In a review of the healthcare sector, brokers Davy has forecast a possible renewal of mega-mergers and corporate activity if R&D productivity does not improve next year. While demand growth will remain solid, the sector will have difficulty maintaining recent levels of topline and earnings growth, especially with some patents on top brands due to expire, according to the brokers.

In the Irish healthcare sector, Davy is forecasting a re-rating for Elan if the company delivers on its 2002 objectives, with the possibility the company could close its current 20 per cent discount to the speciality pharma sector.

Describing Galen as "a good quality story", Davy says commercial success for Menoring in Britain and further product acquisition would help the share price. ICON and United Drug - which posted strong results this week - should continue to outperform their peers, while Trinity Biotech could be the speculative story for the second half of 2002. Davy is broker to Elan, ICON and United Drug.