The past few years have been tough on biotech stock investors across the board. The industry-tracking Nasdaq Biotechnology Index has fallen around 11% since this point in 2015.

Even though it's been a rough few years for many of the industry's larger players, some smaller upstarts have produced stunning gains lately. Shares of Nektar Therapeutics (NKTR 3.98%), BeiGene Ltd. (BGNE 1.86%), and AveXis Inc. (NASDAQ: AVXS) have risen at least 500% in less than three years. 

Three scientists excited about a pink test tube.

Image source: Getty Images.

Let's look at key factors that helped these stocks outperform.

1. Nektar Therapeutics: A big deal

Recent successes for more than one potential growth driver have driven shares of this biotech 818% higher over the past three years. Most recently, Bristol-Myers Squibb (BMY 2.11%) handed over $1.85 billion upfront for rights to Nektar's lead oncology candidate, NKTR-214.

It's not unusual to see big pharmaceutical companies pay 10 figures for clinical-stage drugs, but they usually get the whole thing. Bristol settled for a dinky 35% share of profits, even though it will chip in at least 67.5% of development costs.

It might look like Bristol-Myers was overly generous on the surface, but investors should understand that NKTR-214 could help Bristol's lead drug generate a lot more sales. During a small exploratory study with patients affected by several tumor types, NKTR-214 plus Opdivo shrank tumors for patients at an impressive rate that's probably a lot better than Opdivo on its own. 

Around the middle of the year, the partners will begin a huge slate of combination trials across nine tumor types, each designed to support marketing applications if successful. Success for a lung cancer indication alone could lead to billions in annual revenue.

It will be awhile before we know if Nektar and Bristol will be able to send applications including NKTR-214 to the Food and Drug Administration (FDA), but the company has a submission for NKTR-181 lined up for the present quarter. This is an opioid that significantly improved chronic lower back pain during clinical trials but caused relatively little euphoria that inspires abuse. Doctors weary of prescribing addictive opioids for long-term use could drive annual sales of NKTR-181 past the $1 billion mark.

Three scientists examining a pink test tube.

Image source: Getty Images.

2. Beigene Ltd.: Watch this space

This oncology-focused biotech out of Beijing went public in the U.S. in February 2016, but the stock has already risen around 520%. Investors are enthusiastic about a late-stage pipeline bursting with potential new cancer therapies of its own, plus the company has a license to sell Celgene's (CELG) therapies in a rapidly expanding domestic market.

The Chinese FDA recently began rolling back requirements that prevented a majority of medicines approved in other major markets from becoming available in China. Also, the first Chinese facility to earn a pre-approval clearance from the FDA recently began churning out a new HIV drug. That suggests the runway could also be cleared to export three cancer therapies BeiGene is testing in pivotal trials at the moment.

Celgene licensed ex-Asian rights to tislelizumab -- a candidate similar to Bristol's Opdivo -- last year and the partners have already begun studies designed to support FDA applications to treat several types of solid tumor. If successful, this stock could soar even further.

3. AveXis Inc.: Gene therapy mania?

This biotech highflier made its stock market debut around the same time as BeiGene, and it's already generated a 1,070% return for its lucky shareholders. Even though this gene therapy developer has just one program in clinical-stage development, Novartis (NVS -0.16%) recently announced it will buy this gene therapy developer for $8.7 billion, an 88% premium to the stock's previous day's closing price.

While AveXis stock can't rise much further, there's an important lesson to be learned here. Drugmakers with deep pockets, like Novartis, are scrambling to acquire gene therapy platforms that can, hopefully, be used to develop scores of similar drugs down the road. AveXis Inc.'s lead candidate AVXS-101 uses a re-engineered virus to "correct" a genetic defect that leads to spinal muscular atrophy with amazing results, and it stands to reason that the same platform might eventually produce more successful candidates to address a range of maladies. 

AveXis lacked previous collaboration agreements, which probably influenced Novartis' decision to snap it up at a premium. You should never buy a stock just because you think it will be acquired, but be aware that smaller biotechs with successful gene therapy programs are all the rage among big pharmaceutical companies with lots of cash to work with.

NKTR Market Cap Chart

NKTR Market Cap data by YCharts.

Chase these rising stars?

Although AveXis most likely will cease trading in the weeks ahead, shares of BeiGene and Nektar could be just getting started. While I'd love to own shares of both, their market caps have soared to nosebleed levels, even though their respective operations are still bleeding money. Nektar's soared to such a high valuation that I just can't imagine further gains ahead of a successful launch of its painkiller or a rousing success with NKTR-214 in several pivotal trials.

Nektar's clearly too expensive right now, and BeiGene isn't exactly a bargain, either. Sales of Celgene's therapies in China might stop the losses in the quarters ahead, but it's probably best to wait for a pullback before diving in.