For the most part, sellers were focused on recent earnings in which Merck reported lower-than-expected first-quarter sales due to generic competition. In addition, the company cut its profit forecast for the full year.
"The quarter was widely panned," Cramer admitted. But those sellers probably didn't understand the pipeline. Had they, he doesn't believe they would have sold.
"Merck currently has at least 35 drugs in the pipe and many of these could be very profitable in the 'out years.'" Cramer explained. They range from from treatments for everything from Alzheimer's to asthma. (Click here to see the Merck pipeline.)
Cramer thinks as one or more of these drugs starts to show promise, the Street will begin to factor in the earnings potential – and the earnings potential could be huge. If and when that happens shares could take off.
In fact, Cramer thinks management at Merck is anticipating developments outlined above and they're currently trying to get ahead of the move.
"I believe that's why Merck's has committed to buying $15 billion of its stock now, because management knows that it has some huge drugs that will be terrific in the future," Cramer said.
In other words, they know, pipeline is what matters, he said.