Starboard Value Takes $1 Billion Stake in Pfizer: Reports (Video)

Shares of Pfizer (PFE) rose more than 4% Monday morning on reports that activist investor Starboard Value had taken a $1 billion stake in the pharmaceutical giant.

According to reports late Sunday evening, the investor wants to help make up for the company’s poor performance in recent years. Pfizer declined to comment.

Pfizer shares remain stagnant despite Covid-19-related revenue windfalls. Instead, investors focused on a disappointing portfolio, several blockbusters facing patent expiration in the next few years, and reduced revenues since the end of the pandemic.

“The stock has been under control over the last year, trading from the mid-$20s to the low-$30s and not making much profit outside of a fairly narrow range. Over the long term, this is one of the most disappointing large-cap names. health care with an uninspiring chart for almost any period since the 1990s,” Jared Holz, Mizuho health care expert, wrote in a note to clients on Monday.

CEO Albert Bourla has tried to draw attention to the company’s aggressive strategy, from staking his entire retirement on company stock earlier this year to a $43 billion deal with Seagen and the launch of a dozen new products in the second half of 2023.

No bounty for COVID

During the pandemic, while other COVID market players saw their stock prices skyrocket, Pfizer barely budged. Despite being the leading vaccine in the U.S. and some countries around the world, Pfizer stock has not been similarly rewarded.

Bourla remained optimistic at the time, telling Yahoo Finance: “We think our stock is undervalued, but we’re not worried that investors don’t see it.”

By 2023, Bourla seemed tired. “Even though I’m not happy, the only thing we can do is implement our strategy so that investors see that this is a good growth opportunity,” Bourla told Yahoo Finance.

In 2021, then-CFO Frank D’Amelio, who was reportedly tapped by Starboard as a consultant, told Yahoo Finance: “There is so much more value to unlock. Investors will become more interested in this story.”

It didn’t happen. Despite hitting its target of 6% revenue growth over the past few years – even after sharp Covid-related declines – investors have remained steadfast.

The stock hit a high of $60 per share in December 2021, when the company, along with partner BioNTech (BNTX), filed for FDA approval of a Covid-19 vaccine for teenagers – a year after it gained access for adults.

Aggressive mergers and acquisitions

Since taking the helm in 2019, Bourla has struggled to convince Wall Street of Pfizer’s value. At the time, Pfizer was diversifying away from its consumer healthcare business, forming a joint venture with GSK (GSK) and spinning off its Upjohn generics business. The company was just beginning to grapple with the idea that its products would face a patent chasm by the end of the coming decade.

At the time, Bourla committed on the earnings call to showcasing Pfizer’s ability to be a large-cap company that operates like a smooth and efficient machine, both in internal research and dealmaking.

“Pfizer will be a smaller, more science-focused company, with a particular focus on innovative pharmaceuticals. We will also continue to have the financial flexibility to continue investing in growth while returning capital to our investors. These are deliberate steps we are taking to make Pfizer a very different company,” Bourla said during the second quarter 2019 earnings call.

Fast forward to 2024 and the company has kept some of its promises, but it hasn’t moved the needle toward Wall Street.

The company has entered into a number of transactions, including the reinvestment of windfall gains related to the COVID-19 pandemic worth approximately $86 billion over 2021-2023. Transactions from 2019 to date total $73.7 billion. This includes the Seagen deal, as well as $5.4 billion for Global Blood Therapeutics and $11.6 billion for Biohaven.

“The whole concept of PFE’s aggressive business growth strategy and lack of return (so far) is likely one of the main reasons for the Starboard acquisition,” Mizuho’s Holz wrote.

“It is therefore not too surprising that a company like Starboard would attempt to change the Company’s course, despite the fact that significant operational improvement may not be the simplest of tasks.”

Similarly, Leerink Partners analysts wrote in a note on Monday that the company’s revenue growth is limited over the next five years.

“We are waiting for further developments, but we do not see any prospects that could increase shareholder value,” wrote the analysts.

Anjalee Khemlani is a senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBM, and health policy and politics. This of course applies to GLP-1. Follow Anjalee on most social media platforms @AnjKhem.

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