Prevail and Alector both claim victory in arbitration over scientist-CEO, telling divergent tales of confidential hearings
At 7 am Monday, Prevail Therapeutics announced their CEO “decisively” won a year-plus-long arbitration battle over trade secrets with his old company, the neurodegeneration rival Alector. Forty four minutes later, Alector put out a press release saying that the arbitrator found in Alector’s favor and against Prevail’s CEO.
It was the second and perhaps final twist in an unusual case that centered on Asa Abeliovich, a former tenured Columbia professor and neurodegeneration luminary, and the intellectual property inside the two high-profile biotechs he helped launch. Drawing from a confidential decision, each side claimed victory, telling overlapping but distinctly divergent tales of where an arbitrator ruled on a man at the center of both companies.
Prevail highlighted that the arbitrator didn’t find that Abeliovich stole trade secrets. Alector pointed out that the arbitrator did, they claimed, find Abeliovich destroyed documents potentially relevant to such claims. Prevail said the documents were “an extra copy” and not relevant.
“This action was not something the company undertook lightly, and we did so only after our attempts to resolve the matter were unsuccessful,” an Alector spokesperson wrote to Endpoints News. “We are pleased with the outcome and believe the decision brings this legal matter to a resolution.”
In an email, A Prevail spokesperson reiterated that the ruling was “a clear and decisive victory for Asa and Prevail. The bottom line is that Asa did not misappropriate any Alector trade secrets or breach his confidentiality obligation to Alector. ”
In a note, Stifel’s Paul Matteis said the ruling was largely a win for Prevail, as it freed up any potential claims on their frontotemporal dementia gene therapy, which analysts saw as the center of the dispute.
“Bottom line: most important for the two stocks, PRVL has freedom-to-operate with their progranulin gene therapy PR006, owns their IP, and does not owe ALEC any future royalties,” he said.
Abeliovich co-founded Alector as a scientific consultant in 2013 and, four years later, was named founding CEO of Prevail. Although Prevail focuses on gene therapy and Alector on the intersection of the immune system and neurology, their pipelines overlap. Prevail’s frontotemporal dementia program is designed to get patients to produce more progranulin, a protein that is also at the center of Alector’s lead programs.
Last June, Alector quietly disclosed a tight-lipped accusation in its quarterly report. They didn’t point to any particular patents or programs, but said they initiated arbitration with Abeliovich for allegedly breaching a consulting agreement and for improperly using “confidential information that he learned during the course of rendering services to us as our consulting Chief Scientific Officer/Chief Innovation Officer.”
Prevail quickly bit back against the accusations, arguing they were “without basis or merit.” They said Prevail’s science was based wholly on public info and work Abeliovich conducted independently, and they threatened counterclaims for “damages resulting from Alector’s actions, claims or demands.”
On Monday morning, Prevail claimed vindication. They said the arbitrator had thrown out Alector’s “principal claims.” Although Alector had been circumspect about their precise allegations, Prevail said that, in the hearings, Alector argued Abeliovich used trade secrets in his Prevail work and that Alector thus had claims to Prevail’s patents.
They said the “only relief” Alector had won was “permission to seek reimbursement for a portion of Alector’s out-of-pocket costs and fees in connection with certain document retention-related claims.”
“I am pleased with the decision, which confirms Prevail’s ownership of its intellectual property,” Abeliovich said in a statement. “Our team continues to advance our pipeline and remains committed to our critical mission of developing novel, urgently needed therapies for patients with neurodegenerative disorders such as Parkinson’s disease and frontotemporal dementia.”
Alector CEO Arnon Rosenthal also said the company was “pleased with the arbitrator’s decision.” They didn’t acknowledge any findings against them in their initial statement and didn’t directly respond to written questions about those findings. Instead, they said that the arbitrator found Abeliovich owed damages for violating his confidentiality agreement and destroying documents related to the proceedings. They added that the arbitrator also threw out a counterclaim that Alector brought the hearing in bad faith, finding Abeliovitch had not been forthright about Prevail’s targets.
He remains bound to contractual agreements with the company, they said.
A Prevail spokesperson said that what Alector called “destruction” was in fact the deletion of an extra copy of Alector documents, which took place prior to arbitration and which “was not intentional or willful and was not a breach of contract.”
The spokesperson said the arbitrator found Abeliovich failed to return Alector documents he was given as a consultant, adding that “the arbitrator did not find that any such documents were used to advance Prevail’s scientific program or were otherwise relevant in any way.”
The Alector spokesperson also took issue with Prevail’s language around the relief Alector was owed, calling it “patently false.”
“In fact, Alector was awarded damages and sanctions for Asa’s breach of contract and destruct of documents (spoliation), not ‘permission to seek reimbursement,'” they said.
The Prevail spokesperson said Alector failed to mention that the arbitrator threw out their key claims and found no harm to Alector, which meant the the damages were limited portion of what Alector has spent.
“[W]hich makes this proceeding a net financial loss to Alector,” they said.
On the business side, both Alector and Prevail got off to fast starts after launch. Alector’s immunology approach to dementia and Alzheimer’s vaulted them to unicorn status, although the company’s valuation has slipped from its peak. Bringing forward gene therapies for Parkinson’s and other neurodegenerative conditions, Prevail quickly vaulted from a $75 million Series A to a $125 million IPO.
It, too, has experienced the ups and downs of the stock market.