1018-00008 · Penterra Pharmaceuticals Corp · MAE Analysis & Termination

board-memo-recommendation-termination.docx DOCUMENT M&A / Corporate

38 / 75 ← → ✕

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 200 Park Avenue, 42nd Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com

September 24, 2024

MEMORANDUM

TO: Board of Directors, Penterra Pharmaceuticals Corp.

Attention: Margaret Liu Whitfield, Chair

CC: Dr. Anand Rajagopal, Chief Executive Officer Catherine M. Burgess, Chief Financial Officer Thomas F. Holbrook, General Counsel & Secretary Natalie Reiner, Senior Vice President, Corporate Development

FROM: Oliver Mackenzie, Partner, Calderwood & Harkness LLP Megan Chu, Associate, Calderwood & Harkness LLP

RE: Recommendation to Terminate Stock Purchase Agreement dated June 10, 2024, by and among Penterra Pharmaceuticals Corp., Veridian Biosciences, Inc., the Sellers identified therein, and David Ng as Stockholder Representative

Matter No.: 1018-00008

Right-click to update Table of Contents

I. Executive Summary

Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm") serves as outside counsel to Penterra Pharmaceuticals Corp. ("Penterra" or the "Company") in connection with the Company's proposed acquisition of one hundred percent (100%) of the outstanding capital stock of Veridian Biosciences, Inc. ("Veridian" or the "Target") for an aggregate purchase price of Nine Hundred Million Dollars ($900,000,000) in cash, pursuant to the terms and conditions of that certain Stock Purchase Agreement dated as of June 10, 2024 (as may be amended, the "SPA"), by and among Penterra, as Buyer, Veridian, the Sellers identified therein (the "Sellers"), and David Ng, in his capacity as Stockholder Representative.

The purpose of this memorandum is to present Calderwood & Harkness's recommendation that the Board of Directors of Penterra (the "Board") authorize the termination of the SPA pursuant to Section 8.1(d) thereof. This recommendation is grounded in the Firm's conclusion, following extensive analysis of the relevant factual record and applicable Delaware law, that a material adverse effect (as defined in SPA § 1.1, an "MAE") has occurred with respect to Veridian since the date of the SPA, and that the conditions to Buyer's obligation to close the transaction set forth in Sections 7.2(a) and 7.2(b) of the SPA are not satisfied and are incapable of being satisfied prior to the Outside Date of December 10, 2024.

Summary Recommendation. Calderwood & Harkness recommends that the Board:

1. Authorize the termination of the SPA pursuant to Section 8.1(d) thereof;

2. Authorize Dr. Anand Rajagopal, Chief Executive Officer, and Thomas F. Holbrook, General Counsel and Secretary, to execute and deliver the Termination Notice to Veridian and the Stockholder Representative; and

3. Authorize the ancillary actions described in Section IX of this memorandum, including termination of the financing commitment, escrow notifications, and litigation preparation.

Basis for Recommendation. The factual basis for the Firm's recommendation is as follows. On August 14, 2024, the independent Data Monitoring Committee (the "DMC") for the Marlowe Asset Management-2 Phase II clinical trial (ClinicalTrials.gov Identifier: NCT05837291) of VRD-4187, Veridian's lead therapeutic candidate, conducted an interim analysis that revealed profoundly adverse safety and efficacy results. Specifically, the interim data showed a statistically significant increase in serious adverse events in the treatment arm, including a Grade 3 or higher cytokine release syndrome ("CRS") incidence of 23.4% in the VRD-4187 treatment arm as compared to 4.1% in the control arm — a 19.3 percentage point differential. Moreover, there were seven (7) treatment-related deaths in the VRD-4187 arm (representing 3.6% of the 194 enrolled patients) as compared to one (1) in the control arm (0.5% of the 193 enrolled patients). Of critical importance, the overall response rate ("ORR") showed no statistically significant efficacy advantage for VRD-4187 over the standard of care: 31.4% in the treatment arm versus 28.9% in the control arm (p = 0.58). On August 22, 2024, the United States Food and Drug Administration (the "FDA") imposed a partial clinical hold on VRD-4187 under IND 154832, pending investigation of the CRS-related deaths.

Taken together, these developments — catastrophic safety data, the absence of any meaningful efficacy benefit, and an FDA-imposed clinical hold — constitute an MAE under the SPA and, independently, render the conditions to Buyer's obligation to close unsatisfied and incapable of satisfaction prior to the Outside Date.

Litigation Risk. Calderwood & Harkness acknowledges that the termination of the SPA will in all likelihood precipitate litigation. Veridian disputes the occurrence of an MAE and has demanded that Penterra proceed to closing. Veridian's outside counsel, Zalcourt Archer & Cole LLP (lead partner: Rebecca Whitmore), sent a formal response on September 13, 2024, disputing the Deficiency Notice issued by Penterra on September 6, 2024, and asserting that Penterra's refusal to close constitutes a material breach of the SPA. Veridian has indicated its intention to seek specific performance and/or damages in the Court of Chancery of the State of Delaware. Calderwood & Harkness anticipates that such a proceeding could be filed as early as November 15, 2024.

Despite this litigation risk, it is the Firm's considered assessment that Penterra's MAE claim is well-supported under Delaware law and that the factual record — encompassing both the clinical data and the FDA regulatory action — presents a compelling case for the Board's exercise of the termination right. More importantly, proceeding to close a $900,000,000 acquisition of a clinical-stage company whose sole material asset has suffered a catastrophic clinical setback would expose the Company and its stockholders to materially greater financial and strategic risk than the litigation exposure attendant to termination. The detailed analysis supporting this recommendation is set forth in the sections that follow.

II. Background and Transaction Summary

A. Transaction Overview

On June 10, 2024, Penterra entered into the SPA to acquire one hundred percent (100%) of the outstanding capital stock of Veridian for an aggregate cash purchase price of Nine Hundred Million Dollars ($900,000,000). The SPA was executed by Dr. Anand Rajagopal on behalf of Penterra, in his capacity as Chief Executive Officer, and by Dr. Julian Marek on behalf of Veridian, in his capacity as Chief Executive Officer, following authorization by the respective governing bodies of each party.

Veridian is a privately held, clinical-stage biotechnology company headquartered at 550 Gateway Drive, Cambridge, Massachusetts 02142. Veridian is focused on the research and development of immuno-oncology therapeutics leveraging its proprietary bispecific T-cell engager platform, known as "VeriTCE." The company's research programs are designed to harness the immune system's T-cells to identify and destroy tumor cells expressing specific surface antigens, with a particular emphasis on cancers characterized by the expression of the delta-like canonical Notch ligand 3 ("DLL3"), a target prevalent in small cell lung cancer ("SCLC") and other neuroendocrine tumors.

Veridian's lead candidate, VRD-4187, is a bispecific T-cell engager targeting DLL3-expressing tumors. At the time of the SPA's execution, VRD-4187 was in Phase II clinical development in the Marlowe Asset Management-2 trial (ClinicalTrials.gov Identifier: NCT05837291), a randomized, open-label study evaluating VRD-4187 in patients with extensive-stage SCLC who had progressed on or after first-line platinum-based chemotherapy.

Veridian is a clinical-stage company that has not generated any product revenue. For the fiscal year ended December 31, 2023, Veridian reported total revenue of $0 and a net loss of approximately $87.3 million, funded primarily through equity financing from its venture capital and institutional investor base. As of the date of signing, Veridian had approximately 148 full-time employees.

The strategic rationale for the acquisition was Penterra's desire to bolster its immuno-oncology pipeline. This need became acute following the Phase III futility analysis for Penterra's internal T-cell engager candidate, PPC-0921, in November 2023, which resulted in the discontinuation of that program. The Veridian acquisition was intended to provide Penterra with a clinical-stage DLL3-targeting asset with a differentiated mechanism of action and what was, at the time of signing, a promising Phase II clinical profile.

B. Key Deal Terms

The material terms of the SPA are summarized below for the Board's reference:

C. Financing Structure

To fund the acquisition, Penterra arranged a two-source financing structure:

1. Committed Term Loan Facility. A $500,000,000 senior secured term loan facility provided pursuant to a Commitment Letter (Ref. No. CL-2024-PPCA-0607) dated June 7, 2024, from Summit Ridge Capital Partners, LP, as lead arranger and bookrunner, and Ironclad Trust Company, N.A., as administrative agent. The commitment letter was delivered in connection with the execution of the SPA and was customary in form for a transaction of this nature. The term loan bears interest at a rate per annum equal to the Secured Overnight Financing Rate ("SOFR") plus 225 basis points. The commitment letter provides for a commitment fee of 0.35% per annum on undrawn amounts, and a ticking fee of 0.175% per annum commencing ninety (90) days after the date of the commitment letter (i.e., commencing September 8, 2024). The financing commitment is co-terminous with the Outside Date under the SPA and will expire on December 10, 2024, absent an earlier termination of the SPA.

2. Cash on Hand. The remaining $400,000,000 of the purchase price was to be funded from Penterra's cash on hand. As of the end of the second fiscal quarter of 2024 (June 30, 2024), Penterra reported cash and cash equivalents and short-term investments of approximately $2.1 billion, providing ample liquidity to fund the cash portion of the purchase price.

D. Key Pre-Termination Milestones Achieved

Notwithstanding the subsequent adverse developments described in this memorandum, the transaction had progressed substantially toward closing. The following key milestones were achieved:

• HSR Early Termination. Early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, was granted by the Federal Trade Commission and the Antitrust Division of the Department of Justice on May 20, 2024. No second request was issued, and the HSR condition to closing (SPA § 7.1(a)) was satisfied.

• Veridian Stockholder Approval. The requisite stockholder approval for the transaction was obtained by written consent, delivered on June 14, 2024, four (4) days after signing. The written consent was executed by holders of in excess of 90% of Veridian's outstanding capital stock, including Crestline Ventures, LP (Veridian's largest institutional stockholder), Boreal Health Partners Fund III, LP, and Apex Growth Equity Fund II, LP.

• R&W Insurance Policy. A representations and warranties insurance policy was bound on June 12, 2024, with Atlas Indemnity Insurance Co. (Policy No. AIC-RWI-2024-07892), providing coverage of $180,000,000 (equal to the indemnification escrow amount). The policy was procured through Penterra's insurance broker and is subject to a retention equal to the indemnification basket amount.

• Fairness Opinion. Garrison Zanthor & Co. LLC ("Garrison Zanthor"), Penterra's financial advisor, delivered its fairness opinion to the Board on June 9, 2024, opining that, as of that date and based on the assumptions, qualifications, and limitations set forth therein, the consideration to be paid by Penterra pursuant to the SPA was fair, from a financial point of view, to Penterra. Garrison Zanthor expressly noted in its opinion that the fairness determination was based on the information available as of the date of the opinion and did not take into account any subsequent developments. The fairness opinion was a condition to Board approval of the transaction but is not a condition to closing under the SPA.

III. Intervening Events — VRD-4187 Clinical Data and FDA Action

The events described in this Section III constitute the factual predicate for Calderwood & Harkness's recommendation that the Board authorize termination of the SPA. These events are presented in chronological order.

A. Marlowe Asset Management-2 Phase II Interim Analysis (August 14, 2024)

Marlowe Asset Management-2 is a randomized, open-label Phase II clinical trial evaluating VRD-4187 in patients with extensive-stage small cell lung cancer who have progressed on or after first-line platinum-based chemotherapy. The trial was conducted at forty-two (42) clinical sites across the United States and the European Union, with a total enrollment of three hundred eighty-seven (387) patients: one hundred ninety-four (194) in the VRD-4187 treatment arm and one hundred ninety-three (193) in the standard-of-care control arm.

The independent Data Monitoring Committee convened on August 14, 2024, to review the pre-specified interim analysis of Marlowe Asset Management-2 data. The DMC's findings revealed profoundly adverse safety results and the absence of any statistically significant efficacy benefit, as summarized below:

Safety Findings:

• Grade ≥3 Cytokine Release Syndrome (CRS) Incidence. The incidence of Grade 3 or higher CRS in the VRD-4187 treatment arm was 23.4% (approximately 45 of 194 patients), as compared to 4.1% in the standard-of-care control arm (approximately 8 of 193 patients). This represents a 19.3 percentage point differential, indicating a substantially and statistically significant increase in serious CRS events attributable to VRD-4187. Grade 3 and above CRS events are defined under the American Society for Transplantation and Cellular Therapy (ASTCT) grading system as events requiring aggressive clinical intervention, including vasopressor support, mechanical ventilation, or intensive care unit admission. The 23.4% incidence rate is markedly above the range typically observed in the bispecific T-cell engager class and represents a serious impediment to clinical development and commercial viability.

• Treatment-Related Deaths. There were seven (7) treatment-related deaths in the VRD-4187 arm (3.6% of 194 patients) as compared to one (1) treatment-related death in the control arm (0.5% of 193 patients). All seven deaths in the VRD-4187 arm were attributed to severe CRS and its complications, including multi-organ failure, cardiac arrest secondary to CRS-mediated cytokine storm, and disseminated intravascular coagulation. The seven-to-one differential in treatment-related deaths is a catastrophic safety signal that, standing alone, would raise grave concerns about the continued development of VRD-4187 at the dosing regimen employed in Marlowe Asset Management-2.

Efficacy Findings:

• Overall Response Rate (ORR). The overall response rate in the VRD-4187 treatment arm was 31.4%, as compared to 28.9% in the standard-of-care control arm. The difference of 2.5 percentage points was not statistically significant (p = 0.58). A p-value of 0.58 indicates that the observed difference is well within the range attributable to random variation and provides no basis for concluding that VRD-4187 offers any efficacy advantage over existing therapy. The pre-specified threshold for declaring efficacy success at the interim analysis was an ORR differential with a one-sided p-value of less than 0.01; the observed results fell far short of this threshold.

DMC Recommendation. Based on these findings, the DMC recommended suspension of enrollment in Marlowe Asset Management-2 and implementation of dose modification protocols for patients currently enrolled and receiving VRD-4187. The DMC's recommendation reflects its independent scientific judgment that the risk-benefit profile of VRD-4187 at the current dosing regimen was unacceptable.

B. Notification to Penterra

Veridian provided written notice to Penterra of the DMC's findings on August 16, 2024, two (2) days after the DMC's interim analysis, pursuant to the notification obligations set forth in SPA § 5.1(b). Section 5.1(b) requires the Company to promptly notify Buyer of any event, development, or circumstance that could reasonably be expected to result in a failure of any closing condition set forth in Article VII of the SPA. Veridian's notice was accompanied by a summary of the DMC's findings but did not include the underlying patient-level data, which Penterra subsequently requested and received on August 18, 2024, pursuant to SPA § 5.2 (access to information).

Upon receipt of Veridian's notification, Penterra promptly engaged Broadleaf Scientific Consulting LLC ("Broadleaf"), an independent clinical and regulatory consulting firm, to conduct a supplemental clinical assessment of the Marlowe Asset Management-2 interim data. Broadleaf's engagement was led by Dr. Raymond Kapoor, a board-certified oncologist and former FDA medical reviewer with over twenty years of experience in oncology drug development. Broadleaf delivered its written assessment to Penterra on August 19, 2024.

Broadleaf's assessment concluded that VRD-4187's safety profile is severely compromised by the Marlowe Asset Management-2 interim data. Specifically, Broadleaf opined that the combination of the excess CRS-related deaths and the absence of any meaningful efficacy advantage over the standard of care fundamentally undermines VRD-4187's commercial viability. Broadleaf further noted that the 23.4% Grade ≥3 CRS incidence rate places VRD-4187 at the extreme end of the safety spectrum for the bispecific T-cell engager class and that, in Broadleaf's experience, such a safety signal in a Phase II trial, absent a dramatic efficacy benefit, typically results in either termination of the clinical program or a fundamental redesign of the development strategy that adds years to the development timeline and significantly diminishes the probability of ultimate regulatory approval. A copy of Broadleaf's assessment is attached hereto as Attachment D.

C. FDA Partial Clinical Hold (August 22, 2024)

On August 22, 2024, the FDA imposed a partial clinical hold on VRD-4187 under Investigational New Drug Application No. 154832 ("IND 154832"), pursuant to its authority under 21 CFR § 312.42. The partial clinical hold was imposed pending the FDA's investigation of the CRS-related deaths observed in the Marlowe Asset Management-2 trial. Under the terms of the partial clinical hold:

• No new patients may be enrolled in Marlowe Asset Management-2 or any other clinical study conducted under IND 154832;

• Restrictions are imposed on the dosing of patients currently enrolled in the trial, including a requirement that no patient receive additional doses of VRD-4187 until the clinical hold is modified or lifted; and

• Veridian is required to submit a complete response to the FDA's clinical hold letter, including a detailed safety analysis, proposed risk mitigation measures, and a revised clinical protocol, before the FDA will consider modification or removal of the hold.

The imposition of a partial clinical hold is a significant regulatory action. Under 21 CFR § 312.42(b)(2)(i), a clinical hold may be imposed when the FDA determines that "human subjects are or would be exposed to an unreasonable and significant risk of illness or injury." The FDA's decision to impose the hold reflects its independent scientific judgment that VRD-4187 presents safety concerns of sufficient gravity to warrant restricting clinical investigation.

D. Veridian's Protocol Amendment

In response to the DMC's recommendation and the FDA's partial clinical hold, Veridian implemented a protocol amendment, designated Protocol v4.0, on August 28, 2024. The key modifications under Protocol v4.0 include:

• Mandatory Tocilizumab Prophylaxis. All patients receiving VRD-4187 are required to receive prophylactic tocilizumab (an anti-interleukin-6 receptor antibody) prior to each dose of VRD-4187, in an effort to mitigate the severity of CRS events.

• Dose Reduction. The starting dose of VRD-4187 was reduced from 1.5 mg/kg to 0.75 mg/kg — a 50% reduction from the dose employed in Marlowe Asset Management-2.

On August 30, 2024, Calderwood & Harkness sent a letter to Zalcourt Archer & Cole LLP, Veridian's outside counsel, requesting confirmation as to whether the Protocol v4.0 amendment — particularly the 50% dose reduction — constituted an action requiring Penterra's prior written consent under the operating covenants set forth in SPA § 5.1, which restricts the Company from taking certain material actions outside the ordinary course of business without Buyer's consent during the pre-closing period. As of the date of this memorandum, Zalcourt Archer & Cole LLP has not provided a substantive response to that inquiry.

While the Protocol v4.0 amendment represents a responsive measure to the safety signal, it does not remediate the underlying concerns. As discussed in greater detail in Section VI below, the protocol amendment introduces new and significant uncertainties — including whether VRD-4187 will demonstrate any efficacy at the reduced dose — and does not reverse or mitigate the adverse data already observed, including the seven treatment-related deaths.

E. Penterra's Deficiency Notice and Veridian's Response

On September 6, 2024, Penterra, acting on the advice of Calderwood & Harkness, delivered a formal Deficiency Notice to Veridian and the Stockholder Representative, alleging that a material adverse effect had occurred with respect to Veridian within the meaning of SPA § 1.1 and that the conditions to Buyer's obligation to close set forth in SPA §§ 7.2(a) and 7.2(b) were not satisfied and were incapable of being satisfied prior to the Outside Date. The Deficiency Notice identified the Marlowe Asset Management-2 interim data and the FDA partial clinical hold as the bases for Penterra's position.

On September 13, 2024, Veridian, through Zalcourt Archer & Cole LLP (Rebecca Whitmore), delivered a formal response to the Deficiency Notice (the "Veridian Response"). In the Veridian Response, Veridian disputed the occurrence of an MAE and demanded that Penterra proceed to close the transaction on the terms set forth in the SPA. Veridian's principal arguments were as follows: (i) the Marlowe Asset Management-2 clinical data is preliminary and based on an interim analysis, not a final readout, and therefore cannot support an MAE determination; (ii) the Protocol v4.0 amendment adequately addresses the safety concerns identified by the DMC and the FDA; and (iii) the FDA partial clinical hold is a routine regulatory action that is expected to be resolved through the standard complete response process within a reasonable timeframe.

Calderwood & Harkness has carefully analyzed the Veridian Response and has concluded that Veridian's arguments are neither legally nor factually persuasive for the reasons set forth in detail in Section VI of this memorandum.

IV. Legal Analysis: Material Adverse Effect Under the SPA

A. MAE Definition (SPA § 1.1)

The SPA defines "Material Adverse Effect" or "MAE" in Section 1.1 as follows:

any event, change, development, occurrence, condition, or effect that, individually or in the aggregate with all other events, changes, developments, occurrences, conditions, or effects, has had or would reasonably be expected to have a material adverse effect on (a) the business, results of operations, financial condition, or assets of the Company, taken as a whole, or (b) the ability of the Sellers to consummate the Transactions contemplated hereby.

The definition is subject to certain carveouts (addressed in Section IV.E below), which exclude from the MAE determination certain categories of events that are general in nature and not specific to the Company.

Under established Delaware law, the interpretation and application of an MAE clause in a definitive acquisition agreement is governed by a well-developed body of case law, the most significant of which is the Delaware Supreme Court's decision in Akorn, Inc. v. Fresenius Kabi AG, 2018 WL 4719347 (Del. Ch. Oct. 1, 2018), aff'd, 198 A.3d 724 (Del. 2018). In Akorn, the Court of Chancery and the Supreme Court affirmed that a buyer asserting an MAE must demonstrate that the adverse event or condition is "durationally significant" — that is, it must substantially threaten the overall earnings potential of the target in a manner that would be material to a reasonable acquirer over a "commercially reasonable period," which the courts have interpreted as being measured in years rather than months. The Akorn decision is noteworthy because it was the first occasion on which a Delaware court found that a buyer had satisfied its burden of proving the occurrence of an MAE, and the court's analysis provides a detailed framework for evaluating MAE claims.

While the "durationally significant" standard sets a high bar, it is not an insurmountable one, particularly where, as here, the adverse event strikes at the core value driver of the target company and is of a nature that cannot be remediated within a reasonable timeframe.

B. Application to VRD-4187 Clinical Data

The application of the MAE definition and the Delaware law framework to the facts presented here yields a strong basis for concluding that an MAE has occurred with respect to Veridian.

Single-Asset, Pipeline-Concentrated Company. Veridian is a clinical-stage biotechnology company with no marketed products, no product revenue, and no material assets other than its VeriTCE platform and associated intellectual property, of which VRD-4187 is the lead and most advanced candidate. The company's other pipeline assets — VRD-5203 (preclinical) and VRD-6010 (Discovery-stage) — are at substantially earlier stages of development and were not material value drivers in the pricing of the acquisition. The $900,000,000 purchase price was predicated overwhelmingly on the value and potential of VRD-4187. Accordingly, any event that fundamentally undermines VRD-4187's clinical and commercial prospects strikes at the very heart of the value proposition for which Penterra contracted.

Severity of Clinical Findings. The Marlowe Asset Management-2 interim data presents a devastating combination of adverse safety results and the absence of efficacy benefit:

• The Grade ≥3 CRS incidence of 23.4% in the treatment arm is nearly six times the rate observed in the control arm (4.1%) and far exceeds the CRS rates observed for other approved or late-stage bispecific T-cell engagers, which typically range from 2% to 10% for Grade ≥3 events in comparable patient populations.

• The seven treatment-related deaths in a 194-patient treatment arm represent a 3.6% mortality rate attributable to VRD-4187, a result that Broadleaf characterized as "incompatible with a viable risk-benefit profile absent a transformative efficacy signal."

• The ORR of 31.4% versus 28.9% (p = 0.58) confirms that VRD-4187 does not provide any statistically significant efficacy advantage over the standard of care. This is critically important because, in oncology drug development, a drug with a severe safety profile can be approved only if it demonstrates a substantial efficacy benefit that justifies the associated risks. Here, VRD-4187 presents dramatically elevated safety risks with no offsetting efficacy advantage.

Core Value Driver Impaired. For a clinical-stage company with zero revenue, the entire value proposition is tied to the clinical and regulatory success of its pipeline. The combination of the adverse safety data and the absence of an efficacy advantage fundamentally undermines VRD-4187's path to regulatory approval and commercial viability. This is not a case where a clinical trial produced mixed but interpretable results; rather, the data reflects a profound failure on both the safety and efficacy dimensions simultaneously. The value that Penterra agreed to pay was predicated on the reasonable expectation — based on Phase I data and the trial design — that VRD-4187 would demonstrate a favorable risk-benefit profile. That expectation has been decisively refuted.

Distinguishable from Ordinary Course Adverse Events. Calderwood & Harkness emphasizes that this is not a case involving ordinary course fluctuations in business performance, competitive dynamics, or even garden-variety clinical trial setbacks such as a marginal efficacy miss or a manageable safety signal. The Marlowe Asset Management-2 data represents a categorical change in VRD-4187's clinical profile — one that transforms the asset from a promising Phase II candidate into one with a severely compromised safety profile, no demonstrated efficacy advantage, and an active FDA clinical hold. This type of fundamental, qualitative change in the target's core asset is precisely the type of event that the MAE definition was designed to address.

C. FDA Partial Clinical Hold — Compounding the MAE

The FDA's imposition of a partial clinical hold on VRD-4187 on August 22, 2024, is an independent and significant adverse event that further compounds the MAE. Several aspects of the clinical hold warrant emphasis:

Regulatory Significance. A partial clinical hold under 21 CFR § 312.42 is not a routine regulatory action. It reflects an affirmative determination by the FDA — the agency charged with protecting the safety of clinical trial subjects — that participants in the clinical trial "are or would be exposed to an unreasonable and significant risk of illness or injury." The FDA's decision to impose the hold carries substantial weight and is independent of the Company's own assessment of the safety data. It represents the judgment of the nation's principal drug regulatory authority that VRD-4187 poses unacceptable risks in its current form.

Compounding Effect. The clinical hold creates a regulatory overhang that compounds the adverse clinical data. Even if Veridian were able to submit a complete response to the FDA and the hold were eventually lifted — an outcome that is by no means assured — the process of resolving the hold, redesigning the clinical trial, enrolling new patients, and generating sufficient safety and efficacy data to support a regulatory filing would delay any potential approval pathway by a minimum of twelve (12) to eighteen (18) months, and potentially indefinitely if the safety issue cannot be resolved. This delay is on top of the development timeline that existed prior to the interim analysis.

Permanent Label Impact. Even under the most optimistic scenario, the CRS safety data from Marlowe Asset Management-2 will permanently affect VRD-4187's risk-benefit profile as assessed by the FDA and by prescribers in the commercial setting. The seven treatment-related deaths and the 23.4% Grade ≥3 CRS rate will be part of the clinical record and will be reflected in any product labeling, risk evaluation and mitigation strategy ("REMS"), or other regulatory requirements. This data cannot be "unlearned" and will permanently constrain VRD-4187's commercial potential, even in a scenario where the drug ultimately receives regulatory approval.

D. Durational Significance

The durational significance requirement under Delaware law is readily satisfied here. The Akorn court held that the relevant inquiry is whether the adverse effect "substantially threatens the overall earnings potential of the target in a commercially reasonable period, which one would expect to be measured in years rather than months." Akorn, 2018 WL 4719347, at *90 (emphasis in original).

The impact of the Marlowe Asset Management-2 data and FDA clinical hold on Veridian's business is neither temporary nor cyclical. Veridian has no marketed products and no revenue. Its entire business consists of the development of VRD-4187 and earlier-stage pipeline candidates. The Marlowe Asset Management-2 interim data has fundamentally altered VRD-4187's clinical trajectory in ways that cannot be reversed:

• The clinical data itself cannot be undone. The seven treatment-related deaths, the 23.4% Grade ≥3 CRS incidence, and the absence of an efficacy advantage are permanent features of VRD-4187's clinical record. These data will inform every subsequent regulatory and clinical decision regarding VRD-4187.

• Even under the most optimistic scenario — one in which the Protocol v4.0 amendment succeeds in reducing the CRS rate at the lower dose, the FDA lifts the clinical hold, the trial resumes enrollment, and VRD-4187 ultimately demonstrates an acceptable risk-benefit profile — the development timeline for VRD-4187 is delayed by years, its competitive positioning within the DLL3-targeting therapeutic space is materially weakened (as competitors such as Greaves Industries's tarlatamab continue to advance), the ultimate approvability of the compound remains uncertain, and any approved product label would carry significant safety warnings and restrictions that would limit commercial uptake.

• Under the more probable scenario — one in which the safety concerns cannot be fully mitigated at the lower dose, or in which the lower dose proves insufficiently efficacious — VRD-4187 may never reach regulatory approval, rendering Veridian's primary asset worthless.

This type of impact — one that fundamentally undermines the target's commercial potential as measured over a period of years — is precisely the type of durationally significant effect that the Delaware courts have recognized as satisfying the MAE standard. See Akorn, 2018 WL 4719347, at *92 (finding durational significance where the target's business had suffered a "dramatic downturn" that "substantially threatened [its] overall earnings potential" and was "not a blip").

E. MAE Carveouts — Inapplicability

The MAE definition in SPA § 1.1 contains a standard set of carveouts that exclude from the MAE determination certain categories of events. Calderwood & Harkness has reviewed each carveout and concluded that none applies to the facts at issue:

(i) General Economic or Political Conditions. This carveout excludes adverse effects attributable to changes in general economic or political conditions, including changes in interest rates, commodity prices, or exchange rates. This carveout is not applicable. The Marlowe Asset Management-2 interim data and the FDA clinical hold are company-specific clinical trial results and regulatory actions particular to VRD-4187. They have no connection to macroeconomic conditions or political developments.

(ii) Industry-Wide Conditions. This carveout excludes adverse effects attributable to conditions affecting the biotechnology or pharmaceutical industries generally. This carveout is not applicable. The safety and efficacy data for VRD-4187 is specific to Veridian's compound and clinical program. It does not reflect a general trend or development affecting the biotechnology industry as a whole or the bispecific T-cell engager therapeutic class broadly. No other company's T-cell engager program experienced comparable adverse results during the relevant period.

(iii) Changes in Law or GAAP. This carveout excludes adverse effects attributable to changes in applicable law or accounting standards. This carveout is not applicable; no changes in law or GAAP are implicated.

(iv) Pandemics. This carveout excludes adverse effects attributable to pandemics, epidemics, or other public health emergencies. This carveout is not applicable. The Marlowe Asset Management-2 clinical data has no connection to any pandemic or public health emergency.

(v) Natural Disasters, War, Terrorism. This carveout excludes adverse effects attributable to natural disasters, acts of war, sabotage, or terrorism. This carveout is not applicable.

(vi) Financial Markets Generally. This carveout excludes adverse effects attributable to changes in the financial, credit, or securities markets generally. This carveout is not applicable.

(vii) Announcement or Pendency of the Transactions. This carveout excludes adverse effects attributable to the announcement or pendency of the transactions contemplated by the SPA, including any impact on relationships with employees, customers, suppliers, or other business partners. This carveout is not applicable. The Marlowe Asset Management-2 data and the FDA clinical hold are unrelated to the announcement or pendency of the Penterra acquisition.

Disproportionate Impact Exception. Even if any of the carveouts in clauses (i) through (vi) were arguably applicable (which Calderwood & Harkness does not concede), the SPA's MAE definition includes a standard "disproportionate impact" exception, which provides that the carveouts do not apply to the extent that the relevant event, change, or condition has a disproportionate adverse effect on the Company as compared to other companies operating in the same industry or markets. Here, the VRD-4187 clinical data and FDA hold are, by their very nature, specific to Veridian and disproportionately affect Veridian relative to other companies in the biotechnology industry. No similarly situated company experienced comparable adverse clinical results during the relevant period. Accordingly, even under a hypothetical argument that an industry-wide carveout might be relevant, the disproportionate impact exception would operate to exclude the carveout from application.

Calderwood & Harkness has prepared detailed written analyses of both the carveout applicability and the disproportionate impact exception, set forth in memoranda dated August 28, 2024, and September 3, 2024, respectively, which are cross-referenced as Attachment C to this memorandum.

F. Closing Conditions Not Satisfied

Independent of the MAE analysis, the conditions to Buyer's obligation to close under Article VII of the SPA are not satisfied and are incapable of being satisfied prior to the Outside Date:

SPA § 7.2(a) — Representations and Warranties Bring-Down. Section 7.2(a) conditions Buyer's obligation to close on the truth and correctness, as of the Closing Date, of the representations and warranties of the Sellers and the Company set forth in the SPA (subject to the materiality and MAE qualifiers contained in such representations). In light of the Marlowe Asset Management-2 data and the FDA clinical hold, several of the Company's representations — including, without limitation, representations regarding the Company's business and its clinical programs, regulatory compliance, and the absence of any material adverse effect — cannot be "brought down" to the Closing Date at the applicable standard. Specifically, the representation in SPA § 3.8 that "the Company is not aware of any clinical data or regulatory action that would reasonably be expected to have a Material Adverse Effect on the development, manufacture, or commercialization of any of the Company's product candidates" cannot be truthfully made as of the Closing Date.

SPA § 7.2(b) — No Material Adverse Effect. Section 7.2(b) conditions Buyer's obligation to close on the absence of any Material Adverse Effect since the date of the Agreement. For the reasons set forth in Sections IV.A through IV.E above, a Material Adverse Effect has occurred. This condition is not satisfied.

Incapable of Satisfaction Prior to Outside Date. Both of these conditions are incapable of being cured or satisfied prior to the Outside Date of December 10, 2024. The Marlowe Asset Management-2 clinical data is a permanent part of the clinical record and cannot be remediated. The FDA partial clinical hold remains in effect and, even under the most optimistic timeline, is unlikely to be resolved before the Outside Date. The representation bring-down failure and the occurrence of the MAE are conditions that, by their nature, cannot be cured within the remaining period before the Outside Date.

V. Termination Right Under SPA § 8.1(d)

A. Termination Mechanics

Section 8.1(d) of the SPA provides Buyer with a right to terminate the Agreement as follows:

"This Agreement may be terminated by Buyer if any condition to Buyer's obligation to consummate the Transactions set forth in Section 7.2 is not satisfied as of the date on which the Closing would otherwise be required to occur and is incapable of being satisfied prior to the Outside Date; provided, however, that Buyer shall not have the right to terminate this Agreement pursuant to this Section 8.1(d) if Buyer is then in material breach of any provision of this Agreement."

The three elements required for a valid termination under Section 8.1(d) are as follows:

1. A condition to Buyer's closing obligation under Section 7.2 is not satisfied. As set forth in Section IV.F above, both Section 7.2(a) (representations and warranties bring-down) and Section 7.2(b) (no MAE) are unsatisfied.

2. The unsatisfied condition is incapable of being satisfied prior to the Outside Date. As discussed above, the clinical data and FDA clinical hold cannot be remediated before December 10, 2024. The data is permanent, and the regulatory process for resolving the clinical hold — which requires submission of a complete response, FDA review, and potential additional clinical requirements — is measured in months or years, not weeks.

3. Buyer is not in material breach of the SPA. Penterra is not in material breach of any provision of the SPA. Penterra has complied in all material respects with all of its covenants and obligations under the SPA, including its pre-closing cooperation obligations under Section 5.3, its reasonable best efforts obligation under Section 5.6, and its obligation to maintain the financing commitment under Section 5.7. Calderwood & Harkness has conducted a review of Penterra's compliance with the SPA and has identified no material breach or default.

All three elements are satisfied. Accordingly, Penterra has a valid right to terminate the SPA pursuant to Section 8.1(d).

Process. Upon authorization by the Board, the termination process would proceed as follows:

1. The Board adopts a resolution authorizing termination of the SPA (a draft resolution is attached hereto as Attachment A).

2. Dr. Anand Rajagopal (CEO) and Thomas F. Holbrook (General Counsel) execute and deliver a written Termination Notice to Veridian Biosciences, Inc. (addressed to Dr. Julian Marek, CEO, and Rachel Stein-Goldberg, General Counsel) and to David Ng, as Stockholder Representative, with a copy to Zalcourt Archer & Cole LLP (Rebecca Whitmore). A draft form of Termination Notice is attached hereto as Attachment B.

3. Termination of the SPA is effective upon delivery of the Termination Notice.

B. Reverse Termination Fee — Not Triggered

The SPA provides for a reverse termination fee of Forty-Five Million Dollars ($45,000,000) (equal to 5% of the Purchase Price), payable by Penterra under SPA § 8.3(a). However, the reverse termination fee is triggered solely in the event of a termination resulting from Buyer's failure to consummate the Transactions due to the failure of Buyer's financing — that is, Buyer's inability to fund the Purchase Price at closing. The reverse termination fee was specifically negotiated as a remedy for financing risk and is expressly limited to that circumstance.

Penterra is not terminating the SPA due to a financing failure. The $500,000,000 committed term loan facility from Summit Ridge Capital Partners, LP and Ironclad Trust Company, N.A. remains in full force and effect and available for draw. Furthermore, Penterra maintains approximately $2.1 billion in cash and cash equivalents on its balance sheet, more than sufficient to fund the $400,000,000 cash portion of the purchase price. The termination is based solely on the failure of Buyer's closing conditions under SPA §§ 7.2(a) and 7.2(b), arising from the occurrence of a Material Adverse Effect and the corresponding inability to bring down the Company's representations and warranties.

Accordingly, the reverse termination fee is not payable by Penterra upon termination under Section 8.1(d).

C. No Other Termination Payments

No breakup fee, termination fee, expense reimbursement obligation, or other payment is owed by Penterra upon a valid termination of the SPA pursuant to Section 8.1(d). The only other termination payment contemplated by the SPA is the Target Termination Fee of Thirty-Six Million Dollars ($36,000,000) (equal to 4% of the Purchase Price), which is payable by the Sellers and the Company solely in the event of a termination resulting from the Company's or the Sellers' breach of the no-shop provision set forth in SPA § 5.4. The no-shop provision is not at issue here, and the Target Termination Fee is accordingly not implicated.

VI. Assessment of Veridian's Counterarguments

A. Veridian's Position (as Articulated in September 13, 2024 Response)

As noted above, Veridian, through Zalcourt Archer & Cole LLP, delivered a formal response to Penterra's Deficiency Notice on September 13, 2024. Veridian's response advanced the following principal arguments in support of its position that no MAE has occurred and that Penterra is obligated to proceed to closing:

1. Clinical Data is Preliminary. Veridian asserts that the Marlowe Asset Management-2 interim analysis data is preliminary and does not constitute a final readout of the trial. Veridian argues that interim analyses are, by their nature, subject to significant statistical uncertainty and that the final data, once available, may present a materially different safety and efficacy profile.

2. Protocol Amendment Addresses Safety Concerns. Veridian contends that the Protocol v4.0 amendment, which introduces mandatory tocilizumab prophylaxis and reduces the starting dose of VRD-4187 from 1.5 mg/kg to 0.75 mg/kg, adequately addresses the safety signal identified in the interim analysis and demonstrates that the Company is taking proactive and scientifically appropriate steps to manage the risk.

3. FDA Partial Clinical Hold is Routine. Veridian characterizes the FDA's partial clinical hold as a routine regulatory action that is a standard part of the drug development process and that is expected to be resolved through the standard complete response mechanism within a reasonable timeframe.

4. Delaware's Exacting MAE Standard. Veridian argues that the facts do not satisfy Delaware's exacting standard for finding an MAE, emphasizing the durational significance requirement and the historically high bar that Delaware courts have set for buyers seeking to invoke MAE provisions.

B. Calderwood & Harkness's Assessment of Veridian's Arguments

Calderwood & Harkness has carefully analyzed each of Veridian's arguments and, for the reasons set forth below, concludes that they are not persuasive, either individually or in the aggregate.

"Preliminary Data" Argument. Veridian's characterization of the Marlowe Asset Management-2 data as "preliminary" is misleading and legally insufficient to defeat Penterra's MAE claim. The data is derived from a randomized, open-label Phase II clinical trial involving 387 patients across 42 clinical sites — a robust and statistically powered dataset by any reasonable clinical standard. This is not preliminary preclinical data or early-phase exploratory data from a small cohort of patients. The DMC — an independent body specifically chartered to monitor patient safety and data integrity — reviewed the interim data and reached the extraordinary conclusion that enrollment should be suspended and dosing should be modified. The DMC's recommendation reflects its independent scientific judgment that the data is of sufficient reliability and gravity to warrant immediate action.

Furthermore, Delaware law does not require a buyer to wait for "final" data before concluding that an MAE has occurred. The MAE definition speaks in terms of events that have had or "would reasonably be expected to have" a material adverse effect — language that encompasses events whose full impact has not yet been realized but whose implications are reasonably foreseeable. The Marlowe Asset Management-2 interim data, combined with the FDA clinical hold, provides a more than sufficient basis for concluding that an MAE has occurred or would reasonably be expected to occur.

Protocol Amendment Argument. Veridian's reliance on the Protocol v4.0 amendment as a cure for the safety signal is, in Calderwood & Harkness's assessment, counterproductive to Veridian's position. Rather than demonstrating that the safety concern has been addressed, the nature of the protocol amendment underscores the severity of the problem:

• The 50% dose reduction — from 1.5 mg/kg to 0.75 mg/kg — is not a minor adjustment. It represents a fundamental change in the dosing regimen that introduces entirely new uncertainties regarding whether VRD-4187 will demonstrate any meaningful efficacy at the lower dose. If the drug showed no statistically significant efficacy advantage over standard of care at 1.5 mg/kg, there is no scientific basis for expecting that it will perform better at half the dose.

• The addition of mandatory prophylactic tocilizumab — itself a significant immunomodulatory agent with its own side effect profile — adds complexity to the treatment regimen and further constrains the commercial potential of VRD-4187 by requiring patients to receive an additional medication before each dose.

• Most critically, the protocol amendment does not reverse the seven treatment-related deaths that have already occurred. Those deaths are a permanent part of VRD-4187's clinical record and will be prominently featured in any safety review conducted by the FDA or other regulatory authorities.

In sum, the protocol amendment is evidence of the severity of the safety problem, not its resolution. It introduces new and significant uncertainties while failing to remediate the fundamental clinical and regulatory concerns.

FDA Hold as "Routine." Veridian's characterization of the partial clinical hold as "routine" is factually inaccurate and legally unpersuasive. A partial clinical hold is an affirmative regulatory determination by the FDA that clinical trial subjects face "unreasonable and significant risk." The FDA does not impose clinical holds routinely or as a matter of course; to the contrary, clinical holds are relatively rare and reflect serious safety concerns that the agency believes cannot be adequately managed through the standard clinical trial oversight process.

Moreover, the timeline for resolution of a clinical hold is uncertain and lies entirely within the discretion of the FDA. There is no guaranteed timeline for the FDA's review of a complete response, and the FDA may require additional clinical data, preclinical studies, or other information before considering modification or removal of the hold. The assertion that the hold "is expected to be resolved" within a reasonable timeframe is speculative and unsupported by any commitment or communication from the FDA.

Delaware's "Exacting" MAE Standard. Calderwood & Harkness acknowledges that Delaware courts have historically set a high bar for MAE claims and that buyers have, until the Akorn decision, been uniformly unsuccessful in establishing the occurrence of an MAE. However, the Akorn decision itself demonstrates that the bar, while high, can be met when the facts warrant it. The facts presented here — a clinical-stage company with no revenue whose lead and sole material asset suffered catastrophic safety results in a randomized Phase II trial, demonstrated no efficacy advantage over the standard of care, and is subject to an active FDA clinical hold — present a compelling case for the occurrence of an MAE that is arguably stronger than the facts in Akorn in certain respects, particularly with respect to the specificity and severity of the adverse event.

Overall Assessment. While Veridian's arguments may generate litigation risk — as any vigorous advocacy by experienced counsel will — they do not, in Calderwood & Harkness's considered judgment, undermine the fundamental analysis supporting the conclusion that a Material Adverse Effect has occurred. The clinical-stage nature of Veridian's business, its complete dependence on VRD-4187's success, and the severity of the Marlowe Asset Management-2 data and FDA action make this a strong case for the buyer under Delaware law.

VII. Litigation Risk Assessment

A. Anticipated Claims by Veridian

Calderwood & Harkness anticipates that Veridian and/or the Stockholder Representative will pursue the following claims in the event Penterra terminates the SPA:

Breach of Contract. Veridian will allege that Penterra breached the SPA by wrongfully refusing to consummate the closing and by issuing an invalid termination notice. Veridian will argue that no MAE occurred, that the closing conditions were satisfied (or waivable), and that Penterra's termination was therefore a repudiation of its contractual obligations.

Specific Performance. SPA § 10.12 expressly grants the Sellers the right to seek specific performance to compel the closing of the Transactions, subject to satisfaction of the conditions set forth in Article VII. Veridian's counsel, Zalcourt Archer & Cole LLP, has indicated in prior correspondence that the Sellers intend to pursue specific performance as their primary remedy, seeking a court order requiring Penterra to consummate the acquisition on the terms set forth in the SPA.

Expectation Damages. In the alternative, or in addition to specific performance, Veridian may seek expectation damages measured as the difference between the $900,000,000 purchase price and the current fair market value of the Veridian equity. Veridian will likely argue that the diminution in Veridian's value is attributable not to the clinical data itself but to Penterra's wrongful termination and the resulting disruption to Veridian's business and ability to pursue alternative transactions.

Anticipated Forum. Pursuant to SPA § 10.6, all disputes arising under or in connection with the SPA are subject to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if the Court of Chancery declines to accept jurisdiction, any state court located in the State of Delaware and, in the event such courts decline to exercise jurisdiction, any federal court of the United States of America sitting in the State of Delaware). Calderwood & Harkness expects that any action by Veridian will be filed in the Court of Chancery, which has extensive experience adjudicating MAE disputes.

Anticipated Timeline. Based on the September 13, 2024 Veridian Response and subsequent communications between counsel, Calderwood & Harkness anticipates that Veridian may file suit as early as November 15, 2024, and likely no later than late November or early December 2024, in advance of the Outside Date.

B. Penterra's Defenses

Calderwood & Harkness has identified the following principal defenses available to Penterra in any litigation arising from the termination:

Valid Termination Under § 8.1(d). Penterra's primary defense will be that it validly exercised its termination right under SPA § 8.1(d) based on the failure of the closing conditions set forth in Sections 7.2(a) and 7.2(b). This defense is supported by the detailed analysis set forth in Sections IV and V of this memorandum.

Material Adverse Effect. The core substantive defense is that a Material Adverse Effect has occurred within the meaning of SPA § 1.1, as demonstrated by the Marlowe Asset Management-2 interim data, the FDA partial clinical hold, and the Broadleaf expert assessment. Calderwood & Harkness believes this defense is well-supported by the factual record and is consistent with the analytical framework established by the Delaware courts in the Akorn line of cases.

Closing Conditions Were Not and Could Not Be Satisfied. As a factual and legal matter, the conditions to Buyer's closing obligation were not satisfied at the time of termination and were incapable of being satisfied prior to the Outside Date. This defense is independent of, but closely related to, the MAE defense.

Specific Performance Is Unavailable. Specific performance is an equitable remedy that is available only when the conditions precedent to the party's performance have been satisfied or waived. Because the closing conditions under Section 7.2 were not satisfied, and Penterra has not waived them, the Court of Chancery should decline to order specific performance. This principle is well-established under Delaware law: a court will not compel a party to perform an obligation when the contractual conditions to that obligation have not been met. See Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008) (analyzing the relationship between closing conditions and the availability of specific performance).

Equitable Considerations. Even if specific performance were technically available as a matter of contract, Calderwood & Harkness would argue that a court should exercise its equitable discretion to decline to order Penterra to pay $900,000,000 for a drug candidate with a severely compromised safety profile, no demonstrated efficacy advantage, and an active FDA clinical hold. The equitable considerations weigh strongly against compelling a buyer to consummate an acquisition of this magnitude under such circumstances.

C. Probability Assessment

Calderwood & Harkness has conducted a probability assessment of the principal litigation outcomes, subject to the usual caveats that litigation outcomes are inherently uncertain and depend on a wide range of factors including the court's assessment of the evidence, witness credibility, and the evolution of the factual record through discovery.

Specific Performance. Calderwood & Harkness assesses the risk of Veridian prevailing on a claim for specific performance as low to moderate. This assessment is based on the strength of the factual record supporting the MAE conclusion, the independence and credibility of the Broadleaf expert assessment, the objective nature of the clinical data and FDA regulatory action, and the well-established principle that specific performance is unavailable when closing conditions have not been satisfied. The principal risk factor is the historically high bar that Delaware courts have applied to MAE claims, which creates some residual uncertainty notwithstanding the strength of the factual record.

Expectation Damages. Calderwood & Harkness assesses the risk of a court ordering expectation damages as moderate, but notes that Veridian would bear the burden of proving both (a) that an MAE did not occur (which is the threshold issue) and (b) the quantum of its damages, which would require demonstrating what Veridian's equity would have been worth absent the termination. The latter burden is particularly challenging for a clinical-stage company whose value is, by its nature, highly speculative and subject to substantial uncertainty. Moreover, any damages calculation would necessarily account for the diminution in Veridian's value attributable to the clinical data and FDA hold — developments that are independent of Penterra's termination.

Key Risk Factor. As noted, the principal risk factor in any MAE litigation is the historically exacting standard applied by Delaware courts. Prior to Akorn, no buyer had ever successfully proven an MAE in a Delaware court proceeding. However, the facts presented here — involving a clinical-stage company whose lead asset suffered catastrophic safety results with no offsetting efficacy benefit and an active FDA clinical hold — present a stronger case than most. The Akorn precedent is directly applicable and supportive of Penterra's position, as it establishes that an MAE can be proven when the adverse eve

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 200 Park Avenue, 42nd Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
September 24, 2024
MEMORANDUM
TO: Board of Directors, Penterra Pharmaceuticals Corp.
Attention: Margaret Liu Whitfield, Chair
CC: Dr. Anand Rajagopal, Chief Executive Officer Catherine M. Burgess, Chief Financial Officer Thomas F. Holbrook, General Counsel & Secretary Natalie Reiner, Senior Vice President, Corporate Development
FROM: Oliver Mackenzie, Partner, Calderwood & Harkness LLP Megan Chu, Associate, Calderwood & Harkness LLP
RE: Recommendation to Terminate Stock Purchase Agreement dated June 10, 2024, by and among Penterra Pharmaceuticals Corp., Veridian Biosciences, Inc., the Sellers identified therein, and David Ng as Stockholder Representative
Matter No.: 1018-00008
Right-click to update Table of Contents
I. Executive Summary
Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm") serves as outside counsel to Penterra Pharmaceuticals Corp. ("Penterra" or the "Company") in connection with the Company's proposed acquisition of one hundred percent (100%) of the outstanding capital stock of Veridian Biosciences, Inc. ("Veridian" or the "Target") for an aggregate purchase price of Nine Hundred Million Dollars ($900,000,000) in cash, pursuant to the terms and conditions of that certain Stock Purchase Agreement dated as of June 10, 2024 (as may be amended, the "SPA"), by and among Penterra, as Buyer, Veridian, the Sellers identified therein (the "Sellers"), and David Ng, in his capacity as Stockholder Representative.
The purpose of this memorandum is to present Calderwood & Harkness's recommendation that the Board of Directors of Penterra (the "Board") authorize the termination of the SPA pursuant to Section 8.1(d) thereof. This recommendation is grounded in the Firm's conclusion, following extensive analysis of the relevant factual record and applicable Delaware law, that a material adverse effect (as defined in SPA § 1.1, an "MAE") has occurred with respect to Veridian since the date of the SPA, and that the conditions to Buyer's obligation to close the transaction set forth in Sections 7.2(a) and 7.2(b) of the SPA are not satisfied and are incapable of being satisfied prior to the Outside Date of December 10, 2024.
Summary Recommendation. Calderwood & Harkness recommends that the Board:
1. Authorize the termination of the SPA pursuant to Section 8.1(d) thereof;
2. Authorize Dr. Anand Rajagopal, Chief Executive Officer, and Thomas F. Holbrook, General Counsel and Secretary, to execute and deliver the Termination Notice to Veridian and the Stockholder Representative; and
3. Authorize the ancillary actions described in Section IX of this memorandum, including termination of the financing commitment, escrow notifications, and litigation preparation.
Basis for Recommendation. The factual basis for the Firm's recommendation is as follows. On August 14, 2024, the independent Data Monitoring Committee (the "DMC") for the Marlowe Asset Management-2 Phase II clinical trial (ClinicalTrials.gov Identifier: NCT05837291) of VRD-4187, Veridian's lead therapeutic candidate, conducted an interim analysis that revealed profoundly adverse safety and efficacy results. Specifically, the interim data showed a statistically significant increase in serious adverse events in the treatment arm, including a Grade 3 or higher cytokine release syndrome ("CRS") incidence of 23.4% in the VRD-4187 treatment arm as compared to 4.1% in the control arm — a 19.3 percentage point differential. Moreover, there were seven (7) treatment-related deaths in the VRD-4187 arm (representing 3.6% of the 194 enrolled patients) as compared to one (1) in the control arm (0.5% of the 193 enrolled patients). Of critical importance, the overall response rate ("ORR") showed no statistically significant efficacy advantage for VRD-4187 over the standard of care: 31.4% in the treatment arm versus 28.9% in the control arm (p = 0.58). On August 22, 2024, the United States Food and Drug Administration (the "FDA") imposed a partial clinical hold on VRD-4187 under IND 154832, pending investigation of the CRS-related deaths.
Taken together, these developments — catastrophic safety data, the absence of any meaningful efficacy benefit, and an FDA-imposed clinical hold — constitute an MAE under the SPA and, independently, render the conditions to Buyer's obligation to close unsatisfied and incapable of satisfaction prior to the Outside Date.
Litigation Risk. Calderwood & Harkness acknowledges that the termination of the SPA will in all likelihood precipitate litigation. Veridian disputes the occurrence of an MAE and has demanded that Penterra proceed to closing. Veridian's outside counsel, Zalcourt Archer & Cole LLP (lead partner: Rebecca Whitmore), sent a formal response on September 13, 2024, disputing the Deficiency Notice issued by Penterra on September 6, 2024, and asserting that Penterra's refusal to close constitutes a material breach of the SPA. Veridian has indicated its intention to seek specific performance and/or damages in the Court of Chancery of the State of Delaware. Calderwood & Harkness anticipates that such a proceeding could be filed as early as November 15, 2024.
Despite this litigation risk, it is the Firm's considered assessment that Penterra's MAE claim is well-supported under Delaware law and that the factual record — encompassing both the clinical data and the FDA regulatory action — presents a compelling case for the Board's exercise of the termination right. More importantly, proceeding to close a $900,000,000 acquisition of a clinical-stage company whose sole material asset has suffered a catastrophic clinical setback would expose the Company and its stockholders to materially greater financial and strategic risk than the litigation exposure attendant to termination. The detailed analysis supporting this recommendation is set forth in the sections that follow.
II. Background and Transaction Summary
A. Transaction Overview
On June 10, 2024, Penterra entered into the SPA to acquire one hundred percent (100%) of the outstanding capital stock of Veridian for an aggregate cash purchase price of Nine Hundred Million Dollars ($900,000,000). The SPA was executed by Dr. Anand Rajagopal on behalf of Penterra, in his capacity as Chief Executive Officer, and by Dr. Julian Marek on behalf of Veridian, in his capacity as Chief Executive Officer, following authorization by the respective governing bodies of each party.
Veridian is a privately held, clinical-stage biotechnology company headquartered at 550 Gateway Drive, Cambridge, Massachusetts 02142. Veridian is focused on the research and development of immuno-oncology therapeutics leveraging its proprietary bispecific T-cell engager platform, known as "VeriTCE." The company's research programs are designed to harness the immune system's T-cells to identify and destroy tumor cells expressing specific surface antigens, with a particular emphasis on cancers characterized by the expression of the delta-like canonical Notch ligand 3 ("DLL3"), a target prevalent in small cell lung cancer ("SCLC") and other neuroendocrine tumors.
Veridian's lead candidate, VRD-4187, is a bispecific T-cell engager targeting DLL3-expressing tumors. At the time of the SPA's execution, VRD-4187 was in Phase II clinical development in the Marlowe Asset Management-2 trial (ClinicalTrials.gov Identifier: NCT05837291), a randomized, open-label study evaluating VRD-4187 in patients with extensive-stage SCLC who had progressed on or after first-line platinum-based chemotherapy.
Veridian is a clinical-stage company that has not generated any product revenue. For the fiscal year ended December 31, 2023, Veridian reported total revenue of $0 and a net loss of approximately $87.3 million, funded primarily through equity financing from its venture capital and institutional investor base. As of the date of signing, Veridian had approximately 148 full-time employees.
The strategic rationale for the acquisition was Penterra's desire to bolster its immuno-oncology pipeline. This need became acute following the Phase III futility analysis for Penterra's internal T-cell engager candidate, PPC-0921, in November 2023, which resulted in the discontinuation of that program. The Veridian acquisition was intended to provide Penterra with a clinical-stage DLL3-targeting asset with a differentiated mechanism of action and what was, at the time of signing, a promising Phase II clinical profile.
B. Key Deal Terms
The material terms of the SPA are summarized below for the Board's reference:
C. Financing Structure
To fund the acquisition, Penterra arranged a two-source financing structure:
1. Committed Term Loan Facility. A $500,000,000 senior secured term loan facility provided pursuant to a Commitment Letter (Ref. No. CL-2024-PPCA-0607) dated June 7, 2024, from Summit Ridge Capital Partners, LP, as lead arranger and bookrunner, and Ironclad Trust Company, N.A., as administrative agent. The commitment letter was delivered in connection with the execution of the SPA and was customary in form for a transaction of this nature. The term loan bears interest at a rate per annum equal to the Secured Overnight Financing Rate ("SOFR") plus 225 basis points. The commitment letter provides for a commitment fee of 0.35% per annum on undrawn amounts, and a ticking fee of 0.175% per annum commencing ninety (90) days after the date of the commitment letter (i.e., commencing September 8, 2024). The financing commitment is co-terminous with the Outside Date under the SPA and will expire on December 10, 2024, absent an earlier termination of the SPA.
2. Cash on Hand. The remaining $400,000,000 of the purchase price was to be funded from Penterra's cash on hand. As of the end of the second fiscal quarter of 2024 (June 30, 2024), Penterra reported cash and cash equivalents and short-term investments of approximately $2.1 billion, providing ample liquidity to fund the cash portion of the purchase price.
D. Key Pre-Termination Milestones Achieved
Notwithstanding the subsequent adverse developments described in this memorandum, the transaction had progressed substantially toward closing. The following key milestones were achieved:
• HSR Early Termination. Early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, was granted by the Federal Trade Commission and the Antitrust Division of the Department of Justice on May 20, 2024. No second request was issued, and the HSR condition to closing (SPA § 7.1(a)) was satisfied.
• Veridian Stockholder Approval. The requisite stockholder approval for the transaction was obtained by written consent, delivered on June 14, 2024, four (4) days after signing. The written consent was executed by holders of in excess of 90% of Veridian's outstanding capital stock, including Crestline Ventures, LP (Veridian's largest institutional stockholder), Boreal Health Partners Fund III, LP, and Apex Growth Equity Fund II, LP.
• R&W Insurance Policy. A representations and warranties insurance policy was bound on June 12, 2024, with Atlas Indemnity Insurance Co. (Policy No. AIC-RWI-2024-07892), providing coverage of $180,000,000 (equal to the indemnification escrow amount). The policy was procured through Penterra's insurance broker and is subject to a retention equal to the indemnification basket amount.
• Fairness Opinion. Garrison Zanthor & Co. LLC ("Garrison Zanthor"), Penterra's financial advisor, delivered its fairness opinion to the Board on June 9, 2024, opining that, as of that date and based on the assumptions, qualifications, and limitations set forth therein, the consideration to be paid by Penterra pursuant to the SPA was fair, from a financial point of view, to Penterra. Garrison Zanthor expressly noted in its opinion that the fairness determination was based on the information available as of the date of the opinion and did not take into account any subsequent developments. The fairness opinion was a condition to Board approval of the transaction but is not a condition to closing under the SPA.
III. Intervening Events — VRD-4187 Clinical Data and FDA Action
The events described in this Section III constitute the factual predicate for Calderwood & Harkness's recommendation that the Board authorize termination of the SPA. These events are presented in chronological order.
A. Marlowe Asset Management-2 Phase II Interim Analysis (August 14, 2024)
Marlowe Asset Management-2 is a randomized, open-label Phase II clinical trial evaluating VRD-4187 in patients with extensive-stage small cell lung cancer who have progressed on or after first-line platinum-based chemotherapy. The trial was conducted at forty-two (42) clinical sites across the United States and the European Union, with a total enrollment of three hundred eighty-seven (387) patients: one hundred ninety-four (194) in the VRD-4187 treatment arm and one hundred ninety-three (193) in the standard-of-care control arm.
The independent Data Monitoring Committee convened on August 14, 2024, to review the pre-specified interim analysis of Marlowe Asset Management-2 data. The DMC's findings revealed profoundly adverse safety results and the absence of any statistically significant efficacy benefit, as summarized below:
Safety Findings:
• Grade ≥3 Cytokine Release Syndrome (CRS) Incidence. The incidence of Grade 3 or higher CRS in the VRD-4187 treatment arm was 23.4% (approximately 45 of 194 patients), as compared to 4.1% in the standard-of-care control arm (approximately 8 of 193 patients). This represents a 19.3 percentage point differential, indicating a substantially and statistically significant increase in serious CRS events attributable to VRD-4187. Grade 3 and above CRS events are defined under the American Society for Transplantation and Cellular Therapy (ASTCT) grading system as events requiring aggressive clinical intervention, including vasopressor support, mechanical ventilation, or intensive care unit admission. The 23.4% incidence rate is markedly above the range typically observed in the bispecific T-cell engager class and represents a serious impediment to clinical development and commercial viability.
• Treatment-Related Deaths. There were seven (7) treatment-related deaths in the VRD-4187 arm (3.6% of 194 patients) as compared to one (1) treatment-related death in the control arm (0.5% of 193 patients). All seven deaths in the VRD-4187 arm were attributed to severe CRS and its complications, including multi-organ failure, cardiac arrest secondary to CRS-mediated cytokine storm, and disseminated intravascular coagulation. The seven-to-one differential in treatment-related deaths is a catastrophic safety signal that, standing alone, would raise grave concerns about the continued development of VRD-4187 at the dosing regimen employed in Marlowe Asset Management-2.
Efficacy Findings:
• Overall Response Rate (ORR). The overall response rate in the VRD-4187 treatment arm was 31.4%, as compared to 28.9% in the standard-of-care control arm. The difference of 2.5 percentage points was not statistically significant (p = 0.58). A p-value of 0.58 indicates that the observed difference is well within the range attributable to random variation and provides no basis for concluding that VRD-4187 offers any efficacy advantage over existing therapy. The pre-specified threshold for declaring efficacy success at the interim analysis was an ORR differential with a one-sided p-value of less than 0.01; the observed results fell far short of this threshold.
DMC Recommendation. Based on these findings, the DMC recommended suspension of enrollment in Marlowe Asset Management-2 and implementation of dose modification protocols for patients currently enrolled and receiving VRD-4187. The DMC's recommendation reflects its independent scientific judgment that the risk-benefit profile of VRD-4187 at the current dosing regimen was unacceptable.
B. Notification to Penterra
Veridian provided written notice to Penterra of the DMC's findings on August 16, 2024, two (2) days after the DMC's interim analysis, pursuant to the notification obligations set forth in SPA § 5.1(b). Section 5.1(b) requires the Company to promptly notify Buyer of any event, development, or circumstance that could reasonably be expected to result in a failure of any closing condition set forth in Article VII of the SPA. Veridian's notice was accompanied by a summary of the DMC's findings but did not include the underlying patient-level data, which Penterra subsequently requested and received on August 18, 2024, pursuant to SPA § 5.2 (access to information).
Upon receipt of Veridian's notification, Penterra promptly engaged Broadleaf Scientific Consulting LLC ("Broadleaf"), an independent clinical and regulatory consulting firm, to conduct a supplemental clinical assessment of the Marlowe Asset Management-2 interim data. Broadleaf's engagement was led by Dr. Raymond Kapoor, a board-certified oncologist and former FDA medical reviewer with over twenty years of experience in oncology drug development. Broadleaf delivered its written assessment to Penterra on August 19, 2024.
Broadleaf's assessment concluded that VRD-4187's safety profile is severely compromised by the Marlowe Asset Management-2 interim data. Specifically, Broadleaf opined that the combination of the excess CRS-related deaths and the absence of any meaningful efficacy advantage over the standard of care fundamentally undermines VRD-4187's commercial viability. Broadleaf further noted that the 23.4% Grade ≥3 CRS incidence rate places VRD-4187 at the extreme end of the safety spectrum for the bispecific T-cell engager class and that, in Broadleaf's experience, such a safety signal in a Phase II trial, absent a dramatic efficacy benefit, typically results in either termination of the clinical program or a fundamental redesign of the development strategy that adds years to the development timeline and significantly diminishes the probability of ultimate regulatory approval. A copy of Broadleaf's assessment is attached hereto as Attachment D.
C. FDA Partial Clinical Hold (August 22, 2024)
On August 22, 2024, the FDA imposed a partial clinical hold on VRD-4187 under Investigational New Drug Application No. 154832 ("IND 154832"), pursuant to its authority under 21 CFR § 312.42. The partial clinical hold was imposed pending the FDA's investigation of the CRS-related deaths observed in the Marlowe Asset Management-2 trial. Under the terms of the partial clinical hold:
• No new patients may be enrolled in Marlowe Asset Management-2 or any other clinical study conducted under IND 154832;
• Restrictions are imposed on the dosing of patients currently enrolled in the trial, including a requirement that no patient receive additional doses of VRD-4187 until the clinical hold is modified or lifted; and
• Veridian is required to submit a complete response to the FDA's clinical hold letter, including a detailed safety analysis, proposed risk mitigation measures, and a revised clinical protocol, before the FDA will consider modification or removal of the hold.
The imposition of a partial clinical hold is a significant regulatory action. Under 21 CFR § 312.42(b)(2)(i), a clinical hold may be imposed when the FDA determines that "human subjects are or would be exposed to an unreasonable and significant risk of illness or injury." The FDA's decision to impose the hold reflects its independent scientific judgment that VRD-4187 presents safety concerns of sufficient gravity to warrant restricting clinical investigation.
D. Veridian's Protocol Amendment
In response to the DMC's recommendation and the FDA's partial clinical hold, Veridian implemented a protocol amendment, designated Protocol v4.0, on August 28, 2024. The key modifications under Protocol v4.0 include:
• Mandatory Tocilizumab Prophylaxis. All patients receiving VRD-4187 are required to receive prophylactic tocilizumab (an anti-interleukin-6 receptor antibody) prior to each dose of VRD-4187, in an effort to mitigate the severity of CRS events.
• Dose Reduction. The starting dose of VRD-4187 was reduced from 1.5 mg/kg to 0.75 mg/kg — a 50% reduction from the dose employed in Marlowe Asset Management-2.
On August 30, 2024, Calderwood & Harkness sent a letter to Zalcourt Archer & Cole LLP, Veridian's outside counsel, requesting confirmation as to whether the Protocol v4.0 amendment — particularly the 50% dose reduction — constituted an action requiring Penterra's prior written consent under the operating covenants set forth in SPA § 5.1, which restricts the Company from taking certain material actions outside the ordinary course of business without Buyer's consent during the pre-closing period. As of the date of this memorandum, Zalcourt Archer & Cole LLP has not provided a substantive response to that inquiry.
While the Protocol v4.0 amendment represents a responsive measure to the safety signal, it does not remediate the underlying concerns. As discussed in greater detail in Section VI below, the protocol amendment introduces new and significant uncertainties — including whether VRD-4187 will demonstrate any efficacy at the reduced dose — and does not reverse or mitigate the adverse data already observed, including the seven treatment-related deaths.
E. Penterra's Deficiency Notice and Veridian's Response
On September 6, 2024, Penterra, acting on the advice of Calderwood & Harkness, delivered a formal Deficiency Notice to Veridian and the Stockholder Representative, alleging that a material adverse effect had occurred with respect to Veridian within the meaning of SPA § 1.1 and that the conditions to Buyer's obligation to close set forth in SPA §§ 7.2(a) and 7.2(b) were not satisfied and were incapable of being satisfied prior to the Outside Date. The Deficiency Notice identified the Marlowe Asset Management-2 interim data and the FDA partial clinical hold as the bases for Penterra's position.
On September 13, 2024, Veridian, through Zalcourt Archer & Cole LLP (Rebecca Whitmore), delivered a formal response to the Deficiency Notice (the "Veridian Response"). In the Veridian Response, Veridian disputed the occurrence of an MAE and demanded that Penterra proceed to close the transaction on the terms set forth in the SPA. Veridian's principal arguments were as follows: (i) the Marlowe Asset Management-2 clinical data is preliminary and based on an interim analysis, not a final readout, and therefore cannot support an MAE determination; (ii) the Protocol v4.0 amendment adequately addresses the safety concerns identified by the DMC and the FDA; and (iii) the FDA partial clinical hold is a routine regulatory action that is expected to be resolved through the standard complete response process within a reasonable timeframe.
Calderwood & Harkness has carefully analyzed the Veridian Response and has concluded that Veridian's arguments are neither legally nor factually persuasive for the reasons set forth in detail in Section VI of this memorandum.
IV. Legal Analysis: Material Adverse Effect Under the SPA
A. MAE Definition (SPA § 1.1)
The SPA defines "Material Adverse Effect" or "MAE" in Section 1.1 as follows:
any event, change, development, occurrence, condition, or effect that, individually or in the aggregate with all other events, changes, developments, occurrences, conditions, or effects, has had or would reasonably be expected to have a material adverse effect on (a) the business, results of operations, financial condition, or assets of the Company, taken as a whole, or (b) the ability of the Sellers to consummate the Transactions contemplated hereby.
The definition is subject to certain carveouts (addressed in Section IV.E below), which exclude from the MAE determination certain categories of events that are general in nature and not specific to the Company.
Under established Delaware law, the interpretation and application of an MAE clause in a definitive acquisition agreement is governed by a well-developed body of case law, the most significant of which is the Delaware Supreme Court's decision in Akorn, Inc. v. Fresenius Kabi AG, 2018 WL 4719347 (Del. Ch. Oct. 1, 2018), aff'd, 198 A.3d 724 (Del. 2018). In Akorn, the Court of Chancery and the Supreme Court affirmed that a buyer asserting an MAE must demonstrate that the adverse event or condition is "durationally significant" — that is, it must substantially threaten the overall earnings potential of the target in a manner that would be material to a reasonable acquirer over a "commercially reasonable period," which the courts have interpreted as being measured in years rather than months. The Akorn decision is noteworthy because it was the first occasion on which a Delaware court found that a buyer had satisfied its burden of proving the occurrence of an MAE, and the court's analysis provides a detailed framework for evaluating MAE claims.
While the "durationally significant" standard sets a high bar, it is not an insurmountable one, particularly where, as here, the adverse event strikes at the core value driver of the target company and is of a nature that cannot be remediated within a reasonable timeframe.
B. Application to VRD-4187 Clinical Data
The application of the MAE definition and the Delaware law framework to the facts presented here yields a strong basis for concluding that an MAE has occurred with respect to Veridian.
Single-Asset, Pipeline-Concentrated Company. Veridian is a clinical-stage biotechnology company with no marketed products, no product revenue, and no material assets other than its VeriTCE platform and associated intellectual property, of which VRD-4187 is the lead and most advanced candidate. The company's other pipeline assets — VRD-5203 (preclinical) and VRD-6010 (Discovery-stage) — are at substantially earlier stages of development and were not material value drivers in the pricing of the acquisition. The $900,000,000 purchase price was predicated overwhelmingly on the value and potential of VRD-4187. Accordingly, any event that fundamentally undermines VRD-4187's clinical and commercial prospects strikes at the very heart of the value proposition for which Penterra contracted.
Severity of Clinical Findings. The Marlowe Asset Management-2 interim data presents a devastating combination of adverse safety results and the absence of efficacy benefit:
• The Grade ≥3 CRS incidence of 23.4% in the treatment arm is nearly six times the rate observed in the control arm (4.1%) and far exceeds the CRS rates observed for other approved or late-stage bispecific T-cell engagers, which typically range from 2% to 10% for Grade ≥3 events in comparable patient populations.
• The seven treatment-related deaths in a 194-patient treatment arm represent a 3.6% mortality rate attributable to VRD-4187, a result that Broadleaf characterized as "incompatible with a viable risk-benefit profile absent a transformative efficacy signal."
• The ORR of 31.4% versus 28.9% (p = 0.58) confirms that VRD-4187 does not provide any statistically significant efficacy advantage over the standard of care. This is critically important because, in oncology drug development, a drug with a severe safety profile can be approved only if it demonstrates a substantial efficacy benefit that justifies the associated risks. Here, VRD-4187 presents dramatically elevated safety risks with no offsetting efficacy advantage.
Core Value Driver Impaired. For a clinical-stage company with zero revenue, the entire value proposition is tied to the clinical and regulatory success of its pipeline. The combination of the adverse safety data and the absence of an efficacy advantage fundamentally undermines VRD-4187's path to regulatory approval and commercial viability. This is not a case where a clinical trial produced mixed but interpretable results; rather, the data reflects a profound failure on both the safety and efficacy dimensions simultaneously. The value that Penterra agreed to pay was predicated on the reasonable expectation — based on Phase I data and the trial design — that VRD-4187 would demonstrate a favorable risk-benefit profile. That expectation has been decisively refuted.
Distinguishable from Ordinary Course Adverse Events. Calderwood & Harkness emphasizes that this is not a case involving ordinary course fluctuations in business performance, competitive dynamics, or even garden-variety clinical trial setbacks such as a marginal efficacy miss or a manageable safety signal. The Marlowe Asset Management-2 data represents a categorical change in VRD-4187's clinical profile — one that transforms the asset from a promising Phase II candidate into one with a severely compromised safety profile, no demonstrated efficacy advantage, and an active FDA clinical hold. This type of fundamental, qualitative change in the target's core asset is precisely the type of event that the MAE definition was designed to address.
C. FDA Partial Clinical Hold — Compounding the MAE
The FDA's imposition of a partial clinical hold on VRD-4187 on August 22, 2024, is an independent and significant adverse event that further compounds the MAE. Several aspects of the clinical hold warrant emphasis:
Regulatory Significance. A partial clinical hold under 21 CFR § 312.42 is not a routine regulatory action. It reflects an affirmative determination by the FDA — the agency charged with protecting the safety of clinical trial subjects — that participants in the clinical trial "are or would be exposed to an unreasonable and significant risk of illness or injury." The FDA's decision to impose the hold carries substantial weight and is independent of the Company's own assessment of the safety data. It represents the judgment of the nation's principal drug regulatory authority that VRD-4187 poses unacceptable risks in its current form.
Compounding Effect. The clinical hold creates a regulatory overhang that compounds the adverse clinical data. Even if Veridian were able to submit a complete response to the FDA and the hold were eventually lifted — an outcome that is by no means assured — the process of resolving the hold, redesigning the clinical trial, enrolling new patients, and generating sufficient safety and efficacy data to support a regulatory filing would delay any potential approval pathway by a minimum of twelve (12) to eighteen (18) months, and potentially indefinitely if the safety issue cannot be resolved. This delay is on top of the development timeline that existed prior to the interim analysis.
Permanent Label Impact. Even under the most optimistic scenario, the CRS safety data from Marlowe Asset Management-2 will permanently affect VRD-4187's risk-benefit profile as assessed by the FDA and by prescribers in the commercial setting. The seven treatment-related deaths and the 23.4% Grade ≥3 CRS rate will be part of the clinical record and will be reflected in any product labeling, risk evaluation and mitigation strategy ("REMS"), or other regulatory requirements. This data cannot be "unlearned" and will permanently constrain VRD-4187's commercial potential, even in a scenario where the drug ultimately receives regulatory approval.
D. Durational Significance
The durational significance requirement under Delaware law is readily satisfied here. The Akorn court held that the relevant inquiry is whether the adverse effect "substantially threatens the overall earnings potential of the target in a commercially reasonable period, which one would expect to be measured in years rather than months." Akorn, 2018 WL 4719347, at *90 (emphasis in original).
The impact of the Marlowe Asset Management-2 data and FDA clinical hold on Veridian's business is neither temporary nor cyclical. Veridian has no marketed products and no revenue. Its entire business consists of the development of VRD-4187 and earlier-stage pipeline candidates. The Marlowe Asset Management-2 interim data has fundamentally altered VRD-4187's clinical trajectory in ways that cannot be reversed:
• The clinical data itself cannot be undone. The seven treatment-related deaths, the 23.4% Grade ≥3 CRS incidence, and the absence of an efficacy advantage are permanent features of VRD-4187's clinical record. These data will inform every subsequent regulatory and clinical decision regarding VRD-4187.
• Even under the most optimistic scenario — one in which the Protocol v4.0 amendment succeeds in reducing the CRS rate at the lower dose, the FDA lifts the clinical hold, the trial resumes enrollment, and VRD-4187 ultimately demonstrates an acceptable risk-benefit profile — the development timeline for VRD-4187 is delayed by years, its competitive positioning within the DLL3-targeting therapeutic space is materially weakened (as competitors such as Greaves Industries's tarlatamab continue to advance), the ultimate approvability of the compound remains uncertain, and any approved product label would carry significant safety warnings and restrictions that would limit commercial uptake.
• Under the more probable scenario — one in which the safety concerns cannot be fully mitigated at the lower dose, or in which the lower dose proves insufficiently efficacious — VRD-4187 may never reach regulatory approval, rendering Veridian's primary asset worthless.
This type of impact — one that fundamentally undermines the target's commercial potential as measured over a period of years — is precisely the type of durationally significant effect that the Delaware courts have recognized as satisfying the MAE standard. See Akorn, 2018 WL 4719347, at *92 (finding durational significance where the target's business had suffered a "dramatic downturn" that "substantially threatened [its] overall earnings potential" and was "not a blip").
E. MAE Carveouts — Inapplicability
The MAE definition in SPA § 1.1 contains a standard set of carveouts that exclude from the MAE determination certain categories of events. Calderwood & Harkness has reviewed each carveout and concluded that none applies to the facts at issue:
(i) General Economic or Political Conditions. This carveout excludes adverse effects attributable to changes in general economic or political conditions, including changes in interest rates, commodity prices, or exchange rates. This carveout is not applicable. The Marlowe Asset Management-2 interim data and the FDA clinical hold are company-specific clinical trial results and regulatory actions particular to VRD-4187. They have no connection to macroeconomic conditions or political developments.
(ii) Industry-Wide Conditions. This carveout excludes adverse effects attributable to conditions affecting the biotechnology or pharmaceutical industries generally. This carveout is not applicable. The safety and efficacy data for VRD-4187 is specific to Veridian's compound and clinical program. It does not reflect a general trend or development affecting the biotechnology industry as a whole or the bispecific T-cell engager therapeutic class broadly. No other company's T-cell engager program experienced comparable adverse results during the relevant period.
(iii) Changes in Law or GAAP. This carveout excludes adverse effects attributable to changes in applicable law or accounting standards. This carveout is not applicable; no changes in law or GAAP are implicated.
(iv) Pandemics. This carveout excludes adverse effects attributable to pandemics, epidemics, or other public health emergencies. This carveout is not applicable. The Marlowe Asset Management-2 clinical data has no connection to any pandemic or public health emergency.
(v) Natural Disasters, War, Terrorism. This carveout excludes adverse effects attributable to natural disasters, acts of war, sabotage, or terrorism. This carveout is not applicable.
(vi) Financial Markets Generally. This carveout excludes adverse effects attributable to changes in the financial, credit, or securities markets generally. This carveout is not applicable.
(vii) Announcement or Pendency of the Transactions. This carveout excludes adverse effects attributable to the announcement or pendency of the transactions contemplated by the SPA, including any impact on relationships with employees, customers, suppliers, or other business partners. This carveout is not applicable. The Marlowe Asset Management-2 data and the FDA clinical hold are unrelated to the announcement or pendency of the Penterra acquisition.
Disproportionate Impact Exception. Even if any of the carveouts in clauses (i) through (vi) were arguably applicable (which Calderwood & Harkness does not concede), the SPA's MAE definition includes a standard "disproportionate impact" exception, which provides that the carveouts do not apply to the extent that the relevant event, change, or condition has a disproportionate adverse effect on the Company as compared to other companies operating in the same industry or markets. Here, the VRD-4187 clinical data and FDA hold are, by their very nature, specific to Veridian and disproportionately affect Veridian relative to other companies in the biotechnology industry. No similarly situated company experienced comparable adverse clinical results during the relevant period. Accordingly, even under a hypothetical argument that an industry-wide carveout might be relevant, the disproportionate impact exception would operate to exclude the carveout from application.
Calderwood & Harkness has prepared detailed written analyses of both the carveout applicability and the disproportionate impact exception, set forth in memoranda dated August 28, 2024, and September 3, 2024, respectively, which are cross-referenced as Attachment C to this memorandum.
F. Closing Conditions Not Satisfied
Independent of the MAE analysis, the conditions to Buyer's obligation to close under Article VII of the SPA are not satisfied and are incapable of being satisfied prior to the Outside Date:
SPA § 7.2(a) — Representations and Warranties Bring-Down. Section 7.2(a) conditions Buyer's obligation to close on the truth and correctness, as of the Closing Date, of the representations and warranties of the Sellers and the Company set forth in the SPA (subject to the materiality and MAE qualifiers contained in such representations). In light of the Marlowe Asset Management-2 data and the FDA clinical hold, several of the Company's representations — including, without limitation, representations regarding the Company's business and its clinical programs, regulatory compliance, and the absence of any material adverse effect — cannot be "brought down" to the Closing Date at the applicable standard. Specifically, the representation in SPA § 3.8 that "the Company is not aware of any clinical data or regulatory action that would reasonably be expected to have a Material Adverse Effect on the development, manufacture, or commercialization of any of the Company's product candidates" cannot be truthfully made as of the Closing Date.
SPA § 7.2(b) — No Material Adverse Effect. Section 7.2(b) conditions Buyer's obligation to close on the absence of any Material Adverse Effect since the date of the Agreement. For the reasons set forth in Sections IV.A through IV.E above, a Material Adverse Effect has occurred. This condition is not satisfied.
Incapable of Satisfaction Prior to Outside Date. Both of these conditions are incapable of being cured or satisfied prior to the Outside Date of December 10, 2024. The Marlowe Asset Management-2 clinical data is a permanent part of the clinical record and cannot be remediated. The FDA partial clinical hold remains in effect and, even under the most optimistic timeline, is unlikely to be resolved before the Outside Date. The representation bring-down failure and the occurrence of the MAE are conditions that, by their nature, cannot be cured within the remaining period before the Outside Date.
V. Termination Right Under SPA § 8.1(d)
A. Termination Mechanics
Section 8.1(d) of the SPA provides Buyer with a right to terminate the Agreement as follows:
"This Agreement may be terminated by Buyer if any condition to Buyer's obligation to consummate the Transactions set forth in Section 7.2 is not satisfied as of the date on which the Closing would otherwise be required to occur and is incapable of being satisfied prior to the Outside Date; provided, however, that Buyer shall not have the right to terminate this Agreement pursuant to this Section 8.1(d) if Buyer is then in material breach of any provision of this Agreement."
The three elements required for a valid termination under Section 8.1(d) are as follows:
1. A condition to Buyer's closing obligation under Section 7.2 is not satisfied. As set forth in Section IV.F above, both Section 7.2(a) (representations and warranties bring-down) and Section 7.2(b) (no MAE) are unsatisfied.
2. The unsatisfied condition is incapable of being satisfied prior to the Outside Date. As discussed above, the clinical data and FDA clinical hold cannot be remediated before December 10, 2024. The data is permanent, and the regulatory process for resolving the clinical hold — which requires submission of a complete response, FDA review, and potential additional clinical requirements — is measured in months or years, not weeks.
3. Buyer is not in material breach of the SPA. Penterra is not in material breach of any provision of the SPA. Penterra has complied in all material respects with all of its covenants and obligations under the SPA, including its pre-closing cooperation obligations under Section 5.3, its reasonable best efforts obligation under Section 5.6, and its obligation to maintain the financing commitment under Section 5.7. Calderwood & Harkness has conducted a review of Penterra's compliance with the SPA and has identified no material breach or default.
All three elements are satisfied. Accordingly, Penterra has a valid right to terminate the SPA pursuant to Section 8.1(d).
Process. Upon authorization by the Board, the termination process would proceed as follows:
1. The Board adopts a resolution authorizing termination of the SPA (a draft resolution is attached hereto as Attachment A).
2. Dr. Anand Rajagopal (CEO) and Thomas F. Holbrook (General Counsel) execute and deliver a written Termination Notice to Veridian Biosciences, Inc. (addressed to Dr. Julian Marek, CEO, and Rachel Stein-Goldberg, General Counsel) and to David Ng, as Stockholder Representative, with a copy to Zalcourt Archer & Cole LLP (Rebecca Whitmore). A draft form of Termination Notice is attached hereto as Attachment B.
3. Termination of the SPA is effective upon delivery of the Termination Notice.
B. Reverse Termination Fee — Not Triggered
The SPA provides for a reverse termination fee of Forty-Five Million Dollars ($45,000,000) (equal to 5% of the Purchase Price), payable by Penterra under SPA § 8.3(a). However, the reverse termination fee is triggered solely in the event of a termination resulting from Buyer's failure to consummate the Transactions due to the failure of Buyer's financing — that is, Buyer's inability to fund the Purchase Price at closing. The reverse termination fee was specifically negotiated as a remedy for financing risk and is expressly limited to that circumstance.
Penterra is not terminating the SPA due to a financing failure. The $500,000,000 committed term loan facility from Summit Ridge Capital Partners, LP and Ironclad Trust Company, N.A. remains in full force and effect and available for draw. Furthermore, Penterra maintains approximately $2.1 billion in cash and cash equivalents on its balance sheet, more than sufficient to fund the $400,000,000 cash portion of the purchase price. The termination is based solely on the failure of Buyer's closing conditions under SPA §§ 7.2(a) and 7.2(b), arising from the occurrence of a Material Adverse Effect and the corresponding inability to bring down the Company's representations and warranties.
Accordingly, the reverse termination fee is not payable by Penterra upon termination under Section 8.1(d).
C. No Other Termination Payments
No breakup fee, termination fee, expense reimbursement obligation, or other payment is owed by Penterra upon a valid termination of the SPA pursuant to Section 8.1(d). The only other termination payment contemplated by the SPA is the Target Termination Fee of Thirty-Six Million Dollars ($36,000,000) (equal to 4% of the Purchase Price), which is payable by the Sellers and the Company solely in the event of a termination resulting from the Company's or the Sellers' breach of the no-shop provision set forth in SPA § 5.4. The no-shop provision is not at issue here, and the Target Termination Fee is accordingly not implicated.
VI. Assessment of Veridian's Counterarguments
A. Veridian's Position (as Articulated in September 13, 2024 Response)
As noted above, Veridian, through Zalcourt Archer & Cole LLP, delivered a formal response to Penterra's Deficiency Notice on September 13, 2024. Veridian's response advanced the following principal arguments in support of its position that no MAE has occurred and that Penterra is obligated to proceed to closing:
1. Clinical Data is Preliminary. Veridian asserts that the Marlowe Asset Management-2 interim analysis data is preliminary and does not constitute a final readout of the trial. Veridian argues that interim analyses are, by their nature, subject to significant statistical uncertainty and that the final data, once available, may present a materially different safety and efficacy profile.
2. Protocol Amendment Addresses Safety Concerns. Veridian contends that the Protocol v4.0 amendment, which introduces mandatory tocilizumab prophylaxis and reduces the starting dose of VRD-4187 from 1.5 mg/kg to 0.75 mg/kg, adequately addresses the safety signal identified in the interim analysis and demonstrates that the Company is taking proactive and scientifically appropriate steps to manage the risk.
3. FDA Partial Clinical Hold is Routine. Veridian characterizes the FDA's partial clinical hold as a routine regulatory action that is a standard part of the drug development process and that is expected to be resolved through the standard complete response mechanism within a reasonable timeframe.
4. Delaware's Exacting MAE Standard. Veridian argues that the facts do not satisfy Delaware's exacting standard for finding an MAE, emphasizing the durational significance requirement and the historically high bar that Delaware courts have set for buyers seeking to invoke MAE provisions.
B. Calderwood & Harkness's Assessment of Veridian's Arguments
Calderwood & Harkness has carefully analyzed each of Veridian's arguments and, for the reasons set forth below, concludes that they are not persuasive, either individually or in the aggregate.
"Preliminary Data" Argument. Veridian's characterization of the Marlowe Asset Management-2 data as "preliminary" is misleading and legally insufficient to defeat Penterra's MAE claim. The data is derived from a randomized, open-label Phase II clinical trial involving 387 patients across 42 clinical sites — a robust and statistically powered dataset by any reasonable clinical standard. This is not preliminary preclinical data or early-phase exploratory data from a small cohort of patients. The DMC — an independent body specifically chartered to monitor patient safety and data integrity — reviewed the interim data and reached the extraordinary conclusion that enrollment should be suspended and dosing should be modified. The DMC's recommendation reflects its independent scientific judgment that the data is of sufficient reliability and gravity to warrant immediate action.
Furthermore, Delaware law does not require a buyer to wait for "final" data before concluding that an MAE has occurred. The MAE definition speaks in terms of events that have had or "would reasonably be expected to have" a material adverse effect — language that encompasses events whose full impact has not yet been realized but whose implications are reasonably foreseeable. The Marlowe Asset Management-2 interim data, combined with the FDA clinical hold, provides a more than sufficient basis for concluding that an MAE has occurred or would reasonably be expected to occur.
Protocol Amendment Argument. Veridian's reliance on the Protocol v4.0 amendment as a cure for the safety signal is, in Calderwood & Harkness's assessment, counterproductive to Veridian's position. Rather than demonstrating that the safety concern has been addressed, the nature of the protocol amendment underscores the severity of the problem:
• The 50% dose reduction — from 1.5 mg/kg to 0.75 mg/kg — is not a minor adjustment. It represents a fundamental change in the dosing regimen that introduces entirely new uncertainties regarding whether VRD-4187 will demonstrate any meaningful efficacy at the lower dose. If the drug showed no statistically significant efficacy advantage over standard of care at 1.5 mg/kg, there is no scientific basis for expecting that it will perform better at half the dose.
• The addition of mandatory prophylactic tocilizumab — itself a significant immunomodulatory agent with its own side effect profile — adds complexity to the treatment regimen and further constrains the commercial potential of VRD-4187 by requiring patients to receive an additional medication before each dose.
• Most critically, the protocol amendment does not reverse the seven treatment-related deaths that have already occurred. Those deaths are a permanent part of VRD-4187's clinical record and will be prominently featured in any safety review conducted by the FDA or other regulatory authorities.
In sum, the protocol amendment is evidence of the severity of the safety problem, not its resolution. It introduces new and significant uncertainties while failing to remediate the fundamental clinical and regulatory concerns.
FDA Hold as "Routine." Veridian's characterization of the partial clinical hold as "routine" is factually inaccurate and legally unpersuasive. A partial clinical hold is an affirmative regulatory determination by the FDA that clinical trial subjects face "unreasonable and significant risk." The FDA does not impose clinical holds routinely or as a matter of course; to the contrary, clinical holds are relatively rare and reflect serious safety concerns that the agency believes cannot be adequately managed through the standard clinical trial oversight process.
Moreover, the timeline for resolution of a clinical hold is uncertain and lies entirely within the discretion of the FDA. There is no guaranteed timeline for the FDA's review of a complete response, and the FDA may require additional clinical data, preclinical studies, or other information before considering modification or removal of the hold. The assertion that the hold "is expected to be resolved" within a reasonable timeframe is speculative and unsupported by any commitment or communication from the FDA.
Delaware's "Exacting" MAE Standard. Calderwood & Harkness acknowledges that Delaware courts have historically set a high bar for MAE claims and that buyers have, until the Akorn decision, been uniformly unsuccessful in establishing the occurrence of an MAE. However, the Akorn decision itself demonstrates that the bar, while high, can be met when the facts warrant it. The facts presented here — a clinical-stage company with no revenue whose lead and sole material asset suffered catastrophic safety results in a randomized Phase II trial, demonstrated no efficacy advantage over the standard of care, and is subject to an active FDA clinical hold — present a compelling case for the occurrence of an MAE that is arguably stronger than the facts in Akorn in certain respects, particularly with respect to the specificity and severity of the adverse event.
Overall Assessment. While Veridian's arguments may generate litigation risk — as any vigorous advocacy by experienced counsel will — they do not, in Calderwood & Harkness's considered judgment, undermine the fundamental analysis supporting the conclusion that a Material Adverse Effect has occurred. The clinical-stage nature of Veridian's business, its complete dependence on VRD-4187's success, and the severity of the Marlowe Asset Management-2 data and FDA action make this a strong case for the buyer under Delaware law.
VII. Litigation Risk Assessment
A. Anticipated Claims by Veridian
Calderwood & Harkness anticipates that Veridian and/or the Stockholder Representative will pursue the following claims in the event Penterra terminates the SPA:
Breach of Contract. Veridian will allege that Penterra breached the SPA by wrongfully refusing to consummate the closing and by issuing an invalid termination notice. Veridian will argue that no MAE occurred, that the closing conditions were satisfied (or waivable), and that Penterra's termination was therefore a repudiation of its contractual obligations.
Specific Performance. SPA § 10.12 expressly grants the Sellers the right to seek specific performance to compel the closing of the Transactions, subject to satisfaction of the conditions set forth in Article VII. Veridian's counsel, Zalcourt Archer & Cole LLP, has indicated in prior correspondence that the Sellers intend to pursue specific performance as their primary remedy, seeking a court order requiring Penterra to consummate the acquisition on the terms set forth in the SPA.
Expectation Damages. In the alternative, or in addition to specific performance, Veridian may seek expectation damages measured as the difference between the $900,000,000 purchase price and the current fair market value of the Veridian equity. Veridian will likely argue that the diminution in Veridian's value is attributable not to the clinical data itself but to Penterra's wrongful termination and the resulting disruption to Veridian's business and ability to pursue alternative transactions.
Anticipated Forum. Pursuant to SPA § 10.6, all disputes arising under or in connection with the SPA are subject to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if the Court of Chancery declines to accept jurisdiction, any state court located in the State of Delaware and, in the event such courts decline to exercise jurisdiction, any federal court of the United States of America sitting in the State of Delaware). Calderwood & Harkness expects that any action by Veridian will be filed in the Court of Chancery, which has extensive experience adjudicating MAE disputes.
Anticipated Timeline. Based on the September 13, 2024 Veridian Response and subsequent communications between counsel, Calderwood & Harkness anticipates that Veridian may file suit as early as November 15, 2024, and likely no later than late November or early December 2024, in advance of the Outside Date.
B. Penterra's Defenses
Calderwood & Harkness has identified the following principal defenses available to Penterra in any litigation arising from the termination:
Valid Termination Under § 8.1(d). Penterra's primary defense will be that it validly exercised its termination right under SPA § 8.1(d) based on the failure of the closing conditions set forth in Sections 7.2(a) and 7.2(b). This defense is supported by the detailed analysis set forth in Sections IV and V of this memorandum.
Material Adverse Effect. The core substantive defense is that a Material Adverse Effect has occurred within the meaning of SPA § 1.1, as demonstrated by the Marlowe Asset Management-2 interim data, the FDA partial clinical hold, and the Broadleaf expert assessment. Calderwood & Harkness believes this defense is well-supported by the factual record and is consistent with the analytical framework established by the Delaware courts in the Akorn line of cases.
Closing Conditions Were Not and Could Not Be Satisfied. As a factual and legal matter, the conditions to Buyer's closing obligation were not satisfied at the time of termination and were incapable of being satisfied prior to the Outside Date. This defense is independent of, but closely related to, the MAE defense.
Specific Performance Is Unavailable. Specific performance is an equitable remedy that is available only when the conditions precedent to the party's performance have been satisfied or waived. Because the closing conditions under Section 7.2 were not satisfied, and Penterra has not waived them, the Court of Chancery should decline to order specific performance. This principle is well-established under Delaware law: a court will not compel a party to perform an obligation when the contractual conditions to that obligation have not been met. See Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008) (analyzing the relationship between closing conditions and the availability of specific performance).
Equitable Considerations. Even if specific performance were technically available as a matter of contract, Calderwood & Harkness would argue that a court should exercise its equitable discretion to decline to order Penterra to pay $900,000,000 for a drug candidate with a severely compromised safety profile, no demonstrated efficacy advantage, and an active FDA clinical hold. The equitable considerations weigh strongly against compelling a buyer to consummate an acquisition of this magnitude under such circumstances.
C. Probability Assessment
Calderwood & Harkness has conducted a probability assessment of the principal litigation outcomes, subject to the usual caveats that litigation outcomes are inherently uncertain and depend on a wide range of factors including the court's assessment of the evidence, witness credibility, and the evolution of the factual record through discovery.
Specific Performance. Calderwood & Harkness assesses the risk of Veridian prevailing on a claim for specific performance as low to moderate. This assessment is based on the strength of the factual record supporting the MAE conclusion, the independence and credibility of the Broadleaf expert assessment, the objective nature of the clinical data and FDA regulatory action, and the well-established principle that specific performance is unavailable when closing conditions have not been satisfied. The principal risk factor is the historically high bar that Delaware courts have applied to MAE claims, which creates some residual uncertainty notwithstanding the strength of the factual record.
Expectation Damages. Calderwood & Harkness assesses the risk of a court ordering expectation damages as moderate, but notes that Veridian would bear the burden of proving both (a) that an MAE did not occur (which is the threshold issue) and (b) the quantum of its damages, which would require demonstrating what Veridian's equity would have been worth absent the termination. The latter burden is particularly challenging for a clinical-stage company whose value is, by its nature, highly speculative and subject to substantial uncertainty. Moreover, any damages calculation would necessarily account for the diminution in Veridian's value attributable to the clinical data and FDA hold — developments that are independent of Penterra's termination.
Key Risk Factor. As noted, the principal risk factor in any MAE litigation is the historically exacting standard applied by Delaware courts. Prior to Akorn, no buyer had ever successfully proven an MAE in a Delaware court proceeding. However, the facts presented here — involving a clinical-stage company whose lead asset suffered catastrophic safety results with no offsetting efficacy benefit and an active FDA clinical hold — present a stronger case than most. The Akorn precedent is directly applicable and supportive of Penterra's position, as it establishes that an MAE can be proven when the adverse eve

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

MEMORANDUM

Record

Parties

Dates

Amounts