Prevail and Alector founder Asa Abeliovich (file photo)

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.”

Arnon Rosen­thal

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.

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