Pfizer CEO, Under Fire, Will Do ‘Whatever It Takes’ to Grow

(Bloomberg) — Pfizer Inc. Chief Executive Officer Albert Bourla said he’ll do “whatever it takes” to keep profits growing, including further cost cuts, as he seeks to fend off allegations of mismanagement from activist investor Starboard Value LP.

“We’re very committed to grow our EPS,” he said in an interview with Bloomberg Tuesday. The company has announced $5.5 billion of cost cuts through the end of 2027, but Bourla said “if there is a need to do more, we’ll do more.”

Bourla’s attempting to counter the blistering critique from Starboard’s CEO Jeff Smith, who has taken Pfizer’s management to task for overspending on deals and generating anemic returns from internal R&D. Smith, whose firm has reportedly taken a $1 billion stake in the drugmaker, has also said replacing Bourla “could make sense.”

“I enjoy my job and I think we are in a very good trajectory,” Bourla said, when asked how much longer he planned to stay in the role. “That’s the board decision, what they want to do with the management of the company.” 

Earlier Tuesday, the drugmaker raised its guidance after a strong third quarter that was boosted by a surprising pick-up in sales of its Covid products. The stock was down 1.7% at 1:38 p.m. in New York. 

Pfizer’s shares have shed more than half their value since peaking in December 2021. Since then, Bourla has embarked on a $70 billion string of deals, including last year’s $43 billion purchase of cancer specialist Seagen Inc.

What Bloomberg Intelligence Says:

Pfizer’s 3Q EPS 42-cent beat — on higher Paxlovid sales and strong cost controls — looks encouraging, yet the full-year guidance raise of just 30 cents suggests this may reflect the timing of cost phasing vs. a sustainable level of investment. The recent involvement of activist shareholder Starboard Value has driven talk of potential strategic changes, but Pfizer’s focus (for now) remains firmly on the late-stage pipeline’s evolution and downsizing the cost base.

— Bloomberg Intelligence analyst John Murphy. Read the research here. 

Among other issues, Pfizer in September recalled the sickle cell anemia treatment Oxbryta due to safety concerns. The drug was gained in the 2022 purchase of Global Blood Therapeutics Inc. for $5.4 billion. Pfizer also has experienced multiple setbacks in its attempts to develop an obesity pill, though it hasn’t given up.

During a conference call with investors today, Bourla briefly addressed his meeting with Starboard about two weeks ago, during which the investor presented a detailed slide deck criticizing Pfizer’s deal spending and research productivity.

“The meeting was constructive and cordial,” Bourla said. But said he disagreed with Starboard that Pfizer’s recent deals won’t produce a good return. He said Pfizer “will consider all good ideas” for improving its performance, including those that come from Starboard.

Bourla’s Covid successes continue to help him out. Third-quarter sales of Paxlovid soared to $2.7 billion, Pfizer said in a statement, far exceeding analysts’ estimates, thanks to a summer wave of infections. While Pfizer recorded no US sales of the antiviral in the same period last year, they rose to more than $2.3 billion in the third quarter. Those sales included a delivery of 1 million doses to the US Strategic National Stockpile, accounting for $442 million in revenue. 

Covid vaccine sales also beat estimates, though the company attributed the strong performance to timing, as the new booster shot came out earlier in 2024 than in the year prior. Adjusted earnings for 2024 will be $2.75 to $2.95 a share, Pfizer said, up 30 cents from the previous projected range. 

Still, the results and forecast may not translate into a rosier view of the company, according to Mizuho’s Jared Holz. 

“Investors will look through vaccine and Paxlovid sales at least to some extent and think management commentary on how FY25 could shape up will be a key factor in shaping near-term sentiment,” he said in a note to clients. 

Starboard was briefly allied with former Pfizer CEO Ian Read and ex-CFO Frank D’Amelio. The two switched sides soon afterward, declaring in a late-night statement that they now support Pfizer’s current management. The next day Starboard accused Pfizer of threatening the former executives with legal action unless they released a statement in support of Bourla.

Bourla said in the interview that Pfizer had done nothing “inappropriate” in its response to Starboard’s activist push. 

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