The Vaccine Deal Boost Can’t Keep Ocugen Stock Afloat

Advertisement

It wasn’t very long ago that shares of clinical-stage biopharmaceutical company Ocugen (NASDAQ:OCGN) were a red-hot commodity on Wall Street. Traders were grabbing shares of OCGN stock and a star was born, or so it seemed.

Source: Shutterstock

The problem is that hype cycles don’t last forever. It’s easy to forget that lesson in a time when Reddit short squeezers push stocks to the heavens without any regard for the companies’ fundamentals.

And who knows – maybe they’ll put a short-squeeze move on OCGN stock. However, buying the shares and waiting for that to happen isn’t a viable investment strategy.

Instead, it’s better to closely examine the stock’s price action as well as the company’s prospects of continued success. In the final analysis, you might find that OCGN stock’s best days are in the rear-view mirror.

A Closer Look at OCGN Stock

On Jan. 21, I tried to warn people that OCGN stock looked over-inflated. At the same time, I acknowledged that the stock is “cheap” in the sense that it’s affordable to investors with smaller-sized accounts.

Yet, I wouldn’t say that OCGN stock is “cheap” in the sense of offering a strong value. The day I issued the warning to investors, OCGN shares were trading at $2.22, representing a massive gain as the stock was priced at around 30 cents in mid-December.

Fast-forward to Jan. 29, the final trading day of the month. On that day, OCGN stock had already fallen to $1.77. The air was being let out of the balloon, and today I expect further share-price declines.

Just based on the price action alone, I would advise staying away from OCGN stock. Nevertheless, it’s important to understand why the stock skyrocketed in the first place, and why OCGN is falling back to Earth.

The Big Change

Prior to the onset of the novel coronavirus, Ocugen was mostly known for developing gene-based therapies to cure blindness-related diseases. In particular, the treatment candidates OCU200, OCU400 and OCU410 targeted various vision-related conditions.

I have great respect for Ocugen as the company works diligently to find solutions to blindness-related conditions. However, it must be acknowledged that OCGN stock wasn’t a particularly good investment as the share price has declined over the past five years.

Then came a big change for Ocugen. The Covid-19 pandemic, while tragic, offered an opportunity for Ocugen to enter into the vaccine development race.

And so, in a Dec. 22 press release, Ocugen announced that it is collaborating with biopharmaceutical company Bharat Biotech on the development of Bharat’s Covid-19 vaccine candidate.

That product is known as COVAXIN. According to Ocugen, it promises “safety and immunogenicity demonstrated by the Phase 1 and Phase 2 trials in India” and is currently “in Phase 3 trials in India involving about 26,000 volunteers.”

A Reason to Avoid the Hype

Bharat’s approach to developing a Covid-19 vaccine is more traditional than that of some other drugmakers. COVAXIN uses what’s known as an adjuvanted inactive virus.

Basically, it takes an inactive form of the novel coronavirus and supplements it with an adjuvant, an agent which enhances an immune response.

Ocugen intends to help develop and commercialize COVAXIN in the U.S. So now, you have the scoop on what caused the huge move in OCGN stock.

Now that we’re on the other end of the pop-and-drop cycle in OCGN stock, it’s easy to see why the rally isn’t sustainable. Leading vaccine makers like Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) have already distributed millions of doses of their Covid-19 vaccines to the public.

Pfizer and Moderna are famous, trusted and well-capitalized drugmakers. They’ve already successfully gone through the clinical trial phases. Moreover, they have all of the regulatory clearance they need for their Covid-19 vaccines.

We can’t say these things about COVAXIN. And, we’ll never be able to say that Ocugen was a first mover in the Covid-19 vaccine development race.

The Bottom Line

It’s understandable that the trading community became excited about Ocugen when the company announced the deal with Bharat Biotech.

As the hype phase gives way to a reality check, however, it’s probably best to avoid OCGN stock.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2021/02/the-vaccine-deal-boost-cant-keep-ocgn-stock-afloat/.

©2024 InvestorPlace Media, LLC