WHEN: Today, Tuesday, January 12th
WHERE: CNBC's "Closing Bell"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Shire CEO Flemming Ornskov on CNBC's "Closing Bell" (M-F, 3PM-5PM ET) today.
All references must be sourced to CNBC.
KELLY EVANS: EVEN UNITED HEALTH, THE NICE PERFORMER THERE ON THE DOW TODAY. SOME BIG MERGER NEWS IN THE PHARMA SPACE. SHIRE OFFICIALLY BUYING BAXALTA FOR $32 BILLION CREATING THE WORLD'S BIGGEST RARE DISEASE DRUG MAKER. MEG TIRRELL IS OUT AT THE JP MORGAN HEALTH CARE CONFERENCE IN SAN FRANCISCO. IT HAS BEEN A WHIRLWIND OF ACTIVITY THERE. SHE JOINS US NOW EXCLUSIVELY WITH SHIRE CEO DR. FLEMMING ORNSKOV. MEG?
MEG TIRRELL: KELLY, THANK YOU SO MUCH. AND FLEMMING, THANK YOU FOR JOINING US.
FLEMMING ORNSKOV: OK THANKS VERY MUCH FOR HAVING ME, MEG.
TIRRELL: SO OUT OF ALL THIS HUGE NEWS AT THIS CONFERENCE, YOUR $32 BILLION DEAL ANNOUNCED YESTERDAY WAS PROBABLY THE BIGGEST. AND INITIALLY THE REACTION FROM INVESTORS WAS A NEGATIVE ONE. YOUR STOCK FELL, BAXALTA STOCK FELL. HOW ARE YOU COMMUNICATING TO THEM AND HOW HAS THE COMMUNICATION BEEN BACK FROM THEM ABOUT THIS DEAL?
ORNSKOV: WELL, I JUST CAME OUT OF A LOT OF MEETINGS WITH INVESTORS. I THINK OUR LONG-TERM INVESTORS TOTALLY UNDERSTAND IT. IT'S A VERY GOOD DEAL, IT CREATES SIGNIFICANT VALUE FOR SHAREHOLDERS, IT CREATES A UNIQUE PLATFORM THAT IS GOING TO BE THE WORLD'S LEADING RARE DISEASE COMPANY BY A WIDE MARGIN. SO I THINK OUR SHAREHOLDERS ARE BEHIND IT. IT TAKES A LITTLE BIT OF EXPLANATION, BUT I THINK THEY ARE ABSOLUTELY SUPPORTIVE.
TIRRELL: AND IT SOUNDS LIKE ONE OF THE SORT OF THINGS YOU HAD TO WORK OUT WAS THE TAX FREE STATUS OF THE DEAL BECAUSE BAXALTA WAS SPUN OFF OF BAXTER, YOU WANTED TO PRESERVE THAT TAX FREE STATUS, BUT YOU HAD TO CHANGE SOME OF THE TERMS OF THE DEAL. BUT YOU'RE SAYING YOU'RE CONFIDENT THAT YOU WILL PRESERVE THAT IN THE WAY THE DEAL IS STRUCTURED HERE, IS THAT RIGHT?
ORNSKOV: YEAH, SOME PEOPLE SAID, OH IT TOOK A LONG TIME. IT TOOK US SIX MONTHS. WE DID SIGNIFICANT DILIGENCE AND ONE OF THE AREAS WAS TAX. WE HAD THE WORLD'S EXPERT LOOKING AT IT AND WE GOT THE HIGHEST OPINION, UNEQUIVOCAL, THAT THIS IS A TAX FREE SPEND. SO WE ARE VERY CONFIDENT IN THAT AND WE LOOKED AT ALL OTHER AREAS OF DILIGENCE OF COURSE. I MET A LOT OF THE EMPLOYEES AND I WAS REALLY IMPRESSED. GREAT PEOPLE, GREAT CULTURAL FIT. I THINK WE ARE OFF TO A VERY GOOD START.
TIRRELL: AND ONE THING THAT FOLKS HAVE POINTED OUT ABOUT THE BAXALTA BUSINESS IS IT IS BIG IN HEMOPHILIA. AND THAT IS AN AREA WHERE THERE IS A LOT OF COMPETITION COMING, REALLY CHANGING THE PARADIGM OF TREATING THAT POTENTIALLY MAYBE WITH EVEN GENE THERAPY TRYING TO CURE HEMOPHILIA. HOW DO YOU LOOK AT THE LONGEVITIY OF THE HEMOPHILIA FRANCHISE?
ORNSKOV: OH I FEEL VERY GOOD ABOUT THAT. WE DID SIGNIFICANT DILIGENCE, WE ALSO INTERVIEWED PHYSICIANS, PATIENTS AND PAYERS. I MANAGED ONE OF THOSE BUSINESSES BEFORE. I THINK IT'S OBVIOUS THAT BAXALTA IS A LEADER. THEY KNOW THIS BUSINESS VERY WELL, THEY HAVE A NUMBER OF NEW QUITE INNOVATIVE PRODUCTS COMING TO MARKET. THEY ARE JUST LAUNCHING A LONGER ACTING ADAVATE, ADYNOVATE. THEY KNOW THE SPACE VERY WELL. ALL AREAS HAVE COMPETITION, BUT THEY ARE AS WELL POSITIONED AS ANYONE. THEY EVEN HAVE GENE THERAPY. SO I'M VERY CONFIDENT ABOUT THIS BUSINESS AND ITS LONGEVITY.
TIRRELL: BILL AND KELLY?
EVANS: THANK YOU. DR. ORNSKOV, JUST A QUESTION AS WE LOOK AT THE BUSINESS THAT YOU ARE BUILDING HERE, IT SOUNDS LIKE IT'S GOING TO BE A HUGE ONE. HOW MUCH WILL IT RELY ON THE ORPHAN DRUG LAWS THAT EXIST IN THIS COUNTRY? THE ONES THAT GIVE SPECIAL ENCOURAGEMENT FOR THESE RARE DRUGS IN A WAY, BUT THAT A LOT OF PEOPLE ARE STARTING TO SAY ARE THEY TOO GENEROUS? IF THERE'S SOME PROVISIONS OF THAT THAT ARE ROLLED BACK DOWN THE ROAD, HOW WOULD THAT CHANGE THE ECONOMICS OF THIS DEAL OR YOUR PLANS?
ORNSKOV: NO, I DON'T THINK ANYTHING WILL CHANGE. THE RARE DISEASE SEGMENT IS ONE OF THE MOST ATTRACTIVE SEGMENTS OF HEALTHCARE. THERE IS A LOT OF SIGNIFICANT NEED THERE. 7,000 RARE DISEASES MANY OF WHICH HAVE NO TREATMENT. THERE'S SIGNIFICANT OPPORTUNITIES IN THIS MARKETPLACE. WE'VE GROWN VERY STRONGLY AND WE'VE NOW CREATED THE UNDISPUTED LEADER IN RARE DISEASES. SO THIS IS A VERY ATTRACTIVE SEGMENT TO BE IN.
EVANS: SURE, BUT MY POINT THOUGH IS, IF YOU ARE DEVELOPING – AND I'M JUST INTERESTED IN THE OVERLAP BETWEEN WHAT YOU'RE DOING AND THE ORPHAN DRUGS THAT ALLOW FOR FASTER FDA APPROVAL, OTHER KINDS OF ECONOMIC BENEFITS – YOU KNOW, IT'S BEEN REALLY SUCCESSFUL AND IF THOSE ARE KIND OF PULLED BACK ON IN THE YEARS AHEAD, AS SOME ANALYSTS AND POLITICIANS HAVE SUGGESTED COULD HAPPEN, HOW DOES THAT AFFECT THE ABILITY OR HOW DOES THAT AFFECT YOUR PIPELINE?
ORNSKOV: THE COMPANY WE HAVE AND THE COMPANY WE'RE CREATING TOGETHER WITH BAXALTA IS A PATIENT FOCUSED CULTURE. THERE IS A SIGNIFICANT UNMET NEED AMONG THE PATIENTS. I THINK AS LONG AS THERE'S THESE UNMET NEEDS AS LONG AS YOU DEVELOP MEDICINES THAT ARE TRULY DIFFERENTIATED YOU WILL GET THEM TO MARKET WHETHER THEY ARE ORPHAN OR NOT. BUT THERE ARE MORE OPPORTUNITIES IN THE ORPHAN OR RARE DISEASE AREA THAN IN ANY OTHER AREA OF HEALTHCARE.
BILL GRIFFETH: DR. ORNSKOV, BILL GRIFFETH HERE. FROM WHAT I READ, THE TAX RATE – THE EFFECTIVE TAX RATE FOR THE COMBINED ENTITY AFTER YOU HAVE MERGED WITH BAXALTA WOULD BE 16 TO 17%. BAXALTA'S IS CURRENTLY 23%. YOU HAD TO WALK AWAY FROM THE DEAL WITH ABBVIE A COUPLE YEARS AGO BECAUSE THE OBAMA ADMINISTRATION WAS AGAINST THE TAX INVERSIONS THAT WERE BECOMING SO POPULAR AT THAT TIME. DO YOU THINK YOU ARE GOING TO HAVE A PROBLEM WITH U.S. REGULATORS ON THIS DEAL AS A RESULT OF THIS DROP IN THE TAX RATE AGAIN?
ORNSKOV: OH, THIS IS A VERY DIFFERENT SITUATION. THIS IS NOT ABOUT INVERSION. THIS IS NOT ABOUT TAX. THIS IS ABOUT GROWTH AND CREATING A LEADER IN RARE DISEASES. WE ARE AN IRISH COMPANY SO WE HAVE A DIFFERENT TAX RATE, BUT THIS IS NOT ABOUT INVERSIONS. THIS IS ABOUT GROWTH, INNOVATION AND BUILDING A GREAT COMPANY IN RARE DISEASES.
TIRRELL: SO I HAVE TO ASK YOU, YOU DID TWO BIG DEALS –
GRIFFETH: HAVE YOU HEARD FROM THE IRS?
TIRRELL: I'M SORRY. BILL WAS ASKING HAVE YOU HEARD FROM THE IRS?
ORNSKOV: WHAT YOU DO IN THIS PARTICULAR SITUATION, YOU GO TO THE WEALTH EXPERTS THAT ASSESSES THE SITUATION, YOU GET A SO-CALLED WELLS OPINION, WE GOT ONE OF THOSE. AND THIS IS AN UNEQUIVOCAL OPINION, SO I'M VERY CONFIDENT ABOUT THE TAX FREE NATURE OF THIS SPIN OF BAXALTA FROM BAXTER.
TIRRELL: OK. I THINK THAT'S THE TIME WE HAVE. FLEMMING, THANK YOU SO MUCH FOR JOINING US.
ORNSKOV: WELL THANK YOU SO MUCH FOR HAVING ME.
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