The Legal Battle Brewing At Liquidia With Steven Kiel and Viral Kothari – The Special Situations Report Episode #60

Episode Summary

Executive Summary: The episode examines Liquidia’s special-situation investment case versus United Therapeutics, centered on patent litigation, FDA labeling, and market adoption in pulmonary hypertension and PH-ILD. The guests argue Liquidia’s inhaled product has superior delivery and that, even if the legal case goes against it, the stock still has meaningful earnings power. They also discuss valuation, insider selling, competitor pipelines, and possible M&A once legal uncertainty clears.

Main Topics: Liquidia vs. United Therapeutics legal battle (Priority: 5/5): The core thesis is that United’s patent litigation over Liquidia’s inhaled treprostinil product is the main binary event. The guests believe Liquidia has a strong chance of winning or, at minimum, can still retain substantial value even if the ruling is unfavorable. Product differentiation and clinical advantages (Priority: 5/5): Liquidia’s PRINT technology creates uniform particles that improve deep-lung delivery, reduce coughing, and allow higher titration versus United’s Tyvaso delivery system. This is presented as a durable competitive advantage. Market opportunity in PAH and PH-ILD (Priority: 5/5): The discussion emphasizes that PH-ILD is a large, underpenetrated market and that Liquidia’s label expansion could materially increase revenue. Even without PH-ILD, PAH alone still supports a strong business. Valuation and upside scenarios (Priority: 5/5): The guests outline a bullish valuation framework based on revenue run-rate, margins, and peer multiples, arguing the stock remains inexpensive relative to potential earnings and could rerate sharply after legal clarity. Competitive landscape and pipeline threats (Priority: 4/5): They assess United’s soft mist inhaler, Insmed’s T-PIP, and Merck’s disease-modifying program, concluding that many are early, promotional, or not yet proven, while Liquidia’s own next-gen L606 remains competitive. Insider transactions and signaling (Priority: 4/5): The hosts discuss insider selling at Liquidia and United, distinguishing option-related sales from more meaningful discretionary selling. They view buying as the stronger signal and note prior insider buying helped validate earlier investments. Potential M&A and post-litigation rerating (Priority: 4/5): Once the court case is resolved, the guests expect a broader investor base and possible strategic interest from larger pharma players, which could further lift valuation.

Key Arguments: Liquidia’s legal overhang is the main risk, but the guests believe the process and case law favor Liquidia enough to justify ownership before resolution. The PRINT platform improves particle uniformity, reduces cough, and enables better titration, making Liquidia’s inhaled therapy more effective than competing inhaled products. PH-ILD is a major untapped market; if Liquidia secures the label, insurance coverage and physician adoption should improve materially. Even if Liquidia loses the PH-ILD case, PAH alone still supports meaningful revenue and earnings, so downside may be less severe than the market implies. The stock’s valuation appears low relative to projected earnings and peer multiples, especially if revenue reaches a billion-dollar run rate. Competitor programs are not yet proven and may be promotional; Liquidia’s own L606 pipeline could preserve or expand its competitive position. Insider selling at Liquidia is not viewed as highly alarming because much of it is option/RSU-related and not a full exit, while insider buying is the more important signal. Once litigation clears, the investor base should broaden from special-situation investors to growth and biotech investors, supporting a rerating. A favorable ruling could also open the door to M&A interest from larger pharma companies already active in the space.

Data Points: Episode number: 60 - Special Situations Report episode featuring Liquidia and United Therapeutics discussion Liquidia initial purchase price: $4 per share - Viral described his first purchase around four years earlier Liquidia share price at recording: $36-$38 per share - Current trading range mentioned during the discussion Potential upside target: $150 per share - Stephen suggested this could be a reasonable long-term value if the thesis plays out PH-ILD patient population: 40,000-60,000 patients - Estimated addressable market discussed as a major blue-sky opportunity Total potential patients: 100,000+ - Rough size of the broader PAH/PH-ILD patient pool mentioned Liquidia revenue mix: ~50% PAH / ~50% PH-ILD - Reported recent revenue split after commercialization Earlier revenue mix: ~25% PH-ILD - Viral noted PH-ILD was a smaller share in the prior quarter Expected annual revenue run-rate: $1 billion+ - Roger Jeffs reportedly expected this beginning in Q4 2025 Inhaled market size: $2.2 billion annually - Derived from a $550 million quarterly run-rate discussed on the call United Therapeutics market share expectation: 90% of inhaled market - Jeffs had previously said Liquidia could capture most of the inhaled market Liquidia margin assumption: 60%-70% - Used in valuation discussion to estimate earnings power Illustrative earnings per share: ~$8/share - Based on $1 billion revenue and ~70% margins Alternative earnings estimate: $2.50-$4.00/share - Analyst consensus range referenced for next year and the year after Insmed T-PIP trial: Phase 2 - Discussed as a competitor with a once-daily inhaled approach Liquidia L606 timing: ~3 years - Expected next-generation product timeline mentioned United Therapeutics insider sale: 9,500 shares - Martine Rothblatt sale referenced during the discussion United Therapeutics sale authorization: Up to $1 billion - A filing allowing sales up to this amount was mentioned Liquidia royalty agreement: Few basis points to 10% - Discussed as a possible royalty structure from prior financing arrangements Mankind royalty example: 10% - Used as a comparison for royalty structures in the sector

Pivotal Quotes: "There is still a possibility that it could, you know, go to $150, which a share, which could be a reasonable price, given some of the things we'll discuss today." — Stephen Keel: Bullish valuation framing for Liquidia after legal resolution "The thing is, all of these drugs we speak of, none of them are out. And none of them, you could have a year or two go by where liquidia gets conservatively a billion dollars in sales this year, a billion next." — Viral Kothari: Argument that Liquidia already has near-term revenue power despite future competition "The PRINT technology... they invented this technology and patented it. It's called print technology... They're all uniform sizes." — Viral Kothari: Explanation of Liquidia’s delivery advantage and why patients may tolerate it better

Implications: If Liquidia wins or even partially clears the litigation, the stock could rerate sharply as legal uncertainty fades and broader investors step in. The case also highlights how patent disputes can create long-duration special situations in biotech.