Eli Lilly Stock Drops 14.14% as Orforglipron Falls Short of Wegovy

On August 7, Eli Lilly and Company, a prominent pharmaceutical firm, experienced a significant drop in its stock price, declining by 14.14%. This substantial decrease was attributed to market expectations that were higher than the actual performance of the company's star oral weight loss drug. The drug, Orforglipron, showed an average weight loss of 12.4% over 72 weeks in its phase three clinical trial, which, while impressive, fell short of the 14.9% weight loss achieved by Novo Nordisk's injectable Wegovy in previous trials. This discrepancy led to a wave of disappointment among investors, resulting in a pre-market stock price drop of approximately 14%.

The clinical trial data revealed that the highest dose of Orforglipron (36 milligrams) allowed participants to lose an average of 12.4% of their body weight over 72 weeks, compared to a mere 0.9% for the placebo group. Lower doses of the drug showed an average weight loss of 7.8%. Despite these results, the market had anticipated that Orforglipron would match or even surpass the performance of Wegovy. Analysts from Barclays expressed that the results were a shock to the market, as they fell short of Wegovy's performance.

The most common side effects observed during the trial were gastrointestinal issues, with 33.7% of participants in the high-dose group experiencing nausea and 24% experiencing vomiting, compared to 10.4% and 3.5% in the placebo group, respectively. Approximately 10% of participants in the high-dose group discontinued the trial due to side effects. However, the trial did not reveal any significant risks related to liver function.

Eli Lilly's management expressed optimism about Orforglipron, highlighting its potential as a new option for early intervention and long-term management of obesity. The company also noted that the drug could reduce cardiovascular risk factors such as cholesterol, triglycerides, and blood pressure. Eli Lilly has already initiated production preparations to avoid the supply shortages experienced with previous drug launches, such as Zepbound and Mounjaro. The complete data from the trial is expected to be presented at a diabetes medical conference in Europe next month, with Eli Lilly planning to submit a marketing application to regulatory authorities by the end of this year.

The weight loss drug market is projected to exceed 100 billion by the early 2030s, with Eli Lilly and Novo Nordisk currently leading the market. Analysts and investors have expressed concerns that if Orforglipron fails to outperform Wegovy, Eli Lilly may lose some of its competitive edge in the future. This sentiment was echoed by a shareholder, who noted that the results were favorable for Novo Nordisk, as the threat from Eli Lilly had diminished.