Investors have been reacting as Gilead Sciences, Inc. (NASDAQ:GILD) and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) face criticism. Both companies are being explored for pricing practices while Valeant was also accused of fraud regarding one of its specialty pharmacies earlier this year. Despite the bad press these incidences have garnered, analysts remain bullish on both stocks.

Gilead Sciences, Inc.

Pricing schemes of Gilead’s blockbuster hepatitis C franchises has come under fire recently, and recent developments indicate that Massachusetts is determined to pursue Gilead for unfair trade practices. Piper Jaffray analyst Joshua Schimmer weighs in on Gilead in light of this update, explaining that he believes the probability of a successful case against Gilead is “quite low.”

Gilead’s two hep C regimens, Harvoni and Sovaldi, retail for $94K and $84K, respectively. The Attorney General of Massachusetts is escalating the case by requesting relevant documents for a Civil Investigative Demand. After consulting a legal expert, Schimmer believes the AG has “little basis for a lawsuit.” He explains, “A key consideration is whether unfair business practices law can trump patent law. There is no perfect precedent for this in the world of pharmaceuticals, but some ‘soft’ experiences which suggest that patent law protects monopoly type pricing.”

Schimmer points out that Gilead’s reimbursement issues have eased and the volume of new patients have stabilized. However, state Medicaid programs continue to pose hurdles as they deal with state budget constraints. Overall, Schimmer explains that the biotech sector is struggling in a “perfect storm of macro and company-specific factors.” He remains optimistic, noting, “The pendulum has swung wildly over the past six months, and it’s only a matter of time before the string of bad breaks ends and some positive newsflow gets things moving in the right direction.”

In light of the developing lawsuit, Schimmer reiterates his Overweight rating on Gilead with a $114 price target. According to TipRanks, 15 analysts are bullish on Gilead while 2 remain on the sidelines. The average 12-month price target between these 17 analysts is $116.80, marking a 31% potential upside from current levels.

Valeant Pharmaceuticals Intl Inc

Even though Valeant shares have been reacting to news that the company may have to re-state earnings, Neil Maruoka of Canaccord assures that this is not a major concern. The market is accounting for the Philidor investigation and uncertainty surrounding CEO Pearson’s health “through a lens of suspicion.”

Maruoka insists that the restatement is not a big deal and will only have a minimal impact. He explains that the restatement is “entirely consistent with Valeant’s conservative policy (subsequent to its purchase option) of consolidating Philidor revenue and recognizing Philidor inventory as Valeant inventory until sold to the patient.” The company believes that restated earnings will decrease 2014 EPS by 10 cents while increasing 2015 EPS by 9 cents.

Valeant must report its 10-K by the end of the month, but Maruoka warns that this may be delayed while “board contemplates the potential earnings restatement.” The company is still scheduled to release preliminary un-audited results on Monday, though the analyst does not believe “this will materially affect the debt covenants.”

Despite the recent media circus surrounding the stock, Maruoka reiterates his Buy rating on the company with a $170 price target. According to TipRanks, 10 analysts are bullish on Valeant, 6 are neutral, and only 1 is bearish. The average 12-month price target between these 17 analysts is $156.42, marking an 86% potential upside from current levels.