There are several reasons to believe that the current environment offers a good entry point for investors into the asset class. Since US president Barack Obama unveiled his budget proposals in February last year the prospect of healthcare reform has served as an overhang on the healthcare sector generally, including biotech.

The actual risk to the biotech industry remains minimal, however, and fear would appear to be overly discounted into share prices.

The major, profitable biotech companies are now trading at historically low valuations and are as cheap as they have been since 1991. Virtually all generalist investors are underweight the sector so any change in sentiment could have dramatic impact.

Finally, mergers and acquisitions continue at a solid pace driven by 'big pharma' seeking to bolster its pipeline of drugs to greatly improve their growth prospects.

Many of these companies have very strong balance sheets and huge cash positions with which to make acquisitions at these bargain-basement levels and solve the problems they are facing.

A key driver of sentiment for the industry is new product breakthroughs and 2010 could prove to be a year that witnesses several biotech blockbuster drugs being introduced on the back of several key clinical trials.

Eoin Treacy's view The Biotech industry has great potential and has promised remarkable profits for more than two decades. We are arguably approaching a time when some of the sectors potential will result in actual life changing products and services being released onto the market. However, many of what is promised remains in its infancy stage and importantly the sector has so far failed to ever again attract the level of enthusiasm seen in the 1990s. Also see Comment of the Day on January 13th, in response to which the above article was contributed.

The Nasdaq Biotech Sector has tended to outperform the Nasdaq Composite when general stock market sentiment turns more defensive. It has firmed on a relative basis over the last few weeks for just this reason. The opposite has also tended to be true, in that it has underperformed when sentiment is more bullish, rallying approximately 50% from the March 2009 lows against a rally of approximately 80% for the Nasdaq-100. This will need to change if the sector is attract the investor interest required to propel a secular bull market.

Just who the big winners in the biotech sector are likely to be is not yet clear and some of the more promising ventures have already rallied quite spectacularly. For those interested in the sector but without specialist knowledge a fund holding the larger players might make sense. The Biotech Growth Trust, trades at a discount to NAV of 5.38% and performs more or less in line with the Nasdaq Biotech Index. It remains in a relatively consistent uptrend, defined by the progression of higher reaction lows evident since March 2008. The Trust posted a new high earlier this month but has a history of being unable to sustain upward breaks. If it fails to sustain the upward break, which has happened on least three separate occasions over the last two years, a retest of the higher lows, currently near 125p will become a distinct possibility. As with similar patterns, this trust would be best bought following what appear to be inevitable reactions.