Liquidia Corporation (NASDAQ: LQDA) is a biopharmaceutical company founded in North Carolina in 2004. It produces YUTREPIA, an inhaled dry powder formulation of treprostinil delivered through a palm-sized device. The formula is to be used for the treatment of pulmonary arterial hypertension. The company's share price increased by 45% before the market opened today. This is a huge jump, but what caused it?
Yesterday Liquidia Corporation announced that the U.S. Patent Trial and Appeal Board (PTAB) ruled in its favor in the Inter Partes Review proceeding against a patent ('793 patent) owned by United Therapeutics Corporation (NASDAQ: UTHR). The PTAB ruled that based on the evidence, all the claims of the patent in question have proven to be unpatentable.
Liquidia CEO Roger Jeffs said the "decision is another step down the path towards YUTREPIA's potential final regulatory approval. We will continue to vigorously defend our right to commercialize YUTREPIA as soon as possible." This advancement towards commercialization boosted investor confidence in the company and resulted in the stock price soaring by the end of the day.
However, the legal battle between the two companies continues to drag on. This was just one part of a three-pronged approach used by United Therapeutics, who, in June 2020, filed a lawsuit against Liquidia for infringement of the '901 patent and '066 patent. United Therapeutics included the '793 patent in July of that year. Liquidia defeated the infringement case against the '901 patent in December 2021.
Should Liquidia lose these cases, it will have to wait until the patent's expiry dates before it can begin the commercialization process of YUTREPIA, which would be 2027 for the '793 patent and 2028 for the '066 patent. When the lawsuit started, the FDA issued a regulatory stay on the final approval of YUTREPIA until October 2022 or earlier resolution/ settlement of the case.
These stocks are highly volatile and unsuitable for investors who are wary of risk. New products take years and large amounts of cash to develop and get regulatory approval before being commercialized. This doesn't even guarantee the product will be a success. As seen with Liquidia, legal battles over patent infringements can take place, delaying a product launch and increasing costs.
However, a long-term buy-and-hold strategy can help reduce these risks. After regulatory approval, these stocks can generate lots of cash due to patents acting as a defense against competition. This cash is then used to pay dividends and reinvest in research and development over the long term.
Remember though, only invest in companies that you know well and fully understand. Seeing a huge spike in share price can tempt you to invest, but try to keep your circle of competence in mind before parting with your money.
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