Aug 17, 2021
[5 min Read]
Ocugen Inc is a biopharmaceutical company focused on developing gene therapies to cure blindness diseases and developing a vaccine to save lives from COVID-19. Their product offerings include:
Novel Biologic Therapies for Retinal Diseases — Ocugen is developing OCU200 to treat diabetic macular edema (“DME”), diabetic retinopathy (“DR”), and wet AMD.
Ocugen had been a steady company with focused research on Gene therapy for a long time and investors had not been expecting very high profit margins so soon. The turbulence started when Ocugen announced its partnership with Bharat Biotech for commercialisation of COVAXIN in the US, since the company had changed its direction from Gene therapy and aimed to benefit from the pandemic. It was a good surprise for a few investors to learn that Ocugen Inc will be working towards getting an Emergency Use Authorization(EUA) from FDA. The $OCGN stock soared up 339% to $15.81 per share in February 2021.
Ocugen had missed its targets for three quarters out of trailing four in Q2 2021. But the prospect of EUA for COVAXIN getting approved kept investor expectations and projected $OCGN Stock price high. However, following the rejection of EUA by the FDA on 11th Jun 2021 and Ocugen's change in direction to pursue BLA rather than continuing with its plan to obtain EUA pushed the stock price down. Currently it is one of the most volatile stocks with a short interest of ~27%.
OCGN is targeting a vaccination market and COVAXIN could be more desirable for administer because of its ease of storage and stocking, but the partnership is skewed sharply in Bharat's favor. Ocugen only has rights to distribution in the US and Canada while incurring all the financial and operational costs to get Bharat's Covaxin to market. In return, the company receives just 45% of any profits. So the idea that OCGN stock is next to Moderna or Pfizer is a bit far fetched.
It is also to be noted here that the U.S. has still not approved AstraZeneca and will have sufficient vaccination supplies from the approved vaccines(Moderna, Pfizer and J&J). In addition to this, BLA is targeted to be submitted by the end of 2021 and takes ~10 months to get approved. The demand of Covid-19 vaccine in late 2022 in the US and Canada remains uncertain.
Typical valuations such as DCF, P/E, P/S and EBITDA multiples would not be accurate for Ocugen Inc, because OCGN has always been in the research stage and generated no revenues since inception. Thus its sales are zero and EBITDA and earnings are negative making the above listed multiples uninsightful. Besides this Ocugen has not provided any specific timeline by which it would be able to commercialize its products in the latest investor call. OCGN has not provided any estimates on its growth rate projections.
Thus to get a fair idea of where OCGN should currently stand in the industry we can compare ratios such as ROA and ROE to its competitors.
By comparing Ocugen's Price/Book Value to that of competitors, fair value for the OCGN stock from $1.59 to $10.93, averaging at $4.96.
Ocugen has a Return on assets of -32.56% as compared to the peer average of -17%. Thus giving lesser returns as compared to peers in the industry.
Ocugen has lower Return on equity -72.18% as compared to the competitors average of -43%.
On August 13th 2021, Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, filed a class action lawsuit against Ocugen, Inc. on behalf of the investors.
The Ocugen class action lawsuit alleges that, throughout the Class Period, defendants made false and misleading statements and failed to disclose that: (i) the information that Ocugen submitted to the U.S. Food and Drug Administration (“FDA”) was insufficient to support an EUA; (ii) Ocugen would not file an EUA with the FDA; and (iii) as a result, Ocugen's financial statements, as well as defendants' statements about Ocugen's business, operations, and prospects were false and misleading and/or lacked a reasonable basis.
OCGN currently relies solely on the worsening pandemic to stay afloat. Even if it has the exclusive rights to administer COVAXIN in the US and in Canada, the BLA might take up to the end of 2022 to get approved and demand of COVAXIN in US and Canada with Pfizer, Moderna and J&J available might be insignificant if any. The other product lines that Ocugen Inc boasts are not even in clinical trial phase yet, and would take years to be commercialised. Even if OCGN has promising products to offer, with no revenue and soured investor relations, it will be difficult for the company to maintain current share price.