CONFIDENTIAL — SUBJECT TO ATTORNEY-CLIENT PRIVILEGE AND WORK-PRODUCT DOCTRINE PROTECTIONS
CALDERWOOD & HARKNESS LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 864-7200 Facsimile: (215) 864-7201
Firm Headquarters: 600 Lexington Avenue New York, NY 10022
July 15, 2022
VIA SECURE ELECTRONIC TRANSMISSION AND U.S. MAIL
Revenue Agent Patricia Dunleavy Large Business & International Division Internal Revenue Service 600 Arch Street, Room 6424 Philadelphia, PA 19106
Re: Examination of Penterra Pharmaceuticals Corp. EIN: 22-3741856 Exam Team ID: LB&I-NE-TP-2022-00641 Tax Years Under Examination: 2017, 2018, 2019, 2020 Response to Information Document Request No. 2 C&H Matter Number: 1018-00009
Dear Ms. Dunleavy:
Calderwood & Harkness LLP, as the duly authorized representatives of Penterra Pharmaceuticals Corp. ("PPC") pursuant to IRS Form 2848 (Power of Attorney and Declaration of Representative) filed with the Internal Revenue Service on June 8, 2022, respectfully submits this response to Information Document Request ("IDR") No. 2, issued on June 22, 2022, and received by this office on June 24, 2022. IDR No. 2 requested the production of PPC's cost-sharing arrangement agreement with its Irish subsidiary and all amendments thereto, together with any schedules, exhibits, and supporting documentation forming part of or maintained in connection with such agreement.
This response is submitted on behalf of PPC in a spirit of full cooperation with the examination process. PPC has endeavored to identify and produce all responsive, non-privileged documents in its possession, custody, or control. In furnishing this response and the accompanying document production, PPC expressly reserves all rights, objections, and privileges, including, without limitation, any protections afforded by the attorney-client privilege, the work-product doctrine, the tax-practitioner privilege under Internal Revenue Code ("IRC") § 7525, and any other applicable evidentiary privilege or protection. The production of any document or information herein does not constitute a waiver, express or implied, of any such privilege or protection with respect to the documents produced or any other documents or communications.
The response is organized as follows: Section 1 provides an overview of the relevant cost-sharing arrangement to contextualize the produced documents; Section 2 identifies and describes each document being produced; Section 3 sets forth explanatory notes regarding the structure of the cost-sharing arrangement and its relationship to other intercompany agreements that are the subject of separate IDRs; Section 4 contains PPC's reservation of rights; and Section 5 provides contact information for future correspondence regarding this examination.
Section 1: Overview of the Cost-Sharing Arrangement
To assist the examination team in its review of the produced documents, PPC provides the following overview of the cost-sharing arrangement at issue. This overview is intended as a summary description only and is qualified in its entirety by the terms of the CSA Agreement and amendments produced herewith.
1.1 Parties to the CSA
The Qualified Cost-Sharing Arrangement (the "CSA") was entered into between Penterra Pharmaceuticals Corp. ("PPC"), a corporation organized and existing under the laws of the State of Delaware, with its principal place of business and corporate headquarters located at 2200 Independence Boulevard, Princeton Junction, New Jersey 08550, and Penterra Biopharma International DAC ("PBI"), a Designated Activity Company organized and existing under the laws of Ireland, with its registered office at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland.
PBI is an indirect wholly owned subsidiary of PPC. PBI's immediate parent is Penterra Holdings Luxembourg S.à r.l. ("PHL"), a société à responsabilité limitée organized under the laws of the Grand Duchy of Luxembourg, with its registered office at 14, rue Aldringen, L-1118 Luxembourg. PHL, in turn, is a wholly owned subsidiary of PPC. PHL has elected to be treated as a disregarded entity for U.S. federal income tax purposes pursuant to Treasury Regulations § 301.7701-3. Accordingly, for purposes of Treas. Reg. § 1.482-7 and the analysis of the CSA, PBI is treated as if it were directly owned by PPC. PPC and PBI are the sole "controlled participants" (as that term is defined under Treas. Reg. § 1.482-7(j)(1)(i)) in the CSA.
No other entity within the Penterra group structure is a controlled participant in the CSA, although certain affiliates provide contract research and manufacturing services to the controlled participants in connection with the intangible development activities undertaken pursuant to the CSA, as further described in Section 3 below.
1.2 Effective Date and Execution
PBI was incorporated under the laws of Ireland on March 15, 2012. Following PBI's incorporation and initial capitalization (through equity contributions from PHL), the CSA was executed by authorized officers of PPC and PBI and became effective as of July 1, 2012 (the "Effective Date"). The CSA was structured from its inception as a qualified cost-sharing arrangement within the meaning of Treas. Reg. § 1.482-7 and was intended to satisfy the administrative requirements set forth in Treas. Reg. § 1.482-7(b), including the requirements relating to documentation, contemporaneous recordkeeping, and consistent reporting.
PPC reported the CSA on its U.S. federal income tax returns for all taxable years beginning with the 2012 taxable year, including the filing of Form 8865 and all applicable statements and disclosures required under the Treasury Regulations. PBI similarly reported the CSA in its Irish corporation tax filings for all relevant accounting periods.
1.3 Scope of the CSA
Under the terms of the CSA, PBI acquired the right to develop and exploit PPC's pharmaceutical intellectual property portfolio outside of the Americas territory in exchange for (a) a platform contribution transaction ("PCT") payment, representing a buy-in to pre-existing intangible property as of the Effective Date, and (b) ongoing cost-sharing payments proportional to the reasonably anticipated benefits ("RAB") derived by each controlled participant from the intangible development activities ("IDAs") conducted under the CSA.
For purposes of the CSA, the "Americas" territory is defined as North America (the United States, Canada, and Mexico), Central America, South America, and the Caribbean (collectively, the "Americas Territory"). PPC retained all rights to develop and exploit the covered intellectual property within the Americas Territory. PBI acquired, as of the Effective Date and on a going-forward basis, the exclusive right to develop and exploit the covered intellectual property in all territories outside the Americas Territory (the "Non-Americas Territory"), which encompasses the Europe, Middle East, and Africa ("EMEA") region, the Asia-Pacific ("APAC") region, and all other countries and territories worldwide not included within the Americas Territory.
The CSA covers intangible development activities relating to PPC's specialty pharmaceutical and biotechnology product portfolio, with a particular focus on the following therapeutic areas: oncology, immunology, and rare-disease therapeutics. The IDAs undertaken pursuant to the CSA include basic and applied research, preclinical development, clinical trials (Phases I through IV), regulatory affairs activities, formulation and process development, medical affairs, and post-marketing studies, in each case to the extent such activities are reasonably expected to contribute to the development, enhancement, maintenance, protection, or exploitation of cost-shared intangibles within the meaning of Treas. Reg. § 1.482-7(d).
The key pharmaceutical products covered by the CSA include, but are not limited to, the following:
• Veritaxol — a small-molecule kinase inhibitor approved for the treatment of certain solid tumors in the oncology therapeutic area;
• Imvara — a monoclonal antibody approved for the treatment of moderate-to-severe autoimmune conditions in the immunology therapeutic area; and
• Cerulon — an enzyme replacement therapy approved for the treatment of a lysosomal storage disorder in the rare-disease therapeutic area.
The CSA also covers pipeline compounds in various stages of clinical and preclinical development, as further detailed in the CSA Agreement and amendments produced herewith.
1.4 Platform Contribution Transaction (PCT)
In connection with entering into the CSA, and in consideration for PBI's acquisition of an interest in the pre-existing intangible property of PPC as of the Effective Date, PBI made a lump-sum PCT payment of $312,000,000 (three hundred twelve million dollars) to PPC on July 1, 2012. The PCT payment represented the arm's-length consideration for PBI's buy-in to pre-existing intellectual property, which at the time of the CSA's execution consisted primarily of clinical-stage and approved oncology compounds that had been developed by PPC prior to the Effective Date. The pre-existing intangible property subject to the PCT also included certain know-how, trade secrets, regulatory dossiers, clinical data packages, and workforce-in-place to the extent such items constituted "platform contributions" within the meaning of Treas. Reg. § 1.482-7(c).
The PCT was valued using the income method, specifically a discounted cash flow ("DCF") analysis, at the time of the CSA's execution. The DCF analysis projected the future incremental income attributable to the pre-existing intangibles in the Non-Americas Territory, discounted to present value using a risk-adjusted discount rate reflecting the stage of development and commercial uncertainty associated with the relevant compounds. The contemporaneous PCT Valuation Report, prepared by an independent economic consulting firm (Meridian Economics LLC) and reviewed by PPC's transfer pricing advisors, is being produced herewith as Document 6, as described in Section 2 below. PPC notes that additional supporting workpapers, financial models, and correspondence relating to the PCT valuation are responsive to IDR No. 5 and will be produced in the response to that IDR.
1.5 Cost-Sharing Percentages
Pursuant to Section 5 of the CSA Agreement, PBI's share of annual qualified research and development costs (the "Qualified R&D Costs") incurred in connection with the IDAs was determined on an annual basis by reference to projected reasonably anticipated benefits, measured primarily through projected revenue splits between the Americas Territory and the Non-Americas Territory. The RAB calculation methodology employed a revenue-based allocation key, consistent with the principles set forth in Treas. Reg. § 1.482-7(e)(2), and was subject to annual true-up adjustments to the extent that actual results deviated materially from projections.
For the tax years under examination, PBI's cost-sharing percentages and corresponding dollar amounts were as follows:
PPC's share of Qualified R&D Costs for each tax year constituted the remainder of the total qualified R&D cost pool (i.e., the total Qualified R&D Costs less PBI's share). PPC bore its share of costs through the direct performance of IDAs at its U.S.-based research and development facilities.
The gradual increase in PBI's cost-sharing percentage over the examination period reflects PBI's growing share of reasonably anticipated benefits as non-Americas markets expanded for PPC's product portfolio, driven principally by the maturation of regulatory approvals and commercial launches of key products (particularly Veritaxol and Imvara) in EMEA and APAC markets during this period. The annual RAB calculations supporting the cost-sharing percentages for 2012 through 2020 are produced herewith as Document 5, and additional detail regarding the RAB methodology will be provided in the transfer pricing documentation responsive to IDR No. 4.
1.6 Distinction from Legacy IP License
Separately from and in addition to the CSA, PBI licenses certain legacy compounds from PPC under a separate intercompany license agreement (the "Legacy IP License Agreement"). The legacy compounds subject to the Legacy IP License Agreement consist of pre-2012 vintage intellectual property that was not included within the scope of the CSA — specifically, certain mature, off-patent pharmaceutical products and related trademarks and trade names that were commercially available prior to PBI's incorporation and that were not covered by the PCT or the ongoing cost-sharing obligations under the CSA.
The Legacy IP License Agreement provides for an arm's-length royalty rate of 4.5% of net sales for the Non-Americas Territory, determined on the basis of a comparable uncontrolled transaction ("CUT") analysis. The Legacy IP License Agreement is the subject of IDR No. 3, and a copy of that agreement and supporting documentation will be produced in the response to IDR No. 3.
PPC emphasizes that the CSA and the Legacy IP License Agreement are independent arrangements addressing distinct categories of intellectual property. The CSA covers intangible development activities relating to PPC's core therapeutic portfolio of proprietary, patent-protected specialty pharmaceutical and biotechnology products, while the Legacy IP License Agreement covers mature, legacy compounds that are not subject to ongoing intangible development activities under the CSA. The two arrangements were structured as separate agreements to reflect the fundamentally different economic characteristics and risk profiles of the respective intellectual property portfolios.
Section 2: Documents Produced
2.1 Listing of Produced Documents
In response to IDR No. 2, PPC is producing the following documents, each of which has been Bates-stamped with the prefix "PPC-IDR02" for ease of identification and tracking:
Document 1: Qualified Cost-Sharing Arrangement Agreement, dated as of July 1, 2012
The CSA Agreement, dated as of July 1, 2012, between Penterra Pharmaceuticals Corp. and Penterra Biopharma International DAC (the "CSA Agreement"). The CSA Agreement sets forth the terms and conditions governing the qualified cost-sharing arrangement between PPC and PBI, including the definitions of key terms, the scope of covered intangible development activities, the cost-sharing methodology, the RAB allocation key, the PCT payment terms, territorial rights, administrative requirements, dispute resolution provisions, and termination provisions. The CSA Agreement consists of seventy-eight (78) pages, including all schedules and exhibits thereto.
Bates Nos.: PPC-IDR02-000001 through PPC-IDR02-000078
Document 2: First Amendment to the CSA Agreement, dated as of January 1, 2015
The First Amendment to the CSA Agreement, effective as of January 1, 2015, between Penterra Pharmaceuticals Corp. and Penterra Biopharma International DAC (the "First Amendment"). The First Amendment updated the definition of "Qualified R&D Cost Pool" in Section 2.14 of the CSA Agreement to clarify the treatment of certain categories of research and development expenditures, including post-marketing clinical studies (Phase IV trials) and health economics and outcomes research ("HEOR") costs, which the parties determined should be included within the qualified R&D cost pool as IDAs reasonably anticipated to contribute to the development, enhancement, maintenance, protection, or exploitation of cost-shared intangibles. The First Amendment also expanded the scope of shared intangible development activities to include compounds acquired by PPC in connection with PPC's acquisition of Aethon Therapeutics, Inc. in October 2014, which brought two additional clinical-stage oncology compounds into PPC's development pipeline. The First Amendment consists of fourteen (14) pages.
Bates Nos.: PPC-IDR02-000079 through PPC-IDR02-000092
Document 3: Second Amendment to the CSA Agreement, dated as of July 1, 2017
The Second Amendment to the CSA Agreement, effective as of July 1, 2017, between Penterra Pharmaceuticals Corp. and Penterra Biopharma International DAC (the "Second Amendment"). The Second Amendment addressed territorial scope clarifications relating to PBI's rights in certain newly opened markets in Southeast Asia and sub-Saharan Africa, updated the participant eligibility provisions in Section 4 of the CSA Agreement to reflect PBI's expanded operational capabilities and workforce in Dublin, and refined the cost allocation methodology in Section 5 of the CSA Agreement to incorporate a supplemental activity-based cost driver for allocating certain shared service costs (including global clinical operations support and centralized regulatory submissions) that had previously been allocated on a headcount basis. The Second Amendment consists of eleven (11) pages.
Bates Nos.: PPC-IDR02-000093 through PPC-IDR02-000103
Document 4: Third Amendment to the CSA Agreement, dated as of January 1, 2019
The Third Amendment to the CSA Agreement, effective as of January 1, 2019, between Penterra Pharmaceuticals Corp. and Penterra Biopharma International DAC (the "Third Amendment"). The Third Amendment incorporated the treatment of stock-based compensation costs within the qualified R&D cost pool, consistent with the guidance set forth in Treas. Reg. § 1.482-7(d)(3), and specified the methodology for measuring and allocating such costs between the controlled participants. The Third Amendment also addressed the treatment of government grants and subsidies received by PBI from the Irish Industrial Development Authority ("IDA Ireland") in connection with PBI's research activities in Dublin, providing that such grants would be treated as offsets to the qualified R&D cost pool to the extent they related to covered IDAs. The Third Amendment consists of nine (9) pages.
Bates Nos.: PPC-IDR02-000104 through PPC-IDR02-000112
Document 5: Schedule of Annual RAB Calculations (2012–2020)
The Schedule of Annual Reasonably Anticipated Benefits Calculations for the period from the Effective Date (July 1, 2012) through December 31, 2020 (the "RAB Schedule"). The RAB Schedule was maintained by PPC as required documentation under Treas. Reg. § 1.482-7(b)(4) and sets forth the annual computations of reasonably anticipated benefits used to derive each controlled participant's cost-sharing percentage for each year of the CSA's operation. The RAB Schedule includes the projected revenue data by territory, the allocation key computations, the resulting cost-sharing percentages, and the annual true-up adjustments. The RAB Schedule consists of thirty-seven (37) pages.
Bates Nos.: PPC-IDR02-000113 through PPC-IDR02-000149
Document 6: PCT Valuation Report, dated as of July 1, 2012
The Platform Contribution Transaction Valuation Report, dated as of July 1, 2012, prepared by Meridian Economics LLC (the "PCT Valuation Report"). The PCT Valuation Report constitutes the contemporaneous valuation analysis supporting the $312,000,000 PCT payment made by PBI to PPC in connection with PBI's buy-in to PPC's pre-existing intangible property as of the Effective Date. The PCT Valuation Report includes a description of the pre-existing intangible property, the valuation methodology (income method / Discounted cash flow analysis), the key assumptions and inputs, the financial projections, the discount rate analysis, and the conclusions of value. The PCT Valuation Report consists of fifty-three (53) pages. PPC notes that additional supporting workpapers, financial models, sensitivity analyses, and correspondence with Meridian Economics LLC relating to the PCT valuation are responsive to IDR No. 5 and will be produced in that separate response.
Bates Nos.: PPC-IDR02-000150 through PPC-IDR02-000202
2.2 Summary Table of Produced Documents
The following table summarizes the documents produced in connection with this response:
Total pages produced: 202
Section 3: Explanatory Notes Regarding the CSA Structure
3.1 Regulatory Framework
The CSA was designed to comply in all material respects with the requirements of Treas. Reg. § 1.482-7 (governing qualified cost-sharing arrangements) and Treas. Reg. § 1.482-7(g) (governing platform contribution transactions). In structuring the CSA, PPC and PBI were advised by independent legal counsel and independent economic consultants, and the CSA was reviewed for compliance with the applicable Treasury Regulations at the time of execution and at each subsequent amendment.
PPC maintained contemporaneous transfer pricing documentation under IRC § 6662(e) penalty-protection standards for all tax years under examination (2017, 2018, 2019, and 2020). The contemporaneous transfer pricing documentation was prepared by Crestfield & Associates LLP, PPC's independent auditor and tax return preparer, in consultation with Meridian Economics LLC, PPC's independent transfer pricing economists. The transfer pricing documentation includes a detailed description of the CSA, the RAB methodology, the cost-sharing computations, the comparability analysis, and the economic analysis supporting the arm's-length nature of the CSA and the PCT. The transfer pricing documentation for the tax years under examination will be produced in response to IDR No. 4.
PPC's transfer pricing policies with respect to the CSA were applied consistently across all taxable years from the Effective Date through the present, subject to the modifications reflected in the First, Second, and Third Amendments produced herewith. PPC believes that its transfer pricing positions with respect to the CSA are well-supported and satisfy the requirements of IRC § 482 and the regulations promulgated thereunder.
3.2 PBI's Role as CSA Participant
As a controlled participant in the CSA, PBI functions as an intellectual property holding company and the principal entity responsible for the commercialization of PPC pharmaceutical products in the Non-Americas Territory. PBI is not a mere conduit or shell entity; rather, PBI maintains substantial operational capabilities, a meaningful workforce, and exercises significant decision-making authority with respect to the development and exploitation of cost-shared intangibles in its assigned territory.
As of December 31, 2020, PBI employed one hundred eighty-five (185) full-time equivalent personnel at its offices in Dublin, Ireland, an increase from fifty-two (52) employees at the time of PBI's establishment in 2012. PBI's workforce encompasses a range of functions, including regulatory affairs, medical affairs, commercial strategy, business development, market access and health economics, supply chain management, quality assurance, pharmacovigilance, legal, finance, and general administration. PBI's senior management team includes a Managing Director, a Chief Commercial Officer (Non-Americas), a Vice President of Regulatory Affairs (Non-Americas), a Vice President of Medical Affairs (Non-Americas), and a Vice President of Supply Chain (Non-Americas), each of whom reports to PBI's board of directors and, on a matrix basis, to the corresponding global functional heads at PPC's headquarters in Princeton Junction.
PBI manages contract manufacturing arrangements for the Non-Americas Territory through Penterra Manufacturing Ireland Ltd. ("PMI"), a wholly owned subsidiary of PBI that operates a pharmaceutical manufacturing facility in Ringaskiddy, County Cork, Ireland. PMI operates under a cost-plus arrangement with PBI, with compensation determined at cost plus a markup of 8%, which was established on the basis of a benchmarking analysis of comparable contract manufacturing arrangements in the pharmaceutical industry. The PMI contract manufacturing agreement is the subject of IDR No. 10.
PBI also manages distribution arrangements across the EMEA and APAC territories, including relationships with third-party distributors in markets where PBI does not maintain a direct commercial presence, as well as buy-sell arrangements with affiliated distribution entities in certain key markets. As of the end of 2020, PBI's commercial footprint covered sixty-eight (68) country markets across the Non-Americas Territory.
Critically, PBI bore market risk for the Non-Americas Territory and made key commercial decisions regarding product pricing, market entry strategy, the timing and sequencing of regulatory submissions, the selection of distribution partners, and the allocation of commercial resources across its territory. PBI's assumption of these risks and exercise of these functions is reflected in the CSA Agreement and is further documented in PBI's organizational and governance materials.
Further detail regarding PBI's functions, assets, and risks — including functional analyses, organizational charts, and governance documentation — will be provided in response to subsequent IDRs, including IDR Nos. 8 (PBI organizational documents), 9 (PBI board minutes and governance materials), 12 (intercompany service agreements), and 15 (functional analysis and benchmarking studies).
3.3 Key Products Under the CSA
The CSA covers intangible development activities related to PPC's core therapeutic portfolio. The following table sets forth summary revenue data for the key products covered by the CSA for fiscal year 2020:
These revenue figures illustrate the growing significance of the Non-Americas Territory to PPC's overall product portfolio and are consistent with the upward trend in PBI's cost-sharing percentage over the examination period. Product-level revenue data by territory for all examination years (2017 through 2020) will be produced in response to IDR No. 11 and is not included in the present production.
3.4 Coordination with Other Intercompany Arrangements
PPC's intercompany arrangements with its affiliates constitute an integrated, but contractually distinct, set of agreements that collectively define the allocation of functions, assets, risks, and returns among the entities in the Penterra group. The CSA should be read and understood in the context of these related intercompany arrangements, including in particular:
(a) The Legacy IP License Agreement between PPC and PBI, covering pre-2012 vintage intellectual property not included in the CSA (responsive to IDR No. 3);
(b) The Contract Manufacturing Agreement between PBI and PMI, under which PMI provides contract manufacturing services to PBI at cost plus 8% (responsive to IDR No. 10);
(c) PBI's organizational and governance documentation, including PBI's Memorandum and Articles of Association, board resolutions, and corporate governance policies (responsive to IDR Nos. 8 and 9);
(d) Intercompany service agreements between PPC and PBI for the provision of centralized corporate services, including finance, human resources, information technology, and legal services (responsive to IDR No. 12); and
(e) Transfer pricing documentation, including functional analyses, benchmarking studies, and economic analyses (responsive to IDR Nos. 4, 5, and 15).
PPC will address each of these intercompany arrangements in its responses to the corresponding IDRs and is committed to providing the examination team with a comprehensive and coherent picture of the intercompany arrangements within the Penterra group.
Section 4: Reservation of Rights
In submitting this response and producing the accompanying documents, PPC expressly reserves all rights, including, but not limited to, the following:
(a) The right to supplement, amend, correct, or clarify this response at any time, whether in connection with this IDR or in response to subsequent IDRs or other requests from the examination team;
(b) All protections afforded by the attorney-client privilege, the work-product doctrine, the tax-practitioner privilege under IRC § 7525, and any other applicable evidentiary privilege or protection under federal, state, or foreign law;
(c) Any and all objections to the scope, relevance, materiality, or burdensomeness of IDR No. 2 or any other IDR issued in connection with this examination, whether or not such objections have been expressly raised herein;
(d) Any and all objections to the admissibility, authenticity, or use of any document produced in connection with this response in any administrative or judicial proceeding; and
(e) Any and all rights under the Internal Revenue Code, the Treasury Regulations, and applicable administrative guidance, including the right to contest any proposed adjustment, assert any affirmative position, claim any credit or deduction, or pursue any administrative or judicial remedy available to PPC.
To the extent that any documents responsive to IDR No. 2 have been withheld on the basis of privilege, such documents are identified in the privilege log being maintained by Calderwood & Harkness LLP in connection with this examination. The privilege log will be updated on a rolling basis and made available to the examination team upon request, consistent with applicable IRS procedures and guidance.
The production of documents in connection with this response does not constitute a waiver, express or implied, of any applicable privilege or protection with respect to the documents produced, any other documents or communications, or any subject matter addressed in the produced documents or in this response. PPC's production is made subject to all applicable protections and without any intent to waive privilege as to any document, communication, or subject matter.
PPC's compliance with IDR No. 2 is not, and shall not be construed as, an admission regarding the correctness of any position taken or proposed by the Internal Revenue Service, the applicability or inapplicability of any provision of the Internal Revenue Code or the Treasury Regulations, or the accuracy or completeness of any factual assertion made by the examination team. PPC reserves the right to contest any and all proposed adjustments on any available grounds.
Section 5: Contact Information
PPC invites the examination team to contact the undersigned with any questions regarding this response, the documents produced herewith, or any other matter relating to the examination. PPC is committed to a cooperative and efficient examination process and will endeavor to respond promptly to all inquiries.
All future correspondence regarding this examination should be directed to Calderwood & Harkness LLP as PPC's authorized representatives at the address set forth below:
Leonard Cross, Partner Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 864-7218
Email: lcross@calderwoodharkness.com
We trust that the foregoing response and accompanying document production are fully responsive to IDR No. 2. We appreciate your courtesy and professionalism in the conduct of this examination and look forward to continuing to work with you and the examination team.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Leonard Cross, Partner 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 864-7218
Email: lcross@calderwoodharkness.com
Date: July 15, 2022
cc: (via email)
Marcus Whitfield, Vice President, Global Tax, Penterra Pharmaceuticals Corp.
Deborah Staines, General Counsel, Penterra Pharmaceuticals Corp.
Supervisory Revenue Agent Gerald Meskill, IRS Large Business & International Division
Sylvia Hartwell, Calderwood & Harkness LLP
Garrett Simmons, Calderwood & Harkness LLP
Leila Nazari, Calderwood & Harkness LLP
Enclosures: As described in Section 2 above (Documents PPC-IDR02-000001 through PPC-IDR02-000202)
| Tax Year | PBI Cost-Sharing Percentage | Total Qualified R&D Costs | PBI's Share | |
| 2017 | 38.2% | $487,300,000 | $186,150,000 | |
| 2018 | 39.6% | $523,800,000 | $207,420,000 | |
| 2019 | 41.1% | $561,200,000 | $230,650,000 | |
| 2020 | 42.7% | $598,400,000 | $255,520,000 | |
| Document No. | Description | Date | Bates Range | Page Count |
| 1 | Qualified Cost-Sharing Arrangement Agreement | July 1, 2012 | PPC-IDR02-000001 – PPC-IDR02-000078 | 78 |
| 2 | First Amendment to CSA Agreement | January 1, 2015 | PPC-IDR02-000079 – PPC-IDR02-000092 | 14 |
| 3 | Second Amendment to CSA Agreement | July 1, 2017 | PPC-IDR02-000093 – PPC-IDR02-000103 | 11 |
| 4 | Third Amendment to CSA Agreement | January 1, 2019 | PPC-IDR02-000104 – PPC-IDR02-000112 | 9 |
| 5 | Schedule of Annual RAB Calculations (2012–2020) | Various | PPC-IDR02-000113 – PPC-IDR02-000149 | 37 |
| 6 | PCT Valuation Report | July 1, 2012 | PPC-IDR02-000150 – PPC-IDR02-000202 | 53 |
| Product | Therapeutic Area | Global Net Sales (FY 2020) | Non-Americas Net Sales (FY 2020) | Non-Americas as % of Global |
| Veritaxol | Oncology | $3.12 billion | $1.34 billion | 43.0% |
| Imvara | Immunology | $1.87 billion | $0.79 billion | 42.2% |
| Cerulon | Rare Disease | $0.62 billion | $0.28 billion | 45.2% |