Prevail and Alector Both Declare Victory in Year-Long Legal Battle

Legal Battle_Compressed

When both sides of a year-long arbitration claim the victory, do we call that a tie? 

Prevail Therapeutics rushed to put their spin on the results of the arbitration brought against CEO Asa Abeliovich out first with a news release claiming “decisive victory”. Less than an hour later, Alector pushed out their version announcing the arbitrator decided in their favor.

The confidential arbitration was brought by Alector against Prevail CEO Dr. Asa Abeliovich, who was Alector’s former co-founder. In the summer of 2019, Alector accused Abeliovich of breaching his consulting agreement and improperly using “confidential information that he learned during the course of rendering services to us as our consulting Chief Scientific Officer/Chief Innovation Officer.”  

At the time, Prevail fired back with an 8-K filing calling the accusations “without basis or merit” and insisting the work done by Abeliovich was derived from publicly available information, or from work done outside of and separate from Alector. They even threatened to countersue due to damages to Prevail or Abeliovich from Alector’s claims. 

So how are both now calling the final ruling a win? By presenting different information.

Prevail chose to highlight that the arbitrator rejected the claims that Abeliovich stole trade secrets. Alector focused on the arbitrator finding that Abeliovich destroyed documents, potentially relevant to their claims.  

The PR firm contracted by Prevail told BioSpace the arbitrator rejected all of Alector’s key claims that Dr. Abeliovich breached his consulting agreement. The only breach discovered was that he had failed to return documents he received during the term of his consulting agreement with Alector. However, there was no evidence those documents had been used to advance Prevail’s scientific program or were otherwise relevant. As for the destroyed documents, it was determined they were deleted before the arbitration was filed, not as an intentional or willful breach of contract but rather a “discovery issue.” 

On the other side of the table, Alector told BioSpace that their primary goal was to enforce Abeliovich’s obligations to Alector. According to Alector, the arbitrator determined Abeliovich acted “recklessly” in his destruction of documents and metadata and failed to be forthcoming about his actions. They feel his breach of contract was in that he did not make any effort to return Alector’s confidential information.  

They also both had a word to say about the other’s press release.

Alector says the language in Prevail’s news release is inaccurate in saying that the only relief granted to Alector was permission to seek reimbursement for a portion of out-of-pocket costs and fees. They clarified curtly that Alector was awarded damages and sanctions for Abeliovich’s breach of contract and destruction of documents, not “permission to seek reimbursement.” 

Prevail had a bone to pick with the fact that Alector’s press release “omitted the fact that the arbitrator specifically found that there was no breach of confidentiality and no misappropriation of trade secrets, which were Alector’s original key claims, and therefore no harm to Alector.” They say for this reason the damages and sanctions were limited to a portion of Alector’s out-of-pocket arbitration expenses, making this proceeding a net financial loss to Alector. 

Stifel Financial Corp. Issued an industry update regarding the arbitration with this 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. The arbitration, which had been ongoing for over a year, matters less to ALEC shares, as the potential outperformance of ALEC's stock still rests on the next update for AL001 (1H21) in FTD-GRN and the prospects of pipeline assets including TREM2 in Alzheimer's. Alector did come away victorious on a few arbitration claims related to breach-of-contract/document retention, and some damages tied to a %of legal fees will be owed by PRVL to ALEC; that said while we don't know the amount, we don't think it will be majorly impactful to either company's cash runway.” 

Alector said, “We are pleased with this outcome and we believe the decision brings this legal matter to a resolution.” 

While Prevail closed with, “The arbitrator’s decision on the whole 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.  Prevail remains focused on moving its programs forward for the benefit of patients in need of treatment options for neurodegenerative disorders.” 

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