Pfizer, for activist fund Starboard destroyed 20 billion in value

Value destruction estimated at $20 billion. This is Starboard Value CEO Jeffrey Smith's rebuttal to Pfizer, accused of failing to build a pipeline of new products. Yesterday, speaking at 13D Monitor's active-passive investor summit, Smith described Pfizer's share price drop after the Covid pandemic as "crazy" and said it was time for the company to "step up accountability". Smith calmly went through his 30 minutes at the New York event, pointing out that Pfizer had committed a series of missteps, including overpaying for acquisitions, failing to live up to new treatments, and generating only a 15% return from research and development spending. A figure that would be lower than that of competing pharmaceutical groups such as Eli Lilly and AbbVie. 'That's the problem,' said Smith, 'the discipline of spending and getting the appropriate return from that spending.

Taking a step back, earlier this month it emerged that Starboard had built a $1 billion position in Pfizer to try to stimulate a turnaround of the pharmaceutical company, which according to the activist fund has mishandled the post-pandemic with expensive deals that have not paid off.

Under the leadership of current CEO Albert Bourla, Pfizer has undertaken a series of acquisitions worth a total of USD 70 billion in recent years, including the purchase of companies such as Global Blood Therapeutics, specialising in the treatment of sickle cell anaemia, and Seagen, active in the oncology sector. However, a dramatic drop in demand for Covid vaccines and treatments, coupled with increasing competition for some of the pharmaceutical group's key products, meant that Pfizer was struggling to fill the gap, despite the acquisitions. Starboard, in its presentation at Tuesday's conference, highlighted precisely how Pfizer overpaid for acquisitions completed after 2022, based on its own sales targets: 'They have to do something different to ensure a change in the way they allocate capital,' Smith said. 'They can't follow Einstein's definition of insanity and keep doing the same things over and over again.

Smith also recalled that the lead drug from the Global Blood Therapeutics acquisition, for example, was withdrawn from the market due to safety concerns: 'This is a blow to their due diligence.

During the New York event, Smith went on to say that Pfizer has not kept its promises on its experimental weight-loss drugs, initially estimating sales of $10 billion, while the industry is now expected to generate less than $600 million by 2030.