The approval of a drug candidate is one of the most important events for any biopharmaceutical company, and the approval event becomes even more important for biopharmaceuticals with a limited pipeline. This is because the valuations of the company are strongly affected by the approval or rejection of its candidate. The following two companies have major candidates nearing the end of Phase III clinical trials, and these drugs can significantly affect each company's valuations.

Galena Biopharma Inc (NASDAQ:GALE)

Galena Biopharma is involved in the discovery, development, and commercialization of biopharmaceutical products aimed at the treatment of unmet medical needs. The company is focusing on the treatment of cancer using peptide-based immunotherapy. Its primary drug candidate, NeuVax, is in Phase III clinical trials, and has shown outstanding Phase II results.

After the success of Phase II, the company officially launched Phase III on Sunday. There are approximately 700 breast cancer patients in the trial. The market for NeuVax can be huge, with approximately 20,000 eligible candidates in the US alone. The stock is currently trading at a 40% discount to its 52 weeks high and approximately 100% below the lowest sell side target price. I believe NeuVax will get the FDA nod and the valuations of GALE will go through the roof. There are seven analysts covering GALE with a unanimous ‘buy’ rating.

After MannKind Corporation (NASDAQ:MNKD), Galena is my top takeover pick for 2012. Recently the company has reached an agreement with Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) . This agreement is aimed at future commercialization of NeuVax in Israel and forming key clinical trial sites in Israel. TEVA is one of the most-affected companies from the patent cliff and is struggling to replenish its patent portfolio. In its recent mid-December investor’s conference, the company CEO stressed driving growth by any means necessary. The company refused to increase its yield and stressed reinvestment into new drug candidates and new uses for existing candidates.

The company is also in an agreement with ROCHE to test the combination of Herceptin and NeuVax. I believe these two companies have enough cash and tons of incentive to acquire Galena, which is priced at a mere $120 million.

MannKind Corporation (NASDAQ:MNKD)

There is a global multibillion dollar market for insulin products. It is a life drug for patients suffering from type 1 and type 2 diabetes.  Insulin is administered through an injection-based mechanism, which is a major drawback for patients having to use it multiple times a day. A few years back Pfizer invested billions of dollars in an inhalable insulin product called Exubera. The analysts were very optimistic about the product and forecasted annual sales in the billions.  The tough safety guidelines, especially its adverse effect on the lungs, was the eventual downfall of the drug and Pfizer canceled it due to miserable sales.