Among currently trending biotechnology firms, Ocugen (NASDAQ:OCGN) is undoubtedly one of the riskiest. Since the beginning of last September, OCGN stock hemorrhaged over 97% of market value. Before you even think about gambling on this name, you’ve got to keep this stark fact in mind. Even before the coronavirus panic, Ocugen was already an extremely volatile “investment,” if you want to call it that.
Worse yet, I don’t see OCGN stock benefitting from the surge in relevant healthcare companies. As you know, U.S. coronavirus cases will soon breach the four-digit threshold. At the time of this writing, there are 30 deaths associated with the disease labeled Covid-19. Worldwide, the cumulative tally is ramping toward 120,000, while nearly 4,300 have died.
Naturally, several pharmaceutical firms, ranging from speculative names like Co-Diagnostics (NASDAQ:CODX) to established stalwarts like Gilead Sciences (NASDAQ:GILD) are racing to develop treatment options. In fact, the Centers for Disease Control and Prevention stated that health authorities are already using Gilead’s experimental coronavirus drug.
That bodes well for whichever company ultimately provides the substantively effective treatment. Of course, that doesn’t do anything for OCGN stock, where the underlying business involves underserved rare eye diseases.
However, don’t take that the wrong way. Wholeheartedly, I agree with InvestorPlace contributor David Moadel’s general sentiment toward Ocugen: it offers hope for ocular graft versus host disease or oGVHD. It’s a nasty disease that if caught early, “irreversible damage can be avoided.” If not, it can spark conditions that severely restrict daily life activities.
Therefore, David, I and many others are actively rooting for Ocugen. Currently, no FDA-approved treatment for oGVHD exists. This company could be the first to provide it.
OCGN Stock Must Traverse a Treacherous Path
But will Ocugen succeed in delivering a viable solution? Admittedly, the signs point in a positive direction. According to the company’s website, its flagship oGVHD treatment (called OCU300) is in late-stage clinical trials.
Typically, when a drug passes earlier clinical trials, the odds favor the speculator. However, plenty of obstacles exist. We’ve already seen examples of biotechs failing efficacy tests when measured against broader patient bases. Further, FDA approval is obviously no guarantee.
But the biggest hurdle against OCGN stock is the all-or-nothing nature of the underlying company and the industry. In an interview with Wbur.org, Patsy Freeland, described the unpredictable nature of working for a biotech startup.
According to Freeland’s experience of getting let go, “They just sat us down and they said, ‘This is the end. Everybody, your last paycheck’s in the back. Pack up your box and please leave.’”
Granted, Ocugen didn’t set up shop yesterday. But the company has the hallmarks of a risky biotech startup: no revenue, bleeding cash, negative equity, and largely dependent on financing options. In other words, if the OCU300 bet doesn’t pan out, OCGN stock can quickly tumble in a hurry.
Earlier this year, Endpoints News contributor Jason Mast noted that several biotechs failed in 2019. One of them included a company that pitched a trendy idea but with little science supporting it. Again, I’m not suggesting that Ocugen lacks substance. But from an investor’s perspective, he or she just doesn’t know what’s really underneath the hood.
From my professional experience in the biotechnology space, I can tell you that the sector is a mix of science and marketing. You can have the greatest idea in the world. But without financial support, you’re dead in the water. And this segues into my last point.
Current Environment Not Friendly for Ocugen
I don’t think you need any expertise in technical analysis to realize that broader market sentiment is incredibly poor. Sure, President Trump is proposing stimulus packages, while central banks are or will soon implement various measures. So far, this has had only a temporary benefit.
But the overriding reality is that you cannot stimulate your way to prosperity. I believe Wall Street insiders recognize this; hence, the wide-scale volatility.
Clearly, this environment does not favor risk-on names. It goes without saying that it doesn’t favor ultra-risk-on names that trade as if the coronavirus will be a daily recurring event for the next 100 years. Those with the money to support risky ventures are looking at defensive platforms. Therefore, the spike of enthusiasm that you need to make your riches in OCGN stock is just not available.
Does that mean there’s absolutely no case for Ocugen? I don’t think you can make that argument, either. What I am saying is that OCGN stock was super risky before the coronavirus. With it, the risk has been amplified ten-fold.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.