Mad Money

Cramer’s alternative medicine for biotech blues


If you're intrigued by opportunities in biotech but reluctant to make a bet on an individual drug company, Jim Cramer says there is an alternative.

And it doesn't involve an ETF.

It's Quintiles, a major provider of biopharmaceutical outsourcing services.

Justin Horrocks | E+ | Getty Images

"I think of Quintiles as an arms supplier to the entire pharmaceutical industry," Cramer said, as he explained how Quintiles fits into the biotech landscape.

Although the business is somewhat complex, Quintiles is essentially a firm to which pharma companies outsource their clinical trial work.

Because Quintiles has a large number of clients and conducts business in approximately 100 countries, the financial risk posed by a single drug not getting to market is significantly reduced, at least as compared to the impact similar events would have on the stock of the manufacturer.

In fact, looking at how widespread the business has become, Quintiles has helped develop or commercialize all of the top 50 best selling drugs on the market. That's effectively built in diversification.

And Cramer said there's more to like.

"Not only is Quintiles the number one player in the space, but they're also the top dog when it comes to running late-stage clinical trials, where pharma and biotech companies spend the lion's share of their research and development budgets," Cramer said.

On top of that, clients aren't limited to drug companies. "We've got a contract with the NFL. We're looking at injury data and making sure valid conclusions are being drawn based on the data that's being put together," explained CEO Tom Pike on "Mad Money."

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Cramer believes confirm his enthusiasm.

"Four weeks ago, and the company delivered a spectacular 13-cent earnings beat off of a 55-cent basis, on higher than expected revenues that rose 8.4 percent year over year and very strong gross margins," Cramer said.

And looking forward, it appears business is booming.

"Quintiles' book-to-bill ratio came in a 1.27, meaning they literally have more business than they can handle, including a $10 billion plus backlog, hence why the company raised its full-year guidance," Cramer said.

All told, Cramer thinks Quintilles may offer investors a viable way to play biotech but avoid what he calls, 'FDA roulette.'

Although the stock has advanced 8 percent in only a month, Cramer said, "I think it could have more room to run. Drug makers are looking to outsource clinical development as a way to cut costs. That trend plays right into Qunitiles,"

Call Cramer: 1-800-743-CNBC

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