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Baupost's Seth Klarman Dives Further Into Translate Bio

Baupost Group founder Seth Klarman (Trades, Portfolio) disclosed on Monday he expanded his stake in Translate Bio Inc. (NASDAQ:TBIO) by 38.76%.

Managing about $24.7 billion in assets, the guru's Boston-based hedge fund looks for value in a broad range of opportunities, including stocks, distressed debt, liquidations and foreign securities. Klarman typically seeks securities that trade well below his estimate of intrinsic value and holds for the long term while he waits for their price to rise.

According to GuruFocus Real-Time Picks, a Premium feature, Klarman invested in 3.43 million shares of the Lexington, Massachusetts-based company on Aug. 31, bringing the holding up to 12.3 million shares. The position accounts for 1.04% of the equity portfolio. The stock traded for an average price of $9 per share.


GuruFocus estimates the firm has lost about 14.5% on the investment since establishing it in the second quarter of 2018.

The biotechnology company, which focuses on developing messenger RNA therapeutics to treat diseases caused by protein or gene dysfunctions, has a $509.08 million market cap; its shares were trading around $9.98 on Tuesday with a price-book ratio of 3.84 and a price-sales ratio of 113.36.

After tumbling approximately 35% in 2018, GuruFocus estimates the stock has gained 27% year to date.


On July 31, the company reported second-quarter results, posting a loss of 57 cents per share, which missed analysts' estimates by 9 cents. Revenue of $1.17 million fell short of expectations of $1.73 million.

The company also provided an update on its pipeline on Sept. 9. Based on early positive cystic fibrosis data for MRT5005, the first inhaled mRNA therapeutic, Translate Bio said it is prioritizing and expanding its pulmonary disease programs. It is also discontinuing the development of MRT5201, a liver-targeted treatment for ornithine transcarbamylase deficiency, due to data not supporting the desired outcomes for safety and pharmacokinetics.

Translate Bio's financial strength was rated 4.3 out of 10 by GuruFocus. Despite having comfortable interest coverage and a solid cash-debt ratio of 11.46, the low Altman Z-Score of -0.68 warns that the company could be in danger of going bankrupt.

The company's profitability and growth fared even worse, scoring a 1 out of 10 rating on the back of negative margins and returns.

With 24.06% of outstanding shares, Klarman is by far Transate Bio's largest guru shareholder. Jim Simons' (Trades, Portfolio) Renaissance Technologies also owns the stock.

Portfolio composition

Klarman's $10.73 billion equity portfolio, which is composed of 30 stocks, is largely invested in the consumer cyclical and health care sectors, followed by a smaller holding in the technology space.


Other biotechnology stocks he had positions in as of the end of the second quarter included Atara Biotherapeutics Inc. (NASDAQ:ATRA), Theravance Biopharma Inc. (NASDAQ:TBPH), Akebia Therapeutics Inc. (ABKA), Gossamer Bio Inc. (NASDAQ:GOSS) and Paratek Pharmaceuticals Inc. (NASDAQ:PRTK).

Disclosure: No positions.

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This article first appeared on GuruFocus.