What's the riskiest big biotech stock on the market? According to market research firm EvaluatePharma, it's Celgene (NASDAQ:CELG).

Many investors have been very bearish about Celgene for months. The company's once-promising Crohn's disease drug GED-0301 flopped miserably in a late-stage clinical study in October 2017. Celgene thoroughly embarrassed itself, with the FDA refusing to review the regulatory submission of ozanimod in treating multiple sclerosis (MS). Largely because of these major setbacks, Celgene stock has plunged 45% over the last eight and a half months.

I agree that Celgene is probably the riskiest big biotech on the market in some respects. But despite Celgene's challenges, I remain quite bullish about the stock. 

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Why Celgene is so risky

EvaluatePharma predicts that a $250 billion-plus patent cliff could be on the way for big pharma. Novo Nordisk has the highest percentage of its total revenue at risk as a result of the loss of patent exclusivity for key drugs. However, EvaluatePharma thinks Celgene is the riskiest big biotech for two key reasons.

First, Celgene has the most concentration risk -- the kind of risk that stems from dependence on a small number of products. Celgene relies on blood-cancer drug Revlimid for 63% of its total revenue. The company's patents for the drug are being challenged by potential competitors who want to launch a generic version of Revlimid. Celgene is basically one adverse ruling away from having a disaster on its hands.

But EvaluatePharma looked at how much big drugmakers will depend on their top three products between 2018 and 2024. When you add 2017 Q1 sales for Celgene's No. 2 and No. 3 top-selling drugs, Pomalyst and Otezla, to Revlimid's sales, nearly 86% of the company's revenue hinges on the three drugs. That percentage drops only a little when projecting sales out to 2024. 

No other big pharma company tops 80% of sales dependent on three drugs, according to EvaluatePharma. Only two drugmakers have greater than 70% of total revenue riding on three drugs. 

The other area where EvaluatePharma ranks Celgene as the riskiest drugmaker is in pipeline risk. The market research firm estimated cumulative sales from pipeline products between 2018 and 2024 as a percentage of total revenue. Celgene had by far the highest pipeline risk among all big pharma companies.

Celgene is banking on several current pipeline candidates becoming blockbusters over the next few years. If any of them fail as GED-0301 did, the biotech could be in serious trouble meeting growth expectations.

Why I'm bullish anyway

I don't have a problem with EvaluatePharma's risk calculations. My take is that Celgene really does have the highest concentration risk and pipeline risk among big pharma companies.

However, those calculations only focus on sales projections. They don't attempt to determine probabilities of success or failure. And I think Celgene's chances of success are greater than the concentration risk and pipeline risk percentages indicate.

For example, I don't think Celgene is in too much jeopardy of facing generic competition for Revlimid prior to 2023. The reason is that the big biotech has already stared down one potential generic rival. Natco Pharma agreed to a settlement with Celgene that allows limited-volume sales of a generic version of Revlimid beginning in March 2022 with no volume restrictions after Jan. 31, 2026. My view is that if Celgene's intellectual property rights were strong enough to convince Natco to reach this type of settlement, the company will probably reach similar deals with other prospective challengers.

There's always a possibility of a pipeline setback. However, Celgene isn't dependent on just one or two products for its future growth. The company's pipeline includes five candidates with the potential for sales topping $2 billion, and another five candidates with sales potential of at least $1 billion.

Despite the initial blunder with the ozanimod filing, I fully expect the drug to win approval for treating MS. I'm also especially enthusiastic about luspatercept, which is being evaluated in late-stage clinical studies targeting myelodysplastic syndromes (MDS) and beta-thalassemia -- hematology indications that are right in Celgene's wheelhouse.

In addition, I like Celgene's chances with a couple of drugs picked up through acquisitions earlier this year. The company's buyout of Impact Biosciences brought fedratinib into Celgene's pipeline. My hunch is the drug will become a solid succes story in treating myelofibrosis. An even bigger winner could be liso-cel (also known as JCAR017), a CAR-T therapy Celgene scooped up with its acquisition of Juno Therapeutics. 

The price is right

Risk is usually reflected in a stock price pretty quickly after it's identified. In Celgene's case, I think a higher amount of risk is baked into the stock price than is warranted.

Celgene stock currently trades at less than 7.8 times expected earnings. Its price-to-earnings-to-growth (PEG) ratio is a super-low 0.47. Even if growth projections are overly optimistic by a lot, Celgene is still cheap.

In my view, the market has overreacted to Celgene's problems and underappreciated the company's prospects. Celgene might be the riskiest big biotech on the market, but it's also probably the biggest biotech bargain on the market.

Keith Speights owns shares of Celgene. The Motley Fool owns shares of and recommends Celgene. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.