We would like to let subscribers know that we're adding to our position in Eli Lilly (LLY) by buying shares at an average price of 215.8$/share. Following this purchase, LLY will take up 7.36% of our portfolio (compared to the 8% allocated).

The purchase decision was made on a day LLY is trading down 4% on Alzheimer's related news. As reported here, the Centers for Medicare and Medicaid Services, who sets rules and determines whether a drug will be covered by Medicare and Medicaid programs, recommended that patients need to be part of a medical trial in order to have their Alzheimer's drug covered by the programs. The problem here is that such medical trials are cumbersome to carry out and are likely to dissuade physicians from prescribing the drug altogether.

While we acknowledge that this ultimately diminishes the commercial opportunity for Eli Lilly's Donanemab (Alzheimer's treatment), and it's very understandable why the stock trades down ~4% today, we believe this is a down-the-road obstacle and does not pose any near-term effect to earnings. Specifically, Lilly is still in the process of ramping up their application for FDA approval for Donanemab (see details here), which is expected to be done sometime in 2022. This means currently Lilly is not earning any money from Donanemab and therefore the news does not affect 2022 financial guidance.  However, prices of LLY shares have fallen to levels BEFORE we received a strong 2022 financial guidance on December 15th 2021, one that sent shares of LLY from 249.38 on the previous day's close to 275.28 on the next day's close. In other words, buying shares of LLY here means we are getting in at a price level BEFORE the company announced strong financial guidance (details here).