As a biotech company without any medicines on the market, it's easy to understand why investors might worry that they're behind on buying shares of Ocugen (OCGN -6.40%). As is often the case with biotechs, Ocugen's stock has soared and crashed overnight on several occasions as a result of regulatory rulings and stuttering clinical trial progress.
Is there any clear upward trajectory in sight for people who invest now? Or is Ocugen a has-been stock that's not worth gambling on? Even with a handful of setbacks in plain view, the answers to these two questions are more complicated than they may seem. Let's explore why.
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Its limelight has likely passed right along with Covaxin's prospects
On March 4, the Food and Drug Administration (FDA) opted to reject Ocugen's Emergency Use Application (EUA) for its coronavirus vaccine candidate, Covaxin. Ocugen is licensing the vaccine for sale in North America from a business in India called Bharat Biotech, which has secured its emergency approval there. Therefore, the vaccine isn't something that Ocugen developed in-house.
The company hoped to get its vaccine approved for use in people between the ages of 2 and 18. But even that goal is a step down from its original ambitions to get Covaxin approved for use in adults, a move the FDA also stymied with a clinical hold late last year, though the hold has since been lifted. Regulators in Canada also found its application to be insufficient in December, though the pathway to approval remains open.
With the rebuffs from regulators in hand, Ocugen will need to do more clinical trials if it wants to have a shot at getting any kind of approval.
Of course, the market isn't reacting well to the news. Ocugen's shares have been down by more than 42% this year so far, and there isn't much for investors to look forward to in the near future.
Even if the company performs additional clinical trials that suit regulators' standards, it'll face a difficult path to widespread adoption in the U.S. Powerful competitors like Moderna and Pfizer have saturated the domestic market, and doses aren't in short supply anymore.
Then there's the issue of Ocugen's sparse pipeline. Aside from Covaxin, the company has no programs currently in clinical trials. Though there are several preclinical ocular medicine projects that will likely move to the clinic eventually, timelines remain loose. That means investors who buy the stock today might need to wait upwards of five to seven years before any of its programs are mature enough to be commercialized if any ever are.
So, if you think its early-stage ocular therapies will hit it big someday, it isn't too late to buy the stock. But for most investors, it'd be a highly speculative buy, just like any other pre-product biotech stock.
There might be a distant glimmer of hope
As bleak as Ocugen's situation seems, there are a couple of tidbits that might mean it isn't too late to buy its shares.
Right now, it doesn't have any revenue, and it only has $3.3 million in debt. It also has $94.9 million in cash, which is enough to pay its 2021 total expenses of $58 million for another year or so before the company needs to find more money. Therefore, its recent setbacks haven't endangered the business' health in the near term, so there's a chance of it surviving long enough to eventually grow once again.
There's also the prospect of its vaccine getting approved in the U.S. and Canada. Although it'll be quite late and facing stiff competition in both markets, even a trickle of new revenue would be a massive improvement over its current level of zero. That could cause its stock to shoot upwards, though it might not be enough to stem the losses for current shareholders.
Overall, Ocugen probably isn't a stock that's right for most investors, even if it isn't too late to buy it. While I'd probably be singing a slightly different tune if its vaccine had been approved in early 2021, the barriers it faces right now are substantial, and it'll take some time to get around them if it ever does.
