After being hit by stock price shocks, the "weight loss duo" feels the "excitement" of Wall Street

In the rapidly growing GLP-1 weight loss drug market, even industry leaders cannot rest easy.

The market duopoly of Novo Nordisk and Eli Lilly, with their strong financial data, is no longer sufficient to support their stock prices. Wall Street's extremely high expectations are making the market unusually sensitive, and any hint of underperformance could trigger severe sell-offs.

This week, this tension was vividly illustrated. After Novo Nordisk announced a 18% year-on-year increase in second-quarter sales to $24 billion, its stock price still fell 3.9% on Wednesday. The Danish company had previously significantly lowered its full-year sales growth forecast, leading to a more than 20% drop in its stock price last week.

Then on Thursday, it was Eli Lilly's turn to feel the market's "coldness." Despite its quarterly sales exceeding expectations with a 38% increase to $15.6 billion, its stock price plummeted over 14% due to a clinical trial data for an oral weight loss drug that failed to meet analysts' highest expectations, heading towards the steepest single-day decline in 25 years.

Expectation Gap: When Strong Performance Falls Short of "Perfect" Standards

For Eli Lilly, the stock price plunge on Thursday stemmed from the clinical data of its experimental GLP-1 oral drug Orforglipron. The trial results showed that the drug achieved an average weight loss of 11.2% in obese adults.

Eli Lilly's Chief Scientific Officer Dr. Daniel Skovronsky insisted during the earnings call that this was "the best result achievable" for a daily oral small molecule drug. However, this data did not meet Wall Street analysts' average weight loss expectations of 14% to 15%.

Deutsche Bank analysts noted in a research report that the data might be sufficient for approval from the U.S. Food and Drug Administration (FDA), "but in terms of commercial competitiveness, we believe a higher degree of price concessions may be needed than expected."

Analysts at William Blair were more direct, stating that Eli Lilly's "rare misstep in its impregnable obesity product line could create opportunities for smaller competitors," marking a "once-in-a-lifetime moment."

While Eli Lilly's stock price plummeted on Thursday, its competitor Novo Nordisk's stock price actually rose by about 7%. Novo Nordisk had previously announced that its oral version of Wegovy showed an average weight loss effect of 13% in a clinical trial and submitted an approval application to the FDA in May.

However, Novo Nordisk itself is also under immense pressure. The company not only announced the termination of several new weight loss drug developments, but its stock price has fallen nearly 50% this year. A year ago, Novo Nordisk was the highest-valued company in Europe, but it has now dropped to 11th place.

The Siege of Generic Drugs and the "Reserve Army"

In addition to direct competition with each other, the two giants also face immense pressure from external sources. On one hand, approximately 39 companies worldwide are developing oral GLP-1 drugs, with Structure Therapeutics expected to announce the results of its highly anticipated drug trials in the fourth quarter.

On the other hand, "compounders" providing low-cost customized GLP-1 drugs are eroding their market share. Although the FDA announced the end of the drug shortage in March, these pharmacies continue to operate in a legal gray area. Novo Nordisk stated that over one million people are still using such drugs and has filed 132 lawsuits regarding this issue. Eli Lilly has also sued several compound pharmacies.

The Huge Temptation of a Trillion-Dollar Market

Investors are being so "picky" because they are betting on a market with enormous potential. According to Morgan Stanley's research department, the global weight loss drug market is expected to grow from approximately $15 billion today to $150 billion by 2035.

The vast market prospects have attracted numerous challengers and raised expectations for industry leaders. Furthermore, the application scope of GLP-1 drugs is continuously expanding, initially for weight loss, now extending to the prevention of heart disease, treatment of sleep apnea, and showing potential in kidney disease, Alzheimer's disease, and even reducing cancer risk, which further elevates the market's imaginative space and investors' expectation thresholds