Pfizer in recent months has implemented aggressive cost-cutting measures to help it weather the steep decline in sales of its COVID-19 products.
Activist investor Starboard Value has reportedly taken a $1 billion stake in Pfizer in an attempt to turn the pharma’s business arounds as it struggles to regain its footing in a post-COVID-19 market, according to an exclusive from The Wall Street Journal on Sunday.
Citing sources familiar with the matter, who spoke on the condition of anonymity, the WSJ reported that Starboard appears to have lost confidence in current Pfizer CEO Albert Bourla, who the activist firm believes has moved away from the pharma’s typically disciplined spending and investment in novel drugs.
To help stage its turnaround, Starboard has also enlisted the help of former Pfizer CEO Ian Read and ex-CFO Frank D’Amelio, both of whom have signified their interest in helping, according to the sources.
From the highs of the pandemic, Pfizer in recent months has struggled to weather the sharp decline in demand for its COVID-19 products. In the third quarter of 2023, Pfizer suffered its first quarterly decline since 2019, with earnings slipping 42% year-over-year to $13.2 billion.
Pfizer’s revenues sat at $58.5 billion total for 2023, down 42% from 2022. Sales of Paxlovid, its COVID-19 antiviral treatment, cratered 92%, while its vaccine Comirnaty fell 72%.
The difficulties continued into this year, though Pfizer seems to have at least stemmed the decline. In the second quarter of 2024, it recorded $13.1 billion in total revenue, a 3% operational growth from the same period last year. Excluding its COVID-19 products, Pfizer’s revenue jumped 14% operationally.
The pharma also projects optimism about its performance this year, raising its full-year 2024 revenue guidance to between $59.5 billion and $62.5 billion, from a previous estimate of $58.5 billion to $61.5 billion.
Part of this revenue recovery can be credited to Pfizer’s aggressive cost-cutting measures. First announced in October 2023, the “multi-year, enterprise-wide cost realignment program,” which includes layoffs, is designed to generate $3.5 billion in savings through 2024. It is not yet clear how many employees will ultimately be affected.
The pharma announced another incremental cost-reduction of $500 million in December 2023 and yet another round of cost cuts in May 2024, meant to muster $1.5 billion in savings by the end of 2027.
Beyond these initiatives, it isn’t clear what else the Starboard turnaround can achieve. In an investor note, Guggenheim Securities said that in conversation, “most investors we have spoken to wonder how Starboard can meaningfully impact a company of Pfizer’s size and what steps can be implemented beyond what the Pfizer team is already doing to drive meaningful value creation.”
BMO Capital Markets’ Evan Seigerman was more forthcoming, noting that while it makes sense for an activist investor to get involved with Pfizer, “management appears to actually be undertaking many of the corrective actions to right the ship.”
“Change takes time,” Seigerman wrote, adding that “replacing the CEO (while satisfying to some) is unlikely to fix the story and immediately re-rate shares. Staying the course and focus is usually the right answer in the long-run.”
