Activist investor Starboard Value has a roughly $1 billion stake in pharmaceutical giant Pfizer and is seeking to mount a turnaround at the struggling company, according to people familiar with the matter.
The activist’s exact plans could not be learned, but Starboard has approached former Pfizer CEO Ian Read and ex-finance chief Frank D’Amelio, both of whom have expressed interest in supporting Starboard’s turnaround, said the people.
Starboard believes that Pfizer’s current leadership, under CEO Albert Bourla, has stepped away from historically disciplined cost structure and investment in novel drugs.
Pfizer’s revenue and free cash flow ballooned during the Covid-19 pandemic, thanks to the company’s fast-tracked vaccine. But its stock has not done well, trading about 30% lower than it did in 2019. That is in part due to an expensive acquisition strategy — nearly $70 billion in M&A since 2020 — the return of which some analysts have questioned.
One particularly concerning example to Starboard was Pfizer’s acquisition of Global Blood Therapeutics. Pfizer pulled a drug for sickle cell disease it got just two years ago via the roughly $5 billion acquisition. The company played down the financial impact in September, saying the drug Oxbryta brought in a little over $300 million last year. It is dealmaking like that, said the people, that concerns Starboard.
Read was Pfizer’s chief from 2010 to 2019 and inherited a company in tumult. But shares more than doubled during his tenure, as executives instituted that cost- and core-focused culture that Starboard now believes the company has moved away from.
To be sure, the company has taken steps to tamp down on costs. It began a $4 billion cost-cutting program and then announced a second round of further cost reductions. Still, more than $100 billion in shareholder value has evaporated since the Covid-19 pandemic faded largely into the rearview mirror.
Starboard is run by Jeff Smith, and has historically focused on the technology sector. It is currently challenging News Corp’s dual-class share structure, and in recent months has mounted campaigns at Autodesk, Salesforce and Match Group.
The Wall Street Journal earlier reported news of Starboard’s stake.
A Pfizer spokesperson declined to comment on “speculation and rumor.”
— CNBC’s Angelica Peebles contributed to this report.
Read the full article here