Biotech Values

[DewDiligence]

PFE MRK WYE SGP etc. re leveraging the balance sheet to increase RoE:

As to leverage, there is of course nothing to stop them changing their debt-equity ratio without M&A.

Your statement might be valid in theory, but it fails in practice. Taking on debt makes sense only if the new money is deployed where it generates a return in excess of the cost of capital (on an after-tax basis).

For a company the size of PFE or MRK, there are only two ways of doing this on a scale large enough to be material: acquisitions and share repurchases (the latter being tantamount to a self-acquisition).