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Back To Biotech: Risk & Reward

In the 1990 downturn, biotech was the best place to be. And Amgen was the best of the best in biotech, Cramer said, with the highest risk and highest growth of the group. Today, Amgen’s stand-in is Onyx Pharmaceuticals.

Onyx’s big drug, Nexavar, has been approved to treat a common form of kidney cancer. Nexavar, like Celgen’s Revlimid and Genentech’s Avastin, is benefiting from label expansion as its being used off-label to treat liver cancer. That was a large part of why Onyx’s last quarter – where the Street expected a loss of 21 cents per share and it beat by a penny – was so phenomenal, Cramer said.

The company is expected to get approval for Naxavar to treat liver cancer on-label soon, and the company is also starting trials using the drug on solid tumors as well as on types of lung cancer. That should add up to enormous growth for Onyx, Cramer said. Possibly even stronger than the growth it delivered last quarter.

Onyx’s drug is effective and in demand. But the stock is riskier than Celgene or Genentech because it isn’t as big, as well established, or as profitable. The bottom line is that this market is making it clear that every portfolio should have a high-growth biotech stock, one that would perform like Amgen did in 1990. Onyx is the closest match, according to Cramer.

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