EXHIBIT A
CORPORATE STRUCTURE CHART — PENTERRA PHARMACEUTICALS CORP. AND SUBSIDIARIES
Filed as an exhibit to the Formal Protest of Penterra Pharmaceuticals Corp. (EIN: 22-3741856), dated December 22, 2023, in connection with the examination by the Internal Revenue Service, Large Business & International Division, Exam Team ID LB&I-NE-TP-2022-00641, for Tax Years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020.
Prepared by Calderwood & Harkness LLP, 1735 Market Street, Suite 3100, Philadelphia, PA 19103 (Matter No. 1018-00009), counsel to Penterra Pharmaceuticals Corp.
Section 1: Overview and Purpose
This Exhibit A presents the organizational and ownership structure of Penterra Pharmaceuticals Corp. ("PPC") and its relevant subsidiaries for the tax years under examination (2017, 2018, 2019, and 2020). The chart and accompanying narrative illustrate the corporate chain relevant to the transfer pricing arrangements at issue in this protest, including, in particular, the cost-sharing arrangement ("CSA") and the legacy intellectual property licensing arrangement between PPC and its Irish subsidiary, Penterra Biopharma International DAC ("PBI"). The organizational structure depicted herein was in place throughout the entire examination period and remained materially unchanged from its establishment in 2012 through the close of tax year 2020. This Exhibit should be read in conjunction with the Formal Protest and all other exhibits filed therewith, and is submitted to provide the IRS Independent Office of Appeals with a clear understanding of the entities, relationships, and intercompany agreements that form the factual predicate for the transfer pricing issues under protest.
Section 2: Organizational Chart — Corporate Ownership Structure
The following presents the detailed organizational structure of Penterra Pharmaceuticals Corp. and its relevant subsidiaries, organized by tier within the corporate chain. The ownership chain runs vertically from the ultimate U.S. parent corporation through a single intermediate Luxembourg holding entity to the Irish IP-holding and principal entity, and from there to the Irish contract manufacturing subsidiary.
Tier 1: Ultimate Parent
Penterra Pharmaceuticals Corp. ("PPC")
Key Officers (as of December 31, 2020):
• Chief Executive Officer: Catherine Falk
• Chief Financial Officer: Rajesh Iyer
• General Counsel: Deborah Staines
• Vice President, Global Tax: Marcus Whitfield
Role in Transfer Pricing Structure. PPC is the U.S. parent entity and the originator of substantially all of the group's pharmaceutical intellectual property. PPC conducts primary research and development activities in the United States through its laboratories and research facilities located in Princeton Junction, New Jersey; Cambridge, Massachusetts; and San Diego, California. PPC is a party to the CSA with PBI, pursuant to which PBI acquired the right to develop and exploit PPC's pharmaceutical IP portfolio outside the Americas in exchange for a platform contribution transaction ("PCT") payment and ongoing cost-sharing payments proportional to reasonably anticipated benefits. PPC is also the licensor under the Legacy IP License Agreement, through which PBI licenses certain pre-2012 legacy compounds for exploitation in the non-Americas territory. PPC retains all development and commercial exploitation rights for the Americas territory.
IRS Compliance Assurance Process (CAP). PPC was not a participant in the IRS Compliance Assurance Process for any of the tax years at issue (2017, 2018, 2019, or 2020).
Tax Returns at Issue. U.S. federal income tax returns (Forms 1120) filed by PPC for Tax Years 2017, 2018, 2019, and 2020, together with all applicable international informational schedules, including Forms 5471 and the required transfer pricing documentation described in Treasury Regulations § 1.6662-6(d).
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100% Ownership
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Tier 2: Intermediate Holding Company
Penterra Holdings Luxembourg S.à r.l. ("PHL")
U.S. Federal Tax Classification. PHL is treated as a disregarded entity for U.S. federal income tax purposes pursuant to a check-the-box election filed under Treasury Regulations § 301.7701-3. PHL's election to be classified as a disregarded entity was effective as of its formation and has remained in effect throughout the examination period.
Significance for Transfer Pricing Analysis. Because PHL is treated as a disregarded entity for U.S. federal income tax purposes, all intercompany transactions between PPC and PBI — including the CSA, the Legacy IP License Agreement, and any other relevant intercompany dealings — are treated for U.S. federal tax purposes as occurring directly between PPC and PBI. PHL's existence in the ownership chain does not alter the identity of the parties to any intercompany transaction for purposes of Sections 482 or 367(d) of the Internal Revenue Code or the Treasury Regulations promulgated thereunder. PHL performs no operational functions and holds no assets other than its 100% equity interest in PBI.
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100% Ownership
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Tier 3: IP Holding Company / Principal
Penterra Biopharma International DAC ("PBI")
Function. PBI serves as the IP-holding company and principal for the commercialization of PPC products outside the Americas. PBI manages contract manufacturing and distribution arrangements across all EMEA and APAC markets, exercises independent pricing authority across 68 country markets, and bears the entrepreneurial risk associated with non-Americas commercial operations. PBI maintains its own treasury and banking operations through Glenmore Bank Ireland plc and has progressively built substantial operational capabilities in Dublin since its establishment in 2012.
Board of Directors Meetings (2017–2020). During the examination period, PBI's board of directors held a total of 42 quarterly and special meetings, all of which were convened and held in Dublin, Ireland. These meetings addressed matters of strategic importance to PBI's commercial operations, including product launch decisions, pricing strategies, regulatory submissions, capital allocation, and oversight of the CSA.
Regulatory Expenditures (2017–2020). PBI incurred cumulative regulatory expenditures of €47.2 million during the examination period, reflecting direct engagement with regulatory authorities across EMEA and APAC markets, including the European Medicines Agency (EMA), the UK Medicines and Healthcare products Regulatory Agency (MHRA), and corresponding national agencies.
Key Products — Non-Americas Territory, FY 2020 Net Sales:
• Veritaxol: $1.34 billion
• Imvara: $0.79 billion
• Cerulon: $0.28 billion
Key Intercompany Arrangements with PPC:
1. Cost-Sharing Arrangement (CSA). The CSA between PPC and PBI became effective July 1, 2012. Under the CSA, PBI acquired the right to develop and exploit PPC's pharmaceutical IP portfolio outside the Americas. At the inception of the CSA, PBI made a platform contribution transaction (PCT) payment to PPC in the amount of $312 million, reflecting the value of PPC's pre-existing IP portfolio and make-or-buy rights at the time of entry. On an ongoing basis, PBI shares in the costs of intangible development activities ("Coss") in proportion to its reasonably anticipated benefits ("RAB") from the exploitation of the developed intangibles. The cost-sharing percentages for the examination years were as follows:
• Tax Year 2017: 38.2%
• Tax Year 2018: 39.6%
• Tax Year 2019: 41.1%
• Tax Year 2020: 42.7%
The increasing cost-share percentages over the examination period reflect PBI's growing share of reasonably anticipated benefits as non-Americas markets expanded relative to the Americas territory. The CSA was structured and documented in accordance with Treasury Regulations § 1.482-7 and has been consistently applied since its effective date.
2. Legacy IP License Agreement. Separately from the CSA, PBI licenses certain pre-2012 legacy compounds from PPC under a License Agreement that predates the CSA. These legacy compounds include products for which PPC retained all IP rights and did not contribute to the CSA's intangible development pool. PBI pays PPC a royalty at a rate of 4.5% of net sales generated by PBI from the commercialization of such legacy compounds in the non-Americas territory. This royalty rate was established based on a contemporaneous benchmarking analysis at the time the license was negotiated.
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100% Ownership
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Tier 4: Contract Manufacturer
Penterra Manufacturing Ireland Ltd. ("PMI")
Function. PMI serves as the contract manufacturer of PPC's oncology and immunology biologics for non-Americas markets. PMI operates manufacturing and fill/finish facilities at Ringaskiddy Industrial Estate in County Cork, Ireland, under the direction and supervision of PBI. PMI does not own any intellectual property and performs manufacturing services exclusively for PBI under a contract manufacturing arrangement.
Intercompany Arrangement. PMI operates under a cost-plus arrangement with PBI, pursuant to which PMI is compensated at a markup of 8% above its total manufacturing costs. This arrangement reflects PMI's characterization as a limited-risk contract manufacturer performing routine manufacturing functions. The cost-plus markup was benchmarked against comparable contract manufacturing arrangements in the pharmaceutical industry and has been consistently applied throughout the examination period.
Section 3: Key Intercompany Relationships and Agreements — Summary Table
The following table summarizes all intercompany agreements among the entities in the PPC corporate chain that are relevant to the issues under examination. These agreements are described in greater detail in the body of the Formal Protest and in the accompanying exhibits.
All intercompany agreements were entered into at arm's length and have been documented in accordance with the contemporaneous documentation requirements of Treasury Regulations § 1.6662-6(d). Copies of the executed agreements and the contemporaneous transfer pricing reports prepared by Crestfield & Associates LLP for each of the tax years under examination have been provided to the examining agents and are referenced in the Formal Protest.
Section 4: Territory Allocation Note
The following note clarifies the territorial delineation of the intellectual property structure that underlies the intercompany arrangements at issue in this examination.
Americas Territory (Rights Retained by PPC):
PPC retains all development and commercial exploitation rights for the Americas territory, which encompasses North America (United States and Canada), Mexico, Central America, South America, and the Caribbean. All revenues generated from the sale of PPC products in the Americas territory are recognized by PPC and reported on PPC's U.S. federal income tax returns. PPC's retention of the Americas territory is reflected in both the CSA and the Legacy IP License Agreement.
Non-Americas Territory (Rights Held by PBI):
PBI holds the development and commercial exploitation rights for the non-Americas territory, which encompasses all of Europe, the Middle East, and Africa ("EMEA") and the Asia-Pacific region ("APAC"). With respect to post-CSA intellectual property (i.e., IP developed after July 1, 2012), PBI's rights were acquired under the CSA in exchange for the PCT payment and ongoing cost-sharing contributions. With respect to pre-2012 legacy intellectual property, PBI's rights are held under the Legacy IP License Agreement in exchange for the 4.5% royalty on net sales described above.
Treatment of PHL as Disregarded Entity:
As noted in Section 2 above, Penterra Holdings Luxembourg S.à r.l. ("PHL"), the intermediate holding entity in the ownership chain between PPC and PBI, is treated as a disregarded entity for U.S. federal income tax purposes pursuant to a check-the-box election under Treasury Regulations § 301.7701-3. Accordingly, all intercompany arrangements between PPC and PBI — including the CSA and the Legacy IP License Agreement — are treated for U.S. federal income tax purposes as transactions occurring directly between PPC and PBI. PHL's presence in the ownership chain does not alter the transfer pricing analysis or the identity of the controlled taxpayers for purposes of Section 482 of the Internal Revenue Code.
Section 5: Related Parties Not in Direct Ownership Chain
The following entities and advisors are relevant to the examination but are not part of the direct corporate ownership chain of Penterra Pharmaceuticals Corp. These parties are identified here for the convenience of the IRS Independent Office of Appeals and to provide a complete picture of the advisors and counterparties involved in the preparation and review of the transfer pricing positions at issue.
Section 6: Certification
This Exhibit A is a true and accurate representation of the corporate ownership structure of Penterra Pharmaceuticals Corp. and its relevant subsidiaries as such structure existed during the tax years under examination (Tax Years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020). The information contained herein has been prepared based on PPC's corporate records, organizational documents, and the intercompany agreements on file, and has been reviewed for accuracy by counsel. This Exhibit A is submitted in support of the Formal Protest of Penterra Pharmaceuticals Corp. filed with the IRS Independent Office of Appeals on December 22, 2023, and should be read in conjunction with the Formal Protest and all other exhibits filed therewith.
Prepared and submitted by:
CALDERWOOD & HARKNESS LLP
By: ________
Name: Leonard Cross
Title: Partner
Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 564-8200 Facsimile: (215) 564-8201
Email: lcross@calderwoodharkness.com
Matter No. 1018-00009
Date: December 22, 2023
On behalf of Penterra Pharmaceuticals Corp.
| Attribute | Detail |
| Full Legal Name | Penterra Pharmaceuticals Corp. |
| Entity Type | Corporation organized under the laws of the State of Delaware |
| Public Listing | Publicly traded on the Nasdaq Global Select Market (Ticker: PPCA) |
| Headquarters | 2200 Independence Boulevard, Princeton Junction, NJ 08550 |
| Employer Identification Number (EIN) | 22-3741856 |
| Fiscal Year-End | December 31 |
| Industry | Specialty pharmaceuticals and biotechnology — oncology, immunology, and rare-disease therapeutics |
| FY 2020 Annual Revenue | $6.82 billion |
| FY 2020 Pre-Tax Income | $1.47 billion |
| Global Employees (approx.) | ~14,500 |
| Attribute | Detail |
| Full Legal Name | Penterra Holdings Luxembourg S.à r.l. |
| Entity Type | Société à responsabilité limitée organized under the laws of the Grand Duchy of Luxembourg |
| Registered Office | 14, rue Aldringen, L-1118 Luxembourg |
| Luxembourg RCS Number | B 168452 |
| Ownership | 100% owned by PPC |
| Function | Intermediate holding entity; sole owner of PBI |
| Attribute | Detail |
| Full Legal Name | Penterra Biopharma International DAC |
| Entity Type | Designated Activity Company organized under the laws of Ireland |
| Registered Office | 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland |
| Irish Tax Reference | 3218764T |
| Date of Incorporation | March 15, 2012 |
| Ownership | 100% owned by PHL (and, through PHL, 100% indirectly owned by PPC) |
| Managing Director | Aidan Naughton | ||
| Office Space | Approximately 18,000 square feet at Sandyford Business Park, Dublin | ||
| Employees | 52 at establishment (2012); 185 as of December 31, 2020 | ||
| FY 2020 Revenue | €2.14 billion | ||
| FY 2020 Pre-Tax Income | €1.06 billion | ||
| Irish Tax Rate | 12.5% standard trading rate; effective rate of 6.25% on qualifying income under Ireland's Knowledge Development box (applicable from FY 2016 forward) | ||
| Principal Irish Bank | Glenmore Bank Ireland plc | ||
| Irish Tax Advisor | Thornbury & Keogh, Chartered Tax Advisors, 22 Fitzwilliam Square, Dublin 2, D02 YH68, Ireland (Lead Partner: Ciarán Thornbury) | ||
| Attribute | Detail | ||
| Full Legal Name | Penterra Manufacturing Ireland Ltd. | ||
| Entity Type | Irish private limited company | ||
| Registered Office | Unit 7, Ringaskiddy Industrial Estate, Co. Cork T12 PX29, Ireland | ||
| Irish CRO Number | 512347 | ||
| Ownership | 100% owned by PBI | ||
| Employees | 620 | ||
| Agreement | Parties | Effective Date | Key Terms |
| Cost-Sharing Arrangement (CSA) | PPC ↔ PBI | July 1, 2012 | PBI co-funds intangible development costs for rights to exploit IP outside the Americas; PCT payment of $312 million at inception; ongoing cost-sharing at RAB percentages of 38.2% (2017), 39.6% (2018), 41.1% (2019), and 42.7% (2020) |
| Legacy IP License Agreement | PPC (licensor) → PBI (licensee) | Pre-2012 (pre-CSA vintage compounds) | Royalty rate of 4.5% of net sales for non-Americas territory; applies only to legacy compounds not contributed to the CSA |
| Contract Manufacturing Agreement | PBI (principal) → PMI (manufacturer) | Concurrent with PBI establishment (2012) | Cost-plus arrangement; cost + 8% markup on manufacturing of biologics for non-Americas markets; PMI characterized as limited-risk contract manufacturer |
| Entity | Relationship | Details | |
| Crestfield & Associates LLP | PPC's independent auditor and tax return preparer | Prepared U.S. federal income tax returns (Forms 1120) and contemporaneous transfer pricing documentation for Tax Years 2017, 2018, 2019, and 2020. Engagement Partner: Martin Ogilvy, CPA. Transfer Pricing Partner: Susan Lam, CPA. Address: 1200 Avenue of the Americas, New York, NY 10036. | |
| Glenmore Bank Ireland plc | PBI's principal Irish bank | PBI maintains independent treasury and banking operations through Glenmore Bank Ireland plc. PBI's banking relationship with Glenmore supports its characterization as a substantive operating entity with independent financial management capabilities. | |
| Hargrove National Bank, N.A. | Administrative agent under PPC's $1.5 billion revolving credit facility | Address: 100 Federal Street, Boston, MA 02110. Relationship Manager: Christine Bellucci, SVP. The revolving credit facility is maintained at the PPC parent level and is not directly relevant to the intercompany transfer pricing arrangements, but is identified here for completeness. |