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.