COMMONWEALTH OF MASSACHUSETTS SUPERIOR COURT BUSINESS LITIGATION SESSION SUFFOLK COUNTY
AFFIDAVIT OF RACHEL MENDEZ IN SUPPORT OF PLAINTIFF PENTERRA PHARMACEUTICALS CORP.'S MOTION FOR SUMMARY JUDGMENT
I, Rachel Mendez, being duly sworn, depose and state the following under the pains and penalties of perjury pursuant to Massachusetts General Laws Chapter 268, Section 1A:
My full name is Rachel Mendez. I am currently employed as the Director of Distribution & Logistics at Penterra Pharmaceuticals Corp. ("Penterra" or the "Company"). My business address is 400 Carnegie Center Drive, Suite 600, Princeton, New Jersey 08540. I have personal knowledge of the facts set forth in this affidavit and am competent to testify thereto. I submit this affidavit in support of Penterra Pharmaceuticals Corp.'s Motion for Summary Judgment filed in the above-captioned matter.
Background and Qualifications
1. I have been employed by Penterra Pharmaceuticals Corp. since June 2015. I was initially hired as a Senior Distribution Analyst within the Commercial Operations division and was promoted to Manager of Distribution Operations in January 2017. I assumed my current position as Director of Distribution & Logistics in March 2018. I have served continuously in that role from March 2018 to the present date.
2. In my role as Director of Distribution & Logistics, I am responsible for overseeing the distribution logistics framework for all Penterra products across the United States. My responsibilities include the management of relationships with regional exclusive distributors and national specialty pharmacy partners, the configuration and maintenance of Penterra's distribution management and order-fulfillment systems, the implementation of territorial restrictions and distribution parameters established by the Company's contractual arrangements, and the monitoring of product flow from Penterra's manufacturing and warehousing facilities to authorized distribution channels.
3. The products for which I oversee distribution include, among others, Oncalaris® (pegvisomant-axel), which is available in 20 mg and 40 mg vials and is indicated for the treatment of certain advanced solid tumors in adult patients, and Renuvesta® (cilosporin-beta), 5 mg capsules, which is indicated for the management of chronic inflammatory conditions. I am familiar with the distribution channels, logistics requirements, and territorial designations applicable to each of these products.
4. I report directly to Steven Kapoor, Vice President of Commercial Operations at Penterra. In my capacity as Director of Distribution & Logistics, I also work closely with Jennifer Chao, General Counsel of Penterra, on contractual distribution matters, including the implementation and enforcement of territorial exclusivity provisions contained in Penterra's various distribution agreements.
5. Penterra Pharmaceuticals Corp. is a corporation organized and existing under the laws of the State of Delaware. The Company is publicly traded on the Nasdaq Stock Market under the ticker symbol "PTRA" and is headquartered in Princeton, New Jersey. For fiscal year 2021, Penterra reported consolidated revenue of approximately $1.87 billion. Oncalaris® accounted for approximately $412 million of that revenue, representing approximately 22% of the Company's total consolidated revenue for that fiscal year. Oncalaris® is one of Penterra's most commercially significant products, and the integrity of its distribution network is of paramount importance to the Company.
The Exclusive Distribution Agreement and Territory
6. I am familiar with the Exclusive Distribution Agreement (the "EDA") dated July 1, 2017, entered into between Penterra Pharmaceuticals Corp., as "Supplier," and Vantage Medical Distribution, LLC ("Vantage"), as "Distributor." I was directly involved in the logistics implementation of the EDA, including the configuration of Penterra's internal distribution systems to reflect the territorial boundaries and product allocations established by the EDA. I have reviewed the EDA in connection with my job responsibilities on numerous occasions since its execution.
7. The EDA granted Vantage the exclusive right to distribute Oncalaris® and Renuvesta® within the "Territory," as that term is defined in Exhibit A to the EDA. The exclusive distribution rights conferred upon Vantage were expressly limited to the geographic area specified in Exhibit A and did not extend to any territory or geographic region not enumerated therein.
8. 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')." A true and correct copy of Exhibit A to the EDA is attached hereto and incorporated herein as Exhibit 1 to this affidavit.
9. Section 2.3 of the EDA contains an express territorial restriction on Vantage's distribution activities. Section 2.3 provides, in relevant part: "Distributor shall not actively solicit orders for, or deliver, the Products outside the Territory without Supplier's prior written consent." This provision unambiguously prohibits Vantage from soliciting orders for, or delivering, Oncalaris® or Renuvesta® to customers located outside the six New England states enumerated in Exhibit A, absent Penterra's prior written consent.
10. Section 13.1 of the EDA sets forth the requirements for any modification of the agreement. Section 13.1 provides, in relevant part, that "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." This provision establishes that oral statements, email correspondence, or informal communications cannot serve as a basis for amending or modifying the terms of the EDA, including the territorial boundaries defined in Exhibit A.
11. The EDA has a five-year initial term commencing on July 1, 2017 and expiring on June 30, 2022, with two successive one-year automatic renewal options, each subject to 180 days' prior written notice by either party. In addition, Section 5.2 of the EDA establishes a minimum annual purchase commitment, pursuant to which Vantage was required to purchase no less than $9.5 million of Oncalaris® at Wholesale Acquisition Cost ("WAC") per contract year. This minimum purchase commitment was calculated based on the anticipated demand for Oncalaris® within the six New England states that constitute the Territory and was not designed to contemplate or support distribution volumes associated with any territory beyond those six states.
Penterra's Distribution Logistics System and the Territory Limitation
12. As Director of Distribution & Logistics, I was responsible for configuring Penterra's distribution management and order-fulfillment systems to implement the territorial boundaries established in each of the Company's exclusive distribution agreements, including the EDA with Vantage. This configuration process is a core function of my role and is undertaken each time Penterra enters into, amends, or terminates a distribution agreement with a regional distributor or specialty pharmacy partner.
13. Penterra's internal distribution system operates on an enterprise resource planning ("ERP") platform, supplemented by a proprietary order management module developed for the Company's pharmaceutical distribution operations (internally referred to as "PentraConnect"). The system is configured to route orders based on the ship-to address of the end customer — that is, the hospital, oncology clinic, specialty pharmacy, or other healthcare facility to which the product is ultimately to be delivered. Each authorized distributor is assigned a set of geographic territories within the system, and orders are routed to the appropriate distributor based on the end-customer's ship-to address falling within that distributor's designated territory.
14. For the Vantage territory, my team and I configured the PentraConnect system so that Penterra directed product shipments to Vantage — or authorized Vantage to fulfill orders — only for orders where the end-customer ship-to address was located in one of the six New England states defined in Exhibit A to the EDA: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, or Vermont. This configuration was implemented at the time the EDA was executed in July 2017 and remained in effect, without modification, throughout the entire term of the agreement through the events giving rise to this litigation.
15. At no time was the PentraConnect system configured to include addresses in the State of New York, the State of New Jersey, or the Commonwealth of Pennsylvania as part of Vantage's authorized territory. Orders for customers with ship-to addresses in New York, New Jersey, or Pennsylvania were handled through other distribution channels maintained by Penterra, including direct-ship arrangements and other regional distribution partners. The system logic governing Vantage's territory was limited exclusively to the six New England states, and no system administrator, distribution manager, or other Penterra employee modified that logic to add any state beyond those six.
16. Penterra maintains a broad network of regional exclusive distributors and two national specialty pharmacy partners to ensure comprehensive coverage of the United States market for its pharmaceutical products. At the time the EDA was executed on July 1, 2017, the tri-state area encompassing New York, New Jersey, and Pennsylvania was not assigned to any exclusive regional distributor and was instead serviced through Penterra's direct-ship and national specialty pharmacy channels. This tri-state area remained unassigned to Vantage or any other exclusive regional distributor throughout the entire term of the EDA. Vantage's exclusive territory was, at all times, limited to the six New England states.
17. At no time did I receive any instruction, directive, memorandum, email, or other form of authorization from any officer or executive of Penterra — including Dr. Marcus Lindholm, Chief Executive Officer; Jennifer Chao, General Counsel; Steven Kapoor, Vice President of Commercial Operations; or any other member of Penterra's senior leadership team — to expand or modify the PentraConnect system configuration to include New York, New Jersey, or Pennsylvania within Vantage's authorized territory. No such instruction was communicated to me verbally, in writing, or through any other means at any point during my tenure as Director of Distribution & Logistics.
18. At no time did I, or any member of my distribution team, issue any written consent, approval, authorization, or directive for Vantage to ship, deliver, or distribute Oncalaris® or any other Penterra product to customers located outside the six New England states defined in Exhibit A to the EDA. My team and I were never asked to provide such consent or authorization, and none was ever given.
19. To my knowledge, no signed written amendment to Exhibit A of the EDA was ever executed by authorized representatives of both Penterra and Vantage that would expand the Territory beyond the six New England states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. I have reviewed Penterra's contract files maintained by the Legal Department in connection with the preparation of this affidavit, and no such amendment appears in those files. Moreover, Jennifer Chao, General Counsel, has confirmed to me that no such amendment exists in Penterra's records.
Discovery of Vantage's Unauthorized Tri-State Shipments
20. On or about January 2021, I became aware that Vantage had begun shipping Oncalaris® to hospitals and oncology clinics located in New York, New Jersey, and Pennsylvania — states that are outside the Territory as defined in Exhibit A to the EDA. This information initially came to my attention through reports from Penterra's field-based commercial team, which had received inquiries from healthcare providers in the tri-state area regarding Oncalaris® shipments they had received from Vantage. Upon receiving these reports, I initiated an internal review of Penterra's distribution records and Vantage's order and shipment history to determine the scope and duration of these unauthorized shipments.
21. Based on Vantage's sales records produced in discovery in this litigation, including documents bearing Bates numbers VTG-00004217 through VTG-00004893, Vantage commenced its tri-state shipments on or about September 14, 2020. The records reflect that Vantage shipped Oncalaris® to at least seventeen distinct end-customer locations in New York, twelve in New Jersey, and nine in Pennsylvania during the period from approximately September 2020 through March 2021.
22. These shipments were not routed through Penterra's authorized distribution system for the tri-state area. Specifically, the shipments did not originate from orders processed through the PentraConnect system for tri-state end-customers, and Vantage was not designated as an authorized distributor for any ship-to addresses in those states. Based on my review of available records and the discovery materials produced in this litigation, Vantage appears to have sourced Oncalaris® product from its existing New England inventory allocation — that is, product that Penterra had shipped to Vantage for distribution within the six New England states — and redirected that product to customers in the tri-state area without Penterra's knowledge, consent, or authorization.
23. According to Vantage's sales records produced in this litigation, Vantage generated approximately $6.4 million in revenue from sales of Oncalaris® to customers in the tri-state area between approximately September 2020 and March 2021. This figure is derived from invoices and sales reports produced by Vantage bearing Bates numbers VTG-00005102 through VTG-00005487. These sales were made entirely outside the Territory as defined in Exhibit A to the EDA and without any prior written consent from Penterra as required by Section 2.3 of the EDA.
24. I never approved, facilitated, or had any role in directing Oncalaris® product to Vantage for redistribution into the tri-state area. These shipments were entirely outside the scope of the logistics framework that Penterra had established under the EDA. At no point did Vantage seek my approval or the approval of any member of my distribution team before commencing, or at any time during, its tri-state distribution activities. The first I learned of these activities was in approximately January 2021, as described in Paragraph 20 above.
Vantage's Authorized Purchase History
25. I have access to, and have reviewed in connection with the preparation of this affidavit, Penterra's internal records of Vantage's Oncalaris® purchases throughout the term of the EDA. These records are maintained in the ordinary course of Penterra's business within the PentraConnect system and the Company's financial reporting systems. All of Vantage's Oncalaris® purchases from Penterra were understood by Penterra to be for distribution within the six New England states defined in Exhibit A to the EDA, and the product was shipped to Vantage's distribution facilities on that basis.
26. Vantage's Oncalaris® purchases from Penterra, at Wholesale Acquisition Cost, by fiscal year were as follows:
27. While Vantage's purchases of Oncalaris® grew significantly over the course of the EDA term, my team and I attributed this growth to Vantage's increasing penetration of the New England oncology market, including the expansion of its customer base among hospitals and oncology clinics throughout the six New England states. Oncalaris® experienced strong overall market growth during this period nationally, and growing demand within the New England territory was consistent with broader market trends. At no time did my team or I understand the increase in Vantage's purchase volumes to reflect, or to constitute authorization for, any expansion of Vantage's distribution activities into the tri-state area or any other territory beyond the six New England states.
28. The increase in Vantage's purchase volumes did not prompt any change to the system-level territory configuration for Vantage within the PentraConnect system. The New England states — Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont — remained the sole authorized territory assigned to Vantage in Penterra's distribution systems at all times throughout the term of the EDA. No modification was made to expand or alter Vantage's territory designation in the system at any point.
The Meridian Term Sheet and Tri-State Distribution Plans
29. I am aware that on or about February 15, 2021, Penterra executed a non-binding term sheet with Meridian National Distributors, Inc. ("Meridian"), a corporation organized under the laws of the State of New York with its principal offices located at 520 Seventh Avenue, 12th Floor, New York, New York 10018. The term sheet contemplated the appointment of Meridian as an exclusive regional distributor of Oncalaris® in the States of New York, New Jersey, and Pennsylvania, as well as the State of Maryland. I was consulted in connection with the logistics feasibility of the proposed Meridian arrangement and participated in internal planning discussions regarding the implementation of the Meridian distribution channel.
30. As part of the contemplated Meridian arrangement, my team began preliminary planning to configure the PentraConnect distribution system to route tri-state and Maryland Oncalaris® orders through Meridian. This planning included the identification of end-customer ship-to addresses in those states, preliminary territory mapping within the system, and the development of logistics timelines for onboarding Meridian as a regional distributor. This planning effort stalled and was ultimately suspended when Vantage asserted exclusive distribution rights over the tri-state area and the dispute that is the subject of this litigation arose.
31. The fact that Penterra was independently negotiating and executing a separate distribution arrangement with Meridian for the tri-state area confirms that Penterra did not consider the tri-state area — New York, New Jersey, and Pennsylvania — to be part of Vantage's exclusive territory under the EDA. Had Penterra understood or intended the tri-state area to fall within Vantage's Territory, there would have been no reason for Penterra to seek a separate distributor for that geographic region.
The January 12, 2018 Kapoor Email
32. I am aware of the email dated January 12, 2018, sent by Steven Kapoor, Vice President of Commercial Operations, to Donald Farnham, President of Vantage Medical Distribution, LLC. In that email, which has been produced in discovery in this litigation and bears Bates number PTRA-00012847, Mr. Kapoor stated: "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." I have reviewed this email in connection with my responsibilities and in the preparation of this affidavit.
33. At no time following the sending of this email did I receive any instruction, directive, or communication from Steven Kapoor, or from any other officer, executive, or employee of Penterra, to modify Penterra's distribution logistics systems — including the PentraConnect system — to include New York, New Jersey, or Pennsylvania within Vantage's authorized territory. No changes were made to the system configuration for Vantage's territory at any time following January 12, 2018, and the territory assignment in the system remained limited exclusively to the six New England states.
34. To my knowledge, no follow-up agreement, written amendment to Exhibit A, formal authorization, or other written instrument was ever executed or issued by Penterra as a result of, or in connection with, the January 12, 2018 Kapoor email. The email expressed an openness to future discussions regarding a potential expansion, but no concrete steps were taken to effectuate any such expansion, and no modification to the EDA or its exhibits was ever made. The Territory under the EDA remained, at all times, limited to the six New England states as defined in Exhibit A.
Conclusion
35. In summary, based on my personal knowledge as Director of Distribution & Logistics at Penterra Pharmaceuticals Corp., my direct involvement in the implementation and administration of the EDA, and my review of Penterra's distribution records and systems in connection with this affidavit:
(a) Penterra's distribution system — specifically, the PentraConnect order management and fulfillment platform — was configured to direct Oncalaris® shipments to Vantage only for end-customers located in the six New England states defined in Exhibit A to the EDA: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont;
(b) Penterra never authorized, approved, or facilitated Vantage's distribution of Oncalaris® to customers in New York, New Jersey, or Pennsylvania, whether through modification of the PentraConnect system, written consent under Section 2.3, or any other means;
(c) No modification to the territory configuration within Penterra's distribution systems was ever made to include the tri-state area — New York, New Jersey, or Pennsylvania — within Vantage's authorized territory; and
(d) No signed written amendment to Exhibit A of the EDA expanding the Territory beyond the six New England states was ever executed by authorized representatives of both Penterra and Vantage, as would be required under Section 13.1 of the EDA.
36. I make this affidavit based on my personal knowledge of the facts stated herein. The foregoing statements are true and correct to the best of my knowledge, information, and belief. I am aware that this affidavit is submitted in support of Penterra Pharmaceuticals Corp.'s Motion for Summary Judgment and that the Court will rely upon the truthfulness and accuracy of the statements contained herein.
________________________________________
Rachel Mendez Director of Distribution & Logistics Penterra Pharmaceuticals Corp.
Date: ________
JURAT
State of New Jersey County of Mercer
Sworn to and subscribed before me this __ day of ____, 2022, by Rachel Mendez, who is personally known to me or who has produced valid government-issued photographic identification as proof of identity.
________________________________________
Notary Public, State of New Jersey
Print Name: ________
My Commission Expires: ________
[NOTARIAL SEAL]
EXHIBITS
The following exhibit is attached to and incorporated by reference in the Affidavit of Rachel Mendez:
PENTERRA PHARMACEUTICALS CORP.,
Plaintiff,
v.
VANTAGE MEDICAL DISTRIBUTION, LLC,
Defendant.
| Fiscal Year | Oncalaris® Purchases (at WAC) | Amount Above $9.5M Minimum |
| FY 2018 (July 2017 – June 2018) | $11.2 million | $1.7 million |
| FY 2019 (July 2018 – June 2019) | $14.8 million | $5.3 million |
| FY 2020 (July 2019 – June 2020) | $18.3 million | $8.8 million |
| FY 2021 (July 2020 – March 2021; 9-month period) | $16.1 million | N/A (annualized: approx. $21.47 million) |
| Exhibit | Description | |
| Exhibit 1 | Exhibit A to the Exclusive Distribution Agreement dated July 1, 2017, between Penterra Pharmaceuticals Corp. and Vantage Medical Distribution, LLC (Territory Definition — Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont) |