What: After reporting that it has entered into a legal settlement with Actavis to resolve patent litigation relating to its multiple sclerosis drug Ampyra, shares in Acorda Therapeutics (NASDAQ:ACOR) surged 12% higher earlier today.
So what: Acorda Therapeutics had filed suit against Actavis, which is now a part of Allergan, after Actavis filed an abbreviated new drug application with the FDA for a generic version of Ampyra extended release tablets.
The settlement permits Actavis to launch a generic version of this formulation of Amypra in 2027, or potentially sooner under certain circumstances, and in the process, firms up Ampyra's patent protection.
The news comes only a short time after the U.S. Patent Office decided in August not to review two key Ampyra extended release patents.
Now what: Although the companies are staying tight lipped about the details of the settlement, the deal appears to solidify Ampyra's patent protection, which is slated to end in May of 2027.
As a result, the settlement also offers clarity into a major source of Acorda Therapeutics' revenue. In the second quarter, Ampyra accounted for $105.5 million of the company's $113.7 million in sales.
Acorda Therapeutics expects Ampyra sales of at least $410 million this year, and management is guiding for the company to be cash flow positive this year, so the patent news and resulting clarity should be viewed by investors as bullish -- especially in light of analysts prediction that Ampyra sales growth will lead to EPS of $0.71 this year and $0.91 next year.
Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has 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.