Savient Pharmaceuticals: What Is Cramer Thinking?

At the end of last week, Wall Street stock guru James Cramer discovered Savient Pharmaceuticals Inc. (SVNT) and classified it his 'third speculative stock' for 2007.

Why? First, there is the experienced company management; second, its drug Oxandrin, an adjunctive therapy to combat weight loss resulting from chronic infection, extensive surgery and severe trauma (Cramer, as it happens got it wrong, since Savient is developing a generic version of Oxandrin); and third, Savient’s announcement of Phase III clinical trials for its flagship product, Puricase, for the treatment of gout. “If the company completes the Phase III trials, the stock will triple,” Cramer predicted. Market Touch claims the gains in the stock were due to a company restructuring. Really? Savient has soared 225% since the beginning of 2006.

It’s interesting to note that according to the four analysts covering Savient, the company’s revenue for 2007 will fall 50% to $37 million from $71 million in 2006 (apparently due to the sales of its U.K. subsidiary). The company is likely to post a loss per share of $0.52 in 2007. So what triggered all the excitement? If the analysts are correct, I have no idea why Cramer is so enthusiastic. I too was enthusiastic about Savient a year ago, when the price was $4, not $13. So Cramer’s predictions aside, investors would do well to stop and think, since these days, any adverse changes for investors come a lot quicker and are much sharper.

Savient Pharmaceuticals 1-year chart:

Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007. Republished on Seeking Alpha with full permission.