Just as the proverbial American worker stamps their time card on a daily basis and does their job, biotech giant Celgene (NASDAQ:CELG) continues to deliver for shareholders without fail.

Last Thursday, Celgene dazzled investors yet again by reporting better than expected third-quarter earnings results and pointing to an even brighter forecast for the remainder of the year.

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Source: Celgene.

Running on all cylinders
For the quarter, Celgene announced net product sales rose 19% as net revenue jumped 18% to $1.98 billion. Adjusted income jumped a slightly more impressive 20% as earnings per share rose 24% to $0.97 from $0.78 in the prior-year period. Comparatively speaking, Wall Street had been expecting Celgene to earn just $0.95 per share in profit in the third quarter.

What was impressive about Celgene's quarter is that it appeared as if growth was coming from practically every facet of its pipeline. Of course, blood cancer drug Revlimid continues to be the portfolio superstar, with revenue up 19% to $1.3 billion, and the drug on pace for $4.95 billion in cumulative sales this year alone. In addition, label expansion for Abraxane, which is now approved as a late-stage treatment for pancreatic cancer, helped boost sales 25% to $212 million and is now putting the drug on pace for $850 million in full-year sales. Multiple myeloma drug Pomalyst also witnessed impressive growth, with sales essentially doubling to $181 million as international sales rose 402% to $63 million. Finally, anti-inflammatory drug Otezla, which could be Celgene's next blockbuster in the making, added $18 million in its first full quarter of sales.

But, if investors simply stopped here and didn't read between the lines, they'd miss a big component of the Celgene story: namely, label expansion and collaborations.

Label expansion will extend the exclusivity of key drugs
If you think Celgene is growing at a phenomenal pace now, just wait until the company has its ducks in a row to gain potentially lucrative new indications for Revlimid, Abraxane, and Otezla, which could really ramp up revenue and cause its cash flow to soar.

Though Revlimid is expected to see its first patents begin to expire in 2019, Celgene's ability to expand its blockbuster drug to new indications should give it life well into the next decade. Revlimid is being explored as a potential treatment for first-line follicular lymphoma, as a relapsed/refractory indolent lymphoma treatment, as a first-line (ABC-subtype) and maintenance therapy for diffuse large B-cell lymphoma, and for second-line chronic lymphocytic leukemia maintenance therapy. Though none of these indications are by themselves groundbreaking, combining Revlimid's steady growth in multiple myeloma and mantle cell lymphoma with these new potential indications could cause sales to grow by another $2 billion over the next three years, and perhaps peak as high as $10 billion per year -- if all of the cards fall Revlimid's way.

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Source: Celgene.

In addition to Revlimid, Abraxane has the potential to gain a label expansion to first-line triple-negative metastatic breast cancer, while Otezla is pushing into numerous anti-inflammatory disease indications, including rheumatoid arthritis, ulcerative colitis, and Crohn's disease. By 2017, Celgene estimates Abraxane sales will double from their 2014 sales projections, and that Otezla with be a $1.5 billion-$2 billion per year drug.

Long story short, label expansion is going to play a key role in Celgene's success.

Collaborations play a key role, too
It isn't just label expansion. Celgene is also collaborating on a number of cancer-fighting agents that offer some incredible make or break potential. Best of all, the money being used to divvy out upfront licensing fees to its partners is coming from its existing cash flow thanks to top-selling drugs like Revlimid.

Celgene's partnership with OncoMed Pharmaceuticals (NASDAQ:OMED) is a great example of taking a chance on a promising early stage cancer treatment.

OncoMed Pharmaceuticals, for its part, received $155 million upfront from Celgene and had Celgene take a $22.25 million equity investment in OncoMed's common stock. OncoMed also stands in line to earn more than $3 billion in milestone payments if, in a perfect world, every aspect of its pipeline dazzled in clinical trials and was approved by the Food and Drug Administration. On the flipside, Celgene gets the opportunity to ride a handful of potentially first-in-class drugs that target cancer stem cells, the perceived progenitors of cancer metastasis and recurrence. Rather than attacking cancer proliferation, anti-cancer stem cells actually fight the underlying cells that cause the disease to spread. This could indeed prove to be a very lucrative collaboration. 

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Source: Celgene.

Celgene is also collaborating with Agios Pharmaceuticals (NASDAQ:AGIO) on AG-221, a first-in-class IDH2 mutant inhibitor for advanced-stage tumors that express the IDH2 mutation. What's so exciting about this early stage compound is that in April Agios reported in an interim analysis that three of six AG-221-treated blood cancer patients had a complete response, while six of seven evaluable patients had an objective response. Complete responses are incredibly rare for blood cancers, so Celgene and Agios may be sitting on a big winner. In a later phase 1 analysis, though, just six of 25 evaluable patients demonstrated a complete response, lasting anywhere from one to four months. 

Moving forward, I wouldn't expect Celgene to back away from forging new collaborative deals.

Looking ahead
As you may have gathered from Celgene's stellar third-quarter results, the company boosted guidance once again. Though its full-year revenue forecast remains unchanged at $7.6 billion, the $3.65-$3.70 in estimated full-year EPS is higher than the range of $3.60-$3.65 provided by the company at the end of Q2, and the $3.50-$3.60 range offered up at the end of Q1. This is because Celgene is masterful when it comes to launching new drugs and maximizing its margins.

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Source: Celgene.

With the company expected to double its sales on an organic basis between 2013 and 2017 and more than double its EPS to nearly $8 per share in 2017, at least based on Wall Street's current expectations, supporting a valuation of $150 per share wouldn't be completely out of the question for Celgene. Considering its steady growth rate of around 20% and a forward P/E (for 2017) of just 19, if the company earns $8 per share and hits $150 per share, it would appear that there's still plenty of upside potential left in this stock.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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