When

Celgene

(CELG) - Get Report

reports its quarterly results Thursday, the company will likely have one drug, Thalomid, to thank for what is expected to be solid revenue growth.

Of course, predictions are what investors want to hear, and anything Celgene might offer about its experimental drug Revlimid will command attention.

Analysts expect the company's sales for the quarter to rise sharply from a year earlier, spurred by increased off-label use of the leprosy drug Thalomid for a type of cancer called multiple myeloma. The expanded use of the drug came following positive trial results presented at one of this year's biggest medical meetings.

Although Thalomid's only approved use is for leprosy, the drug has been used to break down cancerous cells. At the American Society of Clinical Oncology meeting earlier this year, Celgene presented trial results that showed Thalomid improved multiple myeloma remission rates and reduced the chance of disease recurrence when it was added to standard treatments.

Federal law lets doctors make off-label prescriptions as long as a product has been approved for a single use, but companies aren't allowed to market a drug for unapproved indications.

Thalomid is Celgene's branded version of the drug thalidomide, which was used in the 1950s and 1960s to treat morning sickness in pregnant women. The drug was banned after being linked to severe birth defects that were caused when growing fetuses stopped developing certain blood vessels.

For the second quarter, analysts expect Celgene to record earnings of $27.9 million, or 14 cents a share, on sales of $131.8 million. In the year-earlier period, Celgene earned $12.4 million, or 14 cents a share, with $87.8 million in revenue.

The company has forecast earnings of about 55 cents a share on sales of $525 million for the full year, in line with Wall Street's estimates.

Eyes Forward

The optimists may have substantial expectations given the stock's recent growth. On Tuesday, Celgene's stock closed at $47.47, less than $2 below the 52-week high. Since the start of 2005, shares have risen 80%.

Celgene could face generic competition for Thalomid in the not-too-distant future. While the company maintains distribution patents, all of its composition-of-matter patents, which are generally considered stronger and harder to break, have expired. Composition-of-matter patents cover the chemical ingredients that make up a compound. To offset any competitive threats, Celgene will be depending on Revlimid, for which the company hopes to receive Food and Drug Administration approval in the fourth quarter.

During its most recent quarter, Celgene reported positive trial results for Revlimid in treating multiple myeloma, myelodysplastic syndromes and chronic lymphocytic leukemia. Celgene is currently seeking approval for Revlimid in myelodysplastic syndromes.

The multiple myeloma front could get interesting.

Millennium's

(MLNM)

Velcade was approved in May 2003 for treating the disease in patients who've had at least two prior drug therapies or who've experienced a relapse. One analyst, Yaron Werber of Smith Barney, has said that drug

may have reached a plateau.

During Celgene's first-quarter earnings conference call, company executives maintained their Thalomid revenue target of $400 million for the year. But Ron Ellis of Leerink Swann sees Thalomid sales of $352 million and Revlimid sales of $48 million for the year, for $400 million in sales of both drugs combined.

Ellis says Thalomid's market position could be eroded somewhat in the fourth quarter after the Revlimid launch. Revlimid is a next-generation immunomodulatory drug, closely related to Thalomid, but more potent and with fewer side effects. Leerink doesn't have an investment banking relationship with Celgene, but the firm has received compensation for nonsecurities services.

Myelodysplastic syndromes are blood disorders that cause improper blood-cell development and low blood-cell count, leading to fatal bone marrow failure and acute leukemia. Multiple myeloma develops when excessive blood plasma clumps together to form multiple tumors in the bone marrow and elsewhere in the body.

Chronic lymphocytic leukemia occurs when the bone marrow produces too many of a certain type of white blood cell, leaving little room for other healthy blood cells and so making the body vulnerable to infection, disease and excessive bleeding.

Revlimid was submitted as a proposed treatment for low-grade myelodysplastic syndromes in which parts of the human chromosome No. 5 are missing. Patients with the so-called 5q minus deletion have a disease that progresses slowly.

Focalin Focus

Despite

previous drug safety concerns, "we remain optimistic about Revlimid's changes for approval in 5q-minus MDS in October and continue to think safety concerns are overblown," Jim Reddoch of Friedman Billings Ramsey wrote in a July 7 research note.

One of those concerns is myelosuppression, or a reduction in the bone marrow's ability to produce blood cells. Myelosuppression is a common side effect of Revlimid, but it's manageable with a treatment interruption or dose adjustment, according to researchers at ASCO in May.

Another Celgene drug that investors will keep an eye on is the attention deficit-hyperactivity disorder drug Focalin. Earlier this year, the FDA issued a warning against ADHD drugs, like

Shire's

(SHPGY)

Adderall and

Johnson & Johnson's

(JNJ) - Get Report

Concerta, announcing its intention to change the drugs' labeling to mention side effects and risks including suicide, heart problems and sudden cardiac death.

In May, Celgene received a $21 million royalty payment from its partner

Novartis

(NVS) - Get Report

when the extended release Focalin XR was approved by the FDA. Focalin is a refined form of the drug Ritalin, an older stimulant used to treat ADHD. Celgene's full-year Ritalin family revenue forecast is about $60 million, including a milestone payment.

As a result of the payment, Reddoch increased his earnings estimate for Celgene's second quarter to 16 cents a share from 9 cents. However, he says overall analysts' models are too low regarding Revlimid's launch expenses for the year. His 2005 earnings estimate remains unchanged at 50 cents. Friedman Billings Ramsey doesn't have an investment banking relationship with Celgene.