New York (HedgeCo.net) – He has been called many names by pharmaceutical and biotech companies, one of which is “patent troll”, but Kyle Bass has to be enjoying what has taken place in the last few weeks. First and foremost, Bass has to be happy that U.S. patent regulators ruled in his favor when Celgene challenged the strategy of challenging drug patents for profit. The regulators stated that, “Profit is at the heart of nearly every patent” before ruling that the strategy is valid.

The second item that has to have Bass smiling is the selloff within the pharma and biotech sectors. Bass has claimed that the reason for the patent challenges wasn’t only about profit, but it was also to prevent or reduce price gouging within the pharmaceutical arena. He formed the Coalition for Affordable Drugs in order file the patent challenges and along with the hedge fund runs, Hayman Capital Management, they would challenge the patents while the fund would make bearish bets on the companies whose patents he was challenging.

Enter Martin Shkreli, the now infamous former hedge fund manager that used Turing Pharmaceuticals to buy the rights to Daraprim and then raised the price from $13.50 to $750 per tablet. Thanks to the New York Times article that outed Shkreli and Turing, the price of drugs has become the latest hot-button political agenda item. And with that, the drug and biotech firms Bass was making bearish bets against have more than likely fallen since almost all stocks within the sectors are down. Rather than having to wait for the all of the patent challenges to play out in court, Mr. Bass may have profited greatly in the last nine trading sessions as the biotech sector lost over 14%.

Rick Pendergraft
Research Analyst
HedgeCoVest