What: Endo International (NASDAQ:ENDP) ended the day up 18%, after announcing midday that the biotech had been issued a patented for Vasostrict.
So what: Normally, the issuance of a patent doesn't send shares of a biotech up by double-digit percentages; they're typically a foregone conclusion issued well before a drug is approved for sale.
But Vasostrict isn't your typical drug. Vasopressin, the active ingredient in Vasostrict, has been used for decades to treat low blood pressure. The drug was first named in 1927, and Vincent du Vigneaud won the Nobel Prize in chemistry for his work on vasopressin in 1955. It's been in use for so long that the Food and Drug Administration has never officially approved it.
To get everything up to snuff, the FDA started an unapproved-drugs initiative to get drug companies to run clinical trials on drugs such as vasopressin to confirm the safety and efficacy that doctors have anecdotally known for decades. Par Pharmacetucial, which Endo International acquired, performed the required studies and got Vasostrict approved in 2014, but no patents covered the drug.
Now what: The newly issued patent expires on Jan. 30, 2035, so theoretically Endo International has almost 20 years to sell Vasostrict without generic competition. In reality, a generic-drug company will probably dispute the patent, requiring Endo International to defend the patent in court.
Even if the patent is found invalid, having it on file with the FDA will fend off any competition for a while. Once a generic-drug company files an application to sell the generic, Endo International is notified and can trigger a 30-month stay while the lawsuit proceeds.
Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.