Billionaire Seth Klarman’s Top 4 Biotech Stock Picks

In this article, we discuss billionaire Seth Klarman’s top 4 biotech stock picks. To read the detailed analysis of the biotech industry, Seth Klarman’s investment philosophy, and Baupost Group’s performance and Q3 bets, go directly to Billionaire Seth Klarman’s Biotech Stock Picks. 

4. Jacobs Solutions Inc. (NYSE:J)

Seth Klarman’s Stake Value: $66.583 million

Jacobs Solutions Inc. (NYSE:J) is a Dallas-based firm that offers technical professional services. The company has a diverse clientele, including biotech companies that are engaged in messenger RNA (mRNA), cell therapy, gene therapy, and more.

On November 21, Jacobs Solutions Inc. (NYSE:J) announced its agreement with Amentum Services, Inc. to develop a brand new, publicly traded business that will operate in the government services sector. The new company will be created by a spin-off of the firm’s critical mission solutions and cyber and intelligence government services businesses that will be combined with Amentum. Jacobs Solutions Inc. (NYSE:J) and its shareholders will have a 63% ownership stake in the new company, and the firm expects to receive $1 billion in cash dividend at closing, plus additional value after closing, through the disposition of a retained stake in the combined company. The new combined company will commence operations with a consolidated revenue of $13 billion following an organizational restructuring.

On November 21, Jacobs Solutions Inc. (NYSE:J) posted its Q4 non-GAAP EPS of $1.90, and its revenue increased 10.5% year-over-year (YoY) to $4.29 billion, surpassing the estimates by $80 million.

On November 16, Jacobs Solutions Inc. (NYSE:J) reported that it was awarded a five-year contract renewal for operations and maintenance of Farmington City in New Mexico for the wastewater and surface water treatment plants and wastewater collection and drinking water distribution systems. The contract will start on January 1, 2024, and will have a value of $9 million per year.

Jacobs Solutions Inc. (NYSE:J) was mentioned in Madison Investments’ third quarter 2023 investor letter. Here is what it said:

“Jacobs Solutions Inc. (NYSE:J), a professional services firm, is benefitting from increased spending on large infrastructure, water, and energy transition projects. Jacobs Solutions is a professional services firm spanning consulting, engineering, and project delivery for both the public and private sector. We admire the company’s strong position across infrastructure, water, advanced manufacturing, and energy transition – all areas which we believe have a bright future. However, as the shares appreciated, we decided to sell to fund more attractive opportunities.”

3. Jazz Pharmaceuticals plc (NASDAQ:JAZZ)

Seth Klarman’s Stake Value: $87.203 million

Jazz Pharmaceuticals plc (NASDAQ:JAZZ) is an Ireland-based biopharma firm that is engaged in the identification, development, and commercialization of medicines, especially for narcolepsy, cancer, pain, and psychiatry.

On November 8, Jazz Pharmaceuticals plc (NASDAQ:JAZZ) announced its Q3 earnings result with a non-GAAP EPS of $4.84. The revenue of $972.14 million grew 3.3% YoY, topping the analysts’ estimates by $2.8 million.

On November 14, Jazz Pharmaceuticals plc (NASDAQ:JAZZ) reported that it has entered into an exclusive license and collaboration agreement with GSK plc (NYSE:GSK) spinout, Autifony Therapeutics for the development and commercialization of drug candidates against two ion channel targets associated with neurological disorders. The upfront and milestone payments are said to have a value of up to $770.5 million.

Aristotle Capital Management, LLC talked about Jazz Pharmaceuticals plc (NASDAQ:JAZZ) in its third quarter 2023 investor letter. Here is what it said:

“During the quarter, we sold our position in Magna International and invested in a new position, Jazz Pharmaceuticals plc (NASDAQ:JAZZ). Founded in 2003, Jazz Pharmaceuticals is a global biopharmaceutical company headquartered in Ireland. The drugmaker’s portfolio of nine approved products focuses on conditions with limited therapeutic treatments in neuroscience (~75% of 2022 revenue) and oncology (~25%).

Jazz’s drug Xyrem was added to its portfolio in 2005 and was approved for use in patients with narcolepsy. The drug’s strong efficacy propelled it to be the standard of care for this incurable sleep condition and has achieved wide adoption for the treatment of excessive daytime sleepiness and cataplexy (episodes of loss of muscle control)…

Xyrem’s patent exclusivity ended in January 2023, and authorized generic versions of the product have entered the market. To prepare for the patent cliff, the company developed Xywav, a lower‐sodium version of Xyrem, which is touted for its potentially better heart safety. The drug has received FDA approval for the treatment of narcolepsy and idiopathic hypersomnia and has orphan drug exclusivity through 2027…” (Click here to read the full text)

2. Tower Semiconductor Ltd. (NASDAQ:TSEM)

Seth Klarman’s Stake Value: $69.996 million

Tower Semiconductor Ltd. (NASDAQ:TSEM) is an Israel-based company that offers integrated circuits and related services. TowerJazz offers technologies like RF and HPA, CMOS image sensors, and more to a diverse clientele, including biotech companies like Axbio Inc., with which it partnered to develop microfluidics Bio-CMOS device for molecular in vitro diagnostic (IVD), based on TowerJazz’s 65nm RFCMOS platform.

On November 14, Craig-Hallum analyst Richard Shannon lowered the price target to $33 from $38 on Tower Semiconductor Ltd. (NASDAQ:TSEM)’s stock and reaffirmed a Buy rating. The firm mentioned the company’s in-line Q3 results and Q4 guidance is below consensus estimates, and believes the sales will bottom out in Q1 2024.

On November 13, Tower Semiconductor Ltd. (NASDAQ:TSEM) posted its Q3 GAAP EPS of $3.07, which beat the estimates by $0.93 and the revenue of the quarter was $358 million.

1. Clarivate Plc (NYSE:CLVT)

Seth Klarman’s Stake Value: $150.975 million

Clarivate Plc (NYSE:CLVT) provides insights and analytics services. Its subscription-based services are aimed at scientific and academic research, life sciences, patent research and intelligence, industry codes and standards, trademark research and protection.

On November 7, Clarivate Plc (NYSE:CLVT) announced its Q3 earnings result with a non-GAAP EPS of $0.21, topping the consensus by $0.03. The revenue of $647.2 million increased 1.8% YoY and beat the estimates by $15.79 million. Due to the growth of transactional and other revenues, subscription revenues, and recurring revenues, the total organic revenue grew by 1.7%.

In the third quarter, Baupost Group initiated a position in Clarivate Plc (NYSE:CLVT) with 22.5 million shares worth $150.975 million, representing 2.89% of the fund’s portfolio. Leonard Green & Partners was the most significant shareholder of the company, with more than 116.666 million shares worth $782.832 million.

Baron Funds mentioned Clarivate Plc (NYSE:CLVT) in its first-quarter 2023 investor letter. Here is what it said:

“We added to our position in Clarivate Plc (NYSE:CLVT), a leading global information services provider that serves customers across academia and government, life sciences & health care, and intellectual property. Clarivate goes to market with a collection of well-known brands, including Web of Science, ProQuest One, Alma, Cortellis, Derwent, and CompuMark.

Clarivate has an attractive business model. The company’s foundation is its highly valuable proprietary data assets (#1 or #2 player in most markets) that are combined with analytical tools and insights to help users apply the underlying data to everyday business problems. As an important part of the end users’ daily workflow, Clarivate’s indispensable, mission-critical solutions create a sticky and predictable business model with high levels of recurring revenue (about 80% recurring revenue and over 90% renewal rates). Clarivate has strong operating leverage (“build it once, sell it many times”) and should be able to sustain adjusted EBITDA margins in the low to mid-40% range…” (Click here to read the full text)

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