Ocugen Faces Long Odds Before Gaining From Its Covid-19 Support Role

While Ocugen (NASDAQ:OCGN) stock is up over 200% this year, it hasn’t been a case of slow and steady growth. On two separate occasions, the shares have been much higher. Yet when I wrote about OCGN stock a month ago, the stock was about 40% below its current price. 

Volatility like that merits some explanation. The first time OCGN stock popped, in mid-February was likely due to the meme stock craze. But when the stock spiked in April, it was due to a more fundamental reason. Ocugen had become a recognized player in the Covid-19 vaccine rollout.

That would be more intriguing if Ocugen was developing its own vaccine. Not that it would make it any less of a long shot, but right now the company is serving the role of a middleman. And it could wind up getting cut out entirely.

America Doesn’t Need Covaxin 

As I noted last month, Ocugen is in a partnership with India’s Bharat Biotech regarding the latter company’s Covid-19 vaccine, Covaxin. Specifically, Ocugen will get 45% of the profits from the sale of Covaxin in the United States.

The concern I had then is the same concern I have now. The U.S. does not require another Covid-19 vaccine. And, although Covaxin has received an emergency use authorization in India, it continues to undergo Phase 3 trials.

Under terms of the agreement, Ocugen will be responsible for the vaccine’s clinical development, regulatory approval (which includes its EUA) and commercialization in the U.S. 

And as my InvestorPlace colleague Larry Ramer points out, that approval appears unlikely. Ramer recently observed that the FDA’s written protocols state that to grant an EUA it “should carry out visits to the sites at which Phase 3 trials are being carried out.” 

That would mean the FDA would have to go to India which is currently under a travel ban by the U.S.

Not Part of the Arsenal 

One of the recent bullish arguments for OCGN stock is that the company will benefit from India’s pause on exporting Covaxin. India will not export the vaccine until at least October to stem the ongoing surge in that country. The rationale is that Ocugen will benefit as more vaccines will need to be created and exported.

But again, I’m skeptical. First, as I’ve pointed out, the United States is not a nation that needs to import vaccines. In fact, President Biden is pledging that the U.S. will be an arsenal for global distribution of Covid-19 vaccines. On May 17, 2021 the president announced that the U.S. would share an additional 20 million doses of the vaccine. This was in addition to the 60 million doses that have already been exported. 

This brings me to a second point. Currently, Covaxin is not part of that arsenal. And even if it were, it’s unclear how exporting Covaxin would work with Ocugen’s agreement in which the company receives compensation for sales of Covaxin within the United States (emphasis mine).

There Are Better Options Than OCGN Stock 

Ocugen specializes in treating rare eye diseases. They don’t currently have a product in market. But one of their candidates, INO-4000, is beginning the clinical trial stage. The partnership with Bahrat Biotech may be successful in raising some non-dilutive revenue. But for reasons I’ve noted in this article, that should not be seen as a given. 

There are other small-cap biotech companies that may have better odds of bringing an additional Covid-19 vaccine to market. I would suggest Inovio Pharmaceuticals (NASDAQ:INO) or iBio (NYSEAMERICAN:IBIO). These companies also face long odds. However both are at least manufacturing their own vaccine. And both companies are bringing something innovative to the table. 

I’m assuming Ocugen’s motives for trying to assist in the Covid-19 vaccine race are pure. I imagine all biotech companies want to alleviate suffering and needless death from this virus. But the company is facing longer odds to achieve that goal than I believe short-term traders are considering.

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.