Ocugen Looks Risky as Markets Tire Of Speculative Vaccine Plays thumbnail

Ocugen Looks Risky as Markets Tire Of Speculative Vaccine Plays

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Ocugen’s (NASDAQ:OCGN) time in the sun is coming to an end. Last year, the stock shot to prominence due to the Covid-19 crisis. The clinical-stage biopharmaceutical company is partnering with India’s Bharat Biotech to bring Covaxin, a Covid-19 vaccine candidate, to the American markets. Although it has faced delays, the markets were very kind to the company, at least until late last year. But OCGN stock is finally showing signs of weakness. In the last month alone, shares of the biotech fell 14.7%.

OCGN stock: hands of medical professional holding a syringe, symbolizing vaccine

Source: shutterstock.com/PhotobyTawat

Part of that has to do with the adage “buy the rumor, sell the news.” Although the company has not obtained an Emergency Use Authorization (EUA), it did obtain an Emergency Use Listing (EUL) for Covaxin from the World Health Organization (WHO). The stock did very well in the run-up to the approval, as expected when dealing with this kind of vaccine play. But once the WHO gave the green light, the share price dropped precipitously.

Now, not everything is bad news with this stock. Covaxin shows 77.8% efficacy against symptomatic coronavirus and 93.4% against severe disease. But that is not enough to guarantee a “buy” rating at this stage. Novavax (NASDAQ:NVAX) is the better option if you are still interested in dabbling in this space. It has several near-term catalysts you can take advantage of if you want to make some money in the upcoming quarter.

OCGN Stock: A Perennial Underperformer

Since its founding in 2013, OCGN stock was just another biotech among a sea of companies popping up recently to take advantage of this growing trend. However, an externally developed coronavirus vaccine was just the elixir needed for a revival. Suddenly the stock was hot and reached $15 on three occasions in the last year. A very impressive stat. But it also highlights the degree of volatility with this one, which sports a five-year beta of 4.2.

The only problem is that the vaccine frontrunners emerged quite quickly after the crisis erupted. Hence, the first-mover advantage is lost. Many of the companies that made and continue to make billions from these vaccines sales are now looking towards booster shots as the next “holy grail.”

Pfizer (NYSE:PFE) recently came out with a statement acknowledging that the efficacy of that immunity from the first two doses of its vaccine starts to wane after the first few months. Meanwhile, Ocugen is still struggling to take the mound. As InvestorPlace contributor Thomas Niel points out, over two-thirds of Americans have already received their first shots. And corporate vaccine mandates mean the number of vaccinated will only rise.

For OCGN investors, it is a matter of frustration and not relief. When most companies are repaying the trust of early investors, OCGN looks like a stock held up on pure hype. However, as the last few months show, it is only a matter of time before it comes back to earth. There is little to offer in the way of fundamentals.

Needs FDA Approval Soon

In October, Ocugen filed an investigational new drug (IND) application to the U.S. FDA. The Covid-19 vaccine candidate, Covaxin, will be tested in a Phase III clinical trial for health care providers. The trial aims to see if the immune response in subjects enrolled into a completed Phase III efficacy trial will show the same results as India compared to the more demographically diverse, healthy adults found in U.S. samples.

In response to the news, OCGN stock popped. The business of a vaccine company can be tough, especially when there’s no revenue coming in. But even if they only capture one percent of all booster shots sold worldwide, it can end up making a huge difference. However, it is not set in stone that Covaxin will get the nod in Canada or America.

The latest jump is yet another example of how news-sensitive this space is, the fortunes of a stock can change at the drop of a hat.

You can thank Redditors and nimble retail traders for much of the price action last year. With the support level at $6 for OCGN, you can go ahead and play this one for short-term gains. But keep in mind, do not think this is a stock you can retire on.

Also-Ran Vaccine Maker

At this point, the laggards in the vaccine race have to convince investors why they should keep their faith. The window of opportunity is quickly closing for also-ran vaccine makers. Pfizer and Moderna (NASDAQ:MRNA) have made the bulk of the money. Johnson & Johnson (NYSE:JNJ) is perhaps the only major disappointment. It could not cash in much because of the less-than-stellar 66% efficacy of its vaccine.

However, the increasing consensus that we need booster shots means there is a market out there worth exploring. Hence, Ocugen can still laugh its way to the bank after the market overreacts to the slightest sliver of positive news in the coming months.

Consequently, the inevitable equity issue will occur, and the company will raise money. That will help with its product pipeline. But ultimately, will you look back in a year and be happy with your investment. It is unlikely, considering what has transpired in the last year.

On the publication date, Faizan Farooque 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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence.