Not bad for a single trade: Baupost Group appears to have made nearly $1 billion on just one of its stock picks.
Seth Klarman's hedge fund firm owns a stake in Idenix Pharmaceuticals, the hepatitis C-focused drug maker that Merck agreed to buy Monday for $3.85 billion, or $24.50 per share. The stock jumped to about $24 a share Monday after closing at $7.23 Friday. Assuming that Baupost still holds the more than 53.3 million shares it disclosed as of March 31, that would mean a paper gain of roughly $900 million.
The apparent big profit on Monday slightly underestimates Baupost's real haul. The Boston-based firm has been accumulating shares since the second quarter of 2011, a year when the purchase price hovered between $3 and $7 a share. The stock briefly surged to about $14 in early 2012, but has mostly traded around $5.
Assuming an average purchase price of $6 a share—an approximate calculation using FactSet data based on public filings and related share values—Baupost has made about $960 million on the Idenix trade. Baupost essentially quadrupled its position, paying about $320 million for shares that are now worth $1.28 billion.
A spokeswoman for Baupost, which managed $27 billion as of Jan. 1, declined to comment.
Merck appears to see similar value in Idenix to Baupost.
"Idenix has established a promising portfolio of hepatitis C candidates based on its expertise in nucleoside/nucleotide chemistry and prodrug technologies," Roger Perlmutter, president of Merck Research Laboratories, said in a statement Monday.
"Idenix's investigational hepatitis C candidates complement our promising therapies in development and will help advance our work to develop a highly effective, once-daily, all oral, ribavirin-free, pan-genotypic regimen that has a duration of treatment as short as possible for millions of patients in need around the world."
—By CNBC's Lawrence Delevingne.