What Happened?
Shares of global pharmaceutical company Eli Lilly (NYSE: LLY) fell 13.9% in the afternoon session after its oral weight-loss drug trial results disappointed investors, overshadowing an otherwise strong quarterly earnings report and guidance increase.
The pharmaceutical company announced late-stage trial data for its oral weight-loss pill, orforglipron, which showed an average weight loss of 12.4%. This figure fell short of analyst expectations, which anticipated a result closer to 15%, and also trailed the effectiveness of a rival treatment from Novo Nordisk. This disappointing development overshadowed Eli Lilly's strong second-quarter financial report, where the company beat earnings estimates and raised its full-year sales and profit forecasts. Investors reacted to the perceived setback in the highly competitive weight-loss drug market, triggering the most significant single-day stock drop in over two decades.
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What Is The Market Telling Us
Eli Lilly’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. But moves this big are rare even for Eli Lilly and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 9 days ago when the stock dropped 4.3% on the news that its key competitor in the weight-loss drug market, Novo Nordisk, lowered its sales and profit growth forecasts for 2025. The lowered guidance from the Danish pharmaceutical giant cast a shadow over the high-growth weight-loss drug sector. This was the second time this year Novo Nordisk had reduced its outlook, which amplified investor concerns about the market's future performance. Compounding the issue, Eli Lilly also faced headwinds as CVS Caremark implemented coverage restrictions on its popular weight-loss drug, Zepbound, in response to surging demand. The combination of a major competitor's weakened forecast and specific access challenges for one of Lilly's key products appeared to prompt the sell-off.
Eli Lilly is down 17.3% since the beginning of the year, and at $643.46 per share, it is trading 33% below its 52-week high of $960.02 from August 2024. Investors who bought $1,000 worth of Eli Lilly’s shares 5 years ago would now be looking at an investment worth $4,208.
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