Image source: Centers for Disease Control and Prevention.

On Thursday, before the opening bell, biotech blue-chip Celgene (NASDAQ:CELG) reported its much-anticipated fourth-quarter earnings results. For the quarter, Celgene announced net product sales of $2.54 billion, up 24% from the $2.06 billion recorded in the fourth quarter of 2014.

The majority of Celgene's product sales are within the U.S., so it experienced only 1% negative headwinds from currency translation. Adjusted income also rose a healthy 14% to $961 million, with adjusted EPS increasing 17% to $1.18.

Celgene misses the mark
Comparatively, Wall Street wasn't thrilled, and neither were investors as evidenced by Celgene's better than $5.00 tumble in Thursday's trading session. Wall Street had been projecting $2.54 billion in sales -- Celgene actually reported $2.56 billion -- which was more or less in line with estimates; but its $1.18 per share in adjusted profits fell $0.04 short of estimates.

Adding more fuel to the fire, Celgene offered first-quarter profit guidance of an adjusted $1.27 to $1.30 in EPS versus the current consensus of $1.30. At the midpoint, it was a bit lighter than expectations.

What were analysts saying? Many pointed to slowing Revlimid sales and a rise in expenditures as cause for the disappointment. Revlimid, the multiple myeloma blockbuster drug that accounts for more than three-fifths of Celgene's total sales, had its sequential quarterly revenue growth slow to 8% in the fourth quarter from the third quarter.

Spending also rose, most notably when it came to research and development. Adjusted R&D expenses jumped to $649 million in Q4 2015 from $478 million in the prior-year quarter, and included a $70 million milestone payment made to OncoMed Pharmaceuticals (NASDAQ:OMED).

All told, it was Celgene's first profit shortfall since the fourth quarter of 2013.

Wall Street's miss is much worse
Considering that Celgene often shares updated guidance with Wall Street analysts a couple of weeks before it releases its quarterly results, big beats and misses are rare. A $0.04 miss is certainly outside the norm for Celgene, and a bit disappointing.

However, what's more disappointing is Wall Street greatly missing the big picture here.

Image source: Celgene.

Wall Street analysts chastised Celgene for its rise in spending, specifically as it relates to R&D. But what those same analysts are overlooking is both the necessity to reinvest in an expanding pipeline, as well as the cost-reducing measures Celgene already has in place.

Celgene's pipeline may not consist of dozens of clinical-stage compounds, but it does contain three purported blockbusters in 2016 -- Revlimid, Abraxane, and Otezla -- that have the opportunity to greatly expand their label indications in the coming years.

Revlimid is being studied as a maintenance therapy for multiple myeloma, in first-line (ABC-subtype) and maintenance indications for diffuse large B-cell lymphoma, first-line follicular lymphoma, and relapsed/refractory indolent non-Hodgkin lymphoma. These added indications, plus growth in existing first- and second-line multiple myeloma, could push Revlimid above $10 billion in global sales by 2020.

You'll find similar expansion prospects with Abraxane as a possible treatment for first-line, triple-negative breast cancer, and Otezla, with around a half-dozen inflammation indications, including ulcerative colitis.

Image source: Pixabay.

We shouldn't forget about ozanimod, either, which was acquired when Celgene purchased Receptos for $7.2 billion in 2015. If approved as a next-generation multiple sclerosis treatment, it could have peak annual sales potential of around $4 billion. For Celgene, investing in these programs is a necessary (and smart) expense.

Celgene, however, has done its best to space out its expenditures over the long run, as well as reduce fruitless spending. It's done so by forging more than 30 collaborations. Although some of its collaborations could put Celgene on the line for some hefty payments -- OncoMed alone could earn up to $3.3 billion in development, regulatory, and sales-based milestones -- Celgene's plan to partner with first-in-class cancer and inflammation drug developers means that it spends its free cash on only the most-promising pipeline products.

Arguing that Celgene's R&D spending rise is a bad thing simply has no merit.

What really matters
Looking beyond Celgene's short-term R&D spending and perceived weak guidance, I view little to no indication of a company in trouble.

According to Celgene's guidance during its presentation at the J.P. Morgan Healthcare Conference, it anticipates four drugs in its product portfolio will be blockbusters ($1 billion+ in sales) in 2016: Revlimid, which is expected to bring in $6.6 billion to $6.7 billion in full-year sales, and Abraxane, Otezla, and multiple myeloma drug Pomalyst. This growth is consistent with Celgene's full-year forecast of $10.5 billion to $11 billion in sales, and adjusted EPS in the range of $5.50 to $5.70, which represent increases of 17% and 19% at their respective midpoints.

Image source: Celgene.

Celgene also hasn't backed off of its 2020 forecast, which calls for revenue in excess of $21 billion, and EPS of at least $13. By comparison, Celgene's full-year revenue totaled $9.3 billion, and its full-year adjusted EPS was "only" $4.71. This essentially implies that Celgene is capable of double-digit percentage growth on its top and bottom line in each year over the next five years, which is hardly worrisome.

The company also offers numerous paths to growth. It can grow organically via label expansion, demand improvement, or price increases. It can go out and buy new therapeutics as it did with Abraxane in 2010 and ozanimod in 2015. Also, it's willing to partner with other drug developers in order to bring new treatments to market. It looks to be a more or less recession-proof formula that I believe will succeed over the long run.

My suggestion: Stop worrying about Celgene's Q4 miss, and keep your eyes on the horizon. The sun is still shining very brightly on Celgene.