Needless to say, the past two years have been rough on biotech. So rough in fact, that a basket of the largest capitalization stocks now trade with a price-to-earnings growth figure that is in line with the S&P 500 and large cap pharmaceuticals. That is an extraordinary figure when you consider the growth rate comparisons. The question for investors is which stocks are the ones that hold the best potential in 2017.

A recent research report from the biotech team at Baird offers their top picks for 2017. While hardly pounding the table, they are cautiously optimistic on the industry. With that said, they are staying with some of the industry leaders, and that makes sense in an environment that is still dicey.

While Baird likes 10 companies for 2017, here we focus on four that are well known and may offer investors some big upside potential. All are rated Buy at Baird.

BioMarin Pharmaceuticals

This is one of Wall Street’s favorites and it posted solid earnings last year. BioMarin Pharmaceuticals Inc. (NASDAQ: BMRN) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. Its product portfolio comprises five approved products and multiple clinical and preclinical product candidates.

Over the past decade, BioMarin has become one of the top orphan drug companies, and it looks poised to stay there. The company is expected to post around $1.09 billion in revenue this year and possibly around $1.32 billion next year following the approval of Vimizim, an enzyme replacement therapy for Morquio syndrome, which posted big results in the quarter.

Roche recently has been mentioned as a company that could be looking at BioMarin. Roche is focused on oncology drugs and invests heavily in early-stage molecules. Although the company is growing consistently, there is a major biosimilars threat to its three big drugs — Rituxan/MabThera, Herceptin and Avastin. These three drugs accounted for 42% of Roche’s total revenue during the first half of 2016. So an acquisition makes sense should the biosimilars eat into current profits.

The Baird price target for the stock is $115, and the Wall Street consensus target is $113.67. Shares closed Wednesday at $87.16.

Vertex Pharmaceuticals

This one has long been considered a buyout candidate. Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) engages in discovering, developing, manufacturing and commercializing small molecule drugs for patients with serious diseases in specialty markets. The company focuses on developing and commercializing therapies for the treatment of cystic fibrosis (CF) and hepatitis C.

Wall Street as a whole has long been very positive on the stock, and some have indicated that the company could have as much as $10 in potential earnings-per-share power. The consensus also expect that Vertex should receive FDA approval for the company’s CF drug Lumacaftor, or as it is known, VX-‘809, which some think could generate billions in revenues.

Its big catalyst for Phase 2 “triple data” in cystic fibrosis could have results in the fall of this year Some feel that the company has a potential parabolic earnings curve and profitability that could go from $0 in per-share earnings to $5 or more in a few years, and two new next generation correctors in Phase 2 as a “triple pill,” which could add $1 billion to 2 billion more down the road from the “hetero” market. In addition, many top analysts feel the company has a fairly good chance that the Phase 3 “triple” will work in the second half of 2017 — a new growth driver with data coming.

The $115 Baird price target is well above the consensus target of $99.35. Shares closed yesterday at $82.52.

Sarepta Therapeutics

This is another top biotech that was hit hard back in the fall and may be offering investors a great entry point. Sarepta Therapeutics Inc. (NASDAQ: SRPT) focuses on the discovery and development of RNA-based therapeutics for the treatment of rare, infectious and other diseases. Its lead product candidate is eteplirsen, an antisense phosphorodiamidate morpholino oligomer therapeutic that is used for the treatment of individuals with Duchenne muscular dystrophy (DMD), a genetic muscle-wasting disease caused by the absence of dystrophin.

The drug won controversial approval from the FDA last fall, because in April the outside experts said there was no substantial evidence that the drug is effective in providing clinical benefit, which is the standard for traditional approval. The injection, known as Exondys 51, is specifically indicated for patients who have a confirmed mutation of the dystrophin gene amenable to exon 51 skipping, who constitute approximately 13% of the population with DMD.

Baird feels that the drugs very broad labeling, which offers few patient restrictions, will set up Exondys 51 for broad coverage. They do note that since the drug has what is called orphan drug status, that it may be subject to slower reimbursement decisions. They also think there is anywhere from 1,000 to 1,400 eligible patients in the United States with an average cost per year of $500,000. That could mean annual sale of as much as $600 million.

Baird has a stunning $102 price target. The consensus target is $62.94 and shares closed at $35.98.

Paratek Pharmaceuticals

This smaller cap stock also offers gigantic upside potential. Paratek Pharmaceuticals Inc. (NASDAQ: PRTK) is a clinical stage biopharmaceutical company that focuses on the development and commercialization of therapeutics based on tetracycline chemistry in the United States.

Its lead product candidates include Omadacycline, a broad-spectrum, intravenous and oral antibiotic that is in Phase 3 clinical trials for use as a monotherapy antibiotic for acute bacterial skin and skin structure infections, community-acquired bacterial pneumonia (CABP), urinary tract infections and other serious community-acquired bacterial infections; and Sarecycline, a tetracycline-derived compound that is in Phase 3 clinical trials for the treatment of acne and rosacea.

Paratek recently announced that it has completed enrollment in the pivotal Phase 3 clinical study evaluating omadacycline for the treatment of CABP. This study, which is designed to assess the efficacy and safety of intravenous to once-daily oral omadacycline compared with moxifloxacin in subjects with CABP, enrolled its first patient in November 2015. The company expects to report top-line data from this study in the second quarter of 2017.

Baird feels the data from the company’s studies will be positive and sees regulatory filing in the first half of next year. The team also notes the need for new antibiotics as bacterial resistance to current drugs continues to increase. The company is executing ahead of schedule, has a broad product line and outstanding senior management.

The Baird target price is $40, while the consensus is $37.71. The stock closed at $14.35.

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Four big opportunities for aggressive investors. There also have substantial risks should the outcomes not play out favorably. With that in mind, some smaller speculative positions could be the right play for aggressive, risk-tolerant accounts.

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