Activist Investor Starboard Value Presses Pfizer's Board Amid Corporate Tensions

The ongoing corporate battle between Pfizer and activist investment firm Starboard Value escalated on Thursday when Starboard pushed Pfizer’s board to investigate alleged coercive actions. This follows the unexpected withdrawal of support from two former Pfizer executives who had initially backed Starboard's campaign against the pharmaceutical giant.

Activist Firm's Call for a Special Investigation

Jeffrey Smith, CEO of Starboard Value, urged Pfizer's board to form a special committee to look into potential "coercive conduct." The activist firm suggested that this pressure may have influenced former Pfizer CEO Ian Read and former CFO Frank D'Amelio to reverse their stance after initially offering their support. Starboard, which has amassed a $1 billion stake in Pfizer (with a market cap of $167 billion), highlighted concerns raised by the former executives about Pfizer's current trajectory under CEO Albert Bourla.

Starboard alleges that Read and D’Amelio were contacted by representatives from Pfizer, who reportedly threatened them with costly litigation and the possibility of losing their previous compensation and unvested performance stock units if they failed to publicly support Bourla.

Pfizer’s Response and Market Implications

In response, Pfizer’s longtime banking partner, Guggenheim Securities, issued a statement clarifying that Read and D’Amelio had chosen not to align with Starboard, emphasizing their continued support for CEO Bourla. Pfizer has yet to officially comment on the situation.

The dispute is intensifying as Pfizer and Starboard prepare for their first formal meeting, scheduled for next Wednesday. Starboard is positioning itself as a critical voice amid rising tensions, but the hedge fund has yet to publicly detail its demands for change at Pfizer. The firm points out that Pfizer’s stock has fallen significantly since 2019 when Bourla was appointed CEO, with shares dropping 11% over the past year. However, Pfizer’s stock has seen a modest recovery in the past week, currently trading at $29.60.

Key Concerns and Pfizer’s Struggles

Starboard’s campaign comes at a challenging time for Pfizer. Following the peak of its success with the COVID-19 vaccine, Pfizer’s stock price has dropped by half compared to its pandemic-era highs. The company has faced additional hurdles, including disappointing results from an experimental obesity drug, the underwhelming launch of a respiratory syncytial virus vaccine, and the recent pullback of its sickle-cell disease treatment Oxbryta due to adverse outcomes in clinical trials.

The activist firm also criticized Pfizer’s aggressive merger strategy, pointing to its $70 billion in acquisition spending—moves that have been viewed skeptically by some analysts on Wall Street. Despite Starboard’s criticism, Pfizer’s leadership, including Bourla, has remained committed to its current course.

Looking Ahead

As Starboard Value continues to press for changes, it remains to be seen whether its efforts will lead to a significant shakeup at Pfizer. Smith’s letter to Pfizer's board expressed a desire for “constructive engagement,” signaling that the hedge fund may seek more influence over the company’s direction.

Starboard has a history of targeting healthcare companies, including an unsuccessful campaign to block Bristol-Myers Squibb's (NYSE: BMY) acquisition of Celgene (NASDAQ: CELG) in 2019. With Pfizer now in its sights, Starboard's latest push could mark a turning point for one of the world’s largest pharmaceutical companies.

Conclusion

The outcome of this clash between Pfizer and Starboard could have far-reaching implications for the company’s future and its investors. The unfolding situation highlights the broader challenges Pfizer faces in regaining its market strength amid declining demand for its COVID-19 vaccine and setbacks in other drug developments.