Ocugen (NASDAQ:OCGN) traded recently at just 34 cents and had a market capitalization of $12.3 million. With its penny-stock status in mind, why should InvestorPlace readers bother with a nano-cap stock? Back on Oct. 9, the stock surged by over 20% when the company said it would buy back $2 million worth of stock. But since then, the stock trended lower. If you haven’t heard of it, Ocugen is a clinical-stage biopharma that is working on treating rare and under-served eye diseases.
Ocugen began a share buyback worth up to $2 million. It reasoned that its shares were significantly undervalued. To maximize shareholder value, management said that buying back stock would benefit its investors. The move proved short-lived: Ocugen stock continues to head lower.
Despite troubles with OCGN stock, the company may find a sustainable business model in the medium term. It entered a strategic partnership with CanSinoBIO on Sept. 30. CanSino Biologics will work with Ocugen on the latter’s gene therapy pipeline product candidates that target inherited retinal diseases. Ocugen is working on these product candidates with Schepens Eye Research Institute of Massachusetts Eye and Ear. This is an affiliate of Harvard Medical School.
On its press release, Ocugen said “CanSinoBIO will provide all CMC development and clinical supplies for the development of OCU400, Ocugen’s first gene therapy product candidate in its modifier gene therapy platform. CanSinoBIO maintains the option to support commercial manufacturing for Ocugen. The agreement also provides commercialization rights to CanSinoBIO in Greater China.”
High Risks Ahead
Investors should recognize the high risks associated with developing a gene therapy platform and related therapies. This area of science is very complicated and could fail. Also, targeting inherited diseases could prove tricky. Ocugen could need even more money in the future to fund its studies. And if it runs out, it will need to sell stock or raise debt, hurting existing shareholders.
Fortunately, the company received two orphan drug designations from the U.S. Food and Drug Administration for its OCU400 candidate. Per its press release, “The first, for the treatment of NR3E3 mutation-associated retinal degeneration and, most recently, for the treatment of CEP290 mutation-associated retinal disease.”
Advanced Program
The company’s most advanced program is OCU300, which treats ocular graft-versus-host disease. oGVHD is a severe chronic autoimmune disease, that commonly occurs after allogenic bone marrow transplants. And by common, I mean oGVHD occurs in after 60% of these surgeries. On its conference call, Ocugen said that by 2020, 53,000 patients will suffer from oGVHD. If untreated, this disease could lead to vision loss and permanent damage to the ocular surface.
In the modified gene therapy space, the company has OCU400. This targets cells in the retina. In a mouse model involving six different retinal diseases, the company reported the trial therapy resulted in reversing disease progression. OCU400 also restored retinal structures.
OC410 is Ocugen’s second program in its modified gene therapy platform. Here, hormone receptor genes are delivered to the subject to treat dry atrophic macular degeneration.
Third-Quarter Highlights
Ocugen completed its merger with Histogenics in the period. Prior to the merger, it completed a private placement financing that raised $25 million. After expenses, it added net proceeds of $17.2 million to its balance sheet.
On the conference call, the company also justified its CanSinoBIO partnership. It said its new partner had state-of-the-art manufacturing capabilities that will enable it to explore gene therapy studies. With its partner providing a manufacturing path, funding all development costs and holding the responsibility for safety studies, investors face fewer overall risks.
My Takeaway on Ocugen Stock
Ocugen is a speculative trade that penny investors may want to consider. The risks are obvious, but the upside may prove rewarding. The stock could surge higher on any positive clinical results. In the near-term, the company completed the necessary financing and reduced its share dilution. That should stabilize OCGN stock for now.
As of this writing, Chris Lau did not hold a position in any of the aforementioned securities.
