Buying Big Pharma - If You Must

There are only a few big pharma stocks Cramer would recommend, especially with all the competition from generics these days.

Roche actually has the least amount of exposure to these cheaper alternatives, but Cramer doesn't want to touch the pink sheets. The companies that occupy second and third place are definite buys, though, as far as Cramer’s concerned: Wyeth and Novartis.

Wyeth, just like most of the other companies in big pharma, is losing exclusivity as drugs come off patent and generics and rivals eat away at market share. But unlike other companies in big pharma, Wyeth has a full pipeline to keep the business growing.

There’s an Alzheimer’s drug in Phase III development that could be worth $5 billion a year. An anti-depressant could be approved in the third quarter this year. Sales of current drugs Prevnar and Enbrel are strong and growing. Wyeth even has a strong women’s health franchise with Primarin, which is used for menopause.

The real winner, though, is Novartis. This company has good patent protection and a strong pipeline. Diovan, a hypertension drug, is the leader in an $18 billion market. A new hypertension treatment called Tekturna is already taking 5% of new treatment starts and could hit $1.5 billion in sales within the next two to three years.

Questions? Comments?