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Jeff Smith Hints At Change Of Pfizer CEO

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HFA Staff
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Jeff Smith

Following are excerpts from the unofficial transcript of a CNBC interview with Starboard Value CEO Jeff Smith on CNBC’s “Squawk on the Street” (M-F, 9AM-11AM ET) today, Tuesday, October 22.

Starboard Value CEO Jeff Smith: Pfizer needs to do a better job disciplining itself on investments

Smith On Pfizer

Everybody remembers Pfizer right now, it’s most known for the great job Pfizer did during the pandemic. We’re here without masks talking to each other in person because of, in part because of the great job they did. During that period of time, you know their revenue jumped, it went from $40 billion to $100 billion. Their cash flow jumped from roughly $10 billion to let’s call it $40 billion. There was huge growth and huge cash flow generation but something is not working because the stock has gone from 41 to 29.

Smith On Pfizer’s Growth

For a pharma company in particular, it’s incredibly important, they’re investing large sums of money in R&D as well as in acquisitions which is really outsourced R&D, and the way you should be measuring those returns is in the expected growth that they’re going to produce. And when we look at it, the growth they’re producing from their investments is worst in class. That doesn’t make any sense. This is Pfizer.

Smith On Capital Allocation

I’m asking for something different. I’m asking for them to massively improve the discipline around capital allocation inside the company so that they can put more dollars to projects that they have a higher degree of confidence and fewer dollars –

Smith On A Potential CEO Change

So in similar situations where a company has underperformed like this, you may see a board make a change at CEO. It wouldn’t be unheard of, it wouldn’t be strange, it could make sense.

Smith On Management Change

We’ve been involved with companies that haven’t been performing all that well and then we come along and management understands that things need to be different and they change, and they change dramatically and perform much better. We don’t know which of, we never know which of those is the right answer. What we’d like to do is work with management and work with the board and try and figure out what’s the best answer and how they’re going to vote, but I will say something material needs to change. They can’t just close their eyes and assume it’s going to get better because you said David, properly what can I do about what they’d done in the past. I can’t do anything about what they’ve done in the past, but today is tomorrow’s past.

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The post above is drafted by the collaboration of the Hedge Fund Alpha Team.