2. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 106
Cramer noted that Eli Lilly and Company (NYSE:LLY) is being careful with its promotion and predicted that the company will be back to its full strength soon enough.
“Eli Lilly is at the top of the list. Now we own this one for the Charitable Trust and it’s earned, it’s nearly [at] $740 billion market cap. But with the stock in the high $700s, it has pulled back almost 20% from its highs in late August. As recently as late October, this stock was still sitting in the low $900s. But Lilly got hit real hard after reporting a seemingly not-so-hot quarter. And then it got hit again after the election, reportedly on an idea that RFK Jr. is not a fan of GLP-1 weight loss drugs like Lilly’s Mounjaro.
Now I think these events are bad reasons to sell the stock. First, while Lily technically reported a miss, it was just technical and it’s technical that it just cut its full-year guidance. The reasons for this were important. The company cited wholesale destocking from Mounjaro and Zepbound for the softer numbers. Many investors took that to mean that the demand for the GLP-1 drugs has to be impaired. But I think Lilly was just being measured with its marketing and promotion at a time when supply was constrained. I don’t think there are any issues with demand whatsoever. These are miracle drugs. If anything, I say Lily’s guilty of poor communication, but that’s created a buying opportunity for anyone who’s missed the stock’s tremendous run. You can get back in.
As for the political risk angle, I got a chance to speak with RFK Jr. on air last week on the floor when President-elect Trump visited the New York Stock Exchange. I asked him directly about these GLP-1 drugs. He said basically that his preference is that people never need these drugs because they eat well and get plenty of exercise. I can’t argue with that. But as David Ricks, CEO of Lilly, has said on this show, diet and exercise, hard to stick to. And there’s plenty of people who need some additional help, which is why these wonder drugs can do.
Kennedy may not like it that we need these GLP-1 drugs, but it certainly doesn’t sound like some major crackdown is coming. I think that is completely false. So in the end, I see things going back to normal for Eli Lilly, assuming they can deliver some better numbers, which I think is a fair assumption. Now, we’ll be back to focusing on the incredible growth of these GLP-1s. By the way, next year we get the fresh phase 3 data for a pill version of Lilly’s GLP-1 treatment, which could be huge if that data’s any good. Basically, you’re getting a chance to buy Lilly at a Black Friday-style discount of nearly 20% year despite its tremendous prospect. What’s not to like?”
Eli Lilly (NYSE:LLY), a leading global pharmaceutical company, is recognized for its extensive range of treatments, particularly in the areas of diabetes and obesity. The company has gained significant attention for its diabetes medication Mounjaro and its companion drug for chronic weight management, Zepbound. These products have rapidly become key drivers of its growth.
Reporting its third quarter, the company stated that U.S. sales of both Mounjaro and Zepbound were impacted negatively due to a reduction in inventories within the wholesaler channel. It should be noted that the sales of both drugs were still strong. Mounjaro alone was responsible for 27.3% of the total revenue, reflecting a remarkable 121% growth compared to the same quarter in the previous year. Zepbound also made a substantial impact, accounting for more than 11% of the revenue in that period.
The company’s CFO, Lucas Montarce, mentioned during the earnings call that wholesalers had reduced inventories of diabetes and obesity medications, describing this as a temporary issue. Looking ahead to 2024, Eli Lilly (NYSE:LLY) revised its earnings forecast, expecting a non-GAAP EPS between $13.02 and $13.52, down from its prior projection of $16.10 to $16.60. This change is largely due to the acquisition of Morphic Holdings.
Lastly, the company is anticipating data from late-stage trials on its experimental obesity pill, orforglipron, with results expected in April 2025, according to a top executive at the company. The pill belongs to a class of medications called incretins, which are designed to replicate the effects of the GLP-1 hormone. This hormone helps control blood sugar levels, slows the rate at which food leaves the stomach, and reduces appetite.
