(Bloomberg) -- Pfizer Inc.’s second weight-loss setback this year is a warning sign that breaking into the lucrative obesity market isn’t going to be easy. 

The New York drugmaker dropped development of a twice-daily version of its danuglipron obesity pill due to nausea and vomiting, according to a statement Friday. The shares fell as much as 7.1%, their biggest intraday loss in more than three years, as of 11:06 a.m. in New York.

Weight-loss shots made by Eli Lilly & Co. and rival Novo Nordisk A/S are a gold mine that’s propelled them to dizzying valuations and lured other drugmakers into the field. Pfizer, AstraZeneca Plc and others see pills as a way to make inroads into a market projected to reach $100 billion within seven years.

Pfizer has said that pills will capture a third of the obesity market. The company had pinned its hopes on danuglipron after discontinuing another experimental obesity drug in June due to safety concerns. 

While the most common adverse events in Pfizer’s study were mild, rates were high. Nausea was seen in as much as 73% of patients, vomiting in about 47% and diarrhea in up to 25%.

Competitive Market

In a mid-stage trial, patients lost as much as 13% of their body weight in 32 weeks. Analysts were looking for body-weight reduction in at least a mid-teens percentage for the drug to compete with Lilly’s experimental weight-loss pill, which helped patients with diabetes and obesity lose almost 15% in 36 weeks.

“The data highlights the very competitive nature of the obesity category,” with Lilly and Novo way ahead, Mizuho’s Jared Holz said in a note. Pfizer’s pill “does not appear too competitive with the leading drugs,” he said. 

Pfizer halted another obesity drug candidate, lotiglipron, in June after tests suggested liver toxicity. Pfizer’s pill is a small molecule, which may have higher risks of liver toxicity than peptide-based drugs like Ozempic, according to analysts from Truist. However, treatment with danuglipron wasn’t associated with increased liver enzyme levels that can indicate toxicity, good news for other companies developing weight-loss pills, analysts from Leerink Partners said in a note. 

Lilly rose as much as 1.9%, while Astra gained as much as 1.8%. Structure Therapeutics Inc., which has an obesity drug in mid-stage trials, added as much as 6.8%. 

Path Forward 

Pfizer said it will continue developing a once-daily version of danuglipron that patients may tolerate more easily. Early-stage data from that pill is expected next year that will “inform a path forward,” the company said.

The company will likely “remain committed to pursuing the category,” analysts from Wolfe Research said in a note. “One solution would be to pick up a molecule through M&A of one of various small biotech companies that are chasing the category.”

What Bloomberg Intelligence Says:

Pfizer’s decision to discontinue twice-daily danuglipron in obesity is probably tolerability-related, though efficacy-wise, it only seems on par — at best — with Novo Nordisk and Eli Lilly’s rival oral GLP-1s. The pair are ahead in the race and also have the advantage of once-daily dosing. Consensus has $1.1 billion of 2030 sales for danuglipron. 

— BI analysts Michael Shah and Sam Fazeli. 

Read the research here. 

The research disappointment is delaying efforts by Pfizer to make up for a huge revenue gap left by the fading pandemic. The company slashed its annual sales forecast range by $9 billion on Oct. 13, citing falling sales of Covid-19 shots and the company’s Paxlovid pill.

In addition to obesity, Pfizer is turning its efforts back to cancer. The company agreed in March to pay $43 billion for Seagen Inc., one of the makers of antibody-drug conjugates that are among the hottest new classes of oncology drugs. 

--With assistance from Gerry Smith.

(Updates with chart, more drugmakers shares.)

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