The 5 Best Biotech Stocks of 2016

By Markets Fool.com

There have been better years for biotech stocks than 2016 has turned out to be. Concerns about a potential crackdown on excessive drug pricing cast a dark cloud over most drugmakers. However, despite headwinds for the broader industry, some biotech stocks performed very well. Here's how Axim Biotechnologies (NASDAQOTH: AXIM), CoLucid Pharmaceuticals (NASDAQ: CLCD), Corbus Pharmaceuticals (NASDAQ: CRBP), Exelixis (NASDAQ: EXEL), and Tesaro (NASDAQ: TSRO) emerged as the five best biotech stocks of 2016.

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Image source: Getty Images.

Popping with hemp-based chewing gum

Axim Biotechnologies' stock has popped by more than 2,000% year to date, with most of those gains coming in the second half. The company has yet to make a profit, but many investors have high expectations for Axim's cannabinoid-based products and pipeline.

The company plans to launch several new products in 2017, including CanChew chewing gum and CannQuit smoking cessation chewing gum. Axim also intends to advance clinical studies for its cannabinoid gum in several indications, including as a potential treatment for chronic pain and spasticity in patients with multiple sclerosis.

Although Axim has generated plenty of investor excitement this year, keep in mind that the company only has six full-time employees and just $870,633 in cash as of the end of September. Executing on its strategy next year will be challenging.

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No headaches for investors this year

Shares of CoLucid Pharmaceuticals skyrocketed 340% in 2016. Like Axim, CoLucid isn't yet profitable. However, the company hopes that will change in the not-too-distant future.

CoLucid's only pipeline candidate islasmiditan. The experimental drug successfully completed the first of two late-stage clinical studies for treatment of migraine headache in September. Positive results from the study generated much of CoLucid's big jump this year. If all goes well in the second study, the biotech expects to submit lasmiditan for regulatory approval in the U.S. in the first half of 2018.

Thanks to a public offering in September that generated nearly $70 million, CoLucid appears to be in great financial shape headed into 2017. The company thinks that its cash position should fund operations through the second quarter of 2018.

Rising with Resunab

Corbus Pharmaceuticals' shares jumped nearly 320% in 2016. What's the key driver for Corbus' success? Experimental oral endocannabinoid-mimetic drug Resunab.

The company completed a mid-stage clinical study of Resunab as a treatment for systemic sclerosis in 2016, and results exceeded expectations. The drug is also being evaluated in two other mid-stage clinical studies, one targeting treatment of cystic fibrosis and the other focused on dermatomyositis. The National Institutes of Health (NIH) plans to launch a mid-stage study of the drug as a treatment for systemic lupus erythematosus in the first half of 2017.

It's possible that Corbus will continue its tremendous momentum into the new year. Top line results from the cystic fibrosis study are expected to be announced in the first quarter of 2017. If they're as good as the results from the system sclerosis study, its stock should continue to rise.

Great launch for "Cabo"

Exelixis investors have enjoyed a great year -- its stock price nearly tripled. The key for the biotech in 2016 was a solid launch for its kidney cancer drug, Cabometyx.

In its first full quarter on the market in the U.S., Cabometyx generated revenue of$31.2 million. It has already claimed a 20% market share as a second-line treatment for kidney cancer and 35% market share as a third-line treatment for the disease.

The best news of all for Exelixis, though, was that Cabometyx performed very well in a mid-stage clinical study as a first-line treatment of kidney cancer that compared it to leading drug Sutent. The biotech is submitting it for regulatory approval based on the results from this study. If approved, Exelixis should build on its momentum in 2017.

Nice gains from niraparib news

Tesaro's share price jumped nearly 170% in 2016. Like Corbus and Exelixis, Tesaro's gains came on the success of one product, in this case, niraparib.

The big story for the company this year came from its late-stage study of niraparib in treating patients with ovarian cancer, which showed a significantly prolonged progression-free survival period. Based on the positive results from the study, the biotech filed for regulatory approval in the U.S. and Europe.

Tesaro hopes that ovarian cancer will be the first of several indications for niraparib. A late-stage study of the drug in treating breast cancer is in progress. Tesaro's partner, Johnson & Johnson, also has begun a mid-stage clinical study of niraparib in treating prostate cancer.

Best shot at winning in 2017?

Any or all of these biotech stocks could be winners again in the coming year. I like Exelixis' and Tesaro's chances the best, though.

Although anything can happen in the regulatory process, Cabometyx seems like a shoo-in to win approval as a first-line treatment of kidney cancer. I think niraparib's odds of gaining approval as a maintenance therapy for ovarian cancer are also very good. With regulatory wins likely in 2017, Exelixis and Tesaro should keep the momentum going.

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Keith Speights has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Exelixis. The Motley Fool recommends Johnson and Johnson. 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.