Ocugen: Buy, Sell, or Hold?

: OCGN | Ocugen Inc. News, Ratings, and Charts

OCGN – Although shares of Ocugen (OCGN) have rallied over the past month in response to the company’s announcement of plans to co-develop a COVID-19 vaccine candidate with India’s Bharat Biotech, the vaccine’s commercialization prospects look bleak. In addition to that, given the stock’s high valuation even though the company has no revenue-generating products in the market, we think the stock may not worth the risk.

A clinical stage biopharmaceutical company Ocugen, Inc.’s (OCGN) share price went through the roof after the company disclosed its plans to co-develop Bharat Biotech’s coronavirus vaccine candidate, COVAXIN, for the U.S. market. The stock’s price skyrocketed from $0.29 on Dec. 21, 2020, to $10.25 on Feb. 10. Over the past month, the stock gained 281%.

While demand remains high enough to warrant emergency use authorization of several COVID-19 vaccine options, there is uncertainty surrounding the likely timing of COVAXIN’s approval because the vaccine’s clinical trials are still underway in India. And in the event that OCGN doesn’t receive authorization to sell the vaccine, the stock will almost certainly witness a significant pullback.

The company’s stretched valuation even though it generates almost no revenue suggests the stock’s future could be troublesome. Here is what we think could influence the performance of the stock in the coming months:

Unapproved COVID-19 Vaccine Candidate

On February 2, OCGN announced the execution of a definitive agreement for the commercialization of Bharat Biotech’s COVID-19 vaccine candidate COVAXIN in the U.S. market. Under the agreement, the company will share  profits from the sale of COVAXIN in the U.S. market with Bharat Biotech, with OCGN retaining 45% of the profits.

However, the vaccine is still in its Phase 3 trials in India. Hence, we believe OCGN’s case for selling a COVID-19 vaccine in the U.S. is weak . It must  complete all clinical trials before pitching for  emergency use authorization from  the U.S. FDA. This means that there is a potential long wait before  the vaccine candidate starts generating  profits for the company.

Sky-High Valuation

Putting the hype aside for a moment, the company’s lofty valuations are sobering.  In terms of trailing-twelve-month price/sales ratio, OCGN is currently trading at 19.05Kx, which is significantly higher than the industry average  9.27x. Also, its trailing-12-month price-to-book of 115.16x is much higher than the industry average  5.44x.

Weak Financials

OCGN has no  products that have been approved for commercial sale, and hence it does not generate any revenue. It reported a net loss of $10.47 million in the third quarter ended September 30, 2020. The company also reported a loss per share of $0.07 compared to $3.55 loss per share a year ago. OCGN’s interest income declined 69.1% year-over-year to $49 million. The  company’s loss from operations stood at $10.18 million at the end of the quarter.

Analysts Expect a Pullback

Currently trading at $12.61, analysts expect OCGN to decline 71.9% to t $3.55 in the near term.

POWR Ratings Indicate Bleak Prospects

OCGN has an overall rating of F, which equates to Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. Among  these categories, OCGN has a D grade for Growth, consistent with its poor financial performance.

In addition, OCGN has a C grade for Momentum and Value, which is consistent  with the stock’s long-term price performance and sky-high valuation.

OCGN is currently ranked #464 of 482 stocks in the F-rated Biotech industry.

To see additional POWR Ratings for Quality, Stability, and Sentiment for OCGN, Click here.

If you’re looking for better stocks in the Biotech industry with an Overall POWR Rating of A or B, you can access them here.

Bottom Line

Despite the hype surrounding OCGN’s COVID-19 vaccine plans and its  impressive rally over the past month, the stock is extremely overpriced with little justification on financial grounds. Furthermore, it could be quite some time before  its vaccine candidate proves effective, and safe enough to secure FDA approval, which it will need before it can sell the vaccine and generate profits.  We think it is unlikely OCGN’s stock will  deliver market-beating returns in the near term.

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OCGN shares were trading at $10.97 per share on Thursday afternoon, up $0.72 (+7.02%). Year-to-date, OCGN has gained 499.45%, versus a 4.20% rise in the benchmark S&P 500 index during the same period.


About the Author: Imon Ghosh


Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...


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