Gilead Sciences (GILD - option chain) stock is trading lower today after the company announced last night that its hypertension treatment darusentan missed the primary goal of a Phase III trial. As a result, GILD says it has ended development of the drug in favor of spending resources on other products in its pipeline. 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 GILD.

This morning, GILD opened at $45.90. So far today the stock has hit a high of $46.28 and a low of $45.01. As of 12:15, GILD is trading at $45.18, down $1.78 (-3.8%). The chart for GILD looks bullish and S&P gives GILD a positive 5 STARS (out of 5) strong buy ranking.

Yesterday, Gilead Sciences (NASDAQ: GILD) announced that it entered a license and collaboration agreement with Tibotec Pharmaceuticals. The two firms will combine to develop and commercialize a new once-daily, fixed-dose treatment for HIV. GILD's CEO John Martin noted, "Gilead and Tibotec share a strong focus on bringing safe and effective treatment options to people living with HIV/AIDS."

If the collaboration is approved, GILD will assume the lead in manufacturing, registration, distribution, and commercialization of a fixed-dose combination of Truvada and rilpivirine. GILD will not be responsible for the commercialization of this combination in the developing world and Japan, which will be handled by Tibotec. The two companies will work toward an agreement to market the combination in the developing world.

Few would argue with the claim that Gilead Sciences (NASDAQ: GILD) is the best-managed biopharma company on the planet.

It dominates the HIV treatment market and gets a 19%-plus royalty on Tamiflu, which is used to treat H1N1 (swine) flue. Gilead also has several drugs on or headed for the market to treat pulmonary disease and hard-to-treat high blood pressure.

Your best strategy for life-changing profits?

Buy the stock and sell the calls (then use the cash to buy puts on the market, which is headed down further.) Or buy long-term calls and keep an eye on them.

Next: Biotech Stock #2

Last year, as the market sank, one group actually went up -- large-cap, cashflow positive biotech and genomics companies.

This year, interest has shifted to the little guys -- the speculative biotech stocks that could be 10- or 20-baggers with one breakthrough.

Here are six biotech stocks with the potential to deliver life-changing profits:

Biotech Stock #1: Gilead Sciences (NASDAQ: GILD)
Biotech Stock #2: Questcor Pharmaceuticals (NASDAQ: QCOR)

Biotech Stock #3: Cepheid (NASDAQ: CPHD)
Biotech Stock #4: Curis (NASDAQ: CRIS)
Biotech Stock #5: Cerus Corp. (NASDAQ: CERS)
Biotech Stock #6: Illumina (NASDAQ: ILMN)

Analyst upgrades:

• UBS upgraded Target (NYSE: TGT) to Buy from Neutral and raised its price target to $52 from $45 citing reduced inventories, some credit stability, and an improved back-to-school period.
• Credit Suisse said concerns regarding Safeway's (NYSE: SWY) price position are overblown and that earnings risk is limited. The firm upgraded shares to Outperform from Neutral and raised the target price to $25 from $22.
• Oppenheimer upgraded Canadian Solar (NASDAQ: CSIQ) to Outperform from Perform as it believes the story is underappreciated following the recent sector rally. The firm has a $14 price target on the stock.
• CME Group (NASDAQ: CME) was upgraded to buy from Neutral at Goldman.
• Freeport McMoRan (NYSE: FCX) was upgraded to Overweight from Neutral at JP Morgan.
• Gilead Sciences (NASDAQ: GILD) was upgraded to Buy from Neutral at FTN Equity.

Analyst upgrades:

• Citigroup upgraded Lennar (NYSE: LEN) to Buy from Hold as it believes the company's near-term liquidity profile is improved following the $400M debt issuance. The firm raised its target price to $12 from $11.
• Jefferies upgraded Rowan Companies (NYSE: RDC) to Buy from Hold as it believes jack-up drillers will continue to outperform deepwater names. The firm raised its target price to $27 from $20.
• Keefe Bruyette upgraded First Financial (NASDAQ: FFIN) to Market Perform from Underperform to reflect more positive loan data for the Texas banks. The firm raised its target price on shares to $44 from $38.
• MGM Mirage (NYSE: MGM) was upgraded to Overweight from Neutral at JP Morgan.
• Morgan Stanley (NYSE: MS) was upgraded to Outperform from Market Perform at JMP Securities.
• Brinker (NYSE: EAT) was upgraded to Overweight from Equal Weight at Barclays.

Analyst upgrades:

• Merriman upgraded Dendreon (NASDAQ: DNDN) to Buy from Neutral on expectations shares will react positively to the full IMPACT data release on April 28. The firm thinks Provenge could represent the first cancer immunotherapy approved in the U.S. and raised its valuation range on the stock to $33-$34 from $18-$19.
• Piper Jaffray upgraded Andersons (NASDAQ: ANDE) as it believes the valuation is attractive, investor expectations are low, and the company's fertilizer and rail segments could recovery in FY10. The firm has a $19 target on shares. Goldman upgraded the auto sector to Neutral from Cautious and added Ford (NYSE: F) to its Conviction Buy list. The analyst does not believe Ford will have to declare bankruptcy and sees the company benefiting from Chrysler share declines and GM's (NYSE: GM) reduced product offerings. Ford's price target is $6
• Banc of America/Merrill upgraded U.S. Airways (NYSE: LCC) to Buy from Underperform.
• Broadcom (NASDAQ: BRCM) was upgraded to Equal Weight from Underweight at Morgan Stanley.
• Caterpillar (NYSE: CAT) was raised to Overweight from Neutral at JP Morgan.

Gilead Sciences (NASDAQ: GILD - option chain) shares are headed higher today after the company reported positive results from a blood pressure drug trial. 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 GILD.

GILD opened this morning at $48.31. So far today the stock has hit a low of $46.03 and a high of $48.37. As of 11:35, GILD is trading at $46.49, up $1.79 (4.0%). The chart for GILD looks bullish and S&P gives GILD a positive 4 STARS (out of 5) buy ranking.

Gilead Sciences (NASDAQ: GILD - option chain) shares are headed higher today after the company posted a fourth-quarter profit of $568.2 million, or 60 cents per share, on revenue of $1.43 billion. Excluding one-time items, GILD earned $598.5 million, or 63 per share, beating analysts' projections of 55 cents per share. 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 GILD.

GILD opened this morning at $49.42. So far today the stock has hit a low of $49.20 and a high of $51.15. As of 12:25, GILD is trading at $51.03, up $2.80 (5.8%). The chart for GILD looks bullish and S&P gives GILD a positive 4 STARS (out of 5) buy ranking.

Celgene (NASDAQ: CELG), a biopharmaceutical company, closed at $50.34. CELG is scheduled to announce Q4 EPS on January 29. CELG February and March option implied volatility of 49 is near its 26-week average according to Track Data, suggesting non-directional price movement.

Genzyme (NASDAQ: GENZ) closed at $68.20. GENZ is expected to report Q4 EPS on February 11. Robert W Baird has an $87 price target on GENZ. GENZ February option implied volatility of 40 is near its 26-week average according to Track Data, suggesting non-directional price movement.

Gilead Sciences (NASDAQ: GILD), a biopharmaceutical company, is scheduled to report Q4 EPS on January 27. GILD February option implied volatility of 46 is near its 26-week average according to Track Data, suggesting non-directional price movement.

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

"Long-term, Gilead Sciences (NASDAQ: GILD) is the best life sciences company on the planet," says biotechnology specialist Michael Shulman in The ChangeWave Biotech Investor.

"Auto sales may plunge, home sales may stay in the tank and retail sales may fall, but disease, old age and human frailty are undeniably 'forever.'

"While the economy in 2009 is almost certainly going to contract, analysts expect the sale of biologic drugs and other life sciences products to increase 12%-15% -- with some winners growing much faster.

"The winners will be rewarded, even in a bear market. In the past year, Gilead has outperformed the Nasdaq by more than 30 percentage points -- and it's doing it as a mature biotech.

Shares of biotechnology company Gilead Sciences Inc. (NASDAQ: GILD) have been plunging this morning, despite the firm posting better-than-expected first quarter earnings per share. Hurting the stock this morning is the company's full-year sales guidance, which was unchanged.

Gilead Sciences reported late yesterday that its profit during the first-quarter jumped 22% to $496.1 million, or 51 cents per share, boosted by strong HIV treatments Atripla and Truvada sales. These numbers are up from $407.4 million, or 43 cents per share reported in the same period a year ago. Analysts' forecast was for lower earnings of 47 cents per share in the quarter.

The company's quarterly revenue also surged by a respectable 22% to $1.26 billion. For this period, the company benefited from strong gains from combination HIV treatment Atripla which came with sales of $342.2 million, a 70 percent rise. HIV drugs sales also saw a growth of 37% to $964.7 million. Analysts, on average, expected Gilead Sciences's sales to be $1.22 billion, according to Reuters Estimates.

Technical expert Leo Fasciocco seeks stocks that have broken out from technical basing patterns or those he feels are poised to make such a breakout, such as Gilead Sciences (NASDAQ: GILD), which has a "breakout level at $50."

The editor of Ticker Tape Digest explains, "Gilead Sciences, with annual revenues of $4.2 billion, makes therapies to treat life-threatening infectious diseases. It focuses on pulmonary and cardiovascular diseases.

"The company has four products -- Viread, Emtriva, combination pill Truvada, and triple combination Atripla -- in its HIV franchise, as well as Hepsera for hepatitis B. GILD recently received approval for pulmonary arterial hypertension drug Letairis, acquired from Myogen.

"The stock has climbed from $10 to $47 the past five years. It is one of the few stocks now that is knocking on the door of making a new high. With earnings growth to be solid this year and next, we see GILD in a good spot to be accumulated in anticipation of a breakout.

"Of all the stocks that I follow and recommend, there is one stock above all others that I have favored for years, and still do: Gilead Sciences (NASDAQ: GILD)," says biotechnology sector expert Michael Shulman.

In his industry-leading ChangeWave Biotech Investor, he explains, "I have owned it for a very-long time and it is fast-growing and rock solid among all of the market uncertainty. When that uncertainty ends, GILD will still be a fast-grower in a recessionary economy."

"The company is a commanding market leader in HIV treatments, sells and collects royalties on other antivirals for flu and Hepatitis B. Gilead recently announced earnings and it had profits of $402 million or 41 cents a share, topping analyst estimates by a penny. It also saw sales grow 22% to $1.1 billion. Despite several product launches and increased clinical trial expenses, the company's cash position doubled to $2.7 billion.

"On a conference call, management said that 2008 would be a very good year, with product sales in the range of $4.7 billion to $4.8 billion. That's more than a 25% increase over 2007 product sales and higher than analyst expectations of $4.6 billion.

"Growth was driven by HIV drug sales, which were up 35% last quarter to $864 million. Management does not guide profit expectations, but the Street has those profits at around $1.88 billion, and Gilead has beaten expectations 14 out of the last 15 quarters.

Gilead Sciences Inc. (NASDAQ: GILD) shares are trading higher this morning in anticipation of a presentation by COO John F. Milligan, Ph.D. at the 19th Annual Piper Jaffray Healthcare Conference in New York. Milligan will will provide an overview of the company at 11:00 a.m. Eastern, which will be webcast on the company's website, www.gilead.com. If you think 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 GILD.

After hitting a one-year high of $47.65 earlier this month, the stock has dropped off slightly. GILD opened this morning at $42.66. So far today the stock has hit a low of $42.36 and a high of $43.72. As of 11:15, GILD is trading at $43.52, up $1.61 (3.8%). The chart for GILD looks bullish but deteriorating, 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 February bull-put credit spread below the $35 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 6.4% return in just 3 months as long as GILD is above $35 at February expiration. Gilead would have to fall by more than 19% before we would start to lose money.

GILD hasn't been below $35 since March and has shown support around $42 recently. This trade could be risky if one of the company's drugs runs afoul of the FDA, but even if that happens, this stock could be protected by strong support GILD found around $36 in August. Plus, the stock could find support at its 200 day moving average, which is currently at $40 and rising.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in GILD.