To The Moon

$Eli Lilly(LLY)$ , with ample cash flow, has made a significant premium acquisition of $Morphic Holding, Inc.(MORF)$ , which has a complementary business outlook. Investment banks have set a target price for $Eli Lilly(LLY)$ above $1040. If one is optimistic about the long-term prospects, it might be worth continuing to hold $Eli Lilly(LLY)$ and consider some call options and selling put options?

Below are personal opinion, for discussion purposes only, and I welcome any additional insights from experts.

Source:InvestorPlace

1.Eli Lilly (LLY) acquires Morphic Holding, Inc. (MORF) at a premium, causing the latter's stock to surge by 75%.

The pharmaceutical giant $Eli Lilly(LLY)$ is quietly approaching the $1,000 mark. As of the close on July 8th, Eli Lilly's stock price has risen by 57.48% due to the weight loss drug business.

On the 8th, Eli Lilly announced the acquisition of the biopharmaceutical company $Morphic Holding, Inc.(MORF)$, headquartered in Waltham, Massachusetts, for approximately $3.2 billion, the latter's stock price soared by 75% to $55.78 on Monday, marking the largest percentage increase since March 1, 2021, and the highest closing price since September 1, 2021.

Eli Lilly agreed to acquire Morphic at a price of $57 per share, which is 79% higher than the latter's closing price on Friday. The transaction is expected to be completed in the Q3 2024.

2. What does Eli Lilly expect from MORF?

Morphic's key product is MORF-057, which is aimed at treating Inflammatory Bows Disease (IBD).

Source: https://investor.lilly.com/

3.What do investment banks think about the acquisition?

Jefferies released a report stating that there are mixed opinions on the drug.

On one hand, the Phase 2a clinical trial data for MORF-057 is not particularly compelling compared to its peers. Meanwhile, Eli Lilly's mirikizumab for the treatment of ulcerative colitis (UC) has already been approved, and it is awaiting approval for the treatment of Crohn's disease (CD). Therefore, the new acquisition may have limited impact on sales scale expansion.

However, the bank believes that the risk-reward ratio of this acquisition is attractive, and $Eli Lilly(LLY)$ also has ample cash to make the acquisition.

Jefferies is optimistic about $Eli Lilly(LLY)$ 's prospects, as the company continues to grow even in a weak macroeconomic environment. Its weight loss drug GLP-1 has development potential. Under the base case scenario, the target price is $1,041, with a 'Buy' rating.

4. Eli Lilly (LLY) will reach $1,000 soon? What strategy should be adopted?

• Continue to hold or buy the common stock?

• Buy a call option for $1,000?

  TradesViz data shows that there is a significant volume of call options for $Eli Lilly(LLY)$ expiring on August 16th with a strike price of $950.

  Source:TradesViz

• Sell a put, and what is a suitable price for selling put options?

  In the short term, I believe the 20-day moving average price of $890 provides some support.

Finnally, welcome discussions and additional insights from Tigers.

Invests carries risk, I wishing you a flourishing account and wealth that grows everyday.