Ask any person at random and chances are, the sense that they would least wish to sacrifice is vision. An impairment in the other senses arguably has viable solutions or mitigatory platforms. With severe vision problems, you either get a stick or a dog. Hence, the fundamental narrative for Ocugen (NASDAQ:OCGN) is compelling. But that doesn’t necessarily make OCGN stock a worthwhile investment.
To give a brief background, Ocugen specializes in a unique modifier gene therapy platform that has the potential to treat multiple retinal diseases. According to scientific experts, an “overwhelming majority” of rare eye diseases can be tied to a single gene defect. Therefore, this segment offers a force-multiplier, if you will. To paraphrase J.R.R. Tolkien, one gene modifier to rule them all.
While OCGN stock has always been incredibly speculative, you can see the scientific appeal. Should a biotechnology firm unlock the genetic key, that company could open a viable pathway to treat conditions like wet age-related macular degeneration, diabetic macular edema and diabetic retinopathy.
Theoretically, this is all good and well. However, the biotech arena is full of soaring optimism and gut-wrenching devastation. Sadly, Ocugen recently received the latter end of the biotech stick.
On June 1, the company announced that it discontinued “the Phase 3 trial of OCU300 for ocular Graft vs. Host Disease (oGVHD). The decision to stop the trial is based on results of a pre-planned interim sample size analysis conducted by an independent Data Monitoring Committee, which indicated the trial was unlikely to meet its co-primary endpoints upon completion.”
Yet on June 5, OCGN stock closed up 11%. Does Wall Street anticipate a recovery for this speculative name?
OCGN Stock Is Still Fraught with Risk
Before you get too excited, you should know that Ocugen stock probably rose in sympathy with the broader markets. Scouring through the news, I couldn’t find anything specific that would drive shares to such heights.
Admittedly, for the time being, it’s possible that OCGN stock could ride the economic recovery narrative. Prior to the disclosure of the May jobs report, economists and financial analysts were expecting the worst. There was talk about another eight million jobs lost, reflecting an unemployment rate nearing 20%.
Instead, the jobless rate fell to 13.3%, down from the 14.7% we saw from last month’s data. This reflects that employers added 2.5 million jobs, completely reversing against the pessimism.
While this doesn’t directly impact Ocugen’s scientific operations, it does help keep the lights on. After all, the company doesn’t generate revenue. Therefore, it relies on alternative means for fiscal support, with investor backing providing an important source. So, a shift to risk-on sentiment is invariably positive for OCGN stock.
But if you’re going to buy shares on that storyline, you have to know that this is a double-edged sword. Recent initial jobless claims still number in the millions, reflecting that the labor market is still incredibly vulnerable. Therefore, the stock could just as easily fall based on Wall Street’s emotions.
However, my biggest contention with Ocugen is the risky nature of its business. Yes, a single gene defect may be responsible for a host of diseases. But acknowledging this reality and providing a viable solution are two very different topics. That’s why the Food and Drug Administration has only approved four gene therapies to date.
And discontinuing a late-stage trial for a much-anticipated therapy is a huge blow to credibility. Most investors probably don’t have the appetite for this risk.
Ocugen Offering an Important Lesson
Still, I wouldn’t say that Ocugen is irrelevant. Frankly, the recent drama affecting its market value presents an important lesson to all of us. It just might not matter to OCGN stock.
What I’m referring to is the broader emphasis toward the biotech and pharmaceutical space. Obviously, the novel coronavirus imposed severe headwinds on the economy. Now, social unrest has taken over the headlines, where the frustration has undoubtedly been fueled by the economic crisis.
As such, we’ve seen multiple companies such as Moderna (NASDAQ:MRNA) and Novavax (NASDAQ:NVAX) suddenly rise to prominence as potential coronavirus vaccine providers. Each competitor in the space is busily attending to their early stage clinical trials.
But even with encouraging initial results, that doesn’t mean you should throw everything at these smaller biotechs. Ocugen proves that even with momentum on its side, you never know what you’re gonna get with this wild industry.
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.
