Activist investment firm Starboard Value has acquired a $1 billion stake in pharmaceutical giant Pfizer, signaling its interest in influencing the company’s strategic direction amid ongoing struggles.
According to sources familiar with the matter, Starboard, led by Jeff Smith, aims to improve Pfizer’s performance and has reached out to former Pfizer executives Ian Read, the company’s CEO from 2010 to 2019, and Frank D’Amelio, who served as CFO until 2021, to support these efforts. However, it remains unclear in what specific capacity the former executives might be involved.
Pfizer has faced significant challenges as demand for its COVID-19 products continues to decline, contributing to a drop in its stock price. Despite a surge in revenue and free cash flow during the pandemic, Pfizer’s stock is currently down about 30% from its pre-pandemic levels in 2019. Analysts have pointed to the company’s aggressive acquisition strategy, with nearly $70 billion spent on mergers and acquisitions (M&A) since 2020, as a contributing factor to its recent financial struggles. One notable deal was the $5 billion acquisition of Global Blood Therapeutics, which has since seen its sickle cell disease drug pulled from the market.
Starboard is said to be concerned that under current CEO Albert Bourla, Pfizer has strayed from the cost-conscious, innovation-driven approach that marked Ian Read’s leadership. During Read’s tenure, Pfizer’s stock more than doubled, thanks in part to a focus on cost discipline and core business investments. Although Pfizer has initiated cost-cutting measures, including a $4 billion savings program and additional cost-reduction efforts, the company has still seen over $100 billion in shareholder value evaporate since the peak of the pandemic.
While Pfizer and Starboard have not commented publicly on these developments, market reactions suggest that investors are taking notice. Shares of Pfizer rose 2.2% in premarket trading following reports of Starboard’s involvement.
This marks one of Starboard’s rare forays into the pharmaceutical sector, as the investment firm has historically focused on tech companies. Starboard has recently taken activist positions in companies like News Corp, Salesforce, and Match Group, seeking to drive structural changes and enhance shareholder value.
Despite Starboard’s stake, analysts warn that Pfizer’s turnaround may not have an easy or quick solution, given the company’s struggles to replace lost COVID-19 revenue with new, innovative products. Pfizer has faced setbacks in launching its respiratory syncytial virus (RSV) vaccine and developing an obesity treatment, which have not met expectations.
