By Josh Nathan-Kazis
There's at least one thing on which both Pfizer CEO Albert Bourla and the activist hedge fund demanding Pfizer management be "held accountable" both agree.
"They say the total shareholder return is poor," Bourla told Barron's on Tuesday. "Also I'm not happy at all with our total shareholder return, and I want [it] to change. So that's clearly in agreement."
In a dour presentation last week, the CEO of activist fund Starboard Value, Jeff Smith, noted that Pfizer's total shareholder return, which takes into account both stock performance and dividends, has dramatically trailed the market and its peers since Bourla took over in 2019.
Pfizer shares have performed abysmally in recent years, as the company has failed to win investor confidence ahead of a wave of patent expirations coming by the end of the decade. That performance finally attracted activist attention this month, when various outlets reported that Starboard had built a $1 billion stake in Pfizer.
Starboard stopped short of calling for Bourla's job, but it did say management "has failed" to deliver on important commitments.
On Tuesday, Bourla defended his record, telling Barron's that he's already undertaken the sort of sweeping changes that Starboard is demanding. Bourla said he had met with Smith, and that the meeting was cordial.
Bouarla asked Smith if Starboard was seeking a change in management. "He said, 'No, I'm not saying that right now, I'm saying something needs to change,'" Bourla said.
"I would agree that something needs to change if he was telling me 12 to 15 months ago, because this is [when] I saw the need to make changes, and I initiated," Bourla told Barron's on Tuesday, rattling off a list of fixes under way at Pfizer: Two cost-cutting programs, new board members, a search for a new chief scientific officer, and the creation of a new oncology organization within the company, among other things.
"I don't think right now something needs to change," Bourla said. "What we need to do is to execute well, the changes that we have initiated."
Pfizer shares are down 1% this year, while the S&P 500 is up more than 20%. Though the company reported third-quarter earnings that came in ahead of Wall Street estimates on Tuesday, the stock still fell more than 1% over the course of the day.
Much of the beat was due to higher-than-expected sales of the company's Covid-19 antiviral Paxlovid, a product in which investors have shown vanishingly little interest in recent years.
Bourla was upbeat on the quarter's results, noting that the company's non-Covid sales grew 14%.
Bourla pushed back on some of Starboard's claims, defending his use of the company's Covid-19 windfall on an M&A spree. Starboard's Smith had written in his presentation that Pfizer "appears to have overpaid" for its acquisitions since 2022.
"We think that they are very good investments," Bourla said. "I think that overall, [they] will have significant returns to shareholders, and some of them, like the Seagen and BioNTech deals, were transformational for Pfizer."
Bourla said that the Seagen deal, among others, are "setting the ground to create way higher multiples."
As investors digest Tuesday's earnings report, the ball now seems to be back in Starboard's court.
Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
October 29, 2024 15:53 ET (19:53 GMT)
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