forbes.com
`http://www.forbes.com/sites/danielfisher/2015/07/15/bass-goes-fishing-trouble-ahead-for-pharma-or-for-hedge-fund-
`trolls/#2715e4857a0b47e56d7f225e
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`Bass Goes Fishing: Trouble Ahead For Pharma, Or For Hedge-
`Fund Trolls?
`
`Jul 15, 2015 @ 10:05
`AM
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`Guest post written by
`
`Tom Engellenner
`
`Partner in the Intellectual Property Department of Pepper Hamilton LLP and editor of the
`PostGrant-Counsel blog.
`
`Kyle Bass, the manager of the Texas-based Hayman Capital Management hedge fund, has
`apparently decided to use the new inter partes review (IPR) process at the US Patent and Trademark Office (USPTO)
`to influence stock prices of U.S. biotechnology and pharmaceutical companies. He has launched at least seven new
`hedge funds for investors to challenge patents on FDA-approved drugs.
`
`The IPR process, recently established by Congress to permit defendants in patent infringement suits to quickly and
`inexpensively challenge the patents asserted against them, has proved to a potent weapon for patent challengers. In
`the roughly three years that inter partes review has been available, nearly 1,000 patents have been vetted by the
`USPTO and over 80 percent of them have had claims invalidated. Some in Congress are now questioning whether
`the IPR rules are perhaps skewed too far in favor of the challengers. But it is safe to say that no one in Congress
`intended this process to be an opportunity for Wall Street to get into the patent-busting business.
`
`Over the past four months, Bass-directed funds, named the “Coalition for Affordable Drugs” (Series I – VII), have
`launched at least 16 challenges to patents owned by Acorda Therapeutics, Shire, Jazz Pharmaceuticals,
`Pharmacyclics, Celgene, Biogen and Pozen. So far the USPTO has not yet issued an institution decision on any of his
`petitions.
`
`The scheme seems too simple to be true: short the stock of a publicly traded pharmaceutical company, file an IPR
`with the Patent Trial and Appeal Board (PTAB) that sends the stock price tumbling and then cover your short position
`by buying the stock at a hefty discount caused by the patent challenge.
`
`But that appears to be exactly what Mr. Bass’s new funds are designed to do. Acorda Therapeutics is a public
`company with a $1.5 billion market cap that gets most of its revenue from the sale of Ampyra®, an FDA approved
`treatment for multiple sclerosis. On February 10, 2015, Bass’s first Coalition for Affordable Drugs fund filed its first IPR
`petition, challenging one of Acorda’s patents on Ampyra®. When news of the challenge broke, Acorda’s stock fell
`almost 10 percent. The Bass coalition filed another petition against a second Acorda patent on Ampyra® on February
`27, 2015 – causing the stock to drop again, this time nearly 5 percent.
`
`In the case of the Ampyra® patents, the Bass fund is arguing that the active compound was already known for MS
`treatment and, hence, it was obvious to use the same drug, at lower doses for longer periods of time, to treat the
`same disease. Bass’s fund has also asserted that the claimed pharmacokinetic (sustained release) profile of Ampyra®
`was described in printed publications (Acorda’s own SEC filings) more than a year before the patent was filed.
`
`Recommended by Forbes
`
`Shortly after the Acorda challenges were filed, on April 1, 2015 Bass’s second fund (Coalition for Affordable Drugs II
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`LLC) went after Shire PLC’s patent on its Lialda/Mezavant® drug for treatment of ulcerative colitis. Sold under the
`Lialda or Mezavant trademark in different jurisdictions, the Shire product is a controlled release formulation of
`mesalamine that generated more than $USD 630M in sales worldwide in 2014. The Series II fund petition asserts that
`Shire’s claims to a sustained release formulation of mesalamine are obvious in light of prior publications.
`
`On the same day, the Bass Coalition II also went after a second Shire patent, this time on the drug Gattex®, an FDA
`approved treatment for small bowel syndrome that recently had been acquired by Shire through a $5.2 billion
`purchase of NPS Pharmaceuticals Inc., in February. The Petition against Gattex® asserts that the patent claims are
`also obvious in light of the prior art. The dual attacks on Lialda® and Gattex® on April 1, 2015 appear to have had a
`significant short-term effect on Shire’s stock – the stock price had dropped over 12 percent by April 3rd.
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