I haven’t written about Ocugen (NASDAQ:OCGN) since last August. I’ll admit to doing a double-take when I saw the OCGN stock price. Wasn’t this a company that was years away from delivering a product to treat rare eye diseases? What did I miss?
Then I went to the company’s web site and got my answer: Ocugen had become a player in the race to develop a Covid-19 vaccine. The company is partnering with an Indian company, Bharat Biotech, to deliver what it calls a differentiated Covid-19 vaccine. The vaccine is already in use under an emergency use authorization (EUA) in India. Ocugen is entitled to a share of any profits that the shot generates in the U.S.
Other InvestorPlace columnists have written about the hurdles that Ocugen will face as it seeks to become a serious player in the vaccine race. Not the least of these challenges is that a number of epidemiologists are now forecasting that the U.S. will achieve herd immunity in the next few months.
I understand the point that any publicly traded company is beholden to its shareholders. And if you’re a biotech company in the middle of a pandemic, I suppose there’s a reason to pivot from a focus on gene therapies for rare eye diseases to a Covid-19 vaccine.
But the story would be a little easier to swallow if Ocugen was a profitable company with established products on the market. The company is neither. In August, I wrote that Ocugen is not likely to bring a product to market until 2025.
Gene Therapy for Rare Eye Diseases
So once you strip away Ocugen’s efforts to deliver a Covid-19 vaccine, you’re left with the company’s core business. That is gene therapy for rare eye diseases. The problem that investors are having is that the company is not yet conducting even early-stage trials for anything in its pipeline. And it’s unlikely that Ocugen will have a product on the market until 2025 at the earliest.
That is not abnormal for a biotech company. That is exactly why many biotech equities are penny stocks; they are frequently unprofitable and many have minimal to no revenue.
So my intention is not to criticize Ocugen for not having a product on the market, but only to illustrate that there is a high likelihood that OCGN stock is going to fall dramatically below its current price.
A Second Bite at the Covid-19 Apple
Something that has fallen under the radar is that partnering with Bharat Biotech is not Ocugen’s first effort to assist in the fight against Covid-19. In April 2020, Ocugen entered into an agreement with Advaite to provide support services for the latter company’s diagnostic Covid-19 test kit.
According to Ocugen’s 10-K, the company was supposed to be paid on an hourly basis for the time it spent helping Advaite. Additionally, Ocugen was scheduled to receive tiered royalty payments from Advaite. However, it appears that the testing kit was unsuccessful, so we can assume that Ocugen generated little, if any, revenue from the project.
Should Investors Buy OCGN Stock?
As it stands now, it appears that Bharat’s vaccine was completed too late to generate any revenue for Ocugen. That means investors need to look at OCGN stock with clear eyes. When they do so, they’ll see that the stock is overvalued.
In time, the company may deliver a product to market. Until then, investors will have to wait and see what Ocugen will do with the capital it could raise by issuing new shares.
Ocugen seems years away from delivering a product that will bring revenue in the door. So instead of looking at how OCGN stock is performing this year, you have to look at what it was doing last year.
On December 21, 2020 OCGN stock closed at 29 cents per share. The share price was little changed over the preceding nine months, showing that Ocugen is a speculative penny stock that for the last few months has been masquerading as something more. And you need to make your investment decision accordingly.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.