"Looking to 2010, we think that M&A activity for small and mid-cap cap biotech may pick up, driven by Pharma but also driven by large cap biotechs. In this report, we've stressed pipelines and sustainability of growth, but as growth in the large cap group matures, increased cash flow generation may fuel increased M&A activity." Meacham and his team see the following companies in its U.S. coverage universe as having "high strategic value" in 2010: Acorda Therapeutics ( ACOR), AMAG Pharmaceuticals ( AMAG), OSI Pharmaceuticals ( OSIP), Medivation ( MDVN), United Therapeutics ( UTHR), Vertex Pharmaceuticals ( VRTX), Human Genome Sciences ( HGSI), Seattle Genetics ( SGEN) and Savient Pharmaceuticals ( SVNT)." Meacham on new biotech IPOs in 2010: "Looking ahead to 2010, we think the IPO window in biotech is likely to open again for several reasons: First, the healthcare reform overhang should be lifted, which should drive fund flows back into healthcare and biotech. Second, the economy has stabilized to a point where there is an increased appetite for risk, especially as the early cyclical trade draws to a close. "Third, there is demand for new stories in biotech. We have consistently heard that a lot of the names in biotech are too 'picked over,' and investors are hungry for new ideas. Fourth, there are a lot of interesting, high-quality, later-stage IPO stories that are likely to attract significant investor attention." Geoff Porges of Sanford Bernstein on the four reasons why he likes the big-cap biotech group despite last year's dismal performance: "First, operating performance is likely to continue to be solid, with some modest upside, in the first part of 2010. Guidance is likely to still be cautious, but may be marginally more encouraging than in 2009 when demand appeared to be stalling for certain products. Second, important late stage pipeline assets are reaching pivotal regulatory and commercial milestones and could drive a reversal of negative sentiment about the group as they come to market in the next 18 months.