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Ocugen, Inc. is a US-based biotech company founded in 2013 with the main focus of the company being the development of product lines and therapies to cure diseases related to eyesight. It has several gene therapy production pipelines for addressing retinal diseases arising from reasons such as aging or genetics. During the 2020 COVID pandemic the company also started to be involved in the development and commercialization of COVAXIN which was a deviation from the core business concept and shift of the company’s focus to target the world’s demand to fight the COVID-19 virus.
Ocugen’s mission is to identify and develop science-based and unique healthcare solutions that will efficiently target diseases that are not currently addressed by any other therapeutic options. For that reason, Ocugen is bringing together professionals from industries such as bio pharmacy, medicine, commercialization, and operations. Currently, the company has more than 50 employees.
The firm’s IPO took place back in December 2014 on the NASDAQ stock exchange with an initial price of about USD 660 per share. The current stock price of the company is around USD 1.60 per share, as we write this, with a market capitalization of USD 350 million which makes it fall under the small capitalization (small cap) stocks family.
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Ocugen Stock (OCGN) Stock Forecast 2023
The most recent Q3 earnings announcement of Ocugen presented a slight negative surprise compared to the market consensus and the next quarter estimation is that the results are likely to be in the same area as Q3 – that is net loss. With no major events expected for the rest of 2023 and early 2023, the stock price would be expected to hover over the same area where it has been for most of 2023.
Based on the quarterly reporting highlights, the company has initiated the US phase ½ for its OCU400 product pipeline, expanded OCU500, OCU410, and COVID-19 vaccine products to cover Stargardt disease, and finalized the enrolment for the US phase 2/3 for COVAXIN. Although this news is indicating some progress in terms of getting further approvals and enhancing the products, nevertheless, would it be sufficient for the investors to fuel the stock price growth in 2023?
Let’s break down the news and try to understand if those improvements or approvals for the products would support stock appreciation.
- Starting with phase 2/3 of COVAXIN – since most of the world starts to get used to the fact that COVID is here to stay and the initial fear of the disease has calmed down, there doesn’t seem to be any major support for the COVAXIN approval to support the price action for the next year. At the same time, there are major players in the market who already cleared the testing phases and got approval for their vaccines such as Moderna, Novavax, and Pfizer to name a few. These competitors have established their market share for the COVID vaccine production and thus it will be difficult for the company to make a significant revenue in the COVID segment.
- Moreover, the COVID vaccine production is somehow diverging from the core business segment for Ocugen, Inc. – eye diseases. This means that the company is spending additional resources on entering a new segment which might jeopardize the growth of the main business line.
- OCU400 product line which is currently in US Phase ½ clinical study is an injection-based therapy that should help cure Retinitis Pigmentosa caused by NR2E3 and RHO mutations. This phase is to test the safety and efficiency of the product and is going to be conducted till April 2023. After successful clearance of phase ½ the company will certainly apply for phase 2/3 similar to other product lines which will delay the production phase until 2024 or beyond.
- Finally, coverage enhancement of the OCU500 and OCU410 although is positive news, still these products haven’t started the ½ phase, hence we should expect the impact of these improvements on the stock price after the positive news on the phase ½ clearance. Therefore, this is rather a long-term price impact with an assumption of positive clearance.
Consequently, the stock outlook for 2023 would be heavily dependent on the phase results published by the company that might cause quick price action based on the outcome. Similarly, in the long run, it will be highly dependent on the company’s ability to commercialize the products and increase the efficiency of those pipelines.
Ocugen’s fundamentals from the profitability standpoint are in the red area since the company is losing money. Although the ratios such as return on assets (ROA) and return on equity (ROE) are relatively stable for the past two years, they are hovering in the same negative territory.
The firm is in a good shape in terms of liquidity ratios such as current or quick ratio falling in the two-digit space and indicating that the firm has no issues with meeting its short-term obligations. However, the current assets have reduced for Q3 2023 making the liquidity ratios slightly below the two-digit area but still in robust conditions.
The leverage ratios on the other side, which are showing the amount of debt that the company is using to purchase assets, are also in a solid state. These ratios are quite low so the company is mostly financed by equity capital with a low risk of bankruptcy due to not meeting its debt obligations.
So the main issue for the company is the loss in its bottom line which is largely driven by high research and development costs – typical for a biotech company, especially in the initial phases of product development.
Hence if we agree that the new product lines will take time to commercialize, and considering the fact that the current low stock price is driven by the lack of profitability, I think we are going to see the price hovering in the same territory for the foreseeable future.
In addition to the fundamental analysis, when looking at the technical indicators such as the relative strength index (RSI) which is indicating whether the stock price is oversold or overbought, based on RSI the stock price is getting some momentum but it is still in the neutral area which is a pointer that the stock is currently fairly priced.
Furthermore, the moving average convergence divergence (MACD) indicator (a momentum indicator showing bearish and bullish momentums), as well as Bollinger Bands (a statistical indicator showing the price volatility over time based on standard deviation – it plots the bands and the average of those bands which are indicating the price being oversold or overbought), both measures show that the price is currently fairly value.
Nevertheless, analysts covering the company expect a 1-year stock price to be above USD 5 per share which is more than a 200% increase from the current level. This is probably due to optimistic expectations regarding product testing and the strong balance sheet of the company.
Ocugen (OCGN) Stock 2022
The YTD result of the OCGN stock performance is about -60% compared to the market result of -15% based on the S&P 500 as a market performance indicator. The overall market downturn certainly caused some aspect of the price decrease in Ocugen’s stock in 2022, however, there are also other factors such as the company’s inability to meet the consensus earnings each quarter generating a negative surprise for each consecutive quarter in 2022.
The stock price drop in early January 2022 was driven largely by the overall market downturn caused by inflationary worries and the worsening economic situation after COVID, despite some positive news on the company’s vaccine testing.
On the 28th of January, the market reacted with a sharp increase in the price due to the news that Ocugen may acquire Liminal Bioscience’s manufacturing facility. Later near the end of February, the company offered additional shares which was not well accepted by the market causing a sharp decline in the stock price. And the further decline in early March was driven by the FDA rejection of the emergency use of COVAXIN for children. But the price managed to recover to the previous levels in mid-March due to the news that the same vaccine was accepted in Mexico.
Overall, over the year the investors’ confidence in the stock declined steadily causing negative year-to-date performance.
OCGN Stock 2021
In 2021 there were 3 jumps in the stock price, the first one being on the 8th of February when the stock increased in value due to the news that the new share offering was accepted at a premium.
The second jump was on the 3rd of May which was driven by the company’s report about the COVAXIN being effective against the COVID-19 variants.
The final jump was in early November which was driven by the announcement that World Health Organization was considering Ocugen’s COVID-19 vaccine for emergency use. However, all these jumps didn’t last long as they quickly reverted to the previous levels.
Overall for 2021, the stock recorded about a +53% increase largely driven by the COVID-19 vaccine news.
OCGN Stock 2020
For most of 2020, the stock price was relatively stable with a large jump in price visible at the end of 2020 due to the news that the company is partnering with an Indian-based Bharat Biotech to develop a vaccine against COVID. Overall the 2020 performance of +133% was driven by the year-end price jump thanks to the vaccine news.
Ocugen’s stock price has declined significantly from its IPO level back in 2014 when it was trading at above USD 600 per share vs the current stock price of USD 1.6 per share. Investors seem to be skeptical about the company’s future given the lack of any significant developments in recent years. The main driver for price jumps over the past two years was news regarding its COVID vaccine instead of its core business which is related to eyesight therapy. The move from the core business to COVID also indicates that the company is searching for short-term gains rather than staying true to the initial goal.
Although the fundamentals are strong, the company is still lacking profitability due to the high research and development costs. The technical indicators further prove that the stock is fairly priced at the moment. There is also no indication of any short-term price appreciation given the most recent quarterly report and news. Nevertheless, some analysts covering the stock believe that the stock price may increase by 200% within the next 1 year.
Why did Ocugen’s stock price drop so much after the IPO?
Ocugen was overvalued in its initial public offering which the market considered an inappropriate intrinsic price for the company’s shares. The negative bottom line and lack of massive progress over the years were other reasons why investors become sceptical about the prospects of the company.
The analysis of the past two years shows that the company’s stock price is heavily dependent on the news, especially headlines regarding COVID vaccine. In case we see news regarding the clearance of product testing phases and/or the go-live of its products, then we might see price jumps.
However, given the multiple-stage testing requirements, it is unlikely to see some large jumps soon. With that said it is worth highlighting that timing the market is almost impossible.
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