With a wave of patent expirations set to sting some of the biggest drugmakers, pharma companies have been steadily turning to mergers and acquisitions to fill key holes in their pipelines and product portfolios. This year, for example, Pfizer paid a whopping $43 billion for cancer drugmaker Seagen, Merck dished out nearly $11 billion for the inflammatory bowel disease player Prometheus Biosciences, and GSK spent $2 billion to acquire the specialty medicines company BELLUS Health.

With biotech valuations at multiyear lows and several companies still in need of additional revenue sources, this trend is expected to continue for the foreseeable future. Here are three biotechs that could become top targets for big pharma companies on the hunt for undervalued assets. 

1. Madrigal Pharmaceuticals 

Madrigal Pharmaceuticals (MDGL -4.60%) makes this list as a result of its late-stage nonalcoholic steatohepatitis (NASH) candidate resmetirom. Recently, the Food and Drug Administration (FDA) granted the drug its Breakthrough Therapy designation, setting the stage for an expedited regulatory review later this year.

If the drug is approved for this leading cause of liver transplants in the U.S., Wall Street analysts think it could generate peak sales anywhere from $2.5 billion to over $9.5 billion. Peak sales estimates vary so much for this drug due to the complicated nature of definitively diagnosing NASH, as well as the potential for competition from other drugs currently under development. 

With a market cap under $6 billion, Madrigal could prove to be a bargain for big pharma on the hunt for a top-shelf NASH asset. Resmetirom, after all, has a real shot at being the market-share leader in NASH over a multiyear period. That's exactly the kind of asset that tends to bring suitors to the table in biopharma. 

2. Amylyx Pharmaceuticals

Amylyx Pharmaceuticals (AMLX -5.56%) stands out as a possible buyout candidate due to its FDA-approved amyotrophic lateral sclerosis (ALS) medication, Relyvrio. ALS is a progressive neurodegenerative disorder that is universally fatal. The disease affects approximately 200,000 worldwide. Relyvrio is the first approved ALS drug that shows a statistically significant improvement in both functional parameters and overall survival.

With few treatment options available for this devastating neurological disorder, Wall Street believes Relyvrio will eventually haul in over $1 billion in annual sales. That's a tidy sum for a company with a market cap under $2 billion. The big picture is that Relyvrio's unique competitive positioning, combined with its sizable commercial opportunity, ought to attract one or more suitors at some point. This groundbreaking ALS medication, after all, is arguably too valuable to pass up.  

3. Aurinia Pharmaceuticals

Aurinia Pharmaceuticals (AUPH 3.74%) is an intriguing buyout play thanks to its FDA-approved lupus nephritis (LN) medication, Lupkynis. As a result of the sizable market for safe and effective LN medications, Lupkynis has been billed by some analysts as a possible blockbuster drug in the making. So far, however, the drug's annual sales have fallen well short of expectations.

This perceived commercial underperformance recently triggered a letter from a top shareholder (MKT Capital) calling for management to consider a strategic review and a possible sale of the company. In a buyout situation, MKT Capital believes Aurinia could fetch a bid in the area of $28 per share. MKT's buyout target would represent a 149% premium to Aurinia's share price at the time of this writing.