So I got here throughout this text about LQDA which I believed was wonderful and want to hear your ideas on it. the hyperlink is right here https://galahadcapital.substack.com/p/lqda-litigation-overhang-creates
Beneath is barely the primary a part of the article
Liquidia Corp (LQDA)
Value: $5.90
Shares Excellent: 64M
Market Cap: $320M
Money: $70M (Solely used 70% of money stability – not worthwhile)
LT Debt: $24M
EV: $274M
The sophisticated nature of this particular state of affairs resulted on this evaluation being longer than my regular posts. Due to this fact I needed to incorporate a fast abstract of the evaluation. Whereas this case is inherently sophisticated, the thesis itself is pretty straight ahead. Liquidia is presently in a Hatch-Waxman litigation after their competitor, United Therapeutics, filed a lawsuit towards them in 2020, claiming that Liquidia was infringing on three of their patents. In 2021, Liquidia obtained tentative FDA approval for his or her product Yutrepia, pending the end result of the patent dispute. Roughly two years later, we at the moment are near the dispute being resolved, with the choice anticipated to be handed down between August and the top of October. Whereas it’s troublesome to likelihood weigh the end result, I do consider Liquidia will obtain a good courtroom ruling and can subsequently be capable of launch Yutrepia in 4Q2022.
Each Liquidia and United are centered on pulmonary arterial hypertension (PAH). United just about has a monopoly on PAH (group 1) sufferers & PH-ILD (group 3) sufferers, and Liquidia is now seeking to enter this market with their new product Yutrepia. United’s product, Tyvaso, did 607M in income in 2021, and appears to do roughly 800M this yr.
That’s income from group 1 and group 3 mixed. The TAM for group 1 and three mixed, is roughly 5.3B – an enormous market. Liquidia additionally has the superior product, and they also may presumably take important market share from United. Given Liquidia’s 320M market cap, and them presumably coming into a 5.3B market with the superior product, a good determination by the district courtroom may lead to a big rerating of the corporate. General, I consider this case presents a really enticing danger/reward profile on the present worth.
Temporary Enterprise Overview
Liquidia Corp is a biopharmaceutical firm centered on pulmonary arterial hypertension (PAH). PAH is a uncommon, power, progressive illness attributable to hardening and narrowing of the pulmonary arteries that may result in proper coronary heart failure and finally loss of life, with an estimated prevalence in the US of roughly 30,000 sufferers. The corporate’s proprietary PRINT engineering expertise permits them to engineer and manufacture extremely uniform drug particles with exact management over the scale, three-dimensional geometric form and chemical composition of the particles. Because of this, the corporate has been in a position to develop their essential drug candidate Yutrepia (treprostinil) inhalation powder, which is an inhaled dry powder formulation of treprostinil delivered by a confirmed, handy, palm-sized system.
The corporate additionally has a commercially accepted product named Treprostinil Injection. The Liquidia PAH subsidiary (previously RareGen) commercializes generic Treprostinil Injection in a partnership with Sandoz. Treprostinil Injection is most probably nothing greater than a $15-25M income product at 80% gross margin. In different phrases, it would present some flexibility by way of close to time period capital wants, however nothing extra.
The PAH market presently has one dominant participant, Liquidia’s solely competitor – United Therapeutics (UTHR). UTHR sells Tyvaso, a nebulized type of treprostinil together with just a few different variations of the identical drug that are administered through infusion. Tyvaso did 607M in income in 2021 and appears to be doing 800M in 2022. That’s for group 1 and group 3 sufferers mixed. As talked about above, Liquidia’s drug, Yutrepia, is an inhaled model of treprostinil concentrating on Tyvaso’s present market. An inhaled model of treprostinil is healthier than a nebulized model – nebulized treprostinil requires a clunky system with 10-13 components whereas inhaled treprostinil solely requires an inhaler. That’s why UTHR is popping out with their very own inhaled product, Tyvaso DPI, by a partnership with MannKind Company.
Timeline And Growth of The Lawsuit
On June fifth, 2020, Liquidia’s solely competitor – United Therapeutics Company – filed a lawsuit towards Liquidia for infringement of U.S. Patent Nos. 9,604,901 (the ‘901 patent) and 9,593,066 (the ‘066 patent) regarding United Therapeutics’ product Tyvaso (treprostinil) Inhalation Resolution. The lawsuit got here on account of Liquidia submitting their NDA for the approval of LIQ861 – now often known as Yutrepia. Upon initiation of the lawsuit, the FDA triggered a statutory regulatory keep on the ultimate approval of Yutrepia till October 27, 2022, or earlier decision or settlement of the continued litigation.
On July twenty fourth, 2020, UTHR filed an amended criticism asserting infringement of U.S. Patent No. 10,716,793 (‘793) along with the already asserted infringement of U.S. Patent Nos. ’901 and ’066. Nonetheless, the ‘793 patent was not topic to the FDA’s regulatory keep as a result of it was not listed within the Orange E-book for Tyvaso when Liquidia submitted the NDA for Yutrepia.
In October, 2020, LQDA offered an replace on the U.S. Patent Trial and Attraction Board Determination on Inter Partes Overview (IPR) of two of United’s Tyvaso patents. The replace defined how PTAB had instituted IPR on patent ‘901, however denied establishment on patent ‘066. This replace meant that the 30 month keep would nonetheless be in impact, and that LQDA must argue invalidity and non-infringement within the district courtroom concerning patent ‘066.
I needed to briefly clarify the distinction between the district courtroom, the place the trial was held, and the PTAB, as they do two various things. The PTAB IPR is filed by LQDA to assessment patentability of claims within the patent, whereas instances filed by UTHR go to the district courtroom to argue LQDA infringes (although LQDA can both argue invalidity or non-infringement as protection). For the PTAB to assessment a patent, a number of claims must be unpatentable.
Quick ahead to August 2021, the PTAB instituted an IPR continuing towards the ‘793 patent. A few months later, in October 2021, the PTAB dominated in Liquidia’s favor within the IPR continuing towards the ‘901 patent. In its ruling, the PTAB discovered that seven of the 9 claims have been unpatentable. Solely the narrower dependent claims 6 and seven stay, each of which require precise storage at ambient temperature of treprostinil sodium.
On November 5, 2021, the FDA issued a tentative approval for Yutrepia (treprostinil) inhalation powder, which is indicated for the therapy of pulmonary arterial hypertension (PAH) to enhance train potential in grownup sufferers with New York Coronary heart Affiliation (NYHA) Purposeful Class II-III signs. What this implies is that if the PTAB and/or the district courtroom guidelines in Liquidia’s favor, the approval will now not be tentative, and so they can launch Yutrepia straight away.
December 2021: The Court docket grants LQDA depart to file a movement for abstract judgment of invalidity of the ‘066 and ‘901 patents on account of collateral estoppel. Trial within the Hatch-Waxman litigation is scheduled for March 28-30, 2022. Later that month, on December twenty ninth, UTHR filed a stipulation of partial judgment with respect to the ‘901 patent. Below the stipulation of partial judgment, UTHR agreed to the entry of judgment of Liquidia’s non-infringement of the ’901 patent based mostly on the Court docket’s development of sure phrases within the patent. With this stipulation of partial judgment, solely the ‘066 patent would function a foundation for the on-going regulatory keep for ultimate approval of Yutrepia (treprostinil) inhalation powder by the FDA.
That brings us to July twenty second, 2022, the PTAB guidelines in Liquidia’s favor in IPR continuing towards patent ‘793. In its ruling, the PTAB discovered that, based mostly on the preponderance of the proof, all of the claims of the ’793 patent have been proven to be unpatentable.
Conclusion
I feel at this level, my conclusion is that whereas it’s laborious to likelihood weigh the end result of the trial, the chance/reward is favorable sufficient that it’s price taking a place, for me. Within the quick time period you get a danger reward profile of 75-80% draw back with 200%+ upside. For what it’s price, I do additionally suppose the percentages of getting a good ruling is in Liquidia’s favor. It’s simply troublesome to find out how a lot in Liquidia’s favor the percentages are. Moreover, provided that the end result is favorable, not solely do you get the potential for 200% speedy upside, you additionally get a transparent path to a a lot increased return than the 200%, over the long run. In reality, the IRR’s may get foolish excessive.
