Stephen Neal ()
In late 2011, Gilead Sciences Inc. revealed that it was spending $11 billion in cash to acquire an unprofitable company called Pharmasset Inc. that was working on a yet-to-be approved Hepatitis C treatment. Gilead’s stock price dropped 10 percent on the day of the announcement.
“For Gilead to give up effectively one-third of their value for an unproven asset still subject to significant ongoing clinical risk seems remarkable,” one analyst opined. “Gilead is paying too much,” another said bluntly.
It turns out that Gilead’s bet on Pharmasset was even more fraught than it seemed. Thanks to a regulatory filing last week, we now know the deal was haunted by a collaboration agreement that Pharmasset reached with F. Hoffmann-La Roche AG back in 2004. Roche commenced an arbitration against Gilead in March 2013, alleging that the 2004 agreement made it the rightful owner of Pharmasset’s Hep C treatment, which Gilead is selling as a pricey prescription under the brand name Sovaldi.
This story has a happy ending for Gilead. For one thing, Sovaldi is on track to generate $10 billion in annual revenue for the company, making it one of the most commercially successful drugs ever launched. Gilead’s stock price is up a staggering 400 percent since the Pharmasset buy was first announced.
As for the bet-the-company arbitration, Gilead disclosed last week that arbitrators rejected Roche’s ownership bid on Aug. 14. “Roche failed to establish any of their claims,” Gilead wrote in its regulatory filing. “As a result, Roche is not entitled to any damages or other relief.” The decision, rendered by arbitrators affiliated with the American Arbitration Association, isn’t public.
The credit for defeating Roche goes to Cooley, one of Gilead’s go-to law firms for more than a decade, and to lead counsel (and firm chairman) Stephen Neal. At least 32 Cooley attorneys worked on the case at various points, squaring off against a Williams & Connolly team led by Joseph Petrosinelli.
Neal and Cooley partners Martin Schenker and Michelle Rhyu helmed a trial team of 15 Cooley lawyers when the arbitration climaxed in a two-week hearing in New York in June. Neal delivered the opening, closing and key cross-examinations.
Neal declined to get into the specifics of the ruling when we reached him on Thursday, citing confidentiality restrictions. But like any smart firm chairman, he did say some nice things about Gilead’s in-house lawyers. Given the high stakes, other companies might have settled, Neal suggested.
“We knew from the beginning that we were right,” Neal said. “But despite that, it took real fortitude from the client to see this through to the end, and the client never hesitated.”
Call it fortitude or call it a lucky bet, but Gilead is unstoppable at the moment. Neal and his team helped make sure of that.