PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 200 Park Avenue, 42nd Floor New York, NY 10166
MEMORANDUM
TO: Oliver Mackenzie, Partner, Mergers & Acquisitions Harrison Wexford, Partner, Mergers & Acquisitions Natalie Reiner, SVP, Corporate Development, Penterra Pharmaceuticals Corp. Thomas F. Holbrook, General Counsel, Penterra Pharmaceuticals Corp.
FROM: Megan Chu, Associate, Mergers & Acquisitions Derek Okonkwo, Associate, Mergers & Acquisitions
DATE: May 14, 2024
RE: intellectual Property Due Diligence — Veridian Biosciences, Inc.
MATTER NO.: 1018-00008
SUBJECT: Analysis of the intellectual property portfolio of Veridian Biosciences, Inc. ("Veridian" or "VBI") in connection with the proposed acquisition of 100% of the outstanding capital stock of Veridian by Penterra Pharmaceuticals Corp. ("Penterra" or "PPC") for $900,000,000 in cash pursuant to the proposed Stock Purchase Agreement (the "SPA" or the "Transaction").
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I. Executive Summary
This memorandum sets forth the results of Calderwood & Harkness LLP's ("C&H") intellectual property due diligence review conducted in connection with the proposed acquisition by Penterra Pharmaceuticals Corp. ("Penterra" or "PPC") of 100% of the outstanding capital stock of Veridian Biosciences, Inc. ("Veridian" or "VBI") for a purchase price of $900,000,000 in cash (the "Transaction"). The Transaction is structured as a stock purchase pursuant to the proposed Stock Purchase Agreement (the "SPA"), an initial draft of which was circulated on April 15, 2024 and which is currently the subject of ongoing negotiation between the parties.
Veridian is a privately held, clinical-stage biotechnology company focused on the discovery and development of immuno-oncology therapeutics. The company is headquartered at 550 Gateway Drive, Cambridge, Massachusetts 02142, and as of the date of this memorandum employs approximately 148 individuals. Veridian was founded in 2016 by Dr. Julian Marek, who serves as the company's Chief Executive Officer and holds approximately 8.4% of the outstanding equity, and Dr. Priya Chandrasekaran, who serves as Chief Scientific Officer and holds approximately 6.2% of the outstanding equity.
Veridian's core intellectual property centers on its proprietary bispecific T-cell engager platform, branded "VeriTCE," and the company's lead clinical candidate, VRD-4187. VRD-4187 is a bispecific T-cell engager targeting delta-like ligand 3 ("DLL3")-expressing tumors, with a primary indication in small cell lung cancer ("SCLC"). Veridian maintains a pipeline of three immuno-oncology candidates leveraging the VeriTCE platform: (i) VRD-4187, the lead candidate currently in Phase II clinical trials; (ii) VRD-5293, a preclinical bispecific T-cell engager targeting claudin 18.2 ("CLDN18.2") for gastric and pancreatic cancers; and (iii) VRD-6104, a preclinical bispecific T-cell engager targeting mesothelin for mesothelioma and ovarian cancer.
Veridian is clinical-stage and reported $0 in revenue for the fiscal year ended December 31, 2023, with a net loss of ($87.3 million) for the same period. Since its founding, Veridian has raised approximately $420 million through Series A through Series D preferred stock financings from a syndicate of institutional investors, including Crestline Ventures, LP (28.3% of outstanding equity), Boreal Health Partners Fund III, LP (19.7%), Apex Growth Equity Fund II, LP (14.1%), the founders and management team, and other institutional investors.
Our review encompassed the full scope of intellectual property-related documents made available in the virtual data room hosted by Thackeray Solutions and administered by Zalcourt Archer & Cole LLP, Veridian's outside counsel, under the direction of Rebecca Whitmore, Partner. Access to the data room was granted on March 11, 2024, and our review continued through the date of this memorandum. Clinical and scientific due diligence on Veridian's pipeline, including an assessment of the scientific validity and commercial potential of VRD-4187 and the VeriTCE platform, has been conducted in parallel by Broadleaf Scientific Consulting LLC, under the direction of Dr. Raymond Kapoor, and is addressed in a separate report.
Summary of Key Findings. Our review has identified the following key themes, which are discussed in detail in the body of this memorandum:
• Patent Portfolio: Veridian maintains a patent portfolio consisting of 14 issued U.S. patents, 23 pending U.S. patent applications (including provisional, non-provisional, continuation, and divisional applications), 11 issued foreign patents, and 38 pending foreign patent applications across key jurisdictions including the European Patent Office ("EPO"), Japan, China, Australia, and Canada, organized across 12 patent families. The portfolio covers the VeriTCE platform technology, VRD-4187 composition-of-matter and method-of-use claims, pipeline candidates VRD-5293 and VRD-6104, and proprietary manufacturing processes.
• Chain of Title: The IP assignment chain from the founders, Dr. Marek and Dr. Chandrasekaran, to Veridian appears clean based on the documents reviewed. Both founders executed IP Assignment Agreements at the time of founding in 2016 containing present-tense assignment language. Employee Proprietary Information and Inventions Assignment Agreements ("PIIAs") are substantially complete, with certain limited exceptions noted below.
• Trade Secret Protections: Veridian maintains trade secret protections that are generally consistent with industry standards for a clinical-stage biotechnology company of comparable size, though certain enhancements are recommended.
• Freedom-to-Operate: Based on our review of existing Veridian-commissioned FTO reports and C&H's own supplemental landscape analysis, the freedom-to-operate position for VRD-4187 and the VeriTCE platform appears reasonable, with certain third-party patents warranting ongoing monitoring.
• License Agreements: Veridian is a party to two material in-bound license agreements, neither of which, based on our review, contains change-of-control provisions that would be triggered by the stock purchase structure of the Transaction.
• Risk Level: We assess the overall IP risk level of the Transaction as moderate, with specific items requiring attention as described in the body of this memorandum. The principal risk factors relate to the concentration of the IP portfolio in a single platform and lead candidate, typical for a clinical-stage biotechnology company of Veridian's profile and stage of development.
II. Scope and Methodology
A. Scope of Review
Our review encompassed all intellectual property-related documents uploaded to the Veridian virtual data room (the "Data Room") hosted on the Thackeray Solutions platform beginning March 11, 2024. Document review was conducted by the undersigned associates with oversight from Oliver Mackenzie, Partner, and Harrison Wexford, Partner.
The categories of documents reviewed included, without limitation:
1. All issued U.S. and foreign patents held by or assigned to Veridian;
2. All pending U.S. and foreign patent applications (including provisional applications, non-provisional applications, continuation applications, divisional applications, and PCT applications);
3. Complete patent prosecution files, including office actions, responses, examiner interviews, and file histories for all material patent families;
4. Invention disclosure forms and related records;
5. IP assignment agreements executed by the founders, Dr. Julian Marek and Dr. Priya Chandrasekaran;
6. Employment agreements and Proprietary Information and Inventions Assignment Agreements ("PIIAs") for all current employees;
7. Consulting agreements and independent contractor agreements containing intellectual property assignment or work-for-hire provisions;
8. All in-bound license agreements under which third-party intellectual property is licensed to Veridian;
9. All out-bound license agreements under which Veridian has granted licenses to third parties;
10. Trademark registrations and applications (U.S. and foreign);
11. Domain name registrations;
12. Trade secret policies, inventories, and related information security documentation;
13. Freedom-to-operate analyses previously commissioned by or on behalf of Veridian;
14. Third-party intellectual property opinions (including non-infringement opinions and patentability opinions);
15. Correspondence with the United States Patent and Trademark Office ("USPTO") and foreign patent offices;
16. Any intellectual property-related litigation, disputes, cease-and-desist correspondence, or inter partes review proceedings; and
17. Board of Directors minutes and resolutions related to intellectual property matters.
Our review was conducted pursuant to the Preliminary Due Diligence Request List dated March 6, 2024, prepared by C&H and delivered to Zalcourt Archer & Cole LLP ("Zalcourt Archer"), Veridian's outside counsel. Supplemental document requests were submitted on March 22, 2024, April 3, 2024, and April 29, 2024.
B. Limitations
The following limitations apply to this memorandum and should be considered in connection with the conclusions and recommendations set forth herein:
Scientific and Clinical Matters. This memorandum addresses the legal due diligence of Veridian's intellectual property portfolio. Scientific and clinical assessments of VRD-4187, the VeriTCE platform, and the pipeline candidates VRD-5293 and VRD-6104 — including assessments of technical feasibility, mechanism of action, clinical trial design and endpoints, probability of regulatory approval, and commercial potential — are addressed separately in the report prepared by Broadleaf Scientific Consulting LLC under the direction of Dr. Raymond Kapoor. To the extent that scientific or clinical findings may affect the value or enforceability of the underlying intellectual property, such matters should be considered in conjunction with this memorandum.
Data Room Reliance. Our review is limited to the documents and information made available in the Data Room as of the date hereof. We have relied upon the representations of Veridian's management, including Dr. Julian Marek (CEO), Dr. Priya Chandrasekaran (CSO), and Sarah Lindgren (VP, intellectual Property), as well as representations by Veridian's outside counsel, Zalcourt Archer & Cole LLP, regarding the completeness of the documents provided. We have not independently verified the accuracy or completeness of the documents or information provided.
No Independent Validity or Invalidity Opinions. No independent patent validity or invalidity opinions were commissioned as part of this review. Our assessment of the strength and enforceability of Veridian's issued patents is based on a review of the prosecution histories and publicly available prior art, but should not be construed as a formal validity opinion. Should Penterra desire formal validity opinions for any of the key Veridian patents, we recommend engaging a specialized patent litigation firm with technical expertise in bispecific antibody technology.
Freedom-to-Operate. Our freedom-to-operate analysis is based on (i) a review of the existing Veridian-commissioned FTO reports prepared by Kessler & Associates LLP, Veridian's patent prosecution counsel, (ii) C&H's own preliminary prior art and patent landscape search conducted using the Drayton Services Inc., Marlowe Solutions, and Pemberton Data Systems platforms, and (iii) publicly available information. The FTO analysis presented herein does not constitute a formal non-infringement opinion and should not be relied upon as such.
Privilege. This memorandum has been prepared at the direction of counsel in anticipation of the Transaction and is protected by the attorney-client privilege and the attorney work product doctrine. It should not be disclosed to any third party without the prior written consent of C&H and Penterra's General Counsel.
III. Patent Portfolio Overview
A. Summary of Patent Estate
Based on our review of the Data Room documents and the patent portfolio schedule maintained by Sarah Lindgren, VP, intellectual Property, supplemented by our own review of the USPTO Patent Full-Text and Image Database (PatFT), the USPTO Patent Application Full-Text and Image Database (AppFT), and the WIPO PATENTSCOPE database, Veridian's patent estate consists of the following:
The patent portfolio is organized across 12 patent families, categorized by the following technology areas:
A complete schedule of all patents and applications, including patent numbers, application numbers, filing dates, issue dates (where applicable), expiration dates, and current prosecution status, is set forth in Appendix A.
All patents and applications are owned by Veridian Biosciences, Inc., a Delaware corporation. We identified no instances of joint ownership with any third party, academic institution, or government entity. We confirmed through a review of Veridian's capitalization records, the UCC-1 financing statements filed with the Delaware Secretary of State, and the security agreements related to Veridian's Series C and Series D preferred stock financings that no patents or patent applications are subject to liens, encumbrances, or security interests. We note that the Series C Preferred Stock Purchase Agreement dated September 15, 2020 included a negative covenant restricting Veridian from granting security interests in its intellectual property assets without the consent of holders of a majority of the outstanding Series C preferred stock, which covenant was carried forward in the Series D Preferred Stock Purchase Agreement dated March 8, 2022. No such security interests have been granted.
B. VeriTCE Platform Patents
The VeriTCE platform is the foundational technology underlying all three of Veridian's pipeline candidates. The platform consists of a proprietary bispecific T-cell engager architecture that links a tumor-associated antigen ("TAA") binding domain to an anti-CD3 binding domain through a proprietary linker system, enabling the redirection of cytotoxic T cells to tumor cells expressing the relevant target antigen.
The VeriTCE platform is protected by four patent families encompassing six issued U.S. patents, seven pending U.S. applications, five issued foreign patents, and 14 pending foreign applications.
Key Issued U.S. Patents:
Prosecution History Notes. We reviewed the complete prosecution histories for each of the six issued U.S. platform patents. The prosecution of U.S. Patent No. 10,421,837 (the foundational platform patent) is noteworthy in that the claims were initially rejected under 35 U.S.C. § 103 in view of a combination of Greaves Industries's bispecific T-cell engager (BiTE®) technology patents (U.S. Patent No. 7,635,472) and a 2015 publication by Zhukovsky et al. in the Journal of Molecular Biology (Vol. 427, No. 6, pp. 1293-1311). The rejection was overcome through an examiner interview conducted on March 14, 2019, during which Veridian's prosecution counsel at Kessler & Associates LLP (Dr. Michael Kessler) presented data distinguishing the VeriTCE linker domain from the prior art. The claims were narrowed from the original filing to specify the proprietary S-G4S-S linker motif and the specific anti-CD3 scFv orientation, but the resulting claims remain sufficiently broad to cover the VeriTCE architecture as employed in VRD-4187 and the pipeline candidates.
The prosecution of U.S. Patent No. 11,702,503 required overcoming a double patenting rejection over U.S. Patent No. 10,421,837 through the filing of a terminal disclaimer, which links the term of this patent to the earlier patent. This is a standard prosecution strategy and does not materially affect the enforceability of the claims, though it means that any future invalidity finding for the earlier patent could potentially affect this patent as well.
No other significant prosecution events, narrowing amendments of concern, or examiner interview outcomes were identified in the remaining platform patent prosecution histories.
International Counterparts. The VeriTCE platform patent families include the following international filings:
• European Patent Office (EPO): Three European patents have been granted (EP 3,532,487; EP 3,694,872; EP 3,841,116), covering the core platform architecture, the stabilized anti-CD3 binding domain, and the enhanced serum half-life constructs, respectively. Two additional applications (EP App. Nos. 20,798,341.2 and 21,734,892.6) are pending, with the former currently in examination and the latter having recently entered the examination phase following a positive International Preliminary Report on Patentability under PCT Chapter II. No oppositions have been filed against the three granted European patents, and the opposition period for EP 3,841,116 (the most recently granted) expires on September 14, 2024.
• Japan (JP): Two Japanese patents have been granted (JP 6,892,471 and JP 7,128,034). One additional application is pending examination.
• China (CN): Four applications are pending before the China National intellectual Property Administration ("CNIPA"). Two have received first office actions and are in prosecution. No Chinese patents have yet been granted.
• Australia (AU): Two Australian patents have been granted (AU 2017,324,891 and AU 2018,302,456). One additional application is pending.
• Canada (CA): Three applications are pending before the Canadian intellectual Property Office ("CIPO"). None have yet been granted.
Additional foreign filings are pending in South Korea (KR), India (IN), and Brazil (BR), reflecting Veridian's strategy of seeking patent protection in major pharmaceutical markets.
Claims Analysis. The platform patent claims vary in breadth across the patent family. The broadest claims (in U.S. Patent No. 10,421,837, Claims 1-4) recite the bispecific T-cell engager construct in terms of its structural architecture — specifically, the arrangement of the anti-TAA binding domain, the anti-CD3 binding domain, and the proprietary linker connecting them — without limitation to a specific target antigen. These claims are foundational and, if valid and enforceable, would provide coverage for VRD-4187 and any future VeriTCE-based products targeting different tumor-associated antigens. Later patents in the family contain narrower claims directed to specific configurations, enhanced half-life modifications, and reduced cytokine release profiles. Taken together, the platform claims provide layered protection of varying breadth and specificity.
We note that the platform patents are critical to the value proposition of the Transaction, as they underlie not only VRD-4187 but also VRD-5293, VRD-6104, and any future pipeline expansion utilizing the VeriTCE architecture.
C. VRD-4187 Composition-of-Matter Patents
VRD-4187, Veridian's lead clinical candidate, is a bispecific T-cell engager targeting DLL3 (delta-like ligand 3), a cell surface protein that is highly expressed on SCLC tumors but exhibits limited expression on normal adult tissues, making it an attractive therapeutic target. The VRD-4187-specific patent portfolio consists of four patent families encompassing five issued U.S. patents, eight pending U.S. applications, four issued foreign patents, and 12 pending foreign patent applications.
Key Issued U.S. Patents:
Composition-of-Matter Claims. U.S. Patent No. 11,512,134 contains the most commercially significant claims, as it recites the VRD-4187 molecule by its specific amino acid sequence, including the complementarity-determining regions ("CDRs") of both the anti-DLL3 and anti-CD3 binding domains and the complete bispecific construct. Claims 1 through 6 of this patent define VRD-4187 with varying levels of specificity, from the full-length amino acid sequence (Claim 1) to the CDR sequences alone (Claims 2-4) to the bispecific construct comprising a polypeptide with at least 95% sequence identity to SEQ ID NO: 1 as defined in the patent specification (Claim 5). Claim 6 recites a pharmaceutical composition comprising VRD-4187 and a pharmaceutically acceptable carrier.
The earlier patent, U.S. Patent No. 11,124,563, contains broader claims directed to anti-DLL3 bispecific T-cell engager constructs generally, defined by the binding affinity characteristics (KD values) and epitope mapping data for the anti-DLL3 binding domain. These broader claims may provide additional layers of protection against potential competitors developing DLL3-targeting bispecific T-cell engagers with different but functionally similar anti-DLL3 binding domains.
Priority Dates and Expiration. The earliest effective filing date for the VRD-4187 composition-of-matter claims is March 14, 2019, based on the priority chain running through U.S. Provisional Application No. 62/818,247, filed March 14, 2019. Assuming no patent term adjustment ("PTA") or patent term extension ("PTE"), the primary composition-of-matter patents would expire between March 14, 2039 and September 22, 2040.
Patent Term Adjustment. U.S. Patent No. 11,512,134 received 47 days of patent term adjustment under 35 U.S.C. § 154(b), extending its expiration to approximately January 19, 2040. The remaining VRD-4187 patents received PTA ranging from 0 to 32 days. These adjustments are reflected in the detailed patent schedule set forth in Appendix A.
Prosecution Status. In addition to the five issued U.S. patents, Veridian has eight pending U.S. applications in the VRD-4187 families, including three continuation applications and two divisional applications directed to additional claims covering alternative VRD-4187 formulations, dosing regimens, and variant constructs. Two of the continuation applications received non-final office actions in Q1 2024, and responses are due in Q3 2024. One divisional application (U.S. App. No. 18/234,567) is awaiting a first office action.
Regulatory Exclusivity Considerations. Veridian filed an application for Orphan Drug Designation ("ODD") with the FDA for VRD-4187 for the treatment of SCLC in November 2022. Based on management representations, the ODD application remains pending. If granted, ODD would provide seven years of market exclusivity following FDA approval under 21 U.S.C. § 360bb(a). This exclusivity is separate from and additive to patent protection. The status of the ODD application is discussed further in Section X.A below.
Patent Term Extension Eligibility. VRD-4187, as Veridian's lead candidate expected to be the first product to receive FDA approval, would be the most likely candidate for patent term extension under 35 U.S.C. § 156, which permits extension of one patent per product to compensate for regulatory review time. Only one patent per product may receive PTE, and the extension may not exceed five years, with the total post-approval patent life not exceeding 14 years. The composition-of-matter patent, U.S. Patent No. 11,512,134, would likely be the optimal candidate for PTE, as it provides the broadest and most commercially valuable protection for VRD-4187. We recommend that Penterra work with patent prosecution counsel to evaluate PTE strategy post-closing and, following FDA approval, to timely file the PTE application within the 60-day statutory window.
D. VRD-4187 Method-of-Use Patents
In addition to the composition-of-matter patents, Veridian has secured and is prosecuting patents directed to methods of using VRD-4187 for the treatment of specific tumor types and patient populations.
The method-of-use claims are distributed across two of the four VRD-4187 patent families. Key claims include:
• Methods of treating DLL3-expressing tumors, including SCLC, extensive-stage SCLC ("ES-SCLC"), and neuroendocrine cancers, by administering VRD-4187 to a patient in need thereof;
• Specific dosing regimen claims reciting intravenous administration of VRD-4187 at doses ranging from 0.5 mg/kg to 3.0 mg/kg, administered on a biweekly or triweekly cycle;
• Combination therapy claims reciting administration of VRD-4187 in combination with immune checkpoint inhibitors (specifically anti-PD-1 and anti-PD-L1 antibodies) and platinum-based chemotherapy agents;
• Patient population claims directed to the treatment of patients who have progressed on or after first-line platinum-based chemotherapy (i.e., second-line SCLC).
We note that the dosing claims reciting administration at 1.5 mg/kg are directly relevant to the Marlowe Asset Management-2 Phase II trial protocol (ClinicalTrials.gov identifier NCT05837291), which is evaluating VRD-4187 at a dose of 1.5 mg/kg administered intravenously every three weeks in patients with relapsed/refractory ES-SCLC. The alignment between the patent claims and the clinical dosing regimen is strategically significant, as it would strengthen enforcement against potential competitors seeking to use similar dosing protocols.
The method-of-use claims provide an additional layer of protection beyond the composition-of-matter patents and would extend patent coverage to the specific therapeutic applications of VRD-4187 even if a third party were able to develop a non-infringing composition that achieved a similar therapeutic effect.
Two pending U.S. continuation applications (U.S. App. Nos. 18/189,342 and 18/267,891) are directed to additional method-of-use claims covering alternative dosing regimens and combination therapy protocols. Both applications are in early prosecution, with first office actions expected in Q3-Q4 2024.
E. Pipeline Candidate Patents (VRD-5293 and VRD-6104)
Veridian's second and third pipeline candidates, VRD-5293 (targeting CLDN18.2 for gastric and pancreatic cancers) and VRD-6104 (targeting mesothelin for mesothelioma and ovarian cancer), are at earlier stages of development (preclinical) and accordingly have patent portfolios at earlier stages of prosecution.
VRD-5293 (Anti-CLDN18.2 Bispecific T-Cell Engager):
• One U.S. patent has been issued (U.S. Patent No. 11,891,432, issued January 9, 2024), covering the anti-CLDN18.2 bispecific T-cell engager construct and the specific anti-CLDN18.2 binding domain sequences.
• Two additional U.S. applications are pending: one non-provisional application (U.S. App. No. 18/312,876, filed May 5, 2023) directed to methods of treating CLDN18.2-expressing tumors, and one continuation application (U.S. App. No. 18/456,201, filed August 25, 2023) directed to variant constructs.
• PCT Application No. PCT/US2023/020147 was filed on April 28, 2023 and entered the national phase in January 2024. National phase applications are pending in the EPO (EP App. No. 23,789,456.1), Japan, China, Australia, and Canada.
VRD-6104 (Anti-Mesothelin Bispecific T-Cell Engager):
• No U.S. patents have been issued. Two U.S. non-provisional applications are pending (U.S. App. Nos. 18/401,234 and 18/401,567, both filed December 15, 2023), directed to the anti-mesothelin bispecific construct and methods of treatment, respectively.
• A PCT application (PCT/US2023/084912) was filed on December 18, 2023 and is currently in the international phase. The 30/31-month national phase entry deadline for this PCT application is approximately June-July 2026.
• One U.S. provisional application (U.S. Prov. App. No. 63/612,478, filed December 19, 2023) covers additional VRD-6104 variant constructs. The 12-month deadline for conversion of this provisional to a non-provisional application is December 19, 2024.
Upcoming Deadlines. We have identified the following time-sensitive deadlines related to the pipeline candidate patents:
• VRD-5293: National phase entry in South Korea and India (if desired) is due by approximately October 28, 2024 (30 months from the earliest priority date).
• VRD-6104: Conversion of U.S. Provisional Application No. 63/612,478 to a non-provisional application is due by December 19, 2024. Failure to file a non-provisional application claiming priority to this provisional before the deadline would result in permanent loss of the priority date.
• VRD-6104: National phase entry for PCT/US2023/084912 is not due until June-July 2026, but Veridian's IP team should confirm jurisdiction selection and begin preparation for national phase filings.
These deadlines are discussed further in Section XII.D below.
F. Manufacturing Process Patents
Veridian has obtained patent protection for proprietary manufacturing processes related to the production of VeriTCE-based bispecific T-cell engager constructs. The manufacturing patent portfolio consists of two patent families encompassing two issued U.S. patents, four pending U.S. applications, two issued foreign patents (one EP, one JP), and four pending foreign applications.
The issued U.S. patents cover:
• U.S. Patent No. 11,345,897 (issued January 25, 2022): Methods of producing bispecific T-cell engager constructs using a proprietary CHO (Chinese hamster ovary) cell line designated VBI-CHO-3.1, including specific culture conditions, media formulations, and purification protocols.
• U.S. Patent No. 11,623,178 (issued April 11, 2023): Formulation and stabilization methods for bispecific T-cell engager constructs, including lyophilization processes and reconstitution protocols.
The manufacturing process patents provide meaningful competitive protection by making it more difficult for competitors to replicate Veridian's manufacturing process for VeriTCE-based products. However, we note that manufacturing process patents are generally more difficult to enforce than composition-of-matter patents, as detecting infringement of a manufacturing process patent may require knowledge of the competitor's internal manufacturing procedures. The primary value of these patents lies in their potential to increase the cost and complexity of competitor entry rather than in their independent enforcement value.
Veridian's proprietary CHO cell line, VBI-CHO-3.1, is also protected as a trade secret (discussed in Section IV below), which provides a complementary layer of protection.
G. Patent Maintenance and Annuity Status
Based on our review of the patent maintenance records provided in the Data Room and cross-referenced with USPTO PAIR records and the maintenance schedules maintained by Veridian's annuity service provider, Quillon Solutions (now part of Camberwell Corporation), we confirm that all maintenance fees and annuities for Veridian's issued U.S. and foreign patents are current as of the date of this memorandum.
The following maintenance fee and annuity deadlines fall within the next 12 months:
*Note: The 8-year maintenance fee for U.S. 10,421,837 is not due until 2028 but is noted here for long-range planning purposes. The 4-year maintenance fee for U.S. 10,738,112 due February 11, 2025 falls within the relevant 12-month window.
Veridian's patent prosecution matters are handled by Kessler & Associates LLP (Dr. Michael Kessler, Partner), a Boston-based intellectual property boutique specializing in biotechnology and pharmaceutical patent prosecution. Foreign patent prosecution is coordinated through Kessler & Associates using a network of foreign associates. Patent annuity management is outsourced to Quillon Solutions. We recommend that Penterra establish a transition plan for patent prosecution counsel post-closing, as discussed in Section XIII below.
IV. Trade Secrets and Proprietary Know-How
A. Trade Secret Inventory
Veridian maintains a trade secret inventory (the "Trade Secret Register") that was last updated in January 2024. The Trade Secret Register was provided in the Data Room as Document VBI-IP-2024-0087. Based on our review, the Trade Secret Register identifies 47 discrete trade secrets across the following categories:
• VeriTCE Platform Know-How: Includes non-patented aspects of the VeriTCE platform, such as specific screening methods for identifying and optimizing target binding domains, proprietary computational modeling approaches for predicting T-cell engager efficacy, and empirical structure-activity relationship ("SAR") data compiled during platform development (14 entries).
• Proprietary Cell Lines: The VBI-CHO-3.1 cell line used in manufacturing, as well as intermediate cell lines developed during the cell line development process. Cell line documentation includes complete characterization data, master cell bank and working cell bank records, and genetic stability data (4 entries).
• Manufacturing Process Parameters: Specific process parameters for the production, purification, and formulation of VRD-4187 and VeriTCE-based constructs that are not disclosed in the patent filings, including optimized chromatography conditions, tangential flow filtration protocols, and fill-finish parameters (8 entries).
• Clinical Data and Protocols: Unpublished clinical data from the Marlowe Asset Management-1 Phase I trial and interim data from the ongoing Marlowe Asset Management-2 Phase II trial, including proprietary biomarker correlation analyses and patient stratification algorithms (7 entries).
• Preclinical Data: Proprietary preclinical efficacy and toxicology data for VRD-5293 and VRD-6104, including animal model data and in vitro assay results that have not been published or otherwise disclosed (9 entries).
• Formulation and Stability Data: Proprietary formulation compositions, excipient selections, and long-term stability study data for VRD-4187 (5 entries).
We note that the Trade Secret Register does not appear to include certain categories of information that may constitute protectable trade secrets under the Defend Trade Secrets Act ("DTSA") and Massachusetts trade secret law (Mass. Gen. Laws ch. 93, § 42), including supplier and vendor relationships, pricing information for contract research organization ("CRO") and contract development and manufacturing organization ("CDMO") services, and certain regulatory strategy documents. We recommend that the Trade Secret Register be expanded post-closing to include these additional categories.
B. Trade Secret Protection Measures
We reviewed Veridian's trade secret protection measures through a combination of Data Room document review and management interviews conducted on April 8, 2024 with Sarah Lindgren (VP, intellectual Property) and James Hartfield (Director, Information Technology).
Physical Security. Veridian's Cambridge, MA facility at 550 Gateway Drive is a leased facility (approximately 42,000 square feet) with controlled access via keycard entry systems at all exterior doors and at the entrances to the research laboratories, the process development suite, and the server room. Visitor access is logged and visitors are required to be escorted in laboratory areas. Physical laboratory notebooks are maintained in locked cabinets with access restricted to authorized personnel.
Electronic Security. Veridian employs a multi-layered information security infrastructure, including role-based access controls on its electronic laboratory notebooks (ELN) system (Benchling platform), data encryption at rest and in transit, multi-factor authentication for all employees, and regular security audits conducted by an external cybersecurity firm (Sentinel CyberDefense, Inc.). The IT infrastructure is hosted on a combination of on-premises servers and Ridgeway Industries ("Meridian Technologies") cloud instances, with data residency in the US-East-1 (Virginia) region.
Confidentiality Obligations. All employees are required to execute a Proprietary Information and Inventions Assignment Agreement ("PIIA") at the commencement of employment that includes confidentiality obligations surviving termination. Consultants and independent contractors are required to execute consulting agreements containing confidentiality provisions. Material business partners, collaborators, and CROs/CDMOs are required to execute non-disclosure agreements ("NDAs") prior to receiving confidential information. We reviewed a sample of 15 NDAs from the Data Room and found them to be generally consistent in form and substance.
Data Classification. Veridian maintains a three-tier data classification system (Confidential, Highly Confidential, and Restricted) implemented in January 2022. The classification system is documented in Veridian's Information Security Policy (Document VBI-POL-2022-003, last revised September 2023). Trade secrets listed in the Trade Secret Register are classified as "Restricted," the highest classification tier.
Employee Training. Veridian conducts annual trade secret and confidential information awareness training for all employees, with supplemental training for employees in research, process development, and clinical operations roles. Training records for FY2023 were provided in the Data Room and indicate that 143 of 148 employees (96.6%) completed the annual training. The five employees who did not complete training were identified as employees who joined in Q4 2023 and were scheduled for training in Q1 2024.
C. Assessment of Adequacy
Overall, we assess Veridian's trade secret protection measures as generally consistent with industry standards for a clinical-stage biotechnology company of comparable size (approximately 148 employees). The company has implemented the core elements of a trade secret protection program, including access controls, confidentiality agreements, data classification, and employee training.
We identify the following gaps and recommendations for enhancement:
1. Trade Secret Register Completeness: As noted above, the Trade Secret Register should be expanded to include additional categories of protectable information, including supplier relationships, CRO/CDMO pricing, and regulatory strategy documents.
2. Exit Interview Protocols: While Veridian's employee handbook references the obligation to return company property and confidential information upon termination, we did not identify a formalized exit interview protocol specifically designed to reinforce trade secret obligations and confirm the return of confidential materials. We recommend implementing a standardized exit interview checklist and acknowledgment form.
3. Third-Party Access Audit: We recommend that Veridian (or Penterra post-closing) conduct a comprehensive audit of third-party access to trade secret information, including a review of all CRO and CDMO relationships, to confirm that adequate confidentiality protections are in place and that access is limited to the minimum necessary for the performance of contracted services.
4. Incident Response Plan: Veridian's Information Security Policy references a cybersecurity incident response plan, but the plan document itself was not provided in the Data Room. We have requested this document from Zalcourt Archer & Cole LLP and it remains an outstanding item.
V. IP Assignment Agreements
A. Founder IP Assignments
The assignment of intellectual property from Veridian's co-founders to the company is a critical element of the chain of title for the VeriTCE platform and the entire patent portfolio.
Dr. Julian Marek (CEO, 8.4% Equity).
Dr. Marek executed an intellectual Property Assignment Agreement (the "Marek IP Assignment") dated June 14, 2016, concurrent with the incorporation of Veridian Biosciences, Inc. Under the Marek IP Assignment, Dr. Marek assigned to Veridian "all right, title, and interest in and to any and all inventions, discoveries, works of authorship, developments, trade secrets, know-how, and other intellectual property, whether or not patentable or copyrightable," related to T-cell engager technology and immuno-oncology therapeutics, conceived, developed, or reduced to practice by Dr. Marek either (i) prior to the date of the agreement, as specifically identified in Schedule A thereto, or (ii) during the term of Dr. Marek's employment with Veridian.
Critically, the Marek IP Assignment contains present-tense assignment language: Dr. Marek "hereby irrevocably assigns, transfers, and conveys" the covered intellectual property to Veridian. This language is sufficient to effect an automatic assignment of inventions upon conception under federal patent law, without the need for a separate written instrument at the time each invention is conceived. See Stanford v. Roche, 563 U.S. 776 (2011) (distinguishing present-tense assignment language from an agreement "to assign" future inventions).
Schedule A to the Marek IP Assignment identifies three pre-existing inventions that Dr. Marek had conceived during his prior employment and that were assigned to Veridian: (i) a conceptual bispecific T-cell engager architecture with a novel linker system (subsequently developed into the VeriTCE platform), (ii) a panel of anti-DLL3 antibody candidates identified through phage display screening, and (iii) preliminary in vitro efficacy data for a prototype DLL3-targeting bispecific construct.
Prior Institutional Affiliations. Dr. Marek was previously employed as an Assistant Professor of Immunology at the Massachusetts Institute of Technology ("MIT") from 2010 to 2016. We reviewed Dr. Marek's MIT employment agreement and MIT's intellectual property policy (the "MIT Technology Licensing Office Invention Disclosure and Licensing Policy," rev. 2015). Under MIT's policy, inventions conceived using MIT resources are generally owned by MIT. However, Dr. Marek obtained a written release from MIT's Technology Licensing Office ("TLO") dated May 28, 2016 (the "MIT Release"), which confirmed that MIT had reviewed the inventions listed in Schedule A to the Marek IP Assignment and had determined that MIT had no ownership interest in such inventions, based on MIT's determination that the inventions were conceived and developed on Dr. Marek's own time and without significant use of MIT resources. The MIT Release was provided in the Data Room (Document VBI-IP-2016-0003).
We note that the MIT Release is limited to the specific inventions identified on Schedule A and does not constitute a blanket release of all inventions conceived by Dr. Marek during his time at MIT. Based on management representations and our review of Veridian's patent portfolio, the inventions listed in Schedule A encompass all pre-founding intellectual property that was incorporated into the VeriTCE platform. We are not aware of any additional pre-founding inventions by Dr. Marek that should have been included. However, as a precaution, we recommend that Penterra obtain a supplemental representation from Dr. Marek at closing confirming that Schedule A is complete and that no additional pre-founding inventions related to the VeriTCE platform or VRD-4187 exist that have not been assigned to Veridian.
Dr. Priya Chandrasekaran (CSO, 6.2% Equity).
Dr. Chandrasekaran executed an intellectual Property Assignment Agreement (the "Chandrasekaran IP Assignment") dated June 14, 2016, on terms substantially similar to the Marek IP Assignment. The Chandrasekaran IP Assignment contains identical present-tense assignment language and covers all inventions, discoveries, and intellectual property related to T-cell engager technology and immuno-oncology therapeutics conceived prior to or during employment.
Schedule A to the Chandrasekaran IP Assignment identifies two pre-existing inventions: (i) proprietary methods for screening and optimizing anti-CD3 binding domains for use in bispecific constructs, and (ii) computational modeling algorithms for predicting T-cell engager efficacy and cytokine release profiles.
Dr. Chandrasekaran was previously employed as a Research Scientist at the Broad Institute of MIT and Harvard from 2012 to 2016. We reviewed the Broad Institute's intellectual property policy and Dr. Chandrasekaran's employment agreement. The Broad Institute's IP policy provides that inventions conceived using Broad Institute resources may be subject to institutional ownership claims. Dr. Chandrasekaran obtained a release letter from the Broad Institute's Office of Strategic Alliances and Partnerships dated June 2, 2016 (the "Broad Release," Document VBI-IP-2016-0006), confirming that the Broad Institute had reviewed the inventions listed in Schedule A to the Chandrasekaran IP Assignment and had no ownership claim thereto.
As with Dr. Marek, we recommend that Penterra obtain a supplemental representation from Dr. Chandrasekaran at closing confirming the completeness of Schedule A.
B. Employee IP Assignments
Veridian utilizes a standard form Proprietary Information and Inventions Assignment Agreement ("PIIA") for all employees. The form PIIA was provided in the Data Room (Document VBI-HR-FORM-001, current version dated January 2022).
Terms of the Standard PIIA. We reviewed the standard form PIIA and note the following key provisions:
• Present-Tense Assignment: The PIIA contains present-tense assignment language consistent with the framework described above, providing that the employee "hereby assigns to the Company all right, title, and interest in and to" all inventions conceived or reduced to practice during the period of employment.
• Scope of Assignment: The assignment covers all inventions, discoveries, improvements, works of authorship, and trade secrets that (i) relate to the Company's business or actual or demonstrably anticipated research or development, (ii) result from any work performed by the employee for the Company, or (iii) are developed using Company equipment, supplies, facilities, or trade secrets.
• Work-for-Hire: The PIIA provides that all works of authorship created by the employee in the scope of employment shall be deemed "works made for hire" under 17 U.S.C. § 101.
• Prior Inventions Exclusion: The PIIA permits the employee to exclude prior inventions listed on a schedule attached to the agreement, provided such inventions were conceived prior to employment and are not related to the Company's business.
• State-Law Compliance: The PIIA includes a notice provision compliant with Massachusetts law (Mass. Gen. Laws ch. 149, § 24L) informing employees that the assignment obligation does not apply to inventions developed entirely on the employee's own time without use of Company equipment, supplies, facilities, or trade secret information, and which do not relate to the Company's business or demonstrably anticipated research or development. A similar notice is included for compliance with California Labor Code § 2870 (applicable to California-based employees) and Maryland Code, Labor & Employment § 3-2A-01 (applicable to Maryland-based employees).
Execution Status. Based on our review of the employee records provided in the Data Room, we identified the following:
• Of Veridian's 148 current employees, 145 employees have executed PIIAs on file. The three employees without executed PIIAs on file are:
(i) Karen Novotny (Quality Assurance Specialist, hired October 2023): PIIA execution records could not be located in the Data Room. Management represented that Ms. Novotny executed a PIIA at the time of hire but the executed copy was misfiled.
(ii) David Park (Data Analyst, Biostatistics, hired November 2023): PIIA execution records not located. Same explanation provided by management.
(iii) Rachel Tompkins (Clinical Research Associate, hired January 2024): PIIA not yet executed. Management represented that the PIIA was provided to Ms. Tompkins at the time of hire but has not been returned with a signature.
We recommend that Veridian obtain executed PIIAs from all three individuals prior to closing. With respect to Ms. Tompkins, given that she has been employed for approximately four months without executing a PIIA, there is a risk (albeit low, given her junior role and recent hire date) that inventions conceived by her during the period of employment prior to execution may not be covered by the assignment. We recommend that the confirmatory PIIA executed by Ms. Tompkins include a retroactive assignment provision covering the period from her start date.
• Of the 145 employees with executed PIIAs, seven employees filed prior invention exclusion schedules. We reviewed each exclusion schedule and confirmed that the excluded prior inventions relate to technology areas outside of Veridian's core business (immuno-oncology T-cell engager therapeutics) and do not overlap with the VeriTCE platform, VRD-4187, or the pipeline candidates. None of the seven employees with exclusion schedules are named inventors on any Veridian patent or patent application.
State-Law Considerations.
• Massachusetts: Veridian's headquarters and primary operations are in Massachusetts. Mass. Gen. Laws ch. 149, § 24L provides that an employer may not require an employee to assign rights to an invention developed entirely on the employee's own time without use of employer resources, provided the invention does not relate to the employer's business. The standard PIIA includes the required notice. We are not aware of any disputes or claims by Veridian employees arising under this statute.
• California: Based on employee records, Veridian employs 11 individuals based in California, primarily in commercial strategy, business development, and clinical operations roles. California Labor Code § 2870 provides similar protections to Massachusetts law, restricting assignment obligations for inventions developed on the employee's own time. The standard PIIA includes the required California-specific notice (Cal. Lab. Code § 2872). We reviewed a sample of PIIAs for California-based employees and confirmed inclusion of the required notice.
• Maryland: Veridian employs three individuals based in Maryland, all in clinical operations roles. Maryland Code, Labor & Employment § 3-2A-01 provides analogous protections. The standard PIIA includes the required Maryland-specific notice. We reviewed the PIIAs for all three Maryland-based employees and confirmed compliance.
C. Consultant and Contractor IP Assignments
Veridian has engaged various consultants and independent contractors in connection with the development of the VeriTCE platform, VRD-4187, and the pipeline candidates. We reviewed the consulting agreements and independent contractor agreements provided in the Data Room and identified 23 consulting or contractor relationships involving IP-related work.
Key Consultants Contributing to Core IP:
• Dr. Elena Vasquez (Protein Engineering Consultant, engaged 2017-2019): Contributed to the design and optimization of the VeriTCE linker domain and the anti-CD3 binding domain. Consulting agreement contains a present-tense assignment provision covering all intellectual property created in connection with the engagement. Dr. Vasquez is a named co-inventor on U.S. Patent Nos. 10,421,837 and 10,738,112. The assignment from Dr. Vasquez to Veridian is recorded with the USPTO.
• Dr. Marcus Li (Computational Biology Consultant, engaged 2018-2020): Developed proprietary computational modeling algorithms used in the optimization of VRD-4187 binding affinity. Consulting agreement contains work-for-hire and assignment provisions. Dr. Li is a named co-inventor on U.S. Patent No. 11,358,997. Assignment recorded with the USPTO.
• Cascade Bioanalytics, LLC (Contract Analytical Laboratory, engaged 2019-present): Provides analytical testing and characterization services for VRD-4187 and pipeline candidates. Master Services Agreement contains an assignment provision whereby all inventions, discoveries, and data generated in connection with the services are assigned to Veridian.
• Meridian CDMO Services, Inc. (Contract Development and Manufacturing Organization, engaged 2021-present): Manufactures VRD-4187 clinical trial material. Manufacturing Services Agreement contains an assignment provision covering all process improvements and innovations developed in connection with the manufacturing of Veridian products.
We confirmed that all material consultant IP contributions to the VeriTCE platform and VRD-4187 have been assigned to Veridian through written agreements containing present-tense assignment or work-for-hire provisions.
We note one exception warranting attention: Dr. Samuel Nkemere (Immunology Consultant, engaged January-March 2017) provided early-stage consulting services related to the T-cell engager concept. The consulting agreement with Dr. Nkemere (Document VBI-IP-2017-0012) contains a confidentiality provision but does not include an express IP assignment clause. Based on management representations, Dr. Nkemere's contributions were limited to general scientific advisory services and did not result in any specific inventions incorporated into the VeriTCE platform. Dr. Nkemere is not a named inventor on any Veridian patent or application. Nevertheless, we recommend that Penterra request a confirmatory assignment or a declaration from Dr. Nkemere confirming that he does not claim any ownership interest in Veridian's intellectual property.
D. Chain of Title Assessment
Based on our comprehensive review of the founder IP assignments, employee PIIAs, consultant agreements, and USPTO assignment records, we assess the chain of title from inventors to Veridian as clean and substantially complete, with the limited exceptions noted above (the three employees with missing PIIA execution records and the Dr. Nkemere consulting agreement).
We confirmed through a review of the USPTO Assignment Recordation System that Veridian Biosciences, Inc. is recorded as the assignee of all 14 issued U.S. patents and all 23 pending U.S. patent applications. The assignment records are current and no discrepancies were identified between the USPTO records and the Data Room documents.
For foreign patents and applications, we confirmed through spot-checks of the EPO Register, J-PlatPat (Japan), and the CNIPA database that Veridian is recorded as the applicant/proprietor for the corresponding foreign filings.
Remediation Recommendations:
1. Obtain executed PIIAs from Karen Novotny, David Park, and Rachel Tompkins prior to closing, with retroactive assignment provisions as appropriate.
2. Obtain a confirmatory assignment or declaration from Dr. Samuel Nkemere.
3. Obtain supplemental representations from Dr. Marek and Dr. Chandrasekaran confirming the completeness of their respective Schedule A prior invention disclosures.
VI. In-Bound License Agreements
A. Summary of In-Bound Licenses
Veridian is a party to two material in-bound license agreements under which third-party intellectual property is licensed to Veridian and which are relevant to the VeriTCE platform, VRD-4187, or the pipeline candidates:
1. License Agreement with the University of Pennsylvania ("Penn License")
• Licensor: The Trustees of the University of Pennsylvania ("Penn")