Spectrum Pharmaceutical (NASDAQ: SPPI - option chain) stock is trading lower today after the company received a Complete Response letter from the FDA regarding FUSILEV, its treatment for advanced metastatic colorectal cancer. The FDA said the company did not demonstrate that FUSILEV is non-inferior to leucovorin in its supplemental New Drug Application. 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 SPPI.

This morning, SPPI opened at $4.98. So far today the stock has hit a high of $5.44 and a low of $4.82. As of 12:00, SPPI is trading at $5.12, down $1.09 (-17.6%). The chart for SPPI looks neutral.

First, who are the Nobel Prize winners? Why is their research so important in the areas of aging and cancer detection?

Three Americans won the Nobel Prize for medicine. They are Elizabeth Balckburn, Jack Szostak and Carol Greider. Balckburn is with the University of California, San Francisco, Greider is with Johns Hopkins School of Medicine in Baltimore and Szostak is at the Harvard Medical School.

Pharmaceutical company Eli Lilly & Co. (NYSE: LLY) is planning to cut 5,500 jobs over the next few years and reorganize into five business units. The company is looking to reduce costs and accelerate how long it takes new drugs to get to market, especially as its top performers see their patents expire. This translates to a workforce reduction of close to 14% – to 35,000. This measure doesn't include new positions in emerging markets with high potential and Japan.

The company hopes to cut as much as possible through attrition and retirements – and it would not indicate how many other positions would have to be cut.

Eli Lilly's goal is to slash its annual cost by $1 billion during this restructuring. The new business units will be: cancer, diabetes, established markets, emerging markets and Elanco, which is its animal health business. This is a change from the existing functional model, which separates U.S. and global marketing for each drug in the company's portfolio. Through the new structure, Lilly says, drug development and marketing will be tied more closely.

Delcath Systems Inc. (NASDAQ: DCTH), which in pre-market trading shot up 48%, closed the trading session up 18% to close at $3.60 after the FDA granted its chemotherapy agent doxorubicin, used primarily for live cancer an orphan drug status. The Orphan Drug Act was created to encourage and promote research for therapies of rare conditions and diseases that affect less than 200,000 a year in the United States.

Late yesterday, Pfizer (NYSE: PFE) announced the discontinuation of the SUN 1122 Phase III trial of Sutent. The drug is for treating colorectal cancer, and the study was terminated because it failed to achieve its primary end point in the study. An independent committee (the Data Monitoring Committee) found that adding sunitinib to the chemotherapy regimen FOLFIRI would be unable to demonstrate "a statistically significant improvement in the primary endpoint of progression-free survival compared to FOLFIRI alone."

The company's vice president of Clinical Development and Medical Affairs Dr. Mace Rothenberg noted, "We are disappointed with this result, but trial successes and failures are an integral part of cancer drug development and contribute to a growing body of knowledge on improving patient care."

Dendreon Corp. (NASDAQ: DNDN) shares more than tripled today soaring from a previous close of $7.30 to $22.10. By noon DNDN traded up over 130% to around $17 a share. The company reported this morning that its experimental prostate cancer treatment, Provenge, was significantly successful in prolonging patient survival. This may clear the way for the long-awaited regulatory approval for the drug.

Dendreon plans to submit additional information to the FDA in the fourth quarter as part of its new drug application, meaning approval could come with six months, by mid- 2010.

Back in June, pancreatic cancer survivor and Apple (NASDAQ: AAPL) CEO Steve Jobs appeared at a conference appearing excessively thin and out of it, spurring rumors that Jobs was sick, possibly with another occurrence of cancer.

Joe Nocera reports that Jobs is now blaming the rumors on "hedge funds with a big short position in Apple."

Color me unconvinced. When a high-profile cancer survivor appears gaunt and sickly, there is no need for a nefarious conspiracy to spur questions about his health. Nocera has an interesting theory: "I think he likes having half the world wondering about his health. I think he likes the fact that Bloomberg accidentally put his obituary on the Web. It's a lovely reminder about just how important he is in the culture. It means half the world is spending time thinking about, well, him. Far more than anyone in hedge fund land, he himself was most responsible for the rumors, by acting so absurdly secretive. His narcissism isn't pretty, but it sure is effective."

Almost everyone these days has encountered cancer in one way or another. While the rate of cancer incidence has stabilized to declined since the early 1990s and, with newer and better treatments as well as early detection, cancer death rates have also declined, the war on cancer is still far from won.

It is no surprise, then, that a few days ago, IMS Health (NYSE: RX) -- a provider of market intelligence to the pharmaceutical and healthcare industries -- said that cancer drugs sales will nearly double by the year 2012. Assuming a compound growth rate of 12-15% a year, sales will grow from $48 billion in 2008 to $80 billion by 2012.

The main contributors to growth, according to the study, are an increasing number of patients on chemotherapy, not just in major markets but in emerging markets, too, as well as longer treatment periods for growing numbers of patients. Also fueling growth are the increased use of targeted therapeutic agents, along with first-time innovations coming to the market. Expensive new biotechnology drugs, and the increasing use of combination therapies that contribute to the exploding cost of treatment will also fuel cancer drugs sales growth.

The overall pharmaceutical market grew at a 6.4% pace in 2007, meaning that with its double-digit growth rate, the cancer drug market -- today contributing 17% to global pharmaceutical sales -- will only represent a greater proportion and emphasis. Of course, there will be factors moderating growth, such as drugs losing exclusivity and financial constraints of payers.

Cancer-fighting drugs can reach the market twice as fast as the average medicine, and companies can charge as much as $50,000 for a single course of treatment. It is no surprise then that with more and more drugs coming off patent many pharma companies are turning their attention to cancer. But can it save them?

Genentech (NYSE: DNA) shares are trading higher today after the company announced that a trial of Avastin in colon cancer patients who have undergone surgery will be completed earlier than expected. Though the news has no effect on the likelihood of the drug's success, investors seem excited that the drug might be approved for use in colon cancer patients up to a year ahead of schedule. If you think that the stock 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 DNA.

After hitting a one-year low of $65.35 in December, the stock hit a one-year high of $82.2 in March. DNA opened this morning at $70.37. So far today the stock has hit a low of $69.52 and a high of $70.60. As of 11:55, DNA is trading at $69.98, up $1.15 (1.7%). The chart for DNA looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $65 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 a 12.4% return in just five weeks as long as DNA is above $65 at June expiration. Genentech would have to fall by more than 7% before we would start to lose money. Learn more about this type of trade here.

DNA hasn't been below $65 at all in the past year and has shown support around $67 recently. This trade could be risky if one of the company's treatments gets into regulatory trouble, but even if that happens, this position could be protected by the support the stock might find around $66, where it has bottomed out twice in the past six months.

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. At publication time, Brent neither owns nor controls positions in DNA.

Readers of this space know that, for a plethora of reasons, companies in the pharmaceutical and biotech sectors are not my preferred stocks, but there are exceptions. And with the above in mind, Celgene is worth a review.

Celgene (NASDAQ: CELG) develops and markets drugs to treat cancer, immunological disorders and other diseases. The company's research concentrates on small molecule compounds that inhibit tumor necrosis factor alpha (TNFa) production or aberrant estrogen production, or that may regulate kinases and ligases (enzymes).

Analysts really like the revenue growth rate for Revlimid, which received U.S. FDA approval in 2005, and treats a malignant blood disease called MDS. In 2006, Revlimid also received FDA approval to treat myeloma. Total Revlimid revenue should exceed $1.7-$1.8 billion in 2008. Further, mainstay Thalomid, which treats bone marrow cancer, rounds-out an impressive one-two signature drug duo. Also, the near-term re-acquisition of European rights for Thalomid will expand Celgene's geographic footprint.

In the current choppy/consolidating (or perhaps worse) market, pharmaceutical companies and selected biotechs garner attention as defensive plays, and among these Celgene is worth an evaluation.

Celgene Corporation (Nasdaq: CELG) develops and markets drugs to treat cancer, immunological disorders, and other diseases. The company's research concentrates on small molecule compounds that inhibit tumor necrosis factor alpha (TNFa) production or aberrant estrogen production, or that may regulate kinases and ligases (enzymes).

Analysts really like the revenue growth rate for Revlimid, which received U.S. FDA approval in 2005, and treats a malignant blood disease called MDS. In 2006, Revlimid also received FDA approval to treat myeloma. Mainstay Thalomid, which treats bone marrow cancer, rounds-out an impressive one-two signature drug duo.

The market's continued choppiness/consolidating pattern does not mean there aren't growth stocks out there for high-risk investors, and Onyx Pharmaceuticals is one pharmaceutical company that fits the bill.

Onyx Pharmaceuticals, Inc. (Nasdaq: ONXX) specializes in small molecule technology, a new, promising method that blocks cancer-causing mechanisms in the human body. In collaboration with Bayer Pharmaceuticals, the company develops and markets compounds that inhibit the function, or modulate the activity of the RAS signaling pathway to treat cancer and other diseases.

Analysts believe ONXX's cancer drug Nexaver as a treatment for advanced kidney cancer could be a big winner, with the company gaining FDA approval for the drug in 2005. ONXX is also testing the drug as a possible treatment for other kinds of cancer (liver, skin, and lung cancer). The Reuters F2007/F2008 EPS consensus estimates for ONXX are -$0.52 to $0.97.

ImClone (NASDAQ: IMCL) implied volatility elevated prior to positive Erbitux data.

• IMCL, an oncology care company, is recently trading up $11.05 to $48.98 in pre-open trading.
  
• Merck KGaA & IMCL announced that Erbitux met the primary endpoint outcomes from the FLEX trial (a phase 3 study of 1000 patients with previously untreated non-small cell lung cancer).
  
• Goldman Sachs says, "Erbitux data in lung cancer positive for IMCL, Minor neg for DNA."
  
• IMCL October option implied volatility of 46 is above its 26-week average of 40 according to Track Data, suggesting larger price risks.

Genentech (NYSE: DNA) September volatility at 21 prior to IMCL's NCSCLC data.

• DNA is recently trading at $76 in pre-open trading, below its close of $79.15.
  
• Merck KGaA & IMCL announced that Erbitux met the primary endpoint outcomes from the FLEX trial (a phase 3 study of 1000 patients with previously untreated non-small cell lung cancer (NSCLC).
  
• DNA September option implied volatility is at 21; October is at 25. DNA's average option implied volatility over the last 26-weeks is 24 according to Track Data, suggesting non-directional near term price fluctuations.

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

The Associated Press reports that America's largest popcorn maker, ConAgra Foods (NYSE: CAG), has been poisoning the lungs of its popcorn plant workers and will take its time solving the problem. Specifically, ConAgra will change the recipe for its Orville Redenbacher and Act II brands over the next year to remove the flavoring chemical diacetyl, linked to a lung ailment in popcorn plant workers.

The decision comes a day after a doctor at a leading lung research hospital said in a warning letter to federal regulators that consumers, not just factory workers, may be in danger from fumes from buttery flavoring in microwave popcorn.

The timing of this decision suggests that ConAgra has no problem poisoning its workers. But it seems to care a bit more about poisoning its customers. After all, if all its customers get lung disease and die, who will pay for the popcorn? I guess ConAgra feels comfortable that its employees can always be replaced.

I wonder whether ConAgra is concerned that its employees will sue the company for unsafe working conditions? Or will microwave popcorn eaters will rise up and sue ConAgra for lung poisoning? Meanwhile ConAgra's planned slow pace of replacing the flavoring chemical guarantees that I will keep its products out of my kitchen for a long, long time.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

A Kansas federal court has ruled that a lawsuit accusing soft drink makers of selling drinks made with ingredients that can form cancer-causing benzen can go forward. The lawsuit asks that makers remove the drinks from stores, change the recipe, and offer refunds to customers who bought them.

Coca Cola Company (NYSE: KO) had been a defendant, but settled earlier this month, offering refunds and reformulating the soda. PepsiCo Inc. (NYSE: PEP) said the suit is without merit, and other defendants include Sunny Delight and Rockstar.

Here's what I don't understand: If the drinks really can cause cancer, shouldn't customers be entitled to a little bit more than a refund? It seems bizarre that all that the plaintiffs want is a refund. The soda companies involved have not conceded that their products can cause cancer.

The relatively minor requests (refunds and new formula) make this suit a pretty insignificant risk for shareholders in the companies.