Pfizer Under Scrutiny by Starboard Value

By Michael Erman and Svea Herbst-Bayliss

NEW YORK (Reuters) – Activist hedge fund Starboard Value's CEO, Jeffrey Smith, stated on Tuesday that Pfizer's board needs to hold management accountable for its underperformance, particularly regarding the lack of profitable new drugs.

> "We measure success in producing blockbuster drugs and we all get measured by our track records. The track record here is not great," said Smith, who also serves as Starboard's chief investment officer, at the 13D Monitor Active-Passive Investor Summit in New York.

Starboard has established a $1 billion position in Pfizer but hadn't previously disclosed its concerns. Smith met with Pfizer CEO Albert Bourla last week, shortly after the hedge fund's campaign became public.

Investors have been moving away from Pfizer as pandemic worries have eased, leading to a significant drop in COVID-19 vaccine and treatment sales.

Pfizer's shares were trading down 0.5% at $28.80 in late morning trading on Tuesday, roughly half of its pandemic-era high.

A spokesperson from Pfizer declined to comment on Smith's presentation.

Smith highlighted a decline in Pfizer's value due to poor capital allocation, failures in research and development, and issues with forecasting and budgeting. He noted that, beyond the loss of COVID-19 revenue, Pfizer faced disappointing results from a closely monitored experimental obesity drug, a weak launch of its respiratory syncytial virus (RSV) vaccine, and the withdrawal of its sickle cell treatment, Oxbryta, after patient deaths in clinical trials.

Smith did not provide specific recommendations for Pfizer's management during the presentation. However, in a CNBC interview, he suggested that a change in leadership might be advisable but refrained from explicitly calling for Bourla's resignation.

> "Something material needs to change. They can't just close their eyes and assume it's going to get better," he remarked.

Starboard's campaign began in an unusual manner, with two former Pfizer executives initially indicating they supported Starboard's push for changes but later endorsing CEO Bourla's leadership.