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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Constructive on post-litigation upside in Liquidia following a global patent settlement, maintaining long 2028 call options and launching an SPV to exploit mispriced commercial cash flows."
Arquitos Capital returned -51.9% net of fees in the third quarter of 2026, bringing its year-to-date net performance to -26.5%, compared to the Russell 2000 benchmark return of 13.9% year-to-date. The substantial quarterly drawdown was primarily driven by adverse litigation developments regarding the fund's core holding, where an unfavorable district court patent ruling temporarily impaired the market valuation of its call option contracts. Despite the steep decline, the fund did not liquidate its January 2028 call options and retained exposure throughout the volatility. The investment narrative is entirely anchored in pharmaceutical regulatory and patent litigation resolution. Rather than relying on broad macroeconomic factors such as interest rate shifts or monetary policy regimes, portfolio outcomes are dictated by legal settlements, intellectual property disputes, and commercialization rights in the pulmonary arterial hypertension (PAH) and pulmonary hypertension associated with interstitial lung disease (PH-ILD) markets. Portfolio activity and capital allocation are centered on Liquidia Corporation. Following the quarter-end district court decision, Liquidia announced a comprehensive settlement with United Therapeutics resolving all six outstanding legal disputes. The fund manager views the post-settlement risk/reward balance as exceptionally compelling at prevailing market prices and is launching a dedicated special purpose vehicle (SPV) to aggressively expand exposure to the equity opportunity alongside existing fund holdings.
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