For many biotechnology analysts sizing up stock picks in amarket coming off a down second quarter, the tried and trueissues are again looking good.

Amgen Inc. and Genzyme Corp., two of the few companiesboasting both products and profits and

among the few stocks that felt little or no pain in the sector'ssecond-quarter setback, are still among the most frequentlycited recommendations offered by five analysts. Chiron Corp.,and Immunex Corp. are mentioned as companies with goodproducts warming up in the bullpen.

But a second-quarter drop in biotechnology stocks, reflected ina 20 percent drop in the AMEX Biotechnology Stock Index, hasgiven investors pause for caution. They're looking to hitch theirwagon to a near-term workhorse instead of a distant star.

Centocor's steep slide in April following problems before theFDA "spooked a lot of investment managers," said RobertPeterson, an analyst with Hanifen, Imhoff in Denver. Manymanagers are now looking only at those companies "that haveearnings or at the very least a compound that's in Phase IIItrials." The difficult second quarter also affected analysts, whoPeterson believes have became a bit more skeptical.

The recent decline is partly explained as "a little bit ofdigestion of all the stocks that were offered last year," saidLinda Miller, an analyst with Paine Webber Inc. in New York.Indeed, IPO issues from the huge Class of 1991 have producedsome of the biggest disappointments.

That helps explain why there appears to be little interest inbottom fishing, especially when many midtier stocks appear tobe attractively priced.

One view of the sector's recent decline in that there is lessroom for prices to fall -- and less risk. "A large portion of thegroup is sitting near what I would hope is their low point," saidDenise Gilbert, an analyst with Smith Barney in San Francisco."I'm not expecting any significant weakness."

What nearly everyone agrees on is that the summer should berelatively quiet in terms of major news and announcements ofthe sort that can drive the sector's stocks. "I expect sidewaysprice performance, no major events (and) time to build supportfor the group," Gilbert said.

David Stone, a Cowen & Co. analyst in Boston, said thatinvestors have oversold the health care sector, which could beheaded for an upturn. As the economic recovery gets into gear,investors may again turn their attention away from cyclicalstocks and back to growth issues.

Biotechnology is well-positioned to benefit from the risingpublic and political pressures to contain medical costs, which ismaking it harder for pharmaceutical companies to wring moreprofits from existing products. "The source of growth in healthcare companies will increasingly be in new products," he said.

-- Ray Potter Senior Editor

(c) 1997 American Health Consultants. All rights reserved.