It has been an eventful year in the big pharma and biotech space, and a lot is happening in this space that biotech investors should take note of. The public has become dutifully aware of the phrase “tax inversion” due to some high profile mergers and proposed mergers trying to use acquisitions to lower overall corporate tax rates by domiciling outside the United States.

Activists have also targeted the area in 2014. Amgen (Nasdaq: AMGN), the granddaddy of biotech stocks, has seen increased pressure from agitating fund managers and Allergan (NYSE: AGN) was pushed to put itself for sale for over $60 billion after a lengthy fight with Bill Ackman and other activists this week. This uptick in activity has brought a lot of attention to the space, and I have picked my two favorite biotech plays that are trading at attractive valuations and are begging to be added to your portfolio.

The majority of the big four of biotech,Gilead Sciences (Nasdaq: GILD), Regeneron Pharmaceuticals (Nasdaq: REGN)Celgene (Nasdaq: CELG) and Biogen Idec (Nasdaq: BIIB), have had very good years with one massive buying opportunity in early March that caused significant declines across the biotech sector that soon dissipated for the larger capitalization firms within the complex.

So where will the opportunities be within the space in 2015? I continue to allocate a third of my own biotech portfolio in the small cap biotech space. These high risk/high reward plays usually have no earnings but potentially lucrative products under development and testing. I mitigate the risk of any one stock blowing up and hurting my overall performance by taking small stakes in a myriad of promising small cap concerns. However, when a company lives up to its potential returns can be staggering. This is the case for Avanir Pharmaceuticals (Nasdaq: AVNR) which is up more than 150% since being included in Small Cap Gems portfolio in our inaugural issue in July.

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