Ailing Drug Stocks Could Get Well Soon

The desire to show no losers this quarter is decking the pharmaceutical and tech sectors. I don't have a good call on the techies and actually agree with the wholesale dumping of stocks like Garmin (GRMN - commentary - Cramer's Take) and Texas Instruments (TXN - commentary - Cramer's Take), even as I marvel that EMC (EMC - commentary - Cramer's Take) is ridiculously low when you consider the VMWare (VMW - commentary - Cramer's Take) stake -- which no one is considering.

But the drug stocks? You have a high-yielding GlaxoSmithKline (GSK - commentary - Cramer's Take) that is truly in the early stages, I believe, of a recovery. You have Eli Lilly (LLY - commentary - Cramer's Take) with a big Zyprexa win, a $4 billion drug, with a decent yield.

I know Pfizer (PFE - commentary - Cramer's Take) and Bristol Myers-Squibb (BMY - commentary - Cramer's Take) are earnings-challenged in the out years, but I do believe that the latter truly has some interesting anti-cancer hopes and is also always a candidate to be put out of its misery.

The decline in Merck (MRK - commentary - Cramer's Take) is breathtaking and can only be considered a wholesale attempt to dump a loser before some manager shows "I was an idiot." The morning news about the Singulair and suicides sure isn't helping the cause. I can't even get into the notion of how bad Schering-Plough (SGP - commentary - Cramer's Take) acts, other than that you really have everyone giving up on Fred Hassan. Don't forget that Clarinex could be the winner off of Merck's Singulair woes.

Meanwhile, the political environment has been pretty good: I don't hear anyone talking about taking away the drug benefit, and I believe that universal health means universal drug use. I know the group is the enemy of itself, not a spokesperson for it, but I like the fact that everyone has given up on the group at a time when I still don't see the dollar bottoming like everyone else does.

Take the risk; buy a drug. If you don't trust my SGP, think about Merck, where the numbers are too low, courtesy of a Zetia snapback, and the dividend will give you some support if the bottom is not yet at hand. Singulair might delay the opportunity till Monday, but I find the decline intriguing after this news gets discounted in the stock.

Random musings: The July 40 put buy is really weighing on Lehman (LEH - commentary - Cramer's Take). I just did a video on Lehman for those who want more color on the situation. If only Dick Fuld would step up the buyback right here.

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At the time of publication, Cramer was long EMC and SGP.

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