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Activist investor Starboard Value has called on Pfizer’s leadership to take action and hold management accountable for its underperforming performance. This comes as Starboard publicly discussed its plans for the pharmaceutical company after acquiring a $1 billion stake.
Starboard’s chief executive, Jeff Smith, criticized Pfizer for not capitalizing on the $40 billion increase in cash flow from its Covid-19 products under CEO Albert Bourla’s leadership. Smith highlighted that the return on investment from research and development efforts, as well as a $70 billion deals spree at Pfizer, was not satisfactory, resulting in at least $20 billion of value destruction.
During a conference for activist shareholders in New York, Smith pointed out the discrepancy between Pfizer’s revenue and stock price, despite significant growth in revenue and cash flow. He urged Pfizer’s board to hold management accountable for generating appropriate returns on research and development and mergers and acquisitions, emphasizing that the company “deserves to be best in class.”
Starboard presented similar concerns to Bourla and another Pfizer board member in a recent meeting. The activist investor’s threat to overhaul Pfizer’s management was a strategic move to reassert itself in its campaign against the pharmaceutical giant.
In addition to its stake in Pfizer, Starboard disclosed a position in Kenvue, the maker of Tylenol spun out of Johnson & Johnson, and called for further improvements at software group Salesforce.
Despite initially gaining support from former Pfizer executives Ian Read and Frank D’Amelio, Starboard faced setbacks when the executives withdrew from the campaign and mistakenly alerted Pfizer to Starboard’s plans. Smith expressed doubt that Pfizer could reverse declining revenues without a significant change in strategy.
Shares in Pfizer dropped following Smith’s comments, reflecting investor concerns about the company’s performance. Pfizer’s stock price has fallen by more than 50% from its peak during the pandemic.
Smith criticized Pfizer for not delivering on its promise to turn experimental treatments into successful products during Bourla’s tenure, as well as for generating lower returns on investment compared to industry peers. He highlighted Pfizer’s lag behind competitors in developing new drugs despite substantial research investments.
Despite Pfizer’s decline, the company has not commented on Starboard’s criticisms, and Starboard has not provided further details on its plans for Pfizer.