Kos Pharmaceuticals (KOSP) and Barr Laboratories (BRL) resolved a patent dispute over the cholesterol reducer Niaspan.

Kos shares shot up $4.95, or 11.1%, to $49.39, while Barr shares sank $1.18, or 2.3%, to $50.48.

Kos will allow Barr to launch generic versions of Niaspan and Advicor, under an exclusive license as of Sept. 20, 2013. The companies have also signed co-promotion and manufacturing agreements. As part of the settlement, Barr will pay royalties to Kos from the sales of generic versions of Niaspan and Advicor.

Niaspan is the only prescription extended-release form of niacin, also known as vitamin B3, which reduces cholesterol levels and triglycerides. Advicor is a combination of the extended-release niacin product and a cholesterol-reducing statin drug.

"The agreements provide the certainty of generic entry four years before the patents expire, or potentially earlier in certain circumstances," says Bruce L. Downey, Barr's chairman and CEO.