When a $7 a share biotechnology company like Dendreon Corp. (NASDAQ: DNDN) rockets 200% to over $20 a share in one day, like it did yesterday after reporting successful Phase 3 trials of its prostate cancer drug, investors get interested in any biotech stock under $10.

But before investing in these speculative companies, you should have a clear understanding of how this niche operates. Marketing plays an important role in order for the companies to raise capital, therefore if you are interested in betting on a company's future, you should consider the risk factors and odds of success.

As an investor, I hate crowds. If a stock or sector that I like attracts a crowd, I know it is time to leave. As they say, the sheep are usually the buyers at the top.

Now, we need sheep to help drive prices of our holdings higher, but at some point it is time to jettison. Nothing goes up forever, and the best signal I have found over the years is to sell when the sheep are buying.

This year the sheep are being told to buy the biotechnology sector.

That advice may be a bit late in coming. 2008 was a disastrous year, but biotechnology did very well. It is that performance that is now attracting the sheep.

It was hard to get a good a gut feel for what the market was doing today, regardless of the closing bell levels. The day was held up because Tim Geithner delayed by a day the Treasury's bank and financial rescue package. But Wall Street took everyone's word at face value that there was only a one-day delay.

Here are the unofficial closing bell levels:
DJIA: 8,270.87 -9.72 -0.12%
NASDAQ: 1,591.56 -0.15 -0.01%
S&P 500: 869.89 +1.29 +0.15%
Top Analyst Upgrades
Top Analyst Downgrades

Analyst upgrades:

• KeyBanc upgraded Epicor (NASDAQ: EPIC) to Buy from Hold based on several near-term catalysts that include possible convertible debt repurchases, reasonable Q4 results, a proxy fight, and a boost from the Epicor 9 product cycle in 2H09.
  
• KeyBanc also upgraded AK Steel (NYSE: AKS) to Buy from Hold based on relative valuation and said the company could benefit from lower iron ore, scrap natural gas, and labor inputs.
  
• JP Morgan upgraded Lennar (NYSE: LEN) to Overweight from Neutral based on relative valuation.
• Marriott (NYSE: MAR) was upgraded to Buy from Neutral at Goldman.
  
• Raymond James (NYSE: RJF) was raised to Market Perform from Underperform at Wachovia.
  
• Deere (NYSE: DE) was upgraded to Outperform from Market Perform at Bernstein.

Analyst downgrades:

MOST NOTEWORTHY: P.F. Chang's, ViroPharma and CSX Corp were today's noteworthy upgrades:

• Jefferies upgraded shares of P.F. Chang's (NASDAQ: PFCB) to Buy from Hold to reflect the company's capital preservation focus, which they believe will drive a best-in-class free cash flow yield in 2009. Despite upgrading shares, Jefferies lowered their target price to $28 from $31.
  
• Thomas Weisel raised ViroPharma (NASDAQ: VPHM) to Overweight from Market Weight on valuation as they believe the sell-off on the Lev Pharmaceuticals (LEVP) acquisition is unwarranted. The firm raised their target price to $15 from $10.
  
• Merrill upgraded CSX Corp. (NYSE: CSX) to Buy from Neutral based on valuation and improved results.

OTHER UPGRADES:

• Borg-Warner (NYSE: BWA) was upgraded to Outperform from Neutral at Baird.
  
• Credit Suiise raised Walgreen (NYSE: WAG) to Outperform from Neutral.
  
• SunTrust upgraded Arena Resources (NYSE: ARD), Bill Barrett (NYSE: BBG) and Concho Resources (NYSE: CXO) to Buy from Neutral.

MOST NOTEWORTHY: DaVita, Dr. Pepper Snapple Group and Ascent Solar were today's noteworthy initiations:

• Suntrust expects DaVita's (NYSE: DVA) dominant market share to help in commercial contract negotiations and they view potential Medicare reimbursement changes as more of an opportunity than a risk. The firm started shares with a Buy rating and $62 target.
  
• JP Morgan initiated Dr. Pepper Snapple (NYSE: DPS) with an Underweight rating and expects declining free cash flow in 2008, which they note would be the third straight year.
  
• Ascent Solar (NASDAQ: ASTI) was assumed with a Hold rating and $14 target at Jefferies. The firm sees high development risk with the company just beginning to operate its pilot line and commencing initial planning for its first 30 MW commercial line.

OTHER INITIATIONS:

• Stanford initiated ViroPharma (NASDAQ: VPHM) with a Buy rating and $13 target.
  
• Goldman assumed Research in Motion (NASDAQ: RIMM) and Qualcomm (NASDAQ: QCOM) with Buy ratings and targets of $163 and $55, respectively.
• Blue Nile (NASDAQ: NILE) was initiated at Thomas Weisel with an Underweight rating and $44 target.

MOST NOTEWORTHY: Durect, Red Robin Gourmet and ViroPharma were today's noteworthy initiations:

• RBC Capital thinks Durect's (NASDAQ: DRRX) overall portfolio is very attractive and started shares with an Outperform rating and $7 target.
  
• Red Robin Gourmet (NASDAQ: RRGB) was initiated at Jefferies with a Buy rating and $40 target. The firm believes the company has one of the few stable earnings stories in the sector, which should warrant a valuation premium in the current environment.
  
• JMP Securities believes ViroPharma's (NASDAQ: VPHM) valuation reflects several negative scenarios and notes that earnings will likely remain positive and that the company has a strong balance sheet; shares were initiated with an Outperform rating and $12 target.

OTHER INITIATIONS:

• Harmonic (NASDAQ: HLIT) was assumed with an Overweight rating and $14 target at Stephens.
  
• ThinkEquity initiated Intuitive Surgical (NASDAQ: ISRG) with a Buy rating and $360 target.
  
• Broadpoint started Salesforce.com (NYSE: CRM) with a Buy rating.

I was alarmed to read an article on Bloomberg early this Sunday morning about Texas high school football. While I am a recovering football addict, I still jump at the chance to even watch Pop Warner football on TV at 3 AM. But enough with my issues. There is something really serious going on in Texas and internationally with certain drug-resistant staph bacteria. This bacteria, a type that's plagued hospitals for decades, has made its way into the general population in recent years.

Without proper treatment, it can spread to internal organs and bones after reaching the bloodstream, causing organ failure. Texas faces a certain type of this bacteria with the acronym, MRSA.

Bloomberg reports that this MRSA has migrated to playing fields in Texas, particularly on artificial turf. Texas has artificial turf at 18 percent of its high school football stadiums. It also has an MRSA infection rate among players that is 16 times higher than the estimated national average, according to three studies by the Texas Department of State Health Services.

Scary, absolutely. What makes this even more troubling is that there doesn't seem to be an accepted practice by the medical profession to treat MRSA. Doctors have differing opinions as to what drugs to use as first-line treatments. One company that provides such a drug is ViroPharma (NASDAQ: VPHM), a small-cap bio firm with a market cap of around $600 million.

I first noticed and wrote about ViroPharma Incorporated (NASDAQ: VPHM) in July 2006 because the management was taking its own money and buying shares on the open market. The stock price was then hovering at $9 per share.

Given that VPHM's senior executives were already receiving equity as part of their compensation package, the additional purchases really caught my attention. I wrote a blog entry entitled, "Insider Buying Signals Good News Ahead" and, for all you who bought, there has been significant upside on the shares – a double for some of you who wrote to me. As of now, you are still up 50% if you still hold the shares.

ViroPharma is a biotechnology company that, according to its website, "aggressively targets deadly diseases that currently have few alternative treatment options. The company's focus is to develop products for physician
specialists in gastroenterology and transplant medicine."

The management is quite talented and my biotech contacts (on the sell side and in venture capital) think it is one of the most impressive teams out there. The first commercial product, Vanocin, is a "potent" antibiotic used mainly on severely ill patients at hospitals to treat significant bacterial infections of the lower digestive tract. Vanocin is mainly used to treat the colitis caused by "Clostridium difficile and enterocolitis caused by Staphylococcus aureus (including methicillin-resistant strains)". So these are powerful medications.

The company is in the preclinical and clinical stage working on medications to combat viruses including hepatitis C and those that cause the common cold. In August 2004, Schering-Plough exercised its option to license the product -- bringing cash flow into the company now and royalties, potentially, later.

I am following up because I received an email asking why the shares had more recently dropped down to the $14 range from their high of $18.39. It comes down to the earnings release that came out in the end of February. The company disappointed (in relative terms, of course) in the fourth quarter, but, if you read the release, an explanation was provided: "During the quarter and twelve months ended December 31, 2006, net sales of Vancocin decreased 4.6% and increased 32.4%, respectively, compared to the same periods in 2005. The quarter comparison was impacted by the timing of wholesaler purchasing decisions. The twelve months increased primarily due to the impact of price increases. The Company believes, based upon data reported by IMS Health Incorporated, that prescriptions during the quarter and year ended December 31, 2006 exceeded prescriptions in the 2005 periods by 19% and 23.2%, respectively." Bottom line is that VPHM could see a blockbuster year in 2007 and, even more likely, in 2008. This is an impressive company – even still.

Type of stock: A biotech that makes money, focuses on drugs to treat global viruses and infections and is a company with a history of insider buying (always a good sign).

Price target: At $14, this is still a good bet for those looking for a solid biotech. There is always risk, but VPHM
could hit $20 within 12 to 18 months as it continues with strong robust sales and introduces new drugs.

Hilary Kramer is a financial editor and money coach for AOL and an authority on investing. Visit her at www.hilarykramer.com.