Does a rising tide really lift all boats? Not necessarily. While the overall stock market delivered solid gains on Tuesday, shares of Ocugen (OCGN -4.24%) sank as much as 13.6% before recovering some of the loss. Is the stock a buy on the dip?
It's important to first understand why investors' optimism about Ocugen has waned. The company had hoped to win U.S. Emergency Use Authorization (EUA) for COVID-19 vaccine Covaxin in immunizing children ages two to 18. However, that door was slammed shut last week by the U.S. Food and Drug Administration (FDA).
Unfortunately, Ocugen has also had other setbacks. The FDA wouldn't allow an EUA pathway for Covaxin in adults, either. The agency initially placed Ocugen's application to initiate a clinical study for the vaccine on hold. Health Canada issued a notice of deficiency to the company, related to its filing for approval of Covaxin.
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But all of this bad news has caused the biotech stock to plunge more than 80% below its peak level in early November 2021. Probably all it would take to send Ocugen's shares soaring again is one positive development. The company still has opportunities for some good news.
Ocugen submitted its response to Health Canada's notice of deficiency and awaits a decision by the agency. It's planning to soon move forward with a phase 2/3 study of Covaxin in adults after the FDA listed its clinical hold.
Positive results from that study could provide a solid catalyst. Ocugen should also have updates on the way in the near future from its phase 1/2 study of gene therapy OCU400 in treating retinal degeneration.
Is the stock a buy? Ocugen certainly could rebound. However, it remains highly risky. My view is that there are other stocks that offer more compelling risk-reward propositions.
