Last week, we stood in support of Pfizer CEO Dr. Albert Bourla, responding to unfounded attacks on him in the media from anonymous sources, and we expressed our initial skepticism about aspects of Starboard Value’s activist position in our Fortune column. This was fortified by a meticulously detailed, original 36-page research slide deck. We received thunderous positive feedback—and many experts joined us in questioning the activist assault on Pfizer.
That chorus of public skepticism grew louder after Starboard’s Jeff Smith presented his highly-anticipated slide deck yesterday during a special CNBC interview with David Faber and at Ken Squire’s 13D Conference, with critics noting it contained a lengthy case for change but few remedies or solutions.
However, what we noted was a subtle shift in Starboard’s approach, with Smith asserting “We’re excited about what’s there… and we think the future [of Pfizer] will be better than people think.” He refused to be baited into calling overtly for CEO change, declaring “I don’t know why we need to be nasty. We like to work with everybody [there]”.
Smith is right: Pfizer’s future, under Dr. Bourla’s leadership, could indeed be much brighter than many expect. Here’s how Dr. Bourla is already well on his way toward getting Pfizer back on track—as well as the next steps Pfizer needs to take to turbocharge its prescription for success.
As Smith accurately pointed out yesterday, Pfizer’s stock is trading at a historically depressed valuation (low multiple of 10x earnings), largely the result of low expectations from Wall Street analysts and investors for Pfizer’s future growth.
A series of high-profile recent misses over the last two years—ranging from COVID-19 vaccine demand collapsing faster than Pfizer expected to capital allocation concerns with a slump in sales of Nurtec after Pfizer acquired the migraine drug from Biohaven for ~$11.6 billion to the recall of Oxbryta after Pfizer acquired the sickle cell disease drug from GBT for ~$5.4 billion to setbacks in GLP-1 drug development—hasn’t helped.
As a result of these setbacks, as Smith pithily noted, “investors and analysts just don’t believe that [Pfizer] is going to produce what they hoped to produce...but for sure, those [low expectations] aren’t right. Could Pfizer do better? Of course.”
Smith is correct: Not only could Pfizer prove these low expectations wrong but it also appears Pfizer is already back on track operationally and poised to raise the bar significantly. Investors and analysts should be paying much closer attention to at least three key near-term revenue drivers that they are currently underappreciating.