Activist investor Starboard builds $1bn stake in drugmaker Pfizer

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Activist investor Starboard Value has built a $1bn position in Pfizer, according to two people familiar with the matter, as the drugmaker behind the top-selling Covid-19 jab struggles to reverse a fall in its share price to below pre-pandemic levels.

Starboard is seeking a turnaround of Pfizer, according to the two people. It has taken the stake as investors question the New York-based drugmaker’s path to post-pandemic growth after its Covid-19 vaccine delivered a shortlived bump in revenues that waned faster than expected.

Pfizer’s market value stood at $161bn as of Friday, after a 52 per cent drop from its pandemic peak. Its shares have traded flat this year, while the S&P 500 has risen by about 20 per cent.

Starboard’s exact plan is not yet clear, including whether it might push for management changes or board representation. The hedge fund has approached Pfizer’s former chief executive and chair Ian Read and former chief financial officer Frank D’Amelio about supporting its efforts at Pfizer, three people said.

D’Amelio and Read have not been briefed on Starboard’s specific plans and it is unclear what their roles might be. But the two former executives agree with Starboard’s argument that Pfizer has underperformed, according to a person with direct knowledge of the matter.

Starboard, whose stake amounts to at least 0.6 per cent of Pfizer’s value, is yet to present to the company’s full board of directors, according to another person with knowledge of the matter. The board is scheduled to convene a regular meeting this week.

“We don’t comment on market speculation or rumour,” Pfizer said of Starboard’s stake, which was first reported by The Wall Street Journal.

The stakebuilding is likely to put pressure on Pfizer chief executive Albert Bourla. Read appointed Bourla in 2018 and was his executive chair for two years.

Bourla played a key role in winning the partnership with BioNTech that led to the top-selling Covid vaccine, but he acknowledged at an investor conference in January that Pfizer had struggled in 2023 as the pandemic receded and said 2024 would be a “clean slate” for the company.

Pfizer has spent much of its $92bn Covid product windfall on a $70bn acquisition spree that has failed to inspire investors. Chief among those deals is Pfizer’s $43bn takeover of cancer drugmaker Seagen, which was aimed at giving it a foothold in the burgeoning field of cancer medicines known as antibody-drug conjugates. Investors have questioned whether the high price tag of 22 times Seagen’s revenues was worth it.

Last week, Pfizer pulled from the market the lead sickle cell drug purchased as part of its $5.4bn buyout of biotech Global Blood Therapeutics, citing safety concerns.

Pfizer addressed flagging performance with the announcement this year of a further $1.5bn in cost cuts before 2027, adding to a $4bn cost-saving programme rolled out in the aftermath of the pandemic. 

David Risinger, an analyst at Leerink Partners, said in a note that he did “not see low-hanging fruit to boost shareholder value” because the company had already engaged in a major cost-cutting drive, faced limits on its growth from patent expirations and had a large debt pile.

Starboard has targeted healthcare companies in the past. In 2019, the hedge fund urged biopharmaceutical giant Bristol Myers Squibb to drop its takeover of Celgene, in a campaign that was ultimately unsuccessful.

More recently, the activist has focused its efforts on media conglomerate News Corp and software company Autodesk.

Additional reporting by Andrew Edgecliffe-Johnson in New York