Activist investor Starboard Value is reported to have taken an approximately $1 billion stake in pharmaceutical giant Pfizer and plans to maneuver a turnaround, reports say. This development comes as the struggling drugmaker cuts costs amid declining demand for its COVID-19 medicines.
According to a CNBC report, while the exact plans of Starboard remain undisclosed, it has reached out to two former Pfizer executives -- former CEO Ian Read and ex-finance chief Frank D'Amelio -- who have both expressed interest in supporting the activist investor's turnaround efforts.
Starboard believes that Pfizer has already stepped away from a disciplined cost structure and investment in novel drugs under its current CEO, Albert Bourla, the report stated, citing people in knowledge of the matter.
Pfizer experienced a significant surge in revenue and free cash flow during the COVID-19 pandemic, mainly due to the quick development and rollout of its vaccine. However, despite this success, the company's stock has struggled, trading approximately 30% lower than its levels in 2019. As the world returned to normal, the U.S. drug giant's profits faded, Reuters reported. Also, Pfizer's costly acquisition strategy — totaling nearly $70 billion since 2020 — has come under scrutiny, with analysts questioning the returns from these investments.
One such deal was the approximately $5 billion acquisition of Global Blood Therapeutics. Just recently, Pfizer announced that it would be pulling Oxbryta, a drug for sickle cell disease, and the "centerpiece" for the acquisition of Global Blood, after data showed that the "risks outweigh the benefits." Pfizer has since then downplayed the financial impact of pulling the drug from the market, saying that it only brought in just a little above $300 million in 2023.
Read was Pfizer's chief from 2010 to 2019 and is said to have inherited a company that was already facing challenges. But shares more than doubled during his tenure, as executives instituted that cost- and core-focused culture, which it has now apparently moved from.
In response to its financial difficulties, Pfizer has initiated cost-cutting measures. It initiated a cost-cutting program of about $4 billion, and another round of reductions was also made.
Starboard, led by Jeff Smith, has historically focused on the technology sector. In recent months, it has launched initiatives at companies like Autodesk, Salesforce, and Match Group.
