Activist investor Starboard Value said Pfizer’s executives haven’t delivered on what they once called one of the best pipelines in the industry, and need to be held accountable by the company’s board of directors.
In a 74-page presentation released Tuesday, Starboard outlined what it described as a failure by the company to convert its success during the Covid-19 pandemic into the next phase of its potential growth.
The investor’s criticisms centered on an inability of Pfizer’s R&D programs to produce promised blockbusters over the last five years — including in obesity — combined with a penchant for overspending on deals. Starboard believes it’s “unlikely” that Pfizer achieves $79 billion in revenue by 2030, a target that the investor said would bring it in line with its peers.
“We believe the Board needs to actively hold management accountable for earning appropriate returns on R&D and M&A moving forward,” Starboard said in a presentation at the 13D Monitor Active-Passive Investor Summit in New York on Tuesday.
While Starboard stopped short of calling for changes to the company’s board or management, it’s not unusual for activists to lay down a marker and see how a company responds before calling for specific changes.
“Pfizer deserves to be best-in-class,” Starboard said.
The investor didn’t respond to a request for comment, and Pfizer declined to comment.
Jeff SmithIt’s the first time Starboard has made its proposal public since its $1 billion stake in Pfizer was revealed earlier this month. The requests were detailed by firm co-founder Jeff Smith.
The presentation follows an Oct. 16 meeting between Starboard and Pfizer where at least some of the investor’s asks were discussed. Starboard has a history of aggressive activist campaigns against large corporate targets. But its effort against Pfizer has gotten off to a halting start, marked by gaining the support of two former top executives, then losing it in a shock reversal just days later. Pfizer also recently added former Vanguard chairman and CEO Tim Buckley to its board, a statement that institutional shareholders are at the helm of the company.
Because of those dynamics, Simos Simeonidis, a former partner at activist firm Sarissa Capital Management, feels Starboard is on the ropes.
“I think it’s over,” he told Endpoints News. “I don’t think Starboard has a chance anymore.”
Though Starboard’s stake represents just 0.6% of the New York pharmaceutical company, it’s indicative of larger investor dissatisfaction with Pfizer since the pandemic waned. Its shares have fallen by about half since the end of 2021. Smith reportedly told conference attendees that Pfizer’s drop in share price since its peak during the pandemic was “crazy.”
Billions of dollars spent on companies like Arena Pharmaceuticals, Global Blood Therapeutics and Array BioPharma have not yet materialized into major returns — and resulted in a costly failure, in at least one case. And while investors largely remain optimistic about the acquisition of Seagen, fully reaping the benefits of the cancer company’s pipeline will take years.
It’s also unclear what an activist would do that Pfizer hasn’t already done, including several rounds of significant cost cuts and executive changes. It has also reduced a handful of research programs, generated cash from its spun-out consumer unit, and sold some programs, such as a suite of preclinical rare disease gene therapies that AstraZeneca bought for as much as $1 billion in 2023.
While some of Pfizer’s bets have not panned out, Simeonidis said “nobody is saying they overspent like they were drunken sailors.”
“Nobody could ever claim that, but you could say ‘your pick didn’t work out,’” he said.
Editor’s note: This story was updated with additional information including Pfizer declining to comment.