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Pfizer’s chief executive Albert Bourla fired back at activist investor Starboard Value on Tuesday as the drugmaker upped its 2024 revenue projections, arguing the company was already pushing ahead with a turnaround and that its plan would pay off.
“We plan to engage with shareholders, including Starboard, and consider any good ideas that create long-term shareholder value, but I don’t think that the statement ‘Something needs to change’ is really pragmatic because it’s coming 15 months late,” Bourla said on a call with analysts, referring to a previous remark made about Pfizer by Starboard CEO Jeff Smith.
Bourla’s first public comments on Starboard’s $1bn stake come a week after the hedge fund outlined its criticisms of Pfizer’s management at a conference for activist investors, blaming it for misspending the company’s Covid-19 windfall and destroying at least $20bn of shareholder value. In a 74-page deck, Starboard called on Pfizer’s board “to hold management accountable” for the drugmaker’s languishing performance.
Bourla defended Pfizer’s acquisition spree, in particular the $43bn takeover of cancer drugmaker Seagen, saying it was “well-invested capital and will demonstrate significant value for shareholders” as it delivered a series of “mega-blockbusters” over the next few years.
Bourla also pointed to $4bn in cost reductions expected by the end of the year as part of a $5.5bn cost-cutting programme, the addition of two board members in recent months and a recruitment effort to find a new chief scientific officer as evidence of the drugmaker’s turnaround efforts.
In its first quarterly earnings since Starboard’s $1bn stake became public, Pfizer on Tuesday boosted its full-year sales and profit forecasts driven by strong demand for its Covid-19 antiviral and vaccine.
The US drugmaker said it now expected 2024 revenue to total between $61bn and $64bn, higher than previous projections of between $59.5bn and $62.5bn. It also boosted earnings guidance for 2024 to between $2.75 and $2.95 per share, up from an earlier range.
But shares in Pfizer were down 1.4 per cent on Tuesday, giving the drugmaker a market value of about $161bn.
Starboard’s campaign against Pfizer got off to a faltering start after the drugmaker’s former chief executive Ian Read and ex-finance chief Frank D’Amelio withdrew support for Starboard just 72 hours after its stake was made public, instead falling in to line behind Bourla.
But the activist investor has still found a receptive audience among Pfizer shareholders, unhappy with the more than 50 per cent decline in share price since its pandemic peak. Starboard did not immediately respond to a request for comment.
Despite its strong quarter, Vamil Divan, a Guggenheim analyst, said in a note that “questions remain on how much investors will care”, given Pfizer’s long-term challenges. “We expect investors will continue to look for more visibility into how management hopes to navigate the various challenges they face in the coming years as many of their top products either lose patent protection or face increased competition.”
Pfizer’s third-quarter earnings came in well ahead of analysts’ expectations. The drugmaker generated $17.7bn in sales, compared with analysts’ expectations of $14.9bn. Earnings per share for the quarter came in at $1.06, ahead of consensus estimates of $0.61.
Bourla said his meeting earlier this month with Starboard’s Smith and partner Patrick Sullivan was “constructive and cordial” but added that “while we agreed with some of the points they raised, we have vastly different views on many others”.
“They expressed dissatisfaction with our total shareholder returns, we are not satisfied either, though we believe we are executing on the best path to increase shareholder value,” said Bourla. “On the other hand they challenged our capital deployment for business development — we believe that our deals will produce significant shareholder returns and some of them like Seagen or BioNTech have been transformational for Pfizer.”
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