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Biotech is a hot sector right now, and we identified a few names that could get gobbled up. The following firms either have potential blockbusters in the pipeline or unique niches that make them attractive buyout candidates because their headway is tough to reproduce. As always, use this list as a starting point for your own research and due diligence:

One we particularly think is interesting is Biogen Idec Inc. (NASDAQ:BIIB). We touched on Biogen in our previous article, and the company's future prospects are heavily dependent on the performance of Tysabri. Biogen concentrates on developing novel treatments for conditions such as multiple sclerosis, and has two steadily profitable drugs in Avonex and Rituxan. However, Avonex will face increased competition from newly released drugs such as Gilenya, and Rituxan begins to lose patent protection in Europe in 2013.

That leaves Tysabri, a treatment for multiple sclerosis, to make up the sales. The drug doesn't come without risk. Researchers discovered that lengthy treatments of Tysabri could spur the deadly infection progressive multifocal leukoencephalopathy in patients. Trials have begun investigating the JC virus antibody, which could predict a patient's risk for developing PML.

If the company can isolate patients susceptible to PML, then Tysabri sales could surpass the $1.2 billion in sales it hit in 2010, and could yield closer to $2 billion in global sales. Biogen has a $20 billion market cap, and therefore is a target for larger players like Amgen (NASDAQ:AMGN), Sanofi (NYSE:SNY), or Novartis (NYSE:NVS).

Another we think is interesting is Celldex Therapeutics Inc. (NASDAQ:CLDX). Celldex is a biopharmaceutical company based out of New Jersey, and it utilizes its Precision Targeted Immunotherapy platform to develop pipeline candidates to target cancer and other difficult-to-treat diseases. As far back as 2007, Celldex was considered the "next big thing" in biotechs with promising results in early trials for lead drug candidate CDX-110.

The drug, now named Rindopepimut, has reached Phase III trials after showing great results in tackling brain cancer in Phase II. Survival increased to 26 months vs. the 15 month average for patients on drug Temodar. Temodar currently earns about $1 billion a year in revenue, meaning Celldex and Rindopepimut have big potential.

We think there is the potential for promise here because of the breadth of disease coverage by CLDX research. With a $100 M market capitalization, CLDX is an easy bolt-on acquisition for a willing acquirer.

We could also see Alexion Pharmaceuticals Inc. (NASDAQ:ALXN) getting bought out. Alexion focuses on the development of drugs for the treatment of life-threatening diseases, and currently has one product on the market, Soliris. Soliris treats paroxysmal nocturnal hemoglobinura, a genetic disease that destroys red blood cells, and causes half of those suffering from it to die within 15 years. Soliris inhibits destruction of the cells and is the first and only treatment for PNH. As such, Alexion can charge premium prices and has a seven-year period of marketing exclusivity. Alexion will be profitable, but the only question is whether it can diversify its portfolio to expand and maintain profitability once Soliris loses patent-protection.

The firm has multiple compounds in the works to treat diseases such as chronic lymphocytic leukemia and multiple myeloma, and Soliris is in Phase II trials for neurological and kidney disorders. If any of these drugs are approved and Alexion puts in solid marketing efforts, watch for the stock to rise. With an $8.4B market cap, we think ALXN's earnings multiple will come down as top line growth continues.

Illumina Inc. (NASDAQ:ILMN): Illumina markets DNA sequencing equipment that identify and order bases, and locate variations in the human genetic code. The market for genetic analysis of this kind has already hit $2 billion, and is growing in double-digit figures. Illumina has positioned itself well by selling relatively low-priced equipment and one-time-use consumables with high margins. Illumina's gross margins as of February were at 65%, while operating margins hit 22% compared to the industry average of 15.5%.

Illumina currently utilizes the bead format, which synthesizes large amounts of genetic information while maintaining a high degree of accuracy. Illumina recently released the HiSeq 2000, which adds high-quality information and commands a premium price tag. Despite Illumina's great financial numbers, we are concerned with its ability to remain competitive.

Prices for technology drop quickly and dramatically, meaning Illumina will have to continue offering better quality products to justify higher pricing, and thus maintain margins. If another firm can develop better technology quicker than Illumina, the firm's advantage will quickly disappear. Illumina remains one to keep a close eye on. Shares trade at $72 with a P/E Ratio of 83.

Another intriging name in this space is Pharmasset Inc. (VRUS). This mid-stage drug company focuses on the development of novel antiviral compounds. The share price surged on the back of analyst upgrades on the stock and an "uptrend" rating from SmarTrend in early January and continued higher to a 52-week high of $135. Pharmasset has multiple Hepatitis C treatments in the pipeline, PSI-938 and PSI-7977, and 15 of 16 patients (94%) treated with the drugs had undetectable levels of Hepatitis C after 14 days. If the drugs reach market, it could be a viable substitute interferon. Interferon treatments cause extreme discomfort to patients and have many side effects. That makes the Pharmasset treatments potential blockbusters, and makes the company one to watch.

We think potential acquirers agree on Pharmasset's growth potential. A deal could be in the works over the next few years as Pharmasset's portfolio continues to show promise.

Regeneron (NASDAQ:REGN): The Baupost Group's Seth Klarman made this biotech purchase among his latest, which he began accumulating around the third quarter of 2010. Regeneron Pharmaceuticals Inc. is a $2.5B biopharma with already over $400 million in sales. The company has a rich pipeline in various stages and its only marketed product is Arcalyst (for Muckle-Wells and auto-inflammatory syndromes). EU availability is just over the horizon. REGN's other drugs target therapeutic pathways for antibody production to treat macular degeneration and, lung and prostate cancer (Aflibercept) in stage 3 clinicals.

REGN's pipeline would be incredibly valuable to any big pharma with impending patent expirations. Pfizer (NYSE:PFE), Merck (NYSE:MRK), and Bristol-Myers (NYSE:BMY) may show an interest at some point.

Alere (NYSE:ALR): This company (formerly Inverness Medical) is on the diagnostics end with 67% of revenues coming from medical diagnostics, and 28% from health management, and 5% from consumer products. The company is a pioneer in that it is capitalizing on in-home diagnostics over in-hospital, and leveraging its suite of products to cross-sell them. The company had a breakthrough with ClearBlue (first digital pregnancy test) and has a portable CD4 counter and a finger-check heart monitor on the horizon. Alere also has a revolutionary HIV viral load device requiring only a fingerstick sample. Revenues are likely to double to over $4 billion on the back of new product launches, and this company also remains an acquisition target.

We know that Seth Klarman's Baupost Group holds shares in this biotech. With a $3.3B market cap and 2.4B in debt, a mid-sized or larger player may be interested. We know that Johnson & Johnson (NYSE:JNJ) and even Stryker (NYSE:SYK) are interested in pursuing diagnostics given their latest acquisitions.

Celgene Corp (NASDAQ:CELG): Celgene boasts an extremely strong portfolio with the acquisitions of Pharmion, Gloucester, and Abraxis, and its blood cancer drug Revlimid is a blockbuster, with global sales growing 45% in 2010 to reach $2.5 billion. The $26 billion market cap company is pushing the drug in Japan, and applied for first-line multiple myeloma approval in Europe. Sales of Revlimid outside the U.S. grew 55% in 2010, and global sales could equal U.S. sales in a few years. Celgene's strong growth and profitability make it a potential takeover target for a large firm (though only few could afford it at this point) looking to expand its oncology portfolio. The only worries we have with Celgene concern the impact Medicare reimbursements will have on revenue, and the approval status of drug Abraxane for the treatment of lung-cancer. These are small concerns, however, considering the strength of the company, and we think Celgene has a very profitable future.

Shares have see-sawed over the past year with the earnings seasons; and the next earnings report is due July 25, 2011.

Mylan Inc. (NASDAQ:MYL) is also an interesting buy-out candidate. With a total debt of $5.4 billion and Debt/EBITDA ratio of 4.27x, Mylan carries significantly more risk than many companies in the pharmaceutical field. However, the world's third-largest generic pharmaceutical manufacturer also has many positives that make it a great prospect for a long-term purchase. Mylan expects gross margins to improve from its current 40.4% to 42.5% by 2015 based on greater economies of scale, and many blockbuster drugs will lose their patents in the next few years including Lipitor, Plavix, Lexapro, and Zyprexa, opening up opportunities for Mylan. While Mylan faces pricing pressure in Europe from government-mandated price cuts on generics, Mylan should be able to offset any loss in revenue by capitalizing on growth in international markets where generic use is low.

Novartis (NVS) and Teva (NYSE:TEVA) could use Mylan as an opportunity to grow generic pharma production.

Geron Corporation (NASDAQ:GERN): This therapeutic and diagnostic biopharmaceutical drug maker is developing a series of drugs targeted towards various forms of cancer, in addition to products developed from embryonic stem cells targeted towards multiple diseases. Needham & Company placed a "hold" on Geron, citing a lack of significant events over the next 12 months that could drive the stock higher. However, we are bullish on Geron's long-term prospects.

Geron's Phase I trials for GRNOPC1 were accelerated because of its efficacy in the treatment of spinal cord injuries, and it has received great results from multiple products in Phase II trials. The stock spikes whenever good news emerges about its stem-cell offerings, and analysts have a $10.13 price target for the stock compared to the $4.06 it trades at at the time of this writing. There is huge upside for this stock, and it's one wave we're willing to ride. Expect larger firms to take interest once more products hit Phase III trials.

Micromet Inc. (NASDAQ:MITI): Micromet develops drugs that mobilize the body's T cells, the body's most potent killers, to detect and destroy normally unrecognizable cancers. Micromet's stock has dropped since January, but recently, share prices have been on the upswing. Share prices jumped 10% on April 6, and multiple analysts including RBC Capital Markets and MP Advisors recently upgraded the stock to "outperform."

The upgrades come on the heel of positive news from Micromet's leading drug candidate, MT-103, which showed positive results in trials for the treatment of leukemia. We think that Micromet's positive showings from MT-103 and unique but effective treatment methods make it a buyout target.

Enzon (NASDAQ:ENZN) is a much smaller biotech ($420M market cap) with a royalty stream from its PEGylation platform which is the novel idea of "masking" therapeutic molecules from host cells which may attack them and binding to the host cell to increase absorption and likelihood of a cure. Merck is licensing the system for its interferon drugs to treat Hepatitis C. The company is levering its technology into other therapies for various cancers. The company is also a potential acquisition target.

We think it makes an interesting bolt-on acquisition for a mid-sized or larger acquirer, given Enzon's deep research bench.

Theravance (NASDAQ:THRX) is a low-revenue biotech that works with Glaxo-Smith Kline (NYSE:GSK) to produce the next-generation COPD-asthma products. GSK's Advair produces almost $8B in revenues for Glaxo, and THRX's product, Relovair would produce 15% on the first $3B in sales and 5% thereafter with virtually no drug application costs to Theravance upon approval of its LABA and ICS combination drugs. THRX also has a partnership with Astellas for commercialization of MRSA (difficult-to-treat hospital staph infection) drug Vibativ in stage 3 and also pending approval in the EU. 2011 and 2012 milestone payments from both GSK and Astellas appear attainable.

Glaxo may eventually want to fold Theravance into its own operations.

Vical Incorporated (NASDAQ:VICL). Vical researches and develops vaccine therapies for the prevention and treatment of cancer and other infectious diseases, with five active clinical and preclinical programs in development. Vical share prices have been fluctuating around $3.74 at the time of writing.

We're high on Vical's prospects because of its use of DNA vaccines, which offer less risk and more efficient manufacturing compared to traditional pathogen-induced vaccines. The technology allows Vical to provide vaccines in weeks instead of months or years without ever having to handle the pathogen.

Based on Vical's effective products in the pipeline, lack of debt, and reserves of cash to last it through 2012, we see Vical as a strong buy. We think shares could reach closer to $5 by year's end with initiation of Phase III trials for multiple drugs.

We think Roche (OTCQX:RHHBY) or Novartis vaccine divisions might be interested in Vical's treatment platforms.

Source: 14 Potential Biotech Buy Out Candidates