Celgene (NASDAQ:CELG) was the subject of a recent downgrade from "overweight" to "neutral" by JPMorgan. Analysts didn't cite new concerns, but that won't stop media from speculating. In the face of uncertainty now is a great time to revisit the bull argument for the company.

Its lead program is going strong and climbing. Recent approvals position Celgene for sustained growth, and the company's adept use of cash is strengthening its market position.

Lead product growth
Revlimid sales have been growing steadily since it hit the U.S. market in 2006, and Celgene estimates $4.9 billion to $5 billion in Revlimid revenue for this year. While analyst estimated peak sales of $11 billion by 2021 seems fantastic, it isn't impossible. Several opportunities exist that would help it reach that peak and should play out over the next twelve months. Late-stage trials to support expansions into lymphoma are under way, and applications for treatment of newly diagnosed multiple myeloma are pending in the U.S. and EU. 

While the Revlimid performance has been outstanding, competition is getting stronger. Johnson & Johnson's (NYSE:JNJ) Velcade recently won a recommendation for first-line treatment of multiple myeloma in some circumstances from the UK's National Institute for Health and Care Excellence. Celgene has tussled with the cost-conscious committee over Revlimid with less success.

Increasingly, austere government payers across the EU are eager to avoid Revlimid's hefty price tag. Velcade's low price appears to be helping it gain share of the multiple myeloma market as first quarter sales rose 18% to $408 million.

The replacements
While Celgene continues expanding Revlimid, it's also feverishly working to fill the gap its eventual exclusivity loss will leave on the company's income statement. So far, the effort is going well. Last year's launch of multiple myeloma therapy Pomalyst was one of the industry's most successful. Sales of the therapy hit $305 million in 2013, and $136 million in the first quarter of this year.

Sales of Pomalyst have been pretty solid considering it ran headfirst into competition with Amgen's (NASDAQ:AMGN) proteasome inhibitor Kyprolis. Kyprolis won approval in July 2012, giving it a 6-month head start, but it appears Pomalyst is steadily outpacing its rival, as Amgen recorded just $68 million in first quarter Kyprolis sales -- but of course you'll still want to keep an eye on both drugs' performance going forward.

After enjoying incredible success in oncology, Celgene is now successfully expanding into immune disorders. In March, the FDA approved Otezla for the treatment of psoriatic arthritis, a relatively uncommon indication. It's currently under review for the much larger plaque psoriasis indication with a decision likely before the end of the year. If approved, Celgene's all-oral therapy's convenience may win over some share from drugs like Humira.

Acquisition history
Otezla and Pomalyst are likely to do well, but Celgene must continue adding to its pipeline. Luckily, the amount of money Celgene generates beyond what's necessary to maintain and expand its asset base -- called free cash flow -- is an executive's dream come true.

CELG Free Cash Flow (TTM) Chart

Source: Celgene free cash flow data by YCharts.

Over the past four quarters, Celgene has generated about $2.3 billion in free cash flow and is sitting on over $5 billion in cash..

Investors will be happy to know that Celgene has a history of investing wisely. The 2008 purchase of Pharmion for about $2.9 billion added Vidaza to the company's blood cancer lineup. Annual sales of the chemotherapy agent peaked at $823 million in 2012 before generic competition entered the U.S. market last September.

The 2010 acquisition of Abraxis -- also for $2.9 billion -- brought Abraxane into the fold. Sales of the injectable mitotic inhibitor are growing fast, with first quarter sales up 50.6% year over year to $184.8 million.

Final thoughts
What I like most about Celgene is the way it refit Thalomid for the multiple myeloma market, then successfully launched improvements in the form of Revlimid and Pomalyst. Successfully marketing Vidaza and Abraxane post-acquisition is another big feather in the company's cap. Past history doesn't necessarily predict future results, but it's a good start. With the amount of cash Celgene is generating, it will be interesting to see what it does next.