Bear Stearns biotech analyst Mark Schoenebaum held a conference call on Tuesday for his institutional investor clients. The topic, despite the market's rebound on Wednesday, was certainly newsworthy: "S.O.S. -- What to do in a crashing market?"

The answer, at least from Schoenebaum and his team: Don't panic. Buy big-cap biotech stocks when they look beaten down. Nibble at mid- and small-caps, but only those with a near-term news event. Stay away from any biotech stock lacking meaningful catalysts and those in need of cash.

It's common-sense stuff, but worth hearing. In fact, it's what I've been hearing from other biotech money managers and analysts for the past several days. A bear market is generally unkind to biotech stocks, so now is the time to avoid taking on unnecessary risk while being opportunistic about picking up high-quality stocks on temporary sale.

"In this market environment, investors turn to real companies -- companies with real profits, growth and tangible assets," says one biotech hedge fund manager with $700 million under his control. In contrast, he's dismissive of most small-caps, calling them "speculative, money-losing crap."

"Those are the kinds of stocks that are getting killed in this market because right now, they're just a piece of paper," he adds.

No surprise, but when I asked professional biotech investors which stocks they're comfortable owning or looking to buy today, I hear the sector's A-team roster repeated:

Genentech

(DNA)

,

Gilead Sciences

(GILD) - Get Report

,

Genzyme

(GENZ)

,

Celgene

(CELG) - Get Report

and

Biogen Idec

(BIIB) - Get Report

.

Amgen

(AMGN) - Get Report

i s noticeably absent from the list - there's still too much risk and uncertainty despite the fact that the stock's worst days could be behind it.

Among mid-caps, I'm hearing interest in

Cephalon

(CEPH)

,

Onyx Pharmaceuticals

(ONXX)

and

BioMarin

(BMRN) - Get Report

. All of those are a bit different, but they're all well established, profitable or near profitable, and have good top-line growth stories.

High-quality biotech companies should be relatively recession proof. People still get sick and need drugs, even in an economic downturn. So, what you have to worry about with stocks like these is mainly general market risk, which can be managed.

Don't get me wrong, institutional investors aren't rushing to buy these biotech stocks, or others, at any price. Biotech stocks are outperforming the broader market, but that's not saying much. Perhaps it's best to say that biotech is treading water, while financial and retail stocks are drowning.

A couple of Bear Stearns' healthcare traders were on Tuesday's conference call, and the words they kept repeating to describe the mood of biotech investors were "conservative," "uncertainty," and "nervous." They're not seeing a ton of new money flowing into biotech, or healthcare in general, as a defensive play. Experienced biotech investors are active but cautious, they said.

Turning to some company updates:

Cardiome

(CRME)

President Doug Janzen told me Tuesday that he and the rest of the company are stumped as to why the FDA has delayed an approval decision for its heart drug Kynapid (formerly known as IV vernakalant.)

"We were told by the FDA to expect a decision by 5 pm

Washington D.C. time, but then late that afternoon they called to say they weren't able to take action," says Janzen, adding that regulators gave no explanation for the delay.

Janzen says there was nothing in previous communications with the FDA to suggest a problem and that discussions for the Kynapid label were ongoing. Recall that an FDA advisory panel voted in December to recommend the drug's approval as a treat for acute atrial fibrillation.

"We were sitting around with champagne on ice," Janzen adds.

Under its own regulations, the FDA has one week past the Jan. 19 deadline to either issue an approval decision for Kynapid or announce a formal delay in the review process.

The timing and uncertainty around Kynapid approval delay could not have come at a worse time. The stock fell on Tuesday, but did rebound 4% on Wednesday to $7.02.

Advanced Life Sciences

(ADLS)

is another company weighed down with uncertainty. Positive phase III trials for its antibiotic cethromycin should be leading the way towards an FDA filing and a partnership.

But both catalysts are on hold for now until the FDA provides more clarity on appropriate trial design and endpoints necessary to garner approval for community-acquiired pneumonia -- the indication that Advanced Life Sciences is seeking for cethromycin.

On a conference call Tuesday, Advanced Life Sciences reiterated its belief that the cethromycin trials, as designed, provide the clinical data to support approval. But the company will delay an FDA filing until after the agency convenes an advisory committee meeting April 1-2 to discuss these issues. If the panel doesn't recommend anything that fundamentally alters the regulatory picture, Advanced Life Sciences says it could file cethromycin in the latter half of the second quarter.

Partnership negotiations are ongoing, but the company also doesn't expect to strike a deal until the after the FDA meeting.

Advanced Life Sciences closed Wednesday up a penny to 81 cents. The stock fell 44% Friday to 84 cents on a Lazard analyst downgrade related to the uncertainty over cethromycin's fate.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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