Hit 'em where they ain't. That's a pithy summary for profitable biotech Genzyme (NASDAQ:GENZ). By plying its research efforts in the direction of treatments for rare diseases with few (if any) existing treatments, Genzyme has not only largely sidestepped the competition, but it has also produced solid investment returns for long-term shareholders.

Second-quarter results appear to reflect more of the same solid performance. Revenue climbed 22% from the year-ago quarter, and margins expanded once again. Reported net income climbed a further 58% ($0.46 per share), even with the inclusion of higher amortization expenses.

As the top-line performance might suggest, Genzyme's major signature drugs performed well in the quarter. Sales of Cerezyme climbed 13% to $236 million, Renagel sales climbed 15% to slightly less than $101 million, and sales of the relatively new Fabrazyme jumped 50% to more than $74 million. Other products, such as Aldurazyme, Thyrogen, Synvisc, and transplant drugs Thymoglobulin and Lymphoglobuline, did their part to contribute as well.

Moving back to Renagel for a moment, investors should soon see the top-line results for the Dialysis Clinical Outcomes Revisited (D-COR) study. For those new to the story, D-COR studied the comparative long-term benefits to mortality and morbidity from using Renagel versus calcium-based phosphate binders. Should the results be positive, that would be a boost to Genzyme's sales efforts; Renagel is expensive, but if Genzyme can show strong long-term data, more doctors and patients may be willing to use the drug.

Looking at the pipeline, Genzyme isn't particularly strong in terms of late-stage candidates, but the pipeline as a whole is solid. Phase 3 candidates include Myozyme for Pompe disease, Tolevamer for a type of hospital-acquired diarrhea, and multiple new indications of Synvisc. Behind those, Genzyme has multiple Phase 2 trials involving treatment for a wide range of diseases.

As time has gone on, Genzyme has done a good job of diversifying its business, without stretching too far beyond its core philosophy of targeting rare and/or badly underserved diseases. What some large pharmaceutical executives sniff derisively at as "niche markets" have proved to be significantly lucrative for Genzyme already, and I would expect that to continue.

Valuing these shares, though, is a bit tricky. Genzyme lives in the no-man's-land of profitable biotechs -- companies that actually have real earnings but aren't directly comparable with pharmaceutical companies like Motley Fool Inside Value recommendation Pfizer (NYSE:PFE) or Motley Fool IncomeInvestor pick Merck (NYSE:MRK), at least not yet.

For those willing to accept the group of Amgen (NASDAQ:AMGN), Genentech (NYSE:DNA), and Gilead Sciences (NASDAQ:GILD) as peers (excluding Biogen Idec (NASDAQ:BIIB) since Tysabri worries have nailed the stock), Genzyme would appear to be relatively undervalued. That said, Genzyme has often carried a below-peer valuation because of its smaller target markets. So while Genzyme could very well still be a promising pick, investors shouldn't expect parity valuation with its brethren anytime soon.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).