On Monday, California-based Genentech (DNA) reported second-quarter profits of $0.82 per share, excluding charges - less than the $0.86 analysts had been expecting. The company generated roughly $3.24 billion in total revenue, approximately 7.7% more than the approximately $3 billion in the comparable period last year.

While revenue was also slightly higher than Wall Street’s expectations, which projected revenue of $3.23 billion, I think there’s cause for concern in Genentech’s performance. Avastin, a key cancer drug, grew 15% in the period; while this is certainly respectable growth, I do get the sense that it’s less than the investment community hoped to see.

Moreover, management increased their full-year earnings outlook from $3.35-$3.45 per share to $3.40-$3.50 per share, which could possibly offset the second-quarter disappointments. The sell side could then elect to increase their numbers, driving up shares.

The earnings report was overshadowed, however, by the release of results from Avastin’s clinical combo trials, which found that some patients who took the drug alongside Pfizer’s (PFE) Sutent developed a particularly severe form of anemia. The combination is not currently approved or recommended by the Food and Drug Administration.

The drug, which is approved to treat colon, lung and breast cancer, accounted for about 25.6% of total product sales in the quarter.

While this news might therefore be viewed as cause for concern, it should be noted that Sutent is used only in advanced stages of kidney cancer - just a fraction of Avastin’s intended market. The majority of drug sales are expected to be for the treatment of metastatic breast cancer.

Rituxan -- a treatment for non-Hodgkin's lymphoma and rheumatoid arthritis developed in concert with Biogen Idec (BIIB) -- reported sales of $651 million, a more than 11.9% improvement on 2007’s sales. But that drug too could face obstacles, given that its safety profile for the treatment of rheumatoid arthritis is still unclear.

Genentech closed at $75.39, down $2.36, or 3.04%. The shares were up just over a point in after hours trading.