Biotech
Monday, October 7th, 2024 4:46 pm EDT
Key Points
- Activist investor Starboard Value has taken a $1 billion stake in Pfizer and aims to initiate a turnaround, expressing concerns that the company’s current leadership under CEO Albert Bourla has moved away from disciplined cost management and innovation in drug development.
- Starboard has reached out to former Pfizer executives Ian Read and Frank D’Amelio, both of whom are interested in helping with the turnaround. Read, as CEO from 2010 to 2019, doubled Pfizer’s stock by focusing on cost and core business operations.
- Pfizer’s stock has dropped 30% since 2019, despite increased revenues during the COVID-19 pandemic, largely due to an expensive acquisition strategy. The company’s $5 billion acquisition of Global Blood Therapeutics has raised concerns, particularly after the sickle cell drug Oxbryta was pulled from the market.
Activist investor Starboard Value has taken a substantial stake of approximately $1 billion in Pfizer, aiming to instigate a turnaround at the pharmaceutical company, which has faced financial struggles despite its pandemic-driven revenue boost. The exact details of Starboard’s plans remain unclear, but the hedge fund has reportedly approached former Pfizer executives Ian Read, the company’s CEO from 2010 to 2019, and Frank D’Amelio, its former CFO, to assist in the turnaround. Both executives have expressed interest in supporting Starboard’s efforts.
Starboard is concerned that under current CEO Albert Bourla, Pfizer has deviated from its historically disciplined cost structure and focus on innovative drug development. Pfizer’s stock performance has been disappointing, trading about 30% lower than in 2019. This decline 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 questioned by analysts in terms of return on investment. One notable deal under scrutiny is Pfizer’s $5 billion acquisition of Global Blood Therapeutics, whose sickle cell drug Oxbryta was recently pulled, a decision that Pfizer downplayed despite the drug generating over $300 million in 2023.
Under Ian Read’s leadership, Pfizer’s stock more than doubled, as he focused on cost control and core business operations, a strategy that seems to have been abandoned under Bourla’s leadership. Despite implementing a $4 billion cost-cutting program, followed by further reductions, Pfizer has seen over $100 billion in shareholder value evaporate since the pandemic subsided, exacerbating concerns over its current strategy.
Starboard, led by Jeff Smith, is primarily known for its activism in the technology sector, but it has increasingly expanded its focus. In addition to its investment in Pfizer, Starboard is currently challenging News Corp’s dual-class share structure and has launched campaigns at companies like Autodesk, Salesforce, and Match Group. Pfizer has declined to comment on what it calls “speculation and rumor” regarding Starboard’s stake and intentions.
Starboard’s intervention could signal a significant shake-up at Pfizer as the investor seeks to restore profitability and address concerns over the company’s current leadership, strategic direction, and costly acquisitions. The potential involvement of former leadership like Ian Read could further influence the trajectory of this campaign.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/10/07/starboard-value-has-1-billion-pfizer-stake-taps-former-exec-for-help.html
