New York (HedgeCo.net) – After hearing criticism for one of the ways he attempts to make money in his hedge fund, J. Kyle Bass decided to strike back. Bass is the founder of Hayman Capital Management and the strategy he has taken criticism for is known as an “activist short strategy”.
The strategy involves filing petitions against the patents of drugmakers and placing bearish bets against the company’s stock at the same time. As one can imagine, big pharma companies are not happy with Bass and his strategy.
One of Bass’ favorite targets is Celgene (Nasdaq: CELG) which has been hit with five petitions. Apparently they had had enough and they have filed a claim against the Coalition for Affordable Drugs which was set up by Bass. The claim is for “abuse of process”.
In a recent article from Business Insider, Bass’ response to dismiss the Celgene motion was quoted. Here are three excerpts from the article that are direct quotes from Bass’ response.
“Celgene’s motion is littered with references to the Petitioner’s and Real Parties-in-Interest’s (collectively, ‘CFAD’) ‘admitted profit motive,’ and makes the curious argument that filing IPR petitions with a profit motive constitutes an ‘abuse of process.’
Yet at the heart of nearly every patent and nearly every IPR, the motivation is profit. Celgene files for and acquires patents to profit from the higher drug prices that patents enable. Generic pharmaceutical companies challenge patents to profit from generic sales. Celgene’s argument is in conflict with Supreme Court precedent expressly finding it in the public’s interest for economically motivated actors to challenge patents.”
“[Coalition for Affordable Drugs] anticipates that fees and costs to complete an IPR for a single drug is approximately $1 million. There are a limited number of entities capable of making that financial commitment. And fewer can make such a commitment without the prospect of profiting from their efforts.
The fact is CFAD’s motivations do not change the social value of its activities. Poor quality patents enable pharmaceutical companies to maintain artificially high drug prices and reap unjust monopoly profits paid for by consumers and taxpayers.”
“Celgene accuses CFAD of motives that are not entirely ‘altruistic.’ That is a truthful irrelevancy. The U.S. economy is based largely on the notion that individual self-interest, properly directed, benefits society writ large. Celgene’s motive is to profit from consumers and taxpayers from drug sales. Celgene’s patent-conferred monopoly results in Revlimid prices that exceed $580 per pill — creating costs in excess of $200,000 per patient year.”
