Activist investor Starboard Value has acquired a significant stake in Pfizer, valued at around $1 billion, as it aims to drive a strategic overhaul at the struggling pharmaceutical giant. The move comes as Pfizer faces mounting challenges, including dwindling revenue from its COVID-19 products and concerns over its recent acquisition strategy. The activist firm's push for change could signal a new chapter in the company's efforts to recapture its former financial strength.
Sources familiar with the matter revealed that Starboard Value has approached former Pfizer CEO Ian Read and ex-CFO Frank D'Amelio, seeking their involvement in guiding the turnaround. Both executives have expressed interest in aiding Starboard's mission to steer the company back to its disciplined cost structure and focus on innovation-a strategy they successfully implemented during their tenures at Pfizer.
The market reacted positively to the news, with Pfizer's shares rising 2.2% to $29.20 in premarket trading on Monday. Despite this bump, the stock has declined more than 13% over the past year and currently trades at nearly half its pandemic-era peak as demand for its COVID-19 vaccine and therapeutic pill wanes. Analysts remain skeptical about Starboard's ability to deliver quick fixes to the company's underlying issues, citing the lack of low-hanging fruit to boost shareholder value.
David Risinger, an analyst at Leerink Partners, voiced caution regarding the potential impact of Starboard's involvement. "We await future developments, but we do not see low-hanging fruit to boost shareholder value," Risinger noted in a research note. This sentiment reflects broader market concerns about Pfizer's ability to rebound from its current challenges, despite the new activist pressure.
Pfizer, under the leadership of current CEO Albert Bourla, has struggled to find new growth engines following its pandemic-driven revenue surge. While Bourla played a pivotal role in the rapid development of Pfizer's COVID-19 vaccine in partnership with BioNTech, the company's efforts to replace that revenue have yet to bear fruit. Key product launches, like the respiratory syncytial virus (RSV) vaccine, have underperformed, and recent clinical data for its obesity pill has fallen short of expectations.
Since 2020, Pfizer has spent approximately $70 billion on acquisitions, including high-profile deals such as the $43 billion purchase of Seagen, $13 billion for Biohaven, $6 billion for Arena Pharmaceuticals, $5 billion for Global Blood Therapeutics, and $2 billion for Trillium Therapeutics. Critics have questioned the returns on these investments, particularly after Pfizer recently downplayed the impact of Oxbryta, a drug for sickle cell disease acquired in the Global Blood Therapeutics deal, which generated only $300 million in revenue last year.
Starboard Value, led by Jeff Smith, has a history of shaking up companies in a variety of industries, though it has traditionally focused on the technology sector. The firm's current efforts to influence Pfizer's strategy align with its broader push for corporate governance reforms at companies like News Corp, Salesforce, and Match Group. By bringing on board industry veterans like Read and D'Amelio, Starboard aims to leverage their expertise in cost management and strategic focus to reinvigorate Pfizer's financial performance.
During his tenure as CEO from 2010 to 2019, Ian Read transformed Pfizer into a more streamlined and profitable enterprise, with the company's stock price more than doubling under his leadership. His approach centered on cost discipline and a focus on core operations-principles that Starboard believes are lacking under the current management.
Despite these pressures, Pfizer has already initiated cost-cutting measures in response to its post-pandemic revenue decline. The company recently launched a $4 billion cost-reduction program, followed by a second phase of deeper cuts. However, more than $100 billion in shareholder value has evaporated since the peak of the COVID-19 vaccine boom, indicating that these efforts have yet to fully stabilize the company's financial trajectory.
Starboard's move to take a significant stake in Pfizer signals a clear intention to drive more aggressive changes at the pharmaceutical giant. The company's leadership is under scrutiny not only for its acquisition strategy but also for its perceived departure from the disciplined management style that once defined Pfizer's operational approach. With Starboard now in the mix, the pressure on CEO Albert Bourla and his team to deliver a credible plan for reversing Pfizer's fortunes is likely to intensify.
While Starboard has not yet disclosed specific demands or a detailed plan for Pfizer, the activist investor's history suggests that it will push for a more stringent focus on cost management and a reassessment of Pfizer's acquisition strategy. The firm's past successes in catalyzing change at other corporations could provide a blueprint for how it might approach Pfizer's current challenges.
