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`Why Are Bass and Spangenberg Filing IPR
`Petitions By Themselves?
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`By Zachary Silbersher - November 30, 2015
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`Last week, Kyle Bass and Erich Spangenberg filed two more IPRs—by themselves. Why
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`is this news? Because neither Hayman Capital nor any Coalition for Affordable Drugs
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`vehicles were involved.
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`It is not news that Kyle Bass’ Hayman Capital has been filing petitions for Inter Partes
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`Review (IPR) since the beginning of 2015 against scores of patents covering
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`pharmaceutical drugs. And it is not news that Erich Spangenberg has been Bass’ key
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`partner in Hayman Capitals’ IPR petitions to date. What is news is that Bass and
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`Spangenberg just filed two IPRs that listed only themselves as petitioners, and listed
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`only themselves as real-parties-in-interest. This is in stark contrast to Bass’ IPRs to
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`date, which listed a specific Coalition for Affordable Drugs vehicle as the petitioners, and
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`listed numerous Hayman Capital entities as the real-parties-in-interest.
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`http://www.markmanadvisors.com/blog/2015/11/30/why-are-bass-and-spangenberg-filing-...
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`3/10/2016
`
`Fresenius Ex. 2021
`Bass et al. v. Fresenius Kabi USA, IPR2016-00254
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`Why Are Bass and Spangenberg Filing IPR Petitions By Themselves? | Markman Adviso...
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`Why are Bass and Spangenberg filing IPR petitions by themselves? Are these petitions
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`part of Hayman Capital’s overall strategy to presumably profit in the stock market
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`based upon IPR taking down pharmaceutical patents? A closer look at the IPRs
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`themselves sheds some light on these questions.
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`The first petition attacks a patent covering a drug called Suprenza®, which is a weight-
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`reduction drug. The IPR petition indicates that the patent is owned by Alpex Pharma,
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`and Suprenza is a registered trademark of Citius Pharmaceuticals, LLC. Marketed by
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`Prenzamax, LLC. Distributed by Akrimax Pharmaceuticals, LLC. None of these
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`companies appear to be listed on any major stock market indices, and definitely do not
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`have deep liquidity that would make them attractive trading targets for a hedge fund
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`that is rumored to already have raised over $300M. Accordingly, the IPR may not be
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`affiliated with Bass’ fund because the target company cannot really be traded. Indeed,
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`the petition specifies that neither Bass nor Spangenberg currently owns any stock in
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`Alpex Pharma or Citius Pharmaceuticals.
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`More noteworthy, perhaps, is that the Suprenza patent appears to be especially weak.
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`It is directed to an orally-ingestible tablet, and the inventive feature is that it has a
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`“speckled” appearance. The patent teaches that the utility of a tablet with a speckled
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`appearance is to allow doctors and patients to identify the tablet. We have not vetted
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`the invalidity arguments set forth in the petition in depth, but on its face, this does not
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`appear to be a patent embodying any groundbreaking scientific discoveries. Rather, it
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`appears emblematic of some particularly ridiculous pharma patents out there.
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`As we previously observed on IAM’s blog, Bass’ strategy may include knocking off as
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`many weak patents as possible. His intent may not necessarily be to set up a trade
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`against the specific company holding these patents. But rather to show that there is
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`general rot within the body of patents backing up pharmaceutical drugs and elevating
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`up high drug prices. (This appears to be the strategy behind the Celgene IPRs, where
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`he attacked REMS patents, which were only a portion of all the Orange Book patents for
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`Revlimid.) Hayman Capital can still use the Suprenza IPR against a particularly
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`egregious patent in its short strategy even though it did not file it. Indeed, over the
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`weekend, Gretchen Morgenson’s piece in the New York Times covering Hayman
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`Capital’s IPR strategy discussed the Suprenza IPR and Fresenius IPR more over any
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`others. Because the fund cannot actually trade any of the pharmaceutical companies
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`http://www.markmanadvisors.com/blog/2015/11/30/why-are-bass-and-spangenberg-filing-...
`
`3/10/2016
`
`Fresenius Ex. 2021
`Bass et al. v. Fresenius Kabi USA, IPR2016-00254
`
`
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`Why Are Bass and Spangenberg Filing IPR Petitions By Themselves? | Markman Adviso...
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`involved, Bass and Spangenberg may have chosen not to involve the fund—and
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`specifically stated they are not trading it. This also potentially avoids another round of
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`motions for sanctions and abuse before the PTAB against a fund attacking a patent that
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`it cannot even trade.
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`The second petition is also interesting, but for a different reason. The second IPR
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`challenges a patent owned by Fresenius, which is a well-known pharmaceutical
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`company with a market cap in excess of $35B. What is interesting about this petition,
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`however, is that it has been the subject of numerous prior litigations and IPRs—which
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`were all dismissed. The patent was already asserted in seven or eight different Hatch-
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`Waxman cases against generic ANDA filers, but all those cases appear to have been
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`dismissed pursuant to stipulations of dismissal. In other words, the cases all settled.
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`The patent was also previously challenged in an IPR proceeding filed by Dr. Reddy’s.
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`That IPR also settled. It appears that Fresenius may be avoiding this patent from
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`falling by paying off all generic ANDA filers to drop their challenges against the patent.
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`The patent is also particularly weak, being directed to a rubber stopper for containing
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`the drug.
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`Bass has been very vocal that Hayman Capital will not settle any of the IPRs it files. He
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`has specifically told Congress that generic pharmaceutical companies are not effective
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`at policing bad patents because they are incentivized to enter pay-for-delay settlements
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`with the brand company. This appears to be a case in point. Indeed, in his letter to
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`Congress, Bass cited to the Dr. Reddy’s IPR against this very Fresenius patent that was
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`dropped after a settlement.
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`Again, just because Hayman Capital did not file the petition does not mean that it
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`cannot use the results of this petition as evidence for its short strategy. While it is not
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`clear why Hayman Capital may not wish to hold securities or short positions in
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`Fresenius (the IPR states that neither Bass nor Spangenberg hold any Fresenius
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`securities,) that may be the result of a conflict having nothing to do with Hayman
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`Capital’s overall strategy. Another theory, in light of some of the first few questionable
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`decisions denying Bass’ first few IPRs, is whether Bass and Spangenberg are testing
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`whether the PTAB will treat non-hedge-fund filings differently.
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`http://www.markmanadvisors.com/blog/2015/11/30/why-are-bass-and-spangenberg-filing-...
`
`3/10/2016
`
`Fresenius Ex. 2021
`Bass et al. v. Fresenius Kabi USA, IPR2016-00254
`
`
`
`Why Are Bass and Spangenberg Filing IPR Petitions By Themselves? | Markman Adviso...
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`Page 4 of 4
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`Overall, these latest IPR petitions, anomalously filed individually by Bass and
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`Spangenberg, nevertheless appear to remain consistent with Bass’ former statements
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`about his overall investment strategy. The Suprenza® IPR attacks an egregiously weak
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`patent, even if there are no tradeable securities involved. And the Fresenius IPR
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`attacks a weak patent protected by a pay-for-delay tactic used by brands and generics
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`to avoid policing bad patents. Even though Hayman Capital is not behind these
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`petitions, it may still hold them up as hallmarks of a rot in pharmaceutical patents at
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`large that are propping up high drug prices. Indeed, in the New York Times article over
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`the weekend, that is what happened.
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`These latest petitions are further evidence that Bass may be using the IPR petitions
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`filed in 2015 to tee up a much larger short of the pharmaceutical sector as a whole in
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`the next couple of years. Indeed, Spangenberg recently announced a $2B IPR fund
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`coming shortly. It does not matter who files the petitions—it does not even need to be
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`Bass or Spangenberg. It also does not matter if shorting the sector is the Hayman
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`Capital’s principal aim. If IPRs lead to one big pharma company falling, and a “Lehman”
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`moment happening in the pharmaceutical sector because of bad patents—even partially
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`because of bad patents, then Bass has already told the market that he will be best
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`positioned to take advantage of that trade.
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`Share this:
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`
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`Zachary Silbersher
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`http://www.markmanadvisors.com
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`
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`http://www.markmanadvisors.com/blog/2015/11/30/why-are-bass-and-spangenberg-filing-...
`
`3/10/2016
`
`Fresenius Ex. 2021
`Bass et al. v. Fresenius Kabi USA, IPR2016-00254