Pfizer (PFE) announced Monday it would pursue one of the two weight loss pill candidates in its pipeline as it vies for a piece of the hot obesity drug market.

But the move is one that surprised investors, sending Pfizer stock lower Monday with at least one analyst calling the announcement a "clear setback" for the company. Shares of the pharma giant were off as much as 4% in afternoon trade.

Pfizer said it would pursue its twice daily pill, danuglipron, over its once daily candidate, lotiglipron, due to concerns of elevated liver damage risk in early stage trials.

The decision from Pfizer was not entirely unexpected, as the company had telegraphed earlier it would choose one of the two candidates to move forward into late-stage trials.

Still, analysts at JPMorgan wrote in a note on Monday this news, "represents a clear setback to the program in our view with lotiglipron expected to be the more competitive of the two assets."

SVB Securities called the news "incrementally negative."

In a statement Monday, Pfizer said it would advance the twice daily option and study different dosing options, while also continuing to work on modifying it into a once daily pill.

"We look forward to analyzing the danuglipron Phase 2 results and selecting the dose and titration schedule that will maximize the therapeutic benefit and safety and tolerability," said William Sessa, Pfizer's senior vice president and chief scientific officer of internal medicine.

"If successful in clinical trials and approved, danuglipron could be in a prime position to differentiate based on profile, including full receptor agonism, which we believe has the potential to translate to robust efficacy," he said.

GLP-1 development heats up

The GLP-1 class of drugs is not new, but competition in the space is heating up as newer generations of these drugs show more desired results for Type 2 diabetes patients who are also battling obesity.

Earlier this year, analysts at Goldman Sachs estimated obesity drug sales could reach $30 billion in a decade with the market opportunity potentially nearing $100 billion.

Older drugs like Novo Nordisk's (NVO) Saxenda are now competing with its Ozempic, approved for type 2 diabetes, and Wegovy, which is approved to treat obesity generally.

The competition extends outside the company to Eli Lilly's Mounjaro, which is also already on the market for Type 2 diabetes, and awaiting an FDA decision on its ability to be used as a weight loss treatment as well.

But each of these drugs are injectables, which has pushed companies to focus development efforts on an oral pill treatment.