Celgene

Source: Celgene Corporation

Celgene's (NASDAQ:CELG) stock price has climbed 11% in 2014. That's good enough to outpace the S&P 500, which has returned just shy of 10%, but not good enough to outperform Celgene's Nasdaq biotechnology index peers, which have returned more than 20%.

Since Celgene is one of biotech's biggest companies, generating more than $6 billion in sales and over a billion dollars in annual profit, let's take a look at what's behind Celgene's stock price performance this year.

CELG Chart

CELG data by YCharts

Solid growth
It's hard to knock Celgene given that the company's sales are up 18.7% to $3.5 billion in the first six months of this year. That revenue success is being driven by an impressive product lineup that includes three fast growing drugs -- the most significant of which is Revlimid.

Revlimid first won approval in 2005 for myelodysplastic syndromes and has since seen its label expand to include use as a treatment for multiple myeloma (in 2006) and mantle cell lymphoma (in 2013). Revlimid notched sales of $2.9 million during its first year on the market and those sales have grown remarkably since to $4.3 billion in 2013. In the second quarter alone, Revlimid revenue totaled $1.2 billion, up 15% from a year ago.

Celgene is also enjoying success with Abraxane, a cancer treatment that won approval for non-small lung cancer in 2012. After winning approval for use in pancreatic cancer last fall, sales have moved notably higher, climbing 39% to $215 million in the second quarter.

The company's Pomalyst is growing even faster. Following its winning the FDA go-ahead in 2013 for use in treating multiple myeloma in patients who have failed on other therapies, including Revlimid, sales have jumped, climbing 143% to $161 million in the second quarter.

The performance of those three drugs would seem to suggest that investors would be flocking to shares, but enthusiasm has been dampened by falling sales of two other drugs.

Revenue from Vidaza, a therapy used to treat myelodyplastic syndromes, fell 28% to $152 million year over year in the second quarter following the entry of generic alternatives in the United States. And Thalomid sales dropped 18% to $54 million.

Vidaza and Thalomid's falling sales create a headwind that may be weighing down Celgene's return this year, but it's investor enthusiasm leading up to the launch of its Otezla, the company's first auto-immune drug, that may be more to blame for Celgene lagging its biotech peers this year.

Celgene

Source: Celgene Corporation

Delivering on high expectations
Celgene is eager to diversify itself beyond its reliance on Revlimid and the company has spent millions ushering Otezla through clinical trials.

Celgene has been bold in its discussions relating to Otezla's potential. The company has maintained that Otezla's sales could be $1.5 billion in 2017.

That bold sales projection is one reason that Celgene's shares more than doubled last year ahead of the FDA approval of Otezla this past March. And therein may lie the problem.

So far investors have little evidence that Celgene can deliver on its seemingly aggressive target. After receiving the FDA's nod as a treatment for psoriatic arthritis in March, Celgene reported it sold just $4.6 million of the drug during the second quarter. That's a solid start, especially since Celgene has indicated that its script volume is outpacing launches of other autoimmune drugs like Xeljanz and Stelera. But investors are likely to remain unimpressed until sales begin tracking toward an annualized rate in the hundreds of millions.

Fool-worthy final thoughts
Revlimid will continue to drive Celgene sales, but Abraxane has billion dollar potential too. And while investors are taking a wait-and-see approach to Otezla, Celgene could see that drug's sales spike next year if the FDA approves it as a treatment for the much larger psoriasis indication. A decision on that indication is expected by the FDA on September 23 and if the regulatory gives a green light, then investors may see Celgene shares continue higher into year end.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned. The Motley Fool recommends Celgene. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.