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EXHIBIT D

Evidence of Economic Substance of Penterra Biopharma International DAC (2017–2020)

Attached to the Formal Protest of Penterra Pharmaceuticals Corp. (EIN: 22-3741856), filed December 22, 2023, in connection with the Notice of Proposed Adjustment dated October 12, 2023, IRS Exam Team LB&I-NE-TP-2022-00641, for Tax Years 2017, 2018, 2019, and 2020.

Prepared by Calderwood & Harkness LLP, 1735 Market Street, Suite 3100, Philadelphia, PA 19103, as authorized representatives of Penterra Pharmaceuticals Corp. pursuant to IRS Form 2848 filed June 8, 2022.

I. Introduction and Purpose

This Exhibit D summarizes the factual evidence establishing that Penterra Biopharma International DAC ("PBI") maintained robust economic substance throughout the tax years at issue (2017, 2018, 2019, and 2020). The evidence set forth herein is drawn from documents and data produced during the course of the IRS examination and from additional factual investigation conducted by Calderwood & Harkness LLP ("C&H") on behalf of the taxpayer, Penterra Pharmaceuticals Corp. ("PPC").

PBI is a Designated Activity Company organized under the laws of Ireland, with its registered office located at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland. PBI was incorporated on March 15, 2012, under the Irish Companies Act 2014 (as amended), and has served since July 1, 2012, as the intellectual property-holding company and principal entity for the non-Americas commercialization of PPC's pharmaceutical products. The non-Americas territory encompasses the European Economic Area ("EEA"), the United Kingdom, the broader Europe, Middle East, and Africa ("EMEA") region, and the Asia-Pacific ("APAC") region, spanning a total of 68 distinct country markets.

PBI is a wholly owned subsidiary of Penterra Holdings Luxembourg S.à r.l. ("PHL"), a private limited liability company organized under the laws of the Grand Duchy of Luxembourg, with its registered office at 14, rue Aldringen, L-1118 Luxembourg, RCS Number B 168452. PHL is, in turn, 100% owned by PPC. For United States federal income tax purposes, PHL is treated as a disregarded entity under Treasury Regulations Section 301.7701-3, such that PBI is treated as a directly owned controlled foreign corporation ("CFC") of PPC.

This Exhibit D responds directly to the assertion set forth in the Notice of Proposed Adjustment ("NOPA") dated October 12, 2023, issued by the IRS Large Business and International Division, Northeast Transfer Pricing Practice Area, Exam Team LB&I-NE-TP-2022-00641, in which the IRS contends that PBI lacked sufficient economic substance to justify its contractual role as intellectual property owner and cost-sharing arrangement ("CSA") participant, and that the key Development, Enhancement, Maintenance, Protection, and Exploitation ("DEMPE") functions with respect to PPC's intangible property remained in the United States during the years at issue. The IRS's position, as articulated in the NOPA, is that PBI's entitlement to residual returns from the non-Americas exploitation of PPC's intangible property should be disregarded or substantially reduced, with corresponding income reallocated to PPC under Section 482 of the Internal Revenue Code and the accompanying Treasury Regulations.

PPC respectfully disagrees with the IRS's proposed adjustment. The evidence summarized in this Exhibit D demonstrates that PBI performed substantive functions, bore genuine risks, and exercised independent decision-making authority with respect to the non-Americas commercialization of PPC's pharmaceutical product portfolio throughout the 2017–2020 period. PBI was not a passive or shell entity; rather, it was an operating company with meaningful headcount, physical presence, governance independence, and commercial responsibility for the non-Americas territory.

All supporting documentation for each category of evidence described herein was produced to the IRS examination team in response to Information Document Requests ("IDRs") issued between June 2022 and September 2023. Over the course of the examination, PPC responded to 47 IDRs in total, producing thousands of pages of documents, financial records, contracts, corporate governance materials, and operational data. Cross-references to specific IDR responses are provided throughout this Exhibit D where applicable, so that the Appeals Officer may locate the underlying documentation in the administrative record with precision.

II. PBI Corporate Organization and Governance

A. Entity Details

PBI's full legal name is Penterra Biopharma International Designated Activity Company, commonly abbreviated as "Penterra Biopharma International DAC." The entity's Irish Tax Reference number is 3218764T. PBI is organized as a Designated Activity Company under Irish law, a corporate form that provides a defined scope of activities as set forth in its constitution and that is commonly used by Irish subsidiaries of multinational enterprises operating in the pharmaceutical sector.

PBI's registered office is located at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland. This location has served as PBI's principal place of business since the entity's incorporation in 2012, and PBI's management and operational personnel are based at this location.

The Managing Director of PBI throughout the 2017–2020 period was Aidan Naughton. Mr. Naughton is a resident of Ireland and is based in Dublin. He was appointed to the role of Managing Director in connection with PBI's establishment in 2012 and has served continuously in that capacity throughout the examination period. Mr. Naughton was responsible for the overall management and strategic direction of PBI's non-Americas commercial operations and reported directly to the PBI board of directors. His compensation, performance objectives, and annual evaluations were determined by the PBI board, and he was not an employee of PPC or any U.S.-based affiliate during the period at issue.

PBI maintains its principal banking relationship with Glenmore Bank Ireland plc, an Irish public limited company authorized by the Central Ridgeway Trust Bank. PBI's banking arrangements with Glenmore Bank include current accounts, deposit accounts, and foreign exchange facilities. PBI's independent treasury operations through Glenmore Bank demonstrate that PBI managed its own cash flows, made independent payment decisions, and maintained financial autonomy from PPC's U.S.-based treasury function. Bank statements and related treasury documentation were produced to the IRS examination team in response to IDR No. 22, dated January 20, 2023.

B. Board of Directors and Governance

PBI maintained an independent board of directors throughout the 2017–2020 examination period. The PBI board was composed of directors with relevant pharmaceutical industry experience, financial expertise, and knowledge of international markets. The board included both executive directors (including Mr. Naughton in his capacity as Managing Director) and non-executive directors with independent judgment and oversight responsibility.

During the four tax years at issue, the PBI board of directors held a total of 42 meetings. This total reflects quarterly scheduled board meetings as well as special sessions convened to address time-sensitive commercial and regulatory matters. All 42 board meetings were held in Dublin, Ireland. No PBI board meetings during the examination period were held in the United States or in any jurisdiction other than Ireland. The consistent conduct of board meetings in Ireland underscores PBI's management and control from its Irish base of operations.

The PBI board meetings addressed a wide range of substantive matters directly relevant to PBI's role as the non-Americas principal and IP owner. The agenda items and topics discussed at these meetings included, without limitation, the following:

• Product pricing strategy for non-Americas territories, including country-level pricing decisions and reimbursement negotiations;

• Market entry decisions, including the timing and sequencing of product launches in new country markets;

• Regulatory submission approvals, including authorization of new marketing authorization applications and lifecycle management submissions;

• Capital expenditure authorizations, including approval of investments in IT infrastructure, regulatory systems, and office facilities;

• Distribution partner selection and management, including evaluation, appointment, and performance review of third-party distribution partners;

• Supply-chain oversight, including review of the contract manufacturing relationship with Penterra Manufacturing Ireland Ltd. ("PMI") and assessment of product quality and supply continuity;

• Financial performance review, including quarterly and annual review of PBI's revenue, profitability, and budget performance against plan; and

• Strategic planning for the non-Americas business, including multi-year forecasting and market assessments.

Complete board minutes for all 42 meetings held during the 2017–2020 period were produced to the IRS examination team in response to IDR No. 9. The response to IDR No. 9 was submitted on September 12, 2022, and included the minutes themselves, together with board packs, supporting materials, and resolutions adopted at each meeting. In addition, PBI's articles of association, memorandum of association, and other governance documents were produced in connection with the same IDR response.

An analysis of the 42 board meetings, prepared by C&H and dated September 2022, catalogs the substantive decisions made by the PBI board at each meeting and identifies the specific DEMPE functions to which each decision relates. A summary of this analysis accompanies this Exhibit D as supporting documentation.

C. Corporate Decision-Making Independence

PBI's board of directors and senior management exercised independent decision-making authority over the non-Americas commercial operations of the PPC group throughout the 2017–2020 period. PBI's governance structure was designed to ensure that the entity responsible for non-Americas commercialization had the authority, personnel, and resources necessary to make and implement key commercial and operational decisions without direction or control from PPC's U.S.-based management.

Key decisions made independently by PBI during the examination period included the following:

• Pricing decisions across 68 country markets. PBI's commercial strategy team, under the supervision of Mr. Naughton and the PBI board, set product pricing for each of PBI's 68 non-Americas country markets. Pricing decisions were informed by local market conditions, reimbursement environments, competitive dynamics, and regulatory constraints unique to each territory. PBI's pricing decisions were not dictated or pre-approved by PPC or any U.S.-based personnel. Evidence of PBI's independent pricing decisions across the 68 non-Americas markets was produced to the IRS in response to IDR No. 35, with the response dated June 2, 2023.

• Market entry timing and sequencing. PBI determined the order and timing of product launches in new non-Americas markets based on its assessment of regulatory readiness, market opportunity, competitive landscape, and resource availability. These decisions were made by PBI's management team and approved by the PBI board.

• Selection and negotiation of distribution agreements. PBI identified, evaluated, and selected third-party distribution partners for non-Americas territories. PBI's legal and commercial teams negotiated the terms of distribution agreements, including pricing, exclusivity, territory scope, performance obligations, and termination provisions. PBI entered into these agreements as a principal in its own right, not as an agent of PPC.

• Regulatory filing strategy. PBI's regulatory affairs team determined the strategy for marketing authorization applications, variations, renewals, and other regulatory submissions across the non-Americas territory. PBI made these decisions in light of the regulatory requirements and timelines specific to each jurisdiction.

• Capital allocation for non-Americas operations. The PBI board authorized capital expenditures and investments for the non-Americas business, including regulatory submissions, IT systems, and office infrastructure. These capital allocation decisions were made independently by the PBI board based on PBI's own financial resources and business needs.

The independence of PBI's decision-making is a critical element of the economic substance analysis. PBI did not merely rubber-stamp decisions made in the United States; rather, PBI's management and board exercised genuine judgment, evaluated alternatives, and made decisions that were binding on the non-Americas business. The documentary record produced to the IRS substantiates this independence across all major categories of commercial and operational decision-making.

III. PBI Personnel and Headcount

A. Headcount Growth Trajectory

PBI was established in 2012 with an initial complement of 52 employees. These founding employees were recruited to staff PBI's core functional areas and to enable PBI to begin operating as the non-Americas principal immediately upon the commencement of the CSA and IP ownership structure on July 1, 2012.

Over the eight years from PBI's establishment through the end of the examination period, PBI's headcount grew substantially. By year-end 2020, PBI employed 185 personnel, reflecting a more than threefold increase over the eight-year period. This growth trajectory is directly correlated with the expansion of PBI's non-Americas business, including the launch of additional products, the entry into new country markets, and the increasing complexity of PBI's commercial and regulatory operations. The growth in PBI's workforce demonstrates a corresponding increase in PBI's operational capability and economic substance in connection with the non-Americas business.

The headcount growth was not incidental or cosmetic. Each phase of PBI's workforce expansion corresponded to identifiable business needs, including the addition of regulatory affairs professionals to support marketing authorization applications in new jurisdictions, the hiring of commercial strategy personnel to manage pricing and market access in an expanding portfolio of country markets, and the recruitment of supply-chain and quality assurance staff to oversee the growing volume of product manufactured and distributed in the non-Americas territory.

B. Functional Departments and Key Personnel

PBI's 185 employees as of year-end 2020 were distributed across the following functional departments, each of which performed substantive activities relevant to PBI's role as the non-Americas principal and DEMPE function performer:

• Regulatory Affairs. PBI's regulatory affairs department was responsible for the preparation, submission, and management of marketing authorization applications, variations, renewals, and other regulatory filings across the 68 non-Americas country markets. This department maintained relationships with national and regional regulatory authorities, including the European Medicines Agency ("EMA"), and managed the regulatory lifecycle for each of PBI's products.

• Medical Affairs. PBI's medical affairs team managed medical information requests, medical education programs, and medical liaison activities in the non-Americas territory. This team also oversaw pharmacovigilance and drug safety reporting obligations for the non-Americas markets.

• Commercial Strategy. PBI's commercial strategy department was responsible for market analysis, pricing strategy, market access negotiations, reimbursement submissions, and product launch planning across the non-Americas territory. This team worked closely with distribution partners and in-market representatives to optimize PBI's commercial performance.

• Supply-Chain Management. PBI's supply-chain team oversaw the procurement of finished pharmaceutical products from PMI (the PPC group's Irish contract manufacturer), managed inventory and logistics, and ensured continuity of supply to non-Americas markets. This function included demand forecasting, order management, and distribution coordination.

• Finance and Treasury. PBI's finance and treasury team managed PBI's financial reporting, budgeting, cash management, foreign exchange hedging, intercompany settlements, and tax compliance. PBI's independent treasury operations through Glenmore Bank Ireland plc were managed by this team.

• Legal and Compliance. PBI's legal and compliance team managed intellectual property enforcement, contract negotiation and management, regulatory compliance, anti-bribery and anti-corruption compliance, and data privacy obligations in the non-Americas territory.

• Human Resources and Administration. PBI's HR and administration team was responsible for recruitment, compensation and benefits, employee relations, and office management at PBI's Dublin headquarters.

Managing Director Aidan Naughton was responsible for the overall management of PBI's operations across all functional departments. Mr. Naughton reported to the PBI board of directors and provided regular updates on PBI's commercial performance, strategic initiatives, regulatory milestones, and operational matters. Mr. Naughton's reporting relationship was to the PBI board, not to PPC's U.S.-based management, reinforcing the independence of PBI's governance and operational structure.

Headcount data, organizational charts, and role descriptions for key personnel across all functional departments were produced to the IRS examination team in response to IDR No. 8. The response to IDR No. 8 was submitted on September 5, 2022, and included detailed organizational charts for each year of the examination period, job descriptions for senior and mid-level personnel, and headcount reconciliations by department.

C. Personnel Interviews

In connection with the preparation of PPC's response to the IRS examination, C&H conducted interviews with 12 key PBI employees in Dublin, Ireland, during August and September 2022. The interview program was led by C&H lead associate Garrett Simmons and working associate Leila Nazari, both of whom traveled to Dublin for the purpose of conducting in-person interviews at PBI's offices.

The 12 interviews covered a cross-section of PBI's functional departments and seniority levels. Each interview documented the following aspects of the interviewee's role and responsibilities:

• The employee's position, title, and tenure with PBI;

• The employee's day-to-day responsibilities and functional contributions to the non-Americas business;

• The employee's decision-making authority, including the types of decisions the employee was authorized to make independently and the types of decisions requiring escalation to senior management or the board;

• The employee's functional contributions to DEMPE activities relevant to PBI's role as non-Americas principal;

• The employee's reporting relationships, including whether the employee reported to PBI management in Dublin or to any U.S.-based personnel; and

• The employee's interactions, if any, with PPC's U.S.-based personnel and the nature and frequency of those interactions.

The summaries of the 12 interviews confirm that PBI personnel exercised substantive control over DEMPE functions relevant to the non-Americas territory. The interviewees consistently described a working environment in which key commercial, regulatory, and operational decisions were made by PBI's Dublin-based team, with PBI management exercising genuine authority over the non-Americas business. Where interactions with U.S.-based PPC personnel occurred, those interactions were characterized as collaborative and informational rather than directive.

Interview summaries prepared by C&H are available as supporting documentation and were made available to the IRS examination team in the course of the examination.

IV. Physical Presence in Ireland

A. Office Space

PBI maintained dedicated office space of approximately 18,000 square feet at Sandyford Business Park, Dublin D18 K7T4, Ireland, throughout the 2017–2020 examination period. PBI's office space was located on the fourth floor of Claremont House, a modern, purpose-built commercial office building situated in one of Dublin's established business districts. Sandyford Business Park is a well-known commercial center that houses the Irish operations of numerous multinational enterprises and professional services firms.

PBI's Dublin offices housed the full range of PBI's functional departments, including regulatory affairs, medical affairs, commercial strategy, supply-chain management, finance and treasury, legal and compliance, and human resources and administration. The office space was configured with individual offices for senior management, open-plan workstations for professional and administrative staff, meeting rooms, a dedicated boardroom for PBI board meetings, and common areas. The physical layout of PBI's office reflected the operational needs of a functioning commercial enterprise with 185 employees.

The lease agreement for PBI's office space at Sandyford Business Park was entered into between PBI and the landlord on commercial terms and was renewed during the examination period. The lease was produced to the IRS examination team in response to IDR No. 12, with the response dated October 12, 2022.

B. Capital Expenditure and Infrastructure

PBI made ongoing capital expenditures on IT infrastructure, office equipment, and operational systems throughout the 2017–2020 period. These expenditures included investments in enterprise resource planning ("ERP") systems, regulatory information management systems, customer relationship management ("CRM") platforms, telecommunications infrastructure, and office furnishings and equipment. PBI's capital expenditures were approved by the PBI board as part of PBI's annual budgeting process and were funded from PBI's own financial resources.

The level of PBI's capital investment during the examination period is consistent with the operations of a substantive commercial enterprise and further evidences PBI's genuine economic substance. Capital expenditure and investment records for 2017–2020 were produced to the IRS examination team in response to IDR No. 44, with the response dated August 22, 2023.

C. Affiliated Manufacturing Presence

In addition to PBI's Dublin-based commercial and administrative operations, the PPC group maintained a significant manufacturing presence in Ireland through Penterra Manufacturing Ireland Ltd. ("PMI"). PMI is a separate Irish private limited company, registered with the Irish Companies Registration Office under CRO Number 512347, with its principal place of business at Unit 7, Ringaskiddy Industrial Estate, Co. Cork T12 PX29, Ireland.

PMI served as the contract manufacturer of PPC's oncology and immunology biologics for the non-Americas markets during the 2017–2020 period. PMI manufactured finished pharmaceutical products under a contract manufacturing agreement with PBI, pursuant to which PMI was compensated on a cost-plus basis, receiving reimbursement of its fully loaded manufacturing costs plus an arm's-length markup of 8%. This cost-plus arrangement was consistent with PMI's characterization as a contract manufacturer bearing limited risk, with PBI, as the principal, bearing the economic risk associated with the commercialization of the manufactured products.

PMI employed approximately 620 persons as of the examination period, making it one of the PPC group's largest manufacturing facilities globally. PMI's manufacturing operations were subject to inspection and oversight by the Irish Health Products Regulatory Authority ("HPRA"), the EMA, and other regulatory authorities. PMI's operations represented a substantial physical and economic presence of the PPC group in Ireland, complementing PBI's Dublin-based commercial operations.

The PMI contract manufacturing agreement was produced to the IRS examination team in response to IDR No. 10, with the response dated September 20, 2022.

V. DEMPE Functions Performed by PBI

A. Overview of the DEMPE Framework

The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as revised in 2017 and further updated in 2022, establish in Chapter VI the DEMPE framework as the principal analytical tool for determining which entity (or entities) within a multinational enterprise group is entitled to the returns attributable to intangible property. Under the DEMPE framework, entitlement to intangible-related returns is determined by reference to the functions an entity performs, the assets it uses or contributes, and the risks it assumes and manages in connection with the development, enhancement, maintenance, protection, and exploitation of the intangible property at issue.

The DEMPE framework recognizes that legal ownership of intangible property alone does not entitle an entity to returns from that property; rather, the entity must perform—or exercise control over and bear the risk of—the functions that contribute to the value of the intangible. Conversely, where an entity performs significant DEMPE functions, assumes and controls the associated risks, and contributes assets, that entity is entitled to a commensurate share of the intangible-related returns, even if it is not the sole legal owner of the underlying intangible property.

PBI performed substantial DEMPE functions with respect to the non-Americas exploitation of PPC's pharmaceutical IP portfolio throughout the 2017–2020 period. PBI's DEMPE contributions are summarized below in each of the five functional categories.

B. Development. PBI co-funded research and development costs under the qualified cost-sharing arrangement between PPC and PBI, effective July 1, 2012 (the "CSA"). The CSA is a qualified cost-sharing arrangement within the meaning of Treasury Regulations Section 1.482-7 and is governed by a written CSA agreement that specifies the terms of cost sharing, including the allocation of intangible development costs, the rights to exploit resulting intangibles, and the measurement of reasonably anticipated benefits.

Under the CSA, PBI's cost-sharing percentages during the 2017–2020 tax years were determined by reference to PBI's reasonably anticipated benefits from the non-Americas commercialization of the intangible property developed under the arrangement, consistent with the requirements of Treasury Regulations Section 1.482-7(e). PBI's cost-sharing payments during the examination period were as follows:

PBI's cost-sharing payments were proportional to its reasonably anticipated benefits from non-Americas commercialization and were calculated and documented contemporaneously, as reflected in the CSA documentation and annual true-up calculations produced to the IRS. The steady increase in PBI's cost-share percentage over the 2017–2020 period reflects the growing proportion of global anticipated benefits attributable to the non-Americas territory, driven by PBI's successful expansion of non-Americas commercial operations.

In addition to funding R&D costs under the CSA, PBI personnel participated in development oversight decisions relevant to non-Americas product formulations and indications. PBI's regulatory affairs and medical affairs teams provided input on clinical development strategies for products intended for the non-Americas territory, including guidance on regulatory requirements specific to non-Americas jurisdictions that informed development timelines and study design. While the primary laboratory-based R&D activities were conducted at PPC's U.S. research facilities, PBI's participation in the development oversight process was substantive and contributed to the alignment of development activities with non-Americas market needs.

C. Enhancement. PBI's regulatory affairs and medical affairs teams enhanced the value of the IP portfolio by adapting PPC's pharmaceutical products for non-Americas markets. Enhancement activities performed by PBI included the preparation and submission of marketing authorization applications to the EMA and national regulatory authorities, the development of market-specific labeling and product information, the conduct of post-approval studies and registries required by non-Americas regulators, and the management of lifecycle management activities (including line extensions, new formulations, and new indications) tailored to the non-Americas regulatory and commercial environment.

PBI incurred cumulative regulatory expenditures of €47.2 million during the 2017–2020 period in connection with regulatory submissions and approvals across 68 country markets. These expenditures reflect the cost of PBI's internal regulatory affairs personnel, external regulatory consultants, submission fees, and associated costs. The magnitude of PBI's regulatory expenditures underscores the substantive nature of PBI's enhancement activities and the genuine investment PBI made in adapting the IP portfolio for non-Americas exploitation.

Documentation of PBI's regulatory expenditures and regulatory submissions for the 2017–2020 period was produced to the IRS examination team in response to IDR No. 15, with the response dated November 8, 2022. The IDR response included a comprehensive listing of all regulatory submissions made by PBI during the examination period, organized by product, country, and submission type, together with supporting financial records.

D. Maintenance. PBI maintained the value and integrity of the intangible property in the non-Americas markets through ongoing pharmacovigilance, regulatory compliance, and quality assurance oversight activities. Maintenance functions performed by PBI included the following:

• Pharmacovigilance and drug safety. PBI's medical affairs team managed adverse event reporting, periodic safety update reports ("PSURs"), risk management plans, and other pharmacovigilance obligations required by the EMA and national regulatory authorities in the non-Americas territory. PBI maintained qualified persons for pharmacovigilance ("QPPV") as required by European Union law.

• Regulatory compliance. PBI's regulatory affairs team managed the ongoing compliance obligations associated with maintaining marketing authorizations in the non-Americas territory, including responding to regulatory authority inquiries, managing variations and renewals, and ensuring that product labeling remained current and compliant with local requirements.

• Quality assurance oversight. PBI managed the relationship with PMI as contract manufacturer, including oversight of manufacturing quality, compliance with Good Manufacturing Practice ("GMP") requirements, and supply-chain integrity. PBI's supply-chain team conducted regular reviews of PMI's manufacturing performance, participated in quality audits, and managed any quality deviations or corrective actions.

These maintenance activities were critical to preserving the value of the intangible property in the non-Americas territory and ensuring continued market access for PBI's products.

E. Protection. PBI undertook intellectual property protection activities in the non-Americas jurisdictions throughout the 2017–2020 period. PBI's legal and compliance team managed trademark registrations, renewals, and enforcement actions in EMEA and APAC territories. PBI also managed patent prosecution and enforcement activities in non-Americas jurisdictions, including monitoring for potential infringements, coordinating with external IP counsel in relevant jurisdictions, and initiating or defending IP-related proceedings as necessary.

PBI's IP protection activities were not merely administrative; they required substantive legal and commercial judgment regarding the scope of protection, the prioritization of enforcement efforts, and the allocation of resources to IP protection in the non-Americas territory.

F. Exploitation. PBI served as the principal entity for the non-Americas commercialization of PPC's pharmaceutical products, bearing market risk and making the key commercial decisions that determined the profitability and success of the non-Americas business. PBI's exploitation functions included the following:

• Independent pricing across 68 country markets. PBI's commercial strategy team set product pricing independently for each of PBI's 68 non-Americas country markets. Pricing decisions took into account local reimbursement environments, competitive dynamics, regulatory constraints, and PBI's overall commercial strategy for each product.

• Distribution partner selection and management. PBI identified, evaluated, selected, and managed third-party distribution partners for the non-Americas territory. PBI entered into distribution agreements as principal, bore the commercial risk associated with distribution partner performance, and conducted regular performance reviews of its distribution network.

• Market entry and launch planning. PBI determined the timing, sequencing, and strategy for product launches in new non-Americas markets, taking into account regulatory readiness, competitive conditions, and market potential.

• Product lifecycle management. PBI managed the commercial lifecycle of its products in the non-Americas territory, including decisions regarding product positioning, promotional strategy, and eventual product retirement or replacement.

Third-party distribution agreements demonstrating PBI's independent commercial decision-making authority were produced to the IRS examination team in response to IDR No. 18, with the response dated December 5, 2022. PBI's market strategy documents and pricing decisions were produced in response to IDR No. 35, with the response dated June 2, 2023. Collectively, these documents evidence PBI's active and substantive role in the exploitation of the IP portfolio in the non-Americas territory.

G. DEMPE Functions Matrix

A detailed DEMPE functions matrix has been prepared and is included in the administrative record as a separate exhibit referenced in support of this Exhibit D. The DEMPE functions matrix documents the allocation of each DEMPE function between PPC (United States) and PBI (Ireland) for each of PBI's three key product lines: Veritaxol (oncology), Imvara (immunology), and Cerulon (rare disease). For each function and each product, the matrix identifies the specific activities performed by PPC and PBI, the headcount allocated to each function, the expenditures incurred, and the supporting documentation produced to the IRS.

The DEMPE functions matrix demonstrates that, across all five DEMPE categories and all three key products, PBI performed substantive and meaningful functions that contributed directly to the value of the intangible property in the non-Americas territory.

VI. Commercial Operations and Revenue

A. Key Products Commercialized by PBI (Non-Americas)

PBI's non-Americas commercial operations encompassed the marketing, distribution, and sale of PPC's key pharmaceutical products across 68 country markets. The three principal products in PBI's non-Americas portfolio during the 2017–2020 period were as follows:

Veritaxol (Oncology). Veritaxol is PPC's blockbuster oncology compound and the single largest revenue-generating product in the PPC group's portfolio. In fiscal year 2020, Veritaxol generated non-Americas net sales of $1.34 billion, compared to global net sales of $3.12 billion. The non-Americas territory thus represented approximately 43% of Veritaxol's global revenue. Veritaxol was approved for multiple oncology indications in the non-Americas territory, and PBI managed the commercial strategy, pricing, regulatory compliance, and distribution for Veritaxol across all 68 non-Americas country markets.

Imvara (Immunology). Imvara is PPC's leading immunology product. In fiscal year 2020, Imvara generated non-Americas net sales of $790 million, compared to global net sales of $1.87 billion. The non-Americas territory represented approximately 42% of Imvara's global revenue. PBI managed the non-Americas commercialization of Imvara, including pricing, market access, regulatory lifecycle management, and distribution partner oversight.

Cerulon (Rare Disease). Cerulon is PPC's rare disease product. In fiscal year 2020, Cerulon generated non-Americas net sales of $280 million, compared to global net sales of $620 million. The non-Americas territory represented approximately 45% of Cerulon's global revenue. PBI's commercial and regulatory teams managed the non-Americas commercialization of Cerulon, including navigating the complex reimbursement and access pathways that characterize rare disease markets in the EMEA and APAC regions.

Product-level revenue data by territory for the 2017–2020 period was produced to the IRS examination team in response to IDR No. 11, with the response dated October 3, 2022. The revenue data demonstrates the significant and growing scale of PBI's non-Americas commercial operations during the examination period.

B. PBI Financial Results

PBI's financial performance during the 2017–2020 period reflected the scale, profitability, and commercial success of its non-Americas operations. In fiscal year 2020, PBI reported total revenue of €2.14 billion and pre-tax income of €1.06 billion. PBI's financial results were reported in its Irish statutory financial statements, which were prepared in accordance with Irish Generally Accepted Accounting Principles and audited by PBI's independent auditors.

PBI's Irish statutory financial statements and Irish corporation tax returns for the 2017, 2018, 2019, and 2020 tax years were produced to the IRS examination team in response to IDR No. 7, with the response dated August 25, 2022. These financial statements confirm PBI's substantial revenue base, profitability, and economic activity in Ireland during the examination period.

C. Legacy IP Royalty Arrangement

Separately from the CSA, PBI licensed certain legacy pharmaceutical compounds from PPC under a license agreement. The legacy compounds are pre-2012 vintage products—that is, products whose intangible property was fully developed prior to PBI's incorporation and the commencement of the CSA on July 1, 2012. PBI licensed the rights to commercialize these legacy compounds in the non-Americas territory from PPC at a royalty rate of 4.5% of net sales, which was determined to be arm's-length based on a comparable uncontrolled transaction ("CUT") analysis.

PBI's non-Americas net sales of legacy compounds and corresponding royalty payments during the 2017–2020 period were as follows:

The declining trajectory of legacy compound net sales over the 2017–2020 period reflects the natural lifecycle of these older products, including generic competition and formulary shifts in certain non-Americas markets. The legacy IP license agreement was produced to the IRS examination team in response to IDR No. 3, with the response dated July 22, 2022.

VII. Risk Assumption and Management

PBI bore genuine market risk with respect to the non-Americas territory throughout the 2017–2020 examination period. The risks borne by PBI included, without limitation, the following:

• Demand risk. PBI bore the risk that demand for its products in the non-Americas territory would fall below expectations due to competitive dynamics, changes in prescribing patterns, or other market factors.

• Pricing risk. PBI bore the risk that pricing actions by government authorities, reference pricing mechanisms, or competitive pressures would reduce product prices below projected levels.

• Currency risk. PBI generated revenue and incurred costs in multiple currencies across 68 country markets, exposing PBI to foreign exchange risk. PBI managed currency risk through its treasury operations, including hedging strategies implemented through Glenmore Bank Ireland plc.

• Regulatory risk. PBI bore the risk that regulatory authorities in the non-Americas territory would impose additional requirements, restrict product indications, or delay or deny marketing authorizations, adversely affecting PBI's ability to commercialize products.

• Distribution risk. PBI bore the risk of distribution partner underperformance, supply-chain disruptions, and logistical challenges in delivering products across a geographically diverse territory.

Critically, PBI's risk assumption was not merely contractual. PBI did not merely assume risks on paper while lacking the capacity to control and manage those risks in practice. Rather, PBI had the personnel, organizational structure, and financial capacity to exercise genuine control over the risks it assumed. PBI's 185 employees, including specialists in commercial strategy, regulatory affairs, supply-chain management, and finance, provided PBI with the functional capability to monitor, evaluate, and respond to risk events as they arose.

PBI's independent treasury operations through Glenmore Bank Ireland plc further evidenced PBI's financial capacity and autonomy. PBI managed its own cash flows, funded its own operations, and made independent financial decisions, including decisions regarding foreign exchange hedging and intercompany settlements.

PBI's cumulative capital expenditure of €47.2 million on regulatory submissions during the 2017–2020 period represented a significant at-risk investment in activities that directly affected PBI's ability to maintain market access and generate revenue in the non-Americas territory. A regulatory submission that failed to result in a marketing authorization would represent a real economic loss to PBI, not a cost borne by PPC or any other entity. This investment evidences genuine risk-bearing by PBI.

The risk analysis set forth above is consistent with the OECD Transfer Pricing Guidelines' framework for analyzing risk under the six-step process articulated in Chapter I, paragraphs 1.56–1.106. PBI's risk assumption satisfied all elements of that framework: PBI contractually assumed the relevant risks, PBI had the financial capacity to bear those risks, PBI's personnel exercised control functions with respect to those risks, and PBI's actual conduct was consistent with the contractual allocation of risk.

VIII. Irish Tax Compliance and Substance Requirements

PBI complied fully with all Irish tax reporting and substance requirements throughout the 2017–2020 examination period. PBI filed Irish corporation tax returns for each year at issue and paid all taxes due on a timely basis. PBI was subject to the standard Irish corporation tax rate of 12.5% on its trading income.

From fiscal year 2016 forward, PBI claimed benefits under Ireland's Knowledge Development box ("KDB") at an effective rate of 6.25% on qualifying intellectual property income. The KDB is a patent-box regime enacted by the Irish Oireachtas in the Finance Act 2015, Section 769R of the Taxes Consolidation Act 1997, and is designed to be consistent with the OECD's modified nexus approach as set forth in the BEPS Action 5 report. The KDB provides a reduced rate of corporation tax on qualifying profits derived from qualifying assets, subject to a nexus requirement that links the tax benefit to the qualifying expenditure incurred by the taxpayer. PBI's KDB claims were based on qualifying expenditure incurred by PBI in connection with its DEMPE activities.

PBI's Knowledge Development box claims and related Irish Revenue filings for the 2017–2020 period were produced to the IRS examination team in response to IDR No. 30, with the response dated April 10, 2023.

PBI's Irish tax advisor, Thornbury & Keogh, a leading Irish tax advisory firm with offices at 22 Fitzwilliam Square, Dublin 2, D02 YH68, Ireland (lead partner: Ciarán Thornbury), confirmed PBI's compliance with Irish substance requirements for each year of the examination period. Thornbury & Keogh provided advice to PBI on an ongoing basis regarding the Irish tax substance requirements applicable to companies claiming the 12.5% trading rate and the KDB, and confirmed that PBI's level of management and operational activity in Ireland satisfied all applicable requirements.

Forms 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations) for PBI were filed by PPC for all years at issue, consistent with PPC's reporting obligations under Sections 6038 and 6046 of the Internal Revenue Code. The Forms 5471 were produced to the IRS examination team in response to IDR No. 40, with the response dated July 18, 2023.

IX. Summary Table — Key Indicators of PBI Economic Substance (2017–2020)

The following table summarizes the key indicators of PBI's economic substance during the 2017–2020 examination period:

X. Conclusion

The evidence summarized in this Exhibit D conclusively establishes that Penterra Biopharma International DAC maintained genuine and robust economic substance throughout the 2017, 2018, 2019, and 2020 tax years.

PBI was not a shell entity, a brass-plate company, or a passive repository for intellectual property. To the contrary, PBI was a fully operational commercial enterprise that performed substantive DEMPE functions, employed 185 persons across seven functional departments, maintained approximately 18,000 square feet of dedicated office space in Dublin, held 42 board meetings in Dublin (all of which addressed substantive commercial and operational matters), invested €47.2 million in regulatory activities across 68 country markets, and exercised independent commercial decision-making authority over the non-Americas territory.

PBI bore genuine market risk for the non-Americas territory, including demand risk, pricing risk, currency risk, regulatory risk, and distribution risk. PBI had the personnel, governance structures, and financial capacity to control and manage those risks. PBI's risk assumption was not merely contractual; it was supported by the operational reality of PBI's day-to-day activities and the decision-making authority exercised by PBI's Dublin-based management and board.

PBI's cost-sharing payments under the CSA totaled $879.74 million during the 2017–2020 period, and PBI's legacy IP royalty payments to PPC totaled $130.18 million during the same period. These payments reflect genuine economic transactions between PBI and PPC, supported by contemporaneous documentation and arm's-length pricing.

The IRS's assertion in the NOPA dated October 12, 2023, that PBI lacked economic substance, is not supported by the factual record developed during the examination. The 47 IDR responses produced by PPC, comprising thousands of pages of documents, financial records, contracts, corporate governance materials, and operational data, paint a comprehensive and consistent picture of a functioning, substantive Irish enterprise.

Penterra Pharmaceuticals Corp. respectfully submits that the evidence set forth in this Exhibit D, together with the functional analysis, economic analyses, and other exhibits accompanying the Formal Protest, demonstrates that PBI's role as CSA participant and IP owner for the non-Americas territory reflects genuine economic substance and satisfies all applicable legal standards, including the standards set forth in Section 482 of the Internal Revenue Code, the Treasury Regulations thereunder, and the OECD Transfer Pricing Guidelines.

Cross-References to Related Exhibits:

• Exhibit A — PPC Corporate Structure Chart

• Exhibit B — Summary of Cost-Sharing Arrangement

• Exhibit C — Summary of Economic Analyses (CUT, CPM, DCF)

• Exhibit E — Penalty Protection Documentation

Prepared by Calderwood & Harkness LLP, as authorized representatives of Penterra Pharmaceuticals Corp., pursuant to IRS Form 2848 filed June 8, 2022.

C&H Matter Number: 1018-00009

Date: December 22, 2023

Tax Year	Total Qualified R&D Costs	PBI's Cost-Share Percentage	PBI's Cost-Share Payment
2017	$487.3 million	38.2%	$186.15 million
2018	$523.8 million	39.6%	$207.42 million
2019	$561.2 million	41.1%	$230.65 million
2020	$598.4 million	42.7%	$255.52 million
Total	$2,170.7 million	—	$879.74 million
Tax Year	Legacy Compound Non-Americas Net Sales	Royalty Rate	Royalty Payment
2017	$814.6 million	4.5%	$36.66 million
2018	$762.3 million	4.5%	$34.30 million
2019	$691.8 million	4.5%	$31.13 million
2020	$624.1 million	4.5%	$28.08 million
Total	$2,892.8 million	—	$130.18 million
Indicator	Detail
Incorporation date	March 15, 2012
Registered office	4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland
Managing Director	Aidan Naughton (Dublin-based, Irish resident)
Employees (2012 establishment)	52
Employees (2020 year-end)	185
Office space	~18,000 sq ft, Sandyford Business Park, Dublin
Board meetings (2017–2020)	42 meetings, all held in Dublin, Ireland
Regulatory expenditures (2017–2020 cumulative)	€47.2 million
Country markets with independent pricing	68
Key product lines commercialized	Veritaxol (oncology), Imvara (immunology), Cerulon (rare disease)
Non-Americas revenue (FY 2020)	€2.14 billion
Pre-tax income (FY 2020)	€1.06 billion

CSA cost-sharing payments (2017–2020 total)	$879.74 million ($186.15M + $207.42M + $230.65M + $255.52M)
Legacy IP royalty payments (2017–2020 total)	$130.18 million ($36.66M + $34.30M + $31.13M + $28.08M)
Contract manufacturer (PMI) employees	620
PMI cost-plus markup	Cost + 8%
Principal Irish bank	Glenmore Bank Ireland plc
Irish tax advisor	Thornbury & Keogh (22 Fitzwilliam Square, Dublin 2)
Key personnel interviews conducted	12 (conducted by C&H in Dublin, August–September 2022)

EXHIBIT D
Evidence of Economic Substance of Penterra Biopharma International DAC (2017–2020)
Attached to the Formal Protest of Penterra Pharmaceuticals Corp. (EIN: 22-3741856), filed December 22, 2023, in connection with the Notice of Proposed Adjustment dated October 12, 2023, IRS Exam Team LB&I-NE-TP-2022-00641, for Tax Years 2017, 2018, 2019, and 2020.
Prepared by Calderwood & Harkness LLP, 1735 Market Street, Suite 3100, Philadelphia, PA 19103, as authorized representatives of Penterra Pharmaceuticals Corp. pursuant to IRS Form 2848 filed June 8, 2022.
I. Introduction and Purpose
This Exhibit D summarizes the factual evidence establishing that Penterra Biopharma International DAC ("PBI") maintained robust economic substance throughout the tax years at issue (2017, 2018, 2019, and 2020). The evidence set forth herein is drawn from documents and data produced during the course of the IRS examination and from additional factual investigation conducted by Calderwood & Harkness LLP ("C&H") on behalf of the taxpayer, Penterra Pharmaceuticals Corp. ("PPC").
PBI is a Designated Activity Company organized under the laws of Ireland, with its registered office located at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland. PBI was incorporated on March 15, 2012, under the Irish Companies Act 2014 (as amended), and has served since July 1, 2012, as the intellectual property-holding company and principal entity for the non-Americas commercialization of PPC's pharmaceutical products. The non-Americas territory encompasses the European Economic Area ("EEA"), the United Kingdom, the broader Europe, Middle East, and Africa ("EMEA") region, and the Asia-Pacific ("APAC") region, spanning a total of 68 distinct country markets.
PBI is a wholly owned subsidiary of Penterra Holdings Luxembourg S.à r.l. ("PHL"), a private limited liability company organized under the laws of the Grand Duchy of Luxembourg, with its registered office at 14, rue Aldringen, L-1118 Luxembourg, RCS Number B 168452. PHL is, in turn, 100% owned by PPC. For United States federal income tax purposes, PHL is treated as a disregarded entity under Treasury Regulations Section 301.7701-3, such that PBI is treated as a directly owned controlled foreign corporation ("CFC") of PPC.
This Exhibit D responds directly to the assertion set forth in the Notice of Proposed Adjustment ("NOPA") dated October 12, 2023, issued by the IRS Large Business and International Division, Northeast Transfer Pricing Practice Area, Exam Team LB&I-NE-TP-2022-00641, in which the IRS contends that PBI lacked sufficient economic substance to justify its contractual role as intellectual property owner and cost-sharing arrangement ("CSA") participant, and that the key Development, Enhancement, Maintenance, Protection, and Exploitation ("DEMPE") functions with respect to PPC's intangible property remained in the United States during the years at issue. The IRS's position, as articulated in the NOPA, is that PBI's entitlement to residual returns from the non-Americas exploitation of PPC's intangible property should be disregarded or substantially reduced, with corresponding income reallocated to PPC under Section 482 of the Internal Revenue Code and the accompanying Treasury Regulations.
PPC respectfully disagrees with the IRS's proposed adjustment. The evidence summarized in this Exhibit D demonstrates that PBI performed substantive functions, bore genuine risks, and exercised independent decision-making authority with respect to the non-Americas commercialization of PPC's pharmaceutical product portfolio throughout the 2017–2020 period. PBI was not a passive or shell entity; rather, it was an operating company with meaningful headcount, physical presence, governance independence, and commercial responsibility for the non-Americas territory.
All supporting documentation for each category of evidence described herein was produced to the IRS examination team in response to Information Document Requests ("IDRs") issued between June 2022 and September 2023. Over the course of the examination, PPC responded to 47 IDRs in total, producing thousands of pages of documents, financial records, contracts, corporate governance materials, and operational data. Cross-references to specific IDR responses are provided throughout this Exhibit D where applicable, so that the Appeals Officer may locate the underlying documentation in the administrative record with precision.
II. PBI Corporate Organization and Governance
A. Entity Details
PBI's full legal name is Penterra Biopharma International Designated Activity Company, commonly abbreviated as "Penterra Biopharma International DAC." The entity's Irish Tax Reference number is 3218764T. PBI is organized as a Designated Activity Company under Irish law, a corporate form that provides a defined scope of activities as set forth in its constitution and that is commonly used by Irish subsidiaries of multinational enterprises operating in the pharmaceutical sector.
PBI's registered office is located at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland. This location has served as PBI's principal place of business since the entity's incorporation in 2012, and PBI's management and operational personnel are based at this location.
The Managing Director of PBI throughout the 2017–2020 period was Aidan Naughton. Mr. Naughton is a resident of Ireland and is based in Dublin. He was appointed to the role of Managing Director in connection with PBI's establishment in 2012 and has served continuously in that capacity throughout the examination period. Mr. Naughton was responsible for the overall management and strategic direction of PBI's non-Americas commercial operations and reported directly to the PBI board of directors. His compensation, performance objectives, and annual evaluations were determined by the PBI board, and he was not an employee of PPC or any U.S.-based affiliate during the period at issue.
PBI maintains its principal banking relationship with Glenmore Bank Ireland plc, an Irish public limited company authorized by the Central Ridgeway Trust Bank. PBI's banking arrangements with Glenmore Bank include current accounts, deposit accounts, and foreign exchange facilities. PBI's independent treasury operations through Glenmore Bank demonstrate that PBI managed its own cash flows, made independent payment decisions, and maintained financial autonomy from PPC's U.S.-based treasury function. Bank statements and related treasury documentation were produced to the IRS examination team in response to IDR No. 22, dated January 20, 2023.
B. Board of Directors and Governance
PBI maintained an independent board of directors throughout the 2017–2020 examination period. The PBI board was composed of directors with relevant pharmaceutical industry experience, financial expertise, and knowledge of international markets. The board included both executive directors (including Mr. Naughton in his capacity as Managing Director) and non-executive directors with independent judgment and oversight responsibility.
During the four tax years at issue, the PBI board of directors held a total of 42 meetings. This total reflects quarterly scheduled board meetings as well as special sessions convened to address time-sensitive commercial and regulatory matters. All 42 board meetings were held in Dublin, Ireland. No PBI board meetings during the examination period were held in the United States or in any jurisdiction other than Ireland. The consistent conduct of board meetings in Ireland underscores PBI's management and control from its Irish base of operations.
The PBI board meetings addressed a wide range of substantive matters directly relevant to PBI's role as the non-Americas principal and IP owner. The agenda items and topics discussed at these meetings included, without limitation, the following:
•  Product pricing strategy for non-Americas territories, including country-level pricing decisions and reimbursement negotiations;
•  Market entry decisions, including the timing and sequencing of product launches in new country markets;
•  Regulatory submission approvals, including authorization of new marketing authorization applications and lifecycle management submissions;
•  Capital expenditure authorizations, including approval of investments in IT infrastructure, regulatory systems, and office facilities;
•  Distribution partner selection and management, including evaluation, appointment, and performance review of third-party distribution partners;
•  Supply-chain oversight, including review of the contract manufacturing relationship with Penterra Manufacturing Ireland Ltd. ("PMI") and assessment of product quality and supply continuity;
•  Financial performance review, including quarterly and annual review of PBI's revenue, profitability, and budget performance against plan; and
•  Strategic planning for the non-Americas business, including multi-year forecasting and market assessments.
Complete board minutes for all 42 meetings held during the 2017–2020 period were produced to the IRS examination team in response to IDR No. 9. The response to IDR No. 9 was submitted on September 12, 2022, and included the minutes themselves, together with board packs, supporting materials, and resolutions adopted at each meeting. In addition, PBI's articles of association, memorandum of association, and other governance documents were produced in connection with the same IDR response.
An analysis of the 42 board meetings, prepared by C&H and dated September 2022, catalogs the substantive decisions made by the PBI board at each meeting and identifies the specific DEMPE functions to which each decision relates. A summary of this analysis accompanies this Exhibit D as supporting documentation.
C. Corporate Decision-Making Independence
PBI's board of directors and senior management exercised independent decision-making authority over the non-Americas commercial operations of the PPC group throughout the 2017–2020 period. PBI's governance structure was designed to ensure that the entity responsible for non-Americas commercialization had the authority, personnel, and resources necessary to make and implement key commercial and operational decisions without direction or control from PPC's U.S.-based management.
Key decisions made independently by PBI during the examination period included the following:
•  Pricing decisions across 68 country markets. PBI's commercial strategy team, under the supervision of Mr. Naughton and the PBI board, set product pricing for each of PBI's 68 non-Americas country markets. Pricing decisions were informed by local market conditions, reimbursement environments, competitive dynamics, and regulatory constraints unique to each territory. PBI's pricing decisions were not dictated or pre-approved by PPC or any U.S.-based personnel. Evidence of PBI's independent pricing decisions across the 68 non-Americas markets was produced to the IRS in response to IDR No. 35, with the response dated June 2, 2023.
•  Market entry timing and sequencing. PBI determined the order and timing of product launches in new non-Americas markets based on its assessment of regulatory readiness, market opportunity, competitive landscape, and resource availability. These decisions were made by PBI's management team and approved by the PBI board.
•  Selection and negotiation of distribution agreements. PBI identified, evaluated, and selected third-party distribution partners for non-Americas territories. PBI's legal and commercial teams negotiated the terms of distribution agreements, including pricing, exclusivity, territory scope, performance obligations, and termination provisions. PBI entered into these agreements as a principal in its own right, not as an agent of PPC.
•  Regulatory filing strategy. PBI's regulatory affairs team determined the strategy for marketing authorization applications, variations, renewals, and other regulatory submissions across the non-Americas territory. PBI made these decisions in light of the regulatory requirements and timelines specific to each jurisdiction.
•  Capital allocation for non-Americas operations. The PBI board authorized capital expenditures and investments for the non-Americas business, including regulatory submissions, IT systems, and office infrastructure. These capital allocation decisions were made independently by the PBI board based on PBI's own financial resources and business needs.
The independence of PBI's decision-making is a critical element of the economic substance analysis. PBI did not merely rubber-stamp decisions made in the United States; rather, PBI's management and board exercised genuine judgment, evaluated alternatives, and made decisions that were binding on the non-Americas business. The documentary record produced to the IRS substantiates this independence across all major categories of commercial and operational decision-making.
III. PBI Personnel and Headcount
A. Headcount Growth Trajectory
PBI was established in 2012 with an initial complement of 52 employees. These founding employees were recruited to staff PBI's core functional areas and to enable PBI to begin operating as the non-Americas principal immediately upon the commencement of the CSA and IP ownership structure on July 1, 2012.
Over the eight years from PBI's establishment through the end of the examination period, PBI's headcount grew substantially. By year-end 2020, PBI employed 185 personnel, reflecting a more than threefold increase over the eight-year period. This growth trajectory is directly correlated with the expansion of PBI's non-Americas business, including the launch of additional products, the entry into new country markets, and the increasing complexity of PBI's commercial and regulatory operations. The growth in PBI's workforce demonstrates a corresponding increase in PBI's operational capability and economic substance in connection with the non-Americas business.
The headcount growth was not incidental or cosmetic. Each phase of PBI's workforce expansion corresponded to identifiable business needs, including the addition of regulatory affairs professionals to support marketing authorization applications in new jurisdictions, the hiring of commercial strategy personnel to manage pricing and market access in an expanding portfolio of country markets, and the recruitment of supply-chain and quality assurance staff to oversee the growing volume of product manufactured and distributed in the non-Americas territory.
B. Functional Departments and Key Personnel
PBI's 185 employees as of year-end 2020 were distributed across the following functional departments, each of which performed substantive activities relevant to PBI's role as the non-Americas principal and DEMPE function performer:
•  Regulatory Affairs. PBI's regulatory affairs department was responsible for the preparation, submission, and management of marketing authorization applications, variations, renewals, and other regulatory filings across the 68 non-Americas country markets. This department maintained relationships with national and regional regulatory authorities, including the European Medicines Agency ("EMA"), and managed the regulatory lifecycle for each of PBI's products.
•  Medical Affairs. PBI's medical affairs team managed medical information requests, medical education programs, and medical liaison activities in the non-Americas territory. This team also oversaw pharmacovigilance and drug safety reporting obligations for the non-Americas markets.
•  Commercial Strategy. PBI's commercial strategy department was responsible for market analysis, pricing strategy, market access negotiations, reimbursement submissions, and product launch planning across the non-Americas territory. This team worked closely with distribution partners and in-market representatives to optimize PBI's commercial performance.
•  Supply-Chain Management. PBI's supply-chain team oversaw the procurement of finished pharmaceutical products from PMI (the PPC group's Irish contract manufacturer), managed inventory and logistics, and ensured continuity of supply to non-Americas markets. This function included demand forecasting, order management, and distribution coordination.
•  Finance and Treasury. PBI's finance and treasury team managed PBI's financial reporting, budgeting, cash management, foreign exchange hedging, intercompany settlements, and tax compliance. PBI's independent treasury operations through Glenmore Bank Ireland plc were managed by this team.
•  Legal and Compliance. PBI's legal and compliance team managed intellectual property enforcement, contract negotiation and management, regulatory compliance, anti-bribery and anti-corruption compliance, and data privacy obligations in the non-Americas territory.
•  Human Resources and Administration. PBI's HR and administration team was responsible for recruitment, compensation and benefits, employee relations, and office management at PBI's Dublin headquarters.
Managing Director Aidan Naughton was responsible for the overall management of PBI's operations across all functional departments. Mr. Naughton reported to the PBI board of directors and provided regular updates on PBI's commercial performance, strategic initiatives, regulatory milestones, and operational matters. Mr. Naughton's reporting relationship was to the PBI board, not to PPC's U.S.-based management, reinforcing the independence of PBI's governance and operational structure.
Headcount data, organizational charts, and role descriptions for key personnel across all functional departments were produced to the IRS examination team in response to IDR No. 8. The response to IDR No. 8 was submitted on September 5, 2022, and included detailed organizational charts for each year of the examination period, job descriptions for senior and mid-level personnel, and headcount reconciliations by department.
C. Personnel Interviews
In connection with the preparation of PPC's response to the IRS examination, C&H conducted interviews with 12 key PBI employees in Dublin, Ireland, during August and September 2022. The interview program was led by C&H lead associate Garrett Simmons and working associate Leila Nazari, both of whom traveled to Dublin for the purpose of conducting in-person interviews at PBI's offices.
The 12 interviews covered a cross-section of PBI's functional departments and seniority levels. Each interview documented the following aspects of the interviewee's role and responsibilities:
•  The employee's position, title, and tenure with PBI;
•  The employee's day-to-day responsibilities and functional contributions to the non-Americas business;
•  The employee's decision-making authority, including the types of decisions the employee was authorized to make independently and the types of decisions requiring escalation to senior management or the board;
•  The employee's functional contributions to DEMPE activities relevant to PBI's role as non-Americas principal;
•  The employee's reporting relationships, including whether the employee reported to PBI management in Dublin or to any U.S.-based personnel; and
•  The employee's interactions, if any, with PPC's U.S.-based personnel and the nature and frequency of those interactions.
The summaries of the 12 interviews confirm that PBI personnel exercised substantive control over DEMPE functions relevant to the non-Americas territory. The interviewees consistently described a working environment in which key commercial, regulatory, and operational decisions were made by PBI's Dublin-based team, with PBI management exercising genuine authority over the non-Americas business. Where interactions with U.S.-based PPC personnel occurred, those interactions were characterized as collaborative and informational rather than directive.
Interview summaries prepared by C&H are available as supporting documentation and were made available to the IRS examination team in the course of the examination.
IV. Physical Presence in Ireland
A. Office Space
PBI maintained dedicated office space of approximately 18,000 square feet at Sandyford Business Park, Dublin D18 K7T4, Ireland, throughout the 2017–2020 examination period. PBI's office space was located on the fourth floor of Claremont House, a modern, purpose-built commercial office building situated in one of Dublin's established business districts. Sandyford Business Park is a well-known commercial center that houses the Irish operations of numerous multinational enterprises and professional services firms.
PBI's Dublin offices housed the full range of PBI's functional departments, including regulatory affairs, medical affairs, commercial strategy, supply-chain management, finance and treasury, legal and compliance, and human resources and administration. The office space was configured with individual offices for senior management, open-plan workstations for professional and administrative staff, meeting rooms, a dedicated boardroom for PBI board meetings, and common areas. The physical layout of PBI's office reflected the operational needs of a functioning commercial enterprise with 185 employees.
The lease agreement for PBI's office space at Sandyford Business Park was entered into between PBI and the landlord on commercial terms and was renewed during the examination period. The lease was produced to the IRS examination team in response to IDR No. 12, with the response dated October 12, 2022.
B. Capital Expenditure and Infrastructure
PBI made ongoing capital expenditures on IT infrastructure, office equipment, and operational systems throughout the 2017–2020 period. These expenditures included investments in enterprise resource planning ("ERP") systems, regulatory information management systems, customer relationship management ("CRM") platforms, telecommunications infrastructure, and office furnishings and equipment. PBI's capital expenditures were approved by the PBI board as part of PBI's annual budgeting process and were funded from PBI's own financial resources.
The level of PBI's capital investment during the examination period is consistent with the operations of a substantive commercial enterprise and further evidences PBI's genuine economic substance. Capital expenditure and investment records for 2017–2020 were produced to the IRS examination team in response to IDR No. 44, with the response dated August 22, 2023.
C. Affiliated Manufacturing Presence
In addition to PBI's Dublin-based commercial and administrative operations, the PPC group maintained a significant manufacturing presence in Ireland through Penterra Manufacturing Ireland Ltd. ("PMI"). PMI is a separate Irish private limited company, registered with the Irish Companies Registration Office under CRO Number 512347, with its principal place of business at Unit 7, Ringaskiddy Industrial Estate, Co. Cork T12 PX29, Ireland.
PMI served as the contract manufacturer of PPC's oncology and immunology biologics for the non-Americas markets during the 2017–2020 period. PMI manufactured finished pharmaceutical products under a contract manufacturing agreement with PBI, pursuant to which PMI was compensated on a cost-plus basis, receiving reimbursement of its fully loaded manufacturing costs plus an arm's-length markup of 8%. This cost-plus arrangement was consistent with PMI's characterization as a contract manufacturer bearing limited risk, with PBI, as the principal, bearing the economic risk associated with the commercialization of the manufactured products.
PMI employed approximately 620 persons as of the examination period, making it one of the PPC group's largest manufacturing facilities globally. PMI's manufacturing operations were subject to inspection and oversight by the Irish Health Products Regulatory Authority ("HPRA"), the EMA, and other regulatory authorities. PMI's operations represented a substantial physical and economic presence of the PPC group in Ireland, complementing PBI's Dublin-based commercial operations.
The PMI contract manufacturing agreement was produced to the IRS examination team in response to IDR No. 10, with the response dated September 20, 2022.
V. DEMPE Functions Performed by PBI
A. Overview of the DEMPE Framework
The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as revised in 2017 and further updated in 2022, establish in Chapter VI the DEMPE framework as the principal analytical tool for determining which entity (or entities) within a multinational enterprise group is entitled to the returns attributable to intangible property. Under the DEMPE framework, entitlement to intangible-related returns is determined by reference to the functions an entity performs, the assets it uses or contributes, and the risks it assumes and manages in connection with the development, enhancement, maintenance, protection, and exploitation of the intangible property at issue.
The DEMPE framework recognizes that legal ownership of intangible property alone does not entitle an entity to returns from that property; rather, the entity must perform—or exercise control over and bear the risk of—the functions that contribute to the value of the intangible. Conversely, where an entity performs significant DEMPE functions, assumes and controls the associated risks, and contributes assets, that entity is entitled to a commensurate share of the intangible-related returns, even if it is not the sole legal owner of the underlying intangible property.
PBI performed substantial DEMPE functions with respect to the non-Americas exploitation of PPC's pharmaceutical IP portfolio throughout the 2017–2020 period. PBI's DEMPE contributions are summarized below in each of the five functional categories.
B. Development.  PBI co-funded research and development costs under the qualified cost-sharing arrangement between PPC and PBI, effective July 1, 2012 (the "CSA"). The CSA is a qualified cost-sharing arrangement within the meaning of Treasury Regulations Section 1.482-7 and is governed by a written CSA agreement that specifies the terms of cost sharing, including the allocation of intangible development costs, the rights to exploit resulting intangibles, and the measurement of reasonably anticipated benefits.
Under the CSA, PBI's cost-sharing percentages during the 2017–2020 tax years were determined by reference to PBI's reasonably anticipated benefits from the non-Americas commercialization of the intangible property developed under the arrangement, consistent with the requirements of Treasury Regulations Section 1.482-7(e). PBI's cost-sharing payments during the examination period were as follows:
PBI's cost-sharing payments were proportional to its reasonably anticipated benefits from non-Americas commercialization and were calculated and documented contemporaneously, as reflected in the CSA documentation and annual true-up calculations produced to the IRS. The steady increase in PBI's cost-share percentage over the 2017–2020 period reflects the growing proportion of global anticipated benefits attributable to the non-Americas territory, driven by PBI's successful expansion of non-Americas commercial operations.
In addition to funding R&D costs under the CSA, PBI personnel participated in development oversight decisions relevant to non-Americas product formulations and indications. PBI's regulatory affairs and medical affairs teams provided input on clinical development strategies for products intended for the non-Americas territory, including guidance on regulatory requirements specific to non-Americas jurisdictions that informed development timelines and study design. While the primary laboratory-based R&D activities were conducted at PPC's U.S. research facilities, PBI's participation in the development oversight process was substantive and contributed to the alignment of development activities with non-Americas market needs.
C. Enhancement.  PBI's regulatory affairs and medical affairs teams enhanced the value of the IP portfolio by adapting PPC's pharmaceutical products for non-Americas markets. Enhancement activities performed by PBI included the preparation and submission of marketing authorization applications to the EMA and national regulatory authorities, the development of market-specific labeling and product information, the conduct of post-approval studies and registries required by non-Americas regulators, and the management of lifecycle management activities (including line extensions, new formulations, and new indications) tailored to the non-Americas regulatory and commercial environment.
PBI incurred cumulative regulatory expenditures of €47.2 million during the 2017–2020 period in connection with regulatory submissions and approvals across 68 country markets. These expenditures reflect the cost of PBI's internal regulatory affairs personnel, external regulatory consultants, submission fees, and associated costs. The magnitude of PBI's regulatory expenditures underscores the substantive nature of PBI's enhancement activities and the genuine investment PBI made in adapting the IP portfolio for non-Americas exploitation.
Documentation of PBI's regulatory expenditures and regulatory submissions for the 2017–2020 period was produced to the IRS examination team in response to IDR No. 15, with the response dated November 8, 2022. The IDR response included a comprehensive listing of all regulatory submissions made by PBI during the examination period, organized by product, country, and submission type, together with supporting financial records.
D. Maintenance.  PBI maintained the value and integrity of the intangible property in the non-Americas markets through ongoing pharmacovigilance, regulatory compliance, and quality assurance oversight activities. Maintenance functions performed by PBI included the following:
•  Pharmacovigilance and drug safety. PBI's medical affairs team managed adverse event reporting, periodic safety update reports ("PSURs"), risk management plans, and other pharmacovigilance obligations required by the EMA and national regulatory authorities in the non-Americas territory. PBI maintained qualified persons for pharmacovigilance ("QPPV") as required by European Union law.
•  Regulatory compliance. PBI's regulatory affairs team managed the ongoing compliance obligations associated with maintaining marketing authorizations in the non-Americas territory, including responding to regulatory authority inquiries, managing variations and renewals, and ensuring that product labeling remained current and compliant with local requirements.
•  Quality assurance oversight. PBI managed the relationship with PMI as contract manufacturer, including oversight of manufacturing quality, compliance with Good Manufacturing Practice ("GMP") requirements, and supply-chain integrity. PBI's supply-chain team conducted regular reviews of PMI's manufacturing performance, participated in quality audits, and managed any quality deviations or corrective actions.
These maintenance activities were critical to preserving the value of the intangible property in the non-Americas territory and ensuring continued market access for PBI's products.
E. Protection.  PBI undertook intellectual property protection activities in the non-Americas jurisdictions throughout the 2017–2020 period. PBI's legal and compliance team managed trademark registrations, renewals, and enforcement actions in EMEA and APAC territories. PBI also managed patent prosecution and enforcement activities in non-Americas jurisdictions, including monitoring for potential infringements, coordinating with external IP counsel in relevant jurisdictions, and initiating or defending IP-related proceedings as necessary.
PBI's IP protection activities were not merely administrative; they required substantive legal and commercial judgment regarding the scope of protection, the prioritization of enforcement efforts, and the allocation of resources to IP protection in the non-Americas territory.
F. Exploitation.  PBI served as the principal entity for the non-Americas commercialization of PPC's pharmaceutical products, bearing market risk and making the key commercial decisions that determined the profitability and success of the non-Americas business. PBI's exploitation functions included the following:
•  Independent pricing across 68 country markets. PBI's commercial strategy team set product pricing independently for each of PBI's 68 non-Americas country markets. Pricing decisions took into account local reimbursement environments, competitive dynamics, regulatory constraints, and PBI's overall commercial strategy for each product.
•  Distribution partner selection and management. PBI identified, evaluated, selected, and managed third-party distribution partners for the non-Americas territory. PBI entered into distribution agreements as principal, bore the commercial risk associated with distribution partner performance, and conducted regular performance reviews of its distribution network.
•  Market entry and launch planning. PBI determined the timing, sequencing, and strategy for product launches in new non-Americas markets, taking into account regulatory readiness, competitive conditions, and market potential.
•  Product lifecycle management. PBI managed the commercial lifecycle of its products in the non-Americas territory, including decisions regarding product positioning, promotional strategy, and eventual product retirement or replacement.
Third-party distribution agreements demonstrating PBI's independent commercial decision-making authority were produced to the IRS examination team in response to IDR No. 18, with the response dated December 5, 2022. PBI's market strategy documents and pricing decisions were produced in response to IDR No. 35, with the response dated June 2, 2023. Collectively, these documents evidence PBI's active and substantive role in the exploitation of the IP portfolio in the non-Americas territory.
G. DEMPE Functions Matrix
A detailed DEMPE functions matrix has been prepared and is included in the administrative record as a separate exhibit referenced in support of this Exhibit D. The DEMPE functions matrix documents the allocation of each DEMPE function between PPC (United States) and PBI (Ireland) for each of PBI's three key product lines: Veritaxol (oncology), Imvara (immunology), and Cerulon (rare disease). For each function and each product, the matrix identifies the specific activities performed by PPC and PBI, the headcount allocated to each function, the expenditures incurred, and the supporting documentation produced to the IRS.
The DEMPE functions matrix demonstrates that, across all five DEMPE categories and all three key products, PBI performed substantive and meaningful functions that contributed directly to the value of the intangible property in the non-Americas territory.
VI. Commercial Operations and Revenue
A. Key Products Commercialized by PBI (Non-Americas)
PBI's non-Americas commercial operations encompassed the marketing, distribution, and sale of PPC's key pharmaceutical products across 68 country markets. The three principal products in PBI's non-Americas portfolio during the 2017–2020 period were as follows:
Veritaxol (Oncology). Veritaxol is PPC's blockbuster oncology compound and the single largest revenue-generating product in the PPC group's portfolio. In fiscal year 2020, Veritaxol generated non-Americas net sales of $1.34 billion, compared to global net sales of $3.12 billion. The non-Americas territory thus represented approximately 43% of Veritaxol's global revenue. Veritaxol was approved for multiple oncology indications in the non-Americas territory, and PBI managed the commercial strategy, pricing, regulatory compliance, and distribution for Veritaxol across all 68 non-Americas country markets.
Imvara (Immunology). Imvara is PPC's leading immunology product. In fiscal year 2020, Imvara generated non-Americas net sales of $790 million, compared to global net sales of $1.87 billion. The non-Americas territory represented approximately 42% of Imvara's global revenue. PBI managed the non-Americas commercialization of Imvara, including pricing, market access, regulatory lifecycle management, and distribution partner oversight.
Cerulon (Rare Disease). Cerulon is PPC's rare disease product. In fiscal year 2020, Cerulon generated non-Americas net sales of $280 million, compared to global net sales of $620 million. The non-Americas territory represented approximately 45% of Cerulon's global revenue. PBI's commercial and regulatory teams managed the non-Americas commercialization of Cerulon, including navigating the complex reimbursement and access pathways that characterize rare disease markets in the EMEA and APAC regions.
Product-level revenue data by territory for the 2017–2020 period was produced to the IRS examination team in response to IDR No. 11, with the response dated October 3, 2022. The revenue data demonstrates the significant and growing scale of PBI's non-Americas commercial operations during the examination period.
B. PBI Financial Results
PBI's financial performance during the 2017–2020 period reflected the scale, profitability, and commercial success of its non-Americas operations. In fiscal year 2020, PBI reported total revenue of €2.14 billion and pre-tax income of €1.06 billion. PBI's financial results were reported in its Irish statutory financial statements, which were prepared in accordance with Irish Generally Accepted Accounting Principles and audited by PBI's independent auditors.
PBI's Irish statutory financial statements and Irish corporation tax returns for the 2017, 2018, 2019, and 2020 tax years were produced to the IRS examination team in response to IDR No. 7, with the response dated August 25, 2022. These financial statements confirm PBI's substantial revenue base, profitability, and economic activity in Ireland during the examination period.
C. Legacy IP Royalty Arrangement
Separately from the CSA, PBI licensed certain legacy pharmaceutical compounds from PPC under a license agreement. The legacy compounds are pre-2012 vintage products—that is, products whose intangible property was fully developed prior to PBI's incorporation and the commencement of the CSA on July 1, 2012. PBI licensed the rights to commercialize these legacy compounds in the non-Americas territory from PPC at a royalty rate of 4.5% of net sales, which was determined to be arm's-length based on a comparable uncontrolled transaction ("CUT") analysis.
PBI's non-Americas net sales of legacy compounds and corresponding royalty payments during the 2017–2020 period were as follows:
The declining trajectory of legacy compound net sales over the 2017–2020 period reflects the natural lifecycle of these older products, including generic competition and formulary shifts in certain non-Americas markets. The legacy IP license agreement was produced to the IRS examination team in response to IDR No. 3, with the response dated July 22, 2022.
VII. Risk Assumption and Management
PBI bore genuine market risk with respect to the non-Americas territory throughout the 2017–2020 examination period. The risks borne by PBI included, without limitation, the following:
•  Demand risk. PBI bore the risk that demand for its products in the non-Americas territory would fall below expectations due to competitive dynamics, changes in prescribing patterns, or other market factors.
•  Pricing risk. PBI bore the risk that pricing actions by government authorities, reference pricing mechanisms, or competitive pressures would reduce product prices below projected levels.
•  Currency risk. PBI generated revenue and incurred costs in multiple currencies across 68 country markets, exposing PBI to foreign exchange risk. PBI managed currency risk through its treasury operations, including hedging strategies implemented through Glenmore Bank Ireland plc.
•  Regulatory risk. PBI bore the risk that regulatory authorities in the non-Americas territory would impose additional requirements, restrict product indications, or delay or deny marketing authorizations, adversely affecting PBI's ability to commercialize products.
•  Distribution risk. PBI bore the risk of distribution partner underperformance, supply-chain disruptions, and logistical challenges in delivering products across a geographically diverse territory.
Critically, PBI's risk assumption was not merely contractual. PBI did not merely assume risks on paper while lacking the capacity to control and manage those risks in practice. Rather, PBI had the personnel, organizational structure, and financial capacity to exercise genuine control over the risks it assumed. PBI's 185 employees, including specialists in commercial strategy, regulatory affairs, supply-chain management, and finance, provided PBI with the functional capability to monitor, evaluate, and respond to risk events as they arose.
PBI's independent treasury operations through Glenmore Bank Ireland plc further evidenced PBI's financial capacity and autonomy. PBI managed its own cash flows, funded its own operations, and made independent financial decisions, including decisions regarding foreign exchange hedging and intercompany settlements.
PBI's cumulative capital expenditure of €47.2 million on regulatory submissions during the 2017–2020 period represented a significant at-risk investment in activities that directly affected PBI's ability to maintain market access and generate revenue in the non-Americas territory. A regulatory submission that failed to result in a marketing authorization would represent a real economic loss to PBI, not a cost borne by PPC or any other entity. This investment evidences genuine risk-bearing by PBI.
The risk analysis set forth above is consistent with the OECD Transfer Pricing Guidelines' framework for analyzing risk under the six-step process articulated in Chapter I, paragraphs 1.56–1.106. PBI's risk assumption satisfied all elements of that framework: PBI contractually assumed the relevant risks, PBI had the financial capacity to bear those risks, PBI's personnel exercised control functions with respect to those risks, and PBI's actual conduct was consistent with the contractual allocation of risk.
VIII. Irish Tax Compliance and Substance Requirements
PBI complied fully with all Irish tax reporting and substance requirements throughout the 2017–2020 examination period. PBI filed Irish corporation tax returns for each year at issue and paid all taxes due on a timely basis. PBI was subject to the standard Irish corporation tax rate of 12.5% on its trading income.
From fiscal year 2016 forward, PBI claimed benefits under Ireland's Knowledge Development box ("KDB") at an effective rate of 6.25% on qualifying intellectual property income. The KDB is a patent-box regime enacted by the Irish Oireachtas in the Finance Act 2015, Section 769R of the Taxes Consolidation Act 1997, and is designed to be consistent with the OECD's modified nexus approach as set forth in the BEPS Action 5 report. The KDB provides a reduced rate of corporation tax on qualifying profits derived from qualifying assets, subject to a nexus requirement that links the tax benefit to the qualifying expenditure incurred by the taxpayer. PBI's KDB claims were based on qualifying expenditure incurred by PBI in connection with its DEMPE activities.
PBI's Knowledge Development box claims and related Irish Revenue filings for the 2017–2020 period were produced to the IRS examination team in response to IDR No. 30, with the response dated April 10, 2023.
PBI's Irish tax advisor, Thornbury & Keogh, a leading Irish tax advisory firm with offices at 22 Fitzwilliam Square, Dublin 2, D02 YH68, Ireland (lead partner: Ciarán Thornbury), confirmed PBI's compliance with Irish substance requirements for each year of the examination period. Thornbury & Keogh provided advice to PBI on an ongoing basis regarding the Irish tax substance requirements applicable to companies claiming the 12.5% trading rate and the KDB, and confirmed that PBI's level of management and operational activity in Ireland satisfied all applicable requirements.
Forms 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations) for PBI were filed by PPC for all years at issue, consistent with PPC's reporting obligations under Sections 6038 and 6046 of the Internal Revenue Code. The Forms 5471 were produced to the IRS examination team in response to IDR No. 40, with the response dated July 18, 2023.
IX. Summary Table — Key Indicators of PBI Economic Substance (2017–2020)
The following table summarizes the key indicators of PBI's economic substance during the 2017–2020 examination period:
X. Conclusion
The evidence summarized in this Exhibit D conclusively establishes that Penterra Biopharma International DAC maintained genuine and robust economic substance throughout the 2017, 2018, 2019, and 2020 tax years.
PBI was not a shell entity, a brass-plate company, or a passive repository for intellectual property. To the contrary, PBI was a fully operational commercial enterprise that performed substantive DEMPE functions, employed 185 persons across seven functional departments, maintained approximately 18,000 square feet of dedicated office space in Dublin, held 42 board meetings in Dublin (all of which addressed substantive commercial and operational matters), invested €47.2 million in regulatory activities across 68 country markets, and exercised independent commercial decision-making authority over the non-Americas territory.
PBI bore genuine market risk for the non-Americas territory, including demand risk, pricing risk, currency risk, regulatory risk, and distribution risk. PBI had the personnel, governance structures, and financial capacity to control and manage those risks. PBI's risk assumption was not merely contractual; it was supported by the operational reality of PBI's day-to-day activities and the decision-making authority exercised by PBI's Dublin-based management and board.
PBI's cost-sharing payments under the CSA totaled $879.74 million during the 2017–2020 period, and PBI's legacy IP royalty payments to PPC totaled $130.18 million during the same period. These payments reflect genuine economic transactions between PBI and PPC, supported by contemporaneous documentation and arm's-length pricing.
The IRS's assertion in the NOPA dated October 12, 2023, that PBI lacked economic substance, is not supported by the factual record developed during the examination. The 47 IDR responses produced by PPC, comprising thousands of pages of documents, financial records, contracts, corporate governance materials, and operational data, paint a comprehensive and consistent picture of a functioning, substantive Irish enterprise.
Penterra Pharmaceuticals Corp. respectfully submits that the evidence set forth in this Exhibit D, together with the functional analysis, economic analyses, and other exhibits accompanying the Formal Protest, demonstrates that PBI's role as CSA participant and IP owner for the non-Americas territory reflects genuine economic substance and satisfies all applicable legal standards, including the standards set forth in Section 482 of the Internal Revenue Code, the Treasury Regulations thereunder, and the OECD Transfer Pricing Guidelines.
Cross-References to Related Exhibits:
•  Exhibit A — PPC Corporate Structure Chart
•  Exhibit B — Summary of Cost-Sharing Arrangement
•  Exhibit C — Summary of Economic Analyses (CUT, CPM, DCF)
•  Exhibit E — Penalty Protection Documentation
Prepared by Calderwood & Harkness LLP, as authorized representatives of Penterra Pharmaceuticals Corp., pursuant to IRS Form 2848 filed June 8, 2022.
C&H Matter Number: 1018-00009
Date: December 22, 2023
Tax Year | Total Qualified R&D Costs | PBI's Cost-Share Percentage | PBI's Cost-Share Payment
2017 | $487.3 million | 38.2% | $186.15 million
2018 | $523.8 million | 39.6% | $207.42 million
2019 | $561.2 million | 41.1% | $230.65 million
2020 | $598.4 million | 42.7% | $255.52 million
Total | $2,170.7 million | — | $879.74 million
Tax Year | Legacy Compound Non-Americas Net Sales | Royalty Rate | Royalty Payment
2017 | $814.6 million | 4.5% | $36.66 million
2018 | $762.3 million | 4.5% | $34.30 million
2019 | $691.8 million | 4.5% | $31.13 million
2020 | $624.1 million | 4.5% | $28.08 million
Total | $2,892.8 million | — | $130.18 million
Indicator | Detail
Incorporation date | March 15, 2012
Registered office | 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland
Managing Director | Aidan Naughton (Dublin-based, Irish resident)
Employees (2012 establishment) | 52
Employees (2020 year-end) | 185
Office space | ~18,000 sq ft, Sandyford Business Park, Dublin
Board meetings (2017–2020) | 42 meetings, all held in Dublin, Ireland
Regulatory expenditures (2017–2020 cumulative) | €47.2 million
Country markets with independent pricing | 68
Key product lines commercialized | Veritaxol (oncology), Imvara (immunology), Cerulon (rare disease)
Non-Americas revenue (FY 2020) | €2.14 billion
Pre-tax income (FY 2020) | €1.06 billion
CSA cost-sharing payments (2017–2020 total) | $879.74 million ($186.15M + $207.42M + $230.65M + $255.52M)
Legacy IP royalty payments (2017–2020 total) | $130.18 million ($36.66M + $34.30M + $31.13M + $28.08M)
Contract manufacturer (PMI) employees | 620
PMI cost-plus markup | Cost + 8%
Principal Irish bank | Glenmore Bank Ireland plc
Irish tax advisor | Thornbury & Keogh (22 Fitzwilliam Square, Dublin 2)
Key personnel interviews conducted | 12 (conducted by C&H in Dublin, August–September 2022)

EXHIBIT D

Record

Parties

Dates

Amounts