Even so, a host of smaller stocks have had stellar runs over the past year, which has continued into the start of 2017, with the likes of Clinuvel and Innate Immunotherapeutics rising almost three-fold as Viralytics more than doubled as investors warmed to their prospects in a year that saw a number of biotech companies go public as investors also backed numerous fund-raisings in the sector.

"There is value," says Morningstar analyst Chris Kallos of the sector. "CSL probably stands out," he says, while acknowledging market concerns over its haemophilia A treatment and the slow turnaround of its flu vaccine business coupled with the cost of its CSL112 drug with a decision on the next phase of clinical trials.

CSL's prospects were confirmed last week with its forecast of a 20 per cent profit rise, which triggered quick share price gains.

Regulatory risk in the US has weighed on Mayne Pharma, which has been caught up in allegations surrounding the generic drug market, with concerns here slashing its market worth by around a third.

"The probe into pricing, focusing on generics, has affected Mayne. Both [Mayne and CSL] we feel are undervalued."

Also representing value in the sector is Fisher and Paykel, despite its legal skirmish with Resmed over some patents. "It is trading at less than fair value," Morningstar's Kallos said.

Resmed among the large caps is expected to be rewarded in 2017, Shane Storey of Wilsons says, with Mayne Pharma among the mid-caps he favours.

"But there's work to be done. We don't know what the outcome will be [to the collusion allegations in the US], but it will be interesting to watch whether senior management comes out on the front foot and tackles the issue head on.

"The focus here is very much on delivery," he said following its recent US acquisitions, which culminated in the $US652 million purchase of a portfolio of generic drugs in mid-2016 from Teva Pharmaceutical and Allergan.

Impedimed is among the small caps Storey favours, even with its weaker finish to 2016.

"Investors have capitulated due to the lack of news flow in late 2016, and also with the rotation out of high PE healthcare stocks, since it has no real earnings at this stage. It copped it first and will probably come back the quickest," he said. "It raised over $70 million last February and there is plenty of headroom. But a lack of news flow and the shorts have crept in. If it can deliver, there's a lot of potential there."

For Sirtex, which has a treatment for some cancers, a competitor product from BTG took market share, "but don't read too much into it", Storey said, with investors putting the recent management woes to one side.

"The share price correction here was probably overdue. Investors have probably over-reacted, but with three large research trials due to report early 2017 this makes it difficult to buy the stock.

"On value, you'd buy Somnomed everyday of the week. It has good profit prospects over the next five years compared to Impedimed and Nanosonics, and it has kicked off a new business venture in the sleep centres for people who have fallen through the cracks of the treatment alternatives. I've got a $4.50 valuation on it. It's held up well during the Q4 correction."

Storey also favours Opthea "which has a great year ahead of it", he said. " A major rival [treatment candidate] fell over in phase 3 testing. Opthea has a promising idea and very elegant science," he says.

At Bell Potter, its biotech analyst Tanushree Jain likes Medical Developments with its pain relief device, along with Opthea, Mesoblast, Bionomics and Starpharma, which are all in focus for the year ahead, even with the knocks the shares in Mesoblast and Bionomics have suffered, with Medical Developments, too, pulled well off its highs by the end of 2016.

"With Mesoblast, I'm feeling quite optimistic in terms of key inflexion points in the year ahead," she said. It has several research results due to be reported in the coming months which will provide clarity over its near-term prospects.

"Medical Developments has come back a bit recently, but has good mid-term and long term growth prospects, while near term, growth will more likely come from Europe, while the US will supply the next leg up of growth."