Can Eli Lilly Keep Up as NVO Eyes First Oral Obesity Pill Approval?

Eli Lilly's shares declined 18.6% last week after its oral GLP-1 candidate, orforglipron, delivered a 12.4% weight loss in a Phase III study, falling short of investor expectations for efficacy comparable to injectable therapies, despite Zepbound's strong sales prompting an increased 2025 revenue outlook to $60-62 billion. This setback has shifted market focus to Novo Nordisk, whose shares gained 4.7% as it anticipates an FDA decision by year-end on its 25mg oral semaglutide, positioning it for a potential first-mover advantage in the critical and rapidly developing oral obesity treatment market.

Analysis

The competitive landscape in the lucrative obesity drug market is undergoing a significant shift, with market leadership now hinging on the development of oral therapies. Eli Lilly (LLY), despite demonstrating market dominance with its injectable Zepbound—which generated $5.69 billion in H1 2025 sales and prompted a full-year revenue guidance increase to $60-$62 billion—has suffered a major strategic setback. Disappointing Phase III results for its oral candidate, orforglipron, revealed a weight loss of only 12.4% and high patient discontinuation rates, falling short of investor expectations and triggering an 18.6% drop in LLY's share price last week. This development has directly benefited its primary competitor, Novo Nordisk (NVO), whose stock gained 4.7% in the same period. NVO is now positioned to gain a critical first-mover advantage in the oral segment, with its 25 mg oral semaglutide under FDA review and a decision anticipated by year-end. While LLY's stock trades at a premium forward P/E of 22.85, this is below its five-year average, and a slight downward revision to its 2026 earnings estimates reflects the newfound uncertainty in its long-term growth trajectory.

Key Decisions for Investors

• Investors should re-evaluate Eli Lilly's risk profile, as the underwhelming orforglipron data significantly weakens its competitive position in the next-generation oral obesity market, potentially capping long-term growth prospects despite strong current sales from Zepbound.
• Consider Novo Nordisk as a potential beneficiary of this market shift, given the upcoming FDA decision on its oral semaglutide by year-end, which represents a major near-term catalyst for capturing first-mover advantage.
• Monitor the broader competitive pipeline, particularly upcoming data from Viking Therapeutics' oral obesity candidate, as the market is highly sensitive to clinical trial outcomes and regulatory news.
• Despite Eli Lilly's 19% year-to-date decline, its valuation remains at a premium to the industry, suggesting that a cautious or hedged approach may be warranted until there is more clarity on its next-generation pipeline.