This Biotech Stock Surges 37% on Patent Settlement. ‘Better Than the Best-Case Scenario.’

Liquidia stock has risen 9% this year. (Dreamstime)

Key Points

• Liquidia reaches a $380.7 million global settlement with United Therapeutics to resolve all pending patent, trade secret, and antitrust lawsuits.
• Liquidia shares soar in premarket trading Wednesday following the settlement announcement.
• Under the agreement, Liquidia must stop selling its drug Yutrepia to patients with pulmonary hypertension associated with interstitial lung disease.

The legal dark cloud hanging over Liquidia stock has passed and analysts see a lot to like.

The biotech reached a $380.7 million global settlement with United Therapeutics that resolved all six pending lawsuits between the companies to resolve all patent, trade secret, and antitrust claims.

Shares of Liquidia soared 37% to $36.60 in premarket trading Wednesday. As of the close of trading Tuesday, shares have risen 9% this year, according to Dow Jones Market Data.

United Therapeutics makes an inhaled version of the drug treprostinil, called Tyvaso, to treat pulmonary arterial hypertension and pulmonary hypertension associated with interstitial lung disease. Liquidia developed a rival dry-powder formulation of that same drug, Yutrepia.

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The agreement came two weeks after Liquidia lost a patent trial against United Therapeutics, which repeatedly has sued Liquidia since 2020 for patent infringement. United Therapeutics has alleged that Yutrepia infringed on the company’s patents covering dosing methods, formulas, and treatment indications.

Under the agreement, patients with pulmonary arterial hypertension will have uninterrupted access to Yutrepia. But there’s a catch: Liquidia will have to stop selling the drug to those with pulmonary hypertension associated with interstitial lung disease.

BTIG analyst Julian Harrison upgraded Liquidia stock to Buy with a $70 price target, saying that removing the legal threat allows Liquidia to market its flagship drug with clear regulatory certainty.

“This outcome is better than the best-case scenario we envisioned,” he wrote in a note Wednesday.

Beyond the legal overhang, Harrison is optimistic about Liquidia’s clinical trials, which have expanded with the goal of converting patients taking rival therapies to Yutrepia.

Adding to the upbeat sentiment, Wells Fargo analysts called the settlement “positive.” The firm wrote Wednesday that Liquidia’s preliminary strong fiscal third-quarter sales for Yutrepia, which grew 31% to $222.7 million from the prior quarter, offers strong momentum that could outweigh the cost of the settlement bill.

The firm projects Yutrepia’s peak sales to reach $971 million in 2029. However, analysts believe it will be harder for Liquidia to authorize new patients, though revenue should still grow as existing interstitial lung disease patients remain on the treatment.

Wells Fargo raised Liquidia’s price target to $33 from $30 while keeping an Equal Weight rating on the stock.

One firm, however, has chosen to tread carefully. Needham lowered Liquidia’s price target to $58 from $72 while maintaining a Buy rating. The firm wrote Wednesday that the settlement is good news for Liquidia as the lower price target reflects the removal of sales from patients pulmonary hypertension associated with interstitial lung disease.

Liquidia didn’t respond to a Barron’s request for additional comment.

Shares of United Therapeutics rose 0.3% before the opening bell Wednesday.

Write to Mariapaula Gonzalez at mariapaula.gonzalez@barrons.com

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