Anyone who’s been on a diet can likely relate: Those first lost pounds are met with a sense of euphoria. The voice inside one’s head screams: “I’ve got this!” But then, it inevitably becomes a slog. The initial novelty wears off, and the real work begins. Investors may see a parallel to the initial elation around Novo Nordisk ‘s Wegovy and Eli Lilly ‘s Zepbound. The drugs, which mimic incretin hormones such as GLP-1 and GIP to control blood sugar, suppress appetite and aid weight loss, offering patients the promise of results that approach the levels seen by bariatric surgery. The medical community cheered the once-a-week injections as game changers, and investors bid up the stocks, seeing a blockbuster opportunity. But it didn’t last. Yuri Khodjamirian, chief investment officer at Tema ETFs, told CNBC that investors hit “peak excitement” last summer. The firm manages the Tema GLP-1, Obesity & Cardiometabolic ETF (HRTS) , and remains optimistic about the category’s long-term growth potential. Especially as market leaders Novo and Lilly present further clinical evidence that GLP-1s work to improve overall health beyond weight loss. Still, the mood has cooled as the pace of growth has proven unpredictable, leading to earnings disappointments and frustrated investors. As the outlook for GLP-1 medications has grown murkier, some stocks that were expected to suffer from the drugs’ success have recovered. Both Novo and Lilly have spent billions to expand manufacturing capacity to meet the tremendous demand. The companies have also had to contend with drug compounders encroaching on their business by exploiting a loophole that allows pharmacies to make versions of drugs in shortage . Where the weight loss trade heads in 2025 will be determined by further ramp-ups in supply, news on next-generation drugs in the pipeline, and regulatory clarity on drug pricing and GLP-1 access. “Lilly and Novo need to start to deliver better results,” Khodjamirian said. “That’s going to benefit all the players. And then the orals could start to unlock that one final bit. … Once you have orals, the market starts to expand in size.” Oral versions of the drugs will be easier for many patients to take, especially those leery of once-a-week injections that are currently necessary. Also, they are less expensive and easier to manufacture, which will ease supply bottlenecks. Trillion-dollar market cap ahead? Phase 3 data on orforglipron, Lilly’s oral GLP-1 drug, is expected next year. Positive data could put the stock back on its march to a $1 trillion market capitalization. During the first half of the year, Lilly’s stock seemed destined to reach the milestone. But as of Friday’s close, its shares had fallen 13% over the past six months. Year to date, the stock is still up nearly 33%, outpacing the S & P 500’s 26% gain. LLY YTD mountain Eli Lilly shares year to date. Analysts remain optimistic about Lilly’s outlook. According to FactSet, 77% rate the stock a buy or overweight; only one is at a sell. The shares are expected to rise more than 30% from Friday’s close of $767.76 to an average price target of $1,008. However, the stock isn’t immune to the political environment that has pressured pharmaceutical stocks. There’s concern that Robert F. Kennedy Jr., President-elect Donald Trump’s choice to head the U.S. Department of Health and Human Services, might restrict GLP-1 use, according to Barclays analysts. But it’s unclear how Kennedy might prioritize various policy initiatives if he is confirmed. Also, there have been positive comments by Elon Musk about GLP-1 drugs, which could support the category. “We see Lilly in a strong position to work creatively with the new administration to expand access to GLP1s (albeit recognizing that there is always a trade-off between access & price),” Bernstein analyst Courtney Breen wrote in a recent note to clients. Compared with Novo, she expects Lilly has a slight advantage as a U.S.-based company and a faster path to scaling production volume. Meanwhile, the Biden administration had proposed a rule that would have allowed Medicare and Medicaid to cover weight loss drugs. Lilly and Novo have been working to gather clinical evidence that GLP-1 medications help conditions such as sleep apnea and reduce cardiovascular risk — a strategy that has helped more patients gain coverage. It’s unclear whether the new administration will take up this cause, or leave a ban on coverage of weight loss drugs in place at the federal insurance programs. CagriSema disappoints Hope for Novo’s stock had rested on clinical trial data for CagriSema, its next generation obesity drug. When the news broke Friday, the company saw $125 billion in market value vanish. Patients in the trial lost an average of 22.7% of their weight after 68 weeks. The result was below the 25% to 30% range Novo had anticipated, though the Danish company said it was “encouraged” by the data . With Novo shares trading at their lowest level in 18 months, average analyst price targets estimate the stock could rebound 58% in the coming year. Several analysts said Friday’s reaction was too severe and was the fault of a poorly structured trial and lofty expectations. NVO YTD mountain Novo Nordisk shares year to date Like Wegovy and Ozempic, CagriSema is administered via a weekly injection and contains semaglutide. However, the drug also includes cagrilintide, a separate molecule that acts like amylin, a pancreatic hormone. The weight loss patients achieved in the trial topped Wegovy’s average of 15%, and was on par with Zepbound’s nearly 23% result in clinical studies. And some 40.4% of those enrolled in the CagriSema trial lost more than 25% of their starting weight. Further, not all the patients took the highest dose of the drug, leading to questions about the study was constructed. Novo said it was going to begin a new trial in the first half of next year and would likely submit the drug for regulatory approval late next year. According to Stifel analyst Eric Le Berrigaud, 25% looked like a “magic number” because it would have made CagriSema the product that would be likely to give patients the greatest chance at significant weight loss and ahead of rival Lilly’s Zepbound. Novo is facing pressure to lessen its dependence on semaglutide, the active ingredient in both Wegovy and diabetes drug Ozempic, as it may wind up on the next list of drugs for Medicare price negotiation. “[Semaglutide] is expected to represent, across the different formulations and brand names, about 70% of group’s revenues in 2027 and although it is still part of CagriSema, the cagrilintide component of the combination would be protective for what the drug generates,” Le Berrigaud wrote in research note ahead of the release of the trial data. Others in the pipeline Zealand Pharma , another company working on an amylin analog drug, fell on Friday, reacting to Novo’s news. Its shares are up 80% year to date. Novo’s experience underscores how challenging it will be for upstarts to unseat the duopoly that has been built with Lilly. Amgen earlier this month announced its experimental drug MariTide helped patients shed 20% of their weight . At one point, this would have been cheered as a huge advancement, but now investors need more to be impressed. Amgen shares fell on the news, and are down nearly 9% year to date. VKTX YTD mountain Viking Therapeutics shares year to date. But dozens of companies, both large and small, are still in pursuit of the holy grail. One reason is that the potential market is vast, and patients need to continue these drugs in perpetuity in order to keep their benefits. Some players may emerge with a manufacturing advantage, while others may create a drug that provides health benefits that are a better fit for some patients. So the field will remain crowded. Among these stocks, Viking Therapeutics shares are “quite interesting,” Tema’s Khodjamirian said. “Their data is quietly better and better, while their share price has been going down.” Viking Therapeutics shares have risen 127% year to date, but the stock, which closed at $42.25 on Friday, has more than halved since it hit an all-time high of $99.41 back on Feb. 28. Beyond Big Pharma As obesity drug stocks faltered, the other side of the weight-loss drug trade has rebounded. These stocks include diabetes technology providers such as Dexcom and Insulet . Dexcom shares are still down more than 35% this year, but the stock has climbed almost 14% over the past three months. Insulet has fared even better. Its shares are up 2% this year, thanks to a 34% rally over the past six months. DXCM YTD mountain Dexcom shares year to date Barclays analysts are anticipating that 2025 will be “an inflection point” in the GLP-1 narrative, as the number of patients taking the drugs is far less than the potential market size. Increased drug production will make it possible for additional patients to get access. That may mean food and beverage stocks will see a more pronounced impact from changes in consumer habits, they said. Companies such as Nestle and Conagra have started to develop new products to serve this market. Campbell Soup has commented on how soup might be well suited for those taking these medications. Barclays analysts expect Danone , with its protein-packed yogurt brands, could be “the biggest potential winner from the GLP-1 landscape.” European-listed shares are up about 9% year to date “Health is truly at the heart of Danone’s brand and ethos — and this is reflected in its portfolio, of which 90% is deemed suitable for daily consumption and is non-HFSS (high fat salt & sugar),” said Barclays analyst Warren Ackerman, in a research note dated Dec. 16. “With protein products potentially becoming more and more popular as GLP-1 users look to fortified products to tackle muscle wastage, Danone’s Oikos product has the high-protein benefits consumers might be looking for.” In addition to watching penetration — or the number of people taking incretin medications — compliance is also an issue, as many patients stop taking thes drugs within a year. “Against the current market backdrop, whereby more assets are coming to the market, and with an expected shift in regulation that could be constructive for deal-making, we expect GLP-1 considerations to remain topical in the food and beverage sector,” said Priya Ohri-Gupta, an analyst at Barclays U.S. consumer division.