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Team-ups launched some health stocks such as

Kyphon

( KYPH) higher, while earnings tugged at others Friday.

A $3.9 billion merger with

Medtronic

(MDT) - Get Medtronic Plc Report

sent spinal treatment device company Kyphon soaring Friday. Medtronic will pay $71 each for Kyphon's outstanding shares. The deal, which prices Kyphon's stock at a 32% premium over its Thursday closing price, is expected to close in the first calendar quarter of 2008.

Kyphon rocketed $13.32, or 25%, to $67, while Medtronic edged down just 1 cent to $50.90.

Targacept

(TRGT)

, a biopharmaceutical company that was spun out of the research division of R.J. Reynolds Tobacco in 2000, climbed Friday on an alliance with

GlaxoSmithKline

(GSK) - Get GlaxoSmithKline Plc Report

to develop and market drugs that target nicotinic receptors in the brain to treat pain and possibly other indications including Alzheimer's disease and obesity.

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GlaxoSmithKline will pay Targacept $35 million up front, which includes a $15 million investment in the company's stock. In the future, Targacept could receive milestone payments for development and royalties on sales, creating the potential for a grand sum of $1.5 billion.

Targacept added $1.92, or 21%, to $10.92, and GlaxoSmithKline lost $1.28, or 2.5%, to $49.93.

Ending the week in the red,

Sepracor

( SEPR) took a 26% hit Friday after posting

quarterly earnings that came in below expectations. The company also reduced full-year earnings guidance to a range of $1.28 to $1.58 a share, from its previous forecasts of $2.11 in April and $2.25 in January.

Sepracor gave up $9.86, to $28.41. It's a component of the Nasdaq Biotechnology index, which fell 7.51, or 0.98, to 800.65.

AtheroGenics

( AGIX), which focuses on drugs to treat chronic inflammatory diseases, fell 12 cents, or 6.3%, to $1.80.

On Thursday the company reported second-quarter revenue of $30.3 million, compared with $6.3 million in the same period in 2006, and a net loss of $6.1 million, or 16 cents a share, compared with a net loss of $13.1 million, or 33 cents a share, in the year-ago quarter. AtheroGenics updated its full-year 2007 earnings guidance to a loss in the range of $1.35 to $1.45 a share.

Similarly, biopharmaceutical company

Theravance

(THRX)

fell Friday after reporting earnings Thursday. Net loss was $45.1 million, compared with $41.5 million for the same period of 2006 -- a 75-cent-per-share loss compared with a loss of 70 cents a share.

Revenue was $5.3 million vs. $4.8 million for the same period of 2006, due to higher amortization of upfront and milestone payments from the company's partnerships with GlaxoSmithKline and Astellas. Theravance fell $1.84, or 6.3%, to $27.51.