Buy these 3 pharmaceutical stocks because of their successful new drugs, JPMorgan says

Published Tue, Jan 24 20173:28 PM EST

JPMorgan gave clients its favorite drug stock ideas based on the industry's recent product launches. "On 2017, we see an upward bias to numbers on an operational basis based on the ongoing product cycle," analyst Chris Schott wrote in a note to clients Tuesday. "With President Trump's drug pricing commentary over the past few weeks, we have seen renewed investor focus on this topic. Nonetheless, we do not see any wholesale shift in the current healthcare market structure in the foreseeable future." The analyst did cite the risk of a rising U.S. dollar, which may hurt drug companies as 55 percent of the industry's sales are international. Here are three overweight-rated pharmaceutical companies JPMorgan recommends. "We see the focus of Pfizer's 4Q results centered on management commentary around business development priorities," he wrote. "Pfizer's core trends appear relatively healthy and we highlight the Ibrance launch in breast cancer, which appears positioned for upside over time." The analyst has a $39 price target on Pfizer , representing 24 percent upside from Monday's close. Pfizer will report fourth-quarter earnings on Jan. 31, according to its website. Merck is "well-positioned on Keytruda driven upside on 1L NSCLC rollout/chemo combo potential approval," Schott wrote. "With Keytruda approved for use in frontline lung ... and the chemo combo sBLA accepted by the FDA for priority review, we see a clear upward basis to our estimates." The analyst has a $68 price target on Merck , representing 10 percent upside from Monday's close. Merck is scheduled to report its financial quarterly results on Feb. 2. "Lilly previously provided 2017 sales and EPS guidance in December and we are not expected any major surprises with results," he wrote. "We continue to see the Lilly story centered on the company's new product opportunities, which we see as supporting roughly > 5% top-line growth through 2020. We see this growth to be primarily driven by a number of $1bn+ new product opportunities such Trulicity, Jardiance ... Taltz and baricitinib." The analyst has a $85 price target on Eli Lilly , representing 11 percent upside from Monday's close. The company is scheduled to report fourth-quarter earnings on Jan. 31.

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JPMorgan gave clients its favorite drug stock ideas based on the industry's recent product launches.

"On 2017, we see an upward bias to numbers on an operational basis based on the ongoing product cycle," analyst Chris Schott wrote in a note to clients Tuesday. "With President Trump's drug pricing commentary over the past few weeks, we have seen renewed investor focus on this topic. Nonetheless, we do not see any wholesale shift in the current healthcare market structure in the foreseeable future."

The analyst did cite the risk of a rising U.S. dollar, which may hurt drug companies as 55 percent of the industry's sales are international.

Here are three overweight-rated pharmaceutical companies JPMorgan recommends.