We transcribed Jim Cramer’s Mad Money on Aug 2nd. Cramer talked about his favorite growth stocks in the first part. He interviewed PPG’s CEO Chuck Bunch in the second part. Cramer analyzed Mosaic’s technicals in the third part of his show. Finally we covered Jim Cramer’s Lightning Round. At the end of his show Cramer interviewed Alkermes’s Richard Pops. Here is the transcript of the interview:
in this tough market, we’re looking for stocks that can work regardless of the ugliness in Europe or the lack of hiring in the united states, the budget wrangling. And that’s why we like companies that are transforming themselves. Changing their stripes to become more profitable entities. Taking their destiny into their own control. take alkermes A-L-K-S, this is a pharmaceutical company that uses it’s technology to improve existing drugs or make it less burdensome for patients to take them. Like vivitrol, the successful treatment for Opioid addiction — I didn’t pronounce it right last time getting it this time. Or, Bydureon, the potentially game changing Diabetes treatment. Talk about an epidemic. Alkermes has been a wild trader over the last couple of years. Sometimes selling off severely, because its products live and die at the whim of the FDA.
But, you know what? This one is like a vampire; this stock keeps coming back, and why it does is because the company has a powerful long-term story. A story that recently become a whole lot more compelling. In May, they announced that it would require Elon drug technologies, called EDT. For $960 million it’s a huge transformational deal that should turn alkermes from a money-losing entity into a profitable one within a couple of years. Yes, it’s like an off/on switch. They get the royalties from EDTs 25 commercial products in addition to an expanded pipeline that increases the company’s scale and versification. Last night this company reported an excellent quarter. I think this has the potential to be a great opportunity. Especially, the stocks sold off nicely today with the rest of the market. The market brings down everything good to start. So, let’s talk with Richard pops, Chairman and CEO of Alkermes. Find out more about where the Company is going and how the Quarter was. Rick Pops, welcome back to mad money.
Rick Pops: Good to be here.
Jim: Good to see you sir. Good to see you. Alright, last time we talked about your stock, we were really worried, there was something we thought was gonna go — the Diabetes drug your way for the FDA. Stock got hit, we said it’s going to be fine — and the stock is above. What is it about your model that makes it so the FDA can’t knock you out?
Rick Pops: I mean, we take a licking and keep on ticking. Don’t we?
Jim: Yes, you do it’s a real Timex model.
Rick Pops: it’s amazing. The secret to what we’ve done is, we’ve never really believed that any single drug is enough to take you to the finish line. So we have been building a company. And it proves the adage, you can manage these companies. You can indeed build a biotech company the same way you build a shoe company. As long as you’re not waiting in your office everyday for someone in a white coat to say Eureka, we have a company.
Jim: But — and a lot of biotech companies try to go the one drug route and hope after they hit that one drug, maybe they can do another one.
Rick Pops: And God bless them. When they get it, it’s brilliant, but most of them fail. So, it’s a sucker bet actually.
Jim: But you’re like the only non-binary mid-cap biotech I know. In other words, if something doesn’t go right, you don’t go to zero.
Rick Pops: That’s right. That’s right.
Jim: And this acquisition even made it more of a diversification effort.
Rick Pops: Well, here we found ourselves in a time win. For diversified cash flow, you could actually borrow a lot of money. There was a lot of liquidity in the system. so we have an attractive currency to acquire with, with our stock, and we could lever up to buy this company, which as you said, diversifies the revenue streams and gives us new pipeline too.
Jim: But, meanwhile the drug that we liked so much was the extended version of the diabetes drug, gets approved in Europe, and it may be just a matter of time before we hear — you know, obviously, you don’t know either way, but it seems encouraging, they told you to come back. It looks like you came back and the information’s better than the FDA might have thought.
Rick Pops: That’s right. They put up one major hurdle for us. They said, run this one study to look at the affect on the heart. That study took about six or eight months to get done. We announced the data in June. The data was clean. So we’ve re-submitted now and we should be back in the game.
Jim: I — you know, no promises. But, I know that it looks real good.
Rick Pops: It does. But, you know, it’s never a bad idea to wait to buy a biotech company until they get the FDA —
Jim: I know. I know. I’ve learned my lesson! Now. I want to talk about how you take on topics and issues of our day that no one else seems to want to. You try to tackle alcoholism. You try to tackle addiction to opiates. These are issues that I — that everybody knows there’s a problem. Where is the government as a helper? Or, do they hurt you? Because we are trying to shy away from companies that need the government to make their quarters and try to find companies where the government needs you to make its quarter.
Rick Pops: that’s right. And so the basic thesis is — and what we do — and what I think all the top biotech companies do is, we go where they ain’t. If Pharma is working in an area, they probably got a lot of resources working on and they tend to be working in areas where they know they can make money.
Jim: Right. Like in other words they know they can make money in cholesterol, they know they can make money in heart, blood pressure, and stroke. These are boom, boom, boom. That’s their checklist.
Rick Pops: Exactly. And, that’s smart business perhaps but, we’re looking for unmet medical needs. So we approach it from the patient’s point of view. Aha, that patient isn’t being well treated. Can we come up with a scientific solution and make a drug that helps the patient.
Jim: now, some of the longer-use drugs, let’s call it, are very applicable. Someone has schizophrenia, someone’s bipolar, they may feel cured every single day. What is your longer-lasting thesis? How does that help those people?
Rick Pops: For certain diseases and I think type 2 diabetes, schizophrenia, two perfect examples, alcoholism too. Part of the disease is the inability or the unwillingness every day to confront that you have that disease?
Jim: Inability because, mentally or unwilling because, it’s socially? You don’t want people to know?
Rick Pops: n schizophrenia, it can literally just be part of the condition itself.
Jim: Right.
Rick Pops: A distorted view of reality. So if you can give somebody an injection, for example, that covers them with therapeutic levels of their drug for a month at a time, they have a safety net. On day 6, day 12, day 22, they don’t have to worry about taking their pill everyday.
Jim: Right. Now, one last thing because, I just thought it’s real interesting. Everyone’s worried about the Government. Prison. Your prison study, what does it show for your drugs?
Rick Pops: So we have a drug that given once a month for the treatment of Opioid dependence. This is Oxycodone, Vicodin these bad addictive…
Jim: — I know people in prison for this because; they had to break into medical facilities to get this drug because they were addicted.
Rick Pops: That’s exactly right. Unlike drinking — you can drink a lot your whole life but, if you get addicted to opioids you need more and more. S1o you end up ultimately in the criminal justice system. So Vivitrol is a drug we’re testing in the criminal justice system to reduce recidivism, reduce the cost–
Jim: And it’s working? The studies crystal clear, isn’t it?
Rick Pops: Well, the data so far is incredibly encouraging. Yes.
Jim: So that would be an example where if the government wants to spend less money on prisons and storing people that should be out, they should be relying on ALKS?
Rick Pops: That’s our long-term goal.
Jim: Alright. You guys are hitting them where they ain’t. I like that. [Inaudible 40:16] strategy.
Okay. That’s Richard Pops, Chairman, President and CEO of Alkermes. Go look. We recommend this stock lower, then it got hammered. It’s well above because they have resilience. we’re looking for resilience in this market right? A-L-K-S, how you spell resilience. Stay with Cramer.
Jim: The old Saint Mary’s exploration hit it out of the park today, proving astounding numbers. Except, the Company changed its name. People are scrambling to find out who the heck is the SM Energy that up nearly 10% on such a bad day. I’ll tell you who it is. It’s a Company that has a ton of Acres in the Eagle Ford Shale in Texas. Perhaps the biggest discovery in 40 years. Yep, since Crudo Bay and, SM Energy is just one of several companies that are making us more energy independent by the hour. The finds are so good in the region that the company increased their exploration budget by an astounding $295 million. Taking it up to $795 Billion — that is amazing — how could they not? The production guidance is off the charts.
SM Energy is another one of these companies with a market cap that’s now simply out of whack and out of touch with the amount of oil it’s sitting on in Eagle Ford. SM has always had good exposure out west, but the oil’s so abundant, in this Texas based Eagle Ford that it’s overshadowing the other leaseholds. SM’s part of a wave of good companies that are becoming too cheap by the hour, because they have much more in reserve than anyone thought, courtesy of the Eagle Ford shale. Who else is in that position? Chesapeake, Cariso, EOG, and Pioneer natural resources. These got hurt today, that last one’s down four points. A lot of people continue to underestimate these companies, which is what’s occurring obviously when you have a stock fly up seven points on a day like today. What makes it so hard for people to understand that we have a huge amount of energy trapped beneath our ground, ready for the drilling? I blame it on perception, the perception that it takes years between the time that we start drilling and the moment when we finally find oil. I think there’s a belief that anyone who even mentions the idea of breaking the back of OPEC is regarded as a dreamer. Hey, come’ on technology has allowed us to drill and hit pretty much very, very fast and, we now definitely have enough oil and gas to dent demand to the point here OPEC would have to cut its prices. When I see results like the ones we got from SM I say we aren’t dreaming about finding loads of oil or busting OPEC. The possibility’s here, we gotta have the will though. That’s why the Stock was amongst today’s biggest gainers and, they deserved every penny. And, that’s why if it cools off, SM is still a buy. Stick with Cramer.
Sell Tech, sell Healthcare, and Sell Banks. Circle the wagons around a couple of groups. Still on Gold, own higher yields, utilities like Con Ed, own some industrials that are growth Industrials with good dividends. Hey, put some money oversees, own a Canadian bank, or a Vodafone. And, then finally, something highly speculative. I still condone Apple, Chipotle, Netflix even, Amazon.
I like to say there’s always more market somewhere, I promise to try to find it just for you right here on Mad Money. I’m Jim Cramer. See you tomorrow.