2 Stocks Set to Benefit as Healthcare Goes Digital, And 3 Biotechs Looking Strong

by: Marc Lichtenfeld

Last week the author attended the J.P. Morgan (NYSE:JPM) Healthcare Conference in San Francisco.

Talk about an all-star panel of high-tech heavyweights. As I filed into the room, the stage boasted:

  • Aneesh Chopra, the United States’ Chief Technology Officer.
  • Todd Park, Chief Technology Officer at the Department of Health & Human Services.
  • Eric Schmidt, Chairman and CEO of Google (NASDAQ:GOOG).

They were there for a fascinating discussion on healthcare information technology – one of the most important themes this year. The moderator was John Doerr, the brilliant venture capitalist from Kleiner Perkins.

The debate centered on a key theory: That a patient in possession of his or her electronic medical records will trigger better value and improved care. They even speculated that one day, all of your medical information will be available to download on your mobile device and by your doctor.

But let’s put the futuristic talk to one side for a second and look at what’s happening right now in order to move the process forward.

Embracing the Digital Age … Finally

Currently, 80% of doctors’ offices have closed systems when it comes to medical record-keeping. But the government is finally forcing the industry to be inter-operable. It’s making $20 billion worth of incentive payments available for doctors to implement healthcare IT in a meaningful way.

One of my favorite names in this area is athenahealth (NASDAQ:ATHN), which helps doctors get paid more quickly and accurately, thanks to its real-time updates to any changes in payment codes and regulations.

Park, the above-mentioned CTO of the Department of Health & Human Services, is a co-founder of the company. Having suffered from an accounting scandal last year, athenahealth has rebounded sharply, from a low of $21.51 on July 22, 2010 to $42.82 today.

Another company that expects to see growth in its IT business is Oxford Trading Portfolio member McKesson (NYSE:MCK). Watch for this one over the second half of the year, in particular, as the stimulus funds get put to work.

Along with the three big trends for this year – healthcare reform, the patent cliff and healthcare IT – investors are always keyed into the latest developments in the biotech sector, too.

Here are three other companies to put on your radar this year…

Three Biotechs Set for a Strong 2011 … And a Message for the Economic Naysayers

The biotechnology sector and the stocks within it are always a hot topic of discussion. These are the firms involved in developing groundbreaking new drugs and medical devices – true pioneers within the healthcare space.

Companies like Seattle Genetics (NASDAQ:SGEN), ImmunoGen (NASDAQ:IMGN) and Lexicon Pharmaceuticals (NASDAQ:LXRX) generated a huge buzz at the conference.

For example, Seattle Genetics recently reported very strong data on its lead drug candidate for Hodgkin’s lymphoma. And just last week, Lexicon also reported strong results for its diabetes drug.

Remember the three healthcare trends to watch for this year: Reform, information technology and the expiration of major drug patents – otherwise known as the “patent cliff.”

I believe this latter trend is not only critical for the healthcare sector, but also potentially very lucrative for investors. For example, 200 million new prescriptions (many of them likely to be generics) are expected by 2014, as a result of healthcare reform’s impact on the drug industry.

Meanwhile, the conference's keynote speaker on Jan. 11 was J.P. Morgan CEO Jamie Dimon, who gave his thoughts on the U.S. economy – and provided a lift for the conference attendees, with an optimistic picture: “Corporations are in fantastic shape,” he declared, and went on to note that he sees “very little that’s worse than a year ago.”

In support of his assertion, he pointed to a few things:

  • The fact that JPM’s small business loans are up 40% over last year.
  • Consumers are in better financial shape.
  • We’re two-thirds of the way through the housing collapse.

And for the doomsayers, who believe the economy is going down in flames and that a “black swan” (an unexpected event) is around the corner, he laughed them off: “There’s a black swan everywhere you look and everyone is an expert on black swan risk management.”

Sounding like a true contrarian, he said the ones with negative views merely add to his confidence that the economy is about to start growing in a meaningful way.

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