Activist investor Starboard Value has made a significant investment of about $1 billion in Pfizer, a major pharmaceutical company, and is looking to bring about a change in the struggling company. Starboard has reached out to former Pfizer CEO Ian Read and ex-finance chief Frank D’Amelio for their support in this turnaround effort.
The current leadership at Pfizer, under CEO Albert Bourla, is believed by Starboard to have moved away from the disciplined cost structure and investment in innovative drugs that the company was known for. Despite Pfizer’s revenue and free cash flow increasing during the Covid-19 pandemic due to the success of its vaccine, the stock has not performed well, trading at about 30% lower than in 2019. This is partially attributed to Pfizer’s costly acquisition strategy, including the questionable $70 billion in M&A since 2020.
One of the deals that has raised concerns is Pfizer’s acquisition of Global Blood Therapeutics, which led to the withdrawal of a sickle cell disease drug acquired through the deal. Although Pfizer downplayed the financial impact, questions remain about the return on investment. Ian Read, who was Pfizer’s chief from 2010 to 2019, oversaw a period of significant growth for the company, with shares more than doubling under his leadership due to a cost-effective and core-focused culture.
While Pfizer has initiated cost-cutting measures, including a $4 billion program and additional reductions, the company has still seen over $100 billion in shareholder value disappear since the end of the Covid-19 pandemic. Starboard, led by Jeff Smith, is known for its focus on the technology sector but has recently been involved in challenging dual-class share structures at companies like News Corp, as well as launching campaigns at Autodesk, Salesforce, and Match Group.
The news of Starboard’s stake in Pfizer was initially reported by The Wall Street Journal, and a Pfizer spokesperson declined to comment on the speculation and rumors surrounding the investment. It will be interesting to see how Starboard’s involvement will impact Pfizer’s future direction and whether the company will return to its previous cost-conscious and innovative approach under new leadership.