However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.          

There are 295 stocks listed under "drugs" in the CAPS screener, more than a handful of which carry well-respected four- and five-star ratings. Those accolades signal our 170,000 CAPS members' confidence that these stocks will beat the market in the months ahead. Let's see what members are saying about the ones below:


CAPS Rating Today

Recent Price

52-Wk Price Change


5-Yr. Growth Rate

AEterna Zentaris (Nasdaq: AEZS) ***** $1.32 28% NA
Amylin Pharmaceuticals (Nasdaq: AMLN) **** $13.30 6% 27%
Zalicus (Nasdaq: ZLCS) **** $1.18 (28%) NA

Source: Motley Fool CAPS; Yahoo! Finance. NA = not available.

Take one and call me in the morning
The markets may be feeling better about the economy, now that a few reports have offset much of the drumbeat of negativism we've seen. The S&P 500 has risen 8% over last year, but surprisingly, CAPS drug stocks have done even better; the average stock in this category up 16% from the year-ago period.

Those average returns got a boost from performers such as Avanir Pharmaceuticals (Nasdaq: AVNR) and Sequenom (Nasdaq: SQNM), both of which more than doubled year over year. But they were also sandbagged by companies such as Zalicus above and Cell Therapeutics (Nasdaq: CTIC), which lost 61% in the same period.

Don't consider Zalicus a zero just yet, though. It's generating royalties from its pain medication Exalgo, which it licenses in the U.S. to Covidien. The company's R&D agreements with a number of organizations and companies, including Amgen and Novartis, also contribute significant revenue.

More than 95% of the CAPS members who've rated Zalicus believe that its focus on new classes of analgesics for the treatment of both acute and chronic pain will enable it to outperform the markets going forward. You can head over to the Zalicus CAPS page and let us know whether you think this biotech will relieve investors' aches.

Some spring in its step
As good as AEterna Zentaris' returns were, its fortunes have been tied to those of Keryx Pharmaceuticals (Nasdaq: KERX), which licenses AEterna's drug perifosine. Keryx received fast-track status for this cancer therapy from the FDA, along with a second orphan drug status for the drug.

In addition to this short-term catalyst, highly rated CAPS All-Star member tenmiles notes AEterna's promising pipeline:

Debt free oncology drug development company-multiple opportunities in the pipeline-could be a runner down the road with Perifosine approval-like the risk/reward after retracement back to the $1.27 level

Only you can determine whether AEterna Zentaris is right for your portfolio. Add it to your stock watchlist and get all our Foolish news and analysis about it aggregated for you.

Driving a bargain
Is this a case of two strikes, you're out? Amylin Pharmaceuticals, Alkermes, and to a lesser extent Eli Lilly (NYSE: LLY), were done in by the FDA's decision to further delay approval of their once-a-day diabetes treatment Bydureon. While the decision didn't outright kill the drug, the FDA wants more testing done, a move that will set back the treatment by as much as two years. Rival Novo Nordisk will now have a lot more additional time to cement its place in treating diabetics.

Amylin's stock might have been oversold after the announcement, as pchop123 suggests, and analysts have even weighed in that it now offers an attractive valuation, because Bydureon could still become a blockbuster drug. Some even think it can come back within six months.

Let us know on the Amylin Pharmaceuticals CAPS page (or in the comments section below) whether the third time will be the charm.

The ball's in your court
Many factors go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.

Novartis is a Motley Fool Global Gains selection. 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.

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.