Those who seek to profit from shorting strategies should keep a close eye on Kyle Bass’ war against the pharmaceutical industry. The founder of Hayman Capital Management has been filing inter-partes-reviews (IPRs) challenging the patents of numerous drugmakers that “allege innovation”. Bass told CNBC’s “Squawk on the Street” that he is targeting “things that are silly that shouldn’t be backed by the U.S. Patent Office”. He also mentioned his plans to file IPRs on less than 1% of the drugs on the market, claiming that “the ones that we are going after are the kind of egregious examples of evergreening, which end up costing the public at large tens of billions of dollars a year in prescription drug prices”.
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Getting back to our story, Kyle Bass’ activist short strategy has not turned out successful thus far, but he is not going to give up anytime soon. Earlier this month, the Patent Trial and Appeal Board rejected the hedge fund manager’s petitions to review a patent for Biogen Inc. (NASDAQ:BIIB)’s Tecfidera. Acorda Therapeutics Inc. (NASDAQ:ACOR) represents another target of the Coalition for Affordable Drugs, formed by Bass. The Patent Trial and Appeal Board also declined to review two cases on Acorda, saying that the information provided by Bass was not publicly available. However, he has already refiled the IPRs on Acorda, which clearly indicates that he will keep up the fight.
Despite fighting the pharmaceutical industry, Bass’ Hayman Capital Management initiated a number of long positions within the industry during the second quarter. Specifically, the investment firm acquired an 836,593 share-stake in Perrigo Company Public Limited Company (NYSE:PRGO), a new stake in Mylan N.V. (NASDAQ:MYL) that consists of 780,251 shares, and a 63,675 share-position in Pfizer Inc. (NYSE:PFE), to name just a few. Therefore, the aforementioned companies will surely not serve as potential targets of Bass’ campaign.