Biotech company Ocugen (OCGN) doesn't have any products that are generating revenue today. Much of the bullishness behind the stock has surrounded the COVID-19 vaccine it is co-developing with India-based Bharat Biotech.
With commercialization rights for the Canadian and U.S. markets, Ocugen has the potential to share in the profits if the vaccine obtains approval in either of those two countries. However, a recent decision from the U.S. Food and Drug Administration (FDA) crushed a lot of that optimism and could pave the way for more of a decline for a stock that's already been in freefall over the past year.
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FDA declines to authorize Covaxin for use in children
On March 4, Ocugen issued a brief press release informing investors that the FDA was not going to issue an Emergency Use Authorization (EUA) for Covaxin to be used in people between the ages of two to 18. Ocugen said that it would still "evaluate the regulatory pathway for the pediatric use of Covaxin" but offered no specifics or promises as to what its next steps (if any) might be.
As recently as Feb. 25, when the company released its year-end financials, Ocugen sounded confident in its submission for EUA, stating that it had a large safety database of over 36 million teenagers who were vaccinated with Covaxin. The setback likely surprised management as the FDA's decision to decline the vaccine came just one week later.
Ocugen has struggled to make headway in North America
The problem for Ocugen is that these sorts of challenges aren't new for the company. Last year, on May 26, it announced that it would seek an EUA for Covaxin (not specific to pediatrics). Just over two weeks later, on June 10, it said the agency nudged it in the direction of a Biologics License Application instead, which would take longer to review. The vaccine hasn't been approved under that path yet either.
At the same time, the company said it obtained commercial rights for Covaxin in Canada and that it would be looking for expedited authorization there. To date, Health Canada still hasn't issued authorization for Covaxin.
Then, in November 2021, Ocugen announced that the FDA had issued a clinical hold on the company's Investigational New Drug Application for Covaxin as it needed to evaluate deficiencies it had identified. The FDA lifted the hold three months later in February, which presumably cleared the path for the drug application to move forward. However, it remains to be seen whether it will make any progress.
Is the stock going to zero?
At a share price of a little more than $2, the healthcare stock hasn't been this low since February 2021, when the meme hype took over, sending Ocugen shares up to over $18. Given the renewed pessimism in the stock, it's hard to see how Ocugen shares can get out of this tailspin without some surprisingly positive news from the FDA. In just one year, the stock has crashed 75% while the S&P 500 has risen by 9%.
The company's cash burn and need for share offerings to raise capital only exacerbate the issue. In 2021, Ocugen used up more than $47.9 million over the course of its day-to-day operating activities. On Feb. 22, it announced a $53.5 million offering to raise additional cash. And with no revenue coming in for the business, investors can expect to see more offerings in the future. As of Dec. 31, 2021, Ocugen reported having $95.1 million in cash (including cash equivalents and restricted cash).
There's no viable reason to invest in Ocugen's stock today. It's full of risk, burning cash, and there is little hope that the vaccine will receive approval in either Canada or the U.S. (the only markets where Ocugen will share in the profits with Bharat Biotech). Barring some surprising news, I wouldn't be surprised for the stock to continue its decline toward zero.
