Hey Folks,

Man, Eli Lilly. It's like that friend who's crushing it at work, buying rounds every night, but you catch them quietly checking their phone for bad news. The stock's up 45% this year, sitting pretty at $989 after last week's Q3 earnings. Revenue clocked in at $17.6 billion, way over the $16.1 billion folks expected, and they bumped full-year guidance to $63.25 billion. Mounjaro and Zepbound? Those GLP-1 heavyweights pulled in $3.4 billion combined, up over 100% from last year. Adjusted EPS hit $7.02, smashing the $5.69 whisper. Shares jumped 10% the next day. Solid, right? Except... insiders aren't acting like it.

Take November 5. The Lilly Endowment, their largest shareholder, basically the family trust, dumped 25 blocks of stock. Total haul: $134 million. One chunk alone went for $28.7 million. That's not pocket change; it's the kind of move that makes you pause. And it wasn't a one-off. Back in early October, they offloaded another $107 million worth. I get diversification, sure, but when the inner circle's cashing out this steadily, it feels off. Like they're seeing supply kinks or competition creeping in that the headlines gloss over.

Hedge funds? Same vibe. Chesapeake Capital shed 9,900 shares in Q2, booking $7.7 million. PNC Financial filed a trim yesterday. Nothing huge, but it's part of the pattern. Short interest is still low, just 0.8% of float, but options trading's tilting bearish. Puts made up 60% of volume last month. Over on X, you see threads popping up, folks side-eyeing the 48x trailing P/E, double the pharma average, and stacking it against Novo's steadier setup at 25x.

Look, the growth's legit for now. But let's talk cracks. Novo Nordisk's Wegovy holds 55% market share, and their oral weight-loss pill just got a head start on FDA approval. It could launch months before Lilly's Orforglipron. Sixteen generics are queued up by 2026. Add the Humalog patent drop in 2027, and that's a $5 billion hole staring back. Margins dipped to 35% this quarter on factory builds, R&D jumped 20% to $2.5 billion, and free cash flow barely scraped $1.2 billion after capex. Debt's at $30 billion. It's a beast, yeah, but beasts slow down.

I ran the numbers last night, half-asleep over coffee. Growth probably cools to 15% a year by 2028 as the GLP-1 boom plateaus. Fair value? I'd call $600 by 2030, with multiples easing to 20x. Sales might top out like this: GLP-1 at $25 billion max, legacy stuff down $5 billion, pipeline netting $3 billion after some trial duds, oncology flat at $8 billion. Total around $60 billion. Basically a stall from the highs.

Then there's the outside squeeze. DOJ's sniffing around GLP-1 side effects, like those thyroid whispers. EU prices are 20% cheaper than here, China's generics are undercutting exports left and right, and the Inflation Reduction Act's yanking $2 billion in rebates. Supply's stuck at 80% capacity through 2026; doses are rationed. Throw in a 25% recession shot, and elective scripts tank. Price fights could drag Lilly's margins to 30% while Novo hangs at 60%. Even that Trump-Lilly pricing deal floating around on X? Feels like a band-aid, not a fix. Short-term pop, long-term drag.

If you're eyeing a short, and I am, this is the spot. Valuation's begging for it. Grab puts for March 2026 around $950, add on any dip below $900. Keep it to 20% of your book, cover half at $750, trail the rest. August's Orforglipron flop already shaved 14%; more headlines like that, and you get 10-15% drops easy. Chanos-types have made banks on pharma peaks before. Sentiment on X is shifting. Bears gaining ground.

Anyway, LLY's fun while it lasts, but the party's thinning out. Earnings hid the wobbles, insiders spotted 'em first. 40% downside in a year? Seems priced in. What do you think, short or wait?

That's all for now.

Until Next Time,

- Equity Insider