Activist investor Starboard Value has acquired a $1 billion stake in Pfizer, aiming to initiate changes at the pharmaceutical giant amidst its financial struggles, according to sources familiar with the situation. While Starboard’s exact strategy remains unclear, they have reportedly sought the expertise of former Pfizer executives Ian Read (former CEO) and Frank D’Amelio (ex-finance chief) to assist with the company’s turnaround efforts.
Starboard, led by Jeff Smith, is reportedly concerned about Pfizer’s recent shift away from its traditionally disciplined approach to cost management and investment in novel drugs under current CEO Albert Bourla. Pfizer’s revenue and free cash flow surged during the Covid-19 pandemic due to its successful vaccine rollout, but its stock has since underperformed, with shares down approximately 30% compared to 2019 levels. This downturn is partly attributed to Pfizer’s aggressive acquisition strategy, with nearly $70 billion spent on mergers and acquisitions since 2020, some of which have been met with skepticism by analysts.
One controversial acquisition was Pfizer’s $5 billion purchase of Global Blood Therapeutics, a deal that included the sickle cell drug Oxbryta, which the company recently pulled after modest sales of $300 million last year. Pfizer has played down the financial impact of this move, but it has raised concerns about the returns from recent acquisitions.
Return to Disciplined Leadership?
Former CEO Ian Read, who led Pfizer from 2010 to 2019, is remembered for doubling the company’s share value during his tenure by instituting a cost- and core-focused culture. Read’s leadership came at a time when Pfizer faced significant challenges, and his strategy of disciplined cost management and targeted investments helped turn the company around. Starboard appears to be advocating for a return to such leadership principles, contrasting them with the current trajectory under Bourla, which has focused more on acquisitions.
In response to financial pressure, Pfizer has already initiated cost-cutting measures, launching a $4 billion cost-reduction program and later expanding these efforts. Despite these steps, more than $100 billion in shareholder value has been lost since the height of the pandemic, reflecting the company’s ongoing difficulties.
Starboard’s Broader Strategy
Starboard Value, known primarily for its focus on the technology sector, is expanding its influence into the pharmaceutical industry with this Pfizer stake. The firm has been active in recent campaigns against companies like Autodesk, Salesforce, and Match Group, as well as challenging News Corp’s dual-class share structure.
This move marks a significant shift for Starboard, as it seeks to bring its activist playbook to Pfizer, a company that has historically weathered various challenges but now faces questions about its post-pandemic future. Starboard’s involvement signals a possible push for further restructuring at Pfizer, though the exact plans are yet to unfold.