<p>Among current biotechnology companies, Ocugen (NASDAQ: OCGN) is without a doubt one of the most risky. Since the beginning of September last year, the OCGN share has bled over 97% of the market value. Before you even think about playing by this name, you need to keep this strong fact in mind. Even before the coronavirus panic, Ocugen was already an extremely volatile “investment”, if you want to call it that.
Even worse, I do not see OCGN shares benefiting from the increase in relevant healthcare companies. As you know, American coronavirus cases will soon break the four-digit threshold. At the time of writing, there are 30 deaths associated with Covid-19 disease. Worldwide, the cumulative number rises to 120,000, while almost 4,300 have died.
Of course, several drug companies are competing, ranging from speculative names like Co-Diagnostics (NASDAQ: CODX) to established stalwarts like Gilead Sciences (NASDAQ: GILD) to develop treatment options. In fact, the Centers for Disease Control and Prevention stated that health authorities are already using Gilead’s experimental coronavirus drugs.
It bodes well for which company finally provides the essential effective treatment. Of course, it does nothing for OCGN stocks, where the underlying business involves rare rare eye diseases.
But do not take it the wrong way. I wholeheartedly agree with InvestorPlace contributor David Moadel’s general view of Ocugen: it gives hope for ocular graft against host disease or oGVHD. It is a nasty disease that “irreversible damage can be avoided if caught early.” If not, it can trigger conditions that severely limit everyday life.
That’s why David, I and many others are actively rooting for Ocugen. There is currently no FDA-approved treatment for oGVHD. This company may be the first to provide it.
OCGN bearings must cross a treacherous path
But will Ocugen succeed in delivering a profitable solution? Admittedly, the signs point in a positive direction. According to the company’s website, its flagship oGVHD treatment (called OCU300) is in late-stage clinical trials.
When a drug passes previous clinical trials, the speculator usually benefits. However, there are many obstacles. We have already seen examples of biotechnologists failing efficiency tests when measured against broader patient bases. Furthermore, FDA approval is obviously no guarantee.
But the biggest obstacle to OCGN shares is the all-or-nothing of the underlying company and industry. In an interview with Wbur.org, Patsy Freeland described the unpredictable nature of working for a biotechnology startup.
According to Freeland’s experience of letting go, “They just sat us down and they said, ‘This is the end. Everyone, your last paycheck is on the back. Unpack your box and please leave. ‘”
Granted, Ocugen did not start a store yesterday. But the company has the hallmarks of a risky biotechnology startup: no revenue, bleeding cash, negative equity and largely dependent on financing options. In other words, if the OCU300 investment does not go out, the OCGN stock can quickly tumble in a hurry.
Earlier this year, noted Jason Mast, Endpoints News contributor, several biotechnologists failed during 2019. One of them included a company struck a trendy idea but with a bit of science that supports it. Again, I do not suggest that Ocugen lacks substance. But from an investor’s perspective, he or she just does not know what is really under the hood.
From my professional experience in the field of biotechnology, I can tell you that the sector is a mixture of science and marketing. You may have the biggest idea in the world. But without financial support, you are dead in the water. And this goes into my last point.
Current environment not friendly for Ocugen
I do not think you need any expertise in technical analysis to realize that a broader market sentiment is incredibly bad. Sure, President Trump is proposing stimulus packages, while central banks will or will soon implement various measures. So far, this has only had a temporary advantage.
But the overall reality is that you can not stimulate your path to prosperity. I think Wall Street insiders acknowledge this; hence large-scale volatility.
It is obvious that this environment does not favor risk-on-name. It goes without saying that it does not favor ultra-risk-on-names that act as if coronavirus will be a recurring event for the next 100 years. Those with the money to support risky ventures are looking at defensive platforms. Therefore, the enthusiasm you need to make your wealth in OCGN stocks is not available.
Does that mean there is absolutely no case for Ocugen? I also do not think you can make that argument. What I’m saying is that the OCGN population was super risky before the coronavirus. With that, the risk has been strengthened ten times.
Josh Enomoto, a former Sony Electronics Business Analyst, has helped broker large contracts with Fortune Global 500 companies. In recent years, he has delivered unique, critical insights for the investment markets, as well as for various other industries, including law, construction management and healthcare. At the time of writing, he had no position in any of the above-mentioned securities.