Its candidate in the vaccine horse race, Covaxin (developed by India-based Bharat Biotech) remains a long-shot contender.
A U.S. rollout is still years away. Assuming it ever happens at all. The company may be moving along with getting approval in the other market for which it holds Covaxin licensing rights (Canada).
But not only is it hard to handicap its chances of getting emergency use authorization (EUA) in Canada. It’s also still hard to see its potential sales from Canada being enough to support this stock’s current valuation.
At the end of the day, Ocugen remains an all-or-nothing wager. Either it overcomes the odds and generates enough sales of Covaxin to zoom back toward its past highs (above $15 per share). Or, as it continues to disappoint, makes its way back down to its pre-Covaxin prices (well under $1 per share).
With so much more pointing to the latter outcome happening rather than the first, my take on this stock stays the same: avoid.
OCGN Stock and Its Limited ‘Boost’
Recent headlines may suggest that vaccine front-runners and also-rans alike could benefit from the permanent need for Covid-19 booster shots. Also, some initial studies have shown that “mixing and matching” can work when it comes to these vaccines.
This may suggest that some of the candidates not yet available in the U.S. Covid-19 vaccine market, could still find success, even if the bulk of Americans have received vaccines. However, it’s still debatable whether that possibility extends to Ocugen’s Covaxin as well.
It remains many years away from debuting in the American market. As I wrote previously, forecasts have called for approval in late 2022 or early 2023.
By then, not only will the existing crop of vaccines have had first-mover advantage when it comes to the booster market. Others late to the game, such as Novavax’s (NASDAQ:NVAX) candidate, could beat it to the punch for the booster market as well.
To be fair, investors haven’t been pricing this “booster catalyst” that much into the price of OCGN stock. Instead, the main driver sending shares higher lately has been its Canada EUA catalyst.
Yet with the prospects of this other catalyst murky as well, the negative prognosis for this stock remains the same as it was when I last wrote about a few weeks back.
Why Canada Will Fail To Save the Day
Yes, the decision by the U.S. Food and Drug Administration (FDA) to pass on giving Covaxin EUA doesn’t mean it can’t get EUA in Canada. But will success in just that market be enough to sustain, or even grow, Ocugen’s current valuation?
Per Canada’s own numbers, 70.7% of Canadians 12 and older are fully vaccinated. 81.5% have received at least one dose. Just as it seems far-fetched Covaxin will find many takers in a saturated U.S. market, that’s clearly the case as well in the Canadian market.
Not only that, remember that Canada’s population is only slightly more than 10% that of the United States. Grabbing what remains of that market will be even slimmer pickings than trying to grab what’s left of the U.S. vaccine market.
As has been the case since it started to skyrocket in price in late 2020, the numbers don’t add up for OCGN stock.
At today’s prices, the company sports a market capitalization of $1.47 billion.
Looking at that large number alone tells you that, barring it seeing high booster shot demand in the years to come, even a scenario where Ocugen “grows into its valuation” seems questionable.
Still an All or Nothing Bet
As seen in its latest quarterly results, Ocugen is quickly putting the cash it raised through secondary offerings to work. For the June quarter, it ramped up R&D (research and development) spending from $1.6 million to $18.9 million. With $115.8 million left in its war chest, it could continue to do so for many quarters ahead.
Even so, the odds of payoff for Covaxin remain slim for the company. If it takes well over a year to get into the U.S. market it may struggle to even find demand for its candidate.
Even if “mix and match” ends up the norm for booster shots. It could in theory get EUA in Canada, but it doesn’t seem like it’s a big enough market to sustain this company’s current $1 billion+ market capitalization.
In so many words, the story’s unchanged with OCGN stock. An all or nothing bet, with more pointing to “nothing,” it’s still best to stay away.
On the date of publication, Thomas Niel 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.
Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.