Seth Klarman (Trades, Portfolio) continues to top weight his portfolio with outsized stakes in health care and pharmaceutical companies. June 30, he bought 18.5% of a company designing a treatment for breast cancer.
Klarman, founder of the Baupost Group, purchased 25 million shares of Cascadian Therapeutics Inc. (CASC, Financial) for around 94 cents per share. The company’s stock had fallen 21% since it announced a name change from Oncothyreon and pivot in focus from therapeutic vaccines to cancer treatments June 8.
The day before Klarman’s investment, Cascade announced it received “fast track” designation from the U.S. Food and Drug Association for its most promising treatment, ONT-380, to fight HER2+ metastatic breast cancer. The FDA’s fast track program advances review of treatments for serious conditions or that fill unmet medical needs, potentially reducing development time and cost. Cascade began its phase 2 trial of the treatment in the first quarter.
The company expects to post little profit or revenue for at least several years, and its ability to do so rests on bringing a treatment candidate to market. In the meantime, it plans to put all its cash and liquid assets toward development. Cascade has one other preclinical oncology product in development, targeting an increasingly studied cell protein with the potential to inhibit tumor growth called Chk1.
As of March 31, the company had accumulated debt of $527.5 million. It also had a first quarter loss of $12.9 million, grown from $7.9 million in the prior-year quarter. Its cash position dropped to $13.9 million in the first quarter from $27.9 million at year end as it spent to fund its operations and make investment purchases.
Cascade shows Klarman is still enamored with certain companies in health care. It is his eighth health-related company in which he has a percentage stake in the double digits (using first-quarter data). His leading choices are Keryx Biopharmaceutials Inc. (KERX, Financial), Atara Biotherapeutics Inc. (ATRA, Financial) and Innoviva Inc. (INVA, Financial).
Companies similar to Cascade with pharmaceutical products on their way to market he owns include: Forward Pharma (FWP, Financial), Innoviva (INVA, Financial) and Kindred Biosciences (KIN, Financial).Ă‚
Klarman is one of the most followed and least communicative value investors. His classic book, “Margin of Safety,” chronicles his penchant for undervalued stocks and extreme patience.
Since the market heard of Klarman’s investment on July 8, Cascade’s shares have popped 5.6%. The price rose 8.4% Thursday to trade around $1.05 mid-afternoon.
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