This is a partial transcript from "Your World with Neil Cavuto," October 20, 2005, that was edited for clarity.
NEIL CAVUTO, HOST: Pharmaceutical giant Roche (search) didn't waste any time responding to New York Senator Chuck Schumer's threat, agreeing today to increase the supply of its avian flu drug and promising to share the vaccine technology with four other drug companies.
And just today, some disappointing earnings news that lopped off about $15 billion in market value in a matter of hours.
Hank, good to have you.
DR. HANK MCKINNELL, CHAIRMAN & CEO, PFIZER: Thank you, Neil. Good to be with you.
CAVUTO: Sorry to hit you with so much, Hank.
First off, on this Roche concession, or whatever you want to call it, what do you make of that?
MCKINNELL: Well, I'm having difficulty understanding exactly what it is Roche agreed with.
They have said they're capacity-limited in the production of Tamiflu (search). But the capacity they're talking about is not filling capsules with white powder. Lots of people can do that, which is what the generic companies do.
The capacity that's limiting is the production of the active ingredient. And that's not what generic companies do. I think there is an opportunity here for broader cooperation to increase the supply of the active ingredient, which can then be turned into capsules. But I don't think it's with generic companies.
CAVUTO: Do you feel any angst that a senator effectively strong-armed a company?
MCKINNELL: Well, there's two issues here, I think, Neil.
One is, in the event of a national emergency or a pandemic, I think every pharmaceutical company needs to be willing to partner with government to produce the essential drugs that are needed to deal with that pandemic. That's exactly what the pharmaceutical industry is doing in sub-Saharan Africa.
On the other hand, while I'm certainly willing to be a good partner with government, I'm not willing to have other companies expropriate our technology for sale at a profit. That's not what they should be about.
CAVUTO: So, you think a dangerous precedent could have been set today?
MCKINNELL: I'm not sure the precedent was set today, because it is not entirely clear what has been agreed here or how the generic companies might be able to help.
MCKINNELL: It's just unclear what Roche has agreed to here.
CAVUTO: Let's talk a little bit about you, not you single-handedly responsible for a big fall in the Dow today, 133 points, but Pfizer in the tumult was a big part of it, surprise, how bad your earnings were. What happened?
MCKINNELL: Well, we had a mixed announcement this quarter. Our quarterly earnings were actually very good. We were 3 cents over expectations and, in fact, ahead of our own expectations.
CAVUTO: So, what happened?
MCKINNELL: The part of the announcement that attracted the attention is, we were reducing expectations for this year. We did have a very soft third quarter.
And we have withdrawn guidance for 2006 and 2007, primarily because we are entering into our annual planning cycle, and all of the changes that have occurred during the year, including a very slow third quarter — and we don't know if that's temporary or longer term — and the success of new products and new products we will be launching next year, that all needs to be brought together into a new forecast. And we said, we would share that with analysts early next year.
CAVUTO: But is the problem with, you know, drugs like Neurontin and Celebrex (search) that are coming kind of off patent, is that what's hurting you, all of a sudden, that is the problem?
MCKINNELL: Well, that's what's hurting the near term.
But loss of exclusively is an unusual feature of our business.
MCKINNELL: We literally know 30 years before the date certain at which we are going to lose that patent exclusivity. So, we have been planning for more than a decade for this period.
What I think is being underappreciated is the success we also announced, not only with growth of our in-line products, but the new introduction of new products, three during the third quarter alone, and the progress we are making on development and regulatory approval of a whole slew of new products.
So, I'm quite pleased that we are on track to weather what is a very difficult period.
CAVUTO: So, were you troubled by the way the market responded to that?
MCKINNELL: Oh. Markets overreact, as you know.
MCKINNELL: And, if they overreacted on the down side, hopefully, that will come back over the next weeks and months.
CAVUTO: All right, thank you very much, Dr. Hank McKinnell.
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