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

After sliding all year, the Nasdaq Biotechnology index steadied in early April, and rose modestly before falling back again last month. The levelling-out reflected good news in the sector, including a couple of large acquisitions and some promising clinical trials results.

In the first acquisition, announced in late April, Shire Pharmaceuticals of Basingstoke, UK, agreed to buy Transkaryotic Therapies for about $1.6 billion. This company, based in Cambridge, Massachusetts, has both late-stage candidates and approved products for treating rare diseases, which will supplement Shire's portfolio. Then GlaxoSmithKline agreed to buy Corixa, an immunotherapeutics company in Seattle, for $300 million. Shares in Transkaryotic and Corixa each rose sharply on the acquisition news.

In mid-May, Cambridge-based Vertex announced positive results in early clinical trials of its drug candidate VX-950 for treating hepatitis C infection. The May meeting of the American Society of Clinical Oncology heard positive news on oncology treatments from several companies including Genentech, whose two drug candidates, Avastin and Herceptin, are showing survival benefits in breast cancer. Although not listed on the Nasdaq, Genentech's exceptional performance helped reinforce investor confidence in biotechnology.

But not all companies fared so well. Shares in OSI Pharmaceuticals of Melville, New York, fell 17% over the two months as investors lost confidence in the approved cancer drug Tarceva, which the company developed with Genentech.