The past 18 months have been a roller coaster for Ocugen (OCGN). Shares of the biotech company skyrocketed in early 2021 after it announced an agreement with India-based Bharat Biotech. The deal stipulated that Ocugen would hold the right to commercialize the Covaxin coronavirus vaccine, which was originally developed by Bharat Biotech, in the U.S. and Canada.
However, shares of Ocugen have now lost most of the gains they accumulated in 2021 due to various regulatory headwinds that delayed the launch of Covaxin. Ocugen, though, has yet to give up on this project, and with a little more time, the company may be able to turn things around. Will one year be enough for Ocugen to bounce back?
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What's the deal with Covaxin?
There is good and bad news when it comes to Covaxin. First, the good news. Ocugen recently announced that it amended its agreement with Bharat Biotech and will now hold the rights to commercialize the biotech's coronavirus vaccine in all of North America, including Mexico. Covaxin has already earned Emergency Use Authorization (EUA) in adults in Mexico, and regulators are currently reviewing it for pediatric use. All this means that Ocugen will be able to generate some revenue from Covaxin in Mexico.
Now, the bad news: Within the U.S., Covaxin's prospects look dim. Ocugen has to run a phase 2/3 clinical trial and submit an application for full approval in the U.S., but regulators placed this study on clinical hold. The decision came as a result of Ocugen voluntarily pausing dosing in the trial after officials from the World Health Organization raised concerns regarding Bharat Biotech's manufacturing process for the vaccine.While there is no time line for the company to resume this study, it is in discussions with the U.S. Food and Drug Administration (FDA) to resolve the issue.
Typically, phase 3 clinical trials last between one and four years. Earlier in the pandemic, the Food and Drug Administration (FDA) granted EUA to coronavirus vaccines that had been in late-stage studies for much less than the typical time. But Ocugen's candidate won't be so lucky, as we are no longer in a state of emergency comparable to where we were when the first COVID-19 vaccines hit the market.
Ocugen initially planned to apply for EUA for Covaxin in the U.S., but the FDA advised the company to seek full approval instead. In other words, even if Ocugen were to resume its phase 2/3 study for Covaxin right now, the vaccine is highly unlikely to hit the U.S. market within the next 12 months.
There is some in-between news, as well: Covaxin may earn EUA in Canada relatively soon. Ocugen completed Covaxin's application for Canadian EUA in July 2021. Authorities initially flagged deficiencies in the company's application, which Ocugen has since addressed. The biotech company is now waiting on regulators to grant authorization to Covaxin, provided there are no further issues. The decision will almost certainly come within the next year.
Can Ocugen turn things around?
In the best-case scenario for Ocugen, which is also the most plausible, Covaxin will earn EUA in Canada and generate some revenue there, as it will in Mexico, where it is already approved. But the company will have to deal with tough competition and the fact that the governments and societies are now better adjusting to a world with COVID-19. Further, as part of its deal with Bharat Biotech, Ocugen will keep only 45% of the vaccine's profits in North America.
For a company that currently generates no revenue, sales from Covaxin will be welcome. But will those sales be enough to make Ocugen a more attractive investment? I don't believe so.
Ocugen's other candidates, all in early-stage studies, might make some progress in the next year. The most advanced is OCU400, a potential gene-editing treatment for several inherited retinal diseases, which is currently undergoing a phase 1/2 study. But this program won't make enough of a difference for Ocugen in the next year. In other words, the company's prospects -- within the coronavirus vaccine market and elsewhere -- look uncertain.
Ocugen is unlikely to improve its overall investment thesis within 12 months. That's why this biotech stock looks too risky to invest in today.
