WHEN: Today, Wednesday, April 6th
WHERE: CNBC's "Closing Bell"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Merck CEO Ken Frazier on CNBC's "Closing Bell" (M-F, 3PM-5PM ET) today, Wednesday, April 6th. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000507489.
All references must be sourced to CNBC.
KAYLA TAUSCHE: PFIZER/ALLERGAN IS THE LATEST AND HUGEST M&A CASUALTY AFTER THE U.S. TREASURY DEPARTMENT ANNOUNCED NEW RULES ON CORPORATE TAX INVERSIONS. BUT HOW WILL THIS IMPACT THE PHARMACEUTICAL INDUSTRY GOING FORWARD? MERCK CEO KEN FRAZIER JOINS US NOW FOR AN EXCLUSIVE INTERVIEW WITH OUR MEG TIRRELL. MEG, OVER TO YOU.
MEG TIRRELL: KAYLA, THANK YOU SO MUCH AND KEN, THANKS FOR JOINING US.
KEN FRAZIER: THANK YOU, IT'S MY PLEASURE.
TIRRELL: NOW ALL EYES IN THE PHARMACEUTICAL WORLD AND THE BUSINESS WORLD OF COURSE HAVE BEEN ON THE SURPRISING EVENTS THAT HAVE UNFOLDED THIS WEEK. TELL US, YOU KNOW, WHAT DO YOU MAKE OF ALL OF THIS?
FRAZIER: WELL, I THINK EVERY COMPANY HAS ITS OWN UNIQUE APPROACH TO CREATING SHAREHOLDER VALUE. FOR US IT'S ALWAYS BEEN ABOUT SCIENTIFIC INNOVATION AND MEETING UNMET MEDICAL NEED.
TIRRELL: BUT YOU'VE SAID OVER AND OVER AGAIN YOU WOULD NEVER DO A TAX INVERSION. FOR THE LAST FEW YEARS THAT WE'VE TALKED YOU'VE TOLD US THIS. WHY WOULDN'T YOU? AND I KNOW THAT YOU'VE BEEN LOOKING FOR TAX REFORM, SO TELL US YOUR THOUGHTS ON THAT.
FRAZIER: WELL, WHAT WE HAVE SAID IS THAT WE DIDN'T THINK DOING A LARGE TRANSACTION FOR THE PURPOSE OF GETTING THE TAX INVERSION BENEFITS, WHICH ARE UNQUESTIONABLY IMPORTANT FINANCIAL BENEFITS, WOULD BE THE RIGHT WAY FOR US TO GO BECAUSE WE ARE SO DEDICATED TO OUR PIPELINE, WE'RE SO DEDICATED TO SCIENCE. WE THINK, HOWEVER, IT'S REALLY IMPORTANT TO RECOGNIZE WHY COMPANIES SEEK TO DO TAX INVERSIONS. AND THAT IS THE CURRENT U.S. SYSTEM OF TAXATION MAKES U.S.-BASED COMPANIES SIMPLY UNCOMPETITIVE.
TIRRELL: IS IT THE TAX RATE THAT YOU TAKE ISSUE WITH HERE IN THE UNITED STATES OR IS IT YOUR ABILITY TO ACCESS YOUR OVERSEAS CASH? I UNDERSTAND MERCK DOES MORE THAN HALF OF ITS BUSINESS, AT LEAST IN TERMS OF REVENUE, OVERSEAS. SO ARE YOU LOOKING TO BE ABLE TO BRING THAT IN WITHOUT BEING TAXED AT THE U.S. RATE ON IT?
FRAZIER: MEG, I THINK A GOOD COMPREHENSIVE TAX REFORM PACKAGE WOULD HAVE TWO THINGS. FIRST OF ALL, IT WOULD HAVE A LOWER RATE, BUT IT WOULD ALSO HAVE A TERRITORIAL SYSTEM THAT WOULD ALLOW US TO BE ABLE TO BRING IN MONEY THAT WE MAKE OVERSEAS, THAT WE'RE TAXED ON OVERSEAS WITHOUT DOUBLE TAXATION HERE IN THE UNITED STATES.
TIRRELL: WHEN YOU SEE THE TREASURY PUTTING OUT RULES LIKE THIS INSTEAD OF CONGRESS ACTING IN ORDER TO ENACT TAX REFORM, DOES IT CONCERN YOU THAT WE'RE NOT ACTUALLY GOING TO GET ANY KIND OF TAX REFORM, THAT WE HAVE THESE KINDS OF TEMPORARY RULES PUT IN PLACE INSTEAD?
FRAZIER: WELL, I'M OPTIMISTIC THAT AFTER THE NEXT PRESIDENTIAL ELECTION, WE WILL GET COMPREHENSIVE TAX REFORM. IT'S ONE OF THOSE ISSUES WHERE PEOPLE ON BOTH SIDES OF THE AISLE AGREE THAT IN ORDER FOR U.S.-BASED COMPANIES TO BE COMPETITIVE, PARTICULARLY IN A FIELD LIKE PHARMACEUTICALS WHERE GETTING THE BEST IP ASSETS WHEREVER THEY EXIST AROUND THE WORLD IS KEY TO SUCCESS, I BELIEVE THAT THE POLICY MAKERS KNOW THAT IT'S IMPORTANT FOR U.S.-BASED COMPANIES TO BE COMPETITIVE.
TIRRELL: AND I WANT TO ASK YOU JUST ONE MORE THING ABOUT THIS, AND THEN I WANT TO ASK YOU A FEW MORE THINGS ABOUT MERCK. BUT THIS MORNING, BRENT SAUNDERS, THE CEO OF ALLERGAN, TOLD OUR DAVID FABER THAT THESE RULES BY TREASURY WERE UN-AMERICAN. ESSENTIALLY IN THAT THEY CAME OUT, THEY HAD DONE A LEGAL DEAL, AND THEN THE GOVERNMENT JUST TURNED AROUND AND MOVED THE GOAL POSTS. DOES THAT WORRY YOU THAT THE GOVERNMENT COULD DO SOMETHING LIKE THIS TO WHAT WAS A LEGAL DEAL?
FRAZIER: MEG, YOUR CONNECTION HAS GONE OUT HERE, SO YOUR QUESTION WASN'T REALLY ONE I COULD HEAR. WOULD YOU REPEAT IT? I'M SORRY, THE CONNECTION ISN'T WORKING WELL.
TIRRELL: SURE. I HOPE YOU CAN HEAR ME NOW. I WAS JUST ASKING YOU YOUR THOUGHTS ON TREASURY –
FRAZIER: I CAN BARELY HEAR YOU, BUT PLEASE ASK YOUR QUESTION AGAIN.
TIRRELL: OK. I WONDER IF KAYLA AND BILL ARE ABLE TO GET THROUGH?
BILL GRIFFETH: HEY KEN, ARE YOU ABLE TO HEAR US HERE?
FRAZIER: I CAN HEAR YOU. YES I CAN HEAR YOU WELL.
GRIFFETH: ALRIGHT. SHE'S POINTING OUT THAT BRENT SAUNDERS OF ALERGAN WAS ON WITH OUR DAVID FABER THIS MORNING AND HE IS VERY UPSET THAT THE GOVERNMENT WAS ABLE TO CHANGE THE RULES MIDSTREAM. THEY ALREADY HAD A DEAL UNDER THE EXISTING RULES. ARE YOU CONCERNED THAT THE GOVERNMENT CAN CHANGE RULES LIKE THAT SEEMINGLY RANDOMLY AND WOULD THAT AFFECT YOUR BUSINESS DOWN THE ROAD?
FRAZIER: WELL, I'M NOT FAMILIAR WITH THE SPECIFICS OF THIS PARTICULAR SITUATION. OF COURSE, I THINK IT'S IMPORTANT FOR THERE TO BE PREDICTABILITY. THAT'S HOW COMPANIES LIKE OURS THAT TAKE BETS OVER THE LONG TERM ARE ABLE TO DO THAT. SO WE WANT TO MAKE SURE THAT THE RULES ARE CLEAR AND PREDICTABLE.
TIRRELL: KEN, I'M BACK, CAN YOU HEAR ME?
FRAZIER: YES, I CAN HEAR YOU CLEARLY. SORRY.
TIRRELL: FANTASTIC. I WANT TO ASK YOU ABOUT YOUR OWN BUSINESS. OF COURSE, YOU'VE SAID YOU WOULDN'T DO AN INVERSION, BUT MERCK HAS BEEN A COMPANY THAT'S DONE A LOT OF BIOTECH DEALS IN THE PAST. HOW ARE YOU LOOKING AT THE ENVIRONMENT FOR M&A RIGHT NOW?
FRAZIER: WELL, I THINK IT'S A GOOD ENVIRONMENT. I THINK THAT THERE'S BEEN A CHANGE IN THE VALUATION OF CERTAIN COMPANIES AND I THINK IT GIVES US AN OPPORTUNITY TO POSSIBLY ACQUIRE GOOD COMPANIES WITH GOOD PIPELINES AT A REASONABLE PRICE SO THAT WE CAN CREATE SHAREHOLDER VALUE.
TIRRELL: ANOTHER HUGE ISSUE IN THE PHARMACEUTICAL INDUSTRY RIGHT NOW OF COURSE IS PRICE. I WANT TO ASK ABOUT THE HEPATITIS-C REGIMEN BECAUSE YOU GUYS PRICED IT AT A SIGNIFICANT DISCOUNT AT LEAST TO THE LIST PRICE OF THE COMPETITIVE REGIME FROM GILEAD. TELL US ABOUT THAT DECISION. IS THIS KIND OF A NEW NORMAL FOR YOU GUYS AND MAYBE OTHER PEOPLE IN THE INDUSTRY?
FRAZIER: WELL, THE WAY WE HAVE LOOKED AT PRICING AT MERCK IS WE'VE ALWAYS SAID WE WANT TO BE RESPONSIBLE WHICH MEANS WE WANT TO OPTIMIZE PROFITABILITY AND PATIENT ACCESS. AND HERE IN THE UNITED STATES, THERE WERE SO MANY PATIENTS WHO WEREN'T BEING TREATED UNDER THE CURRENT REGIME. SO WE SAID LET'S BRING A PRODUCT TO MARKET AT A PRICE WHERE WE CAN TREAT NOT ONLY MOST WELL-OFF AMERICANS, BUT WE CAN TREAT THE LESS ECONOMICALLY VIABLE PEOPLE, BECAUSE THIS IS A COMMUNICABLE DISEASE, IT'S A BIG PROBLEM, WE NEED TO MAKE SURE THAT WE PROVIDE ALL AMERICANS ACCESS TO THIS DRUG AND THAT WAS OUR THINKING.
TIRRELL: WELL, KEN, VERY INTERESTING TO HEAR YOUR THOUGHTS. THANK YOU FOR JOINING US.
FRAZIER: THANK YOU. AND WE LOOK FORWARD TO SEEING YOU AGAIN.
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