Please ensure Javascript is enabled for purposes of website accessibility

Should You Buy Ocugen Stock?

By Keith Speights - Feb 18, 2021 at 5:04AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here's why you might want to -- and why it might not be such a great idea.

Some stocks come seemingly out of nowhere but are huge winners. You can put Ocugen (OCGN 6.61%) in that category. As of Dec. 21, 2020, its shares were down 43% year to date. The next day, though, Ocugen announced that it was teaming up with Bharat Biotech to co-develop COVID-19 vaccine candidate Covaxin for the U.S. market.

Since then, the stock has skyrocketed more than 3,600% and even doubled just last week. Previously little-known Ocugen now ranks among the most popular stocks on Robinhood -- and it's caught the attention of many investors who don't trade on Robinhood, too.

Should you buy Ocugen stock now? Here are the arguments both for and against the high-flying biotech stock

Gloved hand holding syringe labeled "Covid-19 vaccination"

Image source: Getty Images.

Yes, Ocugen's prospects are fantastic

There are several really important things to know about Covaxin:

  1. It's already on the market in India. In January, Bharat Biotech won emergency use authorization (EUA) for its vaccine in the world's second most-populous country.
  2. It doesn't just target the coronavirus spike protein like the leading COVID-19 vaccines in the U.S. This could improve Covaxin's efficacy against new coronavirus variants.
  3. Its safety profile appears to be better than other COVID-19 vaccines.

These advantages could improve Ocugen's and Bharat's chances of winning EUA and eventual full approval for Covaxin in the U.S. They could also put Covaxin in a good position to compete head-to-head against COVID-19 vaccines made by Moderna, Pfizer and BioNTech, and Johnson & Johnson (assuming the healthcare giant wins EUA for its single-dose vaccine). 

Ocugen will pocket 45% of any profits that Covaxin generates in the U.S. It's not unrealistic to envision that the company could make over $1 billion (and perhaps significantly more than that) annually if Covaxin wins U.S. EUA or approval. 

With all of the excitement about Covaxin, it's easy to overlook Ocugen's other pipeline candidates. The company plans to advance experimental gene therapy OCU400 into two phase 1/2a clinical trials this year. OCU400 has picked up orphan drug designations from the U.S. Food and Drug Administration (FDA) for four different genetic eye diseases. Ocugen also hopes to begin early stage clinical testing of OCU200 in treating eye diseases in the first half of 2022.

No, the stock is way too risky

While Ocugen's future could be great, skeptics would be quick to point out that the stock is way too risky to buy right now. For one thing, there's no guarantee that Covaxin will win U.S. EUA anytime soon. Ocugen is talking with the FDA about a path to obtaining EUA and ultimately approval. However, it's highly likely that the FDA will require clinical studies to be conducted in the U.S. first.

It's also possible that the FDA won't grant EUA to many more COVID-19 vaccines. The U.S. government has already secured enough doses from Pfizer and Moderna to fully vaccinate all adults in the country this year. With EUAs for vaccines developed by J&J, AstraZeneca, and Novavax potentially on the way over the next few months, the urgency for an additional vaccine could be significantly reduced.

The efficacy level for Covaxin hasn't been established yet and won't be known until late-stage data from a study conducted by Bharat in India is available. Should the vaccine's efficacy be a lot lower than that of its faster rivals, Ocugen's chances of achieving tremendous commercial success in the U.S. market could dwindle.

As for Ocugen's other pipeline candidates, it's too early to count on any victories. Most drugs that make it to early stage clinical studies never win FDA approval.

And the right answer is...

Some might like the idea of buying shares of Ocugen in the hopes that everything goes right for Covaxin. However, with the company's market cap around $2 billion, much of those hopes are already baked into Ocugen's share price.

Sure, Covaxin could be a big winner and make Ocugen a lot of money. However, the biotech still has several major hurdles to jump before that's a viable possibility. My view is that investors would be better off staying on the sidelines with Ocugen for now.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ocugen, Inc. Stock Quote
Ocugen, Inc.
$2.42 (6.61%) $0.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.