In a significant corporate governance battle, Pfizer CEO Albert Bourla has successfully weathered a challenge from activist investor Starboard Value, which had acquired a $1 billion stake in the pharmaceutical giant. The confrontation, which began in October 2024, has largely fizzled out as Starboard's campaign failed to gain traction among key stakeholders.
The Challenge to Leadership
Starboard Value, led by CEO Jeffrey Smith, initially built approximately 0.6% ownership of Pfizer's $162 billion market cap, claiming support from former executives including CFO Frank D'Amelio and former CEO Ian Read. The activist investor's primary argument centered on Pfizer's declining share price, which had fallen by more than half from its December 2021 peak of $61.71 to $25.36 by December 2024.
At the 13D Monitor Active-Passive Investor Summit in October 2024, Smith presented a 74-slide critique of Pfizer's management, arguing that the company had squandered pandemic revenues through overpriced acquisitions. Starboard estimated that Pfizer had lost between $20-60 billion in market value since 2019 under Bourla's leadership.
Strategic Acquisitions and Market Performance
Despite Starboard's criticism of Pfizer's approximately $70 billion in mergers and acquisitions since the COVID-19 pandemic, industry experts have defended Bourla's strategy. Jeffrey Sonnenfeld, senior associate dean at Yale University, argues that Pfizer's acquisitions, particularly the $43 billion Seagen deal, represent shrewd reinvestment of COVID-19 profits.
The company's Q3 2024 financial results have vindicated this position, showing revenues more than 30% above Q3 2023, with Seagen contributing $854 million in sales. This performance has significantly undermined Starboard's criticism of Pfizer's acquisition strategy.
Expert Analysis of Starboard's Campaign
Industry experts have identified several flaws in Starboard's approach. John Singer of Blue Spoon Consulting characterized their analysis as "under-conceptualized," noting that it oversimplified the role of CEO leadership in pharmaceutical market dynamics. The activist investor's traditional cost-cutting playbook was deemed particularly unsuitable for an industry requiring sustained, long-term investment in research and development.
Market Context and Industry Dynamics
Sonnenfeld's analysis reveals that Pfizer's performance, when adjusted for market trends, particularly excluding the exceptional performance of GLP-1RA therapy leaders, is comparable to industry peers like Merck & Co, Johnson & Johnson, and Bristol Myers Squibb. This context suggests that Starboard's criticism of Pfizer's relative market performance may have been overstated.
Future Implications
While Starboard is unlikely to completely withdraw its investment, experts suggest the activist investor might pivot to a more cooperative approach or focus on board nominations for the 2025 stockholder meeting. The pharmaceutical industry's unique characteristics, including its highly qualified workforce and long development timelines, may present inherent challenges to traditional activist investing strategies.
The outcome of this confrontation demonstrates the importance of understanding industry-specific factors in activist investing, particularly in the pharmaceutical sector where long-term strategic planning and substantial R&D investments are crucial for sustainable success.
