Avastin-Fueled Run Has Genentech Looking Expensive

Since May 19, the day Genentech (DNA Quote) said its experimental drug Avastin improved the survival of patients with colon cancer when used with chemotherapy, the company's shares have been on a tear, rising more than 60%.

CIBC World Markets has seen enough for now. The firm downgraded shares of Genentech Thursday to sector perform from sector outperform. The company's market capitalization has expanded by around $12 billion since the Avastin results were released, and CIBC said in a research note that it believes the move reflects $1.5 billion to $2 billion in peak Avastin sales.

The downgrade was a valuation call, and CIBC still wrote positively about Genentech and Avastin in general. The new rating means that CIBC expects Genentech to perform in line with the biotechnology group for the next year to year and a half. ...