Kyle Bass has lost the first round in his battle with the drug industry.
The U.S. Patent and Trademark Office said Monday the hedge-fund manager hadn’t come up with enough evidence to challenge two Acorda Therapeutics Inc. patents for the multiple sclerosis drug Ampyra. The information he was using wasn’t publicly available so couldn’t be used to invalidate the patents, the patent board decided. The decision to reject the petition cannot be appealed.
Because the findings were case-specific, the board left unanswered the bigger issue of whether it will consider other petitions filed by hedge funds for other drugs. More than two dozen petitions have been lodged by Bass’s Coalition for Affordable Drugs for blockbuster painkillers, blood thinners and a cancer treatment.
The next test will come in about a month, when the Patent Trial and Appeal Board will decide whether to institute reviews of patents related to two Shire Plc drugs, Lialda for ulcerative colitis and Gattex, a treatment for short bowel syndrome.
Also on Monday, Bass filed three more petitions, this time challenging patents on the Insys Therapeutics Inc. cancer pain treatment Subsys.
Acorda’s Ampyra is used to help people walk when they are suffering from multiple sclerosis, a disorder that attacks both the central nervous and immune systems. The active ingredient of the drug has been known for decades. Acorda’s patents cover a dosing regimen to make sure the drug works.
Bass, in his petition, argued Acorda’s patent simply cobbles together what scientists already knew about Ampyra’s active ingredient and the optimal dosage.
It wasn’t that easy, Acorda said in its response. Multiple sclerosis is a complex disease that can change from patient to patient, and from day to day, so coming up with a single solution was no simple task.
“We’re extremely gratified by the patent office’s decision denying institution” said Acorda’s lawyer, Gerald Flattmann of the Paul Hastings firm in New York. “It further validates the strength of the Acorda patent portfolio protecting Ampyra.”
Acorda, which gets about 90 percent of its revenue from Ampyra, soared on the news. Acorda shares rose 18 percent to $34.09 at 9:52 a.m. in New York trading after surging as much as 22 percent.
Bass relied on information that had been presented at scientific meetings, but the board said there wasn’t enough evidence that the information was publicly available. The three-judge panel had total discretion to decide whether to institute a review, based only on the arguments presented in the two sides’ filings.
“Given that the panel reasonably could have gone either way, I wonder whether there’s something else at work here,” said Scott Kamholz of Foley Hoag in Washington, a former judge on the patent board that made the decision. “Is it possible Bass’s motives in filing this request led the panel to demand of him a meticulous showing of every fact required to institute trial?”
The coalition, run by Bass’s Hayman Capital Management LP, filed petitions on two related patents, one expiring in 2025 and the other in 2027. Even without those two, there are still other patents protecting Ampyra from generic-drug competition through December 2026. Bass declined immediate comment.
Acorda reported $192.9 million in U.S. sales of Ampyra in the first six months, amounting to about 90 percent of its total revenue. The drug is only available through specialty pharmacies. Outside the U.S., it’s marketed by Biogen and is known as Fampyra.
Bass has never said exactly how he plans to make money on these petitions. Drugmakers claim that he is trying to undermine the value of their companies and betting that their stocks will fall. Bass, whose Hayman Capital made its name by betting on the U.S. housing market collapse, has said his plans to profit on the challenges is a “truthful irrelevancy.”
While defending the validity of its patent, Acorda also argued that Bass shouldn’t be allowed to “manipulate financial markets” through his petitions.
Acorda’s stock dropped after each of the coalition’s filings: by 9.7 percent on Feb. 10 and 4.8 percent on Feb. 27. Investors were trying to figure out this new wrinkle in what’s normally a routine cycle of litigation to determine when a generic drug can enter the market. Shares in other companies targeted by Bass have had little reaction thus far.
The cases are Coalition for Affordable Drugs v. Acorda Therapeutics, IPR2015-00720 and IPR2015-00817, U.S. Patent and Trademark Office (Alexandria, Virginia).