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Small biotech stocks are some of the riskiest but highest rewarding stocks in the stock market. Here are four promising companies that could show significant gains in 2012 as investors gain confidence in their drugs and technologies.

VistaGen Therapeutics (OTCQB:VSTA) - Drug development is very expensive, and a lot of drug companies face devastating dilemmas after a drug shows efficacy but fails toxicity. By providing predictive toxicology screening assays that more closely approximate human biology at the front end of the drug development process, VistaGen believes pharmaceutical companies can recapture value from their substantial prior investment in drug candidates that have been put on the shelf due to safety concerns. In other words, VistaGen combines modern medicinal chemistry with its stem cell technology to create safer drug rescue variants. Upcoming projected milestones that could serve as catalysts for the stock include generating two new lead drug rescue variants by the end of next quarter, advancing AV-101 into Phase 2 trials, and listing on the Nasdaq BX venture market.

Dendreon (DNDN) - The stock has been beat up by investors. It traded near $40 last summer but has fallen to below $10 a share due to issues with the ramp up of Dendreon's key drug, Provenge. The first misstep occurred on August 4 after the company pulled its 2011 revenue guidance after sales of the drug didn't meet projections. Then just recently there have been worries about competition. However, the stock has lost ¾ of its value and now you are getting a world class drug at a significant discount. Sales of the drug are still growing at a very rapid rate, as seen in the company's Q4 release ($77 million in Provenge revenues vs $25 million in the year ago quarter). The company also was named as a potential takeover target in a recent Seeking Alpha article.

Human Genome Sciences (HGSI) - HGSI is another high flier that has been crushed by investors. It traded between in the $25-30 range last summer and now is trading at $8 a share. HGSI has also been hurt by slower than expected ramp up of a new drug, in this case, Benlysta. However, as in the case of Dendreon, sales of Benlysta are still growing at a very rapid rate, and the company is very confident in its ramp up. In its Q4 release, the company said "we have seen steady quarter-to-quarter progress with Benlysta sales, and we believe Benlysta is on its way to playing a major role in improving the standard of care for SLE patients."

Acura Pharmaceuticals (ACUR) - Acura is a rare biotech stock: It is profitable and recorded EPS of 22 cents a share in 2011 primarily on the basis of its royalties from Pfizer (PFE). The backing of Pfizer is a big deal, as Pfizer is one of the major pharma companies in the world. Oxecta, Acura's leading product, represents the first immediate-release oxycodone product approved by the FDA that applies Acura's Aversion technology. Oxecta will be manufactured and commercialized by Pfizer under its October 2007 license agreement with a subsidiary of Pfizer and was made commercially available by Pfizer on January 23, 2012. Acura is eligible to receive tiered royalties ranging from 5% to 25% on net sales of Oxecta pursuant to its agreement with Pfizer. Notably, in a recent Seeking Alpha article, the stock was named one of 10 biotech stocks with big potential upside in 2012.

Source: 4 Biotech Buys For 2012