In the past 12 months, two of the best-performing biotech stocks were cancer immunotherapy firm Fate Therapeutics (NASDAQ:FATE) and German coronavirus vaccine manufacturer BioNTech (NASDAQ:BNTX). During this period, Fate Therapeutics and BioNTech have nearly tripled or quadrupled investors' money. That kind of return is spectacular, considering that the industry benchmark, the iShares NASDAQ Biotechnology Index (NASDAQ:IBB), went up by just 44% over in the last 12 months. 

Even though both stocks have gone up quite a bit, their rallies are far from finished. Here's why they can continue their momentum and add wealth to your portfolio. 

BNTX Total Return Level Chart
Data source: YCharts.

1. Fate Therapeutics

Fate Therapeutics is a maverick biotechnology company that is investigating various synthetic natural killer (NK) immunotherapies as potential best-in-class treatments for lymphoma, myeloma, and solid tumors. As its name suggests, NK cells are immune cells that seek and destroy cancerous cells. Fate has mastered a technique to develop such a line of immune cells from stem cells.

Intravenous line and vial

Image source: Getty Images.

After synthesis, it can create more than 200 types of NK cells via genetic engineering. The company then clones the NK cells en masse and stores them in a data bank. If a cancer patient needs a customized treatment due to a specific mutation in the tumor, Fate can then match the person's need with one of its NK cell lines in the data bank. Thus far, the company has 300 patents protecting its innovation and over 150 patent applications pending.

Fate also has some early but concrete data to support its science. Its most promising candidate is the FT516 NK cell line for targeting B-cell lymphoma. In an interim phase 1 data release, two out of four patients with recurring forms of this cancer saw the complete elimination of tumor activity after treatment with FT516 and another immunotherapy supplement. Another patient developed at least 30% shrinkage in tumor diameter post-treatment. The therapeutics were well tolerated.

Fate's pipeline seems good enough for it to garner the attention of large-cap biotechs. Since April 2020, the company has entered into a partnership with Johnson & Johnson's (NYSE:JNJ) Janssen subsidiary. Janssen paid Fate $100 million upfront, plus $50 million in an equity investment to jointly develop the company's oncology candidates. If successful, Fate would be eligible for more than $3 billion in milestone payments plus royalties on sales.

Similarly, it signed a partnership agreement with Ono Pharmaceutical in September 2018. Under the deal, Fate received $10 million in cash, and would be eligible for $895 million in milestone payments as well as royalties, contingent on the success of its oncology pipeline. Partnerships aside, biotech giants can also acquire smaller developers that bring one functional immunotherapy to the market for more than $20 billion.

Even though Fate is still in early development stages, the company is well funded. It currently has over $930 million in cash and equivalents in hand (thanks in part to a $432 million equity raising earlier this month). The net loss of $150 million over the past 12 months should, therefore, not be overly concerning. Additionally, over 90% of the company's shares outstanding are owned by institutional investors, in other words, investors with deep pockets. These investors usually have the wherewithal to conduct thorough due diligence on development-stage biotech firms and their therapeutic candidates before putting down money. Additionally, insiders own 1.8% of Fate's outstanding shares, and have purchased 331,310 more shares than they sold over the past six months.

If you are an investor who is fond of Fate's science, and have the patience to ride out the stock's price swings until the company can bring a product to market, then Fate is a top-tier biotech stock for you. Otherwise, check out BioNTech instead. 

2. BioNTech

Last year, BioNTech developed a functional coronavirus vaccine jointly with Pfizer (NYSE:PFE) called Comirnaty. Regulatory agencies in more than 45 countries have thus far cleared the vaccine for use. In clinical studies, Comirnaty demonstrated 95% protection against COVID-19, with only moderate side effects such as fatigue, headaches, muscle aches, and injection site pain. 

Based on these results, BioNTech has received orders for over 1 billion doses of Comirnaty and has shipped approximately 33 million doses to date. It also plans to scale its production capacity to 2 billion doses this year. The company's Marburg vaccine production facility will likely come online in February; it alone can manufacture up to 750 million doses per year.

At a price tag of $14.70 to $19.50 per dose, this means BioNTech would potentially have more than 11 figures in the bag should it fulfill its vaccine orders. Even after accounting for a 50-50 profit share with Pfizer, and a 35% to 40% profit share with Fosun Pharma for distributing the vaccine in China, the sales potential is still remarkable. Indeed, BioNTech has a market cap of $26 billion, giving it a forward price-to-sales multiple of less than two.  

That is undoubtedly inexpensive, considering that its industry peers are trading for eight times revenue. What's more, the company's vaccine has shown it can protect people against the more infectious, mutated strains of SARS-CoV-2 that originated in the United Kingdom. BioNTech also estimates it would only take six weeks to modify its vaccine to target the more antibody-resistant South African coronavirus strain.

Despite a large pop in the stock price, it is still not too late to get into BioNTech's shares. The icing on the cake is that this company, too, has a robust immunoncology pipeline, similar to Fate Therapeutics. BioNTech plans to advance three such programs into phase 2 this year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.