[slide 1]
Penterra Pharmaceuticals Corp. — Proposed Acquisition of Veridian Biosciences, Inc.
Proposed Acquisition of Veridian Biosciences, Inc.
Presentation to the Board of Directors of Penterra Pharmaceuticals Corp.
Prepared Jointly by Calderwood & Harkness LLP and Garrison Zanthor & Co., LLC
June 9, 2024
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED
[slide 2]
Disclaimer and Important Notices
This presentation is provided for discussion purposes only and does not constitute legal or financial advice to any party other than Penterra
Financial projections and valuations are based on information furnished by Veridian and its advisors and have not been independently verified except as noted
Garrison Zanthor & Co. will deliver its fairness opinion to the Board separately
Subject to attorney-client privilege and work product protections; do not distribute outside the Board and authorized Penterra personnel
[slide 3]
Executive Summary
Penterra proposes to acquire 100% of the outstanding capital stock of Veridian Biosciences, Inc. for $900,000,000 in cash
All-cash stock purchase; no stock consideration or earnout
Veridian is a privately held, clinical-stage biotech focused on immuno-oncology therapeutics leveraging its proprietary VeriTCE T-cell engager platform
Lead candidate VRD-4187 (bispecific T-cell engager targeting DLL3-expressing tumors in small cell lung cancer) is in Phase II clinical trials (Marlowe Asset Management-2)
Transaction intended to bolster Penterra's immuno-oncology pipeline following the PPC-0921 Phase III futility analysis in November 2023
HSR clearance obtained (early termination granted May 20, 2024); committed financing in place
Board authorization requested for execution of definitive Stock Purchase Agreement on June 10, 2024
[slide 4]
Transaction Timeline
Feb 12, 2024: Penterra Board authorizes exploration of Veridian acquisition
Feb 14, 2024: Calderwood & Harkness LLP and Garrison Zanthor & Co. engaged as legal and financial advisors
Mar 1, 2024: Penterra submits non-binding indication of interest ($850M–$950M indicative enterprise value)
Mar 4, 2024: Confidentiality Agreement (NDA) executed between Penterra and Veridian
Mar 11, 2024: Due diligence data room access granted; Mar 18: Broadleaf Scientific Consulting LLC engaged for clinical diligence
Apr 22, 2024: HSR Act pre-merger notification filed ($280,500 filing fee)
May 20, 2024: HSR early termination granted by FTC
Jun 7, 2024: Financing commitment letter executed with Summit Ridge Capital Partners / Ironclad Trust Company
Jun 9, 2024: Garrison Zanthor fairness opinion delivered to Board
Jun 10, 2024 (TARGET): Execution of Stock Purchase Agreement
Post-signing: Veridian stockholder written consent; R&W insurance policy binding
Anticipated closing: Subject to satisfaction of closing conditions; SPA Outside Date of December 10, 2024
[slide 5]
Overview of Veridian Biosciences, Inc.
Founded 2016; Delaware corporation; principal office in Cambridge, MA
Clinical-stage biotech; no product revenue (FY2023 revenue: $0; FY2023 net loss: $87.3 million)
Cash and cash equivalents of $112.4 million as of March 31, 2024
148 employees at signing; operations in Massachusetts, California, and Maryland
Proprietary VeriTCE (T-cell engager) platform with three immuno-oncology candidates
Lead candidate: VRD-4187 — bispecific T-cell engager targeting DLL3 for small cell lung cancer (SCLC)
VRD-4187 in Phase II (Marlowe Asset Management-2 trial; NCT05837291; IND 154832) — 387 enrolled patients across 42 clinical sites (US and EU)
Key personnel: Dr. Julian Marek (CEO/Co-Founder, 8.4% equity), Dr. Priya Chandrasekaran (CSO/Co-Founder, 6.2% equity), Steven R. Kessler (CFO), Dr. Anne-Marie Fontaine (VP Regulatory Affairs)
Audited by Northbridge Accounting Group LLP (Patrick Calloway, Engagement Partner)
[slide 6]
Veridian Capitalization and Major Stockholders
Crestline Ventures, LP — 28.3% (Lead Series A & B investor; David Ng, Managing Partner; will serve as Stockholder Representative)
Boreal Health Partners Fund III, LP — 19.7% (Lead Series C investor; Sarah Dalmqvist, Managing Director)
Apex Growth Equity Fund II, LP — 14.1% (Lead Series D investor; Marcus Doyle, Partner)
Dr. Julian Marek (CEO/Co-Founder) — 8.4%
Dr. Priya Chandrasekaran (CSO/Co-Founder) — 6.2%
Other management & employees (ESOP pool) — 9.8%
Other institutional investors — ~13.5%
Stockholder written consent from holders of >90% expected by June 14, 2024
[slide 7]
Purchase Price and Deal Economics
Purchase Price: $900,000,000 in cash (fixed; no adjustments for cash on hand)
Indemnification Escrow: $180,000,000 (20% of purchase price) deposited with Fidelis National Escrow Corp. at closing
Stockholder Representative Expense Fund: $2,500,000 deposited with Fidelis at closing
Net Closing Payment to Sellers: $717,500,000 ($900M − $180M − $2.5M)
Indemnification Cap (General Reps): $180,000,000 (20% of purchase price)
Indemnification Basket (Tipping): $9,000,000 (1% of purchase price)
Fundamental / Special Reps Indemnification Cap: $900,000,000 (100% of purchase price)
Survival — General Representations: 18 months post-closing
Survival — Fundamental and Tax Representations: Statute of limitations + 60 days
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Financing Structure
Total Funding Requirement: $900,000,000
Source 1: $500,000,000 committed term loan facility — Summit Ridge Capital Partners, LP (lead arranger) and Ironclad Trust Company, N.A. (administrative agent)
Commitment letter executed June 7, 2024 (Ref. CL-2024-PPCA-0607)
Term Loan Interest Rate: SOFR + 225 basis points
Commitment Fee: 0.35% per annum on unfunded commitments ($1,750,000/year)
Ticking Fee: 0.175% per annum, commencing 90 days post-signing (September 8, 2024)
Source 2: $400,000,000 from Penterra cash on hand (Q2 2024 cash: $2.1 billion)
Financing commitment expires co-terminous with SPA Outside Date (December 10, 2024)
Reverse Termination Fee (financing failure): $45,000,000 (5% of purchase price)
[slide 9]
Key SPA Terms — Material Adverse Effect Definition
MAE defined in SPA § 1.1: any event, change, or effect that has had or would reasonably be expected to have a material adverse effect on the business, financial condition, or assets of the Company, taken as a whole, or the Sellers' ability to consummate the Transactions
Carveouts (excluded from MAE): (i) general economic/political conditions; (ii) biotech/pharma industry conditions; (iii) changes in law or GAAP; (iv) pandemics; (v) natural disasters, acts of war, terrorism; (vi) financial market changes; (vii) announcement/pendency of the Transactions
Disproportionate Impact Exception: Carveouts (i)–(vi) do not apply if the effect disproportionately affects Veridian relative to comparably situated biotech companies
MAE is a closing condition under § 7.2(b): no MAE shall have occurred since the date of the Agreement
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Key SPA Terms — No-Shop, Termination Rights, and Fees
No-Shop Provision (SPA § 5.4): Veridian prohibited from soliciting or engaging in discussions regarding any Acquisition Proposal from signing through closing or termination
Limited fiduciary out for unsolicited Superior Proposals, subject to 4 business days' matching rights for Penterra
Target Termination Fee: $36,000,000 (4% of purchase price) — payable by Veridian if it terminates to accept a Superior Proposal
Reverse Termination Fee: $45,000,000 (5% of purchase price) — payable by Penterra only upon financing failure
Termination rights under § 8.1: (a) mutual consent; (b) Outside Date (Dec 10, 2024); (c) legal prohibition; (d) failure of other party's closing conditions not curable within 30 days
Specific Performance: SPA § 10.12 grants Sellers the right to seek specific performance to compel closing if all conditions are satisfied
Governing Law: State of Delaware; exclusive jurisdiction in the Court of Chancery (SPA § 10.6)
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Key SPA Terms — Representations, Covenants, and Closing Conditions
Seller Representations: Customary representations covering organization, authority, capitalization, financial statements, absence of undisclosed liabilities, compliance with law, tax, IP, material contracts, FDA/regulatory, clinical trials, employee benefits, environmental, insurance, and absence of MAE since Dec 31, 2023
Disclosure Schedules: Detailed exceptions to representations compiled by Veridian and reviewed by C&H
Interim Operating Covenants (§ 5.1): Veridian must operate in the ordinary course; consent required for material actions outside ordinary course
Notification Obligations (§ 5.1(b)): Veridian must promptly notify Penterra of any event that would reasonably be expected to cause a closing condition to not be satisfied
Buyer's Conditions to Closing (§ 7.2): (a) bring-down of Sellers' reps (MAE-qualified); (b) no MAE since date of Agreement; (c) covenant compliance; (d) delivery of closing certificates and deliverables
Seller's Conditions to Closing (§ 7.3): Bring-down of Buyer's reps; Buyer covenant compliance; delivery of purchase price
[slide 12]
R&W Insurance and Risk Allocation
Buyer-side R&W insurance policy procured through Prescott Whitfield Insurance Brokers, Inc. (Amanda Chen-Kowalski, Managing Director)
Carrier: Atlas Indemnity Insurance Co. (Graham Fielding, SVP); Policy No. AIC-RWI-2024-07892
Policy to be bound June 12, 2024 (two days post-signing)
Policy Limit: $180,000,000 (matches indemnification cap of 20% × $900M)
Self-Insured Retention (SIR): $9,000,000 (matches indemnification basket of 1% × $900M)
Premium: $3,960,000 (2.2% of policy limit) plus applicable taxes
Underwriting Fee: $75,000
Premium is non-refundable per policy terms (sunk cost to Penterra regardless of closing)
Policy provides additional recovery beyond Seller indemnification escrow for breaches of non-fundamental representations
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Due Diligence Summary — Key Findings
Corporate / Organizational: Clean corporate structure; Series A–D capitalization confirmed; stockholder agreements and investor rights reviewed — no material issues
Intellectual Property: VeriTCE platform patents and VRD-4187 composition-of-matter / method-of-use patents confirmed; freedom-to-operate analysis completed; IP assignments from founders properly documented
Material Contracts: CRO agreements, manufacturing supply agreements, license agreements, and Cambridge facility lease reviewed; change-of-control provisions identified in certain investor rights agreements
Regulatory / FDA: IND 154832 in good standing; Marlowe Asset Management-2 Phase II trial ongoing (387 patients, 42 sites); no prior FDA enforcement actions; 21 CFR compliance confirmed
Employment: 148 employees; key-person dependence on Marek and Chandrasekaran; ESOP pool at 9.8%; change-of-control provisions in executive agreements; compliance in MA, CA, MD
Financial / Audit: FY2021–FY2023 audited by Northbridge Accounting Group LLP; no material audit findings; clinical-stage profile ($0 revenue, $87.3M net loss, $112.4M cash)
Litigation: No pending or threatened material litigation or governmental investigations identified
Environmental / Insurance: Laboratory operations compliant; adequate insurance coverage including clinical trial liability
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Due Diligence — Tax Matters
Structure: Stock purchase (acquisition of 100% of Veridian outstanding capital stock); no Section 338(h)(10) election contemplated
Rationale for no 338(h)(10) election: Veridian's net operating losses eliminate the asset step-up tax benefit
Federal NOL Carryforward: $312 million as of December 31, 2023
Section 382 Limitation: Ownership change in Q3 2020 (Series C round); pre-change NOLs of ~$148M subject to annual limitation of ~$5.9M/year
Post-2020 NOLs (~$164 million) are not subject to the Section 382 annual limitation
State Tax Nexus: Veridian has operations and employees in Massachusetts, California, and Maryland
Transfer Taxes: Responsibility of Sellers per SPA § 6.8
Pre-Closing Tax Period: Sellers indemnify Buyer for all pre-closing taxes (Fundamental Representation survival)
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Risk Factors
Clinical Trial Risk: VRD-4187 is in Phase II; no guarantee of clinical success, regulatory approval, or commercial viability — entire acquisition value is pipeline-dependent
Regulatory Risk: FDA actions (including clinical holds, CRLs, or refusal to file) could materially impair VRD-4187 value or delay development
Key-Person Risk: Heavy dependence on Dr. Marek and Dr. Chandrasekaran; non-compete agreements mitigate but do not eliminate risk
Section 382 NOL Limitation: ~$148M of pre-change NOLs limited to ~$5.9M/year, reducing anticipated tax shield value
No Revenue / Cash Burn: Veridian has zero revenue; continued cash burn post-closing until commercialization
MAE Threshold: Under Delaware law, the bar for establishing an MAE is high; a post-signing adverse VRD-4187 development must constitute an MAE to permit termination
Specific Performance Exposure: If closing conditions are satisfied, Sellers may seek specific performance to compel closing under § 10.12
Integration Risk: Integration of a 148-person clinical-stage organization with Penterra's commercial infrastructure
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Ancillary Agreements and Closing Deliverables
Escrow Agreement: Penterra, David Ng (Stockholder Representative), and Fidelis National Escrow Corp.
Stockholder Representative Agreement: Appointment of David Ng (Crestline Ventures) as Stockholder Representative
Stockholder Written Consent and Joinder Agreements: To be delivered by Veridian stockholders (>90% expected)
Non-Competition and Non-Solicitation Agreements: Dr. Julian Marek and Dr. Priya Chandrasekaran (2-year non-compete, 2-year non-solicitation)
Transition Services Agreement: Up to 12 months of post-closing transitional support (clinical operations, regulatory affairs, IT)
Side Letter re: Financing Cooperation: Veridian's obligations to cooperate with Penterra's financing process
Closing Certificates: Officer's and Secretary's certificates from both parties
R&W Insurance Policy: To be bound June 12, 2024 (Atlas Indemnity Insurance Co.)
Board Resolutions: Penterra Board authorization (June 10, 2024)
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Advisors and Working Teams
Legal Counsel (Buyer): Calderwood & Harkness LLP — Oliver Mackenzie (Responsible Partner), Harrison Wexford (Billing Partner), Megan Chu (Lead Associate), Derek Okonkwo (Working Associate), Leonard Cross (Tax Partner)
Financial Advisor (Buyer): Garrison Zanthor & Co., LLC — Kevin Driscoll, Managing Director
Clinical/Scientific Due Diligence: Broadleaf Scientific Consulting LLC — Dr. Raymond Kapoor, Managing Director
Antitrust Counsel (Buyer): Stonebridge HSW Antitrust Advisors LLP — Martin Prumvane, Partner
Legal Counsel (Sellers): Zalcourt Archer & Cole LLP — Rebecca Whitmore (Partner), Jonathan Pratt (Associate), Elaine Sato (Tax Partner)
Financial Advisor (Sellers): Ridgeway Partners LLC — Laura Beckett, Managing Director
Escrow Agent: Fidelis National Escrow Corp. — Brian Mulcahy, SVP
R&W Insurance Broker: Prescott Whitfield Insurance Brokers, Inc. — Amanda Chen-Kowalski, Managing Director
R&W Insurance Carrier: Atlas Indemnity Insurance Co. — Graham Fielding, SVP
Financing: Summit Ridge Capital Partners, LP (Philip Ostrander, MD) / Ironclad Trust Company, N.A. (Samantha Hwang, VP)
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Transaction Costs Summary
Calderwood & Harkness LLP legal fees (estimated through closing): $4,250,000
Garrison Zanthor advisory fee (payable regardless of closing): $2,500,000
Garrison Zanthor success fee (contingent on closing): $9,000,000
Broadleaf Scientific Consulting DD fees: $875,000
Stonebridge HSW Antitrust Advisors fees: $310,000
R&W insurance premium (non-refundable): $3,960,000
R&W insurance underwriting fee: $75,000
HSR filing fee: $280,500
Term loan commitment fee (estimated through closing): accruing at $1,750,000/year
Ticking fee commencing September 8, 2024 (0.175%/year if closing delayed past 90 days)
Miscellaneous (travel, data room, printing): $185,000
Total estimated non-contingent costs (excluding success fee): ~$12.4M+
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Recommended Board Actions
Approve and authorize the execution and delivery of the Stock Purchase Agreement dated June 10, 2024
Approve and authorize the execution of all ancillary agreements (Escrow Agreement, Stockholder Representative Agreement, Non-Competition Agreements, Transition Services Agreement, Side Letter re: Financing Cooperation)
Authorize Dr. Anand Rajagopal (CEO) and Thomas F. Holbrook (General Counsel & Secretary) to execute the SPA and ancillary documents on behalf of Penterra
Ratify the engagement of Calderwood & Harkness LLP, Garrison Zanthor & Co., Broadleaf Scientific Consulting LLC, and Stonebridge HSW Antitrust Advisors LLP
Ratify the binding of the R&W insurance policy with Atlas Indemnity Insurance Co.
Authorize management to take all further actions necessary to consummate the Transactions
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Appendix A — Detailed Funds Flow (Summary)
Sources: $500,000,000 term loan (Ironclad Trust Company, N.A. / Summit Ridge Capital Partners) + $400,000,000 Penterra cash on hand = $900,000,000
Uses: $717,500,000 net closing payment to Sellers + $180,000,000 indemnification escrow (Fidelis National Escrow Corp.) + $2,500,000 stockholder representative expense fund (Fidelis) = $900,000,000
Wire instructions and detailed funds flow to be finalized pre-closing
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Appendix B — Key SPA Section Reference
§ 1.1 — Definitions (including Material Adverse Effect)
§ 2.1 — Purchase Price ($900,000,000)
§ 2.3 — Escrow Deposits (Indemnification Escrow and Stockholder Rep. Expense Fund)
§ 5.1 — Operating Covenants and Notification Obligations (including § 5.1(b) prompt notification)
§ 5.4 — No-Shop Provision