After a 5.8 percent dip in 2010, Pepper Hamilton’s gross revenue rose 3.5 percent in 2011.
Between 2009 and 2010, the firm’s revenue fell from $333 million to $313.7 million. In 2011, however, the firm’s revenue jumped to $324.6 million.
The firm’s executive partner, Robert E. Heideck, attributed the revenue bump to a few busy practice areas.
“I think our pharmaceutical litigation practice continued to be very strong and our white-collar and patent litigation practices had very strong years,” he said.
Litigation brings in about 64 percent of the firm’s revenue.
Meanwhile, the transactional practice, which accounts for about 23 percent of the firm’s revenue, heated up toward the end of 2010 after a sluggish year and kept its brisk pace until late summer, at which point it slowed once again, according to Heideck.
Heideck said he believes that was the trajectory most firms’ transactional practices followed nationwide.
“Our transactional practices were strong in the first six months, but, like others in the industry, we experienced something of a slowdown in August,” he said.
Still, the firm saw its profit margin inch up from 35 percent to 37 percent and its net income grow about 9 percent, from $111 million in 2010 to $121 million in 2011.
The firm’s equity partner profits increased in 2011 by a wider margin than they had the previous year.
In 2010, the firm saw its profits per equity partner (PPP) rise about 1.4 percent from $721,000 in 2009 to $731,000 in 2010. In 2011, the firm’s PPP climbed roughly 4.8 percent to $766,000.
The firm’s revenue per lawyer (RPL) also grew about 1.3 percent, from $683,000 in 2010 to $692,000 in 2011, after slipping about 1.2 percent the previous year.
While Heideck told The Legal last year that the firm was able to increase profits in 2010 by being “very careful about our expenses and very cost-conscious during the year,” he said Tuesday that the “robust nature” of several of the firm’s practices was the real driving force behind profit growth in 2011.
“We had some expense savings — really expense reimbursements — from matters for the prior year, but I don’t think that was so significant that it moved the needle in any material way,” he said.
Heideck added that, along with several matters Pepper Hamilton’s patent litigation lawyers tried before the U.S. International Trade Commission, the firm represented and continues to represent several large drugmakers, including Eli Lilly and GlaxoSmithKline, in significant pharmaceutical litigation.
The firm obtained a complete defense jury verdict in November for Eli Lilly in a Los Angeles state court case involving antipsychotic drug Zyprexa and it continues to represent GlaxoSmithKline in the litigation over diabetes drug Avandia.
The firm also appeared to be in a hiring mode over the past year, increasing its overall headcount by roughly 2.2 percent in 2011, from 459 lawyers to 469 lawyers, after a drop of about 4.8 percent the previous year.
“I think we’re always looking to grow,” Heideck said. “Sometimes we’re successful and sometimes it’s a matter of timing.”
After growing its equity partner tier by 7 percent in 2010, the firm increased its number of equity partners by about 3.9 percent in 2011, from 152 lawyers to 158 lawyers.
Meanwhile, the firm grew its non-equity partner tier by about 9.1 percent in 2011, from 55 lawyers to 60 lawyers, after a steep drop of about 21.4 percent from 70 non-equity partners in 2009 to 55 lawyers in 2010.
The firm’s total non-equity compensation grew along with it, rising about 8.6 percent from $19.7 million in 2010 to $21.4 million in 2011.
According to Heideck, the firm’s partnership growth occurred through a mixture of lateral hires and associate promotions.
Heideck, who told The Legal last year that the firm had moved to a levels model in which associates advanced based on skill level rather than in lockstep, said Tuesday that the new model remains in place.
In addition to its lateral hires, Pepper Hamilton also brought aboard a few notable partners from sources outside private practice in 2011.
Jay A. Dubow, a securities litigator who worked at Pepper Hamilton for about a year before leaving in 2008 to serve as GC of longtime client Advanta Corp., returned to the firm in April following Advanta’s bankruptcy.
He is now co-chairman of the securities and financial institutions enforcement section of the firm’s commercial litigation practice group.
In August, the firm bulked up its white-collar defense practice with the addition of Richard J. Zack, a 12-year veteran of the U.S. Attorney’s Office.
Looking ahead, Heideck said he anticipates the firm’s patent, white-collar and pharmaceutical litigation practices will continue to be hot, along with its construction practice.
According to Heideck, that group, while relatively small, was busy throughout 2011, mostly with disputes over projects that either have been or are being built.
Heideck said he is also holding out “cautious optimism” for a strengthened transactional practice this year.
“We have many deals that are on hold and have been on hold for the last five months and perhaps they’ll get more active,” he said.
And while the firm has not opened new locations recently, Heideck said it’s “always willing to explore opportunities” and will look to grow its New York, Boston and Washington, D.C., practices in the meantime.
Whatever the firm does during the course of the next year, it will do so with some new leadership at the helm.
The firm announced in early February that it has hired Scott Green, who has served as executive director of Wilmer Cutler Pickering Hale & Dorr since 2007, to serve as its first CEO. He will serve on the executive committee and will oversee both the firm’s legal and management functions.
Heideck is in his final year as executive partner of the firm and told The Legal he would be working with Green in the coming year to ensure a smooth leadership transition. The firm will maintain an executive partner role, but has not yet named who will replace Heideck.
Zack Needles can be contacted at firstname.lastname@example.org or at 215-557-2493. Follow him on Twitter @ZNeedlesTLI. •
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This report is part of The Legal Intelligencer’s early coverage of the 2011 financial results of local firms as part of the Am Law 100 and Second Hundred reports. Full results for The Am Law 100 will be published in The American Lawyer and online in May. The Am Law Second Hundred will be published in June. View our interactive chart, which will be updated as additional law firm financial data is reported.