Typically when news drifts out of Washington, D.C., concerning tax changes that can affect a sector, that sector will get pummeled first and questions will be asked later. That is exactly what happened late Thursday. The biotech and specialty pharmaceutical groups got hit hard for a variety of reasons. The largest of which the analysts at Jefferies believe, is commentary within Washington’s new budget proposal regarding tax inversion strategies. They have seen language before and believe that concerns, insofar as they are impacting stocks are overdone.

In a research note the firm put out, the analysts conclude that even if such actions were to be taken to curtail tax strategies, it would take a number of years before laws were enacted. The longevity of the specialty pharmaceutical trade in terms of the value creation merger and acquisition thesis is concerned, has been by far the largest component of the bear thesis with respect to some of the stocks that got hit hard. They Jefferies team thinks that the group is therefore oversold, and would look to buy on weakness.

Here is a list of some of the names Jefferies says to buy now, especially on any continued weakness.

Actavis PLC (NYSE: ACT) is a top generic-drug maker and continues to see unprecedented growth. In the second quarter, total sales exceeded $2 billion, creating 57% year-over-year growth. A key element to Actavis’s growth has been the so-called patent cliff, a period in which many of the world’s best-selling drugs are losing patent protection. In fact, during Actavis’s fourth-quarter report, it specifically mentioned the new generic introduction of drugs such as Suboxone, Lidoderm and Concerta as growth drivers. The Thomson/First Call target is $227.80. Actavis closed Thursday trading at $213.95, down almost 5%.

Auxilium Pharmaceuticals Inc. (NASDAQ: AUXL) has been often mentioned as a solid takeover candidate. Its Testim drug is a proprietary, topical testosterone replacement therapy gel FDA approved for the treatment of male hypogonadism. Since its launch in the spring of 2003, Testim has steadily gained market share from entrenched competition via the company’s increased 150-person sales and marketing organization in the United States. The consensus price target stands at $32.19. Shares closed down more than 7% Thursday at $29.61.

Celldex Therapeutics Inc. (NASDAQ: CLDX) focuses on developing therapeutic antibodies, antibody drug conjugates, immune system modulators and vaccines. Investors are interested in Celldex because of the unmet need therapies the company is developing. Celldex is working on drug indications that include therapies for glioblastoma, breast cancer, dense deposit disease and lymphoma. A late 2013 secondary stock offering helped shore up the company coffers. The consensus estimate is at $36.33. Celldex closed Thursday at $27.65, down 5.5%.

Endo Health Solutions Inc. (NASDAQ: ENDP) announced last year that it was buying Canadian based Paladin Labs for $1.5 billion. The stock reacted favorably as Wall Street loved the deal, which looks to be accretive to earnings in the first year. The consensus price target is $69.50. Endo closed Thursday at $73.89, down 3.4%

Mallinckrodt PLC (NYSE: MNK) just made a big acquisition that some firms on Wall Street think could be a game-changer. While the recent purchase of Cadence Pharmaceutical is expected to be accretive, some also think that Mallinckrodt overpaid. The consensus price target is $62.20. Mallinckrodt closed Thursday at $66.90, down 4.3%.

Valeant Pharmaceuticals International Inc. (NYSE: VRX) acquisition of Medicis last year made it the leading dermatology firm in the United States with segment sales approaching $2 billion. Valeant expanded its acne franchise via the Medicis purchase, with the addition of Solodyn — a once daily oral antibiotic (minocycline) launched in 2006 — and Ziana — a combination clindamycin/tretinoin topical gel introduced in 2007. The consensus price target for this fast growing company is an astonishing $52. The stock closed Thursday at $138.55, down 6.6%.

Event driven hedge funds have computer programs that scan headlines constantly around the world looking for any piece of data that can trigger a buy or sell. Once the selling started Thursday, it became indiscriminate, and it was obvious that short-sellers were trying to exploit the downside weakness. The bottom line, as we all know, is nothing gets done fast in Washington D.C. Any tax amendment that would affect these companies could be way in the distance. Now may be an opportune time to buy some of these top names.

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