10 Pharma Stocks Under $3

NEW YORK (TheStreet) -- The pharma sector witnessed strategic merger and acquisition activity in 2011 with Johnson & Johnson acquiring Dutch biopharmaceutical company Crucell. In fact, pharma companies are eyeing such deals ahead, especially biotech firms looking to build their product portfolio.

Global expenditure for medicines is expected to reach almost $1.1 trillion by 2015, with a five-year compound annual growth rate of 3% to 6%, according to the IMS Institute. Further, the institute adds that spending on medicines in pharmerging markets will double to $285 billion to $315 billion over the next five years from $151 billion in 2010. This will catapult pharmerging markets to the second position, in terms of spending on medicines.

The stocks are stacked based on upside, great to greatest.
10. YM BioSciences ( YMI), a biopharmaceutical company engaged in the development of products for the treatment of cancer, owns or licenses substances or products to advance them along the regulatory and clinical pathways toward commercial approval. The company conducts and outsources clinical trials and subcontracts the manufacture of clinical materials to third parties.

Of the 10 analysts covering the stock, 90% recommend a buy and the remaining rate a hold. There are no sell ratings on the stock. The stock's average 12-month price target is $5.08, about 91% higher than the current price, as per a Bloomberg consensus.

Cash and cash equivalents for the third quarter of 2011 were reported at $21.5 million as compared to $19.8 million in the year-ago quarter. The company's current ratio has increased to 17.25 from 10.69 recorded in the third quarter of 2010, indicating its strong ability to meet short-term requirements. Moreover, its licensing and product development expenses grew to $5.3 million from $4.6 million in the year-ago quarter.

The company recently reported updated interim safety and efficacy results from the Phase I/II study of its JAK1/JAK2 inhibitor, CYT387, for the treatment of myelofibrosis. The Dose Expansion Phase of the study is beginning to report data, and the comprehensive study results are anticipated in the fourth quarter of 2011.

9. Dynavax Technologies ( DVAX), is a biopharmaceutical company that discovers and develops products to prevent and treat infectious diseases, asthma, and other inflammatory and autoimmune disorders. Its main product candidate is HEPLISAV, a Phase III investigational adult hepatitis B vaccine.

Of the five analysts covering the stock, 80% recommend a buy. The stock's average 12-month price target is $5.00, about 98.4% higher than the current price, according to a Bloomberg consensus.

Cash, cash equivalents and marketable securities for the first quarter of 2011 stood at $53.2 million. At close of the quarter, DVAX earned a $6 million milestone payment from GlaxoSmithKline for the initiation of a Phase-1 trial in the partnered lupus program. The company reported multifold increase in service and license revenue to $489,000 from $61,000 in the year-ago quarter. Moreover, R&D expenses increased to $14.7 million from $12.5 million.

In the third week of May 2011, the company reported the completion of the 12-month follow-up on all the 2,449 subjects enrolled in its large-scale Phase III study of HEPLISAV evaluating immunogenicity in comparison to Engerix, lot-to-lot consistency and safety. With the study completed, Dynavax expects to report results within eight weeks.

The company anticipates ongoing quarterly spend to decline through the remainder of 2011 such that its average quarterly net cash usage approximates $13 million for 2011.

8. AEterna Zentaris ( AEZS) is a drug development company focused on oncology and endocrine therapy. The company has a product pipeline with therapeutic options at various stages of development, right from drug discovery through marketed products.

Of the 12 analysts covering the stock, 67% recommend a buy and 25% suggest a hold. The stock's average 12-month price target is $4.35, which is 105.2% higher than the current price, as per a Bloomberg consensus.

For the first quarter of 2011, the company reported revenue of $7.4 million vs. $6.4 million for the same period in 2010. Cash and cash equivalents increased to $38.3 million from $32 million in the corresponding quarter of the prior year. During the quarter, the company received a net sales royalty milestone payment of $2.5 million from Cowen Healthcare Royalty Partners.

In April 2011, the company issued approximately 7.3 million common shares for aggregate gross proceeds of approximately $14.7 million. AEZS has advantages to be gained out of Perifosine -- a drug for treating multiple cancers. After the company receives license to promote the drug, as per the terms of the agreement, it would be entitled to receive $62.5 million upon achieving certain established milestone events in Japan. Besides, it is likely that AEterna Zentaris will be entitled to receive double-digit royalties on future net sales of Perifosine in the Japanese market.

7. BioSante Pharmaceuticals ( BPAX) is a specialty pharmaceutical company focused on developing products for female sexual health, menopause, contraception and male hypogonadism.

Total revenue for the 2011 first quarter decreased 98% to $57,000 from $2.3 million in the year-ago quarter, consequent to recognizing $2.2 million in royalty revenue during the quarter ended March 2010, and the receipt of nonrefundable upfront payments from Azur for eliminating future royalty payments. Cash and cash equivalents stood at $51.3 million, a sequential increase of 34.6%. Current ratio declined marginally to 4.15 from 4.96.

BioSante closed a registered direct offering in March 2011, bringing its cash balance to approximately $51.3 million. The company's management believes this cash balance will be sufficient to finance operations and LibiGel clinical development well into 2012, without the need for additional funds.

Moreover, the company recently revealed that the FDA has lifted clinical hold on the GVAX Prostate Cancer Vaccine (GVAX Prostate). The manufacture of new GVAX Prostate is complete, and planning for a Phase II clinical trial at the Johns Hopkins Kimmel Cancer Center is under way.

Of the five analysts covering the stock, 80% recommend a buy and the rest rate a hold. There are no sell ratings on the stock. On average, analysts estimate 111.5% upside to $5.50 in value from current levels.

6. Zalicus ( ZLCS) is a biopharmaceutical company engaged in developing drug candidates for treating pain and inflammation. The company is committed to developing its drug discovery platform and research and development of its drug candidates including preclinical and clinical trials. Besides, it is also seeking IP protection for its technology and product candidates.

For 2011 first quarter, total revenue decreased 96.9% to $1.1 million from $41.1 million in the year-ago quarter. This decline is due to a $40 million milestone payment from its commercial partner Covidien following the FDA approval of Exalgo on March 1, 2010 compared to $0.4 million in royalty revenue from Covidien based on Exalgo sales for the quarter ended March 31, 2011. As a result, net loss widened to $10.7 million or 12 cents per share from $3.1 million or 5 cents per share in the year-ago quarter.

Cash and cash equivalents soared to $14.7 million, increasing 420% sequentially. Current ratio improved to 6.07 from 5.29. The company revealed that Z160, a novel oral N-type calcium channel blocker, has been reformulated to address solubility and bioavailability issues and is being advanced toward Phase-I clinical trial by the end of this year.

Moreover, Z944 -- a novel oral T-type calcium channel blocker -- has been advanced into IND-enabling toxicology studies with the objective of initiating Phase-1 clinical development in 2011.

Of the three analysts covering the stock, 67% recommend a buy and the rest, rate it a hold. There are no sell ratings on the stock. On average, analysts estimate 125.2% upside to $5 in value from current levels.

5. SuperGen ( SUPG) is a pharmaceutical company engaged primarily in the discovery and development of cancer therapies. SuperGen acquires products developed by other companies, and applies additional effort to advance these products clinically toward approval for marketing. The stock has gained 17.6% during the past one month.

Net revenue for the first quarter of 2011 was reported at $17.1 million vs. 14.4 million in the year-ago quarter. Total revenue includes royalty of $17 million compared with $14.3 million for the same period of the prior year. Net income stood at $5.5 million or 9 cents per share, increasing 17.5% from $4.7 million or 8 cents per share in the year-ago quarter.

As of March 31, 2011, the company had approximately $129.5 million in unrestricted cash, cash equivalents and current and non-current marketable securities, compared to $120.4 million at Dec. 31, 2010, as cash flow from operations rose 83.9% to $10 million. The company has a current ratio of 16.51 and no debt.

Going forward, the company expects royalty revenue for Dacogen to increase up to 5% from the prior year to range from $52 million to $55 million. However, forecasted net income has been revised to less than $12 million for 2011 from the prior guided net income of $14 million.

All the three analysts covering the stock recommend buying it. There are no sell ratings on the stock. On average, analysts estimate 133.8% upside to $6.50 in value from current levels.

4. Biodel ( BIOD) develops and commercializes a line of therapies for diabetes. The company develops its product candidates by applying its formulation technologies to existing drugs.

During the second quarter of 2011, net loss narrowed to $5.4 million or 21 cents per share, from $10.4 million or 44 cents per share in the year-ago quarter. Cash and cash equivalents stood at $17.6 million, as on March 31, 2011. Research and development expenses declined 58.6% to $2.9 million, while general and administrative expenses decreased 32.3% to $2.3 million from the prior-year period.

Recently, Biodel announced to raise $30 million through a private stock placement. Ayer Capital Management, a California-based firm, disclosed buying 6.39% stake in Biodel. Besides, Biodel has entered into a definitive agreement with a group of institutional investors to sell 12.2 million shares of its common stock, 1.7 million shares of its Series A convertible preferred stock and warrants to purchase 9.0 million shares of its common stock at a negotiated price of $2.16 per unit.

Of the six analysts covering the stock, 33% recommend a buy and the remaining rate a hold. There are no sell ratings on the stock. On average, analysts estimate 177.8% upside to $4.17 in value from current levels.

3. Acadia Pharmaceuticals ( ACAD) is a technology-driven biopharmaceutical company focusing on drug discovery and clinical development of treatments for central nervous system disorders.

Net loss for the first quarter of 2011 was $5.8 million or 12 cents per share, compared to a loss of $5.5 million or 14 cents per share in the year-ago quarter. Collaborative revenue totaled $435,000 compared to $2.1 million, following the conclusion of Adadia's collaboration with Biovail in October 2010, when Acadia recognized remaining revenue related to this collaboration.

Cash, cash equivalents and investment securities during the quarter grew to $45.7 million from $37.1 million in the final quarter of 2010. Moreover, the current ratio increased to 7.58 from 6.35 at the end of December 2010, reflecting the company's ability to meet short-term cash requirements.

During April, the company announced extending its drug discovery and development collaboration with Allergan. The alliance is focused on the discovery of new therapeutics for glaucoma and other ophthalmic indications and was formed in March 2003.

Of the two analysts covering the stock, one recommends buying it and the other suggests a hold. There are no sell ratings on the stock. On average, analysts expect 192% upside to $5 in value from current levels.

2. Novavax ( NVAX) is a biopharmaceutical company focused on developing recombinant vaccines. Virus-like particles, or VLPs, drive the company's technology platform. VLPs are genetically engineered three-dimensional nanostructures that incorporate immunologically important recombinant proteins.

Total revenue for the first quarter of 2011 surged to $834,000 from $110,000 in the year-ago quarter, primarily due to services performed under the U.S. Dept. of Health and Human Services' Biomedical Advanced Research and Development Authority contract. For 2011, the company expects to generate revenue as it performs under the BARDA contract. Net loss declined to $7.5 million, or $0.07 per share, from $10.3 million, or $0.10 per share, in the comparable quarter of 2010, on lower research and development spending to support clinical trials for its H1N1 and seasonal influenza vaccine candidates.

Cash and cash equivalents stood at $8.4 million, up 3.7% from $8.1 million at the end of December 2010. Moreover, the company had a current ratio of 2.60.

All the five analysts covering the stock recommend a buy. There are no sell ratings on the stock. On average, analysts expect an upside of 218.8% to $6.38 in value from current levels.

1. Peregrine Pharmaceuticals ( PPHM) is a clinical-stage biopharmaceutical company engaged in developing monoclonal antibodies for the treatment of cancer and viral infections. The company is advancing its Phase-II oncology platforms, as well as its Phase-I hepatitis C virus (HCV) program.

Net loss for the fourth quarter of 2011 is forecast at $10 million on sales of $2.4 million, compared to a loss of $7.7 million on $4.4 million sales recorded during 2010 third quarter, as per a Bloomberg consensus. Loss per share is pegged at 10 cents, down from 16 cents per share reported during the comparable quarter last year.

Net loss for full year 2011 is forecast at $34.1 million on sales of $13.2 million, compared to a loss of $14.5 million on $27.9 million sales recorded during the previous year, according to a Bloomberg consensus. Loss per share is pegged at 53 cents, up from 30 cents per share reported for full year 2010.

The company recently announced the initiation of an investigator-sponsored trial (IST) for patients with castration-resistant prostate cancer (CRPC). Peregrine's fourth IST, or Phase I/II trial will treat up to 31 second-line CRPC patients with Peregrine's investigational monoclonal antibody bavituximab in combination with the chemotherapeutic agent cabazitaxel.

Of the three analysts covering the stock, 67% recommend a buy, while the remaining rate a hold. There are no sell ratings on the stock. On average, analysts estimate 474.7% upside to $10 in value from current levels.

>>To see these stocks in action, visit the 10 Pharma Stocks Under $3 portfolio on Stockpickr.

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