One segment in the markets that has been dogged with issues for almost two years is the big pharmaceuticals, as numerous factors have kept the lid on share prices and, in some cases, kept the headlines right in investors’ faces. The biggest issue is the seemingly constant and somewhat shrill rhetoric from attention-seeking politicians over drug prices. While that may play well with constituents, it can be difficult for companies trying to deliver for shareholders.

In a new research report, the outstanding team at JPMorgan make the case that the best place for investors to look when considering large cap drug stocks is companies that have strong new product cycles already in motion. They also focus on stocks with attractive top-line and margin expansion potential. Three make the grade, and are all rated Overweight.

Allergan

This company has had a very strong run off lows printed in December. This stock has had a very strong run off lows printed in December. 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 company is set to report first quarter results on May 9, so investors may want to buy partial positions in front of the release.

Allergan shareholders are paid a 1.15% dividend. The JPMorgan price target for the stock is $300, and the Wall Street consensus target is $273.69. The shares closed Thursday at $245.25.

Bristol-Myers Squibb

This top company remains a favorite at Jefferies and ranks as the fourth top global pick. Bristol-Myers Squibb Co. (NYSE: BMY) is a global pharmaceutical company focused on discovering, developing, licensing and marketing chemically synthesized drugs or small molecules and biologics in various therapeutic areas, including virology comprising human immunodeficiency virus infection (HIV), oncology, neuroscience, immunoscience and cardiovascular.

The company recently announced that Biogen will pay $300 million upfront to Bristol-Myers to license a palsy drug with a $2 billion market opportunity and the potential to use that to treat Alzheimer’s. The company will pay a total of $410 million in milestone payments and a tiered double-digit royalty to license a drug known only as BMS-986168. The drug just completed Phase 1 testing in progressive supranuclear palsy.

The company reported first-quarter profit and revenue that exceeded Wall Street expectations. The results included a 60% increase in global revenues for cancer drug Opdivo, compared with the year-earlier period,

Shareholders receive a 2.83% dividend. JPMorgan has a $66 price objective, and the consensus target price is $56.33. The shares closed on Thursday at $55.19.

Eli Lilly

This stock also has substantial upside potential. Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.

The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.

Recently, the U.S. Food and Drug Administration (FDA) declined to approve a new drug for rheumatoid arthritis made by Eli Lilly and partner Incyte. The FDA indicated that additional clinical data was needed to determine the most appropriate doses of the drug, Olumiant (baricitinib) and to further characterize safety concerns across treatment arms. The request for additional data possibly means more than a year’s delay for this important product for both companies, and it represents a break for other drugmakers who were expected to face tough competition from Olumiant.

Eli Lilly also reported a bigger-than-expected quarterly adjusted profit as the drugmaker benefited from higher demand for its newer products including diabetes treatment Trulicity and psoriasis drug Taltz. Sales in its newer drugs, including Taltz, Trulicity and lung cancer treatment Cyramza, more than doubled in the first quarter.

Shareholders are paid a 2.5% dividend. The JPMorgan price objective is $100. The consensus target is $89.10, and shares closed Thursday at $83.04.

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Even though the president wants to see lower drug prices, these things move slowly, and with the push to replace Obamacare, the tax reform pledges, and many other agenda items could back-burner any big push on drug prices. Plus, with a nervous markets, pharmaceuticals are always seen as safer havens for investors.

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