May 13, 2013 / 1:55 PM / 5 years ago

Elan-Theravance deal a big boost for Baupost, Fidelity

BOSTON (Reuters) - Fidelity Investments and hedge fund Baupost Group LLC got a lift on Monday from their investment in Theravance Inc THRX.O after the U.S.-based biopharmaceutical company agreed to a $1 billion royalty deal with Irish drugmaker Elan ELN.I.

Fidelity and Baupost are two of the largest shareholders in Theravance, whose shares rose 13 percent to $39.62 in early Monday trading on Nasdaq. Since early April, Theravance shares have surged nearly 70 percent, including Monday’s gains.

    Baupost, founded and managed by Seth Klarman, owns about 13.6 million shares of Theravance, or nearly 14 percent of the company. Fidelity, including its Fidelity OTC Portfolio, holds about 13 million Theravance shares, or a 13 percent stake, according to Thomson Reuters data.

    In a move to maintain its independence, Elan is buying 21 percent of the royalties that Theravance receives from GlaxoSmithKline (GSK.L) for its respiratory drugs. GSK is Theravance’s largest shareholder with a 27 percent stake, according to U.S. regulatory filings made in March.

    Klarman’s stock picks at Baupost are followed closely for his deep-value investing. His book, “Margin of Safety”, is a nod to Benjamin Graham and David Dodd, whose disciples include Warren Buffett. Baupost had $28.1 billion in assets at the end of 2012, according to disclosures to the U.S. Securities and Exchange Commission.

    Reporting By Tim McLaughlin; editing by John Wallace

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