This week, beleaguered specialty pharmaceutical firm QLT (NASDAQ:QLTI) announced another buyback plan for up to $50 million, nearly 10% of its outstanding shares at current prices. This is the continuation of a trend for QLT. The drugmaker has been voraciously buying back shares over the past 12 months, and its share count is down 17%, from 90.7 million shares to 75.4 million.

With $270 million in cash and investments and only $170 million in long-term debt, QLT can afford to repurchase its shares without materially harming its balance sheet. Whether this is the best course of action for its shareholders is another question. The shares QLT has bought over the past year have been at an average price of $7.96, slightly higher than today's share price.

Ever since the regulatory approval of Genentech's (NYSE:DNA) rival macular degeneration treatment, Lucentis, QLT has been under pressure as sales of its top compound Visudyne have shrunk precipitously. 2007 has seen a slight reversal of fortune for QLT after it settled most of the patent litigation facing its hormone therapy drug Eligard.

A share buyback is never a reason to invest in a stock in and of itself. If a company smartly buys back shares on the cheap when they are undervalued, this can boost an investor's returns significantly and be an effective use of capital, especially when compared to the negative tax consequences of paying out dividends. Even though revenue fell 28% last year, QLT's management has signaled what they think about the company's future.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.