Clinical-stage biopharmaceutical company Ocugen, Inc.’s (OCGN) shares soared to hit their 52-week high of $18.77 on February 8, 2021 following its agreement with Bharat Biotech to commercialize COVAXIN, an advanced stage whole-virion inactivated COVID-19 vaccine candidate, in the United States. However, OCGN’s shares fell sharply after it announced on June 10 that instead of pursuing an Emergency Use Authorization (EUA) for COVAXIN it will submit a biologics license application (BLA). The stock has declined  35.6% since the announcement.

Furthermore, the stock has lost 38.7% over the past three months to close yesterday’s trading session at $6.13. Most of the company’s gene therapies to cure eye diseases—OCU400, OCU410 and OCU200—are still in their early stages of development. 

Also, with the COVID-19 cases declining in the United States, other companies such as Pfizer Inc. (PFE), Moderna, Inc. (MRNA) and Johnson & Johnson (JNJ) are already deploying their vaccines in the country based on EUAs. So, OCGN’s near-term prospects look bleak.

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Here are the factors that we think could influence OCGN’s performance in the coming months:

Ongoing Investigation

Several law firms have filed a case against OCGN accusing it of issuing false and/or misleading statements and/or failing to disclose information pertinent to investors. The company confirmed its plan on May 26, 2021, to submit its EUA application for COVAXIN to the U.S. Food & Drug Administration (FDA) in June 2021. However, on June 10, 2021, it announced that on recommendation from the FDA, it will pursue submission of a BLA for COVAXIN. The company’s Chairman and CEO, Dr. Shankar Musunuri said, “this will extend our timelines.”

Weak Financials

OCGN’s loss from operations increased 79.6% year-over-year to $7.06 million for the first quarter ended March 31, 2021. The company’s net loss for the quarter came in at $7.08 million, which represents a 79.4% year-over-year decline. Its loss per was $0.04 compared to $0.07 in the prior-year period. Also, OCGN missed the Street’s EPS estimates in each of the trailing four quarters.

Selling Shares to Fund Growth Activities

On April 28, 2021, OCGN announced that it had closed an  offering with healthcare-focused institutional investors that generated roughly $100 million in gross proceeds. The company also generated roughly $23 million in gross proceeds in February 2021 from an offering of 3,000,000 shares of its common stock. It is expected to use the net proceeds to fund current and future operations.

Consensus Price Target Indicates Downside

OCGN is currently trading at $6.13, and Wall Street analysts expect the stock to hit $3.55 in the near term, which indicates a potential 42.1% decline.

POWR Ratings Reflect Bleak Prospects

OCGN has an overall F rating, 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. OCGN has a D grade for Momentum, which is in sync with its 38.7% loss over the past three months and 29.9% decline over the past month.

The stock has a D grade for Value also. This is justified given its 28.52kx trailing-12-month EV/S, which is significantly higher than the 8.07x  industry average. OCGN’s  21.71kx trailing-12-month P/S  is also higher than the 8.52x industry average.

OCGN has an F grade for Quality. This is consistent with its negative  ROE and ROA values. It also has an F grade for Stability.

In addition to the POWR Ratings grades we’ve just highlighted, we’ve also rated OCGN for Sentiment and Growth. Get all the OCGN ratings here.

OCGN is ranked #472 out of 487 stocks in the F-rated Biotech industry.

Better than OCGN: Click here to access 29 top-rated stocks in the same industry.

Bottom Line

We  believe pursuing a BLA path instead of an EUA for COVAXIN weakens OCGN’s prospects as a competitor in the COVID-19 vaccine space. Also, the  company’s products that focus on  gene therapies to cure eye diseases are  in their initial stages of development, and its financials are unimpressive. So, we think it is wise to avoid the stock now. 

Click here to checkout our Healthcare Sector Report for 2021

OCGN shares fell $6.13 (-100.00%) in premarket trading Tuesday. Year-to-date, OCGN has gained 289.07%, versus a 14.16% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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