Here are 3 top drug stock ideas from Jefferies

Published Mon, Sep 18 20174:02 PM EDT

Although Jefferies is concerned about the pharmaceutical industry's prospects, the firm's analyst said there are several drug companies that can outperform the market. "The sector has had a decent performance in 2017, as concerns over US drug pricing have waned," analyst Jeffrey Holford wrote in a note to clients Monday. "Whilst the sector has acted better recently, we still see significant challenges ahead," including competition, pricing and similar drugs made by rival companies. The iShares U.S. Pharmaceuticals ETF is up 11 percent year-to-date through Friday compared to the S & P 500's 12 percent gain. Here are three buy-rated companies in the industry recommended by Jefferies as stocks that can still do well, along with the firm's current price targets. 1) AbbVie (ABBV) Jefferies has a $107 price target for AbbVie shares, which is 22.5 percent higher than Friday's closing price. "ABBV remains our top pick in large cap pharma and we believe that the pipeline and non-Humira business is materially undervalued … AbbVie is a research-based specialty biopharmaceuticals company with a broad portfolio of medicines, including leadership in immunology and virology, and a pipeline of breakthrough therapies." 2) Zoetis (ZTS) The firm has a $77 price target for Zoetis shares, which is 18 percent higher than Friday's close. Jefferies is bullish on the company's Apoquel, Cytopoin and Simparica products. It also sees the potential for the company to increase its profit margins. "Zoetis, Inc. is a global leader in the discovery, development, manufacture and commercialization of animal health medicines and vaccines, with a focus on both livestock and companion animals. Zoetis represents the largest animal health business in the world, with over $4.7bn in revenue in 2015." 3) Eli Lilly (LLY) Jefferies has a $96 price target for Eli Lilly shares, which is 16.5 percent higher than Friday's close. The firm cited the patent review decision for its Alimta vitamin product as a second half of 2017 catalyst for the shares.

An employee works on the production of insulin pens at the factory of the US pharmaceutical company Eli Lilly in Fegersheim, France.

Frederick Florin | AFP | Getty Images

Although Jefferies is concerned about the pharmaceutical industry's prospects, the firm's analyst said there are several drug companies that can outperform the market.

"The sector has had a decent performance in 2017, as concerns over US drug pricing have waned," analyst Jeffrey Holford wrote in a note to clients Monday. "Whilst the sector has acted better recently, we still see significant challenges ahead," including competition, pricing and similar drugs made by rival companies.

The is up 11 percent year-to-date through Friday compared to the S&P 500's 12 percent gain.

Here are three buy-rated companies in the industry recommended by Jefferies as stocks that can still do well, along with the firm's current price targets.