The reason for investing in Ocugen (NASDAQ:OCGN) stock hasn’t changed. Bulls expect the FDA to allow Ocugen to market Bharat Biotech’s Covaxin vaccine in the U.S., enabling Ocugen to generate massive sales and rapidly boost OCGN stock.
The problems with this thesis, though, remain the same as they’ve ever been. Despite a great deal of speculation, the FDA hasn’t come close to approving Covaxin. And that has led to a situation in which the owners of Ocugen’s shares fall into one of two camps: Those chasing a short squeeze and those chasing FDA approval.
I’d suggest doing neither of those two things.
The Short-Squeeze Chasers
There’s really little to indicate when or if the current short squeeze will continue. Ocugen does currently have very high short interest levels. There is 29.38% short interest, which puts it among the top-20 most heavily shorted stocks.
But it’s very difficult to tell if the short squeeze will continue just because many people are betting that Ocugen won’t be able to bring Covaxin to the U.S. market and the shares have climbed 50% in the last week. My position is that OCGN stock is unlikely to climb much further.
The other contingent of investors is those who believe that OCGN stock is set to pop on FDA approval. That has proven to be a frustrating chase.
FDA Approval
Remember, Ocugen is attempting to bring Covaxin to the U.S. market as a Covid-19 vaccine. Covaxin was developed by Bharat Biotech, an Indian firm. Covaxin has been approved by India and multiple other nations.
But Ocugen stands to benefit primarily from an approval of the vaccine in the U.S. Meanwhile, investors are also interested in whether the shot will be approved by the World Health Organization.
On the WHO front, Ocugen is hopeful that the organization will grant Covaxin an Emergency Use Listing (EUL). If Covaxin is granted such an approval, it would become only the seventh vaccine to be authorized by WHO.
WHO’s technical advisory group recently met to discuss the issue, but it did not make a definitive recommendation. It’s expected to make a final decision on the matter tomorrow.
But even if Covaxin is approved by WHO, Ocugen won’t necessarily profit from the shot. That’s because an approval by WHO doesn’t guarantee that the FDA will allow the vaccine to be marketed in the U.S..
And some form of FDA approval is going to be necessary before Ocugen sees revenue from Covaxin in the U.S. In other words, WHO approval, if and when it occurs, would immediately boost Bharat Biotech’s top and bottom lines. But Ocugen can really only generate significant profits from Covaxin by selling it in the U.S.
There is, however, news on that front which is bound to excite those who are upbeat on OCGN stock.
FDA News
On Oct. 27 Ocugen announced that it had submitted an Investigational New Drug application (IND) to the FDA.
According to Ocugen’s press release on the issue:
“If the study is allowed to proceed, Ocugen’s Phase 3 immuno-bridging study, OCU-002, will seek to enroll several hundred healthy adults in the U.S. Subjects will be randomized to receive either two doses of COVAXIN™ or placebo, 28 days apart. The primary endpoint will compare blood-based samples taken from U.S. participants who received COVAXIN™ with samples of the participants in the Phase 3 efficacy trial conducted in India. The secondary endpoint involves testing the vaccine’s immunogenic profile. The study will also evaluate safety and tolerability in the U.S. population. Ocugen hopes to complete the study during H1 2022.”
So the company expects the study, assuming it’s approved by the FDA, to be completed sometime in the first half of 2022. That means there will be a long wait ahead for Ocugen.
I wouldn’t want to play that game either.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.