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Happy Tuesday! PfizerThe problems could finally come to a head.
Recent reports suggest that former executives of the pharmaceutical giant are supporting activist investor Starboard Value's push to turn around the troubled company.
Starboard holds a roughly $1 billion stake in the drugmaker and turned to former Pfizer CEO Ian Read and former CFO Frank D'Amelio, both of whom expressed interest in supporting the activist investor's efforts to shake up the company, CNBC previously reported. As of late Tuesday, Pfizer had a market capitalization of about $165 billion.
Read and D'Amelio forwarded Starboard's proposals to several of the company's board members on Sunday, the Financial Times reported on Monday, citing sources familiar with the discussions. Still, the details of the turnaround plan are sparse.
Read was Pfizer's CEO from 2010 to 2018, while D'Amelio was Pfizer's chief financial officer from 2007 to 2021.
Here's why it matters: Read and D'Amelio's reported involvement is a rare example of former executives joining in what could be an activist fight for the future of one of the world's largest pharmaceutical companies.
At Pfizer, whose shares have fallen more than 30% in the past two years, investors are demanding change. The company has struggled to recover from the rapid decline in its Covid business, which brought in record-breaking sales at the height of the pandemic.
Pfizer CEO Albert Bourla is under increasing pressure after several commercial missteps over the past two years – including disappointing data on an experimental obesity pill and a slower-than-expected rollout of a respiratory syncytial virus vaccine – as well as a costly development To improve the company's performance M&A strategy that does not yet generate any significant returns.
Pfizer is betting big on oncology, particularly its whopping $43 billion acquisition of cancer drug developer Seagen, to regain its footing. But it could take years for this deal to pay off. Meanwhile, Pfizer last month pulled a key sickle cell anemia drug from the global market – the centerpiece of its roughly $5 billion acquisition of Global Blood Therapeutics in 2022.
Starboard's turnaround push raises questions about Bourla's fate at the company.
“We have been sensing investor frustration with CEO Albert Bourla since at least early 2023,” BMO Capital Markets analyst Evan Seigerman wrote in a research note on Monday.
Still, he said, “While it may seem easy to blame one person, it rarely leads to a quick turnaround.”
Other analysts also said there may not be a quick fix from an activist investor.
“We await future developments, but we see no low-hanging fruit to drive shareholder value,” David Risinger, an analyst at Leerink Partners, wrote in a research note on Monday.
Risinger said that's because the company faces “a hit to revenue growth” over the next five years due to expiration of patents on its top-selling drugs and pressure from competitors. Pfizer has also made significant efforts to reduce costs, he added. The company said last fall it would cut costs by $4 billion and in May announced another multi-year plan to cut spending by about $1.5 billion by 2027.
Pfizer's debt is also relatively high, Risinger said, at $57.5 billion as of June 30. He said this could only be partially reduced by selling more shares in his assets, such as consumer healthcare company Haleon.
We will continue to follow Starboard's turnaround push, so stay tuned for our coverage.
Feel free to send tips, suggestions, story ideas and data to Annika at annikakim.constantino@nbcuni.com.
The latest in health tech: Hims & Hers will join the S&P SmallCap 600 as questions arise about the future of its weight-loss offering
Shares of Health for him and hera direct-to-consumer healthcare company closed up 10% on Monday after announcing the stock would be added to the S&P SmallCap 600.
S&P Dow Jones Indices said Hims & Hers will replace Vector Group before the opening bell on Oct. 9, according to a statement Friday. Japan Tobacco on Monday completed its acquisition of Vector Group, which operates tobacco and real estate businesses.
Hims & Hers offers treatments for weight loss, sexual health, hair loss and other conditions, and its stock is up nearly 120% year-to-date as of Monday's close. However, the company's shares plunged last week after the U.S. Food and Drug Administration announced there was no longer a shortage of tirzepatide injections.
Tirzepatide is the active ingredient in Eli Lilly's GLP-1 weight loss drug Zepbound and the diabetes drug Mounjaro. Hims & Hers doesn't offer these drugs through its platform, but CEO Andrew Dudum told investors in August that the company plans to introduce access to compounded versions as well as branded versions in the near future, as availability permits.
Compounded medications are tailored alternatives to brand-name medications and can be manufactured when brand-name medications are in short supply. Hims & Hers offers its customers compounded versions of semaglutide, the active ingredient in Novo Nordisk's GLP-1 products Wegovy and Ozempic.
“We do not currently offer access to tirzepatide,” a spokesperson for Hims & Hers said in a statement to CNBC on Monday. “When we bring a treatment to our platform, our first consideration is how accessible it is to the vast majority of customers and how accessible remedies are consistently available at a reasonable price.”
Hims & Hers is one of several digital health companies selling compounded GLP-1 drugs as a cheaper alternative for consumers as demand for weight loss and diabetes drugs increases. But they're not a foolproof way to capture a slice of the obesity drug market, which some analysts estimate could generate $100 billion in annual sales by 2030.
Both Zepbound and Mounjaro are under patent protection in the United States, and Eli Lilly does not supply the active ingredient in these two drugs to outside groups. The FDA warned last week that outsourcing facilities are generally prohibited from making copies of an approved drug unless it is on the shortage list.
“When a drug shortage is resolved, the FDA generally assumes that the drug is commercially available,” the agency said on its website. “Certain amounts are permitted by law as long as compounding does not occur ‘regularly or in disproportionate amounts’.”
Although Hims & Hers does not offer compounded tirzepatide, the FDA's announcement was enough to spook investors. Shares of Hims & Hers closed down nearly 10% on Thursday.
Analysts at Citi said Hims & Hers will not be directly affected by the tirzepatide news, but it limits the company's total addressable market. It also suggests that shortages could be resolved more quickly than expected, they added.
“HIMS has asserted that it will be able to further compound GLP-1 after the shortage subsides by changing the form factor/formulation/dosage for an individual's clinical benefit,” the analysts wrote in a note dated Thursday. “In our view, this sets HIMS up for litigation in the coming months.”
Feel free to send tips, suggestions, story ideas and data to Ashley at ashley.caroot@nbcuni.com.
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