Cramer: Future of Cancer Drugs
The Mad Money host has spent the past two weeks attempting to identify companies that may be on the cutting edge of groundbreaking new treatments for a slew of ailments.
"When drug companies innovate, their stocks tend to perform fabulously," said Jim Cramer on Thursday's broadcast.
However, no disease is more feared or more frightening than cancer. And companies that makes drugs that can successfully battle or even reverse cancer are likely to see big profits and equally big gains in share price.
Therefore, Cramer thought it was prudent to take a look at three companies that may represent the future of anti-cancer drugs.
Cramer said Immunogen develops a unique kind of cancer treatments – something called targeted antibody payload technology.
"Basically, Immunogen's drugs use antibodies to hunt down cancer cells—like a guided missile—and then they hit the cancer with a highly-toxic payload that's anywhere from a hundred to a thousand times more potent than traditional chemotherapy," Cramer said.
The company achieved a milestone back in February when the FDA approved Kadcyl, a breast cancer drug that has the potential to be a major blockbuster.
"It has the potential to generate $6.7 billion in peak sales by 2020 if it gets all the additional approvals needed," said Cramer.
However, this drug was developed in partnership with Roche, and that deal cuts into Immunogen's profits. But, perhaps more important, Cramer said the FDA approval validates Immunogen's technology.
"That's important because this company has a near-term pipeline full of drugs that it actually owns outright, unlike Kadcyla. They have a small cell lung cancer treatment that we should get phase 2 data on in the second half of the year—potentially a billion dollar opportunity."
Also Cramer thinks the downstream pipeline looks promising, too. "Immunogen has some early stage drugs: one for lung and ovarian cancer, one for Lymphoma, one for head and neck cancer, of course, all of these will remain in trials for years before they're ready to be submitted to the FDA."
Seattle Genetics uses antibodies to selectively target cancer cells. "Think of these drugs as smart-bombs programmed to detonate when they hit a tumor," said Cramer.
Right now Wall Street knows Seattle Genetics as the company behind Adcetris, a drug used in the treatment of lymphoma.
"Back in 2011 Seattle Genetics received FDA approval for Adcetris, however, it's only used as a second-line therapy," Cramer said
That, however, could soon change. Cramer said the company has 20 clinical trials underway to test the drug for additional indications; 4 of which are late-stages.
"Just looking at the two types of lymphoma the drug is approved for right now, it could do $600 million of peak sales in the U.S," Cramer said.
Meanwhile, the company has six other internal drug candidates either in or approaching clinical trials, and it has a host of partnerships with larger players to develop antibody based cancer drugs. Cramer said all of these could be potential catalysts in the future.
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Jim Cramer said that Onyx is known for the drug Nexavar, which is used to treat liver and kidney cancer. "It is a remarkable drug because these cancers have stymied doctors for years," he said.
In addition to the drug's current success, it may have other uses too. "It's also being studied for thyroid cancer and breast cancer," said Cramer. To provide perspective on the total profit potential, it's already doing a billion dollars in sales globally, Cramer said.
"And in September the FDA approved Stivarga, a colorectal cancer drug that Onyx developed in partnership with Bayer—this could be a billion dollar drug, and Onyx gets a 20% royalty," said Cramer.
Also the Mad Money host said to keep an eye on an Onyx treatment for multiple myeloma. "The FDA approved it last July and it could potentially be worth $2.3 billion in sales by 2018," he said.
In addition, Cramer said they're developing a breast cancer drug with Pfizer that's in phase 3 trials. "This could ultimately generate peak sales of $5 billion, and Onyx gets an 8% cut, which comes to $400 million."
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