Pharmaceutical and Biotech Portfolio Management: How Easy is it to Spend 10 or 20 Billion?
What is an R&D-driven company with $10-50 billion of cash in the bank to do?
In the last twelve months, Merck, Pfizer, HP, AstraZeneca, and Bristol-Myers Squibb have announced stock buybacks totaling over $25 billion, and layoffs of over 30,000 employees. So apparently, for many firms, the best use of their cash hoard is a stock buyback, or to stand pat, secure in the notion that they can defend against a hostile take-over. This trumps increased R&D spending as well as retaining current sales staff.
Last week, venture capitalist Peter Thiel posed a related question, of sorts, to Eric Schmidt of Google during the Fortune Brainstorm Summit in Aspen, CO:
Google also has 30, 40, 50 billion in cash. It has no idea how to invest that money in technology effectively. So, it prefers getting zero percent interest from Mr. Bernanke, effectively the cash sort of gets burned away over time through inflation, because there are no ideas that Google has how to spend money.