Source: Food and Drug Administration, Facebook.

Over the trailing four-year period, the biotech sector has been absolutely unstoppable. For comparison, while the broad-based S&P 500 is up a very respectable 57% in that time, the SPDR S&P Biotech ETF has surged by 246%.

This dramatic outperformance demonstrates one key point about the business: it comes with serious risks, but the rewards can be enormous when you find the most promising biotech stocks.

There really is no sector quite like biotechnology. Because a majority of biotech companies are losing money, it requires something of a leap of faith to invest in them. Instead of using traditional metrics of profits and margins to determine the "value" of an underlying stock, biotech investors must use their imagination and establish the size of a drug's potential treatment pool, and ultimately how much revenue that product could bring in at its peak.

In the end, far more drugs fail to make it pharmacy shelves than are approved by the Food and Drug Administration. However, that doesn't mean there aren't hidden gems just waiting to be discovered by Wall Street and investors. Though not without risks, here are five promising biotech stocks that you can buy for less than $10 per share.

Exelixis (EXEL -0.67%)
Exelixis is a personal holding in my portfolio, and the only one of these five biotech stocks that I currently own. Despite having a rough 2014 in which Cometriq (its only FDA-approved therapy) failed to meet its primary endpoint in the COMET-1 phase 3 metastatic castration-resistant prostate cancer trial, Exelixis is primed for a potentially strong(er) 2015. I say stronger because shares have practically doubled in just three months.

Source: Roche.

In the second quarter, we're due to receive top-line data from the METEOR study of Cometriq as a treatment for advanced renal cell carcinoma. Unlike the COMET-1 study, where median overall survival was the primary endpoint, the METEOR study is all about a statistically significant improvement in progression-free survival, or PFS. In both the COMET-1 study and the metastatic medullary thyroid cancer trial where Cometriq is currently approved, it had no issues in delivering statistical significance in PFS.

Additionally, a combination therapy for a specific mutation of metastatic melanoma involving Roche's Zelboraf and Exelixis' cobimetinib looks promising for FDA approval later this year.

Peregrine Pharmaceuticals (NASDAQ: PPHM)
If there's one trend among these biotech stocks, other than their low share price, it's their primary focus on cancer. What makes Peregrine, by far the smallest company on this list by market value, stand out is the pathway by which it is attacking cancer.

Source: Peregrine Pharmaceuticals.

Peregrine's lead experimental drug is bavituximab, a phosphatidylserine-, or PS-, targeting antibody that binds to PS receptors. These receptors are found on the inside of healthy cells and act as an immunosuppressant protecting the cell from destruction. Cancer cells, however, have PS receptors on the outside of the cell, masking them from the immune system. Bavituximab's job is to bind with PS receptors and cancel out cancer cells' ability to hide from your immune system.

Bavituximab is being tested in the phase 3 SUNRISE study as a second-line therapy in non-small cell lung cancer. Top-line data from this study is expected to be released in December 2016. In phase 2 studies, bavituximab demonstrated a statistically significant median overall survival benefit versus the placebo -- 11.7 months versus 7.3 months. However, the results weren't without controversy, as a third-party laboratory caused Peregrine to revise its results from the initially reported median overall survival data of 12.1 months versus 5.6 months for the control group. This phase 3 study should go a long way toward validating Peregrine's lead drug and its development platform.

ImmunoGen (IMGN)
ImmunoGen, on the other hand, is all about the potential of antibody-drug conjugates, or ADCs, to treat cancer.

Source: ImmunoGen.

Most patients and physicians turn to chemotherapy in treating cancer. While potentially effective at destroying cancer cells, chemotherapy is indiscriminate and ultimately also kills healthy cells. To protect these cells, ImmunoGen has developed antibodies with linking technology that seek out cancer cells and release a payload of toxin (i.e., chemotherapy) directly into the cancer cell. Consider it a cancer-seeking missile in your body meant to minimize healthy cell damage and maximize cancer cell death.

Kadcyla is ImmunoGen's most promising compound, and only has FDA approval as a second-line treatment for HER2-positive metastatic breast cancer. But Kadcyla, which is marketed in collaboration with Roche, isn't ImmunoGen's only chance at a healthy revenue stream. The company has four in-house therapies under development, 13 total compounds in clinical testing, nine compounds in preclinical testing, and seven partnerships with big-name pharmaceutical companies. In short, ImmunoGen understands how to monetize its technology platform. 

Threshold Pharmaceuticals (NASDAQ: THLD)
Another promising biotech stock targeting cancer in a unique fashion is Threshold Pharmaceuticals.

Source: Food and Drug Administration, Facebook.

Threshold's possible claim to fame is its hypoxia-targeted therapy TH-302. In a healthy person, new cells, muscle, and blood vessels tend to grow in harmony, with all areas of the body getting sufficient blood flow and oxygen. Cancer, however, grows without rhyme or reason. In fact, tumor growth often outpaces blood vessel growth, leaving certain areas of a tumor starved for oxygen, or hypoxic. Threshold's TH-302 targets these hypoxic cells, which would be rare in a healthy person.

Threshold's pipeline consists almost entirely of TH-302 and its many indicated possibilities. Although Threshold has a number of clinical studies ongoing, its MAESTRO trial for pancreatic cancer is the one to watch. Pancreatic cancer is a particularly tough-to-treat form of cancer with low long-term survival rates, so any statistically significant improvement in median overall survival here could be a game changer.

Inovio Pharmaceuticals (INO 2.45%)
Last, but certainly not least, is cancer vaccine developer Inovio Pharmaceuticals, which, like Peregrine, aims to give your immune system a boost so it can better recognize and attack cancer cells.

Inovio's drug development platform has produced a balanced portfolio of oncology and infectious disease vaccine hopefuls, including for avian flu, Ebola, and hepatitis B and C. But all eyes are on its most advanced clinical product, VGX-3100 for cervical dysplasia associated with human papillomavirus types 16 or 18.

Source: Inovio Pharmaceuticals.

In its phase 2 clinical study, nearly half of all patients treated with VGX-3100 saw their disease regress from stage 2 or 3 to stage 1 or no disease, compared to just 31% for the control group. Likewise, there was human papillomavirus clearance and a regression to stage 1 disease or no disease in 40% of VGX-3100 treated patients and only 14% of control group patients.

Inovio is also working with a handful of key partners, including Roche, with the development of its hepatitis B therapeutic, INO-1800. As immunotherapies grow in popularity, Inovio could be a name more and more investors turn to.

Did I leave your favorite promising biotech stock under $10 off the list of stocks to watch? Let me know in the comments section below.