Riches and gifts roll on for Lilly Endowment

The Lilly Endowment is writing a flurry of big checks again and recently sold more than $50 million worth of stock in namesake drugmaker Eli Lilly and Co. to fund the gifts, many of them to Indiana organizations.

The Indianapolis-based endowment, one of the largest philanthropic organizations in the country, normally sells thousands of Lilly shares every year to raise money for grants to a wide range of organizations, from churches to public parks.

But the most recent round of selloffs, in late August and early September—totaling $50.1 million—saw the endowment cash in as the drugmaker’s stock skyrocketed to an all-time high of $972 a share on Aug. 22. The endowment sold nearly 52,000 shares at or near the top of the market in blocks ranging from $966 to $972 a share.

The endowment, which is the largest holder of Lilly stock, has been riding a burgeoning wave for years as shares in the drugmaker climbed higher and higher, temporarily pushing the endowment’s assets above $94 billion in August, up from about $41 billion in 2022.

Lilly stock has increased nearly sixfold in the past five years due to huge investor interest in the company’s newest drugs, including diabetes treatment Mounjaro and obesity treatment Zepbound, along with dozens of experimental drugs still in clinical testing.

Even so, Lilly shares have lost a bit of steam in recent months, falling into the mid $700 range this month, trimming the endowment’s wealth back to about $70 billion, based on an IBJ review of government filings and Lilly’s stock performance.

The famously guarded endowment, which rarely grants interviews, declined to make a senior leader available to IBJ. An endowment spokeswoman declined to discuss stock sales in detail.

“The endowment attempts to make sales of Lilly stock and engage in other financial transactions at times and on terms that are favorable to the endowment,” Judith Cebula said.

“The endowment’s sales of Lilly stock are subject to the authorization and oversight by its board of directors,” Cebula added. “The endowment’s staff and directors do not discuss the board’s directions and decisions on these matters.”

Some outside experts say they doubt the endowment tries to time the market to sell Lilly shares at the best price—the recent sales just happened to be especially well-timed.

Roger Lee, director of research at Columbus-based Kirr Marbach & Co., said a review of endowment sales of Lilly stock over the past five years shows a “steady cadence,” regardless of Lilly stock value on any one day. The “very linear” pattern suggests a regular sequence of sales rather than the endowment waiting for the stock to hit a certain price before selling, he said.

Philanthropic foundations like the Lilly Endowment are required under federal law to give away funds, in the form of grants or gifts, of at least 5% of the average fair market value of their assets during a given year. That is determined by a complex calculation and is payable over a two-year period.

A simplified, back-of-the-notebook calculation finds Lilly Endowment, at its current estimated value of $70 billion, would have to give away roughly $3.5 billion a year to keep up with federal requirements.

That might explain why the endowment has made such large grants in the past year or so, several worth $100 million or more.

In 2023, the endowment awarded $1.51 billion in grants. Grants tied to religious purposes and organizations accounted for $540 million, or 36% of the total. Community development grants accounted for $488 million, or 32%. Education grants accounted for $481 million, or 32%.

Most of the grants paid in 2023—$923 million, or 61%—supported charitable efforts in Indiana, according to the endowment’s 2023 annual report. (The endowment normally issues its annual report each spring.)

During 2023, the endowment approved 1,459 grants for a total of $1.72 billion to 1,081 grantees. Grants are not distributed immediately upon approval; awarding the money sometimes comes months later.

Like some other large foundations, the Lilly Endowment has made numerous “mega-gifts,” worth $100 million or more. Such nine-figure gifts were once rare but are increasingly common as the stock market sets records and many philanthropies get richer.

This year alone, the Lilly Endowment has announced or approved a flurry of mega-gifts, including its largest ever, $250 million to the Indiana Economic Development Corp. to support community development projects.

Other large gifts were $100 million to the United Negro College Fund for scholarships and endowments at historically Black colleges and universities and $100 million to Purdue University (in the form of two $50 million grants) to support a new business school and a university-wide computing and artificial intelligence initiative.

All three grants were announced in January, although Cebula said they were actually approved last year.

“The endowment is pleased to have the opportunity to make more grants and larger grants at this time because of the relatively high value of its investment assets,” she said.

Amir Pasic, dean of the Indiana University Lilly Family School of Philanthropy, said it takes less overhead for a foundation to issue five big gifts than it does, say, 50 smaller ones.

“If there’s a rapid increase in wealth, one way of satisfying the requirements or getting the money out is to make a bigger gift … ,” he said. “The whole idea of bigger gifts and having more big impact, that’s been in the conversation around philanthropy for the past 20 years.”

The bulk of the Lilly Endowment’s assets consists of stock in the drugmaker, a practice that started when J.K. Lilly, son of company founder Col. Eli Lilly, set up the endowment in 1937 with his sons through gifts of stock in their business.

The first donations of 17,500 Lilly shares were originally valued at $262,500, according to the endowment’s website.

Several non-family members contributed an additional 210,000 shares, valued at $1.1 million. And the endowment was included in the estate plan of Ruth Lilly, the daughter of J.K. Jr., resulting in gifts from her, beginning in 2003, totaling more than $200 million.

Today, the Lilly Endowment and Eli Lilly and Co. share a name but have no legal connection.

Since 2003, the Lilly Endowment has sold more than 50 million Eli Lilly and Co. shares, or about 30% of its holdings. But as of Dec. 31, Lilly shares accounted for 93% of the endowment’s wealth.

Yet the endowment remains the largest holder of Lilly stock, holding 10.5% of Lilly’s outstanding shares as ofFeb. 28, according to Lilly’s proxy statement filed earlier this year.

The next-largest holder is the Philadelphia-based Vanguard Group, with 7.5% of Lilly’s outstanding shares.•