Enthusiasm for Club holding Eli Lilly needs to be tempered — at least for now — as Wall Street grapples with the possibility of a major shakeup to health policy in Washington. The news Republican President-elect Donald Trump on Thursday nominated prominent vaccine skeptic and obesity-drug critic Robert F. Kennedy Jr. to lead the Department of Health and Human Services . HHS, for short, is the sprawling agency that sits atop the Food and Drug Administration, Centers for Disease Control and Prevention, and Centers for Medicare & Medicaid Services, among other divisions. The cabinet-level position of HHS secretary requires confirmation by the Senate, where the Republicans will have a 53-seat majority, while the Democratic caucus will be 47. Some members of the GOP, such as Kentucky Sen. Rand Paul, congratulated Kennedy on his nomination. But at this point, it’s unclear whether Kennedy will be able to reach the 50-vote threshold for confirmation. Shares of obesity drugmaker Eli Lilly fell more than 4% on Friday, extending a roughly 3% slide in Thursday’s session. Media reports of Kennedy’s nomination surfaced in the late afternoon Thursday, and Trump confirmed the decision in a social media post after the closing bell. Eli Lilly’s main competitor in the obesity market, Danish firm Novo Nordisk , also saw its stock drop more 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 popular 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 due to Kennedy’s selection. Big picture During his campaign, Trump had pledged to let Kennedy “go wild” on health-care issues if he were given the chance to return to the White House, but selecting him to run HHS was generally seen on Wall Street as an unlikely outcome. It now shrouds the pharmaceutical industry in uncertainty until there’s more clarity on his support in 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 career as an environmental lawyer. In recent decades, 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 numerous studies that debunk such assertions. “Vaccines do not cause autism,” the CDC website reads. Kennedy has more recently taken aim at what he describes as a chronic-disease crisis in the U.S., particularly diabetes and obesity among children. It was a focus of his unsuccessful 2024 presidential campaign, initially in the Democratic primary and then 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 a number of topics. In an op-ed in The Wall Street Journal in September, Kennedy wrote that the U.S. should consider preventing companies from advertising directly to the public and argued lawmakers in Washington “should cap drug prices so that companies can’t charge Americans substantially more 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, in which Novo Nordisk and Eli Lilly are currently the two dominant players. Some on Wall Street expect the market for GLP-1 drugs to be worth $100 billion by 2030. GLP-1s drugs mimic a gut hormone to help regulate blood sugar and suppress appetite, leading to weight loss. Eli Lilly’s GLP-1 called tirzepatide, sold as Mounjaro for diabetes and Zepbound for obesity, is at the heart of our investment thesis in the company. Jim Cramer has said it could become the best-selling drug of all time , thanks in large part to its weight-loss adoption. Kennedy contends the way to combat the high rates of obesity in the U.S. is through dietary and food-systems changes. Weight-loss drugs, Kennedy has argued on social media , do not get to the “root” of the obesity problem and instead 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 should be treated as such by doctors and health insurers alike. In that way, they argue, GLP-1s should be seen as a valuable tool, along with diet and exercise, in the treatment of obesity. Lilly and Novo Nordisk also have sought to show that GLP-1s improve health outcomes for patients in ways far beyond just shedding pounds. Earlier this year, the FDA said Novo Nordisk’s obesity drug Wegovy can also be prescribed to lower the risk of serious heart problems, such as heart attacks and strokes, in overweight patients with cardiovascular disease. Eli Lilly has demonstrated similar heart-health benefits for tirzepatide. It’s also shown promise in treating sleep apnea , among others. Bottom line Eli Lilly has been our favorite drug stock for years thanks to its stellar pipeline led by GLP-1s. And the share-price performance since we took a stake in October 2021 — more than tripling even with the recent declines — speaks for itself. The S & P 500 is up a little more than 30% in the same stretch. But, at this point, Kennedy’s nomination requires us to be more cautious on Eli Lilly in the near term. The stock could remain soft while the market digests the implications and probabilities of Kennedy leading HHS. From the perspective of a drug-stock investor, Jim said it’s hard to imagine a more troubling pick for HHS secretary than Kennedy. “We don’t touch Eli Lilly yet. There’s no need to,” 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, but 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 will 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. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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Enthusiasm for Club holding Eli Lilly needs to be tempered — at least for now — as Wall Street grapples with the possibility of a major shakeup to health policy in Washington.
