Ocugen (NASDAQ:OCGN) issued a June 10 press release that it will no longer pursue an emergency use authorization (EUA) for Covaxin, the company’s Covid-19 vaccine it’s licensed from India’s Bharat Biotech for use in the U.S. OCGN stock took a tumble on the news.

As I write this, it is currently trading at $8.35, so I thought I’d bring out a line I used in April to describe my feelings for TPG Pace Beneficial (NYSE:TPGY) stock. 

If OCGN stock is worth $8, I’ll eat my hat. Here’s why.

OCGN Valued at $1.7 Billion  

As of April 30, Ocugen had 198.23 million shares outstanding. That puts its market capitalization at $1.7 billion or 28,516x sales.

Now, I’m not about to pretend I haven’t had mixed feelings about the company. At times in 2021, I’ve been darn optimistic about its chances. 

“Ocugen CEO Shankar Musunuri said that the two-dose vaccine would be go-for-launch by the end of June, providing Americans with as many as 100 million doses once approved for distribution by the Food and Drug Administration [FDA],” I wrote in early May. 

“If all goes according to Hoyle, Ocugen insiders are set to become incredibly wealthy. And I’ll have egg on my face for my spectacularly wrong assessment of the situation.”

However, I did suggest in that article that speculative investors wait until OCGN traded in single digits to buy its stock. It did for most of May. But that was on the understanding that Ocugen was on track to get its EUA. 

We now know that the FDA is having none of it. As a result, Ocugen’s been forced to pursue a biologics license application(BLA). This submission requires the company to gather additional information. It will take time to do so.  

The change of plans has led to class-action lawyers searching for plaintiffs to join the fight against Ocugen. The general premise is that the company made misstatements regarding the viability of its Covid-19 vaccine. 

A lot has to go right for Ocugen to remain in the hunt for Covid-19. And, that doesn’t take into account the fact Moderna (NASDAQ:MRNA) is tripling production capacity to supply three billion doses annually by 2022. 

There is no way Occugen will get on the dance floor if Moderna can produce three billion in a year. Zero. 

To value the company at $1.7 billion given the information available would seem to be a total disregarding of reality by investors.

My Negative Thoughts

In my May article, I argued that Covaxin, in its most optimistic scenario, would not be distributed in the U.S. until the spring of 2022 at the earliest. For this reason, it would be better off securing contracts in other countries and jurisdictions where Covid-19 vaccines are harder to come by. 

And if you think Canada is just such a place, you’d be wrong. There is no way Canada will approve for EUA use if the FDA has said no, something InvestorPlace’s Larry Ramer pointed out in mid-June. 

In May, I also stated, rightly or wrongly, that the “FDA requires it to conduct clinical trials for Covaxin in the U.S.” As a result, even with an accelerated timeline, it wouldn’t happen until the spring at the earliest, which I mentioned previously. 

I conferred with some of my IP colleagues on that front, but we never came to an ultimate conclusion where things stood from a regulatory standpoint. The request by the FDA to move to a BLA suggests Occugen wouldn’t have been able to get to a EUA with its current paperwork. 

Bottom Line on OCGN Stock

So, from where I sit, there is no way I can recommend OCGN stock at $8.32. The risk-to-reward value isn’t there. 

Moderna currently trades at 32x sales. With plans to go to three billion doses, that’s a reasonable risk-to-reward proposition. Moderna went from $60 million in sales in 2019 to $800 million in 2020, to $2.73 billion for the trailing 12 months ended March 31, 2021. 

That’s what I call a sensible position. And that’s after a 255% gain over the past 52 weeks. 

Ocugen stock is not worth $8: hat or no hat.    

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.