For nine long quarters, Genentech (NYSE:DNA) has beaten analyst earnings estimates with a stick. With its second-quarter 2008 earnings report due out just the other side of this weekend, Genentech will go for a "perfect 10" on Monday.

After the news comes out, we'll have time aplenty to dissect it. But in these few hours before we begin obsessing over Genentech's short-term progress, let's take a moment to review what investors think about it as a long-term investment. Our tool in this endeavor: Motley Fool CAPS, where we poll more than 110,000 investors for their views on well over 5,500 companies, Genentech among them. Here's what Fools have to say about it.

Up or down?
More than 1,800 investors have submitted ratings on Genentech. Their verdict: It's gene-a-riffic! Some 95% of CAPS investors rating Genentech expect the stock to outperform the market, and among our best investors -- the CAPS "All-Stars" -- that optimism rises to 96%. That's enough to win Genentech the coveted five-star rating on CAPS.

While investor optimism runs rampant when it comes to major drug manufacturers, few stocks match Genentech's perfect five-out-of-five rating:

Drug Manufacturers -- Major Group

CAPS Rating (out of 5)



Johnson & Johnson (NYSE:JNJ)


GlaxoSmithKline  (NYSE:GSK)


Merck (NYSE:MRK)


Abbott Laboratories (NYSE:ABT)


Bristol-Myers Squibb  (NYSE:BMY)


Eli Lilly  (NYSE:LLY)


Wall Street vs. Main Street
Wall Street is even more bullish (bullisher?) on Genentech. All 19 professional analysts who've taken affirmative buy/sell positions rate the stock a "buy." (That’s not surprising when you consider how gracefully Genentech has sidestepped the market collapse, outperforming the S&P 500 by almost 21 points over the past year.)

Bull pitch
Possibly the best bull pitch on Genentech comes from CAPS player PDTBiotech, who modestly writes:

Not much analysis here, except to point out that ... Analysts project that in 2010 Genentech will have 3 of the top 4 oncology drugs by revenue (Avastin, Rituxan, and Herceptin), with those 3 drugs alone generating $17.1B. If they hit that number they'll be growing sales at a CAGR of ~13.5%, something almost no other major drug companies can expect over the same time frame. ... While I wouldn't say anyone has a really robust pipeline right now, Genentech has done a good job at developing new compounds, and inlicensing a nice mix of drugs that look intriguing and/or complement/enhance their current drugs nicely (the deals they cut with IMGN and SGEN for ADC technology that could enhance their monoclonal antibodies could pay off huge). ... They're still expanding indications for their drugs with new approvals. Avastin's recent approval for breast cancer will give a nice boost, and there are still more cancers out there for their antibodies-the trick will be whittling down which ones the antibodies work for and will provide the biggest payoff. They're also testing their drugs against competitors, such as their recent release of data showing that Herceptin enhances GSK's Tykerb.

Yeah, shame on you, PDTBiotech. Very shabby analysis indeed. Why, you didn't even mention the stock's EV/EBITDA ratio!

Bear pitch
I am, of course, joking. PDTBiotech did a great job laying out the bull thesis on this one. In contrast, the Genentech bears seem to be in hibernation, with hardly a peep heard since 2007. The most recent anti-DNA pitch (would that be an RNA pitch?) of real value dates from February of last year, and is authored by justahistorian, who concedes:

Genentech has some outstanding drugs, perhaps none better for revenue than Avastin. The drug has demonstrated efficacy in a number of different cancers and clinical trials to date have not shown that the drug should ever be stopped. Add to that the drug's cost $55,000/year for the most common use, and it should add up to strong revenue. However, Genentech has recently introduced a new pricing program that has alienated some physicians. Of bigger concern is the Democratic congress that may use Genentech as the poster child for greedy pharmaceuticals during their push to get pharma reforms.

Nearly 18 months later, that risk doesn't seem to have materialized. What has arisen, however, is a bit of pricing risk. While I won't dispute the company's quality, Genentech currently sells for 27 times earnings, and a whopping 32 times free cash flow. Weighed against analyst expectations of 21% long-term growth for the stock, this is one strand of DNA I just can't go long on.

Who said that?
To learn more about the wise Fools who penned these words, their other picks, and their records for accuracy, just click here.

And for a sampling of big-name biotechs that Fool staffers prefer over Genentech, don't forget to claim a free, 30-day all-access pass to Motley Fool Income Investor. You'll find Glaxo, Eli Lilly, and Johnson & Johnson among the newsletter's recommendations.