UPDATED: Hedge funder Kyle Bass' latest patent targets? Imbruvica and Pharmacyclics

Kyle Bass

When Texas hedge funder Kyle Bass promised to go after drug patents early this year, he held out a seemingly noble purpose. The pharma industry milks the healthcare system by "evergreening" drug patents, keeping brands protected--and expensive--for longer than they should be.

His first challenge, using a new method called inter partes review, appeared to follow that theme. The active ingredient in Acorda Therapeutics' ($ACOR) Ampyra was used for decades as bird poison, so, as one analyst has pointed out, it's an "old molecule" to start with.

Acorda did the work to make it useful in humans--to help multiple sclerosis patients walk better--well enough to pass clinical trials and win FDA approval. Bass challenged just two of its 5 FDA-listed patents; meanwhile, Acorda is fighting a half-dozen generics makers in court.

But now, Bass and his Coalition for Affordable Drugs are challenging a patent on Imbruvica, the Johnson & Johnson ($JNJ) and Pharmacyclics ($PCYC) cancer treatment. The drug is expected to surpass $10 billion in annual sales--and it's a key feature in AbbVie's ($ABBV) $21 billion bid for Pharmacyclics. It was just approved in 2013. And as a tyrosine kinase inhibitor it's one in a new generation of cancer-fighters.

The FDA made Imbruvica a "breakthrough" therapy for mantle cell lymphoma (MCL), and it was the second drug approved under that new program. After it won the FDA's blessing for another use in chronic lymphocytic leukemia, MD Anderson Cancer Center ran a story in its quarterly publication Conquest headlined, "The drug that may make chemo a thing of the past."

But the patent Bass is questioning, the '090 patent, is a method patent granted just last year--for treating MCL. It's not set to expire till 2031, 5 years after all the other Imbruvica patents listed in the FDA Orange Book.

Is that evergreening? Bass says so, and he's using Pharmacyclics' own research and PR against it. The company published its findings on Imbruvica as an MCL treatment as the drug was being developed, helping to make that method patent invalid for obviousness, the IPR filing notes. For instance, the method patent cites particular dosages and administration schedules; Bass' IPR petition says those amounts are obvious because of dose ranges used in clinical trials.

Whether the IPR petition goes anywhere is anyone's guess. But one thing is for certain: After Bass' petition was filed Monday, Pharmacyclics shares dropped. Not by a huge amount, as Acorda's did after the Ampyra challenge. But plenty to deliver a significantly bigger profit--provided you were short enough.

Dow Jones Newswire sources have said Bass' trades are set up to make that kind of profit. In a story that ran after Bass' challenge to a Jazz Pharmaceuticals' ($JAZZ) Xyrem patent, the news service cited anonymous sources close to Bass' firm saying that Hayman Capital is betting for and against shares of companies involved in the patent challenges.

- get the Morningstar piece
- see Imbruvica's patents in the Orange Book

Editor's note: This story was updated with additional information about Ampyra's patent coverage.