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Cramer: Valeant must go down for pharma to rally

Jim Cramer finds it difficult to overstate the contempt and anger that most executives feel about Valeant — the company that he considers to have singlehandedly created an entire bear market for drug stocks.

Only on rare days like Friday when Valeant actually rallied, is there a respite to the selling of the whole group.

"Every day that Valeant's awful business practices stay front and center in the public eye is another day that these guys know they are doomed to an era of lower profitability," the "Mad Money" host said.





Traders work on the floor of the New York Stock Exchange underneath a board showing the name of Valeant Pharmaceuticals shortly before the opening of the markets in New York October 22, 2015.
Lucas Jackson | Reuters
Traders work on the floor of the New York Stock Exchange underneath a board showing the name of Valeant Pharmaceuticals shortly before the opening of the markets in New York October 22, 2015.

The creator of Valeant, Michael Pearson, figured out that with the right class of investors who embraced his methods to create higher, tax-aided earnings per share, he could pretty much roll everyone in the game, Cramer said.

"It is an unpalatable situation. It is all that the drug execs can focus on. And it won't play out until Valeant is so small it doesn't matter and the election dynamic resolves itself," Cramer said.

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So, with a new quarter now beginning on Wall Street and Bernie Sanders still running longer than Cramer thought, Valeant still has the ability to cause mayhem for the stock market. The damage seems completely unchecked to Cramer, with only the occasional up day for Valeant providing any relief.

The problem is that Valeant won't go down without swinging, and as long as it remains on its feet, the drug group simply cannot advance for any sustained period of time.

Cramer considers this situation to be an unholy alliance, where there is no referee or group out there to police it to kick it out of the industry.

"Until Valeant settles, I think this bear market in pharma can't end and the money will simply continue flowing into other sectors," Cramer said.

Valeant did not immediately return CNBC calls for comment.

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