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Pricey Companion,
Arquitos returned 13.1% web of charges within the second quarter of 2025, bringing the year-to-date return to twenty-eight.8%. Particular person returns will fluctuate based mostly on timing of funding. Please test your assertion for particular outcomes. See web page 4 for extra detailed efficiency data.
Uncertainty has all the time been a part of the human expertise. For many of historical past, the unknown posed existential threats, whether or not from predators, illness, or rival tribes. To outlive, we developed a deep psychological aversion to uncertainty. We overcorrected for hazard, defaulting to warning, and handed these instincts ahead by means of generations.
Storytelling turned our means of managing that uncertainty. Tales helped us make sense of the world, coordinate as teams, and really feel secure, even when that sense of security was constructed on phantasm. Immediately, those self same instincts stay. When individuals face ambiguity, they usually assemble narratives that present consolation relatively than readability. “Unknown” is insupportable, so it have to be crammed in. Fact is much less essential.
This tendency is particularly seen in markets. Investing is an extension of human nature and is very inclined to narrative-driven habits. Within the absence of clear data, traders create tales to elucidate short-term value actions. These tales, usually fueled by concern or hypothesis, can really feel rational within the second however are not often grounded within the long-term realities of the enterprise.
Instincts that made sense traditionally do not all the time serve us at present. Quick-term uncertainty is not a menace to survival. Uncertainty can usually be a chance. The latest share value fluctuations in our Liquidia funding, described under, offers a well timed instance.
Liquidia Therapeutics (Lq)
Liquidia has navigated a fancy panorama for years, marked by patent disputes and FDA approval delays for his or her flagship drug, Yutrepia. Immediately,the whole lot is about Yutrepia’s product launch and their prospects to penetrate a beforehand monopolistic market. For Liquidia, that uncertainty has all the time been a shopping for alternative. Shares are 200% increased at present than our authentic buy value greater than three years in the past.
Yutrepia lastly acquired FDA approval for Yutrepia in late Could and formally launched quickly thereafter. Curiously, regardless of this important milestone, Liquidia’s inventory value skilled a dramatic however short-term dip, falling from over$19 in early June to$12.46 by the tip of the second quarter. This decline was primarily pushed by investor apprehension concerning the preliminary industrial rollout and considerations a couple of potential competitor nonetheless years away from market entry. Since then, the narrative has quickly modified once more and at present shares commerce for almost$18.
Preliminary studies for Yutrepia’s June prescription numbers are exceptionally sturdy and effectively above expectations. Whereas it is nonetheless early days, this sturdy begin validates our confidence in Liquidia administration’s gross sales pressure and their go-to-market technique, confirming the numerous unmet want Yutrepia addresses available in the market.
I first highlighted Liquidia in our This fall 2022 letter. The problems then had been a wide range of patent disputes with competitor United Therapeutics (Uthr). Up to now, United Therapeutics has failed in every of these authorized instances however had succeeded in delaying Liquidia’s launch and FDA approval. Lawfare labored extraordinarily effectively on this state of affairs.
There are nonetheless two long-shot authorized challenges from United Therapuertics. Each of those instances are extremely more likely to be resolved in Liquidia’s favor. However, as we’ve seen on this lengthy saga, something can occur. Happily, with Yutrepia now in the marketplace, these authorized techniques are far much less impactful than earlier than.
Past authorized points, Liquidia shares had dropped in early June because of the announcement of a profitable section two trial from a possible future competitor. On June 10, 2025, an organization named Insmed (Insm) introduced excellent outcomes for its experimental PAH remedy. Each Liquidia and United Therapeutics shares dropped in response whereas Insmed shares rose greater than 40%. Insmed’s drug,TPIP, is a dry powder treprostinil drug administrated by way of an inhaler and designed to be a once-daily therapy. As a reminder, Liquidia’s Yutrepia delivers treprostinil by way of an inhaler three to 5 instances a day. Clearly, all issues being equal, a as soon as each day therapy could be way more engaging to sufferers, which is why the outcomes harm Liquidia’s inventory value.
Nonetheless, a more in-depth look, as identified by a Raymond James (Rjf) analyst, reveals potential points with Insmed’s trial design which will have artificially inflated the outcomes. The analyst famous that the trial sufferers introduced with extra extreme instances and appeared “undertreated at baseline versus key PAH research, probably favoring therapy response.” This raises questions in regards to the comparability and true efficacy of Insmed’s findings.
It is price contemplating the timing of Insmed’s $750 million inventory providing following these Part 2 outcomes and whether or not that fundraising prospect performed into the design of the trial. Regardless, Insmed nonetheless must conduct a Part 3 trial, which is not anticipated to start till subsequent yr, adopted by an FDA approval requirement. Even assuming a best-case state of affairs with sturdy Part 3 outcomes, TPIP is unlikely to achieve the marketplace for a few years. By then, Liquidia’s next-generation drug, L606, which has additionally proven very sturdy medical trial outcomes up to now, is anticipated to be accessible.
Is Insmed merely telling a great story for the time being, or are they’re future menace to Liquidia? Solely time will inform however my preliminary perspective is considered one of guarded skepticism.
Within the meantime, I’m persevering with to watch Liquidia’s Yutrepia launch. Now we have been rewarded for our endurance over the previous three years, regardless of a number of bouts of volatility. I proceed to be optimistic within the firm, its management, and the prospects for its inventory.
ENDI’s operational efficiency continues to be exceptionally sturdy, significantly inside its CrossingBridge subsidiary. As of June 30, CrossingBridge’s Belongings Beneath Administration (AUM) surpassed $4 billion, a considerable improve from$3.4 billion at first of the yr. The subsidiary publicly studies AUM on their web site on a month-to-month foundation at crossingbridgeadvisors.com
Earlier this yr, ENDI bought 25% of CrossingBridge at a $104 million valuation. Consequently, you possibly can consider ENDI’s share of that present AUM to be $3 billion (75% of$4 billion). ENDI additionally has roughly $52 million in money and investments as of the March 31, 2025 reporting interval and adjusting for the post-quarter partial subsidiary sale. The corporate additionally carries $10 million of debt. Their present market cap is $85 million.
On the present inventory value of$16 per share, the market is valuing that$3 billion of rising AUM at$43 million. If we modify for the valuation of the partial subsidiary sale, the market is pricing the CrossingBridge asset considerably decrease than what refined third-party traders paid earlier this yr when AUM was 15% decrease.
The underside line is that we proceed to have an extended method to go to for ENDI to get to honest worth. And, as the corporate continues to carry out effectively operationally, that honest worth continues to extend as effectively.
Uncertainty usually presents the best alternatives. Quick-term value actions don’t all the time replicate an organization’s true worth. And, keep in mind, not all tales are true.
Thanks once more in your long-term dedication to Arquitos. It has been a pleasure managing the fund for greater than 13 years and investing in your behalf. I look ahead to doing so for many years to come.
Greatest regards,
Steven as
Arquitos Efficiency Since Inception
| Architects (Gross) | Architects (NET) | |
|---|---|---|
| 2025 YTD | 29.4% | 28.8% |
| 2024 | 30.9% | 29.6% |
| 2023 | 23.3% | 22.1% |
| 2022 | -52.5% | -52.9% |
| 2021 | 56.5% | 54.9% |
| 2020 | -1.3% | -2.3% |
| 2019 | -13.8% | -14.7% |
| 2018 | -30.6% | -31.3% |
| 2017 | 80.8% | 64.0% |
| 2016 | 65.4% | 54.9% |
| 2015 | -14.0% | -14.8% |
| 2014 | 72.8% | 57.8% |
| 2013 | 58.7% | 46.6% |
| 2012* | 9.0% | 7.2% |
| Annualized | 15.9% | 12.1% |
|
*Based April 10,2012 |
DisclaimerThis letter is for informational functions solely and doesn’t replicate the entire positions purchased, bought, or held by Arquitos Capital Offshore Grasp, Ltd. or its feeder funds, Arquitos Capital Companions, LP, and Arquitos Capital Offshore, Ltd. Any efficiency information is historic in nature and isn’t a sign of future outcomes. All investments contain danger, together with the lack of principal. We disclaim any responsibility to supply updates or adjustments to the knowledge contained on this letter. Efficiency returns introduced above are for Arquitos Capital Companions, LP and replicate the fund’s complete return, web of charges and bills, since its April 10, 2012, inception. They’re web of the excessive water mark and the 20% efficiency payment, utilized after a 4% hurdle, as detailed within the confidential personal providing memorandum. Arquitos Capital Offshore, Ltd. was launched on March 1, 2018. Returns from Arquitos Capital Offshore, Ltd. might differ barely and will not be introduced right here. Efficiency returns for 2025 are estimated by our third-party administrator, pending the year-end audit. Precise returns might differ from the returns introduced. Positions mirrored on this letter don’t symbolize all of the positions held, bought, or bought. This letter under no circumstances constitutes a suggestion or solicitation to purchase an curiosity in Arquitos Capital Companions,LP, Arquitos Capital Offshore, Ltd., or any of Arquitos Capital Administration’s different funds or associates. Such a suggestion might solely be made pursuant to the supply of an authorized confidential personal providing memorandum to an investor. |
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Editor’s Be aware: The abstract bullets for this text had been chosen by Searching for Alpha editors.
Editor’s Be aware: This text discusses a number of securities that don’t commerce on a significant U.S. change. Please concentrate on the dangers related to these shares.