) to equal-weight from overweight.
Analyst Craig Parker says he thinks there's limited upside in the shares, since the stock trades at about a 101% premium to its peer group on a price-earnings basis, and a 34% premium on a p-e-to-growth basis.
While there's no question that Genentech's tumor-shrinking colon-cancer drug Avastin should be one of the most exciting product launches in 2004, he thinks some of the market may have overestimated Avastin's commercial potential. He says investors should be aware that there's "significant risks to Avastin becoming a multibillion dollar drug." He also says senior management has sold about 1.5 million shares of Genentech since Avastin Phase III results were announced in late May and the stock appreciated 65%, which signals that the stock probably isn't cheap.
Additionally, Parker recognizes that Genentech will report -- any day now -- positive data for lung-cancer drug Tarceva, which would provide additional upside to earnings per share forecasts. Still, he says the stock now discounts the appropriate risk/return profile for that data.