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Will Klarman Buy More TRGT after its 35% Haircut?


BargainValueHunter
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http://www.gurufocus.com/news/155620/seth-klarman-buys-1692-stake-in-targacept-trgt-after-stock-drops-60

 

Renowned investor Seth Klarman is portfolio manager of the Baupost Group, which has averaged returns of nearly 20% since inception in 1983, and loves cheap stocks. He also wrote “Margin of Safety,” a value investing classic. On December 9, Klarman bought 5,649,678 shares of Targacept Inc. (TRGT), according to GuruFocus Real Time Picks. Targacept is a small, clinical-stage biopharmaceutical company that discovers and develops NNR Therapeutics, a new class of drugs for the treatment of central nervous system diseases and disorders.

 

Targacept has a broad 52-week price range of $30.47 to $6.88. Its stock chart shows a sudden drop of 60% on November 8. The same day, Targacept announced that its Phase 3 clinical trial of TC-5214, what could be a breakthrough adjunct therapy to antidepressants in patients with treatment-resistant major depressive disorder, failed to have a meaningful effect compared to placebo. Targacept began working on developing and commercializing the drug in partnership with Astrazeneca (AZN) in December 2009. It is the only of its drugs to be in Phase 3, the stage prior to reaching the market. Eight others are at various stages in its pipeline.

 

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201112201049dowjonesdjonline000355&title=updateastrazeneca/targacept-antidepressant-misses-study-goal

 

An experimental antidepressant co-developed by AstraZeneca PLC (AZN, AZN.LN) and Targacept Inc. (TRGT) again failed to meet the efficacy goal in a late-stage clinical trial, the companies said Tuesday.

 

The setback further clouds the prospects for the drug, TC-5214, which is designed to mimic the antidepressive effects of cigarette smoking and other nicotine-containing products. The drug also failed to meet its efficacy goal in a previous study, announced in November.

 

The setback is a blow for Targacept because TC-5214 is the company's lead product candidate. It also hurts AstraZeneca's efforts to bring new drugs to market that can help offset looming patent expirations for current best-sellers. AstraZeneca also disclosed Tuesday it will halt development of experimental ovarian cancer drug olaparib, citing an analysis of clinical data.

 

Biopharma investing is tough!

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  • 3 months later...

And down again recently. Anyone have thoughts on this one?

 

TRGT @ $5.12 looks cheap, if someone compares it with BV of $5.22 and cash of $5.84.

http://finance.yahoo.com/q/ks?s=TRGT+Key+Statistics

But I don't know anything else about their future earnings prospects?

http://finance.yahoo.com/q/ae?s=TRGT+Analyst+Estimates

It could be from extreme negative to extreme positive, but I rather think after the current situation, that earnings might be rather sluggish and nothing. Anyway I just looked into TRGT for the first time. BV could lose if the burn further money. Cheers!

 

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That's what makes it look interesting, that it sells below cash. Of course the cash will get burnt through sooner or later.

 

What puzzles me about this is that the stock went up ~50% after that large crash late last year, which was also about TC-5214.

 

 

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If it was not for the cash burn then I can make sense of purchase which would a be buy at a discount to IV(cash) + get the pipeline for free. All their R&D is in phase II which would be high risk in my opinion. Maybe he knows something about some of these potential products.

 

I think its a very small position ~ 1% for him.

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If it was not for the cash burn then I can make sense of purchase which would a be buy at a discount to IV(cash) + get the pipeline for free. All their R&D is in phase II which would be high risk in my opinion. Maybe he knows something about some of these potential products.

 

I think its a very small position ~ 1% for him.

 

Here you have a view into his portfolio:

http://holdings.nasdaq.com/asp/OwnerPortfolio.asp?FormType=OwnerPortfolio&CIK=0001061768&HolderName=BAUPOST+GROUP+LLC%2FMA

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If it was not for the cash burn then I can make sense of purchase which would a be buy at a discount to IV(cash) + get the pipeline for free. All their R&D is in phase II which would be high risk in my opinion. Maybe he knows something about some of these potential products.

 

I think its a very small position ~ 1% for him.

 

Here you have a view into his portfolio:

http://holdings.nasdaq.com/asp/OwnerPortfolio.asp?FormType=OwnerPortfolio&CIK=0001061768&HolderName=BAUPOST+GROUP+LLC%2FMA

 

Keep in my mind Baupost invests in debt, real estate, and basically anything they can find good bargains in. So the equities on that web page only represent ~15% of their total assets depending on what their AUM is. I think AUM is between 20-25 billion, but don't quote me on that.

 

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If it was not for the cash burn then I can make sense of purchase which would a be buy at a discount to IV(cash) + get the pipeline for free. All their R&D is in phase II which would be high risk in my opinion. Maybe he knows something about some of these potential products.

 

I think its a very small position ~ 1% for him.

 

Here you have a view into his portfolio:

http://holdings.nasdaq.com/asp/OwnerPortfolio.asp?FormType=OwnerPortfolio&CIK=0001061768&HolderName=BAUPOST+GROUP+LLC%2FMA

 

Keep in my mind Baupost invests in debt, real estate, and basically anything they can find good bargains in. So the equities on that web page only represent ~15% of their total assets depending on what their AUM is. I think AUM is between 20-25 billion, but don't quote me on that.

 

Good point.

 

Has ~ 30 million in Targacept of 3 billion portfolio which is very tiny compared to almost 30B in AUM

 

So really ~0.1%

 

I wonder why he would even bother?

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True. Out of the prominent value guys, they seem to be the only one to follow the biotech space?

 

They actually aren't, maybe of the more well known guys, but there are a number of value funds / event driven value funds that watch the biotech space. Third Point has an analyst who solely looks for biotech plays, Icahn is sometimes active in it too. If you look at 13Ds there's a Biotech Deep Value fund that sometimes posts.

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