The weight-loss boom has created one of the market’s biggest opportunities — and some of its most punishing failures.
A single clinical result can send a stock soaring, wipe out years of gains, or threaten the company itself.
Drug development works like a series of yes-or-no votes. A treatment must prove it is safe, show that it works, then repeat the result in a larger study before regulators decide whether it can be sold.
Most never make it.
How 100 drugs narrow to eight approvals
The figures come from a Biotechnology Innovation Organization study covering drug programs from 2011 through 2020. (Note that despite the “tech” in biotech, these stocks behave nothing like the software and semiconductor names powering the growth trade.)
Phase II is the biggest hurdle. This is generally where researchers first learn whether a treatment works in patients. Of the 52 programs that reach this stage, only about 15 advance to Phase III. The entire trip from Phase I through approval takes roughly a decade on average.
That helps explain how two companies chasing the same weight-loss opportunity ended up with radically different charts.
Viking Therapeutics (VKTX) has gained more than 500% over five years as its obesity drug cleared a major mid-stage trial and advanced into final-stage testing.
Skye Bioscience (SKYE) has lost roughly 99% over the same period. Its competing drug missed the main goal when tested by itself, sending the stock down more than 60% in one day. The company is still testing it alongside Wegovy.
The science is only half the wager. A clinical-stage biotech is also racing its funding clock — the date its cash runs out.
Trials can take years without producing revenue. A company short of cash may have to sell more shares before the next major result. That dilution leaves existing investors with a smaller piece of any eventual payoff.
For an individual stock, the checklist is short. What comes next? What are the odds? Does the cash last long enough to get the answer?
Investors can also decide how many of those risks they want to carry.