NEW YORK (
) -- 'Tis the season for sell-side analysts to issue their sector outlooks for the coming year.
The J.P. Morgan healthcare team released its 2010 forecast this morning, in advance of the firm's big
next week in San Francisco. The firm's top biotech picks for 2010 are
(CELG - Get Report)
(INCY - Get Report)
J.P. Morgan's Geoff Meacham's macro view of the biotech sector:
"In 2010, we are cautiously optimistic on the group with a bias toward small and mid caps and selectivity among the large caps. The worst may be behind us regarding healthcare reform fears, and further multiple compression seems unlikely, but overall sentiment remains negative toward the group, which could create an attractive entry point. We think 2010 will be a year when performance is event-driven, not earnings-driven, given maturation of the biotech sector and the emphasis on sustainability of growth."
Meacham on small and mid-cap biotech in 2010:
"Small and mid caps should continue to lead innovation in the sector, which could spark M&A activity and a favorable deal environment. In addition, a rebirth of the biotech IPO in 2010 could be a big positive for the group by disproving the notion that pipelines within the industry are thin and by expanding the investable universe. Valuation-wise, small and mid caps are not cheap (4.4X EV/Rev, up from 4X in early 2009) but should broadly benefit from high scarcity value, upside growth prospects and good access to capital."
Meacham on 2010 M&A activity:
"Pharma companies at the 2009 J.P. Morgan Healthcare Conference cited a willingness to do 'more deals and bigger deals,' leading us and the Street to infer that there would be increased biotech M&A last year. 'More deals' didn't really materialize in 2009, with four announced deals with public biotech companies...