“I believe 2022 will see the biotech stock trade lower, barring unbelievably positive news about Covaxin, its Covid-19 vaccine. But, of course, the UK just reported its first death from the omicron variant, so you never do know,” I wrote on Dec. 15.
Eight weeks later, OCGN is trading well below the $5 penny-stock ceiling.
Dr. Anthony Fauci did an interview in late December that has me wondering whether anyone cares about Covaxin. Speculative investors might, but beyond that, I haven’t a clue who would bother with Ocugen’s vaccine candidate. Does that mean its stock is dead in the water? Of course, it should, but that doesn’t mean it will be. Here’s why.
OCGN Stock Living on a Prayer
The Dr. Fauci interview appeared on Newsnation’s Morning in America on Dec. 30, 2021. In it, Fauci was asked why Covaxin hasn’t been approved in the U.S.
“We have enough vaccines, the best vaccines available, in the United States. I’m puzzled by that question. We have more vaccines than we need right now,” he said. “We just need the people to get vaccinated with the vaccines that we have. The mRNA vaccines are desired by everyone else in the world. So we have what we need; we need to use it.”
The question itself came from Mike Doyle of Grand Ledge, Michigan. What are the odds Doyle owns some Ocugen stock? Pretty high, I’d say.
Let’s consider for a moment what Fauci said. He believes the problem isn’t that we don’t have enough vaccines. Not enough people have been vaccinated with the existing approved vaccines.
According to The New York Times vaccine tracker, 56% of the world’s population is fully vaccinated, with 16% getting an additional or booster dose. The U.S. has 64% of its population fully vaccinated, with 28% receiving an additional or booster dose. In Canada, where I live, 82% are fully vaccinated, and 45% have received an additional dose.
Canada’s rate of being fully vaccinated is 18 percentage points higher than in the U.S. The difference is 17 percentage points for an additional vaccine.
It wouldn’t matter if the vaccine were a vodka-based formula; some steadfastly refuse to get vaccinated. Therefore, the chances of the U.S. Food and Drug Administration (FDA) giving Covaxin an emergency use authorization (EUA) at this point seem incredibly small.
It’s a solution in search of a problem.
Occugen’s Agreement Only Includes the U.S. and Canada
Forget for a moment that Moderna’s (NASDAQ:MRNA) CEO admitted in December that vaccines are less effective against the Omicron variant. Fast forward to today. He’s been proven to be right on the money.
While the rate of contracting Covid-19 for the vaccinated has accelerated compared to the Delta variant, the unvaccinated are the ones who’ve faced the brunt of it.
According to the Centers for Disease Control and Prevention (CDC), people over the age of 65 who are unvaccinated are 50x more likely to be hospitalized than seniors who’ve received three vaccinations, including a booster shot. In addition, unvaccinated adults ages 18 to 49 were 12x more likely to be hospitalized than their fully-vaccinated peers.
Ocugen is trying to roll a giant boulder up a very steep mountain. Canada’s entire population could be fully vaccinated in 2022. The demand for an additional vaccine is negligible. As for the much bigger market to the south, Fauci said it best: “We have plenty of vaccines.”
Now, there are two ways in which Ocugen could still win.
The first is that Bharat Biotech, the company’s commercialization partner in the U.S. and Canada, expands its agreement to poorer countries worldwide. Then it’s got a fighting chance.
The second way it could win is if a new variant develops that’s even worse than Omicron requires a fourth dose. Maybe then, Fauci might change his tune, and more Americans will choose to get vaccinated, requiring Covaxin to be pressed into service.
Of the two, the former seems far more likely.
The Bottom Line
InvestorPlace’s Ian Cooper recently pointed out that Covaxin isn’t Ocugen’s only potential revenue generator. It’s also got OCU400, OCY410, and OCU200 in the pipeline. On the downside, my colleague pointed out that it could run out of cash within four quarters if it doesn’t get an infusion of capital or start generating revenue.
The former is much more likely than the latter in 2022.
Unless you are incredibly risk-tolerant, I don’t think there’s a good reason to buy OCGN stock at this point. In this instance, time is on your side—no need to jump in despite its penny-stock status.
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On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.