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NeoPharm ( NEOL) was the best-performing drug stock Tuesday after an independent panel recommended the continuation of a phase III trial using its cintredekin besudotox to treat brain cancer. The decision was significant news in a trial where 160 of about 300 enrolled patients are expected to succumb to their illness by the end of the second quarter of 2006. NeoPham's drug is a recombinant protein composed of a tumor-targeting molecule and a cytotoxic agent and is delivered via catheters placed in areas with microscopic tumor spread or that are at risk of tumor spread. NeoPharm shares were up 49% to $11.81.

Shares of Guidant ( GDT) fell after the company issued disappointing earnings guidance and disclosed the receipt of a warning letter from the Food and Drug Administration. The pacemaker company, which is the subject of two competing takeover offers, said late Friday that fourth-quarter earnings would trail analysts' estimates due to the impact of several high-profile pacemaker malfunctions on consumer tastes. It also said it received a warning letter from the FDA regarding a manufacturing plant in Wisconsin. The letter, which focused on quality control practices, should not result in a material impact on the company's financial results, Guidant said. Recently, the shares were down 3.3% to $64.79.

The developments didn't sway Boston Scientific ( BSX) from its resolve to buy Guidant under the $25 billion takeover offer it proffered last month. A Boston Scientific spokesman told Reuters: "We continue to move forward with our due diligence with the goal of reaching a definitive agreement with Guidant." Boston Scientific's shares were down 2.5% to $25.20 while shares of Johnson & Johnson ( JNJ), another suitor, lost 0.7% to $60.67.

Pfizer ( PFE) said it invested $50 million in Perlegen Sciences, a former Affymetrix ( AFFX) unit that does genomics research. Pfizer bought a 12% stake in the company through the purchase of preferred stock and agreed to buy up to $25 million more if Perlegen goes public in 2006. The two companies have been research partners since December 2002, when Pfizer used Perlegen's DNA sample preparation and other products to discover genes associated with common diseases and identify genetic markers.

Applera's Applied Biosystems ( ABI) agreed to pay $273 million in cash to acquire the research products division of Ambion. The division makes RNA-based reagents for use in research. Applied Biosystems expects the acquisition to be slightly accretive on a non-GAAP basis in fiscal 2007, due to "transition and integration costs," and accretive in fiscal 2008. On a GAAP basis, it is expected to be dilutive in fiscal 2006 and 2007 and possibly break-even or accretive in fiscal 2008.

Bristol-Myers ( BMY) rose after receiving Food and Drug Administration approval for a new drug for rheumatoid arthritis. The New York-based pharmaceutical giant announced the news Friday evening. It will market the drug, abatacept, under the name Orencia. Bristol-Myers says the intravenously administered drug has proven effective in treating test patients with moderate to severe forms of the disease who did not respond to so-called disease modifying anti-rheumatic drugs. In recent trading, the stock rose 1% to $23.16.

Other biotech and health-care stocks trading actively Tuesday included Lipid Sciences ( LIPD), down 9% to $2.29; NutriSystem ( NTRI), down 7.6% to $36.89; Repligen ( RGEN), up 19% to $3.78; Regeneron ( REGN), up 15.6% to $15.90; and eDiets ( DIET), up 10% to $5.90.

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