Ocugen (NASDAQ:OCGN) stock plunged after the Food and Drug Administration (FDA) declined to give its COVID-19 vaccine candidate, Covaxin, a pediatric emergency use authorization (EUA). As a result, OCGN stock has plummeted over 30% since.
The decision was a surprise. Covaxin already has EUAs in 20 countries. It was developed in India with Bharat Biotech and is one of the most popular vaccines there.
OCGN stock is currently sitting around $2.26. That’s down from $18 less than a year ago.
But this is not Ocugen’s first failure.
Ocugen was originally Histogenics, which came public in 2014 to create cell-based therapies for orthopedics. It peaked at a split-adjusted price of $778 soon after the public offering but fell below $1 after a failed phase three trial.
Histogenics then bought Ocugen, which was privately held, and changed its name to Ocugen. It also engineered a reverse stock split of 60:1. On its first day of trading that stock over 70%. Ocugen, as the name implies, focused on rare eye diseases. But like Histogenics, it was unable to bring products to market, relying on research grants, cash and its stock to stay alive.
I have long compared biotech companies to oil wildcatters in 1930s Texas. Think of their drugs as wildcat oil wells, their expenses as drilling costs and their potential as gushers. By 2019 this company had two dry holes.
The Vaccine Play
The latest emergence began as Ocugen began looking outside the country for cash and potential drugs it might bring to market.
After first seeking a standard EUA, Ocugen filed to study Covaxin in the U.S., and for a pediatric EUA, based on a study done in India.
What Is Covaxin
Covaxin is called a “whole virion, inactivated vaccine.” That means it contains the actual virus, just an inactive version. The genetic material has been stripped away by heat, chemicals or radiation so it can’t replicate. But such vaccines can still generate an immune response.
This is the same strategy used for vaccines against seasonal flu. One big advantage is that the resulting vaccine doesn’t require special storage or refrigeration, making it easier to transport and distribute. A Harris survey sponsored by Ocugen also found that 73% of those polled preferred a COVID vaccine built with this traditional method.
The latest FDA decision looks like a firm no on Ocugen’s strategy. Ocugen said it lost $58 million, 30 cents per share, during 2021 and ended the year with about $95 million in cash. The stock’s market cap is $469.5 million.
The Bottom Line
Ocugen has enough cash to go another year, but time is running out.
The company has tried to get to market three times. First it had cell-based orthopedics, then a treatment for rare eye diseases, now a COVID-19 vaccine. The first two were dry holes, as an old wildcatter might say. The third looks like it might be one as well.
Zacks recently dropped the hammer on Ocugen, lowering its rating to sell, although there are others who are more hopeful and the average rating remains a “hold.”
Ocugen has always been a gambler’s stock, with projections based entirely on hope for untried treatments. Covaxin is its third strike. Whether or not they play baseball this year, it’s still three strikes and you’re out.
On the date of publication, Dana Blankenhorn did not hold (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.