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Cramer: Big Pharma Is Back

Big phama is back, Cramer announced on Wednesday’s “Mad Money.”

For some time, pharmaceutical stocks were left for dead because the major drug companies are losing patent protection on their largest products. By 2014, $90 billion of branded drugs will go generic. Big pharma stocks are turning around, though, because the industry is undergoing a long-term realignment.

“Rather than developing more drugs for primary care conditions that were already well treated, they started working on specialty drugs—the kind you get from a specialist like a cardiologist or a neurologist or an oncologist—for diseases that were poorly treated, with few if any medications already on the market,” Cramer explained. “The real news right now isn’t about old drugs that are going generic, it’s all about new drugs that could hit the market over the next several years and start turning things around for big pharma.“

To play this turnaround, Cramer this week recommended Merck , Bristol-Myers and Pfizer . On Thursday, he highlighted Johnson & Johnson .

From recent product recalls to questionable management, Cramer admitted Johnson & Johnson faces many challenges. But its pharmaceutical business is much strong than most people realize, he continued. Its patent expirations are already behind it.

“Going forward, Johnson & Johnson’s newly launched products combined with their pipeline of drugs in late stage development could ultimately add as much as $6 billion to the company’s worldwide sales,” Cramer noted. “That’s enough to move the needle even for a gigantic healthcare behemoth like JNJ. They’re not relying on one particular blockbuster drug, but rather a whole bunch of smaller ones.”

Johnson & Johnson also pays a 3.5 percent dividend yield and has consistently raised its dividend for 49 years.

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