Activist investor Starboard builds $1bn Pfizer stake

The week has started with reports that activist investor Starboard Value has amassed a $1 billion stake in pharma group Pfizer and wants strategic changes to restore growth.

If confirmed, the hedge fund's move comes as Pfizer is navigating a fall in sales, profits, and its share price precipitated by the end of the pandemic and a steep decline in sales of its BioNTech-partnered COVID-19 vaccine Comirnaty.

While that could be viewed as a return to normality after the windfall effect of COVID, Starboard Value wants greater clarity on Pfizer's post-pandemic plans, although, so far it has not yet revealed the source of its dissatisfaction – and whether it will push for changes in executive management or board positions at Pfizer.

Its modus operandi is to "invest in deeply undervalued companies and actively engage with management teams and boards of directors to identify and execute on opportunities to unlock value for the benefit of all shareholders," according to its website.

Other companies targeted by the firm in the past few months include media giant News Corp, software group Autodesk, and online dating firm Match.com, while in the past it has also pushed for a change in strategy at Bristol-Myers Squibb – unsuccessfully lobbying to prevent its $74 billion merger with Celgene in 2019. Typically, Starboard will publish a letter to the board of a company, shortly after building a stake that gives it some leverage, detailing its designs.

Citing people close to the matter, the Wall Street Journal said this morning that the investment group has already reached out to Pfizer’s former chief executive and chair Ian Read and former chief financial officer Frank D’Amelio about supporting its efforts.

Pfizer and its current chief executive Albert Bourla – who has been at the helm since 2019 – have not yet commented on the reports. The company's share price has stayed trended down over the last 12 months, albeit with quite a lot of volatility, and its market cap currently stands at $162 billion, around half its value during the pandemic.

The group has been spending a lot of its COVID revenues on an aggressive M&A drive in the last two years. It has spent more than $70 billion on the acquisitions of antibody-drug conjugate (ADC) specialist Seagen for $43 billion, migraine developer Biohaven for $11.6 billion, immunology player Arena Pharma for $6.7 billion, and Global Blood Therapeutics (GBT) for $5.4 billion, alongside other bolt-on agreements, to drive growth.

The jury is still out on how successful these will be, but there was a major setback for the GBT acquisition after the main asset in that $5.4 billion deal – Oxbryta for sickle cell disease – was pulled from the market last month.

Meanwhile, Pfizer has also launched a major cost-cutting effort to try to bolster its profits, with a $4 billion programme announced in 2023 expanded earlier this year.