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Better Buy: Ocugen vs. Pfizer

By Adria Cimino and Keith Speights – Dec 19, 2021 at 6:00AM

Key Points

  • Ocugen caught investors' attention when it inked a deal to co-commercialize a near-to-market vaccine candidate.
  • Pfizer has something to offer to nearly every investor.
  • Ocugen has attracted aggressive investors who are comfortable with risk.

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Can they both win in the coronavirus vaccine space?

There are plenty of options when it comes to vaccine stock investing these days. You can choose a player that's already generating billions of dollars in sales from the vaccine and other products. Or you can bet on a latecomer that may see revenue and share gains down the road. So you might opt for vaccine leader Pfizer (PFE 0.46%), for example, or you might go for Ocugen (OCGN 1.23%) -- this company hasn't yet brought its vaccine candidate to market. Let's look at which may be the better buy right now.

Ocugen: Potential for major gains

Adria Cimino (Ocugen): Ocugen surged more than 700% in a matter of weeks earlier this year on optimism about potential coronavirus vaccine sales. The biotech company partnered with Bharat Biotech to co-commercialize that company's vaccine -- Covaxin -- in the U.S. The deal later expanded to include Canada. But Ocugen has struggled to actually bring Covaxin to market. As a result, shares have dropped 68% from their peak back in February.

A masked and gloved healthcare worker vaccinates a masked patient in an office setting.

Image source: Getty Images.

The problem? First, the U.S. Food and Drug Administration recommended Ocugen follow the traditional regulatory path instead of applying for Emergency Use Authorization. That means a much longer review time. And Ocugen must conduct a new phase 3 trial to confirm the safety and efficacy results of Bharat's trials. All of this means Ocugen -- if successful -- will arrive at the finish line much later than expected. I've written extensively about why Ocugen is an extremely risky bet: competition is tough in the U.S. market, Ocugen is lagging from a timeline perspective, and Ocugen's core program -- gene therapy for eye diseases -- is early stage.

But there is one particular reason an aggressive investor may want to pick up a few shares. And that's the potential for upside if Ocugen announces any good news from its Covaxin program in the near to mid-term. If Covaxin reaches commercialization the shares could soar -- even if Ocugen's possibilities of carving out significant market share are limited. In the long term, Ocugen shares may climb if the company is successful with its gene therapy candidates. I would expect those gains to be more progressive than today's sharp movements on vaccine news. Today, the stock is trading at about $5. So, investors don't have to invest a lot to potentially benefit from an increase in this biotech player in the future.

Pfizer: Something to attract nearly every investor

Keith Speights (Pfizer): If you're an income-seeking investor, Pfizer is a no-brainer choice over Ocugen. The big drugmaker's dividend currently yields 2.7%. It's a pretty safe bet that Pfizer will increase its dividends for years to come. Ocugen, of course, doesn't make enough money to pay a dividend.

Value investors will no doubt like Pfizer a lot more than Ocugen as well. Pfizer's shares trade at close to 11 times expected earnings. That's a lot lower than the S&P 500's forward earnings multiple. It's also well below the average forward price-to-earnings ratio for pharmaceutical stocks, in general. It's difficult to assess Ocugen's valuation since the company doesn't have steady revenue or earnings yet.

But what about growth investors? Sure, Ocugen stock might skyrocket if it wins approvals or authorizations for Covaxin in the U.S. and/or Canada. But Pfizer's growth is practically a slam dunk. The company is poised to generate huge sales in 2022 from its COVID-19 vaccine Comirnaty and COVID-19 pill Paxlovid. And Pfizer's lineup includes plenty of other products with strong growth prospects.

In my view, buying Ocugen stock is similar to playing roulette. You could make a lot of money -- but you could lose a lot of money, too. Buying Pfizer's shares, on the other hand, is more like being the casino. Over the long run, you're very likely to be a winner.

Ocugen or Pfizer?

Your choice may depend on your investing style. An investor looking for a chance at steep gains fast may go for Ocugen. But as Keith says, the risk is that such a stock also may suffer big losses. Overall, Pfizer represents an opportunity to grow your investment over time -- and expose yourself to a lot less risk. In general, that's always a better recipe for long-term investing success.

Adria Cimino has no position in any of the stocks mentioned. Keith Speights owns Pfizer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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