Earlier this week, biotech behemoth Genentech (NYSE:DNA) announced a collaboration agreement with Abbott (NYSE:ABT) to develop and market two of Abbott's early stage anti-cancer compounds.

Both of the Abbott compounds are in phase 1 studies across a broad range of cancer types, with one scheduled to enter phase 2 studies later in 2007. It will be years before either of them could enter the market, assuming the data is strong enough, and it's way too early to speculate about how good these drugs could be.

Some news articles described the deal with Abbott as some sort of hedge, should Genentech's anti-cancer drug Avastin fail against its competitors. But Genentech has made numerous early-stage drug-development deals for other oncology compounds over the years. Cancer-drug makers like Dendreon (NASDAQ:DNDN), Seattle Genetics (NASDAQ:SGEN), and Exelixis (NASDAQ:EXEL) have all signed onto previous research or development deals with Genentech.

Some of Genentech's top compounds, like breast cancer treatment Herceptin, do face increased market competition. However, none of its lead drugs are in any danger of having their market share entirely eroded.

Genentech is the world's largest biopharma, and one of its biggest public drug companies. Investors should expect to see Genentech sign drug development deals covering various classes of therapies and disease indications all the time. These deals don't signal a lack of confidence in its top compounds -- in fact, they're good news for the long term. If the company didn't strike such deals, its drug pipeline would eventually begin to dwindle.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. Exelixis is a Rule Breakers recommendation. The Fool's disclosure policy is good for what ails you.