Given the vast wealth that comes with curing disease, you might think that raising money for the quest would be easy.
It’s not. It never is, not until the final goal is in sight.
Until then, scientists find themselves in a netherworld of finance. They dance between what they can do, what they can say and what investors want to hear.
That’s the story of Ocugen (NASDAQ:OCGN), a company based in suburban Philadelphia seeking treatments for genetic forms of blindness.
Ocugen’s pipeline currently shows three drugs, none of them yet in Phase 1 trials. One of them, called OCU400, recently won its fourth “orphan drug” designation from the U.S. Food and Drug Administration.
The OCGN Stock Orphan Drug Frenzy
The Orphan Drug program offers outsized incentives for the development of drugs that treat rare conditions. The idea is that without a guaranteed market at the end of the process, such drugs will never be trialed. This can include grants for continuing study of such drugs.
Once a company gets the designation, they’re eligible for “a seven-year period of U.S. marketing exclusivity, tax credits for clinical research costs, clinical research trial design assistance, the ability to apply for annual grant funding and waiver of Prescription Drug User Fee Act filing fees.”
Ocugen has now won this designation four times on OCU400. With each designation, the range of conditions it might be tested against broadens. So does its potential market.
But the struggle for money continues. Ocugen has used publicity to raise money. It had $15.1 million at the end of June. Managers said on their recent earnings call their “runway” of cash now extends into early next year.
The Coronavirus Connection
Confusing things further, and adding to the frenzy, is an agreement with Advaite, a Chicago company, to work on its novel coronavirus testing kits. Ocugen brought in just $43,000 on this business during the recent quarter and doesn’t expect much more revenue.
But just the mention of the coronavirus is a red flag before bulls. Driven by traders on Robinhood, the stock popped to nearly $1, from 22 cents. This quickly reversed. The shares opened for trade Aug. 31 at 37 cents, a market capitalization of $54 million.
Don’t Invest in OCGN Stock, Speculate
Right now, Ocugen isn’t an investment, and it’s barely a trade. InvestorPlace writers have been clear on that.
It’s best to avoid Ocugen at the moment, wrote Ian Cooper last week. It needs too much time and too much cash, added Vince Martin. This will be a penny stock for years, wrote our Chris Markoch. Buyers are missing the obvious signs of failure, according to InvestorPlace analyst Matt McCall. With no revenue and dwindling cash, Ocugen is risky, added Tezcan Gecgil.
The Bottom Line on OCGN Stock
I often liken small biotechs to oil wildcatters in the 1930s. With little more than a hunch they would punch holes in the ground, sometimes finding a gusher, but usually pounding drills into sand.
The Orphan Drug program is a way of extending hope into smaller pools of biotech riches. It’s promising a profit if something useful is found.
But you still must find something useful. If OCU400 succeeds in even a Phase 1 trial, the stock will pop again. If it even gets such a trial off the ground it will pop.
But you’re wildcatting. You’re speculating on OCGN stock. You’re not investing.
This doesn’t mean the people behind Ocugen are dishonest in any way. They’re scientists, seeking cash to keep researching. Science is expensive and provides no guarantees. If you want to play that game, know those risks.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.