Inovio Pharmaceuticals, Inc. (NASDAQ:INO) and Incyte Corporation (NASDAQ:INCY) seem to have little in common at first glance. Inovio is a clinical-stage biotech with a market cap of only $385 million. Incyte has a successful drug already and a market cap of $14.8 billion. Both biotechs, though, focus on treating cancer and could even compete against each other one day.

So far this year, tiny Inovio has beaten Incyte when it comes to stock performance. But which of these stocks is the better pick for the future? Here's how Inovio and Incyte stack up against each other. 

Woman wearing glasses with palms held upward and chalkboard drawing of scales behind her

Image source: Getty Images.

The case for Inovio

I think there are two primary reasons investors might want to consider Inovio. One is the company's promising cancer immunotherapy pipeline. Inovio's lead candidate, VGX-3100, is currently being evaluated in a phase 3 clinical study targeting treatment of cervical dysplasia caused by the human papillomavirus (HPV). While cervical dysplasia isn't technically cancer, it is a pre-cancerous condition.

Inovio also claims another couple of immunotherapies for which the small biotech has big partners. MedImmune, a subsidiary of AstraZeneca, is conducting phase 2 testing of MEDI0457 in treating head and neck cancer. Inovio has phase 2 clinical studies under way for DNA immunotherapy INO-5401 in combination with drugs from two major biopharmaceutical companies -- Regeneron and Roche.

The other reason investors could like Inovio is its antiviral pipeline. Inovio ranks among the leaders in the race to develop a vaccine for the Zika virus. The biotech also has phase 1 studies in progress for experimental HIV, Ebola, and MERS vaccines. In addition, Inovio announced promising preclinical data in January for an influenza vaccine. 

With a remarkably deep pipeline for a clinical-stage biotech, Inovio might be the kind of stock that pays off nicely for aggressive investors. Market research firm EvaluatePharma even projects that the biotech will rank as the No. 7 top vaccine maker in the world by 2024. If that prediction comes true, Inovio stock has a bright future ahead.

The case for Incyte

The strongest argument for Incyte in the past has been Jakafi, a JAK inhibitor approved to treat blood disorders myelofibrosis and polycythemia vera. Last year, Jakafi generated revenue totaling nearly $853 million for Incyte. And sales for the drug continue to grow.

However, another investing argument for Incyte in the past isn't so strong now. In April, the biotech announced that a combination of IDO inhibitor epacadostat and Merck's Keytruda had failed in a phase 3 study targeting treatment of metastatic melanoma. 

There are other reasons to like Incyte, though. The company, along with partner Eli Lilly, won FDA approval for rheumatoid arthritis drug Olumiant in June. Olumiant is also being evaluated in clinical studies targeting other immunology indications, including psoriatic arthritis and atopic dermatitis.

Incyte also hopes to win approvals for additional indications for Jakafi. The biotech has other promising candidates in its pipeline as well. Itacitinib is in a pivotal phase 3 clinical study for the treatment of acute graft-versus-host disease. INCB50465 and INCB54828 are two other experimental cancer drugs with significant potential.

Better buy

Which stock is the better pick depends in large part on how much risk you're willing to take on. Inovio could be the bigger winner. All that's needed for the stock to soar is a successful result from the late-stage study of VGX-3100 or positive developments with one of its other candidates. However, there's a significant risk that Inovio won't enjoy those successes.

Incyte doesn't face as many risks. Epacadostat's clinical flop has already taken its toll on the biotech's share price. Jakafi is rocking along. FDA rejection of Olumiant is no longer a worry. On the other hand, Incyte stock doesn't have nearly as much room to run as Inovio does.

Warren Buffett isn't a big fan of biotech stocks, but my view is that it's wise to keep his investing philosophy in mind when deciding between Inovio and Incyte. Buffett thinks like a business owner. He looks at a stock as a part of a business and not just a piece of paper. Which business would you rather own -- Inovio's or Incyte's? My pick is Incyte.

Sure, Incyte has run into roadblocks. However, the company has a solid winner with Jakafi and a potential winner on the market with Olumiant. Incyte also has a pretty good pipeline despite the failure of epacadostat. Inovio might generate greater returns over the next few years -- but only if there aren't any clinical setbacks. That's a big if. Incyte is the better business to own right now. In my opinion, that makes it the better buy between these two stocks.

Having said that, I wouldn't recommend buying Incyte. Why? There are simply too many stocks with better risk-reward propositions. It's OK to say "no" to a pretty good stock to say "yes" to a great one.