DNA Coverage Genetically Flawed

Let's cut to the chase. CNBC threw an undeserved shroud of worry on Genentech(DNA Quote - Cramer on DNA - Stock Picks) Thursday evening.

If you only read the network's coverage of yesterday's first-quarter report, which came out after the close, you'd think everything was breaking viciously bad for the company. But if you read it with a critical eye you'd see the only thing viciously bad was the reporting.

I knew something might be amiss when I read the headline: "Genentech Tops Profit Forecasts but Drug Sales Short."

They said drug sales plural? Not a single drug's sales? Well that's huge because the company trades in good measure on the fate of Avastin, its large cancer drug that has had a wild recent history. But drug sales? Hmmm, I thought it odd that revenue was up close to 8% and they still topped profit forecasts, but sales for a number of drugs were short.

Anything is possible of course, and the revenue report was a hair below expectations, so I read on. And that's when it felt like a circular saw had dropped on my foot. Said CNBC: "Genentech reported earnings that edged forecasts, but sales of all four of its big brand-name drugs fell short of forecasts." Drag out the attack hose and charge it! Pump man, charge it! This is a big one.

But, then I saw that perhaps that blaring smoke alarm was just set off by the steam of a shower. Before CNBC even got around to breaking down the grinding disappointment of the Big Four, it ran this as its first quote (one of only two):

"Genentech beat our earnings estimate, but Avastin sales were definitely light. Everything else was fairly in line. So that's the news today, that Avastin was on the light side, and the stock trades very much of Avastin sentiment."

They Just Don't Get Genentech!

In line? Like, with expectations? What happened to the four that fell short?

So then I scanned the second analyst quote for reference to the Big Four trouble. And found nothing. They then laid out the purported disappointment, which was disappointing. Expectations for individual products always tend to float in a range so it's important not to make too much of mathematically insignificant shifts. And here's what CNBC offered:

"Rituxan sales reached $605 million, shy of the anticipated $607 million; Herceptin revenue was $339 million, compared with forecasts of $343 million, and Lucentis sales reached $198 million, compared with forecasts of $202 million."

On Rituxan, a $2 million disappointment on a base of $600 million is way less than 1%, not exactly alarming lead material. But it gets worse.

The CNBC article said that Reuters contributed to the report, so I decided to let my fingers do the walking over there where I found the darndest thing. The expectations almost everyone else was reporting on drugs two through four were different than CNBC's, which of course led to them showing a different conclusion.

The Reuters headline was pitch perfect: "Genentech profit rises, Avastin disappoints." And they, who contributed to the CNBC effort, did not report that the Big Four disappointed. Because they didn't. Compare the expectation numbers and the conclusions. According to the Reuters article drugs two through four were in line or slightly ahead of expectations:

"U.S. sales of the breast cancer drug Herceptin rose 9 percent to $339 million for the quarter, topping analyst expectations of $329 million. Sales of Rituxan for non-Hodgkin's lymphoma and rheumatoid arthritis rose 13 percent to $605 million, slightly ahead of expectations...Sales of the eye drug Lucentis were down 6 percent from a year ago to $198 million, but roughly in line with expectations."

Look, no one is saying that Genentech does not face a competitive environment. But trying to pull a thread of Big Four weakness out of these results is irresponsible. The most important factor is the slight weakness in Avastin. It's a cancer drug that, after an agency panel's negative comments in December, got surprise approval from regulators to use the drug for breast cancer. The flux the drug was in might have affected sales, or maybe it was encroaching competition, but that is the issue to focus on, not a couple million dollars on a floating base of around $600 million on one of four major drugs.

Know What You Own: DNA operates in the pharmaceutical development industry, and some of the other stocks in its field include Amgen(AMGN Quote - Cramer on AMGN - Stock Picks), Biogen Idec (BIIB Quote - Cramer on BIIB - Stock Picks), Gilead Sciences(GILD Quote - Cramer on GILD - Stock Picks) and Genzyme(GENZ Quote - Cramer on GENZ - Stock Picks). These stocks closed at $43.98, $66.43, $52.09, and $74.70, respectively. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.