Starboard Value LP Chief Executive Officer Jeffrey Smith said there has been at least $20 billion in value destruction at drugmaker Pfizer Inc., which he admonished for failing to deliver on a pipeline of new potential blockbusters.
“We have to amp up the accountability” at Pfizer, Smith said at the 13D Monitor Active-Passive Investor Summit in New York on Tuesday. Smith described Pfizer’s share price drop since the Covid pandemic as “crazy”.
Shares in Pfizer have lost more than a third of their value over the last two years, leaving the company with a market value of about $164 billion.
It emerged earlier this month that Starboard had built a position in Pfizer and is seeking to spur a turnaround of the pharmaceuticals company, which the activist thinks has mismanaged its pandemic windfall with costly deals that haven’t paid off.
Under Chief Executive Officer Albert Bourla, Pfizer has embarked on a $70 billion string of deals in recent years, acquiring the likes of sickle cell anemia drugmaker Global Blood Therapeutics Inc. and cancer specialist Seagen Inc. But a drastic drop off in demand for Covid shots and treatments, and competition emerging for some of its top sellers, has left Pfizer struggling to fill the void, despite the big-ticket purchases.
“Pfizer appears to have overpaid for its post 2022 acquisitions based on the company’s own sales targets,” Starboard said in a presentation accompanying Tuesday’s conference.
Smith said at the New York event that Pfizer had failed to deliver on the promise of its experimental weight-loss drugs, initially setting a $10 billion sales target for the category that the investor said is now expected to deliver less than $600 million by 2030.
A spokesperson for Pfizer couldn’t immediately be reached for comment.
It initially looked like Starboard might have the backing of former Pfizer executives Ian Read and Frank D’Amelio in its efforts to push for change, only for the pair to change tack and pledge their support to the company and its existing management.
Shares of consumer-products company Kenvue Inc., meanwhile, jumped this week after Starboard took a stake in the Tylenol maker with an eye toward making changes to boost the company’s stock price. The activist thinks Kenvue, which was spun out of Johnson & Johnson last year, has some of the best consumer brands in the industry but its shares have underperformed the broader market.
“These are world-class brands, the best of the best,” Smith said at the 13D conference on Tuesday. Smith said that Kenvue, whose other brands include Zyrtec and Benadryl, was cheap compared with peers that have a similar growth trajectory, even though it has the strongest portfolio.
“We believe Kenvue has the best brand portfolio in its peer group,” he said.
Smith said that J&J had made the right decision to spin out Kenvue. He said Kenvue now needed to focus more on skin and beauty products to help spur growth.
