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Image source: U.S. Food and Drug Administration. 

The wait is over. Last Thursday, before the opening bell, biotech blue-chip stock Celgene (NASDAQ:CELG) reported its third-quarter earnings results. Expectations were high for the fast-growing drugmaker, but based on the greater than $7 drop (almost 6%) in its share price last Thursday, things didn't go as planned.

Celgene's Q3, by the numbers
For the quarter, Celgene reported revenue of $2.334 billion, an 18% increase from the prior-year period, as currency translation negatively affected sales by 1.5%. Adjusted net income also screamed higher by 26% on a year-over-year basis, to $1.01 billion. On an adjusted basis, this equates to $1.23 in EPS, a substantial increase from the $0.97 in EPS reported in Q3 2014.

Despite a rich history of leaving Wall Street's estimates in the dust, Celgene's results were mixed in Q3. The $1.23 in EPS surpassed the Street's forecast by $0.01, marking the seventh consecutive quarter it's topped projections. However, Wall Street had been forecasting $2.4 billion in Q3 sales, slightly more than the $2.334 billion that Celgene delivered.

Additionally, Celgene reaffirmed its full-year EPS guidance of $4.75 to $4.85 on $9 billion to $9.5 billion in sales -- in-line with the Street's forecast. But how Celgene achieves those results adjusted a bit. Sales of multiple myeloma blockbuster Revlimid are expected to hit $5.8 billion for the full year, up from a prior forecasted range of $5.6 billion to $5.7 billion, whereas sales projections for cancer drug Abraxane were retracted a bit to a range of $950 million to $1 billion from its prior forecast of $1 billion to $1.25 billion.

Four key observations from Q3
Although headline numbers are the go-to source for Wall Street and investors to quickly determine how well a company is performing, it's the underlying details of how a company got there that often prove far more important. Here are four key observations you may have overlooked if you focused solely on Celgene's headline numbers.

1. Revlimid doesn't appear to be having any issues with Kyprolis
One of the biggest question marks heading into Celgene's Q3 report was how multiple myeloma therapy Revlimid would respond with the introduction of Amgen's (NASDAQ:AMGN) Kyprolis into a second-line setting. Kyprolis had been approved solely for third-line and up treatment for multiple myeloma, but gained the label expansion from the Food and Drug Administration this summer.

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Image source: Amgen.

When Amgen reported its third-quarter results last week, it noted that sales of Kyprolis rocketed higher by 46%, to $137 million. This obviously raised a few eyebrows on Wall Street, and potentially concerned Celgene shareholders. However, with Celgene boosting its Revlimid forecast for the full year, and noting that its market share remains strong across the globe, it would appear that the market for multiple myeloma has widened to cater to both drugs.

Considering that Revlimid still has a long shelf life before generics will enter the picture, this is fantastic news.

2. Abraxane is having difficulty with cancer immunotherapies
On the other hand, cancer drug Abraxane, which is approved to treat breast, lung, and pancreatic cancer, is having all sorts of issues in the United States. Taken directly from Celgene's Q3 press release, "U.S. sales of $145 million decreased 4 percent year-over-year and were affected by competitive dynamics in lung cancer and breast cancer."

This phrase, "competitive dynamics," wasn't discussed in detail in Celgene's earnings report, but I believe it can mean only one thing: the introduction of cancer immunotherapies.

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Image source: Celgene.

Here's the deal: The FDA-approved cancer immunotherapies, such as Bristol-Myers Squibb's (NYSE:BMY) Opdivo and Merck's (NYSE:MRK) Keytruda, are approved to treat a select type of metastatic melanoma and second-line indications for non-small-cell lung cancer. Abraxane is approved in first-line NSCLC.

However, trials are underway pushing Opdivo and Keytruda as possible first-line therapies in breast cancer and NSCLC. There is the possibility that physicians are closely monitoring the progress of cancer immunotherapies and their superior response rates for high PD-L1-expressing patients in clinical trials, and either holding off on prescribing Abraxane, or even pushing these new immunotherapies in off-label use. I want to be clear that this is mere speculation on my part, but it could certainly explain Abraxane's U.S. weakness.

3. Otezla is outpacing its anti-inflammatory peers
Another question leading up to Celgene's quarterly report concerned how well the Otezla uptake was going. Otezla is Celgene's relatively new anti-inflammatory drug, and it offers blockbuster potential by as early as 2016 if it maintains a successful launch. The data offered by Celgene certainly implies that its uptake is moving along smoothly.

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Image source: Celgene.

As you can see above, in terms of weekly prescriptions versus new anti-inflammatory products, Otezla is kicking butt and taking names. For the quarter, Otezla sales jumped 55% from the sequential second quarter, to $139 million. As Otezla ramps up its European launch and pushes for additional indications, there's no reason to believe it can't be a $2 billion-plus annual drug before the end of the decade.

4. Demand, not price, drove results
Most importantly, instead of relying on pricing power to drive growth, a dramatic increase in volume provided the spark for Celgene. True to its organic growth credo, volume improved 16.1% from the prior-year quarter with prices rising by a more pedestrian 3.6%.

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Image source: Celgene.

Demand-driven growth is much more preferable because it will allow Celgene to more easily justify price increases should it need to pass along higher costs, while also affording the company a potentially loftier valuation, because growth driven by demand is more sustainable over the long term. Considering Celgene's previously stated 2020 goals that suggested it could double sales and more than double EPS, the company would appear to be right on track to achieving those targets.

Is Celgene a buy?
The $64,000 question that should be asked here is whether or not you should consider Celgene a buy after the company delivered mixed earnings results.

Though Abraxane's sales data was disappointing and it certainly bears monitoring, Celgene's growth engine and pipeline look as strong as ever. Within its pipeline, it has numerous label-expansion opportunities for Revlimid and Otezla, whereas ozanimod offers blockbuster potential if approved to treat relapse-remitting multiple sclerosis. In terms of approved products, Revlimid continues to be the workhorse that defies expectations, while Otezla's early growth has impressed.

Personally, I'd suggest using last Thursday's decline as more reason to dig deeper into Celgene's business model, and consider taking a long-term position.

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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