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CNBC Exclusive: CNBC Transcript: New Valeant CEO Joe Papa on CNBC's "Mad Money w/ Jim Cramer" Tonight

WHEN: TONIGHT, MONDAY, MAY 9 AT 6PM ET

WHERE: CNBC'S "MAD MONEY W/ JIM CRAMER"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with new Valeant CEO Joe Papa tonight on CNBC's "Mad Money w/ Jim Cramer" at 6PM ET. Video of the interview will be available on www.cnbc.com.

All references must be sourced to CNBC.

JIM CRAMER: We got an incredible chance to check with what may be the single most controversial company in this market today. I'm talking about Valeant. The previously gigantic pharmaceutical roll-up has seen its stock plunge over the last 12 months. And over the past year, Valeant has been accused of all kinds of shady practices, price gouging, channel stuffing. And the one that really worries me the most, which are accounting irregularities. However, a couple weeks ago, Valeant's board announced that they were replacing their admittedly loathed former CEO Michael Pearson with a much better executive, Joe Papa from Perrigo. So here is the question we need to ask ourselves: Is it possible Valeant can turn itself around, which might make the stock a real bargain at these levels? Or is the whole thing a value trap and you gotta steer clear of it? The-- we don't know the answer frankly. Let's take a closer look with Joe Papa. He's the brand new chairman and CEO of Valeant Pharmaceuticals. Find out more about what he thinks of this controversial company's prospects. Mr. Papa, welcome back to Mad Money. Good to see you, Joe.

JOE PAPA: Good to see you. Good to see you.

JIM CRAMER: All right, Joe. This is a tough one because I've known you for many, many years. And you-- made our viewers a huge amount of money. But you're going to a company that while there are 20,000 or more people that are all, I'm sure, very nice, Charlie Munger, one of the great investors of our time, associated with Warren Buffett, said that Valeant's a sewer because it jacked up prices of old medicines to game the system. Joe Papa, why would you want to be a part of that?

JOE PAPA: So Jim, I've been in the pharmaceutical business for 35 years. And what I've always tried to do is go to the data. Try to figure out what's there, what's not there. Because that to me is the most important question. So I did my diligence. And I looked at Valeant from not just the level of the noise because I hear a lot of news, either good or bad. But in terms of the growth. They've grown phenomenally in the eight years that-- that Mike was there. But there's some noise. I absolutely get that. So what did I do? I went in and looked at the information. I said, you know, "What do the people look like?" And candidly, Jim, I-- many of the people that are there-- they have 22,000 people, all dedicated to trying to improve patients' lives. And I think that's a really important, noble-- cause. And I think why-- that's why pharmaceuticals is so important—

JIM CRAMER: But Joe, I mean, we know. I mean, first, it's Barron's this week in a well-researched piece saying that if the accounting had been generally accepted accounting principles, the company would have actually lost money rather than make $8.14. I'm sure these people are very nice and very good. But the accounting, Joe. The accounting seems wrong to me.

JOE PAPA: So I understand the comment on accounting. But-- let me just go through a little bit more. Because what else is there? Because that was the other thing that I said. What-- they have a global leading brand in a number of areas of opthalmics. The Bausch and Lomb products, the contact lenses, great products. They have-- global leading brands in dermatology, global leading brands in the GI disease area. So they've got great brands globally. I think that was really important to me. But you know the biggest surprise and the reason that really got me? Is I looked at their pipeline. Because to me, that's going to predict how is a company successful in the future. Are they going to grow organically or not? We've got 33 products in the pipeline. We got 10 products that are going to launch in the next 12 to 18 months. And they're for important things like psoriasis. They can make a difference for a patient with psoriasis. We've got products in the dermatology space. We've got products in the gastrointestinal space. We've got new products for glaucoma. All these, I think, are really just gonna drive us. Do I—

JIM CRAMER: Joe, more than $30 billion in debt. A research-- I looked at the R&D budget. It's around 3%. Pfizer and Merck are 16%. This isn't a knockoff drug company, Joe. They have to spend more money. They have to be able-- you have to be able to pay this debt. You've got to be able to-- you must have to sell some things. Even though Bill Ackman, who's maybe your putative boss, says you don't need to sell anything. Joe, this is a situation that is dire.

JOE PAPA: Yeah. So I know we've got some things we're going to work on. I believe though that we're going to be generating cash because that's obviously important. We are generating cash. We're generating EBITDA. We've got over $10 billion of sales. So I do think the footprint is in place. I-- do I have to execute on things? Absolutely correct, Jim. But I do think that I look at it. There's-- first thing I need to do is stabilize the company. That's working with our employees, working with the physicians, making sure that we work with patients. I have to get that stabilization. Then I-- then after that, I've gotta turn it around. And that's gonna be launching some of these new products. I've gotta make sure that I take care of the debt holders. I-- I'm comfortable we've got a plan to take care of debt holders. And then importantly, obviously generate the total shareholder return-- for-the—-shareholders

JIM CRAMER: Now, you do stand to benefit according to the press reports. $65 million is the package if things go right. You left Perrigo, and you get this. I mean, are you doin' it for the money, Joe?

JOE PAPA: Jim, this is not about the money. This is about to me-- as I said, I love the pharmaceutical industry. This is an industry that does more good for people than any other industry at least as far as I'm concerned. I'm a pharmist by my training. To me, this was all about if I could play a small role in improving Valeant and that has a beneficial impact on the entire pharmaceutical industry, I think I will have done something that's important. To me, that's what this is all about.

JIM CRAMER: Okay. You were last on the show February of 2015, where you were urging people to not tender to a Mylan bid, which is-- now, amounted to about 160 bucks, as David Faber and I - calculated it. Stock's at $94. Some of our viewers, who have made a lotta money with you, now feel that you left them with a $94 stock. You get to go onto Valeant. And they are questioning what they own.

JOE PAPA: Well, Jim, I-- so I can't say too much about the Perrigo company, of course. What I can say is—

JIM CRAMER: But you did come on.

JOE PAPA: You're absolutely right. Perrigo-- before I joined Perrigo, it was a great company. When I joined-- while I was there, it was a great company. And Perrigo's gonna be a great company for the future—

JIM CRAMER: But maybe Perrigo needs you, Joe. I mean—jeez, you know, you liked it at 160. And now, they're at 94. Maybe Perrigo needs Joe Papa.

JOE PAPA: Well, I-think what I would really say, Jim, is that I'm really excited about the opportunity at Valeant. I do think that-- Perrigo's in good hands. They've got a great new CEO. So I'm just gonna probably say I'll leave Perrigo with the great CEO, the great succession plan that occurred. And I'm gonna really look towards tryin' to really make a difference at Valeant—

JIM CRAMER: But let's talk about that path forward. I know that there is much in the pipeline. You said that. But what's the first thing-- and I know you said stabilization. But does stabilization mean get these multiple investigations behind you? Because the multiple investigations could hinder what you're tryin' to do.

JOE PAPA: So I think the first thing I have to do is just as I said, re-recruit my employees to my company. They—

JIM CRAMER: Re-recruit?

JOE PAPA: Get their engagement back. That's an important message. They've had a tough nine months. There's no doubt about that.

JIM CRAMER: Well, I mean-they're in the paper every day.

JOE PAPA: So I-- but I think I can do that. I've gotta deal with some of the regulatory issues that are out there. And we've got a plan to do that. Just last week, we announced we're gonna put together a patient access and pricing committee.

JIM CRAMER: But-- does that mean that you have to roll back prices? And how can you roll back prices and also pay that debt?

JOE PAPA: Well, I don't know the action yet, but we're clearly going to look at patient access, make sure that if people want our drugs, they get access to our drugs. And to me, that's what's really important. 'Cause once again, the pharmaceutical industry in my mind is always gonna be about making quality products, make them for people to improve their health care outcomes.

JIM CRAMER: Okay. Did Bill Ackman reach out to you when you were at Perrigo and say, "You're my guy"?

JOE PAPA: In terms of joining—

JIM CRAMER: Is that who made the contact?

JOE PAPA: I was contacted by an industry individual. It wasn't Bill.

JIM CRAMER: Okay. When you get in and you look, and you've only been there a few days. And I have to tell you you're totally stand up to come. Because I was candidly upset--. Because we have so many people in Perrigo. And it's a local company. It's from where-- it's-- you know it's from where I-- I have a house in Dublin, Joe. I mean, this is where I grew up. And I look at what-- what's happening. And I say to myself, "Okay, foremost pharmaceutical guy in the state, in a local company comes to this situation." And frankly-- maybe it's not solvable, Joe. I mean, maybe it's not.

JOE PAPA: Relative to how I can solve Valeant?

JIM CRAMER: Well, I mean the balance sheet. I keep coming back to that balance sheet, Joe. And you did get a pretty good balance sheet at Perrigo. You didn't have to worry about such a thing. You always had investment grade.

JOE PAPA: That is true. But I do think we can manage through this balance sheet question. It's an absolute priority for me. I wanna be clear that it's an absolute priority. But I do think we can manage that and also get the returns that we're looking for our shareholders.

JIM CRAMER: But do you think the political stuff can be behind you? I mean, it's election coming up. Are you somehow gonna get that behind you?

JOE PAPA: Well, I'm gonna work really hard at it, Jim. That's all I can promise. 'Cause that's an important objective for me. Once again, I think if I continue to focus on trying to improve patients' lives, then I think that's an important message. And, of course, working with our physician partners. That's an important part of how I believe we'll be successful.

JIM CRAMER: I gotta hand it to you. I gotta hand it to you 'cause you came on. You know I've been very critical. It- frankly, if you hadn't come on, then I would have had a lot more questions. And the fact is I had to hit you with the tough stuff. And you know that. And I really appreciate you coming on for both our viewers and for ourselves because we gotta figure out what to do.

JOE PAPA: Well, I-- and I would say it's always been a pleasure to have a chance to talk with you. And I'm looking forward to-- what I need to get done and importantly just be able to measure by that for the success for the future.

JIM CRAMER: And let's leave it like that. That's Joe Papa. He's the new chairman-CEO of Valeant Pharmaceuticals. He did make us a lot of money in Perrigo. Let's see what happens here. Mad Money's back after the break.

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