Eli Lilly completes small buy of cancer drugmaker — the payoff may come later

Published Wed, Dec 27 20233:02 PM ESTUpdated Tue, Jan 2 202410:32 AM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Eli Lilly on Wednesday completed its acquisition of Point Biopharma, a small but contentious transaction that could take many years to reap any rewards — if it delivers at all. Eli Lilly has wisely leaned into relatively inexpensive acquisitions this year — including the $1.4 billion Point Biopharma deal — to add some more experimental assets to its drug pipeline. Point Biopharma offers Eli Lilly expertise on an emerging class of drugs known as radiopharmaceuticals , which provide targeted radiation therapy directly to cancer cells, according to the National Cancer Institute. These takeovers are riskier than buying more established companies with products already on the market, but Eli Lilly can afford to make those bets due to its fast-growing demand for type-2 diabetes and Zepbound for obesity. These two remain Eli Lilly's most important drugs in 2024 and beyond , even as some in the investment community doubt whether the Club holding's stellar stock performance in recent years can be sustained. Eli Lilly's Alzheimer's treatment donanemab , which is expected to receive U.S. regulatory approval early this year, is poised to become an additional source of growth in the coming years. Eli Lilly's high-quality drug pipeline is a key reason we invested in the company in 2021, and so far the company has delivered, particularly on the massive weight-loss drug opportunity . It's still very early, but we're confident Eli Lilly's position in that competitive race. Jim Cramer has predicted the active ingredient behind both Mounjaro and Zepbound will become the best-selling drug of all time. The closing of the deal with Point Biopharma doesn't not change our investment thesis, and could actually be useful in time. LLY .SPX 5Y mountain Eli Lilly's stock performance over the past 5 years compared with the S & P 500. The fate of the Point Biopharma deal — first announced in early October — was up in the air throughout the fall as Point investors awaited the results of a late-stage trial for PNT2002, a metastatic prostate cancer drug and the company's most advanced asset. Point currently generates immaterial revenue and is unprofitable. A significant portion of Point shareholders appeared reluctant to agree to Eli Lilly's proposal before seeing the data, hoping that highly encouraging results could allow Point to command a higher takeover price than the $12.50 per share in the initial agreement. Without majority support to close the deal, Eli Lilly had to extend its tender offer to Point shareholders multiple times. Eli Lilly finally secured enough support to finalize the acquisition after the late-stage results for PNT2002 were published Dec. 18 and failed to meet the high hopes of some Point investors. PNT2002 is a radiopharmaceutical, and in earlier stage development the company has two others known as PNT2004 and PNT2001. The drug met its efficacy goal and helped stop patients' cancer from progressing for about 9.5 months. However, a similar drug already on the market from Novartis called Pluvicto delayed progression for about 12 months. That is why some investors were let down by the latest PNT2002 data, though comparing results in different clinical trials always requires some caution. In a note to clients Dec. 18, Leerink analyst Faisal Khurshid contended the PNT2002 trial results were meaningfully disappointing and indicated Pluvicto is a "superior product." Eli Lilly still wants in on this new class of drugs. "I've personally been at radiopharmaceuticals for a few decades now and I think the time is right to get into therapeutic radiopharmaceuticals," Dan Skovronsky, Lilly's chief scientific and medical officer, said in late November at a conference before the PNT2002 data was published. "They have a manufacturing facility under construction and I hope we can complete the acquisition, help them build it, get inspected, and start launching products." The first milestone on that list is now checked off. Eli Lilly's strong positioning in diabetes and obesity means patience can be afforded on accomplishing the rest. (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. 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.

David Ricks, CEO, Eli Lilly.

Scott Mlyn | CNBC