Billionaire Seth Klarman’s Top Biotech Stock Picks

#3 Keryx Biopharmaceuticals (NASDAQ:KERX)

 – Shares Owned by Baupost Group (as of December 31): 25.79 Million

 – Value of Baupost’s Holding (as of December 31): $130.25 Million

Keryx Biopharmaceuticals (NASDAQ:KERX) was Seth Klarman’s tenth-largest equity position at the end of the fourth quarter. The value-oriented investor again made no changes to his position during the quarter. It should be mentioned that this equity position weighed significantly on Baupost’s performance in 2015, as the stock has lost more than 70% over the past year due to weaker-than-expected Auryxia sales. The Boston-based fund purchased its initial position in the company at an average price of $14.50, but Keryx shares are currently trading below $4.00 per share. As revealed by a recent letter to investors, Baupost Group overestimated the potential of the company’s approved drug for the control of phosphorous levels in patients with chronic kidney disease on dialysis. The company generated gross Auryxia product sales of only $8.80 million during the first three quarters of 2015, while analysts anticipated sales of as much as $1 billion in the U.S. for the entire year. Nonetheless, billionaire Klarman believes that the market “took a much harsher view [on Auryxia sales] and punished the stock” and remains confident in the long-term potential of the drug. Eric Bannasch’s Cadian Capital Management reported owning 600,000 shares of Keryx Biopharmaceuticals (NASDAQ:KERX) as of December 31.

#2 Atara Biotherapeutics Inc. (NASDAQ:ATRA)

 – Shares Owned by Baupost Group (as of December 31): 5.36 Million

 – Value of Baupost’s Holding (as of December 31): $141.55 Million

Baupost Group owned 5.36 million shares of Atara Biotherapeutics Inc. (NASDAQ:ATRA) on December 31, a stake that remained unchanged quarter-over-quarter. The shares of the clinical-stage biopharmaceutical company are 41% in the red year-to-date, mainly owing to disappointing clinical results related to its lead molecularly targeted product candidate, PINTA 745. The product candidate was being studied in a Phase 2 clinical trial for protein energy wasting, a condition that affects numerous end-stage renal disease patients, but failed to improve the physical condition, level of inflammation or blood sugar in patients under its Phase 2 proof-of-concept trial. Nevertheless, the company is not solely dependent on PINTA 745, so it determined that it would not continue the development of the drug and would instead focus its resources and efforts on advancing other candidates. Jacob Gottlieb’s Visium Asset Management LP reduced its exposure to Atara Biotherapeutics Inc. (NASDAQ:ATRA) by nearly 110,000 shares during the fourth quarter, remaining with 722,626 shares.

#1 Innoviva Inc. (NASDAQ:INVA)

 – Shares Owned by Baupost Group (as of December 31): 19.82 Million

 – Value of Baupost’s Holding (as of December 31): $208.86 Million

Innoviva Inc. (NASDAQ:INVA) is Seth Klarman’s top biotech stock as of the end of 2015. The value investor’s fund left its position in the royalty management company unchanged during the final quarter of 2015. Last month, Theravance Inc. changed its name to Innoviva Inc., a move that comes a year and a half after the company spunoff from pharmaceutical research and development company Theravance Biopharma. The company’s portfolio includes late-stage partnered respiratory assets partnered with Glaxo Group Limited. Innoviva recently registered its first profitable quarter since inception, generating fourth quarter net income of $4.3 million or $0.04 per share. That represented a big improvement from the net loss of $4.6 million reported for the third quarter of 2015. At the same time, the company received royalties amounting to $26.1 million during the fourth quarter, which marked an increase of 55% quarter-over-quarter. Iridian Asset Management, founded by David Cohen and Harold Levy, reported owning 12.42 million shares of Innoviva Inc. (NASDAQ:INVA) through its 13F for the fourth quarter.

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