Here are the top big pharmaceutical stocks to buy and the best restructuring plays.

Abbott Laboratories (NYSE: ABT) ranks high on the Jefferies restructuring list. Abbott has been moved to third place from seventh previously, and is now Jefferies top U.S. pick. Jefferies anticipates a positive inflection in revenue and earnings growth from the second half of this year as the established pharmaceuticals business performance improves. Jefferies raises its price target from $43 to $46. The Thomson/First Call estimate is $40. Investors receive a 1.5% dividend.

Novartis A.G. (NYSE: NVS) is the top European pharmaceutical restructuring play at Jefferies. Novartis is now the top pick due to the greatest total upside available versus current prices, as well as having the most restructuring potential over the next 12 to 18 months. Jefferies raises its price target from $76 to $79 on a dollar adjusted basis, while the consensus is at $73. Investors receive a 3.5% dividend.

Merck & Co. Inc. (NYSE: MRK) is upgraded to Buy from Hold. Management clearly has begun to recognize pressure from shareholders for better returns by the activation of an accelerated share repurchase program. Jefferies also believes that further pressure over the next 12 to 18 months will lead to some restructuring of the business, with consumer and animal health being the most likely assets that could be sold or spun out. The price target goes from $48 to $54, while the consensus target is $51. Shareholders are paid a 3.7% dividend.

AbbVie Inc. (NYSE: ABBV) remains a top stock to buy at Jefferies. With a current market cap of $69.10 AbbVie has become the 49th largest company in the S&P 500. Jefferies raises its price target $3 to $54, and the consensus target is much lower at $48. Investors receive a 3.7% dividend.

Bristol-Myers Squibb Co. (NYSE: BMY) has been on a tear for the past month. Investors clearly are excited about the company’s nivolumab, which helps the immune system fight cancer tumors. Jefferies hikes its price target from $45 to $53.50, but the consensus target is much lower at $45.75. Shareholders are paid a 3.0% dividend.

Pfizer Inc. (NYSE: PFE) finishes off the list of large cap pharmaceuticals to buy at Jefferies. With strong fundamentals and a sound approach to operations, the company is expected to report improved results next quarter after a disappointing first quarter of 2013. Jefferies keeps its price target at $33, while the consensus estimate is at $32. Investors are paid a 3.5% dividend.

Seeking out the next most likely large cap pharmaceuticals restructuring opportunities for investors would seem to be a worthwhile pursuit, given the rising interest and valuations in the sector. Even if restructuring efforts take some time, the total return potential of the stocks make them a good fit in any portfolio.

We have featured many sectors this week for a rising interest rate risk group. Dividend investors better pay attention. Some of these have what may be severe risk if interest rates rise, even if the overall equity market remains strong. The move may push some investors toward growth. Other investors will simply decide that if they can make a half-point or full point higher in Treasury yields without the equity market risk then they will take that. We already saw that investors would suddenly chase higher interest rates in this week’s Treasury note auctions.

Not all banks will flop under higher or rising interest rates. Banks generally just have to avoid inverted yield curves. One analyst report from the team at Merrill Lynch went on to show that Wells Fargo & Co. (NYSE: WFC) and others would win in higher rates, while others would lose. That full list is here.

Before looking further, we did issue a primer in the recent days that is meant to act as a How-To Guide on how to short Treasury bonds. If the next great short is bonds there are ways that Joe Public can make money just like the hedge fund managers.

The high payouts from the Master Limited Partnership sector are considered to be at risk by some investors, although the risk is likely an asset preference risk by investors more than a serious business risk. Deutsche Bank gave a list of the safer MLPs, showing that Enterprise Products Partners L.P. (NYSE: EPD) topped its list. We would caution that JPMorgan Alerian MLP Index ETN (NYSE: AMJ) tracks this broad sector and it has been in a downward trend for almost two weeks and is down close to 10% from its recent highs. There may be value when the dust settles, but investors often shoot first and ask questions later.

Mortgage REITs face a dual risk at the current time. Rising rates creating duration risk is one thing, but low prepayments and a low supply of conventional mortgage-backed securities is another. Annaly Capital Management, Inc. (NYSE: NLY) is considered one of the best of the MBS REITs and it screens out having a 12.5% yield. To show just how bad the rate risk is here, Annaly shares have rallied only once in about two weeks and that rally was so small it was unnoticed. Investors can also look at the close to the same trading pattern in the more diversified Market Vectors Mortgage REIT ETF (NYSE: MORT). Oppenheimer has loosely defended some of the players in this sector but the verdict remains out.

One of the biggest risk sectors is in electric utility stocks. Investors used to use these as the new equivalent of CDs, but higher rates mean that the long-term borrowing costs go much higher to finance long-term power projects that may have a life of 30 to 40 years. The Utilities Select Sector SPDR (NYSE: XLU) may have finally stabilized, but this was down almost 10% from the highs at the start of May. FirstEnergy Corp. (NYSE: FE) was hit hard with an analyst downgrade this last week and shares have not recovered much, leaving it with a dividend yield back above 5%.

Drug stocks are supposed to be safe havens as well. Pfizer Inc. (NYSE: PFE) has performed poorly in recent days and shares are now down 10% from their recent highs. Merck & Co. (NYSE: MRK) has still held up well likely because its yield is higher at 3.6%. Procter & Gamble Co. (NYSE: PG) has now pulled back more than $5 from its $82.54 high even though the activists succeeded in getting its CEO out of the picture. Its yield is about 2.9%, but investors are staying away as P&G still trades at almost 20-times earnings.

We recently reviewed that Sterne Agee went out defending the homebuilder sector. While this group is not known for paying out high dividends at all (or any dividends), housing is of course very prone to being interest rate sensitive. PulteGroup, Inc. (NYSE: PHM) was defended in this call, but the entire group remains at least at some risk here even as housing markets are recovering.

Perhaps the ultimate risk in rising rates, or at least a huge unknown, is gold. Gold has been battered and has lost its reserve currency alternative status for investors after a 12-year bull market. What is interesting is that despite the risks in being a miner is that the mining stocks got back to 2008 or 2009 levels and have become so cheap to gold that value investors have to at least given them a review.

Are interest rates going to rise as fast as the worst case scenario? Probably not, but when rates do reverse the easy-money status that has been in place for years you can bet that the move higher will be much more than just the 50 basis points or so that you have seen in recent weeks.

Keep in mind that a rising interest rate environment is not likely to make companies decide to stop lifting their dividends. What may change is that investors will become much more selective about their dividend investments, and they may avoid some of the sectors which had been in so much favor for dividend lovers of late.

The U.S. dollar index is trading up 0.55% today, now at 84.3240. The GSCI commodity index is down 0.6% at 631.02. WTI crude oil closed down 2%, at $94.28 a barrel on the first day of trading the July contract and following another large rise in U.S. gasoline inventories. Brent crude trades down 1.4% at $102.51 a barrel. Natural gas is down 0.1% today at about $4.19 per million BTUs. Gold settled down 0.6% today at $1,370.10.

The unofficial closing bells put the DJIA down about 80 points to 15,307.56 (-0.52%), the NASDAQ fell nearly 39 points (-1.11%) to 3,463.30, and the S&P 500 fell -0.83% or nearly 14 points to 1,655.35.

There were a several analyst upgrades and downgrades today, including:

• SodaStream International Ltd (NASDAQ: SODA) cut to ‘neutral’ at J.P. Morgan;
• Carnival Corp. (NYSE: CCL) cut to ‘neutral’ at HSBC;
• Bristol-Myers Squibb Co. (NYSE: BMY) raised to ‘buy’ at Citigroup;
• Monster Beverage Corp. (NASDAQ: MNST) started as ‘outperform’ at BMO Capital Markets; and
• Popular Inc. (NASDAQ: BPOP) started as ‘outperform’ at Wells Fargo.

Earnings reports since markets closed last night have resulted in some price changes for reporting companies as of the last half hour of trading today:

• Intuit Inc. (NASDAQ: INTU) is up 0.4% at $58.14;
• NetApp Inc. (NASDAQ: NTAP) is up 1.2% at $37.05;
• American Eagle Outfitters Inc. (NYSE: AEO) is up 1% at $20.51;
• Lowe’s Companies Inc. (NYSE: LOW) is up 0.6% at $42.71 after posting a new 52-week high of $43.84 earlier today;
• Staples Inc. (NASDAQ: SPLS) is up 2% at $15.05 after posting a new 52-week high of $15.50 earlier today;;
• Target Corp. (NYSE: TGT) is down 4.6% at $67.96; and
• Toll Brothers Inc. (NYSE: TOL) is up 2.8% at $37.00 after posting a new 52-week high of $39.25 earlier today.

Before markets open tomorrow morning we are scheduled to hear earnings from DryShips Inc. (NASDAQ: DRYS), Hewlett-Packard Co. (NYSE: HPQ), L Brands Inc. (NYSE: LTD), PetSmart Inc. (NASDAQ: PETM), SeaWorld Entertainment Inc. (NYSE: SEAS), Workday Inc. (NYSE: WDAY), Dollar Tree Inc. (NASDAQ: DLTR), GameStop Corp. (NYSE: GME), Ralph Lauren Corp. (NYSE: RL), and Stein Mart Inc. (NASDAQ: SMRT).

Some standouts among heavily traded stocks today include:

MannKind Corp. (NASDAQ: MNKD) is up 15.1% at $6.17 after posting a new 52-week high of $6.54 earlier today. The biopharmaceuticals firm was touted as a likely takeover target.

Pfizer Inc. (NYSE: PFE) is up 1.7% at $29.26. The drugmaker said it plans to sell its majority holding in animal drug spinoff Zoetis Inc. (NYSE: ZTS).

Suntech Power Holdings Co. Ltd. (NYSE: STP) is down 22.9% at $0.99. The solar energy PV maker has sold one of its projects to another company at a steep discount, and the local government of Wuxi province, where Suntech has its main manufacturing plant, has filed a $2.5 billion claim against the company on behalf of more than 500 creditors.

Stay tuned for Thursday. St. Louis Fed President James Bullard is giving a speech. We have also noted the following events on the schedule (all times Eastern):

• 8:30 a.m. – New claims for unemployment benefits
• 8:58 a.m. – Flash PMI manufacturing index
• 9:00 a.m. – FHFA house price index
• 10:00 a.m. – New home sales
• 10:30 a.m. – EIA weekly natural gas storage report
• 11:00 a.m. – Kansas City Fed manufacturing index
• 1:00 p.m. – Treasury Inflation-Protected Securities (TIPS) auction
• 4:30 p.m. – Fed balance sheet and money supply

In a close examination of their stocks to buy, Merrill Lynch analysts sought to (1) point out possible product launches and (2) highlight important milestones, including potential threats for the companies in their coverage universe. The firm also summarized quarterly growth and margin trends and provided a valuation snapshot for each company. Here are the stocks to buy from Merrill Lynch.

AbbVie Inc. (NYSE: ABBV) seems to be on the radar at most major Wall Street firms, despite the fact that 50% of all revenues are from one drug (Humira). Merrill Lynch is bullish on the stock given its attractive valuation, above-average dividend yield, and the potential for the pipeline to deliver a blockbuster hepatitis C (HCV) franchise over the medium term. Their price target for the stock is $49. The Thomson/First Call consensus target is $45.50. Investors are paid a 3.60% dividend.

Bristol-Myers Squibb Co. (NYSE: BMY) is a stock to buy. Merrill Lynch analysts do have some concern over the pipeline of future products. They believe that pipeline setbacks could pressure the stock, but a solid dividend yield should limit downside risk. The Merrill Lynch price objective for the stock is $45. The consensus target is much lower at $38. Investors receive a 3.50% dividend.

Eli Lilly & Co. (NYSE: LLY) is considered a “sum-of-the parts” stock to buy. Continued strong cash flow generation, a focus on shareholder return through a stable dividend, expense control and potential for positive pipeline news could improve sentiment over time and lead to multiple expansion. The Merrill Lynch price target is $65. The consensus is, again, much lower at $57. Shareholders are paid a 3.60% dividend.

Merck & Co. Inc. (NYSE: MRK) is a stock to buy with characteristics similar to the Eli Lilly story. Merrill Lynch analysts are looking for continued strong cash flow generation, focus on shareholder return through a stable dividend (with potential for growth) and share buybacks, and potential for positive pipeline news could improve sentiment over time and lead to multiple expansion. The Merrill Lynch price target for the stock is $53, while the consensus is at $51. Investors are paid a 3.80% dividend.

Pfizer Inc. (NYSE: PFE) rounds out the list of large cap stocks to buy. With a solid current revenue base and a growing pipeline, Pfizer may have the most potential of the stocks to buy. The Merrill Lynch price target is $33. The consensus is $32. Shareholder are paid a 3.30% dividend.

While the Merrill Lynch report did not assess macro issues, which can play an important role in driving stock performance, it was very helpful for company-specific analysis. Combining strong growth potential with consistent and possibly rising dividends, make large cap pharmaceutical stocks a good bet for any portfolio.

Through an arrangement with CVS Caremark Corp. (NYSE: CVS), patients who have a valid prescription for Viagra will be able to order the medication online. Other treatments for erectile dysfunction like Cialis from Eli Lilly & Co. (NYSE: LLY), Levitra and Staxyn from GlaxoSmithKline (NYSE: GSK) and Germany’s Bayer A.G., Stendra from Vivus Inc. (NASDAQ: VVUS) and Zydena from South Korea’s Dong-A are likely to be the first followers as patients with prescriptions for these drugs may want to avoid the stigma — real or imagined — attached to purchasing these drugs in person.

But the makers of other drugs will be watching as well. By selling direct, drug makers avoid two problems. First is counterfeiting. Viagra, which sells by prescription for $25 a tablet, is often faked by online sellers and sold as the real thing. That damages the drug’s brand and keeps profits out of Pfizer’s hands.

Second, Pfizer will not undersell its distribution chain, at least not yet, meaning that the company will put more profit in its pocket. For Viagra, with sales of $2 billion a year, the company may realize some additional profit, but by promoting Web sales as offering “real Viagra,” Pfizer is offering a guarantee that the knock-off sites cannot match.

Makers of weight-loss drugs will be watching Pfizer’s Web sales closely, and these may be the next drugs to hit the market directly from manufacturers to patients. Drugs like Viagra attract more Internet searches from men and weight-loss medications more searches from women than any other medications.

If Pfizer can pull this off, it could decide to extend Web sales for other drugs or it could promote sales from online pharmacies like CVS or Walgreen Co. (NYSE: WAG). Once again, the Internet changes everything.

Under Pfizer’s new system, men armed with a prescription can order their drugs, have the order filed at CVS Caremark Corp. (NYSE: CVS) and then mailed. Pfizer describes the benefits of the system this way:

CONVENIENCE AND PRIVACY of ordering from your home with FREE shipping in the continental U.S.

CONFIDENCE in knowing that your order is being handled by trusted pharmacists and that your information is secure.

SAVINGS AND OFFERS found on VIAGRA.com that can also be redeemed at your local pharmacy or preferred online pharmacy with a valid prescription for VIAGRA.

Cialis and Levitra can, and probably have to, match the initiative immediately. Through programs for the three, online erectile dysfunction products can follow a system pioneered by companies such as Amazon.com Inc. (NASDAQ: AMZN) in which consumers can buy everything from books to consumer electronics to clothing. Perhaps the three drugs should have joined these other products years ago. It could have blunted the rise of the black market and made the sales of them easier for the consumer, a benefit that other categories of products discovered years ago.

The marketers at Cialis maker Eli Lilly & Co. (NYSE: LLY) and Levitra maker GlaxoSmithKline PLC (NYSE: GSK) are too intelligent and aggressive to allow Pfizer’s plan go unchallenged for too long.

All the men who were embarrassed about their erectile problems can now sneak on to the Internet, get their pills delivered to their homes, and, by the way, get three free pills in the process.

Microsoft Corp. (NASDAQ: MSFT) plans to upgrade Windows 8 to boost sales. (Reuters)

New York state will file charges against Bank of America Corp. (NYSE: BAC) and Wells Fargo & Co. (NYSE: WFC) over mortgage instrument abuses. (Reuters)

Electronic Arts Inc. (NASDAQ: EA) and Walt Disney Co. (NYSE: DIS) set a partnership for Star Wars games. (Reuters)

Intel Corp. (NASDAQ: INTC) makes changes to its Atom chip in a bid for more mobile sales. (Reuters)

The Securities and Exchange Commission charges officials of Harrisburg with misrepresenting the city’s financial state. (WSJ)

Bank of America pays MBIA Inc. (NYSE: MBI) $1.7 billion to settle mortgage-related charges. (WSJ)

European Union officials issue a complaint against Google Inc.’s (NASDAQ: GOOG) Motorola over its patent violations of Apple Inc. (NASDAQ: AAPL) intellectual property. (WSJ)

The three largest J.P. Morgan Chase & Co. (NYSE: JPM) investors fail to support the plan to allow Jamie Dimon to keep both his chief executive and chairman roles. (WSJ)

San Francisco City Attorney Dennis Herrera sues Monster Beverage Corp. (NASDAQ: MNST) over sales of its drinks to underage children. (WSJ)

The European Union will put tariffs on Chinese solar panels. (WSJ)

Some telecom companies adopt mobile OS products that compete with Apple’s iOS and Google Android. (WSJ)

To fight online sales of fake drugs, among other things, Pfizer Inc. (NYSE: PFE) will sell Viagra online. (NYT)

Foxconn, a major Apple supplier, begins to manufacture its own TVs. (NYT)

Google’s YouTube will allow some providers of content to charge subscription fees. (NYT)

Slow increases in health care costs could be due to the recession and higher co-pay charges. (NYT)

Facebook Inc. (NASDAQ: FB) will introduce video ads. (FT)

Swiss unemployment reaches a two-year high. (Bloomberg)

Maybe the big pharmaceutical company figures it is easier to use a computer than to walk into a drug store. After all, contact lenses already are available on the Internet. Another theory is that men are embarrassed to let their local pharmacist know that they have an erection problem.

Whatever the reason, the Houston Chronicle reports on getting Viagra online:

Men still will need a prescription to buy the blue, diamond-shaped pill on viagra.com, but they no longer have to face a pharmacist to get it filled. And for those who are bothered by Viagra’s steep $25-a-pill price, Pfizer is offering three free pills with the first order and 30 percent off the second one.

Pfizer’s bold move blows up the drug industry’s distribution model. Drugmakers don’t sell medicines directly to patients. Instead, they sell in bulk to wholesalers, who then distribute the drugs to pharmacies, hospitals and doctors’ offices.

But the world’s second-largest drugmaker is trying a new strategy to tackle a problem that plagues the industry. Unscrupulous online pharmacies increasingly offer patients counterfeit versions of Viagra and other brand-name drugs for up to 95 percent off with no prescription needed. Patients don’t realize the drugs are fake or that legitimate pharmacies require a prescription.

Those fake drugs do not work, anyway.

Walt Disney Co.’s (NYSE: DIS) “Iron Man 3″ could save the summer box office yield all by itself. Like several serial movie franchises, each installment tops the next. Theater owners, along with Disney shareholders, already may be anticipating “Iron Man 4.” USA Today reports on the “Iron Man 3″ opening weekend:

“The terrible run of 2013 releases ended” this weekend, says David Mumpower of Boxofficeprophets.com. “Iron Man 3 behaved like a box-office black hole, mercilessly devouring the other films.”

Critics and fans wolfed down the superhero story. About 78% of critics recommended the movie, while 83% of moviegoers liked it, according to pollsters RottenTomatoes.com.

Internationally, the film has been a hit for weeks, and IM3′s worldwide haul rose to $680.1 million. IMAX reported a record haul as well, collecting $16.5 million domestically and $13 million internationally.

Viagra Available Online

Men, or their significant others, will be able to buy Pfizer Inc.’s (NYSE: PFE) erectile dysfunction drug Viagra online soon. Maybe the big pharmaceutical company figures it is easier to use a computer than to walk into a drug store. After all, contact lenses already are available on the Internet. Another theory is that men are embarrassed to let their local pharmacist know that they have an erection problem. Whatever the reason, the Houston Chronicle reports on getting Viagra online:

Men still will need a prescription to buy the blue, diamond-shaped pill on viagra.com, but they no longer have to face a pharmacist to get it filled. And for those who are bothered by Viagra’s steep $25-a-pill price, Pfizer is offering three free pills with the first order and 30 percent off the second one.

Pfizer’s bold move blows up the drug industry’s distribution model. Drugmakers don’t sell medicines directly to patients. Instead, they sell in bulk to wholesalers, who then distribute the drugs to pharmacies, hospitals and doctors’ offices.

But the world’s second-largest drugmaker is trying a new strategy to tackle a problem that plagues the industry. Unscrupulous online pharmacies increasingly offer patients counterfeit versions of Viagra and other brand-name drugs for up to 95 percent off with no prescription needed. Patients don’t realize the drugs are fake or that legitimate pharmacies require a prescription.

Those fake drugs do not work, anyway.

Spain’s April Jobless Figures

Unemployment in Spain has been above 24% for several months, and there is nothing about the nation’s economy that will reverse that. The central government has complained that austerity is the cause, as have most of the country’s big unions. However, the European Central Bank, International Monetary Fund, European Union and Germany are not likely to change their view that austerity balances budgets. Spain currently vies with Greece for the highest jobless rate in Europe. Fox Business says about the April jobless figures for Spain:

Almost 5 million Spaniards were registered as unemployed in April, data showed, as their prospects of finding work in the country with the European Union’s second highest jobless rate deteriorated further.

The number of registered jobless fell by 0.91 percent, or 46,050 people. But those gains were mainly down to restaurants and hotels gearing up for the holiday season, and in seasonally adjusted terms the number rose by 17,663 from March, Monday’s labor ministry data showed.

“The figure shows the continued weakness of the labor market and of the Spanish economy. It’s not compatible with the (government’s forecast) of a stronger economy in the second quarter of the year,” Jose Luis Martinez, a strategist at Citi in Madrid, said.

Before calling it a bubble, there are many things to consider. While there are some major ETFs in the sector, we have noted previously how these biotech ETFs are often misrepresented by their name, given the weightings and stocks they hold. Another issue is culling out the risky one-candidate companies from the established biotech leaders. A long-term comparison also can be made to drug giants for relative valuation and for dividends.

As far as why we are asking if a bubble is forming here, it is not just because these stocks have performed well. The four major U.S. biotech players are Amgen Inc. (NASDAQ: AMGN), Biogen Idec Inc. (NASDAQ: BIIB), Celgene Corp. (NASDAQ: CELG) and Gilead Sciences Inc. (NASDAQ: GILD). All four companies hit new all-time highs this last week.

24.7 Wall St. is taking a look at each for valuation metrics by market capitalization, forward earnings multiples, sales and earnings growth expected, and paring up the current stock price against the Thomson Reuters consensus price targets from Wall Street analysts.

Before we get into biotech, Pfizer Inc. (NYSE: PFE) and Merck & Co. (NYSE: MRK) need to be evaluated. Both drug giants were trading very close to multiyear highs going into earnings this week. Somehow the market did not anticipate that both companies were going to offer muted guidance ahead. Merck is now down almost $4 from its 52-week high of $48.78, and Pfizer is down more than $2 from its 52-week high of $31.15. Both stocks trade at 12 or 13 times the projected 2013 earnings estimates from Thomson Reuters.

What sets Big Pharma stocks apart from biotech stocks is that there is just no revenue growth expected this year, or next even, if the so-called patent cliff woes are mostly behind these companies. Pfizer’s common stock dividend yield is 3.2%, versus 3.6% for Merck. Only one of the major biotechs (Amgen) pays a dividend as the sector is still tracking for growth.

Amgen Inc. (NASDAQ: AMGN) took a beating after its earnings report last week. Even after being added to the Conviction Buy List at Goldman Sachs, the biotech giant is up 2% at $106.25 after a recent all-time high of $114.95. The firm’s price target is $130 now, with a consensus target from analysts down at $111.36 and a street-high target of $133 for Amgen. It took a sell-off for this stock to get back under the consensus price target. Amgen shares are still up 24% so far in 2013 after the recent sell-off. The good news is that Amgen trades at about 14.6 times expected earnings this year, but the bad news is that sales growth is projected to be less than 5% for this year and next. Amgen is not really expensive for a biotech stock, but it is missing that monster growth. Amgen also acts like a new Big Pharma stock now that its dividend yield is 1.8%.

Biogen Idec Inc. (NASDAQ: BIIB) is now down $10 from its recent all-time high of $226.18. It was removed from Goldman Sachs’ Conviction Buy List, but at $216.25 its consensus price target is all the way down at $202.56. Biogen’s multiple sclerosis franchise is now approaching a total domination in the field. It pays no dividend but is expected to post 16% to 17% sales growth in both 2013 and 2014. The problem that investors may face going forward is that valuation is stretched at more than 27 times the consensus 2013 earnings estimate, since this stock has risen a whopping 48% so far in 2013.

Celgene Corp. (NASDAQ: CELG) is down just over $10 per share from its recent all-time high of $128.52. The consensus price target of $124.69 is also under the most recent high, while the street-high price target is up at $143.00. What Celgene has going for it is that some market pundits expect its earnings to double by 2015 to 2016. Sales are expected to rise more than 10% for at least the next two or three years, as well. That being said, Celgene trades at about 21 times expected 2013 earnings estimates, now that shares have risen a whopping 50% so far in 2013.

Gilead Sciences Inc. (NASDAQ: GILD) is down about $5 from its recent all-time high of $55.16. Gilead trades at about 25-times expected 2013 earnings, and its shares are up by 37% so far in 2013. The consensus price target is above the prior high at $58.20, and the highest target price is around $70 for the HIV drug leader. Sales continue to grow in the double-digits and are expected to maintain that path for at least the next two years.

Now before you run off scratching your head, there are the market capitalization figures to consider, versus $208 billion for Pfizer and $138 billion for Merck. Amgen is king at about $80 billion as of now, and it seems to be the first biotech that could ultimately reach the mega-cap class at $100 billion. The problem with thinking Amgen will be first is that analysts project more upside and growth at Gilead, and its market cap is almost $77 billion. Biogen Idec is worth more than $51 billion and Celgene is worth about $49 billion.

Biotech stocks have performed incredibly well so far in 2013. For value-oriented investors, these still need to soften up in price. For investors who chase growth at any price, there is still some perceived upside. The good news is that biotechs have pulled back and now Big Pharma stocks have all pulled back. The bad news is that if the market does not keep rising, it is very likely that investors will look for more patient entry points before chasing these high gains and valuations in biotech.

For those looking for undervalue growth with more risk, a firm called PropThink has just issued a list of biotech stocks that it feels are not represented with proper valuations (yet) by the market.

One more issue we noted in much more detail in our ETF Folly for Biotech ETFs is that the exchange traded fund universe is very underrepresented in this sector, regardless of valuation analysis. The top ETFs here are the iShares Nasdaq Biotechnology (NASDAQ: IBB), SPDR S&P Biotech (NYSEMKT: XBI), First Trust NYSE Arca Biotech Index (NYSEMKT: FBT) and the Market Vectors Biotech ETF (NYSEMKT: BBH). Note that the combined market capitalizations are not quite 2% of the combined market valuations of just the top four biotech stocks.