Celgene (Nasdaq: CELG) kicked off the JPMorgan conference yesterday. Meanwhile, its shares got kicked in the pants.

The company basically presented three things:

  • Preliminary earnings for fourth quarter 2010.
  • Guidance for 2011.
  • A short mention of data for Abraxane in lung cancer.

The guidance of $3.30 to $3.35 per share for 2011 was slightly below analysts' expectations, but that's to be expected; Celgene tends to be conservative with its initial guidance at first, then raise it along the way. In 2010, it beat initial earnings guidance by $0.20 to $0.25 per share -- about a 35% increase over 2009 levels.

By now, investors are well aware of Celgene's M.O., so I doubt that was really the cause of the problem, no matter what headlines said. Instead, it seems that most of the share-price drop owed to investors freaking out about the Abraxane lung-cancer data.

For instance, the contingent value rights that Abraxis shareholders got when Celgene bought the company -- which trade on the Nasdaq under the ticker symbol CELGZ -- fell more than 40% yesterday. Clearly, investors are worried about their potential to receive regulatory and sales milestone payments that were tied to the acquisition.

The innocuous comment was said almost in passing -- it wasn't even on the slide -- but the damage was done: Abraxane passed its primary endpoint of response rate, but didn't show a statistically significant increase in progression-free survival (PFS).

Would it have been nice to see an increase in PFS? Absolutely. But the trial was run under a special protocol assessment (SPA), so the FDA has already signed off on response rate as an indicator of whether the drug works.

Expanding beyond breast cancer and into lung cancer is crucial if Celgene wants to get to its $1 billion revenue target for Abraxane, so investors are somewhat right to panic. But lung cancer is extremely hard to treat -- Pfizer's (NYSE: PFE) figitumumab, Human Genome Sciences' (Nasdaq: HGSI) mapatumumab, Novartis' (NYSE: NVS) ASA404, and many others have seen recent failures in the indication -- so the FDA may be more lenient with data requirements. It's likely the reason why the agency allowed Abraxis to use response rate rather than the stricter PFS as an endpoint.

Celgene shares -- and perhaps even those knocked down CVRs -- could be an excellent bad-news buy at this point.

Interested in keeping track of Celgene as it expands the use of Abraxane? Click here to add it to My Watchlist, which will help you keep track of all our Foolish analysis on Celgene.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.