Are Share Buybacks a Wise Investment for Biopharma
Biogen Idec, Genzyme and Amgen have eached announced large share buybacks recently. Wall street smiles on these buybacks and the conventional wisdom suggests they are a tax-efficient way of returning cash to shareholders. But in biopharmaceuticals, there is a downside to these shareholder sweeteners.
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Share buybacks are controversial in the biopharma industry, but European pharma companies, facing tough operating environments and pressures on near-term financials, are planning to invest in them in 2012 more than in recent years.
Pfizer Inc.'s announcement on Feb. 1 that it plans an enormous, near-term share repurchasing program caught investors' attention and highlighted a persistent, if sometimes muted, ongoing debate in the industry about the best use of its cash.
Having created a shareholder addiction to cash payments, companies are now going to have to make the unpleasant choice between pleasing investors in the short term and building their businesses over the next decade. IN VIVO examines pipeline confidence, patent expirations, and cash flow woes to make some forecasts about the industry's financial health, as well as looking inside the strategies that Big Pharma is currently pursuing.