Biotechs with market caps of a billion dollars or more are a dime a dozen. Well, actually, they're more like $12 billion or more a dozen, but you get the point. There are plenty of them. However, most biotechs boasting these high market caps actually have products on the market.

That's not the case for Pharmacyclics (NASDAQ: PCYC) and Sarepta Therapeutics (NASDAQ:SRPT), though. Neither biotech has an approved product yet. Pharmacyclics boasts a market cap of $5.8 billion, while Sarepta's market cap stands near $1 billion.

Are these two biotechs overvalued -- or could their prices actually be attractive? Let's take a look.

Not enough to count
Pharmacyclics and Sarepta do generate revenue despite having no marketed product, by the way. Pharmacyclics brought in $160 million last year, thanks primarily to its partnership with Johnson & Johnson's (NYSE:JNJ) Janssen division. J&J is taking a lead role for non-U.S. commercialization of Pharmacyclics' lead product, ibrutinib, but will also participate in marketing the drug inside the U.S.

Sarepta, meanwhile, generated $37 million in 2012 revenue. Nearly all of those dollars stemmed from contracts with the U.S. government related to research of treatments for treatments of the Marburg and Ebola viruses.

Millions of dollars shouldn't be dismissed when many biotechs generate no revenue. However, neither Pharmacyclics nor Sarepta sport 10-digit market caps because of these revenue figures.

Paying for potential
Investors have driven these biotech's market caps to higher levels solely based on the companies' potential. For Pharmacyclics, that potential is powered by Bruton's Tyrosine Kinase, or BTK, inhibitor ibrutinib. Two late-stage studies are under way focusing on ibrutinib as a treatment for chronic lymphocytic leukemia and mantle cell lymphoma.

Projections for peak annual sales of ibrutinib vary from $4 billion on the low end to as much as $8 billion. The higher estimates assume that the drug will also prove successful in treating multiple myeloma and diffuse large B-cell lymphoma. Early- and mid-stage studies are under way for both of these indications.

If we take the lower-end figure, Pharmacyclics' market cap currently equals less than 1.5 times peak annual sales. How does Sarepta compare?

Sarepta's lead product, eteplirsen, has demonstrated impressive results in a mid-stage clinical study targeting treatment of Duchenne muscular dystrophy. Estimates for peak sales of the drug range from $600 million to $1 billion.

In this case, I'm inclined to use the upper range of peak sales projections because the more conservative estimates only address the U.S. market. Using the higher figure, Sarepta's current market cap basically equals annual peak sales.

Stacking up
Are 1.5 times and one times peak annual sales too pricey? Not if we look at other biotechs.

For example, Alexion Pharmaceuticals (NASDAQ:ALXN) boasts a market cap of nearly $17.7 billion. The company markets orphan drug Soliris. Alexion's 2012 sales came in at $1.13 billion. Analysts think that peak annual sales for Soliris should be at least $3.5 billion. Some think that figure could reach as high as $8 billion.

Using the more conservative estimate, Alexion's current valuation equals around five times peak annual sales for Soliris. That measure is well higher than the peak sales multiple for Pharmacyclics or Sarepta.

Vertex Pharmaceuticals (NASDAQ:VRTX) is another biotech with only a couple of drugs currently on the market: Incivek and Kalydeco. Initial peak sales for Incivek were estimated at around $2.9 billion, but those levels seem unlikely to be reached with sales already falling in the face of competition.

RBC Capital estimates that Vertex's portfolio of drugs for cystic fibrosis, including Kalydeco, could reach $3 billion in peak annual sales. If we add in estimated peak sales of $1.5 billion for other drugs that Vertex has in development, that gives us an optimistic total of $7.4 billion.

The market cap for Vertex now stands at $18.3 billion. This level equates to nearly 2.5 times peak annual sales for the company's drugs using very optimistic projections. That multiple could easily double if we used more realistic estimates for Incivek. Pharmacyclics and Sarepta again look attractive by comparison.

The future carries much more weight than the past in valuing any stock, but especially biotechs. In light of the numbers, I don't think these billion-dollar biotechs are overvalued at all. In fact, I think they're both still undervalued considering their potential.

Since Pharmacyclics and Sarepta have yet to receive approval for their lead drugs, we do need to consider the possibility that bumps along the road could occur. However, both companies seem to have the odds in their favor at this point.