Liquidia Continues To Expand Their Growth Vs. MannKind’s Growth In Share Prices (LQDA)

On June 29, 2022, I had an SA article titled Liquidia (LQDA) vs. MannKind (MNKD): Treprostinil Is the Big ‘IF.’ At the end of the article, I indicated to the readers that my choice in the contest as to who would dominate the market with their respective PAH drug, the winner would be Liquidia.

Eighteen months later, Liquidia’s stock has increased by more than 200%. This dramatic increase in their share price has changed my short-term thesis for the stock. However, my long-term thesis remains in place. But any prudent investor should take advantage of their ownership in a stock that has more than doubled if they have identified another stock that might offer the same growth potential in the near term. What I have done with my portfolio is sell a little more than 50% of my Liquidia’s position. It should be noted that with the shares I accumulated over a long term, the shares I kept are up more than 100%.

Based on my current action, my thesis for the hold rating is to sell a portion if you have benefited from the dramatic price increase. If you have another stock where you see the potential similar to Liquidia, you could take your cash position and roll your funds into that stock.

With the proceeds from my selling Liquidia, I have rolled the funds into another biotech that I’ve written about here on SA’s portal.

Akoya Biosciences: (AKYA) 2024 Could Be the Year to Own Their Stock. Their revenue has grown steadily over the last four years, and they are projecting the company will turn cash flow positive by the end of 2024.

For any new potential investors for Liquidia, I would take advantage of any near-term pullback from the current 52-week high in their share price. The market for their drugs and indications has allowed their major competitor, United Therapeutics (UTHR), to have triple-digit pricing for their shares. With updated events that I will share in this article, it is my belief that Liquidia can garner a major portion of the current patients suffering from lung diseases and where their product could be used.

Where Does the Liquidia Story Currently Stand

It has been an arduous and litigious process and battle between Liquidia, United Therapeutics, and MannKind, the ancillary player in this process. Since Liquidia appeared on the scene where they were promoting the potential for their PAH drug as being a cheaper and better version of Treprostinil, United, instead of reducing the price of their drug to compete in the market, United opted to take their case into the courts of law. Up until recently, United’s legal efforts have been very successful.

On November 5, 2021, the FDA issued tentative approval for Liquidia’s drug for treating pulmonary arterial hypertension as a dry powder inhaled version of Treprostinil as their active ingredient. On May 24, 2022, United received FDA approval for their Tyvaso DPI drug, which was soon launched into the marketplace, generating revenue for United and MannKind. Previously, United had sued to prevent the FDA from giving final approval for Liquidia’s drug until such a time their lawsuit had been finalized as to whether they had a valid patent that would prevent Liquidia from infringing on their use of Treprostinil. This is how our system works: drug companies can use our legal system to prevent competitors from infringing on their monopoly with a given drug. This option for allowing the legal system to be the arbiter for resolution is normally a long process until a final decision has been made. The case of Liquidia is a good example. Since November 2021, they were prevented from being the first DPI product on the market for treating PAH. We have seen that United’s efforts have worked, as they had what will soon be a two-year lead in staking out a share of this market. However, things have changed, and Liquidia should be on the market for what could be the 1st quarter of 2024. However, should this happen it would probably be the 2nd quarter before we see meaningful revenues.

Until December 20, 2023, United had prevailed in their efforts to keep Liquidia from entering the market with their drug, Yutrepia. On this December date things changed in a major way for Liquidia. The U.S. Court of Appeals for the Federal Circuit affirmed the earlier decision by the Patent and Appeal Board which found all claims of U.S. Patent No. 10,716,793 to be unpatentable due to the existence of prior art cited by Liquidia in their briefs to the court.

Based on this clear-cut decision in favor of Liquidia, the legal restraint placed on them should be quickly resolved, leaving the next steps being:

• Filing with the U.S. District Court for the District of Delaware, where they are seeking the cancellation of the United legal suit, which had been denied by the U.S. Court of Appeals, which had the final say about United not having a valid patent.
• Seeking the FDA to move forward with finalizing the November 2021 tentative approval for Yutrepia where the legal case had been resolved in favor of Liquidia.

As expected, United has filed an appeal for the December decision. However, this appeal is expected to be summarily dismissed by confirmation of the original decision. This could mean that it will be the 2nd quarter of 2024 for them to see meaningful revenues signifying significant revenue to justify their stock’s current and future increasing share price. As for the future of Liquidia and what still will be a major tug-of-war between them and United., there are major potential catalysts that will impact United and their partner MannKind in maintaining and capturing new patients with PAH and other lung conditions with their Treprostinil products.

Liquidia Gains Major Partnership with Drug That Could Revolutionize the Delivery of Treprostinil to Lung-Afflicted Patients

On June 28, 2023, Liquidia announced the following partnership that could expand their pipeline in a major way:

“Liquidia Corporation and Pharmosa Biopharm Announce Collaboration for Sustained-Release Inhaled Treprostinil Product in North America

• Liquidia exclusively licenses North American rights to L606, an inhaled formulation of Treprostinil administered twice daily with a short-duration, next-generation nebulizer.
• Liquidia funds a $10 million upfront payment from a finance agreement with HealthCare Royalty
• Pharmosa is to receive up to $215 million in development and sales milestones for PAH and PH-ILD indications, $10 million for each additional approved indication and additional product, and royalties on net sales of L606
• Creates industry-leading portfolio in a rapidly expanding market for inhaled Treprostinil”

What is so important for this partnership is the citation that the dosing of this drug to PAH patients will compete against a major United’s revenue products, the nebulized dosing of Tyvaso, and their DPI product that will impact MannKind’s revenue stream. On February 2, 2024, Liquidia had a poster presentation at the all-important Pulmonary Vascular Research Institute 2024 Annual Congress, which was held in London. This is a direct link to the data presented at this London conference. Normally, in the scientific realm of research, a poster presentation has been approved based on a peer review process. Based on the caliber of those attending this august gathering of medical professionals, this speaks volumes to L606 being well received for filling a critical need for PAH patients. Liquidia has clinical trial data from patients using L606 for over a year. The point is, you don’t attend such a conference as this one and ask to present your clinical data, which is not highly positive. With Liquidia’s stock performing so well, it should be obvious that Wall Street analysts are aware of what L606 promises to bring to patients suffering from this horrific disease. On February 5, 2023, MannKind’s stock hit a new 52-week low share price of $3.17.

The Challenges Ahead for Who Will Control the Treprostinil Market

United’s drug, Tyvaso, is a nebulized delivery drug where the protocol is based on the patient dosing the drug four times a day due to the limited time each dosing works for the patient (it has about a four duration once the drug is delivered to the lungs). The short-duration Tyvaso dose means that the patient needs to limit or disrupt their sleep hours during the night. Assuming the data confirms that L606 only requires the patient to take a dose twice a day, it should be obvious that patients would opt for the same drug (treprostinil) that permits them more nightly sleep time than Tyvaso or Tyvaso DPI allows. More sleep for the patients and less cost to the patient/insurance provider should make the uptake of L606 an immediate success once Liquidia obtains the needed FDA approvals. Should and when these FDA decisions occur, the three companies involved each have a great deal at stake. With the DJIA and S&P 500 broaching new highs with their market index results, it should be noted that the historical dynamic rise in United Therapeutics’ stock, over the last 52 weeks a causation has occurred where their stock has lost about $50.00 a share in valuation. This decline reflects more than a $2B+ drop in their market capitalization.

There is no denying that the MannKind-United Tyvaso DPI drug has shown dramatic revenue coming into United coffers, with a 10% net revenue being paid as royalties to MannKind. The problem is that this revenue for Tyvaso DPI results from cannibalizing the former revenue generated by their Tyvaso nebulized drug patients. Therefore, it should be expected that the long-term users of the original Tyvaso patients, these individuals, have switched to the newer Tyvaso DPI version of the drug. If this is the case, the dramatic growth in the DPI version that MannKind benefits from, this growth is topping out. In the latest 3rd-Q SEC report, the MannKind CFO made these comments relating to what is expected in the near term:

Below the graph, I have plotted the earnings or loss per share for each quarter, and you can see the impact from the increasing revenues. In the third quarter, we’ve recognized earnings per share of $0.01. This is not a typo. We have hit a significant financial milestone. We have now entered a period where we expect to bounce back and forth between earnings and loss per share, I’ll call it a breakeven period and then we expect to grow earnings per share assuming Tyvaso DPI continues its upward trajectory and the endocrine business unit increases its positive contribution.”

In simple terms, the CFO is telling investors that the phenomenal growth in their revenues has begun to level off and that potential earnings are being impacted. Adding to this pending issue of revenues topping out, MannKind, on January 2, 2024, announced they had raised cash by selling off 10% of their revenue stream from Tyvaso DPI royalties. This deal was with Sagard Healthcare. Investors should pay close attention to the caveat given for earnings growth –“Assuming Tyvaso DPI continues its upward trajectory, and the endocrine business unit increases its positive contribution.”

Announcing that you expect revenues that have been growing strongly and upwardly, you now project that you have entered a period where they expect to bounce back and forth between earnings and loss per share. Then, presale 10% of your revenue stream for Tyvaso DPI. Tyvaso products address a medical disease that is progressive and with no current cure for the condition. Patients must maintain the use of the drug as it is a life-or-death situation for them. Once on the drug, the refill revenues should remain fairly constant and increase with new patients being prescribed either Tyvaso or Tyvaso DPI.

The upcoming 4th-Q results will certainly be interesting reading. The results might explain why the stock is setting new 52-week lows.

Current Status for L606 and the FDA

On January 5th, 2024, Liquidia issued a PR updating their clinical pipeline for PAH & PH-ILD patients. In this detailed PR, the following are the key points:

• Related to L606, Liquidia had a Type C meeting with the FDA in December 2023.
• Liquidia agreed on the registration requirements for L606 using the 505(b) (2) filing method.
• The FDA agreed with a single Phase 3 placebo-controlled efficacy trial in PAH-PH-ILD patients.
• In 2024, L606 clinical trials will be fully enrolled. Liquidia will issue updates as the clinical data becomes available.

Liquidia already has data on patients who have been treated with L606 for over one year. Therefore, due to the symptoms suffered by PAH patients, whether a drug is working or not working can be determined. It is safe to assume that in the FDA meeting in December, Liquidia shared efficacy data for L606, thus getting the quick allowance to move ahead with a 505(b) (2) filing for a Phase 3-placebo-controlled efficacy trial.

MannKind’s Continue Saga and Delays with Clofazimine

I believe MannKind’s folly with clofazimine will only lead to another failed effort to expand its pipeline. Afrezza’s marketing efforts, after 10 years of being FDA-approved, are constantly burning their cash position at a fast rate. Thus, MannKind needs to replenish the cash required for its overall operational expenses. They continue to add to the $3 billion dollars that has been spent on developing and marketing Afrezza.

Liquidia only became involved with L606 on June 28, 2023, yet they have met with the FDA and worked out the protocol for developing L606 with a Phase 3 clinical trial starting in 2024. About three or four years after the original Qurmpharma efforts, they were purchased by MannKind, and then their joint effort, they have spent about seven years working with clofazimine and haven’t been able to get FDA final clearance for clinical trials. With a lack of progress with a 70-year-old drug that has already been a failed FDA-approved product for Novartis (NVS), MannKind once again is failing to deliver on its promised product pipeline efforts. Considering that Afrezza is the only product MannKind has taken through clinical trials and obtained FDA approval, MannKind’s survival relies on United Therapeutics maintaining their current revenue stream for their Tyvaso DPI drug, which also benefits MannKind.

My projected guess is that MannKind will never profit from trying to market a clofazimine drug. MannKind spent about $13 million on its purchase of Qurmpharma. The current lack of progress by MannKind adds to my conviction that Liquidia will prevail over MannKind’s success as a viable company.

Financial Status for Liquidia

Based on the 3^rd-Q, 2023 SEC filing, the company had $76M in net cash and had generated nearly $4M from its partnership with Zandoz (SDZ.SW). Their net loss for this 3^rd-Q, 2023, was $ 15.8 million.

During the 4th Q, 2023, Liquidia raised $25.0M with a stock offering.

MORRISVILLE, N.C., Dec. 12, 2023 (GLOBE NEWSWIRE) — Liquidia Corporation (NASDAQ: LQDA) announced today that it has priced an underwritten public offering of 3,491,620 shares of common stock at a public offering price of $7.16 for total gross proceeds of approximately $25.0 million, before deducting underwriting discounts and commissions and expenses payable by Liquidia. The offer is expected to close on December 14, 2023, subject to customary closing conditions.

In January 2024, Liquidia raised an additional $100 million in capital between the two tranches involved.

MORRISVILLE, N.C., Jan. 04, 2024 (GLOBE NEWSWIRE) — Liquidia Corporation (NASDAQ: LQDA) (Liquidia or the Company) announced today that the Company has entered into agreements for an additional $100 million in capital between two transactions with funds associated with Patient Square Capital and HealthCare Royalty (HCRx), respectively.

Based on the initial cash position shown in the 3^rd-Q, 2023 filing in the interim period, we have seen the following development with their available cash.

• $76.0M-ending of 3rdQ-2023
• $25.0 M raised by stock offering in December 2023
• $100.0M January 2024 is based on two tranches from Patient Square and HealthCare Royalty.

Based on the data, the cumulative sum indicates that Liquidia had $201.0 million of cash to operate their company since the end of their 3rd quarter of 2023. So, we need to estimate the cash burn rate for the interim period to the present (February 2024). We need to consider that by the 4^th-quarter quarter, Liquidia had its sales team in place for marketing its drug when the FDA finally cleared it. We also know that Liquidia had legal expenses for the court case with United Therapeutics, which are ongoing now. We also know that Liquidia has been building the needed inventory for when they officially launch their drug onto the market. When looking at the operating expenses for the reported last four quarters, their reported corporate expenses average $17.2M. We will better understand this expense and the run rate after seeing the 4th-quarter results in the next few weeks.

For example, let’s project the current burn rate at $17.2M per quarter; let’s increase this rate by 50%. This would give us a 2024 expense rate of $25.5M per quarter or $102.0M for 2024. Remember that we also must deduct the 4^th quarter of 2023 expenses from the starting $201.0M. The issue we face in making revenue and expensive projects is that we don’t know when Liquidia will be able to launch. But again, for example, assume that the launch will occur late this 1^st quarter or early in the 2^nd quarter. Liquidia has the drug in stock and ready to ship. Since 2021, when the FDA gave Liquidia the tentative approval for their drug, they have promoted the drug within the guidelines allowed by the FDA -conferences, peer-reviewed articles, etc. The CEO of Liquidia is the same CEO who built United Therapeutics into a $12.0B market-capitalized corporation. He knows the key medical professionals, and they know the drug and its efficacy for patients. Previously, I’ve outlined the benefits of Liquidia’s product.

United Therapeutics became a $12B market-capitalized corporation. Currently, Liquidia has a market capitalization of about $1.1B. By assuming that Liquidia can capture 20% of United’s $12B MC level, that would represent an MC of $2.4B, or a common stock valued at around $30.00 per share based on the closing price on February 12, 2024, of $15.00 per share.

When you consider that waiting in the wings, Liquidia has L606, where this drug could cut the patient’s daily dosages down to only two compared to the four daily doses United/MannKind offers. For those interested in investing in Liquidia’s stock, you can extrapolate the long-term potential their stock offers by applying the percentage for what you think about the rate they can capture in the market.

The stock market pricing for a given stock is always by looking at what the future holds for the merits of owning the stock. In my opinion, the future looks bright for Liquidia.

Caveats

• United Therapeutics continues its effort to stop Liquidia from entering the drug market where it dominates due to the lack of competition. Their latest effort to question the December 2023 court decision results should not prevail. However, this could delay Liquidia’s ability to launch its product and generate revenue in the 1st-Q of 2024.
• On January 4th, 2024, Liquidia announced they had secured $100 million in new capital to fund their operations through 2024. At this time, Liquidia is assuming they will be able to launch their drug no later than April 2024. Any pushback on this date will once again delay any revenue stream for 2024.
• Until the FDA gives final approval for L606, anything can happen to derail Liquidia’s success in the marketplace. Yutrepia is a good drug, and its manufacturing process will allow Liquidia to be competitive on the pricing front against United. The dosing benefit for L606 will make the use of this drug even more competitive in the marketplace–but the FDA must approve it with a clean labeling requirement.
• With the current upward pricing of stocks, as shown in the DJIA and S&P 500 averages, this dramatic run could be approaching a major pause and retrenchment.

Conclusion

• Assuming the data confirms that L606 only requires the patient to take a dose twice a day, it could be assumed that patients would opt for the same drug (treprostinil) that permits them more sleep time than Tyvaso or Tyvaso DPI allows.
• More sleep for the patients and less cost to the patient/insurance provider should make the uptake of L606 an immediate success once Liquidia obtains the needed FDA approval.

Should and when this FDA approval happens, the three companies involved have much at stake. With the DJIA and S&P 500 each broaching new highs in their valuation, it should be noted that the historical dynamic rise in United Therapeutics stock in previous months, over the last 52 weeks, there must be a cause for why the stock has lost about $50.00 a share in valuation. This decline reflects more than a $2B+ drop in their market capitalization. United and MannKind’s stock has declined precipitously since my June 2022 article, where I suggested Liquidia would be the winner in the contest between them and MannKind. Liquidia’s stock is up more than 200% in the interim period. As I finish this article on 2/7/2024, Liquidia is trading 4X the price of MannKind’s stock. If the issues I’ve cited occur for Liquidia’s benefit, I’m reminded that United stocks reached the three-digit level.

My former boss and mentor always told me –“It’s not what you did for me yesterday, what is important is what you are going to do tomorrow!” For 25 years I made him happy. But the stock market can be fickle. Good luck with your future investing!