Hayman's Bass Aims At Horizon's $50/Day Vimovo in Latest IPR Filing

May 26 2015 | 3:46pm ET

Texas hedge fund manager Kyle Bass, head of $2 billion Hayman Capital Management, has trained his short-activist sights on Horizon Pharmaceuticals’ patent on arthritis drug Vimovo.

“Vimovo is a drug that merely combines a generic pain reliever with a generic acid inhibitor - but it costs 66 times more than its component parts, based solely on the fact that a single patent examiner issued (in error) the ‘907 patent,” writes Bass on the Harvest platform. 

“Vimovo’s Active Pharmaceutical Ingredients (“APIs”) are not new and vimovo should not be patented,” he writes further. 

What Vimovo does do, however, is account for more than half of Horizon’s annual sales, contributing $163 million of the company’s $296 million in 2014 net sales. Horizon bought the drug from AstraZeneca in 2013. At the time, each pill cost only $2. The current price is more than $26 apiece, raising the daily treatment cost to $50. 

Comparable generics, which in this case is potentially just the component APIs given separately and which are available without a prescription, costs less than a dollar per day, according to the website ValueWalk. 

Bass’s strategy challenges the validity and legitimacy of certain patents granted to pharmaceutical companies that allegedly rely on previously known technology and/or minor modifications to such things as dosage and packaging. 

Bass believes such abuse of intellectual property protections is a contributing factor to sky-high drug costs in the United States. He has publicly contended that U.S. drug firms were benefiting from questionable patents designed to limit generic competition, keeping drug prices inflated for much longer than necessary. In several cases identified by Bass, these drugs are blockbuster sellers for their owners. 

The process involves an Inter Partes Review petition with the U.S. Patent and Trademark office, an approach initially designed to make patent operations smoother, faster and more efficient.

Bass has publicly noted that settlement payments will not stop the challenges, and he employs sophisticated algorithms to analyze industry data and research to find what he terms the worst offenders.

Bass has filed 14 such challenges on seven drugs so far, including on Celgene’s drug Revlimid, Acorda's Ampyra, and Biogen’s drug Ampyra. He will reportedly target fewer than 35 drugs altogether, according to the Finanical Review.

The drug industry, unsurprisingly, is not taking kindly to Bass’s machinations. The chairman of the Senate Judiciary Committee noted recently that lawmakers are planning to amend legislation in order to combat what pharmaceutical companies have termed “abusive” patent reviews by Bass and others. 

Although not publicly disclosed, it is widely thought that Bass has shorted the stocks of the companies whose compounds he has targeted, hoping to cash in on the drop in stock price that will inevitably occur should his challenges be upheld. 


In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...

 

FINalternatives Trending

From the current issue of