Pfizer faces pressure as activist investor Starboard Value takes $1 billion stake

Activist investor Starboard Value has taken a roughly $1 billion stake in Pfizer and wants the struggling drugmaker to make changes to turn its performance around, according to people familiar with the matter.

Pfizer had a market value of about $162 billion as of Friday. Its shares have been roughly cut in half from a record high notched in late 2021 after the company delivered the world’s first Covid-19 vaccine. They are little changed so far this year, compared with a 21% rise in the S&P 500.

Starboard has approached two former Pfizer executives, Ian Read and Frank D’Amelio, to aid in its efforts, and they have expressed interest in helping, the people familiar with the matter said. Read was Pfizer’s chief executive officer from 2010 to 2018 and handpicked current CEO Albert Bourla as his successor. D’Amelio was its chief financial officer from 2007 to 2021.

Other specifics including Starboard’s exact plans and interactions with the company couldn’t be learned.

Pfizer’s Bourla has been under pressure from investors to right the ship at the drugmaker, especially after it overestimated future demand for pandemic-related products once the health emergency subsided.

The New York-based drugmaker delivered its Covid-19 vaccine in record time, cementing its status as a household name and helping communities reopen and children head back to school. In 2022, Pfizer’s shot and its Covid-19 drug Paxlovid powered the business past $100 billion in sales.

But the bet backfired as the world returned to normal. Now, as Pfizer struggles with falling Covid-19 sales, the company’s other products haven’t been able to fill the gap. It is also staring down lower-priced competition for some of its big-selling products such as blood thinner Eliquis and arthritis treatment Xeljanz in the coming years.

Making matters worse, the company’s first attempt at a closely watched weight-loss pill also disappointed while competitors like Eli Lilly and Novo Nordisk found greater success. (Pfizer is now advancing a version of the anti-obesity drug as a once-daily pill.)

Pfizer has been betting much of its future on cancer drugs, wagering they can ring up billions of dollars in new sales. It agreed to spend $43 billion last year on a deal to buy biotech Seagen and its pioneering class of targeted cancer drugs. Pfizer has said it expects Seagen drugs, known as antibody-drug conjugates or ADCs, to generate $10 billion in annual sales by 2030.

The company also struck a slew of other smaller deals with its pandemic cash pile, including buying Arena Pharmaceuticals for $6.7 billion and acquiring the rest of Biohaven Pharmaceutical Holding it didn’t already own for about $11.6 billion. It also paid $5.4 billion for Global Blood Therapeutics and recently said it would pull all lots of an approved sickle-cell drug, Oxbryta, that it received in the deal.

Some analysts have criticized the company for lacking discipline in its approach to M&A and other aspects of managing the business. Under Read’s reign, Pfizer was known for focusing the company on core businesses such as vaccines and cancer.

When Bourla took over, he dramatically increased the company’s R&D budget and got rid of the company’s off-patent drug business. Pfizer’s stock is currently trading below 2019 levels when Bourla became CEO.

At the end of 2023, Pfizer warned its revenue could fall this year and issued underwhelming 2024 guidance. The company also late last year announced a $3.5 billion cost-cutting plan to be realized by the end of 2024.

In May, Pfizer said it would launch a new multiyear cost-cutting program. In July, it hiked its outlook for the year, with several acquired products and commercial launches helping boost the business and offset a decline from Comirnaty, its Covid-19 vaccine.

“We are progressing on all cylinders,” Bourla told The Wall Street Journal in July.

Starboard, led by Jeff Smith, invests across sectors but is especially active in technology, including recent efforts at Salesforce and Autodesk. In 2019, Starboard made a push at pharma giant Bristol-Myers Squibb in an attempt to scrap its $74 billion deal to buy rival Celgene, to no avail. Starboard also won board seats in 2019 at healthcare-technology company Cerner.

Write to Lauren Thomas at lauren.thomas@wsj.com

Disclaimer: This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.