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Seth Klarman Amasses a Third of Drug Company, George Soros Adds Mercury Systems

November 05, 2013 | About:
Holly LaFon

Holly LaFon

277 followers
Two well-known gurus, George Soros and Seth Klarman, bought additional shares of companies of which they own more than 5%, according to GuruFocus Real Time Picks. Klarman, leader of the Baupost Group, added shares to his position in Idenix Pharmaceuticals (IDIX), and Soros grew his position in Mercury Systems (MRCY).

Klarman and Idenix Pharmaceuticals (IDIX)

Klarman raised his stake in Cambridge, Mass.-based Idenix Pharmaceuticals by 37.9% to a massive 36,910,868 shares in aggregate, giving him 27.55% ownership of the company, up from 19.98% a second quarter end. He bought the shares in a series of transactions taking place from Sept. 13 to Nov. 1, at per-share prices ranging from $3.56 to $4.85.

Baupost has been aggressively buying Idenix shares since establishing the position in second quarter 2011.

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Founded in 1998, Idenix is a pharmaceutical company focused exclusively on the treatment of hepatitis C virus infection, with three drugs in its pipeline, two of which are still in preclinical phase.

Idenix shares fell as much as 36% in October, but jumped sharply at the end of October when the company announced third quarter financials and an update on its hepatitis C drug. For the third quarter, Idenix said it made revenues of less than $0.1 million, down from $32.3 million in the third quarter 2012. It also reported net loss of $34 million, or $0.25 per diluted shares, compared to $4.3 million, or $0.03 per diluted share the previous year.

The company’s cash position stands at $148.8 million, enough to cover operations through December 2014.

Idenix also announced that one of its drugs in development, IDX21437, received approval to undergo clinical trials in Canada and Belgium after demonstrating favorable antiviral activity and a strong enough safety profile.

Its second drug in development, Samatsvir, completed a phase II clinical trial with partner Janssen Pharmaceuticals, data for which will become available in the fourth quarter. When that study is complete, the company has a second 12-week Phase II clinical trial in collaboration with Janssen planned for the drug. Idenix commenced partnering with Janssen on the drug in January 2013, and needs it to pass one further study, Phase III, before it can go to market.

George Soros and Mercury Systems

Soros increased his Mercury Systems position by 31.58% on Oct. 22, giving him 1,666,666 shares, or 5.02% ownership of the company. He has been trading the company’s shares for more than five years.

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Mercury Systems is a developer of open-sensor and Big Data processing systems for commercial, defense and intelligence applications, based in Chelmsford, Mass.

The company reported first quarter fiscal 2014 financial results on Oct. 29. The company had revenues up 9% year over year to $53.9 million, including a $2.6 million increase of commercial customers and $1.9 million increase of $1.9 million.

The company also reported a net loss of $2.3 million, or a loss of $0.07 per share, compared to a loss of $7.2 million, or $0.24 per share, a year previously. Its cash and cash equivalents are $40.1 million, up by $1 million from the second quarter.

The company has been facing the headwind of slow military spending for more than a year, but saw a 19% increase in defense booking in the first quarter.

Mercury’s Tuesday share price of $9.40 is close to a one-year high.

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Ron Baron’s Baron Funds commented on the company, of which they own 5.4%, in their first quarter 2013 commentary:

“Mercury Systems, Inc. (MRCY), the provider of signal and imaging processing for defense electronics contractors, continued to trade poorly because of pending cuts to the U.S. government's defense budget soon to be implemented with sequestration passed. We expect cash flow to be wiped out in 2013, but think the programs Mercury supports will come back strong, as will the company's cash flow. We admit to having egg on our face, having lived through this decline, but we think the company trades at a bargain at under four times future cash flow, so it is now worth our while to stick it out.”

For more George Soros stocks, visit his portfolio here. Seth Klarman’s portfolio is here.

GuruFocus Real Time Picks alerts you for the stock purchases and sales that Gurus have made within the last two days. Follow your favorite Gurus closely with GuruFocus' Premium Membership! If you are not a Premium Member, we invite you for a 7-Day Free Trial.


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