The biotech stocks were hot on Thursday but some of them are taking huge blows today after a drug safety scare. Elan (ELN, $11.27, down $8.78) is down another 45% following Wednesday’s 14 point drop. The stock was at $34 on Tuesday when Elan released results of a clinical trial that failed to show an overall benefit for Alzheimer’s patients who received the drug, bapineuzumab.

Biogen Idec (BIIB, $51.40, down $18.36) is also down today as it has a partnership with Elan. However, the stock is not down because of bapineuzumab. It’s the drug Tysabri that is bring down Biogen Idec. Late last night, Biogen reported that it had received word two more cases of PML, an extremely rare but potentially-deadly condition, had been confirmed in Tysabri users in Europe. Tysabri is used to treat multiple sclerosis.

The news will almost certainly make the Biogen Idec August 70 calls (IHDHN, $0.05, down $2.10) expire worthless. That’s the impact that negative news can do to option positions. We had profiled these calls at $2.30 and were out at $2.50. The update I gave Wednesday talked about setting a $2.50 stop on the calls which was hit before this news came out. Yes, we were lucky but once we had a small gain the stop was set and we took all of the emotion out of the trade.

Amylin Pharmaceuticals (AMLN, $30.20, down $1.35) is also trading lower in sympathy and the August 30 calls (AQMHF, $1.70, down $0.80) should have also been sold yesterday. They were profiled at $1.35 and are still showing a profit but I wouldn’t risk losing further profits from here with the weekend coming up.

The good news today is that ImClone Systems (IMCL, $64.45, up $0.52) is up. The August 45 calls (QCIHI, $19.20, up $0.70) are still going strong from our entry price of $2.40. Let’s go ahead and sell half of the position today and let the rest ride over the weekend. The biotech sector is always full of surprises and I don’t profile many trades in the area. However, the four I talked about Sunday have run their course and the only one that should still be open is the ImClone trade.

Rick Rouse