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

The holiday season is typically quiet in the markets. Having fallen steadily since February, the Nasdaq biotechnology index flattened in July, and then managed to start climbing from mid-August. The index is up 5.7% over the past eight weeks, but still down 6.8% since the start of the year.

Good second-quarter results from most of the leading biotech companies accounted for much of this gentle growth. Smaller companies with larger gains included Neurochem from Quebec, Canada: its share value rose 88% in just under three weeks after the US Food and Drug Administration issued an 'approvable' letter for its amyloidosis treatment, Kiacta, on 11 August.

Such a letter signals the agency's readiness to approve the drug, provided it meets additional conditions — in this case more information on its efficacy. For a stock to rise on receipt of such a request is a rarity: because it is not a full marketing approval, an approvable letter almost always sends a stock down. When Encysive Pharmaceuticals of Houston, Texas, received such a letter for its heart-disease drug candidate Thelin in July, its share value fell 37% overnight.

Another large gainer this summer was Pozen of Chapel Hill, North Carolina, itself recovering from heavy losses following an approvable letter for migraine drug Trexima in June. Pozen's shares rose 27% at the end of July, when the company responded to the letter, and jumped a further 39% in early August when it announced a deal with AstraZeneca worth $375 million.