Over the past two years, shares of Celgene ( CELG) have gained a stunning 275%. Due to the stock's remarkable performance, Celgene is a favorite among investors and analysts. Thirteen analysts recommend buying the stock vs. six with hold recommendations.

Considering that earnings and guidance are already in the public's hands, Celgene will likely look to flaunt something to generate interest and keep momentum going when the company reports fourth-quarter and full-year 2006 results before the market opens Thursday.

On Jan. 8, the company preannounced 2006 revenue of $890 million and earnings per share of roughly 57 cents. At the time, the Thomson/First Call consensus estimate was $897 million in sales and a profit of 53 cents a share.

Celgene also issued guidance for 2007 that was a tad disappointing. Projected sales of $1.3 billion and EPS of $1 were slightly below the $1.38 billion and $1.09 consensus estimate of the Street.

Can It Pull Something Out of the Hat?

No significant trial data are expected to be revealed in the report or during the call. Celgene's next major data release is likely to be at the American Society of Clinical Oncology annual meeting in early June, when the company presents results for Revlimid in newly diagnosed cases of multiple myeloma.

My bet is that management will look to celebrate Revlimid's projected success and shoot down concerns over Barr Pharmaceuticals' ( BRL) recent FDA filing seeking an abbreviated new drug application for a generic version of Thalomid.

Celgene said it will report Revlimid revenue of $315 million to $320 million in 2006. However, the drug for multiple myeloma and myelodysplastic syndromes is expected to be a blockbuster. Cowen and Co. analyst Phil Nadeau predicts peak sales of $2.7 billion in 2011. Cowen does not have a banking relationship with Celgene but does make a market in the stock.

In January, Celgene raised the prices on Revlimid by an average of 6.5%. Nevertheless, management issued total sales guidance that was $80 million below the consensus. That suggests that Revlimid may not be selling at quite as torrid a pace as Wall Street expects.

Revlimid competes with Millennium Pharmaceuticals' ( MLNM) Velcade in multiple myeloma. Lehman Brothers analyst Craig Parker believes Revlimid is experiencing slower-than-anticipated penetration in second- and third-line settings, whereas "our conversations with MLNM management indicate that Velcade is holding its own in the face of Revlimid competition."

In fact, Millennium management is confident it will be able to maintain its sales. Earlier in the month, management said Velcade revenue should come in at $220 million in 2006. In the current year, sales are expected to grow to $240 million to $260 million, according to CEO Deborah Dunsire.

A price increase, yet lower-than-expected guidance and a strong performance from a competing drug -- perhaps Lehman's Parker is on to something. It certainly won't help Revlimid's case that Velcade has some marketing muscle behind it. Johnson & Johnson's ( JNJ) Ortho Biotech unit co-promotes the drug with Millennium.

Boosting a Patent Defense

Celgene also may discuss the defense of Thalomid (branded thalidomide) against generic competition. The company is suing Barr for patent infringement. However, even if a generic clears regulatory and intellectual-property hurdles, it's unlikely to reach the market until 2010.

Yaron Werber, an analyst with Citigroup, says that while Thalomid is no longer protected by patents, Celgene's Systems for Thalidomide Education and Prescribing Safety program has intellectual property protection until 2020. Additionally, establishing a similar program to STEPS is expensive. Celgene was required to establish a safety program because of the toxicity associated with fetal exposure to thalidomide.

I don't expect shares to react too strongly to the company's earnings report. However, with a valuation of more than 50 times 2007 earnings and 14 times sales, Celgene can't afford too many missteps. Investors apparently forgave the company for the below-consensus guidance, due to its track record. But at a sky-high valuation, it's unlikely they will give the company many more chances.

Ed Debler, whose firm, Panacea Asset Management, has no position in Celgene, agrees. "If Revlimid doesn't come out of the box strong and hard, the stock will be down 10 points," he cautions. Debler also suggests Celgene shares could see $45 just based on the usual spring swoon of biotech stocks.

In keeping with TSC's editorial policy, Lichtenfeld doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.

Marc Lichtenfeld was previously an analyst at Avalon Research Group and The Weiss Group and a trader at Carlin Equities. He holds NASD 86, 87, 7 and 63 licenses. His prior journalism experience includes being a reporter/anchor for On24 in San Francisco and a managing editor of InvestorsObserver, a personal finance Web site. He is a graduate of the State University of New York at Albany. He appreciates your feedback; click here to send him an email.

More from Stocks

Dow Gets Swept Into Nasty Reversal Even as Nasdaq Posts New Record

Dow Gets Swept Into Nasty Reversal Even as Nasdaq Posts New Record

REPLAY: Jim Cramer on Fed Rate Hikes, Oil Prices and Starbucks Worries

REPLAY: Jim Cramer on Fed Rate Hikes, Oil Prices and Starbucks Worries

What Will GM Do With Cruise -- and Is Its Stock Worth $55?

What Will GM Do With Cruise -- and Is Its Stock Worth $55?

3 Must Reads on the Market From TheStreet's Top Columnists

3 Must Reads on the Market From TheStreet's Top Columnists

This Should Be Your Retirement Savings Plan When the Stock Market Crashes

This Should Be Your Retirement Savings Plan When the Stock Market Crashes