If any sector is offering value in what really appears to be a very overbought stock market, it is pharmaceutical, including biotechnology. Absolutely battered during the election cycle when rhetoric over drug prices got hot, the stocks have again been hit as President Trump said he also wants to see drug prices come down. Some biotech stocks are trading as cheap as big pharmaceuticals with much better growth prospects.

A series of new Jefferies research reports focus on four companies that are all rated Buy at the firm and have outstanding upside potential. While better suited for more aggressive accounts, they make sense for investors looking to put capital to work now.

Celgene

This is a top large cap pick with big upside potential. Celgene Corp. (NASDAQ: CELG) is a very profitable biopharmaceutical company that develops and markets therapies for the treatment of hematologic malignancies, solid tumors and inflammatory conditions. The company’s key growth driver and contributor to the top line is Revlimid for the treatment of multiple myeloma and myelodysplastic syndromes.

Blockbuster blood cancer drug Revlimid continues to dominate. Pomalyst sales also continue to be solid, and cancer drug Abraxane is growing at a respectable rate. So the company continues to have a strong lineup of top-selling drugs. Top Wall Street analysts feel that Celgene is best large-cap de-risked growth story, with possible 15% to 20% earnings growth over the next five years, two new growth drivers (new oral pills for UC and Crohn’s), and the large pipeline of more than 35 partnerships of early-stage next-generation cancer drugs.

The analysts point out that while Johnson & Johnson’s and Genmab’s drug Darzalex will pose a competition threat to Revlimid, there are mitigating factors. They noted in the report:

Physicians expect less 1L and greater 2L Revlimid use for Celgene, somewhat offsetting, and while this suggests less potential US share growth, it provides reassurance that Darzalex’s adoption will not dramatically disrupt their core franchise. We adjusted our company model; however, this has a net neutral impact to Celgene’s valuation.

The Jefferies price target for the stock is $154, and the Wall Street consensus target is $140.13. The shares closed Friday at $125.77.

Gilead Sciences

This company is trading at an astoundingly low forward multiple and offers big potential upside. Gilead Sciences Inc. (NASDAQ: GILD) discovers, develops and commercializes medicines in areas of unmet medical need in North America, South America, Europe and the Asia-Pacific.

Its products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.

The stock was hit on 2017 guidance, which was much lower than expected on diminishing hepatitis C revenue. However, the analyst is positive on the company’s HIV franchise going forward. It also cited new drug filings this year as potential catalysts.

The analyst cited these positives:

Biotech sentiment has gotten incrementally positive since our previous survey, mostly due to diminished concerns over policy/drug pricing and increased enthusiasm for mergers and acquisitions. Responses reinforced our view that Gilead is undervalued, with respondents believing the out year earnings-per-share floor is $6, and the stock trades at only 11 times that number, versus. the low/mid-teens multiple we believe is more appropriate.

Shareholders receive a 3.01% dividend. The $83 Jefferies price objective compares with the consensus target of $79.06. The shares closed last Friday at $69.06.

Kite Pharma

This clinical-stage biopharmaceutical company had a hot 2014 initial public offering and the stock has done outstanding since the debut. Kite Pharma Inc. (NASDAQ: KITE) focuses on the development and commercialization of novel cancer immunotherapy products. It is developing a pipeline of engineered autologous cell therapy-based product candidates for the treatment of solid and hematological malignancies.

The company’s lead product candidate is KTE-C19, a chimeric antigen receptors–based therapy that is in Phase 2 clinical trials for the treatment of patients with refractory diffuse large B cell lymphoma, including primary mediastinal B cell lymphoma and transformed follicular lymphoma.

In late February the company disclosed six-month results from the pivotal study of CAR-T therapy in patients with aggressive lymphomas. The data were overwhelmingly impressive, showing only a slight degradation in response rates and no new safety concerns when compared to the previous three months. On top of that, the company showed that about a third of patients treated with KTE-C19 showed a complete response.

Jefferies noted this:

We highlight a National Health Service study that determined a price of $649,000 for CAR-T, which we view as an upper limit for Axi-Cel pricing, and we raise our Axi-Cel price estimate to $300,000, a number that’s largely in line with consensus, though the Street may not be fully aware of the NHS study.

Jefferies raised its price target to $101 and the consensus target is $74.46. The stock closed Friday at $83.98.

Mallinckrodt

This company has been on a mergers and acquisitions binge over the past three years, and it is a top pharmaceutical stock to buy. Mallinckrodt PLC (NYSE: MNK) is a global specialty biopharmaceutical and medical imaging business that develops, manufactures, markets and distributes specialty pharmaceutical products and medical imaging agents. Areas of focus include therapeutic drugs for autoimmune and rare disease specialty areas like neurology, rheumatology, nephrology and pulmonology, as well as neonatal critical care respiratory therapies and analgesics and central nervous system drugs.

The analysts cited in the recent report:

We recently met with management and key takes were that US healthcare policy change will be gradual but the industry views greater price transparency, positively and MSD-LDD Acthar growth is supported by data build out and volume gains. We think the Street underappreciates the company’s pipeline and clinical timelines for StratGraft and Terlipressin remain on track.

Jefferies has a $70 price target, but the consensus target is higher at $74.87. The stock closed Friday at $62.50.

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These are four top stocks to buy in a sector that has much more value than many on Wall Street. While there still could be volatility, much of the concerns are already long since baked into stock prices.

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