Starboard Value contends that Kenvue, with strong consumer health brands like Tylenol and Listerine, is underperforming its rivals, according to The Wall Street Journal.
Activist investor Starboard Value has acquired a “sizeable stake” in Johnson & Johnson’s consumer health spinoff Kenvue, The Wall Street Journal reported on Monday.
Citing anonymous sources familiar with the matter, the WSJ revealed that Starboard believes that Kenvue has been underperforming since it was spun out of J&J in August 2023, especially given its dominant brands such as Tylenol pain medication and Listerine mouthwash.
It remains unclear how much Starboard has invested in Kenvue. The consumer health company’s stock price rose around 6% on Monday.
J&J first announced plans to launch Kenvue as an independent entity in July 2023, noting that the move would help it sharpen its focus on pharmaceuticals and medical technology. Currently, Kenvue is the biggest dedicated consumer health company by revenue, generating nearly $15.5 billion in 2023 with 5% year-over-year growth. This year, Kenvue estimates net sales growth from 1% to 3%.
Still, Starboard appears to believe that Kenvue could be performing even better, though its exact plans for the company are still unclear. According to the WSJ, Starboard CEO Jeff Smith is set to provide more details at an upcoming investor event.
Kenvue is Starboard’s second high-profile target in recent weeks. Earlier this month, the activist investor carved out a $1 billion stake in Pfizer with the goal of turning the company’s business around. According to the WSJ, which also first broke the news, Starboard contends that Pfizer has strayed from its normally disciplined approach to spending and investment in novel drugs, and that current CEO Albert Bourla is no longer fit to lead the company.
Initially, the WSJ reported that former Pfizer CEO Ian Read and ex-CFO Frank D’Amelio had taken Starboard’s side and were willing to help the activist investor stage a turnaround. In a joint statement a few days later, however, the two former executives announced that they had “decided not to be involved in the efforts of Starboard Value regarding Pfizer” and reaffirmed their support for the pharma’s current leadership.
Starboard later claimed that Read and D’Amelio were pressured to support Bourla.
Pfizer has been struggling to regain its footing as COVID-19 product sales have declined from their pandemic high, with 2023 revenues tanking 42% year-over-year to $58.5 billion. The company has implemented aggressive savings initiatives, first announced in October 2023, designed to reduce costs by $5 billion in the coming years. The campaign appears to be working, with Pfizer reporting a 3% uptick in operational growth in the second quarter of 2024.
Some analysts believe that Pfizer has taken all obvious steps to turn revenues around. In an investor note following Starboard’s initial stake, BMO Capital Markets analyst Evan Seigerman wrote that “management appears to actually be undertaking many of the corrective actions to right the ship.”
