Buffett's Berkshire exited Merck investment just before COVID pill boost, further trimmed AbbVie and BMS holdings

Merck
Berkshire Hathaway had cashed out on Merck before phase 3 data for COVID-19 antiviral molnupiravir shot up the New Jersey pharma's stock price in October. (Merck)

Warren Buffett’s Berkshire Hathaway doesn’t appear to be the oracle of every market movement, at least not in the case of an investment in Merck & Co.

The company cleared its stake in Merck during the third quarter, right on the eve of a major stock price boost for the New Jersey pharma thanks to the phase 3 success of its Ridgeback Biotherapeutics-partnered COVID-19 pill molnupiravir.

Meanwhile, Berkshire also continued to reduce its ownership in AbbVie and Bristol Myers Squibb, a securities filing shows, just as a potential drug pricing reform, including Medicare price negotiations, pressures stock performance for Big Pharma companies.

Before the third-quarter Merck withdrawal, Berkshire already halved its holding in the drugmaker to 9.16 million shares in the second quarter. At that time, the investment shop also reported a stake of 1.55 million shares in the newly formed Organon as a result of its spinoff from Merck. Berkshire also exited that stake in the women’s health specialist during the third quarter.

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The Oct. 1 molnupiravir revelation sent Merck’s share price from about $75 apiece the prior day to as high as about $84. The antiviral’s global-first authorization by U.K. regulators Oct. 4 further elevated Merck’s per-share price to above $90 before tumbling below $82 the next day on the news of Pfizer’s stronger data for its own COVID drug Paxlovid.

As for AbbVie, Berkshire owned about 14.4 million shares for a total value of $1.55 billion by the end of September, down from roughly 20.5 million shares in the second quarter and nearly 22.9 million shares in the first quarter.

AbbVie’s stock had been trending largely upward in 2021 until the FDA unveiled Sept. 1 that it would add an updated classwide boxed warning on one of the company’s key growth pillars, JAK inhibitor Rinvoq. The agency is also limiting oral JAK inhibitors’ use to behind traditional TNF blockers in inflammatory diseases in a move that many view as a blow to Rinvoq's market potential.

The FDA scrutiny dragged AbbVie’s stock price down to around $107 per share at the end of September from around $120 in August.

In BMS' case, the New York pharma’s stock was on a steady decline for about two months since late August. Berkshire reduced its stake in BMS by about 4.2 million shares in the third quarter to 22 million as of end of September. That was similar to the 4.7 million-share reduction the investment company took in the second quarter.

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Berkshire opened its positions in AbbVie, BMS, Merck and Pfizer in the third quarter of 2020 but has been paring back since then. It quickly exited a small stake of 3.71 million shares in Pfizer the following quarter, during which the New York pharma trumpeted the stellar phase 3 results of BioNTech-partnered COVID-19 vaccine Comirnaty.

The Omaha, Nebraska-based investor also cashed out on Biogen in the second quarter of 2021 just as the Big Biotech earned its controversial FDA approval for Alzheimer’s disease therapy Aduhelm.

On top of those investments, Berkshire still holds 327,100 Johnson & Johnson shares, which were valued at $52.8 million as of September. It also hasn’t changed its position in Teva, with about 42.8 million shares.

Meanwhile, Royalty Pharma, a company that works by acquiring pharmaceutical royalties, attracted Berkshire to build a stake of about 13.1 million shares at a cost of $475 million in the third quarter.