Shares of Ocugen (NASDAQ:OCGN) have climbed nearly 180% in the last month. However, OCGN stock is still trading at just 57 cents a share. That’s the life of a penny stock. And that’s the only story you need to know about Ocugen.
The reason the stock is rising is genuinely good news. The company’s lead gene therapy drug, OCU400, received a U.S. Orphan Drug tag. OCU400 is designed to treat PDE6B gene mutation-associated retinal diseases such as Retinitis Pigmentosa (RP).
This news couldn’t come at a better time for Ocugen. I wrote about the company’s fortunes in June. At the time, they had just discontinued a Phase 3 clinical trial for OCU300. That was, at the time, the company’s lead drug candidate.
OCGN stock fell approximately 30% on that news before starting its recent climb. But before speculators decide to jump on the Ocugen train, it’s important that they have a clear view of what’s ahead for the company.
Now the Bad News
This isn’t the first U.S. Orphan Drug tag Ocugen has received. But the company still does not have a product on the market. And OCU400 will not be on the market until 2025. Certainly, there are opportunities for OCGN stock to pop as the drug moves through clinical trials.
But, as was evident with OCU300, there’s also a good chance that the drug will fail to make it through clinical trials. The company touts that their “breakthrough modifier gene therapy platform has the potential to treat multiple retinal diseases with one drug.” The company calls the approach one to many.
However, it’s worth noting that the company is operating in a very narrow niche. Even if the company is successful at bringing a drug to market, investors have to consider what the addressable market for that drug will be.
OCGN Stock Could Still Be Delisted
One of the more obvious and immediate problems facing Ocugen is the very real chance that its stock may be delisted. The company received a delisting notice from the Securities & Exchange Commission (SEC) on December 27, 2019.
The 180-day deadline has come and gone. Ocugen did not execute a reverse stock split. The situation doesn’t look great considering OCGN fell badly following its second-quarter earnings report.
Ocugen Will Not Be an Overnight Success
I understand that you may be reading this and thinking “So what?” And if you’re just looking at getting in and out of trades quickly, then my style is probably not for you. The Covid-19 pandemic has brought out speculative investors, and there is absolutely nothing wrong with that. Investing isn’t limited to only one style.
However, if you’re considering buying thousands of shares on a stock that looks like it’s ready to explode, I’d urge you to look again. OCU400 is not scheduled to received FDA approval until 2025. And that’s if everything goes well, which is frequently not the case as it relates to biotech companies.
The allure of a penny stock is easy to understand. But please remember that Ocugen is operating with no revenue. And the earliest prospects for it to start generating revenue are five years away.
In January, Vince Martin illustrated the risk better than I can:
Ocugen stock is a play with enormous risk. As with many biotech stocks, the most likely outcome is for the company to fail, and for shareholders to wind up with zero.
Martin did go on to say that investors that choose correctly can be looking at blockbuster returns. But with a drug that’s already fallen short in clinical trials, I need to see more before jumping in on OCGN stock.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for Investor Place since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.