The biotech industry was on a comeback trail in 2017 after facing a number of challenges in 2016, including pricing pressure, rising competition, pipeline setbacks, slowdown in growth of mature products and generic competition for certain key drugs.

Frequent FDA approvals, new product sales ramp up, R&D success and innovation, strong clinical study results and continued strength in some legacy products changed the scenario for the better in 2017.

In fact, the NASDAQ Biotechnology Index gained 21.1% in 2017, which was in sharp contrast to a decline of 22% in 2016. Moreover, the Medical – Biomed/Genetics industry has increased 3% this year so far.

Notably, the Medical – Biomed/Genetics sub-industry carries a Zacks Industry Rank of #111, which places it at the top 42% of the 250 plus Zacks industries. Our back-testing shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than two to one.

The positive factors are expected to continue contributing to the sector’s growth this year. In December, the tax overhaul was signed into law, which slashes corporate tax rates from 35% to 21%. This will boost profit margins of large drug/biotech companies, which will have more cash in hand. This, in turn, could be used for striking strategic deals this year, which were relatively fewer in 2017.

Biotech companies are continuously working on bringing innovative new treatments to market, and there could be significant catalysts in the coming quarters in the form of important product approvals as well as major data read-outs.

Here we discuss four companies with a favorable Zacks Rank that are likely to continue on the growth path in 2018 as well.

XOMA Corporation (XOMA – Free Report) : XOMA currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. XOMA’s loss estimates have narrowed 65.9% for 2018 in the last 60 days. Share price of the company surged 584.8% in 2017.