Despite the recent weakness in many meme stocks, Ocugen (NASDAQ:OCGN) stock has rallied in the past week or so. but that surge looks to have been based on a proverbial house of cards that should collapse soon.
Meanwhile, additional research that I’ve conducted has uncovered more bad news involving Bharat Biotech’s Covaxin shot, a vaccine for the novel coronavirus. (More on that in a bit.).
There is virtually no chance that Covaxin will be approved by America’s FDA.
A House of Cards
During the week that ended on June 26, OCGN stock rallied based on the company’s June 16 announcement, in which it disclosed that it would be added to the Russell 3000.
Membership in the Russell 3000 is determined by market capitalization. Market capitalization, in turn, is primarily determined by stock price.
So Ocugen was added to the Russell 3000 primarily because its stock price had rallied earlier this year.
Consequently, the latest advance was primarily due to the shares’ gains earlier this year. Put another way, the shares rallied recently because they advanced earlier this year.
So the stock’s recent rally apparently had nothing at all to do with the company’s fundamentals.
More Bad News for OCGN Stock
In my previous column on Ocugen, I discussed why the FDA’s rejection of an emergency use authorization (EUA) for Covaxin was extremely negative for Ocugen.
But since then, I’ve discovered additional, meaningfully negative news for the American drug maker.
First of all, Covaxin was found to have been 77.8% effective during its Phase 3 trials in India, while Pfizer’s (NYSE:PFE) vaccine was reportedly 88% effective against a key variant in India, and Moderna (NASDAQ:MRNA) over 90% efficacy against the Delta varient.
The information was reported recently on the website of an Indian TV news station.
Admittedly, it’s impossible to parse this data into “apples-to-apples” comparisons, but particularly in the absence of other information comparing Covaxin to the competing vaccines, I think this data indicates that Covaxin is not meaningfully superior to the vaccines of Pfizer and Moderna overall or when it comes to combating variants.
Seropositivity refers to a phenomenon in which tests indicate that those who have received a vaccine have had the virus, even though they have not actually contracted the illness.
Stating that the study had lots of flaws, Bharat said that it was not published in “a peer-reviewed publication, nor statistically & scientifically designed study, the study design & conduct reflect an ad hoc analysis, rather than predetermined hypothesis.”
Still, I believe that the results do not bode well for Ocugen, as they will likely give the FDA another reason to avoid approving the vaccine.
Covaxin has apparently not yet been added to the World Health Organization’s (WHO) emergency use list.
Many countries will only let travelers in if they’ve received a vaccine approved by WHO. Bharat and WHO met to discuss the issue on June 24, but the agency does not yet appear to have made a decision on whether to certify the vaccine.
Finally, multiple colleges in the U.S. are not allowing students who received Covaxin to return to their campuses unless they obtain another vaccine. That decision suggests that American colleges lack confidence in Covaxin.
The Bottom Line
Amid a significant, additional stream of bad news for Covaxin, after an unjustified rally by OCGN stock and with Ocugen still trading with a market capitalization of over $1.5 billion, I continue to urge those who own the shares to sell them.
I think that the shares remain an excellent short-selling target.
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.