"Third, valuations remain in the bottom quintile of their ten year ranges, reflecting near-universal negative sentiment today. Fourth, healthcare reform is reaching an end, of some sort, which so far does not impose a particularly onerous burden on companies in this group and should offer incremental volume, for some products at least, in 2011 or 2012 when expanded coverage is accessible." Porges' picks for best and worst stock performance in 2010: "While the best performers in biotech in 2009 were mid cap and emerging stocks such as Vertex, Human Genome Sciences, Dendreon ( DNDN), Protalix ( PLX), and Incyte, we find it hard to see those same names offering as much upside in 2010. The stocks with the greatest upside to our estimates for 2010 are Genzyme ( GENZ), Gilead Sciences ( GILD), and Celgene and the stocks with the greatest upside to our target prices are those names, plus Amgen ( AMGN), all having 20-40% upside potential at current levels. The stocks where we perceive the greatest risks to our forecasts and estimates are Alexion ( ALXN) and Biogen Idec ( BIIB)." Lehman Brothers issued its 2010 biotech forecast Monday morning. Here's analyst Jim Birchenough's take on the sector and the firm's top picks: "Opportunities for the U.S. biotechnology group are selective and we tend to prefer small-mid cap stocks over large-cap stocks overall in 1H10. Within the large cap group our rank order of preference is Amgen, Genzyme and Celgene as top picks with Gilead and Biogen Idec viewed less favorably. Top mid-cap picks include Amylin Pharmaceuticals ( AMLN), Cephalon ( CEPH), Human Genome Sciences, Onyx Pharmaceuticals ( ONXX) and Regeneron Pharmaceuticals ( REGN) while we are less positive on Theravance ( THRX), OSI Pharmaceuticals and Zymogenetics ( ZGEN).