While it’s currently valued at less than half its 52-week high, Ocugen (NASDAQ:OCGN) stock is once again trending in the right direction. The Malvern, Pennsylvania-based bio-pharmaceutical company that’s focused on developing treatments for blindness has certainly got a comeuppance from investors over the past two months. After a scorching rally at the end of January, OCGN stock hit a ceiling of $18.77 on Feb. 8th. Since then it has been all down hill for the share price, falling 59% to its current level of $11.68.
However, if investors are looking for a silver lining, they should consider that the share price looks to have bottomed in mid-April at $5.52 a share and is again moving upwards. And there is reason to be optimistic that this stock might, at a minimum, be able to stay out of penny stock range.
Ocugen did not hesitate to raise capital while its stock price rallied. In February, Ocugen agreed to sell three million shares of common stock at $7.65 per share. Health-focused institutional investors were keen to respond and the buying helped to push OCGN stock higher. The buying from institutional investors was particularly impressive given that they were purchasing shares at a 27% premium.
Institutional investors were partly attracted to OCGN stock by the company’s position as a leading developer of therapeutic treatments for eye diseases such as age-related macular degeneration and diabetic retinopathy. However, what really drove investors to buy shares was the news that Ocugen is shifting gears to focus on a vaccine against Covid-19. The company is currently working around the clock on a COVID-19 vaccine candidate called “Covaxin.”
OCGN stock really took off in February after the company announced a deal with India-based vaccine developer Bharat Biotech to bring Covaxin to the American market. The vaccine deal prompted some analysts to slap a “buy” rating on Ocugen and issue new price targets on the stock, some of which are as high as $8.00 per share. Industry observers seem to like that Ocugen will receive nearly half of all U.S. profits from Covaxin without having to make an investment in partner company Bharat Biotech.
The medical community also gave a thumbs up to the Covaxin deal, noting that the vaccine, while late to the global inoculation party, could protect people against new strains and variants of Covid-19. Covaxin has already received permission from India’s regulators to use the drug in emergency situations and an application for “emergency use authorization,” with the U.S. Food and Drug Administration (FDA) emergency use pending approval.
The bump higher in OCGN stock since mid-April came after Ocugen reported the results of a phase 3 clinical trial of the Covaxin vaccine conducted by Bharat Biotech that showed the medication is 100% effective at treating severe cases of COVID-19.
Questions Remain On OCGN Stock
While the Covaxin vaccine holds some promise, questions remain about how soon or even if the Covid-19 treatment will be approved by the FDA. Timing of when the vaccine will receive regulatory approval remains a major question mark. Also, there are currently 89 Covid-19 vaccines in human clinical trials around the world, but, to date, only eight vaccines have received approval for use in adults. Despite its positive results in phase three clinical trials, Covaxin remains at the back of the pack when it comes to Covid-19 vaccine candidates.
Also, Ocugen’s pivot to Covid-19 will require a Herculean effort as the company has never before created treatments for airborne respiratory diseases such as Covid-19. To date, the company has focused exclusively on eye diseases. Plus, Ocugen has never previously undertaken the mass distribution of a vaccine throughout the U.S., or anywhere else for that matter. The company may need a distribution partner should Covaxin successfully make it to market.
Pros and Cons
OCGN stock is a tricky one to evaluate. There is potential in the company’s Covid-19 vaccine, and if the company can get it approved in the United States, it could lead to a windfall in terms of revenues and profits. But Ocugen still has many miles to go before Covaxin is being put into people’s arms. Covid-19 aside, Ocugen is a pretty small bio-pharmaceutical company. Before its stock run-up this past February, Ocugen had a market capitalization of just $55 million. The company’s sales in 2020 were just $43,000 and its losses totaled $21.8 million.
At this point, OCGN stock seems to be riding on hope and hype. Staying above the $5 penny stock threshold over the medium-term could be difficult for the company. And the long-term outlook depends entirely on the progress of Ocugen’s Covid-19 vaccine. At this point, investors will be taking on tremendous risk with Ocugen stock. Nevertheless, a small position might be warranted to test the waters. Just be sure to set a stop-loss order.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.