NEW YORK (CNNMoney.com) - Celgene, the fastest-growing tech company in the pharmaceutical industry, owes much of its success to a drug that was once the bane of the pharmaceutical industry.

Sales have grown rapidly for Thalomid, a treatment for multiple myeloma blood cancer and leprosy, jumping 21 percent in the first quarter to $107 million, and up 25 percent in 2005 to $389 million. The drug's success helped propel Celgene, a biotech based in Summit, N.J., to the top of the Business 2.0 list of fastest-growing tech companies.

Celgene's overall sales surged 42 percent in 2005 to $535 million, and its stock price has more than doubled over the last 12 months.

But thalidomide, the basic compound for Thalomid, has one of the most notorious histories in the drug industry. The drug was taken in Europe in the 1950s and 1960s as a painkiller for pregnant women and was blamed for horrible birth defects, including missing limbs.

After a 36-year hiatus from the market, the drug was approved by the FDA in 1998 as a treatment for leprosy, and carries a warning label of "severe birth defects." Women of child-bearing age are not allowed to take the drug unless they take two forms of birth control, or agree in writing not to have sexual intercourse during treatment and for four weeks before or after treatment.

Today, Thalomid is taken primarily as a treatment for certain types of blood cancer. The Food and Drug Administration approved the drug for this use Thursday, though doctors had already been prescribing it off-label as a cancer treatment. In fact, its use a cancer treatment accounted for about 95 percent of Thalomid's sales, according to Lazard Capital Markets analyst Matthew Osborne, even though that use was not approved by the FDA until this week.

FDA approval of Thalomid as a treatment for multiple myeloma sent Celgene's (up $1.14 to $41.58, Research) stock price up about 2 percent Thursday, and up nearly 4 percent in Friday morning trading.

But even through Thalomid has "done the heavy lifting" for Celgene's growth so far, its glory days are winding down and another drug, Revlimid, is expected to drive the biotech's future sales, said Osborne.

"[Thalomid] generated $389 million last year and we project it to decline somewhat over the two to three years and that's primarily because of cannibalization from Revlimid," said Osborne.

Osborne expects Thalomid sales to decline to $274 million in 2007 from a projected $367 million in 2006. But Revlimid, a treatment since 2005 for blood disorders, is awaiting an FDA decision on the drug's use as a treatment for multiple myeloma. Osborne projects Revlimid sales to grow to $262 million in 2006, $1.1 billion in 2007, and $1.7 billion in 2008.

He also expects Celgene's stock price to grow, with a 12-month target of $52.

The Celgene drugs' main competitor is the cancer drug Velcade from Millennium Pharmaceuticals (Research) and Johnson & Johnson (up $0.17 to $60.62, Research), said the analyst, but the Celgene drugs have an edge because they're taken orally, while Velcade is an injectable.

More opportunities for growth will be presented at the annual conference of the American Society of Clinical Oncology, to be held in Atlanta from June 2 to 6, said Celgene spokesman Brian Gill.

At ASCO, Celgene will unveil the results of its study combining Revlimid with dexamethasone as a treatment for multiple myeloma, which targets plasma cells in the blood. Gill said the study will show that this combination improves survival, and the FDA is expected to decide June 30 whether the combo should be approved.

"Thalomid and Revlimid are turning an incurable blood cancer myeloma into a chronically manageable cancer," said Gill. "This may be one of the very best examples of how biotechnology is able to turn a deadly cancer into something that is manageable and treatable. We see the franchise of Thalomid and Revlimid doing very well for many years to come as oral treatments for myeloma cancer."

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