Ocugen Stock Offers Investors a Simple Value Proposition

Stocks to sell

Price is what something costs. The value of something is what others are willing to pay. With that in mind, the premise behind Ocugen (NASDAQ:OCGN) stock appears to be one of value. The biotechnology sector is notoriously volatile. Many startups never make it to a public offering. And even some startups fail.

Ocugen Stock Offers Investors a Simple Value Proposition

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However, one of the problems that have beset Ocugen stock is that the “rare and undeserved eye diseases” it is developing drugs for do not have the attention of the investment community. This is one of the many risks with biotech stocks. Investors are looking to invest in companies that are producing drugs that are going to be in either high demand (e.g. cholesterol drugs) or high-volume, multi-variate diseases like cancer.

The Coronavirus Has Stolen the Show

Right now, the focus of biotech investors is finding a vaccine or treatment for the novel coronavirus. Gilead Sciences (NASDAQ:GILD) is up nearly 22% in 2020 because of the promise of its drug remdesivir. But Gilead is only one of nearly two dozen large and small biotech companies that are working to develop a vaccine, treatment, and/or testing kit.

And for an understandable reason, investors are flocking to these stocks. Whichever companies are able to get approved drugs into the market will see their stock going through the roof.

There are whisperings that Ocugen is teaming with Advaite to help facilitate the availability of Advaite’s rapid antibody kits. If that’s true, the stock may have a short-term catalyst that may allow the company to raise the necessary funds that will keep it solvent until it can get its signature drug out of its pipeline.

Ocugen Has a Narrow Pipeline

Another factor in the success of a biotech company is their current and future pipeline. This is because even when a company successfully gets a drug to market, it has a finite period of time where it cannot have generic competition. That’s why the largest biotech companies typically have one or more active drugs and several more in the pipeline.

When it comes to Ocugen, the pipeline is small. The company’s flagship prospect, OCU300, is in Phase 3 clinical development as a “novel treatment for the debilitating immune condition called ocular graft versus host disease (oGVHD).”

Now, in fairness, there is no FDA-approved treatment for oGVHD. So Ocugen would have a first move advantage. But it’s fair to ask if that will be enough.

Is the Reward Worth the Risk for Ocugen Stock?

My InvestorPlace colleague Vince Martin reminded readers that the most likely outcome for many biotech companies is to go out of business. However, investors are not without hope. As Martin writes:

a partnership with China’s CanSino Biologics (OTCMKTS:CASBF) should help the company develop its pipeline. CanSinoBio is a legitimate player in the industry; the company’s market cap is near $2 billion after a nice rally in recent weeks. CanSinoBio will be able to fund much of the development of OCU300, Ocugen’s flagship product that targets oGVHD (ocular graft versus host disease), a common complication of bone marrow transplants.

But Josh Enomoto offers a fair counterpoint that I think ultimately tells the tale for Ocugen stock. The market does not have much appetite for risk. And Ocugen is far from a sure thing. The stock has been trading for under $1 since the middle of November. The most immediate concern is that the stock could be delisted. And issuing a reverse stock split, while solving the immediate short-term problem, is generally considered a desperate move by investors.

Ultimately, Ocugen stock appears to have a ceiling. Unfortunately, it appears that the diseases the company seeks to treat are not capturing the attention of the broader investment community. And that means that the risk of failure is high.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.

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