Pfizer’s situation with activist investor Starboard Value is already getting messy. Days before the fund is set to sit down with CEO Albert Bourla to pitch a new strategic path for the pharma, two former executives publicly retracted their support of Starboard due to what the investor suspects is “coercive conduct.”
Ian Read, who served as Pfizer’s CEO for nearly 10 years before handing the baton to Bourla, and former chief financial officer Frank D’Amelio had reportedly spoken with several Pfizer board members about hearing out Starboard’s pitch.
According to Starboard, which laid out its side of the story in an open letter to Pfizer’s board members on Thursday morning, the two former executives had both “expressed concerns about the trajectory of the business” in a prior meeting with the investor and “offered to be of our assistance,” Starboard said in the letter signed by its CEO Jeffrey Smith.
Bourla and the company’s lead independent director, Shantanu Narayen, then agreed to the meeting, which is set to take place on Oct. 16.
Late Wednesday night, however, things took a turn, with Read and D’Amelio backing out of the Starboard situation in a statement of their own.
“We have decided not to be involved in the efforts of Starboard Value regarding Pfizer,” the former executives said in their joint release. “We are fully supportive of Pfizer Chairman & CEO Albert Bourla, senior management and the board, and we are confident that over time they will deliver shareholder value.”
Starboard alleges that the change of heart may not have come entirely willingly. In its Thursday letter, the activist investor claimed that behind the scenes, “people within Pfizer” forced Read and D’Amelio’s hands with threats to pursue legal action, snatch back prior compensation and cancel unvested performance stock units unless they released a statement publicly supporting Bourla.
“To be clear, we believe this behavior is highly inappropriate, flagrantly unethical, and a significant breach of fiduciary obligations,” Smith wrote, calling for a special committee of “board members with clean hands” to investigate the alleged “coercive conduct.”
Still, he added, Starboard hopes to have a “constructive engagement” with Pfizer at its upcoming meeting. The investment fund recently picked up a stake in the company worth at least $1 billion.
It’s unclear what Starboard’s exact pitch will be, but people briefed on the investor’s thinking told the Financial Times that it believes Pfizer has been mismanaged in the wake of the pandemic, particularly with its $70 billion M&A spree that included a $43 billion buyout of antibody-drug conjugate specialist Seagen.
According to FT, some Pfizer shareholders would support a “shake-up” that could include replacing Bourla at the helm.
Pfizer’s stock currently trades at just under $30 per share, nearly 50% below its pandemic peak of $59.48 in December 2021 and slightly below pre-pandemic levels. The company has yet to make up for falling sales of its once-popular COVID products, a trend that caused a full-year revenue dip of 41% in 2023 after the company’s record-breaking year in 2022.