Starboard Value CEO says Pfizer’s board should hold management accountable

By Michael Erman and Svea Herbst-Bayliss

NEW YORK (Reuters) -Activist hedge fund Starboard Value’s chief executive officer said on Tuesday that drugmaker Pfizer (NYSE:)’s board needs to hold management accountable for its underperformance, particularly for its record for producing 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 Jeffrey Smith, speaking at the 13D Monitor Active-Passive Investor Summit in New York. Smith is also Starboard’s chief investment officer.

Starboard has built a $1 billion position in Pfizer, but had not previously detailed its concerns about the drugmaker. Smith met with Pfizer CEO Albert Bourla last week, some days after the hedge fund’s campaign at the company became public.

Investors have fled Pfizer as pandemic worries declined and billions of dollars in COVID-19 vaccine and treatment sales disappeared.

Pfizer shares were down 0.5% at $28.80 in late morning trading on Tuesday. The company’s stock is trading at about half its pandemic-era high.

A Pfizer spokesperson declined to comment on Smith’s presentation.

Smith argued that Pfizer has lost value because of poor capital allocation, research and development failures and problems with forecasting and budgeting.

Beyond the loss of COVID-19 revenue, Pfizer has also had to contend in recent quarters with disappointing data for a closely watched experimental obesity drug, the weak launch of its respiratory syncytial virus (RSV) vaccine, and pulling its sickle cell disease treatment Oxbryta due to deaths in its clinical trials.

Smith did not make any specific prescriptions for Pfizer or its management at the presentation. In an interview on CNBC, he said a change at the top of the company could make sense, but stopped short of calling for Bourla to step down.

“Something material needs to change. They can’t just close their eyes and assume it’s going to get better,” he said.

Starboard’s campaign got off to an unusual start. Two former Pfizer executives had indicated they were working with Starboard to press for changes at Pfizer but then reversed course and said they supported the company’s current CEO, Bourla.