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Should you buy Ocugen shares?

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Some stocks seemingly come out of nowhere, but are huge winners. You can putOccugen (NASDAQ: OCGN) in this category. As of December 21, 2020, its shares were down 43% year-to-date. The next day, however, Ocugen announced that it was teaming up with Bharat Biotech to co-develop the COVID-19 vaccine candidate Covaxin for the US market.

Since then, the stock has skyrocketed over 3,600% and even doubled last week. The once little-known Ocugen now ranks among the most popular stocks on Robinhood – and it has caught the attention of many investors who don’t trade on Robinhood either.

Should you buy Ocugen shares now? Here are the arguments for and against the high-flying biotechnology title.

Gloved hand holding labeled syringe

Image source: Getty Images.

Yes, the outlook for Ocugen is fantastic

There are several really important things to know about Covaxin:

  1. It’s already on the market in India. In January, Bharat Biotech obtained emergency use authorization (EUA) for its vaccine in the world’s second most populous country.
  2. It doesn’t just target the coronavirus spike protein like the main COVID-19 vaccines in the U.S. It could improve the effectiveness of Covaxin against newer coronavirus variants.
  3. Its safety profile appears to be better than that of other COVID-19 vaccines.

These benefits could improve Ocugen and Bharat’s chances of winning the EUA and possibly full approval of Covaxin in the U.S. They could also put Covaxin in a good position to compete against COVID-19 vaccines manufactured by Modern, Pfizer and BioNTech, and Johnson & johnson (assuming the healthcare giant wins the EUA for its single-dose vaccine).

Ocugen will pocket 45% of all profits generated by Covaxin in the United States. It is not unrealistic to envision that the company could make over $ 1 billion (and possibly a lot more than that) per year if Covaxin wins the EUA or US approval.

With all the excitement of Covaxin, it’s easy to ignore the other contenders for Ocugen’s pipeline. The company plans to advance the investigational gene therapy OCU400 into two Phase 1 / 2a clinical trials this year. OCU400 has obtained orphan drug designations from the United States Food and Drug Administration (FDA) for four different genetic eye diseases. Ocugen also hopes to begin early-stage clinical trials of OCU200 for treating eye disease in the first half of 2022.

No, the stock is way too risky

While Ocugen’s future may be great, skeptics wouldn’t hesitate to point out that the stock is far too risky to buy now. For one thing, there is no guarantee that Covaxin will soon win the EUA from the United States. Ocugen discusses a path to EUA and ultimately approval with the FDA. However, it is highly likely that the FDA will require that clinical studies be conducted in the United States first.

It’s also possible that the FDA will not grant EUA to many more COVID-19 vaccines. The US government has already secured enough doses of Pfizer and Moderna to fully immunize all adults in the country this year. With the EUA for vaccines developed by J&J, AstraZeneca, and Novavax potentially underway over the next few months, the urgency for an additional vaccine could be drastically reduced.

The level of effectiveness of Covaxin has not yet been established and will not be known until advanced stage data from a study conducted by Bharat in India becomes available. If the vaccine’s efficacy were much lower than that of its faster rivals, Ocugen’s chances of achieving huge commercial success in the US market may decrease.

As for the other candidates for the Ocugen pipeline, it is too early to count on victories. Most drugs that are in early stage clinical studies are never approved by the FDA.

And the correct answer is …

Some might like the idea of ​​buying Ocugen shares in the hope that all goes well for Covaxin. However, with a market cap of around $ 2 billion, much of that hope is already built into Ocugen’s share price.

Of course, Covaxin could be a big winner and save Ocugen a lot of money. However, biotechnology still has several major hurdles to overcome before it becomes a viable possibility. I think investors would be better off staying away from Ocugen for now.



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