Celgene (NASDAQ:CELG) has long garnered one of the richest valuations among large-cap biotechs, and for good reason. The long and short of it is that Celgene has been able to post industry-leading levels of revenue growth year after year thanks to its unmatched ability to churn out new blockbuster products and key line extensions for medicines already on the market. 

Turning to specifics, Celgene sports a dominant multiple myeloma franchise headlined by its megablockbuster Revlimid, and it has rapidly transformed the inflammatory disease drug, Otezla, into a blockbuster product as well. 

Because of the company's stellar track record in the clinic, though, the market apparently took management at its word back in 2015, when it said that it planned to nearly double the company's total revenues by 2020. Unfortunately, this rosy long-term outlook is starting to fall apart at the seams for two key reasons. 

Bubble.

Image source: Getty Images.

Reason No. 1: Celgene's foray into adoptive cell therapy hasn't gone as planned

In June 2015, Celgene announced a $1 billion-plus collaboration and investment agreement with Juno Therapeutics (NASDAQ:JUNO) to develop adoptive cell therapies for cancer and autoimmune diseases.

Because of the size of this deal, along with Celgene agreeing to certain lock-up provisions on its share ownership in Juno, most onlookers assumed this research partnership was simply a prelude to a full-on buyout later down the road. After all, a successful line of genetically modified cellular therapies would give Celgene a nearly insurmountable competitive moat in the high-value blood cancer market. 

Nevertheless, it's starting to look like Celgene backed the wrong horse in this race. Although Celgene and Juno are rapidly advancing the chimeric antigen receptor T cell (or CAR-T) JCAR017 into pivotal stage studies for relapsed or refractory diffuse large B-cell lymphoma that could lead to its approval by perhaps next year, Juno remains well-behind rivals Kite Pharma (NASDAQ:KITE) and Novartis (NYSE:NVS) from a development standpoint.

T-cell.

Image source: Getty Images.

The short version is that Juno's setbacks with its former lead CAR-T candidate JCAR015 have put it into the unenviable position of probably being last to market among the major adoptive cell therapy companies -- namely, Juno, Kite, and Novartis. That doesn't mean JCAR017 will be a commercial failure, but it'll probably have a much harder time gobbling up market share right out of the gate.  

To counteract this late start, Juno is betting on JCAR017 transforming into a best-in-class therapy with a far cleaner safety profile than its would-be competitors. But there's a good reason Juno's stock is only trading at 3.7 times its last stated cash position -- despite this massive financial backing from a biotech heavyweight and a pipeline chock-full of potential mega-blockbusters. 

Reason No. 2: Ozanimod might not live up to the hype after all

When Celgene bought out Receptos for a measly $7.2 billion in 2015 and added the experimental S1P immunomodulating drug, ozanimod, to its pipeline, it appeared that the biotech had gotten an absolutely fantastic deal. Ozanimod's peak sales across its first three lead indications -- relapsing multiple sclerosis (RMS), ulcerative colitis, and Crohn's disease -- are expected to possibly exceed a whopping $6 billion. 

As ozanimod's late-stage clinical program in RMS has progressed, though, these peak sales estimates are starting to look unrealistic. Getting to the point, Celgene recently reported that ozanimod met its primary goal in a second late-stage trial for RMS. But the pooled dataset across the drug's clinical program failed to provide evidence of a significant improvement on disability compared to Biogen's (NASDAQ:BIIB) injected drug Avonex.

The key issue to understand is that the multiple sclerosis (MS) landscape has been evolving at breakneck pace over the last few years. Ozanimod, for instance, was expected to become the next major advancement among oral MS medicines, where it would compete chiefly against Novartis' similar medication Gilenya. Without a clear-cut disability benefit, though, ozanimod may have trouble laying claim to a best-in-class moniker that's going to be critical to grabbing market share away from other oral MS medications that are already deeply entrenched.

That's a big deal because ozanimod is expected to do most of the heavy lifting in terms of boosting Celgene's top line over the next few years.

Is Celgene overvalued?

Celgene still has a number of other avenues via which to potentially reach its lofty revenue growth projections, but there's no doubt that this once-straightforward path has taken some unexpected twists and turns over the last six months.

Truth be told, Celgene's proven commercial network might be able to overcome ozanimod's lack of a disability benefit and go on to steal market share away from both Biogen's Avonex and Novartis' Gilenya. Ozanimod, after all, still has a chance at beating both of these drugs on the safety front.

Additionally, it also wouldn't be all that surprising if Celgene and Juno are able to make up for lost ground with JCAR017. JCAR017 is expected to be more potent than either of Kite or Novartis' initial CAR-T therapies -- and it come with a cleaner safety profile as well.

The point is that Celgene's sky-high growth prospects are no longer as solid as they once were, even a few months ago. And that's perhaps reason enough to wait for a more attractive entry point before buying shares of this pricey biotech stock.

George Budwell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Biogen and Celgene. The Motley Fool recommends Juno Therapeutics. The Motley Fool has a disclosure policy.