2023-04-26 09:06:43 ET
Summary
- Today, we revisit Ocugen for the first time since the summer of 2022.
- The stock has withered since then but the stock picked up an analyst upgrade in March and posted encouraging interim trial data in April.
- Possible signs of a turnaround for its long suffering shareholders? We update the investment thesis on Ocugen in the paragraphs below.
A thing is not necessarily true because a man dies for it .”? Oscar Wilde
Today, we shine the spotlight on Ocugen, Inc. ( OCGN ) for the first time since July of last year. We concluded that initial article on this small clinical-stage biopharma concern in the following way:
Ocugen's pipeline is very early stage and is a couple of years and likely capital raises away from any potential commercialization. Given that, the huge short interest in the shares, as well as the company's long history of destroying shareholder value; the prudent play is to avoid shares in Ocugen at this time ."
That turned out to be the right call in retrospect as the stock has lost another 70% of its shareholder value since that piece ran. The stock was upgraded by an analyst firm in March and posted encouraging initial trial data earlier this month. Is the tide finally turning for Ocugen? An updated analysis follows below.
Company Overview:
Ocugen, Inc. is headquartered just outside of Philadelphia in Malvern, PA. The company continues to develop a Covid19 vaccine but is primarily focused on developing gene therapies to cure blindness diseases over the longer term. The stock currently trades just under 75 cents a share and sport an approximate market capitalization of $165 million.
Recent Developments:
Ocugen continues to push forward with a vaccine candidate 'COVAXIN' it is developing with India’s Bharat Biotech. COVAXIN is an inactivated form of COVID-19 vaccine, which Ocugen believes offers a broader immune response compared to currently approved COVID shots.
April 2022 Company Presentation
The company posted Phase 2/3 study data for COVAXIN in January that met both co-primary endpoints of the trial. They plan to present the full data from this study at mid-year. Management believes this data will support eventual approval.
Reuter's Graphics
I place little value on this asset and other Covid19 efforts until proven otherwise. The pandemic is rapidly winding down and approved Covid vaccine sales are dropping like a rock here in 2023. Pfizer's ( PFE ) market leading vaccine and Covid treatments took in $56 billion of revenue in FY2022, the majority of just overall $100 billion in sales the drug giant booked last year. As of the company's fourth quarter earnings press release, Pfizer only projects just over $21 billion worth of sales from its Covid vaccine and treatments in FY2023.
Reuters Graphics
Johnson & Johnson ( JNJ ) is no longer expecting any further sales for their vaccine from the U.S. in 2023 as it has been limited to certain individuals.
April 2022 Company Presentation
For the rest of the company's pipeline, Ocugen is utilizing a gene modifier approach that is based on nuclear hormone receptors that regulate diverse physiological functions in the retina to develop candidates.
April 2022 Company Presentation
The most advanced of these is a compound called OCU400 which is being studied as a potential treatment of retinitis pigmentosa or RP and Leber congenital amaurosis [LCA]. OCU400 has Orphan Drug status for both of these indications. RP impacts just over 100,000 individuals in the United States while LCA affects some 15,000 people. Management believes RQ400 addresses shortcomings of current gene therapy approaches. As it incorporates a broad-spectrum gene agnostic approach to genetically diverse inherited retinal diseases. Chardan Capital cited OCU400 as the key reason it upgraded the shares from Neutral to Buy at the start of March. It was the first new analyst firm activity around the stock in several quarters.
As of late February, the company has enrolled a cohort of RP patients for a Phase I/II trial for protocol and was working to complete enrollment of individuals with LCA. The company posted encouraging initial data from these RP patients in the Phase I/II trial in mid-April.
A potentially pivotal Phase 3 trial is scheduled to initiate late this year. The company has a couple of other compounds in this genre, OCU410 (Dry AMD) and OCU200 (Diabetic Macular Edema, Diabetic Retinopathy and Wet AMD) in the IND-Enabling phase.
The company is also developing NEOCART, which is an autologous chondrocyte-derived neocartilage. Management plans to start a Phase III randomized controlled study in subjects with articular cartilage defects in the first half of 2024.
Analyst Coverage & Balance Sheet:
In addition to Chardan Capital reissuing its Buy rating and $3.50 a share price target right after those trial results came out on April 14th, Noble Financial ($5 price target), Mizuho Securities ($3.50 price target) and H.C. Wainwright *$5 price target) have all reiterated Buy ratings over that time frame as well.
Almost 17% of the stock's outstanding shares are currently held short. The company ended FY2022 with just over $90 million in cash and marketable securities. Management ' estimated that its current cash, cash equivalents, and investments will enable it to fund its operations into the first quarter of 2024 ' at that time. The company has just over $2 million of long-term debt. The company's CEO sold 100,000 shares of stock in mid-January and another 100,000 shares in mid-February. That has been the only insider activity in the equity so far in 2023.
Verdict:
If Ocugen had developed COVAXIN on a 12–18-month earlier timeline, the company and stock would likely be in a much better place. Unfortunately, that is not the case and I think any eventual value around COVAXIN is simply a potential wildcard at this point.
There is a lot to sort out here. Ocugen still has some promising candidates in the pipeline, most noticeably OCU400. An investor is getting the company's entire asset pool and pipeline for some $75 million (current market cap - net cash) at current trading levels. A tiny ' watch item' holding for aggressive biotech investors seems warranted. I would hold off on any larger stake in OCGN until after the company raises additional capital and the Phase 3 trial for OCU400 kicks off. Both events seem likely towards the end of 2023.
Older men declare war. But it is youth that must fight and die .”? Herbert Hoover
For further details see:
Ocugen: Lots To Sort Through But OCU400 Offers A Glimmer Of Upside Potential