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WHEN: TODAY, MONDAY, November 23, 2015
WHERE: CNBC'S "SQUAWK ON THE STREET"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Pfizer CEO Ian Read and Allergan CEO Brent Saunders today on CNBC's "Squawk on the Street" as the companies announce a merger that will create the world's largest pharmaceutical giant. Following is the link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000458860.
All references must be sourced to CNBC.
TIRRELL: CLEARLY A VERY BIG MORNING. THE BIGGEST DEAL EVER IN THE DRUG INDUSTRY, SETTING YOU GUYS UP TO BE THE FOURTH LARGEST MARKET CAP COMPANY IN THE WORLD AFTER THIS IS DONE PRESUMABLY. GIVEN THE POLITICAL CLIMATE NOW AROUND TAX INVERSIONS, THE FACT YOU'RE MOVING INTO IRELAND, HOW CONFIDENT ARE YOU THAT THIS DEAL GETS DONE?
READ: FIRST OF ALL, I WOULD LIKE TO SAY THIS IS A GREAT DEAL FOR AMERICA. IT ALLOWS US TO CONTINUE TO SUSTAIN AN INVESTMENT OF, YOU KNOW APPROXIMATELY $9 BILLION MAINLY SPENT IN THE UNITED STATES. WE HAVE 40,000 COMBINED EMPLOYEES IN THE UNITED STATES. SO I THINK IT'S A GREAT DEAL. I'M VERY HAPPY TO BE ANNOUNCING THIS DEAL WITH BRENT. ON GETTING IT DONE? WE'VE LOOKED AT THE LAWS. WE LOOKED AT RECENT NOTICE FROM TREASURY. YOU KNOW, IT'S GOING TO BE -- ALLERGAN WILL HAVE APPROXIMATELY 44% OF THE NEW COMPANY. PFIZER SHAREHOLDER ALSO HAVE APPROXIMATELY 56%. THIS IS A GREAT DEAL. IT'S NOT AN ORDINARY DEAL. THIS IS A REAL DEAL THAT CREATES VALUE FOR PFIZER SHAREHOLDERS, ALLERGAN SHAREHOLDERS AND FOR PATIENTS.
TIRRELL: HAVE YOU SPOKEN WITH FOLKS IN TREASURY, PRESIDENT OBAMA, ABOUT WHAT IS GOING ON WITH THE TREASURY RULES ON INVERSIONS? OR DO YOU HAVE CONFIDENCE THAT SOMETHING ELSE COULDN'T CHANGE TO DERAIL THIS BEFORE IT CLOSES?
READ: WE'VE BEEN ENGAGED FOR THE LAST YEAR AND A HALF IN – WITH LEADERS IN THE CONGRESS. WE SEE THIS DEAL AS BEING VERY POSITIVE FOR THE UNITED STATES. AND WE FEEL THAT THE NOTICE THAT BEEN GIVEN BY TREASURY. WE'LL JUST CONTINUE TO GO FORWARD.
TIRRELL: DOES IT MAKE SENSE FOR YOU IF THE TAX BENEFITS GO AWAY? DOES THIS DEAL STILL MAKE SENSE? DO YOU STILL DO THE DEAL?
READ: THIS DEAL IS NOT JUST ABOUT TAX BENEFITS. THIS DEAL IS ABOUT GREAT FRANCHISES. BRENT CAN TALK ABOUT THE FRANCHISES ALLERGAN HAS IN A SECOND. I'M EXCITED ABOUT IT. IT TAKES -- OUR TWO BUSINESSES ARE ESTABLISHED BUSINESS AND OUR INNOVATIVE PHARMACEUTICAL IT GIVES IT GREATER GROWTH, IT GIVES IT BRIGHTER PORTFOLIO. IT'S A REALLY STRATEGIC DEAL FROM THAT POINT OF VIEW. IT ENABLES US TO INCORPORATE BRENT'S OPEN SCIENCE, OPEN DEVELOPMENT PHILOSOPHY WE GET OVERLAP SYNERGIES WE GET FROM OVERLAPS. THERE ARE BENEFITS FROM TAX. IF THE BENEFITS FROM TAX WEREN'T THERE, I WOULD STILL TRY TO DO THE DEAL, BUT I SUSPECT THE PRICE WOULD BE DIFFERENT.
TIRRELL: BRENT, TELL US ABOUT THE REASON TO SELL NOW, AND AT THIS PRICE. SOME FOLKS HAVE SAID THEY WERE EXPECTING $390 DOLLARS AT A MINIMUM PER SHARE. WHY DOES THIS PRICE AND DEAL MAKE SENSE FOR YOU?
SAUNDERS: YOU REALLY CAN'T LOOK AT A SPOT PRICE, WHETHER THAT'S FRIDAY NIGHT'S CLOSE, 3.63 AND CHANGE. YOU HAVE TO LOOK AT WHAT WE ARE GETTING. WE ARE GETTING 11.3 SHARES FOR OUR SHAREHOLDERS WHEN WE NEGOTIATED THE PRICE, THAT WOULD HAVE EQUALED OVER $400 SO YOU CAN'T LOOK AT SPOT PRICE. BUT WHAT YOU GET IS A PRO FORMA OWNERSHIP OF 44% OF THE FOURTH LARGEST COMPANY BY MARKET CAP IN THE WORLD, YOU GET ACCESS TO 100 NEW MARKETS, ACCESS TO A DEEPER PIPELINE, $25 BILLION IN FREE CASH FLOW AND ACCESS INTO A DIVIDEND FOR SHAREHOLDERS. WHEN YOU PUT THAT ALL TOGETHER, THE VALUE CREATION FOR ALLERGAN SHAREHOLDERS IS IMMENSE.
TIRRELL: THE DRUG INDUSTRY LATELY HAS JUST TURNED INTO THIS KIND OF POLITICAL PINATA. YOU JUST ARE THE TARGET OF SO MANY DIFFERENT POLITICIANS FOR SO MANY DIFFERENT REASONS A DEAL OF THIS MAGNITUDE DOES THIS MAKE YOU A MAGNET FOR MORE ATTENTION? HOW DO YOU RESPOND TO THAT ESPECIALLY IN TERMS OF CRITICISM OF POTENTIAL CUTTING OF RESEARCH SPENDING?
READ: WE'RE FOCUSED ON SUSTAINABILITY OF RESEARCH. THIS IS A HIGH-RISK BUSINESS. WE WILL CONTINUE TO PUMP IN 9 BILLION GLOBALLY INTO RESEARCH, MOSTLY IN THE UNITED STATES. WE'RE FOCUSED ON FINDING CURES THAT MAKE A DIFFERENCE IN PEOPLES LIVES, FOCUSED ON ALZHEIMER'S, ON RHEUMATOLOGY, CANCER, VACCINES. AND ANESTHETICS WHICH IS IMPORTANT. I FEEL THIS SHOULD BE A POSITIVE SIGN FOR PATIENTS. THESE SORTS OF RESOURCES ARE BEING BROUGHT TOGETHER TO CURE MAJOR ILLNESSES FOR HUMANITY.
TIRRELL: TRADITIONALLY ALLERGAN I THINK HAS SPENT LESS AS A PERCENTAGE OF REVENUE ON R & D THAN PFIZER HAD. WHAT MODEL SHOULD WE EXPECT TO BE THE ONE GOING FORWARD?
SAUNDERS: I THINK IT'S A COMBINATION OF TWO GREAT MODELS. PFIZER HAS VERY DEEP AND STRONG CAPABILITIES IN DISCOVERY RESEARCH, WE HAVE LIMITED CAPABILITY THERE'S, SO WE TURNED TO AN OPEN SCIENCE MODEL. WE HAVE THIS PHILOSOPHY OF BEING HUMBLE ENOUGH TO REALIZE WE DON'T HAVE THE BEST IDEAS, BUT BOLD ENOUGH TO ACT ON THEM. I THINK THAT IS SOMETHING THAT WILL SURVIVE AS A PART OF THE CULTURE AS WE MELD THESE CULTURES TOGETHER. HAVING A BUDGET OF $9 BILLION TO SPEND ON ADVANCING OUR PIPELINES, LOOKING FOR CURES AND TREATMENTS, I THINK THAT'S REALLY GOING TO BENEFIT PATIENTS AND BUILD VERY STRONG CATEGORY AND THERAPEUTIC LEADERSHIP ACROSS THE ENTIRE RANGE OF OUR PORTFOLIO.
TIRRELL: HOW HAS THE PRESSURE ON DRUG PRICES AFFECTED YOUR DECISION TO DO A DEAL LIKE THIS?
READ: THIS DEAL HAS NO RELEVANCE VIS-A-VIS DRUG PRICING. THE PHARMACEUTICAL INDUSTRY, THE COST OF PHARMACEUTICALS TO THE HEALTHCARE SYSTEM HAS STAYED AT THE SAME PERCENTAGE, 10% TO 12% FOR A DECADE. I EXPECT IT TO STAY THERE. WHAT WE'RE FOCUSED ON IS HOW DO WE BRING BENEFITS TO PEOPLE WHO HAVE ILLNESSES. HOW DO WE ENSURE THE SAFETY OF CHILDREN, THE SAFETY OF PEOPLE WHO HAVE DISEASES LIKE CANCER, ALZHEIMER'S. THAT'S WHAT IS IMPORTANT. THE HOPE THAT THAT RESEARCH OFFERS TO THE POPULATION.
SAUNDERS: I WOULD JUST ADD, I THINK OUR SOCIAL CONTRACT TO INVEST IN R & D, TO INVEST IN CURES AND TREATMENTS FOR UNMET MEDICAL NEEDS IS EVEN STRONGER IN THIS COMBINATION. SO, OUR DRUGS, OUR CURES, OUR TREATMENTS ARE ALWAYS PRICED AT AN PHARAMICAL ECONOMIC VALUE PRINCIPLE AROUND MAKING SURE THAT WE SHARE THAT VALUE WITH THE PATIENTS THAT WE'RE TRYING TO CURE AND TREAT.
TIRRELL: TELL US, IS THERE A BREAKUP FEE HERE? PRESUMABLY THERE IS. YOU DIDN'T DISCLOSE IT. CAN YOU TELL US ABOUT WHAT IT IS?
READ: IT IS ORDINARY AND CUSTOMARY TERMS, IT INCLUDES A BREAKUP FEE OF UP TO 3.5 BILLION, THE DETAILS WILL BE GIVEN AS SOON AS WE FILE WITH THE SEC.
TIRRELL: I'M LOOKING AT THE NEW CEO OF THE COMBINED COMPANY, AND THE COO AND PRESIDENT OF THE NEW COMBINED COMPANY. ARE WE LOOKING AT A SUCCESSION PLAN RIGHT NOW? IS THIS YOUR POTENTIAL SUCCESSOR IAN?
READ: I'M VERY, VERY LOOKING FORWARD TO WORKING WITH BRENT. HE'S DONE A FABULOUS JOB WITH ALLERGAN AND ALL THE COMPANIES HE'S BEEN IN. WE'LL HAVE A GREAT PARTNERSHIP. TOGETHER WE'LL BE VERY SUCCESSFUL.
TIRRELL: THANK YOU BOTH FOR JOINING US. WE APPRECIATE YOUR TIME.
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