Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday October 14.
Inhalable insulin could revolutionize the treatment of diabetes, but approval of drugs has been hindered by difficulties. Mannkind, for instance has had problems getting its product approved, although a new round is scheduled for December 29. Last January, when the FDA delayed approval, the stock was nearly cut in half from around $10 to $6 and $5. Analysts are concerned that Mannkind's drug, Afrezza, won't be approved this time, but Cramer thinks the news is so negative, it might be worth doing some homework to see if Mannkind might be a buy.
Alfred Mann said he has put $1 billion of his own money into developing the drug and has raised an additional $1.5 billion. He says there is more reason to be optimistic about Mannkind's inhalable insulin than Pfizer's (PFE) since MNKD's drug imitates the way the body produces insulin and does not produce side effects like very low blood sugar or weight gain. The company is financing by offering a convertible bond because it is the way that would be the least dilutive to the company's shares. Cramer thinks the prospects sound promising but he would exercise caution and do homework before buying Mannkind.
Cramer inducted a new CEO to his Wall of Shame: Constellation Energy's (CEG) Mayo Shattuck, who has an amazing track record of blunders. He turned down a $7.5 million federal grant to build a nuclear plant in Maryland because he thought the fee was too high. In 2008, the company almost ceased to function as an independent entity because of its faulty management and the stock plunged from $100 to $13. The company was also responsible for an accounting error that underestimated the company's credit liabilities if its credit rating were downgraded; though, it was the disclosure of an accounting error that underestimated the company’s liabilities if its credit rating were to be downgraded, which was “the last thing you wanted to hear if you were a shareholder at that moment in history,” Cramer said.
Constellation bungled a deal in which it was supposed to be taken over by Berkshire Hathaway (BRK.B), but still had to pay Warren Buffett $593 million. Believe it or not, some still believe that Constellation might be taken over, but Cramer doubts anyone would want to buy such a troubled company. Cramer says the company can't be owned until the CEO takes a permanent vacation.
Cramer thinks the biotech sector provides the best opportunity for finding good speculative opportunities. Given the fact that diabetes is a growing problem in the U.S. which is expected to grow by 10 million cases by 2020, Cramer dedicated Thursday's segment to finding the best way to play the need for a new diabetes drug. While Sanofi-Aventis (SNY) has been the leader in the treatment of diabetes, Cramer was on the lookout for a purer play.
He suggested looking to smaller, more specialized companies like Alkermes (ALKS) and Amylin Pharmaceuticals (AMLN) which are jointly working on Bydureon, a once-a-week injection to treat diabetes. The drug is a $2 billion opportunity, and the best way to play it is through Alkermes, which will not take on any financial burden if the drug is not successful, and also has an anti-addiction drug in the pipeline. Amylin has a lot more to lose if for some reason Bydureon is not a success.
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