Government/Academic Research May Mean Greater Upside to Life Sciences Companies

January 27, 2010

In his recommendations to investors, Analyst Dan Leonard says some of his top life sciences picks are those companies with the most exposure to government and academic research.

“Right now I am more predisposed to recommending stocks that have a good amount of exposure to academic and government-sponsored research in the tool space because I think that’s a good growth trend worldwide currently,” said Leonard, vice president at First Analysis Corporation. With a more favorable spending environment forecasted for 2010, such public grants and research could make up for sparse R&D budgets coming off of 2009.

“Academic and government-sponsored research support could be improving worldwide. You not only have the NIH stimulus in the U.S., but you have some science stimulus programs happening around the world in places like France and Germany,” he said. “And it looks like the Japanese science spending is actually improving a bit and showing the first signs of life in a long time.”

Other important trends Leonard emphasized to investors are molecular diagnostics, next-generation sequencing and companion diagnostics. Among these three areas he highlights companies Hologic (HOLX), Gen-Probe (GPRO)Qiagen (QGEN) and Illumina (ILMN).