Ocugen (OCGN -6.45%) has been one of the hottest, most volatile biotech stocks on the market of late; in October, the stock soared 65% while the S&P 500 rose by 7%. The problem is that often its price movement is related to speculation, not to developments that make the business a better or worse investment overall.
The company hasn't generated any meaningful revenue over the past year; investors are banking on the hope that the COVID-19 vaccine Ocugen is co-developing with Bharat Biotech will send the stock soaring. The good news: A recent decision by the Food and Drug Administration (FDA) could create a significant opportunity in the U.S. market, and a path for Ocugen to snag some significant market share if its vaccine gets the green light.
The FDA now allows mixing and matching of booster shots
Under its agreement with the Indian healthcare company Bharat Biotech, Ocugen will share in the profits of Covaxin, the vaccine the two companies are codeveloping, but only in Canada or the U.S. And a recent decision by the FDA could significantly improve Ocugen's prospects in the U.S.
In October, the agency announced that people eligible for booster shots don't have to get the same brand they initially received. This means, for example, that people who got a vaccine from Johnson & Johnson will be able to receive booster shots from a different company, such as Moderna or Pfizer.
Why this is an important development for Ocugen
The danger for Ocugen has been that Covaxin isn't approved for use in the U.S. market; even if it does receive the green light from the FDA, there may not be as much of a need as more of the population gets vaccinated. In the U.S., approximately 57% of the population is fully vaccinated as of Nov. 4 (in Canada, the percentage is considerably higher, at over 74%).
But if the FDA approves Ocugen's vaccine, it could potentially be administered as a booster shot to individuals who received other vaccines. And the market for COVID-19 booster shots in the U.S. will be significant -- bringing in billions of dollars in sales for vaccine makers next year, when the shots could be made available to almost everyone in the country.
For a company like Ocugen that doesn't always have revenue coming through the door, even obtaining a small piece of the market for booster shots could have a significant impact on the business and its financials. However, investors still need to be cautious: The vaccine isn't yet approved in Canada or the U.S., and there are no indications that health officials will approve it.
On Oct. 27, Ocugen filed an Investigational New Drug Application (IND) with the FDA so that it can begin phase 3 trials of Covaxin for the U.S. market. The company believes the study can be completed by the first half of next year. And if that's successful, it could pave the way for the vaccine's approval.
Investors should continue to tread carefully
Right now, there's nothing solid that Ocugen investors can rely on to say that the company will be generating significant revenue next year. Ocugen remains a risky investment that is incredibly volatile and sensitive to news -- on Wednesday, its shares tanked, even on positive news that the World Health Organization granted Emergency Use Listing for the vaccine. Although that doesn't necessarily improve its prospects for approval in Canada or the U.S., it certainly wasn't a negative development for Ocugen.
Unless you can afford to lose a significant chunk of the money you plan to invest, you probably shouldn't take a chance on Ocugen stock today, as there's still too much uncertainty ahead. There are other, safer growth stocks to invest in that won't put your money at nearly as much risk.