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Cramer: Dumping Eli Lilly is a huge mistake

Lately it feels to Jim Cramer that the biotech group has been getting mauled by bears over and over again. But periodically those declines provide investors with an opportunity to gobble up a high quality stock at a discount, such as Eli Lilly.

Just as oil and industrial stocks have recently been running with the bulls, many other stocks ranging from Valeant to Workday, and anything biotech has been subject to a major sell-off. The value stocks within these groups have tried to make a comeback, but Cramer has only seen one stock actually make traction—Eli Lilly.

That traction ended on Monday when Eli Lilly halted Phase 3 trials of a new class of cardiovascular formulation that would act as an anti-cholesterol drug to cut down on heart disease.

"Lilly shareholders are frantically dumping the stock, at one point selling the stock down an outrageous and uninformed 10 points, showing you just how fearful people are of this entire segment," the "Mad Money" host said.

Why does Cramer think dumping Eli Lilly was a huge mistake?





Lilly corporate headquarters in Indianapolis, Indiana
Source: Eli Lilly
Lilly corporate headquarters in Indianapolis, Indiana
"The stock that will turn first? Eli Lilly. If you can get it below $80 it's worth the chance" -Jim Cramer

In Cramer's perspective, Eli Lilly's stock price did not soar to the $80s because of its cholesterol drug in the first place. It was the best acting old pharmaceutical stock because of two drugs; an anti-diabetes formulation called Jardiance, and an anti-Alzheimer's drug called Solanezumab. Those two drugs had the potential to be huge blockbusters for the company.

The third cardiovascular formulation was merely icing on the cake for Cramer when it came to Lilly.

"I believe this drug isn't even in the numbers. But at the same time I have been waiting for this stock to come down even a smidge after the announcement of these back to back blockbusters," Cramer said.

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This is the chance that Cramer has been waiting for. The market has now turned against high-growth stocks, especially drug stocks, and Cramer thinks Lilly presents the most opportunity of them all to maintain pricing stability.

So, while the drug and biotech group are in bear market mode right now, that won't last forever.

"The stock that will turn first? Eli Lilly. If you can get it below $80, it's worth the chance," Cramer said. (Tweet this)

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