Starboard Hammers Pfizer Execs For Failing To Deliver On 'Best Pipeline' Promises

Blockhead10-23

Starboard Value took aim at Pfizer (PFE) in another blow Tuesday, saying the company has failed to deliver on what it once called the "best pipeline" ever. ↑ X How To Buy Stocks: IBD's Four ...

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Despite becoming a household name with the development of a Covid vaccine and treatment, Pfizer has dramatically underperformed its peers and the broader market since 2019, Starboard said in its presentation. Pfizer has lost roughly $20 billion to $60 billion in market value over five years.\nThe presentation argues Pfizer's research and development, as well as expected returns on that R&D, have contributed to its downfall. In addition, Starboard says the company's capital allocation — which includes some big acquisitions — and forecasting/budgeting have proved lackluster.\n\"The board needs to hold management accountable for achieving sufficient revenue returns on R&D and M&A (mergers and acquisitions),\" Starboard said.\nPfizer stock slipped a fraction to 28.77 in morning trades.\nStarboard also took a stake in Johnson & Johnson (JNJ) spinoff Kenvue (KVUE) this month. Kenvue stock dipped 0.1% to 22.91 after the activist investor noted in a separate presentation that the consumer health company trades at a valuation discount to its peers despite having a war chest of \"strong brands in attractive categories,\" including Tylenol, Listerine and Band-Aid.\nStarboard Hammers Pfizer's Innovation\nStarboard argues Pfizer has suffered from a \"lack of internal innovation from 2019 to 2023.\" On Jan. 2, 2019, the company had 61 new drugs in its pipeline — above the peer median of 46. But of 10 potential blockbusters expected by 2022, only two have achieved that status.\nThe company also hoped to launch a weight-loss pill, joining the ranks of Eli Lilly (LLY) and Novo Nordisk (NVO), which have injectable versions. Pfizer Chief Executive Albert Bourla said it could be a $10 billion product in a $90 billion market.\n\"We think that we'll be very few players that will play in the oral GLP-1, us and Lilly,\" Bourla said on Jan. 9, 2023. \"Clearly, we are going to be one of them.\"\nBut Pfizer has faced several setbacks and hasn't yet launched a weight-loss drug. Like others, its daily pill is still in testing.\nAcross all products, Pfizer's sales are expected to decline 3% from 2023 to 2030 — vs. expected growth for other big biopharma names. Excluding its Covid products, Pfizer's sales are expected to grow 9%. But that still lags a peer group median of 27%.\nGBT Acquisition Under Scrutiny\nStarboard noted Pfizer has invested nearly $70 billion in takeovers since the pandemic. That includes the $43 billion takeover of Seagen and $12.9 billion spent on Biohaven Pharmaceuticals.\nPfizer expects its acquisitions since 2022 to generate more than $20.5 billion in sales by 2030. But the Street only projects $13.3 billion in sales from those takeovers, signaling Pfizer could have overpaid for its newest assets.\nNotably, Pfizer spent $5.4 billion to acquire Global Blood Therapeutics in 2022. Then it said GBT's products would generate $3 billion in peak sales. But Pfizer recently pulled GBT's sickle cell disease treatment, Oxbryta, from the market due to patient deaths.\n\"Pfizer's failed GBT acquisition shocked the industry and raised serious questions about its BD (business development) capabilities,\" Starboard said.\nPfizer Stock Takes Guidance Hit\nThe activist firm also argues Pfizer has struggled to accurately predict its quarterly results. During the past 22 quarters, Pfizer beat its sales expectations in 14 quarters. Half of those beats were in 2021 and 2022 when Pfizer experienced a big benefit due to its Covid products.\nIts 64% success rate in predicting sales lags the peer group median of 77%.\nPfizer issued light 2024 guidance, resulting in a \"blow to management's credibility,\" Starboard said.\nStarboard says Pfizer needs to achieve stronger revenue growth based on its investments in R&D and M&A. The investor firm says the company would need to generate $79 billion in 2030 revenue to achieve the median revenue returns expected for its peers. Analysts expect just $50 billion in sales that year.\nToday, Pfizer stock is trading below its 50-day moving average. Shares are forming a flat base with a buy point at 31.54, according to MarketSurge.\nFollow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.\nYOU MAY ALSO LIKE:\nKorro Bio Is Lagging Wave Life Sciences In RNA Editing. Why It Could Ultimately Lead The Space.\nIntuitive Surgical Breaks Out On Massive Earnings Beat, But 2025 Launch Remains Key\nJoin IBD Live For Stock Ideas Each Morning Before The Open\nFind Today's Best Growth Stocks To Watch With IBD 50\nLooking For The Next Big Stock Market Winners? 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