The across-the-board rise in biotech stocks last year may begood reason for investors to anticipate some correction and tochoose their 1992 investments carefully.

"Biotech will continue to be volatile by nature of the largeelement of psychology in these stocks," said Cowen & Co.analyst David Stone. "If people have a warm, fuzzy feeling, thestocks will go higher; if they have a queasy feeling, the stockswill go down. The former would be more due to people'sexpectations of a good stock market background -- low interestrates, low inflation, a presidential election year."

Biotech will be among the few growth stock opportunities thisyear, said Stone. "With a slow recovery, there will be only alittle shift into consumer cyclicals. So there should be a goodtail wind for the biotech group."

But the "almost indiscriminate" gains of 1991 have madeMerrill Lynch analyst Stuart Weisbrod fairly bearish for thenear term, and he predicts a "flight to quality" in the first halfof the year.

BioWorld asked four analysts for their top biotech stock picksfor 1992.

Stone recommends Amgen Inc. (NASDAQ:AMGN) and GenzymeCorp. (NASDAQ:GENZ) based on earnings. He rates Genzyme thebest overall investment, based on its attractive price/earningsmultiple and a strong R&D pipeline.

He also picks three earlier-stage companies: rational drugdesign company Vertex Pharmaceuticals Inc. (NASDAQ:VRTX),neuroscience company Cephalon Inc. (NASDAQ:CEPH) andCalifornia Biotechnology Inc. (NASDAQ:CBIO).

"Cal Bio is our sleeper," he said. "The company has two productsin Phase II trials -- Auriculin for kidney conditions andfibroblast growth factor for wound healing -- which will moveinto Phase III this year. It's a stock with a modest $350 millionmarket cap."

Stone also recommends Centocor Inc. (NASDAQ:CNTO) and XomaCorp. (NASDAQ:XOMA) as event-driven stocks. He expects Xomato get one or two products approved early in the year: its E5monoclonal antibody to treat gram-negative sepsis and/or itsCD5 Plus to treat graft-vs.-host disease. He backs Centocor on atrading basis based on the imminent approval of its Centoxinfor sepsis.

Smith Barney's Denise Gilbert picks Centocor, Biogen Inc.(NASDAQ:BGEN), Cygnus Therapeutic Systems Inc.(NASDAQ:CYGN) and Agouron Pharmaceuticals Inc.(NASDAQ:AGPH).

She anticipates 1992 Centoxin sales of $260 million in theUnited States and $350 million worldwide. Gilbert also expectsapproval of Cygnus' nicotine patch early this year and sheexpects the company to share 80 percent of the market --estimated at $400 million to $500 million in the United States -- with Alza Corp. (AMEX:AZA). Agouron is on the leading edgeof computer-aided drug design in Gilbert's opinion. Sherecommends Biogen on a price basis.

Weisbrod's favorite company for 1992 is Immunex. He expectsits Leukine GM-CSF white blood cell stimulator to receive abroad approval that will put it on an equal footing withAmgen's Neupogen G-CSF. His other top recommendations forintermediate-term gains are Biogen and Genzyme.

For those who like earlier-stage companies, Sarah Gordon ofAmerindo Investment Advisors Inc. picks Glycomed Inc.(NASDAQ:GLYC), Alteon Inc. (NASDAQ:ALTN), MagaininPharmaceuticals Inc. (NASDAQ:MAGN), Cygnus, OncogeneScience Inc. (NASDAQ:ONCS) and CellPro Inc. (NASDAQ:CPRO).

While no one can predict broad market trends, "the industryoverall is still undervalued," said Lindsay Rosenwald, chairmanof The Castle Group. "I'm very bullish on a long-term basis. Thisis a real industrial revolution, and great long-term bull marketsoccur in an industrial revolution."

EDITOR'S NOTES

The Patent and Trademark Office delayed its patentannouncements this week. Patent Flash! will appear onMonday.

In a Dec. 30 story about federal biotech activity, some materialwas provided by the Industrial Biotechnology Association.

-- Karen Bernstein BioWorld Staff

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