Hank McKinnell, Pfizer Chairman and CEO

This is a partial transcript from Your World with Neil Cavuto, July 15, 2002, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: You'd think that a $52 billion drug industry merger would at least tempt some buying today. You'd be wrong. Despite Pfizer's stunning bid for rival Pharmacia, the markets continued reeling before attempting a comeback. Not even Pfizer's anti-depressant Zoloft could have stemmed the blue mood. With us now, the man who might be wondering why he did this deal today, Pfizer CEO Hank McKinnell.

Hank, good to have you.

HENRY MCKINNELL, CHMN. & CEO, PFIZER: Hello, Neil, good to be with you.

CAVUTO: Well, I will give you this, you're gutsy to try this in a market like this. Did it give you any pause going into this?

MCKINNELL: Well, the market actually helped us. Over the last 30, 60 or 90-day period, the two stocks have tracked at almost exactly the same exchange ratio. So we had the advantage of being able to agree a ratio which applied to Friday's closing, and to periods before that.

CAVUTO: Still, you know, when you look at the appetite for mergers, I know stocks are depressed enough to entertain doing deals like this, but there are all the litigation issues, there's the Federal oversight issue, there is the lousy market issue, there is the iffy economy issue. You apparently said, damn all of that.

MCKINNELL: We see this was a great buying opportunity. There are enormous financial benefits in this to our shareholders and Pharmacia shareholders. We think it's a great strategic move in advance of changes we expect in this marketplace over the next decade.

CAVUTO: Now, who has to nod off on this in order to get approval by — as you said — the end of the year?

MCKINNELL: We need antitrust review, both in the United States and Europe. We believe the antitrust review in the United States will be by Federal Trade Commission. But we see no obstacle to those approvals, and expect approval by end of the year.

CAVUTO: What is your view of the way the market acted today? Not just in terms of your two stocks, but in general?

MCKINNELL: Manic-depressive would be our diagnosis. We expected the Pfizer share price to decline today, by maybe $2, as arbitrageurs bought Pharmacia and sold or shorted Pfizer. That was to be expected, and that will be worked through the system within a day or two. But today was a wild day, no question about it.

CAVUTO: You would think that there would be percolating activity in Merck or Bristol-Myers Squibb. Those two companies, of course, have some accounting issues and irregularities that they're looking at, but not near interest would you have assumed. Is it this litigation issue? Is it the cooked books issue? And maybe people saying, we are just backing off?

MCKINNELL: No, I think there will be further consolidation in this industry in response to demands by payers for lower prices, efforts within the Senate this week to reduce patent term, for example. But it's very difficult to find a combination that makes as much sense as Pfizer and Pharmacia. We have very little antitrust overlap and we have worked together for the past two years.

CAVUTO: Let me get your sense of the market environment. I mean, we technically came back, as you know, Hank, from better than 440-point downdraft. We erased a large chunk of that today. Did we go through our panic today and it's off to races from here?

MCKINNELL: I don't know. I'm not an expert on day-to-day stock market movements. But one thing I do know is that historically, corporate profits have lagged economic recovery. Pretty clearly, we're coming out of — if not a recession — a slow period. I would expect that in the second half of the year, next year, some pretty good news on the corporate profit front.

CAVUTO: All right, Hank McKinnell, always a pleasure, congratulations again.

MCKINNELL: Thank you, Neil.

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