Investor Focus: Biotech's 2Q winners and losers

Clinical developments and sales outlooks boosted shares of Vertex Pharmaceuticals and Gilead Sciences Inc. during the quarter, placing them among the top gainers in the biotechnology sector during the second quarter.

Cambridge, Mass.-based Vertex Pharmaceuticals Inc. gained 33 percent during the quarter, driven by a steady stream of positive sentiment for its developing hepatitis C drug candidate telaprevir. Wall Street has been looking at the drug's prospects following data showing it invoked responses in both first-time and repeat treatment patients.

Meanwhile, Foster City, Calif.-based Gilead Sciences Inc. continues to dominate the HIV treatment market, pushing shares up 6 percent for the quarter. Analysts continue to expect increases in revenue throughout the year.

Thousand Oaks, Calif.-based Amgen is up about 10 percent for the quarter and flat for the year, despite persistent negative sentiment on its anemia drug franchise. Sales have fallen on safety concerns and reimbursement changes for its key drug Aranesp, but analysts believe the worst is behind the company. Analysts are also anticipating positive results later in the year for the company's drug denosumab as an osteoporosis and cancer treatment.

Elsewhere, companies including San Carlos, Calif.-based Nektar Therapeutics, plunged on a mix of negative product news. Nektar's stock is down 47 percent as the company still hasn't recovered from the loss of partner Pfizer Inc. and its once highly touted inhaled insulin Exubera. New York-based Pfizer discontinued the product last year, citing lagging sales.

Santa Clara, Calif.-based Affymetrix Inc. shed 41 percent for the quarter as competition and a lower outlook for drug development spending dampen the company's earnings prospects. In April, it lowered its full-year outlook.

New York-based ImClone Systems Inc. is down 12 percent as the company's cancer drug and only marketed product continues its heated competition with Amgen's Vectibix. In May, ImClone reported data showing that adding Erbitux to chemotherapy added only one month to the survival of lung-cancer patients.

The results met the goal of the study, but physicians were left mostly disappointed by the small benefit to patients.

"So far, 2008 has been a year of economic uncertainty with unpredictable swings for stocks in the broader market and within the health care sector," J.P. Morgan analyst Geoffrey Meacham said in a note to investors. "Normally viewed as defensive, health care saw unusually high volatility in big pharma and managed care with big biotech being a relative safe haven."

Analysts are mixed on whether large-cap or midcap stocks will remain the safer investments, but most are urging caution and selective investing for the rest of the year.