Jim Cramer"We like companies that can reinvent themselves," Jim Cramer told viewers of his "Mad Money" TV show Monday. That's why he says he's positive on a drug maker he once hated -- Bristol-Meyers(BMY - Cramer's Take - Stockpickr).
Bristol-Meyers has a big problem. With 50% of its drugs coming off patent protection in the next three years, most investors have lost faith in Bristol's ability to replace those lost revenues. But Cramer feels that the company does have a plan to turn around the situation, and that plan will be unveiled at Bristol's annual shareholder meeting on Tuesday.
Cramer said that Bristol tipped its hand with the recent sale of its wound-care business, ConvaTec, for $4.1 billion. The sale, he said, gives Bristol a much needed cash boost, as does its plan to spin off 10% to 20% of its Mead Johnson baby formula business in an IPO.
With the ConvaTec sale and lofty expectations that Mead Johnson might fetch as much as $9.1 billion, Cramer expects cash-rich Bristol to start acquiring smaller drug companies to replace its waning portfolio.
Cramer also is optimistic about the future of Bristol's internal drug pipeline. He noted the company is developing promising drugs for HIV, leukemia, breast cancer, and arthritis. "The problem is that no one believes what Bristol says," said Cramer, adding all of these new drugs could be blockbusters.
Bristol-Meyers' valuation is also appealing. He said the company trades at 11.4 times its earnings and an 11% long-term growth rate. The company is also aggressively cutting costs and has a "mouth-watering" 5.4% dividend yield.
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