Ocugen (NASDAQ:OCGN) is a small biotech firm. For years, it tried unsuccessfully to commercialize therapies for eye diseases. However, in 2020, it ended a Phase 3 trial on that front and pivoted to Covid-19. Its first effort in that regard, Covid-19 testing, totally failed to take off. The company is nothing if not persistent, however, and has now tried to get into the Covid-19 vaccine race. OCGN stock has been volatile based on these events.
To get into vaccines, it partnered with an Indian firm that had already developed a Covid-19 vaccine. Ocugen is supposed to obtain Food and Drug Administration (FDA) approval for the vaccine and launch it in North America. But the FDA didn’t give Ocugen the green light yet, and the company ended up getting sued by shareholders. Still, traders haven’t given up; despite a mountain of bad news, OCGN stock inexplicably trades for nearly $10 per share.
Vaccine Enthusiasm Is Fading
Recently, Merck (NYSE:MRK) announced that it had developed a highly-effective therapeutic for treating Covid-19.
Since that point, the Covid-19 vaccine stocks have been in freefall. Moderna (NASDAQ:MRNA), for example, has tumbled from $497 to just $310. There’s also been a good deal of uncertainty around the merits of booster shots of the vaccines. Add the two up, and traders have been quickly taking profits in the vaccine names.
Arguably, this should be even more true for second-tier vaccine names like Ocugen. Say what you will about Moderna’s valuation, but we know the vaccine is effective and it has been a huge source of profits for that firm. Ocugen’s product, however, hasn’t yet found commercial success in North America. Additionally, it’s gotten embroiled in scandal overseas.
#CovaxinGate
Another complication for Ocugen is that its partner on the vaccine, Bharat, has run into massive hot water. It has been alleged that Bharat bribed Brazilian officials to win distribution for the vaccine in Brazil. This came after Brazil questioned the vaccine due to its rushed approval process.
It’s unclear how it will all turn out. However, Brazil’s organized crime investigation unit has already gotten involved, and some politicians have suggested this could be an impeachable offense against that country’s president. Regardless, it’s not a good look for a vaccine that is struggling to gain commercial traction to get embroiled in this sort of controversy. What vaccine-skeptical person who passed on vaccines from credible firms will rush to take this one instead?
Also, the FDA has pushed back on Ocugen’s attempts to launch the Covaxin vaccine in the U.S. This shouldn’t too surprising, given Ocugen’s previous underwhelming efforts as a small ophthalmology firm.
Yet, if Ocugen can’t launch a vaccine until 2022 or 2023 (even assuming it gets approval at all), what market value will it have at that point? Ocugen seems to be following the same pattern than it went through with its Covid testing kits last year. Make a big impression, put out press releases, and then let things quietly fizzle out when the effort fails to find any continuing momentum.
After getting the unwelcome news from the FDA about potential U.S. market usage, Ocugen announced that it will try to pursue commercialization in the Canadian market. This looks like a desperate attempt to to keep any buzz alive. Canada has a far smaller population than the U.S., and Canada has achieved higher vaccination rates as well making me wonder what sort of revenue opportunity exists even if it eventually goes live in Canada.
Recent Stock Spike
On Tuesday, OCGN stock surged 18% on heavy trading volume. Traders bought on shares on the news that Covaxin gained emergency use approval for 2 to 18-year-olds in India. On the face of it, that sounds like a positive development.
However, it’s unclear how much this will actually benefit OCGN stock holders. After all, Ocugen has the rights for Covaxin in North America, not in India. Ocugen has failed to develop Covaxin commercially so far. Covaxin having more success in India is not necessarily indicative of any upgrade to the vaccine’s outlook in the more competitive U.S. market.
OCGN Stock Verdict
The clock is ticking on Ocugen. The company’s long history has not been a promising one. Its eye health program never amounted to much in terms of commercial revenues. The Covid-19 testing program was also a major flop despite having a golden opportunity at success.
And now, vaccines have been widely deployed in the United States. People are already moving on to getting booster shots, so when – if ever – is Ocugen going to seize the moment? And, given the rising levels of vaccine skepticism out there, what portion of the remaining market can Ocugen realistically go after, especially given Bharat’s scandals? Ocugen has the fundamentals and risks inherent in your average penny stock, yet it trades at a far steeper valuation.
On the date of publication, Ian Bezek 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.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
