With earnings season behind us, many investors are wondering which stocks should be queued for a buy in the healthcare market.

On this Industry Focus episode, Motley Fool's Kristine Harjes and contributor Todd Campbell discuss second-quarter earnings winners and losers.

A full transcript follows the video.

Kristine Harjes: Bulls and bears post earnings. This is Industry Focus.

Welcome to Industry Focus, healthcare edition. This is your host Kristine Harjes and I'm here with Motley Fool healthcare analyst Todd Campbell. Today, we're doing a post-earnings pick 'em. We've got earnings season in the rearview, and we thought we'd chat about some stocks that look like buys after their earnings reports and ones that look like sells.

Todd, do you want to kick us off? What's a company that you're feeling bullish on while on the heels of this quarter's earnings?

Todd Campbell: I think this is a great topic for us to be discussing. The market has been a bit wonky lately, this is the perfect opportunity for us to go in there and be able to highlight a couple stories that investors may want to think about to help them stay a bit more longer term focus. From that standpoint, the one name that jumps out at me following earnings is Regeneron (NASDAQ:REGN).

Regeneron has had a lot of news lately -- which I'll get to in a minute -- that supports owning it. You've got to begin a conversation with Regeneron by talking about its drug Eylea. Eylea is a drug that helps restore vision to patients who are suffering from either age-related macular degeneration or diabetic macular edema.

Those are two conditions that are growing, not shrinking, in prevalence because people are living longer, they're getting older, and global wealth is increasing the risk of diabetes. You've got a huge patient population that Eylea markets into and in the second quarter, sales of this drug grew 50% to $993 million.

You've got a $4 billion run rate, up 50% from last year. That's kind of unheard of. Usually you get to a certain point in sales and, say, it's a billion-dollar blockbuster and sales growth tends to peter out and starts to mirror more like how many new cases are being diagnosed annually. That's how the growth works.

As it stands, Eylea continues to grab share at an impressive clip. It's competing against Novartis' Lucentis -- which still has $4 billion in sales of its own -- and off-label use of the drug Avastin.

Harjes: That just shows you how big the market is -- that it can support all of those really popular drugs.

Campbell: Absolutely. Eylea is winning in this battle for Regeneron. Who knows if it becomes a $5 billion drug? I don't know. No one knows, right? Toss some shells up in the air and see where they land.

Harjes: Guidance for its growth seemed to be pretty good, right?

Campbell: Yeah. Not only did they report the stellar sales numbers, but they also said the numbers were so good, and they were looking so good for the drug now that they think revenue is going to grow but 10% to 15% than we thought heading into the year.

Harjes: Heading into the year, the projection was 30% to 35% growth. That's a huge jump from a number that was already pretty big.

Campbell: Right. For a drug that's already racking up big sales, this is not something that you see very often. Obviously, Eylea gives investors a lot of reason for optimism, but you also have this news lately with Praluent, their cholesterol-busting drug, getting approved for a patient population that could be as much as 10 million people. At $14,600 a year, that could be a billion-dollar indication for this company, too.

You've got a lot of different things here that could continue to justify owning the company. For that reason, Regeneron is my favorite pick coming out of earnings. How about you? Is there any company that jumps out at you as being one that investors should be looking at?

Harjes: Yes. I definitely have one in mind. I want to preface it by saying that this was actually a company who had somewhat disappointing earnings. This company is Biogen (NASDAQ:BIIB). Biogen's earnings really were not good. They weren't impressive at all. The share price dropped 20%, it's down 22% in the past month, mostly because of slowing sales of their oral multiple sclerosis drug Tecfidera.

That still brought in $883 million in this past quarter alone. The problem now is that we're seeing this slowdown where, even though the drug is still growing strong in several European countries, we're seeing some challenging pricing in Germany and, potentially even more frightening, we're seeing some patients that have contracted a potentially fatal brain infection called PML while on the drug.

These numbers you're seeing for Tecfidera, the growth rate is down quite a bit from what it used to be. Meanwhile, guidance for the company has been totally slashed. The expected 2015 revenue growth was cut from a projection of 14% to 16% down to 6% to 8%. That is pretty much an indication that these slowing Tecfidera sales numbers aren't just a fluke. This is more of a trend that the company is seeing.

Campbell: Kristine, those are some scary numbers. Are you sure this isn't the bear case?

Harjes: I know. Bear with me. I'm throwing out what the headlines have been, what people have really been focusing on. This is the reason I think it's actually a buy case: You have this huge market overreaction to a drug that's still doing just fine. Particularly, if you look at the broader indication, Biogen is still prominent in multiple sclerosis, which is a huge market. This disease affects approximately 3.2 million people worldwide and it's estimated that 38% of patients worldwide in the multiple sclerosis population use a Biogen product.

They've got new ones coming down the pipeline, and more importantly, they also have plenty of other drugs coming down their pipeline. They've got newly approved hemophilia drugs that are looking to ramp up quickly. I'm also intrigued by their Alzheimer's drug aducanumab that is showing fairly good results in clinical trials.

Again, the share price took a haircut following what people are perceiving as disappointing news about this drug. But if you look at the news, it's still a statistically significant, effective drug that didn't have "as amazing" results as the initial top-line release from a couple months ago. This is still looking to be a really well-performing drug in the really hard-to-reach market of Alzheimer's.

Campbell: I'm going to agree with you on this one because you don't really get an opportunity to buy top-tier companies like Biogen as deeply on sale following earnings as you can right now. You're right. Who's going to really [...] at $3 billion in sales run rate for Tecfidera? Multiple sclerosis drugs have historically been associated with PML; this isn't the first time that you've seen cases like this pop up at times.

Who knows where we're going to go from here? Biogen's working on some longer-lasting formulations of its injection-based drugs. Other companies are developing potential competitive threats, but I see where you're going with this one. I like it.

Harjes: It's a really well-diversified company. It's very well established and a top-notch company that you can now get on sale. I think that's a great buy case right there.

Let's flip this around. What do you think you've seen after earnings that screams to you, "Get out now! Stay away from this drug!" What are you feeling particularly bearish on?

Campbell: I hate to say it because this company is one that I really want to see succeed. I think the product that they've launched had tremendous potential to change the burden that patients have to face. The drug and company I'm talking about is Afrezza and the company is MannKind (NASDAQ:MNKD). MannKind is no stranger to the people who listen to our conversations.

We've talked about this company in the past and coming out of that second quarter and its conference call after I listened to the call, I went through all the questions and answers. I couldn't help but think that they just don't have the traction yet. They're just throwing as much stuff against the wall as they possibly can to get that traction.

In the second quarter, Sanofi, who inked a marketing deal to sell this drug for MannKind, reported that sales of Afrezza were €2 million. That's nothing.

Harjes: For a drug that's expected to be a blockbuster drug.

Campbell: Yeah. Demand for insulin is huge. The diabetes population is huge. This is a multibillion-dollar market, and this is a revolutionary drug in that's delivered via inhalation rather than injection. However, the reality has been that there have been too many hurdles in getting payers to pay for it, too many questions from doctors on how to make sure that people get the testing that they need to before they get on it.

These are all struggles that are, unfortunately, weighing down how quickly this drug is gaining market share. Frankly, as time goes on, I get more and more concerned that Sanofi is going to look at this deal a year from now and say, "It's not worth it to us." As it stands right now, last quarter, the share of MannKind's loss on Afrezza was $12.8 million. They had to borrow that money from Sanofi.

They have some money in the books, but they've got a lot of debt. They've got a drug that's intriguing, but it doesn't seem to be selling. As much as I want to say that MannKind is an interesting stock here, I just can't following these earnings. They don't give me any confidence that their corner has turned.

Harjes: The problem for me with MannKind has always been valuation. They've got a $1.6 billion valuation, but you have to remember that MannKind will only see about one-third of the sales of Afrezza at best. If you crunch some numbers on that, most biotech bads have been occurring in three times peak annual sales of their lead drug.

MannKind gets to keep a third of those sales, which leaves you with a multiple of 1. If you want to work backward from market cap to deduce expectations for peak sales, you're right back at that $1.6 billion valuation estimate for what Afrezza should do. If you look at sales so far, I don't see it. I don't see how this drug is ever going to achieve $1.6 billion in annual sales.

Campbell: Maybe we'll be pleasantly shocked by it, but you're still talking about paying a lot of money. It may seem like a cheap stock. It's a single-digit stock. I can buy it for $4 or $5 a share. It's really not. The market cap is still $1.6 billion and that's really what investors have to remember. You can't just look at the share price. You also have to look at the market cap. Until they can start demonstrating that they're actually moving this to patients and patients are paying for it, then you've got to stay away from this one.

Harjes: I think there are quite a few investors out there that would agree with us considering they've got this massive short interest of almost 50%.

Campbell: What stock is it that makes your bear list today?

Harjes: I'm going to go with one that I've felt bearish on for a while. I think earnings only supported this case even more. I'm going to throw Arena (NASDAQ:ARNA) out there. Arena markets Belviq. It's their only approved drug, and it's an obesity drug. You think about how obesity is a huge problem. If you can find a drug that can help people that are obese to lose weight, of course, it's going to be a blockbuster.

Those were the expectations that were baked into this company. That hasn't been the case so far. This drug isn't really that effective compared to its competition. None of the obesity drugs have been that great. They've all been a bit of a disappointment. When you've got weak performance of the main drug, coupled with pretty high cash burn; I wouldn't buy into this company at this point.

Campbell: There's too many competitors. Everyone thought this was going to be a game-changing drug. This whole class would be game changing. It's a billion dollar market opportunity, and unfortunately a lot of drug developers thought that too. So now you've got all sorts of competition that's hit the market and they're all fighting over crumbs.

Harjes: Exactly. Arena tries to say the once daily formula of Belviq called Belviq XR is currently awaiting submission for FDA approval and the company is saying that it's an easier dosing regimen that could beat out competitors like Orexigen's Contrave. Personally, I'm not seeing it.

Campbell: I agree. I'm not seeing it either. Contrave is the prescription market share leader at this point. I think it's going to come down to whether or not any of these drugs show any cardiovascular benefit over time. Whoever does that will probably end up winning this battle.

Harjes: Those are long-term trials that we're talking about. Those are super expensive.

Campbell: Yeah. You're not going to get those answers next week.

Harjes: I'll also throw out there that Arena's last bit of hope is a drug called APD334. It's in phase 2 for ulcerative colitis. The problem I see with this drug is that it works similarly to Receptos' drug ozanimod. If you recall, Receptos was just bought out by Celgene (NASDAQ: CELG) for $7.2 billion. I think some people are looking at that and thinking that $7.2 billion for Receptos, which makes ozanimod -- Arena has this similar drug; maybe it could be a buyout target.

The thing is, Ozanimod is so far ahead of Arena's drug. It's got other indications that it's already working through. It's in phase 3 for multiple sclerosis, it's in phase 2 for Crohn's disease, and I think that Celgene would've picked up Arena for far cheaper than Receptos if it thought that this drug had any hope. That's not a good sign, either.

Campbell: Right. Especially since Arena will have to compete against Celgene. I don't think anyone really wants to compete against Celgene.

Harjes: That's a great point as well. Todd, who else are you looking at for next earning's season? Is there anyone you've got your eye on, looking for some positive catalyst?

Campbell: I don't know. There are so many names out there that I think offer upside. Celgene is actually one of my favorites. Full disclosure: I happen to belong to it. I think there are a lot of things that could move the needle to grow their sales and profit there. That's one that I would continue to watch if I were an investor.

Harjes: There's a reason that name comes up on this show all the time.

Campbell: Yeah. I think one of the things investors need to remember going forward, especially heading into earnings, is that a lot of these really small-cap plays don't have any revenue yet. They don't have any earnings yet. You're really looking at them telling you what the developments are in their pipelines.

When it comes to earnings reports, you have to pick and choose. Focus on the quality stocks, the big-cap names that you and I mentioned. Try to avoid the tertiary, secondary names, and then always approach this industry with a healthy dose of caution.

Harjes: I think that's excellent advice. I'm also going to remind everybody listening that as always, people on this program may have interests in the stocks that they talk about, and The Motley Fool may have formal recommendations for or against those stocks. So, don't buy or sell anything based solely on what you hear on this program.

Definitely dig in, read those earnings calls, do your research. Remember, we're long-term, buy-and-hold investors. Ultimately, what happens in the course of a single quarter is not likely going to change the game for a given company. The ones we've mentioned today, we think what we've heard in their earnings reviews do paint a certain picture, but, of course, things are prone to change and we always want to take the long-term outlook.

Todd, thank you so much for being here today and giving us this bull case and a bear case and talking with me. I look forward to talking with you next week. Folks, thanks so much for listening and be sure to check back to Fool.com for great Foolish coverage of all your favorite stocks.

Kristine Harjes has no position in any stocks mentioned. Todd Campbell owns shares of Celgene. The Motley Fool recommends and owns shares of Celgene. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.