Eli Lilly (LLY.NYSE) received US Food and Drug Administration approval of Foundayo (orforglipron) on April 1 for patients with obesity/overweight, after an accelerated review using a national priority voucher. Shares rose 4% in intraday trading on the news.

Why it matters: We anticipated approval early in the second quarter, and this kicks off a competition between Novo’s Wegovy pill (launched in early January) and Lilly’s Foundayo, particularly in the direct-to-patient channel where sales can ramp almost immediately.

  • Lilly has priced Foundayo at $149-$399 per month depending on dosage, higher than the $149-$299 range for the Wegovy pill, and discount subscriptions announced March 31 bring Wegovy pill’s price for the highest dose down even further to $249.
  • We assume about one-third of the $180 billion global GLP-1 market in 2034 could be driven by oral drugs, led by Foundayo (nearly $40 billion by 2034) and Wegovy pill (around $10 billion in 2034 and declining due to generic competition).

The bottom line: We’re maintaining our $870 fair value estimate for wide-moat Eli Lilly. We think Foundayo’s ease of manufacturing and established inventory will help it share the oral market in the US and dominate international launches, but Lilly shares look fairly valued.

  • Foundayo’s efficacy in the Attain-1 study—11.5% placebo-adjusted weight loss at 72 weeks—looks slightly weaker than Wegovy pill’s 13.9% weight loss at 64 weeks in the Oasis 4 trial, and the semaglutide molecule’s established safety profile should help Novo maintain significant US share.
  • While Lilly is pointing to a lack of food or water restrictions as a differentiating factor from the Wegovy pill, we’re not convinced that a 30-minute wait between taking the pill and eating a meal is a significant barrier to use.

Eli Lilly’s Dominant Diabetes and Obesity Portfolio Underpins a Wide Moat

Eli Lilly’s innovative culture and strong financial commitment to developing the next generation of drugs set the company apart from its peers and fuel its long-term growth. Lilly holds industry-leading growth potential as it is launching several new blockbusters and patent losses are fading.

Lilly’s internal pipeline is well positioned to mitigate the patent losses during the next decade. The company tends to spend a low- to mid-20s percentage of its sales on financing the development efforts of new drugs, much higher than the high-teens industry average. The robust pipeline is a result of Lilly’s strong commitment to research. We believe cardiometabolic drugs Mounjaro, Zepbound, and Jardiance as well as immunology drug Taltz, cancer drug Verzenio, and Alzheimer’s drug Kisunla hold the highest sales potential of Lilly’s currently launched drugs. Recently approved atopic dermatitis drug Ebglyss (lebrikizumab) and pipeline cardiometabolic drugs retatrutide and orforglipron hold major blockbuster potential.

While Novo Nordisk was first to launch a GLP-1 therapy into the obesity market, Lilly’s Mounjaro/Zepbound has quickly gained share in both diabetes and obesity, due to its higher efficacy in trials (including a head-to-head study). Overall, we see a $200 billion market potential for GLP-1 therapies by 2034 ($65 billion diabetes and $135 billion obesity/overweight). We think Lilly will hold more than 50% share for the foreseeable future.

The company is driving margin gains with the strong sales growth. Through operating efficacy gains from top-line growth, Lilly expanded operating margins into the mid-40s in 2025. It expects to increase gross margins through productivity initiatives and greater capacity utilization in the long run, although royalties to Chugai for orforglipron and a growing late-stage pipeline are likely to limit further upside. Overall, we view the strong traction of recently launched high-margin drugs in several indications as supporting strong double-digit growth for the rest of the decade.

Bulls Say

  • Lilly’s strong leadership in weight-loss drugs should drive industry-leading growth, given its approved drugs and well-positioned next-generation weight-loss drugs in the pipeline.
  • Lilly is following its maturing cancer drug Verzenio with newer oncology therapies Inluriyo and Jaypirca, maintaining strong oncology growth potential.
  • Lilly has launched a new Alzheimer’s drug (Kisunla) that could become a major blockbuster, especially since few treatment options exist for the disease.

Bears Say

  • The risks to success for Kisunla remain high because of bottlenecks in patient diagnosis, required scans and monitoring, and competition.
  • Several of the company’s next-generation cardiometabolic drugs could lead to cannibalization of current approved Lilly drugs.
  • Competition to weight-loss drug Zepbound could significantly increase over the next three years from established competitor Novo Nordisk as well as new entrants.

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Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

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Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.