This column was originally published on RealMoney on Oct. 11 at 3:08 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.

Since early 2003, Genentech's ( DNA) stock has been on a phenomenal tear. It's up fourfold, which is amazing when you consider that it sported a $20 billion market capitalization at its outset. In these last two-and-a-half years, management's sharp focus on extremely well-validated science and large, unmet markets has borne tremendous fruit for shareholders.

The company has long been a key holding for the biotech intelligentsia as a result of management's scientific slant, but the company's clinical success has been nothing short of astounding: It has been batting nearly 1.000 since 2003 in drug trials. Shareholders who have been patient enough to hold tight have been rewarded over and over, and the stock became a self-fulfilling prophesy of success, almost hitting $100 per share before a few concerns emerged that sent the stock into the $80s.

While Genentech's financial future undoubtedly looks bright, Genentech's stock still carries an incredibly high valuation by any metric. Investors must ask, "What am I paying for and what should I expect in return as a Genentech shareholder?" I believe that most prudent long-term investors will conclude that they're paying for a great company, but one that's so fully valued it won't deliver the kind of returns that will make its considerable risks worthwhile.

All About Avastin

Genentech's stock began its blastoff on May 19, 2003, when the company announced that its experimental drug, Avastin, markedly extended survival in metastatic colorectal cancer patients. The stock leapt almost 50% that day, closing at a split-adjusted $27.43. This trial's success opened up an annual market of $1 billion to $1.5 billion in the U.S. for Avastin in colorectal cancer.

Avastin's first sales came in the first quarter of 2004, when the stock was trading in the $50s. Over the course of 2004, Genentech was able to increase sales over 2003 by 40% while increasing earnings per share by 44% on an adjusted basis. Avastin's sales in its first year totaled $545 million in the U.S. and continued to grow quickly. While these financial successes were incredible, the stock was rangebound for most of the year, trading between $40 and $60.

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