Shares of biotech company Ocugen (NASDAQ:OCGN) are sharply lower today on news that the U.S. Food and Drug Administration has halted its investigational new drug application for Covaxin, a vaccine for Covid-19.
In a news release, Ocugen said that the FDA still needs to inform it of the reasons why the Covaxin application has been halted and what the company needs to do to address the issues or deficiencies that have arisen. Ocugen said it will work to answer any questions the FDA has and resolve the problems as quickly as possible.
However, news that Covaxin’s progress toward approval and commercialization has been stopped has OCGN stock down 10% today to $6.42 per share. Year to date, the stock remains up more than 100%, though most of that gain came in the first quarter. Over the past six months, Ocugen’s share price has actually declined 18%.
What Happened With OCGN Stock
Covaxin is Malvern, Pennsylvania-based Ocugen’s major commercialization candidate. Covaxin was actually developed by Bharat Biotech, an Indian pharmaceutical company that specializes in vaccines. Essentially, Covaxin is the domestically developed Covid-19 vaccine in India. Ocugen has been trying to get it approved for use in the U.S. and Canada. However, the FDA has now put a halt to Covaxin’s progress toward receiving approval in America, casting doubts on Ocugen’s strategy and hurting its share price.
That the reasons for the FDA stopping Covaxin’s progress haven’t been made public adds to the uncertainty surrounding Ocugen.
Investors should also note that some critics have called into question Covaxin’s lower efficacy against the delta variant compared to vaccines from Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA). However, others have said it is not a problem.
Why It Matters
Ocugen is not your typical biotechnology or pharmaceutical company. It is primarily focused on treating eye diseases and says on its website that its focus is to “cure blindness.” The company jumped on the Covid-19 vaccine train at the outset of the pandemic as the biotech and pharmaceutical industries raced to develop treatments against the deadly illness. However, rather than develop its own vaccine, Ocugen focused on trying to commercialize Covaxin in the U.S. Critics have called this strategy into question.
For Ocugen, the FDA halting progress of Covaxin makes it less likely that the Covid-19 vaccine will become available in the U.S. This reality is putting additional pressure on OCGN stock at a time when it was already in decline. While Ocugen’s share price has been as high as $18.77 this year, most of the increases were the result of it being treated as a meme stock by the retail investors. In January of this year, at the height of the meme stock craze, Ocugen’s stock jumped 769% in a matter of days, climbing to $15.81 from just $1.82.
What’s Next for Ocugen
The FDA’s action is bad news for Ocugen as it lessens the likelihood that Covaxin will become commercially available in the U.S. In the near term, OCGN stock is likely to decline further. Beyond good news from regulators, hope rests with retail investors pumping shares up again.
On the date of publication, Joel Baglole held long positions in MRNA and PFE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.