2 red flags for the future of Ocugen

AAlthough things have improved, we are still in the midst of a pandemic. One of the important reasons we are getting closer to some kind of pre-pandemic normal is that vaccines against the disease are now widely available in many countries. Yet we can never have too many safe and effective vaccines, and several companies are looking to bring new ones to market.

Ocugene (NASDAQ:OCGN), a clinical-stage biotech that focuses on eye-related diseases, is one such company aiming to make inroads into the coronavirus vaccine market in North America. However, the company has faced multiple headwinds and investors need to consider other hurdles when it comes to this biotechnology. Let’s take a look at two of these issues and see if Ocugen is worth investing in.

Image source: Getty Images.

1. Regulatory Troubles

Ocugen’s candidate, Covaxin, was developed by Indian company Bharat Biotech. According to an agreement signed between the two entities in 2021, Ocugen will benefit from this vaccine if it obtains approval or Emergency Use Authorization (EUA) in North America. Even then, he will only keep 45% of the profits. However, Ocugen’s plan for Covaxin to get the green light quickly ran into several regulatory headwinds.

  • In June 2021, the United States Food and Drug Administration (FDA) recommended that Ocugen pursue full approval of Covaxin instead of trying to obtain EUA; the latter would have been a much faster process.
  • In November 2021, the company applied for EUA for Covaxin for children ages 2-18, but the FDA refused to approve it.
  • On April 12, the FDA suspended the company’s Phase 2/3 clinical trial for Covaxin. This is the result of Ocugen voluntarily suspending the dosage of participants in this study after the World Health Organization (WHO) inspection of the manufacturing process of Covaxin by Bharat Biotech. raised some concerns.
  • Ocugen submitted an EUA for Covaxin in Canada in July 2021, but the company’s application received a deficiency notice from authorities in the country. Ocugen has responded to concerns raised by regulators and is still awaiting a final decision.

While Covaxin could still hit the market in Canada relatively soon, the chances of the vaccine in the United States seem dim at best. It will take some time to complete the clinical study the company is currently conducting in the country, not to mention the regulatory process which will also take months.

Maybe the pandemic won’t be over by then, or maybe it will be. Even though the pandemic is still ongoing, other vaccines have come to dominate the market, and more may enter in the meantime. Covaxin is unlikely to make a dent in this competitive environment.

2. An early-stage pipeline

Ocugen currently has no products on the market. The company’s most advanced candidate is Covaxin, and while it has other programs in the works, they are still in an early stage of development. Some of the company’s other candidates include OCU400, a potential gene therapy for retinitis pigmentosa and other inherited retinal diseases.

OCU400 is currently in a phase 1/2 clinical study. Ocugen’s other products haven’t even begun human clinical trials yet. The company likely planned to use the profits it thought it would make from Covaxin to advance its pipeline. However, things didn’t work out that way. Could financing become an issue for the company?

Ocugen ended 2021 with a cash and cash equivalents balance of $95.1 million. Last year, the company’s net cash used in operating activities was $47.9 million. However, Ocugen announced that it dosed its first patient in its Phase 1/2 clinical trial for OCU400 on April 1.

With this ongoing study and Covaxin’s Phase 2/3 trial (if the clinical hold is lifted), the company’s expenses will almost certainly increase this year. Ocugen may have to resort to dilutive financing methods, as clinical-stage biotechs often do, and this is something investors should keep in mind.

Not worth it

Ocugen’s outlook for the coronavirus market in North America is not great. Additionally, other candidates in the company’s pipeline still have a long way to go before they even begin advanced studies. This is why biotech stocks have fallen dramatically over the past year. And even at current levels, Ocugen seems far too risky for most investors. There are many more (and better) biotech stocks to consider in the market.

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