Amgen Inc. (NASDAQ: AMGN) is having a really good day today. Its shares closed up 12.17% to $60.48 (on a day markets were down in the neighborhood of 2%) after it said late Friday a study on denosumab, a bone-strengthening drug, met its desired results and showed statistically significant improvements over a placebo.

Amgen shares rocketed 17% at some point as denosumab has the potential to become a blockbuster drug, especially with women with postmenopausal osteoporosis, a market that could represent $8 billion and $10 billion by 2010. The strong study results also improve the drug's chances with FDA approval. Analysts just loved the results of the study (although the details won't be out until September), upgrading the shares and their target prices.

To top it off, Amgen reported second-quarter financial results after the close, beating analyst estimates. The biotechnology giant recorded net income of $941 million, or 87 cents a share, lower than last year's period, but excluding acquisition-related and stock-compensation costs, earnings rose to $1.14 a share from $1.13. Revenue rose 1% to $3.76 billion. Analysts forecast profit of $1.02 per share on revenue of $3.58 billion, according to a survey by Thomson Financial. Looking ahead, Amgen raised both its earnings and revenue guidance higher than what Wall Street expected. Analysts, in general, liked these results too.

Not all has been rosy with Amgen lately, as the sales of Aranesp, its anemia treatment and what is considered Amgen's most important product, show. Aranesp sales declined 13% on safety concerns. Sales of Epogen, the older treatment, also declined somewhat. Still the sales of both beat estimates.

Amgen's stock has already been punished for the Aranesp concerns throughout 2007, and has been recovering since, today hitting a 52-week high. Amgen showed better-than-expected sales across all products, even its under-scrutiny anemia drugs; it showed it's not resting and that it can and will recover. Combine that with the strong clinical trial results for denosumab, and the potential is great.

Amgen shares are up about 2.8% in after-hours trading to $62.15.

Drug companies have never liked the FDA. Why should a government agency tell them whether their drugs are safe or effective? The FDA approval process can be a long one, and often new treatments are turned down.

According to The Wall Street Journal, the head of Schering-Plough (NYSE:SGP) believes that an "intensifying focus on safety and a diminished tolerance for side effects at the Food and Drug Administration have dramatically lowered the odds that the drugs would make it to market -- at least not without a lot of extra time and money."

Perhaps if pharmaceutical companies had a better track record for safety, the process would not to be so long. It is not that long ago that the FDA discovered that anti-depressants could lead to suicidal thoughts. More recently the agency warned that anemia treatments including Aranesp, Epogen and Procrit increased the risk of strokes and heart attacks.

Drug company earnings may be hurt by a long FDA approval process, but, without the current system there would likely be an increase in deceased patients.

Douglas A. McIntyre is an editor at 247wallst.com.

Amgen (NASDAQ: AMGN) closed at $44.62 Tuesday.

On 3/13/08, the FDA Oncologic Drugs Advisory Committee (ODAC) is scheduled to review the use of Erythropoiesis stimulation agents, including Aranesp and JNJ's Procrit, to treat chemotherapy induced anemia.

AMGN March option implied volatility is at 51; April is at 41; above its 26-week average of 33 according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

It is interesting to see how one piece of news can have a different impact on two stocks. The news? The Food and Drug Administration found that anemia drugs are tied to increased risks of death and faster-spreading tumors at high doses.

Amgen Inc. (NASDAQ: AMGN) makes Aranesp and Epogen, while Johnson & Johnson (NYSE: JNJ) makes Procrit, all used to help cancer and kidney disease patients overcome anemia. But now the FDA says these drug show greater risks for patients with certain cancers on tumor progression and survival, as well as blood clots. While both companies believe the risks were seen when the drugs were given for unapproved uses, including higher-than-recommended doses, it is possible that following the study, the FDA may recommend to end the use of these drugs for patients whose anemia is caused by cancer chemotherapy, or who are at greater risk, but still allow it for kidney disease patients.

Still, as some analysts believe, with the recent updates both companies had on product prescribing and labeling, it is unlikely the drugs will be completely inadvisable for use in cancer patients as they allow the cycle of chemotherapy to continue more smoothly, helping to strengthen them after each treatment. It is more likely the companies will work with the FDA for better regulation on these drugs.

On the news, Amgen shares fell nearly 2%, while JNJ shares climbed over 1%. Surprising? Not really.

Amgen Inc. (NASDAQ: AMGN) stock is falling on news that a study appearing in the Journal of the American Medical Association argues that treating cancer patients with anemia drugs increases their risk of blood clots and death. This could be bad news for AMGN, whose drug Aranesp was used in the study along with Johnson & Johnson's (NYSE: JNJ) Procrit. Researchers said the drugs increased the risk of death by 10 percent. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on AMGN.

After hitting a one-year high of $66.06 last February, the stock hit a one-year low of $43.93 in January. This morning, AMGN opened at $46.90. So far today the stock has hit a low of $46.66 and a high of $47.15. As of 11:05, AMGN is trading at $46.79, down $1.03 (-2.2%). The chart for AMGN looks neutral and improving, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.

Amgen Inc. (NASDAQ: AMGN) is higher today on reports that the U.S. Senate has passed a resolution requesting that the Centers for Medicare & Medicaid Services start reconsidering the final National Coverage Determination issued July 30 on anemia drugs for cancer patients, including Amgen's Epogen and Aranesp. If you think this means that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AMGN.

After hitting a one year high of $77.00 in October, the stock has slipping over the past year, touching a 52-week low of $48.30 in mid-August. AMGN opened this morning at $53.23. So far today the stock has hit a low of $52.15 and a high of $53.39. As of 11:05, AMGN is trading at $52.22, up $0.88 (1.7%). The chart for AMGN looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $47.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just 6 weeks as long as AMGN is above $47.50 at October expiration. Amgen would have to fall by more than 9% before we would start to lose money.

Amgen Inc. (NASDAQ: AMGN) opened at $63.53. So far today the stock has hit a low of $63.00 and a high of $66.40. As of 11:05 this morning, AMGN is trading at $63.46, up $3.45 (5.7%).

After hitting a one year high of $77.00 in October, the stock began 2007 with a dive and established a 52-week low of $55.13 in late March. The stock has been rebounding over the past few weeks, and is soaring today after results of the company's Phase III trial of its Aranesp drug were announced this morning. AMGN shares took a big hit earlier this year when fears arose that Aranesp may actually be harmful to cancer patients. Expectations fell significantly for the drug then, and today's more or less neutral results are welcome assurance for Amgen that this drug does not hurt people. Recent technical indicators for AMGN have been bearish but improving slightly, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $55 range. AMGN hasn't been below $30 since late 2004 and has shown support around $56.50 recently. This trade could be risky if AMGN's earnings (due out 4/23) disappoint or if the FDA shuts down one of their drugs, but even if this happens, this position could be protected by the strong historical support around $55.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.