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Why You Should Keep Your Distance from Ocugen Stock

When it comes to biotech Ocugen (NASDAQ:OCGN), a troublesome valuation and shaky business pivot are warning investors to keep OCGN stock socially distanced from their portfolios. But does that make those same shares a bearish short? Let’s look at what’s happening off and on the price chart of OCGN, then offer a risk-adjusted determination aligned with those findings.

Source: Shutterstock

Pfizer (NYSE:PFE). Moderna (NASDAQ:MRNA). Johnson & Johnson (NYSE:JNJ). AstraZeneca (NYSE:AZN). Regeneron (NASDAQ:REGN). With the exception of MRNA, they’re some of planet’s largest and most diversified biopharmaceutical outfits. As a group they’re also largely responsible for saving the world from the novel coronavirus. And we should be thankful.

But we might be more upbeat knowing there’s still other healthy competition in the market. The fact is we’re still well-removed from herd immunity. Covid-19 also continues to mutate into a more infectious disease, which has just broken a grim milestone of 500,000 lives taken in the U.S. alone. Enter OCGN.

In a nutshell and until a couple months ago, Ocugen was a financially-strapped nano-cap with big ambitions to cure blindness. But the company shifted its attention to even grander plans to help save the human race from Covid-19. Just two months ago, OCGN announced it was partnering with India-based Bharat Biotech to distribute Covaxin, a Covid-19 vaccine produced through an adjuvanted inactive virus.

Since that time, big things have happened. Earlier this month, OCGN formalized its original letter of intent with Bharat Biotech into a definitive agreement giving the company U.S. rights to Covaxin. If clinical trials prove successful, Ocugen will be seeking regulatory approval to commercialize use in the United States in exchange for 45% of the vaccine’s profits.

Covaxin is already in limited use in India under emergency-use authorization. And it’s also generated robust immune responses to multiple viral proteins, which appears important in the fight against Covid’s evolving and more infectious new strains.

There Are Critics

But not everyone is excited or convinced about OCGN’s Covaxin prospects.

OCGN has its share of bearish critics and InvestorPlace’s Matt McCall is among that group. Moreover, you’d be blind to not appreciate at least some of those worries.

For one, Ocugen’s track record isn’t the best. India making Covaxin available without completing Phase 3 studies is another concern. And OCGN’s meager cash reserves to fund clinical trials in the U.S without diluting shares is also a thorny reality.

Lastly, there’s Ocugen’s much bigger competition. They’re busy already throwing their vast resources at the mutating virus. All the while, OCGN still needs to get through trials necessary to receive emergency-use authorization from the U.S. Food and Drug Administration.

That’s not all though. Even if approved, Ocugen needs to figure out how to produce and distribute Covaxin, and compared to it’s mRNA-based drug competition, that’s apparently no easy feat.

OCGN Stock Daily Price Chart

Source: Charts by TradingView

It certainly sounds as though OCGN stock should be watched, not touched, from a safe distance. In fact, it may appear the deck is stacked in such a way that OCGN is a short. And with what we’re seeing on the price chart, superficially that doesn’t seem like such a bad idea.

Technically, shares are challenging their 50% retracement level for a second time after backtracking from Ocugen’s Feb. 8 moonshot reaction as investors learned of the company’s definitive agreement with Bharat Biotech. It’s been a tough and fast correction to be certain. But the sharp retreat in OCGN also doesn’t appear finished.

Currently, OCGN’s stochastics are bearishly expanding and pointed down in neutral territory. It’s not the end of the world, but given OCGN’s tenuous business circumstances, a failure of price support and anticipating a move to fill the stock’s price gap in-between the 62% to 76% retracement levels gains credibility.

Bottom-line though, with the options market failing to green light any decent looking spreads and shorting shares in this sort of situation a potentially lethal non-starter, being a neutral spectator is a risk-adjusted position worth considering.

On the date of publication, Chris Tyler does not hold, directly or indirectly, any securities mentioned in this article.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100%  the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

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