Problems With Catamaran
Bulls make money, bears make money but pigs get slaughtered, Cramer reminded viewers, as he followed up on SXC Health Solutions, a pharmacy benefit manager he recommended about a year ago. A lot has changed in the year since he made that recommendation, said Cramer, which is why we must revisit this stock.
Cramer said the first thing investors may notice is that SXC Health Solutions no longer exists. The company did a $4.4 billion merger in July and rebranded itself as Catamaran (CTRX - Get Report). Shares of Catamaran, however, are up 74% since last December.
Catamaran is still a great story, said Cramer. The new company has great scale to compete with the likes of Express Scripts (ESRX). There is also a wave of patented drug expirations underway, leaving a wave of generic competion for Catamaran to capitalize on.But there is a problem, noted Cramer, and that's Catamaran's largest customer, HealthSpring (HS), which accounts for 10% of the company's earnings. HealthSpring has a contract with Catamaran through 2014, but the status of that contract will be known in January. Since HealthSpring was itself acquired, it may not be renewing its contract. Cramer said Catamaran can eventually replace these lost earnings with new business, but that won't stop anaylsts from sounding the alarm in the coming weeks -- which is why investors need to sell ahead of that pending news. "Don't give up your gains," Cramer concluded.