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.

Five ways to invest in biotech

Even the exchange-traded fund route requires a choice.

The SPDR S&P Biotech ETF (XBI) gives smaller companies more influence, while the iShares Biotechnology ETF (IBB) leans toward established names.

The First Trust NYSE Arca Biotechnology Index Fund (FBT) owns a concentrated mix selected partly through revenue and research spending. The ALPS Medical Breakthroughs ETF (SBIO) targets developers with drugs in the two later trial stages.

The difference is visible in the rally. XBI and SBIO have each gained about 25% this year, roughly twice IBB’s return. Biotech exchange-traded funds have also attracted nearly $2 billion in 2026, confirming that fresh money is following the move.

Dedicated weight-loss funds have largely missed the surge. Their portfolios lean toward Lilly (LLY), Novo Nordisk (NVO), and other large drugmakers, while many of biotech’s biggest gains have come from smaller companies carrying far more clinical risk.

M&A is another possible payoff

A successful program does not always end with the small company selling the drug itself. Sometimes the payoff is a takeover.

Lilly agreed Thursday to buy psychedelic-drug developer AtaiBeckley for $2.8 billion upfront, with another $1 billion tied to future clinical and regulatory milestones. The deal effectively attaches dollar values to several yes-or-no votes that have not happened yet.

“I think we’re at a run rate where there will be over 30 transactions in biotechnology north of $1 billion,” Mizuho healthcare equity strategist Jared Holz said on Yahoo Finance’s Catalyst.

That pace gives small biotech investors another possible payoff. But predicting the next takeover can be every bit as difficult as picking the next successful drug.

Picking one developer means judging the drug, the next vote, and the cash needed to reach it. Most investors are better served spreading those risks across an exchange-traded fund than betting on one result — or one buyer.

Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at jaredblikre@yahooinc.com.

Click here for in-depth analysis of the latest stock market news and events moving stock prices

Read the latest financial and business news from Yahoo Finance