Enthusiasm for Club holding Eli Lilly must be tempered — no less than for now — as Wall Street grapples with the potential of a significant shakeup to health policy in Washington. The news Republican President-elect Donald Trump on Thursday nominated outstanding vaccine skeptic and obesity-drug critic Robert F. Kennedy Jr. to guide the Department of Health and Human Services . HHS, for brief, is the sprawling agency that sits atop the Food and Drug Administration, Centers for Disease Control and Prevention, and Centers for Medicare & Medicaid Services, amongst other divisions. The cupboard-level position of HHS secretary requires confirmation by the Senate, where the Republicans could have a 53-seat majority, while the Democratic caucus will probably be 47. Some members of the GOP, comparable to Kentucky Sen. Rand Paul, congratulated Kennedy on his nomination. But at this point, it’s unclear whether Kennedy will have the ability to achieve the 50-vote threshold for confirmation. Shares of obesity drugmaker Eli Lilly fell greater than 4% on Friday, extending a roughly 3% slide in Thursday’s session. Media reports of Kennedy’s nomination surfaced within the late afternoon Thursday, and Trump confirmed the choice in a social media post after the closing bell. Eli Lilly’s major competitor within the obesity market, Danish firm Novo Nordisk , also saw its stock drop greater than 4% on Friday. Shares of Covid-19 vaccine makers including Moderna and Pfizer sold off late Thursday and again in Friday’s session. A well-liked exchange-traded fund that tracks biotech stocks is on pace for its worst week since March 2023. Meanwhile, analysts at Deutsche Bank downgraded British vaccine maker GSK as a result of Kennedy’s selection. Big picture During his campaign, Trump had pledged to let Kennedy “go wild” on health-care issues if he got the possibility to return to the White House, but choosing him to run HHS was generally seen on Wall Street as an unlikely consequence. It now shrouds the pharmaceutical industry in uncertainty until there’s more clarity on his support within the Senate. The 70-year-old Kennedy — the son of the late U.S. senator and presidential candidate Robert F. Kennedy and nephew of the late President John F. Kennedy — began his profession as an environmental lawyer. In recent many years, he gained traction for his controversial views on health matters, most notably vaccines. Kennedy has pushed unfounded claims that child vaccines are linked to autism, despite quite a few studies that debunk such assertions. “Vaccines don’t cause autism,” the CDC website reads. Kennedy has more recently taken aim at what he describes as a chronic-disease crisis within the U.S., particularly diabetes and obesity amongst children. It was a spotlight of his unsuccessful 2024 presidential campaign, initially within the Democratic primary after which as an independent candidate. Kennedy endorsed Trump in August. LLY YTD mountain Eli Lilly’s year-to-date stock performance. Kennedy has been critical of the pharmaceutical industry on various topics. In an op-ed in The Wall Street Journal in September, Kennedy wrote that the U.S. should consider stopping corporations from promoting on to the general public and argued lawmakers in Washington “should cap drug prices in order that corporations cannot charge Americans substantially greater than Europeans pay.” Kennedy specifically mentioned Novo Nordisk’s diabetes treatment Ozempic when making the case for drug-price caps. Ozempic is the posterchild of the fast-growing GLP-1 class, by which Novo Nordisk and Eli Lilly are currently the 2 dominant players. Some on Wall Street expect the marketplace for GLP-1 drugs to be value $100 billion by 2030. GLP-1s drugs mimic a gut hormone to assist regulate blood sugar and suppress appetite, resulting in weight reduction. Eli Lilly’s GLP-1 called tirzepatide, sold as Mounjaro for diabetes and Zepbound for obesity, is at the center of our investment thesis in the corporate. Jim Cramer has said it could turn into the best-selling drug of all time , thanks largely to its weight-loss adoption. Kennedy contends the strategy to combat the high rates of obesity within the U.S. is thru dietary and food-systems changes. Weight-loss drugs, Kennedy has argued on social media , don’t get to the “root” of the obesity problem and as an alternative merely “gladden the wallets of distant Big Pharma execs.” Eli Lilly CEO David Ricks and other GLP-1 proponents argue that obesity is a disease and must be treated as such by doctors and health insurers alike. In that way, they argue, GLP-1s must be seen as a helpful tool, together with weight loss plan and exercise, within the treatment of obesity. Lilly and Novo Nordisk even have sought to indicate that GLP-1s improve health outcomes for patients in ways far beyond just shedding kilos. Earlier this 12 months, the FDA said Novo Nordisk’s obesity drug Wegovy can be prescribed to lower the chance of great heart problems, comparable to heart attacks and strokes, in obese patients with heart problems. Eli Lilly has demonstrated similar heart-health advantages for tirzepatide. It is also shown promise in treating sleep apnea , amongst others. Bottom line Eli Lilly has been our favourite drug stock for years due to its stellar pipeline led by GLP-1s. And the share-price performance since we took a stake in October 2021 — greater than tripling even with the recent declines — speaks for itself. The S & P 500 is up a bit of greater than 30% in the identical stretch. But, at this point, Kennedy’s nomination requires us to be more cautious on Eli Lilly within the near term. The stock could remain soft while the market digests the implications and probabilities of Kennedy leading HHS. From the angle of a drug-stock investor, Jim said it’s hard to assume a more troubling pick for HHS secretary than Kennedy. “We do not touch Eli Lilly yet. There is not any must,” Jim said during Friday’s Morning Meeting. He noted that our profit-taking in early September, at nearly $961 a share , enables us to be patient and prudent while Kennedy’s nomination process unfolds. Eli Lilly’s most-recent quarterly results were noisy in some areas, however the underlying prescription growth for its key GLP-1 drugs was encouraging. (Jim Cramer’s Charitable Trust is long LLY. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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Eli Lilly and Company, Pharmaceutical company headquarters in Alcobendas, Madrid, Spain.
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Enthusiasm for Club holding Eli Lilly must be tempered — no less than for now — as Wall Street grapples with the potential of a significant shakeup to health policy in Washington.
