Shares in Ocugen (OCGN -5.60%), a Malvern, Penn., biopharmaceutical company, were below $0.30 a share as recently as Dec. 15, and now, they're just above $8 a share. That's after climbing to $10 a share earlier this week. Over the past three months, the company's shares have risen more than 2,500%.
What's behind all of this investor enthusiasm? It isn't the company's balance sheet, at least not yet. Ocugen is a clinical-stage company whose early-stage gene therapies are aimed at preventing or suppressing inherited eye diseases that cause blindness.
Its pipeline includes just three therapies, led by OCU400, which has four U.S. Food and Drug Administration (FDA) orphan drug designations with the potential to treat more than 150 gene mutations of retinitis pigmentosa, a disease that causes a loss of cells in the retina and can lead to blindness.
Image source: Getty Images.
Looking at the financials
The company reported no revenue for the third quarter and, so far, has only $42,600 in revenue for the year. Through nine months, the company shows a net loss of $18 million, which is an improvement at least over the $32.6 million it lost in the first nine months of 2019.
What has investors excited is Ocugen's deal with India's Bharat Biotech to bring that company's COVID-19 vaccine, Covaxin, to the U.S. market. Ocugen, for its part, is taking the vaccine through all the levels of U.S. regulatory approval, in return for 45% of the profits derived from the vaccine.
On March 3, Ocugen announced preliminary positive data in a phase 3 trial for Covaxin, with the vaccine showing 81% effectiveness in fighting COVID-19. The vaccine has already been given emergency use approval in India, and the early signs on its phase 3 trial show it might have a good chance to be approved for use in the U.S.
The vaccine is inactivated, made up of dead coronavirus. When injected into the body, that dead coronavirus is designed to stimulate an antibody response, making the person be able to ward off an actual coronavirus infection.
Coming late to the party
If approved, Covaxin would be the fourth COVID-19 vaccine approved in the U.S., behind the Pfizer-BioNTech, Moderna, and Johnson & Johnson vaccines. The question is, how well would the vaccine be adopted here?
One big problem for Covaxin is that it seems to have few advantages over already approved vaccines. Like the Pfizer-BioNTech and Moderna vaccines, Covaxin would be given in two doses, weeks apart, and must be refrigerated. The early results show it being less effective than those vaccines, however, with the Pfizer-BioNTech vaccine demonstrating 95% efficacy, compared with 94% for Moderna's. Covaxin has a better efficacy than Johnson & Johnson's 66%, but that one requires only one shot and does not need to be refrigerated.
There also may be some resistance to approving a vaccine that was controversial when it was approved in India in January, before what many felt was adequate review. On top of that, AstraZeneca also has a vaccine that is in phase 3 trials.
Still, the slow production of vaccines in the United States has hampered the rollout, so another vaccine, particularly one that is already being manufactured in large quantities, may be welcomed by health authorities.
What investors need to be concerned with regarding Ocugen
Covaxin's positive trial is great news for Ocugen, which could use additional revenue. The company has $19.3 billion in cash as of Sept. 30, but more incoming revenue would help it finance its research and development for years to come.
However, the stock's rise over the past three months means whatever benefits Ocugen may get from Covaxin's approval may already be priced in. The slide back from $10 to $8 a share shows that healthcare investors may already be getting wary of how long the bump can last.
Ocugen's therapies ultimately may be very profitable, but with all of them in clinical development or early-stage trials, that's a long way away. The bigger concern is that if Covaxin isn't approved, new investors will be left with a plummeting stock that, based on its fundamentals, is way overpriced.
My advice is to stay away from the stock, at least until its own pipeline begins to pay off.
