Ocugen (NASDAQ:OCGN) stock is an also-ran Covid-19 play getting another lease on life. You can thank the Delta variant for this latest upsurge in interest for the embattled performer. Shares of the biotech are performing well, with the OCGN stock price gaining 9.3% in the last month.
Those gains should come as no surprise, considering the current climate, where everyone is scrambling to find out if we are headed towards another crisis.
But if you put all that to one side and judge the stock on its merits, you will find there are things to like and dislike in equal measure.
In 2020, Ocugen threw its hat in the Covid-19 vaccine race when it announced the development of Covaxin in partnership with Bharat Biotech in India. Naturally, these were the days when any news regarding a vaccine was met with tremendous investor interest.
As a result of the announcement, the share price rocketed, going from a low of 17 cents in the middle of 2020 to as high as $15.81 per share in early February before dropping back to around $9 per share in March. Last Friday, it closed at $7.54 a pop.
Much of the wild price swings are because of Covid-19 and the Reddit crowd, for which this became the latest target because of high short interest. In the meantime, the company kept chugging away on its own. But once the frontrunners emerged, the stock and a host of others started losing steam. Retail investors took their profits and decided to invest elsewhere.
Those who timed their entries and exits correctly made a lot of money. But with the Delta variant emerging, short-term traders are eyeing this one once again.
Short-Term OCGN Stock Catalysts
I don’t believe a lot of value investors are interested in OCGN stock. It’s mostly retail traders looking to scalp profits at this point. And for those people, Ocugen offers a lot of promise.
Just look at the past few weeks, and you will understand what I am saying.
First, Health Canada is reviewing Covaxin. Although there is no approval, this snippet of information was enough to push up the stock price. Meanwhile, the company also came out with earnings that disappointed investors. Ocugen reported a loss of 13 cents per share in the second quarter of 2021, narrower than 19 cents in the year-ago quarter. Refintiv forecast a loss of just 3 cents, which meant it was a negative surprise of 333.3%.
The company has no clinical-stage candidates in its portfolio. And with no approved products, it did not report any revenues during the second quarter. Research and development expenses were $18.9 million compared to $1.6 million in the year-ago quarter. General and administrative expenses were $6.8 million, up 279% from the year-ago period.
Ocugen plans to submit an Investigational New Drug application for its gene therapy candidate, OCU400, targeting retinal diseases later this year and is evaluating options to start trials in Europe in 2022.
It goes without saying that the disappointing earnings led to a drop in the stock price, while the positive news from Canada led to a spike. There is little you can do at this stage but track the news. It’s a bit like trading cryptocurrencies. You can have good and bad days, just by virtue of the headlines.
Risk-Reward Ratio Is Tilting Toward Negative
Even though it is tempting, the short-term catalysts are not enough for a buy decision. Yes, there are concerns regarding the Delta variant. But Americans could just opt for booster shots rather than gambling with a new name.
Plus, it is still a long time coming for it to become available for use stateside. Chardan analyst Keay Nakae, while reiterating a “neutral” rating on Ocugen, projected late 2022 as when Covaxin could realistically obtain FDA approval. The timelines make sense.
Ocugen has previously revealed that its Covaxin coronavirus vaccine candidate has been withdrawn from consideration for Emergency Use Authorization (EUA) by the U.S. Food and Drug Administration, and will have to take the lengthier route of undergoing a Biologics License Application (BLA) instead.
Could you have a situation where OCGN stock rallies? Yes, that is not out of question, purely because of the Delta variant and the news-sensitive nature of the space. However, if you are looking to buy and hold, OCGN stock is not a great investment.
On the date of publication, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.