Execution Challenges Could Short-Circuit the Big Ocugen Stock Rally

None of my InvestorPlace colleagues like Ocugen (NASDAQ:OCGN). InvestorPlace analyst Matt McCall doesn’t like OCGN stock. Nor do contributors Ian Bezek, Tezcan Gecgil, or Josh Enomoto. In fact, you won’t find a bullish piece on Ocugen stock on InvestorPlace in 2020.

Doctor touched medical clamp a DNA molecule
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And this won’t be the first one.

I’m not one for following the crowd. If anything, many of my ideas actually buck group-think. But the crowd is right here. Specifically, the InvestorPlace crowd is right here in calling OCGN stock a strong sell.

Here’s why.

A Closer Look at OCGN Stock

Ocugen is a small, clinical-stage biopharmaceutical company broadly focused on leveraging breakthroughs in gene therapy to cure blindness.

Bold initiative. With a big long-term opportunity. And the company has been tracking in the right direction to capitalize on that opportunity over the past few months.

Specifically, Ocugen is building gene therapies on its Modifier Gene Therapy platform, which is a breakthrough technology platform that will enable the company to use one gene therapy to modify multiple genetic mutations. That’s a big deal because the core disease Ocugen is trying to treat — retinitis pigmentosa (RP) — has over 150 gene mutations.

Other RP gene therapies are highly targeted and can only treat RP in one of those 150 mutations. Thus, with other gene therapies, you’d theoretically need 150 RP therapies to fully eradicate this rare eye disease.

But Ocugen’s OCU400 treatment does the job of all 150+ of those therapies, in one therapy. It’s a novel “one to many” therapy, which through targeting and modifying various nuclear hormone receptor genes — which are basically the “master” genes of the eyes —  can treat multiple RP genetic mutations.

Sound promising? It is. And it’s more than just talk.

OCU400 has won four Orphan Drug Designations, two of which have come in the past two weeks (hence the huge rally in OCGN stock). That’s an unprecedented number of ODDs for an ophthalmology therapy. And it speaks to the uniqueness and robustness of Ocugen’s underlying technology portfolio for developing novel therapies.

Of course, if Ocugen is successful in bringing OCU400 to market — and other gene therapies thereafter — this $50 million small-cap biotech company, could run to a multi-billion-dollar valuation.

But that probably won’t happen.

Why Ocugen Stock Is a Sell

Ocugen stock is a sell for one simple reason: The company likely won’t make it to FDA approval.

You have to start with the fact that only 14% of drugs pass clinical trials and reach commercialization. So Ocugen is already operating in an environment with a low success rate.

On top of that, Ocugen doesn’t have much money. There’s only $15 million in cash on the balance sheet. That compares to what has been a $5 million quarterly cash burn rate. At that burn rate, Ocugen will only stay afloat for another three quarters, because there’s no revenue coming in the door and FDA approval for OCU400, the company’s leading drug candidate, isn’t supposed to happen until 2025 (if it ever does happen).

Thus, there’s a four year delta between when Ocugen will run out of money, and when the company may start earning revenue.

How will Ocugen fill that delta? An equity raise is possible. Especially if OCU400 starts knocking it out of the park in clinical 1/2 trials in 2021. But counting on favorable clinical trials and a subsequent equity raise to simply keep the company afloat seems risky.

So, when you zoom out and look at the big picture, it becomes pretty clear that the odds are stacked against Ocugen.

Bottom Line on OCGN Stock

I’m not going to sit here and say there’s absolutely no reason for OCGN stock tripling over the past two months. There is a reason. And it’s that this company’s novel drug candidate, OCU400, is gaining traction and credibility, and inching closer to a potential breakthrough.

But I don’t think it’s going to happen. There are simply too many execution risks here for me to say, with confidence, that Ocugen projects as a winner.

So I’d avoid OCGN stock. Don’t chase. Look for opportunities elsewhere.

Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been rated one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/08/execution-challenges-short-circuit-ocgn-stock-rally/.

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