Kyle Bass has scored a huge breakthrough in his short strategy -- and big pharma should be scared

Big pharma should be scared.

Texas hedge fund manager J. Kyle Bass’ just scored a major breakthrough in his big short strategy.

On Wednesday afternoon, the Patent Trial and Appeal Board, part of the Patent and Trademark Office, gave Bass institution for his patent challenge of Lialda, a drug used to treat ulcerative colitis that is owned by Shire.

This is huge for the Bass camp. It means the review will go to trial. 

It’s his first institution for an inter partes review (IPR) petition so far. The decision means that PTAB will hear the merits of his arguments.

The PTAB only allows IPR petitions to go to trial where it believes “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition,” according to a filing today.

Affordable drugs

Bass created the Coalition for Affordable Drugs earlier this year, and the group has now filed dozens of IPRs. He’s going after companies he believes are egregious examples of evergreening “BS patents.”

It’s all part of an “activist short strategy” that Bass thinks will end what he considers to be “pay for delay” agreements that stop lower-cost generic drug competitors from entering the market.

Up until now, Bass’ strategy had not been playing out in his favour. He’s had petitions for two drugs tossed out before a trial could be held. However, he has said that he’s going to “fight” and that he’s “not a quitter.”

His arguments will be heard at a time where drug prices have suddenly become a hot button issue. Democratic presidential candidate Hillary Clinton has recently spoken out about it

Democrats on the US House Oversight and Government Reform Committee then signed a letter sent to their chairman, US Rep. Jason Chaffetz (R-Utah), asking him to subpoena Valeant for information on drugs that have seen “
massive price increases.”

Shire’s stock was down about 0.5% in the after-hours session.   

Here’s the decision: 

Lialda Institution Decision-8


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