(Editor's Note: Come see Adam Feuerstein at the Money Show in San Francisco. Adam will be speaking to attendees on Friday, Aug. 8, at 2:15 p.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits"); again on a lunch panel on Saturday, Aug. 9, at 12:35 p.m. ("Tech and Biotech: Picks and Pans for 2008 and Beyond"); and again on Sunday, Aug. 10, at 8 a.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits").

The biotech sector will remain a tough spot for investors in the second half of the year.

Not exactly an upbeat start to a column, I realize, but the first six months in biotech-land left many investors with flu-like symptoms. The prognosis for the second half of the year isn't looking much better.

How should investors inoculate themselves from the malaise?

Stick to what's worked so far. With investors still steering clear of adding more risk to their already risk-saturated portfolios, large-cap and profitable biotech stocks -- Celgene ( CELG), Gilead Sciences ( GILD) and Genentech ( DNA) in particular -- have been a safe haven, outperforming their mid- and small-cap peers.

Amgen ( AMGN - Get Report), for all of its well-documented troubles, may have finally attracted the attention of value investors, although there is still risk ahead with the expected data release from pivotal studies of its osteoporosis drug denosumab.

Mid-cap biotech stocks have been a mixed bag, generally trading flat to slightly down through the first six months of the year. Stock-moving catalysts, whether phase III trial data, new drug approvals or stronger-than-expected sales and earnings, are definitely the keys to this group.

Elan ( ELN) and Vertex Pharmaceuticals ( VRTX - Get Report) have been winners so far this year, as has United Therapeutics ( UTHR). Stocks like Onyx Pharmaceuticals ( ONXX), OSI Pharmaceuticals ( OSIP), Cephalon ( CEPH) and BioMarin Pharmaceuticals ( BMRN - Get Report) are all fundamentally strong performers that need one or two events to go their way to make a move back into positive territory for the year.

The outlook for small-cap and development-stage biotech stocks isn't all that bright. This is where investors have lost big money this year, for reasons easily understood. Most of these stocks are too risky, with drugs in development too far from the finish line and requiring too much money for investors to get excited about at present.

Xoma ( XOMA) is down 50% year to date; Array Biopharma ( ARRY) is down 44%, Ariad Pharmaceuticals ( ARIA) is off 43%, Rigel Pharmaceuticals ( RIGL) is off 11%; Seattle Genetics ( SGEN) is down 26%. The list of such names is long. It's going to require a major turnaround in the overall market -- and a growing appetite for biotech risk from investors -- to brighten fortunes here.

So what do you need to know for biotech investing into the second half of the year? Below are two event calendars. Thanks goes to BioMedTracker.com for assistance on both calendars.

First up is a drug approval calendar that I've updated for the remainder of the year.

The most contentious, and therefore most interesting, potential drug approval on the list comes from AMAG Pharmaceuticals ( AMAG - Get Report), which is seeking Food and Drug Administration approval for its intravenous iron therapy, ferumoxytol. As I've noted in the past, there is considerable disagreement over whether the FDA will give ferumoxytol a first-pass approval. That's also reflected in the stock's short interest, with about 40% of outstanding shares currently sold short, according to Capital IQ.

Also noteworthy on this list for many of the same reasons is Vanda Pharmaceuticals ( VNDA) and partner Titan Pharmaceuticals ( TTP), which are seeking FDA approval for schizophrenia drug Fanapta; and Cypress BioScience ( CYPB) and Forest Labs ( FRX), which are seeking approval of milnacipran as a treatment for fibromyalgia.

Potential Drug Approvals -- Second Half 2008
Expected Approval Date Company Drug Indication
Ongoing Cardiome Pharma Kynapid Acute atrial fibrillation
8/30 Introgen Therapeutics Advexin Head and Neck Cancer
6/30 (Europe) Progenics Pharmaceuticals Relistor SC Opioid Induced Constipation
7/21 Theravance Telavancin Skin and Skin-Structure Infections
7/23 Amgen Nplate Immune Thrombocytopenic Purpura (ITP)
7/27 CV Therapeutics Ranexa Angina
7/27 Vanda Pharma/Titan Pharma Fanapta Schizophrenia
8/11 Gilead Sciences Viread Hepatitis B
8/29 Johnson & Johnson Paliperidone palmitate Schizophrenia
8/31 BioDelivery Sciences BEMA Fentanyl Pain
August The Medicines Company Cleviprex Hypertension
9/12 Cephalon Fentora Non-cancer Pain
9/16 Gilead Sciences Aztreonam lysine Cystic Fibrosis
9/15-9/30 Celgene Vidaza Myelodysplastic Syndrome (MDS)
10/4 Johnson & Johnson Ustekinumab Psoriasis
10/14 Lev Pharmaceuticals Cinryze Hereditary angioedema (HAE)
10/19 AMAG Pharmaceuticals Ferumoxytol Anemia Due to Chronic Renal Failure
10/31 Cephalon, Inc. Treanda Non-Hodgkin's Lymphoma (NHL)
10/24-10/31 Cypress Bioscience/Forest Labs Milnacipran Fibromyalgia
12/1 Somaxon Pharmaceuticals Silenor Insomnia
12/8 Targanta Therapeutics Oritavancin Skin and Skin-Structure Infections
10/01-12/31 (Europe) BioMarin Pharmaceutical Kuvan Phenylketonuria (PKU)
11/01-12/31 Dyax DX-88 (Subcutaneous) Hereditary angioedema (HAE)
10/01-12/31 Genzyme Myozyme Pompe disease
Source: BioMedTracker, company reports

I've also compiled a second calendar listing major phase III trials, for which data are expected to be released in the second half of the year.

Yes, Dendreon ( DNDN) is on the list. It's been a relatively quiet 2008 for Dendreon and its prostate cancer vaccine Provenge, but that should change rather dramatically as investors begin to anticipate the results from the interim analysis of the ongoing phase III study.

The key to Amgen's future growth swings heavily on the outcome of the phase III study of its drug denosumab in osteoporosis patients. Look for that data in the third quarter.

OSI Pharmaceuticals is looking to expand use of its lung cancer drug Tarceva; but the stock will also be affected by the outcome of several phase III studies from a potential competitor -- AstraZeneca's ( AZN) Zactima.

Phase III Clinical Trials -- Second Half 2008
Expected Date Range Company Drug Indication
Third Quarter Accentia Biopharmaceuticals Biovaxid Vaccine Non-Hodgkin's Lymphoma
Third Quarter Alexza Pharmaceuticals AZ-004 Schizophrenia
Third Quarter Altus Pharmaceuticals Trizytek Exocrine Pancreatic Insufficiency
Third Quarter Amgen Denosumab Osteoporosis
Third Quarter AstraZeneca Zactima Non-Small Cell Lung Cancer
Third Quarter ImClone Systems Erbitux Non-Small Cell Lung Cancer
Second Half MannKind Technosphere Diabetes Type 1 and 2
Second Half OSI Pharmaceuticals Tarceva Non-Small Cell Lung Cancer
Fourth Quarter SciClone Pharmaceuticals Zadaxin Hepatitis C
Second Half Sciele Pharma PSD502 Premature Ejaculation
Third Quarter Titan Pharmaceuticals Probuphine Drug Addiction
Second Half Cell Therapeutics Pixantrone Non-Hodgkin's Lymphoma
Second Half Biodel Viaject Diabetes
Fourth Quarter Anesiva Adlea Pain Indications
Fourth Quarter Dendreon Provenge Prostate Cancer
Second Half Genentech Avastin Adjuvant colon cancer
Fourth Quarter United Therapeutics oral Remodulin Pulmonary Arterial Hypertension
Fourth Quarter Jazz Pharmaceuticals JZP-6 Fibromyalgia
Fourth Quarter Repros Therapeutics Proellex Uterine Fibroids
Fourth Quarter Vivus Qnexa Obesity
Source: BioMedTracker, company reports

Phase II studies are often the way investors get their first real evidence of a drug's efficacy and potential. As such, the release of phase II data can really move stocks. A full list of phase II trials for the remainder of 2008 is too long to include here, but I'll provide some highlights:
  • Elan and Wyeth (WYE) will be presenting data from their phase II study of bapineuzumab in Alzheimer's patients on July 29 at the International Conference on Alzheimer's Disease in Chicago. Also at this conference, on July 30, Medivation (MDVN) will also present 18-month follow-up data from a phase II study of its drug Dimebon.
  • Final "SVR" or cure rate, data from Vertex Pharmaceuticals' phase II study of telaprevir in treatment-resistant hepatitis C patients, are expected in the fourth quarter.
  • Trastuzumab-DM1 breast cancer data from Genentech and Immunogen (IMGN), in the fourth quarter. Also look for Genentech to make a go/no-go decision on moving this drug into phase III studies as it's an important catalyst for Immunogen.
  • From Cardiome (CRME), new data on oral vernakalant for patients with chronic heart arrhythmias.
  • Can Sangamo BioScience's (SGMO) zinc finger protein drug SB-509 really repair and regenerate nerves in diabetic neuropathy patients? We'll get the first solid indication when phase II data is released towards the end of the year.

Here are some additional not-so-random notes and observations about the performance of the biotech sector, looking back at the first half and ahead to the second:
  • The iShares Nasdaq Biotechnology ETF (IBB) closed the first six months of 2008 down 5%; the Amex Biotech Index was down 7%. That's not great, but it's a better than the broader indices. As I said above, however, digging deep into the performance of biotech stocks reveals a disparity -- large-caps were up, while small- and mid-caps were down, some heavily.
  • Fund flow analysis shows an outflow of investor money coming from biotech in 2008, continuing a 2007 trend, according to data compiled by JP Morgan's biotech analyst Geoffrey Meacham.
  • The biotech sector has raised about $6.5 billion year to date, including proceeds from initial public offerings, follow-on offerings, venture capital and other forms of financing such as partnerships. This financial activity, however, is well off the pace of last year, when the sector raised $30.6 billion total, according to BioCentury Online Intelligence. This reflects the difficult credit environment and means that biotech companies in need of cash are finding it harder to raise money -- something for investors to keep in mind.
  • For every one biotech and drug stock with positive returns in the first half of 2008, there were three such stocks with negative returns, according to Capital IQ.
  • Top-performing stocks in the first half included Iomai (up 531% on a buyout), Idenix Pharmaceuticals (IDNX) (+169%), IDM Pharma (IDMI) (+ 159%). Other notables include Elan (+67%), Vertex Pharma (+44%), Celgene (+38%) and Pharmasset (VRUS) (+39%).

    Medicure (MCU) topped the list of disaster stocks with a 96% loss in the first six months. It wasn't pretty for cancer vaccines stocks Genitope (GTOP) and Favrille (FVRL), down 94% and 95%, respectively.
  • Will mergers and acquisitions give a lift to the biotech sector? Perhaps, but deal flow has been relatively scarce and hasn't really provided any meaningful boost to date.

    The GlaxoSmithKline (GSK) takeout of Sirtris and Takeda's purchase of Millennium Pharmaceuticals made for some great headlines, but neither deal really motivated investors to look for other takeout-worthy biotech stocks. As JP Morgan's Meacham pointed out, the sector barely budged after both deals were announced. In fact, the biotech indices sold off after the Millennium takeover.
  • Hey, there's a presidential election under way, in case you forgot. At the very least, all the talk about reining in drug pricing, fixing the health-care insurance system and the coming of bio-generics are a headline risk and a distraction for investors.
  • The FDA still seems under-staffed and highly sensitive to criticisms that it's approving dangerous drugs. A conservative FDA is not a biotech investor's friend.

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; click here to send him an email.