A year ago few of us had ever heard of CASI Pharmaceuticals Inc. (CASI 4.34%), and Mirati Therapeutics Inc. (MRTX). Over the past twelve months, though, they've delivered returns that their lucky shareholders won't ever forget.

Let's peek into the operations propelling these stocks skyward to see if they can keep climbing.

CASI Chart

CASI data by YCharts.

CASI Pharmaceuticals: East-west pharma merchant?

CASI Pharmaceuticals is a decades-old U.S. biotech without any revenue that intends to market cancer therapies it licensed from Spectrum Pharmaceuticals (SPPI) in an enormous market clamoring for such medicines -- China. The stock shot up 84% in September after the company announced China's Food and Drug Administration (CFDA) granted one of those therapies, Evomela, a priority review.

The stock soared again earlier this month after the company announced the CFDA would convene a panel of independent experts to discuss its application. The scheduled date has since passed, but so far we haven't heard a word from the closed meeting.

Evomela is essentially a new formulation of an old therapy for multiple myeloma that the U.S Food and Drug Administration approved in 2016. It only generated $35.2 million in sales for Spectrum in 2017, but there's a chance it could really take off in China, where patients still can't access the old version or a slew of other treatments.

Around two-thirds of new drugs approved by the U.S. FDA between 2001 and 2016 still aren't available in China, largely because the CFDA rarely accepts data generated outside its own borders. Some countries insist that pharma companies run late-stage studies within their own borders, but foreign drugmakers often need to repeat the development process beginning at preclinical stages to meet stifling Chinese regulations.

The CFDA is making some dramatic changes to the way it regulates foreign-sponsored applications, and that could lead to a flood of competition for Evomela. In February, the regulator approved Celgene's (CELG) Revlimid for the treatment of newly diagnosed multiple myeloma patients, based on results that showed it outperformed a regimen that contains Evomela's active ingredient.

A recent collaboration deal means Beijing's BeiGene will market Celgene's therapies on domestic turf. With this in mind, I wouldn't look for further gains from CASI Pharmaceuticals until the company starts booking significant sales.

Three scientists looking at a test tube

Image source: Getty Images.

Mirati Therapeutics: The next Nektar?

Checkpoint inhibitor drugs -- which take the brakes off the immune system so they can attack tumors -- produce tremendous results, but only for some patients. Earlier this year, Bristol-Myers Squibb (BMY -1.78%) announced a $3.6 billion deal with Nektar Therapeutics (NKTR -12.20%) for limited rights to a candidate that looks like it can boost the addressable patient population for its checkpoint inhibitor Opdivo.

Mirati Therapeutics stock started soaring in September after Mirati released data that suggests a big collaboration deal could be in its future as well. Three of 11 evaluable lung cancer patients who had already progressed following treatment with a checkpoint inhibitor showed responses to a combination of Opdivo and Mirati's lead candidate, sitravatinib. More recently, the number of partial responses rose to six out of the first 23 evaluable patients receiving the combination treatment.

A 26% response rate among patients who had already relapsed after treatment with a drug like Opdivo might entice Bristol-Myers Squibb to make a Mirati a Nektar-sized offer down the road. Unfortunately, we don't have comparison data to prove that adding sitravatinib to Opdivo is what caused the tumors to shrink. If we've learned anything recently, it's that single-arm combination studies with checkpoint inhibitors can be misleading.

Consider the odds

Without data from a controlled study, it's hard to imagine Bristol-Myers offering Mirati anything beyond access to more Opdivo. The company is running several single-arm studies but hasn't started anything with a control group yet. At recent prices Mirati sports a big $904 million market cap that probably won't get much bigger unless it signs a deal with Bristol-Myers or one of its peers.

It's going to be a long time before Mirati can generate the sort of data that might lead to a meaningful partnership, and an unlucky result in the meantime could lead to swift and heavy losses. That makes CASI the more likely of the two to continue climbing.

With a recent market cap around $576 million, CASI could slide backward if Spectrum's drugs flop in China. That said, at least we can reasonably expect it to bring in some product revenue in the quarters ahead.