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Better Buy: Ocugen vs. Novavax

By Prosper Junior Bakiny – Dec 13, 2021 at 7:37AM

Key Points

  • Ocugen can only profit from its coronavirus vaccine if it's marketed in North America.
  • Novavax is close to earning authorization in several countries and is already generating sales from its candidate.
  • The choice between these two biotechs isn't too difficult.

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Both of these companies are currently playing second fiddle to the leaders in the coronavirus-vaccine market.

The COVID-19 pandemic isn't over. A new variant of the virus, called omicron, is now making its way around the world. This new strain of the virus seems more contagious than the previous ones, but we still have a lot to learn about it. However, these recent developments highlight the importance of vaccines in the fight against COVID-19.

While companies such as Pfizer and Moderna currently dominate the coronavirus-vaccine market, there may be space for newcomers. Two biotechs looking to enter this market are Ocugen (OCGN -6.68%) and Novavax (NVAX -1.05%). But which of these two vaccine makers is the better buy right now? Let's look into these companies' businesses and decide. 

OCGN Chart

OCGN data by YCharts.

The case for Ocugen

Ocugen penned a deal with Bharat Biotech, an India-based company that developed a coronavirus vaccine called Covaxin. The agreement between the two entities stipulates that Ocugen will hold the rights to commercialize Covaxin in North America, while Bharat Biotech will have these rights in the rest of the world. However, Ocugen will only keep 45% of the profits Covaxin will generate in the U.S. and Canada.

With that said, Ocugen is a clinical-stage biotech. If Covaxin generates even $1 billion in profit in North America -- and Ocugen pockets the agreed-upon slice of this money -- it will still be a significant win for the company. How are things looking for Covaxin in North America? Following the advice of health authorities in the U.S., Ocugen decided to pursue full approval for Covaxin in the country, as opposed to emergency use authorization (EUA).

The former could take a year or two, especially since Ocugen will run a phase 3 clinical trial for Covaxin. To make matters worse, the U.S. Food and Drug Administration (FDA) recently put this planned phase 3 study on clinical hold. It isn't clear what issues the agency identified in Ocugen's application to run this study, but as long as the clinical hold stays in place, Ocugen won't be able to kick things off.

Meanwhile, an application for an EUA based on phase 3 study results for Covaxin conducted in India would have taken a few weeks. The vaccine proved 77.8% overall effective and 93.4% effective against severe cases of the disease in this late-stage study. And while Ocugen submitted an EUA to the FDA for Covaxin for kids between the ages of 2 and 18, the vaccine is highly unlikely to earn this regulatory nod.

Physician vaccinating a child.

Image source: Getty Images.

Things are looking better for Ocugen in Canada. The company completed an application for EUA in the country in August and is waiting on authorities in the country to issue a decision. Ocugen doesn't have a whole lot going on aside from Covaxin: All of the company's clinical programs are still in the early stages of their development. That means the company's performance in the next year will be determined by clinical and regulatory developments related to Covaxin. 

The case for Novavax

Novavax's vaccine proved 90% effective at preventing COVID-19 in a clinical trial -- and 100% effective against critical cases of the illness. The company has already signed multiple agreements with various governments worldwide to deliver millions of doses of its candidate, NVX-CoV2373. Novavax has yet to earn EUA in most countries. That's in part because the company ran into manufacturing-quality issues.

Nonetheless, it has completed a series of applications for NVX-CoV2373 over the past few weeks -- including in the U.K., Europe, and Canada. It expects to file for authorization in the U.S. by the end of the year. Regulatory nods will likely start coming in for Novavax soon, and it's almost guaranteed to generate some sales from NVX-CoV2373 next year.

While estimates vary (as they always do), on average, analysts expect the company to generate $4.8 billion in revenue next year. Novavax does have at least one other promising program, namely NanoFlu, a potential flu vaccine for adults aged 65 and older. This product addresses a pressing need -- there are still thousands of hospitalizations and deaths from the flu every year, especially among seniors.

NanoFlu has already aced a phase 3 clinical study, although it isn't clear when Novavax will formally submit an application for the vaccine. But NanoFlu looks likely to make it to the market eventually, and when it does, it could easily reach blockbuster status

The verdict

Novavax's COVID-19 vaccine proved more effective than Ocugen's in late-stage studies. Although the former has a clear path to launching its product in multiple markets, the latter's hopes in one of its only two markets look increasingly bleak. Further, Novavax is already generating revenue. 

During the first nine months of the year, the biotech's top line came in at $924.1 million, even though it recorded a net loss of $897.5 million. The net loss was driven by the significant research and development expenses which is expected for a biotech organization. Novavax's cash and cash equivalents figure came in at $1.9 billion. By comparison, Ocugen didn't report a single dollar in revenue during the first nine months of the year, and its net loss came in at $43.8 million.

Ocugen's lower net loss is partly because it has less going on -- particularly in late-stage studies, regulatory applications, and commercialization efforts. Meanwhile, Ocugen's cash and equivalents figure of $107.5 million pales in comparison to Novavax. Lastly, while Novavax has a promising late-stage pipeline program other than its coronavirus vaccine, Ocugen doesn't. 

These factors paint a clear picture: Novavax is a better biotech stock than Ocugen right now.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends Moderna Inc. The Motley Fool has a disclosure policy.

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