Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Two of Pfizer’s former top executives have pitched at least four of its directors, including chief executive Albert Bourla, on activist investor Starboard Value’s plan for turning around the struggling pharmaceutical group, said several people familiar with the matter.
The drugmaker’s former chair and CEO Ian Read and former finance chief Frank D’Amelio spoke with at least four board members on Sunday, before Starboard’s $1bn stake in the drugmaker behind a Covid-19 vaccine became public, the people said.
The episode is a rare display of former executives recommending a board of directors listen to a pitch from shareholder activists, who typically call for management and strategy changes in the hope that the company’s share price rises. It is particularly personal for Read, who helped appoint Bourla to the CEO role in 2019 and oversaw him as the board’s executive chair for a year afterwards.
Pfizer’s share price jumped 2.3 per cent Monday after press reports surfaced about Starboard’s campaign against the New York-based drugmaker. The activist investor has not laid out its demands publicly, but people familiar with the hedge fund’s thinking said it believes Pfizer has been poorly managed and misspent its $92bn Covid-19 windfall on a costly $70bn mergers and acquisitions spree.
The two former executives, who have been advising Starboard on its campaign, spoke to Pfizer’s lead independent director Shantanu Narayen and the company’s longest serving director, Suzanne Nora Johnson. Bourla also received a call from his former colleagues, the people added.
Pfizer and D’Amelio declined to comment, while Starboard and Read did not immediately respond to request for comment.
Pfizer’s market value stood at $165bn on Monday afternoon, about half the peak it reached as its Covid-19 vaccine and anti-Covid pill Paxlovid were rolled out across the world.
Pfizer’s board discussed Starboard’s stake at a meeting on Monday, said a person familiar with the matter. The directors learnt of the fund’s position just before starting a tour of the drugmaker’s production facilities in Ireland, as part of a regularly scheduled board meeting, people familiar with the matter said.
Starboard has prepared a pitch deck about its turnaround plans for Pfizer but this has yet to be circulated to the drugmaker’s directors and investors, said two people familiar with the matter. But there is an appetite for change among other shareholders.
A Pfizer shareholder, among the 25 largest, told the Financial Times that “just the performance of the M&A alone is a very strong argument for a shake-up”, adding that investors would entertain a wide array of ideas to improve performance including “maybe Albert’s seat gets . . . reconsidered”.
One hedge fund investor with a small stake said “step one: Albert’s got to go”, adding: “There’s so many things wrong with Pfizer: they can’t guide [Wall] Street, their M&A sucks [and] their cash flows have dried up”, which could threaten dividend payments.
Pfizer has made four large acquisitions since the pandemic, which have been received tepidly by investors. Its $43bn buyout of cancer drugmaker Seagen enabled a push into antibody drug conjugates, an exciting new field of cancer treatment, but investor consensus has been that it overspent.
Pfizer has tried to address its flagging performance with this year’s announcement of a further $1.5bn in cost cuts before 2027, adding to a $4bn cost-saving programme rolled out since the pandemic.