Posted 6 Nov 2009
Cancer kills over a half million Americans a year. The disease has touched almost everyone, whether family, friend or someone else in our community who’s been diagnosed. But there are a number of companies on the frontlines of treatment, fighting to find a cure for or, in the very least, extend the lives of those who suffer from cancer.
As much as the work is noble, cancer drugs are big business. And the stocks of these firms, Cramer says, can be very attractive investment opportunities. Not only do they offer the potential for tremendous growth as new treatments are approved and multiple indications – industry jargon for a drug’s ability to treat more than one kind of cancer – are found, they’re also so-called safety stocks, meaning they work during the kinds of downturns we’ve seen over the past two years.
So who are the best? Cramer did the research and found eight stocks that lead the pack. Read on to get his top picks.
A smart acquisition strategy has made Bristol-Meyers, which has bought seven companies since October 2007, a big player in the cancer-treatment industry. Its purchase of Medarex in July added a key drug for metastic melanoma that’s in Phase III trials. The drug has possible multiple indications – industry jargon for its ability to treat more than one condition – for lung and prostate cancer.
But BMY also sells Erbitux for colorectal, head and neck cancer, Ixempra for breast cancer, Taxol for breast, lung and ovarian cancer, and Sprycel for Leukemia. Sprycel specifically represents a potentially great opportunity, Cramer said, as its sales jumped 40% year-over-year and it’s being tested for its viability in treating prostate and breast cancers.
Cramer also likes BMY’s 5.6% dividend yield. Read more about Bristol-Myers Squibb here
Cramer’s charitable trust owns Bristol-Myers Squibb.
Pfizer, too, used the M&A market to boost its stable of drugs. The company’s oncology division accounted for just 5% of 2008 sales, but the acquisition of Wyeth will change that. In fact, Cramer said, Pfizer is now “one of the most diversified health-care players out there.” The stock offers a 3.8% dividend yield as well.
What about treatments? Pfizer has 22 cancer drugs, the top performers being Aromasin for breast cancer, Camptoar for colorectal cancer and Sutent, a small molecule drug that inhibits the flow of blood to tumors. Cramer noted Sutent as Pfizer’s biggest opportunity, saying that last quarter’s sales came in above expectations and growth in the future could come from ongoing treatment of kidney, lung, liver and prostate cancer. The drug has suffered a few setbacks, but there are still six Phase III trials in Sutent that have yet to report, meaning this could be a “major blockbuster cancer drug” with multiple indications.
Read more about Cramer’s take on Pfizer here.
Celgene’s biggest drug, Revlimid, which pulled in $1.3 billion in sales in 2008, treats multiple myeloma, a cancer of the plasma cells in bone marrow, in patients who have already received one prior therapy and myelodysplastic syndromes, or MDS, another kind of blood cancer. But the indications may not end there. Revlimid is still being evaluated in a number of clinical trials as a treatment for other blood cancers as well.
The company sells other drugs as well – Thalomid for newly diagnosed multiple myeloma and Vidaza, a chemotherapy agent for treating MDS – and CELG is cheap. But Cramer doesn’t want investors buying yet. Better to wait until just before the annual American Society of Hematology meeting on Dec. 5, where Celgene is expected to present “some terrific Revlimid data.”
Get Cramer’s full analysis of Celgene right here.
Immunogen was a high-flying stock back in 2000, when the rest of the Nasdaq was soaring, but some disappointing clinical trials brought the stack back down to earth. Cramer thinks the IMGN might be ready again for takeoff, thanks to T-DM1, a breast-cancer drug in Phase II trials that the company is developing in partnership with Roche/Genetech.
Cramer called T-DM1 “a better version of Herceptin,” the $4 billion drug from Genetech that’s become the standard of care for treating breast cancer. What’s better, though, is that T-DM1 could work in cases where Herceptin doesn’t, and the former could replace the latter entirely. Phase II results for T-DM1 will be released on Dec. 12. If they’re good, Cramer said, “Immunogen will be up gigantically.”
Watch Cramer’s interview with Immunogen CEO and President Daniel Junius.
Allos Therepeutics plans to trade launch Folotyn, a drug for refractory peripheral T-cell lymphoma, to physicians at the American Society of Hematology on Dec. 5, Cramer said, and the meeting could be “a big catalyst” for the stock.
The company also is developing Folotyn for multiple indications, “the jackpot when it comes to cancer research,” including CTCL, a rare form of non-Hodgkins lymphoma and lung cancer. Additional data on the trials is due out later this year and in the first half of 2010.
Cramer called ALTH “a very cheap stock,” saying it “should go higher” once Fotolyn hits the commercial market in January.
Watch Cramer’s interview with Allos Therapeutics CEO Paul Berns.
Dendreon makes a great acquisition target for a company like Bristol-Myers Squibb or Merck, which is looking to build its oncology division. If the FDA approves Provenge, Dendreon’s prostate-cancer drug, which is in late-state development, the drug should reach the commercial market by mid-2010. Sales are expected to reach as reach as high as $730 million in 2011 and maybe more than $4 billion in 2020.
Provenge isn’t Dendreon’s only cancer franchise, but right now it’s the most important. So the stock almost lives and dies based on FDA’s blessing. DNDN is up 507% year-to-date thanks to the positive clinical-trial data released so far, Cramer said, and “it could go even higher” if the feds give it a thumbs-up.
Read more about Dendreon here.
Cramer said that Onyx Pharma is a potential takeover target as well, possibly by Bayer, its development partner for Nexavar. The drug, which is used to fight kidney and liver cancer, brought in $678 million in sales for 2008, and last quarter earned $229 million, which was up 27% year-over-year. Plus, Nexavar is being tested for other indications, namely in breast and thyroid cancer, so there’s the potential for even bigger profits down the line.
When Nexavar was approved for liver cancer in November 2007, Onyx’s share price hit a high of $60.02. But now it’s down to $26.57, just $4 above the 52-week low. The stock’s down 22% year-to-date, Cramer said, making it “pretty cheap.” He said ONXX works as a speculation play as well, though its recent better-than-expected quarter means it carries less risk than Dendreon.
Click here to read about a big Chinese catalyst for Onyx Pharma.
Continuing with the takeover theme, Cramer recommended Exelixis as his final play on the war against cancer. Larger pharmaceutical companies often buy their smaller partners, and Exelixis is working with a number of the industry’s biggest names: Bristol-Myers Squibb, GlaxoSmithKline, Roche/Genentech and Sanofi-Aventis.
The company’s potentially big drug, XL184, is a joint venture with Bristol-Myers. XL184 is intended to help stop tumor growth, but Exelixis is shooting for multiple indications, such as for medullary thyroid cancer and non-small-cell lung cancer, among others. A number of trials are under way.
Exelixis may have reported a better-than-expected quarter on Oct. 29, but this company isn’t yet profitable. Investors should keep that in mind if they plan to buy it. This is a highly speculative stock whose success will depend on XL184 and a couple of other drugs, as well as its M&A potential. But the fundamentals are sound, Cramer said, so EXEL is worth considering, for those with a healthy appetite for risk.
Click here for more about Exelixis.