Since the start of its upward surge, I’ve been skeptical about Ocugen (NASDAQ:OCGN). Trading for far less than $1 per share for most of 2020, OCGN stock went into hyperdrive starting in late December.
The reason? Ocugen has a deal with India-based Bharat Biotech to bring that company’s Covaxin Covid-19 vaccine candidate to the United States. Betting on it gaining regulatory approval, speculators have sent shares up more than 30-fold since Dec. 21. And that’s after pulling back some 46% from its highs set last month.
Those who got in early have made tremendous profits. But what does it mean for those considering a position right now, at around $10 per share? There’s no denying shares are overvalued at today’s prices. So, future developments with Covaxin need to go off without a hitch.
In short, the long-term direction of this stock remains unclear. Yet, with the potential for investors to “buy more on the news” (if said news is positive), OCGN stock may have a shot at rallying once more in the near-term.
What does that mean? For those looking to short it, watch out. But, those looking to go long today should exercise some caution as well. While there’s an opportunity here for another short-term spike, this long-shot vaccine play remains very speculative. It won’t take much to send it soaring again. It also won’t take much to send it falling back towards prior price levels.
OCGN Stock Spiked on the Rumor, Could Soar on the News
As I discussed back in February, the risk-return of buying Ocugen — as it trades at inflated prices — doesn’t look worth it on the surface. However, giving this thesis a second look, admittedly I gave little consideration to the possibility of investors “buying the rumor” as well as buying more on the news — if or when further developments come out regarding its vaccine catalyst.
That’s what happened with names like Moderna (NASDAQ:MRNA) and Novavax (NASDAQ:NVAX). Moderna spiked when it began to work on its Covid-19 vaccine. Then it spiked even further when the vaccine received U.S. Food and Drug Administration (FDA) approval. The same thing will likely happen with Novavax, if it can cinch approval in May. While both stocks have pulled back a bit since then, it’s clear that any sort of progress with Ocugen’s attempts to bring a vaccine to America will result in similar upward moves.
Of course, this is contingent on the company actually getting through the approval process with the vaccine candidate. But, with interim results from its Phase 3 clinical trial showing Covaxin “demonstrates 81% efficacy,” Ocugen may be one step closer to getting it approved in the States.
Any sort of additional progress regarding Covaxin will produce another spike for OCGN stock. But, given its still a long-shot candidate, coupled with other concerns, the long-term prospects for this company and its share price remain unclear.
If Covaxin Fails, There’s Very Little to Soften the Blow
The recently released Phase 3 interim results look promising. However, this alone doesn’t guarantee that Covaxin is well on its way to getting FDA approval. As InvestorPlace’s Vince Martin discussed on Mar. 1, there’s still a long road ahead for Ocugen when it comes to profiting off the Bharat vaccine.
And that’s assuming it gets through all the hurdles, obtaining the ability to sell it in the U.S. market. What if, after the recent promising news, further developments wind up negative? What happens if Covaxin doesn’t get a green light from the FDA?
Obviously, that would be bad news for OCGN stock. Outside of the vaccine candidate, the company has little else going for it that could help soften that potential blow.
Sure, as is the case with other long-shot vaccine plays, the company has other candidates in its pipeline. Yet, while there may be potential with its OCU400 “gene therapy product” for retinal diseases, that’s far from enough to support the stock at its current valuation. Right now, OCGN has a market capitalization of $1.88 billion. Even with the $23 million in proceeds from its recent direct offering, Ocugen still doesn’t have the balance sheet to support that lofty number, either.
So, if Covaxin is a bust, OCGN stock will head fast back towards its prior price levels. Maybe not back to that 52-week low of 17 cents per share. But, likely much closer to that than where shares change hands today.
Ocugen Could Rally Once More, But It’s Still a Big Gamble
All told, I remain skeptical on this speculative biotech play. Yet, further positive news about Covaxin could send it soaring once more. So, putting it simply, it’s too early to bet against this name.
But that said, while there’s a chance for nimble traders to make some fast gains, this is still a big gamble.
What’s the best move? Whether risk-hungry or risk-averse, you should tread carefully with OCGN stock.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
