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

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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 30, 2024

VIA HAND DELIVERY, OVERNIGHT COURIER, AND EMAIL

Veridian Biosciences, Inc. 550 Gateway Drive Cambridge, Massachusetts 02142

Attention: Dr. Julian Marek, Chief Executive Officer

Rachel Stein-Goldberg, General Counsel

With a copy to:

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

Attention: Rebecca Whitmore, Esq.

David Ng, in his capacity as Stockholder Representative c/o Crestline Ventures, LP Address on file with the Company

Re: Termination of Stock Purchase Agreement, dated as of June 10, 2024 (the "Agreement"), by and among Penterra Pharmaceuticals Corp., a Delaware corporation ("Buyer"), Veridian Biosciences, Inc., a Delaware corporation (the "Company"), the Sellers identified therein, and David Ng, in his capacity as Stockholder Representative

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

I. Introduction and Purpose of Notice

This firm serves as legal counsel to Penterra Pharmaceuticals Corp., a Delaware corporation ("Penterra" or "Buyer"), in connection with the above-referenced Stock Purchase Agreement, dated as of June 10, 2024 (together with all schedules, exhibits, and disclosure letters delivered in connection therewith, the "Agreement"), by and among Buyer, Veridian Biosciences, Inc., a Delaware corporation (the "Company"), the Sellers identified on the signature pages thereto, and David Ng, in his capacity as Stockholder Representative (the "Stockholder Representative").

This letter constitutes the formal written notice of termination of the Agreement, delivered by Buyer pursuant to and in accordance with Section 8.1(d) thereof. Buyer is delivering this Termination Notice effective as of September 30, 2024 (the "Termination Date"). This Termination Notice is being delivered simultaneously to the Company, counsel to the Sellers, and the Stockholder Representative in accordance with the notice provisions of Section 10.1 of the Agreement.

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

II. Background and Recitals

On June 10, 2024, Buyer, the Company, the Sellers, and the Stockholder Representative entered into the Agreement, pursuant to which Buyer agreed to acquire one hundred percent (100%) of the issued and outstanding capital stock of the Company (the "Shares") for an aggregate purchase price of Nine Hundred Million Dollars ($900,000,000) in cash (the "Purchase Price"), subject to the customary adjustments and the terms and conditions set forth in the Agreement. The Agreement was duly authorized by the respective boards of directors of each of Buyer and the Company, and was executed on behalf of Buyer by Dr. Anand Rajagopal, Chief Executive Officer, and on behalf of the Company by Dr. Julian Marek, Chief Executive Officer.

The Agreement is governed by the laws of the State of Delaware, without giving effect to any choice-of-law or conflict-of-law rules or provisions that would cause the application of the laws of any other jurisdiction. Section 10.6 of the Agreement provides for the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if such court declines jurisdiction, any federal court of the United States of America sitting in the State of Delaware) for the resolution of any disputes arising out of or relating to the Agreement or the transactions contemplated thereby.

Pursuant to Section 8.1(c) of the Agreement, the "Outside Date" by which the Closing must occur is December 10, 2024, being six (6) months from the date of the Agreement. As described in detail below, certain of the conditions to Buyer's obligation to consummate the Closing set forth in Section 7.2 of the Agreement have failed and have become incapable of being satisfied prior to the Outside Date.

III. Basis for Termination — Section 8.1(d) of the Agreement

A. Termination Right Under Section 8.1(d)

Section 8.1(d) of the Agreement provides, in relevant part, that:

"This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Closing . . . by Buyer, by written notice to the Company and the Stockholder Representative, if any of the conditions to Buyer's obligation to consummate the Closing set forth in Section 7.2 shall have become incapable of being satisfied prior to the Outside Date; provided, that such failure is not the result of a breach by Buyer of any of its representations, warranties, covenants, or agreements set forth in this Agreement."

For the reasons set forth in detail below, multiple conditions to Buyer's obligation to consummate the Closing under Section 7.2 of the Agreement have become incapable of being satisfied prior to the Outside Date of December 10, 2024, and such failures are not the result of any breach by Buyer of any of its representations, warranties, covenants, or agreements under the Agreement. Penterra hereby exercises its right to terminate the Agreement under Section 8.1(d) thereof, effective as of the Termination Date.

B. Failure of Closing Condition Under Section 7.2(a) — Bring-Down of Representations and Warranties

Section 7.2(a) of the Agreement conditions Buyer's obligation to consummate the Closing upon the representations and warranties of the Company and the Sellers set forth in Article III of the Agreement being true and correct in all respects (or, with respect to representations and warranties not qualified by materiality or Material Adverse Effect, true and correct in all material respects) as of the date of the Agreement and as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date).

The representations and warranties of the Company and the Sellers, including without limitation those set forth in Article III of the Agreement regarding the Company's business, operations, condition (financial and otherwise), assets, liabilities, properties, and prospects, are no longer true and correct in all respects and, with respect to representations and warranties not qualified by materiality or Material Adverse Effect, are no longer true and correct in all material respects. Such inaccuracies, individually and in the aggregate, constitute a Material Adverse Effect as defined in Section 1.1 of the Agreement.

Specifically, and without limitation, the following representations and warranties of the Company and the Sellers are no longer accurate:

(i) the representations and warranties regarding the Company's compliance with all applicable laws, rules, regulations, and orders of any governmental authority, including without limitation the Federal Food, Drug, and Cosmetic Act and the regulations promulgated by the United States Food and Drug Administration (the "FDA") thereunder (Section 3.12);

(ii) the representations and warranties regarding the status of FDA regulatory matters, including the status and conduct of the Company's Investigational New Drug Applications, clinical trials, and regulatory submissions (Section 3.14);

(iii) the representations and warranties regarding the conduct of the Company's clinical trials in accordance with all applicable protocols, good clinical practices, and regulatory requirements (Section 3.14(c));

(iv) the representations and warranties regarding the absence, since the date of the Most Recent Balance Sheet, 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 (Section 3.6); and

(v) the representations and warranties regarding the Company's intellectual property and the clinical data supporting the Company's product pipeline (Section 3.10).

The bring-down condition set forth in Section 7.2(a) has accordingly failed and, for the reasons described in Section VI below, has become incapable of being satisfied prior to the Outside Date.

C. Failure of Closing Condition Under Section 7.2(b) — No Material Adverse Effect

Section 7.2(b) of the Agreement conditions Buyer's obligation to consummate the Closing 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, as defined in Section 1.1 of the Agreement.

As set forth in detail in Section IV below, a Material Adverse Effect has occurred since June 10, 2024, the date of the Agreement. The condition to Closing set forth in Section 7.2(b) has accordingly failed and, for the reasons described in Section VI below, has become incapable of being satisfied prior to the Outside Date.

IV. Events Constituting the Material Adverse Effect

A. Marlowe Asset Management-2 Phase II Clinical Trial Data (August 14, 2024)

VRD-4187, the Company's lead clinical product candidate, is a bispecific T-cell engager targeting delta-like ligand 3 ("DLL3")-expressing tumors for the treatment of small cell lung cancer ("SCLC"). VRD-4187 was the subject of the Company's pivotal clinical development program, designated as Marlowe Asset Management-2, a randomized, open-label Phase II clinical trial (ClinicalTrials.gov Identifier: NCT05837291). The Marlowe Asset Management-2 trial was conducted across forty-two (42) clinical sites in the United States and the European Union, and enrolled a total of three hundred eighty-seven (387) patients, with one hundred ninety-four (194) patients in the VRD-4187 treatment arm and one hundred ninety-three (193) patients in the standard-of-care control arm.

On August 14, 2024, the independent Data Monitoring Committee (the "DMC") for the Marlowe Asset Management-2 trial conducted a pre-specified interim analysis of safety and efficacy data accrued through the study cutoff date. The results of this interim analysis were profoundly adverse, and revealed the following:

(i) Grade ≥3 Cytokine Release Syndrome (CRS): The incidence of Grade 3 or higher cytokine release syndrome in the VRD-4187 treatment arm was 23.4% (45 of 194 patients), compared to 4.1% (8 of 193 patients) in the control arm. This difference of 19.3 percentage points represents a dramatically elevated and clinically unacceptable safety signal. Grade ≥3 CRS is a severe and potentially life-threatening immune-mediated toxicity characterized by hemodynamic instability, capillary leak, organ dysfunction, and, in the most severe cases, multi-organ failure and death. An incidence rate of 23.4% for Grade ≥3 CRS is far in excess of the safety profile that would be required for any viable regulatory submission or commercial product in the SCLC indication.

(ii) Treatment-Related Deaths: Seven (7) deaths attributable to VRD-4187 treatment occurred in the VRD-4187 arm (representing 3.6% of 194 patients), compared to one (1) death in the control arm (representing 0.5% of 193 patients). This constitutes a seven-fold increase in treatment-related mortality in the VRD-4187 arm relative to the control arm. The treatment-related deaths in the VRD-4187 arm were associated with severe CRS, disseminated intravascular coagulation, and multi-organ failure, consistent with immune-mediated toxicity driven by VRD-4187's mechanism of action.

(iii) Overall Response Rate (ORR): The overall response rate in the VRD-4187 arm was 31.4%, compared to 28.9% in the control arm. This difference was not statistically significant (p = 0.58), demonstrating that VRD-4187 failed to demonstrate any meaningful efficacy benefit over the standard-of-care regimen. The observed 2.5 percentage point difference in ORR is well within the margin of statistical noise and is clinically meaningless, particularly in the context of the severely elevated safety risks described above.

Following its review of these data, the DMC recommended the immediate suspension of enrollment in the Marlowe Asset Management-2 trial and the implementation of dose modification protocols to address the safety concerns.

These results are of the utmost gravity. The Marlowe Asset Management-2 data demonstrate that VRD-4187 has a severely unfavorable risk-benefit profile: the drug causes dramatically increased rates of life-threatening toxicity without producing any statistically significant improvement in efficacy over standard of care. This combination of findings fundamentally undermines the clinical and commercial viability of VRD-4187, which represented the cornerstone of the Company's pipeline and the primary basis for the valuation of the Company at the agreed Purchase Price of $900,000,000. Indeed, it is no exaggeration to state that the Marlowe Asset Management-2 interim data, standing alone, have destroyed the core value proposition that formed the foundation of Buyer's decision to enter into the Agreement.

B. 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"), pending investigation of the CRS-related deaths observed in the Marlowe Asset Management-2 trial. The partial clinical hold was communicated to the Company via a clinical hold letter from the Division of Oncology Products 2, Office of Oncologic Diseases, Center for Drug Evaluation and Research.

The FDA's partial clinical hold prohibits the enrollment of new patients in any clinical trial conducted under IND 154832 and imposes material restrictions on the continued treatment of existing patients in the Marlowe Asset Management-2 trial, including the requirement for enhanced safety monitoring, dose modification, and the submission of detailed safety reports. The Company is required to submit a complete response to the FDA addressing the clinical hold issues before the FDA will consider lifting the clinical hold.

The imposition of a partial clinical hold by the FDA is an extraordinary regulatory action that is reserved for circumstances in which the FDA has identified significant safety concerns that, in its judgment, present an unreasonable risk to the health and safety of clinical trial participants. The clinical hold reflects the severity of the safety signal identified in the Marlowe Asset Management-2 data and constitutes an independent and significant adverse regulatory event. At a minimum, the clinical hold will materially delay the clinical development program for VRD-4187 by many months, and there is a substantial likelihood that the clinical hold will not be resolved on terms that permit the continuation of the VRD-4187 program in its current form, or at all. The imposition of the clinical hold also casts a significant shadow over the Company's regulatory standing and credibility with the FDA, which will have long-term consequences for the Company's ability to advance VRD-4187 or any successor program through the regulatory process.

C. Protocol Amendment and Dose Reduction (August 28, 2024)

On August 28, 2024, the Company implemented Protocol Amendment v4.0 to the Marlowe Asset Management-2 trial. Among other changes, Protocol Amendment v4.0 (i) added mandatory tocilizumab prophylaxis for all patients receiving VRD-4187, in an effort to mitigate the risk of severe CRS, and (ii) reduced the starting dose of VRD-4187 from 1.5 mg/kg to 0.75 mg/kg — a fifty percent (50%) dose reduction.

While Buyer understands that the Company implemented these modifications in response to the safety signal identified in the Marlowe Asset Management-2 interim analysis, the protocol amendments introduce substantial additional uncertainty regarding the therapeutic viability of VRD-4187. The 50% dose reduction, in particular, has far-reaching implications for the VRD-4187 program:

(i) The efficacy of VRD-4187 at the reduced dose of 0.75 mg/kg has not been established. Given that VRD-4187 failed to demonstrate statistically significant efficacy over standard of care at the original dose of 1.5 mg/kg, there is no scientific basis for expecting that a 50% dose reduction will produce a clinically meaningful efficacy signal.

(ii) The dose reduction effectively requires the clinical program to generate entirely new dose-response data at the 0.75 mg/kg dose level. This data cannot be extrapolated from the existing Marlowe Asset Management-2 dataset, which was generated at the 1.5 mg/kg dose level.

(iii) The generation of new dose-response data at the reduced dose level will likely require the design and conduct of additional clinical trials, a process that will take many months, if not years, and will require additional regulatory interactions with the FDA, including, at a minimum, the submission and acceptance of a protocol amendment or new trial protocol.

(iv) The addition of mandatory tocilizumab prophylaxis, while potentially addressing the CRS signal, introduces its own complications, including drug-drug interactions, additional safety monitoring requirements, and the potential for confounding effects on the efficacy assessment of VRD-4187.

In sum, the protocol amendments represent a fundamental restructuring of the VRD-4187 clinical program that effectively resets the development timeline and introduces substantial uncertainty regarding whether VRD-4187 can ever achieve a favorable risk-benefit profile sufficient to support regulatory approval.

D. Cumulative Impact — Material Adverse Effect

Taken individually, each of the events described in Sections IV.A, IV.B, and IV.C above has had, and would reasonably be expected to continue to have, a Material Adverse Effect on the business, results of operations, financial condition, and assets of the Company, taken as a whole. Taken in the aggregate, these events leave no doubt that a Material Adverse Effect has occurred within the meaning of Section 1.1 of the Agreement.

The significance of these events must be understood in the context of the Company's business and financial profile. VRD-4187 is the Company's lead — and, for all practical purposes, only commercially significant — product candidate. The Company is a clinical-stage biotechnology company with no approved products, no product revenue (the Company reported total revenue of $0 for fiscal year 2023), and substantial ongoing operating losses (the Company reported a net loss of $87.3 million for fiscal year 2023). The Company's enterprise value is overwhelmingly, if not entirely, dependent on the clinical and regulatory prospects of VRD-4187. The Purchase Price of $900,000,000 reflected Buyer's assessment of the probability-adjusted net present value of VRD-4187, premised on the clinical data and regulatory status of VRD-4187 as represented by the Company and the Sellers at the time the Agreement was executed.

The events described herein are not temporary, cyclical, or short-term in nature. The Marlowe Asset Management-2 interim data — demonstrating a 23.4% incidence of Grade ≥3 CRS, seven treatment-related deaths, and the absence of any statistically significant efficacy benefit — are fixed historical facts that cannot be undone or reversed. The FDA partial clinical hold is an ongoing regulatory action of indefinite duration. The protocol amendments reflect a fundamental restructuring of the clinical program. These events, individually and collectively, reflect a profound and durable deterioration in the long-term clinical, regulatory, and commercial prospects of VRD-4187 and, by extension, the Company as an enterprise.

The clinical data demonstrating a severely unfavorable risk-benefit profile — markedly elevated mortality without statistically significant efficacy improvement — and the extraordinary regulatory action taken by the FDA constitute precisely the type of company-specific events that are encompassed by the definition of "Material Adverse Effect" in Section 1.1 of the Agreement. Under well-established Delaware law, a material adverse effect is one that substantially threatens the overall earnings potential of the target company in a durationally-significant manner. The events described herein satisfy that standard comprehensively.

V. Inapplicability of MAE Definition Carveouts

Buyer has carefully considered whether any of the carveouts set forth in the definition of "Material Adverse Effect" in Section 1.1 of the Agreement could apply to the events described above. Buyer has concluded that none of the carveouts is applicable.

The events giving rise to the Material Adverse Effect are, in each case, company-specific in nature. They consist of: (a) clinical trial results specific to the Company's lead product candidate, VRD-4187, generated in the Company's Marlowe Asset Management-2 clinical trial; (b) a regulatory action by the FDA directed specifically at the Company's IND application for VRD-4187; and (c) protocol amendments implemented by the Company in response to the safety and efficacy data from its own clinical trial. These events do not arise from, and are not related to, any of the following categories of events or conditions excluded from the MAE definition:

(i) general economic or political conditions in the United States or any other country;

(ii) conditions affecting the biotechnology or pharmaceutical industries generally;

(iii) changes in applicable law, rule, regulation, or order, or changes in the interpretation thereof by any governmental authority;

(iv) changes in United States generally accepted accounting principles ("GAAP") or the interpretation or enforcement thereof;

(v) pandemics, epidemics, or disease outbreaks, including COVID-19 or any similar public health emergency;

(vi) natural disasters, hurricanes, earthquakes, floods, or other acts of God;

(vii) acts of war (whether or not declared), armed hostilities, sabotage, terrorism, military action, or any escalation or worsening thereof;

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

(ix) the announcement or pendency of the Agreement or the Transactions, including any impact thereof on relationships with customers, suppliers, employees, or other business partners of the Company; or

(x) any action taken or omitted to be taken by the Company at the written request or with the written consent of Buyer.

None of the foregoing carveouts encompasses the company-specific clinical failure, regulatory action, and development program disruption that have befallen VRD-4187. The Marlowe Asset Management-2 interim data reflect the safety and efficacy profile of a specific molecule tested in a specific patient population pursuant to a specific clinical protocol. The FDA partial clinical hold was directed at a specific IND application held by the Company. These are, by their very nature, idiosyncratic, company-specific events that fall squarely within the core of the MAE definition and outside the scope of any industry-wide or macroeconomic carveout.

Moreover, even if any industry-wide carveout were arguably implicated — which Buyer does not concede — the events described herein disproportionately affect the Company relative to other comparably situated companies in the clinical-stage biotechnology industry. The Agreement provides that the carveouts in the MAE definition shall not apply to the extent that the relevant event, change, or condition disproportionately affects the Company relative to other companies operating in the same industries and markets. The Company's unique exposure to VRD-4187 (as a single-asset, clinical-stage company whose entire enterprise value is attributable to one product candidate) means that the Marlowe Asset Management-2 failure and the FDA clinical hold affect the Company in a manner that is fundamentally different from, and disproportionately more severe than, any effect that general industry conditions might have on a diversified pharmaceutical or biotechnology company. Accordingly, the disproportionate-impact exception would render any arguable carveout inapplicable.

VI. Incurability Prior to the Outside Date

The conditions to Buyer's obligation to consummate the Closing set forth in Sections 7.2(a) and 7.2(b) of the Agreement have become incapable of being satisfied prior to the Outside Date of December 10, 2024. The exercise of Buyer's termination right under Section 8.1(d) is predicated on this incurability, and Buyer sets forth the basis for its determination as follows:

(i) The Marlowe Asset Management-2 clinical data cannot be reversed or remediated. The 23.4% incidence of Grade ≥3 CRS in the VRD-4187 treatment arm, the seven (7) treatment-related deaths, and the non-statistically-significant overall response rate (p = 0.58) are fixed historical facts memorialized in the clinical trial record and reported to the DMC and the FDA. Clinical trial data, once generated, cannot be erased, restated, or retroactively improved. No action by the Company, however diligent or well-intentioned, can alter the safety and efficacy profile of VRD-4187 as demonstrated in the Marlowe Asset Management-2 interim analysis.

(ii) The FDA partial clinical hold on IND 154832 remains in effect. As of the date of this Termination Notice, the FDA has not lifted the partial clinical hold, and there is no reasonable expectation, based on publicly available information and the Company's own disclosures, that the clinical hold will be lifted and the underlying safety concerns fully resolved prior to December 10, 2024. The FDA's process for reviewing and resolving clinical hold issues is rigorous and time-consuming, typically requiring the sponsor to submit a complete response, followed by a thirty (30) day FDA review period, and often involving multiple rounds of correspondence and supplemental data submissions. Even in the most favorable scenario, the resolution of the clinical hold would require many months beyond the Outside Date.

(iii) The 50% dose reduction requires the generation of entirely new clinical data. Protocol Amendment v4.0's reduction of the VRD-4187 starting dose from 1.5 mg/kg to 0.75 mg/kg means that the Company must generate new clinical data demonstrating the safety and efficacy of VRD-4187 at the reduced dose level. This process will require, at a minimum, the enrollment and treatment of a new cohort of patients, the collection and analysis of safety and efficacy data over a clinically meaningful time horizon, and the submission of such data to the FDA. This process will take many months, and more likely years, and cannot possibly be completed prior to the Outside Date.

(iv) The cumulative nature of the events precludes cure. Even if any one of the foregoing events were theoretically remediable in isolation (which Buyer does not concede), the cumulative impact of the Marlowe Asset Management-2 data failure, the FDA clinical hold, and the fundamental restructuring of the clinical program renders the closing conditions incapable of satisfaction within any commercially reasonable timeframe, let alone by December 10, 2024.

Accordingly, the failure of the conditions in Sections 7.2(a) and 7.2(b) of the Agreement is permanent and irreversible and is not curable within the timeframe contemplated by the Agreement.

VII. No Breach by Buyer

Buyer has at all times since the execution of the Agreement fully complied with each of its representations, warranties, covenants, and agreements under the Agreement, including without limitation its obligations under Section 5.4 (Commercially Reasonable Efforts), Section 5.5 (Regulatory Filings and Approvals), and all other provisions of Article V. Buyer has cooperated in good faith with the Company and has taken all commercially reasonable steps to advance the consummation of the Transactions.

The failure of the closing conditions described herein is solely the result of the Company's clinical trial results, the FDA's regulatory action, and the resulting deterioration in the Company's business and prospects, and is not the result of any breach by Buyer of any of its representations, warranties, covenants, or agreements under the Agreement. Buyer's right to terminate the Agreement under Section 8.1(d) is therefore properly exercisable, and all conditions precedent to the exercise of such termination right have been satisfied.

VIII. Prior Notice and Opportunity to Cure

Buyer notes that, prior to delivering this Termination Notice, Buyer afforded the Company notice and a reasonable opportunity to cure the failures described herein, consistent with the principles of good faith and fair dealing and the terms of the Agreement.

On September 6, 2024, Buyer delivered to the Company a detailed Deficiency Notice (the "Deficiency Notice") identifying the events constituting the Material Adverse Effect and the resulting failure of the conditions to Buyer's obligation to close set forth in Sections 7.2(a) and 7.2(b) of the Agreement. The Deficiency Notice set forth, in substantial detail, the specific clinical, regulatory, and operational events giving rise to Buyer's concerns, including the Marlowe Asset Management-2 interim data, the FDA partial clinical hold, and the protocol amendments.

On September 13, 2024, the Company, through its counsel at Zalcourt Archer & Cole LLP, delivered a written response to the Deficiency Notice (the "Company Response"). In the Company Response, the Company disputed the occurrence of a Material Adverse Effect, characterized the Marlowe Asset Management-2 data as "preliminary" and "subject to further analysis," asserted that the FDA clinical hold would be resolved "expeditiously," and demanded that Buyer proceed to the Closing on the terms set forth in the Agreement. Buyer has carefully considered the arguments and representations set forth in the Company Response and has concluded that they do not alter Buyer's determination that a Material Adverse Effect has occurred and that the closing conditions under Sections 7.2(a) and 7.2(b) have become incapable of being satisfied prior to the Outside Date.

More than twenty-four (24) days have elapsed since the delivery of the Deficiency Notice. During this period, the conditions to Closing have remained unsatisfied and, as described in Section VI above, are incapable of satisfaction. The Company has not cured, and cannot cure, the failures identified in the Deficiency Notice. Buyer has afforded the Company a more than reasonable opportunity to cure, and the Company's failure to do so further confirms that the termination right under Section 8.1(d) is properly exercisable.

IX. Termination Effective Date and Consequences

Based on the foregoing, the Agreement is hereby terminated effective as of September 30, 2024, in accordance with Section 8.1(d) thereof.

Pursuant to Section 8.2 of the Agreement (Effect of Termination), upon termination of the Agreement in accordance with Section 8.1, the Agreement shall become void and of no further force or effect, and no party shall have any further liability or obligation to any other party with respect thereto, except as follows:

(a) those provisions of the Agreement that by their express terms survive termination shall remain in full force and effect, including without limitation Section 8.2 (Effect of Termination), Section 10.6 (Governing Law; Jurisdiction), Section 10.7 (Confidentiality), Section 10.8 (Public Announcements), and Section 10.12 (Specific Performance), among others;

(b) nothing in Section 8.2 shall relieve any party of liability for any willful and material breach of the Agreement occurring prior to such termination; and

(c) the Confidentiality Agreement, dated April 3, 2024, between Buyer and the Company (the "Confidentiality Agreement"), shall survive termination of the Agreement in accordance with its terms.

No party shall have any further liability or obligation to any other party under the Agreement, except as expressly provided therein with respect to surviving provisions and except for any liability arising from a willful and material breach of the Agreement prior to termination.

X. Inapplicability of Reverse Termination Fee

Buyer notes that the reverse termination fee provision set forth in Section 8.3(b) of the Agreement, which provides for the payment by Buyer of a reverse termination fee in the amount of Forty-Five Million Dollars ($45,000,000), is triggered solely in the event of a termination of the Agreement resulting from Buyer's failure to consummate the Closing due to a failure or unavailability of Buyer's financing as contemplated by Section 5.9 of the Agreement and the Debt Commitment Letter and Equity Commitment Letter referenced therein.

Buyer's termination of the Agreement pursuant to Section 8.1(d) is based solely on the occurrence of a Material Adverse Effect and the resulting failure of the closing conditions under Sections 7.2(a) and 7.2(b) of the Agreement. The termination is not related in any respect to the availability or sufficiency of Buyer's financing for the Transactions. Buyer's financing commitments remain in full force and effect as of the date hereof, and the termination of the Agreement is in no way attributable to any failure or insufficiency of Buyer's financing.

Accordingly, the reverse termination fee under Section 8.3(b) is not triggered, is not payable, and Buyer expressly disclaims any obligation with respect thereto.

XI. Reservation of Rights

Buyer expressly reserves all of its rights, remedies, claims, and defenses under the Agreement, at law, and in equity, including without limitation:

(a) the right to seek recovery of all damages, costs, and expenses (including reasonable attorneys' fees and expenses) arising from or related to the Company's and the Sellers' breach of representations and warranties and the events described herein;

(b) the right to pursue any claims for fraud, willful misconduct, or intentional misrepresentation by the Company, the Sellers, or any of their respective officers, directors, employees, or agents;

(c) the right to enforce any surviving provisions of the Agreement, including the Confidentiality Agreement and the provisions referenced in Section IX above; and

(d) all other rights and remedies available to Buyer under the Agreement, at law, or in equity, whether or not specifically enumerated herein.

Nothing in this Termination Notice shall be deemed to constitute a waiver, release, or relinquishment of any of Buyer's rights, remedies, claims, or defenses, all of which are expressly preserved. Buyer's decision to terminate the Agreement under Section 8.1(d) shall not be construed as an election of remedies or as a limitation on Buyer's right to pursue any other available remedy.

XII. Notices Under the Agreement

This Termination Notice is delivered in accordance with the notice provisions of Section 10.1 of the Agreement. All notices, requests, demands, claims, and other communications under the Agreement should continue to be directed to Buyer at:

Penterra Pharmaceuticals Corp. 1100 Meridian Boulevard, Suite 400 Princeton, New Jersey 08540

Attention: Thomas F. Holbrook, General Counsel

With a copy to (which shall not constitute notice):

Calderwood & Harkness LLP 200 Park Avenue, 42nd Floor New York, New York 10166

Attention: Oliver Mackenzie, Esq.

We trust that this letter clearly sets forth the basis for Buyer's termination of the Agreement and the legal and factual grounds supporting such termination. Please direct any questions or correspondence regarding this matter to the undersigned.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Oliver Mackenzie, Partner

On behalf of Penterra Pharmaceuticals Corp.

Enclosures: None

cc:

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

Dr. Anand Rajagopal, Chief Executive Officer, Penterra Pharmaceuticals Corp.

Natalie Reiner, Senior Vice President, Corporate Development, Penterra Pharmaceuticals Corp.

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

Rebecca Whitmore, Esq., Zalcourt Archer & Cole LLP

NY\12847295.4

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 30, 2024
VIA HAND DELIVERY, OVERNIGHT COURIER, AND EMAIL
Veridian Biosciences, Inc. 550 Gateway Drive Cambridge, Massachusetts 02142
Attention: Dr. Julian Marek, Chief Executive Officer
Rachel Stein-Goldberg, General Counsel
With a copy to:
Zalcourt Archer & Cole LLP One Federal Street, 30th Floor Boston, Massachusetts 02110
Attention: Rebecca Whitmore, Esq.
David Ng, in his capacity as Stockholder Representative c/o Crestline Ventures, LP Address on file with the Company
Re: Termination of Stock Purchase Agreement, dated as of June 10, 2024 (the "Agreement"), by and among Penterra Pharmaceuticals Corp., a Delaware corporation ("Buyer"), Veridian Biosciences, Inc., a Delaware corporation (the "Company"), the Sellers identified therein, and David Ng, in his capacity as Stockholder Representative
Dear Dr. Marek, Ms. Stein-Goldberg, Ms. Whitmore, and Mr. Ng:
I. Introduction and Purpose of Notice
This firm serves as legal counsel to Penterra Pharmaceuticals Corp., a Delaware corporation ("Penterra" or "Buyer"), in connection with the above-referenced Stock Purchase Agreement, dated as of June 10, 2024 (together with all schedules, exhibits, and disclosure letters delivered in connection therewith, the "Agreement"), by and among Buyer, Veridian Biosciences, Inc., a Delaware corporation (the "Company"), the Sellers identified on the signature pages thereto, and David Ng, in his capacity as Stockholder Representative (the "Stockholder Representative").
This letter constitutes the formal written notice of termination of the Agreement, delivered by Buyer pursuant to and in accordance with Section 8.1(d) thereof. Buyer is delivering this Termination Notice effective as of September 30, 2024 (the "Termination Date"). This Termination Notice is being delivered simultaneously to the Company, counsel to the Sellers, and the Stockholder Representative in accordance with the notice provisions of Section 10.1 of the Agreement.
Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Agreement.
II. Background and Recitals
On June 10, 2024, Buyer, the Company, the Sellers, and the Stockholder Representative entered into the Agreement, pursuant to which Buyer agreed to acquire one hundred percent (100%) of the issued and outstanding capital stock of the Company (the "Shares") for an aggregate purchase price of Nine Hundred Million Dollars ($900,000,000) in cash (the "Purchase Price"), subject to the customary adjustments and the terms and conditions set forth in the Agreement. The Agreement was duly authorized by the respective boards of directors of each of Buyer and the Company, and was executed on behalf of Buyer by Dr. Anand Rajagopal, Chief Executive Officer, and on behalf of the Company by Dr. Julian Marek, Chief Executive Officer.
The Agreement is governed by the laws of the State of Delaware, without giving effect to any choice-of-law or conflict-of-law rules or provisions that would cause the application of the laws of any other jurisdiction. Section 10.6 of the Agreement provides for the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if such court declines jurisdiction, any federal court of the United States of America sitting in the State of Delaware) for the resolution of any disputes arising out of or relating to the Agreement or the transactions contemplated thereby.
Pursuant to Section 8.1(c) of the Agreement, the "Outside Date" by which the Closing must occur is December 10, 2024, being six (6) months from the date of the Agreement. As described in detail below, certain of the conditions to Buyer's obligation to consummate the Closing set forth in Section 7.2 of the Agreement have failed and have become incapable of being satisfied prior to the Outside Date.
III. Basis for Termination — Section 8.1(d) of the Agreement
A. Termination Right Under Section 8.1(d)
Section 8.1(d) of the Agreement provides, in relevant part, that:
"This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Closing . . . by Buyer, by written notice to the Company and the Stockholder Representative, if any of the conditions to Buyer's obligation to consummate the Closing set forth in Section 7.2 shall have become incapable of being satisfied prior to the Outside Date; provided, that such failure is not the result of a breach by Buyer of any of its representations, warranties, covenants, or agreements set forth in this Agreement."
For the reasons set forth in detail below, multiple conditions to Buyer's obligation to consummate the Closing under Section 7.2 of the Agreement have become incapable of being satisfied prior to the Outside Date of December 10, 2024, and such failures are not the result of any breach by Buyer of any of its representations, warranties, covenants, or agreements under the Agreement. Penterra hereby exercises its right to terminate the Agreement under Section 8.1(d) thereof, effective as of the Termination Date.
B. Failure of Closing Condition Under Section 7.2(a) — Bring-Down of Representations and Warranties
Section 7.2(a) of the Agreement conditions Buyer's obligation to consummate the Closing upon the representations and warranties of the Company and the Sellers set forth in Article III of the Agreement being true and correct in all respects (or, with respect to representations and warranties not qualified by materiality or Material Adverse Effect, true and correct in all material respects) as of the date of the Agreement and as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date).
The representations and warranties of the Company and the Sellers, including without limitation those set forth in Article III of the Agreement regarding the Company's business, operations, condition (financial and otherwise), assets, liabilities, properties, and prospects, are no longer true and correct in all respects and, with respect to representations and warranties not qualified by materiality or Material Adverse Effect, are no longer true and correct in all material respects. Such inaccuracies, individually and in the aggregate, constitute a Material Adverse Effect as defined in Section 1.1 of the Agreement.
Specifically, and without limitation, the following representations and warranties of the Company and the Sellers are no longer accurate:
(i) the representations and warranties regarding the Company's compliance with all applicable laws, rules, regulations, and orders of any governmental authority, including without limitation the Federal Food, Drug, and Cosmetic Act and the regulations promulgated by the United States Food and Drug Administration (the "FDA") thereunder (Section 3.12);
(ii) the representations and warranties regarding the status of FDA regulatory matters, including the status and conduct of the Company's Investigational New Drug Applications, clinical trials, and regulatory submissions (Section 3.14);
(iii) the representations and warranties regarding the conduct of the Company's clinical trials in accordance with all applicable protocols, good clinical practices, and regulatory requirements (Section 3.14(c));
(iv) the representations and warranties regarding the absence, since the date of the Most Recent Balance Sheet, 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 (Section 3.6); and
(v) the representations and warranties regarding the Company's intellectual property and the clinical data supporting the Company's product pipeline (Section 3.10).
The bring-down condition set forth in Section 7.2(a) has accordingly failed and, for the reasons described in Section VI below, has become incapable of being satisfied prior to the Outside Date.
C. Failure of Closing Condition Under Section 7.2(b) — No Material Adverse Effect
Section 7.2(b) of the Agreement conditions Buyer's obligation to consummate the Closing 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, as defined in Section 1.1 of the Agreement.
As set forth in detail in Section IV below, a Material Adverse Effect has occurred since June 10, 2024, the date of the Agreement. The condition to Closing set forth in Section 7.2(b) has accordingly failed and, for the reasons described in Section VI below, has become incapable of being satisfied prior to the Outside Date.
IV. Events Constituting the Material Adverse Effect
A. Marlowe Asset Management-2 Phase II Clinical Trial Data (August 14, 2024)
VRD-4187, the Company's lead clinical product candidate, is a bispecific T-cell engager targeting delta-like ligand 3 ("DLL3")-expressing tumors for the treatment of small cell lung cancer ("SCLC"). VRD-4187 was the subject of the Company's pivotal clinical development program, designated as Marlowe Asset Management-2, a randomized, open-label Phase II clinical trial (ClinicalTrials.gov Identifier: NCT05837291). The Marlowe Asset Management-2 trial was conducted across forty-two (42) clinical sites in the United States and the European Union, and enrolled a total of three hundred eighty-seven (387) patients, with one hundred ninety-four (194) patients in the VRD-4187 treatment arm and one hundred ninety-three (193) patients in the standard-of-care control arm.
On August 14, 2024, the independent Data Monitoring Committee (the "DMC") for the Marlowe Asset Management-2 trial conducted a pre-specified interim analysis of safety and efficacy data accrued through the study cutoff date. The results of this interim analysis were profoundly adverse, and revealed the following:
(i) Grade ≥3 Cytokine Release Syndrome (CRS): The incidence of Grade 3 or higher cytokine release syndrome in the VRD-4187 treatment arm was 23.4% (45 of 194 patients), compared to 4.1% (8 of 193 patients) in the control arm. This difference of 19.3 percentage points represents a dramatically elevated and clinically unacceptable safety signal. Grade ≥3 CRS is a severe and potentially life-threatening immune-mediated toxicity characterized by hemodynamic instability, capillary leak, organ dysfunction, and, in the most severe cases, multi-organ failure and death. An incidence rate of 23.4% for Grade ≥3 CRS is far in excess of the safety profile that would be required for any viable regulatory submission or commercial product in the SCLC indication.
(ii) Treatment-Related Deaths: Seven (7) deaths attributable to VRD-4187 treatment occurred in the VRD-4187 arm (representing 3.6% of 194 patients), compared to one (1) death in the control arm (representing 0.5% of 193 patients). This constitutes a seven-fold increase in treatment-related mortality in the VRD-4187 arm relative to the control arm. The treatment-related deaths in the VRD-4187 arm were associated with severe CRS, disseminated intravascular coagulation, and multi-organ failure, consistent with immune-mediated toxicity driven by VRD-4187's mechanism of action.
(iii) Overall Response Rate (ORR): The overall response rate in the VRD-4187 arm was 31.4%, compared to 28.9% in the control arm. This difference was not statistically significant (p = 0.58), demonstrating that VRD-4187 failed to demonstrate any meaningful efficacy benefit over the standard-of-care regimen. The observed 2.5 percentage point difference in ORR is well within the margin of statistical noise and is clinically meaningless, particularly in the context of the severely elevated safety risks described above.
Following its review of these data, the DMC recommended the immediate suspension of enrollment in the Marlowe Asset Management-2 trial and the implementation of dose modification protocols to address the safety concerns.
These results are of the utmost gravity. The Marlowe Asset Management-2 data demonstrate that VRD-4187 has a severely unfavorable risk-benefit profile: the drug causes dramatically increased rates of life-threatening toxicity without producing any statistically significant improvement in efficacy over standard of care. This combination of findings fundamentally undermines the clinical and commercial viability of VRD-4187, which represented the cornerstone of the Company's pipeline and the primary basis for the valuation of the Company at the agreed Purchase Price of $900,000,000. Indeed, it is no exaggeration to state that the Marlowe Asset Management-2 interim data, standing alone, have destroyed the core value proposition that formed the foundation of Buyer's decision to enter into the Agreement.
B. 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"), pending investigation of the CRS-related deaths observed in the Marlowe Asset Management-2 trial. The partial clinical hold was communicated to the Company via a clinical hold letter from the Division of Oncology Products 2, Office of Oncologic Diseases, Center for Drug Evaluation and Research.
The FDA's partial clinical hold prohibits the enrollment of new patients in any clinical trial conducted under IND 154832 and imposes material restrictions on the continued treatment of existing patients in the Marlowe Asset Management-2 trial, including the requirement for enhanced safety monitoring, dose modification, and the submission of detailed safety reports. The Company is required to submit a complete response to the FDA addressing the clinical hold issues before the FDA will consider lifting the clinical hold.
The imposition of a partial clinical hold by the FDA is an extraordinary regulatory action that is reserved for circumstances in which the FDA has identified significant safety concerns that, in its judgment, present an unreasonable risk to the health and safety of clinical trial participants. The clinical hold reflects the severity of the safety signal identified in the Marlowe Asset Management-2 data and constitutes an independent and significant adverse regulatory event. At a minimum, the clinical hold will materially delay the clinical development program for VRD-4187 by many months, and there is a substantial likelihood that the clinical hold will not be resolved on terms that permit the continuation of the VRD-4187 program in its current form, or at all. The imposition of the clinical hold also casts a significant shadow over the Company's regulatory standing and credibility with the FDA, which will have long-term consequences for the Company's ability to advance VRD-4187 or any successor program through the regulatory process.
C. Protocol Amendment and Dose Reduction (August 28, 2024)
On August 28, 2024, the Company implemented Protocol Amendment v4.0 to the Marlowe Asset Management-2 trial. Among other changes, Protocol Amendment v4.0 (i) added mandatory tocilizumab prophylaxis for all patients receiving VRD-4187, in an effort to mitigate the risk of severe CRS, and (ii) reduced the starting dose of VRD-4187 from 1.5 mg/kg to 0.75 mg/kg — a fifty percent (50%) dose reduction.
While Buyer understands that the Company implemented these modifications in response to the safety signal identified in the Marlowe Asset Management-2 interim analysis, the protocol amendments introduce substantial additional uncertainty regarding the therapeutic viability of VRD-4187. The 50% dose reduction, in particular, has far-reaching implications for the VRD-4187 program:
(i) The efficacy of VRD-4187 at the reduced dose of 0.75 mg/kg has not been established. Given that VRD-4187 failed to demonstrate statistically significant efficacy over standard of care at the original dose of 1.5 mg/kg, there is no scientific basis for expecting that a 50% dose reduction will produce a clinically meaningful efficacy signal.
(ii) The dose reduction effectively requires the clinical program to generate entirely new dose-response data at the 0.75 mg/kg dose level. This data cannot be extrapolated from the existing Marlowe Asset Management-2 dataset, which was generated at the 1.5 mg/kg dose level.
(iii) The generation of new dose-response data at the reduced dose level will likely require the design and conduct of additional clinical trials, a process that will take many months, if not years, and will require additional regulatory interactions with the FDA, including, at a minimum, the submission and acceptance of a protocol amendment or new trial protocol.
(iv) The addition of mandatory tocilizumab prophylaxis, while potentially addressing the CRS signal, introduces its own complications, including drug-drug interactions, additional safety monitoring requirements, and the potential for confounding effects on the efficacy assessment of VRD-4187.
In sum, the protocol amendments represent a fundamental restructuring of the VRD-4187 clinical program that effectively resets the development timeline and introduces substantial uncertainty regarding whether VRD-4187 can ever achieve a favorable risk-benefit profile sufficient to support regulatory approval.
D. Cumulative Impact — Material Adverse Effect
Taken individually, each of the events described in Sections IV.A, IV.B, and IV.C above has had, and would reasonably be expected to continue to have, a Material Adverse Effect on the business, results of operations, financial condition, and assets of the Company, taken as a whole. Taken in the aggregate, these events leave no doubt that a Material Adverse Effect has occurred within the meaning of Section 1.1 of the Agreement.
The significance of these events must be understood in the context of the Company's business and financial profile. VRD-4187 is the Company's lead — and, for all practical purposes, only commercially significant — product candidate. The Company is a clinical-stage biotechnology company with no approved products, no product revenue (the Company reported total revenue of $0 for fiscal year 2023), and substantial ongoing operating losses (the Company reported a net loss of $87.3 million for fiscal year 2023). The Company's enterprise value is overwhelmingly, if not entirely, dependent on the clinical and regulatory prospects of VRD-4187. The Purchase Price of $900,000,000 reflected Buyer's assessment of the probability-adjusted net present value of VRD-4187, premised on the clinical data and regulatory status of VRD-4187 as represented by the Company and the Sellers at the time the Agreement was executed.
The events described herein are not temporary, cyclical, or short-term in nature. The Marlowe Asset Management-2 interim data — demonstrating a 23.4% incidence of Grade ≥3 CRS, seven treatment-related deaths, and the absence of any statistically significant efficacy benefit — are fixed historical facts that cannot be undone or reversed. The FDA partial clinical hold is an ongoing regulatory action of indefinite duration. The protocol amendments reflect a fundamental restructuring of the clinical program. These events, individually and collectively, reflect a profound and durable deterioration in the long-term clinical, regulatory, and commercial prospects of VRD-4187 and, by extension, the Company as an enterprise.
The clinical data demonstrating a severely unfavorable risk-benefit profile — markedly elevated mortality without statistically significant efficacy improvement — and the extraordinary regulatory action taken by the FDA constitute precisely the type of company-specific events that are encompassed by the definition of "Material Adverse Effect" in Section 1.1 of the Agreement. Under well-established Delaware law, a material adverse effect is one that substantially threatens the overall earnings potential of the target company in a durationally-significant manner. The events described herein satisfy that standard comprehensively.
V. Inapplicability of MAE Definition Carveouts
Buyer has carefully considered whether any of the carveouts set forth in the definition of "Material Adverse Effect" in Section 1.1 of the Agreement could apply to the events described above. Buyer has concluded that none of the carveouts is applicable.
The events giving rise to the Material Adverse Effect are, in each case, company-specific in nature. They consist of: (a) clinical trial results specific to the Company's lead product candidate, VRD-4187, generated in the Company's Marlowe Asset Management-2 clinical trial; (b) a regulatory action by the FDA directed specifically at the Company's IND application for VRD-4187; and (c) protocol amendments implemented by the Company in response to the safety and efficacy data from its own clinical trial. These events do not arise from, and are not related to, any of the following categories of events or conditions excluded from the MAE definition:
(i) general economic or political conditions in the United States or any other country;
(ii) conditions affecting the biotechnology or pharmaceutical industries generally;
(iii) changes in applicable law, rule, regulation, or order, or changes in the interpretation thereof by any governmental authority;
(iv) changes in United States generally accepted accounting principles ("GAAP") or the interpretation or enforcement thereof;
(v) pandemics, epidemics, or disease outbreaks, including COVID-19 or any similar public health emergency;
(vi) natural disasters, hurricanes, earthquakes, floods, or other acts of God;
(vii) acts of war (whether or not declared), armed hostilities, sabotage, terrorism, military action, or any escalation or worsening thereof;
(viii) changes in the financial, banking, or securities markets generally (including any disruption thereof and any decline in the price of any security or any market index);
(ix) the announcement or pendency of the Agreement or the Transactions, including any impact thereof on relationships with customers, suppliers, employees, or other business partners of the Company; or
(x) any action taken or omitted to be taken by the Company at the written request or with the written consent of Buyer.
None of the foregoing carveouts encompasses the company-specific clinical failure, regulatory action, and development program disruption that have befallen VRD-4187. The Marlowe Asset Management-2 interim data reflect the safety and efficacy profile of a specific molecule tested in a specific patient population pursuant to a specific clinical protocol. The FDA partial clinical hold was directed at a specific IND application held by the Company. These are, by their very nature, idiosyncratic, company-specific events that fall squarely within the core of the MAE definition and outside the scope of any industry-wide or macroeconomic carveout.
Moreover, even if any industry-wide carveout were arguably implicated — which Buyer does not concede — the events described herein disproportionately affect the Company relative to other comparably situated companies in the clinical-stage biotechnology industry. The Agreement provides that the carveouts in the MAE definition shall not apply to the extent that the relevant event, change, or condition disproportionately affects the Company relative to other companies operating in the same industries and markets. The Company's unique exposure to VRD-4187 (as a single-asset, clinical-stage company whose entire enterprise value is attributable to one product candidate) means that the Marlowe Asset Management-2 failure and the FDA clinical hold affect the Company in a manner that is fundamentally different from, and disproportionately more severe than, any effect that general industry conditions might have on a diversified pharmaceutical or biotechnology company. Accordingly, the disproportionate-impact exception would render any arguable carveout inapplicable.
VI. Incurability Prior to the Outside Date
The conditions to Buyer's obligation to consummate the Closing set forth in Sections 7.2(a) and 7.2(b) of the Agreement have become incapable of being satisfied prior to the Outside Date of December 10, 2024. The exercise of Buyer's termination right under Section 8.1(d) is predicated on this incurability, and Buyer sets forth the basis for its determination as follows:
(i) The Marlowe Asset Management-2 clinical data cannot be reversed or remediated. The 23.4% incidence of Grade ≥3 CRS in the VRD-4187 treatment arm, the seven (7) treatment-related deaths, and the non-statistically-significant overall response rate (p = 0.58) are fixed historical facts memorialized in the clinical trial record and reported to the DMC and the FDA. Clinical trial data, once generated, cannot be erased, restated, or retroactively improved. No action by the Company, however diligent or well-intentioned, can alter the safety and efficacy profile of VRD-4187 as demonstrated in the Marlowe Asset Management-2 interim analysis.
(ii) The FDA partial clinical hold on IND 154832 remains in effect. As of the date of this Termination Notice, the FDA has not lifted the partial clinical hold, and there is no reasonable expectation, based on publicly available information and the Company's own disclosures, that the clinical hold will be lifted and the underlying safety concerns fully resolved prior to December 10, 2024. The FDA's process for reviewing and resolving clinical hold issues is rigorous and time-consuming, typically requiring the sponsor to submit a complete response, followed by a thirty (30) day FDA review period, and often involving multiple rounds of correspondence and supplemental data submissions. Even in the most favorable scenario, the resolution of the clinical hold would require many months beyond the Outside Date.
(iii) The 50% dose reduction requires the generation of entirely new clinical data. Protocol Amendment v4.0's reduction of the VRD-4187 starting dose from 1.5 mg/kg to 0.75 mg/kg means that the Company must generate new clinical data demonstrating the safety and efficacy of VRD-4187 at the reduced dose level. This process will require, at a minimum, the enrollment and treatment of a new cohort of patients, the collection and analysis of safety and efficacy data over a clinically meaningful time horizon, and the submission of such data to the FDA. This process will take many months, and more likely years, and cannot possibly be completed prior to the Outside Date.
(iv) The cumulative nature of the events precludes cure. Even if any one of the foregoing events were theoretically remediable in isolation (which Buyer does not concede), the cumulative impact of the Marlowe Asset Management-2 data failure, the FDA clinical hold, and the fundamental restructuring of the clinical program renders the closing conditions incapable of satisfaction within any commercially reasonable timeframe, let alone by December 10, 2024.
Accordingly, the failure of the conditions in Sections 7.2(a) and 7.2(b) of the Agreement is permanent and irreversible and is not curable within the timeframe contemplated by the Agreement.
VII. No Breach by Buyer
Buyer has at all times since the execution of the Agreement fully complied with each of its representations, warranties, covenants, and agreements under the Agreement, including without limitation its obligations under Section 5.4 (Commercially Reasonable Efforts), Section 5.5 (Regulatory Filings and Approvals), and all other provisions of Article V. Buyer has cooperated in good faith with the Company and has taken all commercially reasonable steps to advance the consummation of the Transactions.
The failure of the closing conditions described herein is solely the result of the Company's clinical trial results, the FDA's regulatory action, and the resulting deterioration in the Company's business and prospects, and is not the result of any breach by Buyer of any of its representations, warranties, covenants, or agreements under the Agreement. Buyer's right to terminate the Agreement under Section 8.1(d) is therefore properly exercisable, and all conditions precedent to the exercise of such termination right have been satisfied.
VIII. Prior Notice and Opportunity to Cure
Buyer notes that, prior to delivering this Termination Notice, Buyer afforded the Company notice and a reasonable opportunity to cure the failures described herein, consistent with the principles of good faith and fair dealing and the terms of the Agreement.
On September 6, 2024, Buyer delivered to the Company a detailed Deficiency Notice (the "Deficiency Notice") identifying the events constituting the Material Adverse Effect and the resulting failure of the conditions to Buyer's obligation to close set forth in Sections 7.2(a) and 7.2(b) of the Agreement. The Deficiency Notice set forth, in substantial detail, the specific clinical, regulatory, and operational events giving rise to Buyer's concerns, including the Marlowe Asset Management-2 interim data, the FDA partial clinical hold, and the protocol amendments.
On September 13, 2024, the Company, through its counsel at Zalcourt Archer & Cole LLP, delivered a written response to the Deficiency Notice (the "Company Response"). In the Company Response, the Company disputed the occurrence of a Material Adverse Effect, characterized the Marlowe Asset Management-2 data as "preliminary" and "subject to further analysis," asserted that the FDA clinical hold would be resolved "expeditiously," and demanded that Buyer proceed to the Closing on the terms set forth in the Agreement. Buyer has carefully considered the arguments and representations set forth in the Company Response and has concluded that they do not alter Buyer's determination that a Material Adverse Effect has occurred and that the closing conditions under Sections 7.2(a) and 7.2(b) have become incapable of being satisfied prior to the Outside Date.
More than twenty-four (24) days have elapsed since the delivery of the Deficiency Notice. During this period, the conditions to Closing have remained unsatisfied and, as described in Section VI above, are incapable of satisfaction. The Company has not cured, and cannot cure, the failures identified in the Deficiency Notice. Buyer has afforded the Company a more than reasonable opportunity to cure, and the Company's failure to do so further confirms that the termination right under Section 8.1(d) is properly exercisable.
IX. Termination Effective Date and Consequences
Based on the foregoing, the Agreement is hereby terminated effective as of September 30, 2024, in accordance with Section 8.1(d) thereof.
Pursuant to Section 8.2 of the Agreement (Effect of Termination), upon termination of the Agreement in accordance with Section 8.1, the Agreement shall become void and of no further force or effect, and no party shall have any further liability or obligation to any other party with respect thereto, except as follows:
(a) those provisions of the Agreement that by their express terms survive termination shall remain in full force and effect, including without limitation Section 8.2 (Effect of Termination), Section 10.6 (Governing Law; Jurisdiction), Section 10.7 (Confidentiality), Section 10.8 (Public Announcements), and Section 10.12 (Specific Performance), among others;
(b) nothing in Section 8.2 shall relieve any party of liability for any willful and material breach of the Agreement occurring prior to such termination; and
(c) the Confidentiality Agreement, dated April 3, 2024, between Buyer and the Company (the "Confidentiality Agreement"), shall survive termination of the Agreement in accordance with its terms.
No party shall have any further liability or obligation to any other party under the Agreement, except as expressly provided therein with respect to surviving provisions and except for any liability arising from a willful and material breach of the Agreement prior to termination.
X. Inapplicability of Reverse Termination Fee
Buyer notes that the reverse termination fee provision set forth in Section 8.3(b) of the Agreement, which provides for the payment by Buyer of a reverse termination fee in the amount of Forty-Five Million Dollars ($45,000,000), is triggered solely in the event of a termination of the Agreement resulting from Buyer's failure to consummate the Closing due to a failure or unavailability of Buyer's financing as contemplated by Section 5.9 of the Agreement and the Debt Commitment Letter and Equity Commitment Letter referenced therein.
Buyer's termination of the Agreement pursuant to Section 8.1(d) is based solely on the occurrence of a Material Adverse Effect and the resulting failure of the closing conditions under Sections 7.2(a) and 7.2(b) of the Agreement. The termination is not related in any respect to the availability or sufficiency of Buyer's financing for the Transactions. Buyer's financing commitments remain in full force and effect as of the date hereof, and the termination of the Agreement is in no way attributable to any failure or insufficiency of Buyer's financing.
Accordingly, the reverse termination fee under Section 8.3(b) is not triggered, is not payable, and Buyer expressly disclaims any obligation with respect thereto.
XI. Reservation of Rights
Buyer expressly reserves all of its rights, remedies, claims, and defenses under the Agreement, at law, and in equity, including without limitation:
(a) the right to seek recovery of all damages, costs, and expenses (including reasonable attorneys' fees and expenses) arising from or related to the Company's and the Sellers' breach of representations and warranties and the events described herein;
(b) the right to pursue any claims for fraud, willful misconduct, or intentional misrepresentation by the Company, the Sellers, or any of their respective officers, directors, employees, or agents;
(c) the right to enforce any surviving provisions of the Agreement, including the Confidentiality Agreement and the provisions referenced in Section IX above; and
(d) all other rights and remedies available to Buyer under the Agreement, at law, or in equity, whether or not specifically enumerated herein.
Nothing in this Termination Notice shall be deemed to constitute a waiver, release, or relinquishment of any of Buyer's rights, remedies, claims, or defenses, all of which are expressly preserved. Buyer's decision to terminate the Agreement under Section 8.1(d) shall not be construed as an election of remedies or as a limitation on Buyer's right to pursue any other available remedy.
XII. Notices Under the Agreement
This Termination Notice is delivered in accordance with the notice provisions of Section 10.1 of the Agreement. All notices, requests, demands, claims, and other communications under the Agreement should continue to be directed to Buyer at:
Penterra Pharmaceuticals Corp. 1100 Meridian Boulevard, Suite 400 Princeton, New Jersey 08540
Attention: Thomas F. Holbrook, General Counsel
With a copy to (which shall not constitute notice):
Calderwood & Harkness LLP 200 Park Avenue, 42nd Floor New York, New York 10166
Attention: Oliver Mackenzie, Esq.
We trust that this letter clearly sets forth the basis for Buyer's termination of the Agreement and the legal and factual grounds supporting such termination. Please direct any questions or correspondence regarding this matter to the undersigned.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Oliver Mackenzie, Partner
On behalf of Penterra Pharmaceuticals Corp.
Enclosures: None
cc:
Thomas F. Holbrook, General Counsel, Penterra Pharmaceuticals Corp.
Dr. Anand Rajagopal, Chief Executive Officer, Penterra Pharmaceuticals Corp.
Natalie Reiner, Senior Vice President, Corporate Development, Penterra Pharmaceuticals Corp.
David Ng, Stockholder Representative, c/o Crestline Ventures, LP
Rebecca Whitmore, Esq., Zalcourt Archer & Cole LLP
NY\12847295.4

CALDERWOOD & HARKNESS LLP Attorneys at Law

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