Warren Buffet has just revealed that BerkshireHathaway held shares of Biogen worth $192mn at the end of December 2019. Although the position is relatively small compared to the rest of his portfolio (0,8%of its total holdings), this is the first time the“Oracle of Omaha”has invested in a biotech company.Warren Buffet through Berkshire,owns shares in  large healthcarecompanies(Johnson&  Johnson, Teva  PharmaorDaVita),  but  he  is  not  a  big  fan  of  biotech companies. So far, he has avoided the sector because the value of biotech companies does not liein current cash flow generation but the future potential of a promising pipeline.

The father of value investing is widely known for buying companies with "cheap" valuations. By investing in his first biotech, Warren Buffet believes that valuations in the biotechnology sector are becoming more attractive, given the sector's strong fundamentals.

As Warren Buffet said in a 1989 letter to shareholders: ”It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Why this interest in Biogen?

In March 2019, Biogen had discontinued two phase III studies (EMERGE and ENGAGE) on its Alzheimer's disease drug, Aducanumab. Despite this halt, Biogen continued to collect and analyze data in collaboration with the FDA.

According to Biogen, the data revealed that Aducanumab appears to work in patients at higher doses.

The company is currently preparing an FDA filing for possible approval in the first half of 2020, raising a new spark of hope for people with Alzheimer's disease.

Any approval in Alzheimer's disease would be extremely positive for the neurodegenerative sector, which could finally restoreinvestors’ confidence.Indeed, more than 400 clinical trials have failed since the last Alzheimer’s treatment was approved in 2003. Finding an effective treatment for Alzheimer's disease is a priority givenitsdevastating nature and despite incomplete results, the FDA may be ready to approve it.

Regaininginvestors’ enthusiasmin 2020?

We considerthat Buffet's first investment in a biotech company goes beyond the potential approval of Biogen's drug, but a real sign that the sector could be the real investment opportunity of 2020.

As we said in our Investment Recipes outlook2020, we believethatthe sector is towards a re-ratingthis year:

• Major   clinical   results   and   approvals   are   expected   this   year   in   the   neurological,   rare   disease,and cardiometabolic areas.
• Anext-generation of drugs (such as DNA and RNA gene therapy) is coming to maturity after years of research and investments.
• Technology is driving the sectorasartificial intelligence, and genome sequencing will continue to transform healthcarefrom the discovery of molecules to diagnosis and reshaping of clinical trials.
• The FDA is more than supportivetodayby adjusting clinical trial designs to these next generation of drugs and pushing for fasterapprovals.
• China is gaining visibility in the biotech sector due to the increasing number of Chinese biopharma’ IPOs in thedomestic/US stockexchanges and the recent approval in the US of BeiGene's drug.
• M&A will continue to be an important driver for the biotech industry in 2020, most likely in the second half of the  year.  Cash-rich  pharma  giants  will  continue  their  M&A  shopping  spree,  particularly  in  the  fields  of gene/cellular therapies, rare diseases, neurology,and immuno-oncology.
• Despite the volatility of the sector, biotechnology is the future of healthcare and represents along-term trend. Technology and discoveries in biology are finally converging, offering solutions for many diseases that were once considered incurable.
• Our  Biotechnology  portfolio  focuses  on  tomorrow's  new  generation  of  drugs  that  could  revolutionize  the future  of  biotechnology.  We  lookat  companies  that  address  unmet  medical  needs,  which  means  huge untapped markets waiting to be exploited.
• M&A will continue to be an important driver for the biotech industry in 2020, most likely in the second half of the  year.  Cash-rich  pharma  giants  will  continue  their  M&A  shopping  spree,  particularly  in  the  fields  of gene/cellular therapies, rare diseases, neurology,and immuno-oncology.
• Despite the volatility of the sector, biotechnology is the future of healthcare and represents along-term trend. Technology and discoveries in biology are finally converging, offering solutions for many diseases that were once considered incurable.
• Our  Biotechnology  portfolio  focuses  on  tomorrow's  new  generation  of  drugs  that  could  revolutionize  the future  of  biotechnology.  We  lookat  companies  that  address  unmet  medical  needs,  which  means  huge untapped markets waiting to be exploited.