Despite a roaring market in 2017, in which the S&P 500 was up almost 20% on the year, the specialty pharmaceutical group and biotechs severely underperformed. In addition, the performance for the sectors was below their usual solid levels. After years of growth through acquisitions, a strategy that absolutely hammered some of the top specialty pharmaceutical companies, many are now refocused on building out innovative pipelines for future internal growth. Toss in the quieter voices from politicians, and things are looking up for 2018.

A new research report, Stifel feels that overall sector fundamentals look much brighter to start 2018, and the report explained why:

While drug pricing rhetoric does not look to be translating into legislative action near term, market forces have continued to play against manufacturers, with consolidating payers/PBMs continuing to use their negotiating power to extract more concessions. That said, portfolio durability has improved and sector leverage has declined, lending us to believe that sentiment (more than fundamentals) is lagging. At an average enterprise value/EBITDA multiple of 8.5x versus 5-year historical norms in low-teens, we believe the group is due for reconsideration.

We screened the Stifel specialty pharmaceutical list and found five companies rated Buy that have massive upside potential and probably don’t have the investment risk of some of the more speculative biotech stocks.

Aerie Pharmaceuticals

This company could be poised for a monster 2018, with new products hitting the market. Aerie Pharmaceuticals Inc. (NASDAQ: AERI) is engaged in the discovery, development and commercialization of therapies for the treatment of patients with glaucoma and other diseases of the eye.

Its product candidates include Rhopressa (netarsudil ophthalmic solution) 0.02% and Roclatan (netarsudil/latanoprost ophthalmic solution) 0.02%/0.005%. The company’s product candidates are designed to lower intraocular pressure in patients with open-angle glaucoma and ocular hypertension. Its Rhopressa is a once-daily eye drop. Rhopressa inhibits Rho kinase and the norepinephrine transporter, which are both biochemical targets for lowering intraocular pressure. After a late 2017 approval, the company will be launching its first product, Rhopressa, for adjunct glaucoma in the second quarter of 2018.

Aerie’s Roclatan is a once-daily, fixed-dose combination of Rhopressa and latanoprost, which is a prescribed drug for the treatment of patients with open-angle glaucoma. The company is engaged in conducting Phase 3 clinical trial for Roclatan. The company will file a new drug application for the product later this year.

The Stifel price target on the stock is $80, and the Wall Street consensus target is $79.75. The shares traded early Thursday at $60.35.

Horizon Pharma

The may be a great play for more speculative accounts. Horizon Pharma PLC (NASDAQ: HZNP) is a specialty pharmaceutical company based in Ireland, and through its subsidiaries, develops and commercializes medicines for the treatment of arthritis, pain and inflammatory diseases. The company’s best known products include Actimmune for reducing the frequency and severity of serious infections associated with chronic granulomatous disease, and Duexis, a proprietary tablet formulation for the relief of signs and symptoms of rheumatoid arthritis and osteoarthritis.

Stifel remains bullish on the stock and here’s why:

Horizon has successfully reprioritized its investment focus to Specialty/Orphan drugs, which now comprises 65% of its business. In 2018, we see Krystexxa (chronic refractory gout) as the primary growth driver with opportunity beyond rheumatology into nephrology, which doubles its target audience—suggesting strongly that its >$400mn-peak opportunity (estimated on rheumatology only) is very conservative. HZNP believes Krystexxa alone could outpace the collective peak of its remaining commercial portfolio, or $800-1 billion product. Notably, teprotumumab—most recent addition—is expected to be of similar scale to Krystexxa, backed by clinically-meaningful data and an untapped market.

Stifel has a $20 price objective, and the consensus target price is $18.25. The stock traded at $15.35 Thursday morning.