Major pharmaceutical companies have impressed across the board so far this earnings season. Merck and Schering-Plough both beat earnings estimates last week, as did Abbott Labs and Eli Lilly.

Novartis reported this morning that its profits grew 11% in the first quarter, with an 18% growth in sales. AstraZenica added to the good news, announcing plans to buy MedImmune for $15 billion cash.

This comes out to $58 a share in cash for MedImmune, which is 53% above the company’s share price on April 11, according to Reuters. Shares of MedImmune were up $8.58 to $56.59, a 17% rise.

With the overall strength in the pharmaceutical industry, small-cap shares could be getting plenty of extra attention this month — even as potential buyout targets.

There’s one small drug developer worth mentioning that is dirt-cheap right now, despite the good vibes we’re feeling right now from this industry. That company is Aspreva Pharmaceuticals Corp. (ASPV: NASDAQ).

Aspreva is a profitable small-cap drug developer. This $814 million company has a partnership with drug-giant Roche to develop and commercialize a drug called CellCept, which is used to help prevent rejection in patients receiving organ transplants.

With solid sales growth coupled with the recent raise in revenue expectations for the first quarter, it’s hard to believe that this company is only trading for 6.5 times earnings.

That’s right…after a breakout year in 2006, your average investor has been content to ignore this stock. But with the way things are going in the pharmaceutical world right now, this is unlikely to continue.

And there’s another small pharmaceutical company that recently enjoyed a breakout quarter…

Update: NxStage Medical Shares Continue to Show Strength

We first wrote to you about NxStage Medical (NXTM: NASDAQ) — maker of the first truly portable home dialysis machine — on December 11, 2006.

NxStage is a company looking to make life better for the 1.7 million people worldwide who suffer from chronic kidney failure. These patients usually have to deal with countless trips to clinics to undergo dialysis procedures, costing the average patient about $70,000 a year.

Now, instead of spending three hours-long sessions at clinics every week, patients have the option to learn how to use one of NxStage’s portable dialysis machines in their own homes.

We initially liked NxStage stock not only for its ability to improve lives, but also because the company claimed such a small percentage of patients dealing with kidney failure. In fact, less than 1% of these patients receive home dialysis, leaving a large, relatively untapped market for NxStage’s products.

With its strong revenue growth and a relatively untapped market, NxStage wouldn’t stay under $10 a share for long. Now, it trades for $13.85 a share, a 46% gain since we initially recommended it…

As always, we’ll be on the lookout for more companies like NxStage to fill the pages of the Penny Sleuth in the coming weeks…

Good Investing,
Gunner
April 23, 2007

P.S.: There’s one tiny pharmaceutical stock that could have the power to annihilate one of the world’s worst diseases…and you could be one of the first to get in on this unknown gem.

Greg Guenthner

Greg Guenthner uses his experience as a former journalist to dig up the hard-to-find headlines that could lead to big gains for your micro-cap portfolio. Greg offers his readers the scoop on topics ranging from alternative energies to biotechnology, digging up the best penny stock opportunities before they’re discovered by the mainstream media. On top of contributing to Penny Sleuth, Greg also heads Penny Stock Fortunes and Bulletin Board Elite. Special Report: Imagine Getting Rich as Ignored Stocks Soar - You could turn $200 into $1.2 million!

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