Hedge fund heavyweight Kyle Bass has set his sights on a big bet against the biotech space, but one CEO is defending his company and fighting back against the activist's claims.
"He is unimportant in the sense that he is a symptom of a bigger disease here—because he's exploiting a weakness in a system that Congress created a couple of years ago," he added.
Cohen is referring to the Inter Partes Review procedure, nicknamed IPR. The process was originally put in place to protect company's rights against so called patent trolls — people who misuse patents as a business strategy. But Cohen says IPR now serves a very different purpose.
According to Dr. Cohen, the IPR system deliberately created a lower standard for judging whether patents are valid or not.
"What this new IPR system has done is to create a second system that companies like mine have to deal with, along with the existing Hatch-Waxman system and that's dangerous," he said.
"It's scaring away investors who as it is, have to wait between 10 and 15 years for us to successfully develop a drug," Cohen added.
The CEO claims that if these patents are not protected, biotech companies will find themselves in real trouble. That may play to the advantage of hedge fund Hayman Capital's Kyle Bass, who is betting against many of these stocks.
Bass is actively seeking to invalidate patents through IPR challenges of biotech and pharmaceutical companies, while shorting each company's stock. Bass has launched thirty two IPR challenges against biotech companies under the organization he founded, Coalition for Affordable Drugs.