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Vanda Pharmaceuticals (NASDAQ:VNDA):

Shares of Vanda Pharmaceuticals have been on the move of late after Hapoalim Securities initiated coverage of the company with a 'BUY' rating and issued a price target of $23. Additionally, Hapoalim suggested that the company could be targeted for acquisition.

Vanda also announced recently that the company has received a notice of allowance from the U.S. Patent and Trademark Office for a long acting injectible formulation of the currently marketed oral version of the schizophrenia drug Fanapt.

Fanapt is currently marketed by pharmaceutical powerhouse Novartis (NYSE:NVS) through a licensing agreement signed last year, and in a multi-billion dollar anti-psychotic market, sales of the product could ramp up fairly quickly making Hapoalim's price target very reachable in due time.

I personally believe that Novartis will swallow up both Vanda and Titan Pharmaceuticals (OTCQB:TTNP), but if not, then a move to plus-$15 should be in the works for the short to mid term, in my opinion, although it will be sales numbers that dictate how quick that happens.

VNDA continues to be a nice growth story after becoming one of the best rebound plays of 2009 and the possibilities of a Novartis buyout adds to the intrigue of the VNDA stock.

The volatility probably isn't quite over, so it may be worth picking up a few shares on any dips in price.

Titan Pharmaceuticals (TTNP.pk):

I like Titan Pharmaceuticals again as a buy for below for two dollars. Like Vanda, I believe that the company could be a takeover target by Novartis because Titan will receive royalties of between eight and ten percent of net Fanapt sales. That's a pretty decent payday, in my opinion, for a small company that also has Propuphine and the ProNeura technology in the pipeline.

Titan also received a grant from the NIH last year that will go towards funding the latest Probuphine Phase III trial.

If Titan is not bought out sooner rather than later, I'd expect a move off the pink sheets fairly quickly as the royalty money starts rolling in and the ProNeura pipeline advances.

Titan was a great 'sell at various points on the way up story' during its rise from a penny last year, but it might be worth picking up a few more shares for under two dollars because it's my opinion that this drop will be a temporary one.

For a company that was all but dead about a year ago, Titan sure looks to be in pretty good shape. 2010 could turn into a milestone year for this company.

Disclosure: VFC is long TTNP.

Source: Vanda, Titan Pharmaceuticals: 2 Biotech Stocks It Wouldn't Hurt to Own