If you're a lucky owner of Ocugen (NASDAQ:OCGN) shares that gained about 550% over the past week, congratulations. Now that the stock has produced some impressive gains, though, you're probably wondering if now's a good time to sell.

Ocugen's recently inflated market value comes with some expectations that most biotech companies would struggle to meet. Let's weigh the reasons to buy this coronavirus stock against the reasons to take your profits and run. 

Individual investor at home wondering what to do.

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Reasons to buy Ocugen stock

Earlier this month, Ocugen's market cap had dipped below $50 million. That was just before a pivot away from vision-related drug development sent the stock rocketing higher.

On Dec. 22, 2020, Ocugen signed a letter of intent to co-develop Covaxin, a COVID-19 vaccine candidate from Bharat Biotech. This is a pharmaceutical company headquartered in Hyderabad, India, with a history of successful vaccine development and commercialization in South Asia.

After success in early clinical-stage trials that involved about 1,000 patients, Bharat Biotech began a phase 3 clinical trial meant to enroll around 26,000 volunteers across India in November. Interim efficacy results could be available in February.

While Covaxin is far behind vaccines from Moderna (NASDAQ:MRNA) and Pfizer (NYSE:PFE) that recently earned emergency use authorization from the FDA, demand is high enough to warrant emergency use authorization of several vaccine options. As a simple, two-dose injection of inactivated virus, Covaxin could be much easier to distribute than vaccines from Moderna and Pfizer.

Reasons to sell Ocugen stock

Now that we have seen successful outcomes from a handful of phase 3 coronavirus vaccine studies, there's a rough benchmark against which early stage clinical trial data can be judged. Bharat Biotech began a phase 3 study with Covaxin following phase 1 and phase 2 results that the company described as promising. Unfortunately, neither Ocugen nor its new international vaccine development partner found the data promising enough to describe in detail.

We might not know how many immune cells are spurred by Covaxin to patrol for the virus that causes COVID-19, but we know Ocugen hasn't developed any drugs and doesn't have any products to sell yet. This lack of experience makes Ocugen a strange choice for an international commercialization partner.

We also know the last time Ocugen was excited by early clinical-stage trial data, its shareholders lost a bundle. Earlier this year, poor data at the first interim analysis of a phase 3 trial with its lead candidate, OCU300, forced Ocugen back to the drawing board.

OCU300 was a proprietary emulsion of an eye pressure reducer that's been used to treat glaucoma for decades. While misjudging the ability of a well-understood drug to treat a different cause of eye pressure should have humbled Ocugen, it didn't. Instead, the company wants to try developing experimental gene therapies at the expense of its shareholders. 

Doctor preparing an injection.

Image source: Getty Images.

Not worth the risk

The Food and Drug Administration has stated that it won't authorize a coronavirus vaccine without data from a phase 3 trial conducted in the U.S. Ocugen doesn't have the resources on hand to run one. The company finished September with just $19 million in cash after losing $18 million during the first nine months of 2020. 

Ocugen and its partner haven't disclosed any coronavirus vaccine funding from the U.S. government. Now that the FDA has authorized two vaccines for emergency use, this window probably won't open again.

To develop Covaxin in the U.S., the company will most likely sell millions of new shares of its own stock. New share offerings dilute the value of existing shares. Raising enough capital to develop Covaxin could make it impossible for your Ocugen stock to provide a market-beating return over the long run.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.