The news: Eli Lilly’s stock plunged about 14% on Thursday as clinical results of its experimental obesity pill orforglipron fell short of Wall Street expectations.

• The highest dose of the pill helped adults lose between 11% and 12% of their weight after 72 weeks of treatment, with precise figures varying depending on how long people stuck with the drug.
• Analysts expected the pill would help people lose about 15% of their weight, which was achieved by rival Novo Nordisk’s oral version of Wegovy in a late-stage trial.

Zooming in: Expectations for Lilly’s oral GLP-1 were high following study results earlier this year that orforglipron helped type 2 diabetes patients lose a similar amount of weight compared with Ozempic. Still, Lilly’s CEO David Ricks said he wasn’t disappointed by the phase 3 clinical trial data and noted that Lilly plans to submit a marketing application for the medication to the FDA by the end of 2025. Novo did the same earlier this year for its oral GLP-1.

The bigger picture: The market battle between Lilly and Novo pushes forward. Novo missed its Q2 earnings, but gained a temporary lead in the oral GLP-1 race on Thursday.

• But Novo recently cut its full-year guidance as prescriptions of Wegovy trail Lilly’s Zepbound, while the compounded GLP-1 market continues to weigh on the company’s weight loss drug business.
• Novo cautioned that company layoffs are forthcoming. The company’s stock is down ~45% year to date.

Meanwhile, Lilly raised its 2025 guidance on the back of booming sales of its GLP-1 drugs Zepbound and Mounjaro.

• Both blockbuster GLP-1s outperformed in Q2: Zepbound sales are up 172% year over year, and Mounjaro’s are up 68%.
• The two combined to generate nearly $8.6 billion in Q2 revenues.

Our take: We think Lilly has the edge over Novo, despite Thursday’s market reversal due to Lilly’s obesity pill falling short in its trial. That’s likely just a near-term blip—12% weight loss in a little over a year validates that the medication is quite effective, especially when considering that most people would prefer a pill to injecting themselves. Lilly also has in its favor that Zepbound drives better weight loss results than Wegovy, while it faces less competition from the copycat GLP-1 market since semaglutide is more commonly compounded than tirzepatide.

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