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Shortly before the closing bell, we will be buying 50 shares of Eli Lilly (LLY) at roughly $255. Following the trade, the Charitable Trust will own 375 shares of Eli Lilly. This buy will increase Eli Lilly's weight in the portfolio from about 2.01% to 2.30%.
Shares of Eli Lilly are trading lower Monday alongside several other big pharma names. We think this slight pullback is an opportunity to beef up our position.
Our thesis in Eli Lilly is unchanged from what we wrote last Monday. We think Eli Lilly is one of the best run companies in the pharmaceutical industry with its diabetes focused portfolio that consistently delivers growth without any major loss of exclusivity risk. But the top-line numbers are only one part of the story. Eli Lilly also has a tremendous track record of expanding margins by driving efficiencies.
Thinking long term, what excites us the most about Eli Lilly is its pipeline. More specifically, Eli Lilly has two assets that CEO David Ricks said last month are "two of the most valuable projects we've ever worked on and maybe the most valuable projects in the industry right now."
The two projects Ricks is talking about are donanemab as a treatment for Alzheimer's and tirzepatide in type 2 diabetes. Both assets have the potential to be $10 billion opportunities according to analysts, supporting growth for years to come.
Back on November 18th in their coverage initiation of Eli Lilly, analysts at BMO Capital called donanemab a potential $10 billion opportunity if access hurdles can be overcome. And in an October research note from JPMorgan, the analysts estimated tirzepatide could be a $10 billion-plus opportunity in type 2 diabetes with potentially multi-billions more in obesity.
Donanemab and tirzepatide are in focus because both are expected to be approved sometime next year. Our goal is to put on a full position in Eli Lilly ahead of these two separate catalyst events.
With 2022 shaping up to be a transformative year of approvals and product launches, we think LLY down roughly 7% from its highs is an opportunity to buy more shares.
The CNBC Investing Club is now the official home to my Charitable Trust. It's the place where you can see every move we make for the portfolio and get my market insight before anyone else. The Charitable Trust and my writings are no longer affiliated with Action Alerts Plus in any way.
As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Typically, Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If the trade alert is sent pre-market, Jim waits 5 minutes after the market opens before executing the trade. If the trade alert is issued with less than 45 minutes in the trading day, Jim executes the trade 5 minutes before the market closes. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. See here for the investing disclaimer.
(Jim Cramer's Charitable Trust is long LLY.)