If Kyle Bass’s Coalition for Affordable Drugs Series II hedge fund was hoping to reap a windfall from short positions in Shire Plc’s stock this week, it was dealt a major setback by a Patent Trial and Appeal Board (PTAB) decision to uphold Shire’s patent on its colitis drug, Lialda®. In a final written decision
It’s time for an update on Kyle Bass’s efforts to rid America of the pharmaceutical patents that support high priced drugs. Between February and September 2015, at least eleven investment funds organized by J. Kyle Bass and Erich Spangenberg (the Coalitions for Affordable Drugs Series I – XI) filed nearly three dozen different petitions for review of patents held by various drug companies. The petitions were designed to take advantage of the new inter partes review (IPR) proceedings established under the America Invents Act (AIA) in 2012.
Speculation has been rampant as to how Bass’s investors will benefit. Most people think that the funds have been shorting (or will short) the shares of the publicly traded pharmaceutical companies that own the patents; wait for the stock values to tumble and then cover their short positions by buying the stocks at a hefty discount caused by their patent challenges. Others suggest that the funds will invest in generic drug manufacturers that will be able to compete once the drug patents are eliminated.
In the fall of 2015, Bass and Spangenberg appear to have switched gears and began filing petitions in their own names rather than in the names of the various Coalitions for Affordable Drugs (CAD) funds. Whether this represents an actual change in the funding of the IPR challenges or just a legal nicety (i.e. a conclusion that the underlying CADs need not be named under USPTO rules) is not clear.
The hopes of the pharmaceutical industry that these petitions would be quickly dismissed out of hand have been dashed by the Patent Office. Despite initial setbacks for the CADs early last year, over half of the petitions (18 out of 33) have now been found to present a reasonable likelihood of success. In each of these instances, a trial is underway to determine whether the patent is invalid. Given the high statistical likelihood (over ninety percent) that patents challenged under the AIA are ultimately found at least partially invalid once a trial is completed, the pharmaceutical companies have reason to be worried.…
Continue Reading Bass Continues Fishing; Pharma Seeks Sanctuary
Kyle Bass and his hedge funds, the Coalitions for Affordable Drugs LLC, have failed in several of their initial attempts to knock out drug patents. (See our prior article detailing the first seven hedge funds formed by Bass to challenge various pharmaceutic companies.) In two decisions handed down late last month, the Patent Trial and Appeal Board (PTAB) of the US Patent Office refused to initiate trials on two petitions filed by Bass to challenge two patents on Acorda Therapeutics Inc.’s multiple sclerosis drug Ampyra. Then on September 2, 2015 another one of the Bass Funds, the Coalition for Affordable Drugs (Series V), was also dealt a setback in its effort to invalidate Biogen’s patents on another multiple sclerosis drug, Tecfidera.
However, in each instance, the PTAB reached decisions on the merits of the hedge fund’s petitions. The fact that the PTAB considered the petitions and did not exercise its discretion to reject them outright based on the fund’s primary goal of depressing stock prices, was all the encouragement Bass needed. During the last week in August and the first week in September, the Bass funds filed nine more challenges to pharmaceutical patents, bringing the total number to 32 invalidity petitions by eleven different funds.
In the case of the initial challenges to Acorda’s patents, the PTAB found that the Bass fund had failed to prove that two posters presented at a conference were “printed publications” due to insufficient evidence on how long the posters were presented, on the expertise of those who may have seen the posters, or the likelihood that one could have copied the poster material. The Board concluded, “we are not persuaded that petitioner has made a threshold showing that the posters were sufficiently publicly accessible to qualify as a ‘printed publication.’”
Despite this holding, the Bass fund has apparently decided to “double down” on the Acorda bet, filing another petition against each of the previously challenged Acorda patents on September 2nd as well as new petitions against two other Acorda patents covering the Ampyra drug on September 3rd.