There are literally hundreds of new drugs hitting the market each year. Why write about this particular drug? The drug bears discussion because it is the first one in 50 years to treat a disease called Lupus. Lupus is an autoimmune disease in which the immune system turns against part of the body it is designated to protect. It causes debilitating joint pain, organ damage and skin rashes. Up to now the key medication used to treat Lupus are steroids.

A team of researchers from Human Genome Sciences (HGSI) headed by William Haseltine started looking at genes and their special functions. The problem was that there was no gene known to cause Lupus. So they started thinking outside the box. Instead of finding the gene first and then its function, they looked for the function then found the gene called BLyS that is elevated in Lupus. The new drug is called Benlysta.

Earlier this week I met with three CEOs of the neurotech industry -- Ron Cohen of Acorda Therapeutics (NASDAQ: ACOR), Uli Hacksell of Acadia Pharmaceuticals (NASDAQ: ACAD) and Jörn Aldag, of Evotec (NASDAQ: EVTC) -- along with Zack Lynch, the director of their trade association. Their November 10 media tour gave me a chance to gain some insight into this niche within the biotech industry of companies seeking cures for brain illnesses through drugs and devices.

At a time when revenues from blockbuster drugs are tapering off as their patents expire, these companies -- and their two-year-old Neurotechnology Industry Organization -- are hoping to unlock a new area of business growth while offering cures to ailments of longer-living populations and diseases involving the central nervous system.

Hawthorne, New York-based Acorda is already selling its first product, Zanaflex Capsules, which help control spasticity. Its Fampridine medication, aimed at bettering the walking capability of people with multiple sclerosis, is still undergoing Phase 3 testing. Update: November 14: Ron Cohen let me know Acorda has successfully completed Phase 3 testing of Fampridine
and intends to apply early next year for Food and Drug Administration approval to market it.

Meanwhile, San Diego-based Acadia, led by Hacksell, is conducting Phase 3 clinical trials of pimavanserin, which addresses psychosis related to Parkinson's disease.

Evotec, a Hamburg, Germany, company, whose acquisition of San Francisco-based Renovis in May could better position it to attract U.S. venture capital, is working on remedies for insomnia, Alzheimer's disease and smoking cessation.

Merck & Co. Inc. (NYSE: MRK) opened at $51.58 Thursday. So far today the stock has hit a low of $50.25 and a high of $52.26. As of 11:55 a.m., MRK is trading at 51.90, down 0.46 (-0.9%).

After hitting a one-year high of 55.14 in May, the stock has been trading within a $5 range over the past three months. The company and its private partner Neuromed announced yesterday evening that they have abandoned development of chronic pain drug MK-6721 because the drug candidate "did not demonstrate characteristics necessary to advance the compound further in development." Technical indicators for MRK are bearish with minor improvement, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $55 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk and leverage returns. For this particular trade, we will make a 19.0% return in just 6 weeks as long as MRK is below $55 at September expiration. MRK would have to rise by 6% before we would start to lose money. Learn more about trades like this one here.

MRK has never been above $55 for more than a day in the last twelve months, and the stock has shown some resistance around $53 recently. This trade could be risky if the stock breaks through the $55 level where it topped out in June, but the series of lower highs since then suggests a slightly bearish trend.

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 MRK.