Sometime during the middle of the year, Genentech (DNA) shareholders are going to get $95 in cash for each share of Genentech stock they own. In total, nearly $47 billion in funds are expected to be returned to biotechnology investors.

We've come up with an effective "basket approach" to re-deploy those funds back into the biotech sector -- in search of the next Genentech.

Antisense Makes a Lot of Sense

For a little over $13, investors can pick up one share of Isis Pharmaceuticals (ISIS). Isis is the market leader in antisense technology.

We've made it no secret in the past -- we are big fans of antisense. We view the drug discovery engine fueled by Isis' antisense technology very similar to the power of Genentech's recombinant DNA and monoclonal antibody technology breakthroughs of the 1980's. Antisense drugs are still in their infancy, but no company is better positioned to benefit from this exciting new approach to drug discovery than Isis Pharmaceuticals.

Isis boasts over a dozen clinical stage candidates in just about every major disease class. The leading candidate, mipomersen, a cholesterol-lowering agent, is currently in phase III trials, partnered with Genzyme (GENZ). Mipomersen has blockbuster potential in our view given key differentiating factors that could make the drug a superior option for high risk or statin intolerant patients with high cholesterol.

Other drugs at Isis or Isis partners include ISIS-113715 for diabetes, OGX-011 and LY2181308 for cancer, alicaforsen for Crohn's disease and ulcerative colitis, TV-1102 for multiple sclerosis, and ISIS-353512 for coronary artery disease. Besides the best pipeline in small-to-mid-cap biotech, Isis also has over $500 million in cash on hand. If there ever was a "Baby Genentech," Isis surely fits the bill.

Here Come the Stem Cells

Finding the next big thing is certainly something biotech investors are always in searching for. Above we discussed our enthusiasm for antisense technology as powerful drug discovery engine. Perhaps the only other discovery platform that provides as much enthusiasm as antisense is stem cells. The leading stem cell company is Osiris Therapeutics (OSIR).

Osiris is developing Prochymal, an adult stem cell product currently in 3 phase III trials for steroid refractory graft-vs-host disease (GvHD), acute GvHD and Crohn's disease.