If any sector has had a tough go of it the past year, it has been health care, and especially biotechnology. Continued harsh rhetoric from politicians, especially the Democrats, over drug pricing served as a huge weight on the overall sector. With the Republicans now set to control both Congress and the White House, many on Wall Street feel that there could be far less scrutiny on drug pricing.

A new research report from Ying Huang, the outstanding biotech analyst at Merrill Lynch, makes the case that four top biotechs should rally strongly due to their larger exposure to Medicare Part B and D. We chose two of those stocks rated Buy, and also pulled an additional three that could have big upside as they are all down this year, and are also potential tax-loss selling candidates, that are rated Buy at Merrill Lynch.

The stocks with big Medicare exposure are Amgen Inc. (NASDAQ: AMGN) and Regeneron Pharmaceuticals Inc. (NASDAQ: REGN).

Amgen posted outstanding third-quarter earnings, and the biotech giant remains a top stock for investors to buy. The company focuses on areas of high unmet medical need and leverages its biologics manufacturing expertise to strive for solutions that improve health outcomes and dramatically improve people’s lives. A biotechnology pioneer since 1980, Amgen has grown to be one of the world’s leading independent biotechnology companies, reaching millions of patients around the world and developing a pipeline of medicines with breakaway potential.

The company posted revenues above expectations and showed strong expense management. It also raised guidance for revenues and earnings, and many on Wall Street think the numbers could be conservative. Amgen also reaffirmed interest in mergers and acquisitions activity as a way to sustain long-term growth.

Many on Wall Street point to the company’s tremendous pipeline and outstanding forward earnings and revenue capabilities. Amgen’s double-digit earnings and revenue growth rate is expected to continue for the foreseeable future because of the company’s very deep clinical pipeline, which includes potential blockbusters Repatha for high cholesterol and Kyprolis for relapsed multiple myeloma. Amgen also has one of the industry’s deepest biosimilar pipelines, which is expected to generate upward of $3 billion in annual sales in the years ahead.

Regeneron Pharmaceuticals remains one of the favorites among portfolio managers and is another large cap stock to buy on Wall Street. It has been a performance monster over the past two years, and most Wall Street firms expect it to stay one. The company is focused on the development of therapeutic human antibodies for the treatment of eye disorders, hypercholesterolemia, cancer, inflammation and other diseases.

Regeneron’s product sales are driven principally by its VEGF inhibitor Eylea, which is approved for use in wet age-related macular degeneration and diabetic macular edema, and by Praluent for the treatment of hypercholesterolemia.

The company reported a better-than-expected quarterly profit, as U.S. sales of its flagship eye drug Eylea rose 27%. Eylea generated U.S. sales of $831 million in the quarter, topping the consensus estimate of $812 million. Sales are expected to continue a solid upward trend.

Amgen shareholders are paid a 2.73% dividend. The Merrill Lynch price target on the Neutral-rated stock is $182. The Wall Street consensus price target is $184.14. Shares closed Thursday at $149.50.

Regeneron is rated Buy at Merrill Lynch, which has a $526 price objective. The consensus target is $450.90, and shares closed at $428.63.

Below are three companies that have traded down this year and could have big upside potential. It should be noted that they could see more selling as tax-loss candidates. They are also rated Buy at Merrill Lynch, which noted this in a recent report:

To identify tax loss harvesting candidates, stocks which may be temporarily depressed by tax-loss harvesting but could outperform in subsequent months due to solid fundamentals, we screened the S&P 500 for stocks with year-to-date price declines greater than 10%.

Allergan

This specialty pharmaceutical company remains a very large hedge fund holding and is down a stunning 27.9%. Allergan Inc. (NYSE: AGN) develops, manufactures and markets branded pharmaceutical products. Its growth has been driven largely by acquisitions supported by internal growth, with significant acquisitions of the “old” Allergan, Forest and Warner-Chilcott.

Allergan markets a portfolio of best-in-class products that provide valuable treatments for the central nervous system, eye care, medical aesthetics, gastroenterology, women’s health, urology, cardiovascular and anti-infective therapeutic categories, and it operates the world’s third-largest global generics business, providing patients around the globe with increased access to affordable, high-quality medicines.

Allergan is an industry leader in research and development, with one of the broadest development pipelines in the pharmaceutical industry and a leading position in the submission of generic product applications globally.

The stock was hammered after a deal with Pfizer fell through back in the spring. The stock remains on the Merrill Lynch US 1 list with a price target of $270. The consensus target is $270.67. Shares closed Thursday at $216.39.

Alexion Pharmaceuticals

Rumors have flown for some time that this stock is considered by some firms as a potential acquisition target. Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) develops and commercializes life-transforming therapeutic products.

It offers Soliris (eculizumab), a monoclonal antibody for the treatment of paroxysmal nocturnal hemoglobinuria (PNH), a genetic blood disorder, and atypical hemolytic uremic syndrome, a genetic disease. It also provides Strensiq (asfotase alfa), a targeted enzyme replacement therapy for patients with hypophosphatasia, and Kanuma (sebelipase alfa) for the treatment of patients with lysosomal acid lipase deficiency.

The company conducts Phase 4 clinical trials on Soliris for the treatment of PNH registry; Phase 3 clinical trials for the treatment of myasthenia gravis, neuromyelitis optica spectrum disorder, and delayed kidney transplant graft function; and Phase 2 clinical trials for antibody mediated rejection in presensitized renal transplant patients.

The stock is down a whopping 36% year to date and may be poised for a big move higher. It was nailed yet again this week when it announced a delay in filing its 10-Q because the board of directors is looking into recent allegations by a former employee with respect to the company’s Soliris sales practices.

Merrill Lynch has a $187 price target. The consensus target is $169.21. The stock closed on Thursday at $126.88.

Endo Health Solutions

This stock is down a huge 65% this year and could hold incredible potential for patient investors. Endo International PLC (NASDAQ: ENDP) is an Irish-domiciled global specialty pharmaceutical company that develops, manufactures and commercializes branded and generic pharmaceutical products. It has operations in the United States, Canada, Latin America, South Africa, India and elsewhere. Since it re-domiciled in Ireland following its 2014 acquisition of Paladin Labs, which significantly reduced the company’s tax rate, Endo has expanded through several M&A transactions, including Auxilium (brands) and Par (generics).

This company, like many of the specialty pharmaceutical stocks, was absolutely pounded in sympathy over the issues at Valeant Pharmaceuticals, and it should be noted that it appears there is the potential for legal issues. The stock does remain rated Buy at Merrill Lynch.

The $29 Merrill Lynch price target compares with the consensus estimate of $26.68. Shares closed at $17.48, up over 8% yesterday.

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Many of these stocks are cheap relative to the S&P 500, and history says they won’t stay that way forever, especially with the election results. In fact, the current consensus four-year growth expectations for the large cap biotechs has dipped since 2012 and is currently at the lowest level since 2010. In other words, cheap and somewhat ignored.

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