In the pharmaceutical world, it's never good for a company to stumble in a hot therapeutic area, especially if it has some determined rivals competing in the same segment.

That was the dynamic behind Wegovy and Ozempic developer Novo Nordisk's (NYSE: NVO) Friday stumble on the stock exchange --following its latest news from the lab -- and the gains enjoyed that day by up-and-coming Viking Therapeutics (NASDAQ: VKTX) and pharmaceutical titan Eli Lilly (NYSE: LLY). Novo Nordisk's stock price declined by nearly 6% on the day, while the two gainers rose 3.4% and 0.7%, respectively.

Side effects reported for investigational drug

The news item from Novo Nordisk that was so impactful was the readout from a clinical trial of monlunabant, an investigational treatment it's testing for obesity. In a phase 2a clinical trial involving 243 participants, the drug showed efficacy in producing weight loss with daily 10 milligram doses-- patients taking it shed an average of 7.1 kilograms (15.7 pounds), compared to only 0.7 kilograms (1.5 pounds) with a placebo.

The patients were divided into four groups, one of which was administered the placebo. The other three received different doses of the medication, specifically 10 milligrams, 20 milligrams, and 50 milligrams.

However, monlunabant demonstrated some concerning side effects in the trial. Novo Nordisk said that the most common of these were of a gastrointestinal nature. The severity of most was mild to moderate and was dose-dependent. The company added that there were more frequent occurrences of neuropsychiatric side effects such as anxiety and sleep disruption. Again, these were dose-dependent.

While touting the drug's potential for weight loss, in its press release on the results Novo Nordisk admitted that "further work is needed to determine the optimal dosing to balance safety and efficacy."

The company said it aims to move to a phase 2b trial in order to "further investigate dosing and the safety profile of monlunabant over a longer duration in a global population."

Weight loss for profit gain

No matter how efficacious a drug may be, if it produces a series of worrying side effects it has quite a reduced chance of winning approval from regulators.

So with Novo Nordisk's effective "back to the drawing board," news of monlunabant, investors cautiously pulled out of the Denmark-based company to the benefit of Eli Lilly and Viking. The former already has a weight loss drug approved and on the market, Zepbound (basically its Mounjaro diabetes treatment approved for obesity), while Viking's VK2735 weight loss drug candidate has produced highly encouraging results in phase 1 and 2 clinical trials.