3 Up and Coming Biotech Stocks to Watch

By Markets Fool.com

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Source: Ligand Pharmaceuticals

How hot is biotech these days? The top two exchange trade funds focusing on biotech stocks both more than tripled the performance of the S&P 500 index over the past 12 months. That's pretty hot.

You might be asking, however, if it's too late to still make solid returns in this sizzling sector. Not at all. There are plenty of biotech stocks that still hold lots of potential. Here are three up-and-comers to keep your eyes on.

Celldex Therapeutics

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Source: Celldex Therapeutics

Few stocks have gotten off to as great a start in 2015 as Celldex Therapeutics. The biotech's shares are up 74% so far this year. A big chunk of those gains stemmed from the FDA awarding Breakthrough Therapy Designation to brain cancer drugRintega.

Celldex reported terrific interim results from a phase 2 study of Rintega combined with Avastin back in November. Patients in the study taking the Rintega combo experienced astatistically significant overall survival rate compared to the control group. There was also a marked improvement for the progression-free survival rate after six months for the patients taking Rintega.

There is one big event for Celldex in 2015 that could drive shares even higher: Interim results from a phase 3 study of Rintega as a treatment forEGFRvIII-positive glioblastoma should be announced midyear. Celldex also has several other clinical trials under way, the most important of which is a phase 2 study ofglembatumumab vedotin in treatingpatients with metastatic triple negative breast cancers.

Ligand Pharmaceuticals
Ligand is "only" up 42% year to date, but the biotech appears to have what it takes to go a lot higher. The company's management and analysts expect earnings to soar more than 40% in 2015.

Growth from two already-approved drugs should provide a major catalyst for Ligand's sustained rise. Promacta, which helps increase the number of blood platelets in patients, and Kyprolis, which treatsrelapsed and refractory multiple myeloma, are both under consideration for additional indications in the U.S. and Europe.

Ligand partners with larger companies on both of these drugs -- and many more. The biotech counts over 100 drug programs in clinical development, all of which are fully funded by partners. Most of these partners use Ligand's Captisol technology, which helps improve the development process of new drugs by improving solubility and stability of active pharmaceutical ingredients.

Portola Pharmaceuticals
Another biotech that's on a roll these days is Portola Pharmaceuticals. Portola's stock is up 46% in 2015, thanks primarily to a string of good news related to the company's two promising drugs in phase 3 clinical trials.

Source: Portola Pharmaceuticals

In January, Portola announced positive results from the first part of a late-stage study of anticoagulant drug reversal agent andexanet alfa. The biotech followed up with good news in February that theIndependent Data Monitoring Committee for a phase 3 study of betrixaban in preventing blood clotsrecommended going full steam ahead after the drug passed a prespecified futility analysis.Later in February, the FDA gave Breakthrough Therapy Designation toandexanet alfa.

Portola plans to announce the results from the second part of the phase 3 study ofandexanet alfa within the next three months or so. The company hopes to submit for regulatory approval in the U.S. toward the end of the year. If all goes well, the drug could be on the market in 2016.

Betrixaban might not be far behind. Portola should report top-line results from the APEX phase 3 study in early 2016. Assuming those results look good, the biotech will file for U.S. approval later that year. With a little luck, Portola could continue to see a string of good news.

Risks
The problem with hot biotech stocks is that any bump along the road can cause big drops in share prices. That's certainly a risk with all three of these stocks.

Ligand might seem less vulnerable to the danger since it has products already on the market -- but keep in mind the stock dropped 40% at one point in 2014. The fortunes of Celldex and Portola depend heavily on clinical results in 2015 and 2016 that could be disappointing. Still, I like both companies' chances -- and I like Ligand's growth prospects. Investors seeking to jump on the biotech bandwagon might want to check out these three candidates.

The article 3 Up and Coming Biotech Stocks to Watch originally appeared on Fool.com.

Keith Speights has no position in any stocks mentioned -- at least not yet. The Motley Fool recommends Celldex Therapeutics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.