Shares of Ocugen (OCGN -9.43%) have been on quite a ride this past year. The biotech company's intention to enter the coronavirus vaccine market in North America initially stoked investors' excitement; however, that strategy has since faced regulatory headwinds. The company has yet to earn an emergency use authorization (EUA) or approval in the U.S. or Europe for its product, Covaxin.
On the positive side, Covaxin has received an EUA from the World Health Organization and approvals from regulators in 13 countries, including India and Mexico. But that may not be enough for investors. While Ocugen's stock has performed much better overall than the broader market over the past year, that's included some enormous swings in both directions. For potential new investors, the question must be: Where will Ocugen go from here?
Could Covaxin tame omicron?
When Ocugen decided to join the hunt for an effective COVID-19 vaccine, it did not attempt to develop one itself. Instead, it partnered with India-based Bharat Biotech, which had developed Covaxin. Under their agreement, Bharat retains the commercial rights to Covaxin everywhere except for North America, where Ocugen will market it. However, Ocugen will only keep 45% of any profits Covaxin generates in the U.S. and Canada.
Ocugen recently reported data from a clinical trial that showed a booster dose of Covaxin administered six months after the initial two-dose regimen proved effective at neutralizing the delta and omicron variants of the coronavirus. More than 90% of the study participants showed neutralizing antibodies, according to the company. But is this news enough to make Ocugen a buy?
Looking at the big picture
In an initial phase 3 study conducted in India, Covaxin proved 77.8% overall effective at preventing COVID-19 and 93.4% effective at preventing severe cases. That compared unfavorably to what other vaccines were able to accomplish. For instance, Novavax's candidate, NVX-CoV2373, showed itself to be 100% effective against severe cases of the disease and 90.4% effective overall in a late-stage clinical trial.
And while it's good news that Covaxin seems able to neutralize the omicron variant, which has spread rapidly across the world in the past two months, it is unclear whether this could move the needle for Ocugen.
Image source: Getty Images.
First, the vaccines that have already earned emergency authorization or approval are dominating the market, especially in North America. More than 230 million people in the U.S. and Canada have been inoculated with the COVID-19 vaccines marketed by Pfizer, Moderna, and Johnson & Johnson. Further, mix-and-match booster doses have been authorized for these products, at least in the U.S. That means if you originally got two doses of Pfizer's Comirnaty, getting a booster of either the J&J or Moderna vaccine is acceptable. But whether regulators there will eventually authorize Covaxin as a booster too remains to be seen.
Meanwhile, some health experts believe that the omicron wave could lead to a degree of temporary herd immunity due to its highly contagious nature. There's no guarantee on that score, but it's one more reason why Covaxin's prospects don't look great in North America. And that's before we get into the regulatory hurdles it has encountered in the U.S. After discussing the matter with the U.S. Food and Drug Administration, Ocugen opted to seek full approval for Covaxin instead of trying to obtain an EUA. The latter would have taken significantly less time than the former.
Also, while the company needs to conduct a phase 3 study in the U.S. for Covaxin, regulators recently put Ocugen's planned clinical trial on hold because of deficiencies they found in the company's application. Further, Covaxin has been under review for authorization in Canada since August, but it has yet to receive the green light. If regulatory authorities in that country thought Covaxin could help with the recent surge of cases due to omicron, they likely would have already approved its use.
Lastly, Ocugen's attempt to win an EUA of Covaxin for children aged two to 18 in the U.S. is unlikely to be successful.
Ocugen's other drug candidates are far too early in their development stages to meaningfully move the needle for the company anytime soon. So given Covaxin's dim prospects in North America, the biotech's near-term financial outlook isn't bright. For investors, it would be best to stay on the sidelines for now, especially given that there are far more attractive biotech stocks to consider.
