Cramer's 'Mad Money' Recap: Kinetic Diabetic Plays

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Right now the health care sector is out of favor, but investors should get into these stocks before they're back in favor and all run higher, Jim Cramer told viewers of his "Mad Money" TV show Thursday.

In this space, he said, take a closer look at diabetes drugs, given the fact that the global diabetes market is worth $17.8 billion, up from $3.8 billion in 1995.

One way to approach this market, said Cramer, is to take a look at two health management companies, Matria Healthcare(MATR Quote) and Healthways(HWAY Quote).

While these companies are not pure plays on diabetes, he said that these companies monitor, follow up with and manage patients with diabetes, telling them what to do to keep their conditions from worsening.

They ensure that diabetes patients and their doctors are doing things right, he said. And this saves patients and insurers money because "it's a lot cheaper to treat type II diabetes than it is to treat kidney failure."

Even though Matria just gave downbeat earnings guidance, the company is too cheap to be ignored, said Cramer, who also pointed out that the stock was recently upgraded by analysts. He said that Matria is a potential winner, but "just not right now."

He said that Healthways is the better stock and that we should be willing to pay more for a better company. But he reminded viewers that it's not that much better than Matria.

Every now and then, said Cramer, we need to perform some regicide on "Mad Money" and he's beheading the former king of diabetes treatment drugs.

He had once crowned Amylin Pharmaceuticals(AMLN Quote) for its Byetta diabetes treatment. Cramer said the stock is now up more than 150% from where it was when he started recommending it; and he said that it can't make enough Byetta to keep up with demand.

So it's off with Amylin's head, he said, adding that it's a good company, but just not the king.

The new diabetes drug king is Nektar Therapeutics(NKTR Quote). The company's Exubera is an insulin system that people with diabetes can inhale, and most analysts believe this drug has blockbuster potential, Cramer said. People believe Exubera could see over $1 billion in sales, he said.

But, he warned, this is just a trade, not an investment. He said that there's going to be a lot of hype around Exubera that will send Nektar's stock higher but it won't last.

The drug is slated to launch this summer, so he said viewers should buy now and sell it in a month when the hype peaks, "before the drug comes out and has a chance to disappoint."

"All the hope will be in the stock, and we do not trade on hope," said Cramer.