Buckley Capital: Liquidia Corp. ($LQDA) Investment Case
Introduction
In their Q1 2025 investor letter, Buckley Capital Partners presents Liquidia Corp. ($LQDA) as one of their most successful healthcare investments, highlighting it as a prime example of their special situations investing approach. Buckley Capital, known for their small-cap value investing strategy, emphasizes their ability to identify de-risked healthcare opportunities that don’t require deep scientific analysis but rather focus on commercial potential and litigation outcomes. The firm’s investment in Liquidia demonstrates their expertise in navigating complex legal situations while identifying superior products with significant market disruption potential.
Investment Highlight: Liquidia Corp. ($LQDA)
Business Overview
- Developer of Yutrepia, a dry powder inhaler treatment for pulmonary arterial hypertension (PAH) and pulmonary hypertension associated with interstitial lung disease (PH-ILD)
- Uses treprostinil via innovative delivery mechanism
- Began regulatory approval process in 2020
- Product launch scheduled for May 2025 following successful litigation
Market Position
- Targets PAH market affecting approximately 500,000 individuals globally
- ~50,000 American patients currently under treatment
- Competing against United Therapeutics Corp. (UTHR), which had near-monopoly position
- Superior product profile compared to incumbent treatments
Investment Thesis and Special Situation
- Legal Victory Over Incumbent:
- UTHR attempted to delay Yutrepia launch through patent infringement allegations
- Base rate for biotech patent defense is only 15% success rate for incumbents
- LQDA’s case was significantly stronger than base rate scenarios
- Legal process now largely resolved, clearing path for commercial launch
- Superior Product Profile:
- Yutrepia demonstrated superiority over UTHR’s existing products
- Data presented at JP Morgan conference in January 2025 further confirmed product advantages
- Better delivery mechanism and patient outcomes expected
Performance Analysis
- Entry Strategy:
- Initial investment made in September 2022 at $4-$5 per share
- Purchased during sharp decline following adverse legal ruling
- Investment based on high probability of litigation success rather than scientific risk
- Market Opportunity:
- Estimated potential for 50%+ market share capture
- Market continues to grow, providing additional upside
- Target price of ~$50 per share assuming market share split with UTHR
Growth Runway and Catalysts
- Product launch scheduled for May 2025
- Expected rapid market penetration given product superiority
- Potential for acquisition within next 2 years post-launch
- Comparison to Verona Pharma success (tripled since launch in August 2024)
Market Dynamics and Opportunities
- PAH market with significant unmet medical need
- Limited competition with only one major incumbent
- Superior product profile creates strong competitive moat
- Growing patient population and increasing diagnosis rates
Valuation and Return Potential
- Current position represents 5%+ of portfolio (grown from initial small position)
- Expected to double in 2025 with potential to triple over next few years
- Initial investment at $4-$5 per share with target of ~$50 per share
- 10x+ return potential from initial entry point
Risk Mitigation Factors
- Legal risks largely behind the company
- No tariff exposure in current economic environment
- Success independent of overall economic activity
- De-risked through regulatory approval process completion
- Strong management team and execution track record
Strategic Advantages
- First-in-class delivery mechanism for established compound
- Higher barriers to entry post-launch
- Potential for expansion into adjacent indications
- Strong intellectual property position following legal victory
Other Key Points
- Part of Buckley’s healthcare exposure strategy focusing on commercialization risk rather than scientific risk
- Investment leverages Buckley’s special situations expertise
- Fits firm’s criteria for “best-in-class or first-in-class products”
- Management team provides strong downside protection
- No direct competition from other similar delivery mechanisms
Buckley Capital Partners views Liquidia as a compelling special situation investment with significant upside potential, citing the successful resolution of legal challenges, superior product profile, and substantial market opportunity. The firm believes LQDA represents one of their most asymmetric risk-reward investments, with potential for both strong organic growth and possible acquisition premium.
