Is Ocugen Stock a Logical Speculative Buy?
There are a lot of opinions on Ocugen’s stock and its meteoritical rise already has the appearance of a pump and dump, but is it more than that? After languishing for most of 2020 as a penny stock, in 2021 the expectation of the possibility of a Covaxin EUA in the U.S. has given Ocugen a cinderella story. So much so that Ocugen recently did a $100 million offering. Not bad for a biotech stock with relatively few employees.
Bharat Biotech’s COVAXIN is composed of inactivated virions (ineffective viruses outside of host cells). It differentiates itself from other vaccines in its ability to protect against multiple viral antigens. Indians trust and prefer it, and many in the world might as well.
Ocugen then has a “trust” advantage that might be a good vaccine for anti-vaxxer adoption, young people and even to act as a booster shot at home in the U.S.
Still Ocugen as a tiny ophthalmic company may not have real distribution channels for the drug in the U.S. and isn’t big enough to dedicate staff to run a national distribution operation. However, now after the offering, it has a cash pile to quickly get those logistics up and running should an EUA pass with the FDA.
As Americans let their guard down in the summer of 2021, we might be in store for quite a spike in the fall of 2021 and winter of 2022. This is also because it gives time for VOC to mutate further and for a more adaptive version of Covid-19 to become dominant.
However Covaxin appears better than some believed against the variants of concern. Last week, Bharat reported results from the second interim analysis of a phase 3 study of Covaxin that showed the vaccine achieved an overall efficacy of 78% and a 100% efficacy against severe COVID-19.
It’s likely going to be more enthusiastically received as compared to Sputnik V in developing countries as well. Even many Russians don’t want to use Sputnik V. Trying the Chinese vaccine has been a disaster for countries like Chile.
Covaxin might have a bigger future for the world in 2022 than it appears today and Ocugen could have a pivotal role in how that takes place. Under the terms of the agreement, Ocugen will receive 45% of the profits from the sale of Covaxin in the United States (emphasis mine). Bharat Biotech will provide initial doses of the vaccine.
At that point, Ocugen will be responsible for the vaccine’s clinical development, regulatory approval (which includes its EUA) and commercialization in the U.S. However what are the realistic chances of a U.S. EUA coming to pass in 2021? They aren’t great. The U.S. has a demand issue, even for its flashy state-of-the-art vaccines now. Most people who wanted a vaccine there, have gotten one.
So by investing in $OCGN you are gambling that Covaxin will be a booster shot or used for a certain population of young people. That doesn’t seem like healthy speculation considering Ocugen’s already historic rise from a penny stock of $0.28. However there’s more data to consider.
As penny stocks have been in a bear market for eight weeks, enthusiasm for $OCGN is considerable as a Covid-19 play. The sheer volume of interest in its potential to jump from $10 to $30 or higher is very enticing for retail investors who like to speculate on big winners.
There are valid arguments that $OCGN is even nearly 50% undervalued today. There are articles arguing both sides pretty connivingly. However the stock is likely one of those stocks you only want to bet what you are comfortable losing. But while the exuberance about Covaxin continues, Ocugen still faces several key hurdles. After going up 3,320% in 52 weeks, to expect it to go higher really is a kind of wishful thinking.
The U.S. government is even shipping some of its doses of AstraZeneca’s vaccine to India, where Ocugen’s partner Bharat is headquartered. Ocugen might become involved in producing more Covaxin for India itself, as demand for it in the U.S. is likely too late to the game.
However Ocugen only has 45% of rights to the U.S. The need for Covaxin however exists in Canada, Mexico and South American countries. If Ocugen could be involved in U.S. production of Covaxin it would go a long way to helping logistics and vaccinating the world in 2022.
Ocugen hopes to win EUA for Covaxin based on Bharat’s encouraging results from its phase 3 study. The U.S. Food and Drug Administration (FDA) could require the company to conduct another study in the U.S. The FDA didn’t even given AZ a U.S. EUA. The U.S. also has so many good vaccines, the only reason to let Covaxin in is if it’s significantly more effective vs. variants of concern. How likely is it being better than say Pfizer?
COVAXIN is authorized for use in India, where about 300 million doses have been supplied to date. To make it available in the U.S., Bharat Biotech has solicited the help of Ocugen. The latter estimates it will secure emergency use authorization (EUA) from the U.S. Food and Drug Administration (FDA) by the end of June.
This suggests the potential anticipation for $OCGN could be very lucrative in May 2021, whether or not the EUA is achieved in the timeline of the next few weeks.
This has all the markings of a wildly speculative stock and you need to participate in that at your own risk with a healthy dose of realism. It seems implausible that the company could sell 100 million doses of COVAXIN in the U.S unless it was used specifically as a booster vs.
variants or for a wide spectrum of young people. More likely Ocugen will somehow be involved in the vaccination of other countries with Covaxin. If the U.S. is to be a leader in helping the world get vaccinated in 2022, Covaxin needs to be ramped up as it’s one of the easiest vaccines to deploy to South America, Africa and other emerging hot spots like South Asia.
Ocugen can only keep 45% of the profits from selling the vaccine as per its partnership agreement. We have to keep in mind it’s a somewhat modest and small biotech company. It has a 19% short float, and is a highly volatile stock. It only has a market cap of $2 Billion, even with the incredible stock movement it has had in the last six months.
Right now, Ocugen has no product revenue, is losing $21 million a year, and only has about $27.4 million in total assets. Its most promising gene therapy candidate, OCU400 for treating retinal degeneration, has not even entered phase 1/2 clinical trials. Make no mistake, $OCGN is a Cinderella stock.
But as compared to the wild speculation of $MVIS, Ocugen has much more real-world relevance in a Covid-19 shifting world. The U.S. is grossly underestimating the spike that will occur in late 2021. B117 and B1617 could wreak havoc as the vaccination demand in the U.S. has really dried up without any semblance of herd immunity achieved. That false confidence will be a significant problem.
Pfizer has long-established relations with government officials and members of both major political parties. The National Institutes of Health teamed up with Moderna to develop its COVID-19 vaccine. Neither Ocugen nor Bharat has those kinds of political connections in the U.S. The FDA is pretty unlikely to give an EUA to a vaccine created outside of the U.S. However even strictly as a sentiment anticipation play, betting on Covaxin, considering India’s situation, does pull on the heart strings. The U.S. having even 50% vaccination rates isn’t anywhere near herd immunity. Many citizens won’t trust mRNA vaccines, even among the likes of some of the U.S. Army, nurses and teachers.
However Covaxin’s efficacy vs. B.1.617 is very notable. With recent clinical trials in India, patients saw exposure to the new mutant COVID-19 strains circulating in the country. The B.1.617 strain is at least 20% more transmissible and 50% more resistant to antibodies than the original COVID-19 strain. It’s very impressive that COVAXIN maintained its efficacy. Covaxin would make an interesting candidate as a booster shot for the U.S. and Canada.
This is not financial advice but only for entertainment purposes. Always do your own due diligence and accept the considerable risk of trending stocks. $OCGN is $11.24 today with nearly 125k followers on Stocktwits. It’s one of those “stocks of the people” at a time when penny stocks have languished and faded badly with economic recovery momentum. Some will view $OCGN as one of the last great opportunities for a huge run and as a diamond hand play in 2021.
Additionally there’s every reason to believe what’s occurring in India will spread to Nepal, Pakistan, Thailand, the Philippines and other countries. The role of Covaxin will only become more crucial in the months to come. Whether Ocugen gets in on the game in any serious way remains a topic of debate among traders and investors.