, or authorization and in direct violation of Section 2.3 and Exhibit A of the Exclusive Distribution Agreement.
Signed under the pains and penalties of perjury this _ day of ____, 2022.
________________________________________
Steven Kapoor Vice President, Commercial Operations Penterra Pharmaceuticals Corp.
NOTARIAL ACKNOWLEDGMENT
COMMONWEALTH OF NEW JERSEY
COUNTY OF MERCER
On this _ day of ____, 2022, before me, the undersigned notary public, personally appeared Steven Kapoor, proved to me through satisfactory evidence of identification, which was a valid government-issued photographic identification, to be the person whose name is signed on the foregoing instrument, and acknowledged to me that he signed it voluntarily for its stated purpose.
________________________________________
Notary Public
My Commission Expires: ____
(Seal)
LIST OF EXHIBITS
Exhibit 1: True and correct copy of the email dated January 12, 2018, from Steven Kapoor (skapoor@penterra.com) to Donald R. Farnham (dfarnham@vantagemd.com), regarding the possibility of future distribution expansion into New York, New Jersey, and Pennsylvania.
Note: Additional exhibits referenced in the summary judgment record, including Exhibit A to the Exclusive Distribution Agreement, the Exclusive Distribution Agreement itself, and the March 8, 2021 cease-and-desist letter from Jennifer Chao to Donald R. Farnham, are filed separately as part of Plaintiff's Statement of Undisputed Material Facts and the accompanying Appendix of Exhibits in support of Penterra's Motion for Summary Judgment.
ATTORNEY WORK PRODUCT — PRIVILEGED AND CONFIDENTIAL DRAFT Calderwood & Harkness LLP
PENTERRA PHARMACEUTICALS CORP.,
Plaintiff,
v.
VANTAGE MEDICAL DISTRIBUTION, LLC,
Defendant.