Vertex Pharmaceuticals(NASDAQ: VRTX) and AstraZeneca(NASDAQ: AZN), two of the world's leading drugmakers, missed last year's strong market rally. Both finished 2024 slightly in the red. They're already doing better in 2025, though. And there are good reasons to think both could maintain a strong performance throughout the year. Here's why.
Vertex Pharmaceuticals performed well for much of 2024. The stock slid during the year's final months, culminating in a massive one-day drop prompted by a clinical setback.
In a phase 2 study, the company's medication suzetrigine barely performed better than a placebo in treating painful lumbosacral radiculopathy (LSR), a condition that causes pain in patients' lower backs, hips, and legs. While Vertex will advance the medicine to phase 3 studies in this indication, the market isn't convinced it will be successful.
However, Vertex remains an attractive stock. Since that setback, the biotech has earned approval for Alyftrek, a next-generation medicine in its core area of expertise, cystic fibrosis (CF).
Furthermore, suzetrigine earned its first indication in treating moderate to severe acute pain -- where it is marketed as Journavx -- becoming the first of a new class of oral non-opioid pain inhibitors on the market.
These regulatory wins (especially the second) are lifting Vertex's stock, a rally that could continue for much of the year. Alyftrek should start making some noise, as will Journavx. Vertex's Casgevy, a gene-editing treatment for two rare blood-related diseases that has been on the market for a little over a year, could also contribute to the company's financial results.
Vertex should see more pipeline progress, too. The company has a duo of novel medicines in phase 3 studies and several more in earlier stages of development. So, after a subpar 2024, Vertex Pharmaceuticals could perform much better in 2025.
What's more important, though, are the company's long-term prospects. And on that front, investors have little to worry about today. Vertex's strategy of developing medicines in areas with large unmet needs has proven to work. The company's dominance in CF in the past decade -- which led to excellent financial results and stock-market performances -- proves as much:
Vertex's approvals in areas beyond CF and its exciting pipeline make it a great biotech stock to buy.
2. AstraZeneca
AstraZeneca's financial results were strong for most of 2024, as was its stock performance. However, the company faced legal issues in the last few months of the year. Some of its executives in China, including its former president in the country, Leon Wang, have been the subject of investigation by the authorities there. That's on top of an insurance fraud investigation and allegations of smuggling of unapproved drugs, also in China.
These issues have weighed on AstraZeneca's stock, and certainly add some degree of uncertainty to the company's prospects. However, AstraZeneca's legal problems stem from its operations in China, which strongly suggests wrongdoing by specific people affiliated with the company there. These issues will somewhat affect AstraZeneca's performance in the country, and the company will have to pay back unpaid importation taxes related to the smuggling of unapproved drugs in China.
But as AstraZeneca starts moving beyond this issue, its stock price will bounce back. The drugmaker once again proved the strength of its underlying operations in the fourth quarter. The company's revenue of $14.9 billion grew by 24% year over year, a very strong performance by a pharmaceutical giant. AstraZeneca's earnings per share (EPS) soared by 44% year over year to $2.09. Its shares jumped following its earnings release.
Even with the China-related issues, AstraZeneca expects its revenue in 2025 to grow by a healthy high-single-digit percentage and its EPS by low double digits. Elsewhere, it expects well over a dozen clinical trial readouts this year, including for AZD6234, a potential anti-obesity medicine. Between AstraZeneca's current lineup, which is still producing excellent results, and its deep pipeline that will lead to plenty of approvals and label expansions, the drugmaker has strong long-term prospects.
If not for its issues in China, AstraZeneca's shares would almost certainly be in the green over the trailing-12-month period, so that headwind is already factored into its stock price. If it can deal with that problem, AstraZeneca could perform much better this year. And the stock could also deliver outsized returns to long-term investors.
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Prosper Junior Bakiny has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool recommends AstraZeneca Plc. The Motley Fool has a disclosure policy.
