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UBS: 6 Specialty Pharma Picks to Watch

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Insider Monkey) -- UBS Investment Research published a report entitled "UBS Pharma- Large Cap and Specialty" on Jan. 11, 2012. The report isn't publicy available but we will summarize its main points.

In their report, Marc Goodman, Ami Fadia, Matthew Harrison, and Derek Yuan discuss the expectations for the fourth quarter of 2011 for selected pharmaceutical companies. UBS Investment Research also believes that there are many opportunities in the special pharmaceutical sector, with continued synergies, significant deal glows, and robust core growth. In this article we will discuss those stocks in the Specialty Branded sector that UBS has given a buy rating from within its coverage universe.

Allergan (AGN - Get Report) is a multi-specialty healthcare company. It has been given a buy rating by UBS Investment Research due to an improvement in its growth valuations. Earnings per share are expected to grow by more than 15% to 20%.

The company's Botox line is highly sustainable and Allergan's pipeline is underappreciated at the moment. According to UBS, Allergan's growth profile would be a nice fit with other big pharmaceutical companies. UBS is expecting revenues of $1.4 billion by the end of 2012 and earnings per share of $1. The continued roll-out of Botox Migraine and Botox OAB NDO will be closely watched by UBS.

Shares of the company are currently trading at $88 per share and are expected to reach a price target of $100, indicating a potential upside of 13.6%. Ken Fisher 's Fisher Asset Management had more than $350 million invested in Allergan at the end of September.

Valeant Pharmaceuticals (VRX - Get Report) is a specialty pharmaceutical company that develops, manufactures, and market pharmaceutical products. It has been given a buy rating by UBS Investment Research as it believes that the company's organic sales growth is currently underappreciated.

In the presence of an excess capacity in the pharmaceutical sector, Valeant is looking for acquisitions and is also looking to drive cost synergies to its own bottom line. UBS has full faith in Valeant's current management as it believes that they can execute a successful roll-up strategy. Shares of the company are currently trading around $49 per share and are expected to go north of $63, indicating a potential upside of 28.5%. Valueact Capital had more than half a billion dollars invested in Valeant at the end of the third quarter.
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