It’s pulled back big in recent months. Yet some are still holding onto Ocugen (NASDAQ:OCGN) stock. The biotech company, looking to bring Covid-19 vaccine Covaxin to North America, has so far experienced hiccups doing so.
Namely, because its plans to get it rolled out in the U.S. via emergency use authorization (EUA) were dashed. Instead, it needs to get full approval from the Food and Drug Administration (FDA). That’s too little, too late, for investors who have bought this since it went on a parabolic run. As you likely know, the stock went from penny stock levels, to as much as $18.77 per share, after it obtained licensing rights for the vaccine, developed by India-based Bharat Biotech.
News of the Delta variant of Covid-19 getting worse may be helping to prop the case that vaccine demand isn’t going away. That’s good for sales of the existing vaccines from Johnson & Johnson (NYSE:JNJ), Moderna (NASDAQ:MRNA), and Pfizer (NYSE:PFE). But it may not mean much for this late comer/also ran.
Some may still have hopes its secondary catalyst, getting EUA in Canada, saves the day here. Yet that too looks like a dim prospect. So, with the story here unchanged, even as Covid-19 goes from recovery mode back to panic mode, what’s the best play? Avoid it if you don’t own it. If you own it? Throw in the towel, as it’s more likely than not set to continue heading lower.
Why Delta Variant News Means Little for OCGN Stock
Dr. Fauci may now be saying that the U.S. is going in the wrong direction with Covid-19. But don’t take that to mean Ocugen shares will start heading in the right direction again. The rise of the Delta variant may mean a longer runway from the existing crop of vaccine offerings.
Either more vaccine-hesitant Americans will choose to get a jab of the ones currently available. Or Johnson & Johnson, Moderna, and Pfizer could start releasing booster shots that help provide greater protection against current and future variants.
Yet, for this company’s Covaxin candidate? It doesn’t say much about its chances of getting into the North American market. Why? Because it still a long time coming for it to become available for use stateside. Chardan Capital Markets Analyst Keay Nakae projected late 2022 as when Covaxin could realistically obtain FDA approval. InvestorPlace’s Larry Ramer forecasts an even longer timeline for approval (second quarter of 2023). This is due to the need for Ocugen to initiate and execute a Phase 3 trial within the U.S.
Again, too little, too late for investors looking to profit from OCGN stock. With the potential of it getting an EUA for Covaxin in Canada still next-to-nil, further declines for shares remain a near-certainty.
Count on a Trip Back to 70 cents Per Share and Below
It’s down nearly 63% from its high water mark. But Ocugen’s valuation remains high. At around $7 per share, the company has a market capitalization of $1.35 billion. That’s against only five-digit trailing twelve month revenue, and $138.3 million in cash, an amount that includes $93.4 million in proceeds from its April 2021 secondary offering.
It’s clear the lion’s share of its present valuation is based on Covaxin generating some level of sales, either in the U.S. or in Canada. But if it fails to get either EUA in Canada, or full approval in America? Count on OCGN stock falling back around 90%.
Why? Once Covaxin is no longer a catalyst, expect its valuation to fall to a level equal to its current cash reserves. How much is that? Take the value of its war chest ($138.3 million) and divide it by its share count, and around 70 cents per share is what you get.
In fact, it’s eventual bottoming-out price could be much lower. It’ll burn up much of this cash in its efforts to get approval for its vaccine candidate. Yes, it has other candidates in its pipeline, including retinal disease gene therapy OCU400. But given this stock traded for around 30 cents per share back before its Covid-19 vaccine catalyst emerged? Don’t view OCU400 as something that can keep from falling back to deep penny stock levels.
Despite Continued Vaccine Need, Ocugen’s Not Coming Back
Rising cases of the Delta variant may highlight the fact that the Covid-19 health crisis is far from over. This may be encouraging news for investors long the main vaccine plays. But it means little for investors still holding the bag with Ocugen, hoping for its share price to recover.
Barring the slim chance it gets EUA in Canada, which admittedly could result in an outsized move higher? Expect OCGN stock to continue trending lower, eventually falling back to around 70 cents per share.
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, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.