Jim Cramer says he can’t sell Eli Lilly despite its massive growth. Here is the reason
Eli Lilly’s expanding drug pipeline gives us little reason to take profits at this point — even after a big run to record highs. “It’s a parabolic spike. I don’t buy parabolas,” Jim Cramer said on ” Squawk on the Street ” Monday. “But I can’t sell it. I just can’t take that profit.” Jim wants to let Lilly’s rally ride for now, noting that Club stock is up 35% from its year-to-date low set in late April and up 85% from its 52-week low of nearly $624 since last August. Shares of Eli Lilly traded higher during Monday’s session after the company revealed new information about its next-generation obesity drug, retatrutide, at the American Diabetes Association conference in New Orleans on Saturday. One of the most encouraging findings was a low 4-milligram dose of retatrutide, which produced about 19% of body weight gain – compared to the highest dose of Lilly’s blockbuster obesity treatment Zepbound. The maximum dose of Zepbound is 15 milligrams. Both are injectable. Another difference is that Zepbound is a so-called dual drug. It triggers two hormones – GLP-1 to reduce hunger and GIP to help trigger insulin. Retatrutide is a triple agonist, which adds glucagon to improve metabolism. Wegovy from rival Novo Nordisk only targets GLP-1. Wegovy is an injection and a pill. Lilly’s weight loss pill is Foundayo, which is a strong starter. The results reinforced our belief that Eli Lilly is expanding its leadership in the obesity drug market. “I think the majority opinion is that Lilly is pulling back, like Secretariat,” Jim said, referring to the legendary racehorse. Investors are increasingly focused on the potential of Lilly’s pipeline. Shares are up about 8% year to date, while Novo Nordisk stock is down about 18% over the same period. Wall Street analysts were equally upbeat, arguing that retatrutide’s combination of strong efficacy and favorable tolerability could greatly increase its commercial potential. Goldman Sachs said Lilly’s fat pipeline highlights “a rapidly developing innovation engine.” Barclays wrote that retatrutide “delivered with the promise of moving the stakes in what is possible in the pharmacotherapy of obesity.” Lilly’s opportunity extends beyond just weight loss, pointing to growing evidence that GLP-1 drugs can benefit patients with conditions ranging from sleep apnea to cardiovascular disease. “They can actually do a lot more,” Jim said. “You already see it with sleep apnea, but you’re going to see more heart, more blood pressure, and maybe even Alzheimer’s.” Jim also pushed back against efforts by other employers and insurers to limit coverage of GLP-1 drugs because of their cost, arguing that the long-term health benefits of the drugs outweigh the short-term costs. “Companies that reduce quality are being stupid,” says Jim. “Don’t stop at this. Save almost anything else. This is worth it.” (Jim Cramer’s Charitable Trust is long Eli Lilly. See here for a full list of 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 stock in his charity portfolio. When Jim talks about a stock on CNBC TV, he waits 72 hours after issuing a trade warning before making a trade. THE PRIVATE INFORMATION OF THE BURNING CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AND OUR PRIVACY POLICY. NO LEGAL LIABILITY OR OBLIGATION EXISTS, OR IS CREATED, BY YOUR ACCEPTANCE OF ANY INFORMATION PROVIDED BY CONTACTING THE INVESTMENT CLUB. NO PARTICULAR RESULT OR INTEREST IS GUARANTEED.
