Updated from 11:09 a.m. EST

The victory of George Bush over John Kerry plus the Republican Party's ability to strengthen its hold on Congress ignited a rally in drug and medical device stocks.

The Amex Pharmaceutical Index of 15 stocks jumped 3.4% to 309.2. The index recently hit a 52-week low, stung by a series of single company setbacks, such as

Merck's

(MRK) - Get Report

withdrawal of the arthritis and pain reliever Vioxx, as well as the general Wall Street sentiment that Kerry would impose more restrictions on -- and require more government involvement with -- the brand-name pharmaceutical industry.

A Republican victory "eases the pressure on the outlook for major pharmaceutical stocks," said the early morning headline of a Friedman Billings Ramsey report, issued shortly before Kerry conceded.

"While the fundamental outlook for major drug stocks is not without difficulty, worse, in our view, would have been an administration that believed the industry still had things 'too good,'" the report said. "We believe that the drug group, on the whole, will benefit from a Bush victory."

That's the sort of sentiment that enabled all members of the Amex Index to rise Wednesday except for

Sanofi-Aventis

(SNY) - Get Report

, which was off 39 cents, or 1%, to $36.76.

Some recently battered stocks showed gains. Merck was up 85 cents, or 3.2%, to $27.65 and

King Pharmaceuticals

( KG), which recently said it may have to restate earnings, added 6 cents to $10.63.

Big percentage gainers included

Wyeth

( WYE), which rose $2.90, or 7.4%, to $42.24;

Eli Lilly

(LLY) - Get Report

, which gained $3.13, or 5.7%, to $58.25; and

Schering-Plough

( SGP), which added 92 cents, or 5.3%, to $18.39.

Investors in Big Pharma companies are, no doubt, acting on their belief that Bush will resist the importation of drugs from foreign countries and impose fewer regulations on the health care industry in general. As a report from Goldman Sachs stated before the election: "A Bush victory would preserve the status quo."

The latest Friedman Billings Ramsey report said a Bush victory would, among other things, diminish "substantially" the prospects of price controls and improve the chances for reducing the impact of medical malpractice litigation. "President Bush has stated that he intends to implement the Medicare drug benefit in current form, which prohibits government interference on drug price negotiations," the report said.

Meanwhile, the Amex Biotechnology Index, which includes 17 stocks, did almost as well as the Big Pharma index -- climbing 3.9% to 527.4. Investors in biotech firms seemed to be less worried about a Kerry victory in recent weeks as the index traded closer to its 52-week high of 567.9 than its 52-week low of 434.3.

All members of the index rose Wednesday. Among the biggest biotech companies,

Amgen

(AMGN) - Get Report

rose $2.51, or 4.6%, to $57.50;

Genentech

( DNA) advanced $3.01, or 6.6%, to $48.96; and

Biogen Idec

(BIIB) - Get Report

moved up $1.87, or 3.3%, to $58.95.

Friedman Billings Ramsey said a Bush-backed Medicare program, especially under the current leadership of Dr. Mark McClellan, "has potentially industry-friendly policies" such as the reimbursement for "off-label" uses for cancer drugs. Federal law allows doctors to use a drug for any disease or condition once the drug has been approved for a single disease. But the big question is whether the federal government -- and private insurers who often take their cues from Medicare -- will pay for such off-label uses. Such payments are "more likely to be viewed favorably with McClellan in charge, the investment banking report added.

The drug industry response to the Bush victory was so strong that even

Chiron

( CHIR), which recently said it wouldn't sell any flu vaccine this year due to manufacturing problems, took part in the parade of higher stock prices. Chiron's shares rose 56 cents, or 1.8%, to $32.09.

However, some companies didn't participate in the drug rally. Three companies involved in stem cell research recorded significant hits to their stocks, reflecting Bush's restrictive views on the research.

Geron

(GERN) - Get Report

dropped 66 cents, or 8.3%, to $7.27;

StemCells

(STEM)

lost 61 cents, or 14.9%, to $3.50; and

Aastrom Biosciences

(ASTM)

dropped 22 cents, or 15.8%, to $1.17.