Berkshire Sells Glaxo, Sanofi Shares in Favor of DaVita

Berkshire Hathaway Inc. (BRK/A) sold shares in GlaxoSmithKline Plc (GSK) and Sanofi as Warren Buffett’s company joined investors who have soured on the European drugmakers since their stocks reached highs in May.

“Berkshire isn’t the first large investor to rotate out of pharma since the sector peaked in the second quarter,” said Mark Clark, an analyst at Deutsche Bank in London.

The company reduced its investment in Glaxo by 77 percent by selling 1.13 million American depositary receipts and cut its stake in Paris-based Sanofi by 157,800 ADRs as of Sept. 30, Berkshire said in a regulatory filing late yesterday. It added to a stake in DaVita HealthCare Partners Inc., a Denver-based kidney dialysis provider.

Glaxo’s shares have declined about 10 percent since reaching an 11 1/2-year high in London on May 28. Sanofi has retreated 8 percent after the stock hit a record high the same day.

Glaxo’s slide comes amid a bribery probe in China that began in July, and after U.S. regulators proposed a simpler path for rivals seeking to copy the U.K. company’s best-selling respiratory drug Advair.

Sanofi’s profit has fallen for five consecutive quarters amid development setbacks for new medicines to replace revenue lost to generic competition for blockbusters such as the Plavix blood thinner. Chinese (SAN) sales have slowed as a result of a government investigation of the industry, and Sanofi took 201 million euros ($271 million) in charges in the second quarter because of inventory mismanagement in Brazil.

DaVita Purchase

DaVita (DVA), the second-largest dialysis provider in the U.S., has also slid in recent months, though the stock has gained about 40 percent since the company announced in May 2012 that it would buy HealthCare Partners in a deal valued at more than $4 billion.

DaVita’s growth in treatments and a recurring revenue stream made the dialysis provider an attractive buy for Berkshire, according to Kevin Ellich, an analyst at Piper Jaffray.

Berkshire, based in Omaha, Nebraska, began building a stake in DaVita in 2011 and now owns more than 16 percent of the company, according to data compiled by Bloomberg. Berkshire added 1.5 million shares of DaVita as of Sept. 30 and 3.7 million more in November, it said yesterday. Berkshire’s largest new holding was in Exxon Mobil Corp.

Buffett’s bet may not pay off in the short term, at least by one measure. Among analysts who make 12-month price predictions for Glaxo and Sanofi and share their findings with Bloomberg, the average forecast is for each to rise more than 7 percent. The average prediction for DaVita is 4.7 percent.

Peter Grauer, the chairman of Bloomberg LP, the parent company of Bloomberg News, has served on DaVita’s board since 1994.

To contact the reporter on this story: Makiko Kitamura in London at mkitamura1@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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