Buffett's Berkshire bets big on AbbVie, Bristol Myers, Merck, Pfizer as COVID-19 drives healthcare investment
As the COVID-19 pandemic fuels a global interest in healthcare, many deep-pocketed investors have diverted their money to the sector. Billionaire Warren Buffett is among those who have now doubled down on their commitments to the biopharma industry.
Buffett’s Berkshire Hathaway poured billions of dollars into four U.S. Big Pharma companies during the third quarter, according to a securities filing. Those drugmakers are AbbVie, Bristol Myers Squibb, Merck & Co. and Pfizer, and the total investments were valued at over $5.66 billion.
Although the pharma stakes don’t rival Berkshire’s position in tech juggernauts such as Apple or financial instantiations like Bank of America, they still reflect how COVID-19 has made healthcare a popular investment target during the pandemic.
In AbbVie, the investment shop bought roughly 21.3 million shares with a value of over $1.86 billion. It built up 22.4 million shares in Merck at a value of just short of $1.86 billion. From BMS, Berkshire purchased nearly 30 million shares for about $1.81 billion. Pfizer attracted $136 million for 3.7 million shares.
AbbVie recently acquired Botox maker Allergan and is promoting new rheumatoid arthritis drug Rinvoq and psoriasis treatment Skyrizi to reduce its reliance on megablocksuter Humira. Industry watchers have outlined high hopes for the two new launches, and their growth so far has exceeded expectations, with sales now tracking to bust $10 billion by 2025.
BMS, for its part, completed its $74 billion takeover of Celgene in a deal that beefed up its hematology offering. Blood cancer stalwart Revlimid looks like a keeper for further growth. Since the deal announcement, the transaction has also given BMS new FDA approvals for JAK inhibitor Inrebic in myelofibrosis, Reblozyl for the treatment of anemia in patients with beta thalassemia, multiple sclerosis med Zeposia, and Onureg—or oral Vidaza—for acute myeloid leukemia. But a key pipeline candidate, CD19-directed CAR-T therapy lisocabtagene maraleucel (liso-cel), has repeatedly hit FDA review snags, with approval by the end of 2020 now hanging in the balance.
Merck’s PD-1 inhibitor Keytruda, meanwhile, looks sure to topple Humira to take the crown as the world’s best-selling drug. And Pfizer recently took center stage as its BioNTech-shared mRNA COVID vaccine, BNT162b2, showed over 90% efficacy in preventing the respiratory disease. To focus on innovative medicines, the New York pharma put its consumer health business into a joint venture with GlaxoSmithKline and just recently completed a sale of its Upjohn generics franchise to Mylan to form a new company called Viatris.
Buffett’s interest in the four pharma bigwigs comes as drugmakers gain popularity—and publicity—thanks to COVID-19.
COVID has led to a surge in healthcare investments as the pandemic reminds people of the importance of healthcare preparedness. In the second quarter, global healthcare funding to private firms hit a new quarterly record of $18.1 billion, according to CB Insights. And that record was shattered again in Q3, with the funding reaching $21.8 billion. Governments have also spent heavily in the sector to combat the disease, and the money will sure benefit biopharma companies both during and after the pandemic.
In addition to the four Big Pharma players, Berkshire holds about 643,000 shares in Biogen as of Q3, a stake it built late last year. The Big Biotech is at a critical juncture, with a pending FDA decision on Alzheimer’s contender aducanumab. But the outcome from an independent neuroscience advisory committee convened by the FDA didn’t bode well for Biogen, as most experts on the panel voted that existing data don’t offer enough evidence to support the drug’s effectiveness.
Berkshire also has an interest in Teva, whose stock has been weighed down by U.S. lawsuits labeling it the mastermind behind an alleged generic price-fixing scheme, as well as lagging business performance during the pandemic.
Nov 17, 2020