The company makes a lot more money selling generic drugs than they do from selling high-priced branded ones. "So when a bunch of branded drugs go off patent, the margins at Catamaran should soar," said Cramer.
And at the moment, we're right smack in the middle of a huge wave of patent expirations for generic drugs that should last through 2014, with tens of billions worth of branded pharmaceuticals going generic each year.
Wait there's more - also, now that Catamaran is much bigger it can achieve greater economies of scale.
Plus, Catamaran can grab market share.
As Express Scripts digests its acquisition with former rival Medco, a number of Medco clients are expected to leave, and Catamaran has a good chance of poaching some of them.
Those are all the positive catalysts – unfortunately there are a few negative catalysts too.
"That has to do with HealthSpring, Catamaran's largest client. The company's contract with HealthSpring will run until 2014, but we'll find out whether or not it's being renewed in the first quarter of next year."
And according to Cramer there's some reason to worry it might not be renewed.
HealthSpring was acquired
by Cigna earlier this year. Now, HealthSpring accounts for about 10% of Catamaran's earnings, so this contract is a really big deal."
The risk is that Cigna will decide to drop the contract entirely.
"If they cancel, Catamaran will get paid for the balance of the contract, but they'll ultimately have to replace the lost business and the stock could get crushed."
What's the bottom line?
"I still like Catamaran, as a fast growing pharmacy benefit manager but unfortunately, the risk from Cigna means that the stock is speculative. I say you can buy a small position in Catamaran on a pullback, but hold off on buying a lot until we find out about the Cigna contract sometime in the first quarter."
"And if you bought it on my recommendation, you now have a 75% gain, and I think you're simply being greedy if you don't ring the register on some of your position. Some, but not all."