Shares of once high-flying biotech company Ocugen (NASDAQ:OCGN) are seeing some selling pressure again today. At the time of writing, OCGN stock is down over 9% on a business update provided by the company.
Ocugen noted that Phase 3 trials of its OCU400 gene therapy drug are expected to commence in April, and other positive designation-related news was put forward. However, in this release, the company also revealed it would need to restate some of its financial statements.
The company noted that errors were found in some non-cash accounting items on its 2022 financial statements. Accordingly, the company will release updated financials in its 2023 K-1 filing.
Let’s dive into what this announcement means, and why investors are not taking well to this news.
OCGN Stock Sinks on Financial Restatements
Any time financial statements need to be updated due to accounting errors, investors’ ears perk up. Such news is typically not great, as it suggests either the company was too aggressive in its portrayal of its business practices or something worse is going on beneath the surface.
In this case, it’s not going to be clear what’s going on until the company releases its updated K-1 filing. Notably, Ocugen also noted that the first three quarters of 2023 will need to be restated as well, which could have a material impact on certain financial metrics investors use to value the stock.
In the absence of clarity, investors are clearly in selling mode on this news. Ocugen has noted that these updates shouldn’t impact the company’s cash position or its runway moving forward. These are some of the most important metrics for an early-stage biotech company like this. Nonetheless, investors are taking the “better safe than sorry” route today, and I don’t blame them.
Ocugen’s rise this year has been impressive, with OCGN stock more than doubling year-to-date, even after today’s rise. It will be interesting to see if today’s decline marks the end of this rally or if investors will step in at this lower price tomorrow.
On the date of publication, Chris MacDonald 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.
