Conditions only seem to get worse for Ocugen (NASDAQ:OCGN). Since its merger, Ocugen stock has continued the decline that occurred under the company that it took over, Histogenics.
Unfortunately, both the merger and the reverse split have failed to stem the decline of former Histogenics stock. Considering the conditions facing the company, I do not recommend Ocugen stock regardless of risk tolerances.
Ocugen Merger Has Failed to Turn Stock Around
For most of its history, what we now know as Ocugen stock was Histogenics, a cell therapy company focused on orthopedics. The equity has experienced a continual decline for years. It peaked at a split-adjusted level of around $778 per share soon after its initial public offering in 2014. In the late summer of 2018, the stock crashed below $1 per share as investors sold off following a failed phase three trial.
The stock had gained some traction after they announced the Ocugen merger in April. Ocugen, previously a private company, instituted a reverse merger, which they completed on Sep. 30. With this, the newly formed Ocugen initiated a 60:1 reverse stock split. However, when that occurred, Ocugen stock lost most of its value. On its first trading day as OCGN stock, it lost almost 64% of its value and closed that day at $2.85 per share. Conditions have only become worse since that time.
OCGN Is an Overpriced Cheap Stock
Now, with the stock trading near the 40-cent per share level, its prospects have taken a dramatic turn for the worse. Still, this stock is cheap for reasons that my colleague Josh Enomoto spelled out well. The company does not earn revenue, relying on grants, a dwindling cash position, and stock dilution to keep its doors open.
Moreover, Histogenics existed to treat orthopedic conditions, while Ocugen focused on rare eye diseases. The potential synergies of such a union do not seem clear. From the outside looking inward, it looks like a marriage of two people who got together simply because nobody else would take them.
However, the “marriage” of Histogenics and Ocugen looks destined to end in a suicide pact instead of a mere divorce. Other than an emphasis on cell therapies, the companies had almost nothing in common. Hence, instead of ruining just two lives, this new Ocugen may be destroying the investment future of all who buy.
Typically, I care little about financials with biotechs. If they invent a miracle treatment for a condition, the money will find its way to the stock. If they have solid financials, but their trials continually fail, they will likely not succeed.
While anything is possible, I would not anticipate a miracle here. Do not expect this to become the biotech who made good like Biogen (NASDAQ:BIIB). Nor should one look forward to OCGN stock to becoming the next GW Pharmaceuticals (NASDAQ:GWPH) or Cara Therapeutics (NASDAQ:CARA). Instead, this appears destined to join the long list of failed biotech startups.
After all, one cannot expect Ocugen stock to cure its ills when the company itself has fallen into critical condition. It brings in no revenue. It has no treatments to offer the market. OCGN does not even appear to have an apparent reason to exist. Even at around 40 cents per share, I would consider Ocugen stock overvalued.
Bottom Line: Avoid Ocugen Stock
Do not expect a recovery in Ocugen stock. Generally, financial analysts struggle with this sector because these equities rise and fall not on revenue or earnings, but the success of clinical trials. However, even from this limited vantage point, OCGN appears destined to fail. Investors should worry about companies with no revenue even under the best of circumstances.
Unfortunately for longs, OCGN is much closer to the worst of conditions. With no effective treatments, and without a clear reason to exist, I would avoid buying Ocugen stock even as a speculative play.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.