August 12, 2015 / 8:46 PM / 3 years ago

Hedge fund manager Bass defends targeting drug patents for profit

NEW YORK, Aug 12 (Reuters) - Hedge fund manager Kyle Bass has defended his investment strategy of challenging drug patents after criticism from a biotech company, saying he can do good for society and make a profit.

Celgene Corp has alleged Bass is abusing a process set up to challenge patents by short selling pharmaceutical shares that drop when a patent review is filed.

Bass said in a filing late Tuesday that he and his Coalition for Affordable Drugs will end up lowering drug prices.

The coalition’s motivations “do not change the social value of its activities,” he said in papers filed with the U.S. Patent and Trademark Office. “Poor quality patents enable pharmaceutical companies to maintain artificially high drug prices.”

Last month, Celgene, one of the world’s largest biotechnology firms, asked the patent office to sanction Bass and others behind the coalition by throwing out its patent challenges.

Celgene said Bass’ real motive was to make money short-selling.

A representative for Celgene said the company “will continue to vigorously defend its patents.” Neither Bass nor a spokeswoman for his $2 billion Dallas-based Hayman Capital Management could be reached for further comment.

Since February Bass has filed 18 patent reviews, including five against Celgene.

New Jersey-based Celgene’s patents cover methods to ensure that thalidomide and related cancer drugs, which can cause severe birth defects, are only given to approved patients who are not pregnant.

The reviews began in 2012 as part of the America Invents Act, as a faster and easier way to eliminate poor quality patents. Drug companies have recently lobbied Congress to prevent hedge funds from launching the reviews.

In his response on Tuesday, Bass said short-selling is a legal and regulated market activity and that profit-making is at the heart of every patent.

“Celgene files for and acquires patents to profit from the higher drug prices that patents enable,” he said. Celgene’s patents, for example, enable it to price its Revlimid drug at more than $580 per pill, he said, giving the company nearly $5 billion in sales last year.

Targeting patents can drive down high prices, he said. The fact that the coalition’s motivations are not entirely altruistic, he said, is a “truthful irrelevancy.”

Reporting by Andrew Chung; Editing by Alexia Garamfalvi and Andrew Hay

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