Back in December, Ocugen (OCGN -1.69%) was a penny stock trading for as little as $0.28. However, its shares skyrocketed after it announced a partnership with India's Bharat Biotech to commercialize its coronavirus vaccine in the U.S. As a result, shareholders who bought Ocugen stock for literal pennies on Dec. 1 are now up a mouthwatering 3,320% on their investment. Is now a safe time to invest in this biotech?

Doctor giving patient coronavirus vaccine.

Image source: Getty Images.

A top-tier coronavirus vaccine

Bharat Biotech's COVAXIN is composed of inactivated virions (ineffective viruses outside of host cells). It differentiates itself from other vaccines in its ability to protect against multiple viral antigens. During an interim phase 3 analysis, 78% of patients who received two doses of the vaccine developed immunity against mild, moderate, or severe cases of COVID-19. Additionally, the vaccine protected 100% of patients against severe COVID-19.

Of particular interest is the location of the clinical study. Being conducted in India, patients saw exposure to the new mutant COVID-19 strains circulating in the country. The B.1.617 strain is at least 20% transmissible and 50% more resistant to antibodies than the original COVID-19 strain. It's very impressive that COVAXIN maintained its efficacy. The vaccine is also simple to transport because it can last up to three months at room temperature.

COVAXIN is authorized for use in India, where about 300 million doses have been supplied to date. To make it available in the U.S., Bharat Biotech has solicited the help of Ocugen. The latter estimates it will secure emergency use authorization (EUA) from the U.S. Food and Drug Administration (FDA) by the end of June.

So what's the problem? 

Investors are betting a lot on the potential of the commercialization deal between Ocugen and Bharat Biotech. Ocugen doesn't actually own COVAXIN -- it merely owns the vaccine's licensing rights, and only in the U.S. That poses a problem, as the U.S. government has already ordered enough doses to fully vaccinate every individual four times. The Biden Administration is also on track to complete its vaccination program by the end of July.

Ocugen came a little too late to the game. While I do not doubt that the vaccine could receive an EUA, it seems implausible that the company could sell 100 million doses of COVAXIN in the U.S. The only scenarios I can think of are if current vaccines do not offer year-long protection and require booster shots, or if the Department of Defense takes an interest in the vaccine for strategic stockpiling. Even then, Ocugen can only keep 45% of the profits from selling the vaccine as per its partnership agreement.

Right now, Ocugen has no product revenue, is losing $21 million a year, and only has about $27.4 million in total assets. Its most promising gene therapy candidate, OCU400 for treating retinal degeneration, has not even entered phase 1/2 clinical trials. Overall, the company is very dependent on its ability to sell COVAXIN in the U.S. And at this point, there isn't really the need for it. New investors should avoid the stock until it lands a supply agreement, and those who got in before the pop should think about taking profits.