With all the rumors in the past month about big pharmaceutical companies buying the relatively large Biogen IDEC (NASDAQ:BIIB) and the definitely large Sanofi-Aventis, I thought it would be a good idea to look at some small companies that might be on big pharma's radar.

Butterflies
Both of Sepracor's (NASDAQ:SEPR) two main drugs, asthma treatment Xoponex and sleep aid Lunesta, are having a rough time of late. Xoponex sales slumped in the second quarter after Medicare announced that it's dropping the reimbursement rate for the drug down to the level of generic asthma medications. Lunesta sales, meanwhile, have been flat for almost two years, and now the drug faces competition from generic versions of Sanofi-Aventis' Ambien.

All of the bad news has driven Sepracor's stock down 57% off its 52-week high and brought its market cap down to less than $2.9 billion -- chump change for some of the large pharmaceutical companies. Sepracor managed to squeak out $567 million in sales of Lunesta last year, but a pharmaceutical company with a large sales force might be able to increase those sales substantially. With patent protection until 2012, Lunesta could certainly replace the sales of a drug about to go off patent. With Sepracor having just inked a deal with GlaxoSmithKline (NYSE:GSK) to market the drug outside North America and Japan, Glaxo would be an obvious choice to pick up the company, although partner Schering-Plough (NYSE:SGP) might be interested as well.

The one-hit wonder
Whoever would acquire Onyx Pharmaceuticals (NASDAQ:ONXX) would essentially be buying no more than a share of cancer drug Nexavar, since the drugmaker is without a pipeline. Yet what a wonder drug it appears to be. It's the first drug in a very long time to show a meaningful prolonging of life for patients with liver cancer.

Sales of Nexavar totaled $142 million in the first half of this year, but with expensive clinical trials for almost every cancer imaginable, the drugmaker hasn't been able to break into the black yet. If Nexevar is shown to be effective against cancers with a large market, such as breast cancer, the drug will be a cash-generating machine.

The obvious suitor for Onyx would be its marketing partner, Bayer, and such an arrangement could consolidate overhead to cut costs slightly. The approval of its drug's label expansion into treating liver cancer expected later this year -- along with the subsequent increased sales -- has already been priced into its valuation, so any company interested in Onyx would be buying based on future clinical trial results.

Stay focused, Fool
With its acquisition of partner New River Pharmaceuticals, Shire Pharmaceuticals (NASDAQ:SHPGY) has become the dominant force in the attention-deficit hyperactivity disorder (ADHD) market. Tipping the market-cap scales at $13.7 billion, Shire is the largest company on today's list of potential takeover targets. Being that large means it could just as likely wind up on the buying end of the merger-and-acquisition side of things, perhaps by snatching up a fellow ADHD drug developer such as Noven Pharmaceuticals.

Diagnosing pharma
 Roche has been trying to buy diagnostic-test maker Ventana Medical Systems (NASDAQ:VMSI) since June. It has extended its original $75-per-share bid three times, even as the stock flirts with $90. So far, management has rejected every offer.

Ventana has suitors not for its current revenues but for its potential for growth in the next few years. Ventana is the leader in pathology instruments and reagents that stain tissue. In the era of personalized medicine, pharmaceutical companies would like to use these tests to determine whether a patient will respond to a drug, thus increasing a drug's effectiveness and its chances for FDA approval.

Not a reason, but ...
The fact that these companies might be bought isn't a reason in and of itself to buy their stock. Trying to predict when pharma might act is like trying to predict when Britney Spears might next end up in court -- you know it could happen, but the timing is unpredictable. If you do buy these companies, do it because you think they're undervalued -- or because you think their value will grow  -- not because you hope you might get a one-time payoff from one of their big brothers.

That said, I would like to point out a common theme among these companies so that you can find other potential targets: They all have drugs on the market. With patents expiring, big pharma needs to use its cash to buy drugs now, not years down the line. That doesn't mean that drug developers will get the cold shoulder from pharmaceutical companies; they're just more likely to receive milestone payment-laden deals than upfront buyouts.