Genentech (NYSE: DNA - option chain) shares have moved higher today after the company and its partner Roche announced its breast-cancer drug Avastin improved the survival time for patients in a late-stage study. The results bring DNA one step closer to full regulatory approval from the FDA. 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.

DNA opened this morning at $76.40. So far today the stock has hit a low of $74.86 and a high of $79.16. As of 12:40, DNA is trading at $77.09, up $4.35 (6.0%). The chart for DNA looks bullish and S&P gives DNA a positive 4 STARS (out of 5) buy ranking.

For a bullish hedged play on this stock, I would consider a December 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 4.2% return in just four weeks as long as DNA is above $65 at December expiration. Genentech would have to fall by more than 16% 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 $69 recently.

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.

This morning's announcement that Roche wants to pay $43.7 billion for the 44.1% of Genentech (NASDAQ: DNA) it doesn't already own raises the question: "Why is Genentech worth so much to Roche?" The answer: it outperforms its competitors when it comes to innovation.

Roche is offering a 9% premium to Genentech's market value at Friday's close. Reuters reports that Roche wants Genentech's $2.6 billion (2008 estimated sales) Avastin, a colorectal cancer treatment, and Herceptin, a $1.3 billion (estimated 2008 sales) breast cancer drug, as well as Genentech's drug development portfolio.

Roche also expects to save $750 million to $850 million in pretax costs, but the long-term benefit would be for Genentech's innovative culture to take over the relatively dry drug development environment of Roche. If that doesn't happen, the deal could be unprofitable for both companies.

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.

Genentech Inc. (NYSE: DNA) shares are trading higher this morning on news that the Food and Drug Administration granted conditional approval for its oncology drug Avastin for the treatment of breast cancer Friday after market close. The drug is already approved for the treatment of colorectal and lung cancers. 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 DNA.

After hitting a one-year high of $86.04 last February, the stock hit a one-year low of $65.35 in December. DNA opened this morning at $78.12. So far today the stock has hit a low of $77.57 and a high of $79.40. As of 10:45, DNA is trading at $78.06, up $6.46 (9.0%). The chart for DNA looks bullish 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. This particular trade will make an 8.7% return in just four months as long as DNA is above $65 at June expiration. Genentech would have to fall by more than 16% before we would start to lose money.

DNA hasn't been below $65 at all in the past year and has shown support around $70 recently. This trade could be risky if there is new bad news about one of the company's drugs, but even if that happens, this position could be protected by the support the stock might find around $67, where DNA bottomed this past winter.

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

That the FDA has granted accelerated approval to Genentech (NYSE: DNA) for Avastin for the treatment of patients with breast cancer is not just big news for the company, but great news for women around the world in their fight against the dreaded cancer.

"There is no cure for metastatic breast cancer, so it is important to control the disease as early and for as long as possible," said Kathy Miller, M.D., Associate Professor of Medical Oncology, Indiana University School of Medicine and lead investigator on the E2100 trial. "Now with Avastin plus Paclitaxel, we can increase the time a woman's cancer is kept under control, and offer a biologic option to women who previously were limited to chemotherapies alone."

"As an oncologist who has treated women with metastatic breast cancer, I know how important the first course of therapy can be," said Susan Desmond-Hellmann, M.D., M.P.H., president, Product Development, Genentech. "New treatments are needed, and this approval provides women who have not yet received chemotherapy for their metastatic breast cancer a new option to consider with their physician and families."

Genentech Inc. (NYSE: DNA) shares are trading higher after the company reported positive preliminary results before market open from a Phase III study of its drug Avastin in advanced breast cancer. Avastin, which is currently approved as a part of a treatment regimen for colon and non-small cell lung cancer, was DNA's best-selling drug last year. 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 DNA.

After hitting a one-year high of $87.74 last February, the stock hit a one-year low of $65.35 in December. DNA opened this morning at $71.70. So far today the stock has hit a low of $70.60 and a high of $71.90. As of 12:40, DNA is trading at $70.81, up $0.89 (1.2%). The chart for DNA looks neutral and improving slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

Huge biotech firm Genentech, Inc. (NASDAQ: DNA) had high hopes that its drug Avastin would be effective in treating breast cancer patients. The product is currently used for colon and lung cancer and brought the company about $1.7 billion last year. One source said that the drug has brought in almost $2.65 billion so far this year.

The FDA turned Genentech down. According to The Wall Street Journal, an agency panel "on a 5 to 4 vote, said the data provided by the company wasn't sufficient to provide a favorable risk benefit analysis for Avastin." Many on Wall Street had expected the drug to get the green light. Jim Reddoch of Friedman Billings Ramsey looked particularly foolish when he predicted this morning that "a Food and Drug Administration panel will recommend Genentech Inc.'s drug Avastin be approved as a breast cancer treatment." Hopefully, the firms clients did not follow his lead.

When the news hit, Genetech's shares dropped 9% to $66.29, a new 52-week low.

The lesson in all of this is that listening to guesses from research firms can be a dangerous game. Better to wait and see what the feds say.

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

Genentech (NYSE: DNA) is halted down $6.65 to $66.13. The FDA's Oncologic Drugs Advisory Committee rejected Avastin for the use in breast cancer. As of Dec. 31, 2006, Roche Holdings owned a 55.8% position in DNA. DNA call option volume of 83,833 contracts compares to put volume of 46,382 contracts. DNA December option implied volatility of 50 is above a level of 33 from an hour ago and its 26-week average of 25 according to Track Data, suggesting larger price risk.

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

"Genentech (NYSE: DNA), the world leader in cancer treatment, has been weak following its third quarter earnings report," notes biotech sector expert John McCamant.

In his The Medical Technology Stock Letter, he explains, "What we are seeing with DNA's stock represents an irrational overreaction by Wall Street, and one that should be taken advantage of by investors."

The advisor notes, "Starting with their earnings, DNA reported non-GAAP operating revenues of $2.91 billion, and U.S. product sales of $2.2 billion, for the third quarter. These figures represent an increase of 22% and 18%, respectively, over the same figures reported during last year's third quarter.

"As such, we are pleased with the growth that DNA has continued to produce. However, because revenue came in a little shy of analysts' consensus expectation, the stock has sold off. We would note one glaring positive which DNA just isn't getting much credit for anymore. That is, even at its already huge size, the company still expects to produce impressive growth for the full year (and in the years to come)."

Genentech (NYSE: DNA) is perhaps losing some of its old luster to a newer and fresher group of emerging biotechs. The American Society of Clinical Oncology, or "ASCO," is in the midst of its annual meeting in Chicago, the conference that historically has offered make or break news for many a cancer-focused biotech. In previous years, Genentech saw its stock get huge a boost from all of the possibilities of Avastin as an indicated treatment for multiple forms of cancer.

This weekend, Genentech announced results of Phase III study for Avastin Plus Interferon therapy, showing it nearly doubled the median survival in patients with previously Untreated advanced kidney cancer. The company also released more of its pipeline that looks like a post-Avastin world.

Unfortunately, the data coming out of these is not good enough to fuel share buying so far. Shares are indicated down 0.7% at $78.97 in pre-market trading (8:55 a.m.) Monday. While this may change later, Genetech's parent, Roche (LSE: ROG), saw its shares fall 1.9% in London.

Avastin has been a great drug for Genentech and for cancer patients alike, but seeing as that Genentech shares have been dead money for 18-months and with the company sporting an $83 billion market cap, investors are left holding the "what's next?" bag.

Shares of Onyx Pharmaceuticals Inc. (NASDAQ: ONXX) are up 6.7% in pre-market trading (9:23 a.m.) and Celgene Corp. (NASDAQ: CELG) shares are trading up over 1.5% on positive data at the ASCO conference.

Jon Ogg is a partner at 24/7 Wall St.; he does not own securities in the companies he covers.

Cramer said he made a fortune off of the cholesterol lowering statins long ago, and statins are now $32.4 billion in global sales around the world. He said he made a fortune off of investing in Merck long ago back on the statin play. Cramer said the next wave of medical spending that is underestimated is the cancer drug Avastin from Genentech, Inc. (NYSE:DNA). He thinks this could be bigger than any street estimates out there and that Avastin may have many more uses because it starves tumors and doesn't destroy the rest of you like chemo. He thinks the market is already expecting a lot from Avastin, but he thinks it can do significantly more than the street thinks. Cramer said that everyone thinking they are marking up Avastin to cover up for low-end Lucentis sales, he thinks there are many more uses.

Cramer said buy 1/2 of the position before the stock reports earnings next week and then buy another half after they report earnings and the single-quarter risk is behind the stock.

DNA closed down 0.6% at $83.20 in regular trading, and its shares are up 0.9% at $83.97 in after-hours. DNA has a market cap of $87+ billion.