Ocugen (OCGN 8.47%) soared into the spotlight -- and its stock soared too -- when it entered the COVID-19 vaccine race two years ago. In fact, the shares climbed about 700% in a matter of days. That's when Ocugen gained the right to sell Bharat Biotech's Covaxin in the U.S. It later added Canadian rights to the deal.
But the U.S. and Canada still haven't authorized Covaxin. And Ocugen shares have lost their luster. Last year, they sank 71%. Now, investors may be wondering if this movement created a big buying opportunity. Or has Ocugen left center stage for good? Let's consider one reason to buy Ocugen in 2023 -- and two reasons to sell.
Reason to buy: Neocart potential
Ocugen last year expanded its pipeline to include Neocart, a cell therapy candidate for knee cartilage repair it acquired through its reverse merger with Histogenics a few years ago. Histogenics brought Neocart through development, but the potential product failed to meet its primary endpoint in a phase 3 trial. That may not sound too positive.
But fortunately for Ocugen, there's more to the story. The trial design set the bar for Neocart extremely high. And Neocart missed success by a very small degree. Even better, overall data from the trial were promising. All of this means Neocart could succeed in a newly designed trial.
Ocugen recently won approval from the U.S. Food & Drug Administration (FDA) for its design of a new, confirmatory phase 3 trial for Neocart. The company hopes to start the trial at the end of this year or early next year.
There's reason to be optimistic about Neocart's performance in this new trial since it came so close last time. The worldwide knee cartilage repair market is set to reach $5.2 billion by 2029, according to an iHealthCare Analyst report. And Histogenics' earlier market research showed surgeons generally treat only 30% to 40% of patients due to dissatisfaction with current options.
So, surgeons may flock to Neocart if results are strong. And that would be great news for Ocugen, which so far doesn't have product revenue.
Reason to sell: The Coronavirus vaccine program
As mentioned above, Ocugen aimed to make Covaxin its first commercialized product and generate significant revenue in the vaccine market. But that possibility is looking less and less likely.
The company only has the right to sell Covaxin in North America and would share profits with Bharat. That would have been fine if Covaxin launched earlier in the pandemic. But as we head toward a post-pandemic world -- where even vaccine leaders expect to see a drop in revenue -- the picture looks pretty dim for Ocugen.
Even if the U.S. and Canada authorize Covaxin in the coming months, it will be difficult for a latecomer to gain significant market share. At the same time, launching and commercializing the vaccine -- as well as conducting the clinical trials Ocugen has had to run in the U.S. -- are increasing research and development costs.
It's not clear if this venture into the coronavirus vaccine market will be profitable for Ocugen. Right now, it's more of a reason to sell the stock.
Reason to sell: A sense of uncertainty
A few years ago, Ocugen's focus was on its investigational gene therapies for eye disease. These candidates were all in pre-clinical development. (They're still early stage, though one is now in a phase 1/2 trial.)
Then Ocugen entered the coronavirus vaccine race, as mentioned above, perhaps expecting Covaxin to generate revenue and help fund the rest of the pipeline. But this didn't happen.
Next, Ocugen announced the expansion of its pipeline with Neocart. This could be a positive move and a path toward revenue. But it won't happen overnight, and at the same time, R&D expenses are rising.
Broadening a pipeline is often a good idea. But it can also lead to a lack of focus -- and some uncertainty. And that is adding risk to an already risky stock in this case.
So, should you buy or sell?
Ocugen may eventually score a win with Neocart and even with its eye disease candidates down the road. And that's why, if you own Ocugen shares and would lose by selling now, you may want to hold on.
That said, Ocugen doesn't have much visibility right now. I would like to see the company launch its Neocart trial and/or see some advancement in the eye disease programs before I'd recommend buying the stock. Today, Ocugen's direction isn't clear, and that makes it risky to add to your portfolio right now.
