The 3 Best Biotech Stocks of 2017 – Motley Fool

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Biotech stocks rocked in 2017. At least a lot of them did. The SPDR S&P Biotech ETF has chalked up a gain of 40% with only a couple of weeks left in the year — twice the return of the S&P 500 index.

But which biotech stocks performed best of all? Excluding biotechs with tiny market caps below $200 million, three stocks take the top honors for the year: Sangamo Therapeutics (NASDAQ:SGMO), XOMA Corporation (NASDAQ:XOMA), and Marinus Pharmaceuticals (NASDAQ:MRNS). Here’s what made 2017 such a fantastic year for these biotech stocks.

Gold, silver, and bronz winners podiums

Image source: Getty Images.

Sangamo Therapeutics

Sangamo Therapeutics ranks as the third best biotech stock of 2017, with a sizzling gain of more than 440%. The company began the year with a market cap of a little over $200 million and is on track to finish with a valuation topping $1.4 billion.

While Sangamo made solid progress from the outset of the year, an update in May lit a fire beneath the stock. When the biotech provided its first-quarter results on May 10, it also announced a partnership with Pfizer in developing gene therapy programs for hemophilia A. This endorsement by one of the world’s largest drugmakers provided a big boost for Sangamo, whose gene therapy program uses zinc finger nuclease genome-editing technology, an approach that has been eclipsed over the past few years by newer technologies such as CRISPR.

There was plenty of other good news for Sangamo this year as well. The biotech received orphan-drug and fast-track designations for several of its pipeline candidates. The first patients received treatment in a couple of phase 1/2 clinical studies evaluating gene therapies SB225 and SB913. Probably the only factor holding Sangamo stock back somewhat was the company’s public stock offering, which generated gross proceeds of $83.4 million.  

XOMA Corporation

XOMA Corporation claimed the second-highest performance in 2017 among biotech stocks, with its share price soaring close to 700%. Earlier this year, XOMA was a nano-cap stock valued around $25 million. It will probably end 2017 with a market cap of $275 million or more.

Nearly all of XOMA’s gains have come since late August. The company announced on Aug. 25 that it was licensing anti-IL-1 beta antibody gevokizumab to Novartis. Under the terms of this deal, XOMA received $31 million in upfront payments (including a $5 million equity investment) plus potential milestone payments and tiered royalties on future sales of gevokizumab. 

That proved to be just the beginning of good news for XOMA related to product licensing deals. A few weeks after the Novartis announcement, XOMA earned a $3 million milestone payment from a 2015 licensing arrangement with Nanotherapeutics for an experimental anti-botulism drug. In October, XOMA announced three additional licensing deals for its phage display libraries for antibody discovery. And on Dec. 7, the biotech reported that it had licensed XOMA 358, an experimental drug targeting treatment of hypoglycemia, to small drugmaker Rezolute. 

Marinus Pharmaceuticals

The award for best-performing biotech stock of all in 2017 goes to Marinus Pharmaceuticals. Marinus’ stock skyrocketed over 700%, edging out XOMA. Marinus’ market cap was below $20 million at the beginning of the year. The biotech’s valuation now is close to $330 million.

It’s been an eventful year for Marinus. In June, the FDA granted orphan-drug designation to ganaxolone as a treatment for CDKL5 Disorder, a rare genetic type of epilepsy. Marinus announced top-line data from its phase 2 study of the drug in September. Those results were overwhelmingly positive. On Dec. 13, Marinus was added to the Nasdaq Biotechnology Index, which meant that several exchange-traded funds were buying the company’s shares.

2018 should be another huge year for Marinus. The biotech expects to begin a pivotal clinical study of ganaxolone in treating CDKL5 Disorder next year. Marinus should also report results from a couple of phase 2 studies of the drug in 2018, one in treating postpartum depression and the other in treating refractory status epilepticus. 

Honorable mentions

While Marinus, XOMA, and Sangamo were the best-performing biotech stocks this year, a couple of other biotechs deserve honorable mentions. Alnylam Pharmaceuticals (NASDAQ:ALNY) stock more than tripled in 2017, while Nektar Therapeutics (NASDAQ:NKTR) stock soared more than 350%. In a sense, Alnylam’s and Nektar’s gains are even more impressive than the top three biotech stocks, since the two companies started out the year with market caps of $1.8 billion and $3.2 billion, respectively.

Alnylam’s share price had more than doubled by August, but the really big news for the biotech came in September. On Sept. 20, the company reported positive results from a late-stage study of RNAi drug patisiran in patients with hereditary ATTR amyloidosis with polyneuropathy. Alnylam is now pursuing U.S. and regulatory approval for the drug. 

Nektar’s story is similar. The stock posted solid gains throughout most of 2017, but really took off in November. Nektar announced positive clinical results in November for two pipeline candidates — mu-opioid receptor agonist NKTR-181 and cancer drug NKTR-214.

With their relatively large market caps, it will probably be more difficult for Alnylam and Nektar to achieve similar gains in 2018. However, don’t be surprised if all of these biotech stocks — the three winners and the two honorable mentions — perform well next year. 

Keith Speights owns shares of Pfizer and SPDR S&P Biotech. The Motley Fool owns shares of and recommends Alnylam Pharmaceuticals. The Motley Fool has a disclosure policy.