This week, Wood Mackenzie, an Edinburgh-based research and consulting firm, reviews recent trends in biotechnology stocks.

Biotech continues to retreat from its high point in February, although the rate of decline has slowed: the Nasdaq biotechnology index is down 4% over the past eight weeks, and 12% since the start of the year. Broader indices are also falling in a volatile market.

Amgen of Thousand Oaks, California, has fared particularly badly, falling 5% over the past eight weeks and 20% so far in 2006. Investors believe there is a growing threat to Amgen's erythropoietin drugs for treating anaemia, which generated $5.8 billion in sales in 2005 — nearly half of total turnover. Rival Roche of Basel, Switzerland, has a second-generation erythropoietin drug, called CERA, which is likely to reach the market in 2007. And the European Union has cleared a path for the approval of generic versions of some biological drugs, including erythropoietin.

Amgen is given more 'weight' in the index than any other company, so its losses are an important factor in the overall drop. But many other listed firms have suffered.

Shares in Anadys Pharmaceuticals of San Diego, California, lost two-thirds of their value after the company suspended a phase I trial of its hepatitis-C treatment and its chief executive announced his forthcoming departure. Stock prices in another San Diego company, Neurocrine Biosciences, dropped by three-quarters after problems with its insomnia drug candidate, indiplon.

In a period of general market anxiety, biotech shares are particularly vulnerable to bad news. Now, strong second-quarter results will be needed to bolster confidence in the sector.