2020 has certainly been one for the ages and from an investment point of view the healthcare sector delivered its share of that drama, be it from drug companies in the hunt for COVID vaccines, telemedicine businesses growing by leaps and bounds or the general bullish market in biotech. So, what\u2019s up ahead for 2021? In an industry update to clients on Thursday, Mackie Research analysts Andr\u00e9 Uddin and Yue Ma have three Canadian healthcare stocks to watch along with a few higher-risk ideas. Commenting on the sector, Uddin and Ma noted the outperformance of biotech in recent years, saying the Trump administration and the US Food and Drug Administration represented one of the most pro-biotech eras in recent memory. As a result, biotech valuations are nearing record highs and financings have been abundant. Those good times may be winding down for a bit, the analysts said, claiming that a market correction in biotech is due. At the same, Uddin and Ma said telemedicine is likely to continue to be a story in 2021, as the industry is still in the early innings of a steep growth trajectory, while from the specialty pharma perspective, a multi-year fallow period should soon give way, the analysts said, as sector valuations are near historical lows, leading to an opportunity for value investors. \u201cHeading into 2021, we believe investors should look to shift their healthcare portfolio from being overweight in biotech to having a higher weighting in digital health and specialty pharma where companies have a strong growth trajectory ahead and are undervalued,\u201d Uddin and Ma wrote. As to their picks, the analyst have chosen Skylight Health Group (Skylight Health Group Stock Quote, Chart, News CSE:SHG) in the telemedicine sector, Medexus (Medexus Stock Quote, Chart, News TSXV:MDP) in specialty pharma and drug developer Appili (Appili Stock Quote, Chart, News TSXV:APLI). Skylight Health, formerly known as CB2 Insights, started out as an electronic data collection and patient management platform for the cannabis sector but over the past few years has acquired its own network of clinics and added conventional medicine to its alternative medicine offerings. The company completed the refocus last month by rebranding as Skylight, which offers both a subscription-based health care model for uninsured Americans and a traditional fee-for-service model for patients covered by Medicare, Medicaid and commercial plans and has now over 30 bricks-and-mortar clinics across 15 states in the US with a patient base of over 130,000. With the report, Uddin and Ma are upgrading their rating on Skylight from \u201cSpeculative Buy\u201d to \u201cBuy,\u201d saying SHG continues to deliver on the clinic acquisition front with the pending acquisitions of Tennessee-based Perimeter Pain and Primary Clinic and a Florida-based clinic network of six locations, representing the company\u2019s first transaction in Florida. \u201cWith the two clinic transactions, SHG is expanding its footprint to 16 states and its roster to over 130,000 patients. We expect the company to continue executing its three-pronged growth strategy: (i) expanding higher-cost insured services to the existing patient base, (ii) offering subscription-based clinic services to 33 million uninsured Americans and (iii) acquiring strategic and accretive assets,\u201d Uddin and Ma wrote. The analysts said the recent pullback in the telemedicine space due to positive news on COVID vaccines should be transient in nature and that the sector has significant growth potential. With the new rating, Uddin and Ma have upped their target price on SHG from $1.05 to $1.70, which at the time of publication represented a projected 12-month return of 70 per cent. Next up in their Top Picks list is Canadian specialty pharma company Medexus which focuses on autoimmune diseases, hematology and allergies, with lead products Rasuvo and Metoject, Ixinity and Rupall. Uddin and Ma pointed to strong sales over the first three quarter of 2020 for MDP\u2019s US business (showing a 76-per-cent year-over-year growth) and its Canadian business (showing 14 per cent growth. The analysts noted that MDP is working on a label expansion for Ixinity in the US, while in Canada it is working toward a full launch of imaging agent Gleolan and looking to receive Health Canada approval in May 2021 for hematopeoietic stem cell transplantation agent Treosulfan. The analysts said MDP\u2019s current valuation should be attractive to both value and growth investors. \u201cWe expect sales of MDP\u2019s key drugs to continue to show strong momentum and MDP is undervalued compared to peer specialty pharma companies,\u201d Uddin and Ma wrote. With the update, the analysts have maintained their \u201cSpeculative Buy\u201d rating and $6.30 target price, representing a projected one-year return of eight per cent. Uddin and Ma also like anti-infective drug developer Appili, which the analysts say has a diversified pipeline of five candidate drugs with significant monetization potential. Over the near term, that includes its antiviral drug Avigan (favipiravir) for COVID-19 early stage prevention and for post exposure as a prophylaxis (with key data readouts of its late-stage COVID-19 trials in 2021). \u201cInvestors should recognize that APLI\u2019s pipeline has the potential to generate significant commercial value in that the size of a potential COVID-19 stockpiling contract could be massive, a potential BARDA stockpiling contract for ATI-1701 could be worth several hundred million dollars, PRVs have historically had an average selling price of US$140 million, and innovative antifungals have seen significant licensing transactions historically,\u201d Uddin and Ma said. The analysts have maintained their \u201cSpeculative Buy\u201d rating and $1.60 target for APLI, which at press time represented a projected return of 32 per cent. Finally, Uddin and Ma offered up three interesting speculative COVID-19 plays offering high risk, high reward opportunities. Algernon (Algernon Stock Quote, Chart, News CSE:AGN) (\u201cSpeculative Buy\u201d with a $0.80 target) is repurposing ifenprodil for treating COVID, a drug which has a well-established safety profile and should reduce inflammatory responses found in COVID-19 patients, according to the analysts. Betterlife Pharma (Betterlife Pharma Stock Quote, Chart, News CSE:BETR) (Not Rated) is developing interferon-a2b for COVID-19 and is initiating a Phase 2 trial with data expected in Q3 2021. And IMV (IMV Stock Quote, Chart, News TSX:IMV) (\u201cSpeculative Buy\u201d with an $8.60 target), which has a unique COVID-19 vaccine in development, about to enter a Phase 1\/2 trial by the end of 2020 with preliminary results potentially coming out in Q1 2021.