Avastin-Fueled Run Has Genentech Looking Expensive

The sector has seen considerable buying interest lately, as earnings growth, short-covering, the belief that the Food and Drug Administration is willing to work faster on drug approvals, the upcoming ASCO meeting and takeover rumors have combined to lead the biotechs higher.

Among other stocks in the sector, Amgen (AMGN Quote) was hitting a 52-week high at $64.68. Chiron (CHIR Quote) was up 36 cents to $44.48, and Biogen (BGEN Quote) was adding 86 cents to $43.23.

In a research note Wednesday, Lehman Brothers discussed its views on Avastin and Genentech.

"Considerable upside could come from the breast and lung cancer settings in which Avastin has failed to demonstrate a benefit to date," Lehman wrote. "However, several experts in the field we have spoken to are enthusiastic about Avastin's clinical activity in these highly prevalent cancers. Together, these could double Avastin's commercial potential, a possibility not currently being discounted in Genentech's valuation."