Helping save the world from Covid was not enough. Two years after reaching US$100 billion in revenue and becoming the first pharmaceutical company to manufacture a messenger RNA vaccine on a global scale, the Pfizer accumulates unsuccessful bets, sees competitors far ahead in the race for weight-loss drugs and desperately tries to cut costs to control his enormous debt.
READ MORE: Pfizer invests billions in cancer drugs to grow again
Fragile, the 175-year-old company became the target of investors accustomed to shaking up the structures of the companies in which they make their contributions. In this case, for US$1 billion (around R$5.62 billion, or 0.6% of Pfizer’s market value), the activist fund Starboard Value gained the space to pressure CEO Albert Bourla and question his recent decisions.
Pfizer shares are now worth practically half of what they were worth at the end of 2021, when the price of each share reached around US$60. The share performance is well below the S&P 500 and competitors such as Eli Lilly and Novo Nordiskwhich lead the popularization of weight loss remedies.
Who’s Afraid of Starboard?
Activist fund or investor has nothing to do with political or environmental activism – it may happen, but it is not usually the case. Starboard’s strategy is to “invest in deeply undervalued companies and engage with management teams and the board of directors to unlock value for the benefit of shareholders”, summarizes the manager’s website.
In other words, Starboard makes contributions to companies that are experiencing difficulties and uses the influence arising from this participation to carry out internal “cleaning” of the company. The goal – surprise! – is to make the value of the share rise and make a profit from the operation.
Although less common here, this strategy also exists in Brazil. Managers like Tarpon Capital and Esh Capital made headlines for their activist investments in companies like BRF and Gafisa, respectively.
But Starboard’s strategy for Pfizer still remains a mystery. The pharmaceutical company’s debt soared from US$36.2 billion in March 2023 to US$69.9 billion a year later, as a result of investments in Research & Development (R&D) and an aggressive acquisition policy in place since 2020 – Arena, Biohaven, Global Blood e Seen ended up in Pfizer’s shopping cart during the period, the latter being an acquisition that cost US$43 billion.
READ MORE: Ozempic may have another side effect: improving sex
Debt limits the space for a large purchase capable of redefining the company’s future. Going deeper into debt would simply be too dangerous.
O playbook of managers like Starboard usually includes the CEO’s removal. Albert Bourla is not exactly the darling of Pfizer investors – after all, the pharmaceutical company’s shares have fallen 30% in the last two years. But the big pharma has its idiosyncrasies: making Bourla a scapegoat now may not have an effect in the long term, since developing new products takes time.
Furthermore, Pfizer’s high debt means that the company relies on its own R&D department to expand the portfolio – a time-consuming work of which Bourla is the architect.
Increasing product sales is not easy either. New medicines take years to reach pharmacy shelves or government shopping lists. How about cutting costs? It’s always possible, but Pfizer is already doing it: its two cost-cutting programs currently underway target savings of $4 billion and have already led to hundreds of layoffs.
Weight loss
So what can Starboard do? Among the hypotheses raised by experts are divestment of certain hospital products, sale of Pfizer’s stake in the company Haleon – owner of brands like Sensodyne, Centrum and Advil – and perhaps some small acquisitions or deals to make Pfizer a player most relevant in the market for medicines aimed at rapid weight loss. This, in fact, seems like an unavoidable strategy for the company, with or without pressure from Starboard.
An Ozempic to call your own
Medicines that cause rapid weight loss have become a gold mine for the few pharmaceutical companies that have so far managed to present these products to consumers, but getting there is not trivial: the Ozempic and the Wegs demanded from the Danish Novo Nordisk US$68 billion in R&D over the last 30 years.
It was worth it: the company is expected to earn US$65 billion in 2024 alone from sales of these two medicines.
Another exponent of this market is the American Eli Lillyowner of weight loss products Mounjaro and the Zepboundwhich helped the pharmaceutical company’s shares go from a level of US$363 at the beginning of 2023 to a peak of US$950 in July – the current level is US$915 per company share.
The rise of competitors increased investor pressure on Pfizer, which saw sales of its revolutionary vaccines against Covid-19 plummet after the end of the pandemic. The company bets on weight loss Danuglipron to face Ozempic and similar products, with the difference of offering consumers a treatment using pills instead of the injectable pens sold by other pharmaceutical companies.
But reality is being harsh on Pfizer. Daniglipron is still in the testing phase and a two-daily dose version was discontinued by the company at the end of last year after patients reported high rates of nausea and vomiting as a side effect. Another trial of oral treatment for obese people was abandoned after tests showed potential damage to patients’ livers.
Daniglipron continues to be Pfizer’s hope to plant its flag in a market estimated to cost hundreds of billions of dollars in the coming years, but the research is only expected to be completed in the first quarter of next year – and that’s if everything goes according to plan. the planned. The company has not released an estimate of when the medicine will be available in pharmacies.
The pressure to quickly make a drug viable that will increase Pfizer’s bottom line is even more evident given the company’s failed bets. Sales of vaccines against Covid-19 were overestimated – a problem that also happened in Modern and which helped AstraZeneca to abandon this market. Pfizer CEO Albert Bourla even publicly apologized for the failed projections.
READ MORE: ‘Ozempic Effect’ forces Nestlé and Danone to change their product lines
Breaking patents
Pfizer still has an additional challenge. Products that currently account for a large part of the company’s revenue will have their patents broken by 2030. This imminent increase in competition for medicines such as anticoagulants Eliquis and the Xeljanzused to treat arthritis, represents another major challenge for Pfizer’s revenue in the coming years.
No one can take away from Pfizer the historic role it played against Covid. But the challenge now is just as big. Will Pfizer be able to remain competitive in the competitive market of pharmaceutical giants?
