Eli Lilly and Novo Nordisk: Obesity Drug Coverage in Medicare Not a Straight Path
We have raised our fair value estimate for Eli Lilly.
The Centers for Medicare and Medicaid Services issued a final rule on April 4 related to Medicare changes, opting not to finalize a proposed rule to expand obesity drug coverage to Medicare Part D.
Why it matters: Expansion of US access to GLP-1 therapies for obesity will be critical for broader uptake of the therapies.
- Eli Lilly LLY and Novo Nordisk NVO are in a two-way race to dominate the GLP-1 market, which is on track to surpass $200 billion by 2031.
- Of the 110 million Americans with obesity, roughly 30 million are eligible for Medicare Part D.
The bottom line: After taking the opportunity to reassess the relative merits of the pipelines of the two firms, we’re raising our fair value estimate for Lilly to $650 per share from $620 and maintaining our fair value estimate for Novo of $89 per share.
- We had not assumed this proposed rule would pass, and we continue to think Novo and Lilly will gain Medicare obesity drug coverage via overlapping indications with time, such as Zepbound’s recent approval in sleep apnea and semaglutide’s potential 2026 approval in liver disease.
- We now assume that orforglipron sales could approach $20 billion by 2034, up from roughly $10 billion in our prior valuation. We think prior efficacy data and the ease of small molecule manufacturing and distribution bode well for the program.
Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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