Shares of Ocugen (OCGN -0.45%) were soaring 17.4% higher as of 11:53 a.m. EST on Thursday. The big gain came after H.C. Wainwright analyst Swayampakula Ramakanth upgraded the stock to a buy rating from neutral.
Should investors buy a biotech stock like Ocugen just because an analyst upgrades it? Nope. However, it's wise to examine why an analyst thinks highly (or negatively) of a stock.
In this case, Ramakanth is very bullish about Ocugen. He set a one-year price target of $4.50 -- a 60% premium to Ocugen's closing price on Wednesday.
What's fueling this optimism? Ramakanth really likes the deal that Ocugen made with Bharat Biotech that was announced earlier this week. Under this agreement, Ocugen will co-develop, supply, and commercialize Bharat's Covaxin experimental COVID-19 vaccine for the U.S. market.
If Covaxin obtains Emergency Use Authorization (EUA) or approval in the U.S., Ocugen will make 45% of the profits from the vaccine. The vaccine has already received EUA in India. However, no clinical studies have been conducted for Covaxin in the U.S. at this point.
The enthusiasm about Ocugen could evaporate if Covaxin doesn't make it to the U.S. market. Ocugen has already begun talking with the U.S. Food and Drug Administration (FDA) about a potential path to EUA and ultimately approval. The results from these discussions will be critically important as to whether or not the biotech stock can keep its momentum going.