Oracle of Organon: Buffett's Berkshire cashes out on Biogen, trims pharma holdings but discloses stake in Merck spinoff

Warren Buffett's Berkshire Hathaway has exited its stake in Biogen the same quarter Aduhelm got its controversial FDA approval in Alzheimer's disease. (Biogen)

Unlike other high-tech stocks such as Amazon and Apple where Warren Buffett is playing the long game, the Oracle of Omaha was apparently in Biogen for the short run.

Buffett’s Berkshire Hathaway has exited a $180 million stake in Biogen in the second quarter, a securities filing shows.

The timing coincided with the FDA’s controversial approval for the Biogen’s Alzheimer’s disease drug Aduhelm in early June. Biogen’s stock skyrocketed after the approval as the decision opened up a potential $10 billion market by industry watchers’ calculations.

Berkshire built its position in Biogen toward the end of 2019, the same quarter that the Big Biotech switched gears following a previous negative analysis of Aduhelm’s phase 3 data and instead said it would file the drug for approval.

Back then, Berkshire bought 648,447 shares of Biogen that were worth about $192.4 million by year-end 2019, or about $280 a piece. As of the end of the first quarter this year, the holding firm reported a 643,022-share stake in Biogen at a value of $179.9 million.

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In the days following Aduhelm’s high-profile green light, Biogen’s stock price shot up to as high as about $415 per share. That would have made Berkshire’s holding worth about $267 million, translating into a $79 million, or 39%, return on the investment in about a year and a half. Of course, that calculation is based on the premise that Berkshire sold its Biogen shares at the high point after the approval.

Based on the securities filing, it isn’t clear exactly when during the second quarter Berkshire sold its shares.

Plus, one can’t know for sure why Buffett or his apostles opted to abandon Biogen so quickly. But the huge public backlash on FDA’s move to approve Aduhelm and the company’s pricing strategy may offer some clues.

Besides Biogen, Berkshire almost halved its position in Merck & Co. during the second quarter. Berkshire owned about 9.16 million shares in the New Jersey pharma as of the end of June, down from 17.88 million in the prior quarter.

Meanwhile, the investment company also reported a new stake of 1.55 million shares in Organon, which officially spun off from Merck in early June. But it doesn’t seem like the company actively built its Organon stake. That’s because for every Merck share investors owned at the time of the spinoff, they received one-tenth of an Organon share. That ratio roughly aligned with Berkshire’s previous stake in Merck.

RELATED: Buffett's Berkshire bets big on AbbVie, Bristol Myers, Merck, Pfizer as COVID-19 drives healthcare investment

The Omaha, Nebraska-based firm has trimmed its holdings in AbbVie and Bristol Myers Squibb, as well.

As of the end of the second quarter, the company said it owned about 20.53 million AbbVie shares worth $2.31 billion, down from 22.87 million shares worth $2.47 billion in the first quarter. Meanwhile, Berkshire’s stake in Bristol Myers Squibb also dropped by about 4.74 million shares to 26.29 million.

The company opened its positions in the Big Pharma companies in the third quarter of 2020, just as the COVID-19 pandemic fueled investment in healthcare overall. At that time, Berkshire also bought a relatively smaller Pfizer stake of 3.71 million shares at a value of $136 million. The New York pharma quickly disappeared from Berkshire’s investment list a quarter later.

Closing out Biogen and Pfizer on such short holding periods seemed to go against Buffett’s investment philosophy. The billionaire is well-known for his saying: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” Now, one can only guess why Biogen and Pfizer landed on the chopping board so quickly.