Starboard wants to bring Pfizer to life: Billion-dollar investment as a way out of the crisis?
Pharmaceutical giant Pfizer is facing new challenges. After its sales increased dramatically during the pandemic, it is now struggling with a drop in demand for Covid-19-related products. But activist investor Starboard Value, which has raised about $1 billion, has decided to step in and turn the company's fortunes around.
Starboard Value entered Pfizer with a clear goal: to return the company to the limelight. It's not yet clear exactly how Starboard will get involved in Pfizer, but one thing is clear - investor and analyst dissatisfaction with the company's post-pandemic results. In addition, Starboard has reached out to former top Pfizer executives Ian Read and Frank D'Amelio, who have expressed interest in working together, though their specific role in the future strategy is not yet known.
Pfizer, which nearly doubled its sales during the pandemic thanks to the success of its Covid-19 vaccine and treatment, has been struggling with a drop in demand since the downturn. In 2022, sales rose to a whopping $100 billion, up from $42 billion in 2020, but those numbers are now history. The company's shares have lost more than half their value since peaking in December 2021.
Starboard hopes to use Pfizer's failures to set a new course. But Wall Street investors remain skeptical about whether the company will be able to replace its pandemic profits with new products. Many of the acquisitions, such as the $5.4 billion purchase of Global Blood Therapeutics or the $43 billion purchase of Seagen Inc. have not produced the expected results.
In addition, Pfizer recently announced a global recall of a sickle cell anemia drug and faced setbacks in trials of an experimental treatment for muscular dystrophy. Criticism has also been directed at its efforts to develop a cure for obesity, which have so far failed to produce a breakthrough.
One particularly worrying transaction was the acquisition of Global Blood Therapeutics. Pfizer withdrew a sickle cell anemia drug it had acquired just two years ago through a roughly $5.4 billion acquisition. The company downplayed the financial impact in September, saying the drug Oxbryta made just over $300 million last year.
Although the company has launched a cost-cutting plan to save $1.5 billion in the short term and another $2.5 billion by 2027, many investors believe a more forceful intervention would be needed. In contrast, they point to successful leadership under former CEO Ian Read, who led the company to greater stability.
While Starboard's efforts to change direction are welcome, experts warn that Pfizer's "cure" could take years. Starboard is currently run by Jeff Smith and has historically focused on the technology sector. It is currently challenging News Corp's two-class share structure and has run campaigns for Autodesk, Salesforce and Match Group in recent months.
What are your thoughts on this? Can Pfizer get back into the limelight? Let us know!
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