After the epidemic, a setback, radical investors holding $1 billion in shares seek to reorganize Pfizer's leadership

According to sources familiar with the matter, activist investor Starboard Value has acquired approximately $1 billion worth of shares in Pfizer and is seeking to reform the company to reverse its current predicament. Following this news, Pfizer's stock price surged over 4.4% on Monday.

Data shows that as of last Friday, Pfizer's market value was around $162 billion. Since the company launched the world's first COVID-19 vaccine, its stock price has almost halved from the historic high at the end of 2021. This year, Pfizer's stock price has remained almost unchanged while the S&P 500 index has risen by 21%.

It has been reported that Starboard has reached out to former Pfizer CEO Ian Read and former CFO Frank D’Amelio, who have expressed willingness to assist Starboard in achieving its goals. Read served as Pfizer's CEO from 2010 to 2018 and personally selected current CEO Albert Bourla as his successor. D’Amelio was Pfizer's CFO from 2007 to 2021.

Sources have told the media that Starboard believes that under current CEO Albert Bourla's leadership, Pfizer has deviated from its traditional cost control and rigorous structure for investing in new drugs.

Driven by this news, Pfizer's stock price surged over 4.4% intraday on Monday, later narrowing to around 3%, closing at $29.46.

Starboard, led by Jeff Smith, invests across industries but is particularly active in the technology sector, recently taking action in Salesforce and Autodesk. In 2019, Starboard attempted to block pharmaceutical giant Bristol-Myers Squibb's $74 billion acquisition of rival Celgene but was unsuccessful. That same year, Starboard won board seats at healthcare technology company Cerner.

In a Predicament

Pfizer CEO Bourla is currently under pressure from investors as the company previously overestimated the post-pandemic demand for its pandemic-related products, and Pfizer's leadership has been seeking ways to address the issue.

During the pandemic, Pfizer delivered the COVID-19 vaccine in record time, solidifying its well-known position. In 2022, Pfizer's vaccine and the COVID-19 drug Paxlovid drove the company's sales to exceed $100 billion.

However, with the pandemic fading into the background, Pfizer is facing a decline in COVID-19 sales, and the company's other products have not been able to fill this gap. Additionally, in the coming years, some of the company's top-selling drugs, such as the blood thinner Eliquis and the arthritis treatment Xeljanz, will also face competition from lower-priced alternatives Even worse, the company's highly anticipated weight loss drug had a disappointing first attempt, while competitors like Pfizer, Eli Lilly, and Novo Nordisk have achieved greater success.

Pfizer is betting on cancer drugs for the future, believing that these drugs can bring in billions of dollars in new sales. Last year, Pfizer agreed to acquire biotechnology company Seagen and its groundbreaking targeted cancer drugs for $43 billion. Pfizer expects Seagen's drugs (antibody-drug conjugates or ADCs) to bring in $10 billion in annual sales by 2030.

In addition, Pfizer has used funds accumulated during the pandemic to make a series of smaller acquisitions, including acquiring Arena Pharmaceuticals for $6.7 billion and purchasing a stake in Biohaven Pharmaceutical Holding for approximately $11.6 billion.

One particularly concerning deal was Pfizer's acquisition of Global Blood Therapeutics. Pfizer acquired a sickle cell disease drug through a $5 billion acquisition two years ago, but the drug has recently been withdrawn. Pfizer downplayed the financial impact of this decision in September, stating that the drug Oxbryta only brought in slightly over $300 million in revenue last year.

Cost Cutting

Some analysts criticize the company for lacking discipline in mergers and other business management. In contrast, during Read's tenure as CEO of Pfizer from 2010 to 2019, the company was in turmoil. However, under his leadership, Pfizer was known for focusing on core businesses such as vaccines and cancer, doubling its stock price. The management established a culture centered around cost control and core businesses, a culture that now appears to have been diluted.

Under Bourla's leadership, the company significantly increased its research and development budget and divested its generic drug business. Pfizer's stock price is currently below the level it was when Bourla became CEO in 2019.

Pfizer warned at the end of 2023 that its revenue may decline this year and released disappointing expectations for 2024. The company also announced a $3.5 billion cost-cutting plan at the end of last year, expected to be completed by the end of 2024.

In May of this year, Pfizer announced the launch of a new multi-year cost-cutting plan. In July, the company raised its full-year outlook, with the introduction of some acquired products and new commercial products helping to drive business growth, offsetting the decline in COVID-19 vaccine sales. Pfizer released "encouraging" data on its once-daily anti-obesity drug "danuglipron" in July, demonstrating its efforts in expanding the product pipeline.

"We are making progress on all fronts," Bourla said in a media interview in July