Is Ocugen (OCGN) stock a good buy?

| April 10, 2022

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healthcare solutions around the world

Key Points

  • Ocugen stock grew from under $1 per share to above $12 in the first half of 2021.
  • Pharmaceutical companies which are operating in the trial phase are prone to volatility.
  • The real struggle will be when COVAXIN hits the market.

Ocugen (NASDAQ:OCGN) is a pharmaceutical company that develops gene therapies to cure blindness diseases. It recently earned quite the fame for its involvement in creating a Covid-19 vaccine. Also, the sky-high growth of the Ocugen stock caught the investor’s eye.

The remarkable share growth from under $1 to above $12 in the first half of 2021 created quite the buzz. But this momentum hasn’t been maintained. And currently, shares are on a bearish run, trading at around $3. Year-to-date, it’s down 33%. But is now a good time for me to buy this business for my portfolio? Let’s explore.

Will The Ocugen Stock Price Rise?

Companies which are operating in the trial phase are prone to exhibit volatility in the stock market. Hence Ocugen stock is unsurprisingly on a bumpy ride.

According to recent announcements, FDA lifted the clinical hold on the Ocugen’s Covid-19 vaccine COVAXIN. As a result, the company is set to begin its Phase 2/3 clinical trials. Last year the development phase of the vaccine seems to be what triggered the enormous growth. And now that the trials are once again progressing, Ocugen stock could enjoy some significant positive ripple effects, in my opinion.

Also, the firm has increased its investment in R&D by almost 500% within a year. Although this isn’t uncommon for young pharmaceutical companies in the trial phase. But it does point out the group’s ability to continue to raise funding to keep the lights on. I believe this marks good progress for the upcoming future.

Challenges Along The Way

Currently, Ocugen has no reliable source of income. Moreover, all the pipeline projects are currently years away from a clinical trial. Hence, as an investor, seeing no source of cash inflow is making me question the investment worthiness of Ocugen stock.

Moving ahead, the real struggle for the company will commence when COVAXIN will hit the market. In a world where Moderna and Pfizer are the leading vaccine providers, will Ocugen’s vaccine be able to create its own space?

It’s possible. I believe there is a huge space in the Covid-19 vaccine market for new entrants. While the pandemic may be coming to an end in Western nations, the story is very different elsewhere in the world. With leading vaccine providers unable to keep up with global demand, there seem to be plenty of opportunities for Ocugen to find a market, even if it’s late to the party. Having said that, international distribution comes with its own set of problems that could rack up quite a bit of expense.

Will I Include Ocugen Stock In My Portfolio?

The lifting of the FDA ban is a huge leap forward for the pharmaceutical group. Moreover, the business recently announced the pricing of its underwritten public offering worth $53.5m. The proceeds will be used for corporate purposes, capital expenditures, working capital, and general & administrative expenses. In my opinion, the infusion of liquidity will bring a massive improvement to the company.

Will Ocugen stock be able to reach last year’s high? Maybe. But personally, I think there is still a long road ahead. With no existing revenue stream, I feel the risk is simply too high for my tastes. But I will be keeping a close eye on the business is performing over the next couple of months.

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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.