CALDERWOOD & HARKNESS LLP Attorneys at Law
1735 Market Street, Suite 3100
August 10, 2022
Via Hand Delivery and Certified Mail
Revenue Agent Patricia Dunleavy Internal Revenue Service Large Business & International Division Exam Team ID: LB&I-NE-TP-2022-00641
Re: Penterra Pharmaceuticals Corp. EIN: 22-3741856 Tax Years Under Examination: 2017, 2018, 2019, 2020
Response to Information Document Request No. 5 — Platform Contribution Transaction Valuation Report and Supporting Workpapers
C&H Matter Number: 1018-00009
Dear Revenue Agent Dunleavy:
I. Introduction and Purpose
Calderwood & Harkness LLP ("C&H" or "the Firm") respectfully submits this response on behalf of our client, Penterra Pharmaceuticals Corp. ("PPC"), EIN 22-3741856, pursuant to the Power of Attorney (IRS Form 2848) filed with the Internal Revenue Service on June 8, 2022. The Form 2848 names the following individuals as authorized representatives of PPC in connection with this examination: Leonard Cross (CAF No. 4827-19630R), Sylvia Hartwell (CAF No. 4827-22814R), Garrett Simmons (CAF No. 4827-30571R), and Leila Nazari (CAF No. 4827-31209R), all of Calderwood & Harkness LLP.
This submission responds to Information Document Request No. 5 ("IDR No. 5"), which was received by this office on or about July 28, 2022. IDR No. 5 requests that PPC produce the original platform contribution transaction ("PCT") valuation report and all supporting workpapers documenting the $312,000,000 PCT payment made by Penterra Biopharma International DAC ("PBI") to PPC in connection with the qualified cost-sharing arrangement entered into between PPC and PBI effective July 1, 2012. The IDR specifically requests all analyses, models, projections, methodological memoranda, and other documentation prepared in connection with determining the arm's-length amount of the PCT payment.
We note for the record that IDR No. 5 is the fifth in a series of information document requests issued in connection with this examination. As of the date of this response, PPC has received a total of forty-seven (47) IDRs over the course of the examination period spanning June 2022 through September 2023. PPC has endeavored to respond to each IDR in a timely and complete manner, consistent with its obligations under applicable law and its commitment to cooperating fully with the examination process.
PPC is producing the materials requested in IDR No. 5 in their entirety, subject only to certain privilege reservations noted in Section IV of this letter. The produced documents are organized in seven tabbed sections, as described in detail in Section III below, and are accompanied by electronic media containing the relevant Excel-based workpapers.
II. Background — The Cost-Sharing Arrangement and PCT Payment
To provide context for the documents being produced, we set forth below a brief factual summary of the cost-sharing arrangement and the related PCT payment that is the subject of IDR No. 5. This summary is intended to assist the examination team in reviewing the enclosed materials and is not intended to constitute an exhaustive recitation of all relevant facts.
A. Corporate Structure and PBI Incorporation
Penterra Biopharma International DAC ("PBI") was incorporated on March 15, 2012, as a Designated Activity Company under the laws of Ireland. PBI's registered office is located at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland. PBI was organized for the purpose of serving as the entity responsible for the development, commercialization, and exploitation of PPC's pharmaceutical intellectual property portfolio in territories outside the Americas, as further described below.
PBI is a wholly owned subsidiary of Penterra Holdings Luxembourg S.à r.l. ("PHL"), a private limited liability company (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 (Luxembourg Registre de Commerce et des Sociétés Number B 168452). PHL is, in turn, wholly owned by PPC. PHL has been treated as a disregarded entity for U.S. federal income tax purposes at all relevant times, such that PBI is treated as directly owned by PPC for purposes of applying the controlled transaction rules under IRC § 482 and the regulations thereunder.
B. The Qualified Cost-Sharing Arrangement
A qualified cost-sharing arrangement ("CSA") was executed between PPC and PBI, effective July 1, 2012. Under the CSA, PBI acquired the right to develop and exploit PPC's pharmaceutical intellectual property portfolio outside the Americas. For purposes of the CSA, the "Americas" territory is defined as North America (including the United States, Canada, and Mexico), Central America, South America, and the Caribbean. PBI's territory encompasses all other regions worldwide, including Europe, the Middle East, Africa, and the Asia-Pacific region (collectively, the "non-Americas territory" or the "PBI territory").
The CSA was structured in compliance with the requirements governing qualified cost-sharing arrangements set forth in IRC § 482 and the Treasury Regulations promulgated thereunder, specifically Treas. Reg. § 1.482-7. The CSA provides for, among other things: (i) the identification of intangible development activities ("IDAs") to be undertaken by the CSA participants; (ii) the allocation of costs of such IDAs between PPC and PBI based on their respective reasonably anticipated benefits ("RABs"); and (iii) the PCT payment described below, representing PBI's buy-in to PPC's pre-existing intangible property.
C. The Platform Contribution Transaction Payment
As part of the CSA, and in accordance with Treas. Reg. § 1.482-7(g), PBI made a lump-sum platform contribution transaction ("PCT") payment of $312,000,000 to PPC on July 1, 2012. This payment represented PBI's buy-in to the pre-existing intangible property contributed by PPC to the CSA, which consisted primarily of PPC's clinical-stage and approved oncology, immunology, and rare-disease pharmaceutical compounds, together with associated know-how, regulatory dossiers, clinical data, trade secrets, and related intellectual property.
D. Contemporaneous Valuation
The PCT valuation was prepared contemporaneously with the execution of the CSA by Susan Lam, CPA, Transfer Pricing Partner at Crestfield & Associates LLP ("Crestfield"), PPC's independent auditor and tax return preparer. Crestfield is headquartered at 1200 Avenue of the Americas, New York, NY 10036. The valuation report, dated June 2012, was finalized in advance of the July 1, 2012 effective date of the CSA and the contemporaneous payment of the PCT amount.
The valuation employed the income method, utilizing a discounted cash flow ("DCF") approach, as the best method for determining the arm's-length value of PBI's buy-in to PPC's pre-existing intangible property under Treas. Reg. § 1.482-7(g)(4). The selection of the income method was made in accordance with the best method rule set forth in Treas. Reg. § 1.482-1(d), following a comprehensive analysis of all potentially applicable methods, as documented in the enclosed workpapers.
III. Description of Documents Produced
The documents produced in response to IDR No. 5 are organized in seven tabbed sections, each of which is described below. All documents have been Bates-numbered using the convention PPC-IDR05-XXXXXX, beginning with PPC-IDR05-000001 and continuing sequentially through the final document in the production.
A. Tab 1: PCT Valuation Report
Tab 1 contains the complete PCT valuation report, bearing the full title: Platform Contribution Transaction Valuation Report — Penterra Biopharma International DAC Buy-In to Pre-Existing Intangible Property. The report was prepared by Susan Lam, CPA, Transfer Pricing Partner, Crestfield & Associates LLP, and is dated June 2012. As noted above, this report was prepared contemporaneously with the execution of the CSA and the July 1, 2012 PCT payment.
The report contains the following principal sections and content:
(i) Executive Summary. A summary of the PCT transaction, including a description of the parties, the CSA, the scope of the buy-in, and the valuation conclusion that $312,000,000 represents an arm's-length PCT payment within the meaning of Treas. Reg. § 1.482-7(g).
(ii) Description of Pre-Existing Intangible Property. A detailed description of the pre-existing intangible property subject to the buy-in, covering PPC's pharmaceutical IP portfolio as of the valuation date. This section addresses PPC's oncology, immunology, and rare-disease therapeutic compounds, including, among others, Veritaxol (an approved oncology compound), Imvara (an immunology compound then in late-stage clinical development), and Cerulon (a rare-disease compound at an earlier development stage), each at their respective development stages as of mid-2012. The section also identifies associated intangible assets, including patents, patent applications, regulatory filings, clinical trial data packages, manufacturing process know-how, and trade secrets.
(iii) Description of CSA Scope. An explanation of the territorial scope of the CSA and the specific rights acquired by PBI through the PCT payment — namely, the right to exploit PPC's pre-existing IP portfolio outside the Americas.
(iv) Methodology Selection. A discussion of the transfer pricing methodology selected for the PCT valuation. The income method, utilizing a DCF approach, was selected as the best method under Treas. Reg. § 1.482-7(g)(4), consistent with the best method rule of Treas. Reg. § 1.482-1(d). This section includes a discussion of alternative methods that were considered and the reasons they were not selected, including the comparable uncontrolled transaction ("CUT") method and various market-based approaches.
(v) Functional Analysis. A summary of the functional analysis addressing PBI's anticipated functions, assets, and risks as a participant in the CSA. This analysis identifies the key value-driving activities to be performed by PBI following the CSA effective date and evaluates PBI's anticipated contributions to intangible development activities.
(vi) Revenue Projections. Projections of anticipated non-Americas territory revenues attributable to the exploitation of the contributed IP over its remaining useful life, including product-by-product projections and assumptions regarding market penetration, pricing, competitive dynamics, and regulatory approval probabilities.
(vii) discount Rate / WACC. A derivation and discussion of the weighted average cost of capital ("WACC") used to discount projected cash flows in the DCF analysis, including discussion of the cost of equity derived via the Capital Asset Pricing Model ("CAPM"), cost of debt, capital structure assumptions, and applicable risk premiums.
(viii) DCF Model Results and Sensitivity Analyses. A presentation of the results of the DCF model, including sensitivity analyses testing the impact of key assumptions on the valuation conclusion.
(ix) Valuation Conclusion. A statement that $312,000,000 represents an arm's-length PCT payment within the meaning of Treas. Reg. § 1.482-7(g), supported by the income method analysis described in the report.
B. Tab 2: Supporting Workpapers — Revenue Projections
Tab 2 contains the detailed revenue projection workpapers prepared in connection with the PCT valuation. These workpapers set forth the projected non-Americas territory revenues for the contributed IP portfolio over the anticipated commercial life of the underlying pharmaceutical compounds, as projected from the July 1, 2012 valuation date forward.
The revenue projections are organized by product line and include the following:
(i) Veritaxol (Oncology). Projected non-Americas net revenues for Veritaxol over the compound's remaining useful life from 2012 forward, reflecting assumptions regarding approved indications, anticipated label expansions, market share, pricing trajectories, generic entry timelines, and territory-specific competitive dynamics.
(ii) Imvara (Immunology). Projected non-Americas net revenues for Imvara over the compound's anticipated commercial life, incorporating assumptions regarding the probability-adjusted timeline to regulatory approval in key non-Americas markets, projected market size, and anticipated competitive positioning.
(iii) Cerulon (Rare Disease). Projected non-Americas net revenues for Cerulon, reflecting the compound's earlier-stage development status as of mid-2012 and incorporating probability-of-success adjustments for clinical development and regulatory approval milestones.
(iv) Other Contributed Compounds. Revenue projections for additional compounds at various clinical stages that were included in the pre-existing intangible property subject to the PCT buy-in. These compounds are individually identified in the workpapers and are probability-weighted based on their respective development stages.
The revenue projections were developed based on PPC's internal business plans as of mid-2012, third-party market research data, probability-of-regulatory-approval assessments consistent with industry benchmarks for compounds at comparable development stages, and competitive landscape analyses available at the time of the valuation. The workpapers contain source documentation and cross-references to the underlying data upon which the projections were based.
For the examination team's reference, we note that actual non-Americas net sales for certain of the key contributed products in the 2020 tax year were as follows: Veritaxol approximately $1.34 billion, Imvara approximately $790 million, and Cerulon approximately $280 million. This data is provided to assist the examination team in contextualizing the 2012 projection methodology relative to subsequent actual results; however, this data was not, of course, available at the time the 2012 PCT valuation was prepared and does not form part of the original Crestfield report.
C. Tab 3: Supporting Workpapers — Discount Rate / WACC Calculation
Tab 3 contains the detailed workpapers documenting the derivation of the weighted average cost of capital ("WACC") used as the discount rate in the DCF analysis underlying the PCT valuation.
These workpapers document the following components of the WACC calculation:
(i) Cost of Equity. The cost of equity was derived using the Capital Asset Pricing Model ("CAPM"), incorporating the risk-free rate, equity risk premium, and beta applicable as of the 2012 valuation date. The workpapers identify the specific data sources used for each CAPM input.
(ii) Cost of Debt. The pre-tax and after-tax cost of debt applicable to PPC and comparable pharmaceutical companies, reflecting market conditions as of mid-2012.
(iii) Capital Structure Weighting. The debt-to-equity ratios used to weight the cost of equity and cost of debt components of the WACC, based on PPC's actual capital structure and the capital structures of comparable pharmaceutical companies.
(iv) Risk Premiums. Additional risk adjustments incorporated into the discount rate, including pharmaceutical-industry-specific risk premiums and intangible-asset-specific risk adjustments reflecting the heightened uncertainty associated with early-stage pharmaceutical compounds relative to an enterprise-level WACC.
The discount rate applied in the original 2012 valuation is fully documented in these workpapers, including all supporting calculations, data sources, and the analytical rationale for each component input. The discount rate was developed in the context of pharmaceutical industry cost of capital benchmarks prevailing as of mid-2012.
We note, for completeness, that PPC's current defense position — developed separately by Whitmore Valuation Group LLC under a Kovel arrangement (reference C&H Matter No. 1018-00009-KV) — supports a WACC of 9.8%, as compared to the IRS's proposed WACC of 7.2%, and concludes that $312,000,000 falls within an arm's-length range of $278,000,000 to $361,000,000. However, the workpapers produced under this Tab 3 reflect the original 2012 Crestfield analysis, not the subsequent defense analysis prepared by Whitmore. The Whitmore analysis is subject to separate privilege protections, as discussed in Section IV below, and is not responsive to IDR No. 5.
D. Tab 4: Supporting Workpapers — DCF Model
Tab 4 contains the Excel-based discounted cash flow model that forms the quantitative foundation of the PCT valuation. The DCF model is produced both in hard copy (printed output) and in native electronic format on the enclosed USB drive. The model contains the following elements:
(i) Projected revenue streams by territory (non-Americas, subdivided where applicable by region) and by product, consistent with the revenue projection workpapers contained in Tab 2.
(ii) Cost assumptions, including cost of goods sold, operating expenses, selling, general, and administrative ("SG&A") costs, and regulatory costs projected over the relevant time horizon.
(iii) Projected operating income attributable to the contributed intangible property, derived after subtracting projected costs from projected revenues.
(iv) Residual profit split methodology and routine return calculations, including identification of the routine returns attributable to tangible assets and routine intangible assets, and the allocation of residual profits to the platform contribution intangibles.
(v) Terminal value assumptions, including the methodology used to estimate the value of cash flows beyond the explicit projection period (whether a perpetuity growth model or a finite-life assumption based on patent expiration and anticipated generic entry dates).
(vi) Year-by-year discounted cash flow calculations, applying the WACC documented in the Tab 3 workpapers to the projected cash flows.
(vii) Range analysis and concluded value, demonstrating the derivation of the $312,000,000 PCT payment from the DCF model outputs.
The electronic version of the DCF model is provided on the enclosed USB drive in Microsoft Excel format (.xlsx), with all formulas intact and all cell references preserved, so that the examination team may review and test the model's calculations. The hard copy printout included in Tab 4 reflects the model's summary output sheets as well as the key input assumption worksheets.
E. Tab 5: Supporting Workpapers — Comparable Analyses and Method Selection
Tab 5 contains the documentation of the best method analysis performed under Treas. Reg. § 1.482-1(d) in connection with the selection of the income method as the appropriate transfer pricing methodology for valuing the PCT payment.
This documentation includes the following:
(i) A systematic analysis of the transfer pricing methods potentially applicable to the PCT valuation, including the income method (DCF approach) under Treas. Reg. § 1.482-7(g)(4), the comparable uncontrolled transaction ("CUT") method, and market-based approaches.
(ii) A discussion of the reasons the income method was selected as the best method for the PCT valuation. The analysis concluded that the income method provided the most reliable measure of an arm's-length result given the unique and highly valuable nature of the contributed intangible property, the absence of sufficiently comparable uncontrolled transactions involving pharmaceutical IP portfolios of similar scope and development stage, and the availability of reliable financial projections from which to derive income-based valuations.
(iii) A discussion of the CUT method and the reasons it was not selected as the best method. This discussion addresses the search conducted for potentially comparable uncontrolled transactions and the comparability deficiencies identified in the available transaction data.
(iv) Any comparable transaction data that was reviewed during the method-selection process, including licensing agreements, acquisition transactions, and other IP transfers involving pharmaceutical intangible property, together with an analysis of the adjustments that would be required to achieve comparability and the reliability concerns associated with such adjustments.
(v) A discussion of market-based approaches and the reasons they were not selected as providing a more reliable result than the income method in the context of this PCT valuation.
F. Tab 6: Supporting Workpapers — IP Asset Inventory and Descriptions
Tab 6 contains a detailed inventory of the pre-existing intangible property subject to the PCT buy-in as of the July 1, 2012 CSA effective date. This inventory was prepared as part of the contemporaneous PCT valuation and identifies each intangible asset included in the platform contribution.
For each asset, the inventory provides the following information:
(i) A description of the asset, including its chemical or biological designation, therapeutic area, and mechanism of action.
(ii) The development stage of the asset as of July 1, 2012 (e.g., approved and marketed, Phase III clinical trials, Phase II clinical trials, Phase I clinical trials, or preclinical stage).
(iii) The therapeutic area classification (oncology, immunology, rare disease, or other).
(iv) Patent status and remaining patent life, including identification of key patents, patent application filing dates, expected expiration dates, and any patent term extensions or supplementary protection certificates applicable in non-Americas jurisdictions.
(v) Territory-specific regulatory status, including the status of marketing authorization applications or approvals in key non-Americas regulatory jurisdictions (e.g., European Medicines Agency, Japan Pharmaceuticals and Medical Devices Agency, and other relevant regulatory authorities).
The key products identified in the inventory include Veritaxol (oncology, approved and marketed as of the valuation date), Imvara (immunology, in late-stage clinical development), and Cerulon (rare disease, in earlier-stage clinical development), along with additional pipeline compounds at various stages of clinical and preclinical development. The inventory also classifies each asset as conferring "make-or-sell" rights or other categories of intangible property, consistent with the framework of Treas. Reg. § 1.482-7(g).
G. Tab 7: Supporting Workpapers — Reasonably Anticipated Benefits Analysis
Tab 7 contains the workpapers documenting the initial reasonably anticipated benefits ("RAB") analysis prepared in connection with the CSA and the PCT valuation. The RAB analysis was used to determine the respective shares of PBI and PPC in the intangible development costs to be shared under the CSA from 2012 forward.
The RAB analysis identifies the metric used to measure reasonably anticipated benefits — in this case, projected revenue (or, where applicable, another profit-level indicator) — and documents the projected split of that metric between the Americas territory (PPC) and the non-Americas territory (PBI). The analysis sets forth the basis for the initial cost-sharing ratios applied under the CSA, including the data sources, projection methodologies, and assumptions underlying the RAB determination.
For the examination team's reference, we note that the cost-sharing ratios that applied during the 2017–2020 examination years, as updated annually in accordance with the CSA's RAB true-up provisions, were as follows:
The RAB analysis contained in Tab 7 informed both the PCT valuation (by establishing the relative expected benefits from the contributed intangible property across territories) and the ongoing cost-sharing percentages applied in subsequent years. The examination team may find it useful to review this analysis in conjunction with the contemporaneous transfer pricing documentation for tax years 2017–2020 previously produced in response to IDR No. 4.
IV. Privilege Reservation
PPC has produced the PCT valuation report and all supporting workpapers requested in IDR No. 5 in their entirety. To the best of our knowledge, no documents responsive to IDR No. 5 have been withheld from this production on the basis of privilege.
We do, however, reserve PPC's right to assert the attorney-client privilege, the tax practitioner privilege under IRC § 7525, and the work product doctrine with respect to certain categories of documents that are not responsive to IDR No. 5 and accordingly have not been produced. Specifically:
(a) Certain communications between PPC and its legal counsel — including communications with Crestfield & Associates LLP acting in a tax advisory (as distinguished from a return preparation or audit) capacity, and communications with Calderwood & Harkness LLP — that post-date the original June 2012 PCT valuation report and that constitute attorney-client privileged communications or attorney work product have not been produced. These post-2012 communications are not responsive to IDR No. 5, which requests the original PCT valuation report and its supporting workpapers.
(b) Calderwood & Harkness LLP has engaged Whitmore Valuation Group LLC ("Whitmore") under a Kovel arrangement (referenced internally as C&H Matter No. 1018-00009-KV) to prepare independent economic analyses in connection with PPC's defense of its transfer pricing positions in this examination. The Kovel arrangement extends the protections of the attorney-client privilege and the work product doctrine to the analyses being prepared by Whitmore under the direction and supervision of C&H counsel. The Whitmore analyses are separate from and independent of the Crestfield-prepared materials produced herein. The Whitmore materials are not responsive to IDR No. 5 and have not been produced.
PPC is maintaining a comprehensive privilege log in connection with all IDR responses in this examination. To the extent any documents are withheld on privilege grounds in connection with any IDR response, such documents will be identified on the privilege log with sufficient specificity to permit the examination team to evaluate the privilege assertion, in accordance with applicable IRS procedures.
V. Document Production Details
The following summarizes the details of the document production made in connection with this response:
Number of Tabs Produced: Seven (7), as described in Section III above (Tabs 1 through 7).
Format of Production: The documents are produced in both hard copy and electronic format. The hard copy production consists of the complete PCT valuation report and all supporting workpapers, organized in a tabbed binder accompanying this letter. The electronic production consists of a USB flash drive containing the Excel-based workpapers from Tabs 2, 3, 4, and 7 in their native Microsoft Excel format (.xlsx), with all formulas, cell references, and linked worksheets intact.
Bates Number Range: The produced documents bear Bates numbers PPC-IDR05-000001 through PPC-IDR05-000847. A Bates number index identifying the documents contained within each tab is included at the front of the production binder.
Authenticity: All produced documents are exact copies of the originals maintained in PPC's corporate records and in Crestfield & Associates LLP's engagement files. The electronic workpapers on the USB drive are exact copies of the native files as maintained in PPC's and Crestfield's records, and have not been modified, reformatted, or otherwise altered in any way.
Confidential Treatment Request: PPC respectfully requests that the proprietary revenue projections, financial models, and other commercially sensitive business information contained in the produced documents be treated as confidential and not disclosed to any third party outside the examination team, in accordance with IRC § 6103 and applicable IRS procedures governing the protection of taxpayer return information and confidential business data. The produced materials contain highly sensitive commercial information regarding PPC's pharmaceutical product pipeline, revenue expectations, pricing strategies, and competitive positioning that, if disclosed, could cause substantial competitive harm to PPC.
VI. Continuing Cooperation
PPC remains fully committed to cooperating with the Internal Revenue Service in connection with this examination and will promptly respond to any follow-up questions or supplemental requests for information regarding the materials produced herein. PPC understands the importance of providing the examination team with complete and timely access to the information necessary to evaluate the transfer pricing issues under review, and PPC intends to continue its cooperative posture throughout the remainder of the examination.
In addition, we would be pleased to schedule a conference call or an in-person meeting at a mutually convenient time to walk the examination team through the PCT valuation methodology, the DCF model, and the supporting workpapers, should the examination team find such a session helpful in reviewing the produced materials. We believe that such a walkthrough may facilitate the examination team's understanding of the valuation and reduce the need for additional follow-up IDRs on this topic.
We also note that PPC's contemporaneous transfer pricing documentation for tax years 2017 through 2020, which was produced in response to IDR No. 4 (response dated August 1, 2022), contains additional discussion of the CSA and the PCT payment in the context of the ongoing cost-sharing percentages applied during the examination years. The examination team may find it useful to review that documentation in conjunction with the materials produced herein, as the contemporaneous documentation provides the annual updates to the RAB analysis and the cost-sharing ratios that flowed from the initial CSA and PCT framework established in 2012.
VII. Contact Information
We respectfully request that all future communications regarding this examination, including any follow-up questions regarding the materials produced in response to IDR No. 5 and any additional information document requests, be directed to:
Leonard Cross Partner, Tax Department Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 864-7218
Email: lcross@calderwoodharkness.com
Garrett Simmons Senior Associate, Tax Department Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 864-7342
Email: gsimmons@calderwoodharkness.com
Mr. Cross serves as the responsible partner for this engagement, and Mr. Simmons is the lead associate responsible for day-to-day IDR coordination and document production matters. Either may be contacted directly regarding scheduling, production logistics, or substantive questions concerning PPC's examination responses.
We trust this submission is fully responsive to IDR No. 5. Please do not hesitate to contact us with any questions.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Leonard Cross Partner, Tax Department 1735 Market Street, Suite 3100 Philadelphia, PA 19103
(on behalf of Penterra Pharmaceuticals Corp.)
cc: (via email and first-class mail)
Marcus Whitfield, Vice President, Global Tax Penterra Pharmaceuticals Corp. 2200 Independence Boulevard Princeton Junction, NJ 08550
Deborah Staines, General Counsel Penterra Pharmaceuticals Corp. 2200 Independence Boulevard Princeton Junction, NJ 08550
Supervisory Revenue Agent Gerald Meskill Internal Revenue Service, Large Business & International Division Exam Team LB&I-NE-TP-2022-00641
Sylvia Hartwell, Partner Calderwood & Harkness LLP (internal file copy)
Enclosures:
Tab 1: PCT Valuation Report — Platform Contribution Transaction Valuation Report — Penterra Biopharma International DAC Buy-In to Pre-Existing Intangible Property (prepared by Susan Lam, CPA, Transfer Pricing Partner, Crestfield & Associates LLP, dated June 2012)
Tab 2: Revenue Projection Workpapers — Non-Americas Territory Revenue Projections, by Product Line (Veritaxol, Imvara, Cerulon, and Other Contributed Compounds)
Tab 3: discount Rate / WACC Calculation Workpapers
Tab 4: DCF Model — Discounted Cash Flow Model (electronic format on enclosed USB drive and hard copy printout)
Tab 5: Method Selection and Comparable Analyses Workpapers — Best Method Analysis under Treas. Reg. § 1.482-1(d)
Tab 6: IP Asset Inventory and Descriptions — Detailed Inventory of Pre-Existing Intangible Property Subject to PCT Buy-In as of July 1, 2012
Tab 7: Reasonably Anticipated Benefits Analysis Workpapers — Initial RAB Analysis and Cost-Sharing Ratio Determination
Electronic Media: USB flash drive containing native Excel workpapers corresponding to Tabs 2, 3, 4, and 7 (Microsoft Excel .xlsx format)
| Tax Year | PBI Share | PPC Share |
| 2017 | 38.2% | 61.8% |
| 2018 | 39.6% | 60.4% |
| 2019 | 41.1% | 58.9% |
| 2020 | 42.7% | 57.3% |