[sheet: Summary]

[sheet: Summary]
Item | Detail
Client | Penterra Pharmaceuticals Corp. (PPC)
CSA Counterparty | Penterra Biopharma International DAC (PBI)
CSA Effective Date | July 1, 2012
PCT Payment | $312,000,000
Tax Years Analyzed | 2017, 2018, 2019, 2020
Products Covered | Veritaxol (oncology), Imvara (immunology), Cerulon (rare disease)
Americas Territory | North America, Central America, South America, Caribbean (PPC)
Non-Americas Territory | EMEA, APAC — 68 country markets (PBI)
Prepared By | Garrett Simmons, Calderwood & Harkness LLP, in coordination with Whitmore Valuation Group LLC
C&H Matter No. | 1018-00009
Lead Economist | Dr. Helena Vasquez, Managing Director, Whitmore Valuation Group LLC
Supporting Economist | Dr. Rohan Chakrabarti, Senior Director, Whitmore Valuation Group LLC
Purpose | Model actual and projected revenue splits by territory to derive PBI's share of reasonably anticipated benefits (RAB) under the qualified cost-sharing arrangement, per Treas. Reg. § 1.482-7
Regulatory Basis | IRC § 482; Treas. Reg. § 1.482-7 (Qualified Cost-Sharing Arrangements); Treas. Reg. § 1.482-1(d) (Arm's-Length Standard)
PPC FY 2020 Total Revenue | $6,820,000,000
PBI FY 2020 Revenue | €2,140,000,000
Total IRS Proposed Adjustment (Net) | $380,400,000
Settlement Amount | $47,600,000
Total Cash Cost to PPC | $12,840,000
Savings vs. IRS Proposed Position | $83,020,000 (86.6%)
[sheet: Veritaxol Revenue]
Tax Year | Global Net Sales — Actual ($M) | Americas Net Sales — Actual ($M) | Non-Americas Net Sales — Actual ($M) | Americas % of Global (%) | Non-Americas % of Global (%) | Global Net Sales — Projected ($M) | Americas Net Sales — Projected ($M) | Non-Americas Net Sales — Projected ($M) | Americas % Projected (%) | Non-Americas % Projected (%) | Variance: Actual vs. Projected — Global ($M) | Variance: Actual vs. Projected — Non-Americas ($M) | Notes
2017 | 2480 | 1438.4 | 1041.6 | 58.0% | 42.0% | 2420 | 1404 | 1016 | 58.0% | 42.0% | 60 | 25.6 | Veritaxol primary growth driver in non-Americas; oncology blockbuster
2018 | 2710 | 1560 | 1150 | 57.6% | 42.4% | 2650 | 1535 | 1115 | 57.9% | 42.1% | 60 | 35 | Continued EU/APAC launch ramp
2019 | 2920 | 1672 | 1248 | 57.3% | 42.7% | 2870 | 1650 | 1220 | 57.5% | 42.5% | 50 | 28 | New APAC market entries
2020 | 3120 | 1780 | 1340 | 57.1% | 42.9% | 3050 | 1750 | 1300 | 57.4% | 42.6% | 70 | 40 | COVID-19 impact modestly below projection in Americas; non-Americas exceeded
Total | 11230 | 6450.4 | 4779.6 | 57.4% | 42.6% | 10990 | 6339 | 4651 | 57.7% | 42.3% | 240 | 128.6
[sheet: Imvara Revenue]
Tax Year | Global Net Sales — Actual ($M) | Americas Net Sales — Actual ($M) | Non-Americas Net Sales — Actual ($M) | Americas % of Global (%) | Non-Americas % of Global (%) | Global Net Sales — Projected ($M) | Americas Net Sales — Projected ($M) | Non-Americas Net Sales — Projected ($M) | Americas % Projected (%) | Non-Americas % Projected (%) | Variance: Actual vs. Projected — Global ($M) | Variance: Actual vs. Projected — Non-Americas ($M) | Notes
2017 | 1320 | 792 | 528 | 60.0% | 40.0% | 1280 | 775 | 505 | 60.5% | 39.5% | 40 | 23 | Immunology franchise expansion
2018 | 1480 | 880 | 600 | 59.5% | 40.5% | 1450 | 870 | 580 | 60.0% | 40.0% | 30 | 20 | Strong EMEA uptake
2019 | 1690 | 990 | 700 | 58.6% | 41.4% | 1660 | 980 | 680 | 59.0% | 41.0% | 30 | 20 | Expanded indications driving non-Americas growth
2020 | 1870 | 1080 | 790 | 57.8% | 42.2% | 1830 | 1060 | 770 | 57.9% | 42.1% | 40 | 20 | ~42% of global from non-Americas
Total | 6360 | 3742 | 2618 | 58.8% | 41.2% | 6220 | 3685 | 2535 | 59.2% | 40.8% | 140 | 83
[sheet: Cerulon Revenue]
Tax Year | Global Net Sales — Actual ($M) | Americas Net Sales — Actual ($M) | Non-Americas Net Sales — Actual ($M) | Americas % of Global (%) | Non-Americas % of Global (%) | Global Net Sales — Projected ($M) | Americas Net Sales — Projected ($M) | Non-Americas Net Sales — Projected ($M) | Americas % Projected (%) | Non-Americas % Projected (%) | Variance: Actual vs. Projected — Global ($M) | Variance: Actual vs. Projected — Non-Americas ($M) | Notes
2017 | 410 | 230 | 180 | 56.1% | 43.9% | 390 | 222 | 168 | 56.9% | 43.1% | 20 | 12 | Rare disease — smaller base, higher non-Americas share
2018 | 470 | 263 | 207 | 55.9% | 44.1% | 450 | 254 | 196 | 56.4% | 43.6% | 20 | 11 | Orphan drug pricing in EU markets
2019 | 540 | 303 | 237 | 56.1% | 43.9% | 520 | 293 | 227 | 56.3% | 43.7% | 20 | 10 | APAC regulatory approvals
2020 | 620 | 340 | 280 | 54.8% | 45.2% | 600 | 332 | 268 | 55.3% | 44.7% | 20 | 12 | ~45% of global from non-Americas
Total | 2040 | 1136 | 904 | 55.7% | 44.3% | 1960 | 1101 | 859 | 56.2% | 43.8% | 80 | 45
[sheet: Consolidated Revenue]
Tax Year | Global Net Sales — Actual ($M) | Americas Net Sales — Actual ($M) | Non-Americas Net Sales — Actual ($M) | Americas % of Global (%) | Non-Americas % of Global (%) | Global Net Sales — Projected ($M) | Americas Net Sales — Projected ($M) | Non-Americas Net Sales — Projected ($M) | Americas % Projected (%) | Non-Americas % Projected (%) | Notes
2017 | 4210 | 2460.4 | 1749.6 | 58.4% | 41.6% | 4090 | 2401 | 1689 | 58.7% | 41.3% | Sum of Veritaxol + Imvara + Cerulon
2018 | 4660 | 2703 | 1957 | 58.0% | 42.0% | 4550 | 2659 | 1891 | 58.4% | 41.6%
2019 | 5150 | 2965 | 2185 | 57.6% | 42.4% | 5050 | 2923 | 2127 | 57.9% | 42.1%
2020 | 5610 | 3200 | 2410 | 57.0% | 43.0% | 5480 | 3142 | 2338 | 57.3% | 42.7% | Non-Americas share growing year-over-year
Total | 19630 | 11328.4 | 8301.6 | 57.7% | 42.3% | 19170 | 11125 | 8045 | 58.1% | 41.9%
[sheet: RAB Calculation]
Tax Year | Non-Americas % of Projected Global Revenue (PPC Position) (%) | PBI Cost-Share % (PPC Position) (%) | Total Qualified R&D Costs ($M) | PBI Cost-Share Amount (PPC Position) ($M) | PPC Cost-Share Amount (PPC Position) ($M) | Non-Americas % (IRS Position) (%) | PBI Cost-Share % (IRS Position) (%) | PBI Cost-Share Amount (IRS Position) ($M) | Additional Cost-Share Under IRS Position ($M) | Difference in Cost-Share % (pp) | Notes
2017 | 41.3% | 38.2% | 487.3 | 186.15 | 301.15 | 48.2% | 48.2% | 234.88 | 48.73 | +10.0pp | IRS asserts U.S.-source value understated; RAB projections should yield higher PBI share
2018 | 41.6% | 39.6% | 523.8 | 207.42 | 316.38 | 50.6% | 50.6% | 265.04 | 57.62 | +11.0pp
2019 | 42.1% | 41.1% | 561.2 | 230.65 | 330.55 | 52.3% | 52.3% | 293.51 | 62.86 | +11.2pp
2020 | 42.7% | 42.7% | 598.4 | 255.52 | 342.88 | 53.7% | 53.7% | 321.34 | 65.82 | +11.0pp
Total | 2170.7 | 879.74 | 1290.96 | 1114.77 | 235.03 | Total additional CSA cost-share proposed by IRS: $235.03M