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stumbled Wednesday after Lehman Brothers downgraded the stock, saying it has limited upside after its huge runup this year.

Analyst Craig Parker reduced the stock to equal weight from overweight, citing its 156% year-to-date rise and its price-to-earnings ratio of 57 based on the firm's 2004 forecasts. He said that's more than twice the premium of other biotech shares.

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Genentech was down $3.80, or 4.4%, at $83.60 in midday trading Wednesday. Lehman has no banking relationship with the company.

The research report also said there is "limited opportunity for Genentech to materially outperform our current 2004 and 2005 earnings forecast" and that investors have already discounted an extremely optimistic scenario for drugs like lung-cancer treatment Tarceva.

Parker observed senior management has sold about 1.5 million shares of Genentech since its colon-cancer drug Avastin Phase III results were announced in late May and the stock appreciated 65%, which signals that the stock probably isn't cheap.

And although the drug is expected to support current earnings forecasts for the company, the analyst also pointed out investors should be aware "there are significant risks to Avastin becoming a multibillion dollar drug."