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Most biotech stocks have experienced very sharp drops as the markets have plummeted over economic concerns. However, biotechs are not as economically sensitive as other companies and therefore are likely to rebound sharply in the coming days. These dirt cheap biotech companies all have interesting products in the pipeline which could become major catalysts in the future.

The lower priced stocks tend to have more risk, but far more potential reward. The stocks below are trading at valuations that appear to be a buying opportunity that could provide for very substantial gains. Positive results on clinical trials, partnership agreements, and other news are just some of the catalysts that could send these stocks much higher. Almost all of these biotech companies have substantial amounts of cash or cash equivalents on their balance sheets. Most of them have either little to no long term debt.

Below, I detail why these biotech stocks could be poised for major gains in the near future. Here are the stocks that have upside potential of about 200% to even about 600% in the long term and 50-100% in the short term:

Dendreon Corporation (NASDAQ:DNDN) is trading around $9.91. Dendreon is a biotechnology company, based in Washington. These shares have traded in a range between $9.80 to $43.96 in the last 52 weeks. The 50 day moving average is $36.32 and the 200 day moving average is $36.57.

Why Dendreon shares could surge higher: This stock dropped off a cliff several days ago when Dendreon announced financial results. Investors were not pleased with slower than expected sales for Provenge as well as concerns of reimbursement. The stock is deeply oversold and should see at least a short term bounce in the coming days which could be a good trading opportunity.

Biosante Pharmaceuticals, Inc. (BPAX) is trading around $2.17. Biosante is a biotechnology company, based in Illinois. These shares have traded in a 52 week range between $1.29 to $2.60. The 50 day moving average is $2.98 and the 200 day moving average is $2.18. Earnings estimates for BPAX are for a loss of 49 cents per share for 2011 and loss of 13 cents for 2012.

Why Biosante shares could surge higher: BPAX has a licensing agreement with Teva Pharmaceuticals (NYSE:TEVA) for Bio-T-Gel which treats low testosterone levels. The NDA is pending with the FDA for this product and Teva is responsible for all regulatory and marketing. BPAX also has the right to receive up to $140 million in sales-based milestone payments from Azur for "Elestrin" (which targets estrogen) if it reaches certain predefined sales per calendar year.

Opexa Therapeutics, Inc. (NASDAQ:OPXA) is trading at $1.23. Opexa is a biotechnology company, based in Texas. These shares have traded in a 52 week range between $1.02 to $2.99. The 50 day moving average is $1.54 and the 200 day moving average is $1.71. This company has a great balance sheet, with about $11 million in cash and almost no debt. They also have a potential Multiple Sclerosis (MS) treatment called "Tovaxin" with blockbuster potential and phase 3 clinical trials for Tovaxin are scheduled to start in the second half of 2011. This stock is cheaper now than it was under a recent offering made a couple of months ago.

Opexa sold shares at $2.05 in a public offering of 4,146,500 shares, which resulted in gross proceeds of $8,500,325. According to Opexa's website:

Opexa's lead therapy, Tovaxin®, a cellular immunotherapy has completed a Phase 2b clinical study for the treatment of MS which is specifically tailored to each patient's disease profile. Opexa believes the potential combination of efficacy, superior safety, excellent tolerability and administration may position Tovaxin as the MS treatment of choice as compared to existing therapeutics.

Why Opexa shares could surge higher: There are multiple reasons why Opexa stock could surge. Like many biotech stocks there is a large short interest of about 720,000 shares in Opexa, so any goods news or new interest in the stock often leads to a major spike in the share price, causing a short covering frenzy. Just days ago the stock spiked to $1.75 with no news released by the company, in what seemed to be a mini short covering rally. This shows just how quick the stock could go up on pipeline or partnership news.

According to analysts at Vista Partners:

Biogen Idec is actively seeking acquisitions and partnership opportunities in MS and we believe Opexa is an attractive acquisition and partnership as the company's lead compound Tovaxin is scheduled to commence Phase III trials in the second half of 2011.

Vista Partners recently came out with a price target of $6.50 for OPXA due to the stock being very undervalued for a company that is close to starting phase 3 trials and also due to the possibility that Opexa could be an interesting takeover target or partner with a major pharmaceutical company like Biogen (NASDAQ:BIIB). With shares trading under $1.50 and a target price of $6.50, this stock has big potential.

Chelsea Therapeutics (NASDAQ:CHTP) is trading around $3.93. CHTP is a biotechnology company, based in North Carolina. These shares have traded in a range between $2.81 to $8.20 in the last 52 weeks. The 50 day moving average is $4.99 and the 200 day moving average is $5.04.

Why Chelsea shares could surge higher: Chelsea is pursuing an orphan drug strategy for a drug called Northera (Droxidopa) which is for the treatment of hypotension (yes, that's Hypotension, not hypertension). This treatment has been approved and marketed in Japan for over 15 years, and generates about $50 million in revenue in that country.

Recently, Chelsea released positive data on this drug and it caused an analyst to raise the price target to $18 due to their belief this will be approved early in 2012. If the price target of $18 is reached, investors buying now will gain over 500%. CHTP has a high short interest so these shares could also head higher in a short squeeze.

Keryx Biopharmaceuticals, Inc. (NASDAQ:KERX) is trading around $2.99. Keryx is a biotechnology company, based in New York. These shares have traded in a 52 week range between $3. to $5.91. The 50 day moving average is $4.58 and the 200 day moving average is $4.66. Earnings estimates for KERX are for a loss of 35 cents per share for 2011 and loss of 41 cents for 2012. Keryx has a number of interesting candidates in the product development pipeline. This company has two candidates "Perifosine" for multiple myeloma and colorectal cancer and "Zerenex" which targets hyperphosphatemia in patients with end-stage renal disease, both of which are currently in phase 3 trials.

Why KERX shares could surge higher: MLV Capital recently put a buy rating on KERX with an $18 price target. See that here: finviz.com/quote.ashx If the price target of $18 is reached, investors buying now will gain over 500%.

The data is sourced from Yahoo Finance, and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for educational purposes only.

Disclosure: I am long OPXA, CHTP.

Source: 5 Cheap Biotech Stocks That May Rebound Ahead of the Market