The biotech sector, which has outperformed over the last few years, has not exactly had a great start this year — the NASDAQ Biotechnology Index is down 22.2% year-to-date. Compare this to 11.9% growth during the same period last year and one wonders whether the dream run for the sector is over.

The sector has been under immense pressure over the last few months thanks to the increasing political and media focus on high price tags for new drugs as well as the changing competitive scenario.

Last year, the FDA approved the first biosimilar in the U.S., opening the floodgates for additional such products to enter the market. Several companies are currently working on bringing in biosimilar versions of multi-billion dollar revenue-generating products like Enbrel and Humira among others.

Meanwhile, the drug pricing issue is not likely to die down easily – at least not until election is over. While presidential candidates may have differing opinions about other issues, all are pretty much on the same page where the high prices of drugs are concerned. Proposed health care plans include suggestions on how to rein in the prices of new drugs.

Is it all Bad News for the Biotech Sector?

Not really — fundamentals remain strong with companies like Gilead, AbbVie and Amgen continuing to deliver on their pipeline while key products continue to perform well. With valuations approaching reasonable levels, we could see several merger and acquisition (M&As) agreements being announced as the year progresses. Quite a few of the major biotech companies are rumored to be on the look-out for suitable deals.

Moreover, biotech companies continue to work on bringing innovative new treatments to market and there could be significant catalysts this year in the form of important new product approvals as well as major data read-outs. Sales of products that gained approval last year as well as line extensions should ramp up this year and boost growth. Some recently approved products with blockbuster potential include Vertex’s cystic fibrosis treatment, Orkambi, Amgen’s PCSK9 inhibitor, Repatha, Regeneron/Sanofi’s PCSK9 inhibitor Praluent and Gilead’s Genvoya (HIV). Cancer treatments like Kyprolis and Imbruvica should also bring in more sales thanks to label expansions.

3 Biotech Stocks to Add to Your Portfolio

Anyone interested in biotech stocks will know that it could be challenging to pick winners in this industry which is constantly growing and changing. While the major price correction has resulted in attractive valuations, we nevertheless advise investors to exercise caution while selecting stocks. Factors like pipeline setbacks, competition and regulatory actions could change the story overnight for seemingly well positioned stocks.

However, based on favorable Zacks Ranks, we have zeroed in on 3 biotech stocks with strong fundamentals and growth potential.

First on our list is Foster City, CA-based Gilead Sciences, Inc. (NASDAQ:GILD). Gilead, a Zacks Rank #2 (Buy) stock, has been consistently seeing upward revisions in earnings estimates. Gilead’s performance has been impressive with the company surpassing earnings expectations all throughout 2015. The company, which is well known for its presence in the hepatitis C virus (HCV) market, also has a strong hold in the HIV market. In addition to having several blockbuster products in its portfolio, Gilead has a strong late-stage pipeline.

Don’t be late to the party – Click Here to see what 25 Wall Street Analysts say about GILD.

Celgene Corporation (NASDAQ:CELG), another Zacks Rank #2 stock, looks well-positioned for growth. Revlimid should continue performing well driven by increased duration of treatment and market share gains. Celgene also has a strong and diversified pipeline that bodes well for long-term growth. The Summit, NJ-based company has been making prudent acquisitions and entering into deals to bolster its pipeline.

Thousand Oaks, CA-based Amgen, Inc. (NASDAQ:AMGN) is another Zacks Rank #2 stock with a strong earnings track record. The company has already started the year on a strong note by raising its outlook. While legacy products will continue contributing to the top-line, Kyprolis looks well-positioned to gain share with both the ASPIRE and ENDEAVOR data in its U.S. label. Amgen’s pipeline is also progressing with quite a few candidates under regulatory review and important late-stage data readouts lined up for 2016. A big catalyst this year could be positive top-line data from the ongoing phase III cardiovascular outcomes study data on PCSK9 inhibitor, Repatha.