How high can Ocugen (NASDAQ:OCGN) stock go?
As of this writing on Feb. 8th, OCGN stock was up 201%. Not year-to-date or in the past 52-weeks. The share price was up 200% in a single trading session on Feb. 8th. Between Feb. 1 and 8, Ocugen’s stock rose a staggering 756% to $15.81 a share from $1.81. The jump in price has been so fast and furious that it has left investors scrambling to catch-up. The question is, can the rally in Ocugen be sustained or is this another example of a pump and dump that has become commonplace in today’s stock market?
Fueling The Rally
The current rally in OCGN stock is being fueled by news that Malvern, Pennsylvania-based Ocugen has signed a deal with India-based vaccine developer Bharat Biotech to bring “Covaxin,” a COVID-19 vaccine candidate, to the American market. The vaccine deal led several analysts to upgrade Ocugen to a “buy” rating and issue new price targets on the stock. Price targets now range from highs of $4.50 to $8.00 a share. Some analysts praised the vaccine deal because it gives Ocugen a 45% share of the U.S. profits from Covaxin without having to make any upfront investments in Bharat Biotech.
Some of the analysts are predicting that the Covaxin vaccine could better protect people against new strains and variants of Covid-19 and are forecasting that Covaxin will receive “emergency use authorization” from the Food and Drug Administration (FDA) in the U.S. Covaxin has been granted permission by India’s regulators for use in emergency situations only.
Also, Covaxin does not need to be stored at temperatures as cold as other Covid-19 vaccines. This makes its distribution easier and more cost efficient. From an optimistic standpoint, Ocugen and its vaccine candidate have a long road ahead of them before Covaxin is being used to inoculate Americans.
Institutional Interest
While news of a potential Covid-19 vaccine sparked the rally in OCGN stock, the run up in the share price has been sustained by strong buying among institutional investors, which have been buying the stock at a 27% premium in a direct offering from the company. Ocugen agreed on Feb. 8th to sell three million shares of common stock to health care-focused institutional investors at a price of $7.65 per share, which was more than 25% above the closing price of $5.25 on the previous trading day. The institutional buying has shot the share price sharply higher.
While the scorching hot rally in OCGN stock is good news for investors, it could be difficult to sustain long-term. First of all, Ocugen, which remains a comparatively small bio-pharmaceutical company, is now relying on the Covaxin vaccine receiving emergency use authorization from the FDA – no small feat considering the medication has not entered clinical trials yet. Also, it’s worth keeping in mind that there are currently 67 Covid-19 vaccines around the world that are in clinical trials on human beings, and, so far, only four vaccines have received approval for full use. The Covaxin vaccine that Ocugen has hitched its wagon to is far behind the other vaccine candidates.
The Company’s Other Focus
Prior to jumping into the Covid-19 arena, Ocugen was exclusively focused on developing pharmaceutical treatments for eye diseases such as age-related macular degeneration and diabetic retinopathy. Treating airborne respiratory diseases such as Covid-19 has never been in Ocugen’s wheel house. Neither has the mass distribution of a vaccine throughout the U.S. The company has jumped on the Covid-19 bandwagon, but that doesn’t mean the company will be effective in bringing a treatment for the pandemic to market and getting it into people’s arms.
While every investor would love to get in on the ground floor of a stock such as OCGN, people should probably be cautious about putting money into a stock that has already run up more than 750% in a little more than week. At this point, a pullback isn’t just likely, it’s assured.
Plus, the news on which Ocugen’s stock is rallying is encouraging but it doesn’t justify the share price more than tripling in a few trading sessions. There is no indication that the vaccine Ocugen is planning to distribute in the U.S. will ever be approved for use with Americans, or that Ocugen could properly distribute it. At this point, Ocugen’s stock is riding a lot of hype. Investors should proceed with caution.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.
