1018-00009 · Client 1018 · IDR Responses

idr-44-response.docx DOCUMENT M&A / Corporate

124 / 176 ← → ✕

Contract analysis Extract to table

CONFIDENTIAL — SUBJECT TO ATTORNEY-CLIENT PRIVILEGE AND WORK-PRODUCT DOCTRINE

CALDERWOOD & HARKNESS LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103

600 Lexington Avenue New York, NY 10022

Telephone: (215) 814-7200 Facsimile: (215) 814-7201

www.calderwoodharkness.com

August 22, 2023

C&H Matter No.: 1018-00009

VIA SECURE FILE TRANSFER AND CERTIFIED MAIL

Revenue Agent Patricia Dunleavy Internal Revenue Service Large Business & International Division Northeast Territory, Transfer Pricing Practice 600 Arch Street, Room 3214 Philadelphia, PA 19106

Re: Response to Information Document Request No. 44 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

Dear Revenue Agent Dunleavy:

I. INTRODUCTION AND PURPOSE

Calderwood & Harkness LLP ("C&H"), as authorized representatives of Penterra Pharmaceuticals Corp. ("PPC" or "Taxpayer") pursuant to IRS Form 2848, Power of Attorney and Declaration of Representative, filed with the Internal Revenue Service ("IRS" or the "Service") on June 8, 2022 — which designates Leonard Cross (CAF No. 7821-44509R), Sylvia Hartwell (CAF No. 6103-29817R), Garrett Simmons (CAF No. 9245-61034R), and Leila Nazari (CAF No. 8817-50223R) as PPC's authorized representatives for the tax years at issue — hereby submits this response to Information Document Request No. 44 ("IDR No. 44").

IDR No. 44 was issued by the Service on or about August 8, 2023, and requests production of capital expenditure records, equipment purchase documentation, and information technology infrastructure investment records of Penterra Biopharma International DAC ("PBI"), an Irish-incorporated designated activity company and wholly owned subsidiary of PPC, for the tax years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020 (collectively, the "Tax Years" or the "Examination Period"). IDR No. 44 also requests related records of capital budgeting authority, asset registers, depreciation schedules, leasehold improvement costs, and regulatory expenditures made by PBI during the Examination Period.

This submission represents the forty-fourth response in a series of forty-seven IDRs issued by the Service during the course of this examination, which has spanned the period from June 2022 through September 2023. PPC has cooperated fully with the examination team throughout this process and has endeavored to respond to each IDR in a timely, complete, and organized manner. PPC's prior IDR responses, numbered 1 through 43, have collectively produced in excess of 148,000 pages of documents, and PPC anticipates that the remaining IDRs (Nos. 45, 46, and 47) will be responded to within the timeframes agreed upon with the examination team.

PPC produces the enclosed documents responsive to IDR No. 44 subject to the reservations, limitations, and privilege assertions set forth in Sections IV and V below. Nothing in this response or in the documents produced herewith should be construed as a waiver of any privilege, objection, defense, or position that PPC may assert in connection with this examination or any subsequent administrative or judicial proceedings.

II. SUMMARY OF DOCUMENTS PRODUCED

PPC is producing the following categories of documents responsive to IDR No. 44. The documents have been organized by category and tax year for ease of the examination team's review. All documents are Bates-stamped with the prefix "PPC-IDR44-" followed by sequential numbering. A complete Document Production Index is provided in Section VI below, and each document has been cross-referenced to the Master Document Production Index that PPC has maintained for the duration of the examination covering all forty-seven IDRs.

A. Capital Expenditure Budgets and Approvals (2017–2020)

PPC produces PBI's annual capital expenditure budgets for each of the four Tax Years as approved by PBI's board of directors. PBI's board met on a quarterly basis during the Examination Period, and the capital expenditure budgets were presented, reviewed, deliberated upon, and approved during these quarterly board meetings, each of which was held at PBI's offices in Dublin, Ireland. During the Examination Period, PBI's board held a total of forty-two (42) board meetings, including regularly scheduled quarterly meetings and special meetings convened to address significant capital expenditure decisions and strategic initiatives.

The produced documents include the following materials related to PBI's capital expenditure budgeting and approval processes:

(a) Annual capital expenditure budget proposals prepared by PBI's finance department and submitted to PBI's board for approval for each of fiscal years 2017, 2018, 2019, and 2020;

(b) Board resolutions approving annual capital expenditure budgets, including resolutions authorizing specific expenditures in excess of delegated approval thresholds;

(c) Minutes of PBI board meetings at which capital expenditure budgets were presented, discussed, and approved, including records of board deliberations regarding the allocation of capital among PBI's key functional areas (regulatory affairs, commercial operations, medical affairs, market access, pharmacovigilance, and corporate administration);

(d) Capital expenditure authorization forms signed by PBI Managing Director Aidan Naughton, who maintained delegated authority to approve individual capital expenditures up to €500,000 without further board approval, and who submitted expenditures in excess of that threshold to the board for specific authorization;

(e) Quarterly capital expenditure variance reports comparing actual capital expenditures against budgeted amounts, as presented to the PBI board at each quarterly meeting; and

(f) Supporting documentation related to PBI's capital budgeting process, including internal memoranda, cost-benefit analyses, and business case presentations prepared by PBI personnel in connection with significant capital expenditure proposals.

PPC notes that PBI maintained independent capital budgeting authority at its Dublin offices, located at the 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland. The capital expenditure budgets were prepared by PBI's Dublin-based finance team under the supervision of PBI's Chief Financial Officer, who reported to Managing Director Naughton. While PBI's capital expenditure budgets were subject to PPC group-level coordination to ensure consistency with overall corporate strategy, PBI exercised independent judgment and decision-making authority with respect to the timing, magnitude, and allocation of its capital expenditures. This independent authority is reflected in the board minutes and authorization forms produced herewith.

B. Regulatory Expenditures and Submissions

PPC produces detailed records of PBI's regulatory expenditures during the Examination Period. PBI incurred cumulative regulatory expenditures of approximately €47.2 million across the Tax Years 2017 through 2020 in connection with obtaining and maintaining marketing authorizations, regulatory approvals, and post-approval commitments across PBI's licensed territory.

These regulatory expenditures were incurred in connection with regulatory submissions and filings across sixty-eight (68) country markets in PBI's designated territory, encompassing the Europe, Middle East, and Africa ("EMEA") region and the Asia-Pacific ("APAC") region. PBI's regulatory affairs function, based in Dublin with satellite regulatory personnel in key markets, managed the preparation, submission, and lifecycle maintenance of regulatory dossiers across all sixty-eight country markets.

The produced documents include a year-by-year and product-line-by-product-line breakdown of regulatory expenditures, organized as follows:

(a) Veritaxol (oncology): PBI held exclusive commercialization rights to Veritaxol for all non-Americas markets pursuant to the cost-sharing arrangement effective July 1, 2012 (the "CSA"). During the Examination Period, PBI submitted and maintained regulatory filings for Veritaxol across all sixty-eight non-Americas country markets within its licensed territory. Veritaxol generated non-Americas net sales of approximately $1.34 billion in fiscal year 2020. Regulatory expenditures for Veritaxol during the Examination Period included initial marketing authorization applications, supplemental submissions for new indications and formulations, responses to regulatory authority questions and requests for additional data, periodic safety update reports, and post-marketing commitment studies required by regulatory authorities in the European Union, Japan, Australia, and other key markets.

(b) Imvara (immunology): PBI held exclusive commercialization rights to Imvara for all non-Americas markets under the CSA. Imvara generated non-Americas net sales of approximately $790 million in fiscal year 2020. PBI's regulatory expenditures for Imvara included centralized European procedure filings through the European Medicines Agency ("EMA"), national procedure filings in non-EU EMEA and APAC markets, lifecycle management submissions, and post-approval variation applications to expand the approved indication scope in various jurisdictions.

(c) Cerulon (rare disease): PBI held exclusive commercialization rights to Cerulon for all non-Americas markets under the CSA. Cerulon generated non-Americas net sales of approximately $280 million in fiscal year 2020. Regulatory expenditures for Cerulon included orphan drug designation applications and maintenance filings, marketing authorization applications under EMA's centralized procedure and equivalent procedures in APAC markets, post-authorization safety studies, and regulatory submissions related to the establishment of expanded access programs in markets where Cerulon had not yet received marketing authorization.

PPC submits that these regulatory expenditures are of particular significance to the transfer pricing analysis in this examination because they demonstrate PBI's active performance of Development, Enhancement, Maintenance, Protection, and Exploitation ("DEMPE") functions with respect to the intangible property licensed to PBI under the CSA for the non-Americas territory. PBI's regulatory affairs team, headquartered in Dublin, directed and managed these regulatory activities, making independent strategic decisions regarding the sequencing and prioritization of regulatory filings, the engagement of local regulatory consultants and agents, and the allocation of resources among product lines and country markets. These expenditures were funded from PBI's own revenues and constituted a significant component of PBI's overall capital investment in its commercial operations.

C. Equipment Purchases

PPC produces invoices, purchase orders, and related documentation for office equipment, laboratory reference equipment, and specialized regulatory and commercial operations equipment acquired by PBI during the Examination Period. The produced documents include:

(a) Purchase orders and invoices for all equipment acquisitions during each of the four Tax Years, organized chronologically within each year;

(b) Asset registers maintained by PBI's finance department in Dublin, reflecting all capitalized equipment on PBI's balance sheet as of the end of each fiscal year during the Examination Period;

(c) Equipment located at PBI's offices at Sandyford Business Park, which comprised approximately 18,000 square feet of office and reference laboratory space during the Examination Period, including specialized equipment for PBI's regulatory affairs, commercial analytics, medical affairs, pharmacovigilance, and market access functions;

(d) Depreciation schedules for all capitalized equipment, including the depreciation method applied (straight-line, consistent with PBI's accounting policies under Irish GAAP as adopted by PBI), the useful life assigned to each asset category, and accumulated depreciation as of the end of each fiscal year during the Examination Period; and

(e) Records of equipment disposals, retirements, and write-offs during the Examination Period, including any gain or loss recognized on disposal.

The equipment purchase records reflect PBI's ongoing investment in the physical infrastructure necessary to support its commercial operations across sixty-eight country markets. PBI's equipment acquisitions during the Examination Period included, among other items, specialized analytical workstations, regulatory submission and document management hardware, commercial data processing equipment, presentation and conferencing equipment for PBI's Dublin headquarters, and reference laboratory instruments used by PBI's medical affairs and pharmacovigilance teams.

D. IT Infrastructure Investments

PPC produces records of PBI's investments in information technology infrastructure during the Examination Period. PBI made substantial investments in IT systems and infrastructure to support its growing commercial operations across the non-Americas territory, and these investments were a core component of PBI's capital expenditure program during the Tax Years. The produced documents include records pertaining to the following categories of IT investment:

(a) Enterprise Resource Planning (ERP) Systems: PBI implemented and customized an enterprise resource planning system to manage its financial reporting, procurement, inventory management, and commercial operations. The produced documents include vendor contracts, implementation and customization invoices, change order records, and internal project management documentation related to the ERP system implementation and ongoing customization during the Examination Period.

(b) Commercial Data Analytics and Market intelligence Platforms: PBI invested in sophisticated commercial data analytics and market intelligence platforms to support its commercial operations across sixty-eight non-Americas country markets. These platforms provided PBI's commercial team with real-time and near-real-time data on prescription volumes, market share, competitive dynamics, pricing trends, and reimbursement status across PBI's territory. The produced documents include vendor contracts, license agreements, data subscription agreements, and invoices related to these platforms.

(c) Regulatory Submission Management Software: PBI acquired and customized regulatory submission management software to support the preparation, assembly, and electronic submission of regulatory dossiers to regulatory authorities across its sixty-eight country markets. The produced documents include vendor contracts, licensing agreements, implementation invoices, and records of customization work performed to adapt the software to the specific requirements of PBI's regulatory affairs function.

(d) IT Hardware: PBI acquired servers, workstations, networking equipment, and related hardware for its Dublin offices during the Examination Period. The produced documents include purchase orders, invoices, delivery records, and asset register entries for all IT hardware acquired during the Tax Years.

(e) Cybersecurity and Data Protection Infrastructure: PBI invested in cybersecurity and data protection infrastructure to comply with applicable data protection regulations, including the European Union's General Data Protection Regulation ("GDPR"), which became effective during the Examination Period. The produced documents include vendor contracts, security audit reports, penetration testing invoices, and records of cybersecurity system implementations and upgrades.

PPC notes that PBI's IT capital expenditures were funded from PBI's own resources. PBI maintained its primary operating bank accounts at Glenmore Bank Ireland plc, and all IT vendor payments were made from PBI's accounts at Glenmore Bank Ireland. The produced documents include bank statements and payment records confirming that PBI independently funded these investments from its operating cash flows and banking facilities, without reliance on intercompany financing from PPC or any other group entity for these purposes.

E. Leasehold Improvements

PPC produces records of leasehold improvements made to PBI's offices at Sandyford Business Park during the Examination Period. PBI's operations expanded significantly during the Examination Period as the company grew from its initial establishment in 2012 with approximately fifty-two (52) employees to approximately one hundred eighty-five (185) employees by the end of fiscal year 2020. This growth in headcount necessitated substantial investment in office space expansion, renovation, and fit-out at PBI's Dublin headquarters.

The produced documents include:

(a) Lease agreements and lease amendments for PBI's office space at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, including amendments reflecting PBI's acquisition of additional floor space during the Examination Period;

(b) Invoices and contracts with contractors and architects for office fit-out, renovation, and build-out of additional floor space;

(d) Depreciation and amortization schedules for leasehold improvements, reflecting amortization over the remaining lease term or the useful life of the improvements, whichever is shorter; and

(e) Certificates of completion and occupancy permits for completed leasehold improvement projects.

The leasehold improvement records demonstrate PBI's commitment to maintaining and expanding its Dublin operations to support its growing commercial responsibilities across the non-Americas territory. PBI's expansion from approximately 52 employees at establishment to 185 employees by 2020 reflects the substantial and increasing scope of PBI's DEMPE functions during the Examination Period.

F. Summary Capital Expenditure Schedules

PPC produces consolidated capital expenditure summary schedules for each of the four Tax Years (2017, 2018, 2019, and 2020). These schedules provide a comprehensive overview of PBI's total capital expenditures during each year, categorized by the following functional areas:

(a) Regulatory expenditures;

(b) Equipment purchases;

(d) Leasehold improvements; and

(e) Other capital items (including miscellaneous capital expenditures not falling within the foregoing categories).

All amounts in the summary capital expenditure schedules are denominated in euros (€), consistent with PBI's functional currency. PBI's financial statements are prepared in euros, and PBI reports its results in euros to PBI's board of directors and to PPC for consolidation purposes. For context, PBI reported total revenue of approximately €2.14 billion in fiscal year 2020 and pre-tax income of approximately €1.06 billion in fiscal year 2020. The capital expenditure schedules should be evaluated in the context of PBI's overall financial position and the scale of its commercial operations during the Examination Period.

The summary schedules were prepared by PBI's finance department in Dublin and have been reconciled to PBI's audited financial statements for each of the Tax Years. PPC produces these schedules as business records maintained in the ordinary course of PBI's operations.

III. RELEVANCE TO TRANSFER PRICING ANALYSIS

The documents produced in response to IDR No. 44 are relevant to the transfer pricing analysis in this examination because they demonstrate PBI's substantive and growing capital investment in its Dublin operations during the Examination Period. These capital investments are consistent with — and directly support — PBI's role as the IP-holding company and commercial principal for non-Americas commercialization of PPC's pharmaceutical products pursuant to the cost-sharing arrangement ("CSA") effective July 1, 2012.

The capital expenditure records produced herewith are consistent with PBI's functions, assets, and risks as documented in PPC's contemporaneous transfer pricing documentation for the Tax Years. PPC's contemporaneous transfer pricing documentation was prepared by Crestfield & Associates LLP, under the direction of Susan Lam, Transfer Pricing Partner, and was completed and maintained in accordance with the requirements of Internal Revenue Code ("IRC") § 6662(e) and Treasury Regulation § 1.6662-6. The transfer pricing documentation describes PBI's functions, assets, and risks in detail, including PBI's capital expenditure activities, and concludes that the intercompany transactions between PPC and PBI during the Tax Years satisfied the arm's-length standard under IRC § 482 and the applicable Treasury Regulations.

The capital expenditure records produced in this response reflect PBI's economic substance and its independent capacity to perform DEMPE functions for the non-Americas territory. Specifically, the documents demonstrate the following:

(a) PBI exercised independent capital budgeting authority through its board of directors and Managing Director, making autonomous decisions regarding the timing, magnitude, and allocation of capital expenditures across its functional areas;

(b) PBI invested in the regulatory infrastructure necessary to obtain and maintain marketing authorizations across sixty-eight country markets, incurring cumulative regulatory expenditures of approximately €47.2 million during the Examination Period;

(c) PBI invested in IT systems, commercial analytics platforms, and data infrastructure to support its commercial operations across its territory;

(d) PBI expanded its physical office space and headcount to support its growing commercial operations; and

(e) PBI bore the cost and risk of these investments using its own revenues and banking facilities, without reliance on intercompany financing from PPC for capital expenditure purposes.

These facts are directly relevant to the application of the arm's-length standard under IRC § 482, Treasury Regulation §§ 1.482-4 and 1.482-7, and the OECD Transfer Pricing Guidelines, which PPC submits provide persuasive authority for the analytical framework applicable to the transactions at issue. PPC respectfully submits that the documents produced in this response, together with the documents produced in response to prior IDRs, demonstrate that PBI performed substantial DEMPE functions and exercised meaningful control over economically significant risks during the Examination Period, and that the allocation of income between PPC and PBI under the CSA is consistent with arm's-length principles.

IV. PRIVILEGE RESERVATION

PPC has withheld certain documents that may be responsive to IDR No. 44 on the basis of the attorney-client privilege, the work-product doctrine, or both. The following privilege assertions are applicable to this response:

(a) Documents withheld on the basis of the attorney-client privilege and/or the work-product doctrine are identified on the privilege log that was initially provided to the examination team on September 15, 2022, and has been updated periodically thereafter. PPC produces herewith an updated privilege log reflecting additional entries corresponding to documents withheld from this IDR No. 44 response.

(b) PPC reserves the right to supplement the privilege log as additional documents responsive to IDR No. 44 are identified and reviewed. PPC's document review for this response is substantially complete; however, to the extent that additional responsive documents are identified in ongoing review efforts, PPC will supplement both its document production and its privilege log as appropriate.

(c) PPC has retained Whitmore Valuation Group LLC ("WVG") under a Kovel arrangement (Reference: C&H Matter No. 1018-00009-KV) pursuant to a Kovel letter executed on June 20, 2022, by Leonard Cross of Calderwood & Harkness LLP and Dr. Helena Vasquez, Managing Director of WVG. Pursuant to this arrangement, certain analyses, memoranda, reports, and communications prepared by Dr. Helena Vasquez and Dr. Rohan Chakrabarti of WVG at the direction of Calderwood & Harkness LLP in connection with this examination are protected under the attorney-client privilege and the work-product doctrine. To the extent that any such materials are responsive to IDR No. 44, they have been withheld and identified on the updated privilege log. See United States v. Kovel, 296 F.2d 918 (2d Cir. 1961); see also IRM 25.5.4.5.1 (recognizing the Kovel doctrine).

(d) PPC's assertion of privilege with respect to any document withheld from this response is made in good faith and is based on a review of the applicable documents by attorneys at Calderwood & Harkness LLP. PPC does not assert privilege over any document for the purpose of impeding the examination.

V. GENERAL RESERVATIONS AND LIMITATIONS

PPC's production of documents in response to IDR No. 44 is subject to the following general reservations and limitations, which are consistent with the reservations and limitations set forth in PPC's prior IDR responses:

(a) The production of documents in response to IDR No. 44 does not constitute a waiver of any privilege, including the attorney-client privilege, the work-product doctrine, or any other applicable privilege or protection. To the extent that any document produced herewith is later determined to contain privileged information, PPC reserves the right to assert the applicable privilege and to seek the return of any such document. Production of any document shall not be deemed a waiver of any privilege as to any other communication or document, whether or not related to the subject matter of the produced document.

(b) PPC reserves all rights to supplement, amend, correct, or clarify this response and the documents produced herewith. PPC's investigation and document review are ongoing, and additional responsive documents may be identified in the future. To the extent that additional responsive documents are identified, PPC will produce them to the examination team in a timely manner, subject to all applicable privilege assertions.

(c) The documents produced herewith are produced as maintained in the ordinary course of PBI's business. PPC has not created any documents specifically for the purpose of responding to IDR No. 44, except for the summary schedules and organizational indices prepared to facilitate the examination team's review of the produced materials.

(d) PPC does not concede the relevance, materiality, or admissibility of any particular document produced in this response to any issue in the examination. The production of documents in response to IDR No. 44 does not constitute an admission or concession regarding the correctness of any position taken by the Service in connection with the examination, nor does it constitute an admission or concession that any document is relevant to any particular issue.

(e) PPC reserves all rights, claims, and defenses under IRC § 482, Treasury Regulation §§ 1.482-1 through 1.482-9, including without limitation Treasury Regulation §§ 1.482-4 and 1.482-7, and all other applicable provisions of the Internal Revenue Code, the Treasury Regulations, applicable tax treaties (including the Convention between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains), and all other applicable authorities, whether statutory, regulatory, judicial, or administrative.

(f) PPC reserves the right to raise any and all objections, defenses, and affirmative positions at any stage of this examination or in any subsequent administrative or judicial proceeding, including without limitation objections based on the statute of limitations, the burden of proof, the standard of review, and the applicability of penalties.

VI. DOCUMENT PRODUCTION INDEX

The following is an index of all documents produced in response to IDR No. 44. All documents bear the Bates prefix "PPC-IDR44-" followed by the sequential page number. This index has been cross-referenced to the Master Document Production Index maintained by Calderwood & Harkness LLP for the duration of the examination, which covers all forty-seven IDRs issued from June 2022 through September 2023.

Total Pages Produced: 2,812

All documents listed above have been entered into the Master Document Production Index maintained by Calderwood & Harkness LLP, which indexes all documents produced across the forty-seven IDRs in this examination. The Master Document Production Index is available for inspection by the examination team upon request.

CLOSING

PPC has endeavored to respond to IDR No. 44 in a thorough and complete manner consistent with its obligations as a cooperative taxpayer. If the examination team has any questions regarding the documents produced in this response, or if the examination team requires any additional information or clarification, please do not hesitate to contact Garrett Simmons, Lead Associate, at (215) 814-7248 or garrett.simmons@calderwoodharkness.com, or Leonard Cross, Responsible Partner, at (215) 814-7215 or leonard.cross@calderwoodharkness.com. Both are available at the firm's Philadelphia office at 1735 Market Street, Suite 3100, Philadelphia, PA 19103.

PPC is prepared to arrange a conference call or in-person meeting at the examination team's convenience to discuss the produced documents, to answer any questions regarding the organization or content of the production, and to address any follow-up requests that may arise from the examination team's review of these materials.

We appreciate the examination team's continued professionalism in conducting this examination and look forward to working cooperatively toward its resolution.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Leonard Cross, Partner Licensed in New York, New Jersey, and the District of Columbia 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 814-7215

Email: leonard.cross@calderwoodharkness.com

Date: August 22, 2023

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 Team Manager, IRS Large Business & International Division Northeast Territory, Transfer Pricing Practice 600 Arch Street, Room 3214 Philadelphia, PA 19106

Sylvia Hartwell, Partner (Billing Partner) Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022

Garrett Simmons, Associate (Lead Associate) Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103

Leila Nazari, Associate (Working Associate) Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103

Enclosures:

1. Documents responsive to IDR No. 44 (Bates-stamped PPC-IDR44-000001 through PPC-IDR44-002812) — produced via IRS Secure File Transfer

2. Updated Privilege Log entries related to IDR No. 44 (17 entries; Privilege Log Nos. PL-044-001 through PL-044-017)

No.	Bates Range	Document Description	Date	Author / Source	Pages
1	PPC-IDR44-000001 to PPC-IDR44-000038	PBI Annual Capital Expenditure Budget, FY 2017	January 18, 2017	PBI Finance Dept. / A. Naughton	38
2	PPC-IDR44-000039 to PPC-IDR44-000074	PBI Annual Capital Expenditure Budget, FY 2018	January 22, 2018	PBI Finance Dept. / A. Naughton	36
3	PPC-IDR44-000075 to PPC-IDR44-000119	PBI Annual Capital Expenditure Budget, FY 2019	January 14, 2019	PBI Finance Dept. / A. Naughton	45
4	PPC-IDR44-000120 to PPC-IDR44-000162	PBI Annual Capital Expenditure Budget, FY 2020	January 20, 2020	PBI Finance Dept. / A. Naughton	43
5	PPC-IDR44-000163 to PPC-IDR44-000412	PBI Board Meeting Minutes (42 meetings, 2017–2020) — Capital Expenditure Excerpts	Various (2017–2020)	PBI Board Secretary	250
6	PPC-IDR44-000413 to PPC-IDR44-000546	Capital Expenditure Authorization Forms (2017–2020)	Various (2017–2020)	A. Naughton / PBI Finance Dept.	134
7	PPC-IDR44-000547 to PPC-IDR44-000612	Quarterly CapEx Variance Reports (16 quarters, Q1 2017–Q4 2020)	Various (2017–2020)	PBI Finance Dept.	66
8	PPC-IDR44-000613 to PPC-IDR44-000894	Regulatory Expenditure Records — Veritaxol (2017–2020)	Various (2017–2020)	PBI Regulatory Affairs	282
9	PPC-IDR44-000895 to PPC-IDR44-001108	Regulatory Expenditure Records — Imvara (2017–2020)	Various (2017–2020)	PBI Regulatory Affairs	214
10	PPC-IDR44-001109 to PPC-IDR44-001267	Regulatory Expenditure Records — Cerulon (2017–2020)	Various (2017–2020)	PBI Regulatory Affairs	159
11	PPC-IDR44-001268 to PPC-IDR44-001340	Regulatory Submission Cost Allocation by Country Market (68 markets)	Various (2017–2020)	PBI Regulatory Affairs / Finance Dept.	73
12	PPC-IDR44-001341 to PPC-IDR44-001598	Equipment Purchase Orders and Invoices (2017–2020)	Various (2017–2020)	PBI Procurement / Various Vendors	258
13	PPC-IDR44-001599 to PPC-IDR44-001654	PBI Asset Registers (Year-End 2017, 2018, 2019, 2020)	Various (2017–2020)	PBI Finance Dept.	56
14	PPC-IDR44-001655 to PPC-IDR44-001702	Equipment Depreciation Schedules (2017–2020)	Various (2017–2020)	PBI Finance Dept.	48
15	PPC-IDR44-001703 to PPC-IDR44-001724	Equipment Disposal and Write-Off Records (2017–2020)	Various (2017–2020)	PBI Finance Dept.	22
16	PPC-IDR44-001725 to PPC-IDR44-001892	ERP System — Vendor Contracts and Implementation Invoices	Various (2016–2020)	PBI IT Dept. / ERP Vendor	168
17	PPC-IDR44-001893 to PPC-IDR44-002014	Commercial Data Analytics Platform — Vendor Contracts and Invoices	Various (2017–2020)	PBI Commercial Operations / Data Vendors	122
18	PPC-IDR44-002015 to PPC-IDR44-002098	Regulatory Submission Management Software — Contracts and Invoices	Various (2017–2020)	PBI Regulatory Affairs / Software Vendor	84
19	PPC-IDR44-002099 to PPC-IDR44-002187	IT Hardware Purchase Records (2017–2020)	Various (2017–2020)	PBI IT Dept. / Various Vendors	89
20	PPC-IDR44-002188 to PPC-IDR44-002264	Cybersecurity and Data Protection Infrastructure Records	Various (2017–2020)	PBI IT Dept. / Security Vendors	77
21	PPC-IDR44-002265 to PPC-IDR44-002302	Glenmore Bank Ireland plc — Selected Bank Statements and Payment Records (IT CapEx)	Various (2017–2020)	Glenmore Bank Ireland plc	38
22	PPC-IDR44-002303 to PPC-IDR44-002418	Lease Agreements and Amendments — Sandyford Business Park	Various (2012–2020)	PBI / Landlord	116
23	PPC-IDR44-002419 to PPC-IDR44-002567	Leasehold Improvement Invoices and Contractor Records (2017–2020)	Various (2017–2020)	PBI Facilities / Contractors	149
24	PPC-IDR44-002568 to PPC-IDR44-002604	Leasehold Improvement Depreciation and Amortization Schedules	Various (2017–2020)	PBI Finance Dept.	37

25	PPC-IDR44-002605 to PPC-IDR44-002622	Certificates of Completion and Occupancy Permits	Various (2017–2020)	Dublin City Council / Contractors	18
26	PPC-IDR44-002623 to PPC-IDR44-002658	Consolidated Capital Expenditure Summary Schedule — FY 2017	March 15, 2018	PBI Finance Dept.	36
27	PPC-IDR44-002659 to PPC-IDR44-002696	Consolidated Capital Expenditure Summary Schedule — FY 2018	March 12, 2019	PBI Finance Dept.	38
28	PPC-IDR44-002697 to PPC-IDR44-002738	Consolidated Capital Expenditure Summary Schedule — FY 2019	March 18, 2020	PBI Finance Dept.	42
29	PPC-IDR44-002739 to PPC-IDR44-002784	Consolidated Capital Expenditure Summary Schedule — FY 2020	March 22, 2021	PBI Finance Dept.	46
30	PPC-IDR44-002785 to PPC-IDR44-002812	Other Capital Expenditure Records — Miscellaneous (2017–2020)	Various (2017–2020)	PBI Finance Dept.	28

CONFIDENTIAL — SUBJECT TO ATTORNEY-CLIENT PRIVILEGE AND WORK-PRODUCT DOCTRINE
CALDERWOOD & HARKNESS LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103
600 Lexington Avenue New York, NY 10022
Telephone: (215) 814-7200 Facsimile: (215) 814-7201
www.calderwoodharkness.com
August 22, 2023
C&H Matter No.: 1018-00009
VIA SECURE FILE TRANSFER AND CERTIFIED MAIL
Revenue Agent Patricia Dunleavy Internal Revenue Service Large Business & International Division Northeast Territory, Transfer Pricing Practice 600 Arch Street, Room 3214 Philadelphia, PA 19106
Re: Response to Information Document Request No. 44 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
Dear Revenue Agent Dunleavy:
I. INTRODUCTION AND PURPOSE
Calderwood & Harkness LLP ("C&H"), as authorized representatives of Penterra Pharmaceuticals Corp. ("PPC" or "Taxpayer") pursuant to IRS Form 2848, Power of Attorney and Declaration of Representative, filed with the Internal Revenue Service ("IRS" or the "Service") on June 8, 2022 — which designates Leonard Cross (CAF No. 7821-44509R), Sylvia Hartwell (CAF No. 6103-29817R), Garrett Simmons (CAF No. 9245-61034R), and Leila Nazari (CAF No. 8817-50223R) as PPC's authorized representatives for the tax years at issue — hereby submits this response to Information Document Request No. 44 ("IDR No. 44").
IDR No. 44 was issued by the Service on or about August 8, 2023, and requests production of capital expenditure records, equipment purchase documentation, and information technology infrastructure investment records of Penterra Biopharma International DAC ("PBI"), an Irish-incorporated designated activity company and wholly owned subsidiary of PPC, for the tax years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020 (collectively, the "Tax Years" or the "Examination Period"). IDR No. 44 also requests related records of capital budgeting authority, asset registers, depreciation schedules, leasehold improvement costs, and regulatory expenditures made by PBI during the Examination Period.
This submission represents the forty-fourth response in a series of forty-seven IDRs issued by the Service during the course of this examination, which has spanned the period from June 2022 through September 2023. PPC has cooperated fully with the examination team throughout this process and has endeavored to respond to each IDR in a timely, complete, and organized manner. PPC's prior IDR responses, numbered 1 through 43, have collectively produced in excess of 148,000 pages of documents, and PPC anticipates that the remaining IDRs (Nos. 45, 46, and 47) will be responded to within the timeframes agreed upon with the examination team.
PPC produces the enclosed documents responsive to IDR No. 44 subject to the reservations, limitations, and privilege assertions set forth in Sections IV and V below. Nothing in this response or in the documents produced herewith should be construed as a waiver of any privilege, objection, defense, or position that PPC may assert in connection with this examination or any subsequent administrative or judicial proceedings.
II. SUMMARY OF DOCUMENTS PRODUCED
PPC is producing the following categories of documents responsive to IDR No. 44. The documents have been organized by category and tax year for ease of the examination team's review. All documents are Bates-stamped with the prefix "PPC-IDR44-" followed by sequential numbering. A complete Document Production Index is provided in Section VI below, and each document has been cross-referenced to the Master Document Production Index that PPC has maintained for the duration of the examination covering all forty-seven IDRs.
A. Capital Expenditure Budgets and Approvals (2017–2020)
PPC produces PBI's annual capital expenditure budgets for each of the four Tax Years as approved by PBI's board of directors. PBI's board met on a quarterly basis during the Examination Period, and the capital expenditure budgets were presented, reviewed, deliberated upon, and approved during these quarterly board meetings, each of which was held at PBI's offices in Dublin, Ireland. During the Examination Period, PBI's board held a total of forty-two (42) board meetings, including regularly scheduled quarterly meetings and special meetings convened to address significant capital expenditure decisions and strategic initiatives.
The produced documents include the following materials related to PBI's capital expenditure budgeting and approval processes:
(a) Annual capital expenditure budget proposals prepared by PBI's finance department and submitted to PBI's board for approval for each of fiscal years 2017, 2018, 2019, and 2020;
(b) Board resolutions approving annual capital expenditure budgets, including resolutions authorizing specific expenditures in excess of delegated approval thresholds;
(c) Minutes of PBI board meetings at which capital expenditure budgets were presented, discussed, and approved, including records of board deliberations regarding the allocation of capital among PBI's key functional areas (regulatory affairs, commercial operations, medical affairs, market access, pharmacovigilance, and corporate administration);
(d) Capital expenditure authorization forms signed by PBI Managing Director Aidan Naughton, who maintained delegated authority to approve individual capital expenditures up to €500,000 without further board approval, and who submitted expenditures in excess of that threshold to the board for specific authorization;
(e) Quarterly capital expenditure variance reports comparing actual capital expenditures against budgeted amounts, as presented to the PBI board at each quarterly meeting; and
(f) Supporting documentation related to PBI's capital budgeting process, including internal memoranda, cost-benefit analyses, and business case presentations prepared by PBI personnel in connection with significant capital expenditure proposals.
PPC notes that PBI maintained independent capital budgeting authority at its Dublin offices, located at the 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland. The capital expenditure budgets were prepared by PBI's Dublin-based finance team under the supervision of PBI's Chief Financial Officer, who reported to Managing Director Naughton. While PBI's capital expenditure budgets were subject to PPC group-level coordination to ensure consistency with overall corporate strategy, PBI exercised independent judgment and decision-making authority with respect to the timing, magnitude, and allocation of its capital expenditures. This independent authority is reflected in the board minutes and authorization forms produced herewith.
B. Regulatory Expenditures and Submissions
PPC produces detailed records of PBI's regulatory expenditures during the Examination Period. PBI incurred cumulative regulatory expenditures of approximately €47.2 million across the Tax Years 2017 through 2020 in connection with obtaining and maintaining marketing authorizations, regulatory approvals, and post-approval commitments across PBI's licensed territory.
These regulatory expenditures were incurred in connection with regulatory submissions and filings across sixty-eight (68) country markets in PBI's designated territory, encompassing the Europe, Middle East, and Africa ("EMEA") region and the Asia-Pacific ("APAC") region. PBI's regulatory affairs function, based in Dublin with satellite regulatory personnel in key markets, managed the preparation, submission, and lifecycle maintenance of regulatory dossiers across all sixty-eight country markets.
The produced documents include a year-by-year and product-line-by-product-line breakdown of regulatory expenditures, organized as follows:
(a) Veritaxol (oncology): PBI held exclusive commercialization rights to Veritaxol for all non-Americas markets pursuant to the cost-sharing arrangement effective July 1, 2012 (the "CSA"). During the Examination Period, PBI submitted and maintained regulatory filings for Veritaxol across all sixty-eight non-Americas country markets within its licensed territory. Veritaxol generated non-Americas net sales of approximately $1.34 billion in fiscal year 2020. Regulatory expenditures for Veritaxol during the Examination Period included initial marketing authorization applications, supplemental submissions for new indications and formulations, responses to regulatory authority questions and requests for additional data, periodic safety update reports, and post-marketing commitment studies required by regulatory authorities in the European Union, Japan, Australia, and other key markets.
(b) Imvara (immunology): PBI held exclusive commercialization rights to Imvara for all non-Americas markets under the CSA. Imvara generated non-Americas net sales of approximately $790 million in fiscal year 2020. PBI's regulatory expenditures for Imvara included centralized European procedure filings through the European Medicines Agency ("EMA"), national procedure filings in non-EU EMEA and APAC markets, lifecycle management submissions, and post-approval variation applications to expand the approved indication scope in various jurisdictions.
(c) Cerulon (rare disease): PBI held exclusive commercialization rights to Cerulon for all non-Americas markets under the CSA. Cerulon generated non-Americas net sales of approximately $280 million in fiscal year 2020. Regulatory expenditures for Cerulon included orphan drug designation applications and maintenance filings, marketing authorization applications under EMA's centralized procedure and equivalent procedures in APAC markets, post-authorization safety studies, and regulatory submissions related to the establishment of expanded access programs in markets where Cerulon had not yet received marketing authorization.
PPC submits that these regulatory expenditures are of particular significance to the transfer pricing analysis in this examination because they demonstrate PBI's active performance of Development, Enhancement, Maintenance, Protection, and Exploitation ("DEMPE") functions with respect to the intangible property licensed to PBI under the CSA for the non-Americas territory. PBI's regulatory affairs team, headquartered in Dublin, directed and managed these regulatory activities, making independent strategic decisions regarding the sequencing and prioritization of regulatory filings, the engagement of local regulatory consultants and agents, and the allocation of resources among product lines and country markets. These expenditures were funded from PBI's own revenues and constituted a significant component of PBI's overall capital investment in its commercial operations.
C. Equipment Purchases
PPC produces invoices, purchase orders, and related documentation for office equipment, laboratory reference equipment, and specialized regulatory and commercial operations equipment acquired by PBI during the Examination Period. The produced documents include:
(a) Purchase orders and invoices for all equipment acquisitions during each of the four Tax Years, organized chronologically within each year;
(b) Asset registers maintained by PBI's finance department in Dublin, reflecting all capitalized equipment on PBI's balance sheet as of the end of each fiscal year during the Examination Period;
(c) Equipment located at PBI's offices at Sandyford Business Park, which comprised approximately 18,000 square feet of office and reference laboratory space during the Examination Period, including specialized equipment for PBI's regulatory affairs, commercial analytics, medical affairs, pharmacovigilance, and market access functions;
(d) Depreciation schedules for all capitalized equipment, including the depreciation method applied (straight-line, consistent with PBI's accounting policies under Irish GAAP as adopted by PBI), the useful life assigned to each asset category, and accumulated depreciation as of the end of each fiscal year during the Examination Period; and
(e) Records of equipment disposals, retirements, and write-offs during the Examination Period, including any gain or loss recognized on disposal.
The equipment purchase records reflect PBI's ongoing investment in the physical infrastructure necessary to support its commercial operations across sixty-eight country markets. PBI's equipment acquisitions during the Examination Period included, among other items, specialized analytical workstations, regulatory submission and document management hardware, commercial data processing equipment, presentation and conferencing equipment for PBI's Dublin headquarters, and reference laboratory instruments used by PBI's medical affairs and pharmacovigilance teams.
D. IT Infrastructure Investments
PPC produces records of PBI's investments in information technology infrastructure during the Examination Period. PBI made substantial investments in IT systems and infrastructure to support its growing commercial operations across the non-Americas territory, and these investments were a core component of PBI's capital expenditure program during the Tax Years. The produced documents include records pertaining to the following categories of IT investment:
(a) Enterprise Resource Planning (ERP) Systems: PBI implemented and customized an enterprise resource planning system to manage its financial reporting, procurement, inventory management, and commercial operations. The produced documents include vendor contracts, implementation and customization invoices, change order records, and internal project management documentation related to the ERP system implementation and ongoing customization during the Examination Period.
(b) Commercial Data Analytics and Market intelligence Platforms: PBI invested in sophisticated commercial data analytics and market intelligence platforms to support its commercial operations across sixty-eight non-Americas country markets. These platforms provided PBI's commercial team with real-time and near-real-time data on prescription volumes, market share, competitive dynamics, pricing trends, and reimbursement status across PBI's territory. The produced documents include vendor contracts, license agreements, data subscription agreements, and invoices related to these platforms.
(c) Regulatory Submission Management Software: PBI acquired and customized regulatory submission management software to support the preparation, assembly, and electronic submission of regulatory dossiers to regulatory authorities across its sixty-eight country markets. The produced documents include vendor contracts, licensing agreements, implementation invoices, and records of customization work performed to adapt the software to the specific requirements of PBI's regulatory affairs function.
(d) IT Hardware: PBI acquired servers, workstations, networking equipment, and related hardware for its Dublin offices during the Examination Period. The produced documents include purchase orders, invoices, delivery records, and asset register entries for all IT hardware acquired during the Tax Years.
(e) Cybersecurity and Data Protection Infrastructure: PBI invested in cybersecurity and data protection infrastructure to comply with applicable data protection regulations, including the European Union's General Data Protection Regulation ("GDPR"), which became effective during the Examination Period. The produced documents include vendor contracts, security audit reports, penetration testing invoices, and records of cybersecurity system implementations and upgrades.
PPC notes that PBI's IT capital expenditures were funded from PBI's own resources. PBI maintained its primary operating bank accounts at Glenmore Bank Ireland plc, and all IT vendor payments were made from PBI's accounts at Glenmore Bank Ireland. The produced documents include bank statements and payment records confirming that PBI independently funded these investments from its operating cash flows and banking facilities, without reliance on intercompany financing from PPC or any other group entity for these purposes.
E. Leasehold Improvements
PPC produces records of leasehold improvements made to PBI's offices at Sandyford Business Park during the Examination Period. PBI's operations expanded significantly during the Examination Period as the company grew from its initial establishment in 2012 with approximately fifty-two (52) employees to approximately one hundred eighty-five (185) employees by the end of fiscal year 2020. This growth in headcount necessitated substantial investment in office space expansion, renovation, and fit-out at PBI's Dublin headquarters.
The produced documents include:
(a) Lease agreements and lease amendments for PBI's office space at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, including amendments reflecting PBI's acquisition of additional floor space during the Examination Period;
(b) Invoices and contracts with contractors and architects for office fit-out, renovation, and build-out of additional floor space;
(c) Capital expenditure authorization forms and board approvals related to leasehold improvement projects;
(d) Depreciation and amortization schedules for leasehold improvements, reflecting amortization over the remaining lease term or the useful life of the improvements, whichever is shorter; and
(e) Certificates of completion and occupancy permits for completed leasehold improvement projects.
The leasehold improvement records demonstrate PBI's commitment to maintaining and expanding its Dublin operations to support its growing commercial responsibilities across the non-Americas territory. PBI's expansion from approximately 52 employees at establishment to 185 employees by 2020 reflects the substantial and increasing scope of PBI's DEMPE functions during the Examination Period.
F. Summary Capital Expenditure Schedules
PPC produces consolidated capital expenditure summary schedules for each of the four Tax Years (2017, 2018, 2019, and 2020). These schedules provide a comprehensive overview of PBI's total capital expenditures during each year, categorized by the following functional areas:
(a) Regulatory expenditures;
(b) Equipment purchases;
(c) IT infrastructure investments;
(d) Leasehold improvements; and
(e) Other capital items (including miscellaneous capital expenditures not falling within the foregoing categories).
All amounts in the summary capital expenditure schedules are denominated in euros (€), consistent with PBI's functional currency. PBI's financial statements are prepared in euros, and PBI reports its results in euros to PBI's board of directors and to PPC for consolidation purposes. For context, PBI reported total revenue of approximately €2.14 billion in fiscal year 2020 and pre-tax income of approximately €1.06 billion in fiscal year 2020. The capital expenditure schedules should be evaluated in the context of PBI's overall financial position and the scale of its commercial operations during the Examination Period.
The summary schedules were prepared by PBI's finance department in Dublin and have been reconciled to PBI's audited financial statements for each of the Tax Years. PPC produces these schedules as business records maintained in the ordinary course of PBI's operations.
III. RELEVANCE TO TRANSFER PRICING ANALYSIS
The documents produced in response to IDR No. 44 are relevant to the transfer pricing analysis in this examination because they demonstrate PBI's substantive and growing capital investment in its Dublin operations during the Examination Period. These capital investments are consistent with — and directly support — PBI's role as the IP-holding company and commercial principal for non-Americas commercialization of PPC's pharmaceutical products pursuant to the cost-sharing arrangement ("CSA") effective July 1, 2012.
The capital expenditure records produced herewith are consistent with PBI's functions, assets, and risks as documented in PPC's contemporaneous transfer pricing documentation for the Tax Years. PPC's contemporaneous transfer pricing documentation was prepared by Crestfield & Associates LLP, under the direction of Susan Lam, Transfer Pricing Partner, and was completed and maintained in accordance with the requirements of Internal Revenue Code ("IRC") § 6662(e) and Treasury Regulation § 1.6662-6. The transfer pricing documentation describes PBI's functions, assets, and risks in detail, including PBI's capital expenditure activities, and concludes that the intercompany transactions between PPC and PBI during the Tax Years satisfied the arm's-length standard under IRC § 482 and the applicable Treasury Regulations.
The capital expenditure records produced in this response reflect PBI's economic substance and its independent capacity to perform DEMPE functions for the non-Americas territory. Specifically, the documents demonstrate the following:
(a) PBI exercised independent capital budgeting authority through its board of directors and Managing Director, making autonomous decisions regarding the timing, magnitude, and allocation of capital expenditures across its functional areas;
(b) PBI invested in the regulatory infrastructure necessary to obtain and maintain marketing authorizations across sixty-eight country markets, incurring cumulative regulatory expenditures of approximately €47.2 million during the Examination Period;
(c) PBI invested in IT systems, commercial analytics platforms, and data infrastructure to support its commercial operations across its territory;
(d) PBI expanded its physical office space and headcount to support its growing commercial operations; and
(e) PBI bore the cost and risk of these investments using its own revenues and banking facilities, without reliance on intercompany financing from PPC for capital expenditure purposes.
These facts are directly relevant to the application of the arm's-length standard under IRC § 482, Treasury Regulation §§ 1.482-4 and 1.482-7, and the OECD Transfer Pricing Guidelines, which PPC submits provide persuasive authority for the analytical framework applicable to the transactions at issue. PPC respectfully submits that the documents produced in this response, together with the documents produced in response to prior IDRs, demonstrate that PBI performed substantial DEMPE functions and exercised meaningful control over economically significant risks during the Examination Period, and that the allocation of income between PPC and PBI under the CSA is consistent with arm's-length principles.
IV. PRIVILEGE RESERVATION
PPC has withheld certain documents that may be responsive to IDR No. 44 on the basis of the attorney-client privilege, the work-product doctrine, or both. The following privilege assertions are applicable to this response:
(a) Documents withheld on the basis of the attorney-client privilege and/or the work-product doctrine are identified on the privilege log that was initially provided to the examination team on September 15, 2022, and has been updated periodically thereafter. PPC produces herewith an updated privilege log reflecting additional entries corresponding to documents withheld from this IDR No. 44 response.
(b) PPC reserves the right to supplement the privilege log as additional documents responsive to IDR No. 44 are identified and reviewed. PPC's document review for this response is substantially complete; however, to the extent that additional responsive documents are identified in ongoing review efforts, PPC will supplement both its document production and its privilege log as appropriate.
(c) PPC has retained Whitmore Valuation Group LLC ("WVG") under a Kovel arrangement (Reference: C&H Matter No. 1018-00009-KV) pursuant to a Kovel letter executed on June 20, 2022, by Leonard Cross of Calderwood & Harkness LLP and Dr. Helena Vasquez, Managing Director of WVG. Pursuant to this arrangement, certain analyses, memoranda, reports, and communications prepared by Dr. Helena Vasquez and Dr. Rohan Chakrabarti of WVG at the direction of Calderwood & Harkness LLP in connection with this examination are protected under the attorney-client privilege and the work-product doctrine. To the extent that any such materials are responsive to IDR No. 44, they have been withheld and identified on the updated privilege log. See United States v. Kovel, 296 F.2d 918 (2d Cir. 1961); see also IRM 25.5.4.5.1 (recognizing the Kovel doctrine).
(d) PPC's assertion of privilege with respect to any document withheld from this response is made in good faith and is based on a review of the applicable documents by attorneys at Calderwood & Harkness LLP. PPC does not assert privilege over any document for the purpose of impeding the examination.
V. GENERAL RESERVATIONS AND LIMITATIONS
PPC's production of documents in response to IDR No. 44 is subject to the following general reservations and limitations, which are consistent with the reservations and limitations set forth in PPC's prior IDR responses:
(a) The production of documents in response to IDR No. 44 does not constitute a waiver of any privilege, including the attorney-client privilege, the work-product doctrine, or any other applicable privilege or protection. To the extent that any document produced herewith is later determined to contain privileged information, PPC reserves the right to assert the applicable privilege and to seek the return of any such document. Production of any document shall not be deemed a waiver of any privilege as to any other communication or document, whether or not related to the subject matter of the produced document.
(b) PPC reserves all rights to supplement, amend, correct, or clarify this response and the documents produced herewith. PPC's investigation and document review are ongoing, and additional responsive documents may be identified in the future. To the extent that additional responsive documents are identified, PPC will produce them to the examination team in a timely manner, subject to all applicable privilege assertions.
(c) The documents produced herewith are produced as maintained in the ordinary course of PBI's business. PPC has not created any documents specifically for the purpose of responding to IDR No. 44, except for the summary schedules and organizational indices prepared to facilitate the examination team's review of the produced materials.
(d) PPC does not concede the relevance, materiality, or admissibility of any particular document produced in this response to any issue in the examination. The production of documents in response to IDR No. 44 does not constitute an admission or concession regarding the correctness of any position taken by the Service in connection with the examination, nor does it constitute an admission or concession that any document is relevant to any particular issue.
(e) PPC reserves all rights, claims, and defenses under IRC § 482, Treasury Regulation §§ 1.482-1 through 1.482-9, including without limitation Treasury Regulation §§ 1.482-4 and 1.482-7, and all other applicable provisions of the Internal Revenue Code, the Treasury Regulations, applicable tax treaties (including the Convention between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains), and all other applicable authorities, whether statutory, regulatory, judicial, or administrative.
(f) PPC reserves the right to raise any and all objections, defenses, and affirmative positions at any stage of this examination or in any subsequent administrative or judicial proceeding, including without limitation objections based on the statute of limitations, the burden of proof, the standard of review, and the applicability of penalties.
VI. DOCUMENT PRODUCTION INDEX
The following is an index of all documents produced in response to IDR No. 44. All documents bear the Bates prefix "PPC-IDR44-" followed by the sequential page number. This index has been cross-referenced to the Master Document Production Index maintained by Calderwood & Harkness LLP for the duration of the examination, which covers all forty-seven IDRs issued from June 2022 through September 2023.
Total Pages Produced: 2,812
All documents listed above have been entered into the Master Document Production Index maintained by Calderwood & Harkness LLP, which indexes all documents produced across the forty-seven IDRs in this examination. The Master Document Production Index is available for inspection by the examination team upon request.
CLOSING
PPC has endeavored to respond to IDR No. 44 in a thorough and complete manner consistent with its obligations as a cooperative taxpayer. If the examination team has any questions regarding the documents produced in this response, or if the examination team requires any additional information or clarification, please do not hesitate to contact Garrett Simmons, Lead Associate, at (215) 814-7248 or garrett.simmons@calderwoodharkness.com, or Leonard Cross, Responsible Partner, at (215) 814-7215 or leonard.cross@calderwoodharkness.com. Both are available at the firm's Philadelphia office at 1735 Market Street, Suite 3100, Philadelphia, PA 19103.
PPC is prepared to arrange a conference call or in-person meeting at the examination team's convenience to discuss the produced documents, to answer any questions regarding the organization or content of the production, and to address any follow-up requests that may arise from the examination team's review of these materials.
We appreciate the examination team's continued professionalism in conducting this examination and look forward to working cooperatively toward its resolution.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Leonard Cross, Partner Licensed in New York, New Jersey, and the District of Columbia 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 814-7215
Email: leonard.cross@calderwoodharkness.com
Date: August 22, 2023
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 Team Manager, IRS Large Business & International Division Northeast Territory, Transfer Pricing Practice 600 Arch Street, Room 3214 Philadelphia, PA 19106
Sylvia Hartwell, Partner (Billing Partner) Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022
Garrett Simmons, Associate (Lead Associate) Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103
Leila Nazari, Associate (Working Associate) Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103
Enclosures:
1.  Documents responsive to IDR No. 44 (Bates-stamped PPC-IDR44-000001 through PPC-IDR44-002812) — produced via IRS Secure File Transfer
2.  Updated Privilege Log entries related to IDR No. 44 (17 entries; Privilege Log Nos. PL-044-001 through PL-044-017)
No. | Bates Range | Document Description | Date | Author / Source | Pages
1 | PPC-IDR44-000001 to PPC-IDR44-000038 | PBI Annual Capital Expenditure Budget, FY 2017 | January 18, 2017 | PBI Finance Dept. / A. Naughton | 38
2 | PPC-IDR44-000039 to PPC-IDR44-000074 | PBI Annual Capital Expenditure Budget, FY 2018 | January 22, 2018 | PBI Finance Dept. / A. Naughton | 36
3 | PPC-IDR44-000075 to PPC-IDR44-000119 | PBI Annual Capital Expenditure Budget, FY 2019 | January 14, 2019 | PBI Finance Dept. / A. Naughton | 45
4 | PPC-IDR44-000120 to PPC-IDR44-000162 | PBI Annual Capital Expenditure Budget, FY 2020 | January 20, 2020 | PBI Finance Dept. / A. Naughton | 43
5 | PPC-IDR44-000163 to PPC-IDR44-000412 | PBI Board Meeting Minutes (42 meetings, 2017–2020) — Capital Expenditure Excerpts | Various (2017–2020) | PBI Board Secretary | 250
6 | PPC-IDR44-000413 to PPC-IDR44-000546 | Capital Expenditure Authorization Forms (2017–2020) | Various (2017–2020) | A. Naughton / PBI Finance Dept. | 134
7 | PPC-IDR44-000547 to PPC-IDR44-000612 | Quarterly CapEx Variance Reports (16 quarters, Q1 2017–Q4 2020) | Various (2017–2020) | PBI Finance Dept. | 66
8 | PPC-IDR44-000613 to PPC-IDR44-000894 | Regulatory Expenditure Records — Veritaxol (2017–2020) | Various (2017–2020) | PBI Regulatory Affairs | 282
9 | PPC-IDR44-000895 to PPC-IDR44-001108 | Regulatory Expenditure Records — Imvara (2017–2020) | Various (2017–2020) | PBI Regulatory Affairs | 214
10 | PPC-IDR44-001109 to PPC-IDR44-001267 | Regulatory Expenditure Records — Cerulon (2017–2020) | Various (2017–2020) | PBI Regulatory Affairs | 159
11 | PPC-IDR44-001268 to PPC-IDR44-001340 | Regulatory Submission Cost Allocation by Country Market (68 markets) | Various (2017–2020) | PBI Regulatory Affairs / Finance Dept. | 73
12 | PPC-IDR44-001341 to PPC-IDR44-001598 | Equipment Purchase Orders and Invoices (2017–2020) | Various (2017–2020) | PBI Procurement / Various Vendors | 258
13 | PPC-IDR44-001599 to PPC-IDR44-001654 | PBI Asset Registers (Year-End 2017, 2018, 2019, 2020) | Various (2017–2020) | PBI Finance Dept. | 56
14 | PPC-IDR44-001655 to PPC-IDR44-001702 | Equipment Depreciation Schedules (2017–2020) | Various (2017–2020) | PBI Finance Dept. | 48
15 | PPC-IDR44-001703 to PPC-IDR44-001724 | Equipment Disposal and Write-Off Records (2017–2020) | Various (2017–2020) | PBI Finance Dept. | 22
16 | PPC-IDR44-001725 to PPC-IDR44-001892 | ERP System — Vendor Contracts and Implementation Invoices | Various (2016–2020) | PBI IT Dept. / ERP Vendor | 168
17 | PPC-IDR44-001893 to PPC-IDR44-002014 | Commercial Data Analytics Platform — Vendor Contracts and Invoices | Various (2017–2020) | PBI Commercial Operations / Data Vendors | 122
18 | PPC-IDR44-002015 to PPC-IDR44-002098 | Regulatory Submission Management Software — Contracts and Invoices | Various (2017–2020) | PBI Regulatory Affairs / Software Vendor | 84
19 | PPC-IDR44-002099 to PPC-IDR44-002187 | IT Hardware Purchase Records (2017–2020) | Various (2017–2020) | PBI IT Dept. / Various Vendors | 89
20 | PPC-IDR44-002188 to PPC-IDR44-002264 | Cybersecurity and Data Protection Infrastructure Records | Various (2017–2020) | PBI IT Dept. / Security Vendors | 77
21 | PPC-IDR44-002265 to PPC-IDR44-002302 | Glenmore Bank Ireland plc — Selected Bank Statements and Payment Records (IT CapEx) | Various (2017–2020) | Glenmore Bank Ireland plc | 38
22 | PPC-IDR44-002303 to PPC-IDR44-002418 | Lease Agreements and Amendments — Sandyford Business Park | Various (2012–2020) | PBI / Landlord | 116
23 | PPC-IDR44-002419 to PPC-IDR44-002567 | Leasehold Improvement Invoices and Contractor Records (2017–2020) | Various (2017–2020) | PBI Facilities / Contractors | 149
24 | PPC-IDR44-002568 to PPC-IDR44-002604 | Leasehold Improvement Depreciation and Amortization Schedules | Various (2017–2020) | PBI Finance Dept. | 37
25 | PPC-IDR44-002605 to PPC-IDR44-002622 | Certificates of Completion and Occupancy Permits | Various (2017–2020) | Dublin City Council / Contractors | 18
26 | PPC-IDR44-002623 to PPC-IDR44-002658 | Consolidated Capital Expenditure Summary Schedule — FY 2017 | March 15, 2018 | PBI Finance Dept. | 36
27 | PPC-IDR44-002659 to PPC-IDR44-002696 | Consolidated Capital Expenditure Summary Schedule — FY 2018 | March 12, 2019 | PBI Finance Dept. | 38
28 | PPC-IDR44-002697 to PPC-IDR44-002738 | Consolidated Capital Expenditure Summary Schedule — FY 2019 | March 18, 2020 | PBI Finance Dept. | 42
29 | PPC-IDR44-002739 to PPC-IDR44-002784 | Consolidated Capital Expenditure Summary Schedule — FY 2020 | March 22, 2021 | PBI Finance Dept. | 46
30 | PPC-IDR44-002785 to PPC-IDR44-002812 | Other Capital Expenditure Records — Miscellaneous (2017–2020) | Various (2017–2020) | PBI Finance Dept. | 28