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

deficiency-notice-penterra-to-veridian.docx DOCUMENT M&A / Corporate

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PRIVILEGED & CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Attorneys at Law

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

September 6, 2024

VIA OVERNIGHT COURIER AND ELECTRONIC MAIL

Dr. Julian Marek Chief Executive Officer and Rachel Stein-Goldberg General Counsel Veridian Biosciences, Inc. 550 Gateway Drive Cambridge, Massachusetts 02142

David Ng Managing Partner Crestline Ventures, LP In his capacity as Stockholder Representative under the Stock Purchase Agreement (as defined below)

Copy to:

Rebecca Whitmore, Partner Zalcourt Archer & Cole LLP One Federal Street, 30th Floor Boston, Massachusetts 02110

Re: Deficiency Notice Pursuant to the Stock Purchase Agreement, dated June 10, 2024 (the "Agreement"), by and among Penterra Pharmaceuticals Corp. ("Buyer"), Veridian Biosciences, Inc. (the "Company"), the Sellers identified therein, and David Ng, as Stockholder Representative — Notice of Non-Satisfaction of Conditions to Buyer's Obligation to Close

Dear Dr. Marek, Ms. Stein-Goldberg, and Mr. Ng:

1. Introduction and Purpose of Notice

We are counsel to Penterra Pharmaceuticals Corp. ("Penterra" or "Buyer"), a Delaware corporation, in connection with that certain Stock Purchase Agreement, dated as of June 10, 2024 (the "Agreement"), by and among Penterra, Veridian Biosciences, Inc., a Delaware corporation (the "Company"), the several stockholders of the Company identified on the signature pages thereto (collectively, the "Sellers"), and David Ng, in his capacity as Stockholder Representative. The Agreement was executed on behalf of Penterra by its Chief Executive Officer, Dr. Anand Rajagopal, and on behalf of the Company by its Chief Executive Officer, Dr. Julian Marek, and provides for the acquisition by Penterra of one hundred percent (100%) of the outstanding capital stock of the Company for an aggregate purchase price of Nine Hundred Million Dollars ($900,000,000) in cash, subject to customary adjustments as set forth therein.

The purpose of this letter is to provide the Company and the Stockholder Representative with formal written notice that, based on events and developments that have occurred since the date of the Agreement and that are described in detail below, certain conditions precedent to Buyer's obligation to consummate the Closing (as defined in the Agreement) set forth in Sections 7.2(a) and 7.2(b) of the Agreement have not been satisfied, are not currently satisfied, and, based on the information available to Buyer as of the date hereof, cannot reasonably be expected to be satisfied prior to the Outside Date. Specifically, Buyer has determined, based on a thorough review of the relevant facts and circumstances, that a Material Adverse Effect (as defined in Section 1.1 of the Agreement) has occurred with respect to the Company since the date of the Agreement, thereby rendering unsatisfied both the bring-down condition in Section 7.2(a) and the no-Material Adverse Effect condition in Section 7.2(b).

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement.

This notice is being provided as a matter of good faith and in the exercise of Buyer's rights under the Agreement. Nothing contained in this notice shall constitute, nor shall it be construed as, a waiver, release, or modification of any of Buyer's rights or remedies under the Agreement, at law, or in equity, including but not limited to Buyer's right to terminate the Agreement pursuant to Section 8.1(d) thereof, and all such rights and remedies are hereby expressly reserved. Buyer further reserves the right to supplement, amend, or modify this notice at any time based upon additional information that may come to Buyer's attention.

2. Factual Background — Marlowe Asset Management-2 Clinical Trial Developments

2.1 The Marlowe Asset Management-2 Phase II Clinical Trial

As the Company and the Stockholder Representative are aware, VRD-4187 is the Company's lead clinical candidate. VRD-4187 is a bispecific T-cell engager designed to target delta-like ligand 3 ("DLL3")-expressing tumors, principally for the treatment of extensive-stage small cell lung cancer ("ES-SCLC"), and was developed using the Company's proprietary VeriTCE bispecific antibody engineering platform. VRD-4187 was, and remains, the cornerstone of the Company's clinical-stage pipeline and represented the primary basis upon which the transaction was valued and upon which Buyer entered into the Agreement. Indeed, the parties' respective representatives acknowledged during the course of negotiations leading to the execution of the Agreement that the clinical progress and regulatory trajectory of VRD-4187 were the critical drivers of the enterprise value attributed to the Company.

The principal clinical trial for VRD-4187 is Marlowe Asset Management-2 (ClinicalTrials.gov Identifier: NCT05837291), a randomized, open-label Phase II clinical trial being conducted at forty-two (42) clinical sites across the United States and the European Union. As of the date of the Agreement, the Marlowe Asset Management-2 trial had enrolled a total of three hundred eighty-seven (387) patients, with one hundred ninety-four (194) patients randomized to the VRD-4187 treatment arm and one hundred ninety-three (193) patients randomized to the control arm receiving standard-of-care chemotherapy.

At the time of execution of the Agreement, the Marlowe Asset Management-2 trial was ongoing, and the Sellers represented and warranted, among other things, the accuracy and completeness of information provided to Buyer regarding the Company's clinical programs, the status and conduct of the Marlowe Asset Management-2 trial, and the Company's interactions with the U.S. Food and Drug Administration ("FDA") and other regulatory authorities. Buyer relied upon these representations and warranties in entering into the Agreement and agreeing to the purchase price set forth therein.

2.2 Data Monitoring Committee Interim Analysis — August 14, 2024

On or about August 14, 2024, the independent Data Monitoring Committee ("DMC") for the Marlowe Asset Management-2 trial conducted a pre-planned interim analysis of the trial data in accordance with the trial protocol and the DMC charter. The DMC's interim analysis revealed statistically significant and clinically alarming safety signals in the VRD-4187 treatment arm that are deeply concerning and that materially alter the risk-benefit profile of VRD-4187. The DMC's principal findings included the following:

(a) Grade ≥3 Cytokine Release Syndrome ("CRS") Incidence. The incidence of Grade 3 or higher cytokine release syndrome in the VRD-4187 treatment arm was 23.4%, compared with 4.1% in the control arm — a difference of 19.3 percentage points. This rate of severe CRS is substantially elevated relative to clinically acceptable thresholds and represents a significant and potentially life-threatening toxicity burden that would materially impair the approvability and commercial viability of VRD-4187.

(b) Treatment-Related Deaths. Seven (7) treatment-related deaths occurred in the VRD-4187 treatment arm (representing 3.6% of the 194 patients enrolled in that arm), compared with one (1) treatment-related death in the control arm (representing 0.5% of the 193 patients enrolled in that arm). The treatment-related mortality rate in the VRD-4187 arm is thus approximately seven times greater than that observed in the control arm. These deaths were attributed by the investigators to cytokine release syndrome and related immune-mediated toxicities.

(c) Overall Response Rate ("ORR"). The overall response rate in the VRD-4187 treatment arm was 31.4%, compared with 28.9% in the control arm. This difference of 2.5 percentage points was not statistically significant (p = 0.58), indicating that VRD-4187 did not demonstrate a meaningful or clinically significant efficacy benefit over standard-of-care chemotherapy. The lack of a statistically significant efficacy signal, when viewed in conjunction with the substantially elevated safety risk, fundamentally undermines the therapeutic rationale for VRD-4187.

Based on these findings, the DMC recommended the immediate suspension of new enrollment in the Marlowe Asset Management-2 trial and the implementation of dose modifications for patients currently receiving VRD-4187.

Buyer received notice of the DMC's findings and recommendation from the Company on August 16, 2024, pursuant to the notification obligations set forth in Section 5.1(b) of the Agreement, which requires the Company to notify Buyer promptly of any event, change, or development that would reasonably be expected to give rise to a Material Adverse Effect or that would reasonably be expected to cause any condition to Buyer's obligation to close not to be satisfied. Buyer notes that the Company's notification was provided approximately two (2) business days after the DMC's findings were communicated to the Company's management, and Buyer reserves the right to investigate whether this delay was consistent with the "prompt" notification standard set forth in the Agreement.

2.3 Broadleaf Scientific Assessment

On August 19, 2024, following receipt of the Company's notification regarding the DMC interim analysis, Penterra engaged Broadleaf Scientific Consulting LLC ("Broadleaf"), Penterra's independent clinical due diligence advisor, to conduct a supplemental clinical assessment of the Marlowe Asset Management-2 data. The Broadleaf engagement was led by Dr. Raymond Kapoor, a recognized expert in immuno-oncology clinical trial design and bispecific antibody therapeutics, with significant experience in the evaluation of CRS risk profiles and risk-benefit assessments for T-cell engager modalities.

Broadleaf delivered its supplemental clinical assessment to Penterra on August 19, 2024. The assessment confirmed the severity and clinical significance of the adverse safety data observed in the Marlowe Asset Management-2 interim analysis, including the Grade ≥3 CRS rate, the treatment-related mortality rate, and the absence of a statistically significant efficacy benefit. Broadleaf further concluded that the safety data observed in the VRD-4187 treatment arm presented a substantially elevated risk profile that would be difficult to mitigate through dose modifications or prophylactic measures alone, and that the lack of a meaningful efficacy benefit over standard of care called into serious question whether VRD-4187 could achieve a favorable risk-benefit assessment necessary for regulatory approval. Broadleaf's assessment also noted that the observed safety signals were consistent with a class-effect toxicity risk inherent in the VeriTCE platform's mechanism of action, raising additional concerns regarding the broader pipeline implications for the Company's other preclinical and early-stage clinical programs utilizing the same platform.

2.4 FDA Partial Clinical Hold — August 22, 2024

On August 22, 2024, the U.S. Food and Drug Administration imposed a partial clinical hold on VRD-4187 under Investigational New Drug Application ("IND") No. 154832, pending investigation of the CRS-related deaths observed in the Marlowe Asset Management-2 clinical trial. The FDA communicated this action to the Company in accordance with 21 C.F.R. § 312.42.

The partial clinical hold prohibits the enrollment of new patients in the Marlowe Asset Management-2 trial and restricts certain trial activities — including dose escalation and treatment of patients in the VRD-4187 arm who have not yet received a complete first cycle — until the FDA's safety concerns are resolved to the Agency's satisfaction. The Company is required to submit a complete response to the FDA's clinical hold letter addressing the safety concerns, proposed risk mitigation measures, and updated benefit-risk analyses before the FDA will consider lifting the hold.

The imposition of a partial clinical hold by the FDA is among the most significant regulatory actions that can be taken with respect to an investigational drug product. It reflects the FDA's determination that there is an unreasonable and significant risk of illness or injury to the subjects enrolled in the trial. The clinical hold introduces substantial regulatory uncertainty regarding the future development timeline, the potential approvability, and the ultimate commercial viability of VRD-4187. It is Buyer's understanding, based on publicly available regulatory guidance and historical precedent, that the resolution of a partial clinical hold can take many months and often requires the generation of substantial additional preclinical and clinical data, with no assurance that the hold will ultimately be lifted.

2.5 Company's Protocol Amendment

Buyer acknowledges that the Company implemented a protocol amendment (Protocol v4.0, effective August 28, 2024) to the Marlowe Asset Management-2 trial. Buyer understands that the protocol amendment includes, among other changes, the addition of mandatory tocilizumab prophylaxis for patients in the VRD-4187 treatment arm and a reduction of the starting dose of VRD-4187 from 1.5 mg/kg to 0.75 mg/kg — a fifty percent (50%) dose reduction.

While Buyer acknowledges the Company's implementation of these measures, Buyer respectfully submits that Protocol v4.0 does not remediate the fundamental concerns described herein. Specifically:

(a) The protocol amendment does not undo or remediate the adverse clinical data already observed in the Marlowe Asset Management-2 trial, including the seven (7) treatment-related deaths and the 23.4% Grade ≥3 CRS rate. These data are now part of the clinical record for VRD-4187 and will be considered by the FDA and other regulatory authorities in any future regulatory submission.

(b) The protocol amendment does not, in and of itself, resolve the FDA's partial clinical hold. The hold remains in effect, and the FDA has not indicated that the measures implemented under Protocol v4.0 are sufficient to address its safety concerns. The Company will need to submit a formal complete response to the FDA, and the timeline for the FDA's review and any decision to lift the hold remains uncertain.

(c) The fifty percent (50%) reduction in the starting dose of VRD-4187 raises significant questions regarding whether VRD-4187 can achieve a therapeutically effective exposure level at the modified dose. Given that VRD-4187 failed to demonstrate a statistically significant efficacy advantage over standard of care at the original dose of 1.5 mg/kg, it is far from clear — and indeed appears unlikely — that a dose of 0.75 mg/kg will yield an improved efficacy profile sufficient to support a favorable risk-benefit assessment.

(d) The addition of mandatory tocilizumab prophylaxis, while a recognized approach to CRS risk mitigation, adds complexity, cost, and logistical burden to the treatment regimen, may impact the immunological activity and efficacy of VRD-4187, and does not guarantee prevention of severe or fatal CRS events.

Accordingly, while Buyer does not question the Company's good faith in implementing Protocol v4.0, the protocol amendment does not alter Buyer's assessment that a Material Adverse Effect has occurred.

3. Non-Satisfaction of Closing Condition Under Section 7.2(a) — Bring-Down of Representations and Warranties

Section 7.2(a) of the Agreement provides that Buyer's obligation to consummate the Closing is conditioned upon the accuracy of the representations and warranties of the Sellers and the Company contained in Article III of the Agreement, both as of the date of the Agreement and as of the Closing Date (except for representations and warranties that speak as of a specific date, which need only be accurate as of such date), subject in each case to a Material Adverse Effect qualification. Specifically, Section 7.2(a) requires that the representations and warranties of the Sellers set forth in Article III (other than the Fundamental Representations) be true and correct in all respects (without giving effect to any qualifications or limitations as to "materiality" or "Material Adverse Effect" contained therein) as of the date of the Agreement and as of the Closing Date as though made on and as of such date, except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Article III of the Agreement contains extensive representations and warranties by the Sellers and the Company regarding, among other things:

(a) The business, operations, financial condition, and prospects of the Company, including representations that the Company Disclosure Schedule accurately and completely sets forth all material information regarding the Company's business and financial condition (Section 3.7);

(b) The status, conduct, and results of the Company's clinical trials, including specifically the Marlowe Asset Management-2 trial, including representations that all clinical trials are being conducted in compliance with applicable protocols, good clinical practices, and applicable laws, and that the Company has not received any notices from the FDA or any other regulatory authority regarding any material safety issues with respect to the Company's product candidates (Section 3.14);

(c) Regulatory compliance and FDA matters, including representations that the Company is in compliance in all material respects with all applicable laws and regulations administered by the FDA and comparable foreign regulatory authorities, and that all information submitted to the FDA and other regulatory authorities was accurate and complete in all material respects at the time of submission (Section 3.15);

(d) The absence of undisclosed liabilities, including representations that the Company has no liabilities or obligations of a nature required to be disclosed on a balance sheet prepared in accordance with GAAP, except as specifically disclosed in the Company Disclosure Schedule or the Financial Statements (Section 3.8); and

(e) The absence of certain changes since the Balance Sheet Date, including representations that, since December 31, 2023, there has not been any event, change, occurrence, or development that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on the Company (Section 3.9).

Based on the developments described in detail in Section 2 above, certain of the Sellers' representations and warranties in Article III of the Agreement are no longer true and correct as of the date hereof and cannot reasonably be expected to be true and correct as of the Closing Date. The Marlowe Asset Management-2 clinical data — including the 23.4% Grade ≥3 CRS rate, the seven (7) treatment-related deaths (3.6% mortality in the VRD-4187 arm), and the non-statistically significant overall response rate (ORR of 31.4% vs. 28.9%, p = 0.58) — together with the FDA's imposition of a partial clinical hold on IND 154832, render certain of the Sellers' representations and warranties inaccurate in a manner that, individually and in the aggregate, constitutes, or would reasonably be expected to constitute, a Material Adverse Effect on the business, results of operations, financial condition, assets, and prospects of the Company, taken as a whole.

By way of illustration and without limitation:

(i) The representations in Section 3.14 regarding the status and conduct of clinical trials cannot be brought down as true and correct when the Company's lead clinical trial has been suspended by the DMC and is subject to an FDA partial clinical hold due to an unacceptable safety profile.

(ii) The representations in Section 3.15 regarding regulatory compliance and FDA matters cannot be brought down as true and correct given the imposition of the partial clinical hold, which reflects the FDA's determination that VRD-4187 poses an unreasonable risk to clinical trial subjects.

(iii) The representations in Section 3.9 regarding the absence of certain changes since the Balance Sheet Date cannot be brought down as true and correct given that the Marlowe Asset Management-2 data and the FDA regulatory action constitute events that, individually and in the aggregate, have had and would reasonably be expected to have a Material Adverse Effect.

Accordingly, the condition to Buyer's obligation to close set forth in Section 7.2(a) of the Agreement is not satisfied as of the date hereof and cannot, based on the information currently available to Buyer, reasonably be expected to be satisfied as of the Closing Date.

4. Non-Satisfaction of Closing Condition Under Section 7.2(b) — No Material Adverse Effect

Section 7.2(b) of the Agreement provides that Buyer's obligation to consummate the Closing is separately conditioned upon the absence, since the date of the Agreement, of any event, change, development, occurrence, condition, or effect that, individually or in the aggregate, 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 by the Agreement. The term "Material Adverse Effect" is defined in Section 1.1 of the Agreement.

4.1 Occurrence of a Material Adverse Effect

The clinical trial data from the Marlowe Asset Management-2 DMC interim analysis, as set forth in detail in Section 2 above, demonstrates that VRD-4187 — the Company's lead and most valuable clinical-stage asset, and the primary basis upon which the $900,000,000 purchase price was negotiated and agreed — has a fundamentally impaired safety and efficacy profile. The key findings are summarized as follows:

(a) Severely Elevated Safety Risk. The Grade ≥3 CRS incidence rate in the VRD-4187 treatment arm (23.4%) was more than five times greater than the rate observed in the control arm (4.1%). A 23.4% rate of severe cytokine release syndrome — a potentially life-threatening immune-mediated toxicity — represents a toxicity burden that is substantially above the threshold that the FDA and the medical community would be expected to consider acceptable for a product candidate that does not demonstrate a commensurate efficacy benefit.

(b) Unacceptable Treatment-Related Mortality. The treatment-related mortality rate in the VRD-4187 arm (3.6%, or 7 of 194 patients) was approximately seven times greater than the rate observed in the control arm (0.5%, or 1 of 193 patients). Seven treatment-related deaths in a Phase II trial of 194 patients is an extraordinarily adverse outcome that raises fundamental questions about the safety of VRD-4187 and the Company's VeriTCE platform.

(c) Absence of Meaningful Efficacy Benefit. The overall response rate in the VRD-4187 arm (31.4%) was not statistically significantly different from the ORR in the control arm (28.9%), with a p-value of 0.58. This finding indicates that VRD-4187 failed to demonstrate a clinically meaningful efficacy advantage over existing standard-of-care chemotherapy. In the absence of an efficacy benefit, the elevated safety risks associated with VRD-4187 cannot be justified on a risk-benefit basis.

The FDA's partial clinical hold imposed on August 22, 2024, under IND 154832, compounds and exacerbates these already devastating clinical findings. The hold imposes regulatory restrictions that prevent the continued enrollment and advancement of the Marlowe Asset Management-2 trial in its current form, introduces substantial uncertainty regarding the timeline and pathway for the future clinical development of VRD-4187, and reflects the FDA's own independent assessment that the safety profile of VRD-4187 presents an unreasonable risk to patients. Resolution of the partial clinical hold will require the Company to satisfy the FDA's requirements, which may include the generation of substantial additional preclinical and clinical data, the implementation of further protocol modifications, and potentially the redesign of the clinical trial — all of which would entail significant additional time, expense, and uncertainty.

It is critically important to note that VRD-4187 was the primary — indeed, the overwhelming — value driver of the contemplated transaction. The Company is a clinical-stage biopharmaceutical company with no approved products, no marketed products, and no product revenue. The Company's audited financial statements for the fiscal year ended December 31, 2023, reflect total revenue of zero dollars ($0) and a net loss. The Company's enterprise value, and accordingly the purchase price of $900,000,000 agreed to by the parties, was premised almost entirely upon the clinical and commercial prospects of VRD-4187 and, to a lesser extent, the Company's earlier-stage pipeline candidates built on the VeriTCE platform. The Marlowe Asset Management-2 data and the FDA regulatory action have fundamentally undermined those prospects.

The cumulative impact of the adverse clinical data and the FDA regulatory action has fundamentally and durably altered the Company's business prospects. The events described herein are not transient or temporary in nature; they reflect an intrinsic safety-efficacy profile of VRD-4187 that has been revealed through rigorous clinical investigation and that is now part of the permanent clinical record for the product candidate. The material adverse effect on the business, results of operations, financial condition, and assets of the Company, taken as a whole, is reasonably expected to persist for a duration that is significant — and likely indefinite — when measured against the overall time horizon of the Company's business and the expected timeline for the development and commercialization of its product candidates.

Accordingly, a Material Adverse Effect has occurred within the meaning of Section 1.1 of the Agreement since the date of the Agreement, and the condition to Buyer's obligation to close set forth in Section 7.2(b) of the Agreement is not satisfied.

4.2 Inapplicability of MAE Carveouts

Buyer has carefully considered the carveouts to the definition of "Material Adverse Effect" set forth in Section 1.1 of the Agreement. The Agreement provides that certain categories of events, changes, developments, and effects shall not be taken into account in determining whether a Material Adverse Effect has occurred, specifically:

(i) changes in general economic or political conditions in the United States or any other jurisdiction in which the Company operates;

(ii) changes in conditions generally affecting the biotechnology or pharmaceutical industries in the United States or any other jurisdiction in which the Company operates;

(iii) changes in applicable law or in generally accepted accounting principles ("GAAP") or the interpretation or enforcement thereof;

(iv) pandemics, epidemics, or disease outbreaks (including COVID-19);

(v) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires, or other natural disasters, weather conditions, acts of war (whether or not declared), armed hostility, sabotage, or terrorism;

(vi) changes in financial, banking, or securities markets generally (including any disruption thereof and any decline in the price of any security or any market index); and

(vii) the announcement or pendency of the Transactions contemplated by the Agreement.

None of these carveouts is applicable to the matters described in this notice. The Marlowe Asset Management-2 clinical data and the FDA's imposition of a partial clinical hold on IND 154832 are company-specific events arising directly from the safety and efficacy profile of VRD-4187 — the Company's own proprietary product candidate — as revealed through the Marlowe Asset Management-2 clinical trial. These events are not attributable to, and did not arise from or relate to, general economic conditions, conditions generally affecting the biotechnology or pharmaceutical industries, changes in applicable law or GAAP, pandemics, natural disasters or acts of war or terrorism, changes in financial markets, or the announcement or pendency of the Transactions. They are the direct result of the clinical investigation of VRD-4187 in human subjects and the FDA's regulatory response thereto.

Even if any of the carveouts described above were arguably applicable to the matters described herein — which Buyer expressly does not concede — the disproportionate impact exception set forth in the definition of "Material Adverse Effect" in Section 1.1 of the Agreement would apply. The Agreement provides that the carveouts described above shall not apply to the extent that any such event, change, development, occurrence, condition, or effect has a disproportionate adverse impact on the Company relative to other companies of comparable size operating in the biotechnology industry in the United States. The clinical trial results for VRD-4187 and the FDA's imposition of a partial clinical hold are events that are entirely specific to VRD-4187, the Company's proprietary VeriTCE platform, and the Company's own IND application. These events do not affect comparably situated biotechnology companies, and they have had, and would reasonably be expected to continue to have, a disproportionate adverse impact on the Company relative to such comparably situated companies.

Accordingly, the carveouts to the definition of Material Adverse Effect do not preclude a finding that a Material Adverse Effect has occurred.

5. Reservation of Rights

Without limiting the generality of the foregoing, Penterra hereby expressly reserves all of its rights and remedies under the Agreement, at law, and in equity, including without limitation the following:

(a) The right to terminate the Agreement pursuant to Section 8.1(d) thereof, which provides that Buyer may terminate the Agreement if any condition to Buyer's obligation to close set forth in Section 7.2 has not been satisfied or waived and such condition is incapable of being satisfied, or has not been cured, within thirty (30) calendar days after written notice thereof from Buyer to the Company and the Stockholder Representative;

(b) The right to decline to consummate the Closing for so long as the conditions set forth in Sections 7.2(a) and 7.2(b) of the Agreement remain unsatisfied, in accordance with the terms of the Agreement;

(c) The right to seek specific performance, injunctive relief, or other equitable remedies to the extent available under the Agreement and applicable law; and

(d) All other rights and remedies available to Buyer under the Agreement, the ancillary documents, or applicable law, whether at law or in equity.

Nothing in this letter shall be construed as a waiver, release, or modification of any of Buyer's rights or remedies under the Agreement, at law, or in equity. No delay or failure by Penterra in exercising any right or remedy under the Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. All rights and remedies of Penterra under the Agreement are cumulative and are not exclusive of any other rights or remedies provided by law or equity.

Buyer further expressly notes, for the avoidance of doubt, that the reverse termination fee provisions set forth in Section 8.3 of the Agreement are triggered solely by a failure or inability of Buyer to consummate the Closing as a result of the failure of the Buyer's financing condition set forth in Section 7.2(e) of the Agreement. No financing failure has occurred. The $500,000,000 committed term loan facility under Commitment Letter Ref. CL-2024-PPCA-0607, entered into by and among Summit Ridge Capital Partners, LP, as lead arranger, and Ironclad Trust Company, N.A., as administrative agent, remains in full force and effect, and no event has occurred that would excuse the lenders' obligations thereunder or that would cause a failure of any condition to funding. Moreover, Penterra had approximately $2.1 billion of unrestricted cash and cash equivalents on hand as of June 30, 2024 (based on its publicly reported Q2 2024 financial results), which, together with the committed term loan facility, is more than sufficient to fund the aggregate purchase price and all related transaction expenses. This notice is based solely on the non-satisfaction of Buyer's closing conditions under Sections 7.2(a) and 7.2(b) of the Agreement as a result of the occurrence of a Material Adverse Effect, and not on any financing failure or any unwillingness on the part of Buyer to fund the transaction.

6. Request for Response

Buyer respectfully requests that the Company and the Stockholder Representative respond in writing to this notice within ten (10) business days of the date hereof (i.e., on or before September 20, 2024), setting forth in reasonable detail any position the Company or the Stockholder Representative may have with respect to the matters described herein, including, without limitation, any basis on which the Company or the Stockholder Representative contends that (a) a Material Adverse Effect has not occurred, (b) any of the MAE carveouts in Section 1.1 of the Agreement apply, or (c) the conditions set forth in Sections 7.2(a) and 7.2(b) of the Agreement are in fact satisfied or are capable of being satisfied prior to the Outside Date.

In addition, Buyer requests that the Company provide any additional information, data, analyses, or assessments in its possession or control relating to VRD-4187, the Marlowe Asset Management-2 clinical trial (including the complete DMC interim analysis report, patient-level safety data, and any correspondence between the Company and the DMC), and the FDA partial clinical hold (including the complete text of the FDA's clinical hold letter and any correspondence between the Company and the FDA) that the Company believes is material to the assessment of whether a Material Adverse Effect has occurred. Buyer further requests any internal analyses, board presentations, or scientific advisory board memoranda prepared by or on behalf of the Company relating to the matters described herein.

Buyer expects the Company to continue to comply fully and in all respects with all of its obligations under the Agreement during the pendency of the matters described herein, including, without limitation:

(a) Its notification obligations under Section 5.1(b) of the Agreement, requiring the Company to promptly notify Buyer of any event, change, or development that has or would reasonably be expected to have a Material Adverse Effect or that would reasonably be expected to cause any condition to Buyer's obligation to close not to be satisfied;

(b) Its affirmative and negative operating covenants under Section 5.1 of the Agreement, requiring the Company to conduct its business in the ordinary course consistent with past practice and to refrain from taking certain actions without Buyer's prior written consent; and

(c) Its no-shop obligations under Section 5.4 of the Agreement, including the prohibition on the Company's soliciting, initiating, encouraging, or facilitating any inquiry, proposal, or offer relating to an Acquisition Proposal (as defined therein) from any third party.

Buyer will continue to monitor the situation closely and reserves the right to take any and all actions available to it under the Agreement, at law, or in equity, based upon the Company's response (or failure to respond) and any further developments.

7. Governing Law and Notices

This letter constitutes formal written notice and is being delivered in accordance with the notice provisions of Section 10.1 of the Agreement, by overnight courier and electronic mail to the addresses specified therein and on the first page of this letter.

This letter and the matters described herein shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of law principles that would result in the application of the laws of any other jurisdiction, pursuant to Section 10.6 of the Agreement.

Any disputes arising out of or relating to this notice, the Agreement, or the Transactions contemplated thereby shall be 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 over a particular matter, any state or federal court within the State of Delaware), as provided in Section 10.6 of the Agreement, and each party has irrevocably waived any objection to such jurisdiction and venue as set forth therein.

We are available to discuss this matter at your convenience and would welcome the opportunity to engage in constructive dialogue with the Company and its advisors. Please direct any correspondence or communications regarding this notice to the undersigned at the address and contact information set forth above.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Oliver Mackenzie Partner

On behalf of Penterra Pharmaceuticals Corp.

cc (via email and overnight courier):

Dr. Anand Rajagopal, Chief Executive Officer, Penterra Pharmaceuticals Corp., 1100 Meridian Boulevard, Suite 400, Princeton, NJ 08540

Thomas F. Holbrook, General Counsel & Secretary, Penterra Pharmaceuticals Corp.

Catherine M. Burgess, Chief Financial Officer, Penterra Pharmaceuticals Corp.

Natalie Reiner, SVP, Corporate Development, Penterra Pharmaceuticals Corp.

David Ng, Stockholder Representative, c/o Crestline Ventures, LP

Rebecca Whitmore, Partner, Zalcourt Archer & Cole LLP, One Federal Street, 30th Floor, Boston, MA 02110

Harrison Wexford, Partner, Calderwood & Harkness LLP

Megan Chu, Associate, Calderwood & Harkness LLP

A copy of this notice is being sent simultaneously to Zalcourt Archer & Cole LLP as counsel to the Company and the Sellers.

Delivery: Via Overnight Courier and Electronic Mail

PRIVILEGED & CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Attorneys at Law
200 Park Avenue, 42nd Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
September 6, 2024
VIA OVERNIGHT COURIER AND ELECTRONIC MAIL
Dr. Julian Marek Chief Executive Officer and Rachel Stein-Goldberg General Counsel Veridian Biosciences, Inc. 550 Gateway Drive Cambridge, Massachusetts 02142
David Ng Managing Partner Crestline Ventures, LP In his capacity as Stockholder Representative under the Stock Purchase Agreement (as defined below)
Copy to:
Rebecca Whitmore, Partner Zalcourt Archer & Cole LLP One Federal Street, 30th Floor Boston, Massachusetts 02110
Re: Deficiency Notice Pursuant to the Stock Purchase Agreement, dated June 10, 2024 (the "Agreement"), by and among Penterra Pharmaceuticals Corp. ("Buyer"), Veridian Biosciences, Inc. (the "Company"), the Sellers identified therein, and David Ng, as Stockholder Representative — Notice of Non-Satisfaction of Conditions to Buyer's Obligation to Close
Dear Dr. Marek, Ms. Stein-Goldberg, and Mr. Ng:
1. Introduction and Purpose of Notice
We are counsel to Penterra Pharmaceuticals Corp. ("Penterra" or "Buyer"), a Delaware corporation, in connection with that certain Stock Purchase Agreement, dated as of June 10, 2024 (the "Agreement"), by and among Penterra, Veridian Biosciences, Inc., a Delaware corporation (the "Company"), the several stockholders of the Company identified on the signature pages thereto (collectively, the "Sellers"), and David Ng, in his capacity as Stockholder Representative. The Agreement was executed on behalf of Penterra by its Chief Executive Officer, Dr. Anand Rajagopal, and on behalf of the Company by its Chief Executive Officer, Dr. Julian Marek, and provides for the acquisition by Penterra of one hundred percent (100%) of the outstanding capital stock of the Company for an aggregate purchase price of Nine Hundred Million Dollars ($900,000,000) in cash, subject to customary adjustments as set forth therein.
The purpose of this letter is to provide the Company and the Stockholder Representative with formal written notice that, based on events and developments that have occurred since the date of the Agreement and that are described in detail below, certain conditions precedent to Buyer's obligation to consummate the Closing (as defined in the Agreement) set forth in Sections 7.2(a) and 7.2(b) of the Agreement have not been satisfied, are not currently satisfied, and, based on the information available to Buyer as of the date hereof, cannot reasonably be expected to be satisfied prior to the Outside Date. Specifically, Buyer has determined, based on a thorough review of the relevant facts and circumstances, that a Material Adverse Effect (as defined in Section 1.1 of the Agreement) has occurred with respect to the Company since the date of the Agreement, thereby rendering unsatisfied both the bring-down condition in Section 7.2(a) and the no-Material Adverse Effect condition in Section 7.2(b).
Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement.
This notice is being provided as a matter of good faith and in the exercise of Buyer's rights under the Agreement. Nothing contained in this notice shall constitute, nor shall it be construed as, a waiver, release, or modification of any of Buyer's rights or remedies under the Agreement, at law, or in equity, including but not limited to Buyer's right to terminate the Agreement pursuant to Section 8.1(d) thereof, and all such rights and remedies are hereby expressly reserved. Buyer further reserves the right to supplement, amend, or modify this notice at any time based upon additional information that may come to Buyer's attention.
2. Factual Background — Marlowe Asset Management-2 Clinical Trial Developments
2.1 The Marlowe Asset Management-2 Phase II Clinical Trial
As the Company and the Stockholder Representative are aware, VRD-4187 is the Company's lead clinical candidate. VRD-4187 is a bispecific T-cell engager designed to target delta-like ligand 3 ("DLL3")-expressing tumors, principally for the treatment of extensive-stage small cell lung cancer ("ES-SCLC"), and was developed using the Company's proprietary VeriTCE bispecific antibody engineering platform. VRD-4187 was, and remains, the cornerstone of the Company's clinical-stage pipeline and represented the primary basis upon which the transaction was valued and upon which Buyer entered into the Agreement. Indeed, the parties' respective representatives acknowledged during the course of negotiations leading to the execution of the Agreement that the clinical progress and regulatory trajectory of VRD-4187 were the critical drivers of the enterprise value attributed to the Company.
The principal clinical trial for VRD-4187 is Marlowe Asset Management-2 (ClinicalTrials.gov Identifier: NCT05837291), a randomized, open-label Phase II clinical trial being conducted at forty-two (42) clinical sites across the United States and the European Union. As of the date of the Agreement, the Marlowe Asset Management-2 trial had enrolled a total of three hundred eighty-seven (387) patients, with one hundred ninety-four (194) patients randomized to the VRD-4187 treatment arm and one hundred ninety-three (193) patients randomized to the control arm receiving standard-of-care chemotherapy.
At the time of execution of the Agreement, the Marlowe Asset Management-2 trial was ongoing, and the Sellers represented and warranted, among other things, the accuracy and completeness of information provided to Buyer regarding the Company's clinical programs, the status and conduct of the Marlowe Asset Management-2 trial, and the Company's interactions with the U.S. Food and Drug Administration ("FDA") and other regulatory authorities. Buyer relied upon these representations and warranties in entering into the Agreement and agreeing to the purchase price set forth therein.
2.2 Data Monitoring Committee Interim Analysis — August 14, 2024
On or about August 14, 2024, the independent Data Monitoring Committee ("DMC") for the Marlowe Asset Management-2 trial conducted a pre-planned interim analysis of the trial data in accordance with the trial protocol and the DMC charter. The DMC's interim analysis revealed statistically significant and clinically alarming safety signals in the VRD-4187 treatment arm that are deeply concerning and that materially alter the risk-benefit profile of VRD-4187. The DMC's principal findings included the following:
(a) Grade ≥3 Cytokine Release Syndrome ("CRS") Incidence. The incidence of Grade 3 or higher cytokine release syndrome in the VRD-4187 treatment arm was 23.4%, compared with 4.1% in the control arm — a difference of 19.3 percentage points. This rate of severe CRS is substantially elevated relative to clinically acceptable thresholds and represents a significant and potentially life-threatening toxicity burden that would materially impair the approvability and commercial viability of VRD-4187.
(b) Treatment-Related Deaths. Seven (7) treatment-related deaths occurred in the VRD-4187 treatment arm (representing 3.6% of the 194 patients enrolled in that arm), compared with one (1) treatment-related death in the control arm (representing 0.5% of the 193 patients enrolled in that arm). The treatment-related mortality rate in the VRD-4187 arm is thus approximately seven times greater than that observed in the control arm. These deaths were attributed by the investigators to cytokine release syndrome and related immune-mediated toxicities.
(c) Overall Response Rate ("ORR"). The overall response rate in the VRD-4187 treatment arm was 31.4%, compared with 28.9% in the control arm. This difference of 2.5 percentage points was not statistically significant (p = 0.58), indicating that VRD-4187 did not demonstrate a meaningful or clinically significant efficacy benefit over standard-of-care chemotherapy. The lack of a statistically significant efficacy signal, when viewed in conjunction with the substantially elevated safety risk, fundamentally undermines the therapeutic rationale for VRD-4187.
Based on these findings, the DMC recommended the immediate suspension of new enrollment in the Marlowe Asset Management-2 trial and the implementation of dose modifications for patients currently receiving VRD-4187.
Buyer received notice of the DMC's findings and recommendation from the Company on August 16, 2024, pursuant to the notification obligations set forth in Section 5.1(b) of the Agreement, which requires the Company to notify Buyer promptly of any event, change, or development that would reasonably be expected to give rise to a Material Adverse Effect or that would reasonably be expected to cause any condition to Buyer's obligation to close not to be satisfied. Buyer notes that the Company's notification was provided approximately two (2) business days after the DMC's findings were communicated to the Company's management, and Buyer reserves the right to investigate whether this delay was consistent with the "prompt" notification standard set forth in the Agreement.
2.3 Broadleaf Scientific Assessment
On August 19, 2024, following receipt of the Company's notification regarding the DMC interim analysis, Penterra engaged Broadleaf Scientific Consulting LLC ("Broadleaf"), Penterra's independent clinical due diligence advisor, to conduct a supplemental clinical assessment of the Marlowe Asset Management-2 data. The Broadleaf engagement was led by Dr. Raymond Kapoor, a recognized expert in immuno-oncology clinical trial design and bispecific antibody therapeutics, with significant experience in the evaluation of CRS risk profiles and risk-benefit assessments for T-cell engager modalities.
Broadleaf delivered its supplemental clinical assessment to Penterra on August 19, 2024. The assessment confirmed the severity and clinical significance of the adverse safety data observed in the Marlowe Asset Management-2 interim analysis, including the Grade ≥3 CRS rate, the treatment-related mortality rate, and the absence of a statistically significant efficacy benefit. Broadleaf further concluded that the safety data observed in the VRD-4187 treatment arm presented a substantially elevated risk profile that would be difficult to mitigate through dose modifications or prophylactic measures alone, and that the lack of a meaningful efficacy benefit over standard of care called into serious question whether VRD-4187 could achieve a favorable risk-benefit assessment necessary for regulatory approval. Broadleaf's assessment also noted that the observed safety signals were consistent with a class-effect toxicity risk inherent in the VeriTCE platform's mechanism of action, raising additional concerns regarding the broader pipeline implications for the Company's other preclinical and early-stage clinical programs utilizing the same platform.
2.4 FDA Partial Clinical Hold — August 22, 2024
On August 22, 2024, the U.S. Food and Drug Administration imposed a partial clinical hold on VRD-4187 under Investigational New Drug Application ("IND") No. 154832, pending investigation of the CRS-related deaths observed in the Marlowe Asset Management-2 clinical trial. The FDA communicated this action to the Company in accordance with 21 C.F.R. § 312.42.
The partial clinical hold prohibits the enrollment of new patients in the Marlowe Asset Management-2 trial and restricts certain trial activities — including dose escalation and treatment of patients in the VRD-4187 arm who have not yet received a complete first cycle — until the FDA's safety concerns are resolved to the Agency's satisfaction. The Company is required to submit a complete response to the FDA's clinical hold letter addressing the safety concerns, proposed risk mitigation measures, and updated benefit-risk analyses before the FDA will consider lifting the hold.
The imposition of a partial clinical hold by the FDA is among the most significant regulatory actions that can be taken with respect to an investigational drug product. It reflects the FDA's determination that there is an unreasonable and significant risk of illness or injury to the subjects enrolled in the trial. The clinical hold introduces substantial regulatory uncertainty regarding the future development timeline, the potential approvability, and the ultimate commercial viability of VRD-4187. It is Buyer's understanding, based on publicly available regulatory guidance and historical precedent, that the resolution of a partial clinical hold can take many months and often requires the generation of substantial additional preclinical and clinical data, with no assurance that the hold will ultimately be lifted.
2.5 Company's Protocol Amendment
Buyer acknowledges that the Company implemented a protocol amendment (Protocol v4.0, effective August 28, 2024) to the Marlowe Asset Management-2 trial. Buyer understands that the protocol amendment includes, among other changes, the addition of mandatory tocilizumab prophylaxis for patients in the VRD-4187 treatment arm and a reduction of the starting dose of VRD-4187 from 1.5 mg/kg to 0.75 mg/kg — a fifty percent (50%) dose reduction.
While Buyer acknowledges the Company's implementation of these measures, Buyer respectfully submits that Protocol v4.0 does not remediate the fundamental concerns described herein. Specifically:
(a) The protocol amendment does not undo or remediate the adverse clinical data already observed in the Marlowe Asset Management-2 trial, including the seven (7) treatment-related deaths and the 23.4% Grade ≥3 CRS rate. These data are now part of the clinical record for VRD-4187 and will be considered by the FDA and other regulatory authorities in any future regulatory submission.
(b) The protocol amendment does not, in and of itself, resolve the FDA's partial clinical hold. The hold remains in effect, and the FDA has not indicated that the measures implemented under Protocol v4.0 are sufficient to address its safety concerns. The Company will need to submit a formal complete response to the FDA, and the timeline for the FDA's review and any decision to lift the hold remains uncertain.
(c) The fifty percent (50%) reduction in the starting dose of VRD-4187 raises significant questions regarding whether VRD-4187 can achieve a therapeutically effective exposure level at the modified dose. Given that VRD-4187 failed to demonstrate a statistically significant efficacy advantage over standard of care at the original dose of 1.5 mg/kg, it is far from clear — and indeed appears unlikely — that a dose of 0.75 mg/kg will yield an improved efficacy profile sufficient to support a favorable risk-benefit assessment.
(d) The addition of mandatory tocilizumab prophylaxis, while a recognized approach to CRS risk mitigation, adds complexity, cost, and logistical burden to the treatment regimen, may impact the immunological activity and efficacy of VRD-4187, and does not guarantee prevention of severe or fatal CRS events.
Accordingly, while Buyer does not question the Company's good faith in implementing Protocol v4.0, the protocol amendment does not alter Buyer's assessment that a Material Adverse Effect has occurred.
3. Non-Satisfaction of Closing Condition Under Section 7.2(a) — Bring-Down of Representations and Warranties
Section 7.2(a) of the Agreement provides that Buyer's obligation to consummate the Closing is conditioned upon the accuracy of the representations and warranties of the Sellers and the Company contained in Article III of the Agreement, both as of the date of the Agreement and as of the Closing Date (except for representations and warranties that speak as of a specific date, which need only be accurate as of such date), subject in each case to a Material Adverse Effect qualification. Specifically, Section 7.2(a) requires that the representations and warranties of the Sellers set forth in Article III (other than the Fundamental Representations) be true and correct in all respects (without giving effect to any qualifications or limitations as to "materiality" or "Material Adverse Effect" contained therein) as of the date of the Agreement and as of the Closing Date as though made on and as of such date, except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Article III of the Agreement contains extensive representations and warranties by the Sellers and the Company regarding, among other things:
(a) The business, operations, financial condition, and prospects of the Company, including representations that the Company Disclosure Schedule accurately and completely sets forth all material information regarding the Company's business and financial condition (Section 3.7);
(b) The status, conduct, and results of the Company's clinical trials, including specifically the Marlowe Asset Management-2 trial, including representations that all clinical trials are being conducted in compliance with applicable protocols, good clinical practices, and applicable laws, and that the Company has not received any notices from the FDA or any other regulatory authority regarding any material safety issues with respect to the Company's product candidates (Section 3.14);
(c) Regulatory compliance and FDA matters, including representations that the Company is in compliance in all material respects with all applicable laws and regulations administered by the FDA and comparable foreign regulatory authorities, and that all information submitted to the FDA and other regulatory authorities was accurate and complete in all material respects at the time of submission (Section 3.15);
(d) The absence of undisclosed liabilities, including representations that the Company has no liabilities or obligations of a nature required to be disclosed on a balance sheet prepared in accordance with GAAP, except as specifically disclosed in the Company Disclosure Schedule or the Financial Statements (Section 3.8); and
(e) The absence of certain changes since the Balance Sheet Date, including representations that, since December 31, 2023, there has not been any event, change, occurrence, or development that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on the Company (Section 3.9).
Based on the developments described in detail in Section 2 above, certain of the Sellers' representations and warranties in Article III of the Agreement are no longer true and correct as of the date hereof and cannot reasonably be expected to be true and correct as of the Closing Date. The Marlowe Asset Management-2 clinical data — including the 23.4% Grade ≥3 CRS rate, the seven (7) treatment-related deaths (3.6% mortality in the VRD-4187 arm), and the non-statistically significant overall response rate (ORR of 31.4% vs. 28.9%, p = 0.58) — together with the FDA's imposition of a partial clinical hold on IND 154832, render certain of the Sellers' representations and warranties inaccurate in a manner that, individually and in the aggregate, constitutes, or would reasonably be expected to constitute, a Material Adverse Effect on the business, results of operations, financial condition, assets, and prospects of the Company, taken as a whole.
By way of illustration and without limitation:
(i) The representations in Section 3.14 regarding the status and conduct of clinical trials cannot be brought down as true and correct when the Company's lead clinical trial has been suspended by the DMC and is subject to an FDA partial clinical hold due to an unacceptable safety profile.
(ii) The representations in Section 3.15 regarding regulatory compliance and FDA matters cannot be brought down as true and correct given the imposition of the partial clinical hold, which reflects the FDA's determination that VRD-4187 poses an unreasonable risk to clinical trial subjects.
(iii) The representations in Section 3.9 regarding the absence of certain changes since the Balance Sheet Date cannot be brought down as true and correct given that the Marlowe Asset Management-2 data and the FDA regulatory action constitute events that, individually and in the aggregate, have had and would reasonably be expected to have a Material Adverse Effect.
Accordingly, the condition to Buyer's obligation to close set forth in Section 7.2(a) of the Agreement is not satisfied as of the date hereof and cannot, based on the information currently available to Buyer, reasonably be expected to be satisfied as of the Closing Date.
4. Non-Satisfaction of Closing Condition Under Section 7.2(b) — No Material Adverse Effect
Section 7.2(b) of the Agreement provides that Buyer's obligation to consummate the Closing is separately conditioned upon the absence, since the date of the Agreement, of any event, change, development, occurrence, condition, or effect that, individually or in the aggregate, 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 by the Agreement. The term "Material Adverse Effect" is defined in Section 1.1 of the Agreement.
4.1 Occurrence of a Material Adverse Effect
The clinical trial data from the Marlowe Asset Management-2 DMC interim analysis, as set forth in detail in Section 2 above, demonstrates that VRD-4187 — the Company's lead and most valuable clinical-stage asset, and the primary basis upon which the $900,000,000 purchase price was negotiated and agreed — has a fundamentally impaired safety and efficacy profile. The key findings are summarized as follows:
(a) Severely Elevated Safety Risk. The Grade ≥3 CRS incidence rate in the VRD-4187 treatment arm (23.4%) was more than five times greater than the rate observed in the control arm (4.1%). A 23.4% rate of severe cytokine release syndrome — a potentially life-threatening immune-mediated toxicity — represents a toxicity burden that is substantially above the threshold that the FDA and the medical community would be expected to consider acceptable for a product candidate that does not demonstrate a commensurate efficacy benefit.
(b) Unacceptable Treatment-Related Mortality. The treatment-related mortality rate in the VRD-4187 arm (3.6%, or 7 of 194 patients) was approximately seven times greater than the rate observed in the control arm (0.5%, or 1 of 193 patients). Seven treatment-related deaths in a Phase II trial of 194 patients is an extraordinarily adverse outcome that raises fundamental questions about the safety of VRD-4187 and the Company's VeriTCE platform.
(c) Absence of Meaningful Efficacy Benefit. The overall response rate in the VRD-4187 arm (31.4%) was not statistically significantly different from the ORR in the control arm (28.9%), with a p-value of 0.58. This finding indicates that VRD-4187 failed to demonstrate a clinically meaningful efficacy advantage over existing standard-of-care chemotherapy. In the absence of an efficacy benefit, the elevated safety risks associated with VRD-4187 cannot be justified on a risk-benefit basis.
The FDA's partial clinical hold imposed on August 22, 2024, under IND 154832, compounds and exacerbates these already devastating clinical findings. The hold imposes regulatory restrictions that prevent the continued enrollment and advancement of the Marlowe Asset Management-2 trial in its current form, introduces substantial uncertainty regarding the timeline and pathway for the future clinical development of VRD-4187, and reflects the FDA's own independent assessment that the safety profile of VRD-4187 presents an unreasonable risk to patients. Resolution of the partial clinical hold will require the Company to satisfy the FDA's requirements, which may include the generation of substantial additional preclinical and clinical data, the implementation of further protocol modifications, and potentially the redesign of the clinical trial — all of which would entail significant additional time, expense, and uncertainty.
It is critically important to note that VRD-4187 was the primary — indeed, the overwhelming — value driver of the contemplated transaction. The Company is a clinical-stage biopharmaceutical company with no approved products, no marketed products, and no product revenue. The Company's audited financial statements for the fiscal year ended December 31, 2023, reflect total revenue of zero dollars ($0) and a net loss. The Company's enterprise value, and accordingly the purchase price of $900,000,000 agreed to by the parties, was premised almost entirely upon the clinical and commercial prospects of VRD-4187 and, to a lesser extent, the Company's earlier-stage pipeline candidates built on the VeriTCE platform. The Marlowe Asset Management-2 data and the FDA regulatory action have fundamentally undermined those prospects.
The cumulative impact of the adverse clinical data and the FDA regulatory action has fundamentally and durably altered the Company's business prospects. The events described herein are not transient or temporary in nature; they reflect an intrinsic safety-efficacy profile of VRD-4187 that has been revealed through rigorous clinical investigation and that is now part of the permanent clinical record for the product candidate. The material adverse effect on the business, results of operations, financial condition, and assets of the Company, taken as a whole, is reasonably expected to persist for a duration that is significant — and likely indefinite — when measured against the overall time horizon of the Company's business and the expected timeline for the development and commercialization of its product candidates.
Accordingly, a Material Adverse Effect has occurred within the meaning of Section 1.1 of the Agreement since the date of the Agreement, and the condition to Buyer's obligation to close set forth in Section 7.2(b) of the Agreement is not satisfied.
4.2 Inapplicability of MAE Carveouts
Buyer has carefully considered the carveouts to the definition of "Material Adverse Effect" set forth in Section 1.1 of the Agreement. The Agreement provides that certain categories of events, changes, developments, and effects shall not be taken into account in determining whether a Material Adverse Effect has occurred, specifically:
(i) changes in general economic or political conditions in the United States or any other jurisdiction in which the Company operates;
(ii) changes in conditions generally affecting the biotechnology or pharmaceutical industries in the United States or any other jurisdiction in which the Company operates;
(iii) changes in applicable law or in generally accepted accounting principles ("GAAP") or the interpretation or enforcement thereof;
(iv) pandemics, epidemics, or disease outbreaks (including COVID-19);
(v) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires, or other natural disasters, weather conditions, acts of war (whether or not declared), armed hostility, sabotage, or terrorism;
(vi) changes in financial, banking, or securities markets generally (including any disruption thereof and any decline in the price of any security or any market index); and
(vii) the announcement or pendency of the Transactions contemplated by the Agreement.
None of these carveouts is applicable to the matters described in this notice. The Marlowe Asset Management-2 clinical data and the FDA's imposition of a partial clinical hold on IND 154832 are company-specific events arising directly from the safety and efficacy profile of VRD-4187 — the Company's own proprietary product candidate — as revealed through the Marlowe Asset Management-2 clinical trial. These events are not attributable to, and did not arise from or relate to, general economic conditions, conditions generally affecting the biotechnology or pharmaceutical industries, changes in applicable law or GAAP, pandemics, natural disasters or acts of war or terrorism, changes in financial markets, or the announcement or pendency of the Transactions. They are the direct result of the clinical investigation of VRD-4187 in human subjects and the FDA's regulatory response thereto.
Even if any of the carveouts described above were arguably applicable to the matters described herein — which Buyer expressly does not concede — the disproportionate impact exception set forth in the definition of "Material Adverse Effect" in Section 1.1 of the Agreement would apply. The Agreement provides that the carveouts described above shall not apply to the extent that any such event, change, development, occurrence, condition, or effect has a disproportionate adverse impact on the Company relative to other companies of comparable size operating in the biotechnology industry in the United States. The clinical trial results for VRD-4187 and the FDA's imposition of a partial clinical hold are events that are entirely specific to VRD-4187, the Company's proprietary VeriTCE platform, and the Company's own IND application. These events do not affect comparably situated biotechnology companies, and they have had, and would reasonably be expected to continue to have, a disproportionate adverse impact on the Company relative to such comparably situated companies.
Accordingly, the carveouts to the definition of Material Adverse Effect do not preclude a finding that a Material Adverse Effect has occurred.
5. Reservation of Rights
Without limiting the generality of the foregoing, Penterra hereby expressly reserves all of its rights and remedies under the Agreement, at law, and in equity, including without limitation the following:
(a) The right to terminate the Agreement pursuant to Section 8.1(d) thereof, which provides that Buyer may terminate the Agreement if any condition to Buyer's obligation to close set forth in Section 7.2 has not been satisfied or waived and such condition is incapable of being satisfied, or has not been cured, within thirty (30) calendar days after written notice thereof from Buyer to the Company and the Stockholder Representative;
(b) The right to decline to consummate the Closing for so long as the conditions set forth in Sections 7.2(a) and 7.2(b) of the Agreement remain unsatisfied, in accordance with the terms of the Agreement;
(c) The right to seek specific performance, injunctive relief, or other equitable remedies to the extent available under the Agreement and applicable law; and
(d) All other rights and remedies available to Buyer under the Agreement, the ancillary documents, or applicable law, whether at law or in equity.
Nothing in this letter shall be construed as a waiver, release, or modification of any of Buyer's rights or remedies under the Agreement, at law, or in equity. No delay or failure by Penterra in exercising any right or remedy under the Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. All rights and remedies of Penterra under the Agreement are cumulative and are not exclusive of any other rights or remedies provided by law or equity.
Buyer further expressly notes, for the avoidance of doubt, that the reverse termination fee provisions set forth in Section 8.3 of the Agreement are triggered solely by a failure or inability of Buyer to consummate the Closing as a result of the failure of the Buyer's financing condition set forth in Section 7.2(e) of the Agreement. No financing failure has occurred. The $500,000,000 committed term loan facility under Commitment Letter Ref. CL-2024-PPCA-0607, entered into by and among Summit Ridge Capital Partners, LP, as lead arranger, and Ironclad Trust Company, N.A., as administrative agent, remains in full force and effect, and no event has occurred that would excuse the lenders' obligations thereunder or that would cause a failure of any condition to funding. Moreover, Penterra had approximately $2.1 billion of unrestricted cash and cash equivalents on hand as of June 30, 2024 (based on its publicly reported Q2 2024 financial results), which, together with the committed term loan facility, is more than sufficient to fund the aggregate purchase price and all related transaction expenses. This notice is based solely on the non-satisfaction of Buyer's closing conditions under Sections 7.2(a) and 7.2(b) of the Agreement as a result of the occurrence of a Material Adverse Effect, and not on any financing failure or any unwillingness on the part of Buyer to fund the transaction.
6. Request for Response
Buyer respectfully requests that the Company and the Stockholder Representative respond in writing to this notice within ten (10) business days of the date hereof (i.e., on or before September 20, 2024), setting forth in reasonable detail any position the Company or the Stockholder Representative may have with respect to the matters described herein, including, without limitation, any basis on which the Company or the Stockholder Representative contends that (a) a Material Adverse Effect has not occurred, (b) any of the MAE carveouts in Section 1.1 of the Agreement apply, or (c) the conditions set forth in Sections 7.2(a) and 7.2(b) of the Agreement are in fact satisfied or are capable of being satisfied prior to the Outside Date.
In addition, Buyer requests that the Company provide any additional information, data, analyses, or assessments in its possession or control relating to VRD-4187, the Marlowe Asset Management-2 clinical trial (including the complete DMC interim analysis report, patient-level safety data, and any correspondence between the Company and the DMC), and the FDA partial clinical hold (including the complete text of the FDA's clinical hold letter and any correspondence between the Company and the FDA) that the Company believes is material to the assessment of whether a Material Adverse Effect has occurred. Buyer further requests any internal analyses, board presentations, or scientific advisory board memoranda prepared by or on behalf of the Company relating to the matters described herein.
Buyer expects the Company to continue to comply fully and in all respects with all of its obligations under the Agreement during the pendency of the matters described herein, including, without limitation:
(a) Its notification obligations under Section 5.1(b) of the Agreement, requiring the Company to promptly notify Buyer of any event, change, or development that has or would reasonably be expected to have a Material Adverse Effect or that would reasonably be expected to cause any condition to Buyer's obligation to close not to be satisfied;
(b) Its affirmative and negative operating covenants under Section 5.1 of the Agreement, requiring the Company to conduct its business in the ordinary course consistent with past practice and to refrain from taking certain actions without Buyer's prior written consent; and
(c) Its no-shop obligations under Section 5.4 of the Agreement, including the prohibition on the Company's soliciting, initiating, encouraging, or facilitating any inquiry, proposal, or offer relating to an Acquisition Proposal (as defined therein) from any third party.
Buyer will continue to monitor the situation closely and reserves the right to take any and all actions available to it under the Agreement, at law, or in equity, based upon the Company's response (or failure to respond) and any further developments.
7. Governing Law and Notices
This letter constitutes formal written notice and is being delivered in accordance with the notice provisions of Section 10.1 of the Agreement, by overnight courier and electronic mail to the addresses specified therein and on the first page of this letter.
This letter and the matters described herein shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of law principles that would result in the application of the laws of any other jurisdiction, pursuant to Section 10.6 of the Agreement.
Any disputes arising out of or relating to this notice, the Agreement, or the Transactions contemplated thereby shall be 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 over a particular matter, any state or federal court within the State of Delaware), as provided in Section 10.6 of the Agreement, and each party has irrevocably waived any objection to such jurisdiction and venue as set forth therein.
We are available to discuss this matter at your convenience and would welcome the opportunity to engage in constructive dialogue with the Company and its advisors. Please direct any correspondence or communications regarding this notice to the undersigned at the address and contact information set forth above.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Oliver Mackenzie Partner
On behalf of Penterra Pharmaceuticals Corp.
cc (via email and overnight courier):
Dr. Anand Rajagopal, Chief Executive Officer, Penterra Pharmaceuticals Corp., 1100 Meridian Boulevard, Suite 400, Princeton, NJ 08540
Thomas F. Holbrook, General Counsel & Secretary, Penterra Pharmaceuticals Corp.
Catherine M. Burgess, Chief Financial Officer, Penterra Pharmaceuticals Corp.
Natalie Reiner, SVP, Corporate Development, Penterra Pharmaceuticals Corp.
David Ng, Stockholder Representative, c/o Crestline Ventures, LP
Rebecca Whitmore, Partner, Zalcourt Archer & Cole LLP, One Federal Street, 30th Floor, Boston, MA 02110
Harrison Wexford, Partner, Calderwood & Harkness LLP
Megan Chu, Associate, Calderwood & Harkness LLP
A copy of this notice is being sent simultaneously to Zalcourt Archer & Cole LLP as counsel to the Company and the Sellers.
Delivery: Via Overnight Courier and Electronic Mail

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