The Dow Jones industrial average closed above the 10,000 level for the second-successive day, edging up 47 points, or 0.5%.  The S&P 500 index edged up 4 points, or 0.4% and the tech-heavy Nasdaq composite ended the day virtually flat.  The gains in the Dow average were led by Microsoft (NASDAQ:MSFT) whose shares jumped 2.9%.  The Windows 7 is slated for release on October 22.

Among energy stocks, Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM) shares climbed 1.6% and 1.5%, respectively, as crude prices jumped to their highest levels of the year.  Meanwhile, the US Department of Energy said gasoline stockpiles fell 5.2 million barrels per day last week, well below expectations of 700,000 decline.

Pfizer (NYSE:PFE) rose 1.7% after it completed its acquisition of Wyeth.

Nevertheless, weakness in financial sector shares, off 0.6%, hurt sentiment even as Goldman Sachs (NYSE:GS) reported estimate-topping numbers.  Citigroup's (NYSE:C) strong trading returns were overcome by increasing consumer loan losses.  Citi's (NYSE:C) CEO Vikram Pandit warned, "US consumer credit remains the number one issue affecting our near-term results." JP Morgan (NYSE:JPM) CEO Jamie Dimon warned that level of loan losses are likely to remain high. 

Tech shares also failed to advance, even as IBM (NYSE:IBM) raised its earnings outlook and reported numbers that were above Street projections.  Advanced Micro Devices' (NYSE:AMD) narrower-than-expected loss and the return of its core chip-making operations to profitability failed to lift sentiments either.  However, Google's (NASDAQ:GOOG) better-than-expected results were helped by return to sequential quarterly growth, a 5% increase in average cost-per-clicks over the second quarter, and a positive impact from the declining dollar.  Shares in Google (NASDAQ:GOOG) rose 3.6% in after-hours trading as CEO Eric Schmidt noted, "While there are a lot of uncertainties about the pace of [the] economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future."

Today's expected results include a number of significant results from companies such as Bank of America (NYSE:BAC), Genuine Parts (NYSE:GPC), General Electric (NYSE:GE), and Mattel (NYSE:MAT). Also reporting are: Halliburton (NYSE:HAL) and First Horizon National (NYSE:FHN).

Investors can find such funds by checking out the entire list of the Zacks #1 Rank Income Equity Funds.

3 Solid Samples

Parnassus Equity Income (PRBLX) was incepted in September 1992. The investment seeks current income and capital appreciation.

The fund invests primarily in a diversified portfolio of equity securities which include common and preferred stock as well as convertible bonds. As of March 2009, its portfolio turnover was 70.20%.

Shareholders have to make a minimum initial investment of $2,000 to enter this Zacks#1 Rank (“Strong Buy") fund. It has topped the total returns of its benchmark index in the last 1-, 3- and 5-year periods.

Federated Equity Income A (LEIFX) seeks above-average income and capital appreciation. The fund focuses on stocks of companies that have the potential to pay high, growing dividends.

The fund ordinarily selects securities that have a comparatively low volatility in share price relative to the overall equity market, but may also invest in companies that offer superior growth prospects.

AT&T Inc. (T), Johnson & Johnson (JNJ) and Wyeth (WYE) are among the fund’s key holdings.

FAM Equity-Income (FAMEX) seeks current income as well as long-term capital appreciation. The fund mainly invests in income-producing stocks that pay dividends.

This open-end, no-load mutual fund pays dividends on a quarterly basis. Capital gains, if any, are distributed in December.

Paul Hogan has managed the fund since its inception in April 1996. It has an expense ratio of 1.40%.

Discover Many More Funds

Learn more about the new Zacks Mutual Fund Rank and discover some of the best market-beating mutual funds by browsing our new mutual funds section. This part of Zacks.com offers a variety of tools, including mutual fund research, a new mutual fund screener, helpful answers to frequently asked questions and quick access to prospectuses and other information.

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward.

Vibativ, jointly developed with Japan’s Astellas Pharma, is expected to hit the US market by end of this year. While the drug will be marketed and sold by Astellas, Theravance will receive royalties on global sales. In the U.S., the company will help Astellas in marketing the drug for the first three years post approval.

Apart from cSSSI, Vibativ is also being studied for hospital-acquired pneumonia (HAP). The company has already submitted a New Drug Application (NDA) for this indication and has been assigned a Prescription Drug User Fee Act (PDUFA) date of Nov. 26.

The approval for the cSSSI indication comes after a series of delays and a long waiting period since Theravance submitted the NDA in December 2006. Despite receiving an approvable letter from the FDA in October 2007 and a favorable recommendation from the FDA advisory panel in November 2008, the final approval for the drug came after nearly three years.

Last February, the company received a complete response letter from the FDA seeking detailed information related to the treatment of cSSSI. The letter called for Risk Evaluation and Mitigation Strategy data on patients with certain renal risk factors from the cSSSI and HAP studies, revision to the draft label and a customary safety update. Theravance submitted its response in March, which the FDA subsequently accepted in April and set Sept. 16 as the PDUFA date.

Although this approval is a major achievement for Theravance, we remain concerned about competition from other drugs targeting Gram-positive bacterial infections. Vibativ will have to jostle for space against products like ViroPharma's (VPHM) Vancocin, Cubist Pharmaceutical's (CBST) Cubicin, Pfizer's (PFE) Zyvox and Wyeth's (WYE) Tygacil. The drug will also have to fight off competition from pipeline candidates such as Johnson & Johnson's (JNJ) ceftobiprole and Forest Laboratories' (FRX) ceftaroline. We estimate an initial slow sales ramp of Vibativ.

The randomized, double-blind trial compared ceftaroline with ceftriaxone in hospitalized adult patients with moderate to severe CAP. Following both the trials, it was found that patients treated with ceftaroline demonstrated a better cure rate (84.3%) compared to those treated with ceftriaxone (77.7%). In addition, the overall microbiological response rate in the microbiologically evaluable (ME) population was 87% for ceftaroline and 81% for ceftriaxone, while in the microbiological modified intent-to-treat (MITT) population it was 84.8% for ceftaroline and 80.4% for ceftriaxone. 

Based on the positive result, Forest expects to file a New Drug Application (NDA) with the US Food and Drug Administration (FDA) for ceftaroline for the treatment of both cSSSI and CAP by year end.

Earlier, in August, Forest entered into a deal with AstraZeneca (AZN) for ceftaroline. The contract involves co-development and commercialization of the drug in all markets other than the U.S. , Canada and Japan . We believe the deal to be quite beneficial for Forest as the company will receive substantial funds from its partner through signing fee, royalties from sales and payments tied to certain specific sales milestones.

On approval, ceftaroline will have to face tough competition from several players especially from Pfizer’s (PFE) Zyvox and Wyeth’s (WYE) Tygacil. The latest drug to get FDA approval for the treatment of infection caused by gram-positive bacteria is Theravance’s (THRX) Vibativ. There are many pipeline candidates as well, including Johnson & Johnson’s (JNJ) ceftobiprole.

We are concerned about longer-term growth of Forest, especially towards the beginning of the next decade when Lexapro, which accounts for over half of the company’s top line, gets exposed to generic competition. That puts a lot of pressure on the pipeline to come through.

Investors can find such funds by checking out the entire list of the Zacks #1 Rank Income Equity Funds.

3 Strong Samples

Azzad Ethical Income (AEIFX) seeks current income and capital with long-term capital appreciation as a secondary consideration.

The fund normally invests at least 80% of assets in equity securities of dividend paying companies. It may invest in foreign securities and acceptable fixed income bank deposits or securities.

Aluminum Corp of China Ltd. (ACH), Wyeth (WYE) and Buckle Inc. (BKE) are among the fund’s key holdings.

Pioneer Equity Income A (PEQIX) was incepted in July 1990. The investment seeks current income and long-term growth of capital.

The fund invests at least 80% of total assets in income producing equity securities of U.S. The remainder of the portfolio is invested in debt securities, most of which are expected to be convertible into common stocks.

John A. Carey has been lead manager at the fund since its inception. It has an expense ratio of 1.25%.

FAM Equity-Income (FAMEX) seeks current income as well as long-term capital appreciation.

The fund normally invests at least 80% of assets in income-producing stocks that pay dividends. It distributes dividends and capital gains annually.

Shareholders have to make a minimum initial investment of $2,000 to enter this Zacks#1 Rank (“Strong Buy") fund. It has outstripped total returns of its benchmark index in the last year.

Discover Many More Funds

Learn more about the new Zacks Mutual Fund Rank and discover some of the best market-beating mutual funds by browsing our new mutual funds section. This part of Zacks.com offers a variety of tools, including mutual fund research, a new mutual fund screener, helpful answers to frequently asked questions and quick access to prospectuses and other information.

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward.

During late July, as requested by the FDA, Wyeth submitted additional information regarding the vaccine. Though the FDA was initially expected to respond by Sept 30, 2009, the agency has now pushed back the approval date by 90 days. The agency stated that it will need the extra time to review the additional information, which it considers to be a major amendment.

Prevnar is one of the world’s best selling vaccines. It treats illness caused by 7 strains of pneumococcal bacteria.  The vaccine recorded sales of about $2.7 billion in 2008, and we expect $2.9 billion of sales in 2009. In an effort to build on the success of Prevnar, Wyeth has developed the PV13 for infants and toddlers. The new vaccine will block 13 strains including the original 7. Earlier in July, PV13 received its first marketing approval from the regulators of Chile. The company is currently seeking approval for PV13 in about 50 countries.

It is estimated that PV13 would cover 92% of invasive pneumococcal disease, compared to 81% covered by Prevnar. Wyeth filed for EU approval of PV13 for pediatric use in December 2008. Meanwhile, GlaxoSmithKline (GSK) received European approval for its pediatric 10-valent vaccine, Synflorix (meant for children aged 6 weeks to 2 years), in March 2009, which will compete with Prevnar and PV13. However, GlaxoSmithKline does not have plans to launch the vaccine in the U.S.

Prevnar has witnessed solid sales growth over the past few quarters based on a number of reasons. Due to a recommendation from the Centers for Disease Control (CDC), compliance on a fourth dose for all healthy children under 24 months is over 80%.  Wyeth has been expanding Prevnar growth internationally through National Immunization Programs (NIP) with the governments of several countries.

We expect the list of countries to grow further as a result of the recommendations by the World Health Organization (WHO) to include Prevnar in these programs. We have a Neutral recommendation on the stock.

Chicago, IL – August 11, 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: Sanofi-Aventis (SNY), GlaxoSmithKline (GSK), Novartis (NVS), Merck (MRK) and Wyeth (WYE).

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 Monday’s Analyst Blog:

H1N1 Vaccine from Sanofi?

All countries are waiting eagerly for the H1N1 vaccine since the outbreak of the swine-flu pandemic, which has killed hundreds if not thousands of people worldwide. As the swine influenza A (H1N1) virus is comparatively new, no vaccine is available at present to prevent the infection. In this respect, French pharmaceutical giant Sanofi-Aventis (SNY) has some good news. The company announced that Sanofi Pasteur, the vaccines division of the group has started the human testing of its H1N1 swine flu vaccine and accordingly filed a supplemental license application with the US FDA.

Sanofi-Aventis is the biggest producer of flu medicines. On approval, the vaccine will have the potential to earn robust revenue for the company. Viewing this potential, many companies are already working on similar vaccines like GlaxoSmithKline (GSK) and Novartis (NVS).

The vaccine is expected to be available within a short time from Baxter as the company recently declared the completion of production of the first batch of the vaccine. Glaxo expects to manufacture the vaccine within the next two months. The company already has an order book of more than 290 million doses of the vaccine taking estimated value of the orders to about $1.5 billion. We believe if this momentum of orders from several governments continues, the order value can reach up to $ 3 billion.

The vaccine market has emerged as one of the most lucrative segments for a pharmaceutical company. It is expected to grow at a CAGR of over 13% during 2009-2012. The swine flu pandemic is expected to add further growth to this segment. For the last two years, Gardasil from Merck (MRK) for the treatment of cervical cancer and Wyeth’s (WYE) Prevnar (for illness caused by pneumococcal bacteria) were the top selling vaccines. Now, GSK should be able to corner a significant share of this segment with its H1N1 vaccine.

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The vaccine is expected to be available within a short time from Baxter as the company recently declared the completion of production of the first batch of the vaccine. Glaxo expects to manufacture the vaccine within the next two months. The company already has an order book of more than 290 million doses of the vaccine taking estimated value of the orders to about $1.5 billion. We believe if this momentum of orders from several governments continues, the order value can reach up to $ 3 billion.
 
The vaccine market has emerged as one of the most lucrative segments for a pharmaceutical company. It is expected to grow at a CAGR of over 13% during 2009-2012. The swine flu pandemic is expected to add further growth to this segment. For the last two years, Gardasil from Merck (MRK) for the treatment of cervical cancer and Wyeth’s (WYE) Prevnar (for illness caused by pneumococcal bacteria) were the top selling vaccines. Now, GSK should be able to corner a significant share of this segment with its H1N1 vaccine.

In our view, obesity remains the single largest opportunity for a new pharmaceutical product today. Roughly two-thirds of the U.S. population is overweight. The number is expected to grow to 75% by 2015. There is massive unmet medical need and clear pharmacoeconomic benefits to curtailing the problem.

According to the Journal of Health Affairs, obesity costs Americans $147 billion per year in total medical costs. This is 10% of all healthcare spending, and that number has doubled since 1998. It is likely to continue to surge in the years to come. Obesity is associated with an enormous number of co-morbidities, including high cholesterol, high blood pressure, heart disease, diabetes, joint and muscle pain, as well as depression and fibromyalgia. Studies have shown that reducing body weight by as little as 5% has a meaningful impact on reducing these co-morbidities.

New Products Are Coming...

Several biotechnology companies are working on the next wave of obesity candidates. These include Arena's (ARNA) Lorcaserin, Vivus' (VVUS) Qnexa, Orexigen's (OREX) Contrave and Amylin's (AMLN) pramlintide.

Contrave has completed phase III trials and Orexigen's management is expected to file for approval in early 2010. Qnexa is currently in two phase III programs with an NDA expected around the middle of 2010. Amylin's pramlintide and metreleptin is currently in phase IIb. That gives Arena, with an NDA planned before the end of the year, the first-mover advantage.

Safety Is Key Determinant...

Analysis for Contrave looks similar to lorcaserin in terms of efficacy. Both products offered around 17 - 18 lbs of weight loss after one year of treatment. Vivus' Qnexa, which is a combination of phentermine and topiramate, offered up around 20 lbs of weigh loss after only six months.

We are waiting for the Qnexa 1-year data, but it looks like Qnexa is the most efficacious drug. However, it is important to note that there is clearly more to a weight loss drug than just pure efficacy. If efficacy was the only hurdle, Wyeth's (WYE) Phen-Fen would still be on the market.

Physicians' surveys have clearly showed that safety is the paramount concern. And, with the significant prescriber interest in reducing co-morbidities, tolerability and abuse potential are also high on the list of what makes an overall effective drug for obese patients. Physicians will want to prescribe a drug that they feel has excellent safety and tolerability, with a very good chance in helping the patient lose at least 5% body weight. We are starting to feel more and more like that drug is lorcaserin.

What's Next For Arena?...

The biggest near-term catalyst for Arena is the release of the phase III BLOSSOM data in September 2009. From this program, we will look to confirm the efficacy and safety demonstrated in BLOOM, and finalize the NDA package. Data from the ongoing BLOOM-DM program will be filed as a supplement to the NDA in 2010.

There are several scenarios that could play out in 2010. We expect Arena to file for approval in December 2009, putting the FDA action date in October 2010. Depending on the time of the BLOOM-DM sNDA, the FDA will include the diabetes language in the label in October, approve the drug in October and review the -DM data separately, or delay approval in October while it reviews the full application.

The FDA has not met many PDUFA action dates for NCEs over the past few quarters. Plus, the agency has been very tough on new "neuro-physical" drugs for things like obesity, neuropathic pain and fibromyalgia in the past. So we believe the third scenario is the most likely, meaning a final lorcaserin approval will come in early 2011.

Data from BLOSSOM will most likely provide a small pop to the shares. However, the best chance for a meaningful run in the stock is through the signing of a commercialization partnership. We think this will take place around the middle of 2010 after all three firms -- Arena, Orexigen, and Vivus -- have filed for approval of their respective drugs and potential partners can evenly weight the aspects of each application.

We have said in the past, the best overall drug will secure the best partnership. For the meantime, we are maintaining our Neutral rating on Arena, but we believe there is clearly money to be made on obesity stocks over the next few quarters.

Key Points from Van Dijk's Latest Earnings Assessment

Growth

• Second-quarter total net income expected to be down 28% year-over-year
• Third quarter expected to be down 23.5% year-over-year
• Staples and Health Care only sectors expected to post positive growth in second quarter
• Only 31.5% of reporting companies post earnings growth; 24.0% post sales growth year-over-year

Surprise

• Early results much stronger than expected; the median surprise is 6.7%
• Early positive surprises lead disappointments by 3.9:1 margin
• Surprise ratio above 6:1 for Health Care, Tech, Discretionary and Materials
• Margins the cause, not revenue growth
• 72.7% of firms beat on earnings; 46.3% beat sales estimates

Full-Year Forecast

• Bottom-up estimate for S&P 500 now $60.20 in 2009 versus $60.12 last week.
• S&P 500 now expected to earn $74.42 in 2010 versus $74.41 last week
• Top down estimates $54.19 and $68.48, respectively

Revisions

• Total estimate increases outnumber cuts by almost 4:3 for 2009
• Upward revisions outnumber cuts by almost 7:6 for 2010
• Level of increases small given positive earnings surprises
• For 2009, Staples and Health Care lead; Utilities, Telecom lag
• Tech and Materials also look good for both years

Valuation

• S&P 500 P/E at 16.39x based on 2009 earnings - an earnings yield of 6.1%
• P/E of 13.26x based on 2010 Earnings - an earnings yield of 7.54%
• Earnings yields attractive relative to treasury and corporate bond yields
• Health Care has lowest P/Es of any sector

Total Net Income Growth

• Early results are absolutely bad, but better than expected
• Total net income reported $108.9 billion versus $147.5 billion last year, down 26.2%
• Only 31.5% of all reports show positive year-over-year EPS growth; just 24% show sales growth
• Only Staples and Health Care show positive growth so far
• Remaining firms expected to post 33.4% decline
• Materials and Energy expected to see massive year-over-year declines

Total Net Income Growth

• Early results are absolutely bad, but better than expected
• Total net income reported $108.9 billion versus $147.5 billion last year, down 26.2%
• Only 31.5% of all reports show positive year-over-year EPS growth; just 24% show sales growth
• Only Staples and Health Care show positive growth so far
• Remaining firms expected to post 33.4% decline
• Materials and Energy expected to see massive year-over-year declines

• Revisions ratio for full S&P 500 up to 1.32, from 1.19
• Given the level of positive surprises, the increase in the revisions ratio is very small
• Five sectors are in positive territory; Staples and Health Care lead
• Industrials, Utilities and Telecom continue to see estimates cut
• Ratio of firms with rising-to-falling mean estimates up to 1.26, from 1.02
• Total number of revisions (4-week total) up to 3,467 from 2,560 (35.4%)
• Increases up to 1,972 from 1,389 (42.0%); cuts up to 1,495 from 1,171 (26.8%)
• Total Revisions activity rising rapidly, nearing seasonal peak

So far, this is looking like the story of the dog that didn't bark.

Yes the revisions ratio has edged up, but given the magnitude and number of positive surprises in second-quarter earnings, one would expect a flood of positive estimate revisions. After all the second quarter is part of the full year 2009, so if a company beats the estimates for the quarter, and the analysts do not raise their estimates for the full year by the amount of the beat, then they are implicitly cutting their forecasts for the third and fourth quarters.

There is a very good possibility that this is simply a lag effect in the data, as the pace of reports has really picked up in the last few days. If so, we should see the revisions ratios rise dramatically over the next few weeks. We have seen a dramatic increase in total revisions activity, which is normal for this point in the earnings season, but cuts have increased almost as much as increases have. This is a subtle, but very disturbing sign.

The defensive Staples and Health Care sectors are doing the best on the revision front. However, Materials is about as cyclical a sector as you can think of and it has shown a great improvement in its revisions ratio, apparently in response to the much better-than-expected earnings in the sector. Tech is also having a better than expected earnings season, and in response its revisions ratio is also strong. However, positive surprises are leading disappointments by 9:1 in Materials and by almost 7:1 in Tech. Thus, I find a 2:1 lead over estimate increases for the year that includes those surprises to be a little underwhelming.

Generally, in the Staples and Health Care sectors the analysts tend to be in tight agreement about the expected earnings (small standard deviation around the mean estimate). These sectors, therefore, will not show up on screens of the biggest estimate revisions. On the other hand, it means that even small changes in the mean estimate can be significant, and it is best to look for large numbers of analysts changing their estimates in one direction, rather than for big changes in the mean estimate.

There are a number of companies that are worth mentioning for the estimate revisions activity. In Staples, Hershey (HSY) is looking sweet and Phillip Morris (PM) is smoking, while the grocery stores Supervalu (SVU) and Safeway (SWY) are very weak.

In Health Care, the drug companies like Amgen (AMGN), Bristol-Myers Squibb (BMY) and Wyeth (WYE) seem to have found the right prescription. In Tech, the analysts found Apple (AAPL) to be very tasty. They also like chip stocks such as Texas Instruments (TXN).

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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.

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Then, when changes are discovered, they’re applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock-picking system continues to outperform the market by a nearly 3-to-1 margin.

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Contact:
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Director of Research
312-265-9211
Visit: www.zacks.com

Investors can find such funds by checking out the entire list of the Zacks #1 Rank Income Equity Funds.

3 Solid Samples

Fallen Angels Income (FAINX) was incepted in September 2006. The investment seeks high current income with the potential for capital appreciation.

The fund invests in debt and equity securities that appear to be undervalued at current market prices. It may hold positions in the debt and equity securities of small, medium and large capitalization companies. The fund may also invest in shares of closed-end investment companies, as well as exchange trade funds.

Unit holders have to make a minimum initial investment of $10,000 to enter this Zacks#1 Rank (“Strong Buy") fund. It pays dividends monthly and has distributed $1.3664 per share since its inception.

HighMark Income Plus Allocation A (HMPAX) seeks income and secondarily capital appreciation. The fund strives to add value over the long term through a combination of asset allocation and security selection.

The fund is ideal for investors who wish to allocate their assets conservatively with a fixed-income focus. It normally invests either directly or indirectly in underlying funds, with 55% to 85% of assets in fixed-income securities and 15% to 45% of assets in equity securities.

David Goerz has led the fund since its inception in October 2004. He has 18 years of experience in investment management. The fund has an expense ratio of 0.62%.

Federated Equity Income A (LEIFX) seeks above-average income and capital appreciation. The fund focuses on stocks of companies that have the potential to pay high, growing dividends.

The fund ordinarily selects securities that have a comparatively low volatility in share price relative to the overall equity market, but may also invest in companies that offer superior growth prospects.

AT&T Inc. (T), Johnson & Johnson (JNJ) and Wyeth (WYE) are among the fund’s key holdings.

Discover Many More Funds

Learn more about the new Zacks Mutual Fund Rank and discover some of the best market-beating mutual funds by browsing our new mutual funds section. This part of Zacks.com offers a variety of tools, including mutual fund research, a new mutual fund screener, helpful answers to frequently asked questions and quick access to prospectuses and other information.

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward.

Growth

• Second-quarter total net income expected to be down 28% year-over-year
• Third quarter expected to be down 23.5% year-over-year
• Staples and Health Care only sectors expected to post positive growth in second quarter
• Only 31.5% of reporting companies post earnings growth; 24.0% post sales growth year-over-year

Surprise

• Early results much stronger than expected; the median surprise is 6.7%
• Early positive surprises lead disappointments by 3.9:1 margin
• Surprise ratio above 6:1 for Health Care, Tech, Discretionary and Materials
• Margins the cause, not revenue growth
• 72.7% of firms beat on earnings; 46.3% beat sales estimates

Full-Year Forecast

• Bottom-up estimate for S&P 500 now $60.20 in 2009 versus $60.12 last week.
• S&P 500 now expected to earn $74.42 in 2010 versus $74.41 last week
• Top down estimates $54.19 and $68.48, respectively

Revisions

• Total estimate increases outnumber cuts by almost 4:3 for 2009
• Upward revisions outnumber cuts by almost 7:6 for 2010
• Level of increases small given positive earnings surprises
• For 2009, Staples and Health Care lead; Utilities, Telecom lag
• Tech and Materials also look good for both years

Valuation

• S&P 500 P/E at 16.39x based on 2009 earnings - an earnings yield of 6.1%
• P/E of 13.26x based on 2010 Earnings - an earnings yield of 7.54%
• Earnings yields attractive relative to treasury and corporate bond yields
• Health Care has lowest P/Es of any sector

Total Net Income Growth

• Early results are absolutely bad, but better than expected
• Total net income reported $108.9 billion versus $147.5 billion last year, down 26.2%
• Only 31.5% of all reports show positive year-over-year EPS growth; just 24% show sales growth
• Only Staples and Health Care show positive growth so far
• Remaining firms expected to post 33.4% decline
• Materials and Energy expected to see massive year-over-year declines

Earnings are coming in much better than expected with 2/3rds of the reports in. The source of the positive surprises is coming from much better-than-expected margins (both operating and net) rather than from better-than-expected revenue growth. In other words, companies are succeeding in cost cutting their way, if not to prosperity, then at least much better-than-feared results.

While at the individual company level, this is almost always a positive, it is not necessarily so at the macro level. Cutting costs by reducing head count means that there are fewer jobs and less overall demand in the economy. Still given the weak state of the economy, I suspect most investors will not be too picky about the source of the earnings improvements.

The one exception to this might be in the financials, where the earnings quality is weak due to FASB caving to political pressure and doing away with mark-to-market accounting. On the other hand I have not seen any situations of massive mark-to-market of the liabilities but not the assets like we saw in the first quarter.

The total earnings from the 333 firms that had reported by the Jul 30 close were $108.9 billion, a decline of 26.2% from the $147.5 billion those same firms reported a year ago. However, on a sequential basis, earnings are up 9.3% from the first quarter pace. Actual earnings growth has been a pretty rare commodity with only 105 of the 333 (31.5%) reporting firms actually posting higher net income than a year ago.

Perhaps even more surprising is that only 80 (24.0%) have seen an increase in revenues. Total revenues for the 333 firms are 14.8% below last year. The median EPS growth rate is -16.4%, while those still left to report have a median expected EPS growth rate of 0.9%. While the median EPS growth reported is largely in line with the total net income decline, there is a big difference when it comes to those yet to report. The total net income of the remaining firms is expected to plunge 33.4%, which is far worse than what we have seen so far, as well as very different from the median.

Keep in mind that medians are inherently equally weighted with the growth rate of a relatively small firm counting as much as that of an Exxon Mobil (XOM) or a Wal-Mart (WMT). Also changes in share count can affect EPS growth, but not total net income growth.

Total Net Income Growth (Reported)
Sector	Q4 '08 A	Q1 '09 A	Q2 '09 A	Q3 '09 E	2008 A	2009 E	2010 E
Cons. Stap.	3.39%	-8.88%	14.83%	-4.96%	8.48%	-0.09%	10.24%
Health Care	8.38%	-0.34%	1.74%	-5.38%	12.85%	-2.82%	9.39%
Utilities	5.30%	11.63%	-1.95%	-1.61%	4.03%	-0.99%	5.81%
Financials	-375.49%	-1.75%	-15.40%	-3.65%	-77.06%	59.60%	53.05%
Technology	-21.99%	-26.26%	-16.51%	-21.18%	19.89%	-13.84%	25.92%
Cons. Disc.	-62.43%	-52.97%	-17.97%	-2.68%	-15.58%	-17.55%	42.99%
Telecom	-16.95%	-19.34%	-28.59%	-18.84%	-5.38%	-20.51%	5.35%
Industrials	-21.08%	-36.70%	-33.01%	-37.39%	-0.90%	-32.62%	8.58%
Materials	-79.40%	-72.98%	-61.83%	-72.95%	-11.09%	-62.77%	86.06%
Energy	-30.23%	-58.07%	-66.81%	-62.44%	20.95%	-56.56%	42.12%
S&P	-39.13%	-27.30%	-26.20%	-27.45%	-13.37%	-19.49%	24.39%

Total Net Income (Reported)
Sector	Q2 '09	Q2 '08	Q1 '09	Q1 '08
Health Care	$23,575	$23,172	$23,532	$23,613
Financials	$17,518	$20,706	$18,377	$18,704
Technology	$16,686	$19,985	$13,795	$18,709
Industrials	$14,417	$21,520	$11,804	$18,647
Cons. Stap.	$10,877	$9,472	$8,708	$9,557
Energy	$9,179	$27,657	$9,630	$22,968
Cons. Disc.	$6,543	$7,976	$3,972	$8,446
Telecom	$4,890	$6,848	$5,270	$6,533
Materials	$3,061	$8,020	$2,060	$7,621
Utilities	$2,139	$2,181	$2,447	$2,192
S&P	$108,886	$147,538	$99,594	$136,988

Total Net Income Growth (Not Reported)
Sector	Q4 '08 A	Q1 '09 A	Q2 '09 E	Q3 '09 E	2008 A	2009 E	2010 E
Financials	-13563.08%	-107.65%	11.42%	-137.19%	60.61%	-77.49%	-251.67%
Health Care	6.39%	11.96%	3.66%	4.32%	8.14%	4.12%	8.14%
Cons. Stap.	-0.14%	-4.10%	-6.41%	-9.88%	22.89%	-2.04%	10.69%
Utilities	-3.62%	-6.90%	-10.26%	0.93%	0.73%	-2.65%	10.19%
Telecom	-20.70%	-11.61%	-16.60%	1.92%	-1.40%	-6.81%	21.14%
Industrial	-2.93%	-23.29%	-30.61%	-32.03%	18.11%	-26.98%	-0.02%
Cons. Disc.	-156.26%	-31.03%	-33.24%	-8.68%	-42.17%	23.79%	25.82%
Technology	-9.50%	-28.75%	-39.87%	-28.04%	20.60%	-25.07%	14.72%
Energy	-16.11%	-65.57%	-70.36%	-66.77%	23.67%	-61.91%	52.82%
Materials	-110.23%	-107.47%	-79.48%	-46.38%	-46.11%	-68.19%	175.79%
S&P	-119.60%	-26.73%	-33.35%	-10.44%	-32.16%	13.00%	21.51%

Total Net Income Growth (Combined)
Sector	Q4 '08 A	Q1 '09 A	Q2 '09 E	Q3 '09 E	2008 A	2009 E	2010 E
Cons. Stap.	1.54%	-6.34%	3.93%	-7.44%	15.47%	-1.10%	10.47%
Health Care	8.22%	0.52%	1.90%	-4.65%	12.48%	-2.30%	9.29%
Utilities	-0.63%	-1.45%	-7.42%	0.08%	1.79%	-2.10%	8.73%
Financials	-992.86%	4.20%	-12.52%	244.18%	-106.77%	-639.32%	52.83%
Technology	-18.78%	-26.97%	-22.89%	-22.79%	20.08%	-16.86%	23.20%
Cons. Disc.	-96.07%	-43.30%	-24.67%	-5.11%	-27.35%	-2.99%	35.27%
Telecom	-17.12%	-18.99%	-28.06%	-17.91%	-5.21%	-19.91%	6.16%
Industrials	-19.82%	-35.61%	-32.78%	-36.88%	0.54%	-32.12%	7.76%
Materials	-81.98%	-74.07%	-62.77%	-71.69%	-13.36%	-62.99%	89.17%
Energy	-26.01%	-60.57%	-67.97%	-64.01%	21.87%	-58.39%	45.46%
S&P	-58.59%	-27.16%	-27.98%	-23.52%	-17.96%	-12.93%	23.64%

Second-Quarter EPS Growth (Reported)
Sector	2Q '09 (A)	3Q '09 (E)	2008 (A)	2009 (E)	2010 (E)
Healthcare	9.48%	4.49%	15.79%	5.78%	10.28%
Cons. Stap.	3.75%	-3.61%	9.76%	1.84%	9.33%
Utilities	0.00%	0.99%	5.80%	-0.93%	7.32%
Telecom	-5.97%	-7.07%	1.44%	-4.17%	6.96%
Tech	-18.42%	-21.05%	9.72%	-14.16%	13.75%
Cons. Disc.	-19.75%	-16.67%	-7.49%	-14.57%	10.63%
Industrial	-24.26%	-24.74%	10.44%	-20.22%	12.17%
Materials	-33.33%	-34.62%	-4.62%	-36.45%	13.34%
Financial	-38.46%	-26.92%	-25.65%	-30.00%	8.96%
Energy	-56.52%	-65.79%	21.40%	-58.30%	17.71%
S&P 500	-16.40%	-16.47%	5.40%	-13.00%	10.76%

Second-Quarter EPS Growth (Not Reported)
Sector	2Q '09 (E)	3Q '09 (E)	2008 (A)	2009 (E)	2010 (E)
Tech	16.00%	26.32%	16.98%	17.74%	11.97%
Telecom	5.45%	23.30%	11.23%	-5.20%	4.54%
Utilities	0.85%	8.51%	4.62%	3.99%	7.47%
Cons. Stap.	0.00%	5.19%	9.66%	7.55%	10.15%
Healthcare	-2.56%	5.26%	12.07%	0.00%	10.04%
Financial	-9.49%	-15.59%	17.22%	2.01%	3.80%
Industrial	-14.75%	-7.50%	17.24%	29.41%	6.10%
Materials	-14.81%	17.78%	7.38%	-39.86%	9.39%
Cons. Disc.	-23.81%	-9.52%	11.81%	-1.33%	11.85%
Energy	-66.67%	-13.70%	12.96%	21.19%	9.99%
S&P 500	0.85%	8.51%	4.62%	3.99%	9.85%

Surprises Scorecard:

• Positive surprises are leading disappointments by 3.9:1 margin
• The median surprise is a very strong 6.74%
• All sectors but Telecom have more positive surprises than disappointments
• Materials and Consumer Discretionary the leaders on the surprise front
• Tech, Health Care and Staples also doing better than expected

Second-Quarter Scorecard (Surprises)
Sector	% Reported	Median % Surprise	# Pos Surprise	# Neg Surprise	# Match
Healthcare	79.25%	6.12%	35	5	2
Cons. Stap.	51.22%	6.17%	16	4	1
Utilities	31.43%	3.39%	6	3	2
Telecom	55.56%	0.00%	2	2	1
Tech	64.47%	7.69%	34	5	10
Cons. Disc.	60.49%	11.76%	43	6	0
Industrial	84.48%	5.88%	37	8	4
Materials	82.14%	15.09%	18	2	3
Financial	77.22%	6.12%	36	21	4
Energy	57.50%	3.03%	14	6	3
S&P 500	66.60%	6.74%	241	62	30

The Zacks Revisions Ratio: 2009

• Revisions ratio for full S&P 500 up to 1.32, from 1.19
• Given the level of positive surprises, the increase in the revisions ratio is very small
• Five sectors are in positive territory; Staples and Health Care lead
• Industrials, Utilities and Telecom continue to see estimates cut
• Ratio of firms with rising-to-falling mean estimates up to 1.26, from 1.02
• Total number of revisions (4-week total) up to 3,467 from 2,560 (35.4%)
• Increases up to 1,972 from 1,389 (42.0%); cuts up to 1,495 from 1,171 (26.8%)
• Total Revisions activity rising rapidly, nearing seasonal peak

So far, this is looking like the story of the dog that didn't bark.

Yes the revisions ratio has edged up, but given the magnitude and number of positive surprises in second-quarter earnings, one would expect a flood of positive estimate revisions. After all the second quarter is part of the full year 2009, so if a company beats the estimates for the quarter, and the analysts do not raise their estimates for the full year by the amount of the beat, then they are implicitly cutting their forecasts for the third and fourth quarters.

There is a very good possibility that this is simply a lag effect in the data, as the pace of reports has really picked up in the last few days. If so, we should see the revisions ratios rise dramatically over the next few weeks. We have seen a dramatic increase in total revisions activity, which is normal for this point in the earnings season, but cuts have increased almost as much as increases have. This is a subtle, but very disturbing sign.

The defensive Staples and Health Care sectors are doing the best on the revision front. However, Materials is about as cyclical a sector as you can think of and it has shown a great improvement in its revisions ratio, apparently in response to the much better-than-expected earnings in the sector. Tech is also having a better than expected earnings season, and in response its revisions ratio is also strong. However, positive surprises are leading disappointments by 9:1 in Materials and by almost 7:1 in Tech. Thus, I find a 2:1 lead over estimate increases for the year that includes those surprises to be a little underwhelming.

Generally, in the Staples and Health Care sectors the analysts tend to be in tight agreement about the expected earnings (small standard deviation around the mean estimate). These sectors, therefore, will not show up on screens of the biggest estimate revisions. On the other hand, it means that even small changes in the mean estimate can be significant, and it is best to look for large numbers of analysts changing their estimates in one direction, rather than for big changes in the mean estimate.

There are a number of companies that are worth mentioning for the estimate revisions activity. In Staples, Hershey (HSY) is looking sweet and Phillip Morris (PM) is smoking, while the grocery stores Supervalu (SVU) and Safeway (SWY) are very weak.

In Health Care, the drug companies like Amgen (AMGN), Bristol-Myers Squibb (BMY) and Wyeth (WYE) seem to have found the right prescription. In Tech, the analysts found Apple (AAPL) to be very tasty. They also like chip stocks such as Texas Instruments (TXN)

Sector	Avg. 4wk EPS Change (FY1)	Revisions Ratio	Firms With FY1 EPS Increase	Firms With FY1 EPS Decrease
Consumer Staple	0.18%	3.05	26	12
Health Care	1.52%	2.73	42	10
Materials	2.31%	2.03	19	7
Technology	2.95%	1.98	43	19
Consumer Disc	0.02%	1.54	45	30
Financial Services	-2.89%	0.99	31	45
Energy	-3.85%	0.84	20	19
Industrials	-3.30%	0.69	18	37
Telecom	-1.88%	0.67	2	6
Utilities	0.17%	0.25	12	19
S&P 500	-0.41%	1.32	258	204

The Zacks Revisions Ratio: 2010

• Revisions weaker for 2010 than 2009, but still net positive
• Revisions ratio rises to 1.16 from 1.10
• Tech, Staples showing best estimate momentum for 2010
• Industrials, Telecom and Utilities getting cut
• Ratio of rising to falling mean estimates rises to 0.95 from 0.93
• Total revisions activity past lows for the quarter
• Total number of revisions rises to 2,925 from 2,142 (36.6%)
• Estimate increases up to 1,572 from 1,123 (40.0%); cuts up to 1,353 from 1,019 (32.8%)

Sector	Avg. 4wk EPS Change (FY2)	Revisions Ratio	Firms With FY2 EPS Increase	Firms With FY2 EPS Decrease
Consumer Staples	0.50%	3.96	24	7
Technology	2.73%	2.52	35	24
Materials	0.16%	1.78	15	12
Health Care	-0.17%	1.59	35	17
Consumer Discr	-2.46%	1.43	35	40
Energy	-0.83%	0.81	23	17
Financial Services	-3.84%	0.72	23	47
Industrials	-0.74%	0.58	18	36
Telecom	-2.72%	0.44	2	7
Utilities	-1.10%	0.44	7	18
S&P 500	-0.81%	1.16	217	225

Valuation - Earnings Shares and P/Es

• Health Care expected to take earnings crown from Energy in 2009 and keep it in 2010
• Energy's earnings share expected to plunge to 11.1% from 23.2%
• Financials' 2009 earnings share expected to rise to 11.5% from -1.7% in 2008
• 12-month forward S&P P/E of 14.51 equates to earnings yield of 6.89%. This is very attractive relative to the 10-year T-note yield of 3.48% and somewhat attractive relative to 5.15% A-rated 10-year corporate.
• Health Care the lowest P/E sector for both 2009 and 2010; its market cap share (index weight) is well below its earnings share
• Earnings share, including historical, based on current make up of S&P 500

Earnings Shares and P/Es
Sector	2008%	2009%	2010%	Market Cap %	P/E 2008	P/E 2009	P/E 2010
Technology	16.63%	16.01%	15.95%	19.27%	16.5	19.7	16.0
Health Care	16.13%	18.11%	16.01%	13.43%	11.9	12.2	11.1
Financials	-1.69%	11.46%	14.16%	13.23%	NM	18.9	12.4
Cons Staple	12.91%	14.68%	13.12%	12.87%	14.2	14.4	13.0
Energy	23.17%	11.09%	13.04%	11.61%	7.1	17.2	11.8
Industrials	13.53%	10.56%	9.20%	9.80%	10.3	15.2	14.1
Cons Disc.	6.80%	7.58%	8.30%	9.42%	19.8	20.4	15.1
Utilities	4.56%	5.07%	4.45%	3.84%	12.0	12.4	11.4
Materials	3.79%	1.61%	2.47%	3.28%	12.3	33.3	17.6
Telecom	4.18%	3.84%	3.29%	3.25%	11.1	13.9	13.1
S&P 500	100.00%	100.00%	100.00%	100.00%	14.3	16.4	13.3

Neil Malkin contributed significantly to this report.

Data in this report, unless stated otherwise, is through the close on Thursday 7/30/2009

Zacks Investment Research

Actify is a Business-to-Business concept that will provide comprehensive bundled wireless activation solutions to Brightpoint's retail, enterprise, and on-line customers. With its activation services, the company manages and enables additional subscriptions for network operator partners, facilitating the process of activation in non-traditional channels, including contact centers.

Activation services is one of the three business lines of Brightpoint. Sales & Distribution and Logistic service are the other two segments. According to our view, consolidation of the Activation business becomes very critical for Brightpoint since the company's Sales & Distribution business, which generates more than 90% total revenue, suffered a severe set-back due to the ongoing global macro-economic downturn. The company's second-quarter 2009 revenue projection of $722 million - $727 million is significantly below our expectation of $770 million.

Actify supports its channel customers through automated carrier activation processes, subscription processing, e-business solutions, device distribution, commissions management, and merchandising options. Brightpoint provides wireless activation services to large carriers like AT&T (T), Verizon Wireless (VZ), Sprint-Nextel (S) and T-Mobile.

The company launched a program to provide call center customer support, emission management services, and activation services to Dell Inc. (DELL), Nokia Corp. (NOK) and Wyeth (WYE). We believe Actify will help Brightpoint to generate more business in future. The company has a solid clientele such as Research In Motion (RIMM), HTC Corp, Garmin Ltd. (GRMN) and ZTE, to name a few. We maintain Hold for Brightpoint.

Chicago, IL – July 22, 2009 – Zacks Equity Research highlights VimpelCom (VIP) as the Bull of the Day and Regis Corp. (RGS ) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Merck (MRK), GlaxoSmithKline (GSK) and Wyeth (WYE).

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:

VimpelCom (VIP) is the second largest cellular carrier in Russia with over 25% market share and continued expansion in regions of the Commonwealth of Independent States (CIS), operating GSMbased wireless services.

We are encouraged with VimpelCom's successful sales growth trend and the company's ability to retain subscribers on a recurring basis, even as overall economic factors remain weak.

Additionally, the ongoing expansion initiatives into emerging Asian markets are expected to boost opportunity in wireless. We reiterate our Buy rating while we account for global economic factors, ongoing geopolitical events in Russia (surrounding countries) and weaker local exchange rates against the U.S. dollar which may affect near-term earnings.

Bear of the Day:

We maintain our Sell rating on shares of Regis Corp. (RGS ).

The offerings of common stock and convertible notes will likely strengthen the company's balance sheet and provide management with additional flexibility to withstand the economic recession.

However, these capital raises also significantly dilute current shareholders, and we note that the company's operating environment remains weak. As such, we maintain our Sell rating on the shares at this time.

Latest Posts on the Zacks Analyst Blog:

Merck & Glaxo May See a Boost

Recently, the World Health Organization (WHO) recommended the inclusion of oral rotavirus vaccines in all national immunization programs. This recommendation is likely to boost the sales of Merck’s (MRK) RotaTeq and GlaxoSmithKline’s (GSK) Rotarix vaccines. RotaTeq (approved in US in 2006) and Rotarix (2008 approved) recorded sales of $665 million and $268 million, respectively, last year.

According to the WHO, the infection caused by rotavirus (diarrhea) kills an estimated 1,600 children under the age of 5 every day, mostly in Africa and Asia. International agencies like WHO, UNICEF and GAVI (the Global Alliance for Vaccines and Immunization, a WHO partner) are working towards fighting rotavirus diarrhea and pneumonia together. These two diseases account for more than 35% of child deaths every year, especially in the less developed countries. The effort to tackle pneumonia paves the way for higher sales of Wyeth’s (WYE) Prevnar.

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

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The company plans to become the third largest player (from current seventh) in cancer medicine, which contributed about $2.5 billion of sales in 2008. At present, many of its products under clinical trial are for cancer treatment and six more will be added from the acquisition of Wyeth.

A number of factors such as high unmet need, favorable demographics, increased life expectancy and aging population are responsible for the renewed interest in this area. The anti-cancer drug market value is expected to grow to $85 billion in 2013 from $67 billion in 2008. Leading products for cancer therapy (fifth-largest therapeutic class globally) include MabThera/Rituxan, Herceptin and Avastin (of Roche).

Pfizer intends to exit the areas of heart disease, obesity and bone health in order to commit more resources to the treatment of oncology, pain, inflammation, diabetes, Alzheimer’s and schizophrenia.  These are the areas that the company believes where it will be able to take leading position. Wyeth also has some complementary products and research.

Pfizer has established a separate business unit focused specifically on oncology as management expects this area to offer significant opportunities for future growth.  The Oncology Business Unit has been established to expedite the launches of novel oncology agents and focus research efforts on cancers common in Asia.  While the business unit will have a global focus, they will have a significant interest in emerging markets as Pfizer believes this to be a region that has substantial unmet needs.

We have a Hold recommendation on the stock, based on our reservations whether Wyeth will provide the opportunity to grow revenue in the long-term, the significant reduction in the company’s net cash balance and the substantially lower-than-expected financial guidance for 2009.

Investors can find such funds by checking out the entire list of the Zacks #1 Rank Heath Equity Funds.

3 Strong Samples

Rydex Biotechnology Inv (RYOIX) seeks capital appreciation by investing in equity securities of biotechnology companies that are traded in the United States.

The fund may also engage in futures and options transactions, purchase ADRs and U.S. government securities, and enter into repurchase agreements. It is non-diversified.

Amgen Inc. (AMGN), Gilead Sciences Inc. (GILD) and Celgene Corp. (CELG) are among the fund’s key holdings.

Putnam Global Health Care A (PHSTX) was founded in May 1982 and seeks capital appreciation.

Although the fund can invest in companies of any size, it primarily invests in large and midsized firms, considering characteristics like valuation, financial strength, competitive position, earnings, and cash flow. The fund’s total returns have outperformed its benchmark index in the last 1-, 3- and 5-year periods.

Kelsey Chen has been the lead portfolio manager at the fund since January 2005. The fund has an expense ratio of 0.66%.

Fidelity Select Health Care (FSPHX) seeks capital appreciation by primarily investing in equity securities of companies engaged in the design, manufacture, or sale of products or services used for, or in, connection with health care.

Unit holders need to make a minimum initial investment of $2,500 to enter the fund. Dividends and capital gains are declared in April and December every year.

The fund’s top holdings include Wyeth (WYE), Merck & Co. Inc. (MRK) and Allergan Inc. (AGN).

Discover Many More Funds

Learn more about the new Zacks Mutual Fund Rank and discover some of the best market-beating mutual funds by browsing our new mutual funds section. This part of Zacks.com offers a variety of tools, including mutual fund research, a new mutual fund screener, helpful answers to frequently asked questions and quick access to prospectuses and other information.

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward.

Investors can find such funds by checking out the entire list of the Zacks #1 Rank Health equity Funds.

3 Healthy Choices

Saratoga Health & Biotechnology A (WBRBX) was incepted in July 1999. The investment seeks long-term capital growth. The fund is non-diversified.

The fund utilizes a top-down investment approach focused on long-term economic trends for identifying high quality companies within the healthcare sector and seeks to acquire them at attractive prices.

Mark W. Oelschlager has been lead manager at the fund since November 2005. The fund has topped the total returns of its benchmark index in the last 1-andf 3-year periods.

Fidelity Select Health Care (FSPHX) seeks capital appreciation by primarily investing in equity securities of companies engaged in the design, manufacture, or sale of products or services used for or in connection with health care.

Unit holders need to make a minimum initial investment of $2,500 to enter the fund. Dividends and capital gains are declared in April and December every year.

The fund's top holdings include Wyeth (WYE), Merck & Co. Inc. (MRK) and Allergan Inc. (AGN).

Eaton Vance Worldwide Health Sciences A (ETHSX) seeks long-term capital growth by investing in a worldwide and diversified portfolio of health sciences companies. It currently seeks to meet its objective by investing in Worldwide Health Sciences Portfolio.

The fund normally invests in issuers located in at least three different countries. It may invest in companies with a broad range of market capitalizations, including small firms.

The fund may invest in fixed-income securities of health sciences companies. It has an expense ratio of 1.52%.

Discover Many More Funds

Learn more about the new Zacks Mutual Fund Rank and discover some of the best market-beating mutual funds by browsing our new mutual funds section. This part of Zacks.com offers a variety of tools, including mutual fund research, a new mutual fund screener, helpful answers to frequently asked questions and quick access to prospectuses and other information.

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward.

Investors can find such funds by checking out the entire list of the Zacks #1 Rank Flexible Balanced Funds.

3 Solid Picks

Franklin Real Return A (FRRAX) seeks to achieve total return that exceeds the rate of inflation over an economic cycle.

The fund generally invests a substantial portion of its assets in inflation-protected securities. It also has the flexibility to invest in other sectors of the market to increase real return (total return less inflation) potential and offer greater diversification.

T. Anthony Coffey has been lead manager at the fund since its inception in November 2004. The fund has an expense ratio of 0.90%.

Berwyn Income (BERIX) was incepted in September 1987. The fund is designed for investors, who want a high level of current income while maintaining some potential for capital appreciation.

While the majority of its portfolio is invested in bonds, the fund may invest up to 30% of its assets in dividend-paying common stocks. Its balanced, income-oriented approach affords a greater level of price stability than an all equity portfolio.

Unit holders have to make a minimum initial investment of $3,000 to enter this Zacks#1 Rank ("Strong Buy") fund. The fund distributes dividends and capital gains, if any, annually.

Gabelli ABC (GABCX) seeks total returns that are attractive to investors in various market conditions without excessive risk of capital loss. The fund is non-diversified.

The fund primarily invests in securities of domestic and foreign issuers that are expected to yield opportunities for appreciation or investment income. It may invest in value-oriented common stocks, convertible securities and virtually risk-free U.S. Treasury Bills.

The fund's top holdings include Wyeth (WYE), Schering-Plough Corp. (SGP) and CV Therapeutics Inc. (CVTX). The fund has outperformed the total returns of its benchmark index in the last 1-, 3- and 5-year periods.

Discover Many More Funds

Learn more about the new Zacks Mutual Fund Rank and discover some of the best market-beating mutual funds by browsing our new mutual funds section. This part of Zacks.com offers a variety of tools, including mutual fund research, a new mutual fund screener, helpful answers to frequently asked questions and quick access to prospectuses and other information.

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward.

A synopsis of today's Industry Outlook is presented below. The full article can be read at http://at.zacks.com/?id=2678.

M&A activity remains the wildcard for investment in the sector. We have already seen three significant mega-deals so far in 2009, with Pfizer's $62 billion acquisition of Wyeth (WYE) leading the way. Roche's $46 billion takeover of Genentech and Merck's (MRK) $42 billion acquisition of Schering-Plough (SGP) prove that companies are desperately seeking for ways to grow the top-line while cutting-costs all at the same time.

Big pharmaceutical names are keenly aware of their patient situations, and ARE turning to deal-making for the answer. Most of the industry's largest players are sitting on significant cash balances, and Pfizer, Merck and Roche all proved that capital is available for the top players. We expect more deals to come.

Buy-rated names, including Bristol-Myers (BMY) and Johnson & Johnson (JNJ), are sitting on $9 billion and $14 billion, respectively. Given the difficult cash-raising environment during the second half of 2008, most small to mid-sized biotech firms are eager to partner with pharmaceutical companies in 2009.

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About Zacks 

The performance of the Zacks Rank portfolios shown above for annual and year-to-date periods are the linked monthly total returns (price changes + dividends) of equal weighted hypothetical portfolios, consisting of those stocks with the indicated Zacks Rank, assuming monthly rebalancing and zero transaction costs. These are not the returns of actual portfolios. The hypothetical portfolios were created at the beginning of each month from Jan 1988 forward based on the values of the Zacks Rank available to Zacks' clients before the beginning of each month.

The portfolios created monthly from 1988 through September 2006 exclude ADRS and are comprised of stocks that have the indicated Zacks Rank and were covered by at least two analysts at the time of the stocks inclusion in the portfolio. Starting in October 2006 and going forward, the portfolios are comprised of all stocks with the indicated Zacks Rank and do not exclude ADRs, which is more reflective of the list of stocks that customers will find on the Zacks web sites. 2007 returns are for the period of Jan 1 - Jun 30, 2007. These performance numbers have been audited from 1995 through 2003 by Autschuler Melovan, a division of American Express Financial.

Investors can find such funds by checking out the entire list of the Zacks #1 Rank Flexible Balanced Funds.

3 Fine Samples

Changing Parameters (CPMPX) seeks total return. The fund invests primarily in futures contracts, options on futures contracts, swap contracts, exchange-traded funds ("ETFs") and U.S. Treasury instruments.

The fund is non-diversified. It typically invests in U.S. Treasuries with maturities of any duration, or their derivatives, and the allocation of its investments between equity and fixed income market segments may vary without limitation.

Robert Levenson has been lead manager at the fund since October 2006. The fund has outperformed the total returns of its benchmark index in the last 1-year period.

Gabelli ABC (GABCX) was incepted in May 1993. It seeks to achieve total returns that are attractive to investors in various market conditions without excessive risk of capital loss.

The fund invests in securities of domestic and foreign issuers that provide attractive opportunities for appreciation or investment income. It may invest in value-oriented common stocks, convertible securities and virtually risk-free U.S. Treasury Bills.

Genentech Inc. (DNA), Wyeth (WYE) and Schering-Plough Corp. (SGP) are among the top equity holdings at the fund.

Berwyn Income (BERIX) is designed for investors seeking a high level of current income while maintaining some potential for capital appreciation. The fund's balanced, income-oriented approach affords a greater level of price stability than an all equity portfolio.

While the majority of its portfolio is invested in bonds, Berwyn Income fund may invest up to 30% of its assets in dividend-paying common stocks. The fund distributes dividends and capital gains quarterly

Unit holders have to make a minimum initial investment of $3,000 to enter this Zacks#1 Rank ("Strong Buy") fund. It has an expense ratio of 0. 73%.

Discover Many More Funds

Learn more about the new Zacks Mutual Fund Rank and discover some of the best market-beating mutual funds by browsing our new mutual funds section. This part of Zacks.com offers a variety of tools, including mutual fund research, a new mutual fund screener, helpful answers to frequently asked questions and quick access to prospectuses and other information.

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward.

Investors can find such funds by checking out the entire list of the Zacks #1 Rank Heath Equity Funds.

3 Strong Samples

Rydex Biotechnology Inv (RYOIX) seeks capital appreciation by investing in equity securities of biotechnology companies that are traded in the United States.

The fund may also engage in futures and options transactions, purchase ADRs and U.S. government securities, and enter into repurchase agreements. It is non-diversified.

Amgen Inc. (AMGN), Gilead Sciences Inc. (GILD) and Celgene Corp. (CELG) are among the fund's key holdings.

Putnam Global Health Care A (PHSTX) was incepted in May 1982 and seeks capital appreciation.

Although the fund can invest in companies of any size, it primarily invests in large and midsized firms, considering characteristics like valuation, financial strength, competitive position, earnings, and cash flow. The fund's total returns have outperformed its benchmark index in the last 1-, 3- and 5-year periods.

Kelsey Chen has been the lead portfolio manager at the fund since January 2005. The fund has an expense ratio of 0.66%.

Fidelity Select Health Care (FSPHX) seeks capital appreciation by primarily investing in equity securities of companies engaged in the design, manufacture, or sale of products or services used for or in connection with health care.

Unit holders need to make a minimum initial investment of $2,500 to enter the fund. Dividends and capital gains are declared in April and December every year.

The fund's top holdings include Wyeth (WYE), Merck & Co. Inc. (MRK) and Allergan Inc. (AGN).

Discover Many More Funds

Learn more about the new Zacks Mutual Fund Rank and discover some of the best market-beating mutual funds by browsing our new mutual funds section. This part of Zacks.com offers a variety of tools, including mutual fund research, a new mutual fund screener, helpful answers to frequently asked questions and quick access to prospectuses and other information.

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward.

The fund invests the equity portion of its portfolio primarily to predominantly in mid- and large cap companies, with the remaining portion of its equity portfolio in smaller companies. As of December 2008, its portfolio turnover was 25.23%.

The fund's top holdings include British American Tobacco Plc (BTI), Wyeth (WYE) and Groupe Danone.

Franklin Strategic Income A (FRSTX) seeks high current income with capital appreciation as a secondary consideration. The fund invests at least 65% of its assets in U.S. and foreign debt securities.

The fund may invest substantially all of its assets in high-yield, lower-quality debt securities. It may invest a portion of assets in bank loans and loan participations. The fund has outperformed the annual return of its benchmark index in the last 1-, 3- and 5-year periods.

Christopher J. Molumphy has been the lead manager at the fund since its inception in May 1994. The fund has an expense ratio of 0.91%.

Franklin Gold and Precious Metals A (FKRCX) seeks capital appreciation. Its secondary objective is to provide shareholders with current income through dividends or interest received from its investments.

Unit holders have to make a minimum initial investment of $1,000 to enter the fund that enjoys a Zacks#1 Rank ("Strong Buy"). It distributes dividends and capital gains, if any,annually.

AngloGold Ashanti Ltd. (AU), Newcrest Mining Ltd. and Randgold Resources Ltd. (GOLD) are key holdings at the fund.

Investors can find such funds by checking out the entire list of the Zacks #1 Rank Health Equity Funds list.

3 Healthy Picks

Morgan Stanley Health Sciences A (HCRAX) seeks capital appreciation. The fund normally invests at least 80% of assets in common stocks (including depositary receipts) of health science companies throughout the world.

Michael Nolan has been the lead manager at the fund since June 2008. The fund has an expense ratio of 1.50%. It distributes dividends annually.

The fund's top holdings include Johnson & Johnson (JNJ), Pfizer Inc. (PFE) and Merck & Co. Inc. (MRK).

Fidelity Advisor Health Care A (FACDX) was incepted in September 1996 and seeks capital appreciation. It is non-diversified.

The fund normally invests in common stocks and may invest in securities of foreign and domestic issuers. As of January 2009, its portfolio turnover was 134%. Dividend and capital gains, if any, are distributed annually in December.

Wyeth (WYE), Pfizer Inc. (PFE) and Genentech Inc. (DNA) are among its top holdings.

Kinetics Medical Adv A (KRXAX) seeks long-term growth of capital. The fund primarily invests in common stocks, convertible securities, warrants and other securities such as ADRs and IDRs of U.S. and foreign companies engaged in healthcare industry.

This non-diversified fund has topped its benchmark index in terms of total annual returns in the last 1-, 3- and 5-year periods. Unit holders have to make a minimum initial investment of $2,500 to enter the fund.

Its key holdings include Biogen Idec Inc. (BIIB), Johnson & Johnson (JNJ) and Genzyme Corp. (GENZ)

Discover Many More Funds

Learn more about the new Zacks Mutual Fund Rank and discover some of the best market-beating mutual funds by browsing our new mutual funds section. This part of Zacks.com offers a variety of tools, including mutual fund research, a new mutual fund screener, helpful answers to frequently asked questions and quick access to prospectuses and other information.

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward.

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:

L-3 Quarterly Results Improve

L-3 Communications (LLL) announced results for its 1st quarter of 2009. LLL reported stable 1st quarter 2009 results with sales up 3.7% year-over-year, net income up 5.3% and fully-diluted EPS up 9.9%.

The U.S. Department of Defense accounted for 74% of the company's total revenue in 2008.

Net income for the reported quarter increased 4.8% to $197 million or $1.66 per basic and diluted share, compared to $188 million or $1.51 per diluted share ($1.53 basic) recorded in the prior-year quarter. Net sales increased 3.7% to $3.6 billion compared to $3.5 billion in the year-ago quarter. The growth came through primarily from the C3ISR segment, and in the Specialized Products segment.

Wyeth Shares Tread Water

We currently rate shares of Wyeth (WYE) a Hold with a $47 price target. Our target assumes Pfizer Inc.'s (PFE) shares trade up near $14.50 (currently $13.25) by the expected close date in the third or fourth quarter. At an exchange ratio of 0.985 and combined with the $33 cash per Wyeth share, this equates to roughly $47 per share.

Revenue in 2008 grew 2% and was up 1% excluding the benefit from foreign exchange. EPS was flat from 2007 on lower interest income and a higher tax rate, partially offset by lower SG&A spend. Revenue in the first quarter 2009 was lower than our forecast. This was largely due to a stronger than expected impact from foreign exchange, lower contribution from Alliance revenue as a result of softer U.S. sales of Enbrel and weaker-than-expected international sales of Effexor.

Sanofi Should Buy Biogen

Sanofi-Aventis SA (SNY) posted EPS of EUR5.36 in 2008, an increase of just 2% from 2007. Revenue fell 1% in 2008 as a number of products experienced a significant decline in sales including: Ambien, Tritace and Copaxone.

However, for 2009 we expect revenue growth to return as generic erosion is more than offset by strong growth of Taxotere, Lantus, Avapro and the vaccines business. We expect revenue growth of 6% in 2009 and EPS of EUR5.89 ($3.90), up 10% from 2008.

CBI Pulls an Iron Out of the Fire

Chicago Bridge & Iron (CBI) reported that -- while first quarter 2009 Revenue had dropped by 10.0% to $1.439 billion -- EPS had risen by 15.7%, from 43¢ to 51¢, on a 2.0% drop in the number of shares. Extremely refreshing!

CBI's Gross Profit rose by 14.4% to $144.2 million and the Gross Profit Margin increased from 8.8% to 11.1%. S,G&A Expense declined by 7.4% to $59.2 million; however, it increased as a percent of Sales from 4.4% to 4.6%. Amortization of Intangibles dropped by 4.9% to $5.6 million.

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In a marketplace given to looking forward six months or so, investors did not have enough reason to rejoice as the latest growth data showed GDP fell at an annual rate of 6.1% from January through March.  Nevertheless, investors looking for reassuring signs did find consumer data somewhat comfortable.  And U.S. Federal Reserve's observation that the rate of economic contraction was "somewhat slower" was an added relief.  Markets shrugged off reports suggesting Chrysler's imminent bankruptcy and media reports that at least one-third of the stress-test banks may require additional capital.  At the end of the day, the DJIA closed up 2.1% to its highest since February 9, the tech-heavy NASDAQ was up 2.3% to its highest since November 4, and the S&P up 2.2% to its highest since January 28. 

The NASDAQ has now surged 25% from February 27, for its best two-month run since 2002, and is up 34.9% from its March 9 closing low. The S&P has gained 29.1% and the DJIA 25% from March 9 levels. Also, the CBOE Vix "fear factor" index fell 4.9% in yesterday's trading to 36.08, signaling a less volatile environment. Exxon Mobil (NYSE:XOM) joined IBM (NYSE:IBM) in declaring a dividend hike, lifting its quarterly payout by 5% to 42 cents. Despite flu-related worries, a weak GDP report and a huge inventory build up, crude prices rallied 2.2% to $51. As investors took to risk assumption, the prices of Treasuries continued lower, with the 2-year off 0/32 to a yield of 0.954%, and the 10-year off 26/32 to a yield of 3.107%.

Among the ten S&P sectors, nine moved higher Wednesday, with only telecom stocks heading southwards, with a 0.3% drop.  Financial shares led the advance with a 4.6% gain. On the DJIA, banking stocks also topped the list of advancing issues, with Citigroup (NYSE:C) advancing 8.0%, Bank of America (NYSE:BAC) rising 6.5%, and JP Morgan (NYSE:JPM) recording a 5.2% gain. News that shareholders had stripped Bank of America's (NYSE:BAC) CEO Lewis of his Chairman title failed to dampen spirits, with the stock rising 6% in premarket trading. Last night's First 100 Days news conference revealed Obama anxious to lose the mantle of government involvement with the banking industry, ameliorating fears of a backdoor-entrance into banking nationalization.

Yesterday's earnings news also surprised on the upside with better-than-expected earnings from Aetna (NYSE:AET), Baker Hughes (NYSE:BHI), General Dynamics (NYSE:GD), Hess (NYSE:HES), Starbucks (NASDAQ:SBUX), Time Warner (NYSE:TWX), Visa (NYSE:V), Waste Management (NYSE:WMI), and Wyeth (NYSE:WYE).

Wednesday's economic posts indicated advance US GDP fell a worse-than-expected 6.1% during the first quarter, following the fourth quarter's 6.3% drop.  The decline widely missed the expected 4.7% drop. However, the data revealed businesses cut inventory levels at the fastest pace in the past decade, lifting hopes of a turnaround on future builds. Moreover, the key ingredient of consumer spending rose 2.2%, following a 4.3% fourth quarter drop, signaling resiliency in the segment, which represents 70% of the total economy. Wal-Mart (NYSE:WMT) added to such hopes, noting increased consumer purchasing of non-essentials such as sporting goods and bedding.

The FOMC monthly interest rate decision provided the as-expected news that the Fed plans to keep key interest rate levels at 0.00%-0.25% for an extended period as the fragile recovery gains footing.

Today's data include weekly initial claims, expected to show continued gains, with jobless claims up 5,000 to 645,000 from 640,000 the previous week. March personal income is expected to match the prior month's 0.2% decline; personal spending is expected to show an 0.1% drop versus February's 0.2% advance. The Chicago Purchasing Managers Index is likely to show an increase to 34.0 in April from 31.4.

* Verizon (NYSE:VZ) shares gained Tuesday amid rumors the company is in talks with Apple (NASDAQ:AAPL) about a possible new iPhone and/or Microsoft (NASDAQ:MSFT) on an iPhone competitor

* Dendreon's (NASDAQ:DNDN) drug Provenge was found to increase lives of advanced prostate cancer victims by 4.1 months, increasing the likelihood of FDA approval

* US Steel (NYSE:X) reported a worse-than-expected first quarter loss of $3.84 per share versus expected loss of $1.69 per share. The company slashed its dividend to 5 cents from 30 cents; expects another operating loss in the second quarter; plans 18 million common share offering and $300 million senior notes due 2014; will curb capital spending to $410 million from $740 million expected

* Waste Management (NYSE:WMI) reported first quarter results one penny better than anticipated at 42 cents per share, as revenues fell 14.1% year-over-year to $2.8 billion

* General Dynamics (NYSE:GD) reported first quarter earnings topping estimates by 8 cents at $1.54 per share, as revenues gained 18% year-over-year to $8.26 billion

* Hess (NYSE:HES) reported a first quarter loss of 18 cents per share, beating estimates by 9 cents, as revenues fell 35.8% year-over-year to $6.87 billion

* Wyeth (NYSE:WYE) topped estimates by 7 cents, reporting first quarter results of 95 cents (ex-items), as revenues fell 6% year-over-year to $5.38 billion. The firm reaffirmed its 2009 EPS guidance in the range of $3.33-$3.53; the Street expects EPS of $3.50

* Medco Health Solutions (NYSE:MHS) reported inline quarterly results of 63 cents, as revenues gained 14.4% year-over-year to $14.83 billion. The company expects full-year 2009 results in the range of $2.67-$2.77 versus estimates of $2.73

* Aetna (NYSE:AET) reported its first quarter topped estimates by 3 cents, posting at 96 cents as revenues advanced 10.5% year-over-year to $8.6 billion

* Time Warner (NYSE:TWX) reported first quarter results of 45 cents, 7 cents better than expected, as revenues fell 7% year-over-year to $6.95 billion. The company reaffirmed its 2009 earnings guidance of $1.98 per share versus estimates of $1.96

* Baker Hughes (NYSE:BHI) reported first quarter results of 82 cents, beating estimates by 6 cents as revenues fell 0.1% year-over-year to $2.67 billion

* ArcelorMittal (NYSE:MT) reported a 78 cent first quarter loss, missing estimates by 39 cents, as revenues fell 49.3% year-over-year to $15.12 billion

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

Investors can find such funds by checking out the entire list of the Zacks #1 Rank Health Equity Funds list.

3 Healthy Picks

Alger Health Sciences A (AHSAX) seeks long-term capital appreciation. It primarily invests in equity securities of companies of any market capitalization that are engaged in the health sciences sector. It can leverage, that is, borrow money to buy additional securities.

The value of the portfolio's shares is more volatile than other mutual funds that do not concentrate their investments in one sector. AHSAX offers dividends and capital gains annually. Unit holders have to make a minimum initial investment of $1000 to enter this Zacks#1 Rank ("Strong Buy") fund.

Its top holdings include Optimer Pharmaceuticals Inc. (OPTR), Wyeth (WYE) and Johnson & Johnson (JNJ).

Delaware Healthcare A (DLHAX) seeks maximum long-term capital growth capital appreciation. It invests in U.S. and non-U.S. companies across all market capitalizations. The fund may also invest in companies located in emerging markets.

Liu-Er Chen has been the lead manager at this non-diversified fund since September 2007. The fund has topped its benchmark index by 7.91% in terms of totals returns in the last 1 year.

Eli Lilly & Co. (LLY) Biogen Idec Inc. (BIIB) and Amgen Inc. (AMGN) are among the fund's top holdings.

Touchstone Healthcare & Biotechnology A (THBCX) seeks long-term capital appreciation by primarily investing in stocks of companies that are involved in the healthcare and biotechnology industries.

THBCX focuses on companies with improving fundamentals, superior earnings prospects, reasonable valuations and favorable trading volume and price patterns. It typically invests in the common stocks of medium to large capitalization companies, but may also invest in companies of any size.

The fund may engage in frequent and active trading of securities. It is non-diversified. THBCX offers dividends and capital gains, if any, at least annually.

Discover Many More Funds

Learn more about the new Zacks Mutual Fund Rank and discover some of the best market-beating mutual funds by browsing our new mutual funds section. This part of Zacks.com offers a variety of tools, including mutual fund research, a new mutual fund screener, helpful answers to frequently asked questions and quick access to prospectuses and other information.

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward.

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:

Petrobras Denies CZZ Takeover

Some days ago we wrote about the statement of Petrobras (PBR) regarding the possibility of some kind of partnership with local Brazilian ethanol producers and how this would benefit Cosan Ltd. (CZZ), the biggest ethanol producer in Brazil and one of the biggest in the world.

We also said that there were rumors in the market that Petrobras could even consider the acquisition of Cosan. In the last few days, Cosan's shares soared more than 40%.

Wells Fargo's Pleasant Surprise

Wells Fargo & Co., Inc. (WFC) delivered a pleasant surprise to the markets this morning by announcing that it expects a net income of $3 billion, or $0.55 per share, for 1Q09, as against estimates of earnings of $0.23 cents per share. Revenue projection for the quarter at $20.0 billion was also ahead of the estimates of $18.98 billion. The Company will report its financial results on April 22, 2009.

The bank said that the revenue received a boost from exceptionally strong mortgage banking results and strong capital market activities. It appears that the bank benefited from a larger share in the mortgage markets after acquiring Wachovia, and also from the demise of some smaller players.

Wyeth Offers Limited Update

We currently rate shares of Wyeth (WYE) a Hold with a $49 price target. Our target assumes Pfizer Inc. (PFE) shares trade up near $16 (currently $13.49) by the expected close date in the third or fourth quarter. At an exchange ratio of 0.985 and combined with the $33 cash per Wyeth share, this equates to roughly $49 per share.

Revenue in 2008 grew 2% and was up 1% excluding the benefit from foreign exchange. EPS was flat from 2007 on lower interest income and a higher tax rate, partially offset by lower SG&A spend. Fourth quarter results disappointed due to softness in a number of products and a foreign exchange headwind.

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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

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Here are highlights from Monday's Analyst Blog:

Pfizer Kept at a Hold

At the current level, Pfizer Inc. (PFE) is trading at 7.2x our 2009 EPS estimate of $1.89. We recently downgraded our recommendation on the shares from Buy to Hold based on our reservations that Wyeth (WYE) will provide the opportunity to grow revenue for the long-term, the significant reduction in the company's net cash balance and the substantially lower than expected financial guidance for 2009. Pfizer's decision to cut its dividend also contributed to our downgrade.

Revenue guidance for 2009 of $44 - $46 billion (including negative $3 billion affect from forex) is significantly below our prior expectations of $49 billion. We believe this reflects greater-than-previously-expected weakness in some of the company's key products, including Lipitor, Viagra and Chantix. Pfizer expects EPS in the range of $1.85 - $1.95, including lower interest income and a higher tax rate related to the proposed Wyeth acquisition.

Satyam Up Huge on News Items

Shares of India-based Satyam Computer Services Ltd. (SAY) are up a stunning 50%+ in intra-day trading crossing the $3 mark briefly. The scandal-plagued company's shares had fallen dramatically following the news of the fraud perpetrated by its ex-CEO in December 2008, bringing its market capitalization down to <$500 million, compared to nearly $7 billion back in May, 2008.

Two related news items are apparently sparking the move. First, the Indian authorities announced today that they have arrested three senior executives of the company's finance department in connection with the fraud investigation. (Note: we were all along of the opinion that the scale of fraud committed couldn't have been pulled off just by the ex-CEO and his brother, a co-founder of Satyam).

VNUS Medical - Take Profits

VNUS Medical Technologies Inc. (VNUS) is a leading provider of medical devices for the minimally invasive treatment of Saphenous Vein Reflux Disease. The company possesses a technological advantage over competitors (laser), which has led to significant market share gains in recent quarters. We expect this trend to continue with the release of new products in 2009 and beyond.

However, we are changing our recommendation to Sell on valuation. At the current price, VNUS trades at 3.4x 2009 revenues, considerably higher than the industry mean of 2.5x 2009 revenue. While VNUS is the leader in the niche market it operates, the valuation appears too rich for the current economic environment.

Lincoln Nat'l Pays Down Today

Clearly, the life insurer Lincoln National Corp. (LNC) has seen better days. Currently the company is staving off a liquidity crunch following a string of credit rating agency downgrades and its eligibility for accessing the Treasury Department's commercial-paper funding program, as it will have to pay down $500 million in debt today, with another $375 million in commercial paper debt due in May. Management has stated it can pay both of these obligations in full with internal cash, and has been able to shore up cash through dividend cuts and staff reductions.

To make matters worse, on March 27, 2009, the company withdrew its application to sell debt through the government's Temporary Liquidity Guarantee Program because it no longer believed it qualifies. In addition, like other U.S. insurers, LNC has have applied for assistance under the government's Troubled Asset Relief Program (TARP), though none have yet been approved.

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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

Valuations, however, are attractive, with several of the largest players trading at PEs below 10x, including Pfizer (7x), Eli Lilly (8x), Merck (8x), Sanofi (7x), AstraZeneca (7x) and GlaxoSmithKline (9x) based on our fiscal 2009 estimates. Attractive valuations, along with big dividend yields, should protect investors against significant downside risk even if the economy continues to languish well into the second half of the year.

Additionally, expectations are low. Knowing that most of the companies are not expected to generate significant revenue growth, and that cost-cutting initiatives have generally out-paced guidance and financial modeling, any bit of revenue upside could lead to select out-performance at times during the year.

M&A activity remains the wildcard for investment in the sector. We have already seen three significant deals so far in 2009, with PfizerÕs $62 billion acquisition of Wyeth leading the way. RocheÕs $46 billion takeover of Genentech and MerckÕs $42 acquisition of Schering-Plough prove that companies are desperately seeking for ways to grow the top-line while cutting-costs all at the same time.

Big pharmaceutical names are keenly aware of their patient situations and turning to deal-making for the answer. Most of the industryÕs largest players are sitting on significant cash balances, and Pfizer, Merck, and Roche all proved that capital is available for the top players. We expect more deals to come.

Buy rated names, including Bristol-Myers and Johnson & Johnson, are sitting on $10 billion and $16 billion, respectively. Given the difficult cash-raising environment during the second half of 2008, most small- to mid-sized biotech firms are eager to partner with pharmaceutical companies in 2009.

Asset prices for early-to-mid stage product candidates are very cheap, and pharmaceutical companies are now willing to look at phase I and phase II candidates in 2009 -- something most managements have been hesitant to do in the past. This should create a much better environment for the biotech industry to push higher in 2009 as sentiment on smaller names is starting to turn positive.

OPPORTUNITIES

We have three Buy-rated names within the large-cap space: Bristol-Myers (BMY), Johnson & Johnson (JNJ) and Abbott Laboratories (ABT).

For growth funds, we recommend Bristol and Abbott. Bristol is expected to grow earnings by 12% CAGR through 2012. ThatÕs tops in the industry. Growth is sustainable with a product suite heavy in attractive areas such as biologics, cancer and cardiovascular drugs. The late-stage pipeline includes two very promising candidates: apixaban and saxagliptin -- both of which could be blockbusters if approved.

Growth at Abbott is being driven by blockbuster drugs such as Humira for rheumatoid arthritis and the companyÕs drug-eluting stent, Xience. Abbott has also been highly acquisitive over the past few years, most recently paying $175 million to pick up Ibis Biosciences, a subsidiary of Isis Pharmaceuticals, to enhance the companyÕs position in molecular diagnostics for infectious disease.

Our top-pick for value focused portfolios is Johnson & Johnson. The company is trading around 1X growth (PE/G) and sitting on $16 billion in cash. Much like Abbott, J&J has been highly acquisitive over the past year, most recently paying $1.1 billion to acquire medical product maker Mentor Corp. in December 2008. We expect that J&J will continue to look for acquisition targets in both pharma and medical devices throughout the year.

The big opportunity to out-perform in 2009 is to own the names that are going to be acquired. We have no crystal ball, but names that certainly look attractive and fit the model for a large pharmaceutical company to gobble them up include Biogen-Idec, Amylin Pharmaceuticals, Vertex Pharmaceuticals, Acorda Therapeutics, Osiris Therapeutics, Auxilium Pharmaceuticals, OSI Pharmaceuticals, and Elan Corp. All of these companies have what big pharma is looking for -- novel compounds with potential blockbuster sales levels at reasonable valuations.

Our top-pick for biotech continues to be Biogen-Idec (BIIB). Rituxan and Avonex continue to dominate the top-line, but with Tysabri expectations significantly lowered and a late-stage pipeline that boasts seven phase III candidates, we think Biogen is set to out-perform expectations in the years to come. Biogen also possess an enormous biologic manufacturing footprint -- a key asset that could help attract an interested suitor during the year.

On the small-cap, or riskier front, we would point investors towards Osiris Therapeutics (OSIR) with its phase III stem cell candidate, Prochymal, and Acorda Therapeutics (ACOR), with its phase III multiple sclerosis candidate, Fampridine-SR.

WEAKNESSES

We continue to recommend avoiding names that offer little growth or opportunity for a take-out. These include companies developing "me-too" type drugs on hanging on the hopes and prayers of an FDA approval. Now is not the time to be taking on unnecessary risk. The number of new entity approvals was 24 in 2008, up from 18 in 2007, but the number of rejections and delays was also up.

Throughout 2008 it seemed as though just about every FDA action (PDUFA) date was pushed back and delayed. In 2008 we saw our share of surprise rejections and clinical failures as well. Drug development is a risky business; the success rate on new drugs from preclinical to approval is less than 5%.

Stay away from companies that are all ideas and no assets. Above, we discussed some key measures to hang your hat on: cash, dividends, pipelines and strategic assets like biologic manufacturing. If your target company has none of these, now is probably not the best time to roll the dice.

Run from any company looking for money or looking to raise money in the next year. Interest rates on direct financing loans are going to be through the roof, and stock prices are down so big that share offerings will be painfully dilutive. Unless the company is looking to partner with large-cap pharma, expect out-of-cash small-cap biotech to remain out-of-favor.

Above we listed several names that could potentially be taken out by large-cap pharmaceuticals at some point during the year. In contrast, owning the name doing the acquiring is often a sure-fire way to see quick under-performance. PfizerÕs stock dropped by 25% shortly after announcing the Wyeth acquisition. We would be cautious on three names in particular: Sanofi (SNY), AstraZeneca (AZN) and Eli Lilly (LLY), as these are the three largest players in the sector that are likely to "go shopping."Zacks Investment Research

Last week, Biogen Idec (BIIB) held an R&D Day, highlighting the broad depth of the company's pipeline. In total, Biogen Idec boasts 7 programs in phase III registration programs and 20 other programs in phase II "proof-of-concept" programs. Biogen's development programs span oncology, neurology and cardiovascular disease, and include both small molecules and biologics. In our opinion, it's the best pipeline in biotech.

Phase III / Registration programs include:   

• BG-12: An anti-inflammatory second generation oral fumaric acid molecule that offers a more convenient and potentially neuroprotective treatment option for multiple sclerosis. BG-12 is currently in 2 phase III trials, DEFINE and CONFIRM, with data expected in 2010 and 2011.    
• Ocrelizumab: A second generation humanized monoclonal antibody designed to target CD20 positive B-cells as a treatment for rheumatoid arthritis (RA) in phase III and relapsing / remitting multiple sclerosis (RRMS) in phase II. Biogen is building off its experience with Rituxan, the first-generation anti-CD20 molecule, and collaborating with partners Genentech (DNA) and Roche.    
• BIIB-017: A pegylated interferon beta-1a that offers similar efficacy and tolerability to traditional interferon beta with potentially reduced frequency of administration designed to improve convenience and compliance. Biogen is currently designing a phase III program called ADVANCE for BIIB-017 that will seek to enroll over 1200 patients and follow 2 doses of PEG-IFN b-1a over 2 years.    
• Lixivaptan: A V2 receptor small molecule antagonist that suppresses the action of vasopressin, an antidiuretic hormone, for the potential treatment of hyponatremia and chronic heart failure. The registration program for lixivaptan in hyponatremia includes 3 phase III trials, BALANCE, LIBRA and HARMONY.    
• Adentri: A small molecule adenosine A1 receptor antagonist designed to disrupt tubular glomerular feedback to preserve renal function and increase sodium reabsorption leading to increases in natriuresis and dieresis in patients with heart failure. Biogen is currently in 2 phase III programs with Adentri, TRIDENT and POSIDON, testing an intravenous and oral form of Adentri, respectively, in patients with acute decompensated heart failure and renal insufficiency.    
• Galiximab: A first-in-class monoclonal antibody that targets CD80 to induce antibody dependent mediated cellular cytotoxicity (ADCC) on malignant B cells in patients with follicular lymphomas. Biogen believes that galiximab is synergistic with Rituxan, and has potential uses in relapsed follicular non-Hodgkin's lymphoma (NHL) and Hodgkin's disease. Phase II data shows that galiximab, when added to Rituxan, significantly improves response rate and event-free survival.    
• Lumiliximab: A monoclonal antibody that binds human CD23 at a high affinity with the goal of apoptotic cell death via intrinsic mitochondrial pathway in patients with relapsed chronic lymphocytic leukemia (CLL). Biogen is currently testing lumiliximab in a phase II/III combination program with Rituxan and chemotherapy.

We note that our financial models assume contribution from none of these candidates to the revenue line between now and 2013, but dose assumes all the cost to develop these candidates to commercialization. As biotech development typical