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As many people already know, the bio-pharma world is made up of a lot of speculation based on drug approvals, technological advances in drug treatments, and revenue/profit a company can make from those. Today, I have listed two bio-pharmas I feel are poised to bring strong gains in 2012.

Teva Pharmaceuticals (TEVA): Latest market price per share is 43.84.

Technical indicator = Wedge pattern uptrend from September lows.

Key fundamental drivers are:

1. TEVA launch of generic version of Lipitor in May. This is a big one, as the market for Lipitor is huge. This alone should bump up the pps to near $50 a share in the next two months with forward speculation (depending on overall market conditions).

2. Dr. Jeremy Levin, a former executive at Bristol-Myers Squibb (BMY) to be appointed new CEO to replace the retiring Shlomo Yanai. Under Yanai’s leadership, Teva went from generic drug sales of $8.4 billion in 2006 to a 2012 revenue expectation of $22 billion. This was achieved by becoming a more versatile pharmaceutical company with expansion into Europe, Asia and Latin America.

While all this was a positive for Teva, it was not reflected in its stock price. The pps slipped south in 2011, and has just recently made a move back upward after the announcement of the new CEO. The market seems to like Dr. Jeremy Levin as the new CEO, evident by the stock price developing an uptrend channel. It is believed Dr. Levin will focus Teva more toward branded products than generics. Dr. Levin was instrumental in executing Bristol-Myers Squibb Inc's successful, “string of pearls strategy." This included a split-off of Mead Johnson, the sale of Convatec, and the acquisitions of Medarex and Zymogenetics.

3. TEVA sells for a low forward PE of around eight. I feel this is in large part due to the market not liking the direction they were taking in 2011. Teva really did not have a lot of forward looking speculation baked into the stock price. With the appointment of Dr. Levin, this is likely to change.

  • Negatives = None
  • My price target for Teva in 2012 is around $60 per share.

Antares Pharma (AIS): Latest market price per share is 2.08.

Technical indicator = Oversold, possible reverse head and shoulders pattern developing.

Key fundamental drivers are:

1. December 2011 approval of Anturol, a topical gel treatment for overactive bladder.

Antares has around a 12% royalty agreement with Watson Pharma (WPI) for Anturol. Antares received an unknown milestone payment upon the approval of Anturol. Anturol will come to market no later than Q2 2012. I estimate that Anturol will bring Antares about $15 million to $20 million per year in revenues with a high profit margin.

2. Elestrin Gel, a topical treatment for female hot flashes from menopause.

Elestrin is currently marketed and sold by Jazz Pharma (JAZZ). This is a growing revenue stream for Antares.

3. Big Pharma partnership for Nestragel, a female rub on gel contraception.

The market for female contraception is very large, at about $10 billion per year worldwide. Antares completed phase two trials in 2009 with 100% success. There has been no partner for Nestragel to date because Antares was not in the right market position to broker a favorable deal. Now that Antares has two gel products (Elestrin currently marketed and sold and Anturol coming to market this year) they have a much better market position and can now broker a favorable deal. CEO Dr. Paul Wotton said at the Oppenheimer 22nd Annual Healthcare Conference here that Antares is in talks with several potential partners.

I estimate a royalty deal to be over 20% based on the potential revenue of over $1 billion per year with high profit margins. Antares was able to broker a 12% deal with Watson for Anturol, which has a much smaller market. With an ever growing worldwide over population issue, China is facing more international human rights pressure to curve its forced birth control policy. In addition, with emerging third world markets and large government subsidization in birth control, the worldwide market for female contraception will only grow larger. Please refer to my article here for more insight on Nestragel.

Street speculation could be significant for Antares once they have a deal in place with a large pharma for Nestragel. I expect a deal to come this year, likely sooner than later.

4. Recent December 2011 partnership deal with Pfizer (PFE).

Specific details of this partnership deal are currently unknown. Antares is to receive an upfront payment and an unknown royalty for three years after this product comes to market. Currently, this product is in phase two clinical trials. I speculate because the deal was made with Pfizer's Human Health Division, Antares is developing a self-injectable for a vaccine of some sort, possibly a seasonal flu shot. Because Antares will only receive royalties for three years from this product, I speculate that both companies believe it is a huge money maker. The reason I speculate this is because typically, Antares signs deals that include five years of royalties and they were willing to take less in this case.

5. Continuing development of VIBEX Injectors, VIBEX MTX, Teva partnership, and new Teva CEO moving them towards branded products.

VIBEX MTX is a self injectable for Rheumatoid arthritis. MTX is the abbreviation for Methotrexate. Worldwide market of this product is in the billions.

In a clinical pharmacokinetic study VIBEX MTX successfully met its primary endpoints with results demonstrating that the VIBEX MTX system provided equivalent pharmacokinetic performance with safety comparable to subcutaneous or intramuscular injection using a conventional needle and syringe. The study evaluated several dose strengths in a range of 10mg to 25mg of MTX administered by a healthcare professional to RA patients.

Antares expects to file an NDA for VIBEX MTX in 2012 and is seeking a licensing partner for territories outside of the U.S. and Canada. Antares will go it alone without a partner for the U.S. market. This product has a high profit margin rate with reasonable capital expenditures.

6. Management growth plan on target - I am expecting Q4 2011 earnings to be Antares' first profitable quarter ever. I estimate 3 to 5 cents a share profit. The company has no debt, and $32 million in cash and investment.

7. The company is very undervalued considering forward looking speculation and good management.

8. Strong insider and institutional ownership - For a stock that has not been over $5 a share since 1999, 40% institutional ownership is very unusual. See my article here on these two potential pps drivers.

Negatives: Management needs to give the market more clarity on the royalty deals they make. While it is important to conceal certain specific details, giving the market some clarity would help investors better speculate Antares. Management may be keeping quiet because of the pending Nestragel deal. They may sense a loss of leverage if potential partners see less lucrative deals currently in place. Regardless, management does need to do a better job in giving clarity.

Antares has no option chain for its stock. The hedge play for the stock is directly in the pps via short interest. This can cause a larger downward move on bad news because there is no option hedge play. This can also be a positive though as any significant positive PR can cause a massive short squeeze, giving the stock a larger upward move.

My target price for Antares in 2012 is around the $7 per share area. I believe Antares will make a similar move like we saw with Ariad Pharma (ARIA) from 2010 to 2011.

I am extremely bullish on Antares this year and years to come.

Source: These 2 Bio-Pharmas Could Be High Flyers In 2012