Is Ocugen a purchase after doubling last week? | The variegated fool

If you want to find stocks that can produce huge gains in short periods of time, the biopharmaceutical space has plenty of what you are looking for. Parts of drug manufacturer called Ocugen (NASDAQ: OCGN) more than tripled last Monday, and investors will know if it’s too late to buy something for their own portfolios.

Shares of this biotech stock had flown far below the radar before the company and its international partner began making progress with a potential new coronavirus vaccine. Now that it is one of the most popular stock in the biopharma room, can it continue to produce big gains?

Researcher examining a bottle.

Image source: Getty Images.

Why the Ocugen stock could soar much further

Ocugen shares could skyrocket again in response to several good news for COVAXIN, a candidate for a late-stage coronavirus vaccine from Bharat Biotech. On February 2, this major vaccine manufacturer from India signed a final agreement with Ocugen to develop, supply and commercialize COVAXIN for the US market.

If the FDA obtains emergency use authorization (EUA), Ocugen retains 45% of the profits generated from the sale of COVAXIN in the US market. Authorization seems likely because regulators in India have already begun administering COVAXIN under emergency permission with a batch of 30 million doses to be administered to healthcare professionals and frontline workers.

Unlike currently approved vaccines from Pfizer (NYSE: PFE) and Modern (NASDAQ: MRNA) requiring additional refrigeration equipment, COVAXIN can be easily stored at regular refrigerator temperatures. Bringing COVAXIN into the US market can lead to big sales for this relatively small company and drive the stock price much higher in the process.

This year, Pfizer expects to report about $ 15 billion in topline revenue from the COVID-19 vaccine developed in partnership with BioNTech. Pfizer expects about $ 4 billion to reach its bottom line after adjusting for 50% gross margin shared in the partners’ cooperation agreement.

Despite a huge 3,430% run over the last few months, Ocugen’s market value is still worth just under $ 2 billion at the moment. Profitable biotech stocks usually trade at double-digit multiples of net income, so there is plenty of room for the Ocugen stock to climb if it can successfully launch COVAXIN in the US.

OCGN chart

Data source: YCharts.

A block-to-wealth story

It’s been a little over a month since Ocugen regained compliance Nasdaq exchange. The company had been in danger of losing its major IPO because its share price had fallen below the $ 1.00 price for several months in a row. However, thanks to interest in COVAXIN, the company’s value is almost $ 2 billion at recent prices.

As many as 68 new biotech stocks began trading on a major U.S. stock exchange in 2019, but Ocugen was not one of them. Instead, Ocugen acquired its Nasdaq listing through a reverse merger with Histogenics, whose shareholders retained 10% of the new company despite bringing nothing to the trading table other than a stock exchange listing.

It does not look good

Ocugen’s reverse merger with Histogenics is not a decision you expect from a company that is confident in the value of its assets. Giving up a large part of the company to a publicly traded stock exchange at a time when institutional investors were plowing money into promising biotech start-ups strongly suggests that Ocugen’s pre-coronavirus pipeline is not worth much.

With nothing to fall back on, Oncogen’s future depends on potential sales of COVAXIN in the US market. This is a major problem because the company has not yet begun a US trial.

The FDA does not want to review EUA applications for COVID-19 vaccine candidates until they have Phase 3 data from U.S. participants. If this was an option, AstraZeneca (NASDAQ: AZN) would have presented the results leading up to its recent emergency authorization in the UK to the FDA without waiting for an ongoing US Phase 3 trial to be completed.

Successful Phase 3 data from US trials run by Novavax (NASDAQ: NVAX) and Johnson & Johnson (NYSE: JNJ) will likely convince the FDA to approve two more COVID-19 vaccine candidates for emergency use before spring rolls around. With at least two and perhaps four options available once Ocugen has Phase 3 data from a study underway in India, there is no chance the agency will consider giving EUA to COVAXIN on the timeline the company has proposed.

Irrational abundance could drive the Ocugen stockpile much higher in the short term, but there is very little chance that this stock will yield anything other than long-term losses.

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