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Cramer reveals the biggest winners and losers from the JP Morgan Healthcare Conference

  • "Mad Money" host Jim Cramer listed the J.P. Morgan's Healthcare Conference's best and worst performers judging by the stock market's reactions.
  • Cramer said the biggest lesson learned was that investors must be cautious when it comes to speculating on smaller biotechnology stocks.

Of all the major conferences that kicked off 2018 — from the ICR confab to the tech-laden CES — the J.P. Morgan Healthcare Conference was the most important for CNBC's Jim Cramer.

"This meeting tends to make major waves in the health care stocks," the "Mad Money" host said. "The problem is the announcements from these pharma and biotech companies often read like they're written in hieroglyphics. It can be very difficult to understand this stuff without a medical degree or a PhD in chemistry."

So, to help investors make sense of what often proves to be a groundbreaking event, Cramer went through the biggest winners and losers from J.P. Morgan's San Francisco, California-based health care convention.

Winners

Coming in first in terms of stock performance was Atara Biotherapeutics, up 52 percent since the start of 2018. Most of its move came after the J.P. Morgan conference.

The cause? Atara, a small company that develops immunotherapy treatments for cancer and multiple sclerosis, announced that the FDA approved one of its multiple sclerosis drugs for a Phase 1 study.

Better yet, Atara has a treatment for the Epstein-Barr virus (which causes mononucleosis, or mono) in Phase 3 trials — one step away from an FDA review.

"Put it all together, though, and it feels like the investors are warming to speculative biotechs again, even with the tape showing signs of raggedness today," Cramer said on Tuesday.

Up 47 percent for the year, Alder Biopharmaceuticals was the conference's second-biggest winner. Another small, development-stage biotechnology player, Alder announced strong clinical trial outcomes for its top medication, a migraine prevention drug.

"I like the story that CEO Randall Schatzman told us last week," Cramer said. "But remember, Alder's still a very early-stage company and there are plenty of pitfalls remaining before FDA approval, including, by the way, the fact that some competitors are ahead of them in the process."

Other notable winners include Coherus Biosciences, a generic drugmaker with a 43 percent gain, and Illumina, a DNA-sequencing play up over 10 percent after the company introduced a new, low-cost sequencing machine.

(Cramer did caution investors about Coherus, which he saw as a commodity business with no patent protection.)

Losers

The J.P. Morgan Healthcare Conference's biggest loser by far was Axovant Sciences, a company working on treatments for Alzheimer's disease and dementia.

Cramer has watched Axovant's stock get totally decimated in recent months, the first wave of losses coming after the Phase 3 clinical trial for its lead drug missed the mark.

The second negative wave came after the same drug failed to reach its primary endpoint in studies for treating dementia; the third came after Axovant announced that it had wrongly released positive data about a separate treatment for hallucinations.

"That's how a stock goes from $5 to $2," Cramer said. "I think this is a powerful reminder of what happens when you buy a stock without doing the homework, especially when you're dealing with a overly promotional management team."

Tesaro, which makes cancer-related drugs, came in second among the losers, with a stock down more than 20 percent since the beginning of 2018.

Cramer attributed the decline to the fact that Tesaro recently had to change the label on one of its treatments for chemotherapy-induced nausea to include that one of its side effects was anaphylactic shock — a life-threatening allergic reaction.

Next up for the biggest losers was Clovis Oncology, another cancer treatment maker with a stock down big for no real reason, the "Mad Money" host said.

"There wasn't really anything particularly bad about the presentation," Cramer said. "In fact, Clovis had a lot of good things going on for it, especially when it comes to treating ovarian cancer and solid tumors, yet it can't seem to get any credit from Wall Street. That's intriguing."

Others

Shares of Incyte got hit hard after the conference, but the company didn't report any bad news. Cramer said the real problem was that health care giant Celgene is buying Incyte's competitor, Impact Biomedicines, and the budding rivalry pushed investors out of Incyte's stock.

Cramer was also keeping a hawk's eye on Allergan after a tough 2017 for the Botox maker. But even after the company gave Wall Street weaker-than-expected guidance, the stock still managed to rally.

"CEO Brent Saunders painted a very compelling longer-term vision of the company's future in his presentation. Suddenly, Allergan seems to be getting traction again," Cramer said. "We just need to hear something that gives investors a reason to buy the stock beyond the fact that it's cheap."

The stock of Intuitive Surgical, the biotech behind the innovative da Vinci surgical robot, is also surging after a positive earnings pre-announcement. Cramer said he would stick with that name.

Final thoughts

"Here's the bottom line: we got a lot of good news from the J.P. Morgan Healthcare Conference last week, but if this confab showed us one thing, it's that you need to be very careful when you speculate in small-cap biotech stocks, because the difference between the biggest winners and the biggest losers is enormous," the "Mad Money" host concluded.

WATCH: Cramer's conclusions from the JP Morgan Healthcare Conference

Disclosure: Cramer's charitable trust owns shares of Allergan.

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