Israeli professors fight for Kite Pharma sale spoils

Prof. Zelig Eshar Photo: Shlomi Yosef

Prof. Gideon Gross is suing Prof. Zelig Eshhar, alleging that Eshhar cheated him out of his share of the $11.9 billion sale of Kite, which has developed a revolutionary cancer drug.

Sometime during the 1980s, Prof. Gideon Gross and Prof. Zelig Eshhar, then student and teacher, shared a chemical immunology laboratory at Weizmann Institute of Science. Then something happened to them that every researcher dreams of. They made a revolutionary discovery - that a treatment for cancer could be developed utilizing genetic engineering of the immune system's cells. It later turned out that the technology underlying the research was likely to emerge as one of the biggest breakthrough drugs for cancer. The company founded by Eshhar for developing and commercializing the technology - Kite Pharma - was sold to biotech giant Gilead Sciences at a value of $11.9 billion. Somewhere along the line, however, the teacher and the student had a falling out.

The dispute went to court last month. Gross filed a lawsuit against Eshhar alleging that he was entitled to a share of Kite Pharma. For his part, Eshhar claims that he owes Gross nothing, and that the lawsuit should be dismissed.

How did the rift between the two inventors responsible for what is emerging as a revolution in cancer treatment begin? As usual, the answer is money - a lot of money. It has almost become a ritual - every sizeable exist brings legal proceedings, demands, or lawsuits in its wake by various parties alleging that they were partners in it. The lawsuit filed by Gross, however, which exposes the roots of the quarrel between the two researchers, does not concern only the exit. While the lawsuit was filed following the dramatic Kite Pharma exit last September - the biggest deal in history for a company whose product has not yet been approved - it appears that the arguments in it originated many years earlier.

Breach of an agreement

In his claim, Gross is demanding that the court rule that 15% of the options or shares in Kite Pharma held by Eshhar belong to him. In the lawsuit and its attached appendices, however, Gross is making additional allegations against Eshhar that do not involve the exit and the dazzling proceeds from it. Gross is asserting that he was deprived of what he said was owed to him long before the dream of an exit became a reality. The lawsuit indicates that Gross intends to file additional claims against Eshhar in the future. According to Gross, the roots of the dispute lie in the early years of the 21st century, when Eshhar, Gross, and Tova Waks, a technician in Eshha's laboratory from its first days and a partner in the initial development of the discovery, obtained the rights to the invention and the patents registered for it from Yeda R&D Company Ltd., the technology transfer arm of the Weizmann Institute of Science.

According to the lawsuit, in September 2011, at Eshhar's request, Waks and Gross transferred all their rights in the various patents to Eshhar in exchange for his promise to share all the proceeds and intellectual property rights later received by Eshhar when the patents were commercialized. The distribution set was allegedly 70% for Eshhar, 15% for Gross, and 15% for Waks. Gross asserts that he trusted his teacher absolutely, and did not hesitate to accept the terms set by Eshhar.

Gross says that Eshhar commercialized the patents, but violated his commitments according the agreement between them, and did not give him his share of the money obtained from commercialization. According to Gross, he was stunned to learn from the reports of the Kite Pharma exit that Eshhar was been given an option in late 2013 to buy 403,000 shares in the company at $0.70 per share. It is alleged that Eshhar can now sell either the options, or, if he exercises the options, the shares.

"Evasion of a fee"

Eshhar filed his initial response to the lawsuit last week, but has not yet submitted a detailed statement of defense to the allegations made against him by Gross; he is asking that the lawsuit be dismissed, arguing that it was filed improperly. Gross did not file his lawsuit using the normal procedure, but as an originating summons - an abbreviated and rapidly hear proceeding on the basis of statements only, without pleadings or evidence. As a rule, what is requested in this high-speed proceeding is declaratory relief or writs. In this case, Gross petitioned the court to declare that the money possessed by Eshhar belongs to him, Gross. At the beginning of his petition for dismissal, Eshhar denies all of Gross's allegations. According to Eshhar, the argument that Gross is entitled to 15% of the options (or shares) the Eshhar holds in Kite Pharma, net of the share of other holders of rights, is "nothing more than wishful thinking on Gross's part, with absolutely nothing to support it." Eshhar told the court that meanwhile, between the date on which the originating summons was filed and the date on which he petitioned for its dismissal, the options had already been redeemed, and their proceeds transferred to him.

As for Gross's selection of an originating summons (which does not require payment of a fee) instead of an ordinary lawsuit (which requires payment of a fee derived from the amount of the lawsuit), Eshhar argues that "an examination of the substance of the lawsuit shows that it is seeking, under cover of declaratory relief or a mandatory injunction, an operative remedy of clear financial significance whose value can easily be quantified." Eshhar's response therefore states, "Gross filed his illegitimate lawsuit as a claim for high-speed remedy in order to evade paying the legal fee, and in order to obtain the hearing advantages of an originating summons proceeding."

Eshhar alleges that at the present time, when the originating summons is being filed, the value of his options or shares can be quantified, and therefore also the value of the operative-monetary relief for which Gross is petitioning. Eshhar, however, does not state what these sums are; he writes, "Gross's real claim is to receive millions of dollars, which would have required him to pay a considerable fee."

Disputed calculation

Eshhar argues that even though Gross was perfectly aware that the options that Eshhar holds would be redeemed and converted into money in the framework of the sale of Kite Pharma, "Gross deliberately refrained from stating the total value of the options, the value of his alleged and denied share of the options, and refrained from explicitly asking the court to order the transfer of the money received from redemption of the options to him."

According to Eshhar, Gross is arguing that he is entitled to 15% of the 430,000 options whose exercise price is $0.70 per share, and the price paid for them under the merger deal is $180 per share. "A simple and easy arithmetic calculation will enable Gross to calculate the monetary value of the relief he is requesting," Eshhar alleges, but he did not himself use this arithmetic calculation, merely writing, "The real monetary-operative relief claimed by Gross is estimated in the millions of dollars."

In Gross's answer to Eshhar's arguments in his response to the petition for summary dismissal of the originating summons, he argues that he has no means of calculating the value of the options to which he is entitled, among other things because he does not know whether the other rights holders are entitled to any shares whatsoever of the options held by Eshhar, and if so, the proportion of that holding. "Why did Eshhar and Cabaret Biotech, which he owns, refrain from quantifying the options' value themselves, and did not state the proceeds that Eshhar received (insofar as it was received)?," Gross wondered in his response.

Gross also writes that when the lawsuit was filed, it was by no means certain that such proceeds would be received, and that Eshhar is trying to attribute to him "prophetic abilities that he unfortunately does not have." According to Gross, even if he could have quantified the value of the options to which he was entitled (and he denies this assertion), the lawsuit was filed in the proper legal format, and he paid a sufficient fee for it.

Origins of the dispute

Eshhar and Gross are professors of immunology and researchers with international reputations in genetic immunotherapy treatment for cancer. Gross currently heads the immunology laboratory at the MIGAL Galilee Research Institute and is Dean of the Faculty of Sciences & Technology at Tel Hai College. 

Gross's lawsuit tells the story of the beginning of the relationship between the two scientists. In 1987-1990, Gross did his PhD at Weitzmann Institute, with Eshhar as his advisor. Gross asserts that in the framework of his PhD thesis, he succeeded in demonstrating for the first time ever that immune system cells (T-cells) could be engineered using genes, and made the revolutionary discovery that a treatment for cancer could be developed utilizing genetic engineering of the cells. The genetically engineered cells, called CAR-Ts, are capable of identifying and destroying cancerous cells.

According to Gross's lawsuit, Eshhar planted the seed of the idea for Gross' doctorate when he proposed that Gross research how immune system cells operate, and whether they could be genetically engineered. He asserts, however, that it was merely a general and raw ideal. "In his research, Gross brought this idea to life, and achieved a conceptual breakthrough that led to all of the research in the CAR-T field. In May 1990, Gross was awarded the Fainberg Graduate School John F Kennedy prize (the highest award given to doctoral students)," the lawsuit asserts.

After receiving his doctorate, Gross went to the US for six months for a post-doctorate, where he continued his CAR-T technological research and development with Eshhar in Prof. Steven Rosenberg's laboratory at the National Cancer Institute of the US National Institutes of Health in Maryland.

Gross and Eshhar then separated professionally. Gross continued his work in genetic immunotherapy and his development of many new ideas involving treatment of cancer and other diseases. Eshhar continued to work towards clinical trials of CAR-Ts.

The two parties resumed their cooperation in 2014-2015 in the framework of a sabbatical in Eshhar's laboratory at Tel Aviv Sourasky Medical Center (Ichilov Hospital). In 2015, Eshhar won the Israel Prize for life sciences. He said that his scientific work's main achievement was the development of genetically engineered T-cells for attacking cancerous cells. He sent Gross and his wife an invitation to the ceremony at which he was awarded the prize, and attached a letter to Gross that said, "This ceremonial event, the Israel Prize, is a prize for you doctorate and post-doctorate work, which is an extremely significant part of the life sciences work for which I won the prize." According to Gross, he regarded Eshhar as his mentor, and trusted him completely and absolutely. "Eshhar exploited this and violated this trust in the worst way," Gross wrote in his lawsuit.

Published by Globes [online], Israel Business News - www.globes-online.com - on November 5, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Prof. Zelig Eshar Photo: Shlomi Yosef
Prof. Zelig Eshar Photo: Shlomi Yosef
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