## Starboard Value Calls Out Pfizer’s Underperformance: Activist Investor Demands Accountability for Missed Growth Targets
Activist investor Starboard Value has intensified its critique of Pfizer Inc. (PFE), holding the pharmaceutical giant accountable for failing to deliver on its promises of innovation and growth. Despite its relatively small stake in Pfizer, Starboard’s criticism reflects a wider investor frustration with the company’s stock performance, which has plummeted by about 50% since 2021.
At the Active-Passive Investor Summit, Starboard argued that Pfizer’s leadership, under CEO Albert Bourla, has not fully capitalized on the company’s post-COVID-19 pandemic momentum. This has led to significant underperformance in R&D and M&A activities, according to the investor.
In a presentation released on Tuesday, Starboard pointed out that Pfizer has lost $20 billion in market value since 2019, despite a $40 billion boost from its COVID-19 franchise. The activist investor also expressed concerns that Pfizer’s leveraged balance sheet could hinder future acquisitions, further limiting its growth potential.
Starboard’s presentation highlighted Pfizer’s failure to meet its ambitious targets. Notably, the company fell short of its plan for 15 potential blockbuster drugs by 2022, a goal outlined by Bourla when he took over as CEO in 2019.
A Closer Look at Pfizer’s Investment in External Innovation
Starboard’s critique zeroes in on Pfizer’s investment in external innovation, particularly through M&A. The company has spent nearly $70 billion on acquisitions since 2022, including high-profile deals like the $43 billion acquisition of Seagen. However, the returns on these investments have been disappointing. Starboard points out that Pfizer used more than its COVID-19 cash benefit for ‘inorganic investments over the last five years.’
In September, Pfizer withdrew Oxbryta (voxelotor) for sickle cell disease, a drug added via its $5.4 billion buyout of Global Blood Therapeutics in 2022. Starboard contended that Pfizer overpaid for its post-COVID acquisitions, noting that analysts’ expectations for sales from these deals are $7 billion lower than Pfizer’s target of $20.5 billion by 2030.
Internal Innovation Challenges and Lagging Returns
Pfizer’s challenges extend to its internal innovation efforts, specifically its GLP-1 program, danuglipron. Starboard highlights a substantial decline in expected 2030 sales from danuglipron, dropping to $592 million from $1.73 billion, a Wall Street forecast in March 2023. This stark contrast to the management’s forecast of $10 billion underscores concerns about the program’s viability.
According to Starboard, Pfizer’s expected revenue return on R&D and M&A investments is projected at 15% between 2023 and 2030, significantly below the industry median of 38%. The hedge fund claims Pfizer would need an additional $29 billion in revenue by 2030 to reach the industry standard.
“We believe it is unlikely that Pfizer will be able to achieve $79 billion in revenue by 2030, thereby making Pfizer’s return on R&D and M&A insufficient,” Starboard said.
The activist investor concludes with a direct call for accountability: “We believe the board needs to actively hold management accountable for earning appropriate returns on R&D and M&A moving forward,” Starboard continued. “Pfizer deserves to be best in class.”
Price Action:
PFE stock is down 0.12% at $28.90 at the last check on Tuesday.This sharp critique from Starboard Value underscores the pressure Pfizer is facing to deliver on its growth promises. The company’s stock performance, its acquisition strategy, and its internal innovation efforts are all under scrutiny as investors demand better returns and a clearer path to future success.