Leonard,
I spent a good chunk of this afternoon going through the Q1 2023 billing data and time entries for Matter 1018-00009 (Penterra Pharmaceuticals — TP Exam Defense, TY 2017–2020). I wanted to get the numbers compiled before we start putting together the Q2 quarterly status report for Marcus Whitfield. Here's where we stand.
**C&H Fees Billed Through March 31, 2023**
Total C&H legal fees billed through Q1 2023 come to approximately **$2,940,000**. That's roughly 10 months of active work since we executed the engagement letter on June 2, 2022. The breakdown by timekeeper looks like this:
- **L. Cross:** ~420 hours at $1,475/hr = ~$619,500 - **S. Hartwell:** ~185 hours at $1,350/hr = ~$249,750 - **G. Simmons:** ~1,180 hours at $885/hr = ~$1,044,300 - **L. Nazari:** ~1,100 hours at $695/hr = ~$764,500 - **Paralegals and other support:** ~$262,000
As you'd expect, Simmons and Nazari have been carrying the heaviest load given the sheer volume of IDR responses — they've worked through approximately 30+ of the 47 IDRs so far, and the IDR period is still ongoing. Your hours are right where I'd expect them for partner oversight and strategy at this stage of the examination.
**Whitmore Valuation Group Fees**
WVG fees billed through Q1 2023 are approximately **$1,350,000** at the blended rate of $650/hr. Dr. Vasquez and Dr. Chakrabarti have delivered the core economic analyses — the CUT analysis (14 comparable pharmaceutical license agreements, IQR of 3.1%–6.8%, median 4.4%), the CPM/TNMM analysis (22 comparable companies), and the PCT valuation / DCF analysis ($278M–$361M range at 9.8% WACC). Those deliverables are largely complete, which is good, but I expect we'll need substantial additional WVG work once the IRS economist (Washburne) finalizes his analysis and a NOPA is issued. Rebuttal work on the economic side could be significant depending on what they come back with. I'd project remaining WVG fees in the range of **$700,000–$800,000** through Appeals. I've got the WVG fee summary from Dr. Vasquez's office if you want to see the detail.
**Thornbury & Keogh Fees**
Brief update here: T&K Irish coordination fees are running at approximately €180,000 (~$197,000) to date. I expect the total to land around €312,500 (~$341,200) by matter close. Nazari has been the primary point of contact with Ciarán Thornbury on the Irish tax coordination, PBI substance documentation, and Knowledge Development box issues — that relationship has been working well.
**Comparison to Original Budget Estimate**
Pulling up our June 2022 budget (budget-estimate-memo.xlsx), we estimated C&H fees in the range of **$4.5M–$7.0M** through Appeals resolution. Here's how I see the phasing playing out:
- **IDR phase** (June 2022–Sept. 2023 anticipated): ~$3.4M–$3.6M in C&H fees by the time all 47 IDRs are fully responded to - **NOPA review, Protest preparation, and filing:** ~$800,000–$1,000,000 (hasn't started yet; anticipating late 2023 based on exam team signals) - **Appeals preparation and conference:** ~$900,000–$1,200,000 - **Settlement negotiation and closing:** ~$200,000–$400,000
That puts **total projected C&H fees at $5,300,000–$6,200,000** — within the original range, though we're trending toward the upper half. The main variable, as I see it, is the complexity of the NOPA response and whether Appeals goes smoothly or requires multiple conferences. Given the IRS's apparent focus on both the CSA cost-sharing ratios and the legacy IP royalty rate, the proposed adjustments could be very large, which would naturally drive up the protest and Appeals work.
**IDR Volume and Pace**
A few observations: 47 IDRs is a significant number. Meskill and Dunleavy have been thorough — there's really no other way to characterize it. On the positive side, the scope objection we filed on IDR No. 26 back in February paid off — the IRS narrowed the request, which saved us meaningful time and kept the client's costs down. The mid-examination conference you requested for May should give us a much better read on the IRS's timeline and what remaining requests we can expect.
I'll also note that Susan Lam and Martin Ogilvy at Crestfield & Associates have been responsive in providing underlying TP documentation and return data, which has helped keep the IDR response workstream on track. That hasn't always been my experience with in-house teams on exams of this size, so credit where it's due.
**Client Communication and Billing**
I'd suggest we include a budget update section in the Q2 status report to Marcus Whitfield, framing the fees as tracking within the original estimate. Whitfield has been cost-conscious — appropriately so — but he understands the scope of the examination, and we haven't had any fee complaints to date. I think a proactive update on where we are relative to the budget will reinforce that we're managing this responsibly. I'll prepare the detailed Q1 2023 billing statement for transmittal to PPC separately.
For reference, I've got the Q1 2023 billing detail report pulled from our system and the WVG fee summary — happy to forward both if you want to review the raw numbers.
Let me know if you want to discuss any of this on our next internal call. I can also pull together a more granular breakdown by phase if you think that would be useful for the client update. I'll be in the Philadelphia office next week — happy to stop by and walk through it in person if that's easier.
Best, Sylvia
---
**Sylvia Hartwell** Partner, Tax Department Calderwood & Harkness LLP 600 Lexington Avenue, New York, NY 10022 Direct: (212) 554-6183 shartwell@calderwoodharkness.com