Pfizer's bondholders cheer news of activist investor Starboard's $1 billion investment

By Ciara Linnane

Spreads tightened as buyers moved in to snap up the debt in strong volumes

Pfizer Inc.'s stock gained Monday after a report that activist investor Starboard Value has invested $1 billion in the drug company. Bondholders seem to like the news too.

Spreads on the company's outstanding bonds tightened Tuesday, as buyers snapped them up in strong volumes.

The report by the Wall Street Journal said that Starboard had approached two former Pfizer executives to assist it in attempting to seek a turnaround for Pfizer (PFE), which enjoyed huge revenue gains during the pandemic thanks to its vaccine and anti-viral. Sales topped $100 billion in 2022, up from $42 billion in 2020. Since then, those products have seen a major slump in demand and the company has been unable to replicate the success with its other products.

Chief Executive Albert Bourla had highlighted the new class of weight-loss drugs as a key area of interest, but faced a setback last year when patients in a trial experienced several side effects, forcing the company to abandon the effort.

In July, the company had better news when it said it had selected a preferred modified-release formulation of its experimental drug danuglipron, which like Novo Nordisk's (NVO) (DK:NSIS.B) Ozempic and Wegovy, is a GLP-1 receptor agonist but is taken orally rather than injected. Dosing studies of the modified-release danuglipron will be conducted in the second half of this year, Pfizer said.

Investor attention has now shifted to some of the deals Pfizer has conducted under Bourla that have soured. The company last month announced it was withdrawing a sickle-cell drug from markets worldwide and discontinuing clinical trials of the treatment after data suggesting a potential link to sickle-cell complications and "fatal events."

That drug, oxbryta, was acquired as part of Pfizer's 2022 takeover of Global Blood Therapeutics Inc. for $5.4 billion.

Last year, the company spent $43 billion to acquire biotech Seagen, which specializes in cancer drugs. Before that, it acquired Arena Pharma for $6.7 billion and bought the shares in Biohaven Pharmaceutical Holding it didn't already own for about $11.6 billion.

It was not clear exactly what Starboard is planning for Pfizer in the WSJ report.

"We do not comment on market speculation or rumor," a Pfizer spokesperson told MarketWatch. Starboard did not respond to a request for comment.

Pfizer's stock soared during the pandemic, peaking around $59 in late 2021. But Pfizer shares have fallen back to Earth as demand for its drugs and vaccines has slowed, ending Friday at $28.29. The stock plunged about 40% in 2023 following overly optimistic guidance, and the company announced a major cost-cutting effort about a year ago.

The following charts from data solutions provider BondCliQ Media Services show the reaction in bonds as buyers moved in early in the session.

Spreads had been gradually tightening over the last 30 days before a sharper move Tuesday.

Pfizer has more than $60 billion in bonds outstanding with some $5 billion coming due in 2026.

The stock was flat Tuesday and is up just 1% in the year to date, while the S&P 500 SPX has gained 19%.

Mike Murphy contributed to this article.

-Ciara Linnane

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10-08-24 1201ET

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