Editor’s Note: On June 3, this article was updated to state that an estimated 80,000 Americans died of influenza during the 2017-2018 flu season.
With the negative news continuing to pile up for Ocugen (NASDAQ:OCGN) stock, the case against the shares has become almost as strong as an Olympic weightlifting champion. OCGN stock is down more than 44% in the last month.
Among the latest, most critical negative developments for the company are the fact that Pfizer’s (NYSE:PFE) vaccine was found to be effective against a variant of the novel coronavirus that started in India and the further delay of the company’s filing of an emergency use authorization (EUA) application.
Also negative for OCGN stock in the continued sharp downturn in U.S. Covid-19 cases and deaths, along with the FDA’s announcement that it is going to start rejecting some EUA applications from Covid-19 vaccine makers.
Given all of these points, I continue to recommend that risk-tolerant investors short OCGN stock with a small percentage of their portfolios.
Data Belies OCGN Stock Bulls’ Bets
Among OCGN stock bulls, the most common contention is that Covaxin has to be approved by the FDA because it has been shown to protect people from variants of the coronavirus. Yet a recent study showed that Pfizer’s vaccine is “only slightly less effective” against the variant first seen in India than the main strain of the coronavirus, according to MedicalXPress. The shot “probably protects” people against the Indian strain, the publication quoted “the co-author of the study” as saying.
Pfizer’s vaccine has previously been found to be highly effective against variants first discovered in the U.K. and Brazil. Two studies on the shot’s efficacy against the South African variant came to different conclusions, with one showing “robust but lower” efficacy against the strain and another indicating that the jab is over ten times less effective against the strain. Both Pfizer and Moderna (NASDAQ:MRNA) have reported that they are working on shots tailored to the South African strain.
Meanwhile, data shows that the number of U.S. coronavirus cases and deaths continue to drop sharply. The declines strongly indicate that the vaccines already approved by the FDA are highly effective against the coronavirus in general and against variations in particular.
On May 28, for example, there were 620 new deaths from the coronavirus and on June 1, 287 people died from the coronavirus. That’s an average of about 450 deaths per day. Those totals, of course, are far below the peak of 3,000-4,000 that the U.S. reported earlier this year.
However, my calculations indicate that they are also far below the average daily deaths that the U.S. experienced during one of its worst flu seasons in recent times. In the 2017-2018 flu season, an estimated 80,000 Americans were killed by that virus. The flu season is about 13 weeks; as a result, in the 2017-2018 flu season, an average of about 880 people per day died of that virus, almost twice the number of people dying from the coronavirus now.
Since I’ve seen no indications that any government official believed that the 2017-2018 flu season was an emergency, there’s little reason to believe that the government views the current situation as an emergency. Consequently, it’s reasonable to think that the FDA is not desperately seeking new vaccines for the coronavirus.
Filing Delay Amid FDA’s Downer Announcement
Another sign that the FDA is not desperately looking to approve new vaccines was a recent announcement that it made. Specifically, the agency warned that it could decide not to grant EUAs to vaccine makers with which it has not yet met.
Ocugen has said that it believes that it still meets the FDA’s guidelines. But given the lack of detail shared by the company about the agency’s feedback on Covaxin, I would not be surprised if Ocugen has not yet met with the agency. (In its most recent press release, the company said that it had “been in discussions with the FDA since late last year,” but did not mention having met with the agency.)
But even if Ocugen has met with the FDA, the FDA’s statement indicates that it’s ready and willing to reject new coronavirus vaccines. That refutes the contention of some OCGN stock bulls that the agency has to approve all vaccines that are safe and prevent the coronavirus.
Finally, sparking a short-lived rally in OCGN stock, Ocugen on May 26 said that it intends to submit an EUA application for Covaxin to the drugs agency later this month.
But CEO Shankar Musunuri also reportedly said that Ocugen was planning to file an application for an EUA for Covaxin in April. And on April 23, he wrote on LinkedIn that, “Our team is diligently preparing the submission for FDA EUA,” sparking speculation that the company was a week or two away, at most, from submitting an EUA application. So I would not bet much money on Ocugen’s latest timetable.
The Bottom Line on OCGN Stock
The FDA has little reason to approve Covaxin at this point, and the agency’s recent announcement indicates that it’s not eager to do so. Further, as I’ve pointed out in past columns, the Phase 3 trials of Covaxin do not appear to have met the agency’s preferences.
Given these points, I think the chances of the FDA granting an EUA for Covaxin are extremely low. Consequently, I recommend that those who own OCGN stock sell the shares, and I believe that the stock remains an excellent name to sell short.
On the date of publication, Larry Ramer held a short position in Ocugen and a long position in Moderna. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, Ford, Exxon, and Snap. You can reach him on StockTwits at @larryramer.