Nervous drugmakers await decision on Bass' Ampyra patent challenge

Kyle Bass

Hedge-fund manager Kyle Bass has been causing his fair share of consternation among drugmakers this year, challenging patents on products from companies whose stocks he's shorted. Pharma companies, unsurprisingly, haven't been too pleased with his tactics, though--and by next week they could learn how the U.S. Patent and Trademark Office feels about the matter.

Industry watchers are expecting a verdict by Wednesday on whether there's merit in Bass' patent challenge on Acorda Therapeutics' ($ACOR) multiple sclerosis-fighter Ampyra--his first of 20, Bloomberg reports. If the agency thinks Bass has a shot to win, it'll institute a formal review.

"It is the bellwether for the entire series," Foley Hoag's Scott Kamholz, a former judge on the patent board that will make the decision, told the news service. "There's a huge amount of attention on this," he noted, with the decision potentially impacting players including Biogen ($BIIB) and Celgene ($CELG).

The word from the PTO may indicate just who can file patent challenges through the inter partes review system, set up four years ago to weed out low-quality patents involved in litigation. Bass' Coalition for Affordable Drugs has been using it differently, though, and profiting off shorted drug company stocks when its activities spook investors and sink shares.

Bass, though, doesn't see anything wrong with what he's doing; while he may be profiting on the challenges, it's a "truthful irrelevancy" that doesn't diminish the social value of his actions, he said recently. "Poor quality patents enable pharmaceutical companies to maintain artificially high drug prices and reap unjust monopoly profits paid for by consumers and taxpayers," he stressed.

But as Acorda argued in a filing with the office seen by Bloomberg, allowing hedge funds to "manipulate financial markets is inconsistent with congressional intent and the directives given to the office." And if the PTO does decide to institute a review, the way Acorda sees it, it'll "only encourage more such filings."

Meanwhile, Bass has already filed a petition on a second, related Ampyra patent, this one expiring in May 2027, Bloomberg notes. Even if Bass wins reviews in both cases, other patents will shield the drug from copycats through the end of 2026--but a PTO decision to review the case could still hurt Ampyra's efforts to block generic rivals, Leerink Partners analyst Paul Matteis told the news service.

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- here's the Bloomberg piece