NEW YORK (TheStreet) -- Up until last quarter, the biotech sector has been one of the best performing this year. But the third quarter as a disaster.

The Nasdaq Biotech Index is down -18% over the last quarter; it had been up a whopping 21.6% for the first half of the year. By comparison, the Nasdaq had been up 5.3%in the first half and has been down -7.35% in the third quarter. It was the worst quarter for the broader markets in four years.

The biotech sector, as measured by the Nasdaq Biotechnology Industry Index, declined by -18%.

Many in the biotech sector have attributed much of the downfall to a Tweet from Democratic Presidential candidate Hillary Clinton: "Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on. -H"

Marketwatch called it a "$132 billion Tweet" and pointed out that the dip the sector has seen this quarter may be a good opportunity to buy.

Yet, when it comes to Wall St., every dark cloud has a silver lining. Here are the 10 stocks in the biotech sector which had the best third-quarter.

TheStreet
paired each of these tickers with TheStreet Ratings to let you know if you should buy, sell, or hold these best performing stocks. (Note: Because of TheStreet Ratings parameters, not all stocks on this list have a rating).

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which stocks were among the best performers to date, counting down from 10 to one.

INCY data by YCharts
10. Incyte Corporation (INCY) - Get Report
Rating: Hold, C
Market Cap: $19.9 billion
Year-to-date return: 5.9%

Image placeholder title

Incyte Corporation, a biopharmaceutical company, focuses on the discovery, development, and commercialization of proprietary therapeutics primarily for oncology.

TheStreet Ratings team rates INCYTE CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate INCYTE CORP (INCY) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, robust revenue growth and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins and generally higher debt management risk.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • When compared to other companies in the Biotechnology industry and the overall market, INCYTE CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • INCY's very impressive revenue growth greatly exceeded the industry average of 8.9%. Since the same quarter one year prior, revenues leaped by 63.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • INCYTE CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, INCYTE CORP continued to lose money by earning -$0.32 versus -$0.54 in the prior year. This year, the market expects an improvement in earnings (-$0.18 versus -$0.32).
  • The debt-to-equity ratio is very high at 11.96 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 3.65, which shows the ability to cover short-term cash needs.
  • The gross profit margin for INCYTE CORP is currently extremely low, coming in at 2.38%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, INCY's net profit margin of 5.70% is significantly lower than the industry average.
  • You can view the full analysis from the report here: INCY

TheStreet Ratings team rates MYRIAD GENETICS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate MYRIAD GENETICS INC (MYGN) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 0.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • MYGN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.38, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $51.04 million or 24.70% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 14.48%.
  • Compared to where it was trading a year ago, MYGN's share price has not changed very much due to (a) the relatively weak year-over-year performance of the overall market, (b) the company's stagnant earnings, and (c) other mixed results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: MYGN

TheStreet Ratings team rates CARA THERAPEUTICS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

We rate CARA THERAPEUTICS INC (CARA) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CARA THERAPEUTICS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, CARA THERAPEUTICS INC reported poor results of -$0.78 versus -$0.10 in the prior year. For the next year, the market is expecting a contraction of 30.8% in earnings (-$1.02 versus -$0.78).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Biotechnology industry. The net income has significantly decreased by 55.9% when compared to the same quarter one year ago, falling from -$3.65 million to -$5.68 million.
  • Net operating cash flow has declined marginally to -$4.25 million or 0.35% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • CARA, with its decline in revenue, underperformed when compared the industry average of 8.9%. Since the same quarter one year prior, revenues slightly dropped by 8.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Compared to other companies in the Biotechnology industry and the overall market, CARA THERAPEUTICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: CARA

TheStreet Ratings team rates SUCAMPO PHARMACEUTICALS INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

We rate SUCAMPO PHARMACEUTICALS INC (SCMP) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and impressive record of earnings per share growth. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 6.7%. Since the same quarter one year prior, revenues rose by 44.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SCMP's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.05, which clearly demonstrates the ability to cover short-term cash needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Pharmaceuticals industry and the overall market, SUCAMPO PHARMACEUTICALS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Powered by its strong earnings growth of 425.00% and other important driving factors, this stock has surged by 256.16% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SCMP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • SUCAMPO PHARMACEUTICALS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SUCAMPO PHARMACEUTICALS INC increased its bottom line by earning $0.30 versus $0.16 in the prior year. This year, the market expects an improvement in earnings ($0.72 versus $0.30).
  • You can view the full analysis from the report here: SCMP

ZSPH data by YCharts
6. ZS Pharma, Inc. (ZSPH)
Rating: Sell, D
Market Cap: $1.6 billion
Year-to-date return: 25.3%

Image placeholder title


CNCE data by YCharts
5. Concert Pharmaceuticals, Inc. (CNCE) - Get Report
Rating: Hold, C
Market Cap: $403.3 million
Year-to-date return: 26.1%

Image placeholder title

Concert Pharmaceuticals, Inc., a clinical stage biopharmaceutical company, discovers and develops small molecule drugs for central nervous system disorders, genetic diseases, renal disease, inflammatory disease, and cancer.

TheStreet Ratings team rates CONCERT PHARMACEUTICLS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate CONCERT PHARMACEUTICLS INC (CNCE) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CNCE's very impressive revenue growth greatly exceeded the industry average of 8.9%. Since the same quarter one year prior, revenues leaped by 163.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CNCE's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 14.37, which clearly demonstrates the ability to cover short-term cash needs.
  • CONCERT PHARMACEUTICLS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CONCERT PHARMACEUTICLS INC reported poor results of -$1.77 versus -$0.34 in the prior year. This year, the market expects an improvement in earnings ($1.01 versus -$1.77).
  • In comparison to the other companies in the Biotechnology industry and the overall market, CONCERT PHARMACEUTICLS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: CNCE

MDCO data by YCharts
4. Medicines Company (MDCO) - Get Report
Rating: Hold, C
Market Cap: $2.6 billion
Year-to-date return: 32.7%

Image placeholder title

The Medicines Company provides medicines for patients in acute and intensive care hospitals worldwide.

TheStreet Ratings team rates MEDICINES CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate MEDICINES CO (MDCO) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, MDCO's share price has jumped by 76.44%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, MDCO has a quick ratio of 2.47, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for MEDICINES CO is rather high; currently it is at 67.25%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -51.49% is in-line with the industry average.
  • MEDICINES CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, MEDICINES CO swung to a loss, reporting -$0.50 versus $0.23 in the prior year. For the next year, the market is expecting a contraction of 348.0% in earnings (-$2.24 versus -$0.50).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 803.5% when compared to the same quarter one year ago, falling from -$5.16 million to -$46.59 million.
  • You can view the full analysis from the report here: MDCO

TheStreet Ratings team rates LEXICON PHARMACEUTICALS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

We rate LEXICON PHARMACEUTICALS INC (LXRX) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and unimpressive growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has significantly decreased to -$32.18 million or 63.71% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Biotechnology industry average. The net income has decreased by 7.9% when compared to the same quarter one year ago, dropping from -$26.03 million to -$28.07 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Biotechnology industry and the overall market, LEXICON PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 8.9%. Since the same quarter one year prior, revenues fell by 44.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 6.49, which clearly demonstrates the ability to cover short-term cash needs.
  • You can view the full analysis from the report here: LXRX

Must Read:

12 Oil Stocks Down 30% or More

Image placeholder title

ANAC

data by

YCharts

1. Anacor Pharmaceuticals, Inc.

(ANAC)


Rating: Sell, D
Market Cap: $5.2 billion
Year-to-date return: 52%

Anacor Pharmaceuticals, Inc., a biopharmaceutical company, focuses on discovering, developing, and commercializing novel small-molecule therapeutics derived from its boron chemistry platform. It markets KERYDIN (tavaborole) topical solution for the treatment of onychomycosis of the toenails.

TheStreet Ratings team rates ANACOR PHARMACEUTICALS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

We rate ANACOR PHARMACEUTICALS INC (ANAC) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Biotechnology industry and the overall market, ANACOR PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$23.75 million or 48.26% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • ANACOR PHARMACEUTICALS INC has improved earnings per share by 48.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ANACOR PHARMACEUTICALS INC swung to a loss, reporting -$2.07 versus $1.82 in the prior year. This year, the market expects an improvement in earnings (-$1.09 versus -$2.07).
  • ANAC's debt-to-equity ratio of 0.88 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 5.95 is very high and demonstrates very strong liquidity.
  • This stock has increased by 411.14% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in ANAC do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • You can view the full analysis from the report here: ANAC

Must Read:

Jim Cramer Points Out 24 Quality Stocks Down 40% or More