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5 Drug Stocks With Upside Potential of 25%

1. ShangPharma is a China-based pharmaceutical and biotechnology research and development outsourcing company servicing nearly 100 customers worldwide.

Total revenue for the third quarter increased 17%, led by faster growth in fee-for-service-based services (FFS). Full-time-equivalent-based services grew slower at 12%, compared to FFS at 32%. However, gross margins declined slightly to 32.5% from 32.9% during the same quarter last year. Net income rose 32.7% from the third quarter of 2009, primarily due to higher profit from operations and higher other income.

Kevin Chen, chief financial officer and chief operating officer of ShangPharma, expects good quarterly numbers in the fourth quarter.

"We successfully completed several high margin projects at the end of September 2010. The revenues for these projects were recorded in October 2010. As a result, we expect to see acceleration in revenue growth in the fourth quarter, and are well on our way to deliver year-over-year revenue growth of approximately 26% to 33% in the fourth quarter of 2010," he said.

The stock is trading at 13.5 times its estimated 2011 earnings.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
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