Enthusiasm for club holding Eli Lilly can have to be tempered – not less than for now – as Wall Street grapples with the potential of a sweeping health care policy shakeup in Washington. News that Republican President-elect Donald Trump on Thursday named distinguished vaccine skeptic and obesity drug critic Robert F. Kennedy Jr. to go the Department of Health and Human Services. In short, HHS is the sprawling agency that oversees the Food and Drug Administration, the Centers for Disease Control and Prevention, and the Centers for Medicare & Medicaid Services, amongst others. The Cabinet-level HHS secretary position requires confirmation by the Senate, where Republicans can have a 53-seat majority while the Democratic caucus can have 47 seats. Some members of the GOP, resembling Kentucky Senator Rand Paul, congratulated Kennedy on his nomination. However, it’s currently unclear whether Kennedy can reach the 50-vote threshold for confirmation. Shares of obesity drug maker Eli Lilly fell greater than 4% on Friday, extending their decline of about 3% in Thursday's session. Media reports of Kennedy's nomination emerged late Thursday afternoon, and Trump confirmed the choice in a social media post after the closing bell. Eli Lilly's most important competitor within the obesity market, Denmark's Novo Nordisk, also saw shares fall 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 tracking biotech stocks is ready for its worst week since March 2023. Meanwhile, analysts at Deutsche Bank downgraded British vaccine maker GSK over Kennedy's selection. Big picture During his campaign, Trump had promised to let Kennedy “go wild” on health issues if given the prospect to return to the White House, but his selection to go HHS was widely viewed as unlikely on Wall Street. It now shrouds the pharmaceutical industry in uncertainty until there may be more clarity about its support within the Senate. The 70-year-old Kennedy – 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 a long time, he has gained traction for his controversial views on health issues, particularly vaccines. Kennedy has made unfounded claims that childhood vaccinations are linked to autism, despite quite a few studies refuting these claims. “Vaccines do not cause autism,” the CDC website states. Kennedy has more recently focused on what he calls the chronic disease crisis within the United States, particularly diabetes and childhood obesity. It was a spotlight of his unsuccessful 2024 presidential campaign, first 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 criticized the pharmaceutical industry on a lot of issues. In an editorial within the Wall Street Journal in September, Kennedy wrote that the U.S. should consider stopping firms from promoting on to the general public and argued that lawmakers in Washington should “cap drug prices so that companies do not give Americans essential drugs.” Kennedy specifically mentioned Novo Nordisk's diabetes drug Ozempic when he argued for drug price caps. Ozempic is the flagship of the fast-growing GLP-1 class, through 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-1 drugs mimic a gut hormone to manage blood sugar and suppress appetite, resulting in weight reduction Eli Lilly's GLP-1 called tirzepatide Mounjaro for diabetes and Zepbound for obesity is central to our investment thesis in the corporate. Jim Cramer has said it could turn out to be the best-selling drug of all time, largely due to its weight reduction launch. Kennedy believes that the high obesity rate within the United States will be combated through changes in diets and food systems. Weight-loss drugs, Kennedy argued on social media, don’t get to the “root” of the obesity problem but merely “pleasing the wallets of distant Big Pharma executives.” Eli Lilly CEO David Ricks and other GLP-1 proponents argue that obesity is a disease and needs to be treated as such by doctors and health insurers alike. In this manner, they argue, GLP-1 needs to be considered a beneficial tool alongside eating regimen and exercise in treating obesity. Lilly and Novo Nordisk have also tried to point out that GLP-1 improves health outcomes for patients far beyond just shedding kilos. Earlier this 12 months, the FDA announced that Novo Nordisk's obesity drug Wegovy can also be prescribed to cut back the chance of significant heart problems resembling heart attacks and strokes in obese patients with heart problems. Eli Lilly has demonstrated similar heart health advantages to tirzepatide. It has also shown promise in treating sleep apnea, amongst other things. The bottom line is that Eli Lilly has been our favourite pharma stock for years due to its outstanding pipeline, led by GLP-1. And the value development since our entry in October 2021 – which has greater than tripled despite the recent declines – speaks for itself. The S&P 500 is up just over 30% over the identical period. But at this point, Kennedy's nomination requires us to be more cautious about Eli Lilly within the short term. The stock could remain weak because the market processes the implications and likelihood of Kennedy leading HHS. From a pharmaceutical investor's perspective, it's hard to assume a more worrisome selection for HHS secretary than Kennedy, Jim said. “We’re not touching Eli Lilly yet. There’s no need for that,” Jim said during Friday’s morning briefing. He noted that our early September profit taking of nearly $961 per share allows us to be patient and cautious as Kennedy's nomination process unfolds. Eli Lilly's recent quarterly results were a large number in some areas, but underlying growth in prescriptions for its key GLP-1 drugs was encouraging. (Jim Cramer's Charitable Trust is long-LLY. See a full list of stocks here.) As a subscriber to 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 foundation's portfolio. If Jim discussed a stock on CNBC television, he waits 72 hours after the trade alert is issued before executing the trade. 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Enthusiasm for club operations Eli Lilly must be tempered – not less than for now – as Wall Street grapples with the potential of a significant shakeup of health care policy in Washington.
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