Shares of

Genentech

(DNA)

rebounded slightly Monday after a selloff Friday that was triggered by the company's announcement that its new colon cancer drug Avastin increases the risk of heart attacks, strokes and heart-disease-related chest pains.

Genentech revealed that it had told the Food and Drug Administration and sent letters to physicians about these risks that are caused by blood clots. A review of clinical studies, the company said, shows that unusual clotting was found in about 5% of patients taking Avastin and a standard form of chemotherapy. That 5% rate is double that of patients not receiving Avastin.

On Monday, the shares of the South San Francisco, Calif., biotech giant gained 82 cents, or 1.9%, $45.05, recouping some of Friday's 6.1% loss.

Genentech told doctors that patients who experience any serious problems related to the blood-clotting side effect of Avastin should immediately discontinue taking the drug. Patients who had experienced blood clots prior to taking Avastin and patients over age 65 are at even higher risk. Genentech is working with the FDA to prepare a new set of instructions for doctors, explaining in greater detail the blood-clot risk information.

Avastin, approved by the FDA is late February, is a first-line treatment for patients whose colon cancer has spread to other parts of their bodies. Avastin is administered with a standard form of chemotherapy for a disease that is the second-leading cause of U.S. cancer deaths. The FDA approved the drug on the basis of tests that showed patients taking Avastin plus standard chemotherapy had a median survival of 20.3 months compared with a median survival of 15.6 months for patients treated with just chemotherapy.

Monday's stock gain suggests that that some investors decided to swoop in on recently eroded shares of a biotechnology powerhouse, or that the medical warnings -- though scary -- were not unexpected.

Genentech's stock has lost about one-third of its value on a split-adjusted basis since hitting a 52-week high of $68.25 in late April. In the previous 12 months, however, the stock tripled, leading some analysts to previously temper their ratings.

"This issue should not come as a total surprise, as it was highlighted by the company in its second-quarter earnings conference call," said Dr. Adam A. Walsh, a biotech analyst for Jeffries & Co. in a research note to clients following the Genentech announcement.

Although Avastin patients had a higher risk of blood clot-induced problems, Walsh said "it appeared that these adverse events were observed in only a small number of patients and primarily concentrated in patients with severe disease who would be naturally predisposed to such events."

Walsh, who maintained his hold rating, said the announcement could make investors and analysts uncomfortable until they see how Avastin sales are affected "over at least the next quarter." (He doesn't own shares, and his firm doesn't have a banking relationship.) "Based on what we currently know ... we do not believe this new information is likely to impact future sales," Walsh added.

"Expect no impact on growth," said John Sonnier of Prudential Equity Group, in a Friday research report. He is keeping a neutral weight rating on Genentech, adding that he believes that cancer specialists "are already aware" of the blood-clot-related risks of Avastin "and are capable of handling such events routinely."

Sonnier doubted Friday's announcement would affect doctors' prescribing trends or the projected sales growth of the drug, which the FDA approved on Feb. 26. He is keeping to his prediction that Avastin's sales would reach $536 million this year and $1 billion next year. (He doesn't own shares; his company doesn't have an investment banking relationship.) Avastin produced $133 million in sales for the three months ended June 30, its first full quarter on the market.

Genentech has 13 buy recommendations and 15 hold recommendations on Wall Street, according to Thomson First Call. No analyst changed his or her opinion over the company's "Dear Doctor" letter about Avastin. Matt Geller, of CIBC World Markets, kept his overweight rating, telling investors on Friday that Genentech's letter to physicians was sent two weeks ago. He said the letter was not mandated by the FDA.

"We believe this letter will have little impact on Avastin sales, and that the downward move in Genentech shares based on this news is overdone," he said. "We believe the purchase of Genentech shares is becoming more attractive at current prices." (He doesn't own shares; his firm has been paid for non-investment-banking services during the past 12 months.)

Genentech also is conducting clinical trials for Avastin as a treatment for kidney, breast and certain types of lung cancers as well as for prostate cancer and the most deadly form of skin cancer. Geller said the research results released so far on breast cancer and non-small-cell lung cancer don't show increased blood-clot-caused damage from Avastin.