BOSTON ( TheStreet) -- KV Pharmaceuticals ( KV) was the best-performing drug/biotech stock in the third quarter. The troubled drugmaker's stock price rose 185%, sparked by U.S. regulatory approval to re-launch products that had been pulled from the market earlier due to manufacturing problems.

Bookending KV Pharma's resurgence was the poor performance of Icagen ( ICGND), which lost 59% of its value in the third quarter after an experimental epilepsy drug encountered safety problems during a clinical trial.

Overall, the Nasdaq Biotechnology Index rose 12% in the third quarter, matching the performance of the Nasdaq and beating slightly the 11% gain made by the S&P 500. Like the market overall, August and September were especially good months for biotech and drug stocks.

Acquisitions helped two other drug stocks run to the top the quarter's best-performance list. Zymogenetics ( ZGEN) closed the quarter up 141% due to Bristol-Myer Squibb's ( BMY) $885 million, or $9.75-a-share, takeover offer in September.

Likewise, Osteotech ( OSTE) shares were up 126% on a $6.50-a-share buyout from Medtronic ( MDT) in August.

Rounding out the top 10 best-performing biotech/drug stocks in the third quarter, according to CapitalIQ:

Nile Therapeutics ( NLTX) (+110%), Ista Pharmaceuticals ( ISTA) (+94%), Medicines Co. ( MDCO)(+94%), Savient Pharmaceuticals ( SVNT) (+83%), Amicus Therapeutics ( FOLD) (+78%), Oncolytics Biotech ( ONCY) (+77%) and Cypress BioSciences ( CYPB) (+76%).

Arena Pharmaceuticals ( ARNA) was the second-most damaging stock for drug and biotech investors in the just-closed quarter, losing 56% after a U.S. advisory panel voted down the company's weight-loss drug lorcaserin.

Vermillion ( VRML) shares fell 56% in the quarter on the poor launch of its ovarian cancer test.

Rounding out the quarter's worst biotech and drug stocks, according to CapitalIQ: Molecular Insight Pharmaceuticals ( MIPI) (-50%), Xoma ( XOMA)(-50%), AMAG Pharmaceuticals ( AMAG) (-49%), AspenBio Pharma ( APPY) (-47%), Idenix Pharmaceuticals ( IDIX) (-36%), Epicept ( EPCT) (-36%) and DARA BioSciences ( DARA) (-34%).

--Written by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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