Valeant Pharmaceuticals' ( VRX) shares rose 2.4% to $17.74 after it announced a partnership with Jazz Pharmaceuticals involving its Xyrem treatment for narcolepsy patients.

Under the deal, Valeant receives Canadian marketing rights to the drug for an upfront payment as well as payments based on future sales in Canada. Xyrem should be available to patients there in mid-2007.

AstraZeneca's ( AZN) shares gained 2.6% to $56.49 after Bear Stearns upgraded the stock to outperform from peer perform with a $64 price target.

Negative trial data on its proposed stroke drug NXY-059 and patent challenges involving reflux drug Nexium and antipsychotic Seroquel are weighing on the stock, but the analyst sees upside in the company's partnership with Bristol-Myers Squibb ( BMY) to help promote and develop two type 2 diabetes drugs.

Stem-cell stocks took a hit Friday after the House of Representatives passed a bill to expand funding of embryonic stem cell research but fell short of the two-thirds vote needed to override a Bush veto.

Shares of StemCells ( STEM) sank 9.3% to $3.04, Aastrom Biosciences ( ASTM) fell 8.2% to $1.34, Viacell ( VIAC) slid 2.7% to $5.70, and Geron ( GERN) sank 2.5% to $8.68.

Shares of Catalyst Pharmaceutical Partners ( CPRX) gained 2% to $4 after the company said it added Dr. Thomas Kosten, a specialist in the treatment of drug addiction, to its scientific advisory board.

Among other health stocks winner Friday were NitroMed ( NTMD), gaining 21.3% to $2.96; Biogen Idec ( BIIB); 1.1% higher to $50.98; Vertex Pharmaceuticals ( VRTX), up 4.1% to $37.54; ZymoGenetics ( ZGEN), rising 8.3% to $16.26; and BioDelivery Sciences International ( BDSI), up 12.6% to $3.04.

Among the losers were Neurochem ( NRMX), falling 2.9% to $17.96; Mylan Laboratories ( MYL), down 1.3% to $20.59; Novogen ( NVGN), sinking 3.7% to $11.82; and SkyePharma ( SKYE), off 1.3% to $4.55.