How does orlistat damage small intestine?

It doesn't: Orlistat doesn't damage small intestines. All it does is to block lipase, the enzymes that degrades fats in the duodenum causing fatty diarrhea eventually leading to weight loss due to fat malabsorption.

Short answer: Orlistat blocks your body's absorption of some fat-soluble vitamins and beta carotene. Therefore, when you use orlistat you should take a daily multivitamin that contains vitamins a, d, e, k, and beta-carotene. Take the multivitamin once a day, 2 hours before or 2 hours after taking orlistat, or take the multivitamin at bedtime.I have not found any information of damages to small intestines.