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Big BioPharma Stock Buybacks: Are There Better Alternatives?



8/24/2012 8:00:19 AM

Big Pharma remains a highly profitable cash cow in spite of its well-known R&D challenges and perennial patent cliffs. One of the biggest questions their Boards must wrestle with is what to do with all the cash. In recent years, plowing it back into internal R&D hasn’t been the preferred option given pipeline productivity questions. Returning capital to shareholders via dividends has certainly been high on the list. Another, albeit indirect, way of paying shareholders is through share repurchases (stock buybacks), and it has also been quite popular. The expectation (or hope) with these indirect stock buybacks is that the stock will move upwards because the shares oustanding goes down (or at least the buybacks offset the dilution from the exercise of options).

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