Jason G. Sheasby

In March, Sheasby delivered a complete win to Gilead Sciences Inc. as lead defense counsel in a challenge in Delaware Chancery Court as part of contract litigation arising from the merger of Gilead and Calistoga Pharmaceuticals Inc. At issue was Gilead’s Zydelig, a drug for treating blood cancers. Shareholder Representative Services v. Gilead Sciences Inc., 10537 (Del. Ch. Ct., filed Jan. 14, 2015).

The case is currently on appeal before the Delaware Supreme Court.

“It was a bench trial in front of the chief judge,” Sheasby said. “It was interesting because it’s what we focus on doing. Contracts can seem dry, but after we educated ourselves and the judge about the underlying science, it was a joy. There’s a lot about being a lawyer that’s not fun. But learning this science was fascinating.”

The contract litigation arose when plaintiff Shareholder Representative Services, the agent for Calistoga’s security holders, sued Gilead over a milestone provision in the merger agreement. SRS argued that a limited European approval for a small group of blood cancer patients with a rare genetic mutation whose only option was to try the drug qualified as an approval under the agreement that earned them a payout of up to $50 million.

“Their position was what I called radically rationalist,” Sheasby said. “The contract language was about first line approval for any hematologic cancer indication. They looked at the situation in Europe but ignored other issues.”

Sheasby and his team joined the case in the middle of discovery while depositions were starting. “We built our position slowly,” he said. “We pointed out that under SRS’s view of the world, royalties could be triggered by the single word ‘indication.’”

Chancellor Andre G. Bouchard agreed the case boiled down to exactly that but a broader approval of the drug was needed to qualify the shareholders for the milestone payout.

“You can’t control outcomes, but you can leave everything on the field,” Sheasby said. “We managed to turn dry contract language into a really important exploration of the science and how the folks who negotiated the merger agreement understood the language of the contract document. What made it so gratifying is that we found an outcome that was the actual intent of the parties.”

— John Roemer