Starboard claims Pfizer 'threatened' former leaders

In another twist to the tale of Starboard Value's push for change at Pfizer, the activist investor has claimed former executives Ian Read and Frank D'Amelio were bullied into lending their support to current management.

A letter sent to Pfizer's board claims that people within the company or connected to it had threatened litigation against former chair and CEO Read and ex-finance chief D'Amelio that could result in a clawback of prior compensation and the cancellation of unvested performance stock units – unless they issued a statement supporting current chief executive Albert Bourla.

"While we cannot be certain that the board did not authorise this behaviour, we sincerely hope that all, or at least some, members of the board were wholly unaware of this coercive conduct, which in our view constitutes a clear breach of fiduciary duty," writes Jeffrey Smith, Starboard's managing member, in the letter.

Read and D'Amelio have issued a statement, as reported yesterday, expressing their support for Bourla, saying they are confident that Pfizer's senior management and board will "deliver shareholder value" over time.

In the letter, Smith has asked the board to set up a committee to "investigate the extent of this behaviour, determine who approved and executed" the alleged threatening conduct, and to "promptly hold the responsible parties accountable."

Some media reports have suggested that Read and D'Amelio were intimately involved in Starboard's campaign, which comes off the back of the hedge fund taking a $1 billion stake in Pfizer. Smith also refutes those claims, however, writing that they had "expressed concerns" about the company's trajectory and simply "offered to be of assistance."

Some investors have reportedly been unhappy with a series of pipeline-boosting deals the company under Bourla has made with the help of windfall revenues from its COVID-19 drugs, which fell off a cliff after the end of the pandemic.

While actions of this type aren’t uncommon in pharma – in fact, Starboard Value has previously taken a similar approach at Bristol-Myers Squibb in an unsuccessful effort to block its takeover of Celgene – the involvement of Read and D'Amelio has added an unusual dimension, particularly as Read groomed Bourla for the CEO position before he left the company in 2019. Usually, activist investors seek the support of other shareholders to try to drive their proposals through.

The result of the toing and froing has been volatility in Pfizer's share price, which gained 5% after news of Starboard's stake emerged, but fell 3% after Smith's letter was published, which might indicate some shareholders were in favour of a shake-up at the group.

So far, Pfizer hasn’t responded publicly to Smith's letter, which reveals that Starboard is due to meet with Bourla and fellow board member Shantanu Narayen, who is CEO at software giant Adobe, on 16th October.