I give Ocugen, Inc. (NASDAQ:OCGN) a hold rating. Ocugen is very far along in their COVID-19 vaccine trails. While COVID-19 is not the same cash cow it once was, an approval would give the company a consistent long-term source of income to help fund the company’s other treatment candidates and prevent future rounds of dilutive financing from being needed. I am watching the progress of the vaccine closely. Suppose it looks like it will be approved in some form, I will change my rating to a buy, and if it seems the opposite, I will change my rating to a sell.
Ocugen, Inc. is a biopharmaceutical company focused on discovering, developing, and commercializing gene therapies to cure blindness diseases and developing a vaccine to save lives from COVID-19. Our breakthrough modifier gene therapy platform has the potential to treat multiple retinal diseases with one drug – “one to many,” and our novel biologic product candidate aims to offer better therapy to patients with underserved diseases such as wet age-related macular degeneration, diabetic macular edema, and diabetic retinopathy. We are co-developing Bharat Biotech’s COVAXIN™ vaccine candidate for COVID-19 in the U.S. and Canadian markets.
Per Ocugen’s last quarterly SEC filing, the company has $107 million in cash and assets and only $9 million in liabilities. Quarterly, the company burns $10 million to fund its operations. With the relatively strong cash position of the company, I do not think they will need to do any significant financing in the coming one to two years. I think this is particularly important in today’s market environment, where there is a lot of pessimistic market sentiment. Having a solid cash position saves the company from having to raise in what is likely going to be an unfavorable market condition.
I first heard about Ocugen because it developed a COVID-19 vaccine. Ocugen saw a massive explosion in stock price at the beginning of COVID-19 that it has maintained reasonably well and received another big bump in stock price at the beginning of the Omicron variant that it has since lost. Even with the significant fall of over 80% from the Omicron highs, the stock remains up almost 50% on the year.
Ocugen is developing a Whole-Virion inactivated COVID-19 vaccine collaborating with Bharat Biotech, an Indian biotech company. Under their deal, Bharat Biotech retains commercial rights everywhere outside North America and receives 55% of profits generated from the United States and Canada.
Unlike many competitors who use the recently popularized mRNA vaccine, the two companies’ vaccine uses an inactivated form of the virus itself. Per the latest update by the company, the vaccine is currently being used in 13 countries under some form of approval. Ocugen has applied for emergency use authorization in an additional 60 countries. In July of 2021, the company received very positive phase 3 trial results from India with an overall efficacy of 77.8% and protection against severe diseases of 93.4%. With these positive trial results, it is easy to see why investors want it approved for the very lucrative United States drug market.
After talks with the FDA, the company opted to seek full approval rather than the usual path of an emergency approval. I think this is the correct move because I do not think the emergency pathway will be as easy as previously with other options already emergency approved. The company hopes to reap the long-term benefits of an endemic virus by getting full approval. They want to be the shot you receive yearly to re-up your immunity to COVID-19 rather than the shot you receive first. With the company’s limited resources compared to other players in this space, I think this was a reasonable allocation of time and resources. The company will still need to complete phase 3 trials in the United States. As of the latest reports, these trials are on hold due to deficiencies in Ocugen’s application. Since August, the company has been waiting to hear back about approval in Canada.
While the company faces an uphill battle for approval, the company needs to receive approval in one of these countries to justify its current price given the early stages of development in the rest of the pipeline. If the company can get approval, it will have a consistent cash generator that will stop the need for it to have additional dilutive rounds of financing and would help position it to progress the rest of its pipeline. In the end, I think that the vaccine will be approved in some form for use, likely after the massive amounts of money to be made from COVID-19 have been made. This will leave the company with a good cash generator, but nowhere near the blockbuster treatment some investors once hoped for.
COVID-19 is quickly starting to become a part of daily life. Companies need to begin to look ahead to what there is for them after COVID-19, and Ocugen has an interesting pipeline that we will look at. However, this pipeline does not validate their current market valuation because none of their other treatments have even begun clinical trials on humans.
Ocugen 400 “is a novel gene therapy product candidate with the potential to be broadly effective in restoring retinal integrity and function across a range of genetically diverse inherited retinal diseases.” For results to date:
In 5 unique mouse models of RP, treatment with the AAV-NR2E3 gene by subretinal injection effectively prevented the further development of multiple genetically diverse IRDs by protecting photoreceptors from further damage after disease onset. The five RP models tested were rd1 (PDE6β associated RP), Rho-/- and RhoP23H (both Rhodopsin associated RP), rd16 (Leber Congenital Amaurosis) and rd7 (Enhanced S-cone Syndrome). The study, published in Nature Gene Therapy, demonstrates the potency of a novel modifier gene therapy to elicit broad-spectrum therapeutic benefits in early and intermediate stages of RP.
Ocugen 410 is a modifier gene therapy product candidate. This treatment is being created for a market of nine to ten million patients in the United States for a disease in Dry AMD that has no approved therapy on the market.
Ocugen 200 is for treating severely sight-threatening diseases. The company says the three diseases they are looking into for treatment share very common symptoms. As for preclinical data to this point:
In preclinical studies, OCU200 demonstrated efficacy in different animal models of neovascularization. In an animal model for DME and DR (Oxygen-induced retinopathy in mice), OCU200 demonstrated comparable efficacy at significantly lower dose compared to existing approved anti-VEGF therapy in preventing disease manifestation and progression. In animal models for wet AMD (laser induced CNV in mice and rats), OCU200 demonstrated comparable or slightly better activity compared to anti-VEGF control groups in preventing the formation and growth of new leaky blood vessels and subsequent disease symptoms.
These treatments show potential, but I will need to see some human clinical data before I buy further into them. Without the vaccine, this company has a value of around $50 million in market cap, which it was trading around before COVID-19.
As with any biotech company, the stock price depends heavily on the positive or negative progression of the company’s treatment in clinical trials. This is especially true for Ocugen. Approval of the vaccine will give the company a great long-term outlook, while a rejection will send the company back to its valuations before COVID-19 of around $50 million in market cap and tank the stock price even further.
I give this stock a hold rating. The company is in a unique position having one therapy so close to approval and nothing else even in clinical trials after it. I will make my move based on how the vaccine approval goes. Regardless of the outcome of the approval, Ocugen has an interesting pipeline that warrants being watched as it progresses into clinical trials.