It's important for anyone with a sizable portion of his or her portfolio in biotech stocks to be aware of how Genentech (NYSE:DNA) is performing. To a certain extent, as the financial fortunes of this biotech behemoth and rival Amgen (NASDAQ:AMGN) move, so does the rest of the biotech sector.

In conjunction with its investment-community meeting last week, Genentech provided some financial guidance for 2007 and issued long-term goals for its product pipeline. U.S. sales are forecast to grow 25% year over year for the just-finishing first quarter, and by at least this much in earnings per share for the year. This puts the floor for non-GAAP earnings per share at $2.79 for 2007.

Genentech also announced a new goal of bringing at least 30 new compounds into clinical testing by 2010. A drug company's lifeblood is its drug pipeline, so it's good to see Genentech pushing its internal development team beyond the previous goal of 20 new molecules by this timeframe.

Investors shouldn't get sugary visions of billion-dollar blockbusters just yet, though. What really matters is the quality of these compounds entering development, and their targets. With numerous blockbusters like cancer compounds Avastin, Herceptin, and Rituxan to its name already, Genentech does have a proven track record with its drug-development decisions. More information on some of its later-stage cancer compounds will be announced at the American Society of Clinical Oncology medical conference in June.

Many investors mistakenly equate strong drug-company performance with an undervalued share price. Trading at a forward P/E of nearly 30, shares of Genentech aren't cheap, but investors rarely get the opportunity to buy quality at flea-market prices. Fools also need to watch how the competition -- like GlaxoSmithKline's (NYSE:GSK) newly approved Tykerb breast cancer treatment  -- affects some of Genentech's top products. Otherwise, everything else looks good for this firm.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.