Filed under: Deals, Market matters, Anheuser-Busch Cos (BUD), Research in Motion (RIMM), Genentech Inc (DNA), Amgen Inc (AMGN), Gilead Sciences (GILD), Stocks to Purchase, Cramer on BloggingStocks
TheStreet.com’s Jim Cramer says the biotechs look sweet in a bank-led slowdown.
Thank you, New York Times. Remember just a couple of weeks ago, when The New York Times wrote about how Genentech’s (NYSE: DNA) (Cramer’s Take) Avastin was too costly and the stock got cracked down to $77? I know Roche did. I bet that was the last draw. The dramatic decline in the dollar plus a sentiment that has spawned a thousand articles — that life-saving drugs cost too much — gave the Swiss giant a opportunity to bolster its own anemic pipeline by buying what might be the greatest wonder drug of all time in its $43 billion bid, no doubt the beginning price for what will ultimately be a deal close to $100 a share. (I pushed DNA hard here and on “Mad Money” because I’ve been a big believer in Avastin and I’m confident that people will pay anything — or family members will pay anything — for the hope of three or four months or more of life, or the chance of beating cancer altogether.)
I don’t even know where to begin about the positives of this deal. First, it confirms the general trend: the dollar is so weak that it is worth buying anything that’s name-brand if you are from Europe, including Anheuser-Busch (NYSE: BUD) (Cramer’s Take), a total creature of the weak dollar.
It confirms a second trend that the biotechs are the ideal buys when it comes to a bank-led slowdown. Just like in 1990, the biotechs — then led by Amgen (NASDAQ: AMGN) (Cramer’s Take) — produced spectacular results as their earnings shined in the face a collapse in the financials. I purchased Gilead (NASDAQ: GILD) (Cramer’s Take) on Friday for Action Alerts PLUS with the trashing it endured because it spent too much — consider it the Research In Motion (NASDAQ: RIMM) (Cramer’s Take) of the group. Amgen, coincidentally, has been rallying on a better reimbursement environment from the new Medicare bill, an adjunct to DaVita’s (NYSE: DVA) (Cramer’s Take) boost. Don’t forget that the whole group is running, including Biogen (NASDAQ: BIIB) (Cramer’s Take), as the B section of the Journal shows, and Cephalon (NASDAQ: CEPH) (Cramer’s Take), which seems like nothing but net lately.
Finally, there’s the sentiment issue. Each time the press has hit something during this abominable era, it has struck pay dirt. The negativity surrounding DNA was so great that even when it reported better-than-expected earnings, the stock took a hit initially until people realized that Avastin really was growing again. The group is hot, it makes sense, and it should be examined closely as a continual source of gains as we worry about sagging banks and reduced earnings from one of the largest sectors in the market (finance, health care, tech, oil really define this market now).
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RELATED LINKS:
Roche Bids for Rest of Genentech
Feuerstein’s Biotech-Stock Mailbag: Synta
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com’s sites and serves as an adviser to the company’s CEO. At the time of publication, Cramer was long Gilead Sciences.
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