Jim Cramer on his CNBC Mad Money program was bullish on biotechs all summer. This was after a surplus of biotech IPOs flooded the market in the spring, and the sector bottomed. Biotechs rebounded with a vengeance all summer, and Jim Cramer was pushing the sector, even, at one point, making fun of Fed Chief Janet Yellen for warning the public that biotechs were overvalued.
Jim Cramer got behind biotechs that has innovative ways of treating rare conditions, or producing so-called “orphan drugs.” These orphan drugs carry a high price tag, because the conditions they treat are rare and often deadly, and there are high barriers to competition.
Mad Money often featured Cramers “Four Horsemen of Biotech” Regeneron, Gilead, Celgene and Biogen Idec. However, one of these four horsemen, Gilead, faltered the other day when data came out for a new Hepatitis C treatment from competitor AbbVie. The defense against competition, which Warren Buffett refers to as a company’s “moat” didn’t seem to hold up in the case of Gilead. On news of competition, other biotechs sold off, and Cramer is sensing a bearish sentiment on the sector and would hold off buying for now.