OCUGEN A Speculation And Risk Play For Huge Upside

Summary

• Stock is trading near all-time lows as of 7/2/2020.
• Expansive gene therapy pipeline with FDA orphan designation of OCU400.
• Insider purchases in recent months and no reported sales.
• Discontinued phase trial of drug candidate OCU300.

On June 1, the company discontinued their Phase 3 trial of “OCU300” for ocular Graft vs. Host Disease (oGVHD).” This follows the results of a pre-planned interim sample size, which indicated that the trial is unlikely to meet co-primary endpoints upon completion.” Despite this, Ocugen’s stock closed up 11% on June 5, indicating the firm's soaring optimism and anticipated recovery.

A Brief Background on Ocugen

Ocugen Inc. (NASDAQ: OCGN), formerly known as Histogenics Corporation, is a clinical-stage biopharmaceutical company focused on developing transformative therapies to treat the whole eye. It specializes in a unique modified Gene therapy with the potential to treat various retinal diseases. Ocugen provides a single gene modifier to treat a host of eye diseases.

Their pipeline includes OCU200 for the treatment of wet-AMD, diabetic macular edema, and diabetic retinopathy; OCU410 and OCU400 for the treatment of inherited retinal disorders; OCU100 for retinitis pigmentosa.

What Are Experts Saying About Ocugen?

While Ocugen’s stocks have been highly speculative, Analysts across the markets have been continuously raising their ratings for the company. Zacks upgraded Ocugen to Rank #1 (Strong Buy), which indicates an upward trend in its earnings estimates. Zack's rating is based on rating upgrades by Wall Street Analysts. Unlike most rating systems that are mostly influenced by favourable recommendations, Zack rating system is based on an analysis of over 150 brokerage firms. It is mostly driven by factors that are hard to see or measure.

The system maintains an equal proportion of “buy and sell” rating for all its stocks irrespective of market conditions and only about 5% of the 4000 stocks in Zacks universe Ranks #1. Usually, when Zacks revises its earnings estimates upward for a company, the company’s stock price tends to rise over the next months. Overall, Zacks consensus estimate for Ocugen has risen by 58.53% in the past few months, and it's expected to earn “-0.15 per share for the fiscal year ending December 2020, representing a year-over-year change of 89.9%.” Ocugen also received a consensus rating “buy” from analysts on MarketBeat. The Analysts believes the company has a potential upside of 333.3% from its current price of $0.22. In terms of community sentiment, Ocugen received 67.53% “outperform” votes from the MarketBeat community. Analysts from MarketWatch also recommend buying and holding Ocugen’s stock.

The Positives from Inside Trades

When insiders such as the board of directors and employees buy shares of a company, it means they have confidence in that company. A Harvard study found that insiders purchase earns higher returns of more than 6% yearly. Typically, insiders have a better knowledge of the organization and are most likely to invest when they feel the company will perform well.

In examining Ocugen, we found that the largest single purchase by an insider in the last twelve months was by the Founder Shankar Musunuri, who bought $108,000 worth of shares at $0.41 per share. While this may not mean that the founder found the price of $0.41 irresistible, it shows that an insider has overwhelming confidence in the company.

Another interesting fact that highlights the optimism of the company’s future is that none of the Ocugen insiders that bought shares over the last couple of months have sold. Data shows there have been more insider purchases in the last three months than all other periods within the prior 12 months. The history of transactions, as shown above, implies that Ocugen insiders are reasonably well inclined and optimistic for the future. While this shouldn’t be the only basis for an investment, it sure gives a positive projection.

The Problem With OCGN

The problem with Ocugen and a primary reason they are not be getting the attention of the investment community is that it develops drugs for “rare and underserved diseases.” Investors are looking for biotech companies producing drugs that are high in demand or high volume like cholesterol drugs and drugs for multi-variate diseases like cancer. Currently, Gilead Sciences (NASDAQ:GILD) is up nearly 22% because of the potential of its drug Remdesivir in the treatment of the novel coronavirus. Novavax (NASDAQ:NVAX) and Moderna (NASDAQ:MRNA) have also suddenly risen to prominence as potential providers for the Coronavirus vaccine. Several other smaller biotech companies that are working to develop treatment and testing kits are also attracting investors. However, there are whispers that Ocugen may team up with Advaite in order to facilitate the availability of Advaite’s rapid antibody kits.

Is the Reward Worth the Risk for Ocugen Stock?

The long-term speculation of Ocugen’s stock appears worth the risk with the company trading near all-time lows.

Disclosure: I am/we are long OCGN.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.