Cramer: Rise in Pill Abuse Means You Should Buy This Stock
For great stock picks, sometimes you need to look beyond the business section of a newspaper, Jim Cramer said Tuesday on CNBC’s “Mad Money.” “Sometimes, there will be a fabulous idea that’s hidden in plain sight and easy to spot, as long as you know how to connect the dots.”
Take today’s front-page story in The New York Times, for instance — “Rise in Pill Abuse Forces New Look at U.S. Drug Fight.” The Times reports that rising prescription drug abuse has rendered the war on drugs almost irrelevant, since most overdosing that takes place is tied to prescription drugs like painkillers. According to the article, more than 54 percent of overdose deaths since 2008 have involved a prescription drug — that’s more than all other illegal drugs combined.
But Cramer said there is a solution this problem, and it’s a drug called Vivitrol — made by small biopharma company Alkermes .
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So, what does this have to do with making money?
Cramer said Vivitrol is as close as you can get to a cure for people addicted to heroin and certain prescription painkillers like Morphine and Oxycontin. After getting clean, addicts can take a shot of Vivitrol once a month to prevent themselves from relapsing or getting addicted again. He said it effectively makes it impossible to “get high off [these drugs]” — a huge improvement over having to take the standard daily drug dose.
Roughly 1.6 million people in the U.S. are addicted to opioid-based (heroin and certain prescription pills) drugs, and roughly three-quarters of them will ultimately seek treatment. “That’s a massive market,” he said. He also said despite the $1,001 price tag per dose, the drug could actually help state governments avoid exorbitant costs when treating opioid addicts, especially in prison. The state of Maryland conducted a study that supports this notion. “This thing is a miracle,” Cramer said. “The best weapon we have in the modern-day war on drugs.”
But Alkermes actually gives you two ways to play the prescription drug abuse boom.
The company submitted a new drug application to the FDA earlier today for Zohydro, a long-acting opioid some experts fear could be even more addictive than the “current crop of painkillers.” Alkermes also specializes in figuring out better drug delivery mechanisms – like the monthly dose of Vivitrol. The firm made a similar move when it partnered up with Amylin Pharma to develop Bydureon, a diabetes drug that need only be taken once a week. Cramer figures this technology must be pretty valuable if Bristol-Myers paid $7 billion to acquire Amylin in June.
Now, Alkermes gets an 8 percent royalty on global Bydureon sales, and Cramer said the drug will likely get a major boost from Bristol-Myers’ sales force — which means more royalties flowing back to ALKS.
Products in the pipeline include upgraded versions of its two drugs Risperdal and Abilify — both popular and powerful anti-psychotic drugs. Alkermes trades at 17 times earnings with a 25 percent growth rate.
The bottom line: Don’t just focus on the business section of the newspaper — scour the front page. “Every now and then, there will be a fabulous idea hidden in plain sight, like this story about drug addiction on the front page of the New York Times that pretty much screams, ‘Buy Alkermes!’”
Read on for Wednesday's 4 Stocks to Watch
When this story was published, Cramer's charitable trust owned Bristol-Myers.
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