We write to update our April 29th post regarding the stock price of pharma companies targeted by Kyle Bass’ Coalition for Affordable Drugs LLC’s (“CFAD”) inter partes review (IPR) petitions. According to Bass, the generation of returns for his hedge fund investors through short selling the stock of his IPR targets is the primary driver of his IPR petition strategy. Now that several of his petitions have been ruled on, let’s see how his “big short” strategy has played out. As of today, half of the fourteen petitions mentioned in our first post have been granted (i.e., the PTAB has instituted an IPR), and the other half have been denied. Of the seven successful petitions, four were against Celgene Corp. and three against Shire PLC. No IPR proceedings have yet been concluded.

The chart below shows stock movements for targets for which IPR petitions were granted. The share prices on the day before and day after the institution of the IPR are listed in the chart below, along with similar share price information at the time of filing of the petition. The final column indicates the difference between the share prices listed the day before petition filing and the day after petition grant. Although Celgene experienced modest increases, Shire experienced significant drops between the dates the petitions against their drugs were filed and granted.

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The next chart shows stock movements for targets for which IPR petitions were denied.

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It can be observed that targets for which the IPR petition was denied experienced an immediate rise in share price following announcement of the denial. However, every target but Celgene also experienced a drop between the date of petition filing and that of the ruling on the petition.

Finally, the chart below shows share price information at the time of petition filing for all petitions yet to be decided. Since our April post, CFAD targeted 12 additional companies with 22 additional petitions. The total number of petitions filed by CFAD is now 34. In addition, last week, Kyle Bass and his colleague Erich Spagenberg also filed two “truly altruistic” petitions in their individual capacities targeting patents covering the obesity drug Supranza (Citius Pharmaceuticals, LLC) and the anesthetic Diprivan (Fresenius Kabi).See IPR2016-00245 and IPR2016-254, respectively.

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