Biotech is booming these days. But that's not a new story by any means. Biotech stocks as a group have done very well over the past several years. None, though, have skyrocketed as much as a select few that have racked up staggering gains. Here are the best performing biotech stocks of the last decade.
1. Medivation (NASDAQ: MDVN )
Medivation tops the list of top biotech stocks with 10-year gains of more than 11,000%. To put that in perspective, an investment of $10,000 in the biotech back in July 2003 would now be worth $1.12 million. The path to achieving those gains was a bumpy one, though.
For several years in the first decade of the 21st century, Medivation experienced success. The biotech, in collaboration with Pfizer (NYSE: PFE ) , worked on developing dimebon, a promising treatment for Alzheimer's disease. Shares soared more than 36-fold before plunging in 2010 following dismal phase 3 results for the drug. The collaboration between Medivation and Pfizer ultimately disbanded two years later.
Medivation bounced back in a big way with prostate cancer drug Xtandi. The drug, developed with partner Astellas Pharma, received U.S. Food and Drug Administration approval in August 2012. Xtandi, with peak annual sales projections varying from $1 billion to $2 billion, has powered the huge stock gains for Medivation.
2. Questcor Pharmaceuticals (NASDAQ: QCOR.DL )
Questcor Pharmaceuticals shares have zoomed up more than 5,000% in the past decade. As is often the case with biotechs, though, volatility has been the name of the game for Questcor.
The stock nearly quadrupled in 2010. By December 2011, Questcor shares had almost tripled from those levels. However, from that point forward investors experienced a roller-coaster ride -- with multiple drops and gains of more than 25%.
This volatility and overall success stem from Questcor's one product: Acthar. Critics have alleged that Acthar is too expensive and that payers will eventually limit reimbursement for the drug. Concerns that these allegations hold merit have contributed to Questcor's shares bouncing up and down.
On the other hand, the biotech continues to expand the indications for which it markets Acthar, from infantile spasms to multiple sclerosis to rheumatology-related conditions and more. These efforts have driven sales to higher levels -- and generated hefty profits for shareholders who stayed the course.
3. Illumina (NASDAQ: ILMN )
Illumina has ridden the wave of genetic sequencing to incredible heights. The stock soared more than 3,900% during the past 10 years. It probably won't come as a surprise, however, that Illumina's upward ride hasn't been nice and steady.
The financial crisis in 2008 caused Illumina's value to be cut in half. By August 2010, the stock had climbed back and continued to surge to even higher levels. Illumina's earnings report in late July 2011, while solid overall, disappointed some investors and led to a massive drop over the next few months -- cutting the stock by half yet again.
Illumina emerged as one of the best biotechs of the decade, though, because of its technology. Genetic sequencing has opened up new opportunities in improving health care, with advances in personalized medicine at the forefront. Investors continue to be attracted to Illumina with its position as a leader in the growing field.
The decade ahead
I doubt that any of these three companies will be on a list of the top three biotech stocks a decade from now. The likelihood is that the fastest growth will come from the companies that currently aren't on many investors' radar screens.
That's not to say that the companies mentioned won't continue to be successful. Medivation, Questcor, and Illumina have business models that have won in the marketplace. I won't be surprised if all three generate great profits for shareholders in the next 10 years. Just don't count on those four-digit percentage gains, though.
The tremendous returns, along with bumps along the way, experienced by these biotechs help validate that the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.