If any set of stocks has had a rough year plus it is the biotechs, and they took another shot recently when President-Elect Trump said he wanted to see lower drug prices. The fact of the matter is there probably will be some movement to lower costs, but there is also expected to be an effort to cut regulation and speed up approval of badly needed drugs and medicine.

Regardless of the political chatter, top new drugs that will have huge demand can still make the difference for biotech companies. A new series of Jefferies reports focus on four top stocks that have big upside potential. All are rated Buy at Jefferies.

Alnylam Pharmaceuticals

This company was pounded back in October after it discontinued clinical trials for a top drug. Alnylam Pharmaceuticals Inc. (NASDAQ: ALNY) is a biopharmaceutical company that discovers, develops and commercializes novel therapeutics based on RNA interference.

In recent encouraging news, the company reported positive data from an ongoing Phase 2 study of its hemophilia drug fitusiran for treating hemophilia A and B patients with inhibitors. The promising results from the early-stage study will help it progress into a Phase 3 study during early 2017. The company said fitusiran helped manage bleeding in a subset of hemophilia patients who typically are difficult to treat.

Jefferies noted in its report:

There have been concerns around the safety of therapeutic oligonucleotide programs following recent reports of adverse effects in several different programs, so we analyzed the data. We found that certain chemical modifications are associated with some toxicities, suggesting there is significant room for improvement. Our analysis also suggested the discontinuation of Alnylam revusiran was likely program specific, we also find that mortality in the placebo arm was unusually low, which made the drug arm appear high.

The Jefferies price target for the stock is $58, and the Wall Street consensus target is $62.43. The stock closed Friday at $42.25.

Edwards Lifesciences

This company pioneered the artificial heart valve, and it could be poised for big growth. Edwards Lifesciences Corp. (NYSE: EW) provides products and technologies to treat structural heart disease and critically ill patients worldwide. The company offers transcatheter heart valve therapy products, comprising transcatheter aortic heart valves and their delivery systems for the nonsurgical replacement of heart valves.

The company also provides surgical heart valve therapy products, such as pericardial valves for aortic and mitral replacement, and minimally invasive aortic heart valve system, as well as tissue heart valves and repair products, which are used to replace or repair a patient’s diseased or defective heart valve.

Top Wall Street analysts feel that the company’s acquisition of privately held CardiAQ earlier this year made good sense going forward. CardiAQ has human implants of transcatheter mitrial valves, and Edwards is focused on the mitrial valve opportunity after its very strong success in aortic valves. The company also has had tremendous success with transcatheter valve replacement. Transcatheter heart valve replacements are rapidly gaining favor in the medical community for use in those patients who are deemed unsuited for open heart surgery, and they are a fast growing revenue stream for the company.

Jefferies said:

Company hosted an analyst day and provided an initial 2017 global TAVR (transcatheter aortic valve replacement) guide of 15-20% growth vs. our model for 19%. We view this as reasonable and expect the confluence of a larger aortic market, new technology and mitral beginning to mature should keep TAVR growth in the teens for some time. Company noted the market is ~2x larger than initially anticipated, with a large portion of this bigger size a result of “severe asymptomatic AS” patients, and two trials are focusing on these markets.

The stock was hit hard back in October and may be offering investors an attractive entry point. Jefferies has a $115 price target, and the consensus target is $116.22. The shares closed Friday at $90.37.

Pacira Pharmaceuticals

This stock has been on a roller-coaster for years and is now trading where it was in 2013. Pacira Pharmaceuticals Inc. (NASDAQ: PCRX) is a specialty pharmaceutical company that develops, commercializes and manufactures proprietary pharmaceutical products primarily for use in hospitals and ambulatory surgery centers in the United States. The company develops pharmaceutical products based on its proprietary DepoFoam drug delivery technology. Its lead product includes, Exparel, a liposome injection of bupivacaine, an amide-type anesthetic indicated for infiltration into the surgical site to produce postsurgical analgesia.

The company also markets DepoCyt(e), a liposomal formulation of the chemotherapeutic agent cytarabine indicated for the intrathecal treatment of lymphomatous meningitis, a life-threatening complication of lymphoma, a cancer of the immune system. Its development pipeline comprises DepoMeloxicam, a long-acting non-steroidal anti-inflammatory drug, which is in preclinical development for the treatment of acute postsurgical pain, and DepoTranexamic Acid, a pre-clinical development product for the treatment or prevention of excessive blood loss during surgery by promoting hemostasis.

According to the Jefferies report:

Last year, we did a survey of payers and clinicians that found generally muted appetite for Exparel. Indeed, Exparel sales have not meaningfully re accelerated in fiscal 2016 and the stock has performed poorly. However, our new survey shows 44% of clinicians expect utilization to increase (versus 10% in 2015), and more indicated that Exparel access is “less restrictive” than last year. 76% of clinicians now view Exparel as a “primary solution” to the opioid epidemic. The company’s numbers have been falling, and if our survey is right, we’d expect to see stability/improvement in numbers. We look for 13% Exparel sales growth in 2017, 22% in 2018.

The $53 Jefferies price target compares with the consensus target of $49.55. The stock closed Friday at $33.35.

Vertex Pharmaceuticals

This is a stock that has long been considered a buyout candidate and after the mauling it took in the biotech sell-off this year it is even more of a candidate now. 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 its known, VX-‘809, which some think could generate billions in revenues.

The analysts noted:

We spoke with several teratogenicity experts to address lingering concerns around the company’s next-gen correctors, key for enabling expansion into het/min which is another type of gene mutation that causes Cystic Fibrosis and growing the long term franchise revenue potential from $4 billion to $6 billion. We believe the observed findings of fetal abnormalities in rabbits should not delay ‘440’s development given that these findings are usually noted out of abundance of caution and may not necessarily translate to humans. Stock trades near our $70 ex-het/mins valuation floor and shares look very attractive to us.

Jefferies has a $102 price target. The consensus target is $101.80. The shares closed last Friday at $76.67.

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All these stocks have tremendous upside potential, but only investors with very high risk tolerance should consider adding them to their portfolios. Biotech is very data and product approval dependent, and can have big downside if there are failures.

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