Pfizer Inc. PFE CEO Albert Bourla is set to meet with activist investor Starboard Value amid growing pressure to revitalize the pharmaceutical giant’s struggling share price and refine its strategic focus. The meeting comes as Starboard builds a $1 billion stake in Pfizer, equivalent to about 0.6% of the company’s $165 billion market value.
What Happened: Bourla and at least one other director will hold talks with Starboard next week, following the revelation of the fund’s significant investment. The activist investor, led by CEO Jeff Smith, is calling for a strategy shift and has prepared an extensive slide deck outlining its turnaround plans, reported the Financial Times citing people familiar with the matter.
The mounting pressure on Pfizer’s leadership comes as the company’s stock has fallen more than 30% over the past two years, sinking below pre-pandemic levels. According to the report, critics argue that Pfizer has mismanaged its $92 billion COVID-19 windfall, particularly pointing to a costly $70 billion acquisition spree that has failed to boost the company’s valuation.
In an unusual twist, two of Pfizer’s former top executives, ex-CEO Ian Read and former CFO Frank D’Amelio, are reportedly collaborating with Starboard. The pair has reached out to at least four Pfizer directors, urging them to consider working with the activist investor, reported The Wall Street Journal.
Analysts and investors are speculating about potential management changes, with some receptive to the idea. However, others caution that a mere change at the top may not be sufficient to address Pfizer’s challenges, citing the importance of a promising drug pipeline for long-term success in the pharmaceutical industry.
"We've sensed investor frustration with CEO Albert Bourla since at least the beginning of 2023," BMO Capital Markets analyst Evan Seigerman wrote, according to WSJ.
Pfizer and Starboard Value did not immediately respond to Benzinga‘s request for comment.
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Why It Matters: Starboard is expected to push for a more focused development strategy and deeper cost cuts beyond the $5.5 billion reduction already announced by Pfizer through 2027. Critics argue that Pfizer’s recent acquisitions, spanning neuroscience, blood disorders, and cancer, lack a clear, cohesive focus.
Bourla has acknowledged missing earnings expectations and weak commercial performance but maintains that investors haven’t fully appreciated the potential value of recent acquisitions, such as the $43 billion Seagen deal.
As pressure mounts, Bourla has shown signs of attentiveness to Wall Street critics. Earlier this year, he hired Andrew Baum, a former Pfizer bear at Citi, as chief strategy and innovation officer, in a move reminiscent of Novartis‘ hiring of outspoken analyst Ronny Gal.
In a bid to streamline its operations, Pfizer recently divested a $3.3 billion stake in Haleon, reducing its shareholding from 22.6% to 15%. Despite these efforts, the company remains under pressure to deliver better financial returns and strategic clarity.
Price Action: Pfizer’s stock closed on Tuesday at $29.18, down 0.068% during regular trading hours. However, in after-hours trading, the stock gained 0.31%. Year to date, Pfizer’s stock has fallen by 1.85%, according to data from Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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