US Pharma Rewards its Shareholders

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In 2019 big pharma companies prioritised shareholder payouts and dividends, with the eight biggest US pharma companies topping $31 billion in stock buybacks and the same amount in dividends. Revenues were not necessarily consistent with dividend and buyback amounts, and some critics argue that payouts should be lessened in favour of more R&D spending.

 

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Shareholders often consider pharma companies a profitable investment, as each year multinationals see tens of billions of dollars in sales. The corporate tradition in the US consists of making shareholders richer with stock buybacks and dividends, though this practice is considered by many to be a short-term solution, suggesting that investing more in R&D would provide more long-term value.

 

Despite being embroiled in legal battles and recalls, Johnson & Johnson shareholders still saw favourable returns, with the company repurchasing $6.32 billion shares, which is more than triple the amount it spent the year before, as well as $7.42 billion in dividends. Many of the companies on the list touted much higher dividend and buyback payouts than what they spent on R&D, with Pfizer’s payouts equaling more than two and a half times its R&D spending during the first three quarters of 2019. Some, such as Gilead and Merck, spent the same or more on shareholder payouts as on R&D. Merck continued to remain competitive in oncology, its blockbuster Keytruda blowing its competition out of the water, and Gilead set its sights on breaking into cell therapy.

 

Some companies’ payouts were smaller in 2019 than in previous years. AbbVie spent just $300 million on buybacks as the company spent the latter half of the year negotiating and securing its merger with Allergan. Similarly, Bristol-Myers Squibb was involved in a USD 74 billion merger with Celgene, leaving shareholder payouts on the back burner.

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