By Deena Beasley
LOS ANGELES, Jan 7 (Reuters) - When healthcare investors convene next week at the industry's leading annual conference, they will be weighing their best bets for 2011 at a time of rising interest in the sector, from drugmakers to hospital operators and medical record technology companies.
The top executives from France's Sanofi-Aventis and its $18.5 billion hostile takeover target, Genzyme Corp , are among the company presenters likely to draw big crowds at the JP Morgan Healthcare Conference in San Francisco from Monday through Thursday.
Sanofi's bid, the largest in a rising tide of healthcare deals, and the precarious status of a new U.S. healthcare law are attracting new investor interest in the sector.
'I'm really excited about healthcare in 2011 as a value investor,' said Ron Saba, director of stock research at Horizon Investments. 'I can dig through the pile and find some opportunities ... valuations are relatively low, earnings estimates as a group are starting to rise for the first time in a long time.'
The U.S. healthcare law, passed last March, heightened the focus on the cost of drugs and other services, helping to cap share prices. The Standard & Poor's Health Care Index rose by less than 1 percent in 2010, compared with a gain of 12.8 percent for the overall S&P.
'For 2011 we are in a wait and see mode with healthcare,' Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, said in a telephone interview.
Republicans, who now control the U.S. House of Representatives, have vowed to repeal the law, which was aimed at addressing the huge cost of U.S. healthcare and extending health insurance to all Americans. The Senate is expected to oppose any measure to repeal the law and a veto has been promised by President Barack Obama.
Wells Fargo does not expect a major overhaul to succeed, but does anticipate the new Congress will take a few symbolic votes on repeal.
'We would be looking at those points ... if a stock were to rally, to take some profits,' Jacobsen said.
He said there are still 'some great opportunities ... even in pharmaceuticals, which has been somewhat moribund,' as well as smaller drug companies that might be bought or do some kind of joint venture to bring a promising product to the market.
Pfizer Inc, the world's largest drugmaker, is one of Barron's top 10 stock picks for 2011 -- even though the company's shares fell nearly 4 percent last year.
GROWTH PROSPECTS
News that the House would vote next week on repealing the reform legislation helped drive stocks of some companies such as health insurers Cigna Corp -- up 3.8 percent on Thursday -- and Health Net Inc, which rose 3.7 percent. Cigna added 1 percent on Friday and Health Net, 0.6 percent.
'Some managed care companies will do well,' said Doug Cannon, chief investment officer at Texas First Investment Management company, which holds shares in Health Net.
He said both Health Net and Cigna offer decent growth prospects, especially 'if we can get some changes in the health reform law that are advantageous.'
Another company that could benefit from consolidation and uncertainty in the industry is PharMerica Corp, a provider of pharmacy services to hospitals and healthcare facilities.
'It can be advantageous for smaller hospitals to use their services,' Cannon said.
The fund manager also said mergers in some sectors -- particularly hospitals -- are spurred by the reform efforts.
'We have seen a number of buyouts,' Cannon said, also citing Community Health Systems Inc's $3.3 billion hostile bid for Tenet Healthcare Corp. 'We think there is still room for either Community to raise their price, or for another acquirer to come in.'
The JP Morgan conference -- now in its 29th year -- will feature executives from virtually every industry in the healthcare sector, including CEOs from biotech Amgen Inc , medical device maker Medtronic Inc, health insurer WellPoint Inc and pharmaceutical giant Merck & Co Inc.
Keen interest is expected for top performing companies such Human Genome Sciences Inc, with its promising lupus drug, and Dendreon Corp, which recently launched sales of a vaccine for prostate cancer.
Sanofi CEO Chris Viehbacher and Genzyme CEO Henri Termeer are due to give back-to-back presentations on Tuesday, as some on Wall Street believe it is time for them to hold serious discussions on a friendly deal.
'What you are really going to get is a lot more M&A activity,' said Saba. 'Whenever there is a new regulatory regime everyone kind of puts on the brakes ... then they start to strategize and go out and make acquisitions.'
Glen Giovannetti, head of Ernst & Young's global biotechnology practice, said deals will pick up speed as patents expire on even more top-selling pharmaceuticals.
'We might have seen buyers being a little bit disciplined in terms of not wanting to overpay, but will they be able to remain as disciplined as the pressure ramps up?' he noted.
Ron Bentsur, chief executive officer at biotechnology drug developer Keryx Biopharmaceuticals Inc, said positive news on the clinical and regulatory fronts over the past year has renewed interest in the biotech sector.
He does not expect healthcare reform to dampen that growth.
'At the end of the day, it costs a lot of money to develop these drugs ... It is in every country's interest, certainly the U.S., to have such a high-end industry. You don't want to nip it in the bud,' Bentsur added.
(Editing by Michele Gershberg; editing by Andre Grenon, Gary Hill) Keywords: HEALTHCARE CONFERENCE/ (deena.beasley@thomsonreuters.com +1-213-955-6746) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
LOS ANGELES, Jan 7 (Reuters) - When healthcare investors convene next week at the industry's leading annual conference, they will be weighing their best bets for 2011 at a time of rising interest in the sector, from drugmakers to hospital operators and medical record technology companies.
The top executives from France's Sanofi-Aventis and its $18.5 billion hostile takeover target, Genzyme Corp , are among the company presenters likely to draw big crowds at the JP Morgan Healthcare Conference in San Francisco from Monday through Thursday.
Sanofi's bid, the largest in a rising tide of healthcare deals, and the precarious status of a new U.S. healthcare law are attracting new investor interest in the sector.
'I'm really excited about healthcare in 2011 as a value investor,' said Ron Saba, director of stock research at Horizon Investments. 'I can dig through the pile and find some opportunities ... valuations are relatively low, earnings estimates as a group are starting to rise for the first time in a long time.'
The U.S. healthcare law, passed last March, heightened the focus on the cost of drugs and other services, helping to cap share prices. The Standard & Poor's Health Care Index rose by less than 1 percent in 2010, compared with a gain of 12.8 percent for the overall S&P.
'For 2011 we are in a wait and see mode with healthcare,' Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, said in a telephone interview.
Republicans, who now control the U.S. House of Representatives, have vowed to repeal the law, which was aimed at addressing the huge cost of U.S. healthcare and extending health insurance to all Americans. The Senate is expected to oppose any measure to repeal the law and a veto has been promised by President Barack Obama.
Wells Fargo does not expect a major overhaul to succeed, but does anticipate the new Congress will take a few symbolic votes on repeal.
'We would be looking at those points ... if a stock were to rally, to take some profits,' Jacobsen said.
He said there are still 'some great opportunities ... even in pharmaceuticals, which has been somewhat moribund,' as well as smaller drug companies that might be bought or do some kind of joint venture to bring a promising product to the market.
Pfizer Inc, the world's largest drugmaker, is one of Barron's top 10 stock picks for 2011 -- even though the company's shares fell nearly 4 percent last year.
GROWTH PROSPECTS
News that the House would vote next week on repealing the reform legislation helped drive stocks of some companies such as health insurers Cigna Corp -- up 3.8 percent on Thursday -- and Health Net Inc, which rose 3.7 percent. Cigna added 1 percent on Friday and Health Net, 0.6 percent.
'Some managed care companies will do well,' said Doug Cannon, chief investment officer at Texas First Investment Management company, which holds shares in Health Net.
He said both Health Net and Cigna offer decent growth prospects, especially 'if we can get some changes in the health reform law that are advantageous.'
Another company that could benefit from consolidation and uncertainty in the industry is PharMerica Corp, a provider of pharmacy services to hospitals and healthcare facilities.
'It can be advantageous for smaller hospitals to use their services,' Cannon said.
The fund manager also said mergers in some sectors -- particularly hospitals -- are spurred by the reform efforts.
'We have seen a number of buyouts,' Cannon said, also citing Community Health Systems Inc's $3.3 billion hostile bid for Tenet Healthcare Corp. 'We think there is still room for either Community to raise their price, or for another acquirer to come in.'
The JP Morgan conference -- now in its 29th year -- will feature executives from virtually every industry in the healthcare sector, including CEOs from biotech Amgen Inc , medical device maker Medtronic Inc, health insurer WellPoint Inc and pharmaceutical giant Merck & Co Inc.
Keen interest is expected for top performing companies such Human Genome Sciences Inc, with its promising lupus drug, and Dendreon Corp, which recently launched sales of a vaccine for prostate cancer.
Sanofi CEO Chris Viehbacher and Genzyme CEO Henri Termeer are due to give back-to-back presentations on Tuesday, as some on Wall Street believe it is time for them to hold serious discussions on a friendly deal.
'What you are really going to get is a lot more M&A activity,' said Saba. 'Whenever there is a new regulatory regime everyone kind of puts on the brakes ... then they start to strategize and go out and make acquisitions.'
Glen Giovannetti, head of Ernst & Young's global biotechnology practice, said deals will pick up speed as patents expire on even more top-selling pharmaceuticals.
'We might have seen buyers being a little bit disciplined in terms of not wanting to overpay, but will they be able to remain as disciplined as the pressure ramps up?' he noted.
Ron Bentsur, chief executive officer at biotechnology drug developer Keryx Biopharmaceuticals Inc, said positive news on the clinical and regulatory fronts over the past year has renewed interest in the biotech sector.
He does not expect healthcare reform to dampen that growth.
'At the end of the day, it costs a lot of money to develop these drugs ... It is in every country's interest, certainly the U.S., to have such a high-end industry. You don't want to nip it in the bud,' Bentsur added.
(Editing by Michele Gershberg; editing by Andre Grenon, Gary Hill) Keywords: HEALTHCARE CONFERENCE/ (deena.beasley@thomsonreuters.com +1-213-955-6746) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.