Pfizer’s not-so-healthy returns want the activist remedy

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By most measures, Pfizer appears like the best goal for some activist remedy.

The US pharmaceutical firm loved outsized features in the course of the pandemic because of its Covid-19 vaccine developed with BioNTech. Gross sales topped $100bn in 2022.

However as demand for the shot waned, so did gross sales. Makes an attempt to develop an weight problems drug have been a flop. Pfizer’s shares have fallen greater than 50 per cent from their peak in late 2021, representing a lack of $177bn in market worth. 

The corporate is value much less now than earlier than the pandemic. That’s regardless of forking out greater than $60bn on a collection of acquisitions over the previous two years.

Small surprise then that Starboard Worth has moved in. The activist investor has amassed a $1bn place in Pfizer. It has approached Pfizer’s former boss Ian Learn and former finance chief Frank D’Amelio to assist. Nevertheless it has but to disclose its plans.

The difficulty is there are not any fast options to Pfizer’s woes. The pandemic supplied a once-in-a-lifetime windfall. Gross sales greater than doubled and web revenue tripled between 2020 and 2022.

That success set a excessive bar that Pfizer couldn’t meet. Its valuation at 11 occasions ahead earnings is according to its 10-year historic common. Nevertheless, it’s a fraction of Eli Lilly’s 42 occasions. That hole displays Pfizer’s failure to this point to seek out an anti-obesity remedy for its portfolio.

Albert Bourla, who was handpicked by Learn to be his successor and took over in 2019, has binged on overpriced offers. These embody Seagen, the lossmaking most cancers biotech purchased final 12 months for $43bn, together with debt. Pfizer expects Seagen medicine to generate $10bn in annual gross sales by 2030. That compares with the $58.5bn Pfizer pulled in final 12 months.

Bourla’s massive guess on most cancers medicine might nonetheless repay. However investor persistence is briefly provide, particularly after Pfizer abruptly withdrew Oxbryta, a sickle cell illness remedy, from the market final month. The drug was the centrepiece in Pfizer’s $5.4bn acquisition of World Blood Therapeutics in 2022.

Pfizer’s return on capital has fallen from greater than 19 per cent in 2022 to 2.2 per cent final 12 months, based on figures from S&P World Market Intelligence. In response, Boula has introduced massive value cuts — $4bn this 12 months and one other $1.5bn between 2025 and 2027.

Activist involvement might usefully impose extra self-discipline. However swearing off portfolio improvement just isn’t an possibility in revolutionary prescribed drugs. Pfizer has already streamlined its enterprise, shedding shopper well being and its off-patent medicine unit. Generally it’s simpler to determine the signs of an ailment than prescribe an efficient remedy.

pan.yuk@ft.com