The expansion of Masimo’s corporate headquarters will further strengthen its engineering, sales and administrative functions in 2010. These are required to accommodate the increasing demand for its breakthrough medical technologies, including the expansion of its Masimo Rainbow SET Pulse CO-Oximetry and new Acoustic Monitoring business. The current year alone has seen more than 150 hospitals throughout the world adapt the company’s advanced pulse oximetry technology.

As a reminder, earlier this month, Masimo’s new customer, Brookdale University Hospital and Medical Center in Brooklyn, New York, completed its system-wide conversion to Masimo SET pulse oximetry technology. Brookdale has also installed Masimo’s first-ever continuous and non-invasive hemoglobin monitoring (SpHb) technology in its select care settings. This allows clinicians to detect and treat chronic or acute anemia earlier, more effectively manage blood transfusions for their patients and identify internal bleeding quicker.

Despite the economic slowdown the company continues to grow impressively, registering a 17% revenue growth in the first nine months of 2009 compared to the first nine months of 2008. The expansion of the company’s corporate headquarters is a step to sustain the growth.

Masimo develops, manufactures and markets a family of non-invasive blood monitoring systems that consist of a monitor, circuit board and sensors. The systems are primarily used to monitor blood oxygen saturation levels and protect against hypoxemia and hyperoxemia. Hypoxemia, low blood-oxygen levels, can cause brain damage and death. Hyperoxemia, high-blood oxygen levels, can permanently damage eyes and cause blindness.

Masimo is a leader in the pulse oximetry monitoring equipment market. The company competes with Covidien Plc (COV), Becton, Dickinson and Co. (BDX) among others in the medical appliances & equipment industry.

Chicago, IL – August 27, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: China Life Insurance Company (LFC), American International Group (AIG), Deutsche Bank (DB), Morgan Stanley (MS) and Amgen (AMGN).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Wednesday’s Analyst Blog:

China Life’s Profits Grow

China Life Insurance Company (LFC), the leading life insurer in China, has posted a 15% rise in profits in the first half of 2009 compared to the prior-year period. The company earned 18.2 billion yuan ($2.7 billion) in the first half of 2009 driven by gains realized on financial investments. The gains stemmed from the capital market rally in China.

Gross yield on its investments in the period was up 3.27% from 2.31%. Gross written premiums and policy fees were up 11% to 87.86 billion yuan. The increase was mainly attributable to an increase in its insurance business. Renewal premiums grew 23% year-over-year, while the proportion of renewal premiums to gross written premiums increased to 66.84% in the first half of 2009 from 60.44% in the year-ago period.

The company said that it may invest in AIA, which is planning a Hong Kong initial public offering (IPO). AIA is the Asia unit of American International Group (AIG), Deutsche Bank (DB) and Morgan Stanley (MS) have been appointed by AIG as its joint global coordinators for a more than $4 billion IPO for AIA. The company is also eyeing an equity tie-up with Agricultural Bank of China. However, the company does not intend to sell its 5.1% stake in Minsheng Banking Corporation.

The company is also a leading provider of annuity products and life insurance for both individuals and groups and a leading provider of accident and health insurance. China Life’s market share in the first half of 2009 was approximately 39.2%.

Amgen’s Kidney Drug Fails

Yesterday, Amgen (AMGN) said that Aranesp failed in a large, randomized, double-blind, placebo-controlled, phase III study that was conducted in patients with chronic kidney disease (not requiring dialysis), anemia and type II diabetes.

The study, referred to as the Trial to Reduce Cardiovascular Endpoints with Aranesp Therapy (TREAT), had two primary endpoints. The first evaluated time to all-cause mortality or cardiovascular morbidity including heart attack, congestive heart failure, hospitalization for angina, or stroke. The second primary endpoint evaluated time to all-cause mortality or chronic dialysis.

Aranesp could not show statistically significant improvement in either. While a higher number of strokes were observed in the Aranesp-treated group compared to the placebo arm, we note that drug’s label already carries a warning regarding the stroke events.

Full efficacy and safety analyses are yet to take place. Amgen will present full results at an upcoming medical meeting later this year.

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Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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The study, referred to as the Trial to Reduce Cardiovascular Endpoints with Aranesp Therapy (TREAT), had two primary endpoints. The first evaluated time to all-cause mortality or cardiovascular morbidity including heart attack, congestive heart failure, hospitalization for angina, or stroke. The second primary endpoint evaluated time to all-cause mortality or chronic dialysis.

Aranesp could not show statistically significant improvement in either. While a higher number of strokes were observed in the Aranesp-treated group compared to the placebo arm, we note that drug’s label already carries a warning regarding the stroke events.

Full efficacy and safety analyses are yet to take place. Amgen will present full results at an upcoming medical meeting later this year.

Aranesp is currently used for the treatment of anemia both in supportive cancer care and in nephrology. The product’s primary competitor is Johnson & Johnson’s (JNJ) Procrit.

Amgen also has another erythropoietin-stimulating agent (ESA), Epogen, in its portfolio. However, sales of the company’s ESA franchise have been under pressure due to safety concerns. Aranesp sales declined 13% to $3.1 billion in 2008.

We believe the environment will remain challenging for both products, especially Aranesp, which is seeing declining sales in both the supportive cancer care and nephrology settings. Moreover, Amgen has submitted a Risk Evaluation and Mitigation Strategy to the FDA. The approval of this plan, expected later this year, could further limit Aranesp sales.

We have a Neutral rating on Amgen. We expect investor focus to remain on the approvability of key pipeline candidate, denosumab, which is the future of Amgen.

During the second quarter, Amgen’s ESA franchise contributed 36% to total revenues. Aranesp sales declined 16% to $693 million (U.S. - $338 million, down 21%; ex-U.S. - $355 million, down 11%), mainly due to a decline in demand reflecting the negative impact primarily in the supportive cancer care setting. Aranesp also lost some share in both the U.S. and ex-U.S. markets. International sales were also impacted by foreign exchange fluctuations. Epogen sales increased 3% to $638 million reflecting an increase in demand, which was supported by patient growth and an increase in average net sales price.

Johnson & Johnson’s ESA franchise recorded a 12% decline in sales during the second quarter of 2009 primarily due to the declining markets for ESAs in the U.S.  Although sales from Aranesp and Epogen are quite crucial for Amgen, Johnson & Johnson is less dependent on contribution from Procrit, which contributed about 10% and 2% to pharmaceutical business revenue and total revenues respectively during the second quarter.
 
The inclusion of a safety-related boxed warning on the labels of Amgen’s Aranesp and Epogen and Johnson & Johnson’s Procrit had an adverse impact on the sales of these products. We believe the environment will remain challenging for them especially Aranesp, which is witnessing declining sales in both the supportive cancer care and nephrology settings for which it is approved. Amgen has also submitted a Risk Evaluation and Mitigation Strategy (REMS) with the U.S. Food and Drug Administration (FDA). The approval of this plan, potentially later this year, could limit Aranesp sales further.

The higher quarterly net loss is attributable to a 39% increase in year-over-year operating expenses. Research and development expenses rose 43% as the company is working on expanding its manufacturing capabilities and development infrastructure. Selling, general and administrative expenses also increased 37% for commercialization of anti-anemia drug candidate, Feraheme.

Since Feraheme is a very important product for the company, we expect investor focus to remain on the initial sales ramp of the product.

As a reminder, the US Food and Drug Administration (FDA) granted marketing approval to Feraheme injection on June 30. AMAG officially launched Feraheme in the U.S. on July 13. It is an intravenous iron-replacement therapy used to fight anemia in patients with chronic kidney disease. The drug can be used by patients irrespective of dialysis.

Wholesalers and specialty distributors will primarily distribute Feraheme in the U.S. AMAG will use its commercial organization, consisting of approximately 150 seasoned professionals which includes an 80-person specialized sales force, to market the drug. For every 510 mg vial, the wholesale acquisition cost (WAC) of Feraheme is $396.78.

Iron deficiency anemia is a significant problem in patients with chronic kidney disease and often goes undiagnosed and undertreated. We believe peak sales of Feraheme could reach $500 million.

Although we are pleased to hear about Feraheme’s approval and subsequent launch, stiff competition awaits AMAG’s drug in the IV iron replacement therapy market. Fresenius Medical Care AG & Co.’s (FMS) Venofer and Watson Pharmaceuticals Inc. (WPI)-Sanofi-Aventis’ (SNY) Ferrlecit are AMAG’s main competitors in this market.

We believe that Feraheme's safety and efficacy profile should help it gain share in the market and advice investors to Buy the stock at the current price.

Chicago, IL - July 2, 2009 - Zacks Equity Research highlights AMAG Pharmaceuticals Inc. (AMAG) as the Bull of the Day and Palm, Inc. (PALM) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Everest Re (RE), Ace Limited (ACE) and Montpelier (MRH).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all five stocks:

Bull of the Day:

AMAG Pharmaceuticals Inc. (AMAG) develops superparamagnetic iron oxide nanoparticles for use in pharmaceutical products. The company's focus is on developing IV iron replacement therapy for anemia in chronic kidney disease and imaging agent to aid in diagnosis.

The company filed the NDA for its lead drug Feraheme in December 2007, and the drug was approved by the FDA on June 30, 2009. Clinical data in over 1,700 patients indicate an excellent safety profile for the drug with lower incidents of heart problems.

Clinical results and eventual approval for additional indications should ensure strong growth in the coming years. We maintain our Buy rating on the shares of AMAG with a target price of $62.

Bear of the Day:

Although 4Q09 revenue declined by 70.7% y-o-y and the loss increased y-o-y, results for Palm, Inc. (PALM) quarter were better than expected due to the ramp up in Treo Pro shipments and strong domestic and international carrier interest in its Web OS platform.

Although Palm has had some initial success with the Pre, its next-gen phone, we have doubts on its success as it competes with several much larger competitors such as BlackBerry and iPhone. As the Palm Pre was launched in June, we expect that its impact will be better reflected in the first quarter of fiscal 2010.

Palm has struggled to match supply with demand for the new handset. We have a low confidence on long-term prospects, so we reiterate our Sell rating on Palm but raise our six-month price target to $8.00.

Latest Posts on the Zacks Analyst Blog:

Reinsurance Rates Stable

In the first half of 2009, the reinsurance industry has not experienced any major underwriting losses. Also, there are some early signs of recovery in the financial sector. In addition, reinsurance companies took some desperate steps in the early part of 2009 to curb any significant deterioration in their balance sheets.

We also remain concerned about the primary insurance market, where there is still an absence of meaningful rate increases. Further, in the U.S. Casualty market, some new insurance companies are entering and thereby bringing in more capital in the industry and resulting in significant rate competition.

Though companies such as Everest Re (RE), Ace Limited (ACE) and Montpelier (MRH) have experienced rates increases this year; we believe that this "sufficient availability of capital" in the market will restrict any hefty rate increases in the industry and hence confine the top-line growth of the companies.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=5508.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5509.

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

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Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579.

Here are highlights from Thursday's Analyst Blog:

Garmin's Next Phase of Growth

GPS capability is expected to provide further impetus to growth in cell phones. Garmin Ltd. (GRMN) already enjoys an important position in automotive navigation, and management intends to leverage this position in the cell phone market.

The first step in this direction is the launch of the company's own smartphone. Although the cell phone market is relatively more competitive, management expressed enthusiasm about the growth prospects for its nuvifone.

The company announced two nuviphone models. Both phones are feature-rich 3.5G devices incorporating a PND with on-board maps and premium points of interest; UMTS, HSPDA and Wi-Fi data connectivity; a premium mobile web browser; a local search portal that seamlessly integrates navigation functions; SMS; instant messaging and e-mailing; a camera with automatic location tagging and picture navigation; and multimedia functions such as a video recorder, MPEG 4 video player and MP3. Research In Motion's (RIMM) Blackberry is the most popular platform for smartphones in North America. Apple's (AAPL) launch of the iPhone in Q3 of 2008 met with resounding success, lifting it to the second position.

3SBio Stays a Buy, Post Report

In addition to a diversified marketed product portfolio, 3SBio, Inc. (SSRX) also has a decent pipeline under development.

In the EPO franchise, the company has filed new drug applications (NDA) with China State Food and Drug Administration (SFDA) for higher dose EPIAO (36,000 IU/vial vs regular 10,000 IU/vial) for the treatment of anemia associated with chemotherapy in cancer patients. If approved, high-dose EPIAO would be the only dosage form of this kind available in China.

Also, 3SBio has completed preclinical test for NuPIAO and the company plans to move NuPIAO into clinic in 2009. NuPIAO is second generation of EPIAO that is designed to have a longer half-life. NuPIAO is comparable in structure and function to Amgen's (AMGN) Aranesp. Preliminary testing has demonstrated that NuPIAO has a comparable half-life to Aranesp.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=2677

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
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Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579.

Here are highlights from Friday's Analyst Blog:

On Bankruptcy & Banking

With the bankruptcy of Chrysler, and the potential bankruptcy of General Motors Corp. (GM) the bankruptcy code is very much in the news. Imagine for a minute, though, what would happen if the biggest single liability for these firms -- say, their legacy Pension and Health Care liabilities -- were by law not allowed to be touched by the courts. How much good could it really do?

Well that is the way it should be according to every single Republican and twelve Democrats in the U.S. Senate. No, not for big firms like GM, but for individuals.

The same day that Chrysler went "Tango Uniform," the U.S. Senate bowed to the pressure of the bankers' lobbyists and refused to allow mortgage cram-downs is bankruptcy courts. As Sen. Richard Durbin (D- IL) put it, referring to the bank lobbyists, "They own this place."

Evergreen Solar's Wider Loss

Evergreen Solar, Inc. (ESLR) announced financial results for its 1st quarter ended April 4, 2009.

Revenue for the reported 1st quarter of 2009 was $55.8 million, up 26% from $44.2 million in the sequential 4th quarter of 2008, and up 144% from $22.9 million in the year-ago 1st quarter of 2008.

AMAG Drug Nears Approval

AMAG Pharmaceuticals, Inc. (AMAG) reported first quarter 2009 financial resorts and recent accomplishments Thursday after market close.

Apparently, investors are not interested in its financial results; instead, they are more focused on the approval status of the company's lead anti-anemia drug Feraheme. In the news release and the conference call, the company disclosed that all outstanding issues pertaining to the manufacturing of Feraheme have been settled to the satisfaction of the FDA, and that a re-inspection of its manufacturing facility will not be required as a condition to approval of Feraheme.

Boeing Suffers Rating Cut

Fitch Ratings lowered to negative its long-term credit ratings outlook on The Boeing Company (BA) and its financial unit, Boeing Capital Corp.

Fitch said the long-term issuer default rating of A+ on Boeing and Boeing Capital Corp., along with other ratings, were supported by financial flexibility, large order backlog, and the company's balanced portfolio approximately equally split between defense and commercial.

Micros Beats on Lower Revenues

Micros Inc. (MCRS, Hold) released its fiscal Q3 results yesterday. Revenues were sharply lower at $205.7 million, versus our and consensus expectation of $227 million and $222 million, respectively. Non-GAAP EPS was impressively higher at $0.32, compared to our estimate of $0.27 (consensus was at $0.28).

EPS upside was largely a result of cost-cutting measures, while the revenue shortfall was attributed to weak restaurant business. The stock is up around 10% in trading today.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=2677

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Chicago, IL - April 17, 2009 - Zacks.com announces the latest Industry Outlook. Today's outlook from Zacks Equity Research analyst Grant Zeng discusses the Biotech sector. Highlighted stocks include: Myriad Genetics (MYGN), Onyx Pharmaceuticals Inc. (ONXX) and AMAG Pharmaceuticals Inc. (AMAG) and 3SBio Inc. (SSRX).

Here is the latest on the Biotech sector:

We continue to have BUY ratings on Myriad Genetics (MYGN), Onyx Pharmaceuticals Inc. (ONXX) and AMAG Pharmaceuticals Inc. (AMAG). All three companies have strong balance sheets, which eliminate immediate financing needs.

MYGN is a biopharmaceutical company that focuses on the development of molecular diagnostic and therapeutic products. The company's molecular diagnostics business has been very strong and continued to grow impressively in the fiscal second quarter of 2009 ended December 31, 2008, and the outlook is bright even in the current economic environment. We expect another strong quarter coming out early next month. Our price target is $53.

ONXX is an oncology company developing and marketing Nexavar for various cancer indications. Nexavar has been approved for kidney cancer and liver cancer, and sales remained strong in 4Q08 and will continue its momentum in the coming quarters. With profits at its back, ONXX recently in-licensed two cancer drug programs, BGC945 from BTG International Limited, and JAK2 inhibitors SB1518 and SB1578 from Singapore's S*Bio, while continues to expand Nexavar labels. With a cash balance of $458 million and no debt as of December 31, 2008, ONXX is well positioned for long-term growth. The company is also cooperating with Bayer for Nexavar, which makes it a potential and meaningful buyout target by Bayer. Our price target is $45.

AMAG develops superparamagnetic iron oxide nanoparticles for use in pharmaceutical products. The company's focus is on developing IV iron replacement therapy for anemia in chronic kidney disease and imaging agents to aid in diagnosis. The company filed the NDA for its lead drug, Ferumoxytol, in December 2007, and we expect FDA approval to come in the middle of 2009. AMAG is not profitable yet, but with Ferumoxytol approval at its fingertips, the company should enjoy strong growth in the coming years. its balance sheet is strong. As of December 31, 2008, the company had $215 million in cash, cash equivalents and investments and no long-term debt. Our price target is $55.

We also have a Buy rating on 3SBio Inc. (SSRX). SSRX is a integrated, China-based biotech company focused on developing and marketing therapeutics for nephrology, oncology and cancer supportive care. The company's flagship product, EPIAO, is the number 1 brand in China EPO market. Its second lead product, TPIAO, has gained rapid physician acceptance for thrombocytopenia, and is making a meaningful contribution to the company's top-line growth. A recent deal with US-based AMAG Pharmaceuticals Inc. will boost its expansion into IV Iron market. Our price target is $10.

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About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment

Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4581. 

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release. 

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security. 

Contact:Mark VickeryWeb Content Editor312-265-9380Visit: www.zacks.com

This can partly be explained that when the recession gets deeper, even large-cap biotech companies will feel the pinch while the smaller ones are still struggling with survival. The recent story with Celgene Corp (CELG) served a good example. Celgene dished out a less-than-expected new guidance for the 1Q09 on March 31, 2009 in a news release related to a conference presentation due to challenges from the global economic environment. We may see industry-wide impact in 2009.

Valuation is attractive, though. The industry's average P/E (trailing 12-month) ratio has declined to 16x from its historical 35x to 40x. The five-year PEG ratio is less than 1 at 0.96 according to Yahoo Finance.

We continue to expect M&A spree in the remainder of the year. Recent mega deals include the acquisition of Wyeth (WYE) by Pfizer (PFE), the acquisition of Schering-Plough Corp (SGP) by Merck & Co. (MRK) and the acquisition of Genentech (DNA) by Swiss drug maker Roche. Also, on March 12, Gilead Science (GILD) announced it will buy CV Therapeutics (CVTX) for $1.4 billion, exceeding Japan's Astellas' proposed offering price of $1 billion.

We believe the current market environment in the pharma/biotech industry is favorable for M&A activity. Big pharma and biotech companies still face three major challenges: patent expiration, low research and development productivity, and generic competition.

With very active M&As in the pharma/biotech sector, investors have every reason to speculate on buyout targets. Opportunities also exist in companies with decent pipelines that may attract big pharma or biotech companies for partnerships.

OPPORTUNITIES

We continue to have BUY rating on Myriad Genetics (MYGN), Onyx Pharmaceuticals Inc. (ONXX) and AMAG Pharmaceuticals Inc. (AMAG). All three companies have strong balance sheets, which eliminate immediate financing needs.

MYGN is a biopharmaceutical company that focuses on the development of molecular diagnostic and therapeutic products. The company's molecular diagnostics business has been very strong and continued to grow impressively in the fiscal second quarter of 2009 ended December 31, 2008, and the outlook is bright even in the current economic environment. We expect another strong quarter coming out early next month. Our price target is $53.

ONXX is an oncology company developing and marketing Nexavar for various cancer indications. Nexavar has been approved for kidney cancer and liver cancer, and sales remained strong in 4Q08 and will continue its momentum in the coming quarters. With profits at its back, ONXX recently in-licensed two cancer drug programs, BGC945 from BTG International Limited, and JAK2 inhibitors SB1518 and SB1578 from Singapore's S*Bio, while continues to expand Nexavar labels. With a cash balance of $458 million and no debt as of December 31, 2008, ONXX is well positioned for long-term growth. The company is also cooperating with Bayer for Nexavar, which makes it a potential and meaningful buyout target by Bayer. Our price target is $45.

AMAG develops superparamagnetic iron oxide nanoparticles for use in pharmaceutical products. The company's focus is on developing IV iron replacement therapy for anemia in chronic kidney disease and imaging agents to aid in diagnosis. The company filed the NDA for its lead drug, Ferumoxytol, in December 2007, and we expect FDA approval to come in the middle of 2009. AMAG is not profitable yet, but with Ferumoxytol approval at its fingertips, the company should enjoy strong growth in the coming years. its balance sheet is strong. As of December 31, 2008, the company had $215 million in cash, cash equivalents and investments and no long-term debt. Our price target is $55.

We also have a Buy rating on 3SBio Inc. (SSRX). SSRX is a integrated, China-based biotech company focused on developing and marketing therapeutics for nephrology, oncology and cancer supportive care. The company's flagship product, EPIAO, is the number 1 brand in China EPO market. Its second lead product, TPIAO, has gained rapid physician acceptance for thrombocytopenia, and is making a meaningful contribution to the company's top-line growth. A recent deal with US-based AMAG Pharmaceuticals Inc. will boost its expansion into IV Iron market. Our price target is $10.

WEAKNESSES

We suggest investors avoid small biotech firms with weak balance sheets -- particularly those which need immediate financing. Even with a promising pipeline, these small biotech firms may suspend operations and may be forced into survival mode without immediate new funds until current financial market and economic situation improve.

We continue to suggest investors to avoid Genta Inc. (GNTA), Cell Therapeutics Inc. (CTIC), Decode Genetics (DCGN) and Cyclacel (CYCC). All these tiny biotech firms have great pressure for further financing in the next 6 to 12 months, and they have entered into survival mode in order to save cash.

In addition, we continue to be negative on SurModics Inc. (SRDX), Alkermes (ALKS) and Celera Group (CRA). The recession has finally taken a toll on both top lines and bottom lines of these companies.

For ALKS, termination of recent two deals with Eli Lilly (LLY) and Cephalon (CEPH) for the inhaled insulin program and Vivitrol, respectively, have major negative impact on the company's top-line growth. Sales growth of Risperdal Consta, from which Alkermes generates manufacturing and royalty revenue and which is the biggest revenue contributor, has been diminishing in the last three fiscal quarters of 2009, and will continue to decline due to heavy competition in the schizophrenia market.

Exenatide LAR approval may be delayed by the FDA due to the pancreatitis found in patients on Byetta therapy, and by the FDA's concern over a study that indicated Novo Nordisk's (NVO) Liraglutide might trigger thyroid cancer tumors in rodents. Both liraglutide and exenatide belong to the same class of drugs called GLP-1s. So far, according to data from both preclinical and clinical studies, we think Exenatide LAR may have a better safety profile than liraglutide, but we are not sure if the FDA will exert tough rule on the safety concerns of Exenatide.

Exenatide LAR is the company's only late-development program after the termination of the AIR Insulin program. Our price target is $8.

Our Sell rating has not changed for SRDX and CRA.

Our Sell call on SRDX is based on the lackluster financial performance of fiscal 1Q09 ended December 31, 2008 and bleak outlook for 2009 due to current financial and economic conditions. With the current financial and economic environment, coupled with the termination of the Merck agreement and expiration of the Abbott agreement, we expect a decline in both revenue and earnings per share in the rest of fiscal 2009. Total revenue for fiscal 2009 will be down 3% compared with fiscal 2008. EPS for 2009 will be $0.71 per share compared to $$1.13 per share for 2008.

In the case of CRA, we also see a worse-than-expected calendar fourth quarter 2008 financial performance. We are deeply concerned about the company's outlook for 2009. In the fourth quarter news release, management of Celera provided guidance for 2009 which was well below our expectations. The company expects revenue in 2009 to be in the range of $192 to 202 million, versus our estimate of $227.5 million. The company expects non-GAAP EPS in the middle single digit versus our double digit EPS for 2009.Zacks Investment Research

This can partly be explained that when the recession gets deeper, even large-cap biotech companies will feel the pinch while the smaller ones are still struggling with survival. The recent story with Celgene Corp (CELG) served a good example. Celgene dished out a less-than-expected new guidance for the 1Q09 on March 31, 2009 in a news release related to a conference presentation due to challenges from the global economic environment. We may see industry-wide impact in 2009.

Valuation is attractive, though. The industry's average P/E (trailing 12-month) ratio has declined to 16x from its historical 35x to 40x. The five-year PEG ratio is less than 1 at 0.96 according to Yahoo Finance.

We continue to expect M&A spree in the remainder of the year. Recent mega deals include the acquisition of Wyeth (WYE) by Pfizer (PFE), the acquisition of Schering-Plough Corp (SGP) by Merck & Co. (MRK) and the acquisition of Genentech (DNA) by Swiss drug maker Roche. Also, on March 12, Gilead Science (GILD) announced it will buy CV Therapeutics (CVTX) for $1.4 billion, exceeding Japan's Astellas' proposed offering price of $1 billion.

We believe the current market environment in the pharma/biotech industry is favorable for M&A activity. Big pharma and biotech companies still face three major challenges: patent expiration, low research and development productivity, and generic competition.

With very active M&As in the pharma/biotech sector, investors have every reason to speculate on buyout targets. Opportunities also exist in companies with decent pipelines that may attract big pharma or biotech companies for partnerships.

OPPORTUNITIES

We continue to have BUY rating on Myriad Genetics (MYGN), Onyx Pharmaceuticals Inc. (ONXX) and AMAG Pharmaceuticals Inc. (AMAG). All three companies have strong balance sheets, which eliminate immediate financing needs.

MYGN is a biopharmaceutical company that focuses on the development of molecular diagnostic and therapeutic products. The company's molecular diagnostics business has been very strong and continued to grow impressively in the fiscal second quarter of 2009 ended December 31, 2008, and the outlook is bright even in the current economic environment. We expect another strong quarter coming out early next month. Our price target is $53.

ONXX is an oncology company developing and marketing Nexavar for various cancer indications. Nexavar has been approved for kidney cancer and liver cancer, and sales remained strong in 4Q08 and will continue its momentum in the coming quarters. With profits at its back, ONXX recently in-licensed two cancer drug programs, BGC945 from BTG International Limited, and JAK2 inhibitors SB1518 and SB1578 from Singapore's S*Bio, while continues to expand Nexavar labels. With a cash balance of $458 million and no debt as of December 31, 2008, ONXX is well positioned for long-term growth. The company is also cooperating with Bayer for Nexavar, which makes it a potential and meaningful buyout target by Bayer. Our price target is $45.

AMAG develops superparamagnetic iron oxide nanoparticles for use in pharmaceutical products. The company's focus is on developing IV iron replacement therapy for anemia in chronic kidney disease and imaging agents to aid in diagnosis. The company filed the NDA for its lead drug, Ferumoxytol, in December 2007, and we expect FDA approval to come in the middle of 2009. AMAG is not profitable yet, but with Ferumoxytol approval at its fingertips, the company should enjoy strong growth in the coming years. its balance sheet is strong. As of December 31, 2008, the company had $215 million in cash, cash equivalents and investments and no long-term debt. Our price target is $55.

We also have a Buy rating on 3SBio Inc. (SSRX). SSRX is a integrated, China-based biotech company focused on developing and marketing therapeutics for nephrology, oncology and cancer supportive care. The company's flagship product, EPIAO, is the number 1 brand in China EPO market. Its second lead product, TPIAO, has gained rapid physician acceptance for thrombocytopenia, and is making a meaningful contribution to the company's top-line growth. A recent deal with US-based AMAG Pharmaceuticals Inc. will boost its expansion into IV Iron market. Our price target is $10.

WEAKNESSES

We suggest investors avoid small biotech firms with weak balance sheets -- particularly those which need immediate financing. Even with a promising pipeline, these small biotech firms may suspend operations and may be forced into survival mode without immediate new funds until current financial market and economic situation improve.

We continue to suggest investors to avoid Genta Inc. (GNTA), Cell Therapeutics Inc. (CTIC), Decode Genetics (DCGN) and Cyclacel (CYCC). All these tiny biotech firms have great pressure for further financing in the next 6 to 12 months, and they have entered into survival mode in order to save cash.

In addition, we continue to be negative on SurModics Inc. (SRDX), Alkermes (ALKS) and Celera Group (CRA). The recession has finally taken a toll on both top lines and bottom lines of these companies.

For ALKS, termination of recent two deals with Eli Lilly (LLY) and Cephalon (CEPH) for the inhaled insulin program and Vivitrol, respectively, have major negative impact on the company's top-line growth. Sales growth of Risperdal Consta, from which Alkermes generates manufacturing and royalty revenue and which is the biggest revenue contributor, has been diminishing in the last three fiscal quarters of 2009, and will continue to decline due to heavy competition in the schizophrenia market.

Exenatide LAR approval may be delayed by the FDA due to the pancreatitis found in patients on Byetta therapy, and by the FDA's concern over a study that indicated Novo Nordisk's (NVO) Liraglutide might trigger thyroid cancer tumors in rodents. Both liraglutide and exenatide belong to the same class of drugs called GLP-1s. So far, according to data from both preclinical and clinical studies, we think Exenatide LAR may have a better safety profile than liraglutide, but we are not sure if the FDA will exert tough rule on the safety concerns of Exenatide.

Exenatide LAR is the company's only late-development program after the termination of the AIR Insulin program. Our price target is $8.

Our Sell rating has not changed for SRDX and CRA.

Our Sell call on SRDX is based on the lackluster financial performance of fiscal 1Q09 ended December 31, 2008 and bleak outlook for 2009 due to current financial and economic conditions. With the current financial and economic environment, coupled with the termination of the Merck agreement and expiration of the Abbott agreement, we expect a decline in both revenue and earnings per share in the rest of fiscal 2009. Total revenue for fiscal 2009 will be down 3% compared with fiscal 2008. EPS for 2009 will be $0.71 per share compared to $$1.13 per share for 2008.

In the case of CRA, we also see a worse-than-expected calendar fourth quarter 2008 financial performance. We are deeply concerned about the company's outlook for 2009. In the fourth quarter news release, management of Celera provided guidance for 2009 which was well below our expectations. The company expects revenue in 2009 to be in the range of $192 to 202 million, versus our estimate of $227.5 million. The company expects non-GAAP EPS in the middle single digit versus our double digit EPS for 2009.Zacks Investment Research

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Here are highlights from Thursday's Analyst Blog:

Cognizant Sails in Choppy Waters

Recent outlook for companies in the IT Services sector has not been positive, and the sentiment has been supported by datapoints through CY2009. However, companies like Cognizant Technology Solutions Corp. (CTSH), Infosys Technologies, Ltd. (INFY) and Wipro Ltd. (WIT) appear to be bucking the trend and the shares have recovered nicely in the past couple of weeks.

Is this a case of "rising tide lifting all boats," given the market's upswing over the last week or so, or the beginning of a largely fundamental bullish scenario?

A closer look at the datapoints does not support a bullish outlook. Current offshore outsourcing bookings activity level remains depressed and pricing pressure of 5%-15% has become commonplace. Demand in the U.K. has softened noticeably in the last few months and client IT budgets in 2009 may end up down close to 10%-15%, putting material pressure on discretionary IT project spending.

Amgen Stays a Long-Term Hold

Amgen, Inc. (AMGN), a global biotechnology company, is focused on the development and commercialization of human therapeutics. The company's key products are Epogen/Aranesp (anemia), Neupogen/Neulasta (neutropenia), and Enbrel (inflammatory disease). Results over the past few quarters demonstrate the challenging, but stabilizing ESA market.

Nevertheless, we still feel as though the pipeline is significantly undervalued, and we continue to recommend the name as a long-term Hold within the biotechnology sector. Recent positive news on phase III denosumab is a big reason we continue to be positive on Amgen. Our price target is $56.

AK Steel Downgraded from Buy

We expect AK Steel's (AKS) cost reduction efforts to prevent excessive margin deterioration in light of higher commodity costs. The company has greater product diversification compared to its peers and is focusing on markets and products which have the greatest long-term potential to succeed.

AK Steel has a sound liquidity position with no significant debt maturities in the near term. However, the company's competitive position, compared to other steel companies, is undermined by its legacy costs.

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We expect the M&A spree will continue in 2009. While licensing has been the lifeline for biotech industry, we believe big pharma and giant biotech companies are more willing to swallow small biotech companies with very low valuations in current market conditions.

The market environment in the pharma/biotech industry is favorable for the M&A activity. However, big pharma and biotech companies still face three major challenges: patent expiration, low research and development productivity, and generic competition from companies sitting on a pile of cash reserves. Acquisition will solve at least part of these problems.

OPPORTUNITIES

Our top picks for biotech industry include BioMarin Pharmaceutical Inc. (BMRN), Onyx Pharmaceuticals Inc. (ONXX), Celgene Corp. (CELG) and AMAG Pharmaceuticals Inc. (AMAG). All of the four companies have strong balance sheets, which eliminates immediate financing needs.

BMRN is among the few companies who specialize in enzyme replacement therapies. The company already has three FDA-approved products on the market and has become profitable in the first three quarters of 2008. EPS growth during the 2008-2011 period should be 192%. The company also has a decent pipeline. Cash position is also strong with $563 million as of September 30, 2008. BMRN is also a potential buyout target by Genzyme (GENZ) or Shire PLC (SHPGY). Our 6-12 month price target is $28.

ONXX is an oncology company which is developing and marketing Nexavar for various cancer indications. Nexavar has been approved for kidney cancer and liver cancer. Nexavar sales have remained strong in 3Q08, and the drug should continue its momentum in the coming quarters. With profits at its back, ONXX recently in-licensed two cancer drug programs -- BGC945 from BTG International Limited, and JAK2 inhibitors, SB1518 and SB1578 from Singapore's S*Bio -- while continuing to expand Nexavar labels. With a cash balance of $488 million and no debt as of September 30, 2008, ONXX is well positioned for long-term growth. The company is also cooperating with Bayer for Nexavar, which makes it a potential and meaningful buyout target by Bayer. Our 6-12 month price target is $45.

CELG is a fully integrated biotechnology company focused on oncology and hematology. The acquisition of Pharmion brings three medically meaningful products -- Thalomid, Revlimid and Vidaza -- into market, which will drive growth in 2009 and beyond. The MDS market will be dominated by Celgene with complementary Vidaza and Revlimid, although Revlimid and Thalomid face tough competition in the MM [multiple myeloma] market. Also, strong balance sheet and deep pipeline will provide long-term growth for the company. Our price target is $70. The company has a strong balance sheet. As of September 30, 2008, Celgene held $2.5 billion in cash and marketable securities and no long-term debt.

AMAG develops superparamagnetic iron oxide nanoparticles for use in pharmaceutical products. The company's focus is on developing IV iron replacement therapy for anemia in chronic kidney disease and imaging agent to aid in diagnosis. The company filed the NDA for its lead drug, Ferumoxytol, in December 2007, and we expect the FDA approval to come in 1H09. AMAG is not profitable yet, but with Ferumoxytol approval at its fingertips, the company should enjoy strong growth in the coming years. Its balance sheet is strong. As of September 30, 2008, the company had $241 million in cash, cash equivalents and investments and no long-term debt. Our price target is $55.

WEAKNESSES

As opposite to our top picks, we try to avoid companies with weak balance sheets. We have seen increased numbers of biotech companies who have failed due to cash shortage recently. It is extremely difficult to raise any additional capital due to the current credit crunch and economic downturn. Therefore, we try to avoid companies with great financing pressure in the next 6 to 12 months.

These names include Genta Inc. (GNTA), Cell Therapeutics Inc. (CTIC) and Decode Genetics (DCGN). All of these tiny biotech firms have great pressure for further financing in the next 6 to 12 months, and they have entered into a survival mode in order to save cash since it's almost impossible for them to raise additional funds anytime soon.

We are also negative on MannKind Corp (MNKD) and Trimeris (TRMS). Our Sell call on MNKD is based on our general negative view on the inhaled insulin segment. Investors should also stay away from TRMS. The company has only one product -- Fuzeon -- on the market, with sharply declining sales in recent quarters due to fierce competition. Its pipeline is also weak. We don't see any huge upside potential in the next few quarters, even when the broad market recovers from its current downturn.
"CTIC" Free Stock Analysis: Buy? Sell? Hold?
"CELG" Free Stock Analysis: Buy? Sell? Hold?
"BMRN" Free Stock Analysis: Buy? Sell? Hold?
"GENZ" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Most biotech companies are in early to middle stages of development, and continuing financing is an integral part of their operations. With liquidity drying up, capital raising will be very difficult in the next 6 to 12 months. Recently we have seen increased number of small biotech companies which are forced to enter into a survival mode to reserve cash, forced to suspend operations or file for bankruptcy.

We expect the M&A spree will continue in 2009. While licensing has been the lifeline for biotech industry, we believe big pharma and giant biotech companies are more willing to swallow small biotech companies with very low valuations in current market conditions.

The market environment in the pharma/biotech industry is favorable for the M&A activity. However, big pharma and biotech companies still face three major challenges: patent expiration, low research and development productivity, and generic competition from companies sitting on a pile of cash reserves. Acquisition will solve at least part of these problems.

OPPORTUNITIES

Our top picks for biotech industry include BioMarin Pharmaceutical Inc. (BMRN), Onyx Pharmaceuticals Inc. (ONXX), Celgene Corp. (CELG) and AMAG Pharmaceuticals Inc. (AMAG). All of the four companies have strong balance sheets, which eliminates immediate financing needs.

BMRN is among the few companies who specialize in enzyme replacement therapies. The company already has three FDA-approved products on the market and has become profitable in the first three quarters of 2008. EPS growth during the 2008-2011 period should be 192%. The company also has a decent pipeline. Cash position is also strong with $563 million as of September 30, 2008. BMRN is also a potential buyout target by Genzyme (GENZ) or Shire PLC (SHPGY). Our 6-12 month price target is $28.

ONXX is an oncology company which is developing and marketing Nexavar for various cancer indications. Nexavar has been approved for kidney cancer and liver cancer. Nexavar sales have remained strong in 3Q08, and the drug should continue its momentum in the coming quarters. With profits at its back, ONXX recently in-licensed two cancer drug programs -- BGC945 from BTG International Limited, and JAK2 inhibitors, SB1518 and SB1578 from Singapore's S*Bio -- while continuing to expand Nexavar labels. With a cash balance of $488 million and no debt as of September 30, 2008, ONXX is well positioned for long-term growth. The company is also cooperating with Bayer for Nexavar, which makes it a potential and meaningful buyout target by Bayer. Our 6-12 month price target is $45.

CELG is a fully integrated biotechnology company focused on oncology and hematology. The acquisition of Pharmion brings three medically meaningful products -- Thalomid, Revlimid and Vidaza -- into market, which will drive growth in 2009 and beyond. The MDS market will be dominated by Celgene with complementary Vidaza and Revlimid, although Revlimid and Thalomid face tough competition in the MM [multiple myeloma] market. Also, strong balance sheet and deep pipeline will provide long-term growth for the company. Our price target is $70. The company has a strong balance sheet. As of September 30, 2008, Celgene held $2.5 billion in cash and marketable securities and no long-term debt.

AMAG develops superparamagnetic iron oxide nanoparticles for use in pharmaceutical products. The company's focus is on developing IV iron replacement therapy for anemia in chronic kidney disease and imaging agent to aid in diagnosis. The company filed the NDA for its lead drug, Ferumoxytol, in December 2007, and we expect the FDA approval to come in 1H09. AMAG is not profitable yet, but with Ferumoxytol approval at its fingertips, the company should enjoy strong growth in the coming years. Its balance sheet is strong. As of September 30, 2008, the company had $241 million in cash, cash equivalents and investments and no long-term debt. Our price target is $55.

WEAKNESSES

As opposite to our top picks, we try to avoid companies with weak balance sheets. We have seen increased numbers of biotech companies who have failed due to cash shortage recently. It is extremely difficult to raise any additional capital due to the current credit crunch and economic downturn. Therefore, we try to avoid companies with great financing pressure in the next 6 to 12 months.

These names include Genta Inc. (GNTA), Cell Therapeutics Inc. (CTIC) and Decode Genetics (DCGN). All of these tiny biotech firms have great pressure for further financing in the next 6 to 12 months, and they have entered into a survival mode in order to save cash since it's almost impossible for them to raise additional funds anytime soon. 

We are also negative on MannKind Corp. (MNKD) and Trimeris (TRMS). Our Sell call on MNKD is based on our general negative view on the inhaled insulin segment. Investors should also stay away from TRMS. The company has only one product -- Fuzeon -- on the market, with sharply declining sales in recent quarters due to fierce competition. Its pipeline is also weak. We don't see any huge upside potential in the next few quarters, even when the broad market recovers from its current downturn. 

The company filed the NDA [New Drug Application] for its lead drug, Ferumoxytol, in December 2007, and we expect FDA approval to come in 1H09. Clinical data in over 1,700 patients indicate an excellent safety profile for the drug with lower incidents of heart problems.

Clinical results, and eventual approval for additional indications, should ensure strong growth in the coming years. We maintain our Buy rating on the shares of AMAG with a target price of $55.

Read the full analyst report on AMAG

How has earnings season gone this quarter? Any major surprises?

As you know, most of the companies covered by me are small-cap biotech companies which usually report their quarterly earnings quite late. I just finished updating all my companies last week and I have both positive and negative surprises.

On the positive side, Celgene’s (CELG) Revlimid beat our estimate by $15.8 million; Vidaza sales beat our estimate by $7.2 million. Total product sales beat our estimate by $16.5 million with quarterly sales of $542 million. Celgene’s adjusted EPS also beat our estimate by 6 cents. We have a Hold rating on Celgene due to valuation concerns.

For BioMarin (BMRN), sales for all three marketed products beat our estimate. Both top line and bottom line exceeded our expectations. We have a Buy recommendation for BMRN.

On the negative side, Both Trimeris’ (TRMS) top line and bottom line were slightly below our expectations. For MannKind (MNKD), it total operating expenses exceeded our estimate by $6 million and not loss per share was 7 cents below our expectations. We have Sell ratings on MNKD and TRMS.

Are you expecting M&A activity to continue? If so, for how long?

From the beginning of this year to the date of this writing, M&A has been sizzling for the Pharma/biotech industry. The most high profile acquisitions include the proposed acquisition of Genentech (DNA) by Roche ($44 billion); the $8.8 billion acquisition of Millennium Pharmaceuticals by Japan drug maker Takeda; the proposed acquisition of ImClone Systems (IMCL) by Bristol-Myers Squibb (BMY) ($4.5 billion) and the acquisition of Pharmion by Celgene ($2.9 billion).

We expect the M&A activity will continue in the remainder of 2008 and beyond because we believe that current market environment in the Pharma/biotech industry is favorable for M&A activity. The big pharmaceutical companies have long been faced with big challenges such as patent expiration for blockbusters, low research and development productivity, and generic competition. Platform technology and efficient R&D efforts in smaller biotech companies may be part of the solution to the challenges faced by Big Pharma. As long as the challenges still exist in the pharmaceutical industry, the M&A of smaller biotech companies by big Pharma will continue to make sense.

Which are your top Buy recommendations at this time?

At this time, our top Buy recommendations are AMAG Pharmaceuticals (AMAG) and BMRN.

AMAG’s Ferumoxytol is under FDA review for IV iron replacement therapy for anemia. This product candidate has advantages over current existing products on the market and has great potential since anemia is a very large market. The FDA will make a decision in late October and we expect an outright approval of Ferumoxytol. Our six to twelve month target price is $70.

BMRN has achieved profitability in the first half of 2008 and will become profitable going forward due to strong sales from its three marketed products for rare genetic diseases. BMRN also has a robust pipeline and strong balance sheet. Our price target is $46.

In what ways has the slowing U.S. economy had a direct impact on the companies you follow?

Although the US and the global economies are slowing down, they have not had any negative impact on the companies I follow. As I said earlier in the year, my outlook for the biotech industry in general was positive, and I have not changed my opinion.

Actually, if you compare the performance between the biotech industry and the broad market indices, you will find that the biotech index has been outperforming both the NASDAQ composite and S&P500 index so far. As of August 27, 2008, NASDAQ composite index has declined by 8.7% from the beginning of year. Both S&P500 and Dow Jones Industrial index have double digit decline with Dow declining by 11.8% and S7P500 declining by 11.4%. However, as of August 27, 2008, Amex Biotech index has advanced by 4.5% from the beginning of the year, while NASDAQ biotech index has advanced by 7%.

As an integral part of the healthcare industry, Biotech companies are very good examples of defensive stocks. Historically, biotech stocks were less impacted by economical downturns, while more affected by the companies’ own clinical trials and business developments.

In what way would you advise investors looking toward overweighting biotech stocks in their portfolios?

Although biotech stocks have been performing well in general so far, investors should be aware of the inherent risks involved with biotech investing. Biotech stocks, especially those still in development stage with no approved products on the market, are very volatile and unpredictable sometimes because their valuation are mainly driven by clinical trial results and business developments.

If investors want to overweight biotech stocks in their portfolio, we always suggest they look at three factors: pipeline, technology and cash position. If a biotech company has a decent pipeline, or even already has approved products on the market with good potential; if the company has a platform technology to derive multiple drug candidates down the road, and the company has rich money to advance its pipeline, then it may be worth adding it to the investor’s portfolio.

Grant Zeng, CFA is a senior analyst covering the biopharmaceutical industry for Zacks Equity Research.
"GENE" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research