Shares of Ocular Therapeutix (OCUL -3.50%) have been hammered this year despite plenty of good reasons to expect rapid growth ahead. Now, the stock looks like a bargain opportunity poised to produce big gains for your portfolio.

This company's finding new ways to deliver well-understood drugs, which isn't the most interesting corner of biomedical science at the moment. But investors should know that useful new drug delivery technology can produce exciting gains.

Life science professional looking at a bottle.

Image source: Getty Images.

Read on to see why I recently felt compelled to scoop up shares of this beaten-down biotech stock.

1. Improving Dextenza sales

Ocular Therapeutix's lead product, Dextenza, is an ingenious solution to a problem that affects millions of Americans who undergo eye surgery each year. It's made of an anti-inflammatory steroid called dexamethasone and an injectable hydrogel that healthcare providers slide into patients' tear ducts following eye surgery.

Instead of applying dexamethasone drops when needed, Dextenza constantly takes care of business, even when patients are sleeping or too busy to apply eye drops. In trials leading to its approval, constant administration of dexamethasone with Dextenza significantly reduced pain and inflammation compared to a placebo group in the post-surgical setting.

Independent new drug launches tend to progress slowly, but eye doctors are catching on to Dextenza fast. Second-quarter sales came in at $11.1 million, which was a whopping 647% more than the previous-year period and 65% higher than the first quarter of 2021.

2. Allergic conjunctivitis

The specialized cells in the center of your lenses are the same ones you were born with. It's just a matter of time before they begin scattering light before it can reach the retina, which is why roughly half of Americans over 75 years old have cataracts.

Dextenza's growth opportunity as a post-surgical treatment is significant, but post-surgical pain is temporary. In March, the FDA began reviewing an application that could expand Dextenza's available patient population to include people with allergic conjunctivitis, a condition diagnosed about 3 million times a year in the U.S. alone.

Dextenza's expansion to allergic conjunctivitis seems like a slam dunk. During a trial supporting the application under review, patients who received Dextenza reported itch scores that were significantly lower than the placebo group after exposure to known allergens.

Person chewing on their thumbnail while looking at a laptop screen.

Image source: Getty Images.

3. Expansion ahead

In addition to a label expansion for Dextenza, Ocular Therapeutix is rapidly developing a handful of new hydrogel-based drugs that elute drugs eye doctors are already comfortable with. For example, the company expects data from a placebo-controlled phase 2 trial with a chronic dry eye candidate treatment called OTX-CSI in the fourth quarter.

Ocular Therapeutics uses the same hydrogel for OTX-CSI as Dextenza, but it swaps out dexamethasone for cyclosporine. This is the active ingredient in Restasis, a prescription eye drop brand that generated $787 million in sales for AbbVie (ABBV -2.22%) last year.

Age-related macular degeneration (AMD) and diabetic retinopathy are leading causes of progressive vision loss. These days, anti-vascular endothelial growth factor drugs that get injected into patients' eyes to prevent the progression of these diseases are a big business. Eylea is an injectable anti-VEGF drug from Regeneron (REGN -1.70%) used to prevent vision loss. Sales of Eylea reached a whopping $4.5 billion in the first half of 2021.

In July, Ocular Therapeutix began injecting the eyes of AMD patients with OTX-TKI in a head-to-head phase 1 trial against Eylea. OTX-TKI is made of the company's hydrogel plus a small-molecule anti-VEGF drug from Pfizer (PFE -1.82%) called Inlyta.

Patients will receive one dose of OTX-TKI or Eylea every other month for 36 weeks. If patients who receive OTX-TKI lose visual acuity at the same rate as patients randomized to receive Eylea, this stock will rocket higher. Signs of increased efficacy compared to Eylea would send it to the moon.

4. Hard to lose

At a glance, Ocular Therapeutix's recent price of around 25 times trailing-12-month sales might not seem like much of a bargain. The company's current market cap of just $793 million, though, is just a little bit more than the amount of Restasis revenue AbbVie reported last year. In other words, this stock could more than double if just one of its several ongoing ventures succeeds. 

There aren't any guarantees that OTX-CSI or any of this company's pre-commercial pipeline assets can earn approval. That said, investors who scoop up the stock at its bargain-bin price can rest easy knowing Dextenza sales in the post-surgery setting alone could be enough to drive the stock higher over the long run.