Patent challenger Bass shrugs off Celgene's attack on his short-selling motives

Kyle Bass

Money makes the world go round--the patent world, that is. That's the word from hedge funder Kyle Bass, who has been targeting drug patents he calls "low quality," and shorting pharma stocks along the way.

So what if Bass makes money off those shorts? His profit motives "do not change the social value of his activities," according to a U.S. Patent and Trademark Office filing by Bass' Coalition for Affordable Drugs (as quoted by Bloomberg).

After all, drugmakers file patents and fight challenges for the same reason--to make a profit. "Poor quality patents enable pharmaceutical companies to maintain artificially high drug prices and reap unjust monopoly profits paid for by consumers and taxpayers," the filing states.

The filing comes in a dispute with Celgene ($CELG), which is bucking the coalition's challenge to several patents, including one covering its best-selling Revlimid. Celgene is asking the patent office to toss out the challenges as a punishment for Bass' stock-shorting strategy.

The coalition opposes those sanctions, of course, pointing out Celgene's own profit-maximizing strategies. "Celgene accuses CFAD of motives that are not entirely "altruistic." That is a truthful irrelevancy," the filing states, going on to cite Revlimid's $5 billion in 2014 sales and its $540-per-pill price.

But Celgene isn't the only drugmaker balking at Bass' use of a new legal maneuver--inter partes review, instituted in 2011--to challenge drug patents at the PTO. Industry trade groups PhRMA and BIO have asked Congress to change the inter partes review system to exclude drug patents.

Among Bass' other targets have been Acorda Therapeutics' ($ACOR) Ampyra, Shire's ($SHPG) Lialda and Gattex, and Johnson & Johnson ($JNJ) and AbbVie's ($ABBV) Imbruvica. It remains to be seen whether any of Bass' challenges will succeed at the patent office. But the very idea of it is spooking investors (and delivering returns on Bass' short positions). Acorda's stock slipped 7% on Bass' move, and Shire's dropped on the news, too.

- see the coalition's latest filing (PDF)

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