Once upon a time—and we must begin with that phrase, because what follows sounds like one hairy fairy tale—there was this company called Ocugen (NASDAQ:OCGN) that had a vision, if you will, for treating blindness-related diseases. When it went public in December 2014, that vision led to OCGN stock selling for $660 per share.
Now, dear readers: Smart investors are supposed to buy and hold. But they’re also supposed to buy low, not at the absolute pinnacle. And so we reach the point in this fable of failure where the Big Bad Wolf, Evil Stepsisters and six Wicked Witches combined couldn’t have planted a more painful hurt.
Today, Ocugen trades at 33 cents per share. Yup. One share for less than a pack of gum. Or, if you put up $10,000 based on your know-it-all uncle’s recommendation in 2014, your OCGN stock would be worth $5. Was that your stomach that just fell out from under you?
Or, to pose that question worthy of any Nobel-winning economist: What the hell happened?
OCGN Stock: Three Therapies, No Winner (Yet)
First off, it helps to know that biopharmas often live and die by their ability to deliver medical breakthroughs, or at the least blockbuster deals. Based in the Philadelphia area, Ocugen has placed its bets—whichever ones it has left, anyway—on three therapies known as OCU200, OCU400 and OCU410. They’re intended to treat neovascular disorders, inherited retinal disorders, and dry age-related macular degeneration respectively.
The company’s Founder, Chairman and CEO is Dr. Shankar Musunuri, and if shareholders aren’t happy with him, they should know that to some extent he shares their pain. Wallmine.com reports that he bought 406,000 shares of OCGN stock in December. He paid just north of $158,000; that stock is worth about $134,000 today. While that’s not exactly a good day at the races, it could’ve been much, much, much worse: Those shares would’ve fetched $268 million in 2014.
Musunuri takes home $572,320 in annual salary so he’s not exactly hurting for dough. But if OCN stock could somehow, someway, someday bounce back to even 25% of its IPO price, he’d be looking at $67 million in the portfolio.
Here’s why that matters to you: When the founder buys a significant number of shares in a very recent transaction, it speaks volumes about his confidence in the company.
An FDA Ray of Hope
Meanwhile, you could skip the gym bill this month and go crazy with a $100 purchase of OCGN stock, roughly 303 shares. And should that 25% bounce ever come to pass? Huzzah: $50,000! Who needs to lift weights when you can lift sacks of cash? Think about it. Just one victory in the lab could make that happen. Or a lot more.
Before you spend your fantasy stash, keep in mind that none of Ocugen’s three therapies has advanced beyond the pre-clinical stage. Yes, it’s important to note that OCU400 and OCU410 are gene therapies, and as such use technology licensed from the Schepens Eye Research Institute of Massachusetts Eye and Ear (Harvard Medical School). Success with either or both would make medical headlines worldwide and propel the stock into the stratosphere.
Meanwhile, the Food and Drug Administration recently granted OCU400 its fourth “orphan drug” designation. It amounts to a continuing show of good faith as Ocugen works on a medical treatment for a rare condition. “Orphan drug” refers to the probability that without government aid, work on the therapy would be abandoned because the condition it treats is so exceptional: an “orphan disease.”
The Bottom Line
A chorus of InvestorPlace writers and analysts have noted the perils of buying OCGN stock, ranging from the company’s cash crunch to the long timeline its therapies will need to ever see daylight. Ian Cooper, Vince Martin, Chris Markoch, Matt McCall, Tezcan Gecgil and most recently Dana Blankenhorn have laid out cases that collectively point to this purchase as speculation on steroids.
I agree. But that said, speculation isn’t such a horrible thing so long as you understand the risks and manage your expectations. That cycle of FDA funding points the way to rosier prospects, so maybe a token purchase isn’t a horrible idea. If you were going to spend $100 on some gadget for your iPhone, you could just as easily buy 300 shares of OCGN, tuck the stock cert in a drawer and call it good. Chance are you won’t miss the money once it’s spent. You may even forget.
And maybe, just maybe, you’ll be cleaning out that drawer years later, find the OCGN certificate you forgot about and discover you’re thousands of dollars richer. Awesome!
Don’t you just love fairy tale endings?
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.
