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The market correction has created many new stock bargains and a number of biotech stocks have recently dropped to bargain levels. Now is a good time to start picking up cheap shares and set your portfolio up for some big gains in the coming months. While the market correction and other factors have caused some biotechs to drop, the longer-term outlook for these companies is not dependent on the economy. If you buy at or near the recent lows, you could end up seeing very large percentage gains in a very short time.

The best time to buy biotechs is when the markets lets you have them cheap and when investors are not paying attention to them. Huge gains are possible when you buy the right stocks at bargain levels. Just look at Inhibitex (NASDAQ:INHX), which I have written about in prior articles. I was able to buy INHX shares for about 70 cents per share when few investors wanted them. This stock has been on a tear after the company released positive data, and now trades around $10 per share.

Here are a few stocks that recently dropped to unreasonably low levels that could rebound sharply in the coming days and weeks. One or two of these could wind up being the next biotech multi-bagger, like Inhibitex. While all of these stocks have big potential, I think Chelsea Therapeutics (NASDAQ:CHTP) and Catalyst Pharmaceutical Partners (NASDAQ:CPRX) have the most potential and least risk. Here are the stocks to consider:

Catalyst Pharmaceutical Partners, Inc. (CPRX) shares are trading for about $1. Catalyst has exclusive worldwide licenses to commercialize CPP-109 and CPP-115. The company is working on a clinical trial, the majority of which (about $7.2 million) is being paid by the government. The trial is for CPP-109, Vigabatrin, to treat cocaine addiction. Two drug addiction treatments from Reckitt Benckiser have achieved blockbuster status with combined U.S. sales of over $1 billion. This shows that Catalyst has the potential to bring a blockbuster drug to market.

Cowen, Zacks Investment Research and other top analyst firms have recently started to cover Catalyst, and have given the shares a buy or outperform rating with price targets ranging from $4 to $7 for CPRX shares. Catalyst investors could get good news soon as the company has set a goal for a possible partnership agreement. Catalyst recently announced a small secondary offering (about $3 million) at $1.15 per share and that knocked the stock down from about $1.45 to around $1.

The good news is that a capital raise is out of the way now and the shares are providing a rare buying opportunity at about 45% below where the stock was trading just two weeks ago. I think this stock will soon rebound to about $1.40 for short-term traders, and then make further advances to over $4 for long-term investors as more data and a possible partnership is announced.

Chelsea Therapeutics (CHTP) is trading around $4.50. CHTP is a biotechnology company based in North Carolina. These shares have traded in a range between $3.25 to $8.20 in the last 52 weeks. The 50-day moving average is $4.30 and the 200-day moving average is $4.46. Chelsea is pursuing an orphan drug strategy for a drug called Northera (Droxidopa) which is for the treatment of hypotension. (Yes, that's hypotension -- low blood pressure -- 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. I believe Chelsea is a low-risk, high-potential biotech stock.

NPS Pharmaceuticals, Inc. (NASDAQ:NPSP) is trading around $5.37. Ligand is a biotechnology company based in California. These shares have traded in a range between $4.35 to $10.75 in the last 52 weeks. The 50-day moving average is $6.58 and the 200-day moving average is $8.27. NPSP is estimated to lose about 43 cents per share in 2011. NPSP shares have dropped in the past couple of days due to concerns over one experimental drugs called Gattex. With the stock down in recent days, bargain hunters are buying, including two insiders. One insider bought 20,000 shares, and another bought 30,000 shares.

Amylin Pharmaceuticals (AMLN) shares are trading at $9.48. Amylin is a biotechnology company, and is based in California. These shares have a 52-week range of $8.03 and $16.65. The 50-day moving average is $10.54 and the 200-day moving average is $12.12.

Earnings estimates for AMLN are for a loss of 79 cents per share for 2011, and 75 cents loss for 2012. These shares fell hard when AMLN announced that the partnership deal with Eli Lilly (NYSE:LLY) would be terminated. Investors seem concerned that the marketing costs will impact Amylin but those concerns seem overblown.

Dendreon Corporation (NASDAQ:DNDN) is trading around $7.26. Dendreon is a biotechnology company based in Washington. These shares have traded in a range between $6.46 to $43.96 in the last 52 weeks. The 50-day moving average is $9.98 and the 200-day moving average is $28.22. This stock dropped off a cliff for the second time this year when Dendreon announced financial results which indicated slower than expected sales for Provenge. While revenues are not as high as expected, it is still early and the company has begun to reduce expenses. This stock looks oversold and could be a good candidate for a short term rebound trade. The relative strength index for DNDN shares is about 34, which indicates the stock is oversold.

Ligand Pharmaceuticals, Inc. (NASDAQ:LGND) is trading around $10.92. Ligand is a biotechnology company based in California. These shares have traded in a range between $8.14 to $16.24 in the last 52 weeks. The 50-day moving average is $14.28 and the 200-day moving average is $11.69. LGND is estimated to earn about 50 cents per share in 2011. Until recently, Ligand stock has been very strong in a weak market and looks like a good buy, especially on any dips. LGND shares have dropped in the past couple of days, and could be poised for a rebound. The relative strength index for LGND shares is about 29 which indicates the stock is oversold.

Inhibitex, Inc. (INHX) is trading around $9.56. Inhibitex is a biotechnology company, based in Georgia. This company is working on treatments for shingles (FV-100) and hepatitis C (INX-189). Inhibitex has a promising pipeline and a partnership with Pfizer. These shares have traded in a range between $1.74 to $5.23 in the last 52 weeks. The 50-day moving average is $3.86 and the 200-day moving average is $3.61. This stock has surged, and while it still has long-term potential, I think it makes sense to take at least some profits now and roll them into other high-potential biotechs.

The data is sourced from Yahoo Finance and stockcharts.com.

Disclaimer: 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 informational purposes only.

Source: 6 Biotechs That Could See Huge Gains (Like Inhibitex)