Viking Therapeutics (VKTX 1.99%) and Novavax (NVAX 4.63%) were two of the big winners in the biotech industry last year. Both companies saw their shares rise significantly; the former had exciting clinical progress, while the latter signed a lucrative deal with a biotech giant that had Wall Street cheering.
Are these stocks worth buying in 2025 after their strong performance last year? My view is that only one of them looks attractive, while the other isn't worth the trouble. Here's why.
NASDAQ: VKTX
Key Data Points
The biotech stock to buy: Viking Therapeutics
Weight-loss drugs like Wegovy and Zepbound are proving incredibly lucrative, and analysts project this field will grow by leaps and bounds through the end of the decade. Viking Therapeutics is looking to carve out a niche thanks to VK2735, a potential anti-obesity therapy that aced phase 2 studies last year.
True, this mid-cap biotech still looks risky. It has yet to start late-stage studies for any candidate. And like most clinical-stage biotechs, Viking generates no revenue and is unprofitable.
Still, there's much to like about the company. It's produced positive mid-stage data in an area where there are now dozens of investigational therapies, and few drugmakers have been able to deliver the kinds of phase 2 results in weight loss that Viking has. It plans to start a phase 3 study for the subcutaneous version of VK2735 in the second quarter. It's also running a phase 2 study for the oral version of its lead candidate.
Elsewhere, Viking is developing another exciting medicine. VK2809 is a potential therapy for metabolic dysfunction-associated steatohepatitis (MASH), another area with a high unmet need. And the company has a couple of other candidates, including a next-gen weight loss medicine in pre-clinical studies.
Given Viking's success so far, some analysts believe it could get acquired by a larger drugmaker (at a premium, of course). That's a real possibility. Well-established biotech companies often shy away from early-stage research by buying out smaller players with exciting mid-stage candidates. Investors shouldn't bet on this outcome, though.
Viking Therapeutics looks like an innovative biotech. Even if it isn't acquired, it could deliver excellent returns over the long run through solid clinical and regulatory progress and, eventually, a couple of lucrative medicines.
NASDAQ: NVAX
Key Data Points
The biotech stock to avoid: Novavax
Novavax rose to prominence in the early pandemic years thanks to its efforts to develop an effective COVID-19 vaccine. Though the company faced a turbulent road, it eventually pulled it off. However, Novavax's vaccine played second fiddle to the leaders in the field.
Last year, the biotech found a solution to this issue. It signed an agreement with Sanofi that granted the France-based biotech giant the right to market Novavax's vaccine in most countries worldwide. Sanofi also acquired the permission to use Novavax's adjuvant technology for several of its investigational vaccine candidates. For its trouble, Novavax got a $500 million up-front payment with the potential for $700 million based on various milestones, not including royalties on various products developed using its adjuvant technology.
This agreement was a big deal for Novavax, but the stock still isn't attractive because to be successful in the long run, the company will need to develop and market its own candidates. Its two leading programs, a vaccine for influenza and a combined COVID/flu vaccine, are in late-stage studies. Late last year, both were put under clinical hold by the U.S. Food and Drug Administration (FDA) for suspected adverse events, leading to Novavax's share price falling off a cliff. The company has yet to recover from that debacle, even though its candidates were pretty quickly cleared of suspicion.
However, even if Novavax's programs go on to deliver positive phase 3 results, how successful will they be? Several companies are seeking to develop competing candidates in these areas, which aren't nearly as promising or fast-growing as the weight loss market. And as we learned from the COVID market, some are far more adept than Novavax at this exercise. Moderna posted strong phase 3 results for its combined COVID/flu vaccine last year. Others, including Moderna, are also developing novel flu vaccines.
Novavax doesn't just need a clinical win -- it needs a significant commercial win. In my view, there's little reason to think the biotech can pull it off, so it's not worth investing in the stock.
