GO
Loading...

Worst House, Best Neighborhood

Wednesday, 13 Aug 2008 | 11:09 PM ET

Cramer’s so confident that biotech will work in this environment that he said together even a laggard in the group is worth buying.

Investing in Biotech
An outlook on biotech stocks, with Mad Money host Jim Cramer.

And that’s just was Vertex Pharmaceuticals is. While the Biotech HOLDRs, the biotech index, is up almost 18% since July first, Vertex dropped 16%. But Cramer defended the stock today, claiming Wall Street misread some recent study data and took VRTX down unnecessarily.

The company’s Teleprevir drug, a treatment for chronic hepatitis C currently in Phase III trials, took a hit when Schering-Plough’s rival drug, testing in Phase II, reported better results. At least that’s what it seemed like at first.

As Cramer pointed out, the two tests weren’t a true one-to-one comparison. The test designs were different, and Schering had fewer test subjects and lower drop rates. Also, Vertex’s drug seemed to have less severe side effects. And Teleprevir works on patients with treatment-resistant hepatitis C, while Schering’s drug does not. That means Vertex had virtually exclusive access to the 300,000 Americans who fit that description. And, on top of all this, Teleprevir is much closer to market than Schering’s drug. In the U.S. alone, the expected sales top out at $1.2 billion.

Vertex is cheap with a promising outlook, both from its cystic fibrosis pipeline and the hep C drug. This alone should attract most big-money managers. But for the doubters, Cramer mentioned a number of upcoming catalysts – two new studies this quarter and a key conference at the end of October – that should move the stock.




Jim's charitable trust owns Schering-Plough.

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

  Price   Change %Change
BBH
---
VRTX
---

Contact Mad Money

  • Showtimes

    Monday - Friday 6p ET
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.