3 Mid-Cap Biotech Stocks to Buy in February

By Keith Speights Markets Fool.com

Many small-cap biotech stocks are super-risky, with no products on the market yet. Some big-cap biotech stocks, on the other hand, aren't growing like they used to. Mid-cap biotech stocks could meet Goldilocks' criteria of finding what is "just right." Three mid-cap biotechs, in particular, look like winners. Here's why it could pay off to buy shares of Clovis Oncology (NASDAQ: CLVS), Exelixis (NASDAQ: EXEL), and Seattle Genetics (NASDAQ: SGEN) in February.

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Clovis Oncology: A big win under its belt

Clovis Oncology scored a huge win in December when it gained U.S. Food and Drug Administration (FDA) approval for Rubraca as a third-line treatment for advanced ovarian cancer. Rubraca received this approval under the FDA's accelerate approval program based onobjective response rate and duration of response results from two clinical studies.

The biotech immediately kicked off the commercial launch of Rubraca following the FDA decision. Clovis already had a sales force of 85 representatives in the field and marketing programs ready to go. Its distribution channel was fully stocked with the drug within the first week of approval.

Even better news could be on the way. Clovis expects to announce results from a late-stage study evaluating Rubraca as a maintenance therapy for ovarian cancer in mid-2017. Success with this additional indication would open the door to a significantly larger market for the drug.

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Exelixis: Quadrupling isn't enough

Exelixis' share price has nearly quadrupled over the past 12 months. This impressive performance stemmed from tremendous success for the biotech's kidney cancer drug Cabometyx. Can Exelixis go even higher? I think so.

Currently, Cabometyx is approved as a second-line treatment and as a third-line treatment for kidney cancer. It appears likely, though, that the drug could win approval for the more lucrative first-line indication relatively soon. Exelixis reported great results in October 2016 from a phase 2 study of Cabometyx as a first-line treatment for kidney cancer. Those results were so positive that the biotech immediately got the ball rolling for regulatory submission.

There's also a possibility that Cabometyx might be successful in treating other forms of cancer. Eleven mid-stage clinical studies are in progress evaluating the drug in treating several other indications, including non-small cell lung cancer, breast cancer, and endometrial cancer.

Seattle Genetics: Adding to Adcetris

Like Clovis Oncology and Exelixis, Seattle Genetics has a product on the market already with Adcetris. Also like the two other biotechs, Seattle Genetics hopes to add to the approved indications for the cancer drug in the not-too-distant future.

Adcetris is currently approved as a treatment for Hodgkin lymphoma and systemic anaplastic large cell lymphoma.The company reported positive results in 2016 from a late-stage study evaluating the drug in treatingCD30-expressing cutaneous T-cell lymphoma. Seattle Genetics plans to file for U.S. regulatory approval for the indication in the first half of this year.

The biotech also expects to report on results from a late-stage study of Adcetris in treating newly diagnosed patients with Hodgkin lymphoma in 2017, probably in the second half of the year. There's a chance that Seattle Genetics could announce results from another late-stage study evaluating the drug as a front-line treatment ofCD30-expressing mature T-cell lymphoma by the end of 2017, although it could be early 2018 before the results are available.

Best bet?

Which is the best bet right now among these three mid-cap biotechs? It's not an easy call.

Clovis Oncology's Rubraca could hit peak annual sales of up to $1 billion. The biotech's current market cap stands at $2.7 billion.Sales for Cabometyx could be at the same level or even higher. However, Exelixis' market cap is over $5.3 billion due to the stock's big run-up.

Adcetris might be the biggest winner. At least one analyst thinks the drug could reach peak annual sales of around $2 billion. Seattle Genetics licensed marketing rights for the drug outside the U.S. and Canada to Takeda, though, so it won't receive all of the revenue Adcetris might make. The biotech claims the highest market cap of the three companies at $8.3 billion.

My view is that the nod for best pick goes to Clovis Oncology. The biotech owns all of the rights for Rubraca, which is a big plus. With its relatively low market cap, I wouldn't be surprised if Clovis becomes an acquisition target in 2017. For that matter, so could Exelixis and Seattle Genetics. I suspect all three of these mid-cap biotech stocks will perform well this year.

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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 Seattle Genetics. The Motley Fool has a disclosure policy.