Kyle Bass – Prophet Or Fear Profiteer?
By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL
This past August, Anna Rose Welch, executive editor of BiosimilarDevelopment.com, wrote an article titled “The IPR Process: How Will Pharma’s Patents Fare?” The question was in reference to the recent exploits of Hayman Capital Management hedge fund manager Kyle Bass, who has been using the Inter Partes Review (IPR) proceeding to issue 16 patent challenges held by eight pharmaceutical companies.
The Bass attack of biopharma began with Acorda Therapeutics back in February of this year and was promptly met with a written response from Jim Greenwood, president and CEO of BIO, who stated, “Bass has opened a new door to abuse of the U.S. patent system, exploiting the USPTO’s [United States Patent and Trademark Office’s] patent challenge proceeding as part of his cynical short-selling strategy against innovative biotech companies that are delivering transformative therapies to patients in need.” A March Bloomberg Business article followed by an April Wall Street Journal piece seem to concur with Greenwood. But, if you think Bass is looking to score a few million by short-selling a few biopharma stocks, you are probably forgetting that he has a tendency to take a rather big-picture approach. To better understand him you need to dig into this profiteer’s prophetic philosophy, founded on pessimism, fear, cunning, and a willingness to “hedge” his bets.
In 2007, Bass turned his prediction of the subprime housing mortgage crisis into over half a billion dollars — a rare financial success during what, for most, was a global economic meltdown. In 2012, it is estimated Bass made 650 times his investment on the Greek debt crisis. In other words, Bass bets big. An assessment by patent-focused consultants at Markman Advisors reveals the Kyle Bass pharma patent IPR strategy to be much more sophisticated and long-term than most might think and that any conclusion about his ultimate investment strategy remains a speculation. The most likely scenario seems to be that Bass is preparing to set up the entire branded pharmaceutical industry. A Business Insider publication from 2011, “15 Brilliant Insights From Hedge Fund Superstar Kyle Bass,” provides the necessary knowledge. Insight number three: Psychology is more important than the quantitative analysis. American citizens are up in arms about high-priced drugs. If you want the masses to rally behind you, align yourself as one of them. Could this be why the IPR petitions filed by Bass have been done on the behalf of the Coalition For Affordable Drugs (ADROCA) LLC?
In a letter dated April 14, 2015, Bass wrote to the chairman of the U.S. House of Representatives Judiciary Committee, Bob Goodlatte, stating that he intended to challenge the existing patents of branded prescription drug companies “in order to police the abusive patent tactics used by the worst offending drug companies.” Bass business insight 15: He thinks social unrest will continue to grow. That being said, it never hurts to hedge your bets by fanning the high-priced drug flames via the IPR patent process. In other words, let’s not get carried away celebrating the recent IPR wins by Acorda and Biogen. Of the 11 new positions taken by Hayman Capital Management since June 30, 2015, 10 are biopharma and include the likes of branded behemoths (e.g., Pfizer, Merck) and generic giants (e.g., Perrigo, Mylan). Biopharma’s battle with Bass has only just begun.