Tuesday's Health Winners & Losers

Cephalon and Gilead lag bellwether Genentech.
By Elizabeth Trotta ,

Health stocks largely drooped on Tuesday, following the broader markets, as earnings failed to enthuse investors.

Biotech bellwether Genentech added 2% to $73.38 on Tuesday. But many of its peers, such as

Gilead Sciences

(GILD) - Get Report

and

Cephalon

(CEPH)

, lagged. Those stocks were down 1.9% and 1.6%, respectively. Subsequently, the Nasdaq and Amex biotechnology indices were down 1.4% and 1.1%, respectively, on Tuesday.

A winner on Tuesday,

Arthrocare

(ARTC)

, which makes minimally invasive surgery products, saw its shares rise $2.60, or 7.2%, to $39.14 after releasing its quarterly results. The company earned $9.2 million, or 34 cents a share, up from $7.1 million, or 25 cents a share, in the comparable year-ago quarter. Sales increased 23% to $91 million, also beating expectations of analysts polled by Thomson Financial who expected 32 cents a share on $89.3 million in sales.

The company also said it expects profit of between $1.95 and $2, on sales growth of at least 20% for full year 2008. As of Tuesday, analysts polled by Thomson Financial were anticipating $1.93 a share on sales of $382 million.

Also on the uptick, pharmacy benefit manager

Medco Health Solutions

(MHS)

said Tuesday that it has a renewed contract that was set to expire in 2009 with UnitedHealth Group, its largest customer. The companies didn't disclose terms of the new contract, which will last through 2012.

UBS, Citigroup and Jeffries all upgraded the stock to buy. Jeffries upped its price target to $65 from $57 on the news. Medco shares were trading up $3, or 6.3%, to $50.79.

In another analyst action, BMO Capital downgraded

Amylin Pharmaceuticals

(AMLN)

to underperform from market perform a day after the company reported sluggish first-quarter sales for its lead product, diabetes drug Byetta.

Amylin shares were off by 88 cents, or 3.1%, at $27.30 on Tuesday.

Meanwhile,

Genzyme

(GENZ)

cut its forecast Monday after the close on a regulatory delay for 2,000-liter scale Myozyme, for Pompe disease treatment. It has domestic approval for 160-liter scale of the drug and hoped to secure clearance to manufacture the larger scale. But due to differences in the carbohydrate structure of the molecule, the Food and Drug Administration considers them different products and will require a separate biologics license application.

Because of the delay, Genzyme expects Myozyme sales of approximately $275 million to $285 million in 2008, down from its previous estimate of $320 million to $330 million. The company is now predicting an adjusted profit of $3.90 a share for this year, compared with $4 a share previously expected, and GAAP earnings of $2.65 a share, also down 10 cents from its prior guidance.

Genzyme shares fell $2.24, or 3%, to $71.87 on Tuesday. The company is set to report its quarterly results on Wednesday.

Also on Wednesday, look for earnings from pharmas

Schering-Plough

(SGP)

and

GlaxoSmithKline

(GSK) - Get Report

,

Biogen Idec

(BIIB) - Get Report

, medical technology company

Becton Dickinson

>

(BDX) - Get Report

, and health benefits company

WellPoint

(WLP)

.

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