Pulmonary hypertension drugmaker Liquidia soars 27% after settling patent battle

Shares of drugmaker Liquidia soared around 27% on Wednesday. The company announced it had settled all patent disputes with rival United Therapeutics, allowing it to continue selling its lead drug, Yutrepia. The outcome was better than even the most optimistic scenario, a BTIG analyst said.

Liquidia jumped 26.6% on the Nasdaq on Wednesday to $33.94 per share. In premarket trading on Thursday, the stock was down less than 1% at the time of this writing.

The Wednesday rally followed the company’s announcement that it had settled all litigation with United Therapeutics. Under the settlement, Liquidia will make payments totaling $380.7 million, including $60.3 million to third parties with interests in the antitrust litigation. Liquidia will make an initial net payment of $175 million to United Therapeutics within 30 business days, followed by two installments of $72.7 million each, due on or before January 31 and April 30 of next year.

The settlement will allow the biotech to continue selling Yutrepia to patients with pulmonary arterial hypertension, but it has submitted an application to remove the indication for pulmonary hypertension associated with interstitial lung disease from the drug’s label. In that condition, damage to lung tissue causes pressure in the lungs’ blood vessels to rise.

Liquidia expects to fund the payments through ongoing Yutrepia sales, which totaled a preliminary $222.7 million in the third quarter, and with cash, which stood at $396.1 million at the end of September, COO and CFO Michael Kaseta noted in the press release. The company expects to rebuild its cash reserves and fund its planned clinical studies without raising additional financing, he added.

The litigation centered on drugs containing the active ingredient treprostinil. United Therapeutics makes an inhaled version called Tyvaso to treat pulmonary arterial hypertension and pulmonary hypertension associated with interstitial lung disease. Liquidia developed its own dry-powder formulation, Yutrepia. United alleged that Yutrepia infringed its patents covering dosing methods, formulations, and treatment indications, Barron’s reports.

At the end of September, a court sided with United, finding that two of the six asserted claims in its rival’s patent were valid and infringed by Liquidia. Liquidia stated at the time that the remedy remained uncertain and that it could not reasonably estimate the potential outcomes or financial exposure. In the second quarter, Yutrepia accounted for almost all of the company’s revenue, which rose almost twentyfold year over year to $171.7 million. News of the ruling sent Liquidia stock plunging 60% in a single session.

“This outcome is better than the best-case scenario we envisioned,” BTIG analyst Julian Harrison wrote in a note cited by Barron’s. On Wednesday, he upgraded Liquidia to “buy” at a target price of $70 per share. That is the highest TP on Wall Street and implies that the stock could roughly double from the last close. Harrison argues that now the company will be able to market its flagship drug with regulatory certainty.

Liquidia has six “buy” recommendations from Wall Street analysts, while another three recommend "hold." The average target price is $53.50 per share, 58% above Wednesday’s close.