What’s behind Eli Lilly’s down-and-up day after last week’s post-earnings surge
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Stocks pulled back from earlier-session highs amid ongoing concerns about the war in Iran. Oil prices jumped after the United Arab Emirates said its air defense system faced missile and drone attacks from Iran. WTI crude climbed roughly $3 per barrel to $105, while Brent crude jumped about $6 to $114 per barrel. Interest rates also increased, with the yield on the 10-year Treasury jumping to around 4.45% and the 30-year yield crossing above 5%, as the odds of a rate hike by year’s end rose to 36% from 23% on Friday, according to CME FedWatch. We are in the camp that a Federal Reserve led by incoming Chair Kevin Warsh is more likely to cut interest rates this year than raise them, but the committee will be in a predicament the longer energy prices stay elevated. There’s some profit-taking in Eli Lilly after last week’s 9% post-earnings surge , but the action looked much worse earlier, when shares were down almost $15 on news tied to its oral obesity drug Foundayo. The Food and Drug Administration said in its Adverse Event Reporting System (FAERS) that one patient experienced liver failure following use of Foundayo. Around the time the FDA approved the medication in April, the regulatory agency asked the company for more safety data, including information on liver injury. That’s why the market was initially so sensitive to the headline. However, the stock ultimately rebounded from its session lows and eventually turned positive after the company issued a statement that its patient safety division reviewed the case and determined the adverse event was “not reasonably related to Foundayo.” The Investing Club received a full statement from a Lilly spokesperson on the matter: “Patient safety is Lilly’s top priority. In line with our standard procedures, Lilly Global Patient Safety thoroughly assessed the individual report, which was submitted within days of commercial availability, and determined it was not reasonably related to Foundayo. Our confidence in the safety and efficacy of Foundayo is based on our robust clinical trial program, which followed over 11,000 participants for up to two years. Across our seven completed Phase 3 studies, the liver safety profile of Foundayo was similar to placebo and active comparator medicines, including Farxiga, Rybelsus, and insulin. No cases of drug-induced liver injury (Hy’s Law) were observed, and there was no hepatic safety signal.” As we learned last week, Foundayo may not be off to the same start that Novo Nordisk’s oral version of Wegovy achieved at launch, but more than 20,000 people have started taking the medication, and more than 80% of those users are new to taking GLP-1s. That means Foundayo is not cannibalizing sales of Lilly’s industry-leading injectable drugs, Zepbound and Mounjaro. We expect Foundayo will have a strong second half of the year as commercial access improves and the company starts a full-scale consumer promotion. Palantir is the big earnings headliner after the close on Monday, but Onsemi , BWX Technologies , and Pinterest also report. Club stocks DuPont and Eaton report before the opening bell on Tuesday, along with Shopify , PayPal , Pfizer , KKR , Fiserv , American Electric Power , and GlobalFoundries . Also on tap: The final read on April S & P Global US Services PMI, the ISM services index, and March new home sales. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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