Until late 2020, Ocugen (OCGN 2.17%) was an under-the-radar biotech company focusing on developing gene therapies targeting eye disease. Then along came Bharat Biotech. The drugmaker had already won authorization for its COVID-19 vaccine Covaxin in India. Bharat wanted a partner to help get Covaxin into the U.S. market. It picked Ocugen.

Advancing Covaxin in the U.S. proved to be more difficult than either company hoped, though. Ocugen eventually punted on the Emergency Use Authorization (EUA) route and decided to pursue full U.S. approval for the vaccine in immunizing adults.

Last Friday, however, the company announced a plot twist. Ocugen revealed that it had filed for EUA with the U.S. Food and Drug Administration (FDA) for Covaxin in children ages two to 18. But does the company have a realistic shot at winning U.S. EUA for Covaxin in kids?

A healthcare professional giving a shot to a child.

Image source: Getty Images.

In the FDA's own words

It's important to recall why Ocugen chose not to pursue the EUA path for Covaxin in adults earlier this year. The company was preparing to file for EUA until the FDA issued revised guidance on the process on May 25. In that revised guidance, the FDA said:

For the remainder of the current pandemic, FDA may decline to review and process further EUA requests other than those for vaccines whose developers have engaged in an ongoing manner with the Agency during the development of their manufacturing process and clinical trials program as described in this guidance, Emergency Use Authorization for Vaccines to Prevent COVID-19. These COVID-19 vaccine developers will have had the benefit of FDA feedback early and throughout the development process. Therefore, their EUA requests are more likely to contain the comprehensive data and information needed to demonstrate that issuance of an EUA is appropriate, and the Agency is more likely to be able to confirm the validity of the clinical and manufacturing information submitted in the EUA request.

Ocugen clearly had not "engaged in an ongoing manner" with the FDA during the development of the manufacturing process and clinical trials for Covaxin at that point. It wasn't even involved in the process.

The FDA hasn't changed its tune since then. But Ocugen moved ahead with its EUA filing for Covaxin in kids anyway. The company submitted data from a phase 2/3 study conducted by Bharat in India. This study was an immuno-bridging trial that showed comparable antibody response in children ages two to 18 as was seen in a larger study in adults.

Mr. Market's opinion

Warren Buffett's mentor Benjamin Graham personified the stock market as the character "Mr. Market" in his book The Intelligent Investor. Graham wrote that Mr. Market isn't always rational. However, it's sometimes helpful to observe how Mr. Market reacts to events.

For example, Mr. Market was excited about the prospects for Covaxin securing Emergency Use Listing (EUL) from the World Health Organization. Ocugen's shares skyrocketed in anticipation of this EUL, even though it really didn't affect the company.

In this case, though, it appears that Mr. Market is skeptical about Ocugen's chances of winning U.S. EUA for Covaxin in kids. You'd probably think that the company's announcement about filing for EUA would have caused the vaccine stock to soar. It did -- initially. However, nearly all of Ocugen's gains early Friday morning after the company announced its U.S. EUA filing quickly evaporated.

What about after investors had a chance to think about the news over the weekend? There wasn't any improvement. Ocugen's shares also fell on Monday. And the stock continued its slide on Tuesday after the company's third-quarter update.

Ocugen's management team might believe they can win U.S. EUA for Covaxin in children. But Mr. Market apparently doesn't.

Iffy chances, at best

To be clear, the FDA never said that it absolutely wouldn't grant EUA for vaccines whose developers had not worked with the agency throughout their clinical trials and manufacturing process. The FDA just stated that it "may decline to review and process" such EUA filings.

However, Ocugen appears to definitely have an uphill climb to win authorization for Covaxin. It's probably fair to say that the company has iffy chances, at best.

On the bright side, Ocugen also filed an Investigational New Drug (IND) application with the FDA to begin a phase 3 study of Covaxin in adults. This seems to be a more promising path for bringing the vaccine to the U.S. market.