Shares of small biotech companies can experience significant increases due to clinical or regulatory advancements. This year, both Viking Therapeutics and Summit Therapeutics experienced such momentum following positive data reports. While it is uncertain which companies will follow this trend in 2025, certain indicators can help make informed predictions.
Two biotech companies that show potential for substantial returns next year are Recursion Pharmaceuticals and BioAge Labs. The question remains whether these drugmakers are worthwhile investments.
Recursion Pharmaceuticals
Recursion Pharmaceuticals is at an important stage in its development. The company is known for its artificial intelligence (AI)-powered operating system that tests clinical compounds against a wide array of human genes to identify the most promising candidates for clinical trials. Despite Recursion’s assertion that this approach could significantly reduce the time and cost of developing new medicines, it currently lacks marketable products and has no candidates in phase 3 studies. The company anticipates several data readouts in the upcoming 14 months.
In the fourth quarter, Recursion Pharmaceuticals might release results from the initial part of a phase 2/3 study for REC-2282, a potential therapy for neurofibromatosis type 2. This rare disease causes tumors in multiple areas, including the nervous system. Recursion is also expected to announce top-line data for REC-4881, an investigational phase 2 treatment for familial adenomatous polyposis, in the first half of 2025—a genetic condition that can lead to colon cancer.
Other readouts and clinical trial initiations are planned for next year, and positive results could increase the stock price and validate Recursion Pharmaceuticals’ potentially groundbreaking approach to drug development. However, there is a possibility that some or all of the company’s clinical trials may not succeed. Even in the event of success, Recursion Pharmaceuticals remains far from becoming a commercial-stage biotech company. The company’s AI-focused initiatives appear promising, enhanced by partnerships with several major enterprises, including Bristol Myers Squibb, Roche, Bayer, and AI company Nvidia. Despite these promising ventures, uncertainty remains, and those considering investment should have a high tolerance for risk.
BioAge Labs
BioAge Labs is a relatively new player in the market, having completed its initial public offering (IPO) on October 1. The company’s leading candidate, azelaprag, is being developed as a weight loss treatment with a unique approach. Currently in phase 2 studies, azelaprag is tested in combination with tirzepatide, the active ingredient in the obesity treatment drug Zepbound. A common issue with many weight loss therapies is the loss of both muscle and fat.
Azelaprag attempts to mitigate this problem by mimicking exercise-like signals in the body, potentially leading to muscle retention or even growth as patients lose body fat. A phase 1b study in healthy volunteers indicated that azelaprag could increase muscle metabolism and decrease muscle atrophy, among other benefits. Additionally, BioAge Labs plans to conduct a phase 2 study in combination with semaglutide, the active ingredient in Wegovy.
The anti-obesity market is rapidly growing and is estimated to be valued at $150 billion by the early 2030s, up from $24 billion last year. If azelaprag is approved as a vital complement to medicines like Wegovy and Zepbound, aiding in muscle retention during weight loss, BioAge Labs could see a substantial increase in its share price. The company plans to release some phase 2 data next year, which could significantly impact its stock based on the results.
Despite the promising prospects of its leading program, BioAge Labs, like Recursion Pharmaceuticals, remains an unproven entity. Consequently, caution is advised when considering investment in this stock. For now, it might be prudent to observe BioAge Labs’ progress from the sidelines before making any investment decisions.
