Will Conservative Guidance Sink This Big Biotech in 2014?

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Celgene , the biotech company best known for its blood cancer treatments, has rallied nearly 70% over the past twelve months.

It has constantly fired on all cylinders, with its flagship drug Revlimid posting blockbuster sales and newer drugs like Abraxane and Pomalyst also reporting strong growth.

On January 13, Celgene announced its top and bottom line forecasts for 2014, 2015, and 2017. Although its longer-term projections for 2015 and 2017 were optimistic, its 2014 numbers slightly missed consensus estimates, causing the stock to slide nearly 3%.

Does this mean that Celgene's year-long rally has come to an abrupt end, or does this dip represent a strong buying opportunity for long-term investors?

Let's review Celgene's key fundamentals to better understand how the company compares to industry peers Amgen , Biogen , and Gilead Sciences .

A closer look at Celgene's guidance

Let's first take a look at Celgene's preliminary year-end results and its guidance.

Source: Celgene press release.

Wall Street has noticed some flaws in Celgene's 2014 projections.

Analysts polled by Thomson Reuters had expected Celgene to earn $7.29 per share on revenue of $7.43 billion. That slight miss means that Celgene could post weaker year-over-year top and bottom line growth than it did in 2013.

However, Celgene's long-term growth targets in 2017 are highly encouraging, and would represent 152% and 111% increases in earnings and net product sales, respectively, from 2014.

Investors should remember that Celgene's announcement is a preliminary earnings release. Celgene is expected to report its complete fourth quarter and full year earnings on January 30.

The Foolish fundamentals

We should also check Celgene's fundamental scaffolding to see if the stock is due for a pullback.

Let's compare its key fundamentals against three of its large cap biotech peers -- Amgen, Biogen, and Gilead Sciences.

Source: Yahoo Finance as of Jan. 14.

Celgene doesn't excel in any category, but it is competitively valued with its peers on the basis of its PEG, P/E, and P/S ratios.

However, Celgene's bottom line growth is lagging that of its peers, mainly due to increased expenses last quarter related to the European launch of Imnovid (Pomalyst) for multiple myeloma in Europe and the U.S. launch of Abraxane for pancreatic cancer.

Celgene's rally, while impressive, still can't measure up to Biogen and Gilead's growth over the past year.

Source: Ycharts.

Biogen and Gilead's whopping gains were fueled by plenty of positive headlines.

Biogen's multiple sclerosis drug, Tecfidera, was approved in March 2013 and is expected to hit peak sales of $3.8 billion. Gilead's hepatitis C drug Sovaldi was approved in December 2013, and is forecast to generate peak sales of $7 billion.

Meanwhile, Celgene's biggest headline in 2013 was the approval of Abraxane for pancreatic cancer in September. While that was a major catalyst for the stock, it couldn't match the hype generated by Biogen and Gilead.

A trio of key drugs

Looking ahead, investors should be familiar with three of Celgene's drugs -- Revlimid, Abraxane, and Pomalyst.

Source: Celgene press release.

In a nutshell, Revlimid is still expected to be Celgene's backbone for the foreseeable future. The drug has been a bigger blockbuster than ever imagined -- analysts originally expected the drug to only generate peak sales of $1.5 billion prior to its approval.

A key catalyst for Revlimid will be approval as a second-line treatment for chronic lymphocytic lymphoma (CLL), which Celgene intends to pursue with its new phase 3 CONTINUUM trial. A prior trial testing Revlimid as a CLL treatment was halted by the FDA in July 2013 due to safety concerns. Celgene also intends to pursue U.S. and EU approvals of Revlimid as a treatment for newly diagnosed multiple myeloma.

Meanwhile, Abraxane and Pomalyst are expected to become blockbusters on their own, with the former expanding Celgene's reach beyond blood cancers and the latter reinforcing its leading position in multiple myeloma treatments.

In 2014, Celgene intends to initiate two additional phase 3 trials, testing Abraxane as a treatment for adjuvant pancreatic cancer and a first-line treatment for late-stage squamous cell non-small cell lung cancer. Celgene also intends to pursue a regulatory approval for Pomalyst/Imnovid in Japan to boost global sales.

In addition to those three core drugs, Celgene's Otezla (oral apremilast), a treatment for psoriatic arthritis and psoriasis, could generate blockbuster sales of up to $1.75 billion if approved. Celgene expects the FDA to approve Otezla in 2014.

The Foolish takeaway

In closing, Celgene still has bright days ahead, and although its top and bottom line growth might stall out in 2014, long-term investors shouldn't be worried.

Celgene's three main drugs could generate $10.5 billion in combined sales by 2017, and Otezla could also emerge as another pillar of growth. In addition, Revlimid's patents won't start expiring until 2019 -- giving it plenty of time to develop new drugs to offset those eventual losses.

Celgene might not be generating as much media excitement as Gilead or Biogen, but its steady top line growth and growing portfolio of non-hematology treatments indicate that it is well positioned to grow over the next decade.